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Transform Customer support into a value generating function

Marketing & sales focus on customer acquisition and essentially the buyer. Customer support focuses on the user and is required for customer retention. This is valuable in businesses where customer lifetime value is significant; (ex: we keep visiting amazon repeatedly to shop); Especially, online retailers, automobile companies (who depend on significant revenue through service), hospitals, machinery/OEMs, technology products, SAAS products and other such businesses where delivery, service, maintenance and renewals are important. So, while there is value embedded in the product or solution, there is also the concept of “value in use”. The embedded value comes from the product, performance, price. However, significant “value in use” comes from the continued experience of the product that is often neglected by companies. This can be delivered and enhanced by our Customer Support Service (CSS) function. When CSS can deliver high level of personalization and timely responses to customers’ need for support, there is an enhanced customer experience which is valuable to the customer and this leads to customer loyalty as well as a stronger brand.

Strategic importance

CSS functions are often relegated to the background. There are companies that have been around for decades, and may have thousands of industrial customers, but rarely do they give importance to sale of spares or repeat sales and the experience of those existing customers. Once the deal is done and the tender is successful, the product is delivered, and a minimal level of customer support is provided for the stipulated period.

Due to the fact that CSS functions are typically closer to customers, they develop amazing insights on user behaviour and can actually play a significant role in reshaping the product/solution offering, customer segmentation (say in terms of the way customers use the product) and in evaluating the lifetime value of customers. CSS can also play a major role in product development and improvement, since they have unique insights into usage that others in the organization do not.

Move CSS closer to the leadership

CSS can actually be used to build the brand, customer loyalty, increase customer lifetime value and grow the revenues of the company.  It should therefore, be a strategic function in the organization. CSS should be close to the leadership in terms of reporting structure and close to the customer as well. This will demonstrate its importance within the organization and enable this function to be taken seriously. When leadership and top management decide to take customer experience seriously and start to measure and monitor customer experience, naturally CSS becomes a very important function to deliver these values.

Being close to the customer

The function should be so designed that it should integrate with the customers organization and be completely involved in the usage of products and solutions. The quality and closeness of interaction with the customer determines the quality of customer intelligence that is collected. CSS is therefore in a position to provide strategic inputs to an organization. Customer strategy should be closely linked with business strategy. Customer strategy should also be clearly defined and road mapped (stuff like customer segments, their needs, our unique proposition and value, the customer experience we wish to create, and our internal structure and capabilities to deliver this). All customer touchpoints should be brought under a single umbrella and data that is collected has to be managed to extract insights for necessary action across the organization.

This is therefore about moving CSS from an administrative to a strategic function; moving it from a cost centre to a profit centre where CSS can also be responsible for revenues.  The necessary governance processes and metrics need to be then put in place to manage a sophisticated CSS function.

Employees

Customers typically remember the person they interacted with and say “employee’s assistance was appreciated” and place a lot of importance to such human interaction; but companies rarely treat CSS employees as important. We think it is the system that served the customer and not the employees’ approach or reaction which made a big difference.

So, the role of employees needs to be emphasised in CSS. Leadership should play a crucial role here to help employees understand the importance of this role and move them to think about customer experience. This requires a lot of internal marketing and training. Employee experience (in terms of ability and the years put in) also plays a major role in the quality of service delivered. It has been found that employees who have spent more time in this function, as well has employees who have a positive experience of their own job,  are better able to handle customer requests in an unstructured manner and thus provide a superior level of customer experience. Systematic re-training and sensitization of employees to such issues is very important.

Operations – Systems & process

A typical CSS function handles customer enquiries, complaints, merchandise returns and payment related issues. It is quite normal for CSS functions to grow from a rudimentary role to one where large volumes of transactions are handled as the organization grows, resulting in chaos and low service quality.

But there are ways to enhance the effectiveness of CSS by designing robust processes, systems and policies and enforcing them across the function. Rather than tweak existing processes, it is much better to undertake something like a Zero-based design, where we start with the outcome required, and work backward using agile-scrum methodologies to design the CSS function. First get a minimum-viable-design out and then rework and improve from thereon.

Use Zero based design to re-design Processes

The design and structure should also keep in mind cross functional linkages with the rest of the organization. Going in for certifications like CMM service certification is not a bad idea either. It helps bring in a level of seriousness and the required level of discipline in the function. Needless to say, strong management control systems need to be implemented and suitable performance frameworks have to be put in place so that the right metrics are measured and monitored. Hence operational governance is crucial.

