The first part of the discussions between strategy consultant Rama Bijapurkar and Wharton's Yoram (Jerry) Wind on The power of impossible thinking on CNBC to be telecast on Saturday May 14, 2005, at 10:30 pm, and repeat telecast on Sunday May 15, 2005, at 8:30 pm. Anchored by CNBC-TV18's Anuradha Sengupta.
Previewed exclusively on domain-b.
Anuradha Sengupta: In the past decade or so, in order to survive, Indian companies have had to go on crash courses to re-learn the rules of business. The paradigms for competition, consumer expectations, policy frameworks have all changed. On Lessons in Excellence today we'll talk about how to dismantle the old order and bridge the adaptive disconnects or the gaps that show up in the new way of making sense of the old and the new one. We'll do that with special focus on Indian companies and changing markets and consumers. Here is Jerry Wind and with him is marketing and business strategy consultant Rama Bijapurkar. Jerry, dismantling existing models; it's not an internal process only is it? It is about taking down or adapting the systems and processes that these models have spawned.
Yoram Wind: Correct. It is much more that changing the mental model of the company is reflected in their business and revenue models and value propositions and it really involves all the stakeholders of the firm and the entire architecture - organisational architecture of the firm. So not only have you to change your strategy - you have to change the components in terms of you have to focus on how to create a corporate culture, how do you change the structure, how do you change the business processes, what type of competencies do you need, what type of people do you need, what resources you need.
Anuradha Sengupta: This can be painful isn't it and this can be expensive - this entire process?
Yoram Wind: It is painful. The expense is really a question because a surgery is sometimes cheaper in the long run and more effective than slight changes. Furthermore, if you are going in for a re-invention of an organisation with having stretch objectives like with doubling of revenues and profits in three years or something like that it is obvious that you cannot continue doing this the old way. So you have to look at new ways of doing it and this typically leads companies to look for better and more efficient, cheaper and better ways, and faster ways of doing things. So it is not always more expensive, depending the way you do it.
Anuradha Sengupta: Right, Rama, this might not be more expensive but there is effort, energy, emotion, investment that has gone into creating this infrastructure, this investment - it's grand, maybe. Is that one of the reasons, maybe, why companies don't react so fast to the changing environment?
Rama Bijapurkar: I think it has less to do with discarding infrastructure and brand investment. It's more to do with discarding knowledge or conventional wisdom because when you move away from the 'doesn't everybody know that this is the way the world works', you have to have a very clear and proven alternate view of the market and when you don't have an alternate view of the market, then your tendency is to stay with the safe.
For example what we have seen in the FMCG sector is the amount that it has been competing with durables that have been financed by credit. So consumers are mortgaging their future income to buy durables and houses and what is left is coming to the FMCG sector.
Now for the sector to learn to compete in this kind of an environment with the other categories with which it has never competed with before is a lot of stress. And, well, to have to discard and build new models is risky and dangerous, because who knows, if you compete with the mobile phone, your FMCG competitor may take your pants off.
Anuradha Sengupta: You want to answer Rama's concern of, 'if a market leader has a model and if there is nothing wrong with it because they are making money, when is the right time?' Where do you get the courage from, if you are No. 2 or No.3, to come up with an alternative? Because there is no incentive, is there?
Yoram Wind: There is a huge incentive… I always liked the advertising of Avis - "We are No. 2. We try harder." I think if you are No. 2 or 3 or 4 or 10, the only chance you have is to do something yourself. To go against this big market leader is a slow, incumbent, typically arrogant…
Anuradha Sengupta: Rama, why is it not happening in India?
Rama Bijapurkar: I totally agree with him that they see a lot of people at NO. 2, 3 and 4 see the market leaders floored. I also heard discussions in the offices of the No. 2 and 3 that "you know, we know he is going to crack up." The minute somebody comes to challenge him, this will happen. So why don't you challenge him?
Anuradha Sengupta: What's the answer to that?
Rama Bijapurkar: The answer to that is, it takes too much money. there is always within the system which says, "you got to have to prove it", the onus, the proof is on the challenger to prove his guts.
Anuradha Sengupta: Jerry, going back to companies which want to talk to consumers and listen to consumers - is research adequate enough?
Yoram Wind: Well, first we have to make a distinction between good research and bad research and unfortunately there is a lot of bad research.
Anuradha Sengupta: Rama, you have railed against the fact that they are product-centric and are not customer-centric for the longest time.
Rama Bijapurkar: Yes, I have always maintained that asking the customer about the product till kingdom come is not customer-centricity and that very few research projects have the courage to talk to the customer about the customer. As far as the research is concerned I think that the notion is taking some root that the lower middle-class educated woman who has more aspirations than money is often the lead user on a lot of things.
The bigger problem is I think we are not doing enough macro-consumer work because there is big change happening. For example half of urban India has gone self-employed. That little piece requires huge changes in models because if you are in the healthcare business, you must realise that what makes self-employed people paranoid is the day you fall ill and you don't go to work and you don't earn. In the end there is no pay-check. It means that the middle class is more compliant than the upper class as far as healthcare is concerned because they need the stuff. It also means that large banks and companies haven't actually figured out or done credit appraisals for anybody else apart from the salaried worker.
Just having self-employed people changes the way homes live, things happen. I mean it is a huge ripple of change. So a simple macro - I keep saying that we have enough macro - economic discipline but in this country we need a macro-consumer discipline that looks at demographics, economics, values, attitudes. For example, rural. Actually, we do not have a ready number for what is rural GDP. We know agriculture and we assume that agriculture is equivalent to rural agriculture.
But some work recently Serge and I have jointly done has shown that about half of rural is non-agriculture. Now simple statistics like that can completely transform the way you look at agriculture if you look at rural.
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