DLS Associates

DLS Associates: Where to Play and How

to Win1
DLS is a family-owned cleaning company that has served the Bhubaneswar area for the last 28
years. Second-generation owner Jagriti Dhal has seen the company grow into the leading
office-cleaning company in the region on the basis of great service.
She builds deep relationships with clients, hires friendly and reliable staff, and ensures that
every client has the service structure that suits his or her individual needs. She has a stable of
loyal clients willing to pay a premium over the lowest-price competitors.
The strategy has been working well, but Jagriti worries that growth is slowing. She wonders
how to retain what is great about DLS while finding a new way to grow.

Current Strategy
DLS aspires to be the leading office-cleaning company in Bhubaneswar and to have the highest
client loyalty and level of repeat business in the industry.
Its customers comprise of small and medium enterprises spanning across sectors, regional
offices of leading large enterprises, ITES development centres and central as well as state
government undertakings/ establishments. It offers its services directly to the clients and use
no intermediaries. It delivers cleaning/ housekeeping services through service contracts for
regular office cleaning (daily, weekly) plus à la carte specialty deep-cleaning offers. It operates
in the Bhubaneswar Municipal Corporation (BMC) area.
The cleaning/ housekeeping business in BMC area is fragmented with more than 12 operators.
Unlike the other players, DLS differentiates its services through service excellence; deep
relationships- knowing the decision maker better than its competitors can; customization-
tailoring its offerings to client needs; and familiarity- deploying friendly and knowledgeable
staff each and every time. It has been able charge a premium in the range of 12-25% during the
last five years.
Some of the key competencies which had enables DLS to achieve success include, retention
and recruiting (building adaptable, service-oriented teams); sales and customer service; quality
control and accountability.
To be able to execute the service deliveries meeting the desired standards, it has put in place, a
set of structure, systems and process concerning logistics and fleet management; compensation
and rewards systems; and customer relationship management (CRM).

Problem, choice and possibilities.

The growth in revenue has been flat for the last two and half years. There is pressure on cost
owing the rise in inflation and concurrent rise in the input cost and rise in manpower cost owing
to revision in the minimum wages by the government. As a result the return on equity has come

1
Prepared by Prof. Ashok K. Sar for class room use in the Strategic Management Course at KSOM

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down from an average of 22.57% till two years back to 12.22% for the year ending 31st March
2017. Considering the challenges of slow growth and rising cost, DLS is exploring to expand
geographically, diversify customer base and offer new services. Expanding geographically
would mean grow into another major city base, and grow into another region using franchise
model. Diversifying customer base would mean extend into cleaning high-end homes and
extend into residential cleaning- condominiums and apartments. Offering new services would
mean offer office repair and maintenance services- electrical, plumbing, furniture and fixtures;
offer office supplies/ consumables and offer moving services.
The DLS team then culled the possibilities down to the three it felt were most promising:
1. Geographic Growth: Grow beyond Bhubaneswar into five major industrial and
tourism townships, using a franchise model.
2. Extend to Residential: Expand into residential cleaning by adding housing societies
to customer base, using a B2B model.
3. Office Service Company: Add more services to offerings (e.g., moving and basic
maintenance and repairs of electrical, plumbing and furniture and fixtures) and products
(e.g., basic office supplies such as water, coffee, and paper towels).
Having defined its strategic problem as slowing growth and rising cost, the DLS team then
framed its strategic choice as expanding geographically or offering new services. From these
two, the team then generated specific possibilities and clustered them by themes:

Strategic Possibility #1: Geographic Growth - franchising model across the defined
region
Winning aspiration: To be the leading office-cleaning company in the defined region and to
have the highest client loyalty and level of repeat business in the industry
Where to play: Customers: Small and medium enterprises; Channel: Franchise model (outside
Bhubaneswar) with direct-to-customer in Bhubaneswar; Product: Service contracts for regular
office cleaning (daily, weekly) plus à la carte specialty deep-cleaning offers; Geography: Major
industrial and tourist townships in the defined area.
How to win. Branded Differentiation: Clear brand positioning as the office-cleaning experts,
excellent customer service, standardized set of service offerings, deep relationships with office
managers, and friendly and familiar staff each and every time.
Capabilities: Marketing and communications, franchise development and oversight (training,
recruiting, contracting), quality control and accountability, and sales and business
development.
Management systems: Logistics and fleet management, net promoter score (NPS), training
programs, customer relationship management (CRM).

