STRATEGIC TRANSFORMATION FOR EFFECTIVE HR

PROCESSES IN ORGANIZATIONS
By Ganesh Shermon ©

Is an Organization Death Inevitable?

Must business, like humankind, go through a life cycle? Would every business, the technology,
products and customers encounter life cycle turn as they go along managing the enterprise?
Perhaps not by rule, but more possibly because of environmental inevitability given the nature of
economic volatility that businesses face. This would as a consequence bring us to the next
question, must growth be followed by maturity, decline, even failure? Or Can business escape the
limits of mortality?

Some seem persistently in a position to resist the enfeeblement of old age. Unilever has
consistently grown in the last 2 decades or GE has shown its resilience against economic
downturns quite significantly. Companies are born, they grow, they get sick, they recover, they
mature and they grow old. And like people, companies are mortal - they can die. Unlike our own
demise, however, lifetime of a corporation could be indefinite.

Organizational Death is certainly not inevitable. Corporations that have not understood the
process of renewal and revitalization encounter close encounters with death, not others.

Organizational Life-Cycle

There are three kinds of Companies that form a typical corporate enterprise.

• LEADERS, the incumbents that built the industry, the creators and protectors of industrial
orthodoxy. They are the oligarchy. An automobile giant or an aircraft manufacturer that has
over 100,000 suppliers who manage their components and ensure timely and high quality
delivery.
• FOLLOWERS, the companies that pay homage to the industrial “lords”. They are peasants and
their life is hard. The vendors who are dependent on the companies and their destiny.
Companies that are happy being in partnership with their customers and confining their supply
source largely to one/two players. Example: Levis Strauss and Cone Mills.
• CREATORS shackled neither by convention nor by respect for precedent, these companies are
intent on overturning the industrial order. The new age revolutionary entrepreneurs who see an
opportunity for business in every walk of life. Netscape Navigator/ Java.

The company classification demonstrates the need to position each company in the context of its
life cycle when compared to comparable companies in the industry. As a consequence some
companies are classified as one of the three above-mentioned alternatives.

How Organizations Develop and Grow. (See Figures given below)

Five Key Dimensions:

– Age of the organization. Management problems and principles are rooted in time. The
history and time spent in doing business influences managerial strategy and processes. It is
essential that organizational create a method for institutionalization of managerial attitudes.
 Responses become predictable and difficult to change if a deep-rooted understanding of the
impact of the age of the organization is not understood in perspective. Again simplistic
assumptions are made on age of the organization. That the styles and practices are old
fashioned, that systems are not contemporary enough, that people attitudes need to be
changed. From 3 M, to GM, to Ford have all demonstrated that they have the ability to
turnaround despite economic odds.

– Size of the Organization. Problem of co-ordination and communication is visible where

size has not been dimensioned or where size has happened over time. in gaining size, new
functions emerge and they in turn influence organizational culture and climate that on
balance impacts transformation. Similarly levels in hierarchy multiply. Jobs become
interrelated and roles get intertwined with overall business processes. Past assumptions
have stated that companies with 100,000 people should be simply broken up; or businesses
that have crossed a certain turnover mark should be spun off as a profit center. Clearly
there are no right answers to this issue.

– Stage of Evolution. Prolonged quiet growth period in a logical, organic method symbolizes
a state of evolutionary growth. Modest adjustments only for maintaining growth sometimes
occur when the organizational management see the need for tweaking the system to make
way for a few rapid strides in what would otherwise be a rational growth path for the
organization. The company employs a dominant management style to achieve growth.

– Stage of Revolution. Revolution necessitates turbulent time periods in excess of what

could be planned or visualized at the planning stage. Revolutionary stage implies upheaval
of management practices, questioning of basic assumptions and past practices. It also
means a change over to a frame of reference not experimented or attempted before.
Finding new organizational practices becomes a basis for next period evolutionary phase.
Sometimes organizations could be seen to be sowing seeds for their own decay just to
facilitate leading to another period of revolution. Growth rate of the industry is a key-
determining factor while this stage of revolution is accepted and agreed as the way to go.
Here in contrast to the above evolutionary model, dominant management problem must be
solved before growth can continue. Each phase is a result of the previous phase and a cause
for the next phase.

How Organizations Grow:1 2

Five Key Dimensions: Eg. Arvind Mills

• Age of the organization: 70 Years of all products/12 Yrs of current products

• Size of the Organization: 12000 – 8000 after a VRS of 7700 and hiring of 3500
• Stage of Evolution: Growth – Maturity as an Industry, Growth as a company
• Stage of Revolution: Dynamic/Turbulent, creative consolidation
• Growth rate of its industry: Negative/Recession Prone/Cyclical/High Value Niche Markets.

1
Greiner, Larry E. Evolution and Revolution as Organizations Grow. Harvard Business Review , May-June
1998.
2
The author acknowledges the intellectual contributions of Santosh Kumar in the contents of this article.
 HOW COMPANIES GROW
large Company in Company in
high-growth industry medium -growth industry

Size of Organisation

Company in
low-growth industry

Evolution : stages of growth

Revolution : stages of crisis

small

young Age of Organisation mature

Five Phases of Growth

Phase 1 2 3 4 5
large Collaboration

Coordination
Size of Organisation

“?”
Delegation

red tape
Direction

control
Creativity

autonomy Evolution : stages of growth

Revolution : stages of crisis

small leadership
young Age of Organisation mature

Why do Organizations encounter performance trauma?

Some key questions need to be addressed to respond comprehensively to this issue.

1. What’s a mature business?

• Is it defined by constrained financial performance?

• Are there difficulties faced by mature firms wherein their perceptions of the state of business
health influence what managers do?
• Do people feel imprisoned by their environments and are unable to add value? Is the business
intrinsically viable? Does the company still have products and customers that are loyal and
with them?
• Are people asking for innovation, change and new ways of doing things?

Mediocre performance is not the result of “outside forces beyond their control” but internal
routines and behaviors “which they can do something about”. This understanding is a pre
requisite to make organizations understand the need for transformation. Mature organizations
intrinsically are being implied to be poor performing. They are seen as companies positioned in a
precarious financial state and would border on decay and decline unless appropriate interventions
are made.

2. Why Good Companies get into trouble?3

• Active Inertia
♦ an organizations tendency to follow established patterns of behavior - even in response to
dramatic environmental shifts
♦ The Managerial unwillingness to see beyond the four walls of strategy
♦ Problem not of taking action, but an inability to take appropriate action
♦ “In trying to dig yourself out of the hole, you just deepen it”
♦ For Arvind it was the changeover time between single product to multiple product that caused
the temporary shift in performance.

Why Inaction?
• Due to all plausible arguments - typically based on past experience - even when the reasoning
is superficial and demonstrably false. Successful past turning into a handicap for initiating
change.
• Resistance can arise from personal unwillingness to face the uncomfortable fact that all one’s
professional experience might count for little in the future.
• Changing competencies and strategic orientation not being aligned with customer needs and
preferences.
• For Arvind high profitability and peak performance forced the delay. In addition the integrated
nature of the technology and the product delayed the project implementation.

CASE OF FIRESTONE: Victim of Active Inertia

History :

3
Sull, Donald N. Why Good Companies Go Bad. Harvard Business Review (July-August 1999).
• 7 decades of uninterrupted growth, seen best of prosperity. Managers with clear vision,
strategy and the willingness to lead from front. Market leader in Tire and Rubber business,
customer friendly and loyal. In addition there were in an enviable position with the big 3
Detroit automakers being key customers for long years and time frames. As far as the
company was concerned their challenge was to simply keep up with steadily increasing
demand and manage the enterprise along with the customers.

