The Reluctant Entrepreneur: Decision Logjam

Every once in a while as individuals we face mental blocks. A logjam, we see often at cross roads, happens in our mind. This mental block also effects entrepreneurs and just like at roundabouts or cross roads, it happens when the business is at a decision point.
With sales a healthy 25% up YOY, my first rotomoulding conference to America became a reality. On my return one month later, things were different. We follow the JIT (just in time) production policy, we make to order. As orders were  “zero”, production was at a standstill. A quick check on the market conditions revealed that our biggest competitor had dropped prices by 33%. The trade expected us to do the same.
Everyone, dealers, board of directors, employees and myself was looking for a decision. Classic logjam. I was not the best marketing student at the Asian Institute of Management where I studied for my MBA. But one lesson kept coming back to me. Prof Faustino, used to say you do not need managers to sell a product by reducing the price, you need “boy scouts” to stand at a corner and give it a way.  While sure it was not my job to reduce the price and sell. What could  be done?
As I walked from dealer to dealer, the same sentiments were expressed, SHAKTI would have to drop its price as otherwise customers would prefer the cheaper more established brand. The visits to the dealer while taking time allowed me to inspect the competitors product and I noticed that whenever I bent over to look inside the top was not able to take my weight. We purchased some tanks from the market and studied them. EUREKA!!!! We found the reason for the drop in price, the competitor had simply dropped the weight of the tank 30%.
This revelation did not make matters simple, it raise more questions. The Board believed we should launch a sub brand a la “SHAKTI LITE”, the trade believed we should simply reduce the weight and reduce the price. Both these decisions effected our core policies. We had already committed the product weight to our customers, could we quietly change without informing them just because our competitor had done so? Could we have two  types of product on one line, SHAKTI, a quality product at a higher price and SHAKTI LITE a chalta hai product. What would be the effect of this decision on our functioning with industrial customers. Would we become accustomed to offering cheaper products by cutting corners instead of costs? Would we be able to meet our long term goal of servicing industrial customers with such practices?  Classic Logjam and in the process sales were being lost.
After much soul searching, discussions with stake holders and well wishers the decision was taken. Stick to original weight, stick to original price and inform customers about the weight feature (advertise). This decision was in line with core policy, deliver to the customer as per promise, we would not have any “chalta hai” products on our line, thus ensuring the integrity and sharpness of our employees on the line, and most of all our customers past present and future would trust us.
The delay in deciding cost us lots of sales, by Mar 2001, we closed just below the previous years close.  However subsequent years sales endorsed our decision. We had clawed our way back. The point is could we have decided faster, did we need the time we took.?
I believe  that we were fortunate to have a road map, we wanted to be first choice suppliers to OEM customers. For that market, quietly changing specifications to keep costs down is not an option, therefore had we applied that test early to the possible choices we would have had a decision earlier. Unfortunately we delayed checking if our decisions met our long term goals.  In a logjam it will be easier to filter out suggestions that do not help the goal. Moral of the story: Every business has to have a long term goal or strategy against which day to day operational decisions are benchmarked  to prevent mental blocks.

The Reluctant Entrepreneur: Happy Anniversary

Congratulations to Business Goa on completing three years in a challenging world of business magazines. May you see many more.

We (my company) completed 16 years in manufacturing recently and it is always something special. It is  not  just a day to cut a cake and sing happy anniversary, but to look back and see where the business has come from and then look in front and head in the direction you wish to arrive.

Usually when you look back all you will see are the good times; the not so good usually are forgotten. One can easily recall the highs but will struggle to remember a low point unless it is especially low and very significant. This does not imply we forget the bad times, it simply means we move on but learning the lesson. I travelled to the USA for a conference, reasonably confident that all was well with sales - a healthy 25% ahead YOY. To my surprise on my return a month later, the factory was almost shut. Since there were no orders production had come to a grinding halt, given the fact that we operated on the JIT (just in time) concept and produced only to order. After a few calls it was confirmed, the competitor had dropped his prices 33% and the trade expected us to follow.

Rather than blindly following our competitor which would be suicidal, we opted to study the reason for their drop in prices. A few days and several samples later, it was clear the competition had dropped price but also dropped weights without informing the customer. Agonising decision making followed. Should we also match their strategy, should we produce “SHAKTI LIGHT” a cheaper/lighter version of our brand, to differentiate between a good product and a cheap product? We finally decided to maintain our weights and our price but began to focus our advertising communication on our product weight. We felt that this strategy was in line with our original goal of being a trusted supplier and our industrial customers would easily spot such methods of short changing the customer. It took some time but by the next anniversary we were buzzing again. The lesson: With age methods or technology may change but the goal should be constant.

In life we reap what we sow, so also in business. One can either have a policy of paying suppliers late or in time. Once, as the milk lady was leaving the factory, she mentioned to me that she was called the following day to collect her payment. I asked her to return with me and checked with the accountant how much time it took to calculate the milk bill for a month and what was the need for the lady to make another trip. He accepted my logic and made the payment in the next few minutes. This set the tone for how suppliers should be treated with respect to payments. A few years later when we faced a cash crunch each and every supplier supported us and help us out of the situation. This would not have been feasible without the track record we had managed to build up The Lesson: sow good practices early; you will reap rich dividends later..

