What Drives Business?

I was asked to write an article for our college magazine on the topic - 'What drives business?' and here's what I came up with.

This is a draft version. The complete version is in the magazine which comes out next month.
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(The following is a small fictional story that takes place in a company called Widgets India Pvt. Ltd. This story tries to look at what drives a business through the eyes of practitioners.)

The Introduction

Guru V Gurumoorthy
CMD and Director – R&D

‘Baloney’ was the word that came to my mind as I was discussing with Siva yesterday about the possibility of right sizing the company. Both of us knew that the decisions we took would affect the lives of so many families who have given so much for the success of this company.

I still distinctly remember the day I stepped back on Indian soil fifteen years ago after completing my PhD from the USA. Starting a company in India back then seemed a crazy idea. “Wishful thinking”, said everyone around me. But to me it was all very clear. I would have the power to give jobs to so many people if I came back, the same jobs I am supposed to take away now!

G. Sivaramakrishnan
Director – HR

I have not seen Guru in such a mood ever before. I have known him from the time we were kids, after all our dads worked together and we went to the same school. He has always been fresh and full of energy. To me he is still the kid I knew. Yesterday was different; he looked tired and sapped.

Guru started this company from scratch. With his patent for a new process of making widgets, he could have done this right in the US but he chose to come back. Money was never a problem for us from the start, getting people was. We had to make people leave their secure government jobs and join a young startup. Looking back, I would say they had made the right decision. But I guess the good times don’t last forever. Guru has not told me his decision yet, but I expect some big announcements today at the meeting.

Gaurav Shah
Vice-President – Marketing and Sales

I don’t know why we have this sudden meeting today. This better be good ‘coz I had to cancel a customer meeting for this. Gurubhai has been acting funny this week. I love this company and though we are going through tough times, I strongly believe that we will turn it around.

I still remember the speech Gurubhai gave at our college ten years ago. ‘The true leader is not the one who gets more accolades, but the one who wins more hearts’, he said. This simple truth has helped me close many a deal in my career. As a fresh MBA then, I clearly knew joining this company was my destiny. The more experienced among us told me that I would be spoiling my career and that a company making widgets would never succeed in India. They advised me to take up a job in FMCG or one in a big government company. I decided otherwise. I have never regretted my decision.

T. Shyamsunder
Vice-President – Accounting and Strategic Finance

‘Tough decisions have to be made in successful companies’, I tell Mr. Gurumurthy every time I meet him. He is a good man, but then we are running a business here.

I joined this company six months ago. I am supposed to be their turnaround man. I have studied the entire cost structure and pricing ability of the company’s products and submitted a report to Mr. Guru a week back. We desperately need to drastically cut costs if we ever hope to be competitive. I hope some useful decisions are made in today’s meeting.

Ragahvendhar Rao
President – Operations

I am hearing a lot about job cuts and this is really demoralizing the workforce. I hope we don’t take such drastic measures. Guru and his R&D team are almost ready with widgetX. Guru tells me how we will take off once the product hits the market. It’s just a matter of time, a year or two utmost.

I have been with Guru from the start. Siva, for lack of a better word, had poached me from a big government organization with a promise of more challenging work. And boy has he kept up with his promise! We have seen trailblazing growth in the past and I hope today’s meeting will set the direction to get us back on that track.

The Meeting

Gurumoorthy: “Good Morning Gentlemen. For the past few weeks, I have been having frequent discussions with most of you regarding the current situation of the company. Most of you have been, in this time, compiling data and taking an objective look at our sales, operations and financial performance. When I take a combined look at all the data I don’t see a pretty picture.

We started the manufacture of widgets in India and we are probably the most innovative company here currently, but as you see we are neither the top company financially or in the marketplace. I know that some of the major reasons for this have been the entry of multinationals and big Indian conglomerates into this business. This meeting though is not to discuss about them. Neither is this meeting for discussing the causes of our plight.

I have called you gentlemen, to discuss something more fundamental. I want you to do some soul searching and tell me what according to you really drives our business and taking it forward, will drive our business in the future?”

