Consulting Research Entrepreneurship Strategy
Issue 7
Nov ’09
Crest
The E-Magazine of CRESCENT, XLRI
This issue Institutionalizing EntrepreneurshipP.2 The New Global Challengers P.3 Consulting P.5 Special Report P.6 Crescent Reporter P.7
Crescent The Committee for Research, Strat‐
Editorial
egy, Consulting and Entrepreneur‐
ship (CRESCENT) is the result of the endeavor of the student community of XLRI to promote an environment of creative solution building amongst the students of the institute, while reaffirming high ethical standards and values, and fostering personal development in the pursuit of excel‐ lence. It works with the two fold agenda of creating a brand presence of XLRI among the corporate and to help nurture ideas of budding entre‐ preneurs by providing a platform to them to showcase their Ideas
Editorial Team Mandar Kulkarni Manoj G. Kamath Himanshu Saxena Miti Vaidya
1
Dear readers, Welcome to the new CREST! The speed with which the past few weeks flew was mind boggling and we wit‐ nessed activities full of energy, enthusiasm and excitement. The Summer in‐ ternship process, ENSEMBLE, flurry of projects, quizzes and tests, The Joy of Giving Week, Colosseum and the list goes on… This issue of CREST continues the spirit and promises to be an exciting read. Under the entrepreneurship section we have tried to raise a very pertinent question: Is the formalization and structuring of entrepreneurship suffocating its very purpose? We have also tried to analyze how MNCs originating from BRIC nations are ris‐ ing to become global giants. A BCG review explains the interesting and unique strategies adopted by these firms. Questions are now being raised about the latest practices of Consulting firms to overwork their associates to earn more revenues at the cost of their burn out. We have tried to find out the latest practices and also why some consult‐ ing companies clearly stand out in work life balance. A surprise package in this issue waits for you as you flick it. We have also given a brief report on the highly successful event Strategikon organized by CRES‐ CENT this Ensemble and a special session conducted by E&Y HC partner Mr. N.S. Rajan, who is also the National President of NHRD. For months CREST has been your friend in keeping you updated on various events that shape our campus and issues that shape the world of consulting, strategy, research and entrepreneurship. The positive encouragement and feedback given by you only keeps our spirits high to make CREST more rele‐ vant, informative and entertaining. Hope this issue keeps you busy as you learn and enjoy... The Editorial Team of Crest invites articles from readers for publication in forthcoming issues. If you have articles/ experiences/ studies to share in the areas of consulting, entrepreneur ship, research or strategy, please do send them in to crest.xlri@gmail.com mentioning your name and institute name.
ENTREPRENEURSHIP
Institutionalizing Entrepreneurship In our effort to try and give an impetus to entrepreneurship are we creating too many formal structures for what is inherently meant to be free from rules? CREST presents a view on an un known threat that the current breed of unsuspecting entrepreneurs might be facing.
One of the reasons entrepreneurship sounds so romantic and glamorous is because of the freedom, randomness and equality attached to it. You don’t have to be from a B‐school to do business nor need an IQ of over 140 to be certified a successful entrepreneur. India is a place where entrepreneurs have blossomed from the most modest backgrounds having ordinary academic credentials. Most of them lacked sophistication and even lacked the structure as prescribed by the business environment at that time. They all bucked the trend and came out trumps. However, entrepreneurs in India may be at a risk of losing this freedom away. In the era of Venture Capitalists and Business Plan compe‐ titions we are doing again what we did to all art forms and creativity: Giving structure and institutionalizing it. So, we have prescribed formats, things like ‘10 Must Not Dos for a budding entrepreneur’; arm‐chair seminars and confer‐ ences that focus on ideas but not execution etc. Increas‐ ingly, a lot of entrepreneurs are losing their own identity, their own unique trait falling prey to structuring them‐ selves and their Business plans for a Venture Capitalist or a fund. A serious question needs to be asked by the entre‐ preneur whether he/she is losing himself/herself in this new trend where one is constantly tailoring oneself in the desperation to kickoff a business. Recently, we had a workshop on entrepreneurship here at IIM. Half‐way through the workshop I switched off. The speaker started giving models and Porter’s theories to evaluate businesses. This is slowly turning into another major problem. If entrepreneurship could be taught like this then only the MBAs of the world would conquer the world of business. As soon as you try formalizing a con‐ cept, you say it has rules. There are no rules for entrepre‐ neurship. It can be as great an equalizer as the internet. Even the Juicemaker can rise up to be the market leader in selling music cassettes (Gulshan Kumar) or a college dropout can amaze the world with products like the Mac and iPod (Steve Jobs). No one can prevent their success. The ironic thing is that they are now trying to make money by teaching entrepreneurship and giving gyaan on it. The modus operandi is simple like many other ways of making money. Complicate a sim‐ ple thing first. Then extract money to give an illusion of simplifying something that does not need any simplification. Entrepreneurship is the transformation of subdued energy into something meaningful, a vent for the creativity of the human mind, a process where raw talent finds its rightful place. It’s the single big‐ gest reason for the progress of mankind and the change we all experience over time. Do not kill it by adulterating it with formal structures. About the Author: Ankit Doshi is a firstyear student at IIMIndore. He is an aspiring entrepreneur and writes extensively on his website http://www.ankit9doshi.com.