Every anniversary we take time out to recognize the employees who have spent time with us as a team – three, five, ten and fifteen year milestones are awarded. Those recognized feel a sense of belonging. On the other hand it helps new hires aspire to attain these milestones and give them a sense that there is a future.  The lesson: The recognition of long serving employees helps team building.

Business Goa will take a little time off to party hard but when the music stops, everyone will be ready to face a new year of challenges head on. Once again Happy Birthday “BUSINESS GOA”


Read: Breakout Nations by Ruchir Sharma - an interesting take on who or which country will emerge on the economic canvas.

Wealthsavvy: Branding

Grow A Home Business:

In my last column, we proved that the average housewife practices world class management practices instinctively. In most cases she would not be highly educated either. The means there is a hidden wealth generator in almost every household.

Some years ago, the crash of the airbus 320 in Bangalore was the beginning of the end of successful Company. The founder died in the crash and soon things went from bad to worse. The professional CEO of one of the divisions was soon out of a job where he had spent many years. Unqualified family members were introduced, an occupational hazard for any professional.

The CEO's wife till then had been a home maker, bringing up the two sons while the CEO kept the home fires burning. When the CEO lost his job, his wife instinctively decided to help out and support the family. She began by trading in sarees. A simple formula, buy good quality low priced saris from an acquaintance in another State and sell for a small profit in Mumbai. The selling would today be called direct selling chain marketing style. Except that in those days there was no chain and neither were there any training sessions.

She leveraged her skill at choosing a good sari into a business proposition. Buying a sari is something every indian housewife would be comfortable with. She leveraged her appreciation of the "value for money" concept every housewife swears by. Finally she leveraged her network, her acquaintances on the bus to the market, other mothers at school, the neighborhood and voila she had a business going. Since she offered a value for money proposition, the word of mouth marketing ensured a steady stream of customers who came searching for her. Initially she brought in cash and as the quantity increased, she increased the volumes by picking larger stock on credit. This reduced transportation costs, enabled her to offer a better variety and she was on a roll. She was a business woman and a home maker to too.

The husband soon moved to another city to start his own business. The wife had to leave her thriving business and move, she did this readily as her primary goal was to provide for her family. In the new city, with the kids out of her hair having enrolled in professional courses, she decided to assist her husband in running his factory. Her stint as a business woman and home maker was an asset. Home makers have tremendous intuition.

You cannot keep a good man down, modified it can read you cannot keep a business woman down for too long. She saw opportunity when a leading cosmetics company offered beauty parlous on the franchise model. With her prior business experience an new found operational/administrative stint, she was soon doing well enough to pick up a second franchise. It was all the way up from here.

If we look at the situation, we will see that almost anyone can venture into an entrepreneurial space and the housewife is very well positioned, based on her multitasking abilities performed everyday. No big project no heavy investment, yet the goal is met.

The lady in our story leveraged what to my mind is her network. We will look at what she did and try and draw a frame work and add some features so that this story which just happened into a story that could be written time and time again.

While the business was small when the lady moved to another city she could not capitalise on her hard work. She closed the business and moved. What if she could actually sell her “business” to another like minded lady? She would have made her money selling each piece of sari but also when she transferred her knowledge to someone else she would have what can be termed as capital gains, To do this she should have taken a small step at the start. She should have sold the sari's she brought under her own brand name. Let us say "Champa", her customers would then relate every sari they purchased from her with the fledging brand name. When she decided to quit the new owner would buy from the same source and the old customers would be assured about the quality because of the brand name.

This is a common mistake many women in a small business make, no branding. They make masalas, or chocolates and rarely have a brand name so recognition is near impossible. There is no way a customer can be assured he is buying the same quality in the absence of a brand name. This is pretty strange behaviour for a housewife who generally swears by certain brands. Branding Branding Branding is the key even for small businesses.

The other factor is scale. Why did the lady not enlist more housewife's to sell, She would buy larger quantities and farm them out to other ladies who wold then extend the network, The advantage is that for any business to survive over the long term scale is important. What would happen as it did in this case if the lady had to leave town for an extended period of time. The business collapsed. Had she sub agents in place they would have kept the business running and she would continue to coordinate sales and purchases. The same logic can be extended to pickles and chocolates or what ever, the idea is to grow to survive. Growth is imperative to survive.

So ladies if you are already running a small business home business go ahead, BRAND & EXPAND, you have nothing to lose but your small business, you will gain a bigger business though.

