SHOULD MEMBERS OF PROFESSIONAL BODIES BE ALLOWED TO ADVERTISE?

IN INDIA, MOST PROFESSIONAL BODIES DON’T ALLOW THEIR MEMBERS TO ADVERTISE. REASON: ADVERTISING UNDERMINES THE RELATIONSHIP OF TRUST BETWEEN A PROFESSIONAL AND HIS CLIENT. BUT, IS IT TRUE?

In US, as early as in 1977 the Supreme Court had upheld the right of professionals to publicise and advertise their services. Although in India most professional bodies don’t allow their members to advertise, occasionally there is a clamour for such permission. The code of conduct for practising members of ICAI says that a Chartered Accountant (CA) in practice will be deemed to be guilty of professional misconduct, “if he solicits clients or professional work either directly or indirectly by circular, advertising, personal communication, interview, or by any other means.”

The issue of self promotional advertising rears its head from time to time. The rising tide of consumerism and the state commitment to the philosophy of laissez-faire have together fuelled this move. Those who support advertising by professionals proffer a number of arguments. Thus, the case for self promotion rests on points like; one, advertising will increase demand, innovation, and competition, particularly in the area of routine practice of the profession; two, advertising will make it easier for new entrants to a profession to establish a viable practice; three, advertising will increase the availability and quality of information to consumers; four, advertising will potentially lower the prices of professional services to consumers as a result of increased competition; and, five, inter-professional competition necessitates advertising. Practising CAs supporting the freedom to advertise, for example, say that nowadays the practising members undertake multi-varied jobs from project fi nancing to certifi cation of financial statements. And since this has led to specialisation on the part of the individual CA firms, at least informative advertising should be allowed.

In US when optometrists were allowed to advertise prices fell by about 32% for eyecare products. And no evidence of deterioration in quality of services was found. For routine legal and medical services also, prices in US have fallen since the date permission to advertise was granted. Recently the Parliamentary Committee on Subordinate Legislation in India has taken a serious note of exorbitant fees charged by lawyers, physicians, et al, and proposed to the government to introduce a system of transparency about the remuneration charged by them.

On the other hand, there is a growing feeling in the US that too many legal ads mislead clients by failing to provide correct information on how to hire a lawyer. Many ads, in fact, contribute to distrust on the justice system.

DRAW UP A BALANCE SCORE CARD
Let’s critically examine the arguments against advertising by professionals:  Mass advertising undermines the relationship of trust between a professional and his client: A related corollary thus is that such relationship should not be a result of high pressure advertising. Professional skills can seldom be evaluated by the client. Thus, he cannot ‘shop around’ like in case of  a commercially marketed product to get ‘best bargain’. And since advertising can simultaneously lead to increased supply (in terms of either increased number of professional or they serving more clients by increasing the speed) these professionals will indeed pass on the cost of promotion to the customer.

Second, practice of advertising may mean less incentive to introduce more efficient practices. On the other hand, restriction on advertising will promote non-price competition which in turn should promote innovation and efficiency. Third, a professional service is non-standardised, and so personal that there is nothing to inform except the existence of the professional.

The above arguments can be easily countered. There are two suppositions, both wrong, involved here: One, that there is no advertising information that can reduce a client’s search time, and, two, restriction of competition springs from a concern for the consumers rather than for earning higher profi ts.

In actual fact there are at least some services which are relatively standardised (filing of tax returns, getting uncontested divorces, termination of pregnancies within medically permissible time limits, et al). Besides, without intraprofessional competition innovation is likely to take a back-seat. And even if the services are somewhat non-standardised, while some clients may make a wrong choice, there cannot be an ex-hypothesis case to suggest that the number of clients deciding wrong will exceed these deciding right.

Professional advertising is inherently misleading: It is said that the professional services are so individual in content and quality that meaningful comparison is futile. Second, advertising by a professional does nothing to help the customer make an informed choice because it highlights irrelevant factors; advertising can’t really highlight the competence and quality of a professional service. Well, regarding the first argument, as said above, for routine services fee can be indicated in the ad. And as regards the difficulty of making an intelligent comparison, while the argument can’t be dismissed entirely, it would be really ironic if consumer is denied at least some of the relevant information – even if not complete information – needed to make more informed choice.

Some members of profession will abuse the privilege: They may come out with outrageous ads bringing the whole profession into disrepute. Again, this indeed is a real possibility. But the correct option would be to regulate, and not put a blanket ban on advertising. The regulating bodies already exist so policing such advertising should be quite easy and effective.

Advertising will be done by large players, leaving small firms somewhat maimed: While this charge has lot of a priori merit, evidence from the US (where such advertising is permitted) establishes its falsehood. It has been observed there that larger the firm, less is its reliance on advertising.

But when small firms will advertise, all others will feel compelled to follow suit: Well, if everyone advertises then is such a development necessarily bad or should it be encouraged since it is likely to increase the comparative information available to public? Besides, again taking a cue from US, more than three quarter lawyers don’t advertise despite the option being available.

