It's not a sport. It's corporate warfare. 120 companies from 13 countries faced off in the world's most demanding game of strategy last year. And two teams of managers from corporate India eventually emerged the victors.
BT's R. Chandrasekhar scripts their success story.

The global games India's managers play--and win! It's missing, they claim, from the corporate genes of India Inc.. Factor XXX--that unknown quality which is demonstrated only by corporates that can manage to beat their rivals across the globe. They're wrong. Not one, but two teams of Made-In-India managers have recently proved as much, by emerging the champions and second runners-up in the world's most demanding contest of corporate strategy: the International Management Course, 1998-99, organised by the Dutch training and consultancy company, MCC International (and sponsored by Sista's and BUSINESS TODAY in this country). While this management game pitted 120 of the biggest companies in 13 countries against each other in a bid to successfully manage a virtual company over a period of 8 months, amazingly, 2 of the Top Three were piloted by managers from the same Mumbai-based company: Tata Liebert.

Not only did the virtually-unknown company produce two winning teams, code-named Team Shakti and Team Agni, and 10 world-class managers, the toppers also ran up a record score of 1,570 out of 1,600--the highest since the competition went global in 1994. Only 5 years old, the Rs 94-crore joint venture between the Tata Group and Liebert Corp.--a subsidiary of an American transnational, the $13-billion Emerson Electric--maintains a low profile. However, Tata Liebert is a real market-winner in both its product-categories: uninterruptible power supply systems, with a 46 per cent marketshare, and precision air-conditioning systems, with a 76 per cent share. And the fact that it was the only one of the 14 Indian companies that participated in the contest to enter 2 teams, the second time around it did so, broadcasts its belief in management theory, in general. And management games, in particular.

Re-creating reality without the attached price-tag of failure from mistakes, simulation is the bedrock of the IMC. Points out Jurriaan Propper, 33, General Manager, MCC International: "There are certain managerial responses which cannot be learnt from a textbook or in the protected environment of a classroom. Simulation offers a safe, risk-free alternative. It fosters the integration of skills and knowledge, cultivates an aptitude for strategic thinking, nurtures an entrepreneurial attitude, and, above all, improves team-spirit among the participants."' He's right, as corporate India, which first woke up to the training potential of management games 5 years ago (see Games Managers Play, BT, July 22, 1995), will vouch. As always, playing is more important than winning; learning more important than competing.

These were actually the assumptions that drove the teams too. Explains Peter Baptista, 55, President, Tata Liebert: "My brief to them was not that they should go out and win. It was important for them to compete in a global arena, but winning was not the objective; we looked upon it as a learning opportunity. I can say with conviction that I now have 10 potential CEOs at Tata Liebert. It has made our succession-planning so much easier." Even as they played and learnt, however, the hand-picked participants were told by Baptista that they couldn't slack off from their daily responsibilities either. Which led to all-nighters in office, and week-ends spent at each other's homes. Laughs R. Ramaswamy, 41, Divisional Manager, Tata Liebert, and the leader of Team Agni: "Our families got to know each other really well." Not coincidentally, the chosen ones were all members of Tata Liebert's Total Quality Management Apex Committee. Claims Baptista: "The bedrock of the entire approach was the JRD Quality Values Model that we have been following at Tata Liebert."

Which of their abilities--leadership, decision-making, problem-solving, teaming--Tata Liebert's managers sharpened in the process is difficult to pinpoint. Primarily, the entire portfolio of skills needed to lead a company. Essentially, the game involved managing a virtual consumer electronics firm with 3 products: Scave II, a microwave oven with the added benefits of being able to defrost food and freeze leftovers; Presco, a PC with a translation mechanism and a video-conferencing tool; and the Vicam, a specialised multi-video player for playing video-tapes, tapes out of a home video-camera, VCDs, and compatible with all kinds of TV sets. Operating in the mythical currency of the yala--valued at 0.94 yala per US dollar--each company started off with an equity capital of 96 million yalas.

Targeted at the health-conscious, weight-watching sub-section of the Double-Income No-Kids (DINKS) customer segment, the 1,170-yala Scave II was embellished by a chilling-facility, a weighing-scale, and recipes that were provided on a diskette. Aimed at managers and entrepreneurs, the 620-yala Presco was price-sensitive, with little brand loyalty, and was driven by technology and testimonials besides marketing. And the 1,800-yala Vicam was targeted primarily at families with children, but had little loyalty to count on. All 3 products had manufacturing-capacities that were exactly one-fifth of their estimated markets. Both teams had to operate in a fast-changing marketplace, where their gains and losses were correlated to the degree of innovation they--and their rivals--managed to display.