Technology & AI

Use of technology is crucial. As the function scales, cost of the function needs to be evaluated. Voice and email are typical tools used in a human transaction. Significant volume of transactions can also be automated, thus increasing accuracy and productivity by using AI tools and technologies such as IVRS and AI chat bots. This reduces the cost of transactions and the load on human operators. Amazon for example, has a very sophisticated machine learning algorithm that provides suggestions to customers based on what they’re looking for. Similarly, a lot of banks have implemented AI chat bots to help human agents in their interactions and these bots not only provide information to customers but also undertake some standard transactions. (We’ll discuss how some companies have used AI in CSS in a separate blog).

Align sales under CSS

For industrial organizations, or even software solution providers selling to business customers, it also makes sense to bring the key account management/ sales team under the CSS function. The key account management sales team can then leverage on the insights of the CSS function to sell to strategic customers. This combination of key account management and CSS actually lends itself to a very powerful CRM or customer relationship management capability within the organization.

Above are some steps organizations can take to transform CSS from a support function to a strategic function that also delivers additional revenues and value.

Is marketing evil or good?

Evil marketing

Well, It’s is just a tool. But it is the marketer and the goods being pushed that really matter. If it’s drugs, or cigarettes, then yes, certainly it is evil. Then there are cases where the marketer started out with a good reputation and has turned malefic. Recently, a very large reputed mutual fund in India that holds tens of thousands of crores of people’s money in trust to invest on their behalf in certain types of funds (allegedly safer!) faced extreme redemption pressure from investors (like a run on the bank); the debt market froze at the same time due to Covid 19; they knew this; the only way out was to immediately inform investors; But instead, they decided to put out advertisements inviting more people to invest in these safe funds. Such marketers (the very top management or leaders) apparently have intentions of profiteering while causing damage to others. They forget their code of ethics in search of profits.

Similar could also be the case of a marketer of organic vegetables who gets overtaken by greed and starts to supply produce that is loaded with pesticide.

Doubtfully Evil Marketing

My doctor prescribing me an expensive antibiotic when I could do with the generic version certainly doubtful. A non-profit doing fund raising, calling me for donations is also doubtful especially when I’m not able to understand what part of the fund is for the cause/outcome and what is being used to fund their extravagant administrative expense.

Essential services around last rites or even coffin makers often have a basic package, a silver, and a gold package. They design the basic package to be so pathetic that people are forced go in for a silver package, since they really cannot afford the gold. All three packages almost cost the same; this is unethical, ripping people off during their moment of distress and agony.

Marketing to greed

The very purpose of marketing is to convert something from a commodity to a brand; or even to skim off the market as much as possible before the product becomes commoditised.  In this category a lot of luxury goods marketing would fall, which typically play on impulses and desires and end up decreasing the financial security of a person, forcing them into unwise decisions. So, if marketing forced some consumers to buy products that they would not have done so otherwise it is evil. But let’s be clear – if this provides some happiness to the buyer, then it certainly isn’t evil marketing at least for the one who enjoyed the product. So, this could be grey for some, and good for others.   

Border line – neither black/white marketing

So, while we may say marketing is evil and it caused people to buy what they would not have otherwise, it could also have made them use a product that impacted their life positively. Take for example cosmetics. Some may say it is evil marketing and forcing people’s psyche into a framework of beauty. But users of cosmetics may feel that beauty is not the end goal, but it is the process and the usage of cosmetics that gives them happiness. If that is so then it certainly doesn’t qualify as evil marketing.  

Good marketing

On the contrary, can marketing be good? Or is it just bombarding us with needless information? Well, as we all saw in the recent pandemic, there was a lot of marketing done by Government agencies and health organization to help protect us from the pandemic. While this may be social, there were also a few commercial advertisements like say a liquid soap company promoting hygiene in this era of pandemics. Similarly, promotion of organic produce or yoga is promoting a product or idea and informing us about something that could be good for us. This could be called good marketing, at least until the marketer’s goodness is overtaken by greed.

So, what should we do?

The marketer is saying they have good products that do something really well, and can make a change in this world, hence they are trying to tell a story, so that people take notice and change and derive value and happiness.

