Sunday, March 31, 2013

Practical, Successful Leadership: Elegant Tightrope walking

Leadership is one subject which has spawned awe inspiring experiential and non-experiential theories. From clichés like “leaders are born and not made” to truisms like “leadership is the ability to transform”, the folklore of leadership is sprinkled with multiple hypotheses of fiction and fact. Leaders are expected to be charismatic and visionary, attributes which are not possessed by all but a few. As I mentioned in one of my earlier blogs, there are over hundred adjectives and phrases that are considered as leadership attributes. Leaders, in organizational setting, are seen and heard but not experienced as often as the common professional would hope for.  As a result of the management literature that abounds on leadership and the distance that separates a leader from followers, there tends to be aura and mystique on what leaders and leadership represents.

In practical terms, however, leaders and leadership are less esoteric than they are made out to be. Leaders do not necessarily belong to an extra-terrestrial class with extra-sensory perceptions on future. Nor are they just competent professionals with added drive of aspiration, aggression and passion. Leadership is also not only about vision, strategy and execution in a transformational perspective.  Practical leadership is also the art and science of achieving sustainable growth with profitability, reconciling, resolving and managing contradictory drivers of performance. Practical leadership is contextual, in terms of external and internal environment as well as external and internal stakeholders. Practical leadership involves making wise, even if seemingly inconsistent as viewed by others, choices between pairs of drivers of performance.  A practical, successful leader does far more of elegant tightrope walking than dashing flying in the air. There exist five pairs of such challenging contradictions a successful leader manages which this blog post discusses. In the process though, a successful leader primarily holds a few parameters of leadership non-negotiable.
Non-negotiable parameters
The five non-negotiable parameters of successful practical leadership are truly foundational ones: safety, quality, productivity, ethics and compliance. There can never be a compromise on the safety of business, operations, people and environment.  Quality of products and processes is essential to serve the customers, markets, society and nations well. Productivity, whether in decision making or operational execution, is the sine qua non of competitive advantage. Ethics represent the super-ordinate values that govern the conduct of each and every member of the organization. Compliance reflects an unswerving commitment to follow all the laws and regulations of doing the business. Leadership, while endeavoring to manage contradictory performance drivers will need to be unflinching in respect of non-negotiable parameters.  Given this foundational hypothesis, practical leadership is all about leading a way out of contradictions. This blog post postulates five pairs of such apparent leadership contradictions, covering a vast canvas of strategic and tactical leadership.
Empowerment versus control
The biggest leadership challenge a successful leader tackles is making and sustaining his entity entrepreneurial yet systematic; empowered yet accountable. Entrepreneurial and empowered cultures go hand in hand and are known to generate products and services of transformational nature. Equally, lack of systemic controls and sense of accountability also leads such ventures to near-terminal experiences. A highly systematized and stage-gated organization, in contrast, delivers consistent results but not transformational outcomes. Fusing empowerment with accountability is best achieved by creating business unit organizations, identifying single point business leadership, integrating all line and staff functions in the business unit and holding leadership accountable for growth with profitability.
Not many organizations are successful in achieving the above essentially because they are faced with a paucity of real business leaders as opposed to functional leaders who are much more easily found. Over time, the functional leaders who are unable to transform into business leaders develop a vested interest in keeping the organization functionally driven, rather than multiple business, product or service driven. Creation of business unit organizations must be seen as an essential step to develop top leadership bench that knows how to run a business rather than a function. Boards and Chairmen/CEOs have a special responsibility to develop business leaders out of functional leaders.  Integration of empowerment and accountability would come naturally with such a business and leadership ecosystem.
Short term versus long term
A common fallacy is that leaders need to focus on the long term and the executives need to focus on the short term. While leaders certainly need to have the long term vision of how technologies and markets would shape up and how the organization could transform itself for the future, no leader can ignore the short term. Short term actions ensure revenues and profits that enable a company undertake futuristic initiatives. A leader’s dilemma is not whether he has to choose between the long term and the short term but to make them work together. The successful leader would need to approach this with two clear foci. Given that the long term is always fraught with uncertainty, his or her objective must be to minimize the margin for error and given that the short term is predictable, his or her objective must be to maximize the scope for success.
Leaders can achieve the above by concentrating on technological advantage for the long term and operational advantage for the short term. Success in the long term is derived by banking on the right technologies which create new markets with new products or services, and also deliver them effectively with efficient processes. Success in the short term is derived by ensuring high quality products consistently with as low operationally-efficient costs and as high market-acceptable prices as possible. This requires leaders to constantly bet on sunrise technologies and optimize mature technologies. Successful leaders will deploy sub-leaders who have the necessary depth in various aspects of science and technology as well as operations to integrate the short term and long term successfully without any conflict.       
Competing versus collaborating

Leaders by definition tend to have a strong competitive spirit. There are leaders who believe that in the businesses they operate in they must be the first or the second. Competitive spirit, if not moderated and titrated could drive leaders, especially those committed to keeping their businesses in top pecking order, to take actions that engulf their businesses and leaders in competitive actions which could destabilize the businesses and leaders. In growing or stalling companies, neither the success nor failure is singularly that of one leader but of the leadership team as a whole. A leadership team which competes for success is more likely to fail its organization while a leadership team which collaborates for success, or even in failures, is more likely to secure success for its organization.
Extending the theme to the external world, successful leaders must know the relative benefits and pitfalls of unmitigated external competition. As brought out in my earlier blog, collaboration can contemporaneously coexist with competition in the current industrial and business world. Successful leaders who understand the tightrope between collaboration and competition would be best positioned to take optimal decisions between integration and diversification, in-sourcing and out-sourcing, in-licensing and out-licensing, investment and divestment, and physical and Internet aspects of business.  The ability to optimize investments and maximize returns would depend upon the ability to walk the tightrope between collaboration and competition.  
Kaizen versus Kaikaku