22
CREST CRESTNov July2009 2009
STRATEGY
The New Global Challengers A new world order is emerging. One where the most respected Multinational Corporations are not just western organizations. As Rapidly Developing Economies (RDEs) take centrestage, CREST examines a report by The Boston Consulting Group to find out what kinds of strategies make these corporations tick. Any discussion on the world economy these days is incomplete without mention of the very signifi‐ cant contribution of developing countries, more correctly referred to as the emerging economies. This group, led by the BRIC nations, now control a huge chunk of the world’s wealth through corpo‐ rations that were initially behemoths in their home countries, but which have lately become multina‐ tionals to reckon with. A report by The Boston Consulting Group titled “The New Global Challengers” follows the strategies followed by these multinationals and examines how 100 top companies from rapidly developing economies are changing the world. A few years ago, any corporation aspiring to “globalize” had to keep track of a few MNC’s which usu‐ ally hailed from the western economies, chief among them being, of course, the USA and UK. How‐ ever, lately the heads of corporations are wondering which world‐class companies from the emerg‐ ing economies are to be looked up to. Firstly, the reasons why these new global chal‐ lengers are becoming significant. They are rather evident: 1. The rapidly developing economies (RDEs) have low cost resources 2. They have rapidly growing markets, some of which are very large 3. Difficult operating environments in RDEs produce some highly capable companies 4. RDEs are training grounds for competing with global incumbents Based on the above, the companies easily de‐ velop the competency to scale up and go global. Their motivation to go global is almost always to develop new profit pools, because overseas mar‐ kets mean higher margins as well as higher volumes. The need for sustainability is also another fac‐ tor. Though all the 100 companies studied are pursuing globalization in their own unique ways, an inter‐ esting finding of the report is that certain patterns in their strategies are discernible. The approach of all the 100 companies could be categorised into six broad models. Model 1: Taking RDE brands global 28 of the RDE 100 are growing internationally by taking their established home‐market product lines and brands to global markets. A good example of this is China’s Hisense. The company is China’s premier manufacturer of TV sets, air conditioners, PCs, and telecom equipment, and now has a presence in 40 countries. Hisense’s success to date is based on its stylish consumer products which provide very good value for an affordable price. Like Hisense, companies in this category build inter‐ national momentum on the basis of home‐market products that have broad global appeal and often position their products as good value‐for‐money alternatives to established brands. Contd. on Pg. 4
3
CREST Nov
2009
STRATEGY Model 2: Turning RDE engineering into global innovation 22 of the RDE 100 are growing internationally by marketing innovative technology‐based solutions that leverage their strengths in engineering and research. A representative example is Wipro, the IT‐ services group. Whereas Wipro’s value proposition initially focussed on cost, it now creates value by completely re‐designing its clients’ business processes, something that requires high degree of inno‐ vation capabilities. This is spurred on the by the cast talent pool that the emerging economies pos‐ sess. Model 3: Assuming global category leadership 12 of the RDE 100 are growing by focussing on one specific, relatively narrow product category. For example, Hong Kong’s Johnson Electric, which is the global market leader in small electric motors for automotive, consumer and various commercial applications. Johnson Electric makes broad use of China’s advantages, leveraging superscale manufacturing and material sourcing to achieve an ex‐ tremely high degree of specialization, very high volumes and very low global unit costs. Companies in this category have in common a relatively well‐defined target market for their products and con‐ siderable depth in their chosen niches. Their specialization, thus, allows them to be best‐in‐class. Model 4: Monetizing RDE natural resources 13 of the RDE 100 are growing by marketing products that leverage their home countries’ natural resource advantages. Prime examples are the Brazilian food processors Sadia and Perdigao. Both op‐ erate along the entire value chain, from farming to marketing chilled and frozen foods and high value‐added products such as ready‐to‐eat meals. Companies in this category build their global ex‐ pansion on natural resources which are low cost by international standards. Their advantage stems from an abundance of energy, minerals, agricultural feedstock, or a combination of these. Model 5: Rolling out new business models to multiple markets 13 of the RDE 100 use this approach by rolling out models that they have pioneered in their home markets. Representative of this