Five principles of “scaling up a start-up”

Start-ups are darlings of media and investors at the moment.  While many attract huge valuations and grab headlines, many of them bite dust or fade away.  Hoping you have built a start-up, how well it grows depends upon adopting few fundamental scalability principles.

First principle is checking the fundamentals. Validate your product/service is robust, and customer segments are there to encash.  Evaluate whether you have ironed out market fitment, you are relevant to customers segments that are likely to grow and spend. Finally, you have resources in terms of people and infrastructure to support the growth.

Second principle is to formalize process, and the culture you want the organization. Template and automate the surround process.  Detail the culture and align everybody in your current organization to own and drive the initiatives.  Identify and handover the management to entrepreneurs within the organization. Automate or outsource HR and related process. They save a lot of your time and energy.  Create process and systems for an organization 10X times than what you are, not to meet current requirements.

Third principle is to charge marketing. Bring in high voltage less investment drives, right from campus drives, free rides on techcrunch or IEEE or respected incubation platforms. See if you can ride on the ecosystem of OEM’s, educational institutions, HNI’s and angels.  More free vehicles better it is.

Fourth, keep your sales engine simple and stupid. Hire for their attitude than double degree MBA’s.  Bring in a centralized sales operations role that reviews and drives sale to success. Define incentives that are idiot proof.

Finally, but most critical is evaluate well prepared is the organization for your absence. Are there enough people who loose their sleep if delivery are not met or client meetings are missed.

Unlike what mercenary VC’s think, scalability is all about creating a homogenous unit. Scalability is all about creating an entity that breathes and lives a vision, follows common system and process, people and plans.

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How effectively are you using your marketing assets…..

A senior marketing director in a recent conversion blurted out that while her marketing budget has increased YoY, the ROI seems to be elusive. What was bothering her was the fact the company spends substantially in curated events managed by respected analysts, and yet Sales find the coverage insufficient. Look familiar. This is a common problems with most companies where marketing focus on few vehicles. Some believe in only the physical networking events and other lean heavily on social media platforms. Here again companies do not follow an “embellish” strategy.  Consider the broad marketing asset a company has its disposal. On the social media front, the assets range from infographics, blogs, extended blogs, videos, case studies, white papers, publications and community platforms. On the physical front, a company could use industry events, workshops, analyst meets, association forums, and breakfast meetings. What works best is when companies know how to mesh mash both physical and online assets and the assets within each category.  One strategy that could be effectively followed is to have a quarter-wise marketing plan aligned to sales expectations. Then follow up a “embellish” strategy where in the messaging starts from basic assets and progresses to high scale assets. The advantage of this is that content development and curation can happen in stages and stronger stories and messaging emerge with each insert. For example, an infographic can be used to reward the reader with rich insights with high level cause-effect. Marketing team adopts a Tufte approach that may be high on information density and distilled functionality, focus on connectedness, and communicate through high imagery. Next level, a blog, which is used to influence, informative or thought provoking, may extend the infographic content using Kafka model. The blog could contain rich arguments and silver line conclusion. Whitepaper an extensive write up of blog may be used as a teaser before all material are tested, or position credibility and promote advocacy. Beauty of the embellish model is the content not only unfolds in a consistent manner, content is richer and all of them form independent hooks to improve visibility. Similar extensive strategy can also be used for physical platforms. Companies realize focus group meetings, followed by industry forum and curated events including analyst shows provide improve coverage and affinity. Moral of the story?. When planning for marketing, consider the complete assets at your disposal and build a embellish strategy that improves reach and richness of marketing communication complementing sales.

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Bridging the craters between Sales and Marketing

Most companies in traditional industries during the formative years typically have marketing and sales managed by a single department. On the marketing front, companies usually make rudimentary investments as part of sales efforts. They at best participate in related industry events or advertise in local media. However, as organizations grow, the need to manage marketing and sales as independent and yet complementary functions becomes necessary. In our observation, most companies run into the puddle of creating silos with no tight alignment between marketing and sales departments. In some companies the lack of synergy permeates product development and delivery functions also. The result is that product development does not use marketing to get market inputs, marketing does not use sales as their antennae in the market, and sales does not use marketing to drive a marketing led sales approach to grow revenues. The need of the hour is for greater co ordination between the two functions to succeed in the highly competitive and uncertain environment. Integration is ensuring the team coordinate and complement each other as in a relay rather than a 100 meters dash.

