Case Game: The Case Of Counter-strategy

CASE GAME
The Case Of Counter-Strategy
Contd.

THE DISCUSSION

N.M. DHULDHOYA
CMD, NOCIL

It is important for Abhinav Kumar and his father to first formalise a 'family' strategy for the group. Evidently, this would be independent of the business strategy for Total Industries. It should be first finalised among the family members themselves. This helps establish the boundaries of the family's involvement in the running of the business. The crucial question: do the Kumars want to be involved in day-to-day management, or just play the role of a strategic investor?

There are other questions that need to be addressed too. In driving shareholder value, what is the basic change required in the company's business portfolio, and what is the direction to be provided for the group's individual businesses? For instance, should the soaps and oils business-clearly a laggard-go for a tie-up with one of the leading players? How frequently should new products be launched in the consumer durables business where brand equity is critical? How can the switchgears business sustain its market leadership? The answers would give an indication of the level of investment required within a particular time-frame.

Once the Kumars set the boundaries of their involvement, they should communicate its contours to the members of the executive committee. Each individual business should be asked to work on three specific areas: they should conduct a SWOT analysis of the business based on current data; examine the trends in the industry over the next five to 10 years and visualise where their business will fit in; and define the role of the corporate centre as perceived by them. This would provide the basis for formulating the strategy for each individual business. It is noteworthy that the only vision and strategy that should be common to all businesses of Total Industries is the one related to the family's role. At the operations level, each business must be led by its own independent vision and strategy.

Clearly, there is no cut-and-dry approach to strategy formulation. There is no ''either-or'' between the two approaches currently under review. In fact, I am wary of involving outside agencies in both strategy formulation and strategy implementation. At best, Kumar can enlist outside help only to facilitate the process to tide over possible road-blocks. But I would certainly recommend involving leading customers in strategy formulation. Unlike a consultant, they are at the centre of the action in the marketplace, and are clued into competitive trends.

I do not believe that Kumar and his team should go by intuition. They should, instead, document the strategy. Documentation helps in four ways: it provides a sense of direction and guidance to people within; it eliminates uncertainties and misinterpretation; it helps measure the performance of both individuals and the business as a whole; and it helps keep track of where the business is heading, and take timely and corrective actions.

GITA SURI
Asstt Professor (Strategic Mgmt), XLRI

Total must be innovative in formulating a strategy for long-term competitiveness. Strategy is not static, it is a series of dynamic adjustments depending on what Total wishes to achieve. Sensing the external environment is critical for strategy because it is in learning about the competencies of competitors that a firm discovers what its customers desire. Moreover, investment in learning about new developments in related technologies keeps the firm abreast of future development in the industry and, perhaps, leads to novel solutions to reduce costs or develop new products.

An accurate assessment of the company's internal capabilities is essential since a smooth implementation of strategic decisions requires co-ordination of skills. Again, the difficulty companies may encounter in predicting which capabilities may be needed necessitates the development of a repertoire of capabilities. Smooth and co-ordinated performance, however, requires training and practice. Divestment decisions should be taken keeping in mind whether the business can yield gains in terms of providing opportunities to practice and develop capabilities which may be prized in the future. For example, the soaps business, in which Total is clearly not a top-performer, would provide invaluable clues about customer types. Similarly, a joint venture or acquisition would be an occasion to learn new skills. General Electric's (ge) experience with acquisitions, for example, has led it to evolve procedures to ensure co-operation from members involved in the merger.

At a minimum, formalising and consciously engaging in strategy-formulation makes available a method which can later be fine-tuned, communicated, and evaluated based on results achieved, and the conditions under which such results were accomplished. While the involvement of senior managers in strategy-formulation is essential, simply relying on their intuitions may lead to decisions based on incomplete understanding, especially if data about current business performance is not thoroughly examined. Therefore, strategy formulation must include both top management and those at lower levels who are close to the customer, and involved in day-to-day problem-solving.

In contrast to the emphasis on the current business scenario in the strategy framework presented by Strategic Consultants Ltd, the approach presented by the Transformation Consulting Group represents a movement towards new directions in strategic thinking. However, while the simulation approach can provide a glimpse of possibilities, it is obviously necessary to have one's feet firmly on the ground so that one knows what needs to be done to make the envisioned state a reality. Strategy is, ultimately, about improvising in the present to enact, and to realise, a dream of the future.

K.A. Ramakrishnan
Dir., Business Consulting Group

I would strongly recommend that Kumar and his team look at the development of strategy as an integral part of a four-component module. These components run in the following order: Diagnostics; Goal-Setting; Strategy-Development; and Corporate Plan Of Action.

The Diagnostics module should address the crucial question of what drove Total Industries in the past. It would examine the current strengths and weaknesses in each of the four existing businesses. It would also look at the emerging trends and opportunities, and their impact on various businesses of Total. This is an exercise in which the executive committee and the functional heads of various profit-centres would be actively involved.

Goal-Setting is an exhaustive process. Two factors influence this exercise: the size of the individual business, and the nature of the industry of which it is a part. At the end, you will have measurable end-points that facilitate close monitoring of various pre-determined parameters.

The Strategy Development module addresses two related questions: where do we want to go? And how do we reach there? This, obviously, means that strategy development is not based on current competencies. The module also takes a look at issues like resource mobilisation and resource allocation. It sets clear guidelines on resolving the dilemmas involved in organic growth versus acquisition. This module must be driven as far down the line as possible to ensure that there is active participation by middle managers.

The Action Plan module is, by and large, the domain of operations managers and outlines a framework for monitoring business results at regular intervals.

There are two related issues that are noteworthy.

Intuition is fine for the owner of a small business but, for an organisation with diversified interests like Total, there must be a formal system in place wherein at least some, if not all, elements of strategy are known to managers.

It is alright for a company to develop its strategy in-house. But I do not think Total has the expertise to do so on its own. It is, of course, important to ensure that the consultant acts as a facilitator. An outsider can help Kumar and his team to crystal-gaze, and get a better view of where Total stands in relation to the competition, both local and global. And a consultant can bring in much-needed rigour in testing assumptions, crunching numbers, and analysing alternatives. Kumar should use these to his advantage.

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