Worldwide Is Not World-Class

Momofukus started as a single noodlebar in New York, arguably the toughest food and beverages (F&B) market on the planet. When they opened their doors for business in August 2004, Manhattan already had over 13,000 places to eat. But Momofukus obviously found their niche quite quickly with a reputation that went far beyond New York City. With that they later expanded to locations as far away as Sidney. It is a testament to their obsessive commitment and standards that their 37-year-old founder, David Chang, is the only Asian chef to make it to TIME magazine’s list of the 100 most influential people in the world.

Many businesses have limited locations and a finite set of clients. But a few of them choose to subscribe to exacting standards far above the norm for their business. These could be in design, manufacturing, packaging or customer experience. One or more of these will be of a level far above the demands of the limited catchment that they service.

And at times this could be a virtue. Theobroma in Mumbai is a fine example of a small but rapidly growing bakery business that is obsessed with maintaining its impeccable product and innovation standards. As a result, I suspect, they have a fervently loyal set of regulars who are driving growth through thoroughly well-deserved advocacy. It’s very difficult to play catch up with an obsession like that.

On the flip-side, there are any number of businesses which have achieved international footprint by a combination of scaling and acquisition. We know through hard experience that many of these “global businesses” trade in standards in exchange for market presence. Or at least fail to keep pace with the increasing demands of an expanded play in their rush to conquer new territory. I dare say, the undoing of two of the biggest handset brands had less to do with the advent of Apple or Samsung than a comfortable sense of numbness about what they were serving up each year.

Last fortnight, we explored the cross-border ambitions of Indian aspirants. An increasing number of players, in an ever widening number of categories from metals to automobiles and even consumer goods, are planting their flags on foreign shores. There is an unfathomable urgency amongst these worthies to get going as soon as they land. A ringside view will reveal the need to convince an impatient shareholder that it was indeed worth the investment.

Many of them come apart quite quickly. And this happens primarily for two reasons: either there is little understanding of what it takes to play in more complex environments, or worse, there is a substantial dilution of already existing standards in their anxiety to cover new ground. For example, domestic leadership in Indian telecom doesn’t necessarily equip you for the African market!

Most well-meaning firms struggle with the ability to retain (or build) the exacting standards that are absolutely essential to retain the essential character of their businesses. The  quest for fresh value from new markets, new consumers or even new offerings, are all risks to running performance. It is only the firms that can scale the standards that can overcome the pangs of expanding globally.

The reason why so many of the Fortune 500 still come from a clutch of Western nations is not hard to find. They set high bars. They are relentless about raising that bar and they usually are uncompromising (with the entire ecosystem) about adhering to these in letter and spirit.
Going worldwide is not the same as becoming world-class. There’s a world of difference.

The author, Ramesh Jude Thomas can be reached at ramesh@equitor.com

(This story was published in BW | Businessworld Issue Dated 13-07-2015)


The Indian MNC. Really?

Fifteen years ago, it was a proud moment for corporate India when the first Indian advertising hoarding went up in the middle of Paris. Titan watches was on offer literally at the centre of the fashion capital of the world. That took courage of a different order. Had Indian design arrived in Europe?

The bourses cheered when Tata Tea snatched away Tetley in a fiercely fought acquisition bid against no less an adversary than Nestle AG in 2000. Could we grow inorganically in the West? Jet Airways was the first Indian airline since privatization to go international in 2006. Could our aviation business regain Air India’s original glory from the 60s and early 70s?

Since these watershed events, much water has passed under the proverbial bridge. Corporate India no longer believes that it is confined to market leadership in India. However, most of our multinational capers from Amtek to Zain Telecom have struggled to make any headway.  

But is India alone? Toyota was the first Asian brand to break into the top ten of Businessweek’s most valuable brand table. But Toyota and other Japanese automakers struggled in the US market throughout the 70s and early 80s. 

Did anyone make it? To really understand the challenges of succeeding in mature global markets, it might be worth looking at the Indian companies who made it. 

