HOW TO GROW YOUR BUSINESS WITHOUT LOSING REAL VALUE
Any one of us who has entered a Udipi hotel knows what to expect. By the time you have slid into your seat, a waiter materializes at your elbow. No ostentatious “Good morning” or “Good Evening” or even a plain “Welcome”. He waits attentively for your order. Repeats it at the end for confirmation, then quietly vanishes.
Within 5 minutes, he is plunking down the dishes you ordered. After each dish you finish, the next one is on the table. Rarely, do you have to raise your voice, call out or remind. When you finish and gesture, the bill is on the table with a small dish of saunf. You pay and the change is there in seconds. Unless you chose to loiter, you can finish your lunch or snacks in under 20 minutes and be out.
The Udipi Hotels were giving us “fast food” long before Americans invented the word. Speed is the key.
Actually, they were doing something to fulfill a felt need. As increasing numbers of bachelor South Indians came to Mumbai post-war looking for employment, they needed a place where they could get cheap, good quality, vegetarian food on the fly. The Udipi hotel was the only place where you could walk in at 8 a.m. have a plate of idlis/dosa and coffee, and be out in time to catch the 8.30 a.m. train to V.T.
Speed is the hallmark of the Udipi Hotel, its real value, however modest and small or all polished granite and swanky.
The owner sits at the galla, fingering the change, swiftly counting the notes, slapping down the change on the counter but his eyes are everywhere. A small curt order to the water boy, who is not alert enough to serve a customer who has come in from the hot, dusty street. Occasionally getting up to fill any small gap in service himself.
Attention, speed and quality service. Stuff which is difficult to maintain when one expands.
The “Udipi” MSME – The original disruptors
The unique competitive advantage of an Owner Managed Business lies in its agility – MOSTLY NOT in its products, technology or services. This also defines its biggest threat to growth.
Remember the famous David and Goliath story? Let’s now rewind to the time when we started our business and explore the reasons why our initial customers loved us and rewarded our efforts. For sure, it was not because of our assets, products or our team.
They actually bought you, the “Owner” and your passion and promise of providing better service than the biggies.
The reason SMEs are in business is almost solely because they offer more and better attention to the customer. This usually means the Owner is hands-on, accessible to the customer 24×7. It also means the Owner is quick to take decisions and respond to market opportunities, which a larger company cannot do easily.
The Owner is able to “disrupt” status quo and get things moving for themselves and their clients.
This is what creates and also, limits SMEs across the world – irrespective of the sector, industry, size or product. It is the opportunity and also, the biggest risk.
What happens when an MSME grows?
When this agility is rewarded by the market and the SME grows, it tries to mimic the biggies and slowly builds infrastructure, teams, systems and processes.
All of these are indeed good – but do they come at the expense of speed and agility? Not unlike a lean and hungry man who suddenly tastes success and prosperity. He adds belly and girth at an astonishing rate. No wonder he can barely move.
Quite often, growth adds layers to the business process and teams add bureaucracy. The Owner and the SME forget their core USP and begin to hanker after things that do not really matter to the customers – brands, collaterals, technology, offices, web presence…. et al. The obvious result is added costs, which reflect as added prices to the customer. Now, the key question is this.
Does the customer see your growth as adding value to their business? Are they prepared to fund your costs?
If not, it is time to step back and check the “price” of growth. The biggest risk to sustained success of an Owner Managed Business does not lie in the market, competition or its products – but lies within.
When the crunch comes
For most SMEs, the timing of this challenge is killing.
The symptom is a cash crunch – resulting from a long chain of added costs, delayed deliveries, slower decisions, stressed working capital, lesser customer value and price pressures. This is the worst time to consider strategic initiatives or new investments. You are caught completely off-guard.
So, how does one go about managing this change and becoming big? We all know that being BIG means that the Owner needs to step back and allow teams and systems to take over. That indeed is the only way to scale. But that is merely the outcome and not the process.
