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.
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.
Difference between the best companies and the rest
Surveys have revealed that most senior executives believe that their companies do not have a winning strategy, nor do they have the right capabilities to execute the strategy. Companies that are great at both strategy and execution don’t necessarily follow existing industry practices. Below are a few things they do that contradicts conventional management wisdom, but if followed in your respective industries would lead to long term sustainable advantage.
Don’t pursue growth mindlessly
The best companies do not pursue growth for making the headlines. They have single minded clarity on what they do best, what their value proposition is, and focus on building capabilities that help in delivering this. For example, Ikea only focussed on designing furniture that is supposed to impact everyday life, that is frugal, and can be self-assembled. It never tried to leverage its brand for luxury sofas or interior furnishings, although there may certainly have been intense pressure for faster growth.
Focus on what you do best rather than copy
Managers in most companies feel that they should copy what competitors are doing, especially so called “best practices”. For example, if a competitor claims to have a certain type of CMM or ISO certification, typical companies start spending precious management bandwidth to follow suit. But the best companies rather focus on building & scaling their own inhouse capabilities – those that will eventually give them a competitive advantage, and that is hard for others to copy. Example: Many small niche restaurants have stood the test of time, because they focussed on what they did best, and continue to keep serving those specialities, but never felt the pressure to copy or benchmark themselves with competition. Brahmin’s café at Shankarpuram, Bangalore still makes and serves the best vada, chutney and coffee. They never ventured into other items, and even after many decades, they get sold out in a couple of hours.
Leverage unique company culture
Many large companies hire consultants, who are asked to come in and transform the company to overcome execution problems, and they usually suggest changes in structure and incentives. But the best companies always resist such disruptive change, and instead leverage the culture of the company to drive change that is most effective and lasting. Smaller companies, and especially, owners of mid-size companies are great examples of transformation and usually get this right, by leveraging their own unique culture. But the larger companies try these disruptive changes for a time, at least until a leadership change. They are constantly under pressure to project such initiatives to their stakeholders. They perhaps survive due to the momentum that have built in the market. Otherwise it would be a disaster. But, had they nurtured their culture and laid it as a foundation, they would be a in a better position to weather any storm.
Build on strengths and cast-off flab
Companies often go on a cost reduction spree across the board based largely on evaluation of economic parameters. This might lead to sub optimal performance, and sometimes could be damaging in certain functional areas. The best performing companies though, evaluate strategy, and carefully consider where costs should be reduced. Instead, they might even pump in resources into capabilities that matter the most and need building. According to an article in HBR, Lego that was losing huge amounts of money in 2004, went on to become the largest toy company in 2015. They did this by cutting business like theme parks where they had no core competence. They instead focussed on the building blocks that they were best known for.
Systematically create the future
In a nutshell, these companies did not ape others, but methodically went about creating their own future by doing what they did best. Leadership in these companies need to be a cut above the others. They must believe in themselves, and it takes a lot of nerve to not cave into pressure from stakeholders, to not fall into the trap of aping others, and relentlessly improve whatever they do best.
Most people think of Strategy as intellectual and exciting, while execution is considered mundane. It is often left to lower and middle level managers to handle on a day to day basis, and not much thought goes into it, especially among small and medium enterprises. Execution means effective management and this means challenges in the form of processes and people. Unless companies actively make necessary investments in these areas, execution is bound to be mediocre at best. Today, as the bar for survival in business is being set higher, it becomes essential to enhance core management capabilities, making it harder for competitors to imitate. It is perhaps one of the best ways to build a sustainable advantage over others.
Research conducted by Harvard on more than 12000 companies in the area of operational excellence, revealed that the top 10% of the firms are 25% more profitable and 50% more productive than the bottom 10% of the firms. Better managed firms grow faster, are more profitable and are less likely to die. Operational excellence was measured in areas of processes, process documentation, performance management, target setting, control systems etc. On a scale of 1 to 5 (1 being bad and 5 is very good), the grey bars show the global distribution of companies in operational excellence. Blue bars indicate the distribution of companies in the respective countries. As seen, Indian companies are lagging their global peers. (Image courtesy: HBR)
In our work, we’ve found that management practices are better in some companies than in others, because of the following common reasons:
- Most companies do not invest enough on people and processes. They do not see value in such investments. Managers often underestimate the impact of good processes
- To allow processes to function, sometimes, managers just need to make their presence felt. When everyone sees top managers walk the talk, things happen. But companies do not often allow managers this leeway, and would like to see everyone producing and achieving individual quotas
- Stubborn blind spots and deficiencies could prevent companies from knowing their own problem areas. Managers are of the opinion that their processes are good enough and hold on to the “way of doing things here…”
- Employees who recognise bad practices, seldom bring these to light for fear of being singled out, or given too much responsibility without any authority, or maybe even a fear that an improvement in productivity might lead to job losses
A study of Indian textile industry done by Accenture in a Stanford-World bank project showed that companies never implemented quality systems, production planning process or appropriate reward systems since they were sceptical about its benefits. Consultants were often informed that “such processes will never work here”. But among companies who did adopt processes, significant benefits were recorded.
Family firms have been especially found to have weaker management processes, because adoption of such processes entails significant costs in terms of hiring outside talent, and decision making becomes decentralized, which may not be to the liking of the family, unless they are really comfortable in letting go control in order to scale up.