Strategic Possibility #2: Extend to Residential - expanding into cleaning for residential
buildings
Winning aspiration: To be the leading cleaning company in Bhubaneswar for residential and
office buildings and to have the highest customer satisfaction, client loyalty, and level of repeat
business in our industry

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Where to play: Customers: Small and medium enterprises, property management firms and
housing societies; Channel: B2B and direct; Product: Service contracts for regular office and
residential cleaning (daily, weekly) plus à la carte specialty deep-cleaning offers; and
Geography: Bhubaneswar area
How to win: Scale and efficiency, become supplier of choice to property managers and housing
societies with a suite of residential and office buildings, efficient servicing of large buildings
(scale, speed, cost savings), partnering with property managers, with enough scale to deliver
across their portfolios (broadest offering vs. competitors)
Capabilities: Sales and business development, sophisticated account management, quality
control and accountability, and cost management and supply chain expertise.
Management systems: Logistics and fleet management, large-client CRM, account
management, 24/7 support system, and procurement systems.

Strategic Possibility #3: Office Service Company - offering more services to small-and
medium-sized businesses, including maintenance and office-product delivery
Winning aspiration: To be the one-stop shop for office customers’ service needs, and to have
the highest customer satisfaction, client loyalty, and level of repeat business in our industry.
Where to play: Customers: Small and medium enterprises, Channel: Direct, Product: Service
contracts for regular office cleaning, basic maintenance, small repairs, and regularly ordered
office products (paper towels, large-format water, coffee), Geography: Bhubaneswar area.
How to win: Simplicity and ease for customers (seamless, comprehensive support for all office
maintenance), “We worry about it for you”—simplified caretaking of the customers’ office
space, Customized routines and regimens to suit each client, and trusted brand with specific
staff expertise
Capabilities: Project and process management, comprehensive maintenance routines, efficient,
timely service, partnering with specialized suppliers, and sales and business development.
Management systems: Logistics and fleet management, 24/7 support system, procurement and
partner management, training and development, evaluation.

Reverse Engineering
The team then analysed what conditions would have to be true for each strategy to work. This
process is called reverse engineering. It isn’t about evidence—yet. That comes in the testing
phase. It isn’t about what is true either, but rather about what would have to be true for the
team to be confident in choosing this particular possibility as the new strategy. The DLS team
looked at conditions in seven categories relating to the industry, customer value, relative
position, and competitors:
 Industry: Segments and structure
 Customer Value: Channels an end customers
 Relative Position: Capabilities and costs
 Competitors’ reaction

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Once they listed all the conditions, they reviewed them and for each one asked: If this weren’t
true, and everything else were true, would we still move ahead with this strategy? If they
answered “yes,” they considered the condition “nice to have” rather than essential and crossed
it out.
In the following section covers the conditions they identified in each category for each of the
strategic possibilities and for their current strategy are discussed.

Reverse Engineering the Geographic Growth Possibility - It would have to be true that...

Industry Segments: There is a large and stable or growing number of urban small and medium
enterprises (SMEs) in the defined region who care about high-quality cleaning and choose
cleaning services based on brand and reputation (and not just low price). There is a large
potential number of franchisees in neighbouring industrial/ tourist areas who would be attracted
to this opportunity. Demographics indicate that franchisees would be able to recruit and train
employees in their local markets
Industry Structure: Expansion markets are populated by small local players, who will not
impede our brand development. Regulations that cause barriers to entry (e.g., unionization) are
not excessive in target areas. Few substitutes (e.g., landlords who provide cleaning services
under lease agreements) are available.
Customer value – Franchisees: Value having a brand with a reputation across the defined region
value being a part of franchised network of companies, over time, value the ability to offer a
standardized product and value developing deep relationships with office managers within their
defined geographic boundaries
Customer value - SME Customers: Value cleaning services from a branded, bonded company,
value a standardized set of service offerings for office cleaning, and value friendly and familiar
staff for their cleaning services.
Relative position – Capabilities: We can build a recognizable brand among office managers in
the defined region; we can recruit, train, and manage franchisees to our standards; we can
maintain quality of service and brand reputation with franchisees through legal and financial
mechanisms; we can build standardized best practices for cleaning that are applicable to the
majority of SME offices; we can leverage MIS as a feedback tool for franchisees and direct
customers; and we can maintain our reputation and roster of clients during and after the
franchise development period.
Relative position – Costs: We can operate the franchising model at a level that is affordable to
the franchisee, and franchising revenues will exceed the cost of building the franchise system
Competition – Reaction: Independent cleaning companies will not replicate this approach to
expansion in the same ways and geographic areas, competitors in our current market will not
reduce service fees below current levels, competitors in franchisee markets will not reduce
service fees to an unreasonable level, franchisers (across industries) will not offer financial
arrangements for franchises that greatly exceed our value proposition to franchisees.

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Reverse Engineering the Extend to Residential Possibility - It would have to be true

that...

Industry – Segments: There is a large and stable or growing number of property management
entities and housing societies that manage multiple office and residential buildings in
Bhubaneswar. These entities require regular cleaning services and are: willing to choose a
large, single supplier, willing to engage in contracts across a number of properties driven by
factors other than price.
Industry – Structure: Existing residential building service providers are small and fragmented.
Existing service providers in residential properties do not serve as adequate substitutes for
cleaning services. Property management entities will not coordinate to exert excessive buyer
power. Reputational excellence and strong customer relationships create barriers to new
entrants.
Customer value - Property Managers: Value partnering with one cleaning service company
across multiple office and residential properties, value consistency and certainty in cleaning
services, and value coordination of services through a centralized support system.
Office Workers and Residents: Value regular and standardized cleaning services, and value
cleaning services from a recognizable and reputable company.
Relative position – Capabilities: We can build standardized cleaning best practices that can be
used for residential and office buildings. We can develop relationships with property managers
to build brand reputation. We can build and maintain systems for 24/7 support to maintain
cleaning standards across clients. We can hire, train, and retain service-oriented staff who can
work in both residential and office environments. Across multiple sites, we can: manage the
logistics for mobilizing people and resources, and assess and reward quality of cleaning and
service.
Relative position – Costs: Cost advantage can be created through scale in materials and
supplies. Travel costs and time between sites are manageable. Additional equipment
requirements do not undermine our cost structure.
Competition – Reaction: Independent office-cleaning entities: will not replicate this approach
to service in the same way in the Bhubaneswar area, and will not expand into residential
cleaning services.

Reverse Engineering the Office Service Company Possibility - It would have to be true
that...
Industry – Segments: There is a large and stable or growing number of SMEs, regional set-ups
of large enterprises in the Bhubaneswar area who require a comprehensive solution for their
cleaning services, office maintenance and repair, and office product supply needs. These
entities are: willing to pay for holistic office service and product management, and willing to
switch from their current office maintenance and office product suppliers.
Industry – Structure: Relationships with office managers serve as a barrier to new entrants in
cleaning or repair services. Building managers (or landlords) are not adequate substitutes for

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cleaning, maintenance, and repairs. The structure of the combined cleaning, maintenance, and
repair industry is structurally more attractive than any one of the industries alone.
Customer Value - Office Managers: Value the simplicity and convenience of a single point of
contact for all office-cleaning services, maintenance, repair, and supplies. Value partnering
with a cleaning services company for their office maintenance and supply needs. Value routines
and regimens for cleaning and maintenance of the office.
Customer Value - Office Workers: Value an uninterrupted work experience
Relative position – Capabilities: We can define basic and complex maintenance and repairs,
and build contracts accordingly. We can build attractive comprehensive service packages. We
can build partnerships with specialized suppliers for office products and repairs. We can recruit,
train, and retain staff who can both clean and perform basic maintenance and repairs. We can
build a system for dispatching staff to manage a diverse set of resources. We can build deep
relationships with office managers to increase sales in all three areas of service and sales
Relative position – Costs: We can source supplies and office products at competitive costs and
deliver at comparable prices. We can create cost advantage through scale in materials and
supplies. We can manage inventory costs to avoid decreasing our return on investment.
Competition – Reaction: Independent cleaning companies will not replicate this approach in
the same way in the Bhubaneswar area. Players in office product sales or office repair and
maintenance will not attempt to broaden into office-cleaning services

Reverse Engineering the Current Strategy - It would have to be true that...