strategy is Cemex, one of the largest ready‐mix‐concrete companies in the world. The key to Cemex’s success lies in its rigorous approach to integrating and running ac‐ quisitions. A number of companies in this category are still in the early stages of globalization. These companies tend to expand in one of three ways – either they have a comprehensive formula for ac‐ quisitions, or they operate in a manner that creates superiority along a critical dimension, or they may exploit advantages such as cultural similarities, shared language, or political ties. Model 6: Acquiring natural resources 12 out of the RDE 100 are expanding overseas not to capture new profit pools, but to obtain vital raw materials. A good example is Shanghai Baosteel Group Corporation, China’s biggest steelmaker. Baosteel’s international expansion has been aimed at securing sta‐ ble iron ore supplies. The companies in this category are active in either fossil fuels or metal and mining products. The fact that most companies’ strategies fit into one or the other mould means that there is a certain method these MNCs from emerging economies are using which works wonders for them. It is now upto the incumbent leaders to learn from these strategies and come up with measures to counter them. Source: “The New Global Challengers: How 100 Top Companies from Rapidly Developing Economies Are Changing the World” by The Boston Consulting Group
4
CREST Nov
2009
CONSULTING
To Consult or Not To Consult? As margins dwindle and assignments are hard to come by, questions are being raised about the latest practice of consulting companies to over work their associates. In this these tough times, certain companies still stand out due to their employee friendly prac tices, reports The Consulting magazine Consulting as a profession has always been attractive, especially for the young business school graduates. However a recent article in The Con‐ sulting Magazine would make everyone think again. A research conducted on the top few consulting firms by the magazine reveals startling figures. Everyone, starting from the lowest analysts to the highest partners has been made to overwork extensively to increase billable hours. In 2009, the analysts have worked 10 percent more hours than they have worked a year ago. This is perhaps because the firms want to increase profitability by making the analysts with the lowest compen‐ sation work the most. If the junior consultants handle the chunk of the projects, senior consultants could focus on more assignments to increase the overall profit margins for the firm. On the other hand, Partners and VPs are working an hour more on an average per week (from 54.6 to 55.4) and increasing the billable hours by 6 percent. This is perhaps an effort to include more sen‐ ior hours on the project, thereby strengthening client relationships and bringing more probability for repeat assignments. Consulting firms need to ensure that burnout doesn’t occur in the consultants. In the earlier down‐ turn (2001 to 2004), there was an overall decline in employee satisfaction, especially in the lower‐ most of the pyramid due to extensive and stressful working hours. A large number of layoffs oc‐ curred in the lower ranks leading to plunging employee motivation, engagement and faith in the sec‐ tor. This was coupled with a freeze in business school hiring during the same period. The overall re‐ sult was an acute shortage of quality talent in the recovery period, which migrated to other sectors. The research reveals that the sector is currently facing a dual problem of skill scarcity at middle management level and an overworked lower level. Now let us come to the brighter aspects of things. Certain consulting firms have emerged clear winners during the downturn. They have not only maintained high employee engagement levels, but have also been rated as one of the best places to work. There are many compa‐ nies in the top few ranks who have active Indian operations. This of course gives a green signal to us to apply when they come down next to campus for recruitment. When we see the rankings given according to the overall quality of job, we have McKinsey at rank 1. Others hav‐ ing Indian operations are Bain at rank 4, A.T Kearney at rank 5, BCG at rank 8 and Booz at rank 10. The quality of projects given, overall util‐ ity of the project, and satisfaction of having done a project that solves a major client problem have been considered as the parameters for this ranking. When we see leadership capability rankings, we have Bain, McKinsey and BCG at ranks 2, 3 and 4 respectively. We also have Booz at 6 and A.T.K at 8. An interesting candidate is PWC at rank 10. Nearly all the above mentioned companies have also a top rank in work life balance, with the new entrants being Accenture at 8 and Deloitte at 10. Deloitte also leads the pack in Culture rankings, with a rank of 4. The most interesting rankings, those of compensation and benefits given to employees, have BCG, Bain, McKinsey and Towers as the leaders. 5
CREST Nov
2009
SPECIAL
REPORT
