Why Lankan companies.........

Wednesday, 3 April 2013 00:00 -     - {{hitsCtrl.values.hits}}

We live in an era where companies such as Unilever touch as much as 3.5 billion lives every day in some form, as Paul Polman, the Unilever Global Chief Executive Officer (CEO) claims. One’s market penetration levels cannot be high as this unless he or she is absolutely world class.

At a time when an increasing number of organisations are thinking global and striving to become world class, Sri Lankan companies, on the contrary, are yet to make their mark even in this region. Or else can anybody think of a company who serves our own 20.2 million people, in other words at least a 0.57% of what Unilever does?

Unilever’s next strategic vision is to touch almost every living human being on this earth; serving the everyday lives of a population of 7.0 billion as Paul Polman envisions.

This is not to say being world class is serving everyone on this planet or for that matter being best in class, as Amal Cabraal, the Chairman of Unilever Sri Lanka correctly opines.

But a thing to ponder: Amidst all this, only two Lankan companies have managed to feature among the top 1,000 Asian companies; a ranking carried out based on market capitalisation of the companies in developing nations. The highest ranking was at 680 with a market capitalisation of US$ 1.4 billion followed by the second having a ranking in the range of the 800s.

This revelation came at a time when a much larger number of companies from Malaysia, Thailand and even Bangladesh have crept in to the top 1,000 list. One Bangladesh company is ranked well above its Sri Lankan counterpart at 362. There are 78 Malaysian companies too in the list.

This is also at a time when Asia is home to the most super rich with 608 billionaires out of 1,453 billionaires in the world.

These two very different anecdotes would have brought a shock to many, yet in different tones, particularly to those who were present at a regular power evening organised by the Sri Lanka Institute of Directors (SLID) under the theme ‘Aspiring to World Class Performance,’ which was empowered by Aubrey Joachim, a Sri Lankan born globally-renowned strategic finance change manager who now runs his professional training and coaching consultancy in Sydney.

Why do we fail?

This may be a sensible question to be asked from ourselves and Aubrey capitalised on this opportunity to pose those few but tough questions which kept a powerhouse of Lankan business decision makers on their toes.

  • Do you understand your customer expectations?

“I have been visiting Sri Lanka quite a few times during the last year,” said Aubrey. “I engaged one particular car driver on all these occasions and even referred him to a few other tourists as I thought he deserved it. So he struck a chord with me. But when I was planning my visit this time and dropped him a mail one month ahead asking him to help me to get around, I received a return mail from him declining flat out even without offering me an alternative option.”

Here is an opportunity to build a business, yet as everyone understands there is no appreciation of customer expectations particularly at a time when a vast majority of companies are all out to exceed customer expectations.

“Sri Lanka has a burgeoning service sector which dominates the entire economy by 58%. Tourism is a booming industry in this country. Yet, what have your organisations done to recognise customer needs?” he asked.

For an Australian of the likes of Aubrey who visits Sri Lanka only a few times a year, this could be a one-off event which surprised him, yet for a Sri Lankan customer who shops every day, this is business-as-usual as everyone experiences this throughout the day.

nDo we harness information for decision making?

“Today, if you literally open your corporate front door, there is an ocean of data flowing by you. But what are you doing about it?” Aubrey asked the Lankan director fraternity, quoting a CEO of SAS, the leader in business analytics.

Today, in every eight to nine months the amount of data in the world is doubling (big data revolution) and the question of how much emphasis the Lankan organisations are putting on the use of this information in their decision making is a question worth asking.

  • Do we have open access to capital?

According to the HSBC global research report published last October, Sri Lanka is starting to appear in the global investors’ map again and moreover, amongst the four Asian countries which have been evaluated, Sri Lanka has been identified as the most investor friendly nation.

“Opportunities are abundant in Sri Lanka because you are now on the investor radar screen. So what do you need to tap in to this vast amount of capital?” he asked. “Good returns are required and excellent performance is required. So, in order to deliver good returns to lure these investors the company needs to perform better.”

  • Do we harness human capital?

Aubrey is of the view that harnessing the human asset is an area which is significantly underplayed in Sri Lanka. “I am yet to see the Sri Lankan leaders grasp it with a passion.”

Aubrey Joachim, the first non-European Global President of the Chartered Institute of Management Accountants (CIMA) United Kingdom in the ’90s (2009/2010), asked how much emphasis is given by the Sri Lankan organisations on investment on training and development of the employees who are instrumental in delivering higher quality service.

“Human capital is the only appreciating asset in an organisation. Despite Sri Lanka having the second largest CIMA population behind United Kingdom; what we see here is a company hiring someone qualified assuming that they know everything. But it is not the case. To me, it is just the start of a learning process,” he quipped.