Typical management practices that can be implemented for starters are:
- Quick and effective performance management processes
- Target setting and alignment with overall strategy
- Processes in sales and marketing to find new customers and reach out to the market
- Documented processes in support, aftermarket and product development that really allow the company to respond effectively to its customer requirements, reduce risk and respond quickly
- Structured interactions between teams for regular debriefing and problem solving
- Management control systems
Implementing core management practices seems simple, and does not involve heavy technology investments. But these are not practices that can be started and stopped at will. They need long term commitment from the top, and a shift in mentality at all levels in the firm. Everyone needs to act as a manager. Strategy is always successful when coupled with execution. Management practices bridge this gap.
Many mid size companies in India have good calibre sales men. In some of the older companies, these sales people acquire technical capabilities and are long timers in the company. They are pretty good in talking the customer’s language and closing deals. Unfortunately, 70% of a sales reps time is spent scouting for leads and in trying to get an appointment. They just don’t seem to have enough of them. The common complaint I hear from senior management is that the sales team is warming the seats. These expensive resources should be out there with clients, closing deals. But we need to enable them. There are two ways to do that. Build good marketing capability that will cast the net wide and obtain leads. Second is to build an inside sales team. This is a team of highly skilled lead researchers, who will choose a target segment, identify companies and the right decision makers. The leads thus obtained need to be enriched by gathering further information. The team then connects with the lead and qualifies them. A lot of communication and exchange of marketing content happens with the lead. The inside sales team manages to influence the lead, and almost converts the lead to a customer. Once this milestone is achieved, the lead is handed over to the sales team for negotiation and closure.
Here is a real story of a customer (a senior and well known consultant) on how a solar company sold him their solution without even meeting him. It demonstrates what alignment of marketing and inside sales can actually achieve. The consultant reached home in the evening and found an envelope in his mailbox. He opened it, to find the website of the company on a slip of paper, in bold letters. That’s it! Curious to know more, he typed the URL and went to the website. A classic instance of how a customer is taken from the physical to the digital world of marketing. It briefly told him about the solar solution that was offered. He then gets a call from the company ( It now gets engaging). The inside sales person who has called, already knows all the details like the house address, the area of the roof (which they have calculated from google satellite maps) etc. Then they start to talk and tell our friend, how many panels he would need, the amount of energy it would produce, they knew his current bill amounts, so they also worked out the cost benefit analysis and told him about break-even etc. All this was done while sharing a screen with him, while the inside sales rep talked and ran him through the decision making journey. A classic case again, of mapping rich marketing interactive content with the customer’s decision journey, and taking him through the process. The deal was done. No sales person ever stepped out of the office. This to me demonstrates the power of combining effective marketing with inside sales to grow business, and this is where we help our clients build capabilities as well. Often, in marketing we get carried away with social, mobile, lead scoring etc. But core content that helps a customer make a decision is neglected. And then, inside sales is of course about process and diligence. So, while a lot of solutions will still need a direct sales presence, much of the initial stages can be done with marketing and inside sales. It is a combination of technology, process, intelligence and creativity, which when combined and implemented well, will lead to great results.
Marketing has evolved from being personal to being generic and finally onto algorithmic personalization today. Marketing culture today is obsessed with digital technology. People are just data points and subsets of various online communities, profiling logic, databases etc., The outcome of such micro targeting has still been a hit and miss. Going forward, this could be a thing of the past. Messaging platforms are expected to make marketers do a U turn and get up close and personal with their customers (or consumers rather!!). There is afterall a huge difference between algorithmic personalization of an e commerce site (based on past purchase recommendations and items viewed) and the personal interaction being attempted via messaging platforms. There are a number of platforms out there like whatsapp, facebook messenger, snapchat etc. They are part of everyone’s personal life, and most of us spend a lot of time on these messaging platforms. Smart marketers are all set now to leverage these messaging platforms to manage branding, e-commerce, advertising and customer service.
In China, 650 million users use wechat (similar to whatsapp), and companies are already using wechat to enable e-commerce. Typical messaging platforms are feature rich and allow a variety of media to be exchanged. Besides, what happens on such a platform is personal. It is a conversation. If the customer stops the conversation, it means she is no longer interested. It allows brands to connect customers with experts and enable an intelligent and rewarding conversation (as in, say a travel site connecting a customer with a guide who can offer tips). It also opens up a whole new door for content marketing allowing brands to really fine tune their content, get creative, and explore the art of a contextual conversation. This allows brands to collaborate with experts and get conversational and personal with the customer. It will also weed out the brands that do not really care, because customers will just log off, the moment they get inundated with broadcast style messages. Recently, there was a WhatsApp promo doing the rounds. It mentioned that Reebok and Amazon have come together to gift away shoes. All we needed to do was re send the message to 10 other groups in our contacts. I presume they collected the contracts of all the ten groups. They then allowed us to download an app to complete the transaction. The app wasn’t from the play store. I of course panicked at this point, thinking of malware “Godsend” and we aborted. There will always be intrusive attempts. It’s up to us to get creative and innovative (while still being mindful of customer privacy and sensitivity issues) in using messaging platforms to reach out to our customers. It could open whole new avenues.