Professional advertising will have a deleterious effect since it will encourage trivial or frivolous redressals: Empirical enquiries have not found any abnormal increase in unwarranted cases. Besides, in some cases at least, will it not be better for a person to obtain a solution rather than suffering silently.

Advertising costs will be passed on to the clients: As said earlier even if advertising is permitted, not all professionals advertise. So those who advertise can’t possibly afford to raise their prices to recover the advertising costs, more particularly for standardised services like preparation of a will, statutory audit, et al.

Advertising (particularly fee advertising) will lead to lower quality services: The premise here is that advertising will lead to fierce competition and encourage some professionals to cut corners. However, every buyer does not necessarily go for the most inexpensive offer. Of course, advertised product generally has a better image though not necessarily better competence than the unadvertised one. But this difference in competence will have to be marginal; else truth will come out in no time.

Advertising is beneath professional dignity: This, however, is a tenet of faith, and not really an assertion of fact. There are likes of K.Venkataratnam from the Bar who believe “a lawyer is a repository of his client’s trust. And you can’t advertise trustworthiness”. But you have also R. K. Anands from the same Bar who think nothing of this privilege of promotion and opine that regulated promotion will be in the interest of the clients.

TO SELL, YOU NEED TO TELL
Without advertising every profession is covered with a veil of secrecy. Sans informative advertising it becomes expensive for the buyer to sample the varied offers available in the market. Since cost may be high, less searches are undertaken, uninformed choices are made. Being unaware about competitive offers, a consumer will be made to pay up a high price. Besides limited demand in absence of self promotion would mean less probability of enjoying the economies of scale thereby further limiting the possibility to cut costs and reduce prices. Advertising will in fact segment the service providers into low price-low quality group and high price high quality one. The consumer can now exercise his own discretion. Finally, in the absence of advertising the early movers (into the profession) enjoy monopoly rent due to established brand. It is only through advertising that newer entrants can build up their practice and offer the oldies competition.

So, while a complete ban is not justified, some professional control over the content of advertising will protect buyer’s interests. Tightly organised professions have been able to appropriate consumer surplus derived from quality assurance (emanating from certification); this has raised practitioners’ income to inclusion of monopoly rent. Blanket advertising bans arise because of buyer’s weak bargaining power; the ban should be lifted. And big deities’ riches be moderated.

SHOULD MEMBERS OF PROFESSIONAL BODIES BE ALLOWED TO ADVERTISE?

BRANDING POP QUEENS TO PILLS SUCCESSFULLY

A MARKETER NEEDS TO HAVE A LONG-TERM STRATEGY AIMING AT CREATING, NURTURING AND THEN HARVESTING THE BRAND IF HE ACTUALLY WANTS TO CREATE AN ICON OUT OF THAT BRAND

Lady Gaga has become the flashiest and most ubiquitous pop queen of the 21st century. By her own admission she is a ‘show without an intermission’. The Fame, The Fame Monster, and Burn This Way, her albums have sold millions of copies in the US alone. Of course, she was not an overnight sensation; she had her quota of early rejections. But she never lost her ambition and drive; being always ‘in the boxing ring’ she is now at the pinnacle of success. She rehearses too in full make up – dark lipstick, elaborately lined and lashed eyes, blood red fingernails, and a jacket that barely covers her thighs. Even if initially people did not think anything of her talent, she is presently a goddess, a counsellor, and a cheerleader to hordes of her fans. The venerated magazine The Economist says that she is a leader in the same league as Mother Teresa and a role model for the corporate world.

Such is the stuff iconic brands are made of. Every marketer has a dream to develop and sustain powerful brands. Baba Ramdev to Rolex, Lux to Lady Gaga are other marketers’ envy. Brand equity – consisting of the differential attributes underpinning a brand which give added value to the firm’s balance sheet – has to be carefully built and nurtured for attaining this status.

BUILD FOR BUYER

Saif, Shahrukh, and Salman share one common trait in their recent flicks (Agent Vinod, Ra.One, and Bodyguard): They herald the comeback of stereotypical hero of yore. Post 1991 upper middle class and NRI audience, coupled with the advent of multiplex phenomenon, prompted the producers to release movies like Hum Aapke Hain Kaun (HAHK) and Dilwale Dulhania Le Jayenge (DDLJ), films which had romance and family drama as dominant themes. However, the burgeoning lower and middle class, patronising less expensive single screens, forms the lucrative “bottom of the pyramid” market. They demanded and have got back their larger than life iconic heroes. Even if later the trend may move in some other direction, right now Bodyguard, Ready or Singham are likely to top the box office collection charts. The marketer has to listen to the customers.

When a new brand is developed initially it can be described only through its physical characteristics. A marketer must get his product right. Multinationals, with their ignorance and arrogance towards Indian market, often get it wrong be it Reebok (no coloured uppers in their casual shoes, initially), Tang (no mango flavour!), or Kellogg (cold milk, routinely?). And pay a price for this complacency.

