Rich Resources Could Add up to Poor Results: Costly Lessons from Tollywood Movie Disappointment, "Brahmotsavam"

In recent months, two movies of Telugu movie superstars raised huge expectations but failed to live up to them. While Sardar Gabbar Singh, starring Pawan Kalyan in the lead role, and also scripted and pseudo-directed by him released about a month ago disappointed viewers, the even more recent release, Brahmotsavam, starring Mahesh Babu in the lead role, threatens to be an even greater disaster. In fact, Brahmotsavam was a greater shocker because it seemed to have all the right ingredients: the handsome and elegant Mahesh Babu as the central anchor, three glamorous heroines Kajal, Samantha and Praneeta, an ensemble star cast of over 30 veteran stars, soulful and peppy music by Mickey J Meyer, gorgeous sets by Thota Tharani, breath-taking cinematography by Rathnavelu, an editor known for slickness, K Venkateswara Rao, famed choreographers Raju-Sundaram, a production house that splurges, and above all, a director who has track record of successful family entertainers in the past, Srikanth Addala.

Brahmotsavam was also notable for an intense level of promotions starring all the major stars and the music director and director in the 3 week run-up to the release, with clips and talks which underwrote the feel-good value of the movie, driving up viewer expectations sky high. After a great pre-release extravaganza, the movie released in over 900 screens globally. It is remarkable that from the very first show, there was a negative view about the movie across regions and across viewers, most of it centred on a meaningless and meandering second half, and all the songs wasted in the first half in rapid succession. Although the movie team has tried out a rear guard action by chopping off 18 minutes of draggy scenes in the second half and one song, there has been no improvement of the sentiment. The author has held in some of the previous blog posts that movie making is a highly enterprising creative endeavour and offers valuable management lessons, both from successes and failures. Brahmotsavam too offers important lessons, both for movie making and enterprise management.  

Calibrating investments

The general expectation is that if an enterprise is able to commit huge resources, either as investment or expenditure, it will be able to build world class infrastructure and business. While there is some proportionality between resources and outcomes the curve of proportionality tapers off after a stage. In fact, expenditures beyond what may be called ‘functionality’ level tend to be sunk costs with declining levels of returns. The phenomenon may be comparable to what a specific piece of sponge can absorb. Brahmotsavam has a super-gorgeous mounting of a movie but the movie as a visual treat made possible by a lavish budget (by Indian standards) of Rs 750 million but had little meaning without consistent emotional tether (which would have required no investments of such scale).

In business too, luxurious offices and gold plated factories have a visual impact but beyond a functionally utilitarian scale, they add more costs and overheads than value.  Internal value generation at increasing levels, which is hard to come by, is required to cater to increased investments.  Alternatively, investments have to be tailored to the value that can be created.

Synergizing expertise

Expertise is the key to success. The foundation of Brahmotsavam was to have the best expert in each field contribute to his or her department being top class. Indeed, the assumption played out well individually, there being nothing to fault any department in terms of cinematic excellence. However, together it made incoherent sense. Potentially, experts took specialized views rather than a comprehensive view of the movie, and the movie director was more preoccupied in providing each stalwart with a sub-canvas commensurate with his expertise, rather than building a more holistic total canvas with appropriate embellishments from all.

In business organizations too, having too many experts could lead to functional specialization but business sub-optimization. The CEO would more often than not be preoccupied with satisfying the individual domain needs of expert CXOs rather than do what is holistically good for the enterprise.

Roles to drive numbers

Closely allied with having more technician-experts on board, Brahmotsavam had even more stars for the screen. In a movie of 150 minutes having more than 30 plus veterans would only mean not more than 5 minutes of screen time for each star. With the hero Mahesh being required to be in every scene throughout the movie to carry it on his able shoulders, each veteran’s average screen time has been even lower. Rather than tight story telling what emerges in such a scenario is a visual spectacle of all stars vying for screen space. In low cost economies the tendency to over-deploy people is endemic; seen in movies as much as in businesses.

Having too many people lumped into a value chain is less productive than their being spread out across the value chain, in a role based manner. When a technical or operational bottleneck occurs it is the qualitative ingenuity of a few rather than quantitative redundancy of a mass that works.

Book rather than chapters

Brahmotsavam is much like a classic case of a book with an inspiring title and having a few chapters that are brilliant and several which are weak. The movie certainly has its beautiful frames and touching moments which reflect the theme in the first half but there are also several frames which run away from the theme as the hero takes off on a rather meaningless pan-Indian journey to connect with some spread out relatives. A book must be interesting to read cover to cover; so must be a movie from start to finish. Continuing emotional connect with the reader or viewer underwrites success in both the cases.

Enterprise is a series of projects but is an unending book or movie. Participants in an enterprise, employees or investors, look to a continuing story that is engaging. The moment a project wanes, and gives the feel of a ‘done chapter’, and in fact has more such disappointments in sequence or in store, enterprise starts becoming an emotionally and economically losing proposition.   

Directorial deficit

All said and done, the director remains the central anchor for a movie. Only he or she holds in his mind a mental picture of how he or she would convert the emotional theme to visual frames. He alone knows why he has engaged the stars and technicians he has engaged and the results expected of them. In Brahmotsavam, the director has failed in his primary role, probably with the misplaced belief that conversion of the concept of his earlier successful family movie set in rural background into an urban setting would provide a similar success. He is also responsible for all the deficiencies listed above, again due to excess of confidence and infallibility. Sometimes, directors are hamstrung by weighty producers and stars which also impacts their delivery on screen.  

The CEO of an enterprise wields a similar powerful role. The growth script or turnaround script can only be in his hands. Those CEOs who do not exercise this right and obligation or are not allowed to exercise such a role by the promoters and boards could lead to sub-optimal, if not disastrous, results for their companies.  

Expectations management

The modern society grows on expectations. Expectations management which is relatively new is different from advertisement management which has been age old. While the latter largely explains what a product or service stands for, and only subtly raises expectations, expectations management through a series of leaks, chats, promos presents an alluring image of great things to come. That said, there must be some link between the delivered reality and promised utopia. The issue with Brahmotsavam is that expectations were driven to crazy heights by focusing only on the good parts of the movie. Those who were exposed to such feel-good promos expected that the entire would pan out like the promos and were highly disappointed when things did not turn out as promised.

