Strategy & Execution

Which is more important- "Startegy or Execution"?

Strategy is a series of choices you make on where to play and how to win to maximize your long term value. Execution is producing results in context to those choices. Therefore, you cannot have good execution without having good strategy. Thus, stating strategy is less important than execution and vice versa is hard to refute. Both are equally important. Most everyone would agree that you cannot achieve good results without having a good execution. Similarly, most would agree that having a good strategy alone is no surefire formula for success.

 

Consider Toyota Motor Corporation and General Motor Corporation. Yes, Toyota produced better results than GM for many years because it executed better than GM. It was able to out execute GM because it made much clearer and more coherent choices  about where it would play and how it would compete. This includes sharper choices about its target customers, its value propositions in terms of products, features and price points and the superior capabilities it needed to deliver that proposition to those customers. In other words, Toyota out executed GM because it had a clearer and better strategy than GM.

 

The airlines industry provides another example. Soutwest Airlines has outperformed American Airlines Inc. for decades. Is this beacuse Southwest has executed better than American Airlines? Absolutly. But its no coincidence that Southwest airlines also has a better strategy. It has more sharply defined the target market ( the point to point economy traveler), a more compelling value proposition (Lowest price, more convenient, and most passanger friendly) and a more cohrant set of capabilites to deliver that proposition (maintaining a simpler fleet, running a point to point operations). Having a better strategy has made it possible for Southwest to consistently out execute American.

 

Infact, no matter how much American Airlines improves it execution, it will never be enough to overcome the lousy economics of airline industry and make it a big value creator. The company would have to find a more distinctive strategy. Likewise, no matter how much GM improves its decision making culture, Product development processes or dealer operations, that effort wont be enough to produce better results without a coherant strategy.

 

U.S. CPG Industry

A type to good that is consumed every day by the average consumer. The goods that comprise of this category are ones that needs to be replaced frequently, compared to those that are usable for extended period of times. While CPGs represent a market that will always have consumers, it is highly competitive due to high market saturation and low consumer switching costs for example the global financial crisis has driven consumers to value offerings, and it is a trend which is likely to stick. Recent Mckinsey research suggested 70 percent of US consumers are looking for ways to save money. Fifteen percent are trading down to cheaper brands during recession and almost half of the consumers say their experience with cheaper brands including private labels has exceeded their expectations. According to the report from Grocery Manufacturers association and PwC, CPG industry generates estimated $2.1 trillion of revenue and contributes over $1 trillion worth of value added to overall U.S economy.

The industry’s growth over the past decade has been phenomenal. CPG companies have launched innovative products to meet an ever-growing array of human needs and desires; as a result they have expanded rapidly into the consumer markets of developing world. To make this expansion possible and profitable, CPG companies have invested heavily in building global scale of along every part of value chain, including R&D, marketing and sales, operations like procurement, manufacturing and distribution. According to the study, many CPG companies are looking to innovate by reaching consumers in more places or tailoring products for local customer tastes in emerging markets. Additionally, understanding customer priorities is central to innovation as consumers in the United States are buying more carefully, buying different pack sizes, taking advantage of volume discounts, and trading down to non-premium brands.

As consumers make more product and brand purchase decisions in-store, shelf performance becomes an area where CPG companies can gain market share. Although, performance depends upon how CPG companies are striking balance between different customers with different sets of needs. As per Customer and Management Channel Survey released in August 2012, CPG companies winning in their categories are three times more likely to invest in growth channels, 50 percent more likely to use price optimization tools and invest twice as much time in talent development. Overall, the report also found that winning CPG companies have outperformed their peers in four key areas: investment in key areas, use of analytics to fine tune pricing and promotion, prioritizing the retailer relationships and commitment to talent development and strategic planning efforts. In today’s world, social media is also playing a vital role in CPG industry. This provides CPG companies with a unique opportunity to engage with its customers. Successful CPG brands are meeting today’s consumer by establishing a social presence, directly engaging their customers, sharing helpful content and learning their customers’ needs and interests.

Demographic and economic shifts are the two major factors which over the next ten years will dramatically reshape the growth of consumer packaged goods. These factors will create both challenges and opportunities for CPG marketers, and companies that anticipate the shifts could have a competitive advantage. It will be absolutely critical for CPG companies to adapt in order to gain the attention and brand loyalty of the ageing baby boomers, multi-cultural families and lower income consumers of future.

Risk, Opportunity & Momentum in Recession

The momentum carries you down hill but you need skill and stamina to climb uphill. For students of management and aspiring leaders, there has never been a better opportunity to learn the forgotten art of not only navigating the teams in a momentum business but also in a business that needs climbing to the top again. The skills required are quite different and the attitude to love challenges is an essential because each day is a challenge.

