Book Review - 'Harsh Realities: The Making of Marico’

 

Book Review - 'Harsh Realities: The Making of Marico’

 

 

 

I enjoyed reading 'Harsh Realities: The Making of Marico’ - co-authored by Harsh Mariwala, the founder of Marico and Prof Ram Charan, the legendary management Guru.

In less than 300 pages, the book presents a fascinating tale of how Harsh Mariwala built MARICO. The author presents the various challenges of transforming a joint family- owned traditional business in commodities into an inspiring world-class FMCG organisation having multiple brands - products and services.

The book starts with the history of Mariwala joint family and provides information about their traditional oil and spice business. It narrates the family separation and how the third generation of entrepreneurs decided to come out on their own. The book predominantly focusses on the challenges of building Marico across the pre and post liberalization era along with various learnings shared by the authors.

There are excellent lessons in leadership including ideas on how to create and build an organization with Purpose - one that would not just cater to profits but more importantly care for society and all stakeholders. The importance of Leadership, Culture, Values, Transparency, Trust , Strategy, HR, Talent Management, Financial Management, Marketing, Branding, Communication, Technology, and the role of leader/ entrepreneur is succinctly emphasized.

Often strategy is about deciding where to compete and where not to compete. The author says, “Looking back, basing my business ideas on my strengths and interests, and staying away from areas where I could have been somewhat challenged, was probably what led me to success.” 

The book teaches lessons in competitive intelligence and strategy pertaining to consumer marketing , branding, packaging and price wars. Various examples of experimenting, risk taking, failing, and scaling to increase product range and capture market share are insightful.

The chapter titled ‘ Angels and Predators’ present the corporate battle between David V/s Goliath and clearly highlights the leadership conviction and some unconventional strategies to face the mighty Hindustan Lever ( now Unilever) and other competitors. The various anecdotes and real-life situation present an engrossing tale and are truly educative coupled with some incisive advice from Prof Ram Charan. Relentlessly focusing on enhancing the core business of hair and cooking oil, gradually capturing various other brands, and increasing market share in that category and later diversifying into beauty and skin care business makes for an interesting reading.

The author reiterates the role of a Leader to sustain and constantly enhance the organisation culture. Harsh tells us about Marico Leadership Competency Framework which has a strong linkage to its core values and shares about the organization’s continuous improvement through the 5E Model: Educate, Engage, Enable, Evaluate and Evolve.

I was very impressed with the chapter, ‘ Governance: Building the Board”. This chapter is not to be missed as it perspicaciously provides information about the role of Board and Corporate Governance. It provides insights on selecting professional board members, their duties, responsibilities, and active involvement in the growth of organisation and not just attending quarterly meetings and merely finding faults. What is interesting is the clear demarcation of the responsibilities between board members and management and why boards must not get involved in strategic planning.

It is always difficult and daunting for any entrepreneur to hand over the control of their business to any professional especially who is not from the entrepreneur family. However, it is very inspiring to learn how Mr. Harsh Mariwala seamlessly passed on the baton to a professional leader.

Overall, the book is enjoyable, educative, encouraging and a must read for all entrepreneurs and professionals.

Lessons from Engineering in Managing Change!

I studied Engineering in the 20th century. Little did I know that concepts from engineering will teach lessons in managing change.

Inertia can teach us a lot about implementing organizational change. Most organisations are always in a state of inertia popularly known as Business as Usual (BAU)!  Every organization will remain in its course (rest or movement) forever if no new forces act upon it. Some external and / or internal forces will have to operate on the organization to change its state. Does this remind of Newton’s first Law of Motion.

Newton’s second law defines the relationship between acceleration and applied force. For business this means, if you want big change, you must apply bigger force. Newton’s third law is relatively simple. Every action produces equal and opposite reaction. In organizations even a simple change in office timings or canteen facility are met with resistance isn’t it.