Companies are well within their rights to promote their products. In fact, it speaks of the collective confidence of the corporate sector that they are able to openly present futuristic features without concerns of copying by competition. That said, expectations have to be set in realistic zones to be able to deliver on them.

Customer supremacy

Even after the high profile debacle, the stars and the makers of Brahmotsavam must be wondering what hit them and why things went wrong. The reason lies in the possibility that all of them took the viewer for granted, and assumed that flashes of brilliance would suffice to impress the viewers. The fact, however, is that the user has his own way of feeling the experience which develops as one sees the movie. While many reasons for viewer dissatisfaction can be adduced as above there may indeed be no one reason why the viewers reject a movie. It can only be related to rather qualitative phenomenon of user experience.

Enterprises are not immune to failing to gauge user experience. Apple has tasted many successes by providing a great user experience on its iPod, iPhone and iPad products but has failed to provide the same user experience with its Apple watch. The customer continues to be supreme in judging a new product regardless of the past successes of a firm.  

Open to feedback

One can have open-to-sky ambitions with a relentless focus and unremitting faith in the goals and processes.  In fact, such passion is needed to fuel growth ambitions. However, as with many things the dividing lines between healthy ownership of a concept and unhealthy possessiveness, and between positive commitment and blind obsession are indeed thin. When a movie is taken with a few overarching themes (eternal family sentiment, charismatic Mahesh Babu, best-in-class departments, successful director etc.,) everyone believes that the success is assured. The makers must, however, be open and sensitive to feedback, which alone can course-correct disasters in the making.

Enterprises tend to be far less interactive and open-house oriented as movie houses are. Yet, if movie houses themselves suffer from myopic or obscured approach towards open feedback, the asphyxiating situation in tightly run enterprises can only be imagined. The need to facilitate and receive continuous feedback in an open manner and respond to that meaningfully is quite evident.

Result not a sum of parts

We are all aware of the constant exhortation that organizations must aim at synergy, whereby the sum is more than a mere addition of numbers. As this blog post illustrates parts are extremely critical but even the best parts cannot automatically make for even a viable product, let alone the best product. Just as in a mechanical watch all components must be fine-tuned for perfect assembly and perfect operation, every product and a project whether it is moviemaking or product manufacture must have parts that are fine-tuned in a success formula that is, in the overall, cohesive, balanced and integrated. Without coherent, balanced and unified thought as well as execution, the result of an endeavour may not even be a sum of parts!

Hopefully, the lessons of Brahmotsavam will be learnt. There was once a movie, Dil Se, made in 1998 by an ace director (Mani Ratnam ) with a star hero (Shahrukh Khan) and some of the finest technicians ( A R Rahman and Gulzar, for example) which raised huge expectations as a visual and musical masterpiece but turned out to be a huge box-office disappointment. Both the director and actor (and, of course other technicians) picked up the pieces and went on to make great movies, individually and collectively, post-failure. All stakeholders of Brahmotsavam, likewise, would hopefully bring out their collective best in their future movie endeavours.

That said, why should anyone, movie makers or enterprise leaders, fail at all when success can be assured with some sensibility and sensitivity as well as some reflection and introspection?

Posted by Dr CB Rao on May 27, 2016

Ten Commandments of Indian Entrepreneurship: Five Inspirational and Five Precautionary!

There were times when graduates of premium engineering and management institutes thought of anything other than professional career as the only employment option. Things have changed significantly in current times with young professionals forsaking attractive employment offers and going in for entrepreneurial ventures. There was of course, the more established trend, of moving into entrepreneurship after a few years of work experience and savings accrual. Both segments reflected first generation entrepreneurship. India Bulls, Bharti, Apollo, Orchid, Sun, RedBus, Wellspun, Dusters, JustDial, Flipkart and a host of entrepreneurial companies are examples of such entrepreneurial initiatives. Within the first generation entrepreneurship, the class that jumps into the entrepreneurial journey straight after education needs special kudos. They may be called India’s new age entrepreneurs. While business management and leadership are common across all enterprises, established or entrepreneurial, there are certain guidelines which Indian entrepreneurs must be cognizant of to a greater extent. 

Young entrepreneurs are typically full of academic accomplishment and growth aspiration, and typically imbue their immediate environment with high energy and anticipatory excitement. They also tend to dream with the guts that are required to turn their dreams into realities. While it is difficult to hypothesize when and how the young graduates are influenced in favor of entrepreneurship, the placement season, more often than not, tends to be the period when they get to know not only their worth but also whether their aspirations and corporate offerings match. The placement season is not only a time of futuristic direction and career shaping but also a period of self-awareness. That is the period when all students feel equipped to enter industry or business, but some feel inspired to give back to the society in terms of wealth creation through organizations and businesses they aspire to establish.  This blog post postulates ten principles which are particularly relevant for Indian entrepreneurship. 

The context   

Most young entrepreneurs get their entrepreneurial call as they pursue management programs. The reasons are not far to seek. Management programs, in particular, provide students with a unique value addition that puts the basic academic capabilities, be it engineering, science or commerce to even more efficient and effective use. Management program provide one with unique conceptual and analytical skills which helps one view complex business problems in terms of their simple core issues on one hand and at the same time splice them in terms of diverse perspectives with insightful analytics on the other.  In addition, the programs equip people with multiple soft skills, the main skill being people skills.  The institutes and programs prepare the students not merely to be managers of day-to-day operations but also be equipped to be potential leaders who can shape the strategic future of  organizations.  

That said, there is a valid concern that scientists and technologists would be straying away from their core if they pursue management programs. The only way this concern can be mitigated is through letting the managerial thinking create the spark of entrepreneurship. India holds great potential; all economists agree that India would be the third largest economy of the world by 2030 or so.  Statistics, however, tell only one part of the story.  In qualitative terms, our growth has been more in terms of islands of manufacturing excellence, retail luxury or social affluence.  We need to do much more in terms of social infrastructure, be it schools, colleges, universities, hospitals or industrial infrastructure, be it power, roadways, railways, seaports and airports.  The opportunity for contribution by young professional aspirants to Indian economy therefore stand out, the opportunity is not merely one of a regular job rather it is more of making a difference through an entrepreneurial spirit, of creating wealth and jobs for the society.