CREATE THE RIGHT IDENTITY AND POSITION CORRECTLY

To convert a product (undifferentiated offering) into a brand (product with a distinct identity), its identity needs to be created and a positioning strategy has to be decided. First of all, the name of the brand has to carefully chosen.

Sam Gimignano, the Italian restaurant at the Imperial Hotel, is named after a pretty medieval hill town in Tuscany, Italy. Dakshin is appropriately named because it offers authentic coastal specialities (at Welcome Sheraton Hotel, Delhi) from the four southern states. However, the Zest had to change itself to SET’Z within a year. And need we tell you what happened to a lipstick brand which required PYTs (Pretty Young Thing) to ask for Kiss & Tell (the brand name!) from the shopkeeper?

Along with the name positioning plays a critical role in introducing the brand and carving out a distinct identity. DIVA by chef Ritu Dalmia refuses to serve ‘Indo-Italian’ aberration, while the menu is changed every three months. At Bukhara (ITC Maurya), serving the likes of Clintons, Obamas, and Karzais, however, the short and simple menu has consciously not been changed since its opening 33 years ago; the USP lies in being the same old place. Cocoberry has positioned its unique frozen flavoured yoghurt as a healthy lifestyle brand. This has helped it etch out a unique identity quite different from other FMCG players like Baskin Robbins, which has a pure indulgence orientation.

ENSURE PURCHASE AND TRIAL

When a brand is launched three objectives need to be achieved: attainment of brand awareness (through recognition and/or recall), the development of favourable associations, and involving the customers to the level of purchase and trial. At times a brand is already known and tried by the target customers at another physical location. When it is introduced in a new more convenient location to such customers, acceptance should come relatively easily. Hakkasan, the originally London based top-end restaurant, has been witnessing packed tables since it opened in Mumbai this June. This, despite complete absence of advertising or preopening publicity. Indian visitors to London are already enamoured of its reputation and popularity. But the issue of right timing for the launch is crucial too. Currently Indian market seems to be ready for international dining experience. But Nobu, another chain for gourmet dining, made three attempts – all in vain – in past to register its presence in India, encouraged by the fact that it has branches in nearly all of the world’s great cities, barring India. The effort yielded no result because till now India had been immune to the cult of the up market restaurants. ‘Such fancy prices’ and ‘advance reservation’ were the reactions that came with exclamation marks from the targeted Indians.

At other times repackaging and repositioning might help. Traditional Indian treatments are being reformulated as luxury exotic experiences so that they find more takers than traditional Ayurveda can hope to. Smelly oils used in traditional massage at Ananda, a luxury destination spa in Himalayas, have been replaced by specially developed deodorised ones. Kaya Kalpa at ITC Mughal, Agra has successfully repositioned the Mughal hammam into a voyage in luxury. Bridal ubtans, post childbirth massages, and the likes are being repackaged to appeal to the deep pocketed patrons.

Brand awareness (through visual recognition and/or verbal recall) depends on effective brand communication. “2-minute” promise of Maggi, Nirma jingle, and the sign off line “I love you Rasna” are the stuff legendary communication are made of. The distinct packaging of Johnson & Johnson baby products, Cadbury Dairy Milk, Kit Kat likewise call out for customer’s attention. Additionally, the customer has to be incentivised to prefer and try a marketer’s brand. The 24x7 Bar at Hotel Lalit hosts a high heel night every Thursday when female patrons get 10% off on their drinks for every inch of the heel on their shoes. Result: Instead of an average of 20 guests, the number has been swelling to 75-90. The Chalchitra Café at GK-II (in New Delhi) assures a 10% discount if you are on café’s Blackberry messenger list.

Despite all this, however, distribution sometime can prove to be the nemesis of a brand. While Bharti and Hutch both entered Indian mobile services market at the same time, Bharti quickly took the lead in subscriber numbers since Hutch made the mistake of focusing only on the large and lucrative circles and positioned itself as a premium brand. Café Coffee Day (CCD) has nearly 1,100 cafés now. Maruti has a 45% market share, partly because with 100 dealers in 643 cities its reach is thrice that of Hyundai, the number 2 in the passenger automobiles. Baba Ramdev reaches 30 million people daily through his daily yoga telecast on 27 channels. In addition, he attracts commoners and leaders alike through yoga shivirs, books, and CDs.

Finally, price plays an important factor in inducing trial. Pepsico’s Lays is facing tough competition from Johnniescome- lately, the smaller players like Balaji, and Prakash snacks. To counter it, it has recently introduced another brand Lehar at Rs.5 for a 20 gm pack, the idea being to make inroads into the “bottom of the pyramid” market. Most of these small players have been low on advertising; but at the same time, on one hand are competitively priced and on the other have been penetrating the smallest of towns through direct sales force and substockists.

FROM ATTRACTION TO ENGAGEMENT

The long term success of the brand, however, is influenced by the consumer’s perception of its true value. This perception is often based on functional and psychological attributes. Unique performance attributes that appeal to customers make them buy a brand. MacYoga of Ramdev – promising instant, on demand gratification – appeals to both hoi polloi and high profiled.

The core of Dhoni’s brand is a cool determination to win against all odds; this gives him fantastic brand equity. In the high-end apartments builders are now differentiating their offers through technology, sports academies, golf courses, and so on. At Dakshin, each dish on the menu is cooked in the spices that are traditionally used for it. At Bukhara quality checks are so stringent that each prawn used for Tandoori Jhinga dish has to weigh between 80-120 gms, not even a gram less. ‘And no forks and knives please, we are serving you finger food’. Kebabs are cooked twice so as to keep them succulent. The chefs go through rigorous training to be able to gauge spices, mix marinades, and even judge the heat. Result: Even with a cover price of about Rs.20,000 for a table for four, you have to either make advance reservation or wait for at least 45 minutes, even a couple of hours, on busy days.

A customer also uses the subjective criteria (past experience, associated cues, etc) for evaluation. Ai (meaning love in Japanese language) partly owes its success to the name of the owner A. D. Singh, a well known restaurateur. China Kitchen (Hyatt Regency, Delhi) roasts Peking Duck in an old fashioned wooden oven. The magic of Magique (owned by famed Marut Sikka) is known for elegant presentation of dishes which are served by hospitable and attentive staff. The intimate aura is created around twilight when the sitting place is lit up with lamps making for a romantic evening.

ENGAGEMENT TO WEDLOCK

Eventually the brand becomes a part of the consumer’s brand repertoire. At this stage he stops comparing it with competing brands, choosing it over them habitually, routinely. Such brand loyalty of course is a function of several factors like the perceived quality of the brand (Dum- Pukht at ITC Maurya), the perceived value image (Forest Essentials range of personal care products), the trust placed in the brand (Nokia), and the commitment the customer feels towards a brand (Tata Salt). A committed consumer guarantees future income streams as well as facilitating brand extensions by transferring any positive associations to new brands. In the past six years or so Ramdev has created a loyal customer base through enviable communication and wide distribution network; this parallels that of many big market led consumer brands in India.

Indipop, ruling between 1995-2000, on the other hand died because the myopic music companies, blinded by big buck earnings, started introducing cheaper but very mediocre stuff. International sensations like Kate Perry, Shakira, and Lady Gaga easily dethroned the likes of Alisha, Biddu or Lucky Ali.

MILCHING IT FURTHER

The last stage in the evolution and development of brand equity enables a marketer to strategically exploit any equity the parent brand has built up, into newer areas of promise. Brand loyalty allows companies to further grow the brand equity by gaining commitments towards related brands from existing consumers and existing channels. Baba Ramdev, the savvy marketer that he is, is trying to use his phenomenal success as a yoga guru to extend his brand to social activism and politics. His Facebook page has now 61,000 fans. 3.2 million people have already joined his anti-corruption campaign online. His pan India presence and popularity cannot be surpassed by any politician. His image of a true yogi (selfless, pure, and do gooder) has rubbed off on his activist avatar. The audience grants him a lot of credibility while his bhaktas are willing to lap up whatever he offers in verticals other than his core ones (yoga & ayurveda). Kissan (HUL), Dove, and umpteen other brands try for attractive bottomlines through the same route of brand extension.

So, unless you are in the business of selling lip tattoos or stick on stones for the pout, you have to have a long term strategy aiming at creating, nurturing and then harvesting the brand. More importantly, you must have the correct route map.

BRANDING POP QUEENS TO PILLS SUCCESSFULLY

CHEERLEADERS FOR CONSUMERS

IN TODAY’S COMPETITIVE WORLD, THE MARKETER CERTAINLY NEEDS TO CREATE THE RIGHT MOOD IN THE POTENTIAL BUYER TO INFLUENCE HIS PURCHASE

Badnaam Munni, the controversy surrounding the song, and the popularity of the song worked wonders for Emami owned Zandu Balm; sales doubled during July- September 2010 quarter. Then, the company decided to use Shiela Ki Jawani to sell Boroplus. And now, Emami is funding the entire cost of a Bhojpuri film song that will mention its Himani Navratna extra thanda hair oil. The idea behind all this: cut through the clutter, reach out to core consumers directly, uplift their mood, and make them buy the promoted brand. Also, media penetration being low in markets for these core consumers – rural UP and Bihar residents – the movie itself will act as a good medium to reach them. Finally, Emami has also entered into a co-branding pact with the movie Dum Maro Dum to promote its talcum powder brand Navratna Cool by using the grabs from the title track of the movie.

MOODY BUYER

All voluntary purchases are dictated by our attitudinal disposition towards an item. So the job of a marketer is to create (when non-existent), enhance (when Brands like (from left to right) Zandu Balm, Boro Plus, KFC and Dabur Chyawanprash are coming up with ads that are helping them to cut through the clutter, reach out to core consumers directly, uplift their mood, and make them buy their products low), maintain (when sufficiently high), or even change (when negative) the right kind and quantum of attitude. Dabur has identified 30 villagers in Bihar & UP who will work along with Bhojpuri actor Ravi Kishan, as ‘immunity ambassador’ for promoting Dabur Chyawanprash. Indianisation of cricket in the form of IPL has meant a heady mixture of film personalities and sports, and a mela atmosphere at the matches. And with IPL setting the pace, hockey is now set to get a faster, truncated avatar with a 6, 8 or 9 members a side team, with matches of only 30 minutes duration, music on the field, and an increased pace of the entertaining game. There will be a new title as well – International Super Series. Reason: The marketers (whether Dabur or BCCI, or the World Hockey Federation) have a common aim, that of ensuring favourable altitude towards the marketed brand.

But when a customer is not interested or involved in processing marketer’s information at a deeper level, his mood itself can create the right kind of feeling towards the marketed brand. While not as intense as emotion, a mood is an affective state that is general and persuasive. A stimulus can create a positive or negative mood; this in turn can affect consumer’s reaction to any other stimulus he happens to evaluate. A person in good mood naturally likes something; the opposite is also true. Domino’s Pizzas sold about 30% more when the ICC Cricket World Cup was on recently. Mood can bias attitudes in a mood congruent direction. Consumers in a good mood tend to give more weight to positive information when evaluating a product. So Close Up toothpaste has designed an advergame Fire Freeze in which you are supposed to kiss your colleague, but without getting caught. Gaming combined with the wide reach of DTH TV is the ideal route to involve youth, the target audience and orient them positively towards the brand. HUL has online games for its deodorant brand AXE as well.

MOOD TRIGGERS

In restaurant business there is something called ‘menu engineering’. This refers to the design and strategic placement of dishes to increase consumer spend. Thus, when people are short of money during tough economic times, the menu should be short, with simple descriptions, and the prices printed right after the dish details and not in a column on the right hand side of the page since the latter practice leads to direct price comparison. Even the menu type size needs to be carefully chosen: in a dimly lit restaurant, unless the target diner is Gen Y, a large and clear format is required. Get the customer into ‘right’ mood for ordering. Not only the menu card, the overall ambience also puts the customer in a certain mood. Warm colours are more likely to draw customers to an outlet but can also create tension. Cool colours on the other hand are more relaxing, but are not so inviting. So when the goal is to stimulate quick purchase, warm colours are more appropriate (like in Café Coffee Day, McDonald’s), in health clubs, sports stadia, et al, where a high level of activity and energy is desirable. Cool colours are more suited when the goal is to have consumers feel calm or spend time deliberating (hospitals, fine dining restaurants). Apple’s stores, for instance, are decorated in white and shades of grey so as to provide a clean, uncluttered environment for showcasing high tech products.



Buyer behaviour and consumption patterns

Consumers may also like a brand better when they are put in a good mood through an advertisement or any other mode of communication. When ads for Huggies disposable diapers picture tender moments between babies and parents, they also generate positive feelings for the brand. Why do you think Johnson & Johnson is able to sell its ‘overpriced’ baby products to not-so-rich Indian mothers? – Through control on consumer/ buyers’ mind due to its highly liked and recalled commercials.

Besides, today’s customer wants to experience a brand in real time. Vending machines should deliver candies to condoms to cans of soft drinks; pop up retail space is a must wherein companies offer an experimental area for sampling the brand. There should be online/mobile platforms allowing users to get opinions on quizzed brands in real time.

Thus, a marketer has several opportunities to induce positive moods in consumers, ranging from service encounters to point of purchase contacts to marketing communication. Total Mall at Bangalore offers a free pick up and drop service to customers. Max Retail has employed NIFT graduates to help buyers select their wardrobe. Lifestyle and Madura garments promise to homedeliver the garment of your size in case not immediately available in the store. Consumers linger in stores with a pleasant ambience, increasing the probability of purchase. In marketing communicationboth the media and the message can influence the consumer’s mood. Both KFC and McDonald’s have introduced products that are heavy on spice, since spicy food is a staple for many in India. KFC has positioned itself as a youth oriented brand with teens and young adults as its main targets. The Nick channel has licensed Dora, one among many adorable characters that it has, to Colgate, while the brand has recently tied up with McDonald’s. Soon SpongeBob Happy meals will be a part of the fast food joints’ menu. Nokia, after witnessing a steady loss of its marketshare in India, is trying to rope in Shahrukh Khan and Priyanka Chopra as brand ambassadors, since the two can communicate the ‘trust’ factor to the target buyers.