Never before have you been pitted against so many odds and never before your decisions had such far reaching impact. Thus if there was ever a period to be in the industry and be excited—this is the time. These few years will produce a very different class of leaders—smarter, sharper and leaders who do believe that hope is not a strategy and know how to take rifle shots at opportunities by focusing few resources for bigger impact rather than spreading the risks evenly. If you love a challenge, next few years are going to unfold ample excitement for you.

The past 12 months however have been quite literally a bloodbath for world economies. As businesses across the globe witnessed degrowth in every direction, most companies put on hold any investment in expansion plans preferring to wait and watch the global recessionary trends play themselves out.

A safe approach, you might say. Yet, not necessarily the best. As pointed out in a study titled Learning to Love Recessions in a special edition of the McKinsey Quarterly on Risk and Resilience, which studied business behaviour in previous recessions: “When other companies simply battened down the hatches, seeing only risk during the recession, the more successful competitors found opportunity and pressed their advantages.” The companies emerged leaders when the winds turned.

The leaders at HCL Technologies for example decided to swim against the tide. We believed, as McKinsey had inferred, that “managing risk does not mean avoiding it altogether.” We refused to see the recession as an excuse for declining performance. On the contrary, we saw it as an opportunity. We pressed on the accelerator while others applied the brakes. We increased our sales and marketing spend and focused on targeting uncontested market spaces in line with our Blue Ocean strategy, remember, we inked the largest acquisition ever made by an Indian IT company by taking over AXON, a UK based, high-end SAP blueprinting and consultancy firm at the height of recession. We acquired new strengths, while demonstrating value-centricity and flexibility to our customers.

The result was evident: We have outperformed global as well as Indian IT services providers during the recessionary year (last 12 months). While revenues of most global and India IT majors dropped or at best remained flat, we were able to grow nearly 20%year-on- year during this period.

The theme was simple—we saw opportunity in adversity and realized it to our advantage.

Now let’s look at the present scenario. Once again, while people are rejoicing the end of the recession and expected recovery, we can see there are tough and thus exciting times ahead. Looking at data from SMP 500, we know that broad economy recovery is expected by Mid-2010. An analysis of S&P 500 companies shows that number of companies with negative sales growth peaked during AMJ’09 quarter with 75% of companies registering a negative growth and 25% companies registering positive growth. The situation is estimated to reverse by AMJ’10.

However, business growth in the recovered economy won’t be same as before. An analysis of S&P 500 companies’ growth distribution shows that there were over 50% of the companies registering growth greater than 10% year-on-year in AMJ’08. During AMJ’10, only 24% companies are expected to register growth greater than 10% year-on-year. So, the number of companies registering high growth will almost be halved.

So what does the crystal ball foretell about the year ahead? The 2009 tidal wave has brought us to shore in what is increasingly being referred to as the ‘New Normal’ economy. The storm has passed. But there is work to do, craters to fill, pitfalls to avoid and a new phase of ‘frugality’ to be understood.

To quote William A Galston, senior fellow, Governance Studies, at The Brookings Institution: “Once the dust settles from the economic crisis of 2007-2009, we are likely to enter a period of new normality, with lower household debt, higher personal savings, and less consumption as a share of gross domestic product. The effects of this transition will ripple through both the domestic and the international economy.” The conclusion seems inescapable. We are entering an era of private thrift and public restraint. In the US, a recent Gallup poll showed 59% of Americans now say they enjoy saving money, compared with 48% in 2001.

The impact on industry will be far reaching. Clearly, we are looking at a market of a different shape and size ahead. Lower ‘normal’ levels of expenditure, lower volumes, hard costs, lower margins, lower annual increases—a demand environment that appears permanently damaged. What is more, there are no ‘undisputables’, no ground rules anymore. Gone is the undisputed leadership of the US and Europe, aka ‘the West’. New countries are emerging as growth leaders within the global landscape. And within these new geographies, new industries are emerging as boom sectors. Finally, the regulators—until now a passive partner—are ready to play an active role in the post bailout arena.

Yet, as will be the case in any era, there are new opportunities for those who are able to follow the pulse of the new trends and leverage the change.

Look back at developments within our industry, Y2K was the last mega trend that transformed our world. In the early formative years, the industry could monetize outsourcing opportunities due to surplus demand despite a lack of maturity on several fronts. This will no longer be the case.

