What is your Company's Strategy?

Over the years I have asked this question to a number of managers from MNC and Indian firms. Senior and junior. Today I am sure of this – if I ask this question to 1000 senior managers with an average 10+ years of managerial experience, more than 900 of them will not be able to answer the question with absolute clarity. Yet! They and their companies carry on with their day to day business. That explains, why many of the companies are not successful or are unable to retain market share and profits year after year on a consistent basis. It also explains ever shortening organizational life spans.

Before we get into the messy world of business, let us explore military history here, of our own war heroes! Yes! I am talking about the 1971 war! All of us think that India won the 71 war, because she had more tanks, guns, troops, and planes.

While the latest Russian weapons systems of the day may have played their part (The MIG-21 jet, The T-55 tank and the 130 mm field gun), let us not forget that India was fighting a two front war here. Pakistan too had the latest American weapons systems at its disposal in the west and even in the east; Pakistan had a huge number of troops deployed. In the west the IAF had approximately 450 aircraft and the PAF matched the IAF in numbers. The IAF enjoyed a huge numerical superiority in the east with nearly 200 fighters, where PAF had deployed just around two squadrons of Sabre Jet Fighters. The idea was to hold the ground in east till superpower help arrived! And indeed the US 7th fleet was on its way and rumors of a Chinese intervention was floating around. Also the PAF in east enjoyed a strategic locational advantage. All its aircraft was concentrated around the Tezgaon base near Dhaka, which was at the extreme range of IAF fighters operating from Assam or even West Bengal. So by the time an IAF fighter reached the Tezgaon base for bombing, it was at the end of fuel reserves and couldn’t hover for long. The PAF knew this and covered the airfield with saturating anti-aircraft fire. So! IAF’s numerical superiority in east was actually a misnomer! Relentless bombing of the Tezgaon base on December 4th and 5th 1971 didn’t yield any result and the PAF squadrons were intact. The military planners and New Delhi was aware of the super power factor and knew that the time was short. What had to be done, had to be done in less than two weeks’ time. The IAF was mandated to clear the skies in 3/4 days before the Army started moving in. The Army planned a fast Blitzkrieg style pincer movement from multiple fronts towards Dacca and the Russian T-55 tank regiment deployed played a decisive role in battle plans.

But the skies had to be cleared! And on 5th December evening, the IAF was nowhere near its objective! On 6 December, the IAF adapted a different strategy. The high speed Russian jet in IAF’s inventory – the MIG 21 was primarily an air defense interceptor – that’s the way NATO saw it and that’s the way even PAF perceived it. The IAF with practice and training with just around 10 pilots turned the MIG-21 into a lethal supersonic bomber, diving from 15000 feet at close to speed of sound and dropping a runway destroying 500 pound bomb exactly in middle of the runway and pulling up at that speed. So the anti-aircraft guns were useless at that speed. On 6th December the IAF destroyed the Dhaka runway and on 7th rendered it beyond repair. All the PAF aircraft was concentrated around Dhaka. The PAF never took off after that and a new nation was created. So the Bangladesh victory can be attributed to superior planning and out of the box thinking of using an air defense fighter as a bomber and relentless training. The IAF cleared the skies by seventh of December and army started moving in. On 16 December a new nation was created. After the war even the Russians were curious to know how the IAF turned the MIG-21 into a lethal war winning supersonic bomber, which left the enemy speechless in surprise!

The answer was a combination of fundamental Physics and Mathematics resulting in superior strategic thinking, here it was Physics + Mathematics = Strategy! So! It was finally superior strategic thinking, which played a decisive role here. The weapons only were the means to execute the strategy. The weapons by themselves didn’t prove decisive initially. The Army displayed similar strategic thinking by smartly deploying a full T-55 tank regiment, which spearheaded the attack and the march to Dacca. (Source – Eagles over Bangladesh by PVS Jagan and Samir Chopra).

I had a twin purpose of narrating the MIG-21 runway bombing episode here: - first is for all of us to know about the heroic and daring feats of a few IAF pilots, who changed the course of the war in less than 2 days. In a Bollywood obsessed nation, where a wink from an actress goes viral in social media, but the daily sacrifices by officers and jawans on the border goes unreported by an irresponsible media, this was important. The second was to emphasize the role STRTEGIC THINKING PLAYED HERE.

Business history is replete with examples, where a company entered the market and snatched away a substantial market share in a hyper competitive market, from entrenched competitors, not aided by any superior technology. Of course technological disruptions do occur and wipe away an entire set of industries, which in literature is known as Disruptive Innovation, but we are not focusing on technology based competitive advantages here. Rather I would like to emphasize on a theoretical situation from Neo-Classical Economic Theory of perfect competition, which states that all the competitors in a perfectly competitive market, has an equal amount of resources and information at their disposal. Of course this doesn’t again happen in real life, where information and resource asymmetries play out a major role in variation of market share and profits.

But let us raise a question here:- if the neo classical theory played out perfectly in real life……can a company snatch away market share from entrenched competitors? Just look at the way the two entrenched Indian bus manufacturers are losing market share in the long distance luxury intercity bus segment to VOLVO, which is a more expensive product to buy and maintain for operators, you can get some partial answers. There is a superior strategy involved here, apart from the fact that VOLVO buses are technologically superior to the domestic offerings. But again, technology alone didn’t win the market for VOLVO here. Again – Big Bazaar didn’t become the no.1 retailer in a short span of time, aided by any technology, it’s the way the chain designed its stores, crowded like Indian bazaars, and offered its schemes – reflecting deep strategic thinking.