The other very important leadership choice is between kaizen and kaikaku. The more famous Japanese word kaizen means continuous improvement. Kaikaku, a less known Japanese word means radical change. Both the conceptual words have their origins in the famous Toyota Production System but have applications in areas beyond production.  Leaders who come in to turn around adverse business situations or to drive supernormal growth or leaders who are steeped in aggressive leadership templates may be tempted to consider radical change in preference to continuous improvement. On the other hand, leaders who are at the helm of mature businesses and whose leadership templates are built around balanced scorecard of all aspects of business may be inclined to consider continuous improvement in preference to radical change.
The above kaizen-kaikaku choice is more of an opportunity than a challenge if the leader sees the short term as the arena for kaizen (or continuous improvement) and the long term as the canvas for kaikaku (or radical change). In fact, Toyota has demonstrated how it applies both kaizen and kaikaku to its leadership culture. If Toyota’s annual refreshes and periodical overhauls of its automobile models are a result of kaizen, its pioneering pursuit of automobiles with hybrid technologies, and diversification into robotics and intelligent homes is a reflection of kaikaku. Samsung is another group whose leadership culture demonstrates simultaneous application of both kaizen and kaikaku. Samsung applies both kaizen and kaikaku to foundational short term, reflecting a high degree of technological, operational and leadership strength while every kaikaku transformation is quickly followed up with several kaizen initiatives.
Speaking versus listening
Leaders are evangelists of what they ardently believe in. The famous Quality gurus Deming and Juran and the management gurus Drucker and Prahalad have been evangelists of what they believed in. Charismatic leaders are well positioned to be evangelists of change whether of kaizen and kaikaku mode. Without their passionate espousal of change organizations, whether they are moribund or vibrant, would find it difficult to be catalyzed into change. That said, continuous evangelism could be more mesmerizing than galvanizing for the rank and file. It often distances the leader from ground realities, and even makes the sub-leaders become mere followers rather than creative thinkers and doers on their own. It requires perfect focus and fit-as-glove dovetailing for only single minded evangelism to become an institutional strength.
In contrast, leadership which combines passionate advocacy with empathetic listening takes leadership to the next higher level. If Douglas McGregor’s Theory X is to be believed, and many virtuous corporations do, in fact, benefit from Theory X as a driver of positive corporate culture, grassroots leadership often lies innate in an organization at senior levels to express to, and develop with, charismatic and passionate leaders. Great organizations, therefore, resort to continuous leadership development in their own institutes to listen to and to coach future leaders. Great leaders not only coach and mentor employees, negotiate with vendors, and assure customers and investors but also are willing to listen to employees, customers, vendors, investors and various stakeholders so that their own passion and evangelism gets directed at real issues and succeeds in providing real, sustainable solutions.
When ends converge
As the foregoing illustrates, leadership is a synthesis of not only excellence but also a harmony of contrasts. Practical, successful leadership is built on solid foundations of five non-negotiable parameters of safety, quality, productivity, ethics and compliance, and achieving convergence between five important pairs of apparently contradictory but realistically synergistic options for leadership, these being empowerment and control, short term versus long term, competing versus collaborating, kaizen and kaikaku, and speaking versus listening. The result of this model of practical, sustainable leadership would surely be sustainable growth with profitability for the organization it leads. This elegant practical leadership model has the potential to generate sustainable wealth and value for the organizations, customers, markets, societies and nations.
Posted by Dr CB Rao on March 31, 2013.

Sunday, March 24, 2013

A New Theory of Generic Collaborative Strategy: Adding Value to Porter’s Generic Competitive Strategies

Michael Porter has been the Darwinian advocate of strategy. He proposed in the 1980s with great insight, and to considerable success, that companies (much like human beings) compete to succeed and in the big aggressive world of business competition it is the game of the survival of the fittest. As a strategy guru, he prescribed three competitive strategies of cost leadership, differentiation and niche for companies to compete and derive competitive advantage in an industry. While Porter’s rather easy-to-follow strategic prescription is universally available, companies are not universally successful even if they follow Porter’s competitive strategies. Execution is often cited as the reason for this; two firms following the same broad generic strategy could have vastly different execution profiles.