Inside Story
“A monument to its own success” was the way they described themselves. Culture and
Operations reflected vision of founder, Harvey Firestone,Sr. and peole were happy to be
associated with the corporation. Customer & employees were part of “Firestone Family” and
this was made a corporate dictum in all company family interactions. Deceptive divisions
between management and non-management were equally eliminated and visible bridging of
levels was attempted and practiced. Eg. Company country club open to all ranks. The
company created fiercely loyal managers who believed in their company, their leader and their
product. Customer relationship to them meant much beyond business and many were personal
friends of the corporate hierarchy of the auto makers.

Operations:
• Operating and capital allocation was designed to exploit the booming market with volumes
and size reflecting the growing market share opportunity. The company to keep pace with this
growth and to ensure that their supply to the auto manufacturers is not disrupted quickly put
new production facility on line. Companies’ frontline was made to identify opportunities while
the middle managers were expected to evaluate & select. Finally top executives were
responsible for final approval.

Secrets of Success:
• The company believed that their strengths were in strategies, values, and relationships with
customers and employees. Operating and investment processes were streamlined to ensure
customer service and satisfaction.

Almost overnight, everything changed. Michelin, a French Company, introduced the radial tire.
Radial tires - based on breakthrough design with product features that were unique in those
times:
– Safe
– Longer-lasting
– Economical
More importantly the company had dominated Euro market. The first fall came when Ford in
1992, started usage of only radial tyres. Firestone Reaction was as expected, an opportunity and
let us get at it.
• Invested nearly $400 Mn
– radial production
– building new plant
– converting existing factories
• Firestone’s response was quick and well forecasted. They were back into the market with the
new product for supply.
But was it good enough?

• Firestone clung to its old ways of working and continued to believe that their customers would
not change to another supplier or to a cheaper source.
• They made marginal improvements, tinkered with processes, made superficial corrections to
customer demands, rather than redesign the product aggressively to bring in an innovative and
dynamic design.
• Took their time and delayed closing factories impending obsolescence and those that were
bordering on poor performance and losses. Active Inertia had taken hold.

Firestone’s Demise…

• By 1979, Firestone was in deep trouble. Plants were running at 59% capacity and gross
production inefficiencies had crept in. the company started renting warehouses to store unsold
tires. Costly and embarrassing product recalls were turning into an every day affair. Over $200
Mn used by domestic business to retain product dominance failed to pay dividends and the
company forcibly surrendered market share. As a consequence suffered two hostile takeovers.
In 1988, Bridgestone, a Japanese Company finally acquired.

What are the Patterns of Organizational Failures?

The 5 Neurotic Styles :

Dramatic Organisation.

Dramatic Organizations are characterized by Impulsiveness. Over ambitious, dominating and

power hoarding CEO’s leads it. Their Personal styles influence organizational functioning. They
have a large temptation to diversify into unrelated markets and products. Eventually the
organisation is merely an extension of the CEO’s personality. This organization is typical of
simple, functional structures with lines of authority extending directly to the CEO. Many
organizational members are happy doing what the CEO desires, conform to acceptable ways of
working. The strategic planning process is dependent on gut and how the CEO feels towards a
business at a point in time. The organization is definitely not data or information driven.

Suspicious Organisation

Suspicious organizations are wary of their environment. They are always alert and ready to fight
in any situation that the business may demand. They like to call themselves as fighting fit to face
any situation. The companies are heavily into detail. They create elaborate mechanisms to collect
and analyse data, information and facts that make the organization work. At the psychological
level they work on low level of trust and delegation. Information as an instrument of power is
perceived as a part of the organizational culture.

Compulsive Organisation
Effectively compulsive organizations are stagnant bureaucracies. Reliant on narrow, archaic
strategy their role envisages primarily managing in a steady state. Dogmatic adherence to
traditions and norms, Rigid and formal rules and procedures make their work life an every day
affair. Above all they develop elaborate information system to manage and retain control of all
the activities. The decision making style is highly centralized. And they are quite trapped in their
glorious past.

Depressive Organisation

Depressive organizations are worn-out, purposeless enterprises with no sense of mission or

direction that is palpable within the company. They drift and appear to almost run-by themselves.
People demonstrate behavior that are listless, apathetic, a passive stance and a gross lack of
initiative. Many suffer from “decidiphobia” - fear of deciding or committing to any goals. There
is a heavy reliance on outside “messiahs” or consultants for solving their internal every day
problems. Poor internal communication and lack of adaptation to reality with time are some of its
additional characteristics.

Detached Organisation

Detached organizations are basically “Headless” - leadership at the top. Schizoid Chief Executive
who does not have a particular frame of reference in managing the enterprise normally leads it.
Their view of the world rarely seeks to offer meaning or purpose to their role and activity. It is
rudderless - no unifying or directional effort and the culture is rampant with power struggle,
politicking abound and the work life can sometimes be quite miserable for high performers.

Winners v/s Losers

What distinguishes outstanding companies from the rest?

• What differentiates Microsoft, GE, HP, and Sony Corporation? They understand that
consistent innovation is the key to a company’s survival. They know that the most powerful
changes they can make are those that create value for their customers and potential customers.
They constantly look for ways to change every aspect of their business. They translate those
changes into advantages customers will appreciate. They know that their competitive success
is built on a steady stream of improvements in production, finance, distribution, and every
other function, not just a big hit in sales or marketing or R&D. They make sure they’ve got
players who can deliver consistently. They create organizations that give those players all the
backup they need

Who will win?

The fortifications that protected the industrial oligarchy are crumbling under the weight of
deregulation, technological upheaval, globalization and social change. Never has the world been
more hospitable to industrial revolutionaries and more hostile to industry incumbents. But how?
Can we transform? Can a mature business transform itself into a successful one? It is amazing
that a caterpillar can turn into a butterfly. The caterpillar creeps along the ground, has limited
horizons, and is unable to move quickly. Yet that small furry larva can become one of nature’s
most graceful creatures, able to fly and traverse a much wider terrain. One might doubt that a
mature firm could become dynamic and entrepreneurial? Yet such a metamorphosis is possible.
Change is usually painful, slow and immensely difficult. Many mature businesses have tried to
rejuvenate. Some show improved results before the effects evaporate. Only a few succeed in
holding on to improved performance for any length of time. Firms in the last category do
transform themselves. They transform their industries and create new competitive rules. Such
transformations are rare, but inspirational and their rich histories suggest many valuable lessons.
They demonstrated that organizations could counter their own history of poor profitability and
low growth and operate successfully in the same, often hostile, environment that weighed so
heavily on their rivals.

What does it take?

Creating and sustaining a corporate environment that values better performance above everything
else. Structuring the organization to permit innovative ideas to rise above the demands of running
the business. Clearly defining a strategic focus that lets the company channel the innovative
efforts realistically, in ways that will pay off in the market. Knowing where to look for good ideas
and know to leverage them once they’re found. Going after good ideas at full speed, with all the
company’s resources to bear. Systematic effort to institutionalize innovation is what gives market
leaders their competitive edges.

For Arvind the winning combination was as follows:

1. Restrategizing on the business portfolio and creating a new product mix that met with
the changing customer needs.
2. Bringing back a focus on manufacturing excellence with a cost conscious process made
the bottom line look better.
3. Communicating across the board on what needs to be done, by whom and by when
provided a strategic and tactical clarity on both short term and long run goals.
4. Hiring experts who could fix pending problems and hastening the learning curve delays
was yet another masterstroke of a strategy.
5. Direct and hands on dealing with problems as they arise and as they are fixed made
management decision process and involvement of relevant management staff easy and
user friendly.
6. Ensuring high performers are rewarded and special incentives designed for people who
can work effectively under adverse conditions helped other aspirants to emulate high
performers and bring up the overall performance standard.
7. Spreading the risks in such a way that the company manages its cash flows effectively,
helping business managers take ownership for collections, making critical raw material
buying decisions strategically, bringing innovations in product and process areas and
learning to make the organization think differently were the ground level actions.
8. Making staff functions perform line driven profit oriented goals created a sense of all
being in it together and everybody sharing the role of revitalization the corporation.
9. Teams came into focus, sharing of resources, breaking traditional boundaries of
knowledge and expertise were additional features of the turnaround.
10. And finally the fact that we continue to be a preferred employer with high attraction for
employees and low turnover helped bring up the morale significantly.