Newtons Law of motions – Inertia, Acceleration & Reactions guide us in driving change but before using them, it is important to understand the various levers and dynamics of change management. This can be learnt from Archimedes and Thermodynamics.

Archimedes reportedly said, “Give me a lever long enough and a fulcrum on which to place it and I shall move the world." He proved that force could be multiplied by applying it to a lever at a particular distance from a fulcrum.

In any change programme, it is critical to find the right levers and push them hard enough. This law of lever helps us understand what to change and how to maximize the return on efforts by changing the things that will produce the greatest results.

We can identify four types of levers that can bring about changes in organisations.

·       First, look at the macro-changes in the industry and study its impact on organisation using PESTAL analysis – Political, Economic, Social, Technological, Environmental, and Legal.

·       Second examine the levers such as organizational vision, mission, values, culture, leadership, people, brand, board, governance, risk, compliance etc.

·       Third look at the metrics and economic levers - customer acquisition and retention, revenue increase, capital allocation, profitability, balance sheet, income statement, debt, cash flow, inventory, costs optimization.

·       Fourth understand how the organization—policies, practices, structures, processes, systems, technology, targets, and measurements—affect performance and the metrics directly or indirectly.

For any successful organizational change, we must focus on the second lever. The fact is organizations don't just change because of new systems, processes, or structures. They change because the people within the organization adapt and change.

But how do we induce this Change?

Organisations and business are dynamic, adaptive, and often function in a closed loop system. Both Change and Work are dynamic and requires Organizational Energy. Organizational energy can be defined as the extent to which an organisation has mobilized its emotional, cognitive, and behavioral potential to pursue its goals.

But where is this energy to come from? This is where we jump into ‘The Laws of Thermodynamics’. 

The First Law of Thermodynamics – Energy can be changed from one form to another, but it cannot be created or destroyed.

In organisations there is always a tendency to resist change. This means maximum energy is being used to resist change, and hence it is not available for making change. Kodak and Blockbuster, both at different point in time resisted change.

For a business, the energy one puts into the business, will be transformed into the energy of the business. The trick is to put the energy into the right parts of the business. The energy required to change must come either from within a closed system (from your manager or dept) or from beyond the boundaries of the closed system (market, customers, suppliers, vendors, partners, auditors, consultants, management, board, or shareholders).

Many leaders turn to negative energy generation, emphasizing on creating a ‘burning platform’ to motivate people. The Best Leaders rely on positive energy generation by painting new vision and involving energetic, enthusiastic, creative, open-minded people in driving change. Businesses that can direct energy to fast and positive transformation are able to exploit many more opportunities than enterprises mired in resistance.

Today most organisations are in state of permanent flux and battling high entropy. This naturally brings us to, The second Law of Thermodynamics - For a spontaneous process, the entropy of the universe increases.

This law is intuitive and easy to observe. It simply states that all systems tend towards disorder or disintegration or entropy.

How many organizations are closed systems, inwardly focused, rigid, working in silos and monotonous? No wonder they gradually deteriorate because of the entropy. Remember Nokia and its failure to change. Organisations fail to change because their minds and systems are closed. Their leaders’ pride in imitating ostrich mentality.

Entropy generally creeps in due to distractions, wavering focus, rapid unplanned expansion, unrelated diversification, changing market conditions, constant equipment breakdowns, product obsolescence, faults in software and hardware, quality and process failures, nepotism, misalignment, poor governance & compliance, risk failures, and many other such elements.

No organisations are frictionless. Given enough time every organisation and system are prone to these disruptions.

Fortunately, unlike thermodynamic systems, a business can reverse the impact of entropy.

To avoid entropy, organisations must welcome new ideas, open the system, hire new people, nurture talent, share new information, monitor change programmes, measure performance, mitigate risks and strive to foster a culture of innovation.

Despite these efforts, change management programmes often fail. Not all change management programmes are 100 % successful. The failure rates are grim reminder of the third law of Thermodynamics.

The third Law of Thermodynamics - A perfect crystal at zero Kelvin has zero entropy.

