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Understanding ground rules of all successful businesses


There are some good ground rules for successful businesses anywhere in the world. Those businesses that are cost effective, presence in growth markets, capabilities of becoming global businesses and a focus on HR are some of the ground rules.Some nuances of each of these ground rules are sought to be discussed in this article.

Introduction

What is common between Asian Paints, Larsen&Toubro, Dabur, Pathanjali group, Hindustan Unilever, ITC, TVS group, Rane group of Chennai, Sona Steering Systems and Hero Motor Corp? One single big answer: Focus. It is this single-minded focus on systematically building Core Competencies over a period of several years and then making a big statement of their continued success. Now, what is common between the Essar Group, the SPIC group, the Anil Ambani group, the Jaiprakash Associates group, and even the Duncan Goenka group? Lack of focus. Extremely high ambitions but lack of even basic planning to build competencies.

Be that as it may, it now turns out that the basic ground rules of all successful businesses are a) Never borrow beyond limits b) Enter only into markets where the growth potential is always good c) Enter into businesses where going global is easy with Core Competencies d) A very big focus on HR and e) Constant efforts at renewing competencies and reviewing strategies. We will discuss these in some detail.

Never borrow beyond limits

Most borrowings of up to Rs.100 crores, for most of the TVS companies is done through the fabulous Non-Banking Financial Company called Sundaram Finance. The trust of the TVS group is reflected in the fact that most organizations of the group are zero debt companies. The group never borrows beyond limits. So do the TAFE group and the Rane Group of Chennai. Playing around with what is called Other Peoples' Money, is not in the scheme of things in these organizations. The Anil Ambani group is the worst example in this regard. It had borrowed far beyond its means and is now barely able to survive in most businesses. In total contrast, these organizations have successfully learned to build competencies that will turn out world-class products with globally acceptable quality standards.

The ability of these organizations to address and capture significant presence in global markets and hence maintain very good cash flow is another reason as to why these organizations have been able to quickly repay debts is the key.

Enter only into markets where the growth potential is always good

Potthy's is a big retailer in Chennai. It caters to all classes and has textile goods at various price points. Its philosophy of catering to various classes of customers has made it a big success. It has the top-of-the-mind recall and during the festival season, it is impossible to even enter the shop to buy clothes.

The entire TVS group is based on the philosophy that the entire world is one market. When the Indian market becomes sluggish the export markets give it the big cushion to stay in business and grow. Even small players like the Nandu brand lungies have identified a niche and are successfully milking it.

Enter into businesses where going global is easy with Core Competencies

Bharat Forge is a global player. How did it do it? It perfected its Core Competencies over a period of time in Quality Management. Mahindra & Mahindra also has world-class capabilities in terms of Quality. The result is that it is able to export it's tractors to the USA and other European countries. Larsen&Toubro and BHEL have projects abroad and have world-class skills in project management and execution. Such capabilities transform themselves into Core Competencies that can never be built by competitors in a few years' time. It takes decades. This, in turn, helps the organization to grow from strength to strength. It should be noted that the organization can manufacture and market it's products abroad. There is no need to have manufacturing plants abroad. There is always scope for exports in the case of Indian products that are good but lower in terms of price. This is exactly the basic philosophy of imports. For the Indian organization, it is exports. But for the Indian organization, it is called imports. Any customer anywhere in the world will buy any Indian product only if the product is okay or even extremely good in terms of quality and price. Otherwise, the product itself does not stand any chance. Indian handicrafts is another example in this regard.

A big focus on HR

Effective organizations that have several successful businesses, systematically groom hundreds of professional managers who can beat or match the best in the world. Apple computers, Microsoft, HP, IBM, Google, and Facebook. These are among the best in the world in terms of Information Technology. Each of them has hundreds of Indians from the best of export-oriented institutions such as the Indian Institute of Science, Bangalore and the IITs. Now the IITs and the ISB have also joined this game. Result? Name the company and the hundreds of Indian managers on rolls are always formidable. This has been made possible only because these organizations firmly believe in recruiting the best of talent and systematically grooming them for roles abroad.

