Saturday, June 13, 2015

Missed Opportunities but Neither Last nor Lost Opportunities!

When in 2005 the Ambani brothers, Mukesh Ambani and Anil Ambani, split the huge conglomerate business Reliance Empire of their late father Dhirubhai Ambani, the telecommunications business, along with a few other perceived growth businesses like infrastructure and financial services, went to Anil Ambani Group. The established businesses of oil, gas and textiles remained with Mukesh Ambani. At that point of time, the telecommunications business was seen as one of the growth engines of the future for the Reliance Group and it must have been difficult for the Mukesh Ambani group to relinquish the business. Given the loss of the talent base to the Anil Ambani group, any non-compete clauses that could have come into force as a result of the business division and the licensing regime that existed at that point of time the giving up of the telecommunications business would have been viewed as a departure from the domain, never meant for re-entry by the Mukesh Ambani group.

The clock has turned full circle by mid-2015, however. Addressing the 41st Annual General Meeting of Reliance Industries Limited (RIL) on June 12, 2015, the flagship company of his group, Mukesh Ambani, RIL Chairman outlined the operating and commercialization plans for Reliance Jio, the group’s highly ambitious 4G telecom venture.  According to him, Reliance Jio, from the start would deploy the latest 4G or fourth generation telecom technology, also called LTE or Long-Term Evolution to offer wireless broadband as well as voice services. He also said Jio would achieve 100 percent national coverage in just three years. He promised to make the 4G revolution affordable by bringing 4G LTE smartphones to India at a price less than Rs 4000 by December 2015 by when the beta testing operations would be expanded into regular commercial operations. All this alongside massive investments in the other existing and new businesses, all in all aggregating to Rs 2 lakh crore over the next 12 to 18 months!

Late, latest

The Reliance Jio venture is a powerful story of how one may miss or lose an opportunity, advertently or inadvertently, but could still re-enter the domain, at times with a greater scale and scope. For example, in the case of Reliance Jio, the re-entry is coupled with national broadband license, pan-India cable television multi-system operator (MSO) license and entry into broadcast TV distribution. This will enable Jio’s 4G services and phones beam HD television, video on demand and various other media services. Given that the use of data services is still a minor share of Indian Telcos’ (Bharti, Idea, Tata DoCoMo and RCom, for example) revenues, one may expect Jio to make a major foray into data based services as well. In addition, the deployment of latest generation technology implies/requires deployment of latest generation equipment across the network as opposed to upgrades to a 3G network. There are probably a few fundamental principles of business or life, in general that can be gleaned from the above.

Firstly, there is really no concept that being late in the game would necessarily mean being never in the game in future. Being late in the game, however, may provide the opportunity in business to be the latest in the game, be it in terms of products, services, infrastructure or operating processes. Obsolescence and opportunity tend to be the two sides of the same coin. Another principle is that being the latest does not necessarily mean that one would remain contemporary in future. In a related manner, being driven down by competition does not mean that business can never be driven up.  Business and life are too complex in canvas and too rollercoaster in ride to be concluded in a simplistic manner at certain cross sections of time. Rather than worry over missed or lost opportunities, individuals and industrialists would do well to be prepared for the next opportunity. This blog post looks at a few approaches to be prepared for future successes even in the face of short term setbacks. 
Value the existing

A firm would obviously aim at a new opportunity to expand and diversify or overcome the likely decline of the current business. The principal goal in all these cases is to ensure growth and build value. One would therefore presume that a missed opportunity would, at the minimum, mean loss of time in achieving the goals. The logic is similar for a graduate who desires a postgraduate specialization but misses out the opportunity. The first response in such cases must be to refocus on the existing businesses and make them stronger. This is what the Mukesh Ambani group did in the aftermath of the split. It made its core oil, petrochemicals, gas, plastics and polymer businesses stronger with additional inputs of capital and technologies and with an additional drive for scale. The capital allocated for new (missed) businesses needs to be effectively deployed in the short term to generate more cash for the future. 

Serendipity and happenstance at times help businesses discover their true full value. Companies which miss their acquisition targets are able to refocus and discover greater value in organic development or newer inorganic opportunities. Aditya Birla Group lost on the L&T bid but went on to refocus on their core metals, cement, power, and textiles businesses. Research on well managed companies, Reliance included, guides us that failed opportunities trigger renewed vigour in established businesses. When Hero group and Honda Corporation split themselves out of their Hero Honda joint venture, they lost out an opportunity to continue to combine their global technology and local marketing capabilities with new products. Such missed opportunity has made the two companies refocus on their innate capabilities and emerge successfully with own capabilities in both product and market spheres.