History of Transformation
History of Organizational Transformation

The First Wave comprised of composed of change programs that are designed to address
operational problems, new business philosophy and the need for change. Some major change
programs included, History of Organizational Transformation, critical factors governing the
revitalization objectives, players involved in the transformation process, expected outcome,
communication and feedback methods and actual problem solving models.

Several interventions were attempted, be it, Quality Circles, JIT, Six Sigma, Re Engineering,
MBO, MRP, Theory Z, Team Structures, Empowerment, Participative Management etc. However
there were fallacies of The First Wave. All had worthwhile goals. They provided positive impact.
But, none met a single vision. None achieved strategic goals. The history of Organizational
Transformation as a consequence is driven by a checkered success experience. The Second Wave
involved, “reverting the Organizations to business processes that propelled growth”. Defining
strategic imperative, creating a breakthrough goal - presently out of reach, making goal lie
between present reality and “pipe dreams” and at times at the edge of wall of disbelief. An added
pre requisite was to align processes necessary to accomplish the stated objective. The
Involvement Spectrum contained fundamental change in thought, action and work desired by
commitment, time, resources, courage and concurrently on structural change in systems, basic
human processes, vision and commitment.

What’s Forcing Change?

Reasons for Transition

Some serious and impacting transition particulars are mentioned here. Proliferation of new
technologies enabled by microchip is a key factor. Globalization in the economy leading to entry
and exit of currently high performs businesses. Open flow of ideas, money, goods & services,
migration of growth rates, Job creation, Ecological constraints etc. Again the drivers of Future
Business radically changed with quality no more a winning differentiator, with Speed as the the
new mantra, reducing development time for new product launches, bringing in manufacturing
innovations be it, Simultaneous v/s Sequential Production Techniques, providing JIT distribution,
increasing product turnover, utilizing electronic transfer of funds etc. Strategic Innovation is the
only source of profit. Innovation beyond mere product improvements is but a minimum standard
for the corporation. Market factors necessitated anticipate and not respond to market changes on a
reactive basis. Change assumptions about how value chain must look and function was yet
another important factor. Dell & Compaq against “Big Blue” is an example of this situation.
Emphasis on Partnership with cooperative efforts by generating increased value reducing time,
cost and risk. “Cooperative competition”, mass customization, ability to offer personalized
versions, maintain cost/volume advantage of mass production are some illustrative points. Car
Companies serves as examples. Focussed mass, using sophisticated customer buying and usage
patterns (Eg. Modi Xerox) and structural Change, a higher permanent level of structural
unemployment are but some more discontinuities.

STRATEGIC BUSINESS TRANSFORMATION

Strategy as Revolution

Everything Else is Tactics. Strategizing is not a rote procedure - it is a quest. Giving planners
responsibility for creating strategy is like asking bricklayers to create Michelangelo’s Pieta. Any
company that believes that planning can yield strategy will find itself under the curse of
incrementalism while freethinking newcomers lead successful insurrections. Strategic Planning
isn’t Strategic and In most companies, strategic planning is a calendar - driven ritual, not an
exploration of the potential for revolution. The strategic making process tends to be reductionist,
based on simple rules and heuristics. It works from today forward, not from future back,
implicitly assuming, whatever the evidence to the contrary, the future will be more or less like the
present. Strategic Planning isn’t Strategic and only a tiny percentage of an industry’s conventions
are challenged, rendering strategy making largely extrapolative. An industry’s boundaries are
taken as a given; thus the question is how to position products and services within those
boundaries rather than how to invent new, unconventional competitive space. The planning
process is generally elitist, harnessing only a small proportion of an organization’s creative
potential.

Strategic O rganization al Transform ation

K now ledge C reation

Technology Leadership
Products
H R M C o n ten t Developm ent
H
R
M
C u rrent Config uration D esired
A HRM Culture HRM
U Level Com petency Level
D
I
T Change
Diagnosis H R M P ro ce ss M anagem ent
K now ledge M anagem ent

Strategy making must be subversive, If there is to be any hope of an industry revolution, the
creators of strategy must cast off industrial conventions. Rule makers and rule takers are the
industry. Rule breakers set out to redefine the industry, to invent the new by challenging the old.
The Bottleneck is at the Top Where will you find people responsible for creating strategy? At the
top. Where are you likely to find people with the least diversity of experience, the largest
investment in the past, and the greatest reverence for industrial dogma? At the top. The
Bottleneck is at the Top. The organizational pyramid of experience is valuable only to the extent
that the future is like the past. In industry after industry, the terrain is changing so fast that
experience is becoming irrelevant and even dangerous. Unless the strategy - making process is
freed from the tyranny of experience, there is little chance of industry revolution.
Revolutionaries exist in every company and it would be sad to conclude that a company can fully
exploit the emotional and intellectual energy of a revolutionary only if he or she succeeds in
navigating the tortuous route to the top. If you don’t let the revolutionaries challenge from within,
they will eventually challenge you from without in the marketplace. Change is not the problem,
Engagement is where senior executives assume two things about change that squelch
revolutionary strategies, People - that is, middle managers and all the rest - are against change.
Only a hero - leader can force a timid backward looking organization into the future. All too
often, change epics portray the Chief Executive dragging the organization kicking and screaming
into the 21st century. Enough of top - management grandstanding. Change is not the Problem;
Engagement in humankind would not have accomplished what it has over the past millennium if
it was ambivalent about change or if the responsibility for change was vested in the socially or
politically elite. Often, senior managers talk about change, which they plan to impose on
unprepared and unsuspecting employees. This sort of change is not about opening up new
opportunities but about paying for the past mistakes of corporate leaders. What is Engagement?
The objective is not to get people to support change but to give them responsibility for
engendering change, some control over their destiny. When senior managers engage their
organization in a quest for revolutionary strategies, they are invariably surprised to find out just
how big the pro - change constituency is.

Strategy must be Democratic. Despite years of imploring people to bring their brains to work,
senior managers have seldom urged them to participate in strategy making. There is often a kind
of intellectual incest among the top officers of a large company. Their positions are well
rehearsed, and they can finish one another’s sentences. Democratic Strategy the capacity to think

STRATEGIC BUSINESS TRANSFORMATION

Executive High
Performance Team
Supportive
Infrastructure
Driving Business
Decision
Strategic
Work Imperative
Redesign
Change
Leadership

Compelling
Partnerships Fully engaged
Workforce

creatively about strategy is distributed widely in an enterprise. It is impossible to predict exactly

where a revolutionary idea is forming; thus the net must be cast wide. To help revolutionary
strategies emerge, senior managers must supplement the hierarchy of experience with a hierarchy
of imagination. This can be done by dramatically extending the strategy franchise. In Democratic
Strategy, it is ironic that the group with the biggest stake, the operating core, in the future is the
most disenfranchised from the process of strategy creation. The people at an organization’s
geographic periphery are the second constituency that deserves a larger say in strategy making.
The capacity for strategic innovation increases proportionately with each mile you move away
from headquarters. The constituency that deserves a disproportionate says are new - comers,
people who have not yet been co - opted by an industry’s dogma. Senior executive must ensure
that they don’t drown out people who are overly inclined to deference. People should have say in
their destiny, a chance to influence the direction of the enterprise to which they devote their
energy. Top - down planning is not a Democratic program but a monumental testament to lack of
faith in the ability and intelligence of the people and they will have little to do with it. That which
is imposed is seldom embraced. An elitist approach to strategy creation engenders little more than
compliance.