This blog post hypothesizes that the relative performance success or superior competitive advantage is not merely related to execution but is even more importantly to collaboration. If generic competitive strategy drives cost or differentiation advantage or a mix thereof, generic collaborative strategy drives value up for firms, and even the industry as a whole. Generic competitive strategy is an extremely firm-centric approach which exhorts a firm to maximize its performance by maximizing its competitive power vis-à-vis all the power of its industry stakeholders (suppliers, customers, new entrants, substitute products and industry players). Generic collaborative strategy, on the other hand, is a refreshingly industry-oriented approach which advises a firm to maximize its performance by optimizing its collaborative network not only within its industry but also across a broad range of industries. While the need for a firm to be competitive will never go away, the need to be competitive by optimizing its network is now greater than ever before. 
Lifecycle drives collaboration
The generic competitive strategy was set in an industry environment of three decades ago which had three theoretical premises, which are by now outdated. Firstly, it encouraged monopoly power and scale economics as the drivers of competitive efficiency. This is the reason for the competitive strategy theory viewing the original equipment manufacturer (OEM) and vendor relations in terms of conflicting power play rather than one of mutual dependence. Secondly, it considered new product and new entrants as being industry antagonist, rather than as consumer protagonist. This is the reason for Porter’s competitive strategy viewing substitute products and new entrants as threats to industrial stability rather than as enablers for market expansion. Thirdly, it considers industry evolution from monopoly state to fragmented state as a phenomenon to be controlled by powerful incumbent firms rather than as one of new firms adding to consumer choice as much as to industry competition. In sum, Porter’s generic competitive strategy tends to defend status quo.
The generic collaborative strategy derives its relevance in a contemporary industry environment that has three theoretical premises, which are positively futuristic. Firstly, it recognizes that monopolies are a thing of the past even though scale continues to offer economies. This is the reason for the collaborative strategy theory viewing the OEM and vendor relations in terms of mutual dependence rather than one of conflicting power play. Secondly, it considers new products and new entrants as market expansive for the industry, even if share erosive for firms. This is the reason for the collaborative strategy theory accepting timed and coordinated launch of new products as a structural reality of market expansion rather than as an industry destabilizing factor. Thirdly, the generic collaborative strategy views technology as a more widely available input leading to early formation of oligopoly. This is the reason for the collaborative strategy theory to continuously seek re-segmentation and re-structuring of industry to counter fragmentation.
The generic collaborative strategy postulates five collaborative value drivers. These five collaborative value drivers are the values of co-integration, co-development, co-fulfillment, co-expansion and co-saturation. These value drivers are achieved collaboratively with suppliers, innovators, customers, new entrants and also all the players within the industry. By leveraging the collaborative value drivers, a firm can ensure competitive operations, optimized investments, innovative products and processes, enhanced consumer choice and larger market. As opposed to competitive strategy which seeks to increase the value of the firm on a relative basis at the cost of related as well as competing stakeholders, collaborative strategy drives up the value of the firm and its stakeholders simultaneously.
In an ideal scenario, a firm can achieve maximum competitive efficiency with respect to its products if all of its components and systems are manufactured in-house. A fully integrated development and manufacturing value chain operating at the highest scale possible is the dream of any monopoly player. The automobile industry in the mechanical age and the electronics industry in the digital age have demonstrated how outsourcing can help optimize investments. In the former case, an unconnected OEM and component industrial structure demonstrated how maximization of respective competitive positions, caused essentially by non-sharing of respective positions on volumes and costs, could dilute mutual efficiencies.  In the latter case, a complete farming out of all critical components and systems demonstrated how maximization of dependence on external manufacture, caused essentially by the belief that integration of software and hardware is more important than integration of components, could diffuse a firm’s core competency. The golden mean between a firm being troublingly reclusive and dangerously open is provided by the concept of co-integration. Co-integration is based on the concept that limited co-exclusive relationships between OEMs and suppliers provide for scale and scope so that they are dovetailed to collaborate rather than compete.
The concept of co-development is that technologies of components and systems will develop at an exponential pace, making specialization the forte of outsourcing while a well-integrated OEM product provides the scale economics for all value chain players. The current paradigm of technological development is one of fits and starts of technological flourishes, many of them uncoordinated. Probably, the initiative for ultra notebook is one of the few coordinated strategic technological developments, strangely driven by the chip manufacturer to withstand the competition from tablet computers. Co-development, however, needs to be a more widespread initiative.  If computer makers were to take the challenge of making tablets thinner than smart phones it would require coordinated development amongst all the component makers of a notebook maker, to develop a breakthrough generation of new components,  from unbreakable and unbendable screens and ultrathin imaging components to custom built super chips and wafer-thin battery packs. Similarly, operating system developments, instead of going through continuous improvements every six months, must aim at breakthrough changes to achieve leading edge connectivity and computing power.  
The traditional concept is that companies develop products based on market research and customers accept or reject them depending on how they are perceived and utilized. Steve Jobs overturned the established practice and demonstrated that brilliantly designed and manufactured Apple products create new needs or fulfill existing needs better. In both cases, it is the singular mind of the lone firm that imagines new technologies and new products. The concept of co-fulfillment is that a cluster of all the firms in the industry not only work together but also individually and collectively work with the consumers to identify the current and future needs. This collaborative process generates a far more intensive and far more effective understanding, and hence far more effective fulfillment of consumer needs. This requires an enlightened and non-egoistic approach by all the stakeholders to analyze and question themselves at the hands of consumers. Even the greatest innovator Apple has held on too long to its pet technological positions and refused to recognize the need for co-fulfillment with consumers as a result of which the company lost some of its momentum.
Porter’s theory advocates that the force of substitute products is a key competitive force rendering existing products obsolete and even modifying industry structure. Co-development as outlined above enables firms and component makers to proactively identify unfulfilled as well as emerging needs. New products that emerge out of a different way of fulfilling the need is a collaborative and proactive way of handling product transition that is superior to the practice fighting an inevitable change. The dated prescriptions like BCG grid institutionalize past technologies. The rate of technological change is so rapid and the changing consumer preferences are so decisive that preserving the past oftentimes distracts from shaping a future. The watch industry, the imaging industry, the printing industry and scores of several other industries are examples. Just to detail one example, the change from mechanical to quartz to analogue to digital has been an inexorable movement in watch movement technologies. The watchmakers who partnered the change in a timely manner progressed while those who refused to see the writing on the wall (or, on the dial?) had serious setbacks.
Sunrise industries evoke interest but rarely attract big ticket investments by incumbent firms who are in fact best positioned to take those little risks. Paradoxically, smaller startups take larger risks to develop sunrise technologies but when these risks are rewarded larger firms rush into the space with acquisitions of such startups. Growth industries and growth markets evoke even greater rush for firms, big and small alike. Porter’s theory advocates that such excessive competition increases competitive intensity in an industry and drives down industry profits. Firms must, in Porter’s strategic framework,   adopt competitive strategies that edge out smaller firms and dominate the available market. The generic collaborative strategy, on the other hand, welcomes newer and additional competition as it only expands markets, often creating new segments. Samsung’s strategy of introducing “phablets” is as revolutionary contributor to market expansion as Apple’s first smart phones. Co-saturation is the concept that incumbent firms must view entry of new players as an opportunity to co-saturate the market and expand as well as diversify product range. Market share in such co-saturated markets is less important than expanding volumes for every player. 
Collaborate to compete
As product lifecycles become shorter and investments to retool become larger, a generic strategy of only competing to vanquish others is a less relevant option than collaborating and competing.  Treating all the stakeholders in the industry, be it suppliers, customers, innovators or new entrants, as helpful elements in expanding and diversifying product-market scope works to the benefit of the firm. Porter’s generic competitive strategy considers industry competition as a win-lose game where the fittest only survive whereas this blog post’s generic collaborative strategy considers industry collaboration as a win-win game where everyone elevates the game and serves the consumers even better with more products and services that are more fulfilling than ever.
Posted by Dr CB Rao on March 23, 2013

