Srinivasan asked:
Poor managerial performance is viewed more as structural rather than market factors. The mantra of the managements for increasing efficiencies and profitability is more often than not structural adjustments within the organization.
Structural adjustments at best produce short term results. Many of the change initiatives fizzle out after the initial spurt in productivity while management grapple with sagging morale and bottom-line. Managements initiate more change for the sake of keeping the trend going resulting in further worsening of the situation and attritions.
The major Change initiative needs to focus on the market forces and any internal change has to be specific to orienting the organization and its people towards the markets.
Some key factors that need to be addressed for market oriented change initiatives:
Globalization
Globalization has created a new scenario where capacity is no longer the constraining factor for any business. Huge capacities are available across geographical borders across product categories. Managements need to focus on the intangibles such as brand building and human resources rather than building capacities to expand markets. The phenomenal overcapacities available especially in high population countries with cheap labor creates price pressures which makes it detrimental for companies focused on capacity expansion.
Globalization has also created new levels competitiveness where price advantages alone may not be able to create the market advantages. The customer value-benefits vary across the borders. Organizations need to create products which satisfy the diverse needs of global consumers demanding a certain level of ethnic and geographical adaptation to meet local expectations and needs. The products can no longer be uniform and mass produced. Customization to market requirements and even to the level of individual customers is the pre-requisite. Some of the premium car companies have successfully adopted customization to meet customers’ individual needs across the globe and created markets where none existed.
Building Non Core Business
Capacities no more being a constraint the organizations need to build a strong brand and move into unrelated businesses as well to drive revenues and survive in a changing market scenario. If you are focused onto a ‘core business only’ strategy you may be out of business the moment technology changes make your product or market defunct. Building new businesses makes sense for managements who have build competencies in human potential and management resources along with global brands.
With easy access to capital and ability to move capital across international markets, it is very easy to own businesses with core management teams running varied businesses internationally. With change in market factors business may be exited if the management has the competence to forecast market and demand trends.
Creating a Customer focus across business divisions
Half a century back Peter Drucker said Customer is Business. Whether finance or projects every department in your organization must be tuned to the customer and markets. They must be trained to be marketing oriented while performing their specialized functions. Businesses exist solely for the purpose of customer.
The necessity for adapting to relentless change should essentially be a change geared to the external environments rather than internal processes. Internal change can create limited results and cannot be pushed beyond a certain point. On the other hand gearing up change focused on external factors can create a constant and never ending momentum forward for the organization.