Every organization cuts costs, in one or more areas. However, cutting corners is confused with spend rationalization. We have seen organizations generally resolve to direct measures like downsizing, travel restrictions, reducing spend on new product development, reducing features from products/services, adopting cheaper alternatives rather than really cost effective solutions and adding multi-level approvals to deter expenditure without effective analysis.
Cost cutting measures as above give you immediate savings but may start destroying the fabric of the organization. Employees start feeling too constrained, spends that can generate higher ROI get discouraged, workload on resources increases, and all this might prove to be detrimental for the long term. Also, when going gets better, these measures get lifted and bring the flab back into the system. Such measures also deteriorate customer experience and affect the brand negatively, which are not as easy to win back later. Think about the cost of cost cutting before taking the measures.
Organizations that take the way of improving performance through initiatives driving an excellence mind set and continuous improvement culture are able to manage both the short and the long better for sustainable business performance. Such organizations achieve the goals by finding the right opportunities and then quickly but systematically exploiting those to achieve spend rationalization without disturbing the organizational eco-system. This is what cost reduction really is.
“Ask not what your country can do for you, ask what you can do for your country.” John F. Kennedy
The recent article in Economic Times* confirmed the looming fears for the Indian Rupee (INR) downslide vis-à-vis the US Dollar. Predictions indicate that Rupee could further devalue to 57 vis-à-vis the USD. The situation is such that some Bankers are not taking a view on INR. Chinese Yuan, Brazilian Real and South African Rand have appreciated against the USD – thanks to current account surpluses and steady economic fundamentals.
Indian Industry watches with dismay as the INR slides and is trying to estimate the fallout of this – erosion of profits due to mounting import bills, loss of competitiveness due to induced price increases
There are several factors that interact with each other to make any economy work. It’s a fine balance and any disruption can have far reaching consequences. India’s current account deficit is at 4.3% of GDP worse than the acceptable number of 3%. Trade deficit (excess of imports over exports) has reached a record high of 185 billion USD. Although RBI has made several symptomatic efforts to address the issues, it has largely been superficial given the impact of higher dollar pay-out on imports and reduced supply of dollars due to lower demand for India’s goods and services. Redemptions of external borrowing by organizations, India’s high oil import bill and the Eurozone crisis are all large contributors to the current issue. However, here are some facts – oil contributes only about 32 to 35% of India’s total import bill. The rate of growth of imports is higher than the growth of exports. India will not meet its targeted growth of exports.
Can the Indian Industry Contribute in Salvaging the Situation and Strengthening the Future?
It is but true that the Indian Government has been slow on policy making and decisions to capitalize on the robust growth and boom time witnessed during 2005-08. However, the Indian Industry can contribute by following a well thought out agenda that can bridge the trade deficit.
Strategic Initiative 1 – Focus on export oriented organic growth
By April/May every year most companies finalize their strategies. Key question here is what percentage of targeted revenue is from – organically developed new products and services and from new international geographies?
Many companies have global ambitions and are looking to reach out. There are several challenges that are faced in such initiatives – selecting the right country and market, understanding customer needs and competitive scenario, right entry strategy and ability to deliver as promised (better than prevailing standards). What has worked so far may not continue to work and hence a mere grudging acceptance of dwindling exports due to the Eurozone crisis will not help
Drive for Innovation is the key here. Some techniques to mitigate the above challenges are as follows –
- Understanding the organization’s core competencies and finding the “customer jobs**” that can be fulfilled through those competencies in identified target markets.
- Following a structured process for “Country Selection/De-selection” for identification of target market (and country)
- Determining “customer jobs” in identified markets and then working to build capability to fulfil those customer jobs
- Establishing strong capabilities in managing a “global supply chain”
The above includes products, services (including export of competencies). A recent interesting example of this was an Indian company “exporting its manufacturing competencies” to turn-around an ailing company in Africa.
Strategic Initiative 2 – Strengthen “Make & Deliver” Capabilities
While most companies have a “Continuous Improvement Program” in place, the key question to ask is “has the program done enough?” If it is has, then why is there increasing movement towards cheaper Chinese imports? Why is the quality of Indian products/services being questioned in international markets? Indian companies may not be happy to rely so heavily on imports as it exposes them to several risks apart from tolerating erratic quality and managing higher inventory (definitely not just-in-time!)..but still “cost as driver” prevails.