It is also true that if we keep telling ourselves things every day, true or false, it becomes our reality.  Marketing is somewhat like this. I see this in news channels these days. They all feed us with biased news, and it forms the only world view of many viewers to the extent that people start to believe that the one instance with some strong visuals that was depicted repeatedly on media is the only reality.  In all these cases, even those of us in the process, who handle these marketing tools and managing the operations should know we are abetting such atrocities or goodness.

Hence, fundamentally, we need to keep some basics in mind. 

  • We must be really good at what we do
  • good at making something that is of value to some consumers, and
  • finally, and only lastly do we have to be experts at marketing.

We need to be all three to be successful. So, improve the product – “if it is bad”. When we start to really embark on marketing, we realize gaps in our offering and figure out how the product should have been in the first place. We then need to seriously work on the product front. Marketing not only helps us reach out, but also teaches us to improve.

Marketing is not awfully expensive these days, it has more speed, reach and power. But it is just a tool. It must be used wisely. It is not just about using technology or software to be faster. If we send out garbage, we get it back. We don’t want to be doing a lot of wasted digital campaigns and activity for nothing. It has to be about telling a story. Market to the right people. We cannot be everything to everyone. Someone needs to stand apart from the noise and apply concepts. Communicate value. So, get someone to think through the entire strategy, and do it for you. In the era of remote work, access to expertise is easier. The impact comes from our intention to start marketing and improving our product, not form the tools, technologies used in marketing, which is more a matter of detail.

Hybrid Innovation Strategies

Innovation now needs Second wave technologies to be integrated

Digital is no longer about digitizing bits and pieces of workflow in the company to usher in automation and be productive. There is a more serious disruption at play involving innovation in products, business models to transform the entire business itself.  It’s not just using IT, but also adopting many second wave technologies like IOT, AI, AR, and machine learning across areas like product, training, customer support, you name it, to disruptively transform the company. Imagine the scale of transformation at Reliance from a Petro chemicals business to one where consumer/retail revenues started contributing significantly, to another innovative transformation involving Jio – using the power of Facebook, WhatsApp, Enterprise apps, ecommerce, financial payments etc. that is set to unfold (as I write this).

Internal Innovation

Until now innovation was mostly internally driven, where companies have their own R&D departments. The advantage is that such innovation provides a sharp differentiation with respect to the competition. But there is a limit to the talent and speed at which this can be done. It is also too expensive and impossible for smaller companies to embark on.

External Innovation

To keep up with the market, companies have been looking at external innovation with partners such as universities and start-ups and this is a kind of open innovation model. Many large companies adopt the model wherein they invest and allow a start up to innovate, and when successful, the start-up is acquired. There are some large companies that have specific teams scouting the world to meet and evaluate innovative start-ups and finally invest in a certain number of best bets every year.

For example, JLR, Fiat Chrysler and Renault Nissan tied up with Google’s Waymo for self-driving cars. But the product that comes out of something like this would essentially not provide any one company with a cutting edge. It will merely raise the bar for all of them to stay afloat. And, this certainly needs to be done or risk extinction.  We’ve also seen this happen in automobiles (say engines from fiat, chassis from ford), mobile phones (all about the screen/processor/GPU/camera sensor from say Samsung, Sony, Qualcomm) or even TVs. There is really nothing to differentiate many products around us.

Hybrid Innovation for Small-mid companies

Now, the time has come for smaller and mid-size companies to also be innovative and survive. It is impossible to have/fund all the required talent inhouse and innovate internally. Being stagnant and slow will put the entire company at risk. At the same time, it is also risky to partner with external technology providers. I’ve come across companies that rolled their idea into products by outsourcing to outside teams, only to get extorted financially towards the end.  Now-a-days there is a great need to use sensors, IOT, AI, a combination of electronics and firmware to transform processes and products. These are not skill sets that we all typically possess. So, we are forced to use external partners. But it should not so happen that the external partner offers this very same innovation to other competitors, thereby nullifying any advantage that was hoped for. Typically many small technology experts/start-ups look for a use case/ data from a brick-and-mortar company; they look forward to build a solution for the brick-mortar company and then spin it off into a full-fledged product at a later stage. This does not benefit the guinea pig. At the same time, the small external partner may feel short changed if the innovation succeeded and they were not part of the success.