Now, the competing teams had to maximise the marketshares of each of their products in each market as well as notch up the highest-possible profits. Equally important, a team had to ensure continuity in its success, which was considered more critical than peaking in one year and hitting rock-bottom in the next. Since each virtual company competed against 4 others in its pool, the highest points went to the best performer relative to the rest. As in real life, differentiation held the key. The same set of assumptions governed all the companies: demand for a product was directly proportional to quality, promotion, and consumer credit, and inversely proportional to price. And employee working-conditions influenced both production-efficiency and manpower-turnover. Of course, none of the improvements could be generated ad infinitum; at some point, saturation would kick in. And the fundamental framework of the game was strategy, which was why every action needed advance planning; the players could not expect to evoke instantaneous responses from their companies.

As in real life, the players had a broad, but not unlimited, range of choices. The objective was to end the virtual 7-year period with the highest number of points, earned on the basis of their performance on different parameters. Crucially, the external environment changed constantly. Economic factors--like new wage-agreements, exchange-rate fluctuations, shifts in employment-levels, and changes in industry-capacity--were altered at regular intervals, forcing the players to fine-tune their strategies to adapt. As they realised, the disruptions could make mincemeat of both operations and strategy. For instance, 2 specific crises that the teams had to confront with were an act of arson, which reduced production-capacity by 11 per cent, and a sudden strike, which had the same impact on output. Says Propper: "It was an exciting market that was created, with lots of opportunities and competitive pressures, to bring out the best in the managers."

Although the armoury for each team consisted of 5 marketing instruments, the one with the biggest impact was the sales-team. Team Shakti began with 40 sales-groups, their task being to secure orders and manage the associated administration. Each group could handle upto 8,000 units of Scave II in the home market and 10,000 units for export, 8,000 units of Presco at home and 10,000 for the dump market, and 3,000 units of Vicam. If that wasn't enough, the company had the leeway to recruit upto 7 more sales-groups every year so long as it was willing to pay the additional cost of 250,000 yalas per group for hiring and training. Three of the 4 Ps of the marketing-mix could be changed as per the demands of the company's strategy, with only the distribution system being frozen. According to the rules of the game, every product-improvement initiative would increase demand by 80 per cent over that of the previous period. They carried a bill of 50,000 yalas each, and no more than 20 per product were permitted in any given period. Price-variations, within the stipulated limits for each product, could be used any time.

As for promotional campaigns, the expenses were calculated at 50,000 yalas--$60,000 in the export market--per initiative, with full applicability in the period in which they were used, and a 20 per cent rub-off effect on the next period. The other strategies at the team's disposal included all that a real-life business can do, such as the sharing of R&D facilities, or trade transactions between teams for raw materials and finished goods. Since a different marketing-mix would mean a different demand on manufacturing, the company could change its production infrastructure too. This had 2 components: people, measured as Personnel Units (PUs), and machinery, calculated in Machinery Units (MUs). Starting with 248,667 pus and 445,200 MUs--and operating with utilisation-rates of 90 and 100 per cent, respectively--the company could change both components. Similarly, it could hire or fire people, or take on temps, all of which carried their own costs and savings. Likewise, it could add, hire, or close down production-capacities, paying the associated cost of each move.Raw materials for all 3 products were measured in common units--15 for Scave II, 10 for Presco, and 20 for Vicam--and had to be ordered one period in advance, emphasising the role of corporate planning. They also had to be paid for in cash, with discounts available only on bulk purchas p. The team's other resources included on-line data on their competitors' positions in terms of their pricing strategy, stock-levels, marketshares, resource-utilisation, production-levels, quality-improvement initiatives et al. As in today's business environment, the company could, for a price, use the services of a management consultancy--actually, the IMC itself--too.

Given its equity-base of 96 million yalas and reserves of 5 million yalas, the company could safely borrow upto 2.15 times that, with loans being available at the rate of 3 per cent per annum. Of course, it could float equity issues too, with the price being determined on the basis of the level at which the scrip ruled on the stockmarket, which, in turn, was a function of the company's fundamentals. Not only did the company have to ensure cash-flows and liquidity, it also had to generate sufficient profits at the end of the day to ensure dividends for shareholders. In short, the players had to manage the company in the entirety of its operations, and not just in the marketplace. The objective, obviously, was to devise and apply strategies aimed at emerging as the strongest company in the field. But, as in the real world, this was measured in terms of the team's performance on a multitude of, rather than a few, parameters.

Earnings per share, net profits, marketshares--both absolute and gains over the years--and dividends were the specific measures used to measure corporate success. Alongside the main competition, the game also tested the players' abilities to manage 3 separate issues--strategy, product-liability, and ethics--using case studies, and evaluating the solutions presented. To come out on top, the winners had to be among the Top 15 scorers in the main rounds, which were played by e-mail and fax at their home-bases between September, 1998 and November, 1998. This was, of course, preceded by the trial round between May, 1998 and June, 1998, when the teams were divided into 24 pools of 5 teams each, with the virtual companies managed by each team competing against the others in its pool. The scores, awarded on the basis of the teams' performance on 6 parameters, identified the 15 participants in the final round--they were again divided into 3 pools of 5 teams each, and judged in the same way as earlier--which was played in Amsterdam in January, 1999.