CHOOSE TRIGGERS FOR YOUR TARGET CUSTOMERS

Today’s girls no longer believe in fairy tales, nor are they waiting for the Prince Charming to arrive or being swept off their feet. In DDLJ, Raj comes to India looking for his Simran. Now, Saif Ali Khan and Deepika Padukone opt to go their separate way instead of maintaining a long distance relationship in Love Aaj Kal. Movies like Break Ke Baad, I Hate Luv Storys, and Love Aaj Kal have altered the love games. Now couples throw break up bashes in Hindi films, which earlier were all mushy affairs. With the changing stance of the society towards premarital sex, breakups, and divorce people have stopped swearing by love tales. The attitudes have changed. Thus, the marketer needs to create the ‘right’ mood in the potential buyer to influence his purchase.

So, how does understanding the customer mood help marketers? Well, it provides moods cues to aid in consumer information retrieval, and it helps create positive mood states in retail or other purchase settings; this in turn should hopefully culminate in actual buying behaviour.

CHEERLEADERS FOR CONSUMERS

INDIA INC., AND THE ZEN MONK

SOME COMMANDMENTS OF LEADERSHIP THAT ONE CAN DRAW FROM M. S. DHONI’S PERFORMANCE, INDIA’S MOST SUCCESSFUL CRICKET CAPTAIN SO FAR

Cricket in India is not merely a game; it’s a religion practised by the entire nation. In that sense, it is truly a unifying force. So it was hardly surprising that people fasted (or ate only specific food items), performed havans, and made all kind of offerings to their Gods to make sure that India lifted the World Cup 2011. Why, even Yuvraj Singh wore a divine totem as a lucky charm. How much did all this contribute towards India’s win on that fateful day of April, is acceptably arguable. But no one – and there is no exception – would dispute the contribution of M. S. Dhoni or MSD or Mahi, the cool commander of the cricket brigade in bringing the glory to us all. Imbued with a positive attitude, he had told Gary Kirsten (the India coach) to keep the champagne ready to be uncorked after the final victory at Mumbai as early as when India had registered a win over Bangladesh. For Dhoni, winning has become a second nature. Ganguly made a belligerent announcement of India’s arrival on the firmament of world’s cricket when he waved his shirt in 2002. But Dhoni’s casual sleeveless tee appearance after the latest triumph declared that India could well repeat these celebrations many more times in future. The leadership provided by unflappable Captain Cool has made all the difference.

Now, he needs to steal some time from his packed schedule and offer leadership lessons to the captains of the Indian industry. A recent survey in India by Harvard Business Publishing says that gaps in leadership pipeline have emerged as the biggest HR challenge. Organisations now are likely to invest nearly 41% of their budget in leadership and management development within their companies. Indubitably, many Indian companies would love to give their left arm to engage MSD as their leadership trainer. Examples are available aplenty in media reports. While K. Ramkumar (ICICI Bank) is all praise for Dhoni’s positive motivational leadership, Santrupt Misra (Aditya Birla Group) appreciates his equanimity & calm composure, and Suvojoy Sengupta (Booz & Co.) likes his trait of leading from the front. Apparently, even IIM-A would like to appoint him as a professor. Until then, and if that happens, can we draw some commandments of leadership from Dhoni’s performance?

WINNING HIGH OCTANE BATTLES

A leader of the caliber of Mahi has a number of traits and multiple tasks to perform, so as to steer his organisation to sustaining successful performance.

Commandment 1: Have a vision & pursue it relentlessly.

Since Dhoni took over in 2007, he has given his team a vision of being top rankers in test cricket and one-dayers. In the match against Pakistan, Shahid Afridi was defensive and tentative but Dhoni was decisive and sharp (Imran Khan’s words, not mine!). Both were under high pressure but Mahi exhibited greater guts. He is always confident about trusting his instincts. He is not afraid to make mistakes and admits them, if he does (as he did, in Mohali). The solidity and intent in him makes him different from the other captains. He is a true visionary.

Commandment 2: Be unafraid to go by gut feel, the intuition.

A leader, then, correctly specifies what needs to be accomplished, and breaks it down into discrete bits. Dhoni has unerring instincts, based on which he takes chances; he wins the impossible gambit more often than not. Despite losing Ganguly and Dravid, because of their poor running between wickets, he still won the series 2-0 in Australia. Only he could have given the untested Joginder Sharma the final over in the T-20 final against Pakistan in 2007. He helps the team focus on the target, breaks it into smaller goals. Dhoni always thinks on his feet being no stickler for obstructing rules. So he promoted himself in the batting order in the final match against Sri Lanka. He takes decisions based on logic applicable at the moment. He does not like to complicate his decision making by entertaining too many counter thoughts.

Commandment 3: Manage with what you have; don’t lament over what you lack.

A great leader like Dhoni knows the strengths of his team well – but understands the weaknesses even better. When he was asked whether he was comfortable playing without Tendulkar, Ganguly, and Dravid during the inaugural T20 Cup, he replied with his characteristic candour: “I play with what I have, not with what I don’t.” The job of a leader is to allocate tasks and resources to the team members in such a way that each one of them knows what is expected of him & understand the importance of his contribution. In Mohali, he told Yuvraj, Raina, & Harbhajan to keep their cool, control the emotional outbursts, and contribute to the best of their abilities. Yuvraj was eventually declared the ‘Man of the Tournament’.