Sunday, March 17, 2013

Dr Kallam Anji Reddy (1941-2013): Game-changing Techno-Entrepreneur

Dr Kallam Anji Reddy, the Founder-Chairman of India’s Dr Reddy’s Laboratories (DRL) and an undisputed doyen of the Indian pharmaceutical industry passed away in Hyderabad on March 15, 2013. In his sad demise, the country lost a brilliant and creative first generation entrepreneur who was driven by a passion for science and technology. He was truly a game changer for the Indian pharmaceutical industry who placed the company on the global pharmaceutical map with cost-effective bulk drugs (or, active pharmacutical ingredients) and affordable generic formulations (or, finished drug products), several of them with path-breaking patent challenges. He was the first to lay the path of basic research and drug discovery in the Indian pharma, and was the inspiration and motivation for several other firms to emulate him in terms of not only APIs and generics but more importantly, drug discovery research. Under his stewardship, DRL which was set up with a seed capital of just Rs 25 lakhs (USD 50,000) in 1984 grew to be a Rs 10,000 crore (USD 1.8 billion) globally diversified pharmaceutical corporation by 2012 with several core research and manufacturing facilities in India, and employing  over 16,000 employees in India and abroad.

Dr Anji Reddy, a recipient of India’s third highest civilian honour Padma Bhushan in 2009, rose from humble agricultural roots. A son of a turmeric farmer in a village called Tadepalli, near Guntur of Andhra Pradesh was a combination of science and technology. He graduated from Bombay University in B. Sc. (Tech) with specialization in pharmaceutical science and fine chemicals, and went on to obtain his Ph. D. in chemical engineering from the famed National Chemical Laboratory in Pune. After his studies, he joined in 1969 the government owned Indian Drugs and Pharmaceuticals Ltd, which was set up to ensure self-sufficiency in drugs and medicines. His entrepreneurial spirit made him set up Uniloids in 1976 with his partners, which he later sold of, and Standard Organics Limited in 1980. He later on went on to set up Dr Reddy’s Laboratories in 1984 and built it into a global pharmaceutical corporation, listed in Indian stock exchanges and New York Stock Exchange (NYSE). The current market capitalization of DRL is Rs 30,000 crore (USD 5.4 billion).
In demeanor, Dr Anji Reddy was always unassuming and self-effacing, belying his stature and the great regard in which he was held. There would, in the coming days and weeks, be many tributes and eulogies to the life and achievements of Dr Anji Reddy from his family, peers and organizational followers, bringing out several known and unknown facets. His own biography, which he is reported to have completed despite his illness of the last several months, would probably sharpen his expressed thoughts and obvious achievements and unravel his embedded ideology and silent initiatives. When an accomplished leader passes away, the best way to pay a tribute to his memory is by synthesizing and distilling his leadership model so that budding entrepreneurs and aspiring professionals can have a template that they can follow or adapt. This blog post endeavors to delineate Dr K Anji Reddy’s scientific and business leadership model, reflecting the germination and growth of DRL as an institution of repute.  The Kallam Anji Reddy-Dr Reddy’s Laboratories saga has six praiseworthy features of world-class entrepreneurship.
Science, engineering and economics
Business leaders in their use of science and engineering are of three kinds. The first class views science and engineering in terms of products and processes, and costs thereof as platforms for businesses. The second class views science and engineering as creators of value for customers and businesses. The third class, to which Dr Anji Reddy belongs, views science and engineering not only in terms of products and processes, costs and value, and markets and businesses but also in terms of sound and sustainable economics. Dr Anji Reddy transformed the economics of the Indian pharmaceutical industry both in a macroeconomic sense, laying the foundations of affordable generic medicines, and in a microeconomic sense, with scope and scale of production redefining industrial costs and global value arbitrage. His simple economic formula of what a drug costs in the US in terms of a Dollar should be made and sold in India for a Rupee was a simple but effective paradigm of considerable economic foresight. His unique combination of pharmaceutical science and chemical engineering became his, as well as DRL’s, core competence in developing high quality active pharmaceutical ingredients through reverse engineering and establishing operationally efficient global scale generic formulations. From Dr Reddy's accomplishments, it emerges that Science, Engineering and Economics is a knowledge triad of a higher elan business leader that transforms human development.  
Quality as the Q.E.D. 
Dr Anji Reddy was one of the early entrepreneurs who recognized that the higher quality of requirements of advanced markets such as the USA and Europe and complying with the regulatory standards of international regulatory agencies such as the US FDA was the sine qua non of sustainable pharmaceutical business. His first failures in meeting the quality requirements of Merck & Co for its bulk drug only prompted Dr Reddy to lay the foundations of quality focused US FDA compliant bulk drug plants, and later generic formulation plants. As early as in 1987, DRL secured approval from the US FDA for DRL’s Ibuprofen, opening up the US market for DRL. The series of bulk drugs such as Ibuprofen, Ranitidine, Ciprofloxacin, Methyldopa, Norfloxacin and Omeprazole as well as their follow-on products from DRL enjoyed huge world markets. Whenever standalone formulation companies desired complex products of high quality they preferred to rely on DRL despite the price premium. When new startups desired to establish US FDA compliant plants they sought talent from DRL. These establish that Quality is the paradigm of virtue that successful business leaders seek to prove and eventually establish beyond doubt. “Quality Enterprise Diffused” is literally and figuratively the Q.E.D. of sustainable business.
Talent in teams, teams with targets
The engine of growth for any organization is the intellectual power. DRL illustrates that when the founder’s intellectual power is reinforced by his team’s broader intellectual competencies, the organization moves into a targeted high trajectory of sustainable growth. Dr Anji Reddy has built DRL on three principles of talent, teams and targets. Whether it is bulk drugs, formulations or drug discovery world-class indigenous talent laid the foundations and built the superstructure of the DRL seen today. Some of the best names of Indian pharmaceutical science and technology are identified with DRL, even if they are no longer with the company. Dr Anji Reddy was also one of the earliest first generation entrepreneurs who saw merit in coalescing talent into business teams and eventually into strategic business units. The growth of bulk drugs, global generics, branded formulations, custom synthesis and basic drug discovery was based on custom-inducted and business-focused talent teams. The third component of a talent-focused organization is targets. The best targets that an entrepreneur develops are not metrics of turnover or profits but are mega visions of transformation. When as a student Anji Reddy who saw a Pfizer plant thought of building a Pfizer-like plant as his entrepreneurial venture or after he set up his business targeted his pharmaceutical corporation to be a "Pfizer" or "Merck" of India driven by innovation, he was articulating concisely and passionately a visionary target that inspired him and his talented teams.   