Mechanisms to integrate: Sales and marketing need to be consistent, congruent (same goals, support each other) and co-ordinated (event plans, time promos, content marketing with sales visits). Some mechanisms in Process, Structure, people and Goals can be used by managements to achieve integration.

Processes is all about ensuring communication flow is seamless, no information hoarding happens and internal latency is nil. Process is to ensure the owner has the complete info and authority to drive the outcomes and outputs. that are well designed and implemented are most useful. Process are effective only when the actors are embedded deeply. Defining a process for marketing where certain inputs are mandated to be obtained from sales, and outputs shared with sales can help to tie down integration and embed this in the process itself. Same thing can go for sales, where they seek marketing inputs into presentations, collateral required, target customers etc. Defining a detailed process with inputs, outputs, metrics and persons responsible is very useful.CRM systems can be used to achieve a degree of integration between sales and marketing, especially when it comes to co-ordinating marketing campaigns, lead management, getting information through call reports from sales etc. Marketing and sales have different customer experiences and information. The experience a sales person has with the customer can be very different from the experience a marketing person would have in interacting with customers. Somewhere these need to be woven together to build the real picture. When integrated with an effective CRM to provide one view, it becomes a powerful tool for insight and effective action.

Structure can be used to integrate sales and marketing. Having a common Head of Sales and marketing will allow effective integration.  In large companies, cross functional teams tasked with joint activities across sales and marketing will be useful. They will be driven, there will be ownership and it will be effective.  Though. At times, it could be slow due to consensus issues and expensive as well, due to the redundancies built in. The new trend is for companies to have Integrators or SDR (Sales Development Reps) who act as co-ordinators between sales and marketing. This can be an effective low cost structure, But the KPIs of the SDR, sales and marketing folks need to be tied down to common objectives.

People aspect needs attention as well. When the culture in the organization is such that people have too much affinity for functional areas, and there are interdepartmental politics and fights, integration is not easy, and one knows for sure that this needs to be ironed out. The level and experience of people at the boundary units (like sales) makes a big difference and determines structure, process maturity, etc. When sales persons are mature and experienced, companies can work with loose processes, informality and uncertainty. But when we have in experienced and junior teams, and there is churn, systems have to be robust to help the organization withstand the confusion at the boundaries. This is a call leaders need to take – if the role is critical and processes weak, then place mature people in such roles. Co location of product development, marketing and sales is good, especially for large dispersed companies. It builds affinity and cohesion, but there could also be some trade-offs here. On the cultural front, facilitating Informal social ties, having an open environment, being job oriented rather than individual oriented, being result oriented rather than process oriented, are issues that need attention and tweaking.

Goals Integrated: In many organizations the adage “what you measure gets done” is the norm. Companies can use common objectives and goals to tie up complementary functions. Marketing and sales responsibilities can be designed around the customer buying processthe steps that the customer goes through – some call this the revenue cycle and not the sales cycle. Hence how do marketing and sales together funnel leads through awareness, interest, consideration, intent, evaluation and purchase is the key. Earlier, only the TOFU (top of the Funnel) activities qualified as marketing and the rest was sales. But as consumers research &educate themselves, 75% of buying decisions are made even before the sale begins. Hence marketing now extends all the way to the bottom of the funnel as well. Marketing is becoming more about content while sales is more about expertise, and these need to be well knit. Incentive design and linking good performance management systems are keys to get teams to work together. A lot of attention needs to be paid here, but companies are typically weak in this area, and a schism in inter-functional coordination always exists. Job rotation programs also help in getting sales and marketing folk to appreciate the challenges on either side and enable them to work well as teams.

When the above systemic, structural, cultural/people, and goal oriented issues are analysed and designed to be integrative in nature, high levels of sales and marketing integration can be achieved, leading to substantial performance improvement.