Hence smaller companies need to adopt a hybrid approach. Evaluate your capability gaps, and map out the areas where external innovators will be brought in. Then build precise innovative governing models and metrics to monitor and control the partnership. Have in place an internal team that can absorb the innovation and take it forward from there. Smaller companies could explore a build-operate-transfer model. First transfer the capability and then the team.  Also incentivise external partners to be part of the continued success of the innovation once it succeeds in the market. That way, they will also have a stake in further innovation and support for the technology.

Read other articles at our blog post: https://catalystindia.in/blog/

Catalyst India (Bangalore/India) offers Management consulting services to grow & build your capabilities, Strategy, Business transformation, Market entry and Marketing support services. To know more about how we can help strengthen management capabilities in your firm and support your business to grow and scale, please visit www.catalystindia.in or mail us at info@catalystindia.in

How to use permission marketing to grow business

Fundamental tactics of digital marketing
The tactics for digital marketing strategy are essentially advertisements, social platforms or direct mailing. The first two will allow us to market to an audience for a certain payment. They give temporary permissions to target certain audiences. In the case of ads, its like an interruption in the consumer’s flow of consuming media (like a TV ad), though, in the case of digital ads, the consumer is given a choice in whether to click on the ad. In the case of social media platforms, we have followers and subscribers and ad interruptions as well – as in YouTube. Nevertheless, both the methods are akin to renting; we stop paying rent and we lose it all. Direct mailing or marketing can be our own. In the long run, it is better to go this route and the subscribers, rather than rent it from a social media platform. For all of these we need permissions for marketing – either a willingness to click on the ad, or follow us on social media or more direct subscription to allow us into the inbox in the case of direct mailers.

Direct Mailing is a substantial and important piece of the DM strategy
Just a decade ago, no one bothered about digital marketing. Those days, we were not inundated with spam. Some smart marketers who were early adopters of digital, especially email marketing, took it up and flooded mailboxes with spam. Significant malware also became part of spam emails.
That was when email providers started filtering out spam using spam blacklists, keyword based filtering, then IP/domain filtering which was all encompassing since ISPs could be common. This led to genuine content providers being blocked. But not everything is spam, and some of us attempt to provide genuine content around our service. So, there is hope. The newer spam filtering solutions learn from manual segregation and then start to understand what consumers like. Consumers also have the power now to unsubscribe or worse block us. There are also authentication parameters introduced like SPF, DKIM, and DMARC that allow identification genuine mailers from spammers and malware. AI or machine learning classification studies the email content and images to decipher spam from good content. Among gmail’s 1.5 billion users – only 0.1% spam gets in. But then gmail also claims chances of classifying good email as spam is less than 0.005%.
There are beta trials going on with the ability to create instant alias emails for certain subscriptions. So, fundamentally, the way technology is moving, there is hope for genuine content marketing. But, if we need to market directly, we need to earn the customer’s permission; earn their attention. This “Permission” is the privilege of delivering relevant messages to people who want them, or do not mind reading them.

Permission marketing
How do we do this? It’s just like a newspaper. We buy a newspaper everyday, or subscribe to a magazine thereby permitting the newspaper to show us ads. So, marketers rent the newspaper’s subscribers to show their ads. Without this permission, it would have been impossible. Similarly, in the online world, we need to earn permissions.

Our product should be of value, if not, improve!
How to get this permission? Well, it is easier said than done. it needs to be done day by day, drop by drop, with regular engagement. Spreading the word about your product is not easy. Surely it cannot be done one-by-one to each of your customers. What’s the point in marketing at scale? We might as well have sent out a salesman! Here’s were we need to bite the dust. VCs talk of the “Fail Fast” strategy for start ups. They don’t want to throw good money behind startups that could eventually fail. So, the faster they realize that their product is not worth anyone’s time, the better. Marketing therefore gives us a chance to take a hard look at our offering and sit down and redesign or recreate something that will really deliver value. It has to be a product worth talking about. Otherwise, there is really no point being in the market. Once we have exceptional value to offer our customers, then we should start to consider where to get our customers (they are still subscribers to our digital marketing campaign now) from, and how to get their permission.

Earn trust
How do we get our subscribers to listen to our online marketing pitch? The online world is afflicted by a serious scarcity of attention. It is awfully hard to get noticed. Our campaigns hardly reach anyone. Most are programmed to land in Promotional tabs, or even worse “the spam folder”. This gets decided automatically and sometimes arbitrarily. Even if we do manage to sneak past and get noticed, subscribers will unsubscribe if they see that we are not who we really claim to be. Worse, they can block us, spoiling our chances of reaching other consumers. Hence there is a need to earn trust and create value for the subscriber even before our product creates value – once the subscriber becomes a customer – which is much later!