Professional family, family of professionals
DRL as a first generation enterprise has been an entrepreneur driven business. With the induction of Dr Anji Reddy’s son-in-law G V Prasad  and son Satish Reddy as the chief executive officer and chief operating officer in 1986 and 1993 respectively, DRL became a compact family run business. Yet, it was a highly professional second generation that came on board. Both the next generation leaders were very well qualified and have admirably learnt the ropes on the job, building businesses and operations. Dr Anji Reddy ensured that the leadership roles to them played to their strengths, with GV Prasad focusing on strategy and generics business and Satish focusing on operations and emerging markets, and Dr Anji Reddy himself focusing on drug discovery and overall mentorship. In addition, the troika of family leadership ensured that they were governed by a strong board of directors of eleven, in which all directors except the three were independent directors of high repute representing diverse domains. In fact, in a recent survey DRL board was judged to be a top ranking board in India acclaimed for its corporate governance. The uniqueness of the family team at the helm has been that it surrounded and reinforced itself with professionals of outstanding expertise in their domains.  Classy chemistry expertise, outstanding generics leadership, creative medicinal chemistry and discovery biology and savvy commercial, business, financial and legal strengths, among other domains, together made DRL a professional powerhouse. Dr Anji Reddy established that entrepreneurial chemistry and creativity is highly synergistic with professional expertise and integrity, both needing to be perpetual partners in progress.
Risky challenges, global rewards
Most successful leaders are intelligent and empathetic using their traits for planning and executing but all are not adept at taking investment and business risks based on the organization’s intellectual competencies as well as networking and negotiating capabilities. Dr Anji Reddy took intellectual and investment risk-taking progressively up four levels, ahead of most Indian pharmaceutical companies. DRL was the pioneer, in the 1980s, in taking the first risk of reverse engineering patented molecules through innovative non-infringing processes, and manufacturing them, leveraging India’s prevailing patent regime. This risky initiative handsomely paid off with the bulk drugs becoming the foundational cash generating business for the next wave of generics risk-taking. The next was in the 1990s when the generics business unit began embarking on the Paragraph IV, First to File (P4 FTF) challenges under the Hatch-Waxman’s Act of the USA which provided options for innovative challenges based on patent litigation in the US legal system. DRL’s Fluoxetine P4 FTF patent challenge against the innovator of the molecule has been a game changer leading to the dominance of the Indian pharmaceutical industry in the US. DRL has since built up one of the largest portfolios of P4 FTF products in the generics world.  This second level of risk-taking enormously benefitted DRL and positioned it as an awe-inspiring player in the generics space. The third level of risk pertains to aggressive internationalization of its branded formulations business. Russia has been a beacon of success in this dimension while a few others have been less than successful. DRL's success in creating the dossier framework for global markets has prompted GSK to ally with the company for emerging markets. The fourth level of risk pertains to Dr Anji Reddy’s passion for basic drug discovery research with the aspiration of globally commercializing a DRL discovered new chemical entity. Despite the high investments and overwhelming uncertainty of payback in drug discovery, he founded as early as in 1993 Dr Reddy’s Research Foundation with chemistry and biology infrastructure in India and also established overseas discovery infrastructure progressively. Though the early discoveries failed to make it past all the human clinical phases, Dr Anji Reddy still remains the icon of drug discovery in India. Calculated risk taking initiatives based on indigenous intellectual capability have been part of Dr Anji Reddy’s leadership profile.  
Enabling and sustaining good life
Pharmaceuticals support life, and the pharmaceuticals industry is a noble industry by any yardstick. If pharmaceutical corporations and the leaders of the pharmaceutical industry deploy their corporate and personal wealth to enable and sustain good life, they would be even more significant corporate citizens. DRL’s focus has primarily been on three life-altering areas: Patient Care, Education and Livelihood. The company channels its wide network of social activities through Dr. Reddy’s Foundation (DRF) and Dr. Reddy’s Foundation for Heath Education (DRFHE) which address health education needs and patient care activities. DRL also creates positive impact on communities through Corporate Social Responsibility (CSR) teams in each location. Two of the social responsibility initiatives undertaken by Dr Anji Reddy illustrate a silent social facet of his entrepreneurial profile.  He spearheaded the Neo-natal Intensive Care and Emergencies Foundation called NICE Foundation, the only institute for new-born babies in India. He also set up Naandi Foundation (Naandi meaning start of a new initiative) for providing safe drinking water in rural areas. The foundation provides midday meals to 1.3 million government school-going children and farmers.  Anand Mahindra, the Head of the automobile conglomerate Mahindra & Mahindra tweeted “R.I.P. Dr Anji Reddy. Your business achievements were well known, but you were an unsung hero for your transformational philanthropy.”     
Game changing techno-entrepreneur
The author of this blog post has had no direct professional contact with Dr Anji Reddy except meeting him in a few pharmacutical forums. However, as an observer of Dr Anji Reddy's leadership model and DRL's continuous growth, the author believes that Dr Reddy’s contributions of entrepreneurial and business leadership have been truly exceptional as synthesized in this blog post. Successful entrepreneurs typically create sustainable institutions that create products and services for markets and generate returns for investors. A few entrepreneurs, however, craft and execute game changing strategies for their enterprises that fundamentally redefine the very structure and strategy of entire industries. Dr Anji Reddy clearly belongs to this illustrious genre of “super-entrepreneurs” in so far as the Indian pharmaceutical industry is concerned. His transformational contributions to the Indian pharmaceutical industry will remain unsurpassed for a long time to come. The epithets “doyen”, “icon” and “pioneer” describe his game-changing techno-entrepreneurial leadership perfectly. Dr Kallam Anji Reddy, the super-entrepreneur who wanted to create a "Merck" in India has certainly created, in Dr Reddy’s Laboratories, a robust and growth oriented pharmaceutical corporation that has earned global respect, and has in the process left an indelible mark on the Indian pharmaceutical canvas.
Posted by Dr CB Rao on March 17, 2013     