The challenge 

The journey as an entrepreneur is not only the most challenging but also the most satisfying one.  The journey is challenging because, more often than not, one as an entrepreneur, would have nothing but one’s dream to pursue and convert into reality.  The entrepreneur is most likely to lack the organization, the financial resources and in some cases even the support of his or her near and dear as he or she pursues the entrepreneurial journey.  That said, it is this challenge of creating something valuable from almost nothing, against all odds, in pursuance of one’s dream makes for the entrepreneurial excitement. No entrepreneurial journey, however, cannot commence without seed capital to support the dream idea. The more fortunate ones step up from the initial security of their regular self-employed businesses, for example pharmaceutical distribution or medical practice, to venture into product development and manufacture or healthcare service; Sun Pharma’s Dilip Sanghvi and Apollo’s Dr Pratap Reddy, respectively, are two examples. Many others leverage their professional employment opportunities, in India or abroad, to generate savings. 

Either way, one would have to go through the tribulations and excitement of an entrepreneurial journey. Even the most successful entrepreneurial behemoth cannot be immune to vicissitudes. Dr Reddy’s which seemed to make no wrong move hit a bad patch subsequent to the acquisition of Betapharm in Germany. To be a successful entrepreneur, one may hypothesize a three step process. The first is self-discovery; a recognition of the yearning within to be an entrepreneur. The second is the ability to spot the niche. The third is the ability to raise the seed capital. The ecosystem for entrepreneurs in India pales in comparison to the one that exists in the USA. It is to the credit of the new age entrepreneurs that they are undaunted. For example, Ola, a taxi service startup founded by two IIT-Bombay graduates has succeeded in starting its services and raising funds ahead of someone like Uber making an entry into India. So do the likes of Café Coffee Day in being ahead of Starbucks, for example. Whether it is lateral entrepreneurship or new age entrepreneurship, there exist certain commandments; recognizing them entrepreneurs can institutionalize growth and sustainability in their entrepreneurial ventures.

High Fives 

First and foremost, is the discovery of the intrinsic inspiration and passion within a person to become an entrepreneur. All successful entrepreneurs (and even unsuccessful ones) would agree that there could be no avocation more challenging and exciting than that of being an entrepreneur.  The satisfaction of creating a business of value to the society, of building an organization creating employment, and developing a brand that brings recognition to the nation are well worth all the problems one would face in assembling a like minded team, finding progressive investors and creating an R&D, manufacturing and marketing infrastructure.  Dedication and commitment of an authentic entrepreneur  would be such that even If one were given an option to restart the my life after a degree, he or she would unhesitatingly choose to be an entrepreneur again. 

Secondly, and this is as important to established businesses as to entrepreneurial start-ups, the right business choice is one which helps an entrepreneur secure a toehold; and within the business the   product choice is what makes or breaks a business; and a right product choice backed by the deployment of efficient process technology, provides the sustainability to business. The success of new age entrepreneurs lies in reinventing the ordinary services into new customer-centric services deploying new technologies of development, manufacture and delivery. Even ordinary businesses like recruitment, coffee serving and ticket booking can be viable entrepreneurial activities with a dash of technology and a feel of customer-fulfillment, achieving differentiation and sustainability in the process.  

Thirdly, nimble execution is as critical as differentiated strategy, especially to entrepreneurial firms. Execution cannot be at the cost of quality though.  Ability to establish a quick but perfect beachhead not only optimizes the investment-revenue equation but also raises entry barriers to the others. Many successful real estate firms began their journey by delivering their first projects fast and perfect. Great Lakes Institute of Management in Chennai, set up by Professor Bala Balachandran has to its credit the fastest execution time frame for a high quality academic infrastructure of its kind.  Establishing or accessing world-class R&D and manufacturing infrastructure in record time frames, developing products and securing regulatory approvals in the shortest time frame is a sure prescription for success in the scale-up phase of an entrepreneurial startup. 

Fourthly, sustainable competitive advantage is derived by operating at opposite ends of spectrum without compromise to any one factor; for example, being the highest quality producer with the lowest cost position, being lean in organization but powerful in delivery, balancing efficiency requirements of high throughput with market needs of low batch sizes and high product variety and driving high revenue and market share without compromise to profitability and sustainability. It is important for the entrepreneurs to focus on the critical parameter that differentiates one’s competitiveness and then reinforce it. An icecream maker, for example, has to focus on two essential parameters: access to high quality milk and integration of a cold chain. Everything else, comes next.

Fifthly, technology ought to play a major role in whatever we conceive of, and execute. If Flipkart, despite being a first generation enterprise, could secure a leading position in the highly competitive e-retailing format, it is in no small measure to its unswerving emphasis on high technology, including certain quality and compliance differentiators specific to Indian e-purchase environment. Entrepreneurs often are forced to make choices between technological competitiveness and resource optimization. Those who persevered with technology eventually end up successful. The case of MTR Foods in terms of newer technologies driving value despite the limitations of a family enterprise is an example. 

Check fives 

While the above are significant positive lessons for a successful entrepreneurial journey, there also exist some pitfalls one must be aware of.  Firstly, as a first generation enterprise, it is an eternal struggle to overcome financial resource limitations.  Given the classic preference in the Indian stock markets that promoter should stay invested in the company with high promoter share-holding, it is a challenge to raise risk capital without dilution.  Perforce, one is required to depend on debt.  The race to become what one is capable of in terms of product, manufacturing and marketing canvas has to be tempered by prudential norms of debt-equity structure from time to time.  Dilution of equity and monetization of non-core assets would become inevitable, to restore balance sheet stability and sustain future growth, however emotionally painful such options would seem to be.  

Secondly, as a company evolves from being an entrepreneurial start-up to become a more organized enterprise it is important to keep developing organization structures and talent profiles as well as systems and processes that move in step with changing business requirements.  The art of management and leadership vary significantly between a start-up and an established enterprise; the leadership teams must display a high degree of self-awareness and sensitivity in this important aspect. Even a highly successful company such as Infosys struggled with reinventing itself to changing levels of competition and the increasing levels of internal aspirations of people for positions of influence and power.