Most marketers still take a laundry list of subscribers from a database and hire digital marketing agencies that do creatives which are basically pictures with a tag line or may be some kind of Happy festival messages. The question is – as a customer, would you see value in these? Or, would you rather see value in messages from which you learn something? That is enriching you? It’s most likely the latter. Once subscribers see value in our messaging, they will eventually trust us and give us “Permission” to enter their inbox – just like they allowed the newspaper into their home. They are not a list of leads in a database anymore. They have subscribed to us! That is when trust is gained. It is only then that we stand a fair chance of being able to reach out and be known for our product offering.

Focus on the targets only
In this process, there would be many subscribers who would drop out and unsubscribe. That is but fair. Never market to a laundry list of 20,000 customers who would ignore us. But if we market to a trusted subscriber base of say – just even 2000 or any smallest viable audience, we stand a greater chance of being successful. This is the first step in Digital Marketing; especially B2B.

Commitment, research and creativity
So, it’s really not about publicity and unnecessary talking to reach as many people. It is rather about digging in our heels, and doing the work to write those genuine stories, creating high quality content, building the capabilities required, and then earning trust of even a small number of potential targets. My advice to clients would be to think through this process very carefully, spend time on it, be committed to a sustainable marketing campaign and align every bit of content with your strategy. Make it deep, creative and research based rather than “Happy festival” messages. This would mean not only working on strategy, aligning marketing to it by understanding what our customers need, but also continuously changing our offering to add value and make a change to our customers. If we can make this investment, eventually business will come, and marketing will be successful. If not, it is just a marketing campaign.

Note: The words Permission marketing were coined by Seth Godin, who is a leading marketing thought leader. I’m sure he advises many of the big and famous companies. One can learn a lot reading his articles and blogs. Those of you in our part of the geography, who seek consulting services around strategy, marketing, processes, and some help in implementation, can reach out to me.

Read other articles at our blog post: https://catalystindia.in/blog/

Catalyst India (Bangalore/India) offers Management consulting services to grow & build your capabilities, Strategy, Business transformation, Market entry and Marketing support services. To know more about how we can help strengthen management capabilities in your firm and support your business to grow and scale, please visit www.catalystindia.in or mail us at info@catalystindia.in

Thoughts for Strategy – post opening of lockdown

Economic and work changes due to the pandemic

The virus could recur, and severity could wax and wane, if predictions that it will follow the influenza virus pattern is something to go by. Also, how long will it be before everyone gets vaccinated? Future pandemics cannot be ruled out. Strategists will be worrying about these now. There is already a thinking that dangers from climate change could be worse and irreversible compared to this pandemic. It would be much harder to invent a cure and get back to normal. But for now, with the given virus, change will happen to some extent even if a vaccine is soon found, and in a couple of years things might return to normal; though investors and planners will certainly keep this crisis in mind and make course correction. But if the cure tales longer, changes will be more drastic. This is all conjecture.

First there certainly might arise a new department in charge of risk planning, scenarios, and real business contingency. BCP was in vogue many years ago, but all caution got thrown to the winds. In the last couple of months, Directors, VPs, heads of teams risked their way to the office just to make sure office desktops/assets are delivered to lower level staff, and keep the companies working. So, anticipation, building resilience and detailed planning are going to be critical.

There was the realization of supply chain weakness – like they say when the tide disappears, those swimming naked are exposed. But then, this global supply chain was more by design and no one expected the tide to reverse and nor did they intentionally swim naked.  Total Globalization as we saw in the last decade could be a thing of the past. With the rise of protectionism, China is perhaps the only country that benefited from the past two decades of globalization, and they got rich, moved to another orbit. Apart from the Info-comm sector and perhaps around 3 million people in the sector, India did not benefit from this, and we perhaps missed the bus.

