Managing Radical Change What Indian Companies must do to become world class

1. Managing Radical ChangeWhat Indian Companies must do to become world class Extracts from Book written by • Sumant Ghoshal, London Business School & • Consultant on international management • Gita Piramal, leading Business Writer • Christopher A Bartlett, Harvard Business School

2. Lessons from case studies of companies • Sustained superior corporate performance is based on the ability to manage tension between two symbiotic forces : • the need for on going in improvement operational performance and productivity through constant rationalization in existing activities • the need for growth and expansion through continuous revitalization of strategy , organization and people • No company can achieve radical performance improvement without transforming resource productivity and no company can achieve such results only through improvement in in operating efficiencies

3. Cooking Sweet and sour • The sweet and sour cycle: Radical performance improvement is by improving resource productivity (sour) and Creating and exploiting new opportunities (sweet) • Improving resource productivity (sour): • Portfolio choice (eliminating low return activities) • Improving labor productivity (revenues and profits per employee) • Improving operating efficiency (speed reducing waste) • Improving capital productivity (return on capital employed)

4. Cooking Sweet • Creating and exploiting new opportunities (sweet) : • Growth opportunities (new products and markets; expanding share) • Building competencies (new capabilities and resources) • Organizational capabilities (revitalizing organization and people)

5. The downward spiral of Rationalization Poor Performance Cut Resources; sell businesses, close factories, sack people Spiral is to be set right by solving underlying problems Temporary Improvement in results Underlying problems not solved Performance declines again Cut Again

6. Vicious Spiral of Unprofitable Growth Growth Unprofitably Increased Debt to generate cash (D/E) Decreased Financial degrees of freedom ( less funds,more expensive rates) Decreased ability to support growth Lack of cash, loss of strategic freedom Decreased attractiveness to investors Lower share prices, higher D/E

7. Virtual Spiral of Profitable Growth Increased attractiveness to investors higher share prices,lesser D/E Grow Profitably Spiral of betterment Increased financial degrees of freedom (Lower cost of capital) Increased ability to support growth Investment potential, strategic freedom Generate internal cash for growth, Lower D/E

8. Why to Change or Reform ourselves and our Organization? • Change is the only constant. We can not ignore it. We can not simply get together once in a while to think about it. Nor can we spend all our working hours worrying about change taking us by surprise • What we need to do I stay alert and resourceful…… to avoid complacency …. To stay flexible. We must review and re-evaluate our priorities on a regular basis. We must keep our mind and doors open to new ideas. • Change is nature’s greatest challenge to man , rewarding those who do, punishing those who resist . Understanding the simple concept of the nature of change , has propelled some men and some companies to the heights.Failure to understand has frequently brought despair and destruction to other men and companies

9. Attitudes towards Change • Why people resist change? • Would life be easier or more comfortable if the pace of the change is slower? • Is a new way of doing things necessarily better way ? • Should we change simply for sake of change? • Does it take courage to change? To resist change? • Should we try to predict change - or simply react to it when it happens? • Is it useless to try keep with the tremendous technological changes of today? • Are such technological Changes hopelessly in conflict with an individual’s desire for peace of mind and a frantic way of life ?