BENCHMARK IT RIGHT
The old (read, traditional) industry is one where change is not as rapid as the tech sector. When you want to make big shifts, it takes time. Even growth takes time. Today the time it took Google or FB to build the kind of market cap or scale, equals 100 years of being in business for GE. Everyone talks about technology space when they talk about biz. Even among youngsters, there is this need for instant ‘nirvana.’
Understanding the aspiration is a no-brainer but it is the ability to bring change in self that will determine the results. Have we ‘internationliased’ our people? For instance, while doing my PhD, I met Korean students with a fatalistic attitude. When asked, they would say their company has sent them to study and become American. This is the kind of investment that happened in the 80s. Later, these were the same leaders who were sent back to America to build the market.
So, there is a Western and Eastern model of business. In the West, businesses were built over last 100 to 200 years, leading to creation of strong brands. Thus, when a Western firm came into a developing market, the brand’s pull factor could be capitalised by managing with local people, like Unilever. In the eastern model, you don’t have a brand. So, you need sustenance over failures to eventually succeed. We must build an Eastern model, wherein, the leadership talent can be present in a country and build the brand outward. That’s what we mean by saying preparing this company for such an approach.
Look at the Japanese or the Korean systems. Even when the companies aspired to be worldclass, their social infrastructure was moving up in that direction. While we may have created the physical infrastructure within limited scope, the biggest issue is to find good people. You go to engineering colleges to recruit an engineer where instead of progress, we only find them regressing. Should we recruit and then retrain them? Where will we get the resources... The domestic faculty is awful enough forcing us to bring them from outside the country and build our own skills infrastructure. It is a big decision.
For instance, our blue-collar employees will soon be in the retiring cycle. Therefore, we developed a three-year vocational training system. We brought a German expert, made him sit here and built a curriculum as otherwise, we could not have got quality in the workshops. Replicating it for the white-collar workers will mean adding to costs of the organisation. Either we do it inhouse or we send these kids abroad. Education is generic but the experience is Western.
INSPIRATION COMES CALLING
The company that I really look up to, which has done very well is the Mahindra Group. It is closest to being number one in the tractor business. It didn’t have any technology but built it from scratch. Look at the kind of investment it made in people and process - in going out and conquering markets, making some bold moves. If we must invest in a company, you need the talent to back it up. Else it is risky and therefore it is better to stay away.
SOUTH vs NORTH DIVIDE
Business communities in the North are a lot more practical. They don’t get attached to assets. Out here, a company is perceived as an asset. For the north, it is simply a means to generating wealth. There is no attachment to them. We tend to (in the south), even at an individual level, not spend on vacations because it is intangible. We have an asset-based orientation whereas north is more experience-based.
ON PROTECTIONIST ENVIRONMENTS
It is a parochial national behavior that is not sustainable. We are going through a phase, where the fundamental problem is inequity. Disproportionate earnings not matching capabilities is a trend that is being seen in India too. Transferring the blame on somebody else is the reason for voting in favour of a radical person. He is not going to change your life but that does not mean you need to go back to socialism. Capitalism comes with a huge divergence. It is moderation that is required at an individual level and a company level. At Elgi, we practice certain multiples between the lowest and the highest pay. We will not make these maverick kind of CEO payments. My favourite example is Alfred Sloan, who built GE to be one of the most successful companies. If you look at the salaries of blue collar employees and the salary of Sloan, the multiple was reasonable. Now, you have a CEO of GM, which is on the brink of bankruptcy, as a multiple which is crazy.