Thirdly, all organized activity, including its competitive advantage, will stem from people, and only people. The success of a first generation enterprise such as Orchid Pharma in becoming a globally recognized pharmaceutical major has been directly linked to the founder’s ability to attract and leverage some of the stalwarts in science, engineering and business in achieving aggressive technological development and business growth.  The real source of competitive advantage of an entrepreneurial firm would lie in its ability to attract the best talent with inspirational goals and empowering ecosystem.  The day a front ranking organization loses the ability to attract such talent, one may say that the organization has lost its soul!  

Fourthly, as entrepreneurs scale up their organizations and businesses, they must learn to evolve from the science of making right product choices to the art of making right business choices.  As a successful entrepreneur, once he or she brings up a business to a critical mass, he or she must learn how to forego control, entrust it to other professionals and redirect his or her entrepreneurial entry and passion into newer vistas of growth.  Inability to make this transition in a timely and graceful manner could cost you the business dearly and also sub-optimizing future potential immensely. The recent split announced by Indiabulls’ three promoters indicates their realization that their business has outgrown the desire to stay together. 

Fifthly, entrepreneurs at least the successful ones, would need to look beyond their own firms and businesses, and consider how they can contribute to creation of virtuous ecosystems in the country that institutionalize entrepreneurial spirit.  This requires establishment of a positive climate of angel investing, start-up investment and equity investment besides an institutional framework for incubation of ideas.  This requires that entrepreneurs should not be lost in the success of their enterprises but must interact with the broader stakeholder community so that our nation can be truly a nation of entrepreneurs. While N R Narayana Murthy’s Catamaran is an example but the hugely successful entrepreneurs and entrepreneurial groups can do much more, if they put their heart to creating an Indian entrepreneurial ecosystem. 

Ten commandments

The growth of India’s private sector has been that of India’s entrepreneurship, right from the historical days of Tatas and Birlas. Indian entrepreneurship has been less flamboyant than it ought to have been, given its successes. The potential to maximize new age entrepreneurship is also less recognized than it ought to be. India’s future still has several challenges of scarcity and inequity, but with dedicated and diversified entrepreneurship each challenge is an opportunity of development for both established businesses and entrepreneurial startups. As one embarks upon an entrepreneurial journey, the ten themes of entrepreneurship of this blog post should be of some inspiration and guidance.

Posted by Dr CB Rao on July 13, 2014

 

Transformative Leadership of Ratan Naval Tata: A Role Model of Ten Leadership Dimensions

After a glorious innings of 21 years at the helm of India's largest conglomerate, the Tata Group, its Chairman Ratan Naval Tata handed over the baton to Cyrus Mistry today, December 28, 2012. This caps the remarkable 5 decade career of Ratan Tata who joined the Tata Group in 1962 as an apprentice, became a director of National Radio and Electronics (NELCO) in 1971, became a director on the board of Tata Sons, the Group’s holding company in 1974, became the chairman of Tata Industries in 1981 (after the patriarch Chairman JRD Tata stepped down) and finally became the Chairman of the Tata group in 1991.

This orderly and meticulously planned succession, on Ratan's 75th birthday is in keeping with the Group's retirement policy of chieftains stepping aside when they turn 75, a policy which was crafted by Ratan himself with forethought. Ratan's tenure at Tata has been path-breaking and it is no surprise that it has already drawn several eulogies in the media, including a rare cover story in the prestigious international journal, The Economist. Ratan Tata clearly had a magical spell in his career at the Tata Group, and more specifically in the over two decade long career as the captain of the Tata Group.

Tata – a distinctive group

While there are other large private industrial groups in India, notably the Birlas and Reliance, no Indian corporate group is as monolithic and yet as diversified as the Tata Group. The Group, known for operating in almost every domain from automobiles to aerospace, salt to steel and information technology to retail management has a list of corporate entities, each a behemoth in itself, that have achieved international scale and scope in design, manufacture and delivery. To be associated with each such major company of the Group as its Chairman, be it Tata Motors, Tata Steel, Tata Consultancy Services, Tata Chemicals, Tata Global Beverages or Tata Power, and lay his distinctive imprint on the affairs of the company is no mean task for any leader, even globally.

The legacy of Ratan Tata will continue to live on in the Tata Group given the enormous contributions he has made to the Group on several dimensions. This blog post summarizes ten of his greatest strategic achievements for the Group. It is instructive that the dimensions of his achievement, individually and collectively, symbolize the essentials of astute leadership. In more ways than one, Ratan Tata symbolizes a role model of highly effective leadership that has taken the vicissitudes of India as an emerging market and the turbulence of the global economy in its stride successfully. His leadership performance leads us to the model of 10 leadership dimensions, a model which is highly relevant and appropriate for academic simulation and practical followership. And by no means, these are exhaustive and comprehensive; Ratan Tata and the Tata Group have achieved far more than what a modest blog post can do justice to!

Consolidation

Ratan Tata's tenure at the helm of Tata Group which commenced in 1991 (although he was inducted into the Tata Group in 1962 and given select turnaround assignments) was marked by the consolidation of over 300 businesses and firms into a more logical and more cohesive 100 odd businesses focusing on technology with a balance of mature, established industrial firms, fast growing businesses and nascent, sunrise initiatives. The Group came to be known as one that touches the lives of the people at large through wide ranging products and services which signify quality. A leader's legacy is judged by the portfolio of businesses he or she runs. Tata Group's consolidation is a remarkable evidence of the astuteness of the strategic prioritization set in motion by Ratan Tata. Simultaneously, the manner in which he increased the holding of Tata Sons in various group companies reflects the strategic and financial acumen in protecting the promoter interests in the consolidated group.

