Sucess strategies

Waiting for Kalki – I

The Economic Times -22 April 2002

But then India has always been about mixed verdicts. Talk to a lot of business people, and the cynical will tell you “this is the end, send your children out of the country there is no future here”. The more pragmatic will draw attention to examples of pockets of peace and prosperity defined either by business segments or geographic pockets or select companies. As always, everything you say of India, the opposite is also true. Economic and political diversity is increasing between states, and there is every combination of economic performance, political ideology, and business friendliness existing. Even within states there are oases and deserts. Ask any sales manager in any business to analyse the business and he will confirm it. So that’s the first clue to surviving the short term.

Waiting for Kalki in the form of 8% or more high quality growth which will bring universal salvation is pointless. The growth strategy going forward for the domestic market will not be about big, bold, universal, life changing moves to grow across the board. Rather it will be about managing a diverse bundle of activities designed for small, local pockets, with distinct market and consumer characteristics, and aggregating the results of those to get to respectable top line growth. The sources of sustenance will be different. Every year new economic, man made and natural disasters strike in different parts of the country and have different cycles of demand depression and recovery. The current market management paradigm that most companies use is to develop a macro market demand stimulation strategy and then allocate the implementation effort and resources across micro markets based on the market potential. It is now time to move to micro market demand stimulation, to carefully and continuously identify oases in the desert and specifically target them.

Companies need to enrich the consumer base if they have to achieve growth ambitions that are in excess of the natural growth in consumer purchasing power. The more progressive companies are already partnering with the more receptive state governments to investing in improving consumers’ lives to enable them to earn more to consume more – this is not about corporate social consciences and supportive governments, but about enlightened self interest for both. There is a win-win here for government and business, and Andhra Pradesh and Madhya Pradesh are showing the way. Activities cover design and implementation of a wide range of programs aimed at increasing income levels or improving those factors which influence demand (more working taps in villages does mean more baths!). Other partnership models include the quid pro quo of relaxed regulations / lowering taxes in exchange for project management skills to drive vote improving development projects, which may not have a direct impact on demand for the company’s products. Certainly better than the quid pro quo model of money in exchange for privileges. The fact is that no single political party controls more than half of the states that count, and therefore there are several combinations of ethics and ideology and business friendliness to choose from.

And now for some less obvious enlightened self interest. Whose business is it to ensure that Gujarat does not become a model that is replicated across the country, and that communal violence is contained? Most business people tell me that it is the Government’s business. But waiting for the Central Government to act is like waiting for Kalki to arrive. In fact, there is a view that the BJP has now strengthened its ‘brand positioning’ significantly, by reinforcing its ‘USP’, and that the brand proposition is not just unique but a selling one too. But like everything in India, I feel there is a mixed verdict here too. I would like corporate India to undertake a ‘shape public opinion and develop community based mechanisms to contain social unrest’ activity (which incidentally is quite different and more actionable than a ‘promote communal harmony’ initiative). It is a universal truth that parents do not want the physical and economic security of their children to be jeopardised. Rather than try and organise this under an industry association banner (which is also like waiting for Kalki), the workable model would be for each company to strategize and implement this activity anywhere and in any way they feel fit. As discussed earlier, it is time for many micro level interventions to add up. Business people keep insisting that this is not the business of business. But isn’t taking care of things that affect business the business of business?

In the Part1 of this article. I had written, in the context of stimulating sluggish top line growth, of the futility of waiting for the Kalki avatar of Vishnu to come and rescue us…that it would be a long and anxious wait for decisive Government action, which would fix the macro economic and social problems. I had said that we needed to find other paradigms of extracting market growth – not big, bold, all India moves, but a series of small tailored micro market initiatives which, summed up, could be significant, and ‘enlightened self interest’ partnerships with sensible state governments to enrich the soil from where future demand would grow. At that time, I thought this was a medium term solution, but now it appears that we need to think again, because Governements may come and go but not much change will happen.

We know that in India the cup of everything is always half full. And we relentlessly focus on the half empty cup which we are struggling to fill using world wide wisdom which doesn’t work as well as it does elsewhere, because “we are like that only” as a nation. Then we get cynical, and say there’s no hope for India. The last month for me has been very stressful. There has been a relentless assault on my intellectual beliefs, from many directions. I have been hearing about the half full cup that we already have. It makes me wonder, is Kalki already here, only we don’t recognise it? Let me do some loud thinking, and sharing of what I heard and read. And I know that I will get a lot of flak, as I always do, on my naiveté and lack of understanding of the macro issues! But again, look at it this way. The CII meet had the dabba wallas as a speaker. The ET awards celebrated the Ladies from Lijjat. Is it tokenism or the beginning of a new dimension to our thinking about winning ways of growing India? I’d like to think the latter.

