Coverstory pg[2]: "i firmly believe that growth is all about mindset"

"I firmly believe that growth is
all about mindset"

M.S. Banga, Chairman, HLL, talks about his company's growth-strategies in an exclusive interview with BT's Sanjoy Narayan and Roshni Jayakar.

Mr Banga, if you look at your largest business, soaps and detergents, where product-penetration and volumes are high, there does not seem to be much scope for incremental growth. What is Lever's strategy? Where do you go from here?

Where will our future growth come from? I believe that growth is all about mindset. The first important point is to set a stretch-target. The second point is the way you define the markets. Let's take the example of the personal wash market. If you define the market in terms of the number of tonnes of soap sold, you will see that the market has been growing at 3 or 4 per cent a year. But you must then ask yourself-what is the percentage of people who use soap every time they bathe? It may surprise you to learn that there are a large number of people who use soap only once out of every ten or twelve baths they have. If we could increase the usage of soap to every time they bathe you can imagine the growth that is possible.

But wouldn't increasing usage imply moving into other price segments?

I think it will involve a range of issues. Price is one aspect, but there is more. You have to identify the barriers to usage. By empathising with the consumers, watching them, even living with them. Only then can you design solutions to overcome these barriers.

Accepted, but how do you change your company's focus from one definition of the market to the other?

That's the challenge. That's what our marketers will do. They must reflect an extraordinary degree of consumer-knowledge. Operationally, we have plenty of data about the consumer. But we have to go beyond that and develop a true intimacy with her. Alongside that you need technology to surmount the barriers (to usage) at an affordable cost. We have both competencies in spades.

Where else will your growth come from?

We need to think of growth across different time-horizons. We need to think of deriving much more growth from the businesses we are in today. Like personal wash. But we also need to think of the businesses for tomorrow and the businesses for the day after. What are the businesses for tomorrow? There are many ideas we have been experimenting with for some time-where we have developed new business models. We will expand significantly in these areas, and they will become the businesses of tomorrow. It could be popular foods, which is capable of very high growth, and where we have a lot of experience. Or it could be an extension of our laundry service business. Or our Aviance business. These are what I would call businesses of tomorrow.

You must also have heard of Project Millennium. A truly unique project. One of the things it has done is to look far ahead and identify nine or 10 different growth businesses for the day after. We have already taken out a lot of talented people, created teams, and given them the responsibility of building these future businesses. What I would like to see is growth plans in these three horizons: today's, tomorrow's, and the day after's.

When you say tomorrow, what kind of time-frame are you talking about?

When I say tomorrow, I am talking of the next couple of years. When I say 'the day after', I am talking of beyond. We have got ideas for today, ideas for tomorrow, and ideas for the day after. And I think one of the challenges that we face is to simultaneously manage these three initiatives.

Let's look at the foods business. There are many imponderables in this business in India. In terms of diversity. In terms of taste. For instance, do Indians like ready-to-eat chappatis. How do you see this business growing?

In most cases, building a branded foods business means you are competing with a commodity. So the question we need to address is: how can we deliver sustainable competitive advantage. The answer lies in three levers. The first is consumer insight. What is it that people really want? The second is leveraging technology to add value by making the product superior to the commodity. And the third lever is to develop expertise and competence in supply-chain (management) to reduce the cost structure dramatically.

Let's take salt. Salt is as much a commodity as you can think of. When we entered the salt business we faced a huge challenge on how to brand it. But as we worked on it we realised that there was a huge opportunity to deliver real value to the consumer. This real value was by delivering iodine. It's extremely important for children in their formative years to have a regular dose of iodine in small, measured quantities. Many districts of India are iodine deficient. And clinical studies have proven that there is a huge difference between the IQ levels of children who get the right level of iodine and those who don't. We linked all these facts-this is what we call consumer insight, a set of linked and relevant facts-and involved our technical people to produce a superior product. We also looked at the supply chain and worked on innovative ideas to make sure we were the lowest-cost producer of salt. Today, we have a large business which is growing very fast.

What about going further up the value-chain?

We will have chappatis, for instance, and are working on the product to get it right. We also see a lot of synergy between this business and the Modern Foods business. That was one of the principal reasons we went in for the acquisition. Modern Foods' biggest business is bread. We are in the wheat business. If we understand the wheat supply chain, we should be able to leverage that supply chain in the making of bread. If we are distributing bread, then we have a fresh distribution system that we can leverage to sell other products.