This law shows that nothing in the Universe is perfect. The process may be smooth and seamless, yet zero entropy is not achievable. That is why we adulate Six Sigma. Any change programme will have its share of ups and downs, success and failures, intended and unintended consequences.

This means that organisations must keep their business goals and change programme realistic and like any good project manager allow for contingency planning. 

For any change to occur, we must apply more energy to the system than is extracted by the system.

Eventually, sustainable change only takes place when managers identify the right levers, manage the dynamics of change, and ensure the changes, they are communicating are clear, compelling, and credible similar to the Laws defined in Engineering!

 

Pharma Pains!...

The pharma industry looks stable but remains confounded with several challenges. It takes 8-10 years and about US $ 800 million – US $ 1000 million for developing new drug. Investor expectations, regulatory barriers and patent expiration have its own impact. Governments around are demanding extensive clinical trials, reduction in health care expenses and this affects investments in product development. Moreover the emergence of low cost providers and pressures of demand have surged attrition and advent of generic drugs. Indeed the pharmaceutical industry is a high risk and high return industry and grappling with innumerable challenges. But HR can play a stellar role in reducing this pain.

The current valuations would increase consolidation, acquisition and provide necessary impetus to sales and R&D. Establishments of global delivery and shared service centers reduces cost and provides instant access to global talent. The business processes in local subsidiaries are firmly entrenched and properly aligned with parent companies but outsourcing requires more fillip. To ease integration and enhance employer branding, HR has to focus on developing strong corporate culture.

Instead of pursuing higher education, students join high paying BPO’s. The shortage of skills in R&D, biotech, regulatory services, patents, formulation and delivery calls for establishing academic alliances and continuous training. To hire researchers, companies must institute best in class practice, redesign compensation for fresh post graduates and importantly equip laboratories with latest technology. Pharma Companies have unique specialization and therefore HR must facilitate regular interactions between line managers and placement consultants to reduce communication barriers in selection process. Hiring people from different domain and industries, especially in sales and support functions will spur creativity.

Leaders are known for their technical accomplishments and rose through ranks. Leadership development coupled with challenging assignments and mandatory job rotation for high potential /performers after 18- 24 months would groom people for business leadership and increase loyalty. Technical professionals display greater loyalty and affiliation to external technical communities or groups. They require independence, hate being controlled and detest administrative tasks. Leaders have to lead with caution and compassion. HR along with senior leaders must create small-company environment, encourage informal teams, promote flexible working, reduce hierarchies and introduce broad banding to reduce attrition.

Automation encourages knowledge management, stifles bureaucracy and eases communication. Investments in latest IT and project management software improves productivity, control, quality, security, risk and compliance in R&D projects.

Sales decisions should be decentralized and strategies must evolve from zonal offices. This promotes ownership, accountability and speedy execution. R&D has to be part of business decision-making and sales events. Apparently Pharma relies on seller centric marketing tools rather than buyer centric communication. In rural areas, franchising would pave way for local marketing agencies. To be an effective business partner, HR must increase its interaction with these agencies.

OTC (Over the Counter) drugs would enhance branding, maximizes revenues but success depends on local field force, innovative marketing campaigns and emulating best practices from retail and FMCG. Compliance regulations impede sales force from entertaining doctors. Undoubtedly performance metrics and training has to focus on compliance and consultative selling - encouraging field force to study consumer behaviour and increase awareness about drugs.

With changes in strategies, job descriptions often end up having shelf life. Companies can effectively manage expectations by retaining designations and making changes in job descriptions. HR and Line managers must increase transparency, provide realistic preview of job and share employment policies so as to allow candidates to take informed decision. Fancy designations do motivate, but technical staff likes to be addressed as Doctors / Principal Scientist and need access to senior leadership. HR and line managers have to regularly review business targets and incentive plans.

To conclude, in knowledge economy, investment in ideas are critical than economies of scale and therefore unconventional HR practice becomes a decisive differentiator.