Anyone Can be a Strategy Activist. Senior managers are reluctant to give up their monopoly on
the creation of strategy. Activists are not anarchists. Their goal is not to tear down but to reform.
People who care about their country - or their organization - don’t wait for permission to act.
Activists don’t shape their opinions to fit the prejudices of those they serve. What must an
Activist do? To be an activist, one must care more for one’s community than for one’s position in
the hierarchy. The aim is not to stage a palace coup. But when senior managers are distracted,
when planning has supplanted strategizing, and when more energy is being devoted to protecting
the past than to creating the future, activists must step forward. This perspective is Worth 50 I Q
Points. Without enlightenment, there can be no be no revolution.

To discover opportunities for industry revolution, one must look at the world in a new way,
through new lens. A view of discontinuities as levers for change rather than threats to the status
quo is a new perspective. A view that imagination rather than investment determine an
organization’s capacity to be strategic is a new perspective. What is the Right Perspective? The
company must identify the unshakable beliefs that cut across the industry - the industry’s
conventions. The company must search for discontinuities in technology, lifestyles, working
habits, or geopolitics that might create opportunities to rewrite the industry’s rules. The company
must achieve a deep understanding of its core competencies. The company must use all
revolutionary ideas, the unconventional strategic options that could work. Top - Down & Bottom
- Up are not Alternatives. What one sees from the mountaintop is quite different from what one
sees from the plain. There can be no innovation in the creation of strategy without a change in
perspective. A strategy activist who fails to win senior manager’s confidence will achieve
nothing. To bankroll the revolution, senior executives must believe, both intellectually and
emotionally, in its aims.

In the traditional model of strategy creation, the thinkers are assumed to be at the top and the
doers down below. To achieve diversity of perspective and unity of purpose, the strategy -
making process must involve a deep diagonal slice of the organisation. Unity without diversity
leads to dogma, and diversity without unity results in competing strategy agendas and
fragmentation of resources. You Can’t See the End. A strategy -making process that involves a
broad cross section of the company will almost inevitably reach surprising conclusions.
Challenges for senior executives who believe that strategy must be revolution: Invite new voices
into the process Encourage new perspective, synthesize unconventional options and start new
conversations that span organizational boundaries.

The Right mind-set

To convert a solid performer into an aggressive competitor, you have to create an organization
that not only values better performance but also sustains the commitment year after year. To
sharpen an organization receptivity to change, several ingredients are essential. To begin with, top
management must be deeply and personally involved in the process. Innovative leaders lead
innovative companies. Unsettle the Organization and make mindsets radically change. A
champion who believes that the idea is really critical and who will keep pushing ahead, no matter
what the roadblock. A sponsor who is high ups enough in the organization to marshal its
resources - people, money, and time. A mix of bright creative minds (to get ideas) and
experienced operators ( to keep things practical ), a process that moves ideas through the system
quickly so that they get top - level endorsement, resources, and perspective early in the game.
Hardheaded strategy for successful innovators usually has pretty clear idea of the kind of
competitive edges they are seeking. They have thought long and hard about what’s practical in
their businesses. Your strategic vision has to ground in a deep understanding of the competitive
dynamics of your business. You have to know your industry and your competitor’s cold. For a
hardheaded strategy, you have to know how you stack up on every performance dimension, And
you have to be hardheaded about using this knowledge to position your company to gain a
competitive edge.

Strategic focus works - in real life, not just in articles but strategy. Directions should be so clearly
set, that creative people can channel their efforts toward things that will work against competitors
in their particular business. What to Concentrate on, what’s already working in the marketplace
that you can improve on and expand. Outside ideas are useful because your competitors are
already doing market research. How can you segment your markets differently and gain a
competitive advantage, offer your customers better value than your competitors do? How does
your business system compare with your competitors? Any business system can be basis for
building edges, and in any event go for broke. Even the best concepts or strategies tend to
develop incrementally. They rarely ever work the first time out or unfold just as they were
planned. The original concept or its execution usually gets changed considerably before it’s ready
to be implemented broadly. Even after you spot a segment and develop a product to serve it, you
have usually still got at least one major hurdle to jump before you can capitalize on your new
idea. Development is key to this strategy. Most of the new - product mistakes grow from the
company’s failure to back up the innovation with enough resources - not from overspending.
People are often in such a hurry to get into the market with a new product that they neglect to
think through all the things needed to launch it properly. Big winners make careful plans to throw
everything needed at new products-to ensure their success-money, people, and programs in every
functional area.

The Key Principles of Transformation

•Lead from the front, show commitment and action for change
•Make visible organizational and performance stakes in making change happen
•Create a corporate environment that puts constant pressure on everyone to beat your specific
competitors at innovation.

•Structure the organization so that you promote innovation instead of thwarting it.
•Ask for the intellect that would make the organization work.
•Develop a realistic strategic focus to channel innovative efforts.
•Convert every business experience into a knowledge archive. That is the bank of the future.
•Know where to look for good ideas and how to use your business system to leverage them once
found.

•Throw the book at good ideas once you’ve developed them fully. And ask for more.
•Get culture working to make people have fun.
Preconceiving a Product or Service

Radically improving the value equation by preconceiving the product or service depending on the
realistic market scenario. Here it is not the vision that matters but hard reality. In every industry
there is a ratio that relates price to performance. And another ratio that links product to value.
Eventually the company is measured through its EVA. (Economic Value Add). The challenge is
to improve that value ratio and that too radically. Such a fundamental redefinition of the value
equation forces a preconception of the product of service. Separate function and form to separate
core benefits (function) from the ways in which those benefits are presently embodied in a
product or service (form). Any organization that is able to distinguish form from function and
then reconceived one or both has the opportunity to create an industrial revolution.

Achieving joy of use is essential for every product conceptualization. In business our only role is
to offer customer delight. To make every client interaction value added. We live in a world that
takes ease of use for granted. The new goal is joy of use. We want our products and services to be
whimsical, tactile, informative, and just plain fun. Any Company that can wrap those attributes
around a mundane product or service has the chance to be an industry leader. It is perhaps this
extension of assumption that makes the virtual shopping happen faster than projections on its
success.

Redefining Market Space

Pushing the bounds of universality is critical for gaining new entry market space. That would
mean creating a space from now where. Every company has an implicit notion of its served
market: the types of individuals and institutions that are -and are not - customers. Revolutionary
companies, however, focus not just on their served market but on the total imaginable market.
From class to mass, adult to child, professional to consumer, and national to global, the traditional
boundaries of market space are being redefined. Striving for individuality no one wants to be part
of the mass market. We will all buy the same things - but only if we have to. Deep in our need to
be ourselves, to be unique, are the seeds of industry revolution. Increasing accessibility is but a
next logical step. Most market spaces have temporal and geographic bounds: customers must go
to a specific store at a specific location between certain hours. But market space is becoming
cyberspace, and every industry is revolutionizing consumer expectations about accessibility.
Redrawing industry boundaries and rescaling industries are becoming the new form buzzwords of
the transforming organizations. As industry revolutionaries seek out and exploit new national and
global economies of scale, industries around the world - even office cleaning and haircutting - are
consolidating at fearsome pace. Any industry that was local, such as consumer banking, is
becoming national. Any industry that was national, such as the airline business, is becoming
global. Compressing the supply chain is yet another extension of the market space expansion. The
cognoscenti use the word disintermediation: the removal of intermediaries. Driving convergence,
revolutionaries not only radically change the value-added structure within industries but also blur
the boundaries between industries. Deregulation, the ubiquity of information, and new customer
demands give revolutionaries the chance to transcend an industry’s boundaries. Industry
boundaries today are as meaningful as borders in Balkans.

Pathway to Transformation

Business Transformation is the orchestrated redesign of the genetic architecture of the

corporation, achieved by working simultaneously - although at different speeds - along the 4
dimensions of Reframing, Restructuring, Revitalization and renewal.