Of course, the champs played their strategic card the best. Avers S.S. Bapat, 33, General Manager, Tata Liebert, and the leader of Team Shakti: "Our team took a long-term view from the beginning. If there was one single focus, it was on the continuity of business. That was our core objective. We also worked simultaneously on increasing turnover, profits, and marketshare. It was this long-term perspective that helped us tide over the hiccups that surfaced as we went along." In fact, his team avoided the dump market completely, partly because such sales would not count towards marketshare calculations. Recollects S.H. Kulkarni, 30, Deputy Manager (Manufacturing), Tata Liebert, and a member of Team Shakti: "We concentrated on building our infrastructure facilities, like manpower, machinery, and quality improvements, during the first 3 periods. Although it took time, from the fifth period onwards, the results began to show."

In a sense, the shakti of the winning team came from 2 strategic approaches. First, Team Shakti focused consistently on continuity, putting sustainable improvement--whether in marketshares, sales, or profits--ahead of short-term gains. Says Bapat: "We consciously invested in people, physical assets, and other infrastructure in the first 3 years, with a view to developing internal competencies that would pay in the long run." The second strategy was to boost product quality systematically. Adds Bapat: "Many of our competitors invested in process-improvements too, but where we scored over them was in our ability to link them to customer satisfaction and business results. Process-improvements, at best, lead to high-quality products, but high-quality products do not necessarily create customer value."

The product strategy? Take one brand at a time. Team Shakti lavished its resources in the first year on Scave II, enabling it to grow an impressive marketshare of 19.40 per cent for the brand on that period, and spent the remaining 6 years protecting and consolidating its position. Why start with Scave II? The margins were the highest. In the same way, Presco became the focus of attention from the second year onwards, and Vicam, after year 3. That was how Team Shakti had achieved marketshares of 25, 32.60, and 31 per cent, respectively, by the end of the 7th year. The route to building marketshares: investing in quality and efficiency to lower costs, and, therefore, prices.

Unexpected pay-offs resulted. Says Bapat: "Of course, the move was aimed at securing volumes. But it also put our competitors in a spot. Some lost on turnover while others lost on margins." Having calculated that it would be better-placed to pay dividends when it was making more profits, Shakti declared no dividends at all in the first 4 years, paying 10, 17.50, and 30 per cent in the last 3 instead. And its rivals, who rushed to reward shareholders initially, ran out of money eventually. In fact, much of Team Shakti's success stemmed from the expanse of its strategic armoury. Explains Bapat: "We targeted both the home and the export markets, increased the number of sales-groups, used sales promotions, invested in quality improvements, bought new machinery, borrowed money, floated equity, and went in for co-operation agreements and trade with our competitors." Not having invested in just one or two strategies, this company succeeded in tiding over all the crises since it could fall back on the other aspects of its gameplan. And that was how Team Shakti beat the world.

Was Tata Liebert's success in what was, after all, a simulation of reality a measure of real-life managerial brilliance? Simulation can be simplistic, ignoring the twists-and-turns of reality. Some participants complain that quality cannot be equated with numbers alone--as the game does. How, they ask, can pouring money into product improvement guarantee market success? Points out Himanshu Jain, 35, Deputy General Manager (Sales), and the leader of the Godrej-GE Appliances team, the only other Indian company to make it past the cut to the Top 15: "Quality depends on how you invest, not on how much you invest. Two companies will manage the same process differently." True, complexity was lacking in some cases, but the situations were challenging enough to force the participants to innovate. Analyses N. Balasubramanian, 54, Chairman, Centre For Development Of Cases & Teaching Aids, Indian Institute of Management, Bangalore: "While the case study approach is good at challenging participants to apply knowledge and theory to given situations, the simulation technique provides a good opportunity to hone managerial skills."

Corroborates Sanjay Sen, 43, Director (Human Resources), Citibank: "The biggest hurdle to effective performance is the inability to translate concepts into successful implementation. This hurdle is normally crossed by applying methods like orientation sessions and on-the-job training. But the former has the problem of being steeped in theory, while the latter runs the possibility of failure, raising business risks. The best possible bridge between concepts and implementation is simulation." Moreover, the learning was deep--and unexpected, such as the one on the value of co-operation among competitors.

Adds Godrej-GE's Jain: "It was partly because of the inter-team dynamics that our pool, as a whole, did not throw up a winner at the end. We would have stood a chance if the group had come to some understanding on price commonality." What, then, does the victory of the Tata Liebert teams mean for India's managers? The realisation that the companies they manage can, given the right resources, win against any corporate in the world. And that India Inc.'s CEOs need to capitalise on opportunities to offer their people the kind of learning experience that such a contest provides. Today, the laboratory. Tomorrow, the world.

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