The key here is to not get caught in “we have implemented xyz methodology fad” but to truly make “Improvement and Efficiency” as a Cultural Pillar of the organization. Here are some actions to enable movement in this direction –
- Focusing on quality as ability to meet “customer outcome expectations” – doing away with “chalta-hai” attitude
- Specific programs designed to build a “frugal mind-set” in employees – do more with less
- Inculcating the ability to relate to “cost of activity” – currently most employees are not aware of costs of their actions
Strategic Initiative 3 – Conserve Oil and Energy
This should be a key focus. If every organization does their bit, this can add up to a substantial whole. Some actions here can be as follows:
- Replacing raw material that find their roots in “oil”
- Reduction in energy consumption
- Efficiency in utilization of oil and related products
There could be several other actions. The key is relentless focus on the above stated strategic initiatives by the Leadership Team and considering these elements as critical as your routine operations.
Here, literally a dollar saved will be a dollar earned, thereby reinforcing the concept of “every drop makes an ocean”. The impact of this effort will mean increased confidence of the Indian Industry on itself thereby reducing dependence on the imports. Innovation and organic growth shall help spur exports and the whole effort, should over a period of time, work favourably to reduce the trade deficit.
Hence, it’s time for positive action by ensuring that the challenges of uncertainties are faced head-on and that India gets its rightful place in the world economy. Leadership teams will ensure that news items such as “Industrial output belies everybody’s expectations & logs impressive growth rates” dot the headlines landscape.
BMGI is a global consulting firm that works with companies to improve competitiveness and drive growth. BMGI has worked passionately with the Indian Industry as a true partner in the Nation Building Process.
by Ambarish Raj
*- ET dated 10th May 12
** – Customer Jobs to be Done – When a customer buys a light bulb, the job to be done is to “provide light/illumination”. The bulb is a current solution that delivers this.
Business Leaders inspired by the Lean thinking process in Volkswagen, John Deere, SKF, Apollo Tyres and VIP Bags to provide an outsider’s perspective came together to share their views on 23rd of April 2012, at BMGI’s invite only event of “Lean as a Strategic Driver for Business Ecosystem” held at Radisson in Pune.
The event sought to explore how the Lean principles can be used strategically to drive the business ecosystem. This central idea was articulated over four themes by means of sharing of experience and through a panel discussion.
The first theme revolved around understanding how lean could enable business growth where organizations adopt Lean to create capacity for growth or where organizations align to the customer need and create larger pull for the pro ducts/services. The second theme showcased how Lean could enable a cultural transformation within organizations. The third theme probed how Lean could be used for designing the organizational DNA while the fourth explored how Lean could be taken beyond the shop floor.
Here’s a PDF copy if you wish to download: Lean as a Strategic Driver to Business Ecosystem
“Operations keep the lights on, strategy provides a light at the end of the tunnel, but project management is the train engine that moves the organization”
– Joy Gurnz
Managing multiple projects demands a lot of planning and directed efforts from a project manager in order to demonstrate a successful and on time completion of all the projects. Success or failure of a project depends on the project manager and his ability to perform in all kinds of situations to close the projects with the desired results. The difference between completion and successful completion of the projects has a direct impact on the balance in the organizations. While handling multiple projects one does not get a second chance because the time as well as the resources would be limited and there is a need for a successful completion.
Projects can come in all shapes and sizes such as straight forward improvements or complicated ones which require detailed lean six sigma methodology. The most important factors that can impact your projects can be:
1. Strategic planning: This is a very important aspect which helps you to visualize the future of your projects as well as problems you might face with the execution. One should always plan their projects in advance keeping the important milestones in mind to estimate the and the effort required in each project.
2. Stakeholder Analysis: Project teams and the leadership team are two key stakeholders for a project manager. A project manager should always understand the management expectations in advance to stay focused. Stakeholder analysis of Project teams is very important because it gives you a better understanding of team members in terms of their influence on others, working style, resistance power, interest level etc. This information helps you to ensure that the project performance is never affected during its course.
