Book Title: Managing Radical Change-What Indian Companies Must do to become world class

Authors : Sumantra Ghosal , Geeta Piramal, Christopher Bartlett

Publisher : Viking Price: Rs. 495/-

Since most of us do not have experience of corporate management and have little idea about how decisions are taken in leading companies , I personally recommend this book to all Alumni of BCS course. This book discusses real life problems of Indian companies and suggests remedies too. A very enriching experience.

There is highly predictable process which the pathology of satisfactory under performance takes hold of the company. By luck, chance or foresight and courage a company develops an effective and successful business strategy. The strategy fits the market demands and matches the company's strength. As a result, the company becomes highly competitive, with growth and profits as the ensuing rewards.

With growth and profit come recognition and celebration. Top managers of the company start their face on the covers of business journals. The Harvard Business School writes a case of their success. Soon they start believing all that is being said of them-they are the best. It is their brilliance that caused it all. They go on the lecture circuit to tell others how they did it, despite great odds. With growth comes the perceived need for better control. After all, if they did it all, ten must continue to do it all, to protect the success and build on it. As the company becomes bigger, to do it all they need support to collect all the information, to bring all the important choices and decisions to them. So they hire layers of staff ,as instruments to leverage their own brilliance in the expanded organisation. The staff joins the business press in telling them how good they are, and it all becomes a positive reinforcement cycle.

Being the best gives these managers the right to be arrogant, not only with their subordinates , but also with customers and suppliers: " Why make fuss if some little thing goes wrong? Don't you understand what a privilege you have , dealing with the best?"

External arrogance and a focus on internal control soon stifle all initiative and enthusiasm at operating levels of the company. Those who can manage the politics progress , those who side with customers and employees or raise uncomfortable questions are see as obstacles. And are soon sidelined or ,better still, pushed overboard. Compliance and fear take over from enthusiasm and passion. Gradually the company slips first into satisfactory under performance and finally , into acute crisis.

While there are some exceptions, and this book will tell the tales of some of these exceptional companies -satisfactory under performance is pervasive in corporate India.

Radical Performance Improvement is possible

This is the first and essential prerequisite for creating and managing change: Senior managers have to develop the belief that radical change is possible.

That is the fundamental premise behind this book, as well as its key purpose: to make managers believe-really believes that radical performance improvement is possible. It is certainly possible for small and medium sized firms, but it is also possible for large , established companies. And it is possible to achieve such non -incremental improvements within a reasonably short period of time- not quarter or even a year, but not ten years either.

There is a religion in the field of management: it is called incrementalism. It is based on the belief that everything in companies happens slowly and incrementally. It comes with its own rituals and metaphors: like the analogy of supertankers. Supertankers turns slowly , in long turning circles. You can not jerk them around. Ditto for companies, particularly large companies with thousands of employees: you can't push them too much too fast. You have to have patience, you have to be pragmatic. In big companies, things simply do not happen that quickly.

There are those Dhirubhai Ambani at Reliance, for example _ who have never believed in this religion, but most Indian managers practise it, knowingly or unknowingly. They have been brought up in an era of crippling regulations, bureaucratic dominance and poor systems and infrastructures when the tenets of this religion tended to be valid most of the time. That is how they got converted to this faith. They continue to maintain that faith. They do not like words like "Radical Change" - they find the concept too childish, too unsophisticated , too un Indian. For them , it is difficult to convert once again to the faith of radical performance improvement.

Yet, this is the most important implication of deregulation. In a deregulated , competitive economy driven by the cruel logic of markets, a company that fails to change enough can and will die-as it manifest in the slow march of extinction that has already become inevitable for some of India's great old companies. At the same time, in this deregulated market economy , a determined management can transform a company much more quickly and much more effectively than was possible in the past.

International experience clearly shows that radical performance improvement is possible. Motorola had fallen off the precipice in 1985: its profitability had collapsed from 6.3 % to 1.3 %, a drop of 80%. Competition from Japanese companies had forced Motorola out of the DRAM business. It had slipped from the second to the fifth position as a supplier of semiconductors and was considering merger- a polite term for divestment-of its semiconductor operations with that of Toshiba. Even in the pagers and cellphone businesses, the Japanese competitors were surging ahead in the battle for miniaturization and featurization, appearing well set to soon capture market leadership.