Sunday, March 10, 2013

Harnessing Emotions at Workplace: The Model of Intelligent Emotional Balance (IEB)

Emotions are strong feelings that people have.  Emotions can be positive as well as negative. Typical emotions, positive and negative, are happiness and sadness, liking and disliking, calmness and anger, politeness and bluntness, confidence and fear, friendship and enmity, trust and mistrust, kindness and jealousy, gentleness and aggression, so on. Given that organizations are nothing but groups of people, it is but natural that emotions are a part and parcel of a typical workplace. The emotional profile of a manager or a leader, in fact, gets identified as a dominant characteristic of a manager or a leader as his or her management and leadership style, and becomes a visible and consistently felt experience for the larger organization. There is often a misplaced view that in organizations negative emotions must necessarily be eliminated and positive emotions mandatorily embedded at the work place. This is a simplistic view of how business processes and organizational behaviors work.

There have been several theories of emotions from the centuries’ prior days of Aristotle to the contemporary days of Stephen Covey, highlighting the need to understand human emotions and for achieving mastery over emotions. In fact, the phrases “emotional balance”, “emotional quotient” and “emotional intelligence” have spawned several journal articles and management books on how executives could achieve mastery over their emotions to be effective at the workplace. Important as these are, there is a need to view emotional management at the workplace in terms of intelligent business process management rather than only as an introverted framework of behavioral correction. Fundamental to the concern on management of emotions is the fact that emotions could affect rational thinking and actions. The paradox of human emotions is rendered more complex when organizations are expected to be embodiments of logical and rational approaches in the conduct of their businesses on one hand, while being driven by hues of emotion such as aggression and passion in achieving superior performance on the other.
For most part, emotions need contexts to express themselves. The contextual basis of emotions is that the gap between expectations and accomplishments sets the tone for emotions. If the leader is a stickler for perfection, a perfect process or a perfect outcome from his subordinate makes him or her happy while a shoddy process and outcome makes the leader angry. In the same interaction, if the subordinate knows what perfection is, he or she would display confidence or fear while presenting the process or product. From the simple example that has been considered, it is clear that emotions emerge from the gaps between that exist between expectations and outcomes. The other contextual part of emotions is that people come into organizations as bundles of emotions themselves. In addition, people tend to be of different personality types which will invariably influence how people emote at the workplace. Many employees also do not adequately understand the nexus between their individual roles and performance and corporate goals and outcomes, and anticipate rewards independent of performance. The alignment or gap between career objectives and career growth also leads to emotional dynamics.
Emotions are sharpened by the way they are expressed.  The culture of expression, if it is positive enhances the helpful impact of positive emotions and moderates the erosive impact of negative emotions. The culture of expression, if negative, achieves exactly the opposite. The expressions of verbal language, positive or negative, are further accentuated positively or attenuated negatively by the body language, positive or negative. The part that communication plays in moderating or amplifying emotions is not well understood. Effective and controlled communication is part of emotional balance in organizations. Emotions are not necessarily correlated to circumstances. Crisis situations, contrary to perceptions of chaos, helplessness and stress, may actually bring out positive emotions of sharing and caring, and of strength and stability amongst the team members. On the other hand, luxurious outcomes may bring out negative emotions of envy and jealousy, and of mistrust and aggression among them. The paradox of the contextual perspectives is that emotions are impacted by a number of internal and external contexts.
It is also incorrect to assume that positive emotions are always beneficial and negative ones detrimental. If team members are not mature enough and instead are subservient to emotions in appraising performance, performance management would be at a discount. In such cases, people may get formatted into emotional archetypes as they and their supervisors lack the ability to differentiate task delivery from emotional wrapping. Emotions, whether positive or negative, are likely to introduce skew, bias and halo effects in relationships if emotions are not objectively and discriminatingly expressed or understood. Emotional balancing may help the groups manage positive or negative performance in a stable manner only if emotional expression is indexed to the context of task delivery of individuals, teams and organizations. If managers and teams, as well as cross-functional peers ensure clear target setting with joint ownership, clarity and alignment on objectives and resources and evaluation criteria, the chances for emotional upheavals, positive or negative, would be minimized. 
Another hypothesis could be that industry context would determine the emotional texture of an organization. Market and customer facing organizations may be postulated to be more emotionally sensitive compared to manufacturing organizations. Domains like advertising and consumer research may be considered to be more emotionally interactive than others. In practice, however, emotional sensitivity and responsiveness is related more to expectations-accomplishments gap and expressions-communications competency levels, independent of any domain or industry. The organizations and team members of the movie industry which is dominated by emotive artistic elements in all its aspects, for example, has all the interpersonal emotional fallibilities as any other industrial organization; if at all, the movie industry seems to have an even greater level of emotional dynamics. 