Industry – Segments: There is a large and stable or growing number of SMEs, and regional set-
ups of large enterprises who require cleaning services in Bhubaneswar. These entities desire to
be served by a branded service provider and are not swayed solely by the lowest price.
Industry – Structure: Strong reputation confers advantages to large incumbents, creating some
barriers to entry. Few substitutes (e.g., landlords who provide cleaning services under lease
agreements) are available to SMEs, and regional set-ups of large enterprises.
Customer Value - Decision Makers: Value the contribution of a regular cleaning services to
the operation of their office. Value deep relationships with sales and service staff. Value
specialized cleaning services. Value responsive customer service and issue management for
cleaning services (and will pay for these additional services)
Customer Value - Office Staff: Value familiarity with a regular cleaning staff. Value and
reinforce the choice of a cleaning service made by a decision maker
Relative position – Capabilities: We can recruit and train flexible customer service-oriented
staff. We can maintain a low staff turnover rate. We can manage client-by-client customizations
as requested. We can assess and improve the quality of cleaning.
Relative position – Costs: Labour costs will continue to be less than 50% of operating costs.
Travel costs and time between client sites remain manageable. Growth in fuel prices remain in
line with inflation.

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Competitors – Reaction: Independent cleaning companies: will not replicate this approach to
service in the same way in the same geographic region, will not hire whole intact teams from
us.

Identify Barriers
After the DLS team had captured all the conditions that would have to be true for the
geographic growth strategy to work, they then asked themselves: Which of these conditions do
we worry the most and aren’t true? In other words, what are the greatest barriers to this strategy
being successful? The team voted on which they thought were most worrisome and identified
four that topped the list.

Barriers for Strategic Possibility #1: Geographic Growth

1. We can maintain quality of service and brand reputation with franchisees through legal
and financial mechanisms.
2. There is a large number of franchisees in neighbouring urban areas who would be
attracted to this opportunity.
3. Competitors in our current market will not reduce service fees below current levels
4. We can build standardized best practices for cleaning that are applicable to the majority
of SME offices.

Barriers for Strategic Possibility #2: Extend to residential possibility

1. We can develop relationships with property managers to build brand reputation.
2. Cost advantage can be created through scale in materials and supplies, and capacity
utilisation of equipment.
3. Property managers and residents value cleaning services from a recognizable and
reputable company.
4. Independent office-cleaning companies will not replicate this approach to service in the
same way in the Bhubaneswar area.

Barriers for Strategic Possibility #3: Office service company possibility

1. Office managers value partnering with a cleaning services company for their office
maintenance and supply needs
2. We can build deep relationships with office managers to increase sales in all three areas
of service and sales
3. We can create cost advantage through scale in materials and supplies
4. Players in office product sales or office repair and maintenance will not attempt to
broaden into office-cleaning services

Barriers to current strategy

1. There is a large and stable or growing number of SMEs and regional set-ups of large
enterprises who require cleaning services in BMC area.
2. Decision makers value responsive customer service and issue management for
cleaning services (and will pay for these additional services)
3. Labour costs will continue to be less than 50% of operating costs
4. Independent cleaning companies will not hire whole intact teams from us

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Design Tests of Barriers

After highlighting the four most worrisome barriers to their possible strategies, the DLS team
moved on to designing tests of those barriers, starting with the most worrisome—the one the
team felt was least likely to hold up. The tests would not provide absolute assurance that this
strategy was perfect, but they would improve the odds of the team choosing a successful
strategy.
They designed three types of tests: guerrilla-style, small-scale, and definitive test.
Guerrilla-style tests are the simplest and the lowest-cost, and take the shortest amount of time.
They indicate if investment in more-expensive tests is needed. In some cases, they may produce
enough confidence to move ahead without further testing.
Small-scale tests often require new data, low to moderate investment, and more time. They
can provide reasonable levels of confidence in a strategic choice, but may also indicate the
need for more-definitive tests.
Definitive tests often include pilot and large-scale in-market tests and require the highest level
of investment—and provide the highest level of confidence.