Professionalization
From the very early years of inception in the late 1800s, the Tata Group was known for its professional moorings, relative to other groups and entities. Nevertheless, when Ratan Tata took charge of the Group, he found that the larger companies were run by established powerful veterans almost as individual fiefdoms. This had inhibited a unified group focus, debilitated growth impulse and introduced crony management. It is to the credit of Ratan Tata that he displayed gumption and resoluteness to "de-satrap" the Tata Group, induct talented professional leaders from outside the Group, rotate and elevate performing managers and introduce orderly processes of retirement and succession planning. A leader's ability is demonstrated by the capability to lead several capable leaders with equity and equanimity, catalyzing in the process a rich blend of youthful aggression and experienced wisdom. Ratan Tata's professionalization of the Group's leadership bore all the hallmarks of an authentic leader in command of a sprawling conglomerate, managed by multiple leaders.

Globalization

Ratan Tata's start of the Chairmanship of the Group in 1991 coincided with the opening up of the Indian economy and the unleashing of a slew of economic reforms in 1992. Ratan Tata's stewardship of the Tata Group in terms of globalization of domestic entities through entry into sunrise sectors and overseas acquisitions has been unrivalled in the Indian industry. During his tenure, Tata Global Beverages (formerly Tata Tea), Tata Motors, Tata Chemicals and Tata Steel emerged as global companies. There have been over 40 major acquisitions by the entities of the Tata Group, some of them larger in size than the acquiring entities. Indian Hotels, Tata Chemicals, Tata Communications, Tata Consultancy Services, Tata Global Beverages, Tata Motors, Tata Power and Tata Steel have led such acquisitions between 2004 and 2010, reflecting the intensity of his globalization drive. Successful turnaround and/or growth of the acquired businesses has been a distinctive hallmark of his globalization drive. An ability to globalize successfully and in a sustainable manner is the hallmark of a global leader, and Ratan Tata demonstrated a unique acumen for globalization in a daring and pioneering manner. And, the fact that in almost all the cases, the managements and employees of the acquired entities welcomed the Tata group as the preferred acquirer speaks volumes about the cultural ethos and brand equity of the Tata Group.

Innovation
Innovation is the core of sustainable growth for an enterprise. Ratan Tata was known to have an inventive mind for creative product design and an innovative approach to conducting competitive business. His passion for indigenous innovation showed off in no uncertain terms when he got Tata Motors to develop and manufacture India’s indigenously developed passenger car, Indica in 1998. His subsequent drive in the mid and late-2000s to develop, manufacture and launch Nano small car as the world's cheapest four door family car (against all odds) is another example of creative passion to fulfill mass consumer needs. Tata Swach, a low cost water purifier and Tata’s plan for affordable quality homes are further examples of innovating to meet India’s unique developmental needs. He was also open to listening to, and fostering, his colleagues' innovative ideas. The aggressive and ethnic approach to the watch and jewels business that Titan and Tanishq adopted as well as the first-off-the-block approach for digital broadcasting that TataSky pioneered are examples of his support to his entities becoming innovative in business.

Diversification

A wise leader diversifies his business and product portfolio to be able to not only drive growth but also to counter cyclical trends. His drive to transform Tata Motors from its predominantly truck and bus business to a full-line automobile business has been a striking example. There is no integrated automobile firm in the world that manufactures an unmatched range, from the smallest and the cheapest Nano to the most expensive Jaguars and Rovers (as well as the smallest trucks and buses, Ace and Magic respectively to the largest Prima trucks). The segmentation of the hospitality business into four brands of hotels was another notable example of diversifying the market base to cover a wide range of travelers in budget, business, affluent and luxury travel categories. Equally impressive has been his foray into emerging growth sectors such as telecommunications and consumer retailing. Some diversification moves such as the move into basic pharmaceutical research have not done well. That does not distract us from his fundamental vision and fortitude in identifying new areas of growth on a continuous basis, whether it is solar power, aerospace or automotive components, and more recently coffee chains (in joint venture with Starbucks). An ability to refocus and reprioritize has not come in the way of smart diversification for Ratan Tata, reflecting his visionary approach to consolidating and growing the Group.

Harmonization

A Group tends to get known not only for its businesses but also for a homogenous brand equity that flows through the apparently unconnected businesses and stands out as a binding force across the independent legal entities. Ratan Tata has been a prime mover in rebranding the Tata brand both visually and emotionally, and also connecting each entity as a Tata Enterprise. The Group also developed a common code of ethics, a common standard of corporate governance and, as referred to earlier, a common retirement and succession policy to ensure that all the Group companies reflected harmonized standards. In a milieu where growth was and is seen to be dependent on external support, the Tata Group stands out as a proof of how companies dedicated to excellence and probity can continue to grow on their own merits. A leader inspires his entities as well as the external world by the standards he sets for himself. Ratan Tata excelled in setting benchmarks that drew the best global brands to collaborate with him and the Group. It is not surprising therefore that Tata has spoken, in his farewell letter to the employees about the Tata Group playing an important role in the continued development of India, providing leadership in various industrial segments it operates and living by the value systems and ethical standards on which the Group was founded.

Socialization

The Tata Group has always been in the forefront of social development. The Group, especially the lead companies such as Tata Motors and Tata Steel, have been in the forefront of integrated township development for Tata employees, complete with schooling and hospitals as well as utility systems. Under Ratan Tata, corporate social responsibility took a more institutionalized and inclusive turn with the Group spending approximately 2 percent of its turnover on projects of corporate social responsibility. Himself a well educated professional (with BS in Architecture from Cornell University), Ratan Tata was in the forefront of supporting educational causes. His USD 50 million grant in 2008 to his Alma Mater Cornell University and the subsequent grant of USD 50 million to Harvard University to establish dedicated educational forums stand out as the largest and most visible examples of corporate educational support by the Indian industry. He continued to maintain the Group’s commitment and support to academic institutions and industrial laboratories such as the Indian Institute of Science (IISc) and the Tata Institute of Fundamental Research (TIFR).

