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Media enquiries
should be directed to: (Please use this contact for media
enquiries only ).
Dr. Pragnya Ram
Group Executive President
Corporate Communications
Aditya Birla Management Corporation Private Limited
Aditya Birla Centre
1st Floor, 'C' Wing
S.K. Ahire Marg
Worli
Mumbai 400 030.
telephone:
91-22-6652 5000 /
2499 5000
fax:
91-22-6652 5741/ 42
email: pragnya.ram@adityabirla.com
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Economic
Times
6 April 2008
"Street-vendors
are business people, they get no training
yet they understand cash"
It
was the sheer power associated with the Kumar
Mangalam Birla name that worked. The idea
to interview Ram Charan, one of the foremost
CEO coaches in the world, came up in one of
the conversations while finalising the content
plan. We hesitantly put forward the management
consultant’s name but with a caveat;
he was almost impossible to get. Mr. Charan
hardly ever gives interviews, and whenever
ET had approached him, either the mail
went unanswered or the request was politely
declined, “I would like to take a raincheck
this time,” were his preferred words
for refusal.
For the uninitiated, the world-famous consultant,
who started his career with Usha Sewing Machines,
works almost 365 days in a year and even has
his clean clothes couriered to him at company
addresses. He is often the man Fortune 100
CEOs like to be on their side, trouble or
no trouble.
It was then Mr. Birla said that Charan actually
wanted to speak with him to discuss some matters
and had approached him through some mutual
acquaintances and that they might be speaking
soon. We at ET were excited that we
might finally have the ever elusive man on
our pages. And though he didn’t respond
to our requests, he finally agreed to an interview
during his telecon with Mr. Birla and blocked
a solid hour of his time.
The topic was every CEO’s eternal quest
— growth at all times —
something that Charan specialises in, having
studied it in great detail in his 35 years
of consulting for top companies. His bestseller
on the topic, ‘Every
Business Is A Growth Business’, is
still considered a bible by many CEOs.
Mr. Birla showed all traits of a pesky journalist;
he asked for examples, sometimes even two
times, sought clarifications and even repeated
questions many times. And the hour just passed
by as if in fast forward, with us listening
in awe as both held forth with interesting
examples peppered with profound management
gyan. Excerpts:
KMB: Ram, you know one book that really
got me thinking was your Every Business
is a Growth Business. In India, on one
hand, we have a whole set of new opportunities
that have opened up because of India liberalising
and becoming more and more a part of the global
economy. But, you have another set of businesses
which are the more real economy businesses
— lots of businesses where one wonders
how to grow any further because growth stats
in that industry are not very high. So how
does one take larger market share from a pie
that isn’t growing, sometimes even shrinking?
So on this whole concept of Every Business
Being a Growth Business, tell us a little
more about the philosophy.
Ram: First thing, what every manager,
every business leader has to have is the attitude,
a mind set of profitable growth. It is the
challenge for the leader and the leadership
team to reconceptualise a landscape in businesses
which have low or zero growth. It’s the
imagination that makes the difference.
Businesses are led by leaders. Every organisation
is led by a leader. A leader and a leadership
team can take a business and can do things
differently from another leader and another
leadership team. Therefore, the first thing
is the attitude and the mindset.
KMB: Right.
Ram: Saying, this is the hand that
I have dealt with. Now I am going to look
forward and re-conceptualise, re-imagine and
find ways in which there can be profitable
growth. It starts with the leadership.
KMB: That’s a bold leadership
stance to take in a business that is not growing.
So what happens next?
Ram: So, the leadership of the company
and the leadership chain is now looking at
ways to grow. Here are the ways. And this
is not in order: First, the overall growth
of the market maybe zero, but you search for
segments in the market that are growth markets
because style is changing, new technology
is changing. So I will give you an example
in the American scene.
KMB: Right.
Ram: If you look at roughly the last
five years, the total market in the automobile
industry in America has not grown in any significant
manner. But there are segments in it that
have been very profitable and growth oriented.
