Elementary, Mr Watson, “Focus”!!

Polaris announced separation of its products and service divisions. Infosys also announced separation of its products and platform division from the rest of services. So why are Indian software companies rushing to redefine SBU? What is the grand strategy in creating separate divisions?  Has this happened in other industries too?

More than a decade ago, World class manufacturing (WCM) companies, realized the value of focus and dedication. Companies like Toyota, Copeland corporation (part of Emerson group) and others have implemented simple 3 link WCM method to ensure their SBU’s are profitable. First, these companies separated the production lines that required high customization and low volume from those that were high volume and highly standardized ones. Second, the management process focused on efficiency and utilization in one group, while the other was aligned to capturing customer requirement and eliminating rework and waste.  Manpower resources with different skills are aligned for different SBU. High customization and low volume require resources with significant experience, often with ability to work independently. On the other hand, younger workforce may be better suited to high volume, standardized production set-ups. Finally, the incentive structures will be aligned differently for these two groups. More individual, piece-oriented incentives for high volume set-ups and group based for low volume customization set-up.

Service businesses, including hospitality, have adopted similar strategy. Hotel properties have been grouped into business, leisure and luxury with separate branding, customer experience and resources. Indian IT industry, which has enjoyed the benevolent market friendly years till now, is at cross roads. Companies understand product business with higher EBITAs, longer sales and implementation cycles and higher investments in terms of people and expertise is much different from service business. Unlike service business, the product business is sticky, monetization and protection of services is much higher and highly scalable. Product business require not just good software engineers, but also people who can bring years of domain experience to help you  build state-of-art products. Partner ecosystem can help in increasing the reach, entry barriers are high and complementary strategies can be effectively deployed to grow business. Service business, are high on “commoditization” axis, suffer from lower EBITA’s, have higher receivable cycles and associated working capital woes. If your company engages with government, additional Bank guarantees (BG) and approval cycles test the nerve of CFO.

Indian software companies have to quickly realize the intrinsic value of each business and see how they could be cut loose to grow independently. Indian companies have to quickly learn to move beyond “Business as usual (BAU)”, and adopt sensible strategies to defend and grow business. Expect more companies to streamline operations, bring dedicated focus in SBU, and align tighter organizational process and measurement systems.

Make customers own stories around your product/services.

Creating a memorable experience for customers is what makes a customer come back again. Unique products and experiences make a customer talk about the product and the company. Designing and creating this unique experience requires “sensemaking”. It is all about understanding how the customer would be consuming your product/service, what associations trigger when consuming it and what settings drive “stickiness” and loyalty. Both online and offline business are finding ways to involve the customer in creating their own stories of association and personalize the experience better.

The best examples are from street food stars. One such joint allows customers to customize the topping on dosa (Pancakes), in fact they claim to be a 100 dosa joint. Customers regale how they recommended the variety and some of them are named after their customers. Another unique joint, is Tom’s restaurant in Bangalore, which allows you to create a product, taste it and approve it for others to consume. Kapil 65 is a good old chicken recipe that has been created by a customer in the euphoria of Indian winning the world cup and it is still a crowd puller. Tom’s has a wall where the customer’s name is inscribed with the dish and experience. Consumers as co-creators and idea generators is well understood and Eric Von Hippel of MIT has done ground breaking work on user-led innovations.

Hotels & resorts design unique interfaces for customers to share their experiences and influence decision-making of others. Vintage hotels benefit largely by actively persuading their customers to share and post their experience. However, the major challenge in customer stories is the authenticity of user and their experience. Most website, only have text recommendations and many of the names may look suspect or sponsored. Creating a platform for authentic customer stories requires to understand what people may like to see in the content and how they can relate to the experience. One of the most unique examples for building customer stories is Fabfurnish.com. They have a separate section called “Customer Stories” on their social media page where a customer can upload a personalized photo of the product (furniture or décor) at their house and they also write their experience of shopping and how helpful was Fabfurnish.com with their purchase. This personalized form of review would not only help the business grow but also ensures the loyalty of the customer for their next purchase.