Collaboration

Tata Group, over the last two decades, has taken the lead in public-private collaboration and private-private collaboration, a significant part of the credit must go to Ratan’s apolitical approach to doing business. In the late 1990s when public sector and the government on one hand and the private sector had frequent face-offs, Ratan Tata showed an amazing perspicacity in collaborating with the public sector and the government on merits. Tata Group, under his stewardship, was the first to participate in public sector disinvestment processes by acquiring Computer Maintenance Corporation (CMC) in 2001 and Videsh Sanchar Nigam Limited (VSNL) in 2002, reinforcing the Group’s position in information technology and telecommunications respectively. He was also open to collaborating with the Birla group to establish a cellular telephone services company. Over the years, his leadership became famous for collaboration in several areas to bring new technologies and new processes into the Indian milieu. While successful integration of iconic businesses such as JLR, Corus and Tetley represented one level of seamless internal collaboration, establishment of new joint ventures and alliances with companies such as Cummins, AIG, Marcopolo, BP, Starbucks and DoCoMo, to quote a few, represented the other impressive level of external collaboration.

Reinvention

Successful companies reinvent themselves periodically. Ratan Tata’s early leadership in the Group started with both successful and failed turnarounds (NELCO in 1971 and Empress Mills in 1977, respectively). Ratan drew the right lessons and ingrained reinvention as the mantra to stay competitive. Modernization represents a challenge as it requires investments that could drag down profits in a competitive business landscape. Tata was willing to sacrifice short term profits to build long term future. Listing the key entities on overseas bourses, raising large scale funding through aggressive bond issues and enhancing internal generations through performance optimization, Ratan Tata ensured that modernization of the Group always had sufficient funds. More importantly, however, Ratan Tata virtually reinvented the group by entering into new areas such as telecommunications, insurance, realty and housing, satellite services, supercomputing, consumer retailing and so on. Carrying out the reinvention on the back of domestic and global acquisitions and collaborations and alliances gave an additional competitive edge and execution speed to the Group. Within the established industrial sectors too, the focus of reinvention was applied within entities such as Tata Chemicals, Titan Watches,Tata Motors and Tata Steel. Reinvention is often associated with tough decisions and painful transitions. A visionary leader reinvents the Group in a timely manner by making reinvention itself as a positive DNA of the enterprise. Ratan Tata has been able to achieve reinvention at the entity level as well as the group level painlessly, seamlessly and productively.  

Transformation

A great leader’s mission in life is transformation. On the benchmark of transformation, Ratan Tata emerges as a leader of great strategic accomplishment. During his tenure, the group grew over 50 fold to become a USD 100 billion group, employing nearly 500,000 people. From a largely domestic orientation, the Group became truly global deriving nearly 60 percent of revenues from global sales. He transformed an essentially industrial group (which had over 75 percent of revenues from steel, power and trucks) into a diversified group (with consumer goods and technology contributing over 66 percent of revenues). Inheriting a leadership team of veterans, he infused youthfulness and vigor in the team by accelerating the development of next generation leaders. Ratan Tata’s transformation over the five decades of an illustrious career in the Tata Group, from the position of a shop floor apprentice to an entity director, a Group director and finally to the ultimate leadership role of the Group Chairman, was driven personally and professionally by the highest standards of ethical and transformative performance, which enabled him to take the Group on the transformational journey, literally walking the talk. The two decade plus leadership of Ratan Tata as the captain of the Group has made Tata as the 45^th ranked brand globally and the top ranking brand nationally. It is certain that Ratan Tata’s legacy will not only live on but inspire the successor Cyrus Mistry and the Tata leadership team to continue to achieve higher trajectories of transformative growth.

The Ten dimensions

Great leaders like Ratan Tata leave enduring lessons of management and leadership to study, absorb and follow. The ten dimensions of leadership of Ratan Tata, namely consolidation, professionalization, globalization, innovation, diversification, harmonization, socialization, collaboration, reinvention and transformation represent together a leadership paradigm that is not only unparalleled in the emerging markets but also a differentiated role model even for the developed economies. It is to be hoped that the Government of India would honour Ratan Tata for his leadership drive and industrial contributions with the highest civilian honours. Ratan Tata himself, the author is sure, would like to see his legacy grow through the institutionalization of his development and transformative leadership model in India, across enterprises and organizations, for fulfilling his vision of India as a great nation.

Posted by Dr CB Rao on December 29, 2012 (the author is an alumnus of Tata Motors).

Reverse Leadership: Forward Initiative

Leadership is often seen to be synonymous with top positions in an organization. The reasons are not far to seek. Incumbents of top positions would typically possess high competencies honed out of academic studies and practical experience. This would lend maturity and ability to steer the complex affairs of an organization. This conventional paradigm has some challenges in a world where young talent is competent and competitive and is more desirous than ever to climb higher echelons of an organization earlier than the previous generations hoped to. Many organizations do try to provide fast track opportunities to promising youngsters through faster job rotation and independent projects. Despite this variation, leadership is still held synonymous with a position one occupies, the only difference being age is perhaps less of a determining factor.

The fast track paradigm while apparently seeming to find a solution actually ends up leading to additional problems. Comparisons between composed, competent mature leaders and aggressive, talented young leaders apart, the paradigm barely covers a score of young performers at best. Performance tends to be driven by visible metrics and fierce individualism. Eventually, most fast track performers find themselves slowing down at some point of time or other based on demand and supply of talent. Virtuous organizations clearly need a more broad-based leadership canvas to be distinguished on a sustainable basis from others. Many experts, accordingly, refer to the concept of grassroots leadership but this also has its limitations.

Grassroots leadership

Grassroots leadership refers to a concept whereby leadership, as defined by the ability to lead and make things happen, occurs on a universal basis across the bottom of the organizational pyramid. Literally, it would extend to the multiple layers of the organizational pyramid. Exciting and impressive the concept may sound, it tends to remain largely utopian. The reasons often relate to the fact that in most cases focused execution tends to be the need of the hour at the operating levels. In addition, leadership requires space to create and innovate for individuals, which obviously cannot be universally made available. Moreover, most organizational processes are repetitive, requiring standardization and perseverance than versatility and promptitude. There is, however, one or two domains that could enable, or even require, grassroots leadership. Selling in the field is a clear example of grassroots leadership. 

