Hi Friends,

Even as I launch this today ( my 80th Birthday ), I realize that there is yet so much to say and do.

There is just no time to look back, no time to wonder,"Will anyone read these pages?"

With regards,
Hemen Parekh
27 June 2013

Thursday, 5 January 1989

STRATEGY: INPUTS (PRIMARY RESOURCES)


INPUTS: PRIMARY RESOURCES

A. Primary Resources
A.I Manpower

By far, manpower is going to be the most crucial resource in the years and decades to come. Managements, the world-over will ASK more of its manpower. Whether they will actually get more (higher productivity & quality of the goods and Services) will itself depend upon:
                    
                                     A S K
     
A = Attitudes
S = Skills
K = Knowledge Of its manpower

The cornerstone of the corporate strategy with respect to the EMPLOYEE-ATTITUDES:

EMPLOYEE PARTICIPATION IN MANAGEMENT

Although we have done considerable work in this direction at Powai Works during the last decade, this will require a lot more top management commitment in the years to come. Attitudes need demonstration through personal examples and repeatedly. For the top management which does not practice employee participation in decision making at all levels as an article-of-faith, the battle of the 21st century is already lost!

As far as physical SKILLS and the mental KNOWLEDGE is concerned, the strategy will involve setting-up of a

             CLC = Corporate Learning Centre

The next 25 years will witness a rapid obsolescence of the skills and knowledge possessed by the employees. One time education from an ITI or a professional college will simply not suffice. All throughout his career, an employee will have to continuously unlearn old tricks and learn new tricks. Already major corporations, all over the world have set up full-fledged, professionally staffed, full-time colleges/learning centres at recurring expenses of millions of dollars, exclusively engaged in upgrading the skills/knowledge of their employees. Some of these corporations have made it mandatory for all of their employees (from Chairman down to shop-floor workman) to spend ~ weeks every year at the Learning Centre.

In the 21st century life-long training and retraining of its employees is going to be the key to the survival and growth of a corporation. Our glorious past will be irrelevant and there will be no short-cuts!

A.2 Finance

At a recent gathering of young entrepreneurs, Mr. S. L. Kirloskar is reported to have advised them:

"If you wish to succeed in your business venture, do not borrow money from the bankers. The interest burden will kill your enterprise before it can stand on its own legs. Get a few friends to invest as partners and let them share in the profits of the company when it makes money. Do not work for the bankers."

Now even Shantanu knows that a large, modern-day enterprise cannot manage without borrowing funds from the bankers - nevertheless his words are not without substance. The bigger the interest burdens the more susceptible does an enterprise become to the ups and downs of business-cycle. This will be all-the-more true when we talk of selling our goods and services abroad where the interest-rates are often 50% to 30% of those prevailing in India!

So the Name-of the game is going to be:

1. As far as possible use our own internally generated funds;

2. When these are insufficient, borrow from the public in the form of equity;

3. If you must borrow from the bankers, borrow from the cheapest source. Different sources of finance/strategies to optimise financing cost for diversification could be:

a)  An Indian banker (there is now a possibility to get a 1 interest rate advantage as compared to other' Indian companies - if we enjoy a higher credit rating)

b)  A foreign banker ( it is gradually becoming easier to borrow directly
from foreign bankers)

c) Foreign Govt owned/assisted Development Banks such as:
- KFW of FRG
- DANIDA of Denmark
- CDC (Commonwealth Development Corp)
- French Indian Protocol Credit
- Official Development Assistance
         (ODA) of Japan, besides 
       - IFC, IBRD, ADB, etc.

Some of these institutions are even willing to invest in the equity of a new venture in India (in lieu of or in addition to long-term loans at lower interest rates). This could be one more reason for floating joint venture companies with overseas partners.

d) Get foreign collaborator to invest in the equity of j joint venture companies (new diversification ventures) to the tune of 40 of the equity.

e) Tap NRI funds

f) Set up joint venture projects in Gulf where project costs and interest rates   are low (e.g. suggested Sponge Iron project in Jebel Ali Free Trade Zone- - or Muscat where production cost per ton of sponge iron could be as low as Rs 1200 per ton as against over Rs 2400 per ton in India!)

g)Over the years offer as much of equity to employees as legally permitted. As far as new j joint ventures are concerned, this should be implemented from the inception stage itself no matter how small a venture. Besides slightly lowering the interest burden of the project, the "ownership concept" will inject an element of dedication and commitment amongst the employees, improving the chances of the success of the venture.

h) Wherever possible, collect interest free deposits from dealers/distributors of our products.

i) Working capital management especially customer outstanding, will have to be innovative, incorporating devices such as electronic funds transfer from dealers I bank-accounts. We would also need to link­up in a private network, all the computers of L&T allover India. This would enable us to have instantaneous, on-line access to customer outstanding and collections data.

We should encourage all our dealers to install computers which could be linked to our own private computer network, as and when desired. Such a network would streamline monthly indents and dispatches.


A.3 Information

From the 19th, to the 20th to the 21st century, we are progressing from the first to the third industrial revolution.