So the writing on the wall is clear – unless every manager, right down the management trainee on field or manufacturing shop-floor understands a company’s strategy, competitive advantage can’t be retained for long. Technology, IIT-IIM stamped talent, deep pockets, political connections….all notwithstanding!!

Now let’s come to the point – WHAT IS STRATEGY? HOW DOES ONE DEFINE IT? For benefit of my managerial audience I narrate it in a simple and practical way here –

A strategy statement answers three questions very clearly –

WHO is my Customer? - Objective

WHAT needs of the customer I wish to serve? - Scope

HOW do I deliver and at what price? - Advantage

WHO will be my customer will entail answering the question – WHO WILL NOT BE MY CUSTOMER? S/W airlines in 1971 was very clear – they focused on point to point customers, who wanted to board the plane and get down with minimum of fuss and didn’t want any on board service, except perhaps a glass of water. They didn’t entertain the customer who wanted all the luxury inflight service. Often companies fail and lose market share, because they don’t answer the first question clearly and see the tradeoffs.

WHAT needs of the customer do I serve? Can I unearth any hidden and unspoken need? Can I offer something beyond the customer’s imagination? The founder of SONY, Akio Morita attempted to answer these questions and the legendary WALKMAN was born. While Nikon and Canon focuses on the serious photographer with their range of DSLRs, Hasselblad the Swiss camera manufacturer doesn’t normally makes cameras for us, the ordinary mortals. The Hubble Telescope which revealed the deepest secrets of the Universe was powered by Hasselblad, a majority of the NASA’s cameras are made by this company, and all the dazzling photography of Nat-GEO and Discovery channel is powered by Hasselblad again.

HOW do I deliver? At what price? Through what kind of supply chain? Will it be home delivery only or through retail outlets? The final element of competitive advantage will come through answering the HOW. Prior Maruti’s arrival, cars were driven from factory to all parts of India and the customer bore the in-transit charges including damages and accidents. Maruti started using long trailer trucks for delivering cars across showrooms in India and cars arrived, factory fresh. This became an industry best practice later on.

Let’s now apply the conceptual WHO-WHAT-HOW framework onto the most competitive segment of the Indian automobile Industry – the passenger vehicles.

Taking the example of MSIL, this car maker first moved in with modern automobiles in 1983 and can be credited for ushering the automobile revolution in India. MSIL’s competitive advantage comes from answering the first and last question. Especially the HOW. MSIL was the first company to deliver cars factory fresh and offered show room finance and tied up with a number of banks for auto loans. The idea was – once a customer walked inside the Maruti Showroom, he should not walk out without buying a car! Also MSIL’s extensive dealer network and good service and inexpensive spare parts answers the HOW very clearly. Early on MSIL, then known as MUL focused on the common man – the WHO. If this company today has any competitive weakness it’s in the second question – WHAT? Which it is aware of and is trying to address, evident in its product launches in last 3-4 years.

Taking the example of the two European makers – VW and FIAT, the diesel engine specialists. VW answers the WHO clearly and also the WHAT very clearly. VW doesn’t focus on the first time car buyer, it emphasizes on German Engineering excellence and focuses on the discerning customer, who may be buying his/her second or even third car. Its product excellence is beyond any question. If there is a major competitive weakness in VW, it’s in answering the third question – HOW? There had been numerous complaints about its after sales and service network and also VW is yet to get its pricing correct. Till VW answers the HOW clearly, its market share will only crawl. Its European counterpart – FIAT also answers the first two questions clearly, but badly loses out on the third one!

Coming to the two Japanese auto giants – TOYOTA AND HONDA. They answered the second and third question clearly over the years. But they are yet to figure out the first question. Their product range is still limited and yet to reach the range offered by Maruti.

Coming to the two American Auto Giants – FORD and GM. GM never understood the Indian market and never seriously attempted to answer any of the three questions clearly, resulting in its exit. FORD on the other hand dug its heels and at times painstakingly carried on with failures, till it managed to answer the first two questions clearly – WHO and WHAT with its FIGO in 2010, subsequently FORD has substantially beefed up its dealer network, indigenized the spares and has attempted to answer the third question very well. In my opinion FORD and to a good extent the Korean car maker HYUNDAI are the two PV makers, who can be ticked off for answering all the three questions right and these two can give MSIL a serious run for is money in coming years.  

Lastly coming to the two Indian PV makers – Tata Motors and M&M. They answer the first and third question very well, having been around for more than half a century. M&M is making a serious attempt to answer the second question through a series of product launches, but we don’t see Tata Motors succeeding in answering the second question clearly and can be attributed to its losing market share in all segments, including buses – its bread and butter.

This was a conceptual analysis of the Indian PV industry, using the basic WHO-WHAT-HOW framework of Strategy. Theory will vary from practice and my analysis will of course not match the reality in totality, but it still can answer many vexing strategic questions and managers in all companies, across industry segments attempt to employ the WHO-WHAT-HOW framework seriously, they can answer and solve many puzzles that may have bugged them for years.

I hope my managerial audience will find this write up useful. It was an attempt to simply theory and bring it on a manager’s table for his/her daily benefit.