KMB: For example?
Ram: For example, the Lexus. The important
thing is to figure out a segment which is
growing and continues to grow — share
out of Mercedes Benz, share out of Cadillac,
share out of Lincoln, and is very profitable.
KMB: And that’s a live example
that you have.
Ram: That is one of the examples. So
the concept here is that you look at the landscape
and you look for drivers of change of the
landscape and re-segment your market. That
requires skill, attitude and imagination.
How is the outside world changing? If the
outside world is changing, there are opportunities.
If the outside world is not changing, then
you have a different issue.
KMB: So this is an example, like you
said, of businesses where growth is almost
nil — which is the automobile business
in the last five years in the US. Ram:
When I look at companies in any space, I am
looking at the landscape from a different
lens. That lens is re-segmentation. That lens
is where are the drivers, demographics, life
style, income or technology that can change
the landscape.
KMB : Right. Yes.
Ram: That’s one area. The second
area is what technology can do to change the
landscape. Now look at Mexico. In Mexico you
have demographics where you have low income
families but they are not really starving.
And here, the housewife spends considerable
time in washing, in cleaning clothes for the
family. So here is what people will call a
“mature brand”. And the brand is
Tide. But most people don’t expect the
Tide brand to grow. People think it’s
matured. But it is growing very well.
KMB: Right.
Ram: It has a huge market share. So
the people in Procter & Gamble go to a
consumer’s house and they live there
and they observe it, and they find out that
the housewife rinses the clothes four times
before it goes for laundry. They go back to
the laboratory and say, can we do this in
one rinse or two rinses? And what will that
do?
KMB: And then?
Ram:
They figure out a new composition, that actually
reduces the number of rinses, uses less water,
less labour and it’s also cheaper. And
you are creating more demand at that level
and below. I can take that from Mexico to
India, China, Russia and we have found a growth
driver. So if you have tools and technique,
attitude and imagination, tenacity and passion,
that’s my methodology for growth and
that’s where I come out with growth for
every business.
KMB: Right. So, how do you get companies
to have deeper insights into what their consumers
are looking for really, or would be looking
for in the next couple of years?
Ram: I think there are simple tools.
One of the best ways for leaders is to set
themselves as an example. If the leader does
it in a truthful way, others usually learn
from it and many actually copy it. One of
the very best in the world that did it was
Sam Walton. He was at his store three days
a week. He saw his competitors’ stores
three days a week. And so he was in tune with
what is happening to the competition and what
is happening to the consumer.
KMB: Right.
Ram: Leaders need to go directly to
the user, then competition, and see what is
happening. Also the leader needs to see these
consumers, observe these consumers, buy in
complementary products. For example, I buy
expensive jeans. Do I also buy expensive perfumes?
What is their behaviour? What are the new
trends?
KMB: Very interesting.
Ram: So, as a leader, you are a highly
passionate person about the consumer. Business
first. If you don’t understand the customer
and the consumer, you really are not a very
good businessman, first of all.
KMB: True
Ram: Every leader at the helm of a
company and business unit must demonstrate
this quality.
KMB: Right.
Ram: The second thing that I have organised
in companies is that every month at the staff
meeting a leader should spend half an hour
asking his/her colleagues, what is that they
are detecting new about their customers. Do
it twelve times a year. You will be surprised
how it changes the culture in the company.
KMB: Right. What happens after that?
You have the CEO who spends times in observing
change in consumer preferences, lifestyles.
How does he complete the loop by feeding it
back into marketing, product development?
Ram: Great question. Two things happen.
One is if you are doing it with a discipline
repeatedly, other people see it that you are
doing it, they will do it. That influences
their behaviour and that is very powerful.
Second, if you believe that you don’t
want to tell people what to do, you as a leader
are very good in asking the right questions.
KMB: Right.
Ram: In the reviews of the product/projects,
you ask those questions like – will the
consumer prefer this? Why? Why not? What is
the evidence? By asking these questions, empower
them. They begin to look at it. You can make
your inputs if you are not a delegating type
of CEO.
