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Strategy for dramatic success in business rare

FE NEWS SERVICE

As this expression suggests, brilliant strategising for dramatic success is as rare as being born in a royal family. Most entrepreneurs and companies have to work hard to achieve success and become medium-/large-scale enterprises. And nowhere is the effort more gruelling and more rewarding than in the management of logistics of manufacture, procurement, purchase, sales distribution, etc. It is gruelling because it is repetitive, unglamorous.

Sometimes this requires efforts in difficult working conditions. Someone has to go through a given process in its full details, study each operation in its minutest detail and see how it can be modified so that just a little less material, labour, time, fuel, power, etc., would be consumed. And then repeat it ad infinitum. After all, reduction in net effort (represented by material or labour consumption per unit output) resulting from the learning curve (more generally, the experience curve) occurs precisely because workers and engineers cumulate such minor butcumulatively useful insights and knowledge about the process. As a successful entrepreneur of the 1980s said, `I become like a worm moving around inside every section of my process. My head is full of details about the process and its steps. I think of nothing else but the process improvement. And then one by one things begin to become clear: heat this longer, let the material flow be changed such, reduce the storage time there... And then I have to work through the shop floor and the sullen staff to actually try these changes. Tiring process, but that is how we reduce cost and cycle time!' Incidentally, he patented one or two changes in this manner. He also got the manufacturers of his machines to incorporate some 36 changes in the machines. He redesigned most of the process flow to achieve unique low-cost positions. At the initial stage of a small enterprise, it has virtually no solid competitive advantage. If it is `expert', creative or inventive, yes it would have the advantage of its expertise or ofbeing the first to start a product. But India has experts going dime a dozen, at least those specialising in learning from other companies and putting in practice in one's shop floor.

Products get copied fast. Other almanac-cum-calendars followed Kalnirnaya in just a few years. Dr Reddy could exploit the new drug market profitably only for a few years. Others soon come up with me-too products capable of replacing the `innovations'. Expertise and creativity are no long-standing advantages. Hence most of the firms have very little inherent competitive advantage. Usually firms start by building this advantage in the market. But more pronouncedly perhaps, they do so by making a better and cheaper product. As is commonly understood, business firms tend to be centred around production activities in their initial stages. (The classical model of business growth follows the sequence of production-centred business, followed by finance-centred, followed by market- centred. By these terms we mean that the primarymanagerial attention is focussed on these departments.) Thus it would be surprising if the successful firms did not pay attention to manufacturing and logistics at the growth stage.

Nevertheless, what is crucial is making things better and cheaper and then selling them better and at lower costs. The cases studied throw up the following messages about successful companies: