The Business of Life: Answers to 101 Tough Questions

BUSINESS

001

Why do governments facilitate business growth?

As someone from a business family, I was taught the ropes of the trade by my family from an early age. During my formative years, dinner table discussions came with opportunities to learn the basics. An avid reader and observer, I believe that there is nothing like practical knowledge. Not even B-schools and degree courses can teach one the basics of business. It boils down to common sense and application.

Every large business, when broken down, is the same. Take the computer hardware business for example. It requires procuring microchips, durable plastic, insulated wires, plugs, mobile applications, software licences and so many other things. Can you imagine the boost Apple Inc must have given to businesses manufacturing these parts across the world? Then imagine the accessories that each Apple computer comes with – covers, chargers, power packs, add-ons – the list is long. A trillion-dollar market capitalization creates many a billion.

A trillion dollars doesn’t seem like an impossibly high figure anymore. Global oil companies, mining giants and Big Tech, including Microsoft, Facebook, Google and Berkshire Hathaway, have all upped their game in a bid to reach the new milestone – the trillion-dollar mark. No matter what the leadership says, I can assure you most of them do care about their company’s stock prices. The stock exchanges have given a new impetus to many companies. Keeping in mind the fact that every company has an ecosystem of multiple stakeholders: suppliers, customers, employees and more, the revised targets have led to an overall improvement in various matrices across the board. Employment goes up and with it the standards of products and services.

Some diversified conglomerates – flourishing and profit-making groups of companies – that are in the limelight in India are the age-old Tata, Essar, Mahindra, Reliance, RPG and Aditya Birla. As for the West, we have General Electric, Virgin, Trump, etc. So specialized or diversified, corporations and/or family-owned businesses, at their core they are all just that – businesses.

Business growth and development are pivotal for any economy, and cross-border co-dependence is unavoidable in the age of globalization. It is evident that when a recession hits, everyone gets affected. However, all targets can be achieved if we create a solid framework and an environment conducive for businesses to operate and grow in, be it higher tax collections, more employment or better products and services.

The far-right or proponents of extreme political ideologies, I feel, often slow down business development and, in turn, growth and prosperity. It is important to understand their sentiments, but nothing is more important than health, wellbeing, economic prosperity and happiness which can only be brought along by a people’s and society’s progress. Too much pride and entanglement with local issues often get in the way of progressive policies and deter industrial growth. In the past, this has been the reason for slow progress in many economies. The Chinese government adopted a leftist approach, and look at how fast their economy has grown. Look at the progress of USA, Japan and the European nations as well that have facilitated the growth of businesses. Though not as extremist as China, their economies have grown rapidly as well. India is also following suit. In fact, the country is already showing signs of prosperity, and I laud Prime Minister Narendra Modi and his leadership for this.

The last two prime ministers of India – Dr Manmohan Singh and Atal Bihari Vajpayee – deserve a fair share of the credit. They were reformists and took courageous steps, with maturity and astuteness, towards the economic growth of the country. Today, our country is growing at one of the fastest rates compared to any major economy in the world.

Businesses generate employment and thus bring in an abundance of resources. Although there is a strong dependence on agriculture, and this is true for most nations, trade forms the backbone of the gross domestic product (GDP). The more the spending capacity of a nation, the better the focus on health services, education and research. Propelling industrial growth is also the best way forward to solving problems related to poverty and increasing income gaps. This is applicable to all economies, regardless of their size.

The challenges that face business growth, however, are greater in places that have less skilled labour. Education must be brought to every doorstep of in the world to make up for this lack. Technology adoption has become a key parameter in determining efficiency in an increasingly automated world and thus must be promoted. Behind each giant spring up many more, and behind them, some more.

I just want to add here that the bias against family-run businesses must end. Sometimes high stakeholder interest in a well-established business can lead to superior performance, and a well-instilled corporate governance mechanism is a major prerequisite. Europe is full of family-owned brands that have been running successfully for centuries. My own businesses are both family-owned and diversified and, unfortunately, I can’t recall many success stories of companies otherwise – that’s the harsh reality. There is a shared pool of resources, a capitalistic approach to life, discreet knowledge and other factors that also come into play within this setup. Of course, on the flip side there is crony capitalism and nepotism too, which exist in imperfect economies. But the world isn’t a utopia yet.

002

Should we remove hierarchy with a hands-on approach in business?

Most organizations are hierarchical. There is a top-down chain of command, and people work within the ambit of their designated titles and positions. I think that’s a pragmatic way of organizing a company with a large number of employees, when they are required to execute things in a specific manner. However, there are ways in which the inner circle of chief strategists and CXOs can function better. The top leadership shouldn’t forget that each employee has infinite potential and that harnessing it could be a source of organizational growth.

In the case of Enso, which is a mid-sized organization in terms of employees, employees often skip the chain of command to offer valuable advice. As a result, I find that the corporate office in many ways is a think tank, replete with creativity and big ideas, even outside the cabins of the big bosses. The secret behind this is that we, as the promoters, give our employees the respect and freedom to be honest and express views openly, irrespective of hierarchy. This approach has taught me something very meaningful. Every individual’s power of mind is infinite, and if you can harvest that, your company will grow from strength to strength. And while every field is different, drawing out the full potential of every member of an organization is better than having them do the bare minimum. That’s a great underutilization of human potential and can be demotivating for collective performance in the longer run. At Enco, we often hand out bonuses and employee achievement awards to incentivize performance. Being heard is a sure-shot way of adding to the motivation level of employees.

I don’t think the chain of command needs to be enforced everywhere. This comes with a disclaimer that nobody should misuse their access across the board, of course, and that’s why enterprises must hire only quality individuals with merit. Positions that come with job descriptions give way to structure and enable the allocation of responsibility feasibly. But each of these positions should come with a certain freedom for the hired persons to maximize their potential, not just perform their obligatory duties.

There should be a palpable team spirit channelled towards a common purpose. Even if that purpose is something as simple as increasing sales, for example, the right strategy, as well as the bigger picture, should be made clear to all concerned. That will enable decision-making and align everyone with the leadership’s vision. This is vital. Corporate strategy is very important, and the game of management must be played nicely by senior leaders.

003

How can you build your brand’s ethos?

To me, marketing is all about obsessively and compulsively thinking about the most effective ways of communicating the brand’s ethos and transforming lives. You have to keep pushing out the message until it really feels like you are known and have recall value among your target population, whether local, regional, national or global.

Create the best product, do your best and don’t rest till you are known to be the best. A good logo is a must. It should be one that attracts attention. A solid brand should be able to speak for itself in such a way that a representative does not have to spend time explaining to people what they do; people familiar with the brand will know it. Its image should be global, green and transparent. Investing in a brand’s ethos is an investment in the future of the company and is to be guarded like a priceless asset.

When I think of a solid brand, I think of Tata, Rolls-Royce, Bentley, McKinsey, Hermes, Rolex, Microsoft, Apple and Google. All of them have stood the test of time, in terms of product quality, service and management. Bear in mind that the journey of building a strong brand begins from building a strong product; that the latter will decide the strength of your finances.

The many stakeholders of your product or company are part of the value creation circle, and they should all be proud to wear the badge of your brand image alongside theirs. A possible investor, to be specific, also buys into your brand, and I don’t mean just the intellectual property rights (IPR) of the logo, but the company’s ethos and its past hard work, which are a part of the brand legacy.

While attending Carnegie Mellon University’s Tepper School of Business for my undergraduate degree in business administration, marketing was my favourite subject. I got a solid ‘A’, along with what might have been a good recommendation from my professor, who told me that I was in the best place for studying business. I quietly agreed. I remember working on the marketing plan for the Segway, which was a new product released at the advent of the millennium. Since then, I have loved marketing.

It is an abstract art. It may seem like a science because of the number of frameworks and structures involved, as well as the many theories, but a mix of a lot of things in random proportion is again an art.

One recalls certain names because they are easy to remember, and that should also be your marketing mantra. The ethos of your brand should be simple. It should be communicated through branding exercises that convey loyalty and care to consumers.

Just as a business requires common sense more than structured frameworks, marketing also requires ground-level thinking and, often, just like business, this art also requires some testing of the market. You can start with social media, which offers entirely free platforms to test and showcase your marketing skills.

Today, people think of themselves as brands when often they are the product themselves. If you want to become a brand, your skill set in your chosen field as well as being non-controversial is key. You must invest in yourself. Personal and professional sacrifices are sometimes directly linked to your success and that of your brand(s). With time and experience, one might get into multiple industries and manage several brands. Thought leadership, in addition, creates another brand, which is you yourself. That leaves a narrow window to err because you are in the spotlight 24x7. These are hard choices that you have to make as a leader. But one point must always be clear – you must do what you love, as you are at some level going to be a product of your career and choices.

A brand’s ethos can be built on pillars of a strong past and present and the promise of a bright future. Keep it plain and simple. I have always opted for green brand associations, be it with sporting events, celebrities or even influencers. A lot of hustling can take you far. Keep at it and watch your pockets – don’t overspend. There are creative ways to do things at a lower cost. Let the brand ethos get built gradually while sticking to a path of endless service through your offerings.

004

How easy is it to go global?

‘Act local, think global’, a slogan that was once used by marketing experts the world over, applies most to running global businesses. In India, where I live, many foreign brands have entered the scenes. If these brands thought that they could sweep in with their global identity and do well here, or any market for that matter, they would have been right until a few years ago. Today’s consumer, however, is conscious, smart and has no dearth of choices. Thus, for deeper market penetration and increased market share, businesses are required to adapt – their products and services and their communication to the customers – as per local needs in order to strike a chord.

The challenge for companies entering new markets is not to win over global citizens, people who have widely travelled and are early movers in the adoption cycles, but to win over the locals, who aren’t that exposed to the outside world. All big enterprises, right from Google to Amazon to Facebook, have had to launch local advertising campaigns in India to win over the majority of people living in small towns and cities, who hadn’t adopted their platforms yet. The middle-class consumer today is very smart and looks for value for money spent, while those with a higher disposable income look for superior quality. In the latter case, there is a niche created, and that is a higher segment market.

Let’s take the example of Unilever. The global company has an Indian arm called Hindustan Unilever. It offers various FMCG products, the names of which are different from those that are sold in, say, a country like Thailand. These names are designed to target people in a similar income stratum across geographies. The company realizes that all these people need to be won over for the brand to take on a leading market position. The pricing strategy has to be in accordance with consumer income and sometimes, the products need to be altered to suit market needs.

Often, we think of going global as a huge leap, but in some cases, it could be cheaper to operate from certain other countries than your home country. It’s all about your understanding of global business and the efficacy of your communication skills. You must be able to sell your offerings to foreign consumers. By going global, you may sometimes gain from the price differential in the monetary value of goods and services in that country. The cost of setting up an office, hiring staff and local administration has to be sustainable in the beginning, but if your plan fails and your business is unable to attract people, you may have to shut shop and write off the investment. One must also factor in and plan for the worst-case scenario at every step.

There could be many barriers to running a business arm in a foreign country, one of the biggest being government regulations. Another challenge is corruption. Walmart backed out of India when there were reports of widespread corruption. It did not want to risk being held accountable in their home country, as their global business and reputation would suffer. The Indian government did not allow sole entry into India for retail, and hence, Walmart is not in India.

We see, therefore, that there are multiple hurdles to entry into foreign markets, and one has to be astute while undertaking international expansion. Often, entering new markets requires deep pockets and a time commitment.