Indian industry carries a large baggage operating in a restricted market place, where demand far outstrips supply. Success was guaranteed through the all important licence. As we near a decade of the new economic detante, the Indian marketplace presents vastly different challenges. MNCs have flooded the market with over-capacity and in doing so have turned the tables in favour of the consumer away from the manufacturer. A change that favours MNCs, given their rich experience in serving customer centric economies.

The native industry finds itself in a vastly disadvantageous position as their immense skills, perfected in a restricted economy, lose much of their relevance. Companies that were the most successful in that era find themselves in the hardest position, as successes from the recent past are still fresh in the company's collective conscience.

The altered market dynamics poses the greatest threat to these companies as they try hard to cling to practices perfected in a different market place. The smaller players have been more nimble and have either sold their interest or have aligned themselves along minority JVs.

The analogy of a burning platform comes to mind, smaller players with an immediate threat to profitability were quick to respond, while the larger companies with greater shock absorption capacity try and tweak the existing practices to remain competitive.

Increasingly, companies would have to make the transition to the next threshold - international competitiveness. Currently, three cross pressures constrain the move to that threshold:

a) Production centric organisation versus financially responsive organisation: One of the legacies of a supply dominant economy is its emphasis on production. Make the best widget and the world would beat its way to your door, went the conventional logic.

This assumption has been seriously questioned in an over capacity economy, where capacity utilisation has taken a back seat to sales. Even today, companies in the traditional sectors like steel, cement and paper, place an unusually high emphasis on production and is often the most important criteria in evaluating a plant manager's performance.

Companies would have to revisit such orientation at a time when cash flows begin to assume a greater significance over capacity utilisation. One cannot grow one's way out of bankruptcy.

b) Individual centric organisation versus systems driven organisation: This conflict afflicts majority of businesses worldwide, although its application in India, with its legacy of family run businesses is especially acute. Professional management is key, however, a management is only as good as its systems. Private sector's over dependence on the individual and public sector undertakings' blind application of protocol driven system, have both proved to be less than adequate. Systemic management in India has to focus on both consistency and sustainability as well as flexibility and responsiveness. The balance is in appreciating that leadership and systems are complimentary attributes and not at odds with one another.

c) Size versus effective corporate governance: With the increasing activism of institutional investors, an appreciating stakeholder value has assumed center stage. Identifying and focusing on core competence has become critical to good corporate governance. Sheer size is no guarantee of continued investor support. Each corporate entity must be individually responsible to its stakeholders. Being everything to everyone is no longer tenable. This salient shift in priorities is critical to companies that look to be successful in the new millennium, as investors would be less accepting of profits getting lost in corporate cross-subsidies.

(To be concluded)
The author is a senior consultant with a premier international management consultancy