Amol Adlakha | General Manager | Maier+Vidorno
First published in M+V`s India Insight in 2012
You are no stranger to conference calls, online meetings, and Skype discussions if you are managing operations overseas. Technology helps us in managing our businesses from a distance — data is received around the clock and decisions taken are based on facts.
Leading from a distance means so little until we start getting surprises. A poor forecast, cancelled orders, thin pipeline, accounting & compliance issues, delays in logistics, transparency problems – and the best of the managers realize that they did not consider these challenges in their water-proof planning.
What is it about doing business in India that most companies face challenges with? Is it the usual issues of market entry, pricing, branding & logistics?
Or are there other sets of issues that make doing business in India difficult? We ran diagnostics checks for several foreign companies doing business in India and we found that other than the common issues — that would be faced in any country — there are unique issues, specific to doing business in India. Especially, issues around Compliances, Accounting and Trust & Transparency topped the list.
We came across companies which didn’t collect their C-forms for many years, wrongly recognized revenues, had issues with SVB and import duties, had uninsured inventories in the warehouse, didn’t pay taxes on time or were sitting on compliance time bombs. However, what surprised us was the fact that for every three diagnostics the team carried out, there was one case where some breach of trust was evident.
Though findings in such cases usually lie in the grey area but in most of these cases “Anything Grey is Black”. In one case M+V was engaged by a company in machine tools industry to find out why its Indian subsidiary could not do any business for the past 2 years. We thought of looking at Market Strategy and Sales Approach to begin with, the market looked interesting but in this case the sales pipeline was thin for no reason. A little background check on the Sales Manager revealed that he ran a parallel family business for past 3 years and was not focusing on his employer’s business.
In another case the Indian Managing Director was running two parallel companies and was feeding his side businesses in a manner which was clearly not ethical. In another case the distributors company appointed in India were distant relatives of the Sales Manager. Having learnt from these experiences, we now proactively look for cues during our diagnostics visits for anything that might lie in the grey area. The irony of all these cases was the fact that the principals really trusted their lead Manager in India and had no organized/ transparent system for running India operations and faced the challenges of leading from a distance.
Well “Problems in business” is a fact that may never change and what might also not change is the fact that “Problems are best solved by being onsite”. But wait, does this mean we travel onsite to solve every single problem? Maybe not and the solution might lie in the middle. Some problems require closer presence but also many problems don’t and we can only tell ones from the others if we have the details. So, before you plan to fix all the problems, gather as much detail as possible on all known critical problems and potential critical problems.
Diagnostics is an exercise which helps you do just that. It is a dipstick analysis of various aspects of a business with an objective to find out the current challenges and the story behind these challenges. Do you have the right understanding of the market (customer needs)? What are the potential areas of cost reduction? Why am I loosing margin in business? What are the gaps in statutory compliances? Are accounting norms being followed? What challenges are faced in logistics? How to improve production efficiencies? The idea is to identify, analyze and prioritize the issues and give recommendations so that decision making can be quick and smooth.
The diagnostics exercise is carried out in three phases. The first phase is essentially of planning. This phase is targeted to understand the objectives of the diagnostics and create a common understanding among the team on how to go about it. Missing pieces of information are either filled in or adequate planning is done to do the same at a later stage. Phase II consists of onsite visit for interviews and data analysis, many meaningful insights come out of this phase and are shared with the clients.
Phase III constitutes detail report writing for findings along with the recommendations on how problems might be solved in a sustainable manner. Some of our clients have been so happy with our approach and recommendations that they have partnered with us to assist in implementing the recommendation of the diagnostics; the details captured during the diagnostics exercise have been helpful in not only implementing solutions but also setting up measurement system to ensure sustenance of the solutions.