Not many in India are aware that India's Chartered Accountants simply dominate the Indian businesses everywhere in the Gulf. The huge MNCs like PepsiCo that operate in such countries also prefer Indian Chartered Accountants for top-notch Finance roles. Hence, India is a big export house of hundreds or even thousands of world-class professionals. The Aditya Birla group recruited a proven HR professional from Hindustan Lever. This gentleman called Sankrupt Misra has brought in the best of world-class HR practices in this globally competitive conglomerate. He was allowed total freedom. The rest is history.

Having the mindset to invest in HR and make it work does not mean just making pious statements like" people are our best assets" from time to time. It means systematically addressing the growth potential of those who are really smart and can indeed make a big difference. For example, Performance Management can ideally work only when absolute merit is seen in the organization. It cannot and will not work if managers have their own "yes men" who are promoted without any merit. There are so many other " ground rules" for HR to work. These are not discussed here.

Constant efforts at renewing competencies and reviewing strategies

Around eighteen years ago, the IT infrastructure of a famous TVS group organization was in shambles. The present Managing Director took up this issue with the Board and got a grand plan of putting together a massive SAP system to link every unit and every single operation with the Corporate Office. "I want information on tap," he told his team. Who were members of this big team? All humble junior officers from the NIIT, with a GNIIT qualification and some years of experience in what we're called "EDP" departments.

This Managing Director is himself a gold-medalist Chartered Accountant with a razor-sharp memory. He would never take any decision in haste. Wipro was the service partner. This organization had several rounds of meetings with functional managers of all units. It took thirty months all right. The SAP system was excellently implemented. He fine-tuned the System with the help of in-house experts. As expected almost the entire team who had the SAP configuration experience, were poached by organizations such as TCS and Infosys Technologies. The MD did not bother. The output takes care of itself. Humble souls manage the System and one Manager is enough to keep it going.

This is the best example of renewing competencies. He was advised to take only fresh MCAs. He did not budge an inch and stood firm in his decision to stick to the same NIIT products. Today, the MD has been proven to be right. Hundreds of Indian organizations have implemented Organizational Development initiatives to build sustainable change in many organizations. This ground rule is also important.

Conclusion

The basic ground rules of successful businesses have been discussed above. Once again, the discussion is not exhaustive. Those ground rules having Strategic implications will be discussed in other articles.


Comments

Author: DR.N.V. Srinivasa Rao08 Dec 2019 Member Level: Platinum   Points : 12

A very good article from the author. Many people start their own business. But how many of them are successful? Why they are successful? Why the others are not successful? The answer is- 'Focus'. When you do a job you should always have a focus on the work you do. Then only you will be coming out successful. The same is the case with business also. The author started the article on a good note with good examples of successful people who are having good focus and some examples for the other.

When we go for a business we should understand the market position for the business we are choosing. If we have a feeling that the business will progress well, we should confirm it by doing the market survey and then only we should enter into that business. Otherwise, we should not venture into it. This is the basic point. An analysis of the strengths we have, the threats and whether we can overcome these threats and convert them into opportunities is very much essential before we expand or get into the market.

All other resources are different from human resources. In olden days we never considered manpower as a resource and they thought we can hire them as and when we want. But the days are changing. Now human resources are very critical for the progress of the organisation. The person who is leading the business should understand the importance of human resources and he should focus on them also. How to retain talent and how to hire talent is very important for a successful business. Making fall back arrangement and second line for taking over the lead role in case of any problem to the first line is very important. All the points should come under HR purview.

A well-established company may also go bad due to lack of strategic planning and proactiveness. One should be the first in the market so that always that first comer advantage will be there. The promoters should be proactive and should identify how the market is going to change and he should plan for that before any other person smells the same and comes into the market. The proactive nature of the entrepreneur will always pay a lot.

Author: Umesh11 Dec 2019 Member Level: Diamond   Points : 3

Nice article by the author bringing out the ground rules of doing business.

Many people aspire to become a businessman but it remains like a dream in their lives. Making a business successful is not the cup of tea of every person. It requires hard work, focus and understanding the very basic need of the customer. Customer will never be satisfied and will ask for many things as per his wish without bothering for anything in this required. A real businessman will ask others or his friends about his business strategies and will be happy to take their advice. Some of the innovative minds take the business as usual and then create value in it by their new ideas. It takes time to become a full-fledged businessman.



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