Tolerances and controls
As in engineering design, the theory of tolerances plays a vital role in emotional management too. People, in the organizational context, must observe tolerances in mutual expression of emotions. While not all emotions may be appropriate in an organizational context, there are a few which have relevance. While a gentle, trusting, caring, sharing and joyous emotional outlook may enhance positive energy in a team, excessive levels of such positive emotions could be counter-productive. While fun at work is desirable, it cannot be only fun at work to the detriment of stretch and challenge at work. At the same time, an aggressive, evaluative, demanding, consolidating and somber emotional outlook may bring out the right amount of fear and adrenal rush in the face of adversity or complacence. While fear is the key to compliance and achievement, fearful authoritarianism cannot be endorsed to the detriment of creativity and innovation at work. Clearly, only if teams are able to play upon their positive and negative emotions within fine tolerances that are synergistic in organizational context, emotions can be helpful.    
At the core of intelligent emotional balance lies the ability to understand the emotional sensitivity of self and others, and develop the ability to control the emergence and expression of emotions in organizationally appropriate manner. This approach does not mean that people should or would lose their spontaneity. It merely recognizes that an organization has certain primary performance metrics to deliver on a day to day basis. A culture of emotional sensitivity, in fact, helps the team modulate performance expectations and delivery achievements. The model of intelligent emotional balance has three vital components; the first, understanding the importance of a person’s own and his team members’ emotional proclivities,  the second, an understanding of the tolerances within which mutual emotions become synergistic rather than antagonistic and the third, a competence to control emotions to be supportive of a virtuous organizational culture. An ability to retain rationality, objectivity and logic in the face of exciting opportunities and depressing setbacks alike with the just right touch of humanism helps spread the positive vibrations of energy across the organization.
IEB model in practice
An organization can achieve intelligent emotional balance when its leaders practice the optimal business processes that enable a sense of fulfillment in day to day work and thereby enabling appropriate emotional balance.  The optimum business process does not end merely with objective setting or questioning but incorporates problem solving where required.  A leader who sets a challenging technical task for his subordinate logically expects the subordinate to deliver, failing which finds it rational to take the subordinate to task. The IEB model, in this case, expects that the leader does not merely stop at expressing his unhappiness but also empathizes with the subordinate’s incapacity to deliver and sets about to work with the subordinate to develop a solution. Once the subordinate develops the solution to the leader’s satisfaction, the leader joyously celebrates with the subordinate, thus wiping clean the earlier unhappiness and opening a new chapter of collaboration.  In another case where the subordinate succeeds in terms of delivery, the leader celebrates with the subordinate first but goes on to prescribe a higher level of challenge for the subordinate that leads the organization onto a path of continuous achievement and fulfillment.
A purely emotional view of achievement leads to a sense of complacence and distances the participants from the competitive scenario that exists in the outside business world. Setting expectations appropriately, reinforcing competencies commensurately, providing resources adequately, evaluating results objectively, coaching for improved results empathetically, learning from failures confidently and celebrating successes with humility provides an optimal intelligent emotional balance in an organization. The leaders and managers can help facilitate institution of intelligent emotional balance by being themselves role models of the following: (i) equidistance from, or equal attachment to, functions and people, (ii) adaptive of rational and emotionally balanced objective business and communication processes, (iii) focused on competency development and task delivery, (iv) controlled and titrated in experiencing and expression of emotions, (v) learning openly from setbacks and failures, and (vi) optimally celebrating successes with humility. The foregoing leadership model would help institutionalize the broader Intelligent Emotional Balance (IEB) model on a sustainable basis in the organization.
Posted by Dr CB Rao on March 10, 2013

Sunday, March 3, 2013

Cascade and Cluster Strategy for Industrial Development: A Potent indigenization Prescription for the Indian Industry

India, undoubtedly, has been a leader in tablets and other kinds of pills and diverse pharmaceutical products. Pharmaceutical development and manufacturing has been one domain of manufacturing that has brought out a Made in India advantage onto the global arena. Of late, however, Indian manufacture has been demonstrating early shoots of manufacture and global challenge in another kind of tablets - the electronic tablet computers that were hitherto considered the preserve of the likes of Apples and Samsungs! In fact, the launch of an indigenous 5” tablet by an indigenous manufacturer at almost half the price of a ruling imported tablet product has led Samsung to announce posthaste a new tablet model at a dramatically reduced price. This development points to the possibility that with some concerted government-industry action electronics manufacture could be a new wave of growth for India.  