The Four Phase Transformation

Innovative
Innovative
Diversity

Focused
Focused
Alignment

Latent
Latent
Radical Evolution

Awakening Alert
Alert

Inert
Inert

Reframing addresses the corporate conception of what it is and what it can achieve and involves
3 steps:

1. Achieve mobilization,
2. Create the Vision
3. Build a measurement system

1. Achieving Mobilization

Developing leaders who share the passion and perhaps the coffeepot to make the changeover
from the current state is the starting point. Bringing a critical mass of management talent makes
the role of th leaders that much easier as it helps leverage success experience of one on to
another. Creating wide-band, interactive communication follows the leadership building strategy.
The Chosen leaders make talking about the need to revitalize and change a virtual daily activity
and take their role of speaking on the change as the critical part of the change process. This walk
around meeting, informal as it may be, makes way for clarifying doubts, responding to otherwise
unanswered questions, bringing down dissonance amongst affected people, offering security and
stability where possible and so on. Encouraging the formation of “natural work teams” is another
step to mobilize critical mass support for the initiative. Teams that have been working physically
or by nature of their roles working together are made to work with the change facilitators and as
clarity emerges on the areas of resistance or bottleneck an action planning scenario is set by
preparing individuals for the cycle of change. Bring like and unlike minded together and
identifying bondage’s that make people enjoy what they are doing is the final step in active
mobilization.

2. Creating the Vision

Developing a strategic intent through a internal SWOT analysis and reaching a well debated
conclusion on the purpose, scope, method and outcome goals of the revitalization strategy needs
upfront articulation. This clarity is converted into a change or a vision goal.
Prioritizing expectations among constituencies
Establishing values
Communicate hard the basic business philosophy and reason for us being in business
Construct the vision across people groups

3. Building the measurement system

•Develop top-level measures and targets
•Building connectors across the top-level targets
•Constructing a bottom-up business case for change
•Connect bottom-up and top-down measures
•Make measuring the Intellectual Capital fundamental to the people building process
•Evaluate change management programs and its benefits, and ensure its review and feedback
•Ensure links to bottom line
•And make customers as the goal of the organization.
Restructuring - the need to be lean and fit Involves constructing an economic model Managing
the portfolio to build shareholder value Encouraging the definition of high-level value chain for
each business Fostering the allocation of resources by activity, based on cost and service level.

This involves:

•Configuring the Physical Infrastructure

•Construct an economic model
•Formulating an operations strategy
•Developing a network strategy
•Aligning individual facilities
•Articulating a sourcing strategy
•Redesigning the Work Architecture
•Configure and align processes
•Orchestrate by goals and measures
•Produce symphony of value creation
Revitalization the phase of igniting growth includes such steps as achieving market focus,
requiring the development of value propositions, segmenting the customer base of benefits,
guiding the design of a values delivery system. Revitalization necessitates changing the rules
through Information Technology, sanctioning technology for localized efficiency improvements,
inducing technology - based integration of internal business processes, promoting technology -
enabled re-engineering and leading the development of technology-enhanced business form the
key characteristics of this process.

•Inventing new Businesses

•Achieve market focus
•Invent new businesses
•Fostering the cross-fertilization of core competencies
•Building alliances
•Making acquisitions
•Changing the rules through Information Technology and
Provide a basis of new ways to compete

Renewal Involves the people side of Transformation, cultivation of a reflex adaptation to

environmental changes and means Process involves steps like:
Developing the Rewards System, fostering alignment of rewards to the goals and measures of the
Organisation, extending the reward system beyond corporate boundaries and allowing people to
determine their own rewards.

The process of renewal involves:

•Building Individual Learning

•Committing to the development of the individual
•Creating Mentor-guided, life-forming projects for high-caliber individuals
•Identifying critical skills and designing an education strategy
•Balancing the supply of and demand for skills inside the corporation
•Developing the Organization
•Designing the Organization
•Using teams as the basic connecting node and the driver of Organizational adaptation
•Creating global learning
•Create a reward structure
•Embracing the corporation’s soul and its shadow
Change Strategies

Why Change?

Squeezing another penny out of costs, getting a product to market a few weeks earlier, responding
to customer’s inquiries a little bit faster, reaching up one more notch, capturing another point of
market share - those are the obsessions of managers today. But pursuing incremental
improvements while rivals reinvent the industry is like fiddling while Rome burns.

SOME CASE STUDIES45

THE CONTINENTAL AIRLINES: TRANSFORMATION

History
• Healthy phase since 1936 till deregulation in 1978
• First loss in 1979 of $13.2 Mn
• Break-even load factor rose from 40% to 63% of available seats
• Merger with Western Airlines fell through in 1981
• Major Lay-off in 1980, first in 46 years

Story of the Past

• Low employee morale, strikes rampant
• 1983, company became bankrupt
• Cut payroll from 12,000 to 4,000
• Hired new CEO to bail out. Recovery was in progress
• Gulf war escalated fuel prices. Hit Continental hard
• Several new mergers and initiatives failed
• By 1994,
– Lost money 12 of the past 16 yrs. Post deregulation
– Declared bankrupt twice

Entry of Gordon Bethune

• New President and CEO, made changes large and small - and ubiquitous
– Casual dress days
– Open access to his office to one and all
– Operating jobs divided among 8 people - Team building
– 50 of the 61 officers fired
– Hired consultants to strategize
New Strategy

Continental’s “Go Forward Plan”

4
Rucci, A.J, Steven P Kirn, Richard T Quinn. The Employee Customer- Profit Chain at Sears. HBR, Jan-
Feb. 1998.
5
Stopping Good Companies going Bad. Internet. URL
Built around the four components
• “Fly to Win”
• “Fund the Future”
• “Make Reliability a Reality”
• “Working together”

“Fly to Win”

• a Marketing plan and first part of recovery strategy

– Identify markets
– Segment your market
– Price competitively
– Listen to the customer
• Stopped flying loss making routes
• Folded out bleeding subsidiaries
• Laid of 1500 workers

“Fund the Future”

• Second part of recovery strategy

• Projections showed Continental to be out of cash, out of business, on Jan 17, 1995
• Two options in front of the board
– Renegotiate with creditors
– Go bankrupt the third time
• Board opted for the former
• Called for a meeting of all the creditors
• Continental’s shared
– Its current position
– Its future plans
– Help required by the creditors
• Boeing and GE also sought for help

“Make Reliability a Reality” and “Working Together”

• Third part based on Customer and Employees

• Hired smart people to replace fired executives
• Training in team building skills
• Reward every employee when airline gave on-time performance
• Measured Customer Satisfaction metrics and rewarded them
• Disbanded factionalization
• Introduced profit sharing plan
– Reserved 15% of pretax income for employees
– Top Mgt. Pay linked to overall performance
• All get a bonus or nobody gets
• Overhauled entire company
– New logo & interiors
– Tailored navy blue uniforms
– Stopped cutting the value-added part of the company
• To cut costs, remove back-office staff in Pizza factory instead of Cheese on the Pizza to
make Pizza cheaper

Results

• Lost $131.8 Mn in 1994

• Earned $225 Mn in 1995
• 1997 - became premier carrier in the country
• Joint Venture with Northwest Airline
– Earned $500 Mn in three years
• Today, Continental has
– About $1 Bn in bank
– 37 straight months of profit
The Benetton Way

• Benetton, one of the new wave of innovators whose success in Europe has been emulated
elsewhere in the world, began in 1965 as a small producer of Knitwear in Venetto in northern
Italy.
• It was a family run business of three brothers and one sister. Luciano was the head, Giuliana
the designer, Gilberto in charge of finance, and Carlo in charge of production.

The Beginning
• In 1968 they opened their first two shops to sell the brightly colored knitwear designed by
Giuliana.
• By 1975 they had launched more than 300 shops in Italy, all of which bore the new well-
developed distinctive features of the organization.
• Within fifteen years of its first shop, Benetton had created a worldwide organization that
integrated the activities of a chain of production and distribution.