Beyond evident local pressures against outsourcing, CIOs today are not looking for technology solutions. They are looking for business solutions. They are in search of partners who have the expertise to help them get from point A to Point B on their business plans.

So winning on the basis of quality, experience or relationships is passé. The future lies in providing clarity—the ‘what’ and the ‘how’—to help client on mature terms of partnership. And we, as an industry, will have to grow up to be counted as true business consultants.

As the roller coaster comes to a halt, only those who can pick their markets in uncontested spaces within this dynamic Blue Ocean, and stay sharply focused on delivering deep value within them will succeed. As future managers and leaders you have a great opportunity ahead of you. Watch carefully, listen often, think more and make every action count. You will love the times ahead as what you do or do not do will make a big difference.

                                                                        -Strategy+business jun'12 , Mckinsey Quarterly

Automotive Industry 2010

The year passed by has proved to be a tremendous year for Automobile companies. They have registered record number of sale on their vehicles. Not only this, the industry continues to tread on a high growth path for the current fiscal year. We’ll have a look at the automobile industry as a whole, Including the current fiscal year & announcements made by companies.

INDUSTRY AS A WHOLE:

The Indian automobile industry is the seventh largest in the world with annual production of 2.6 million units in 2009. In the same year, it emerged as a 4th largest exporter of Automobiles behind Japan, South Korea and Thailand. The Gross turnover of the industry was around 40 million in yr 2008 and with the momentum it is growing, the automotive mission of 2006-16 to have an output capacity of $145bilion doesn’t seems like impossible. If we have a look at the domestic market share and the production trends, 80% of it is from 2 & 3 wheelers whereas rest 20% is of commercial and passenger vehicles. Similar is the case of domestic sales and exports of automobiles which can be explained through the graphs below.

In the two-wheeler industry Hero Honda, Bajaj & TVS have attained exceptional growth rate as a whole and have already started the current fiscal year with tremendous sales in Q1. TVS is aiming to increase their market share to 20% from current 15% by increasing the sales of Wego and by exporting 50,000 three-wheelers this year. This segment of the industry is going to face enormous competition not only among the top 3 market leaders but also from the companies like Kinetic, Suzuki, Yamaha etc who have started the year 2010 with great plans and announcements. Yamaha is going to increase its investment from 600 to 800 cr so as to produce vehicles for exports. The company is eyeing to increase its market share to 10% this year from current 7. 75%. It is going to launch 3 new models ranging from 47,000 INR to 53,000INR. New entrants like Mahindra entering the motorcycle segment this year can also come as a surprise for the 2 wheeler manufacturers.
Similarly there is an intense rivalry in commercial vehicle segment too. Big foreign brands are coming in and setting up their manufacturing plants in India to meet country’s demand and later to export from here. Almost all foreign brands have already launched their vehicles for every segment of the market and have started giving tough competition to leaders like Maruti & Hyundai. Maruti is looking at gaining 50 % market share where as AUDI has expanded their dealership network in India and aimed to have 25% market share by 2010. Companies like Honda, Toyota are making huge investments in Rajasthan and Karnataka respectively to produce variants serving all the segments. Not only this, companies are also planning to launch new models with CNG & LPG Variants. Government policies are also favoring the Manufacturer in producing new innovative and quality product at reasonable prices. The Govt. of India has given deductions for in-house R&D from 150% to 200% where as for outsourced R&D from 100% to 125%, thus encouraging the producers to work towards innovation. With change in demographic profiles and steady increase in per capita income of people in rural areas, it has become a potential market for the products from various segments. Companies have already started targeting such kind of untapped markets. Big companies like Mercedes have announced that they are going to target tier II cities in Gujarat and Kerala. Old giants like Ambessador and Premier automobiles are also set to join the race. Not only OEM’s but the tier 1 & tier 2 suppliers are also growing. They are also investing into new plants and thus increasing their production to meet the required demand without compromising on quality. For e.g. Alf engineering which is into manufacturing of chassis is coming up with their plants in Hosur and chakkan.

We can all imagine the kind of growth the industry is going to have and the competition that companies are going to face. Marketers are going to face the pressure and new challenges. They need to come up with stand alone strategies to take their respective companies to new heights. Thus the 4A’s of rural marketing has now become equally important as 4P’s of marketing.

At last, since contribution of agriculture to Indian GDP is declining, it is the manufacturing industry which is going to contribute the most, thus providing enormous job opportunities.