Commandment 4: Be a coach, mentor, and leader to your assets.

Dhoni puts steel into Team India’s spine. He has been able to instil and make the best use of cool aggression of youngsters like Kohli, Raina, and Gambhir. He has always acted like a buffer between his boys and the general public or the media hostilities. Performance was the only thing that mattered. In the end, what saw Team India become world champion was the fact that they were ready and confident that they would win.

Commandant 5: Monitor and control the performance of your resources; keep them on track.

Dhoni went beyond merely motivating them. He made sure that the team players backed each other and did not criticise any member even if he had a hard time in the field. Zaheer bowled frugally, Yuvraj performed to more than justify his reentry, Sehwag stuck to his job of giving India a flying start, while the youngsters made best of all the opportunities which came their way. Since Dhoni knew that his team was prone to distractions during the long gaps between matches, he would remain connected, checking even the daily routine of the players.

Commandment 6: Provide and receive feedback from others. More importantly, ensure that it is acted upon.

While the CWC-2011 was in progress, Dhoni did not mince words when he publicly said that he was concerned about his side’s fitness, which in turn was likely to impact India’s batting and fielding performance. To lessen the demotivating impact, however, he also added that as long as the team won, people would forget these shortcomings. He makes accurate and insightful judgment about people and performances, including that of his own. He openly admitted that he did not assess the Mohali pitch accurately. He candidly accepted that dropping Ashwin for Nehra thus was a mistake.

MAHI DESERVES IT ALL

Harish Mariwala (Marico) says Dhoni is a perfect fit for HR and strategy position, Venugopal Dhoot (Videocon Group) is willing to even make him an Executive Director. And Harish Bijoor thinks that he would be suitable for the position of Head, Internal Branding. Boards of many Indian companies are drawing new and tough rules to link CEO pay with performance, or lack of it. In Dhoni’s case, this year’s package of Rs.77 crore (including endorsement fees) will hardly be grudged by anyone after such a sterling performance. 2010 FIFA World Cup final was viewed by 1.5 million people, IPL-3 by 9.6 million, CWG -2010 opening ceremony attracted eyeballs of 30 million, Budget 2011 was witnessed by 37 million. And the CWC-2011 final? The number swelled to 67.6 million. During the winning moments, the match got a TVR rating of 21.44, breaking all previous records. Dhoni gave reasons to rejoice to all the stakeholders. The legendary tennis player Bjorn Borg used to have a pulse rate of about 50 upon waking up and 60 in the afternoon. One could bet Dhoni’s has never crossed 10 – at least, metaphorically speaking.

“Dhoni has transcended the ranks of captain to become a true leader,” says Imran Khan. While that could be now often heard hyperbole, the truth is, we couldn’t agree more. Dhoni practices a fine blend of transactional and transformational leadership, as mandated by the exigency of the situation. Not dictated by copybook rules of leadership, he adapts his style to the requirements of the game. Of course, he might not be able to sell coffee for nuts – but he’ll be able to instil the fear of God in your salespeople to ensure they perform phenomenally. Now, which company will have a problem with that?

INDIA INC., AND THE ZEN MONK

LIMITS OF A BORDERLESS ORGANISATION

VERTICAL INTEGRATION IS PROMPTED BY A MOTIVE TO REDUCE COSTS. IT MAY ALSO GIVE A PRODUCER ENHANCED CONTROL OVER HIS ECONOMIC ENVIRONMENT

With a 30% margin clothing business had allured many textile mills. But now, most of them, such as Arvind Mills, are opting out of this high risk, high margin industry. They realise that the highly labour intensive business is facing a chronic shortage of talent pool, and with cyclical sales patterns, offers everyday new challenges in face of high rejections of the finished product. Vertical integration is virtually nonexistent.

Now read this: Garment companies at Tirupur and Bangalore have felt that backward integration and consolidation have become crucial to the growth of textile industry as uncertainty in raw material availability and cost have been unnerving. Assured quality, timely delivery, saving on transportation cost and even availability of raw materials are some of the benefits for integrated companies. Vertical integration helps them control the costs at various points in the supply chain. Further, a company can be flexible with the order quantity as it need not outsource any work that might require a minimum quantity.

Contradictory, ain’t the above two scenarios? Well not really.

MAKE OR BUY DECISIONS

A firm integrates backward/upstream when it undertakes to produce raw materials and semi-fabricated inputs that might otherwise be purchased from independent producers. Firms integrate forward/downstream when they move toward further finishing of semi-fabricated products and the wholesaling and retailing operations that put manufactured goods in the hands of consumers. Amway, for whose 123 products (across personal care, home care, cosmetics, and gift items) Indian market is growing at 25% annually, has planned to invest Rs.400 crore to set up its first manufacturing facility in India. Currently 85% of company’s products in India are produced by seven contract manufacturers. Retailer turning producer – an example of backward integration.

