was time for the 'vision clarity test'. R.M. Lagoo, 56, ceo, Osiris
Synthetics, pushed the 'demerger plan' docket aside, stared at his
company's logo-a pyramid with an eye at the apex-and then shut his
Lagoo liked what he saw. It was seconds before
the final demerger meeting, and his mind was almost made up. Osiris,
which had started as a yarn maker, was now predominantly a maker
of yarn's raw material-polyester. This bit of backward integration
had worked well; in fact, it was the cost-crimping of the polyester
division that had helped Osiris make a comeback recently. But now
there was reason to believe that the future lay in splitting the
two businesses into separate companies. ''This should be easy,''
he mused, as his top strategy team started assembling in his office.
''Mobius has hired a pipeline consultant,''
murmured Rajiv Vedi, 40, Marketing Controller, as an aside. ''Hmm,''
responded T. Suresh, 48, Vice President (Finance), ''good for it.''
The 'it' was a petrochem major that hovered at the back of every
Osiris mind, and not only because it was 20 times the size. ''We
are in the polyester business,'' added K.P. Mankad, 50, president
of the polyester SBU, brushing Vedi's information off. ''You are
in polyester, we are in life-quality enhancement," said Adarsh
Ahuja, 55, president of the yarn SBU, ''and that's why we're here-so
that we're clear on the div...''
''Ahem,'' interrupted Lagoo, "the whole point of the demerger
should be to free the two SBUs to pursue independent strategies
based on the peculiarities of the businesses-focus where you need
to, and raise shareholder value.''
Peculiarities. Divergences. These were listed
on the first page of everyone's demerger docket. For one, synthetics
was capital-intensive, yarn was labour-intensive. The bigger differences
concerned market dynamics. The Indian synthetics industry had woken
up to consolidation during the recent 'bust' phase of the commodity
cycle. With Osiris now boasting a fifth of all-India sales (second
only to Mobius), it was waiting for the coming 'boom'. Surfing the
waves of this cycle was, in a sense, Osiris' core competence. Yarn,
however, marched to a different drumbeat. It was a highly fragmented
business, with hundreds of small players-and the opportunities here
|"Let's break the commodity mindset...
customers are customers, and I'm sure yarn buyers can help us
serve polyester buyers better"
Both needed fresh investment, but for different
purposes. Polyester needed additional capacity to gain marketshare,
plus an R&D budget to differentiate its offerings. Yarn needed
to stimulate demand for synthetic products overall. Beyond clothes,
applications could extend to upholstery, shoe-linings, tyres, cords,
aprons... even polymatted building blocks.
''So finally, we get to drive our own business,''
said yarn's Ahuja, looking forward to a leadership role-without
anybody looking over his shoulder. ''You could have done it even
without this demerger,'' retorted polyester's Mankad, ''and you'll
still have to drive efficiencies-the basics won't change. There's
no saying where naphtha prices will go.''
The two SBU heads did have rather divergent
views, and the capital markets thought it justified. ''Look,'' said
Suresh, ''so long as we need to raise money, it's not as if we have
much choice about this split. Vertical integration works if it goes
all the way, an oil-to-fabric affair, like Mobius. That name spells
'success', period. For us, investors want some four-to-five easy
variables to track. If you're excited about capacity tightening
in polyester, you may not be excited about yarn.''
''Unless we show what we can pull off,'' said
''Yeah, sure,'' acknowledged Suresh, ''But
let's be done with it-two companies, with two fields of competence.''
There was a moment's silence, as the CEO turned to Vedi. ''Rajiv,''
said Lagoo, ''any point you have on marketing?''
''Er,'' began Vedi, absent-mindedly pressing
the two points of a geometry-box divider onto the tabletop. ''I
know it's easier to focus separately on specialised customer needs.
But I think we need to crack our skulls over Mobius. Why are they
''Where's the mystery?" asked Suresh,
''Their model is vertical, and they'll buy the Caspian Sea if they
could, and maybe the planet's silicon crust as well.'' There was
''Hey, level with me, alright?'' Vedi seemed
serious. ''They present a common front, and it works. What Mobius
says is what holds. They set domestic prices and can choke realisations
''If they want, that is,'' replied Mankad,
''Given the forces of globalisation, they have a good incentive
for economic rather than predatory pricing in polyester.''
''But aren't we being defeatist? Don't you
see any strength in diverse skills functioning under a common banner?''
Everybody stared at Vedi, who stopped for awhile,
and then continued. ''I mean, even if we operate in a narrow band,
we should foster a culture where everyone is tuned into the dynamics
of the entire chain, from crude oil to fashion trends. Maybe we
can exert influence be relevant on cost issues when it comes to
the big picture. Maybe we can also integrate forward into clothing
and catalyse new consumer aspirations... by spanning a wider range
of market inputs, we'll get cross-field insights that'll help everyone
innovate and add value.''
Lagoo was bemused. ''You want oil traders to
take fashion designers out for lunch, no? I've heard this one before.
The management books keep dispensing this fluff-but can we get real
Vedi was undeterred. ''I'm saying our 'core
competence' should be a function of our understanding of the world
rather than some chemicals. Let's break the commodity mindset...
customers are customers, and I'm sure yarn buyers can help us serve
polyester buyers better. Remember the time Ahuja found small mills
using weak loose-weaves because they wanted lighter fabric? Mankad
used the information for polyester's R&D. Remember my paper
on naphtha prices? I didn't make any 'commodity' calculations, instead...''
Vedi trailed off, as his gaze fell on his PalmPilot, ''It's Mobius-they
might be setting up an investment cell in Russia!''
Russia? That word had the room's attention.
''Oil contracts?'' asked Suresh. ''No, media-in South Russia. I
suggest we abort the split-up and think again.''
The question: should Lagoo proceed with the