Barrier Tests for the Geographic Growth Possibility

The barrier: We can maintain quality of service and brand reputation with franchisees
through legal and financial mechanisms.
The Concern: Consistency of quality and brand are difficult to manage, so we will need
assurance that we can create effective mechanisms on this front. An underlying assumption
is that legal and financial mechanisms are the best tools available for franchise-based
organizations to maintain consistency in quality and brand.
Guerrilla-Style Test Small-Scale Test Definitive Test
Objective: To learn how Objective: To identify the Objective: To test our
other industries’ franchise ways in which we may ability to use legal and
businesses use legal and apply legal and financial financial mechanisms to
financial mechanisms to mechanisms to maintain maintain quality consistency
maintain service quality and quality and brand and brand reputation by
brand reputation. consistency. creating a prototype
Test: Interview owners of at Test: Get an expert opinion franchise model.
least two analogous from a lawyer and/ or an Test: For six months,
franchise businesses (e.g., accountant who specializes reward the team as
EatOut in food and KidCare in supporting franchise franchisees would be, and
in day care for kids). Learn businesses. The expert can assess how well they
from these franchise owners provide information about, maintain our quality of
where their franchise a) effectiveness of using service and brand reputation.
systems work well and legal and financial Utilize customer and
where there may be mechanisms, b) best employee surveys to
challenges. practices to ensure determine variance with
If/Then Hypothesis: If consistency in quality and other locations. Review and
other franchise businesses brand, and c) areas in which assess team behaviour and
are able to use legal and the mechanisms enable or outcomes during this period.
financial mechanisms to limit success. If/Then Hypothesis: If we
maintain consistency in are able to create a prototype
quality and brand, then we franchise model with

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will be able to do the same If/Then Hypothesis: If we appropriate financial and

in the cleaning industry. know in advance how legal legal mechanisms in one
Standard of Proof: All the and financial mechanisms market, then we’ll be able to
franchise owners it can help overcome specific replicate in other markets.
interview report being able challenges around Standard of Proof: Client
to overcome challenges in maintaining consistency in satisfaction will remain at
managing consistency in quality and brand, then we least at current levels. The
quality and brand using legal will be able to use those prototype cleaning team will
and financial mechanisms. mechanisms in our franchise not require additional
Results: The franchise model. training and support. The
owners the team interviewed Standard of Proof: The prototype team will acquire
were each able to overcome expert’s insights point to at least three new customers
challenges in managing specific parameters that we during the trial.
consistency in quality and can use to construct a Results: After six months,
brand using legal and franchise opportunity that the results were negative.
financial mechanisms, and maintains consistency in Coordination costs and
the DLS team noted enough quality and brand. brand risk were considerably
similarities with the cleaning Results: A set of standard higher than anticipated.
industry. operating procedures can be Rather than acquiring new
created and executed clients, DLS lost two of the
through works-service cleaning team’s clients and
contracts with clear had to establish regular, paid
objectives and measures. coordination and mentoring
Accordingly financial sessions with the team lead.
incentives can be structured
for meeting and exceeding
the set standards.

Barrier Tests for the Extension to residential possibility.

Barrier: The capability to develop relationships with property managers/ office bearers of
housing societies to build brand reputation.
Concern: The business of cleaning services has been fragmented, low value and low price
affair. Major part of the services were the lookout of individual apartment owners/ occupiers.
Thus it was considered critical to build brand through the property managers/ office bearers
of housing societies.
Guerrilla-Style Test Small-Scale Test Definitive Test
A team of experienced senior Taking the service quality gap DLS set up a pilot team with
staff interacted with the office input from the Guerrilla-style an existing, high-performing
bearers of large upscale test, a team of 5 contacted an cleaning crew to test their
housing societies to expert group to understand ability to network with large
understand perceived service opportunities and challenges residential apartment
quality gaps with reference to in creating customers in this societies with a view to offer
housekeeping solutions. segment housekeeping solutions for
the apartment owners/
The teams then rates the The expert team offered two occupiers. The team took up
housing societies in a scale of scenarios, a) pertaining to apartments in large upscale
1-10, 1 meaning very little existing properties –
housing societies to
gap and 10 meaning very relatively difficult to offer
demonstrate cleaning and
large gap. More than 75% of value and charge a premium
and b) pertaining upcoming
broad housekeeping