Automobile Fuel Efficiency “*”

We are all familiar with the “*” (asterix) that follows all car fuel efficiency claims. The auto companies then hide behind the “*” which states ideal conditions which cannot be replicated on any road when dealing with customer claims of below par performance. This will soon be a thing of the past as the Government of India has started the process to institute “FUEL MILEAGE STANDARDS AND LABELING” for cars,. The norms, to be implemented shortly, will force automobile manufacturers to paste government certified fuel efficiency labels on each car they sell and improve efficiency of the cars they sell every year, 
The sticking of labels will come into effect soon, the standards, however, will be implemented by 2015, giving car manufacturers time to improve the technology. The labels will certify the fuel efficiency of the car model under standard conditions and where it stands in comparison to other cars in the same category.  This means car companies will have time to think of ways to actually improve and not cheat unsuspecting customers using the current “*” method..
The standards will have two parts. After 2015, manufacturers will not be allowed to sell models that fall below the government's 'one star' rating forcing the companies to produce better cars. The way the standards are defined, the companies would have to ensure that they sell enough efficient cars so that they meet the corporate fleet average standard set by the government. For 2015 it is 18.15 km per lt and by 2020 the bar will be raised to 20.79 km per lt.
This average combined with the new norms of declaring the fuel efficiency under normal conditions, and not under ideal conditions will make not only more efficient cars but also auto companies more accountable for performance which is easy to measure.
As one can imagine such standards had been opposed by the auto majors on several grounds - ranging from bad road conditions, congestion to bad fuel quality, which are also the reason given when a vehicle does not meet even 80% of the ARAI tested fuel efficiency declared. They are the words that the “*” implies.
Thankfully from a customer point of view the Government did not bend and soon, Indian cars and technology will be at par with the European market by 2020. Since there are huge penalties and ofcourse litigation it can be expected that auto companies will raise the bar and meet the new standards.
I brought a TOYOTA LIVA, based on the reputation of the Company as it was a new introduction. The advertisements screamed 18.3* kmpl. I was told that post 1000 km the mileage would rise from an abysmally low 10.5kmpl. Nothing happened. Testing by Company engineers on two occasions who literally had to be dragged by a team of wild horses proved that the car mileage was surely nowhere near the satisfaction mark. But surprise surprise, the engineers verdict was the car and engine had no problem. They insist that the “*” after 18.3kmpl means that the ideal conditions cannot be duplicated on the road and therefore any mileage below 18.3 is acceptable.  When it was pointed out that other cars in the same category and same stable give atleast 16kmpl (80% of ARAI standard) as per testimonies on the radio, then if a car gives 11/12 kmpl it is under performing.  This drew a blank and they resorted to “no problem” with car. Well litigation is on the cards and the news of the fuel mileage norms is a ray of hope.
Now imagine that the fuel efficiency and labeling standards were in force, TOYOTA would not be allowed to get away with declaring a higher than achievable rating ie 18.3kmpl. They would have to state the mileage achievable under normal conditions. The moment they do that they will have issues complying with the fleet average of the Company as a whole, ie the 201 5 Company average of 18.15kmpl.
2015, the wait will be worth it for all automobile customers.

Wealthsavy: The Home maker

We have all come across “Japanese Management Techniques” atleast once in our lifetime. The techniques include viz, KAIZEN, JUST IN TIME, 5S, KANBAN etc . When teaching students or employees, the belief was these concepts would not succeed as there was no exposure to japanese culture.
One day in an interaction with like minded people it dawned on us that while these concepts are universal , it is the japanses who packaged them. We realized that the ordinary indian home maker has been doing the same, day in and day out without a Japanese background or a degree in management.

The simple question to be asked to demonstrate this little known fact is, Do you have tea in the morning? If yes,  on how many occasions did your mother or wife announce that there would be no tea because she had forgotten to replenish the stock of tea or sugar or milk or LPG? The answer would make the world’s leading practitioner of the famous quality concept six sigma, Motorala, blush. Almost never.

Yet, do we see a sackful of tea leaves or sugar in the house, or barrel of milk? No, usually a small glass bottle which is magically replenished JUST IN TIME. The idea that one does not keep too much tea in the house and that it will lose its flavor is age old. This fact can be repeated for sugar or milk.  Adding another dimension, does the home maker run around the house to prepare the tea.  Or are the ingredients all placed in such a way that they are with arms reach.

If we are to draw parallels, then JUST IN TIME is the concept behind having a small quantity at a time, the tea once made will be just sufficient for the whole house hold, neither will it be less nor will it be more which would be a waste. The PEEP (Place for Everything & Everything in Place) formula of 5S ( a housekeeping technique) is evident with the ingredients needed frequently being kept close at hand and those needed one in a way, possibly in the store room a little distance away.  The bottles of masala are neatly labeled and the prospect of a wrong condiment finding it way into the food is far fetched.  As is a stock out, unless there is a shortage in the market itself.

This proves beyond doubt that the “homemaker” is a born manager. We will work with this natural manager to try and leverage this natural talent into a skill capable of ensuring the economic SAVVYness.  A home maker economically strong will automatically mean financial independence and greater emancipation.

Andrea : The last line is not according to me the best, u can rewrite it as I cannot do so till evening ie submit tomorrow