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Strengthen M&E to gain from efficiency and impact of Government projects

Across the world, governments are the major sponsors of multi-year multi-million projects. Most government projects, whether infrastructure like hospitals or roads or developmental like vaccination or HIV intervention program often do have well defined project development objectives (PDO) and well supported investments from lending agencies such as World Bank or Asian Development Bank.  Many of these projects expect to gain from improved processes and capacity building at various governmental units.  In several cases the lending organizations tie the loan component to specific areas of improvement termed tied loans. In cases where the institutional arrangements are satisfactory, lending organizations allow block grants that may be used at the discretion of the users and the government agencies. The assumption in block grants is that consumption units can prioritize their areas of improvement, plan and allocate funds in line with their prioritization.  Despite noble intentions, many lending organizations realize the funds are misused. In China World bank funds were diverted to speculative investments. Uganda and Zambia governments reported misuse of debt-relief funds to non-scheme areas. Scams in construction, animal welfare, healthcare and other schemes in India and the subcontinent are clear indication to the misuse of development loan funds.  Administrative reforms projects, including judiciary have seen large scale misuse of funds from Philippines, Russia, Sri Lanka, Ukraine and Greece.

What is the weak link in the execution of government sponsored projects. Our analysis of several World bank lent projects reveal absence of a tight leash on the PDO, activities and outcomes is the real culprit. While World Bank and other lending organizations insist on describing in detail the project context, developmental objectives, design, key indicators , safeguards and implementations, many a slip happens between the project  fund allocation and implementations. It is not uncommon to see many department heads putting their heads together in stitching a formidable Implementation completion report (ICR) to the lending agencies for their approval or extensions. While World Bank and other lending organizations insist on using result based management framework to capture YoY outputs, Outcomes and Impact, many a gaps exist in the government organization and limited knowledge of junior consultants sent by lending organizations. No formal analysis and alignment of outcomes and secondary effects are planned ahead by the implementation agency. The result, many assets and works get completed without significant long-term effect.  Lending organizations must insist on a strong M&E organization within the government departments. Formal and up-to-date data analysis must be conducted before release of YoY grants. Half yearly reports detailing the nature of assets being created or programs planned is a good indicator of what would be the expected outcomes and impact of the investments. World Bank consultants must seek an intermediate completion report with sufficient use of latest ICT technologies including images, and videos.  New age institutional lending requires lending organizations deploying more investments in M&E to reduce fiduciary compliance.

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A structured approach to professionalizing a family business

Family businesses are a significant constituent of many economies. Family business have certain traits like high emotional involvement, unilateral decision making and optimization focus that offer unique advantages, more so in tough times. However, these very traits prove to be their Achilles heel once they start to grow and expand.  Family businesses realize a need for formalization of processes and bring in professionals at senior levels to drive focus on results and efficiency. Family businesses attempt professionalization to build newer fences and wedges at some managerial levels to drive the emphasis on outcome rather than relationships.

Professionalization of a family business is a process that folds over couple of quarters. Smart family businesses have traversed the distance pace the change in terms of short term outputs and long term intended results. Results based management is a strategic management tool that can be effectively used by family business embarking upon professionalization program. RBM has various dimensions. Results are realistic, risks are identified and managed and appropriate indicators are used to monitor the progress of the expected results. These indicators help the organization in assessing whether or not the activities are yielding the desired results. RBM helps to bring clarity on the purpose of the programme/activity/change and the desired results from the very beginning. RBM captures the process of change in short, medium and long term. Professionalization results  (in terms of formalization of process, reporting mechanisms, performance systems, outcomes management, etc) are commonly linked together in a result chain. The results are captured at three levels:

  • Short term or output
  • Medium term or outcome
  • Long term or impact

The result at each level aggregate or contributes to the goal or desired impact that needs to be achieved.  RBM integrates people, process, resources and measurements to administer the programmes and improve transparency and accountability. RBM clearly defines the activities to be performed at each stage to achieve the desired results. These activities are further segregated into allocation to different groups. Each group is reviewed based on the activities and the outcomes and outputs are consolidated at the programme level to report the impact or the final result in comparison to the objective set.

While adopting RBM for professionalization program, family businesses must use PCC-DIO framework to identify activities and the outcomes. The PCC DIO involves

  • Purpose
  • Comprehensiveness
  • Consistency
  • Delivery
  • Impact
  • Outcome

Purpose:  Each activity must meet the objective of formalizing, integrating process, functions and roles so that actions drive performance.

