Leadership and Purpose in Turbulent Times

The first talk under ‘Leaders Speak Series by Pond’s Veterans’ was delivered by Mr Nandu Nandkishore, Professor, Indian School of Business and former Global C Suite Leader with Nestlé S.A, mentor, consultant, venture capitalist and coach. The event was held on 6 June 2020.

Mr V Balaraman, Past President, MMA and former MD, Pond’s India Ltd delivered the opening remarks wherein he highlighted the core values practised by Pond’s in a challenging environment that was marked by government imposed shackles in the pre-­liberalisation era. “Human resource was our only strength. We valued character and culture ahead of competence,” he reckoned.

He said that Pond’s India trusted managers and gave them the liberty to learn from failures. Talking about the transformation of young executives who joined Pond’s, Mr Balaraman alluded to George Bernard Shaw’s play, ‘Pygmalion’ in which Eliza Doolittle gets transformed from a poor flower girl into a sophisticated young woman. He recalled the heights reached by many professionals who had a stint in Pond’s and went on to don prestigious positions in India and abroad and spread the fragrance of business. Mr Nandu Nandkishore thanked Mr V Narayanan, Mr Balaraman and others under whom he learnt the hard lessons of management while working in Pond’s after his IIT and IIM graduation. He quoted from the Chinese classic Tao Te Ching:

“When the master governs, the people are hardly aware that he exists. Next best is a leader who is loved; next, one who is feared. The worst is one who is despised. If you don’t trust the people, you make them untrustworthy. The master doesn’t talk; he acts. When his work is done, the people say, ‘Amazing.’ We did it all by ourselves.”

“That was Pond’s and it reflected the culture of Pond’s,” said Mr Nandu. During his gripping address, he stressed the need for people to adapt to changing circumstances and to handle every crisis in a methodical way, staying rooted to one’s core values. He gave many examples from the corporate world of organizations that weathered many a storm and came out triumphantly and also of organizations that failed badly.

Extract from his talk and the subsequent Q&A session are summarized below:

The average life span of the 500 biggest companies in the 40 years since 1960 has come down from 60 to less than 20 and now, it’s around 15. Today’s top 10 tech companies did not exist 30 years ago.

The average life span of the 500 biggest companies in the 40 years since 1960 has come down from 60 to less than 20 and now, it’s around 15. Today’s top 10 tech companies did not exist 30 years ago.

The Kodak Moment

We grew up with the image of the world’s inventor of photography­--Kodak. For 130 years, they dominated specialty chemicals and photography. We remember ‘the Kodak moment.’ They invented the digital camera. But where’s Kodak today? They disappeared.

In 1991, they decided to focus on digital photography; in 1998, they closed that business and decided to focus on photographic paper. They decided to cut costs to compete with Fuji film but ten years later, they were gone.

The speed of technological change throughout the 20th century has been accelerating steadily. Arguably, 20th century has seen more of technological change than the 50,000 years before that, during which (earlier) period we had agriculture, the development of the wheel, livestock, etc., as major developments. Communication, radio, television, telephone, motor cycles, trains, cars and spaceship–all came in the 20th century and the world became, all of a sudden a much smaller place. This century has seen more change than the 20th century as this pace of change accelerates.

Today, we can’t imagine life without the internet, social media, smartphone and online meeting platforms. Worldwide, 88% of the people go to bed with their smartphones. This is a behavioural change that has happened in the last ten years.

Adopting Digital

In 1998, there was one company that had the market leadership, with more than 50% global market share of analogue mobile phones­--Motorola. Within one year, the technology changed from analogue to digital. Motorola too discarded the analogue version, retooled and adopted digital over the next twelve months, but could not compete….

In those twelve months, a new company­, Nokia­, came in, whose core competency in the home market of Finland was making rubber boots. They embraced the new digital mobile technology and became the world’s number one in mobile telephony. They led the market for close to ten years and even invented the smartphone. And then disappeared as they lost to iPhones, Samsung and the Android smartphones.

Change or Die

If you look at the world’s natural history, at times of great change, according to Charles Darwin, ‘It is not the strongest or most intelligent who survive; it is, the most adaptable to change.’

This is also very relevant in business, and the key lesson is: Change or Die; or to re-state it, the only choice we have today is: Disrupt or be disrupted. Therefore, the fundamental task of leadership is to prepare the organisation for change. Leaders should also know that they should not change their fundamental values while adapting their value chain. Turbulence is part of the new normal in technology, economy, global trade and visas. The latest addition to this list is the Covid­19 crisis. We have no clue as to how long it will last. Perhaps, we may choose to blame everything on the pandemic or we can build scenarios and plan for each. This is a transition event in our history which people will talk about for the next 100 years.