Keep the eye on

Missing or losing an opportunity and the corresponding refocus on the existing business does not mean that one should lose sight of or ignore the missed/lost opportunity. Prudence requires the firms to remain open and prepared for re-emergence of such opportunities. Reliance Jio is a result of such approach. Not only that, the Reliance Group’s reopening of the closed retail oil filling stations in the new decontrolled oil pricing situation is another example (they had to be closed down as they could not compete with the subsidized administered prices of public sector oil companies earlier). Another classic case is that of Tata Group’s keen interest to enter the aviation sector. Though prevented by previous policies, the Group remained observant of the trends and eventually entered the aviation sector in recent times with a minority stake in AirAsia India and as a joint venture with Singapore Airlines.

‘Keeping the eye on’ requires a continuous 360 degree evaluation approach by the strategists and businessmen. It also requires certain strong premises as to why the missed out or lost businesses were considered for entry in the first place. These two approaches, coupled with generation of cash from refocused established businesses enables firms to be prepared for re-entry. These approaches together with the founder’s passion make such renewed efforts amazingly successful. Such re-entry should never be on re-dusted and refurbished old plans. Instead, the entire plan must be recast to cater to changed scenarios including use of new technologies and new ways of doing businesses. A continuous study of industries, products and markets as well as technologies would need to be institutionalized. A Group level think tank or brains trust helps firms be prepared with superior solutions at all times.

Aim larger

Entering a product-market space, years later, after a missed out or lost opportunity does not mean that the firm has to be modest in its approach on the assumption that the space is dominated by the current incumbents. Instead, the firm can well (and probably should) be ‘disruptionist’ in its approach and aim larger and better on the strength of breakthrough products and marketing. Reliance JIo promises to do that exactly. Having lost out the early edge on Cloud and Open Platforms, Microsoft is now doing that exactly on a larger scale with wider range of devices. The key in such an approach is, of course, technology on one hand and capital on the other.

Indian aviation scene is characterised by bruised completion. Yet Tata-SIA airline VIstara has succeeded in bringing certain boldness and freshness to its aviation entry even at the late stage. Oftentimes, such re-entry requires a robust and passionate icon as an internal motivator and external mobilizer. Ratan Tata’s passion kept Tata’s aviation plans ready to take off. Satya’s break with the past enabled a larger Cloud play by Microsoft. As a lateral but relevant example, re-entry of BJP as a national mainstream party in the last year’s elections has been made possible by the iconic efforts of Shri Narandra Modi. Founders, industrialists and strategists must see every missed/lost opportunity to script a larger and more formidable success story in the future, which they personally lead.

Neither the last nor the lost

Some management experts urge managements to deprioritize established businesses and consciously seek new businesses (for example, the four quadrant BCG Business Matrix). One way to present such a business approach more positively is the three horizon McKinsey approach, wherein the first horizon is the established business which provided (and still provides) cash for new businesses and would eventually fade away, the second horizon the previously invested growth businesses which are beginning to make a contribution, and the third horizon the seeds of the future which require investments for expected growth (but also with uncertain returns). The issue with this approach is that it conditions the business mind to a certain ‘phase-out; phase-in’ business process continuum which is not necessarily the optimal. An iterative business approach taking a reasonably long time horizon is always helpful.  The continuing success of the established oil and petrochemical business and the likely success of the newer telecom business of Mukesh Ambani business group is proof enough of this.

There is no doubt that opportunities are the moments of destiny for firms and people to grasp and grow. Converting the opportunities into realities is a very deliberative and actionable leadership process but is fraught with its own uncertainties. The ability to leverage opportunities is dependent on a host of factors, ranging from internal preparedness to external environment. Internally, one may be constrained by non-alignment of stakeholders or underestimation of needed resources. Externally, one may stumble upon unexpected competition or inexplicable regulatory hurdles. It would be counter-productive to view the missed or lost opportunities as a reflection of the competencies of the firm or the individual; rather due lessons need to be learnt and the next foray fortified with increased alertness and preparedness. Likewise, it is somewhat delusory to be complacent that today’s latest would always remain the latest. What works for the re-discoverer today could work for another re-discoverer tomorrow. As the suffix Jio in Reliance Jio means, life, business or individual, is one of living long to the best!

Posted by Dr CB Rao on June 13, 2015 

1 comment:

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