Comprehensiveness:  Each activity and tasks are aligned with complete consideration of the the roles, responsibilities, and different levels of learning. The focus is to ensure the tools, and methodologies are rich enough to make informed decisions.

Consistency:  Systems and activities must be repetitive and consistent in terms of data, duration and procedures for the complete professionalization program and show no deviation from the desired architecture.

Delivery: The timeliness and quality of delivery by each activity should meet the professionalization goals and be delivered within the defined time.

Impact: The impact analysis of every process on the concerned stakeholders must be done after delivery.

Outcome: On completion of each process, outcomes must be evaluated to assess what was desired and what has emerged.

While the above frameworks can offer a defined approach to professionalization program, certain critical human elements are key to the success of professionalization program. First, is the change management champion from the family who can anchor the program, imbibe the tantrums and shocks that emerge in the early days of transformation and buffer the professionalization program. Second, a trusted experienced non-family person who can work with new professionals brought into change the desired areas. Thirdly, planning and showcasing some quickly demonstrable outputs like formal employee policy manual, incentive models or documentation of knowledge management processes to convey the seriousness and commitment of family business on professionalization program.   Fourthly, preparing the business to bear the shock of untimely exit of relatives or other executives who find adopting to the program a little difficult.  Finally, family learning to clearly devise approaches to successfully manage the conflicts between family business and business of the family.

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Hopping on to Dad’s throne: successful immersion strategies of Daughter’s into the family owned businesses

In the past, gender has been a particularly thorny issue when it comes to ascent of throne or board room. Catherine the great, or Elizabeth I and many princess had to manage male chauvinism and persecution to survive and manage their kingdoms. Fortunately, business owners across the world are recognizing that gender is a non-issue and are seeking a family champion for continuity.  Are you a business owner blessed with a daughter interested and capable of running your business and take to next stage.  How should your business plan and execute successful in immersion of daughter into family owned business.

Insights from successful entry and immersion of daughters into family business show there are some common principles that can be easily adopted.  First, the immersion is well planned ahead. For a large automotive seat manufacturer, the immersion started when the daughter was just 12 years old. She was encouraged to spend summer holidays in the plant, know the employees and their families and develop personal bonds with long standing respected non-family members. By the time she graduated from engineering she had helped design two innovative products.  The second principle is to bring them at appropriate level, preferably closer to market. A large construction company based out of Mumbai that has diversified into food parks, hospitality and related areas, asked the daughter to start with interning for an operational excellence team that had a charter to improve customer engagement. Working with the excellence team helped her understand the gaps from 10,000 sq.feet,  get a large picture view across various functions and what to change to make things happen in the company. A great advantage was she could tag along with the excellence team to all departments without being prying. Third principle is identify respected non-family mentors who would take the new ward under their umbrage and fill in “implicit knowledge”.   A manufacturing company in Ahmedabad placed the daughter who was going to take the overall mantle of the firm shortly from the founder under the guidance of sales and marketing chief stationed at Mumbai. The ward had an advantage of learning the ropes of business from an experienced hand, but away from the distraction of royal court. Fourth, but the most important one followed by most successful companies is to help the heir position as a winner by setting them to win, especially by focusing on related non-core business. An equipment manufacturer that has been in business for over two decades, after announcing the entry of the heir apparent in a normal way, asked her to work on areas of improvement with no investment but significant revenue upside. What the young heir went on to do for the first two quarters is to build successful aftermarket revenue of their existing business. A large construction house brought in the daughter as an marketing assistant,  pushed her to go through the grinds of sales and marketing. After an year the company asked her to come with ideas for related business areas that can be pursued. The heir came up with School and Interior decoration unit  that complemented the integrated real-estate development. The two business units now support 18% of the overall group revenue and with the successful running of the two enterprises, the daughter has gained the appreciation of all stakeholders.