Kaarthik Shakthi R

Junior Consultant – Marketing & Social Media

CSR audit and management through RBM

Recently the Government of India has promulgated an order as per the Companies Act 2013 that stipulate companies with a turnover of Rs. 1,000 crore or more or net worth of Rs. 500 crore or more or net profit of Rs. 5 crore spend every year at least 2 per cent of their average net profit over the preceding three years as a part of CSR. According to the Indian Institute of Corporate Affairs, of the 1.3 million companies in India, about 6,000-7,000 companies are covered under the new CSR rule, expecting an annual CSR spending of Rs 15,000-20,000 crore by India.CSR is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large, to improve their lives in ways that are good for business and for development (World Bank). Companies realize CSR can be successfully used to 1) create brand awareness, 2) increase employee participation and bonding, 3) improve community relationships and 4) ensure corporate accountability. Many companies are pursuing CSR as an obligation rather than focussing it as a strategic program with long term benefits. Most common statement one hears in the corporate corridors is that they have engaged an NGO to distribute food or plant trees or blood donation camps. Managing CSR must start with what are your corporate objectives?. What social activities are consistent with your founding principles and business?. What values do your want your employee want to enshrine and be associated with?.  

We suggest companies first do a CSR audit and then use RBM to manage the CSR process incorporating the best of GRI G4 and ISO 26000:2010 guidelines. CSR audit can be done by internal resources or external consultants. The first step in CSR is to assess your current practices and any violations from your CSR charter. Start with your mission statement, and CSR mandate and check whether any of your vendors, employees have violated any of the principles. Do an RCA and identify approaches to stem the outlier. Evaluate how your customers and employees think about your company, competitors and how your business plans are consistent with the mission mandate. Assess positives and negatives, the trends and directions to chalk out the next steps. Once an CSR as-is evaluation is done, share it internally to get feedback on the status and what areas could be improved.

Next, do a benchmark analysis covering industry-wide ethical practices, corporate code of conduct best practices, what social cause programs have yielded the best results and why, what have not worked, what are the trends, etc. Forecast the next 5 years investments set-aside for CSR activities, what CSR activities can add value to the society and the organization in terms of impact and branding. Identify which NGO activities and plans align with your short-term and long-term goals. Use Result based management (RBM), a strategy management tool for planning and performance evaluation to align the investments across various projects of different NGOs. RBM helps to measure the result of the activities periodically and emphasize more on what is to be accomplished. 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 and the desired results from the very beginning. RBM captures the progress of activities in short, medium and long term, thus helping your company know how CSR is working, what activities are yielding the most and what partner activities are most promising. CSR is an important element to just outsource, own and manage it to see better business impact.

 Pratibha Sharma and Deepesh M 

Align Rewards and recognition (R&R) with employee life-cycle for better results.

Rewards and recognition (R&R) are important levers for an organization. They must help to motivate the employees, recognize and applaud their contributions and help improve bonding and association with the organization. Unfortunately, many organizations imitate industry norms and do not weigh how their R&R system is making a difference in recognizing the superior performance and bonding. Organizations also do not realize the R&R systems must be aligned with the life-cycle needs of the employee. While cash incentives may be highly appreciated at junior level, they alone may not be enough to sustain senior professionals. Crafting rewards transcending multiple generations requires systematic thinking. According to Laura Reeves (2010) worker’s stage of life typically has five stages namely (1) Pre-career stage, (2) Early career stage, (3) Mid career stage, (4) late career stage and (5) encore career stage. Also there exists four generations in today’s workforce. It is critical to sharpen our focus on attracting and retaining this diverse talent base.

Pre career workers are fresher out of college, with lots of hope and exuberance. Many join the worforce as interns, volunteers, or part time employees. Early career workers are those who embark on their careers with limited experience in a chosen field. For example a college graduate or a stay at home parent entering the work force for the first time. Mid career workers are those who make critical career decisions like shifting priority from career to family after two or three roles in an organization or sector, frequently before moving from one job to the next. These people have held four to six career roles and vary widely in organizational levels, from manager to VP. Late career professionals are those who have moved among multiple organizations or have been employed long term with one organization. They are likely to remain with their current organizations. Generally, individuals in this stage are nearing optional retirements or traditional retirement age. Encore career stage workers are those whose priority is to make a social impact, rather than build their credentials or maximize their income.

The question in red is that “what do employees need at various stages of their career and what must companies offer?”   Rewards such as spot recognition, post –it, certifications, awards from other organizations, volunteer tree (recognize volunteer by planting a sapling in their name) could be given to pre career stage workers.