What did a Tata Motors get so right with a dead duck like JLR? First, it was considered a trusted acquirer. Second, it didn’t take an Indian view on the future. Or an English view for that matter. It just decided to go out and create a new product for the most attractive automobile market in the world that is China. The Evoque single-handedly turned the company around. 

This might be difficult to swallow, but long before we could even pronounce ‘cross-border acquisitions’, Air India was considered to be the gold standard for punctuality and cabin service across the world. One popular story has it that Geneva airport set its clocks by the arrival of an Air India flight!
Are there some fundamentals that we are missing here? From available experience and material, there seem to be three broad themes that will make or break our globalization efforts: they can be summed up as engagement, standards and compliance. Let’s consider each of these.

Engagement: I have seen any number of articles on how we need to build truly global brands to create an MNC. Certainly necessary but not sufficient. One chairman we worked with on an $800 million cross-border acquisition insisted that only an Indian CEO would be able to understand what he wanted out of it. To be a global company, we need to first develop a truly multinational mindset.

Standards: Since the advent of total quality management in the early 90s in India, the notion of having a quality standard became de rigour. But the true spirit of what Demming and Baldridge taught us is yet to take root. Decades before ISO was known, JRD Tata used to personally check the quality of the meals served on board an Air India flight. His letters to the catering department, so well documented in Russi Lala’s tomes, are now legend. How many Indian CEOs are that particular even in their domestic market?

Compliance: This is one area in which jugaad does not and should not work. Ask Ranbaxy or  Rajat Gupta. Respecting each of your operating environments in letter and spirit is fundamental to being respected in that market. Being seen as a good corporate citizen is only a by-product. 
I don’t doubt we have what it takes to build products and services for the world. But it’s time to think about world-class organisations as well.

The author, Ramesh Jude Thomas can be reached at ramesh@equitor.com


Sinking Societies, Shrinking Markets

Last Saturday night, between some lovely blues pieces, one feisty activist from Amnesty suggests to me that the Tatas are not as holy as one thinks. I thought about it and asked her if, in her view, the Catholic Church was defined by the number of pedophiles in its ranks. The argument soon faded away in the bars of the next BB King masterpiece. It set me thinking for the rest of the weekend. There’s an old English expression about how everything looks like a nail to someone with a hammer. Perfectly well-meaning folk with a mission may just be blindsided to the large amount of good sitting behind some explicable (though not justified) anomalies.   

Both institutions, like others you could come up with, have undoubtedly had their share of questionable decisions and some rather dodgy leadership too. But it is equally true that these entities over a period of history have done more to reduce inequities than most. I have to disclose that at heart I am a capitalist and not anywhere close to being converted to socialism. This is not about the wealthy versus the rest, but about an environment in which the “rest” is sinking further. The macroeconomic question here is whether this makes for sustainable marketplaces. 

Thomas Piketty, in his book Capital in the Twenty-First Century, makes a compelling case for re-examining our apathy to the current contours of wealth distribution. Through his brilliant expression R > g, he argues that if return on cornered capital (R) is going to be perennially greater than the growth (g) of the market, there is little hope for the little people. So in the end, just who will the rich sell to? 

Just like climate change or any other disasters of instability that we relentlessly continue to build, unsustainable economic environments are a reality we are creating through a cockeyed approach to wealth creation. My driver, on way to Kolkata airport this morning, makes this childlike attempt to explain the earthquake, suggesting that it’s all this digging we are doing to build flyovers and underpasses that’s causing dangerous shifts under the earth. A naive oversimplification perhaps, but you get his drift. 

I recall a thought-provoking documentary from last month entitled Born Rich. An amateur attempt by the Johnson & Johnson heir to give us an insight into the attitudes of those (not so meek) who have inherited the earth. It is a telling commentary on how there is a concerted effort, assisted by lawyers, trustees, wealth advisers and the lot, to keep it all in the family. Nothing wrong with wealth preservation, but if it means that the benefits of Piketty’s “R” will be restricted to the small club of capital owners, then we must be prepared for the long-term effects on the economic climate. Unfortunately, like climate change itself, it happens in inches and we won’t quite get it until a tsunami like the Wall Street crash is upon us. Immediately thereafter, some barricades like Sox and Dodd Frank will come up, after which life goes on as if nothing ever happened. 