Supply chains will be shortened and re-imagined. Some manufacturing and jobs may return back to developed economies. But Developed economies are more investment driven and the focus could be on automation and robotics. While productivity and costs may increase, reskilling will be a concern.  Developing economies like ours are more consumption driven. We cannot afford to be investment driven and cannot really let automation drive industry to the extreme. We need to keep people employed because our median age is perhaps around 27. So, a consumption driven economy needs to produce and manufacture, and if supply chains shorten, a lot of industrial activity can unfold in India. This is opportunity for economic growth in the next two decades.  Our industry may look more inwards now. It has to be Jobs – Infrastructure- Production – Consumption – Investment and the whole cycle. But certainly, there could new opportunities thrown up in the global supply chain reconfiguration.

Foreign travel will surely be cut. Hospitality and tourism will be definitely affected. What will the numerous workers depending on this service industry do? Out of India’s 400 million workforce, perhaps 4 million work in the software industry, maybe another couple of million in the knowledge sector and other support services/office work – they can WFM (work from home) immediately. But then most of the paper pushers/approvers in government can also WFM too. This will be a huge change and decongestion of roads. High quality info-comm technologies will be the focus and the most innovative ones will succeed. I am already wondering why does one have to constantly think what the other side has (zoom, or meet or teams?), and consider only using mutually common applications, why can’t there be universal applications that can talk to each other? On the fip side, would such technologies preclude the elderly and bottom-of-the-pyramid population from active engagement and future opportunities? How can the playing field be evened out here? Or would everyone be able to come online without getting left out?

Anyway, bulk of us, like those working in manufacturing, customer facing sectors, warehousing etc., will still need to travel to work. The upwardly mobile might choose to take personal transport and will be uncomfortable with mass transport. Those of us who can afford, would surely say a prayer and think twice before sitting in an aircon taxi every day, given the hygiene levels maintained by operators who are already highly stressed and disgruntled making ends meet, and hygiene would be last on their mind. But then maybe the long-term future looks bright for driverless small personal cars. That would certainly be a timesaver.

So, what will the ridership for MRT, public buses be like when things reopen? Usually they get so crowded that we are bang in each other’s faces during rush hour. Well these were the first to shut down when the virus struck. But people are largely dependant on it. Once things reopen, some of these people will surely migrate to two wheelers. So, there could be a two-wheeler boom for sure. Would it lead to a dent in ride sharing taxis? possibly. All said and done, Buses and Metros will still have to be used by the majority. So, there need to be systems to manage this better. Maybe, contactless systems that allow metered number of people to pass through and keep the bus/train from getting overcrowded. Scope for a lot of innovation here.

WFH can affect real estate. Commercial real estate can get affected, with companies trying use the opportunity to trim real estate expenses. But on the flip side, given the new distancing norms that are essential, more real estate space is necessary. So, it could be 24×7 offices, only 25% of staff in office on a rotational basis etc. All leading to complex HR scheduling activities. In fact, Some of the FMCG companies like Nestle, ITC etc.  had their old plants deep in the hinterland, closer to where raw materials were available. These were the first to reopen and maintain the production of biscuits, packed wheat and rice flour, Maggie etc. So, companies will rethink urban strategies and there could be a move to rural areas for many such companies whose supply chains are short, especially farm to packed food. So, again supply chain rethink.

With the IT workforce having and ability to work from anywhere, many may choose the comfort of their hometowns rather than metros like Bangalore, Mumbai, Delhi.  Besides more than 50% of them are worried about their job prospects, so chances of plonking in for large home loans are ruled out. All this will have an impact on residential real estate in metro cities for sure.

But what about the rest? Jobs in the regular economy (agriculture and industry) need to be created., But at the same time, many of us will evaluate closely the feasibility of adopting automation and going digital versus using human resources. So, huge ramifications for the educated workers going ahead, and calls for a serious rethink on reskilling and upgrading. Those resources who are more into manual or semi-manual labour need to be taken care of until we can really afford to move on the AI-automation and robotics orbit. So, owners need to be mindful of what is automated and digitalized, and it is all with reference to local contexts. But surely, all firms will be wanting to go an a structure that is more flexible on the human resource front, perhaps a move to contract hiring and temporary, especially since during this crisis, contract staff were easily let go and companies could conserve financial resources. So, for individual, opportunities for the enterprising among us, and mostly challenging otherwise.  Hope we can come out a happier and more contented society on the other side.