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How to attract and manage women professionals re-entry to office

Women contribute majorly to a nation’s GDP by participating in informal and formal sectors. According to Census 2001, Indian workforce is about 400 million of which 275 million are men and 127 million are women. Women not only actively contribute in formal economic activities, but they are also significant contributors in informal sectors too. According to a recent report SHEROES- Women at Work, India 2014, about 23% of women professionals with significant experience, skill and adaptability have stopped working. The reasons for quitting their jobs include marriage and childbirth, additional responsibilities of care-giving roles in the family or spousal associated displacement. Various life events that characterize a woman’s life are responsible for the social factors that lead her to a career break. Some of these key life events are marriage, spouse relocation, pregnancy, child care, elder care, pursuing higher studies or under unfortunate circumstances chronic illnesses. Even if women overcame these barriers, structural barriers like poor day care, crèche and nursing facilities, limited reliable childcare infrastructure access, longer distance between workplace and their homes, and higher costs are reasons which force women professionals to take a break from their work and manage the chores themselves. Increasing atrocities on children and elders aggravate the concerns of depending on outside help and consequently many women professionals trade-off their career prospects. Job related factors such as night shifts, frequent travel, etc also discourage a woman professional from continuing her job.

The economic loss of women quitting jobs has significant social and economic impact. A study of Korean women workforce estimated that the departure of female workforce led to about 14.2 % of loss to Korea’s GDP.  A 2012 report by Booz and Co., estimated that India loses a quarter of its GDP because of female workforce exits. With India facing an estimated shortage of 5 million skilled workforce exits from labour markets is a major concern.

Towards addressing this issue, many companies have initiated several initiatives to attract women professionals to return to work. GE India has a program to recruit women, whether they are an ex-employee or who are on a career break. Tata SCIP is a flagship program that offers opportunities for women professionals who have been on leave for at least six months with a minimum of two year experience in their field. Godrej runs GROW (Godrej Revival of Opportunities for Women), which enables qualified women professionals to join the workforce after a break. Mahindra runs Start over – a return to work program for who have taken a mid-career break for personal reasons. Browne & Mohan has run a program titled, returning falcons from January 2009 to attract women professionals who have taken a break.

From an organization perspective there are several decisions that need to be made before embarking upon such a program. First HR and line management must be clear on what areas and at what levels would they like to attract the talent.  While social media is certainly a good platform to attract the talent, some companies have discovered fliers at high end beauty saloons and well run Crèche as ideal place to reach out to prospective candidates. One company has successfully run fliers at key bus stops of reputed school bus route to reach out to candidates.

While middle management is a safe bet, companies need to consider the work group dynamics and work content implications also. Next, companies must prepare a comprehensive induction, quarter-wise assessment and involvement plan. It is important to design a comprehensive induction covering not just the job areas, but also across functional areas. Companies must plan to have at least a month long induction to help prepare the individual cope up with new work environment. A senior mentor must be involved in supporting and guiding the new associate. Smart companies use induction period to assess the capabilities of the individual and mould required support structure in tandem. Our experience has been to offer non-critical tasks in functional areas to bring back the confidence and expertise to fore in the initial quarter. It is important to have monthly feedback to the re-entrant with respect to how they are coping up with the company culture, tasks and so on. Mentor and HR must discuss with the new associate what has been the expectations, how they have done and elicit any challenges that are facing in adjusting to the new demands. Many a re-entrant leave due to the conflicts of work life balances. It is imperative to take a three quarter perspective of immersion and outcome whenever re-entry programs are designed.

A crucial aspect of running an re-entry program is to have a systematic plan to expand the role and responsibilities. Companies must have a comprehensive plan of what responsibilities can be added without compromising the work-life balance, and role expansion that would meet the aspirations of the individuals. One of the biggest challenges of pursuing re-entry programs is the ability to expand and retain the associate. Many companies face a challenge when the associate does not wish to expand role and responsibilities. It is not uncommon to see many of them refusing promotions and responsibilities after couple of years. Companies pursuing re-entry program, especially SMB, must be prepared to short or medium term view of the programs. In our experience, while the long term impact of returns may not accrue for most companies, yet there are certain short term advantages. Senior women professionals re-entering the job brings loads of experience and commitment to their job. Many companies have witnessed their unique ability to connect across generations and can do attitude a huge rub off on the floors. Client engagement is an area where many companies witness a perceptible change with re-entry of women professionals. Credibility, experience sharing and solution selling capabilities are gains that companies benefit with women professional re-entry.