Electronics need not be seen as the only early shoot of industrial manufacture. There are several other industrial manufacturing segments, some near the maturing state and some in the emerging and growth stages. These include aeronautics, space vehicles, automobiles, heavy engineering, electrical products, white goods and consumer items, to name a few. There is, of course, the caveat that in each of these certain critical internals are based either on overseas technical designs or imported into the country from the collaborators. Examples could be engines, compressors and the like. Yet, even in these areas capability exists to build indigenously capable systems, for example cryogenic engines or ejection systems in space equipment. It is instructive that the development of Indian industry occurred when phased manufacturing programs as in the case of automobiles and national policy missions as in the case of space engineering were put in place.
Singular drive, plural participation
There are two main considerations that drive indigenous manufacture. Firstly, the Original Equipment Manufacturer (OEM) must feel and demonstrate the passion for developing a completely indigenous product as a long term goal (say of 5 years). Secondly, the OEM should be willing to spread the same passion to multiple industries to participate and support the indigenous OEM product. The national space mission, for example, became an icon of indigenous success because of its efforts to draw in as many as two hundred industries in the development of indigenous space systems and equipment. Maruti Suzuki became the most indigenized car by bringing along all of the Japanese component makers to India. There is, however, only a limited indigenization that an individual firm can prompt. An automobile OEM typically can influence its component makers to come to India but not necessarily the raw material makers, for example steel.
OEMs require more than normal procurement or vendor development activities to develop high quality, low cost indigenous activities. A complete supply chain, cascading the Bill of Materials (BOM) down to the basic materials would need to be drawn up to establish, first the plurality of participation that is required and next the suitability of the available component and materials infrastructure. A detailed gap analysis would then establish the task of development at hand. While it would be impractical and inefficient to try to develop the entire new BOM of an OEM product to new standards, a judicious mix of indigenous development and import access should be examined on a case by case basis. The strategic plan for total indigenous development has several imponderables to consider, essentially related to the technological and investment considerations.
Cascade, cluster
To establish a complete indigenous industrial infrastructure that enables an OEM product with 100 percent indigenous content, there exist two approaches. The first approach is the cascade approach discussed briefly above. In the cascade approach, the drawback or limitation is that what works at the OEM level does not necessarily apply to the steel sheet level. In a typical automobile weight of 1400 kg, approximately 75 percent is metal weight (iron, steel and aluminum). Steel by itself constitutes 60 percent at 800 kg.  Considering that most cars in India are small cars, the average weight of a car could be 1100 kg and the average weight of steel per car could be lower at 600 kg. India produces 3 million cars which is an economical volume of production. The three million per annum car output requires a steel tonnage of 1.8 million per annum. This level of steel tonnage is, however, less economical for steel plants. Moreover, the lead time for a new steel plant could be as high as 10 years and for modernization 5 years. On the other hand, changes in steel technology as a subset of automotive technology could be occurring every 5 years. The investment in a steel plant’s technological modernization could be three times that of an automobile plant’s modernization.   Such imbalances in technological, lead time and investment considerations in OEM and basic material industries make a coordinated cascade approach that seeks complete indigenization across the entire industrial spectrum more of an aspiration than a practical proposition.
In the cluster approach, several indigenous industrial infrastructural capabilities are created regardless of any coordinated pull from the OEM sector. This could be infrastructure in all kinds of metals, machine tools and plastics, for example. Early industrialization in India followed this approach. There are again two fundamental considerations in the cluster approach.  The first consideration is that of creation of islands of excellence in various industrial segments which like bubbles would grow and coalesce into larger clusters. The second is that individual industries, if developed well, provide their own push effect to overall industrialization. The cluster approach of indigenous industrialization works well in the short and medium term but does not provide spread or competitiveness in the long term. In India, for example, steel and machine tools were developed as the first islands of indigenous industrialization without giving any fillip or support of any sort to the automobile industry which is one of the most important users of these two segments, and which also sets the higher standards of technology  (in terms of machining and material tolerances). As a result, not only the automobile industry lagged behind domestic needs for decades (until Maruti Suzuki came on the scene in the 1980s) and international capabilities but also the enabling industries of steel and machine tools remained uncompetitive in both quantity and quality.
Integrated development
Integrated development of a spectrum of industries with a simultaneous approach of cascade and cluster strategies is well merited. The success of the Indian National Space Mission in accomplishing its mission with largely indigenous clusters is a great example of combining the cascade and cluster approaches. Whatever be the past considerations in not applying such a combined approach in indigenous industrial development, the move forward requires such an approach, particularly because India has achieved globally critical mass in a number of industries. India, for example, is the sixth largest producer in the world of all four wheeler automobiles with an annual output of 4 million units (nearly 6 percent, out of a global output of 70 million units). India is also the fifth largest producer of steel with an annual output of around 80 million tonnes (5 percent, out of a global output of 1600 million tonnes).  In terms of cellular phone usage, India is the second highest user in the world with cell phones in use of 1.2 billion (20 percent, out of the world’s use of cell phones being 6 billion). There are, however, a few industries like machine tools where India has the potential but is just 3 percent of the global output in dollar terms, and just 10 percent of even the Chinese machine tool output.   
India can catapult into global industrial output if it adopts an integrated strategy of cascade and cluster. For the cascade component of the integrated strategy to be successful, India must choose industries which would move in alignment with India’s population and the country’s changing demographic, employment and income profiles, all of which are a clear positive for maximizing industrial output. Electrical, electronic, computing and telecommunication devices and equipment, automobile, rolling stock, aircraft and machine tool products, and chemical, oil and gas and pharmaceutical products, for example, can define and pull the cascade. Semiconductor, chip, steel and other metal and non-metal, forging, casting, tooling, mold and die industries could be the clusters that support the cascades. The combination of cascades and clusters could together boost indigenous industrial production where consumption and usage has already reached (or will reach) critical scale. The implementation of the cascade and cluster strategy requires active collaboration between various industries on one hand, and the industry in the aggregate and the governments, central and state, on the other.
Prescriptive need
However good the concept of cascade and cluster industrial paradigm is, it cannot be proactively initiated and effectively implemented without a prescriptive approach. The prescriptive approach requires industry associations to develop strategic plans by which industries can be effective in triggering cascades and clusters. It also requires the governments to provide material support and regulatory direction to participate in the cascade and cluster strategy. If Japan could become a global industrial power by inter-industry and industry-government collaboration facilitated by the government agencies (for example, MITI), there is no reason why India cannot excel in the same manner. The fundamental transformation sought to be achieved by the Indian tablet devices could be indicative of the right prescription for the future health and vigor of Indian indigenization.
Posted by Dr CB Rao on March 3, 2013