Winners and Losers

Every crisis has winners and losers. In covid too, there will be potential winners like anything consumed in­-home such as e-­commerce, entertainment, personal care and healthcare, food processing and retail, medical supply and services sectors and potential losers which are consumed ‘out-of-home’ like tourism and leisure, aviation and maritime, automotives, construction and real-estate, non-essential manufacturing, financial services, education and oil and gas sectors. The struggling sectors have to adapt and reinvent themselves.

A restaurant owner in Australia, who was given just 24 hours to close down her outlet due the pandemic, converted it into a grocery store and thrived. Her advice to others: Adapt, adapt and adapt. When a crisis comes, we can stick our head in the sand like an ostrich or choose to face it.

The Wei Ji Mindset

There is saying in Chinese called ‘Wei Ji.’ It is represented by two symbols meaning Danger and Opportunity. A successful strategic response to a crisis should view the disruption as a threat and at the same time, as an opportunity. Like Kodak, Fuji Film too decided to cut cost and focus on photographic paper but unlike Kodak, Fuji decided to put the money saved into their R&D and innovation efforts. Today, Fuji is a global leader in business. Kodak doesn’t exist.

The Indonesian Devaluation Crisis

In 1998, in Indonesia there was an economic crisis. Within six months, the exchange rate went from 2000 rupiah for a dollar to 17000 rupiah. An entire segment of middle-class went into poverty. Many companies closed down and many laid off people. I was there at that time with Nestle. We struggled to maintain our supply chains and keep our units running but at the same time, demonstrated our commitment to our core values. We did not lay off even a single person. We ensured that our consumers got good quality products. In the first year, our business volume declined by 30%; we worked with our farmers/ trade partners and invested in our brands. The entire value chain rewarded us handsomely and gradually, our business grew up many fold. Today, Nestle is a 1.5 billion dollar company in Indonesia, having bounced back from a turnover of 200 million dollars in the year of crisis.

The ‘Glass in the Glass Jar’ Crisis

We were selling Nestle Baby glass jars in France. In 2009, we discovered there were pieces of glass in the jars due to a defective line. We quickly put a team in place and traced the problem to just two batches. Some of the products from these batches had already gone to the market. We quickly alerted the authorities and customers; together with them, we retrieved the glass jars and no one got hurt. The consumers responded very positively. Our customers in other countries queried through social media if they too had to return their jars. We clarified that the problem was restricted only to France and reassured them.

A few days later, on a Friday evening at 8.30pm (normally big crises happen after 6 pm on Fridays; you can call this Nandu’s law!), I was still in the office when I got a call from our social media unit that Hollywood star Alyssa Milano who had 17 million followers on Twitter had tweeted, “In the US, Nestle is recalling their baby food ‘Gerber.’ So please return your Gerber baby jars to Nestle.” For no reason, the tweet had created a panic. We had to react immediately. Within five minutes, I responded to her on Twitter stating the correct position; the star was so gracious and retracted her tweet saying that the US products were fine; it was a localised issue in France and that the problem had also been resolved. We heaved a sigh of relief!

The below aspects are important in a threat response:

• Know your facts and vulnerabilities. Stop the bleeding.

• Act decisively. Speed is important.

• Know your core values and purpose.

• Protect your consumers.

Chilean vs. European Babies

It was Christmas 2010. I was in Chennai to be with my mother. I got a call from our Chile country manager of Nestle. She said, “Boss, we have a serious problem,” and explained it. A politician used a local lab to test our product, apparently to discredit the government and some multinationals in Chile. He tested some Nestle baby food products and found that they were completely compliant with the local regulations, FDA norms and Codex norms.

He discovered in our product, there were trace elements in parts per million of a pesticide called Iprodione, the limits of which were permitted in Chilean law. According to European law, it was completely banned. The politician went to the government and complained. The government turned to Nestle and asked us to handle the issue. Questions were raised to us: “Are you telling us that European babies are more important than Chilean babies? Why do you have double standards?” We don’t. In every single place, we comply with the local laws and regulations. The product was perfectly okay. But still, we recalled the product and reformulated it over the next six months. That is when we launched a new initiative.

Project Saturday

According to this project, irrespective of the local law, for each parameter, we decided to go with the strictest among the local, European and US regulations. We started with the baby products and slowly, worked our way through all Nestle products. We communicated and addressed the emotional concern of consumers. We worked with the farmers and the pesticides they used and relaunched the product along with commercials that reassured them that we deliver the best quality at every stage: from field to the jar.