In a contrarian fashion, however, in March 2004, Sunil Mittal created a flutter by outsourcing the very heart of his telecom business – technology and networks. At that time Bharti had 8.4 million subscribers; this number was expected to grow to 50 million by 2014, the terminal year of the deal period. By December 2010 it already had more than 150 million subscribers. So now the outsourcing also includes billing, application development, customer relationship management, network expansion ... The success of this model has prompted even the rivals like Vodafone, Idea, Aircel, Videocon, and others to follow suit. The whole arrangement freed up Bharti’s senior management bandwidth to focus on what they know best – build the brand, customer acquisition, and strategy formulation while the partners (IBM, Nokia, Ericsson) deliver on signed service levels.

MAKE, DO NOT BUY

A coffee plantation yields about 400 kilograms of Arabica grade, valued at Rs.142 a kilo, for Amalgamated Coffee Company. This can be exported at Rs.165 (i.e one sixth more than the local market price). But each kilo of coffee powder sold at roast and ground outlets in India sells for about Rs.250, i.e a markup of 50% from the farm gate pricing (taking into account roasting loss of about 18%). Finally, a mug of coffee at Café Coffee Day sells at Rs.42 on average, using 12-15 grams of coffee; this is Rs.4 worth of coffee per mug. This has prompted the owner of 10,000 acres of coffee plantation to set up more than 1,000 coffee retailing outlets (the highest number in India, and the fifth highest in the world) and reap the fruits of vertical integration by reducing costs and extract higher incremental value.

Vertical integration is prompted by a motive to reduce costs. It may also give a producer enhanced control over his economic environment. Upstream integration, for example, helps to ensure that supplies of raw materials are available as and when needed at a certain cost & quality parameter. Tata Motors has its own forging plant. There are many other advantages such as confidentiality of technology, barriers against potential entrants, and so on.

BUY, DO NOT MAKE

Unfortunately the choice is not so obvious always. At least, some of the benefits of vertical integration can be achieved through outsourcing. So, for every Tata Motors there is a Maruti Suzuki, for every Reliance there is an Indo Rama; they prefer to stick to knitting. These companies argue with equal convincing force: outsourcing may actually mean availability of supplies at competitive prices. Thus, with the imposition of 10% excise duty on branded garments in the latest budget, Van Heusen is contemplating sourcing them from Bangladesh and Sri Lanka, though currently 90% of the brand’s manufacturing is done in India. Then the input needed may be of highly specific dimensions requiring very large operations to enjoy economies of scale. For McDonald’s the humble potato is a very critical input, what with 30% of its customers coming to McDonald’s only to eat French fries. But due to unsuitable quality of locally grown potatoes, it invited Mc- Cain, its global partner, to come to India and set up shops here; through contract farming route McCain accesses right kind and sized potatoes so that when fried at exactly 168 degrees Celsius for precisely 3 minute and 10 seconds, the restaurant gets perfect golden coloured patties. So, instead of vertical integration, it is argued, the benefits can be achieved through contracts or informal agreements. Each firm then remains free to adjust its own scale of operation and to deal with others. Each firm will have its own incentives thereby obviating the need for an administered system as would have been required in a joint (vertically integrated) company. To be sure, the problems arise for such agreements when there are marked changes, say, when there is a sharp fall in demand, or the technology changes considerably, or when it is contract renewal time that may either be pre-planned or initiated by one side because of changed circumstances. Bombay Dyeing, for example, once crossed swords with its international raw material suppliers over the issue of purchase price of Paraxylene, wanting to convert contracted price into spot price.

DEEP END OF THE POOL – OR SHALLOW?

It is also crucial to decide how vertically integrated must the firm be or obversely, to what extent can a firm satisfy its needs through outside procurement of large scale economy components, perhaps avoiding thereby some diseconomies of managing a larger organisation (such as moral hazard, limited span of control). Noteworthy it is that while resource allocation in the market is normally guided through prices, within the firm the same job is done through the conscious decisions and commands of management. The activities will be performed intrafirm if transaction costs incurred in using the price mechanism exceed the cost of organising the same activities through direct managerial controls. These transaction costs could be high due to price shopping, communication of work specifications, contract negotiations, and even tax regulations. On the other hand if the pricing power vests with a large supplier and he exercises it to detriment of the buyer, the latter may decide to produce something intra-firm, even at a higher cost. Generally, we could say that more prone the markets are to a breakdown of competitive supply conditions, the stronger will be the buyer’s incentive to integrate upstream. So you may decide to go as far as Kodak did once – rearing its own sheep to obtain gelatin to be used in photographic films. Likewise a firm likes to integrate downstream when margins are mouth watering. A Yash Chopra dabbles into film distribution and exhibition.

LIMITS OF A BORDERLESS ORGANISATION