The next century is going to witness " The Information Revolution" - and the the time to prepare for it is NOW.

In his memorable book, "FORT AMITY", Sir Queeler wrote,

"Time, like an ever-flowing stream, sweeps all its sons away."

To this, I would only add that, the 21st century will most certainly wipe-out all those who will choose to remain un-informed or mis-informed! And I am purposely using the word "choose", because we also have a choice to remain fully informed and up-to-date about matters that affect our survival and growth.

That's right!

The choice is ours.

And the price to pay is not prohibitive.

The 21st century is going to be full of upheavals and changes -

the changes in the way we

-      Compile business-intelligence Perceive customer-needs
-      Scout for technologies
-      Pursue the markets
-      Follow-up with the Govt agencies Select distribution channels Conduct R&D
-      Finance Projects
-      Apply novel manufacturing processes Train human resources
-      Motivate employees
-      satisfy clients
-      Advertise our products & services organize our resources
-      optimise the inputs

In short,
an unprecedented change in the entire manner of managing our enterprise.

Just one forecast should suffice to illustrate the point I am making.

By the end of the 21st century, I foresee total elimination of wires and cables within residential and commercial complexes. I foresee all low-powered home-appliances/office-equipment to draw their energy requirement directly from an electrically charged field pervading each building, with the help of a micro-processor controlled device built into each appliance/equipment, whether it is an ordinary light bulb or an expensive super-computer.

No wires, no plugs, no sockets!

The demise of a whole industry and the birth of a new one!

And instead of 100 years, this could happen in 50 years or even 25 years!



Some of the GET's who joined us a few months back could still be around when this happens!

One of the prime catalysts for such an 'upheaval', could be the non-stop developments in the information technology that we all have been witnessing during the last 1-2 decades. Take the segment of storage technology in computers. The earliest computers stored their data on bulky reels of magnetic tapes. Today we have erasable optical disk drives that put information on them and get it off again.

An optical drive that can put a full gigabyte of data - one billion bytes, the equivalent of 500,000 type­written pages or 2800 floppy disks on a single optical disk only 5.1/4 inches in dia, the same size as most floppies.

An optical disk, the size of a CD can store the entire text of the Encyclopedia Britannica !

The new magneto-optical storage technology would eventually replace its old counterparts - making them obsolete. Unless our Group XI considers itself to be in the business of "Information Technology" (and not in the business of manufacturing floppy disk drives) , it would soon find that a competitor has quietly and hurriedly introduced into the market (through screw­driver technology?) a compact disk drive and made our floppy disk drives obsolete overnight.

How apt is Theodore Levitt when he says: "If you do not make your product obsolete yourself, somebody else would do it!"

Needless to say, we would need to broaden the "nomenclature" of our business from a particular product to the satisfaction of its entire range of needs - which could open up immense alternative possibilities.

Levitt's immortal essay on "The Marketing Myopia" was never more valid than today!

So, the question will be

-      Our ability to "foresee"/"anticipate"
-      Our ability to "make things happen"

or, as someone has said,

- Our ability to "build castles in the air, even as we are busy laying the foundations upon which the castles will rest".

And that foundation will be our Information Technology.

Not just a computerised data-bank,

-      on anything and everything
-      concerning all facets/functions of enterprise that has happened/is happening now/or likely to happen soon or in distant future
-      here in India and world-wide

but much more than that.

Expert-systems (cumulative, conjectural wisdom, providing options-for-actions) manipulating the data­bank.
At the most mundane level, this expert-system will print-out a booklet of "Standing orders" to be followed for a new factory being set up in J&K, drawing upon:

-      Existing standing orders at all facto­ries of L&T
-      Relevant Industrial Relation legislation of J&K
-      Special status of J&K in the state of India
-      IDR Act
-      Products to be manufactured
-      Employment strength, etc. ,

    At a much more complex level, the expert-system will tell an R&D engineer whether the material and the shape of the component which he is manipulating on the computer screen (CAD Computer Aided Design) will lend itself to optimum cost-effective manufacturing processes available in-house (CAM - Computer Aided Manufacturing), or tell an advertising executive that -

- given the population distribution
- readership profile
- recall rate, etc.

Whether the media-plan for the new product will succeed or flop !

In the 21st century, this is the way others will manage their businesses, based on :

- Expert-system driven
- Computerised data-banks
- Connected to International Data Networks
- Providing instant consultation
- with far-flung locations
- Through satellite-linkages offering conference facilities

In fact, a number of highly successful Japanese, European and American companies are already managing their far-flung businesses through such an integrated information network.

In India, ONGC has a primitive network and TELCO is not far behind. Much of our own current success depends upon some of our past "Pioneering" efforts. Even if we cannot be the FIRST, in India, we can certainly be amongst the FOREMOST.

Such a network, may cost us around Rs 10 crores initially and thereafter perhaps Rs 2 crores annually (for updating and maintenance) .

This is a relatively small price today for a successful entry into the 21st century. 

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