Outside-In Management: The New Age Funda of Wealth Creation

By Shiv Malik

Should we spend scarce time, knowledge and other resources inside an organisation or outside? The answer to this question determines whether an organisation prospers or perishes. This is true for all organisations, be it business, NGOs, the government and even individuals. This book addresses this question in the outside-in management' approach recommended in it. When we look outside, change is the predominant phenomenon. Management of change determines to a large extent whether we succeed or falter. We cannot profit from change unless we know how to recognise it, analyze it, create it and proactively make changes and innovations and introduce them in the market. Such a business analysis coupled with appropriate strategies, resources and actions will open a mine of opportunities. Outside-in Management: The New Age Funda of Wealth Creation steers you through such complex issues in a simple style. The book will help you find answers to momentous questions and open up a treasure trove of opportunities for you. The book suggests exercises at the end of the chapters that can be used for executive training and changing their attitudes.

• Language: English
• Publisher: Fingerprint Publishing
• Release date: Apr 10, 2017
• ISBN: 9789358567809

Book preview

PREFACE

This book aims to serve as a guide for achieving transformational results in organisations by managing the changes that continually transpire in the ecosystem. This ecosystem—which comprises of customers, clients, competitors, suppliers, distributors, and other partners—accounts for the failure or success of the most fundamental objective of all organisations. In the case of a private sector company, this objective could be earning profits. For an NGO, it could be bringing about a change in the society or environment, and for a government entity, it could be improving the lives of the common man.

In addition to affecting the outcome of all organisations’ efforts, this ecosystem also accounts for most of the costs incurred by them. I have argued that if an organisation’s focus is directed inwards, it achieves little and spends more than it should. On the contrary, if its focus is directed outwards, especially on the changes happening there, it can tremendously increase both its achievements and savings.

My mantra is this: look outside and flourish; look inside and perish.

This idea has major implications not only on where we spend our working hours and other resources, but also on the kind of information we collect, tabulate, analyse and act upon. Many decades of leadership have convinced me that this information should be more about the outside than inside, so that the changes taking place there can be converted into growth opportunities. I believe that an outward focus should drive not only our outside actions, but also our inside actions. I call this method of organisational management ‘outside-in management’.

As stated above, the outward focus should be especially on the changes happening there. Whether organisations notice them or not, these changes happen all the time and have a profound impact on their results. If managed well, they can be converted into opportunities. If ignored, they can pose grave threats.

To understand the nature of these changes and the ideal way to leverage them, I have used both fictional and real life stories. I am aware that many readers and writers are uncomfortable with the use of fictional stories in business literature, but, in my view, these stories have a unique advantage: they can use the past to guide the present and the future. In addition, they can be used to combine separate events to develop an integrated story with pivotal lessons.

Even so, to place my stories in context and keep the bigger picture in perspective, I have inserted my voice at key junctures in the book. Using these opportunities, I have summarised important themes, drew pertinent conclusions and connected distant dots to reveal the interplay that informs the philosophy of change management. Additionally, at the end of a few chapters, I have provided a few action points that can be profitably used by the management to train employees. These action points may not suit all set-ups, so organisations are free to alter them to suit their peculiar context, if they so wish.

Overall, this book details how existing businesses can be modified and repaired to bring about transformational change as well as how substituting old assumptions with new ones and thoroughly analysed strategies can bring about transformational changes and growth. It also deals with the strategic issues involved in the appointment of CEOs, who are the chief change catalysts of every organisation. I conclude with the philosophy of change, which I have developed over decades of coping with changes at the ground level.

Looking at the current environment in India, I believe that there are two key changes in our economic ecosystem that can be beneficial for all organisations. The first is the change in the country’s demographics: India has become the youngest nation in the world, with about 800 million people in the working age group of 15-59, out of which about 239 million are in the 0-34 age-group according to census data of 2011. This group is increasingly dictating consumption trends in the sub-continent and organisations must build their strategy keeping it in mind. The second is the increasing use of technology in various aspects of life in the country. As India moves ahead on the digital path, organisations must keep pace with it.