Transforming the business for growth, sustainability & scale

Owner driven small and mid-size companies grow quickly, but may at some point, consider professionalizing the business, to allow the next generation to take over, or scale up the business, or to bring in strategic investors. Reasons could be many. Owner led firms usually depend on preferential access to clients (by virtue of the founder’s relationships), talent & capital. Clients would know them well, their bankers lend because of their track record, and talent within the company sticks on since they have grown with the founder. But it is hard for the next generation to replicate this pattern. The next generation may have other interests, succession could be an issue, the business may have passed the cash cow stage (and needs reinvention); there could be better opportunities; technology might be changing, allowing better positioned firms to take advantage of the existing franchise, or the founders may now want to take the back seat.
Apart from the above reasons, there could also be several internal challenges that necessitate transformation. It could be lack of expertise within the company to grow and scale up, inability to find the right talent, centralized decision making, lack of second level leadership, an informal culture that is reactive, lack of predictability and sustainability etc.
Regardless of the reasons, the transition from an owner driven to a professional structure involves various issues or blind spots, and it is well worth considering making changes along some of the following value drivers.
Goals & Strategy
Employees often cannot relate to goals, as they appear to point to some distant incongruent future. Daily activities seem more like fire-fighting and bear no link with either the goal or the ensuing strategy. Clarity on the goal at this stage in the life of an organization is essential. Goals should be about bringing in predictability in revenues, sustainability in operations, improving capabilities, transforming behaviour, team-work and co-ordination. While being cost efficient and reactive served the purpose all along, there needs to be a strong focus on being effective, becoming a prospector, exploring and exploiting market opportunities (using the Miles & Snow Typology). Such transformative goals should drive creation of strategy and subsequent work design. While leadership of the business is mostly clear on the strategy, it is the execution that presents difficulty. Hence identify core strategy, strengthen it first and then extend along adjacencies.
Organization Design
Organization design is critical to reach goals and implement strategy. Small firms grow as families, with decision making centralized with the founder-owner. Staff get used to the style over time and depend on the leader for decisions. The refrain from making any important decisions. Structures are also informal. A Goal means nothing to them, since it is considered the owner’s goal. Everyone is used to just taking instructions. This often leads to immense activity (as they are not clearly defined) and firefighting around thorny issues. It also indicates inefficient resource allocation. A well-designed structure that caters to the need of strategy – be it domain competence led, or product focussed or project focussed, will largely reduce such confusion. The structure also brings with it effective delegation and operational control that will reduce the burden on the founder.
Operational governance
Operational governance would mean implementing systems for co-ordination, information sharing, cross functional work flow design, assigning clear roles and responsibilities, checks and balances for operational governance, as well as performance management systems. It could be activity driven, result driven or behaviour driven. But, such systems help streamline work, documented processes enable hiring new talent, plugging them into the organization quickly and scaling up; teams then come together to get the work done and achieve goals. Behaviour aligns with the objectives and goals of the leadership. Rewards and increments that are usually subjective, need to be re-designed around performance and skills. It takes the load off the founder-leader and allows the leadership to focus on the next phase for the business.
People & talent
On the people front, smaller firms lack the broad range of expertise and deep functional competencies (while they do possess excellent domain/technical competence), especially in marketing, strategy, sales, operational governance. It is essential to bring in outside talent depending on the capabilities that need to be built out. For a leader, this could create a lot of noise, and leadership needs to rise above the noise. It would also be a good idea to outsource expertise and bring in external consultants. At the same time, existing loyal staff need to be assured that they are taken care of, need to be trained, and career paths need to be clarified.
Capability building
If core strategy going ahead is product development, then the right team needs to be hired, systems such as scrum/agile processes that enable iterative product development have to be implemented, market sensing skills have to be really acute and strengthened, product development team needs to be structured such that they are comfortable collaborating and networking with outside experts and technology partners. Outsourcing and contracting skills may play an important role too. Marketing capabilities need to be good enough to communicate the value of new products or solutions. An ability to create content & establish thought leadership may be crucial, especially in the B2B context. If operations and support and efficiency is the core strategy, then the capability needs to be built along different lines that bring in efficiency, meeting pre-set standards, quality etc. So, it all really boils down to the chosen strategy.
Change management
Last but actually the most important, is managing the change. Better to select small areas that can be worked on, and change can be demonstrated. This motivates staff, and helps other staff see for themselves as to what can be achieved. Hence mentoring people, guiding them, ensuring operational governance, having clear milestones are clearly important and clarity on these subjects will certainly help firms to transform and position themselves at the next level.