Daily Archives: March 3, 2003

On the Balanced Scorecard:

My opinion is that companies after taking these quadrants of the
Balanced Scorecard get back into the old rut of managing by metrics.

Let’s take the example of the focus of the BSC on Customers. Many
instances can happen as to how companies can interpret this
quadrant. For example, one company can say it will measure “the
number of times we meet our customers” which is at a very basic
activity level kind of measure. While, another can choose to
measure “Customer Satisfaction level” and while it is a
more ‘evolved’ method than the first one, it can still deteriorate
into meaningless number crunching. While a third company can
say “Using the Pareto principle, let’s see which 20% customers
contribute 80% of our business , take their feedback and measure as
to how we have implemented their views into our products/services”

So while all the three firms can claim to implement the BSC only the
third one is actually using it to its full potential.

The really worrisome part is that the BSC is now being touted by IT
firms and the real fear is that of getting snowed under data.

Reliance overall is a great case study for how a company can
master “radical growth” as a Prof of mine puts it.

That reliance has been able to define the concept of “core
competence” from an industry to a process is well chronicled.

What is not so well chronicled is the way reliance has mastered the
art of

(i) Knowing its business web
(ii) Mastering the +ve feedback cycle (also known as the virtous
cycle)

Let’s look at the business web…as said earlier, Reliance views its
competence to be an executor of large, challenging projects, and it
knows how to mastermind partnerships (either with Du Pont, L&T,
MorganStanley) to execute these projects.

When it comes to feedback loops lets take two examples..

Reliance has quick delivery schedules, which leads to a low customer
inventory, which result in savings to customers, which results in
two things : (a) A larger customer base (b) the customer willingness
to pay a premium…both these result in substantial profits over
competitors, which is ploughed as investments into locational and IT
facilities which results in quick delivery schedules…thus driving
this virtuous cycle faster and faster, grnding away all the
competition …

Or the second virtuous cycle it has mastered:

Investments to assimilate talents and IT infrastructure, leads it to
have knowledge of global sources of funding, which gives it access
to low cost capital, which fuels growth and expansion and drives
profits and surplus which is invested in more talents and
infrastructure

These virtuous cycles trigger “the law of increasing returns”
something not too many economists would agree with
But it is not enough to know and master these virtous cycles…and
therefore it needs to bet on the correct technology standard…and
that is what we are witnessing now…the war between GSM and CDMA
standards…and it is the side that bets on the winning technology
that comes out the winner…and the irony is that the technology
does not have to be the better technology or even more matured
technology…:-), hence an organization that can foresee the
technology and standard waves and can ride that is always the
winner..

In fact, it is quite amazing to notice the commonalities between
Microsoft’s strategy orientation and Reliance’s…both always keep
their eggs in different baskets…experiment in the market (not as a
test:-), listen to the feedback and constantly keep improving based
on that..speed and size of launch is valued by both of them
(Reliance Infocomm’s 28th Dec launch reminds one of Windows 95 !!)

Warm regards,
Gautam

Between strategy crafting and execution

Over the last one week a colleague and I were involved in diagnosing
how strategy execution dilutes as it flows from the top to the
frontline salespeople and then down to the level of dealers.

It was interesting to note that the deviation in strategy execution
happens right from the group that crafts the strategy. This is due
to assumptions not clarified on small seemingly inconsequential
details like (how a certain initiative has to be carried out, what
is the context, and what is the overall purpose?)

This translates into more deviations and dilution as the strategy
flows downstream, which emphasis being placed more on the means than
the ends, and then the firm starts to track numbers that take focus
away from the overall purpose.

Finally, when the rubber hits the road at the level of the retailer
and dealer he/she is aligned to a totally different purpose by the
sales people than what the planning group wanted him to be.

And the reviews that are supposed to be clarifying these questions
only add up more to the confusion with people not knowing why they
are requesting a certain request or doing a certain activity.

It was an amazing learning as to how organizations are falling short
in performance and a pointer to things like how MUCH more they can
achieve.

ETHICALITY IS NOBODY’S BUSINESS

hi folks,

When we were in B school (XLRI, Jamshedpur) we had a core course
called “Business Ethics” which would evoke a lot of yawns and
amazement from the students (XL was the first B School to introduce
this course in the mid 80s)…and the comments would range from “How
boring” “Global fundas” “what an oxymoron” etc etc

Of course this was much before Enron and ensuing scams, and I
guess “ethics” has become hot now

My OHO (own humble opinion) is that ethics (amongst other things) is
an organizational trait that is a direct descendant of the
entrepreneur/visionary’s worldview and mental models….this shapes
the policies, processes and the unwritten rules of conduct as to
what goes and what does not go in that organization. If the founder
is a person who wants to “win by hook or crook” then the
organization degenerates into “ends over means” …If the founder
takes the view that the path and the goal are both non-compromisable
then the foundation is laid for a truly ‘generative’ corporate
culture..

Some organizations have achieved outstanding success with “ethical
business” and some have achieved it without it…The reason for the
debate exists because nobody can prove that ethical business
practices lead to business growth…there have been cases recently
of academic research suggesting that “good” CEOs are much better for
the organization and employees than “loud abrasive” CEOs…however
that has to be seen in the social context of the Protestant work
ethic in the US and could be a result of the need to “right”
sentiments towards business post-Enron…

I guess the time is just right for a research study in this area in
India…any PhD student interested ?

Those who are following the banking/fin services thread, I just
wanted to sound you out.

In the “discipline of market leaders” it is analysed that market
leaders usually do three things very well, and of them one thing
extremely excellently

These are:

1. Customer Orientation
2. Process Excellence
3. Product Leadership

While for a large part, the focus is determined by the nature of the
industry one operates in, (for example, a logistics/ courier company
has no choice but to be leading in process excellence)… what
distinguishes one from the other is leadership in one area.

Therefore Sony leads in Product Excellence over others like National
which concentrate on process excellence to get it out cheaper after
Sony gets out the product.

So, where are our various players in the Indian Banking industry?

Who is the product leader?
Who leads in process excellence?
And who leads in customer orientation?

The premise of the theory is that you have to be good on all three
but can only differentiate from the others on the basis of one.. !

Anish, this might address your questions too

Regards,
Gautam