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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