An analysis of a yet‐to‐fail creativity king Failures are stepping stones to success. But such stones seem to be absent in some exceptional success stories. CREST brings a special re port on one such wonder, an everyone’s favourite—PIXAR ANIMATION STUDIOS. The review has been inspired by Harvard Business Review article ‘ How Pixar fosters collective creativity. Sept 2008’ Very few companies have seen constant success. And the number is al‐ most zero for movie production companies or studios. Why we have used the word ‘almost’ is because of the existence of an entity know as Pixar Studios. The California based animation master uses the latest technology and the best talent to produce classics year after year. Till date it has won 22 Oscars, 4 Golden globes and 3 Grammies, and it has yet to see a flop. The association with Disney since 2005 has not halted or changed the pace of its success. What lies behind its unstoppable vic‐ tory trot? Interestingly, Pixar never borrows ideas from outside. Each of its movies have been completely conceptualized, idealized, designed and executed in house. They have pushed the limits of technology each time, creating dozens of patents in the process. Adherence to a set of principles that are never compromised is a major reason for its success, says Dr. Ed Catmull, head of the motion studio. Focus on relationships with people is a constant endeavour. Risk prevention is a bad word, and instead they divert their en‐ ergies to develop capabilities to fight when small hurdles challenge them. A constant challenge given to oneself and a never ending search for flaws that may destroy their culture is a hallmark of every employee. Creativity, according to them, is not a mysterious solo act or a serendipity but a conscious effort on the part of a team of people working together to solve many problems. The initial idea, or the so called breakthrough, is for them merely one step towards a process that would take another five years. Ideas exist in every dialogue, every movement, every second of their movie. And those ideas are generated by a team of 200‐250 people working together, which are sorted out and de‐ signed to form a meaningful mosaic. This of course, is not an easy task. Be‐ hind the string of movie blockbusters, says Ed, lies a strong culture of peer driven problem solving process. Fear is a must in every Pixar pro‐ ject, and they believe that if they aren’t always atleast a little scared, they are not doing their job. ‘Something new’ or ‘innovation’ is not a one time af‐ fair but an everyday reality. Risk is therefore, the source of their existence. Their most recent film, WALL·E, is a robot love story set in a post‐apocalyptic world full of trash. And their previous movie, Ratatouille, is about a French rat who aspires to be a chef. Talk about unexpected ideas! At the outset, everyone is generally sceptical about many ideas. But then they take the plunge and never look back. To act in this fashion, they as execu‐ tives have to resist their natural tendency to avoid or minimize risks, which, of course, is much easier said than done. In the movie business and plenty of others, this instinct leads executives to choose to copy successes rather than try to create something brand‐new. That’s most of the movies are so alike. It also explains why seeing unchartered territories are an obvious imperative for them. This, HBR be‐ lieves, comes only from talented people. 6
CREST Nov 2009
CRESCENT REPORTER
Ensemble 2009 was a huge success on campus with hundreds of students participating from all over the country. The CRESCENT organized event Strategikon was no exception. Sponsored by none other than COGNIZANT, an IT consulting major, Strategikon turned out to be a major crowd puller in the management festival. No less than 96 entries poured in for the first round of the event, with contest‐ ants thinking in all ways possible to crack the case. Teams were required to study the basics followed by a detailed research and recommendation of viable targets that Pas‐ sion Inc., a fast expanding consulting firm should acquire. Sky was the limit of imagina‐ tion and teams came up with the whackiest of proposals for potential target companies. 6 teams made into the final list with the stakes being quite high (one lakh prize money). Behemoths like IIM B, IIM C, IIT B, XIM B and 2 teams from our own XLRI marched in with their weapons sharpened for the final round. Judges were none other than Mr. Rajarshi Chaterjee from Cognizant and our Respectable finance expert Profes‐ sor Prantik Ray. Judging the teams was an arduous task since the entries were each masters of their own right. Teams used different ap‐ proaches to arrive at the target acquisition, some going for geographical strategy while others pursuing niche areas like tourism and hospitality. Various aspects like syner‐ gies, financials, market scenario and indus‐ trial scenario were thoroughly analyzed. But finally a call was made and the team from IIT Bombay came out victorious, with the runners up being from our own insti‐ tute XLRI. The comments given to the XLRI organizing team were extremely positive and it was a great learning experience for all the participants and the audience.