Resilience, the Key Differentiator

Jim Collins, for his book ‘Great by Choice,’ studied several companies over a period of 20 years. He says that good luck and bad luck will keep alternating, but those who show resilience succeed. In my life too, I had many successes and failures. The roots of all of my successes lie in my failures. We should always convert a problem into an opportunity.

You need to be personally resilient with a measured response that separates panic / despair and thoughtfulness. You have to build a support network and embrace uncertainty. When others follow an ostrich response, you might be the only one who balances a threat response and an opportunity response. So, never waste a good crisis. The response to a crisis makes the difference between great companies and also-­ran companies. It is also true for individuals and leaders.

The Covid crisis is going to be a watershed moment in our species’ history. You have to ask yourself: What will my legacy be? Will I be of proud of the choices I made 20 years hence? For, our choices define us. Despite so many disruptions and disasters, the 20th century has been, by far, the safest. If we look for greatness in the world, it will get better and better.

10 Rules for Crisis Management

1) Recognise and accept the crisis. Don’t panic. 2) Get a crisis team in place with relevant skill sets and communication experts. 3) Appoint a Devil’s advocate to challenge group think. 4) Determine the gaps and put a process in place. Separate facts from opinion. Focus on what you can control. Have a scenario plan for what you cannot control. 5) Remind yourself of the core purpose, values and core strengths which you will not compromise. 6) Recognise if there are opportunities. 7) Communicate. Communicate. Communicate. 8) Take action and ensure flawless implementation. 9) Study the lessons learnt and redesign your processes. 10) Have regular simulations and scenario planning to prepare BEFORE a crisis.

Insights from the Q&A Session

a) As companies grow in size and business, the corporate leader should focus on four things that are very important and help create the culture, which in turn determines how well strategy is executed. (You May have heard, “Culture eats strategy for breakfast”. Well this is what it means):

* Strategy of the company: Are they a box of constraints or are they stretch oriented?

* Processes: Do they focus on compliance or discipline?

* Leadership: Does it revolve around controlling or supporting people?

* Team dynamics: Do they run based on contracts or trust?

b) An individual’s values and company values should be in alignment.

c) Decision making: Leaders should know to separate facts from opinions to arrive at good quality decisions.

d) Leadership across places: Leaders must focus on values. Across cultures, the fundamental values – for instance, respect, integrity and trust ­do not change. Human beings are not so different. Their underlying values do not change. Leaders must keep their word, listen and be honest and transparent. Culture impacts strategy. A leader should work closely with both.

e) Governance: Board members must ensure good governance. There are different styles of governance. The board must ensure that the operational management is in place, appropriate to the stage of business. We come across people sitting in many companies’ boards and they may not be able to do justice. In India, people are reluctant to be independent directors because of liabilities and legal responsibilities. There is definitely a lot of opportunity to raise the standards of governance.

f) Dealing with Employees in Covid Crisis: In a worst case scenario, rather than laying off people, salary cuts starting from top level will be a better option. Corporate leaders must respect their employees and make sure that people have a dignified exit. Though Airbnb and Uber took some tough decisions, their responses were appreciated because of their heart-­to-­heart communication and the intent shown. The global chairman of JW Marriot spoke to all employees about the situation. There are bad examples too. Some companies have fired employees over a Zoom chat. That’s not the way to do things. This crisis will separate great leaders from the ordinary.

One cannot keep on running a loss-making unit. I have closed down some units and had the misfortune of laying off employees. But in every single case that I handled, I have tried to look people in their eyes, talk to them rationally, discuss their exit plan and treat people with grace.

Covid Management, in general:

* Behaviours of consumers will change because of the crisis.

* Leaders must try to protect the vulnerable during this crisis.

* There has to be a different strategy for semi-­urban and urban areas. For effective management of the crisis, not only national leaders but also corporate leaders and the people should act in harmony and create a conducive environment. Singapore has been an inspiring role model.

* Leaders must maintain their sanity and balance in their perspective. They must keep communicating, or else, fake news will fill the vacuum which is dangerous.

Mr V Balaraman thanked Mr Nandu Nandkishore for an enticing talk and summed up saying that corporate leaders must lead from the front, be available and visible in a crisis. He recalled that India had come out of many crises well. He promised to collaborate with the Madras Management Association (MMA) and bring in more leaders of Pond’s lineage to follow sound management principles, especially in these turbulent times.