He urged the Lankan business leaders to empower the staff to do the right thing, exploiting human resource analytics and at the same time rewarding and recognising them for their performance.

“Recognising and investing on human resources is of paramount interest particularly in a country which has a burgeoning service sector and more importantly at a time of striving to develop a knowledge economy,” he opines.

nDo we harness the technology?

For the first time in history the Sri Lankan software industry was featured on the United Nations Conference on Trade And Development’s (UNCTAD) Information Economy Report (IER) – 2012 which identified the country’s software industry as having the highest export orientation, a position shared with the IT services of the off shoring giant, India.

“The question is whether domestic companies have made an attempt to harness the already available competency in Information Technology. I recently met a Norwegian investor who had come all the way bypassing many other countries to Sri Lanka as he believed Sri Lankans could develop high end technology for his requirements,” he remarked.

The UNCTAD’s IER report itself raised concerns of the Lankan software industry’s bias towards the export market which results in crowding out the domestic software needs. The fact that the size of the domestic market for software and IT services is estimated to be only one sixth of the software export market (at US$ 48 million) in 2011 speaks for itself.

nDo we have a management philosophy?

According to Aubrey, the management philosophy involves the way of doing things in an organisation which includes but not limited to concepts such as Total Quality Management (TQM), 5-Ss and Toyota Production System et al.

“Management philosophy should permeate through the organisation right from the top to the bottom of the hierarchy. However in order to ensure that the management philosophy is accepted and embraced by everyone in the organisation, the senior management needs to drive the philosophy through example,” he demonstrated.

  • Are we really fast to the market?

‘Cycle time leadership’ in management terms is how rapidly the company can bring the products to the shop floor faster than the competitors. This becomes particularly important because today, ‘time is money’.

Aubrey explains: “That is why manufacturing is now going back from China to Europe and to the United States because today companies are increasingly looking at near sourcing rather than outsourcing to Far East.”

Elaborating further on how world class companies such as Zara, a Spanish fashion retailer operates worldwide, he said Zara had completely turned around the conventional retailing model through a concept of ‘rapid respond retailing’.

“Zara has the core-competence in identifying any emerging fashion design from fashion shows and bring the product within just 14 days to the shop floor, across the world simultaneously,” he said.

Zara has near-sourced their production back from China to Europe in order to enable them to reduce the flying distance to a range of four to five hours to deliver the products to the capital cities in Europe such as London, etc.

Coincidentally, the founder of Zara fashion brand, Amancio Ortega of Spain, became the third richest man on earth with a net worth of US$ 55 billion behind only to Carlos Slim and Warren Buffett according to the Hurun Report, a world rich list published in February.

Nevertheless this is in stark contrast to what Aubrey experienced in Sri Lanka on his visit where he walked in to a reputed tailor of men’s garments to get a suit stitched during his brief stay in Sri Lanka. Accordingly, to his surprise, Aubrey has been asked to wait 12 days to deliver the garment whereas he was expected to stay only three days in the country.

“In Bangkok you can get a suit done within 24 hours before you fly-out. After they take your measurements for the first time they give you (customer) a unique number which enables them to recognise your tastes and measurements. So, whenever you want to get another suit done they could deliver to your doorstep irrespective of where you live in this world. You only have to tell them the colour you want and the place you live because they already have your measurements in their database which is identified based on that unique number,” he said.

However, here is a country (Sri Lanka) which attempts to attract tourists. There is a vast majority of people who visit the country on two to three days’ business trip during which they might want to try a new suit before they fly-out. “In Sri Lanka the opportunities are going a begging and what are you doing about them?” was his question from the audience.

nAre we cost leaders?

Or have we at least tried to become cost leaders? How much leakage of costs is there in organisational processes in all areas? Have we given any thought to this?

“I inquired from a group of business leaders at a recent workshop if they had heard of concepts such as activity based costing or if they have at least tried to apply them in their organisation. Surprisingly the responses were in the negative. These are things that they have given up on, even though there is a whole gamut of opportunities to be exploited through practicing in organisations,” he noted.

  • Do we deliver what the market wants?

Today the markets increasingly want ‘agility’. The concept of being agile refers to an organisations’ ability to quickly respond to changing environments around them.

“Organisations do not operate in isolation. Organisations operate in customer environments where customer requirements are changing at a rapid pace. And sometimes the companies will have to respond to things that are unexpected. So how agile are you?” he questioned.

nAre we serious about virtual relationships?

Even though relationships are increasingly becoming virtual with the aggressive proliferation in social networking, e-commerce, e-mails, mobile telephony, etc., Sri Lankan companies do not appear to have taken those avenues seriously in their strategy formulation in building strong customer relationships across borders and across time horizons.