CCubed: Interaction with Mr. N.S. Rajan
This month’s C‐Cubed event was an interactive session with Mr. N.S. Rajan, Partner & Asia Pacific Head of Human Capital at Ernst & Young. An XLer from the batch of 1983, he gave the participants some wonderful insights into the world of consulting. After laying down the detailed structure of the consulting world as we see it today, Mr. Rajan enthusiastically asked everyone to come up with as many questions as possible. Besides clarifying larger doubts on students’ minds, he also shattered some common consulting myths. Finally, he wound up the session by sharing his own experiences with clients and advice to students on what to look forward to in a career in consulting.
7
CREST Nov 2009
NEWS WATCH
Social Networking explodes as Job Search tool
As the nation's job seekers attempt to find any advantage in a tight job market, more and more are turning to social networking to stand out from the crowd. However, while these sites have the potential to revolu‐ tionize the job search, they could also prove harmful for those who rely too heavily on them or misuse them, warns one employment authority.
"The job search has changed radically over the last two decades with the advent of electronic mail, the Internet, social networking, smart phones, etc," said John A. Challenger, chief executive officer of global outplacement consultancy Challenger, Gray & Christmas, Inc., which provides job‐search training and counseling to those who have lost their job. "However, it is important to remember that all of these tech‐ nologies simply enhance the job search; they will never replace the face ‐to‐face connections that are critical to a successful search.”
One reason the number of social networkers is on the rise is due to increased use among busi‐ ness professionals. In fact, the most rapidly growing age group represented on Facebook is the 35‐and‐older population.
Job seekers are not the only ones taking advantage of these new tools. Employers are also jump‐ ing on the social networking bandwagon. A recent survey by Jobvite found that 80 percent of companies use or are planning to use social networking sites to fill vacant positions.
CRESCENT MEMBERS Faculty Advisor Prof. Munish Thakur
Secretary Vishal Agarwal Senior Executive Members Abhinav Singhal Ankit R. Agarwal Anwar Syed Mandar Kulkarni Manoj G. Kamath Sandip Shinde
"Perhaps the most dangerous aspect of the Internet is the permanency and pervasiveness of any and all information that finds its way there," said Challenger. The other danger is that many job seekers tend to let the Internet become their primary, if not sole, job‐search tool. It is too easy to simply sit in front of one's computer all day, scanning job boards and expanding one's virtual network through LinkedIn. One must understand that nothing that replace the impact of face‐to‐face meetings.
Source: http://www.consumeraffairs.com
Indrajit Yadav
Junior Executive Members Aalok Sanghvi Ajanta Anindita Himanshu Saxena Miti Vaidya
FUN CORNER Managers’ Speak Says: I didn't understand the e‐mail you said you sent. Can you give me a quick summary? Means: I still can't figure out how to start the e‐mail program. Says: Our business is going through a paradigm shift. Means: We have no idea what we've been doing, but in the future we shall do something com‐ pletely different.
Mohammed Quraishi Siddhesh Ajgaonkar
CRESCENT email id crescent@xlri.ac.in
Says: You obviously put a lot of work into this. Means: This is awful. Says: We need to syndicate this decision. Means: We need to spread the blame
Cover Photo Courtesy Varun Madan
if it backfires. Says: There are larger issues at stake. Means: I've made up my mind so don't bother me with the facts. Says: We have to leverage our resources. Means: You're working weekends. Says: I'm glad you asked me that. Means: Public relations has written a carefully phrased answer.
8
CREST Nov
2009