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Design Thinking approach to “Business transformation”

Many businesses are prisoners of their past success. Their business model and its components (including sales, marketing and organization) that served them well in the past may not be effective any more in current environment.   Revenue growth is suspect, revenue predictability becomes difficult and operations untenable.  Business have to reinvent and redefine themselves in terms of increased Productivity, Better Sales, Efficient Functioning for which they’ll have to undergo Multiple, non-standardized set of Changes and be bull-headed against resistance at various stages of the process till it reaches the desired goal. Changes are a necessity when efficiencies are low, outcomes paring below expectations and growth is alluding.

In our experience of helping many business transform, we have relied on a design thinking approach for managing the transformation. For us design thinking is an approach that employs suite of tools to unlock complex problems and solve them using untapped potential. The broad framework we use in business transformation consists of five stage: Evaluation (E), Visualization (V) – Definition (D) – Implementation (I) and Sustain (S). In the first stage of business transformation, we conduct an as is analysis of the organization: Its process, decision making styles, products, systems, alliances, sales and marketing approaches, etc.  Next stage involves visualizing various patterns of change by consultants and the organizational members. The objective is to enumerate all possible approaches that may be embraced to create a better PSPD business. P stands for profitability, S for sustainability, P for predictability and D refers to de-risk. Solutions are discussed and vetoed by the transformation committee and the implementation committee consisting of members across functions and at different levels within organizations draw their implementation plans, seek investments and other approvals and own roll outs. Process changes, and associated measurement tools are tracked and discussed both at implementation committee level and strategic transformation group level.  The iterative process involving all key decision makers is useful to bring out the risk perceptions and dogmas affecting the behaviour. From our own experience of working with Quest, Prosim, Nsoft and others, this stage is very useful to know the limits of growth and extensibility of the organization. Teams explicitly probe for efficiency improvement by adopting any of the following strategies: consolidation, elimination, outsourcing and co-creation.

In next stage, from the complete set of patterns, the group defines plausible state that score high on  desirability, feasibility and viability.   Desirability looks at quality of short term and long term outcomes of following an approach. Feasibility refers to whether the outputs (in short term) and outcomes (in long run) are achievable. At what cost is measured by viability.  Once the approach is identified, prioritization of changes and tactics are expounded using PCCIO framework. All implementation actions are prioritized and pursued based on (P)urpose, (C)omprehensiveness, (C)onsistentency, (D)elivery, (I)mpact and (O)utcome.

In our experiences, many finer changes to sales structures, partners and marketing happen over period.  We adopt P2O (Purpose, Ownership, and Outcome) approach to sustain changes. Creating process, product and change owners at all levels helps in pursuing the right changes over time.

Dr TR Madan Mohan and Sanjay R.M.

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Phase-wise approach to successful Business Transformation

Business Transformation is the radical and holistic change companies undergo to grow the business faster, make them more relevant to the market, and de risk them from any technology or environmental change.  Like any change companies can either pursue a big bang approach or a state-wise approach. In this blog, we share our experience of companies that have successfully embarked and achieved business transformation using an incremental approach.

Like the Chinese proverb, a long journey starts with small steps, successful business transformation starts with small but measured initial steps. The first question when companies attempt transformation is which process to touch. In most businesses, the easiest function that is amenable change and one without too much dependencies and investments is “sales”.  Moreover, any minor changes in sales function has a direct impact on the “outcome”, be it new customer acquisition, or more orders from existing customers. Either ways the outcomes impact the overall mood and functioning of the company.  Sales outcomes are also highly visible, all across the organization people can see the flurry of activities that start once a new client is gained. Any win, however small, can uplift the mood for change and thaw the resistance to change. Employees should not feel threatened by it; instead they must be allowed to participate in this change – especially the critical members of the team who are key influencers. It must vibe with a sense of growth and pride in the organization. What such changes do is to convince fence-sitters that change is good and doable. A highly visible short term win will also enable the top leadership of the firm to start change on a winning note.