Now, it is in this context that my young activist friend’s angst must be examined. Entities like the Tatas and the Church have undoubtedly generated vast quantities of wealth and managed much of it well. But equally, consider their approach to redeploying it. Not only have they been abundant in targeting their billions, but have ensured that large swathes of those communities have been educated, healthy and thereby prospered (Howard Schulz openly declares his intent to create in Starbucks a microcosm of the US he dreams of). In the bargain, these organisations are creating massive, thriving markets that have kept them alive and well through generations. Is there a lesson in this for all of us, individuals, business leaders and policymakers?   

(This story was published in BW | Businessworld Issue Dated 18-05-2015)


Driving in God's own country- God help us

Last week my colleague, Siddharth and I landed in Kochi’s Nedumbaserry airport on our way to a town called Valapad. Believe if you will, but it was for a client meeting. The only thing in that town was the client. Not unlike Bentonville and Walmart.

I’ve been travelling to Kerala since I was a toddler and I had never heard of the place. We land at 9.15 and we have an 11 am session with the CMD and all those who directly report to him. We can’t be late. Sid asks very confidently at the prepaid counter for a car to Valapad, just to check for familiarity. He isn’t sure from the transaction, so he asks whether the driver knows Valapad? “Ohh, yes, yes. Driver knows very well,” came the answer, without skipping a beat. Then he asks if he would know the client’s office. “Ohh, yes yes… very well.” So we were on our way.

We get into the car. Sid is still not very convinced, so he asks the driver in his inimitable style, “How long does it take to Valapad?” Anywhere between three and four hours, we are told. (We know it’s not more than 90 minutes.)
Finally it turns out that Sid had to navigate him all the way to Valapad on his GPS and I had to keep him on a tight leash — with my broken Malayalam) within the boundaries of safe and legal driving.

The incident from that morning left us definitely irritated but got us to introspect as well. We were chatting on the way back and concluded that it must have been socialism at work. What did it take to shift us to a driver who knew Valapad? No, that wouldn’t work. That driver had to book that fare. Damn whether he knew the place, or even to drive.

So, I have forever wondered, for an Indian state that boasts some of the world’s best social and human indicators, why Kerala has remained an economic laggard. Why has it not attracted serious capital since Independence? It has always produced some seriously talented folk. Why did they all leave? Why has it been unable to create jobs to provide its very bright and educated young people?

Maybe we need to look beyond the social and human indices. I’ve said this before and I will say it again for good measure: Kerala may be God’s Own Country but when the Creator wants to chill, he probably goes to Goa. I wonder whether He would consider, “His own country” to put in long-term capital?

God’s Own Country was a clever reference to the landscape. It is breathtaking and it was indeed God’s gift. 
I wonder what instructions God gave to the people running “His country”. Did He tell them that customers do matter? That engagement is a key element in building an economy? That chemistry is important to people who bring in long-term capital to the state?

I keep hearing from the locals about how the state provides people who are intelligent, highly-skilled and of high integrity. I cannot disagree from experience. But these are only ‘hygiene’ factors to creating an attractive economic ecosystem.

Bangalore became the Mecca of the job-seeker and the international investor in the 90's. This was not only because of its climate, but also because it had a welcoming, hospitable core and an engaging style. I still carry fond memories of how RTO officials put me at ease when I first went there in October 1991. I was pleasantly surprised and grateful that an Indian city held out hope for the future.

It wasn’t as though Karnataka had economically evolved to the level where it could afford to be less socialistic. It was still finding its feet. Bangalore was the new kid on the block. It didn’t stop them from offering engagement and empathy.
I think God’s Own Country can do with a few neighborly tips. What say?