By 1989 , in mere three years , the position had totally changed. Profitability was back at 5.3 % and Motorola had established clear leadership in pagers and cellphones with a slew of innovative and price competitive products. It was back in DRAM business , and had emerged as a major supplier of semiconductor products to the moist demanding customers around the world.

Within these three years, Motorola achieved dramatic improvements in its operations. Development time for new products was shortened from an average of 3 years to 1.8 years. Design improvements led to a fall in the average number of parts per product from 3400 to 630. The order to shipment period was cut from thirty to three days. Defects per million fell from 3000 to 200, thanks to the celebrated six sigma total quality programme.

Motorola is by no means an isolated case. Over last two decades, many companies around the world have achieved similarly radical performance improvements, shattering the myth of incrementalism. Collectively their experiences demonstrate some simple truths that most managers, steeped in the tradition of business as usual incrementalism, may find hard to believe.

High performance companies exist in Unattractive industries:

Industry determination is perhaps the most debilitating of all management beliefs. Of all management beliefs. "How can I do much better, my industry is in lousy shape". In India, we have heard it over and over again from executives in consumer durable, electrical machinery, paper, heavy engineering ,bulk chemicals and variety of other businesses. "Didn't Michael Porter talk about industry attractiveness? Well mine is a most unattractive industry."

Outstanding performance can be achieved even when competitors are much bigger & stronger

Yes, size maters but no, size does not determine. While David & Goliath stories may be relatively rare in other aspects of life, they are all too common in the world of business. To those Indian managers who shy away from the aspirations of radical performance improvement on the ground that their ambitions must match the reality of their comparative resources and scale, we say look at the case of Zee TV in Chapter 3. Against the Goliaths of Rupert Mudroch and his star TV , on the one side and Doordarshan on the other , if Zee could do what it ash done , why not you.?

Radical performance improvements is possible even when you are already very successful

Perhaps the most pervasive myth of all is the belied that truly radical change is possible only when company is in actual crisis. With crisis come defreezing, a delegitimization of the existing order that includes the existing power structures, beliefs and processes, and this delegitimization of the old clears the path for the new. " Fix it while it ain't broken yet" is a fashionable statement but not a very practical one, the belief goes because people cannot see the need for change when everything is going well.

Helping people become the best they can be: The campus in Electric City

For an outsider walking into Infosys' head office and software development center in Bangalore's Electronic city can be an interesting if somewhat unsettling experience. Walking through the reception area would lead the visitor to a bridge over a little stream running through a landscaped garden. Walking over the bridge would lead her to the canteen, the little kiosk which sells cold drinks and snacks, and the basketball court. At any time of the day, individuals or groups can be seen either deeply involved in some heated debate about the project on which the team is working or simply lying on the grass and having a quintessential "chai Break".

Coffee and tea drinking is an essential feature of the daily life in Infosys, spilling over from the cultures of the engineering college where most Infoscians spent their university years. Beverage stations are located in each floor of the office building and dispense 2400 cups of tea and coffee a day.. As a project manager explained," This campus like work place is certainly critical as the company mostly recruits freshers from engineering colleges and IITs. This setting helps the transition from a semi-campus to a productive environment.

This deliberately designed campus environment is reinforced at Infosys by a massive commitment to continuing education. Immediately after joining the company, all professionals recruits have to undertake a 105 day training course. Designed to create a standard starting point for technical skills, the quality and intensity of the course is such that any student emerging successfully from this training develops technical skills equivalent to a graduate in the US with a Bachelor's degree in Information Systems.

Regaining Corporate Legitimacy

Ideas matter. In a practical discipline like management, they matter even more. The philosophical vacuum of the strategy structure systems doctrine has caused managers to subvert their own practice, trapping them in a vicious circle. But there is a choice. When the solution to a recruiting problem is always "try Harder" , there is usually something wrong with the terms , not the execution. So our final advice to Indian managers -when in a hole , the first thing to do is to stop digging. The outlines are emerging in India of a very different management philosophy, based on a better understanding of both individual and corporate motivation. The time has now come to throw out the old paradigm of management, and to make a jump to the new one. Otherwise, the fatal gap between companies' economic power and their social legitimacy will continue to grow, stunning the growth potential of Indians, Indian companies and India.