The Achievement
• The achievement was all the more remarkable considering that Benetton, the central firm in
1999 employed fewer than 4,000 people and its profits per employee were more than $60,000
in a low wage industry.
• Fashion is notoriously fickle, and most fashion producers believe that they face high costs due
to short life cycles coupled with highly uncertain demand.
Solutions
• Benetton avoided these difficulties by two simple expedients.
• It designed an information system that enabled fast communication between the retailers and
production, and a production system that could quickly respond.
• The information system ensured that everyone in the organization, from retailers and agents to
subcontractors, knew what had been sold and could easily determine what was needed to
replace stocks.
• Benetton relies on small shops dedicated to the sale of its items in minimal inventories, there
are only short time lags between production and the final consumer.
• By integration Sales and Design into the production process, Benetton could supply
merchandise within days, and introduce new products cheaply and quickly.
• This required careful integration of traditionally separate functions like stock and dyeing
systems
• Benetton pioneered technical innovations such as late - dying techniques to ensure that low
costs could be maintained.
• It was the among the first to late - dye in large quantities, link point of sale to the factories, and
develop the late rush design system called pronto moda.
• Equally significant were its new methods of organization, which facilitated pulling together its
diverse empire.

Approach to Size
• Traditionally, retailers aiming at mass markets have built large outlets to exploit scale and
scope economies.
• Benetton’s innovation was to develop and adapt for the mass youth market small outlets that
traditionally sold high - priced merchandise to a limited clientele.
• Benetton’s small outlets were, and still are operated by partners, reflecting the firms strategic
network philosophy, that help create an image of exclusivity.

Common Goals
• It developed the concept of strategic center, where retailers, agents, designers, purchasing and
factories were linked not by formal long-term contracts but by information sharing and a sense
of common purpose.
• The strategic center achieved common goals without bureaucracy, a combination many other
organizations had sought and failed to achieve.
• Benton’s success has been built on developing multiple capabilities to achieve multiple
advantages.

Thinking Differently
• The original and fundamental idea was to provide fashion at a price and quality accessible to
young people - a mass -fashion market, which went against prevailing conventional wisdom.
• Fashion, it was always assumed, had to be expensive, while most of what was accessible to the
young at low prices was staid, tatty, or out of date and boring.
• To achieve its goal, Benetton had to employ techniques that reduced the costs of the garments
it sold while producing clothes that appealed to young people.
Other Milestones
• The ability to act quickly and at low cost, which is essential in a fashion oriented business.
• Ability to manage variety at a low cost.
• Variety to Benetton is evident not in its range of goods but in the markets it serves.
• Benetton was the first textile textile producer - retailer to become truly international, with a
large network of retailers catering to young people in different parts of the world.

Strategic Innovation
• Benetton’s ability to create mass fashion at low cost gave the organization a significant
advantage over its competitors.
• For the young people it provided unrivaled value for money.
• Benetton was the first truly global textile organization.
• Mass production itself was a strategic innovation.

THE TOYOTA STORY

• In the 1950’s Toyota was a mature organization, finding it difficult to compete in a world of
giants.
• The American producers were more profitable and better resourced.
• The failure of American automobile firms to hold on to world leadership is one of the clearest
examples of the dangers of believing that past strategic approaches can endure.

The Japanese Strategy

• The Japanese did not seek to replicate the conventional wisdom that emphasized the
importance of large - scale factories and large cars.
• They displaced the American and European firms as leaders because their new ways of
thinking about manufacturing and marketing rendered traditional Western techniques obsolete.

Adopted Ideas
• These new approaches to competition are what we call strategic innovation.
• Borrowing from rejected Americans such as W. Edwards Deming, they pioneered the idea of
– Zero defects
– Just - in - time production
– Total quality control
– Flexibility in all stages of production.
The Result
• The Japanese have shown that they can produce better cars at lower cost than almost everyone
else can in the world.
• W. Edwards Deming, the famous American statistician who has advised the Japanese since the
1950’s, explains why low cost and high quality are not opposites.
• Doing it right the first time, Deming says, means less rework and not so much waste.
• He points out that an organization that achieves near - perfect quality can eliminate a great
deal of expense.

Toyota’s Achievements

• Comparing plant-level productivity and defects of Toyota, at its plant in Takaoka, Toyota
City, built in the mid - 1960’s, with General Motors (GM), at its plant in Framingham,
Massachusetts, now shut down.
• Although Toyota did not achieve perfect quality, its rate of defects was about one-third that of
GM, and its costs - hours to assemble and inventories required - were considerably lower.
• There appears to be little difference between the two in the extent of automation - in which
Toyota has not invested heavily - but less downtime and much smaller inventories in the
Japanese plant led to better utilization of assets.
• Toyota’s technical achievements were not trivial, as U.S. and European car manufacturers
have discovered.
• Reducing defects and simultaneously improving productivity requires new approaches to
managing, to gathering information, and to control.

The Lesson
• The Toyota story is most apposite for managers in mature organizations.
• The American producers were more profitable and resourced.
• Toyota has managed to displace these leaders, establish itself in their place, and show that it is
possible to rejuvenate.

Thermax India Ltd.

• After soldering on for 25 years without access to public funds, Thermax made a debut in the
capital markets.
• The then Rs 302 crore company, which makes energy and environment-related products,
realized that its financial conservatism is no longer compatible with its new growth plans.
• To tap this potential the worked out a Strategic Business Plan (SBP)

Strategic Business Plan

• The aim to become a one -stop shop for water plants, boilers, air pollution control equipment;
and absorption chilling equipment’s
• Begin manufacturing water treatment products for domestic use
• Set up four fully owned subsidiaries for the new product lines.

Areas Identified
• The SBP identified 21 approaches, and the focus was on
– Marketing instead on selling
– Efficient project management
– Quality product development
 – Establishment of research centre on energy and environment
– And committed planning

Concerns
• The company drew flank for having widened the scope of its activities to such an extent.
• They say
– We feel we should not tie our fortune to any one industry
– We got into whatever made good sense, and we were lucky that there have been more
pluses than minuses.

The Change
• The company is now taking precautions.
• The logic of floating fully - owned subsidiaries are to concentrate on the mainstream activities
indoor and separate the other.
• Though subsidiaries are being set up, the management has no interest in joint ventures.
• Apart from holding a 60 per cent stake in the Rs 55 crore Thermax Babcock and Wilcox
(TBW)

The problems and solutions

• Thermax’s growth frenzy led to liquidity problems. Growth at any cost can be suicidal.
• Each business has been provided with powers to translate corporate policies and the job of
corporate is to keep track of the cash flow every quarter.
• There was a time when there was at least one (or even more ) businesses which had to be paid
from profits made by others.
• But now each business is profitable.

What Ahead
• A profitability of 10 per cent of sales and a growth of 25 % for the new businesses.
• Thermax enjoys a prominent position in the employment market despite not being the best
paymaster; the company’s forte is its personnel, half of whom are engineers.
• They plan to turn finance function into a profit center
– Each activity of finance is being questioned in turns of value it adds
– In case of insurance, the premium paid has been reduced by 10%
CANON - AN ENTREPRENEURIAL ORGANIZATION
• Canon Corporation provides a good example of what an entrepreneurial organization can
achieve.
• Famous as a leading producer of cameras, Canon decided to explore the possibilities of
entering the photocopier business.
• Many years of patient building of new capabilities was needed before it could make significant
inroads into the market dominated by Xerox.
The Capabilities
• Imaginative reconceptualization of the means to manage accesses to customers and the
purpose and design of the machine itself.
• Though many of Canon’s successes were seemingly bold and imaginative leaps, close
inspection of what was actually done shows that rapid progress at any one time was usually
the result of combining separate capabilities that were built earlier.