The exploitation of these changes can not only transform companies across industries and sectors, it can also address many of the pressing concerns—including poverty—faced by the Indian economy and society.

Rohan, who rose at a young age to the position of CEO of ABC Ltd—a well-established Indian company with its headquarters in Delhi—through sheer hard work, sales management skills and administrative ability, is now facing criticism from the company’s board of directors for its gradually falling sales in the last two years, loss of relative market share to two major competitors, and continuously declining profits and profitability.

The last board meeting was a fiasco for him, who had so far enjoyed a reputation for success. At the meeting, one of the influential independent board directors, Shroff, had pointedly expressed his unhappiness. Some other directors too had expressed deep concern.

What’s worse is that Rohan is foxed and does not know what has hit the company. This reflected in his unconvincing explanations to the board at the meeting. Before that day, he had never sounded so tentative and unsure, and ever since the meeting, he has lost his sleep.

After a lot of mind-mining and introspection, he decides to call a reputable management consultancy company, Wharton Consultants.

Before long, a partner of the consultancy, Sakshi, comes calling in his plush corner office in the World Trade Tower. After the pleasantries, they start discussing the company’s problems and Rohan’s concerns. As Rohan sets to explain, Sakshi is looking at him intently through her glasses. Midway through, she abruptly yells, ‘Hey, Rohan, it’s me. Haven’t you recognised me?’

Rohan, suddenly losing his reserve, gets up, holds Sakshi’s hands warmly and shouts, ‘My God, this is the last place I expected to see you, Sakshi! Where have you been all these years? No news from you. What a pleasant surprise!’

Rohan had a crush on her when they were studying together in JNU. Though Sakshi liked him and they were good friends, she had maintained a studied reserve while they were in the university. After graduation, both had gone their separate paths and had soon lost trace of each other.

‘May I suggest we extend this meeting over lunch?’

Even before Sakshi can react, Rohan buzzes his secretary to find out if he has another appointment in the afternoon. Since his next appointment wouldn’t start before 4.30, he instructs his secretary to book a table for lunch at Machan, Taj, Mansingh Road.

During lunch, they discover that neither of them has married so far.

Rohan shares his dilemma and difficulties with Sakshi, who has a sterling reputation for guiding many companies to good health. Her insightful and penetrating questions range from the current context of the company, mission and purpose, quality of human resources, skills available and required in the present context, strategy, direction of the company, USPs, strategic positioning of the company, business model, sales plans, marketing plans, customers, non-customers, suppliers, sub-suppliers, alliance partners, joint venture partners, compensation systems, monitoring systems, information systems, action plans, productivity of resources, value addition, benchmarking capability and practices, innovation capability as compared with that of the competitors, state of technology in the industry and elsewhere, competitors and their strategy, relative shares of business, profitability as compared with the competitors, the state of the industry, and where the company fit in the value chain of the industry.

Through experience, she knows that these are the relevant questions to ask to know about the health of a company. She tells Rohan she will submit her report and recommendations four months later, after deep analysis and further confabulations with him and his other colleagues.

She later checks on the same points and a few others when she meets other senior and middle-level officers of the company to know their perspective.

Her team for this job includes two bright young consultants, both graduates of premium management schools. She also has the guidance of her senior partner, Chopra.

Rohan and Sakshi meet off and on for dinner or lunch whenever their travelling schedules permit. They reminisce about their old college friends and the wonderful time they spent together. They decide to get in touch with them on Facebook.

Sushma has joined the Government of India and is posted as a joint secretary in the agriculture ministry at Delhi; Malvika is stationed in Bengaluru, heading an NGO dedicated to the education of village children in and around the city. Rohit is based in Bhopal and is in-charge of an NGO concerned with the health of the poor children in villages in and around Bhopal and Sehore. Promod is in Dubai and is a vice-president in a consumer goods company.

Suddenly, they are all in touch on Facebook and WhatsApp, chatting, exchanging photographs and generally keeping each other informed of their lives. Facebook has indeed become our closest neighbour. They say if you know six persons on Facebook, you can get in touch with anybody else in the world, because each is connected to many others and it’s a never-ending chain.