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the housing societies had gap properties – easy to offer solutions. The team also
more than 8. value and charge a premium. demonstrated housekeeping
Further, the experts projected solutions with the
opportunities to offer value demonstration flats at
and charge premium for the several new projects. They
common facilities in both set success parameters
existing properties and around building awareness
upcoming properties. about cleaning solutions,
and developing a positive
attitude towards the same.
The increase level of
awareness was proven with
more and more calls for
demonstration. The increase
in positive attitude towards
the cleaning solutions was
proven with registration for
the service by 80% of
upscale housing societies,
with 30-50% of occupiers
participating in the
enrolment facilitated by the
housing societies.

The definitive test indicated that the most worrisome condition had passed the test with
outstanding scores. The team then went ahead to test the other three barriers, which passed with
equally good scores.

Barrier Tests for the Office service company possibility

Barrier: Office managers value partnering with a cleaning services company for their office
maintenance and supply needs
Concern: It is not easy to offer a value proposition to meet their use and signalling criteria
better than the existing vendors.
Guerrilla-Style Test Small-Scale Test Definitive Test
A team of two experienced Taking the service quality gap Being reasonably convinced
senior staff who interact with input from the Guerrilla-style to overcome the barrier, DLS
the client organizations test, a team of 5 contacted an created a pilot SBU, to launch
interacted with the office expert group (part of a the office maintenance
managers to understand consulting firm) to gain (covering electrical,
perceived service quality gaps deeper insights into the plumbing, furniture and
with reference to office possibilities of making value fixtures) and office supplies
maintenance and propositions that would be to two clients, a) one with
consumables. associated with much lower service quality gap of 1 and
service quality gaps. other with service quality gap
The teams then rates the of 9.
client organizations in a scale The expert team while
of 1-10, 1 meaning very little suggesting ways and means After 6 months, performance
gap and 10 meaning very of creating value of the pilot SBU was
large gap. More than 50% of propositions, cautioned on the reviewed. It was heartening to
ability of maintaining cost find that DLS was able enter

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the client organizations had parity and proximity with the into three years’ service
gap more than 7. rivals. contracts (with annual price
escalation based on rise in
inflation and minimum
wages)

The results from the definitive-test also signalled towards overcoming the other barriers viz.,
building deep relationships with office managers to increase sales in all three areas of service
and sales; create cost advantage through scale in materials and supplies; and players in office
product sales or office repair and maintenance will not attempt to broaden into office-cleaning
services.

Barrier Tests for the current strategy.

Barrier: There is a large and stable or growing number of SMEs, regional set-ups of large
enterprises who require cleaning services in BMC area.
Concern: Unless there is growth, it will be difficult to offer quality service by maintaining
cost proximity with competitors to improve the returns on investment.
Guerrilla-Style Test Small-Scale Test Definitive Test
All entities that DLS serve, Based on the input from the Being convinced about the
are registered under the Guerrilla-Style Test, two outcome of the small-scale
commercial establishment leading developers were test, no further test was
act. The record of all such contacted to have an objective conducted.
entities are maintained with assessment of the growth
BMC. The MSME potential in the commercial
department has record of the space in the BMC area.
trend of growth of the
enterprises in this sector. The developers indicated a
Information related to much higher rate of growth
development of commercial owing expansion plans in the
retail, hospitality, education,
space in the BMC area, were
telecom and financial sectors.
also examined to have a feel
They projected a growth of
of the associated growth. over 20% in the next three
years.
Examination of the
aforementioned data,
indicated that there is a
likely growth of commercial
space use in the BMC area
by about 12-15 % per year
in the coming 3 years.

In one Monday morning, Jagriti called four of her experienced staff members along with a
family senior, who has been her mentor to take a call of the future plan for DLS. Jagriti
presented some the findings from the analysis and tests to the team to kick state a brain storming
session. There have been divergent views from members. However, Jagriti made it clear that,
they need to come up with a decision, if not in this meeting, over another meeting within the
same week. Which strategy will work for them? Can they win by extending their customer base

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to serve residential clients? Or should they expand their offerings to include new services and
products?

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