Machine Design
• A team was set up resolve the critical problems surrounding maintenance of the photocopier
drum, which was the source of 90 percent of the problems.
• The answer, which seems in hindsight to be almost trivial, was a disposable drum that the user
could replace without the assistance of a skilled technician
• Because team-based approach had already been put in place as a dominant value in the
organization, this solution was not only identified but put into practice in a surprisingly short
time.

Winning
• This was but one of many innovations that helped put canon into a winning position in the
photocopier market.

MARKS & SPENCERS

• This U.K. retailer has also demonstrated an extraordinary capacity to innovate collectively.
• Limited in growth potential in its traditional market by high market share and threatened by
the trend to small boutiques by firms such as Benetton and Next, it moved from being a
clothing store to dominating one segment of the food trade as well.

Achievement
• It has captured the number one position as the innovator of fresh prepared foods.
• Identifying and then satisfying this newly created segment.
• Its shelves are filled with fresh foods ranging from simple salads to complete meals, many of
which could be described as gourmets.
• To achieve its purpose, it had had to organize supply chains completely different from those of
the traditional food industry.

Value Added
• It had to pioneer new packaging, new processing, and new ideas of customer service with
great attention to quality
• All this has required change because handling fresh, prepared food requires far higher
standards than required in handling clothes or fresh unprepared and frozen foods.
• These standards have subsequently migrated to other parts of the organization to improve the
service delivery of stores handling both fresh food and clothes.

Lesson Learnt
• There must be a recognition that something of potential worth has been discovered and that
there is a freedom to follow up, Marks and Spencer’s demonstrates the lasting value of such
freedom.
• It discovered an interesting feature reputedly by accident when it sold out its fresh fruits every
Friday afternoon.
• The first reaction of the mangers was that they had failed to serve their customers, but the
customer’s reaction was different.
• They became convinced that the food of the following day would e really fresh, so more of
them came to buy.
• Instead of admonishing and reimposing the old system, the business moved to a policy of
deliberately limiting stocks to reinforce the message that freshness was ensured.
• The nature of necessary experiments varied greatly according to where a business stood in its
path toward rejuvenation and frame-breaking change.

ARVIND MILLS: AN EXPERIENCE IN TRANSFORMATION

History
♦ Start up in 1931
♦ World suffered a traumatic depression, India Swadeshi movement
♦ Into traditional Indian textile businesses, cottons and blends,
♦ Strong basic values, high integrity, limited ambition and loyal countrymen.
♦ Hanging on to ethics and values despite changing political scenario and consequently
losing strategic ground.
♦ Family managed Enterprise until the 80’s.

The Renewal Story

Watershed 1 Watershed 2
1980-85 1986-92
Business Crisis Business Clarity
Owner Managed Leader Defined

Watershed 3
1993-97 Watershed 4
Global Ops 1998 & Beyond
HR Intervention
Single Product Today
 Textile Company in HRM
Evolution
CATEGORY PHASE 1 PHASE 2 PHASE 3 PHASE 4 PHASE 5

Management Make and Sell/ Efficiency of Expansion of Consolidation Leadership

Focus Denim Operations/95 market:Global/ of orgnzn:
Commodity % Top Quality India 85% MS Bright / Young
Organizational Informal : Centralized Decentralized Line staff and Matrix of
Structure Owner and functional and product groups: teams: Team
Managed geographical/ MBU Structure Structure
SBU Structure
Top- Individualistic Direct : Delegate: Watchdog/ Participative:
Management and Clarity/tasks Growth Mode Corporate Limited
Style entrepreneurial and Goals Supervision Corporate Role
Control Systems Market results Standards & Reports and SAP centers Mutual goal
cost centers, profit centers setting
MIS Based
Management Ownership: Salary and Individual Profit sharing Team bonus,
Reward Egalitarian merit increases bonus: Life and stock One on One
Emphasis Style Perks options

HRM Consulting Group Limited

Watershed: 1 – 1980 – 1985:

♦ Indian Textiles face a major crisis on account of resource crunch, poor industrial
relations, composite mills losing ground, unfavorable government policies on
machinery, import, quota on export etc.
♦ In contrast market undergoing change through Far East emergence, availability of
cheap blended fabric and India app4earing to be a potential garmenting source.
♦ Arvind losing ground as it emerges more and more like other closed mills on financial
parameters.
♦ First and second generation promoters giving up active roles and attempts are made to
find at least one family member.
♦ Management lacking clarity on transition to professional management despite sincere
intent to make the changeover.
♦ Management indulging in mediocre consultants to provide solutions to facilitate
creation of a dynamic culture, but failing with the consultants employing themselves full
time.
♦ Management fires the first round of consultants and brings in a few select highflying
leaders.
Watershed: 2 – 1986 – 1992

♦ Family identifies one potential member to lead a change program for revitalization
given his demonstrated and proven success performance outside of the Flagship
Company. The leader is reluctant to continue his family status presence in the
corporation and is made to work the trenches over an 8-year period.
♦ Strategic Management Cell created with an outstanding IIM Ahmedabad faculty and
consultant who work closely with the MD on the emerging strategy.
♦ Strat Cell identifies Macro and Micro level interventions including opportunity for
household sector wanting better quality fabrics, rapidly growing garments markets,
deep penetration in international trade in yarn, fabrics and clothing.
♦ Strategy to compete by altering the composition of the product mix so that an increasing
proportion of the revenue is generated from standard and high value sophisticated
products and markets. Creation of high entry barriers makes relative standard fashion
content and use the opportunity created by traditional textile mills withdrawing from
the market.
♦ Sure signs of changing government policies towards the textile sector given large-scale
closures of textile mills and caus9ing unprecedented number of unemployment.
♦ International markets becoming more discerning with a need for easier and free market
access, demanding quality conscious customers.
♦ Company strategically identifying a niche product segment, Denim, to dominate.
♦ First Vision statement articulated a need to dominate in select product segment, global
theme in all actions, redefine markets, and bringing in managerial talent across the
board. Keep it simple, drive it hard.
♦ Need for change becomes inevitable given inevitable global competition, impending
liberalization, exploiting the low cost India scenario and the company’s core competence
in cotton textile/garments manufacturing and marketing.
♦ Company grows from a 3 million meters of Denim to 45 million meters of Denim in this
period and emerges to be the world’s third largest.
♦ Significant cash flows and net worth generated making the company a blue chip
investor favorite.

Watershed: 3 – 1993 – 1997

♦ The company turns truly global with manufacturing, marketing, commercial,

purchasing and HR operations in several parts of the world.
♦ Professionalization takes a complete fast forward with a large scale hiring on high
value, competent, globally proven top management for worldwide operations.
♦ While corporate performance had skyrocketed, people practices were still traditional
and textile in nature.
♦ Company’s ability to attract and retain top young talent was yet to be proven and had
to be focused immediately.
♦ Concrete need felt to restrategize given excessive dominance in a single product
category.
♦ McKinsey and Company brought in to support the strategy work and a concrete plan
drawn to grow in multiple cotton product segments, make appropriate people changes,
 energize the corporation, make focus an important structural decision and globalization
an inevitable part of the future.
♦ Top management commitment workshop and communication program conducted over
several months to bring alignment across the business and functional managers.
♦ Second vision and value statement articulated to provide for innovation, cost
management, people focus and core competence dependence.
♦ Creation of a large-scale HR function empowered to participate in the company
strategy, draw the change management program and initiate a series of revitalization
initiatives.
♦ HR Function initiates change strategies on:

¾ Creating the HR Vision and Strategy as appropriate to the company in the midst of an
upheaval.
¾ Drawing and Identifying through a manpower planning process the right numbers.
¾ Performing a gap analysis to bring in versatile talent into otherwise a textile bastion of
expertise and dominance.
¾ Making a sandwich strategy to bring in top management and junior management and
make the middle perform or perish.
¾ Create appropriate IR/OD interventions to make traditional textile workmen and
supervisors understand the need to change and support global and world-class
standards.
¾ Bring in HR Process and Content interventions to make the company a preferred
employer and a business/technical school favorite.
¾ Facilitate the implementation of the SBU structure for the new products that are being
launched with world scale manufacturing and marketing capabilities.
¾ Establish benchmarking and best practices system on the management processes of the
corporation.
¾ Make HR interventions on hiring, position evaluation, compensation, reward
management, career planning, and leadership building acceptable across the business
groups and make way for effective implementation.
¾ Make training and management developments including competency building
integrated with the performance management system and ensure its execution.