A retail sales person or a field sales person typically serves as a microcosm of the company’s capabilities in its products and services as well as consumer need fulfillment. In a sense, he or she serves as the chief officer of the territory he or she serves. He or she is often expected to promote the products with feature selling, coordinate with multiple agencies to ensure stocks and payments, analyze and address competition, and in some cases take decisions on the spot. A field salesman could be the lowest in the hierarchy but could be expected to take leadership decisions of the highest order. Similarly, designers could be expected to be creative and resonant regardless of the level. These are, however, exceptions rather than the rule. In contrast to grassroots leadership, and in addition to its need in specific domains, reverse leadership is a paradigm of interest.

Reverse leadership  

Reverse leadership is considered to occur when so called ordinary employees or frontline managers, who are outside the leadership arena, demonstrate exceptional leadership in making things happen in the face of anticipated and unanticipated challenges. Reverse leadership provides solutions when apparently none exists. Reverse leadership often ends up providing sustainable solutions including tangibly better ways of performing corporate activities. A reverse leader is often a product of mentorship and typically emerges in an ecosystem that is willing to experiment rather than is terminally afraid of making mistakes. Reverse leadership, unlike grassroots leadership, can occur in any domain or department. Reverse leadership often also leads to visible improvement in the overall leadership strength of an organization.

There could be several examples of reverse leadership in day to day organizational life. In the movie industry, one has the examples of assistant directors coming up with astounding ways of taking certain scenes that defied the imagination of highly experienced senior directors. Cricket teams usually encounter situations where junior cricketers contribute innovative ideas of field formation in the face of opposing teams piling up runs relentlessly. A field salesman could come up with brilliant solution of off-label promotion of appropriate medicines. A designer may come up with redesign of components to reduce costs and weights and enhance strengths. A machine tool operator may come up with ideas to increase cutting speeds with tool feeds backed by novel rake angles. An accounting officer may come up with novel documentation system that cuts processing times and enhances archival capabilities.                                                                  

Characteristics of reverse leaders

Reverse leaders tend to have certain unique attributes that distinguish them from other employees. Fundamentally, they tend to be result oriented and creative process drivers. Observant always of the processes and products they own, they come up with lateral solutions to intriguing problems. Typically, they can operate under multiple constraints and yet provide optimal solutions. Such reverse leaders would require leaders in formal positions who understand the reverse leaders’ impatience and creativity in appropriate perspective, coaching and encouraging them appropriately. The unique approaches of reverse leaders are often borne out of their unique balancing of domain competencies with social skills. They have positive attitudes towards life in general.

Reverse leaders have a strong level of self-awareness which is accompanied by a strong sense of self-worth too. Their confidence, coupled with social skills, enables them to be non-egoistic but proud about their ability to drive a change. Their confidence often arises from a deep understanding of their core domain and their ability to contribute to the departmental and organizational competitiveness through such skills. As a result, when an organization is confronted by a problem, formal leaders and peers tend to look up to the reverse leaders for creative results. Reverse leaders display a high level of integrity and risk taking in their work, building trust and credibility in their competency and commitment.

Not surprisingly, reverse leaders carry out their assignments for the sheer pleasure of achieving results rather than for grandiose plans of creating fabulous careers. Typically, therefore, they are  seen to be transparent without any hidden agendas. As an extension, they also tend to be individual performers being content with the image of do-gooders. Much of their passion and dedication is driven by a motto of delighting the customers, whether internal or external. The satisfaction of changing the internal operating landscape through product and process improvements and influencing customer preferences through better product and service offerings tends to be of genuine fulfillment for them.

From reverse to formal leadership

Given the significant talent base, positive attitude set and selfless approach to performance, it is desirable that an organization nurtures an ecosystem that enables reverse leaders grow into formal leaders. This requires, at a simple level, coaching and mentoring by select formal leaders   to make the reverse leaders aware of the larger contributions they can make. At a more advanced level, they would need to acquire additional skills so that they can replicate their accomplishments on a wider scale. While certain reverse leaders would content to be individual contributors other reverse leaders would be willing to take on additional roles. Organizations which are able to recognize the different types of reverse leaders and recognize, develop, motivate and reward them would develop a solid and sustainable leadership base, and remain ahead of others.

Posted by Dr CB Rao on December 26, 2012                                                      

 

From Business Matrix to Technology Matrix: The re-crafting of the BCG Model

The BCG Growth-Share matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970s. It is based on the premise that a corporation's business units can be classified into four categories (shown as four quadrants of a business grid) based on combinations of market growth and market share relative to the largest competitor. Market growth serves as a proxy for competitive advantage and relative market share serves as a proxy for competitive advantage. These two variables of market performance are considered in the BCG model to be the critical determinants of profitability of a company.

The BCG matrix has lost much of its sheen over the years mainly because of three reasons. Firstly, business performance is influenced by a greater number of strategic factors than just market variables. Secondly, the four types of businesses are not independent of each other; some could be actually supporting the other while some could be in the kind of position they are in due to the others. Thirdly, the matrix is applicable more for broad and large markets rather than to small and niche markets. The concepts, unfortunately however, still get to be utilized extensively in academic and business settings mainly to determine the investment philosophy of a firm towards business units in each of the four segments. This is a worrisome factor.

Investment logic and fallacy

The BCG investment logic is that based on the future business and profit potential, businesses or products must be divested, analyzed, invested or milked, each of this being a mutually exclusive option, in the proponents’ view.

Businesses which have low market share and low growth rate tend to be marginal businesses which could consume disproportionately higher management time and organizational human resources. These businesses called Dogs must be divested, according to the BCG theory. Some consider these as cash traps which have little potential as a result of which the company would be better off without them than with them.

Question marks are products or businesses that grow rapidly, and as a result consume large amounts of cash. However, because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually, a cash cow when the market growth slows. If it does not become a market leader it will become a dog when market growth declines. Question marks need to be analyzed carefully to determine if they are worth the investment required to grow market share.

Stars are products or businesses that generate large sums of cash because of their strong relative market share that too in a fast growing industry, but also consume large amounts of cash because of their high growth rate. So the cash being spent and brought in approximately nets out, unless managed well. If a star can maintain its large market share it will become a cash cow when the market growth rate declines. On the other hand, if stars cannot maintain their market dominance with reasonable investment logic, they could become dogs.