I did not want them to start a blame game by asking them as to what went wrong. Instead I wanted them to ask themselves what it is that when done right can right the wrong.

Ragahvendhar Rao: “With all due respects sir, what makes an airplane work – the engine or the wings?”

Gurumoorthy: “Point well taken Mr.Rao, but all I wanted was for everyone in this forum to come to the same level of understanding regarding all the activities in this company before we decide on a course for the future. I wanted everyone to appreciate the purpose and direction of departments other than theirs”

Gaurav Shah: “I believe a strong marketing strategy built around the needs of our customers is what has driven our business till now. All our competitors though have really caught up with us on that. But where we really stand tall is the customer’s knowledge about us. They know our customers but our customers know us!

We are one of the most well known and trusted companies in the market and our competitors are constantly being benchmarked against us. All we now need to do is to build a strategy to leverage this mind share to get the market share. I suggest we do a comprehensive and integrated marketing campaign that tells the market why we are different. We can introduce a slew of schemes, promotions, warranties and tie-ups backed by targeted advertising. This strategy is what I believe will propel us forward till we take off with the introduction of widgetX.

Gentlemen, we do not have the lowest price in the market. So, let’s be different.”

T. Shyamsunder: “Using our brand image to increase sales is fine but our current cost structure does not allow us to compete in the market. A detailed costing analysis has revealed that our variable costs are more than the price we command leading to negative contributions. We are bleeding gentlemen. Gaurav spoke about growth. I am here to talk about survival. And sound and prudent financial management is what will help us survive and drive us through these tough times.

Our competitors are driving our pricing decisions, but what they cannot decide is our costs. That is the variable we have in our hand. I strongly suggest we start a program to drastically cut costs. Our current employee utilization rates are an abysmal sixty percent. We should immediately lay-off some employees to bring the numbers close to ninety-ninety five percent. This single move will reduce our costs by five percent.

I know this is a tough call, but right now we need to survive and our survival depends on cutting costs.”

Ragahvendhar Rao: “Downsizing is always the trump card we management have, to pull ourselves out of tough spots. But, by doing so we are just pushing the real issues under the carpet. We also have to see the long term effects of such a decision and the morale of the surviving employees. Moreover these are real people that we are dealing with and not just numbers.

In the past our production has invariably been able to meet the demands of the market on time. Our quality and reliability have really been the driving force in establishing our brand in the market. If we are able to increase our sales by measures suggested by Gaurav, we will be able to match that demand by moving to three shifts from the current two shifts increasing machine and manpower utilization rates.

Moreover through a process improvement program, we can improve the flexibility of our production. With that we will be able to churn out smaller batches of customized widgets exactly matching customer requirements giving us a better pricing ability compared to our competitors. All these improvements will augur well for the eventual launch of widgetX as well.

Friends, we can improve on the cost front without going in for lay-offs.”

Gaurav Shah: “Good suggestion Mr.Rao. I can include a ‘Widgets to order’ program as part of my campaign.”

G. Sivaramakrishnan: “Three shifts is a very good idea. This gives a strong signal to the workforce that the management is not going for a lay-off strategy. This will improve our attrition numbers.

Moreover our employees are our wealth. The experience that our employees have in the widget industry is way ahead of other competitors. It’s our people who have driven our business to the success and stature we enjoy today. We simply cannot afford to lose them to our competition. We will then be handing over our competitive advantage to them in a platter.”

Gurumoorthy: “Well said Siva. It’s definitely our people who have taken us to success and it is by them we will stand in times of distress. I am sure together we will be able to turn around the company.

I thank you all for taking time to answer my question. You have all answered in earnest and I now clearly see what really drives our business. No, all businesses in general. It is passion gentlemen. Passionate people like you make business successful. With each one as passionate as you are about your domain, when put together form a force potent enough to take on any obstacle we might face. It is not the engine or the wings that make an airplane work, but man’s passion to fly!

It is this passion that made me start this company. It is this passion that will take this company to greater heights.

Gentlemen, I present to you widgetX.”