Once this clarity of purpose is communicated through changes in sales, it becomes necessary to get the second level. It is best at this stage to use existing resources within the firm and enable them to drive change on two areas eliminate waste and improve visibility.  Create groups to improve the operations, ask them to identify and drive changes where they feel empowered. Next involve people in information, communication and advocacy changes. Ask the employees to suggest changes to website, the sales and marketing collaterals that work best and ask them to drive these improvements.  Their buy-in is absolutely essential to drive the second-order change. Now that we have a broad based team that believes in the new vision, we need to build a sense of urgency so that the change that has been demonstrated can be capitalized upon.  Once this happens, creative inputs on products, offering and markets start to pour in. It also gives everyone a chance to delve deeper into the core offering to examine possible extensions. This helps build the roadmap for the company as to which markets and products they need to be in. Once we have the top and second level of leadership involved in this exercise, they believe in the new vision and positioning, especially since it is their aspiration that has been translated into the firm’s vision and strategy.

Once there is trust, comfort and belief in the vision and need for change, it becomes easier to begin small structural changes within the organization. The structure needs to align the capabilities within the organization to the new goals and strategies. Given today’s environment, no team or division can work in silos. Hence it becomes imperative that we put in place review mechanisms that will facilitate cross functional work. Implementing measures and balanced scorecards that help break silos should be thoughtfully designed and implemented. Training and reviewing team members to drive this, building their capabilities and motivating them becomes essential.  Working as teams and leveraging off each other needs to become a habit, a new way of working. Once success can be shown in a couple of inter-functional initiatives, a broad base of employees becomes adept at adopting such structures across the entire organization. Making change happen in other functions and departments new becomes a lot easier. Hence managing transformation in stages with the right vision, by building the right capabilities, help build the foundation for a large business transformation.

– R M Sanjay

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Why after-sales service lacks the sting…….?

After-sales service is often seen as necessary devil and not many organizations think about the impact it has on revenues and customer satisfaction. This is despite the fact that dealers and OEM’s margins on the virgin equipment may be less than 2-3% of the final price, while parts revenues can hover around 25++ margins.

The biggest cause for lack of proper after-sales service is that many organizations have no proper service strategy aligned with their organizational goals. Many adopt the concept of “Outsourcing of parts logistics” without realizing the zone of conflicts it can create and the impact. The idea to make cost efficient parts supply and distribution is appreciated, but this doesn’t synchronize with the field customer service. Worst part, is that various divisions work at loggerheads within the organization, causing a lack of cohesion between the field service and parts supply. The parts and service aspect of an automotive organization go hand-in-hand.

More than 60% of parts per vehicle, on an average, are out-sourced by the OEMs from individual parts supplier. In order to avoid risk, OEMs develop 4-5 vendors per part when 2-3 vendors are more than sufficient. This policy of the OEM forces these suppliers to supply in the open market to increase revenues. Moreover, Parts supply and parts sales in open market are more profitable than sales through the respective OEMs. This inevitably leads to revenue loss from services for the OEM.

Product development regulations are pretty high in developed nations, leading to high quality. Hence, minimum levels of Standard Operating Procedures (SOP) for service are adequate to ensure there is no cause for complaint from consumers. When the same SOPs are implemented in the Indian market, it leads to service failure due to the lower quality of components. When the foreign culture of highly reliable and innovative product doesn’t exist in the cost conscious Indian automotive industry, then why does the after-sales service strategy and policy remain the same for both the markets?

With a specialized mechanic in every corner of the street providing service at cheaper rates and the availability of cheaper spare parts in grey market, the dealership revenues are in doldrums. The automation and IT infra-structure connecting the OEM and dealerships is not robust and not fool-proof. Moreover, the revenue generating model for the dealerships is not very sustainable in the long-run especially during economically low periods, considering the huge infrastructure investment made by each dealership of an OEM. All these factors induce the dealer to purchase from grey market and eventually, a loss for the OEM occurs.

The Indian Automotive Industry is moving towards technology saturation. There is no substantial product variation, especially in terms of technology. Brand differentiation can only be improved through an effective and efficient after-sales service channel. Issues such as development and implementation of a sustainable after-sales strategy, with focus on number of parts suppliers, India centric SOPs for service, and not outsourcing the parts logistics, are just tip of the iceberg issues that need to be grappled with. There needs to be a well thought out and integrated service strategy specific to local markets, since it is a substantial revenue stream that will improve bottom line and help companies tide out the troughs in sales!!!

Bangaru Vignesh

Junior Consultant – Marketing & Strategy

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