As market leaders in a mature market, cash cows are businesses or products that exhibit a return on assets that is greater than the market growth rate – so they generate more cash than they consume. These units should be ‘milked’ extracting the profits and investing as little as possible. They provide the cash required to turn question marks into market leaders. A corporation that has more cash cows in its portfolio tends to soar high on market capitalization. The concept of milking without investments does not appear to be progressive management thought, however.

Distorted logic

The BCG Matrix has always been deficient due to its preoccupation with visible variables of market performance, ignoring the underlying drivers of either firm competencies or market requirements. In fact, the way the investment logic is built up there is a clear absence of customer or market centricity and a dominant preoccupation with the firm’s business or growth. More importantly, the corporate responsibility to serve the markets with appropriate products and businesses is made subservient to return on investment as the only criterion. Fundamentally, products and businesses are built on investments in R&D and manufacturing assets which have a useful life. The corporate leadership has a responsibility to ensure that the assets run their useful life, and if the product life cycle outlives the asset life cycle, the assets are either modernized or substituted.

The BCG Matrix also ignores the logic that product technology has the capability to make the quadrants relive their utility or lose their utility much earlier than the asset life. Automobiles, for example, are a classic group of products which can be produced to newer capabilities on apparently dated machinery. Smart phones, on the other hand, can be rendered obsolete in a year due to changes in operating systems rather than the declines in the manufacturing assets. Technology well harnessed can help channel additional investments to enhance the returns on the total investments, past and the new ones together. The computer chip is a striking example of technology beefing that can rewrite the rules of the BCG Matrix.

The essential logic of the BCG Matrix is that all products and businesses outlive their utility, and firms must therefore be opportunistic in utilization of the assets. While the Matrix explicitly considers market based variables, it does not exhort firms to first understand the key drivers of the markets prior to matching the available or future assets to the market needs. The Matrix does not take into consideration either the consumer or the competition. While it may be argued that the BCG Matrix is not intended to address the issues of competitive strategy, an important management tool cannot be allowed to be grossly deficient, leading to errors in how corporate leaders use it while trying to serve their stakeholders, including customers and investors.

Quadrants astray

The BCG Matrix is essentially a 2X2 matrix. The author of this post has been a votary of the simple, but exceptional, usefulness of a 2X2 segmentation in the strategic classification of issues, products, assets or markets (please refer to the author’s earlier post, “The 2 Dimensional Matrix: A Universal Analytical Tool” in Strategy Musings, July 3, 2011). The 2X2 product-market matrix is a fine example of connecting existing products and new products with existing markets and new markets to define four unique strategies of market penetration, product expansion, market expansion and product-market diversification. However, the product-market matrix is just a lens to clarify strategic approaches to product-market options; and no less or no more. On the other hand, the BCG Matrix is erroneously used to drive the investment strategies of a firm that could actually injure the firm and its markets.

The concept of cash cows, for example, is deleterious to the long term health of a corporation. The approach that market leading products and businesses in mature industries must be milked to earn high returns with the least investments is deficient in that it could compromise key parameters of safety, quality and productivity, if indiscriminately deployed. The temptation to earn super-profits on the basis of lean investments needs to be resisted, and instead cash cows must merit reasonable reinvestments to ensure that the products and businesses, which are favored by mature markets, meet the high standards.

Stars are considered cash guzzlers as well as cash generators. The BCG Matrix suggests good management as the requirement to ensure the net cash surplus of stars. Management could, however, just be one factor. Luxury products in any space, for example, require significant investments. The ability of the stars to be net cash generators often is a function of economic strength of the nations as much as the managerial strength of the firms. JLR, for example, became sick as part of global meltdown but became a star in the hands of Tata Motors not merely because of the Indian management (or component supplies) but also due to the global economic recovery.

Question Marks need to be analyzed, according to the BCG proponents. Question marks actually require risk taking ability on the part of the managements as the products and businesses represent bets on the future. Focus needs to be on securing the right blend of technology and management to ensure that the question marks fulfill their potential. Manufacture of fire resistant glass could be a question mark given the high costs but with appropriate technology and scale it could be the most preferred glass option at least for commercial and industrial spaces.

Dogs is an uncharitable sobriquet given to a quadrant of products and businesses which the BCG Matrix recommends to be divested. Dogs, if at all, are the most faithful, loving and adorable creatures. It is rather paradoxical to suggest that businesses that served well once upon a time should be divested once they become frail. The inability of the leadership to read market signals and technological trends should not lead to divestitures. More appropriately, resetting of business priorities or the possibility of generating greater value for a business or a product line in someone else’s hands should be the real driver. The success of IBM’s computer business under Lenovo after the acquisition is an example of win-win divestiture.

Technology matrix

Management of the product-market portfolio is one of the greatest challenges of corporate leadership. As companies become multi-product and multi-business, the challenges of portfolio management become more complex. The strategic issue for the leadership is not as simple as finding an easy solution through simplistic analytical tools such as the BCG Matrix, which has several limitations in itself. The challenge for the leadership is to have a portfolio of projects with not only with the right growth and earning parameters but also with the needed customer centricity and technological profiles. For those who visit the established automobile plants of Japan and Korea it is a surprise how the relatively older plants produce the most gleaming automobiles. The answer lies in the prudent investments that are made in product and process technologies to keep the standards high. Once the leadership starts viewing its portfolio of products and services or businesses from a true market serving perspective rather than from the firm performance perspective, the BCG Matrix loses its glamour as well as the relevance.

The more appropriate dimensions to assess the portfolio of products and businesses of a company are the product technologies and process technologies. A technology matrix drawn on product and process technologies provides sharper insights into the management of the future. A quadrant with dated product and dated process technologies has no justification to stay in economic life; divestiture is not an option. Companies which have quadrants of products and businesses with dated product and contemporary process technologies, but with contemporary product and dated process technologies would be able to grow these question marks into viable options by making relevant investments in product and process technologies respectively. Companies which secure a quadrant of businesses and products that have contemporary product and contemporary process technologies are destined to win in the current competitive world. Responsible and proactive leaderships will need to consider Technology Matrix rather than Business Matrix as the tool to achieve sustainable growth with profits.

Posted by Dr CB Rao on April 8, 2012