♦ Signs of single product weaknesses appear on the horizon with a definite trend in a
recession in the Denim market.
♦ New Projects implementation undergoes unprecedented delays owing to the creation of
an integrated world scale plant and factory premise.
♦ Gross oversupply in the Denim market worldwide and Far East financially collapses.

Watershed: 4 – 1998 and Beyond

♦ Managing Director takes a lead role in organizational revitalization and transformation.

♦ Business Executive teams converted into Transformation and operations driven.
♦ Aggressive posture in bringing in alliances, experts and international relationships to
make new projects work early and provide early success.
♦ Work through a planned change management program involving the following
activities:
1. Focus on the supply and value chain and eliminate wasteful processes.
2. Globalize more aggressively and move into untested markets to push volumes.
3. Introduce on line management information system (SAP) and communicate hard on the
turnaround strategies. (Intranet/One on one meetings/Open house/Business
Presentation etc).
4. Consciously manage internal and external word of mouth talk on the corporation and
help stakeholders understand the truth.
5. Revitalize HR strategies to provide for long term people security, golden handcuff,
performance pay, aggressive goals and bonuses, ESOP etc.
6. Bring in greater ownership of HR processes to line management and bring down
corporate dominance towards all processes.
7. Make development of people a priority through a series of job rotations, special
assignments, working with the leader directly on corporate priority projects etc.
8. Concurrently make the company intelligentsia look for more and more new and 21st
century businesses for the group to invest in.

♦ Create cultural revolutions and examples of unprecedented actions in the company

demonstrating that we will turn around and we mean business.
♦ Role of HR as an advocator of strategic change was quite imminent. This meant a
strategic realignment of all organizational resources, building skill pool of human
competencies, sustaining a competitive advantage by redefining strategy for HRM, right
sizing and enhancing individual competencies integrated with organizational
competencies were some of the initiatives.
♦ HR was made responsible for creating and sustaining through a process of facilitating
an enabling environment, leadership through knowledge and technology and changing
the basic way of working.
♦ Strong bottomline orientation brought into the performance and compensation system.
♦ Individualized compensation system created for over 150 management staff, linked to
job value and performance goals.
♦ Use of the knowledge management team to consolidate and create knowledge banks
across functional groups.

Knowledge Management at its Best

Innovation in Information Age

• New competitors skillfully exploiting a wave of technological change have displaced or
seriously challenged the companies that once dominated such industries as
– Machine tools,
– Steel,
– Xerography,
– Automobiles,
– Semiconductors,
– Computers
The Exception - Pharmaceutical
• The longevity of pharmaceutical companies attests to a unique managerial competency :
– Ability to foster a high level of specialized knowledge within an organization
 – Preventing information from becoming imbedded in such a way that it permanently fixes
the organization in the past, unable to respond to an ever - changing competitive
environment.

Role of Managers
• The best managers do not merely administer a static system.
• They constantly challenge the company’s conventional wisdom and stimulate the dynamic
exchange of ideas.
• It takes more than hiring the best people and giving them funds to be successful.
• Effective management can greatly the efficiency of any R & D effort.

How to Remain Successful

• Successful companies must keep abreast of the changes within particular scientific disciplines
and successfully integrate this knowledge within and across company boundaries.
• Successful pharmaceutical companies have been forced acquire key competitive advantage of
the 1990’s
– the ability to innovate in an information - intensive environment.
The Success of Pharmaceuticals
• Over a period of 30 years, the most successful companies
– obtained more than twice the number of patents per research dollar
– advanced to clinical trails more often
– were more than twice as likely to bring new drugs to market than their less successful
competitors
• These companies had sales and profits far above the industry average

Role of Managers
• They used sophisticated resource allocation procedures, hired the best people, and encouraged
cross-functional and cross-disciplinary communication.
• They didn’t view these innovations as quick fixes to a static system.
• They focused continuously refurbishing the innovative capabilities of the organization.
• They actively managed their companies’ knowledge and resources.

What these Companies had

• They kept abreast of the changes in their field by making and maintaining close connections
with the scientific community at large.
• They allocated resources across a wide range of therapeutic areas, ending up with the most
advantageous of projects.
• They actively confronted the tension between organizing by function and organizing by
product group.

Keeping Connected
• Most successful companies ensure that they are efficiently connected to the scientific
community and to the peers.
• They permit their employees to publish in scientific journals and to attend conferences.
• They have scientific advisory boards and eminence in the scientific community is an important
criterion for promotion.
• They balance the ability to reach out beyond the company for new scientific knowledge with
the ability to link that Knowledge to therapeutically useful goals.

Allocating Scarce Resources

• Productive companies are those whose project portfolios are not only diverse, but enable them
to leverage their specialized scientific expertise but also related sufficiently to allow them
from cross - fertilization of ideas.
• Effective resource allocation processes encourage lively debate and in turn stimulate the rapid
transfer of information across the company, while ensuring that the opportunities this
information flow presents are reflected in the set of projects chosen.

Managing Organizational Design

• Every organization must choose between organizing by function and organizing by product.
• Organizing by function ensures that the in-depth, specialized knowledge fundamental to long-
term innovation is preserved and enhanced.
– However, it opens the company to developing the functional silos.
Organization by Product
• Organization by product, on the other hand, focuses the energies of the organization on the
customer and encourages rich communication across functions.
– But it often does so at the cost of a steadily eroding base of functional knowledge
• The functional specialists have spent so much time thinking about the whole product that they
lose the functional expertise that are their core competence.

Success is a Quest
• Success is not a function of a particular organizational choice or a particular form of
boundary-spinning mechanism.
• The most successful companies are those who are never satisfied with any single answer.
• They continually expend organizational energy to ensure that neither the disciplinary nor the
therapeutic perspective took the upper hand.
• This experience underlines the need to revisit and rebalance the organization’s flow of
knowledge continuously.

CONCLUSION

To see clearly is poetry, prophecy and religion, all in one

- John Ruskin
REFERENCES

1. Senge, Peter. (1990). The Fifth Discipline. New York: Doubleday.

2. Hofstede, Geert. (1991) Cultures and Organizations: Software of the mind. Berkshire, UK:
McGraw Hill Europe.
3. Beer, Michael, Russel A Eisenstat, and Bert Spencer. (1991) The Critical Path to Corporate
renewal, Boston: Harvard Business School Press.
4. Mintzberg, Henry. (1989). Mintzberg 0n Management. New York: Free Press.
5. Whiteley, Richard C. (1991) The Customer Driven Company. Redding, Mass: Addison-
Wesley.
6. Goullard, Francis,J and James N Kelly. (1995). Transforming The Organization. Mc Graw Hill, Inc.
7. Case Studies on companies have been used only for academic learning purposes. The author holds a
high regard for these organizations and has thought it appropriate to show case them for the benefit of
students and learners as a model of successful transformation. If any articulation sounds offensive or
objectionable the author unquestionably apologizes for the error.

Article by Ganesh Shermon, President (Personnel), of The Arvind Mills Ltd. Responsible
for group textiles, garments, financial services, entertainment, realty, telecom, air
conditioning and refrigeration and Chairman of HR Folks International, www.hrfolks.com
a virtual knowledge organization and is available on ganesh.shermon@arvindmills.com and
shermon@ad1.vsnl.net.in .