Business Excellence and Strategy

Speech delivered by R.Kannan

30^th January 2014 at National Stock Exchange

On the Business Excellence – Annual Day

I am very pleased to be here today and would like to thank you for inviting me to be part of this  Business Excellence day and annual celebrations.

We are living in a VUCA world, where things are vague, uncertain, Complex and Ambiguous and the challenge for organistions today is to bring predictability to the performance from operations. This has become a major concern for Governments and corporates after the  2008 financial and economic crisis. Every thing  done well within a company is not a clear recipe for success since the developments in the environment have a major impact on performance of companies. Developments in the environment including the hyper competition,  challenge the proven business models and companies have to be agile and nimble to address the emerging challenges with fast response.   The businesses which were very attractive five years back had become unattractive today. The viability of many of the business models is being tested in this uncertain world and new models of doing business are emerging and in a continuous, evolution mode. To address these challenges , it is necessary to build a business excellence frame work spanning the entire organsiation.

The organisations which emerge as leaders in their field have Visionary leadership,Customer focus, robust strategy, appropriate organisation structure, scientific allocation of financial resources, sound HR policies,excellent business systems and good corporate governance practices. The combination of above factors will go a long way in creating and preserving the competitiveness of organisations.

Jack Welch Says . “A strategy is something like, an innovative new product; globalization, taking your products around the world; be the low-cost producer. A strategy is something you can touch; you can motivate people with; be number one and number two in every business. You can energize people around the message.” GE is a great organisation which introduced the latest management principles on Strategy and competitiveness and these models are being adopted by corporates and management consultants in strategy formulation across the world. GE as a company went through many business cycles and witnessed many economic crises during its existence of more than hundred years and it  continues to perform very well even today. The company is a good example for large corporates to adopt the best practices in strategy formulation and implementation.

Strategy development will be at two levels, one at the corporate level and other at the business level. In a corporate level, the decisions regarding What business to enter, what business to grow, what business to maintain and what business to divest are taken.

In Business level Strategy, it is the strategy to be adopted within a business and Strategy is all about positioning an enterprise in the minds of the target customers. The battle of companies and the leadership happens in the minds of the customers. Companies can adopt Strategies like Cost leadership, Differentiation or combination of both to achieve a competitive position in an industry. The strategy adopted by NSE is integrated and combination strategy. In any industry , there will be companies adopting one of the above strategies and the companies creating competitiveness do different things from others or adopt different methods to do the same thing. The best strategy which provides the long term competitiveness of an enterprise is the one, which is able to offer quality products and services at affordable and reasonable costs. The companies adopting these strategies emerge as market leaders and achieve margins which are much higher than the rivals, which is evident from the experience in many industries.

Earlier companies adopted one of the above strategies, competing in a few product market segments. The emerging trend is that  companies are trying to compete in all price points and cater to different customer segments . Starting point of successful strategy is right positioning of the product which will attract the targeted customers.

Strategic management has two phases. The first phase in which the formulation of strategy takes place ; the Vision, Mission and Objectives and overall direction are decided. In the implementation phase, allocation of resources, adapting the organisation structure  / systems and procedures in line with the change in strategy , performance monitoring and implementing course correction are adopted. The methods like Balanced score card are being utilised by many organisations today in the strategy formulation and strategy implementation stage. The same process is being adopted to evaluate the performance of employees at all levels to decide the  incentives, bonuses and promotions.

For effective strategy implementation, adoption of business excellence model goes a long way in achieving the intended goals of an organisation. Business excellence is one of the main pillars of good strategy implementation. The difference between organisations which succeed and fail is mainly determined by how well the formulated strategy has been executed and seamless execution depends on the excellent practices adopted across the enterprise in organisations.

Perfection is what every visionary leader wants to achieve. According to Aristotle, “Perfection is not attainable, but if we chase perfection we can catch excellence.
Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.”

The companies use business excellence framework to attain and maintain competitiveness. Business excellence process by itself is not  strategy but a process by which effective strategy implementation takes place. The framework covers the entire organisation .

Unlike in Strategy formulation wherein only a few in the organisation are involved, the strategy implementation involves every one in the organisation. In this respect, the business excellence framework has to be a company wide exercise and covering all the employees. Each employee has a role to play in bringing out the best in the organisation. It is a combined effort.

It had been empirically proven that the organisations which adopt business excellence frame work report much better performance than those who do not adopt this frame work. According to a Mckinsey study, internal processes in an organisation leads to variation in performance to the extent of 50% compared to the peers.

One tool that can help organizations strengthen their management systems and processes holistically, is the internationally-benchmarked Business Excellence framework. It provides standards for managing people, innovation and service, which are key enablers of business excellence.