Indian Economy and GST

Finance Minister while presenting the budget had the most challenging task of striking the balance between the interests of aam aadmi under soring inflationary pressure, and garnering more revenues for sustained, inclusive growth. The IMF has projected a global recovery to 3.1% in 2010, while OECD pegging up a figure to 1.9% for its member countries. These countries are still facing concerns such as fiscal imbalances and unemployment.
Keeping in mind the priority areas highlighted by G20 framework includes stepping up investment in infrastructure through private public partnership, augment capital investment in agriculture, support investment in green energy research and strengtheing exports. Adding to it focusing on education, skill development, health care and social security aspects are other ares.
Improving access to financial services through strengthening the micro finance, realization
of tax structure are other areas which were needed to be addressed.
For realizing the tax straucture Govt has introduced GST which is supposed to be implemented by april1,2010. It is being decided to have 16% rate of GST for both state and centre combined.
It is to be levied on companies and traders with an annual turnover of Rs 10 lakh. This will provide a tax base of 40-45 lakh of assesses and ensure that neither state nor centre will suffer
revenue losses. According to sources, the rates for both the centre and state could be 8% each or states could get a percentage point higher depending upon the discussions with centre.
The Introduction of GST will streamline the movement of goods and services across India with single tax structure replacing the current multiple tax system, which includes central excise, State VAT, service tax- the sum of which runs to high as 30%

BANE IN RETAIL!

The retail industry in India is growing rapidly. From a country which only had the mom and pop stores, we now have the option to visit spanking malls, shops, supermarkets, stores to purchase almost anything and everything.
The organized retail story in India has a rosy picture but no rose plant exists without thorns. The thorn in Indian’s organized retail sector is customer dissatisfaction.
The advantage of organized retail is more about the convenience and the quality of service extended towards the customer than it is about the uniformity and reasonability of prices.
We all have visited such retail formats at some point of our lives or rather we visit them every now and then. Let us ASK ourselves a question….
How happy is the customer at the end of the day (in terms of service provided)..?? The answers would be that the customer is partially satisfied or not satisfied. It is true that the Indian customer is price sensitive.
But isn’t he paying a price for its reputation? The Indian customer is not only price sensitive but also demands better quality of service. That is the area where most of the companies have failed and are failing. That is the reason for the dissatisfaction.
There can be many causes for this problem: for example,
Inexperience of retail companies.
Not so well trained staff.
Rigidity of the retail companies.
Over confidence.
Lack of funds.
Lack of competition (FDI cap on foreign companies on multi brand formats).
Lack of training institutes.

All these causes are nothing but carelessness on the part of the retail companies. It is time that these companies move up the ladder from “transaction based selling to relationship based selling”.
It is true that customers want value for money products (VFM), but companies which provide customers with superior experience stand out from the crowd. It has been forgotten that customer experience and quality service is also part of the “VALUE” in VFM than just providing moderately priced products and services.
Attracting customers is important but retaining them is even more important!!! Selling the products becomes easier as you already have a relationship with them. A high rate of Customer retention assures sustainable growth in the top-line and it also helps the other brands/businesses of the same company thereby increasing the BRAND VALUE of the company.
“CUSTOMER IS THE KING” and the most important part of each and every business. The retail companies in India should realize the importance of customer experience and provide the customer with quality service. Please learn the best practices from the hospitality industry. Implement the necessary processes and take the retail story of India to the next level. All these steps are important as

“A HAPPY CUSTOMER MEANS ASSURED RETURNS!!!”