Sakshi gets busy studying and analysing ABC. Besides professional reasons, she has an added incentive to do a good job: Rohan’s job and reputation is at stake. No wonder this assignment becomes an obsession for her.

She scans the records of the company and those of its competitors, studies the needs of their customers and talks to important ones, interacts with the suppliers and their sub-suppliers, studies end-uses and end-users of the company’s products and services, and scrutinises non-customers and why they are non-customers.

She also analyses the following: technologies used in the company and the rest of the industry; latest changes taking place in the technology and the stage of adoption of such technologies within this company; innovations in other fields that could affect the industry and the company; changes sweeping the industry and opportunities and threats posed to the company and the industry by such changes; cost streams, revenue streams, working capital, cash flow and capital expenditure; and special efforts made by the company for cost reduction and revenue growth to desperately defend the current margins of profit and market share, which are falling despite the valiant efforts of Rohan and his colleagues.

She knows that a thorough study of the above parameters will show her the way through the maze, as similar studies in many other companies have helped her turn them around in the past.

She examines the entire value and economic chain of the company to understand how and where Rohan’s firm could reduce its costs and increase profit margins and market share; collects as much information as possible about the comparative skills of the competitors for all the above parameters; studies the objectives and targets of the company and the type of information collected, analysed, systemised, measured and monitored regularly by it as well as the frequency of doing so; examines the balance sheets of the company and some of the important competitors to understand important ratios, basic information and the relative position of the company as compared with its competitors.

She also looks for attitudes and working habits of the company’s employees to understand its culture. She studies how the people within the company are spending their time in office and in the market place to understand whether the focus of the team is within the company or outside. She makes a comparative study of the special skills and abilities of the people in the context of the customer needs and the strategy adopted by the company and its competitors. She also examines the productivity of capital invested and that of key human resources in their respective assignments, checks whether they have delivered as originally expected or promised, and assesses the institutional structure for decision-making and a host of other issues.

Within her office, she gets hold of reports done on this sector by the consultancy in various parts of the world for different clients and discusses the recommendations of the lead authors of the reports with them.

She is neck-deep in studying and analysing all the information relevant to the health of the company, but does not a whisper ever a word to Rohan, not even in their dinner meetings. She can sense tension building in Rohan’s mind as time goes by.

‘Rohan, our preliminary findings are ready and I want to discuss them with you informally before discussing with your colleagues and the board of directors. They could be sensitive and a little disruptive, and I want you to take certain corrective steps before your board has a whiff of these recommendations. Could you indicate a convenient date early next week, so that we can finalise our recommendations within a few days from now?’

Relieved that the report is in the final stage, Rohan schedules the meeting on Monday itself. However, her remarks have disturbed him. Why did she mention that her recommendations are sensitive and even disruptive? Could he be in trouble? But, he has faith in Sakshi and intuitively feels she wouldn’t like to be the cause of his downfall. At the same time, he knows that she will never compromise her recommendations to make things easy for him, despite their personal chemistry, being a thorough-bred professional. Right since their college days, he has admired her strong streak of sincerity as well as fearless adherence to truth and principles even at a personal cost.

Monday, 9.00 am

Venue: Private dining room in the Belvedere Club, Hotel Oberoi, New Delhi

Even as she enters, Sakshi is lulled by the serenity of the place overlooking the pool. Rohan is already waiting for her.

‘I am glad we are meeting in such a beautiful and peaceful place, Rohan.’

Sakshi goes through her key PowerPoint presentation, which is based on the analysis of the data compiled by her and her team. She finally concludes her findings: ‘We find that you and your team have an inward focus and perspective in managing ABC, whereas it should have been an outside focus on the customer, the competitor and the rest of the economic chain. Two of your competitors to whom you have lost the market share have a much sharper focus on the outside. This is one reason of your losing out.’

‘But isn’t it our job to focus sharply on managing ABC, which pays us?’ asks Rohan.

‘Yes, it is. But Rohan, you can’t manage ABC by managing ABC alone.’

‘What do you mean?’

‘Rohan, don’t get worked up. I didn’t mean to offend you. The data and my analysis lead me to the conclusion presented. I have full faith in your capabilities, and you