Before the Owner can step back, it is necessary for a new “customer value” to be created – one that replaces the Owner’s passion. This cannot be directly replaced with teams or systems. The business needs to give a new reason for the client to work with them, other than the Owner. This reason should command a premium and a competitive advance. Do we have that yet?
This question needs disruptive answers and a commitment to invest in building value in the Company. Not just hiring people or implementing ERPs. Successful Owners who keep their eye on the customer and their own profitability do this intuitively.
Quite often, it is about thinking of your own business as a “franchise” that needs to be recognized by clients and run by your team. Can we create such a model?
Can we learn something from the Army?
In an excellent Ted Talk Captain Raghu Raman takes us step-by-step through the horror of the hostage crisis in the Taj Mahal Hotel at Mumbai on 26/11.
NSG Commandos aged 26/27 who have never been in a 5-star hotel before, have no idea or details of the layout, the operation of lifts, the walls are bullet proof or not, air-conditioning ducts can bear their weight or not are suddenly catapulted in.
1000 rooms to clear, 72 hours to do it in, with barely 70 odd commandos to do it. No sleep for 72 hours. Food and water, whatever they could grab in the rooms.
Each room they opened had 3 possibilities. It could house a tourist or a terrorist or a terrorist with a tourist. Imagine the almost superhuman restraint one needs, not to let loose a burst of fire from your machine gun as soon as you spot a man or men in a room who could kill you in the blink of an eye. As you cleared each room and floor, you left behind a couple of men to keep the floor sanitized, so that as you went up, you had lesser and lesser men.
At the end of the superhuman operation, there was not a single collateral casualty. Not one person was wrongly shot, which is extraordinary to say the least.
Captain Raghu Raman summarizes the principles or the ingredients which went behind it:
- Every soldier must know the Commanders strategic intent. Because in the course of a battle or encounter or clearing operation, he must have a fairly clear idea what the Orders would have been even if there are no actual Orders.
- Every leader should be capable of doing one up, which means that each man should be trained and capable of taking up his immediate superior’s job.
- Focus on core drills and battle procedures until they become second nature /muscle memory. How he puts it is “Sweat in peace so that you don’t bleed in war.”
- Be trained to Improvise and innovate on the fly.
- The leaders on the frontline will be presented with fleeting opportunities and should be capable of taking decisions on the run.
- Good leaders love chaos. All planning, structuring and schemes are fine but it is in the chaos of battle that one is really tested.
Business Crisis and the challenges of expansion
Sounds pretty far-fetched applying it to business expansion?
Nothing far-fetched about every employee on the frontlines knowing the Entrepreneur’s intent.
That is what makes it clear to her what is the value to be delivered to the customer. That is what makes it clear to her the areas of the company’s deficiencies. That is what makes it clear to her the actions necessary to put “value” back on track.
That value could be quality or pricing or delivery or innovation or whatever.
Training, which many companies ignore, is nothing but simulating the challenges she is likely to face on the field and be prepared to resolve with a host of already well-thought-out solutions. Training is also what instills problem-solving skills which are necessary for resolving crises on the fly or the guts to take those decisions when faced with fleeting opportunities.
Clarity about the value which must be delivered to the customer, training in subject disciplines, leadership and decision-making is what will enable a small company succeed, while clawing its way upward in a field of biggies.
The best way to do this is to take time, to step back from day-to-day challenges when the going is good. Investing in the future requires ourselves to be accountable to our goals. It is important to periodically subject yourself to a formal, critical review. It can be an external agency or people you trust or an executive board. The first step is to promote your goals ahead of yourself. Possible?
Author: Ramas Krishnan
Ramas Krishnan is an original management thinker who heads Aspire Infinite, a consulting firm based in Mumbai and The Alternative Board, India, a peer advisory board, which works exclusively with Owner Managed Businesses in 18 countries across the world (firstname.lastname@example.org)
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