All the while, the company's principle will remain the same: use cash cows to fund new businesses....

That's why I emphasised the need to think in terms of time horizons earlier. If you are able to grow the businesses you are in today, they will provide the cash to invest in the businesses of tomorrow. But you can only build the businesses of tomorrow, if, today, you are experimenting on where to go. And, as soon as you have perfected the business model for tomorrow's businesses, use the cash to scale them up. It's important to think long-term.

If you look at the most successful companies around the world and analyse the reasons for their success, you'll find that the most successful have got this sorted out. The computer industry is a case in point. They've got the next innovation, and the three after that.

Service is going to be part of your agenda for growth. Some of the service businesses you are getting into are adjacent to the current businesses. But others, like stoking rural demand by entering the micro-credit business, may require skills not readily available within the organisation. Aren't these diversifications risky for an FMCG company?

I think we must constantly push the boundaries. Whether it is thinking about how we can extend into the service sector or how we can extend into e-Commerce. Of course, it is risky. But we must manage our risk through controlled experimentation.

We will have to see how we will bring in new skill sets. The best way is to bring in new people. We must look at diversity of recruitment. Historically, we have tended to have most of our recruitment at the management-trainee stage. As we look at new businesses, we may need to bring in people at different levels in the company.

What do you perceive as your biggest challenge?

Ensuring that the organisation continues to have the best people and the most entrepreneurial culture. Then they will find the solutions. I really believe people make a huge difference.

HLL's employees have always been sought after in the placement market. Today, there are several exciting opportunities for people. Are you finding it difficult to attract and retain people?

Not at present. Our attrition rate has been low at 5 to 6 per cent. I think the real solution lies in attracting the best talent. I will personally spend a lot of my time in recruitment, making sure that we attract the right people.

What do we have to offer that other companies don't? Firstly, I believe that people respond to the thrill of building business up: the entrepreneurial challenge involved in creating something. We are unique in that we have a large number of very diverse businesses. Therefore, we can offer an individual the opportunity to build a personal care business today, a laundry business tomorrow, and a foods business, the day after. Secondly, we can offer our employees global exposure.

Is funding employee ideas part of this game-plan?

We have set up a venture fund within the corporation. It recognises good ideas, allows a certain amount of investment to develop that idea, and measures the results carefully. If the progress is fine, you get more resources, and if progress does not meet expectations, you stop it.

What else will you do to attract talent?

To attract young people, we must recognise that we ourselves have to change. We have to be young in mind, spirit, and heart. This is a bigger challenge then we think it is. We have to put ourselves in the shoes of the young. They respect speed. They want things to move at Net speed. They also respect a great degree of transparency. They expect to work in a culture of meritocracy. And finally, they wish to be in a business which is entrepreneurial.

What will transparency and speed mean to the existing structure?

First of all, there has to be a recognition that speed is important. In the past, we often tended to act after a lot of thought, and a lot of research. That's fine. But we must also recognise that we have a lot of individual talent. More important, we have a lot of collective talent. I believe that one way to enhance speed of action is to rely much more on our individual and collective instinct.

Does this mean research will take a back seat?

No, we will still conduct a lot of research. That's an integral part of any market(ing) organisation. But it is important that we encourage ourselves to use our individual and collective instincts more. We must use our own knowledge-base. In many cases, it's better to go to the market when an idea is 90 per cent born and learn the rest in the market. That's a quicker and a surer way to get there rather than trying to aim for total perfection.

Naturally, this will be easier when we are talking of growing our current businesses because that's where all the individual and collective knowledge, or collective instinct is. When it comes to the businesses of tomorrow we have to be far more careful. Because, there we have to experiment, and refine the business model. It's horses for courses. We have to use different ways of working, at different speeds, for different types of decisions.

Isn't this approach riskier?

Of course, it is riskier. But that risk will be balanced by our collective instinct. The second way to attain speed is to re-organise our businesses. We want to push decision making down into the company. So we are going to re-organise our businesses into smaller category operations.

Which means a larger category of heads broken into sub-heads...

Today, we have the detergents business. Tomorrow, we could well re-organise the detergents business in such a way as to have three category business units: personal wash business, laundry business, and home care business. And the decision-making will come one level down.