I always believed that small scale businesses were shoddy and lacked consumer care, surviving because of protectionism; that ‘unorganised’ equalled ‘disorganised’. Hearing the Lijjat papad story was a humbling expereince – women’s cooperatives making the lowly papad, 315 crores of turnover, and a brand that qualifies to be called a brand. Being made, yet again, to reflect on the dabba wala business was more of the same feeling – one city, 100 crores plus turnover, and an innovative, low cost, amazingly efficient business model that many of us would give our eye teeth to possess. A few months ago I went to speak at a conference which had participants from the development sector. I had my standard speech about having a deep understanding of customer needs, about finding innovative business models to deliver them despite all the obvious reasons why it could not be done etc. etc. After hearing a few participants describe their ‘projects’ (developmentspeak for ‘business’), I figured they had what we struggle to have in our world – deep understanding of consumer needs, innovative solutions, and huge leverage of technology to make these solutions low cost. What they did not have was scale and the notion of the profit mind set – though many of their solutions in fact had the potential for profit. It made me wonder what scale was – if the model is to replicate small projects thousands of times over by different small groups, using a standardised template, and leveraging learning from each previous replication, is that scale or is it not?

A visit to the Gujarat milk cooperative is mind blowing. The system is amazing. The rag tag bunch of people who come to a milk collection centre, deposit their milk, instantly get their milk tested and a computer generated receipt for what they are owed, and cash for it in a few days. And the thing that assaulted my conventional paradigms about business was that they are the ones that own the system, and are the employers of the folk that create and manage the collection system and the huge modern processing facilities. And between them, and the other state cooperatives, control a turnover that is at least five thousand crores.

A statement made by Jerry Rao of Mphasis, at a recent Bombay Chamber of Commerce function, stuck in my mind. We don’t celebrate these examples of alternative business models and solutions for India, enough. When we do, it is in a way that is similar to the way we celebrate “parallel” cinema – arty, good, but not mainstream and commercial. Maybe we need to view many of these business models that we have through an analytical business lens, celebrate them more for business success and less for the human spirit and the social good that they embody, and give them the legitimacy and recognition of being mainstream business solutions for India. Critics of the Amul story say it could only have succeeded because of the era of protectionism it grew up in and ‘environment management’. But then the same can be said of mainstream business houses too. Yet they both now have a base that they can build further on, in the new world with new rules.

Last week I also heard a very insightful and inspiring talk by Dr Vijay Mahajan of ISB. His point was that 86% of the world population in developing countries should stop waiting for the 6% of population in developed countries to show them the way and find solutions for their problems. Also, that people from this 86% have demonstrated capability of solving the problems that the 6% have. So why not, as he called it, “take charge”, rather than wait (for Kalki!) Being an academic, he also talked about business education which is relevant for this 86% world. Makes a lot of sense, doesn’t it?

The best thing about India is that it is plural. We know that there are many ways to skin a cat. And that we don’t have to choose between the different ways. “This as well as that” is in the DNA of our society. If we can live with parallel economies, then we can live with parallel business models.

My friend SL Rao once said that the Indian economy is like the walk of a drunken man. You know he will eventually get home, but till then it will be two steps forward, one step sideways and one backwards. A sentiment echoed by a CEO I know, who said in frustration “The long term prospects for my business are happy, but it is the short term that could kill us”. The new reality is that economic growth will struggle along at between 5 and 5.5%, made up of an average of better than average years and worse, like the one we just saw. Like the wind chill factor that makes the same temperature feel colder, there is the quality of growth factor, which is less comforting than the number. P Chidambaram in a recent speech, described the quality of growth that we have as ‘jobless growth’, and even for those with jobs there is a contraction in disposable income. To add to it we have the double whammy of demand depression and economic value destruction caused by communal tension, fuelled by a deliberate breakdown of law and order, which the newspapers say, has the support and approval of the ‘average man on the street’. And finally, waiting for the Kalki avatar of Vishnu to come and rescue us, in the form of a good, strong government at the centre, is futile. We will see more fragmentation of power, and policy will be about common minimum programs, which, as the name suggests, is all about lowest common denominators and not highest common factors.