Aubrey, who is also an Old Peterite, describing one of his experiences with a leading bank in Sri Lanka, said: “As an old boy, we set up a fund opening an account in one of the leading bank in Sri Lanka to support us with the objective of providing financial support to a selected group of deserving students in the school. Since there were some practical issues with regard to signature cards, etc., I dropped an e-mail to this particular senior bank officer perhaps two week before I came to the country expecting to get a solution to the problem.”

Aubrey has so far not heard a word from this particular banker. “Now you can see that there are opportunities abound. But are we taking advantage of them?” he queried.

  • Do we offer individual customer satisfaction?

Today, a simple vanilla offering to every customer may not be adequate to sustain a company given the sophistication of customer requirements and their uniqueness. Therefore while Unilever offers the same toothpaste to 7.0 billion people in the world, the times may not be too long for Zara to offer 7.0 billion unique designs based on each person’s tastes.

But as Lankan shoppers we know better the pathetic attitude carried by a vast majority of sales personnel just to sell their only available product on display. So need we say more of satisfying individual customers in this country?

To put it simply, most organisations are not bothered at all about the customer.

“We are in a world today following a human genome project and the work is being carried out by pharmaceutical companies to produce medication to the DNA of every human being,” Aubrey said.

According to him within the next 20 years mass produced medication such as Paracetamol, etc., will disappear and other medication will be produced based on the DNA of the human being.

“That is the extent to which customerisation (Wikipedia: the customisation of products or services through personal interaction between a company and the customer) is getting in to in the world,” he said.

So, is this world class performance?

Yes, world class performance is about performing at a superior level, delivering on the perceived customer quality, price, speed and reliability of delivery, flexibility and continuous innovation.

Aubrey puts the above criteria (tough questions) in to a framework and calls it ‘The World Class Performance Pyramid’ of which ‘offering individual customer satisfaction’ is at the top of the pyramid along with the fundamental starting point of ‘understanding the customer requirements’.

But many an eyebrow must have been raised among the audience as to how the Lankan companies could become world class.

Much has already been said. Nevertheless as Aubrey simply puts it, “by doing the right things and doing them right” we should be able to achieve this standard.

‘Doing the right thing right’

“Do you have processes in your organisations where you identify those? Do you identify people who need the opportunity to identify those? Do you identify the best performers?” he continuously asked the Lankan business leaders as he believed the meritocracy in our corporate sector is an area which required attention.

According to Reed Hastings Jr., an entrepreneur and education philanthropist and the Fortune’s CEO of the Year in 2010, if he identifies a 22-year-old best performer in a department of 40-year-olds, he will not hesitate to promote him as the boss.

“Could we expect this from organisations here? Here are things to consider…” he gave us food for thought implying that being world class to a greater extent depends on world class people.

But the right strategy is the key

Yes, strategy is the key either in becoming world class or becoming a failure.

“Do you have strategic vision for your organisations similar to what the Unilever CEO envisions? When can we see Sri Lankan companies going up the ladder in becoming world class, at least even in the Asian top 1,000?” he challenged the Lankan corporate leaders.

Strategising as well as becoming world class is a continuous journey because if a company stops at a point, a competitor could beat you.

Dear directors, strategy is no more your prerogative

According to a Harvard University Professor, strategy is no longer the prerogative of the CEO or the members of the board but everyone’s responsibility. Strategic ideas can emerge at every level in an organisation.

“But unfortunately very few in the organisation are aware of its organisational strategy. So, how are they going to deliver if they do not know of the company strategy?” he asked while urging the strategic apex to facilitate an open culture in order to encourage best ideas emanating from the operational level similar to that of many Japanese management styles such as TQM.

It is equally important to realise that corporate failures too occur at the strategic level.

“British Petroleum had to spend billions of dollars only because five years prior to the Gulf of Mexico incident a strategic decision was taken at the board meeting to compromise safety at the expense of the bottom line. So this sent a message down the line and we know the consequences of that,” he illustrated.

Lanka in a flat world

Thomas Friedman, in his bestselling book ‘The World Is Flat’ brilliantly analyses globalisation, primarily in the early 21st century and says world is a level playing field in terms of commerce, where all competitors have an equal opportunity and no country is better than any other.

Hence Sri Lanka is now on an equal footing with the rest of the world. But the greatest challenge is that we are not isolated anymore and thus the country has a very important part to play in the global economy. Therefore to compete with the rest of the world class players there is no other alternative for us but to become world class ourselves.

“I see a tremendous opportunity for this country to climb up the ladder of world class performance because we are in an era where exponential technological development is taking place. So, a country does not necessarily require putting up ports and airports with huge sums of money because today the key is information,” Aubrey correctly mentioned, demonstrating how India and China is at the forefront of Business Process Outsourcing with virtually no infrastructure.

Hence this is an opportune time for Sri Lankan corporates to lift themselves to world class standards since our corporate leaders have the potential.