BUSINESS
Nokia’s downfall did not come from the lack of resources of any kind
“Did you get it all right from the first step? Isn't sometimes the road to growth complex and difficult?”
I was interviewing Sudhir Rao, MD of Bombardier Transportation. His gentle laugh mostly was the response but he combined that with his words. “See, despite their many differences, most companies that achieve sustainable growth share a common set of motivating attitudes and behaviors; mostly because a bold, ambitious founder or managing person who got guts to fight till the end. Getting it right is crucial but to keep it going is mandatory.”
For the companies that have grown profitably by managing their core traits, those very traits were the primary reason why they became a growing company. They innovate the existing industry or create a new industry altogether. They are focused, with a sense of purpose and the mission is very clear. Their employees know what the company stands for. Employees develop an emotional connect to company, making attrition rate much lower.
The second interview was with Pankaj Singh, chairman and CEO of La Renon Healthcare Pvt Ltd, which was founded in 2007. They grew at the rate of 70% per annum and in 11 years, they become the 43rd among the top 50 pharmaceutical companies. What are the components needed to attain such growth?
Differentiate the strategy: The basic differentiation strategy is to separate your business from its competitors by putting a specific difference in the mind of your target audience.
This focus can be the services you provide, the cutting edge products or even the way the customers are treated. Each organisation has a differentiating strategy when they began but over a period, loss of employee accountability, increasing distance from frontline sales people and not giving credit to people where it is due are just a few reasons to lose focus on core strategy.
Right people to fit in: We all know how important it is to keep fitting people in their roles and ensure they give their best. Certain companies have the old-timers as key managers, who take over certain duties performed by the founder/owner.
The key managers should be competent but they need not be of the highest calibre in the industry. This is because they have to keep wheels running at utmost capacity but very carefully stay out of bureaucracy rut. These people need their responsibility clearly divided and also the managing director has to be very careful not to get into grateful guilt. It is an interesting psychological dilemma is when founders cannot admonish key people because of the loyalty at both ends.
Ruthless execution: An all-time favourite example of mine is Nokia. Its downfall did not come from the lack of resources of any kind. Nokia had its foot firm in ground of one of the biggest growth markets the world had ever seen. Besides, it even sat atop of one of the biggest cash piles. They just did not think like a start-up or invest in the future. Instead, Nokia gave out 40% dividends and used its cash to buy back large quantities of its own stock. Within just a few years, Apple, Samsung, Google and Chinese players overtook the smartphone market. An erstwhile, revered innovator saw a steep decline. Having a great strategy is just a piece of the puzzle. You need the right piece in the correct place, even if needs to be pushed hard to fit in and stay that way. Once you have a differentiating strategy, push it hard and remember that the climb upwards is difficult. Weaker ones would leave you midway maybe but that's for the better.
Cash resources: Pankaj Singh mentioned that most owners forget the debt-equity ratio and with that begin bad investments. Successful organisations have 10 times more cash assets than needed. Nothing ages and frustrates a key team and CEO than having a great idea, excellent team and no cash resources to go ahead.
In new business, every businessman bootstraps but as one grows, owners have to rise to challenges of a growing organisation. Many companies go back to where they began because the cash resources dried up. And lucky are those who do not perish.
The writer is a strategic advisor and premium educator with Harvard Business Publishing
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