Rewards such as Bonus, field visit to other countries, training and development, attending workshops/ conferences and public recognition for deserving workers, signature products(like bags or accessories non profit’s logo), participation in campaigns could be given to early career stage workers.  Rewards like educational opportunities, T&D, flexi time, attending workshops, allocation of special project /responsibilities, decision making participatory, public recognition, exposure to media, financial planning services, participatory decision making, providing long term career prospects could be given to mid career stage workers. Rewards such as pension, decision making, flexi time, education opportunities for their children could be given to late career stage workers.

Few rewards have low cost, high engagement and have appeal across multiple career stages, such as Coaching, Empowering culture, parking spaces, Incentive compensation, subsidized meals/clothing, housing allowance, flexi time, peer to peer reward and wellness. Companies must employ the complete set of R&R systems to attract and retain a diverse work force.

S Indu Priya and Dipna Ramdas

Big Foot: revenue opportunity in large sizes!!!!

Of Rs 15,000 crores Indian footwear market, most revenue comes from size 8 and below. If you’re a six footer and athletic with foot size of 12 or 13, it is very unlikely you would find decent footwear in any of the swanky malls or the industry chains. With better diets and growth, many men and women are finding getting the right footwear as a major problem. If you are size 12 or size 11, options are few and limited. While international brands sell sports shoes in larger sizes, formals are almost non-existent in market. It is either the good old cobbler in a spooky old part of Nizamuddin in Delhi or Mumbai’s Nagpada or Shivaji nagar in Bangalore, or a pick up from friends or relatives from US or UK.  Interestingly, women footwear market is also witnessing demand for larger sizes. While smaller sizes were the norm till about 4 years back, demand for larger sizes women has increased.  With average turns of 3.4 footwear per year, women form a sizeable unmet market.

Market estimate for big sizes is around Rs 395 crores and growing at 25% year on year. What is more promising is that the average price for the big foot is higher than the normal and the margins are pretty attractive. While brick and mortar may be an expensive way into this market, e-com venture on the lines of Canada’s “Poppy Barley”,  is a low cost  approach that can be easily adopted in India. For one most these customers depend on “words of mouth” and have strong preferences. Brand association in the larger segments is weak and price can be a determinant. Internet can be used to get scale and reduce real estate investment for the venture. Made-to-measure can not only work for big footers, the venture can also tap related markets like horse riders shoes (another growing fad in Metros & tier 2). 

Is your sales firing?

One thing common about Sales is that it exhibits a common tendency to go uncertain! Many companies suffer from unpredictable, unsustainable sales and thus profitability. Most organizations fall into a common fallacy that only numbers matters, what is the sales output.  In my view, measurement of sales functions requires one to take a comprehensive view of the inputs harnessed, the sales process and outcomes. First let’s look at sales inputs. Does your organization have a sales structure to exploit new customer acquisitions and mining independently? Dedication brings focus and efficiency. Second part of input, is what investments are made to identify opportunities and how to quickly convert them, what most management theorists call “sense and respond”. Have you built intelligence tools (not just salesforce.com, but more humane partner info systems) that help in steering the sales organization to new ebbing business opportunities? Is your sales org agile enough to notice and cash on gaps in competitive product space, new delivery requirements or just plain fulfilment opportunities?  Most crucial part of your sales is the sales person.  How lively and active they are in engagement skills, listening, requirement gathering and solution selling. Plain Jane product pushers may not drive sales and customer engagement in markets beset with technological and requirement advances. Hire them for attitude and not some fancy degree. 

Sales process arrangement and efficiency drives the sales process. Is sales process comprehensive to capture all that happens during a sales process? Does it help you uncover where the current status is and why the sale is stuck at this junction? Is the process simple enough for sales guy on the street to work with? How does the sales process enable your staff to take calculated and approved risks? Does the sales process allow sales people to function within ethical guidelines and yet remain competitive? Are the incentives sharp enough to drive the expected behaviour? Do the incentives stretch the performance of individuals?

Finally, on the output side, what is that one wants to measure, how often and how this measurement must drive a particular behaviour? An insight from world class manufacturing organizations warrants a look here. Companies that have built great products and are successfully competing globally, have one thing in common. The number of measures of output is few, they allow ownership and risk taking at the front line and overall the performance is highly “visible”. The benefits the world class companies’ gain is relevant, reliable and accurate information to know where they are leading and how to land at the determined shores.

Deepesh M