KMB: So you are leading people in a
particular direction.
Ram: Leading through questioning, by
opening their minds. Let them have the passion
to learn about customers. And of course, one
must stress heavily on innovation. Let’s
say, Apple’s iPod. If the customer doesn’t
buy it, it is not very good. So Apple creates
the iPod and the first moment of truth is
that the customer buys it. The second moment
of truth is that the customer actually uses
it. Third moment of truth is that the customer
does repeat his purchase. Fourth moment of
truth is when the customer tells other customers
about it.
KMB: Correct. How true!
Ram: Most of the consumer habits are
not about the numbers, it’s about the
preferences and how is it changing.
KMB: But when you talk about the leadership
at the helm, getting deeper insight by interacting
directly with the customers — that would
require a huge time commitment. In your experience,
with top managers, top leaders, how much time
does one actually spend with customers?
Ram: It’s a very good question.
Here you use a sampling technique. Just the
way Gallup does it. Build the rhythm and consistency
as does an athlete.
KMB: Right.
Ram: You can do the sampling through
the year when travelling, going to visit the
plant site. Take an hour to go to the supermarket.
Take an hour to go and stand outside of some
particular area. Talk to five customers. Observe.
Observation is a skill but the time commitment
depends on the company and multiply yourself
by other people doing that. I am saying 10
per cent of your time needs to go to observe
customers and competitors.
KMB: Say for example, since you have
done lot of work with Dell, how would someone
like Michael Dell go about implementing this?
Ram: Let’s pick some other company.
I cannot talk about Dell.
KMB: You pick one that you are comfortable
talking about.
Ram: Almost all people like Target,
Wal-Mart do. The CEO of P&G does. He is
absolutely in his own way very, very disciplined.
He walks through these major mega stores,
and he feels unhappy if he did not figure
out what is new and if somebody else did.
He spends that time. If you do it regularly,
you make those trips in less time in the future
because you become efficient and become more
observant.
KMB: Let’s go ahead. You have
always spoken of execution as a source of
competitive advantage. Your book Execution
was path breaking. What in your experience
do companies that execute well do differently?
Ram: There are many things. But I give
you just three items. The most important thing
they do is putting right people in right jobs.
Nothing will overcome the deficiency if you
have wrong people in key jobs. It is a huge
discipline. Second, is that you have to be
very good in follow through. Third –
each of these things have milestones and there
are review mechanisms for major milestones.
KMB: That sounds deceptively simple!
That takes up to the issue of leadership.
How do companies create leaders who have the
multiple skills required in abundant measure
to do all that you have spoken about?
Ram: I think we got to be very clear.
First is — no human-being is going to
have all of this. So what you are looking
for is leadership where the leader himself/herself
is personally growing. The growth engine in
each of us is very important. Second —
today leaders have to work with teams, not
just solo. So they are complementary. Third,
you have got to develop leaders in the sense
that identify them early, at the age of 25-26-27
and give them a variety of experiences.
KMB: Right
Ram: Move them out from one function
to the other, but keep them long enough to
demonstrate a track record. You will be surprised
how they all grow their skills. And they realise
what they don’t have and how to complement.
KMB: How do you identify a leader at
25-26?
RAM: Does this person like to work
with people? Does this person mobilise people
without hierarchical power? Is this person
looking at another person, and really figuring
it out — what is this person’s talent
and how do we use it?
KMB: That would require very keen observation
skills.
RAM: That’s very true. Just go
with those three items. You begin to see —
is this person a loner or is this person a
leader? Can this person be a leader.
KMB: One last question, Ram. I read
that you talked about teaching business acumen.
Can you actually teach something like business
acumen?
Ram: I think the key point here is
that some of the basics of business acumen
are present in a large part of the population,
say in India. The largest number of businessmen
and business-women are street-vendors. They
get no training. They understand ‘cash’.
It is a four-letter word, they understand
that. Their mind works on how to get ‘cash’
at the end of the day.
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