 The BE framework helps organisations to assess their performance, identify gaps, and take action for improvement. It encourages a systems-based approach to management, with the adoption of a robust measurement system, to assess and monitor performance. Measurement allows organisations to compare and benchmark their performance against the best-in-class in their industry.

Employees play a key role in an organisation’s journey towards higher productivity and business excellence. The business excellence journey of every company is anchored by its employees. It is, therefore, important to align employees’ aspirations and efforts with the organisation’s goals.

Your branding of this effort, ACE ( Attitude, Customer and Excellence  is very apt.) The business excellence initiative should start with a positive and favourable attitude from every employee. An effective implementation of identified strategies depends on the favourable attitude from all the employees. Every employee in the organisation has to understand the Vision , Mission and overall objectives of an organisation and align his /her personal objectives with the organisational objectives. Their activities should be channelised towards excellence in whatever they do. The attitude towards company’s vision,mission, objectives, colleagues and customers should be in alignment with the overall organisational efforts in achieving the overall objectives of an organisation.

Customers decide the future of an organisation . It is essential that companies understand the customer expectations well and develop products and services which meet their needs. Today customer awareness is very high and customers expect a fair deal from the companies and they support companies which are very fair to the customers delivering the expected value for the price paid.

In my career I had an opportunity to work in companies where new business excellence initiatives were undertaken. Especially after the  liberalisation the competition in industries increased and the need for developing formal strategic plans and excellent business processes became very important , to sustain the competitiveness.

1. Our Group is a family managed Enterprise. The group gives full independence to the Executives who are in charge of different businesses and the involvement in the group is more in Strategy formulation level and the budget finalisation is done at board level. Once the budget is decided and allocation of resources is decided,  there is a complete independence to the CEOs on operational matters and  the CEO’s have the freedom of choice to change their tactics according to the emerging market dynamics. There is an effective  performance measurement and management system which is in operation which contributes a lot to the value addition to the overall performance of companies. The best practices adopted by a company within the group is being shared with other companies and group companies encouraged to adopt the best practices in all their operations. Balanced score card frame work has been used for Strategy formulation, implementation and performance appraisal. Business excellence frame work had been introduced in a few companies in the group and it is being introduced in phases across the group companies.
2. ICICI bank redefined the paradigm of banking in India.The banking business in India  today is totally different from the way banking was done 20 years ago in India. Under the Visionary leadership of Shri.K.V.Kamath, intensive automation of processes and reduction of manual intervention in operations enabled the bank to scale up the growth very fast. Several new initiatives were taken under Operational Excellence Initiative and Sig Sigma initiative, which helped the bank to acquire customers faster than others and enabled cross selling of products. The importance of  fee income had become equally important as that of core income and existing branch and IT infrastructure was effectively used to sell more products and services to the existing and new customers. The diversification into new geographies helped the bank to gain leadership in remittances business and cross border mergers and acquisitions. The creation of trading platform under ICICI securities helped the company to gain the leadership in the retail stock trading business. All this was possible through involvement of all employees and eliciting the best ideas from employees. There was a   reward system for the innovative ideas given by the employees. It was enabled by establishment of an Intranet which helped in knowledge sharing, training and transfer of best practices .

3. Thai Airways in Bangkok ,benchmarked its performance , systems and processes with the Airlines like Qantas, Singapore Airlines and Cathay pacific and fine tuned the strategies to become  more competitive. It has started hedging its fuel requirements and monitoring the performance of each flight operation. This helped the company to prune some routes, increase flights to routes where there was more traffic and optimise the use of fuel. This has improved the overall performance of the company.

NSE is a world class organisation led by a Visionary and committed leadership. The Forbes had acknowledged this fact and the leader of your organisation has been ranked among the top 15 leaders in the world and among the top three leaders in India.  NSE had set the global bench marks and redefined the way the securities trading was happening in this country with high transparency, good governance, robust processes and high quality standards. It ranks among the top three in volume in all its activities in the world and continues to improve its performance and if the pace of the Indian Economic growth continues, NSE will become the leader in all its activities in the Global arena.  Despite achieving an invincible leadership in the near term and far ahead of the competitors in all the performance parameters, the business excellence process has been identified as a key enabler for sustaining the competitiveness of the enterprise in the long run. This is the articulation of desired outcomes by your leadership  and the focus was not just on immediate opportunities and challenges, but also on building capabilities for the future.     

Business Excellence is a Journey and am sure every one of you is working towards the excellence in your organisation.

I would like to congratulate this year’s award winners and all those who are here on the Excellence journey. You serve as an inspiration for all other colleagues to continue the journey of  business excellence. I wish you all the best and   and have an wonderful evening.

Thank you.