Shikhar Vaid

Dr. Abdul Kalam's Speach

The President of India DR. A. P. J. Abdul Kalam 's Speech in Hyderabad .Why is the media here so negative?Why are we in India so embarrassed to recognize our own strengths, our achievements?We are such a great nation. We have so many amazing success stories but we refuse to acknowledge them. Why?We are the first in milk production.We are number one in Remote sensing satellites.We are the second largest producer of wheat.We are the second largest producer of rice.Look at Dr. Sudarshan , he has transferred the tribal village into a self-sustaining, self-driving unit. There are millions of such achievements but our media is only obsessed in the bad news and failures and disasters.I was in Tel Aviv once and I was reading the Israeli newspaper. It was the day after a lot of attacks and bombardments and deaths had taken place. The Hamas had struck.. But the front page of the newspaper had the picture of a Jewish gentleman who in five years had transformed his desert into an orchard and a granary.. It was this inspiring picture that everyone woke up to. The gory details of killings, bombardments, deaths, were inside in the newspaper, buried among other news. In India we only read about death, sickness, terrorism, crime.. Why are we so NEGATIVE? Another question: Why are we, as a nation so obsessed with foreign things? We want foreign T.Vs, we want foreign shirts. We want foreign technology. Why this obsession with everything imported. Do we not realize that self-respect comes with self-reliance? I was in Hyderabad giving this lecture, when a 14 year old girl asked me for my autograph. I asked her what her goal in life is. She replied: I want to live in a developed India . For her, you and I will have to build this developed India . You must proclaim. India is not an under-developed nation; it is a highly developed nation.Do you have 10 minutes? Allow me to come back with a vengeance. Got 10 minutes for your country? If yes, then read; otherwise, choice is yours.YOU say that our government is inefficient.YOU say that our laws are too old.YOU say that the municipality does not pick up the garbage.YOU say that the phones don't work, the railways are a joke. The airline is the worst in the world, mails never reach their destination. YOU say that our country has been fed to the dogs and is the absolute pits. YOU say, say and say. What do YOU do about it? Take a person on his way to Singapore. Give him a name - 'YOURS'. Give him a face - 'YOURS'. YOU walk out of the airport and you are at your International best. In Singapore you don't throw cigarette butts on the roads or eat in the stores. YOU are as proud of their Underground links as they are. You pay $5 (approx. Rs. 60) to drive through Orchard Road (equivalent of Mahim Causeway or Pedder Road) between 5 PM and 8 PM. YOU come back to the parking lot to punch your parking ticket if you have over stayed in a restaurant or a shopping mall irrespective of your status identity… In Singapore you don't say anything, DO YOU? YOU wouldn't dare to eat in public during Ramadan, in Dubai . YOU would not dare to go out without your head covered in Jeddah.YOU would not dare to buy an employee of the telephone exchange in London at 10 pounds (Rs.650) a month to, 'see to it that my STD and ISD calls are billed to someone else.'YOU would not dare to speed beyond 55 mph (88 km/h) in Washington and then tell the traffic cop, 'Jaanta hai main kaun hoon (Do you know who I am?). I am so and so's son. Take your two bucks and get lost.' YOU wouldn't chuck an empty coconut shell anywhere other than the garbage pail on the beaches in Australia and New Zealand .Why don't YOU spit Paan on the streets of Tokyo? Why don't YOU use examination jockeys or buy fake certificates in Boston??? We are still talking of the same YOU. YOU who can respect and conform to a foreign system in other countries but cannot in your own. You who will throw papers and cigarettes on the road the moment you touch Indian ground. If you can be an involved and appreciative citizen in an alien country, why cannot you be the same here in India? In America every dog owner has to clean up after his pet has done the job. Same in Japan.Will the Indian citizen do that here?' He's right. We go to the polls to choose a government and after that forfeit all responsibility.We sit back wanting to be pampered and expect the government to do everything for us whilst our contribution is totally negative. We expect the government to clean up but we are not going to stop chucking garbage all over the place nor are we going to stop to pick a up a stray piece of paper and throw it in the bin. We expect the railways to provide clean bathrooms but we are not going to learn the proper use of bathrooms.We want Indian Airlines and Air India to provide the best of food and toiletries but we are not going to stop pilfering at the least opportunity.This applies even to the staff who is known not to pass on the service to the public. When it comes to burning social issues like those related to women, dowry, girl child! and others, we make loud drawing room protestations and continue to do the reverse at home. Our excuse? 'It's the whole system which has to change, how will it matter if I alone forego my sons' rights to a dowry.' So who's going to change the system?What does a system consist of? Very conveniently for us it consists of our neighbours, other households, other cities, other communities and the government. But definitely not me and YOU. When it comes to us actually making a positive contribution to the system we lock ourselves along with our families into a safe cocoon and look into the distance at countries far away and wait for a Mr.Clean to come along & work miracles for us with a majestic sweep of his hand or we leave the country and run away.Like lazy cowards hounded by our fears we run to America to bask in their glory and praise their system. When New York becomes insecure we run to England . When England experiences unemployment, we take the next flight out to the Gulf. When the Gulf is war struck, we demand to be rescued and brought home by the Indian government. Everybody is out to abuse and rape the country. Nobody thinks of feeding the system. Our conscience is mortgaged to money. Dear Indians, The article is highly thought inductive, calls for a great deal of introspection and pricks one's conscience too…. I am echoing J. F. Kennedy's words to his fellow Americans to relate to Indians….. 'ASK WHAT WE CAN DO FOR INDIA AND DO WHAT HAS TO BE DONE TO MAKE INDIA WHAT AMERICA AND OTHER WESTERN COUNTRIES ARE TODAY' Lets do what India needs from us. Forward this mail to each Indian for a change instead of sending Jokes or junk mails. Thank you, Dr. Abdul Kalam