3. Team Motivation: As a project manager it is your responsibility to keep your teams motivated. During the course of projects, teams see you as a guide who will help them achieve their goals. You can always meet their expectations by doing as much hard work as they are doing and always providing them solutions to their problems. This is the most difficult part of the journey but this is the part where you learn the most and can contribute the most to the success of a project.
4. Time management: Time is a very critical factor while handling multiple projects at once because you will never have enough of it. In such a scenario you get very small amount of time to spend with a team, sometime you don’t even get to see the actual problem area and might end up spending time in the conference hall. So it is very important that you prepare a detailed plan of your week/day and put your efforts very efficiently.
5. Focus on Results: Performance metric of for a project manager is the number of successfully completed projects. So one should always be focused and evaluate the performance of his teams to visualize the future of the projects and plan accordingly.
A project manager should always evaluate his/her performance every day on the key factors outlined above to visualize his strategy for the next day, next action and a successful completion of the project.
by Anand Pareek
Most manufacturing companies treat their IT systems as a necessary evil. Production schedules rarely reflect in gemba realities, email call for actions have no confirmation mechanisms, actual work tasks either remain undone or have no associated data sometimes, because there is no way to do them on the system. Most companies know that their ERP data doesn’t reflect what generally is going on in the company. In this sense, sometimes, lean implementations succeed despite of IT rather than because of it.
But it doesn’t have to be that way. There are ways in which IT can be utilized in order to implement lean. These could be: using code-less methods in the shop to get accurate step cycle time (operator at a piece of equipment which performs that step has a record start and record end keystroke, with a picklist if needed for the part being produced); or ERP based Kanban alerts to vendors for replenishment of parts or raw material; or utilizing the internet and using email/SMS based system reminders in case a job is not done or recorded in ERP by a predetermined time are only to mention a few ideas. It becomes the responsibility of change leaders in order to ensure their lean implementation leverages their IT systems and use them to their lean advantage.
by Akhil Mehta
If only Taiichi Ohno said this when he went to the Indy Car racing or the Supermarket… If only Henry Ford said this when he visited the slaughter house in Italy… If only Joseph Juran said this when he read about Vilfred Pareto’s theory in economics… If only Jack Welch said this when he heard about Motorola implementing six sigma in its pager assembly line…
… We would be living in a world that is much much different from what it is today.
Ask instead, how can I apply this idea to my context, for that is what the above greats seem to have asked. For, I am today, thankful for the people who asked and experimented.
by Vishnupriya Sharma
Crisis has almost always made lean to work. Irrespective of the overall economic situation, all manufacturing and service industries face constant pressure to reduce costs and optimise productivity in order to maximise their profitability. Sooner or later comes a crisis in our affairs and how we meet it determines our future success and eventually happiness. But why does it happen? Let’s examine the possible reasons for this.
When your organization does well, there are plenty of ways and logic to continue in the good old way. People will argue saying when everything is working fine why should you change anything? It makes perfect sense when everything goes good. Every executive and worker feels secure and their basic needs are satisfied and they get their salaries. They have no risk of losing their jobs. Everyone wants to climb the organizational ladder, however when things are not charming and not going well, it will throw few encounters to the people. It is easy to pilot a ship when sea is calm, but real challenge comes when there is a storm. Everyone is worried about their jobs and they want to be sheltered. When things get worse, when you have a predicament, this problem is much more pronounced. So everyone will try securing their basic needs. That is, everyone will try securing their job. In other words, the needs will change.
Lean is not about the things you do well, it is about removing the things that get in the way of your work. This is the time when a movement like lean, where major changes are required in organizational structures and organizational thinking, can thrive. You can now prove the good old way of doing things is not working.
In the time of crisis, people are motivated by their basic needs. When they are motivated by these lower level needs, the motivation levels are very high. This is why a system like lean can help the organization thrive in a situation where everything seems to be failing and then it seems like we have a hammer and every encounter begins to look like a nail. Having said that, will change happen if you threaten to throw people away from their jobs if they do not follow the process? I really doubt it. People will react negatively to such forces, making your implementation much more difficult.
The point is not to say crisis is a good or bad, not even suggesting fear of losing jobs or that instability is a good thing. However, I was spellbound by all the organizations that have flourished in these situations and how they have continuously looked at what comes in the way of their work.
“One environment which does constant Value Stream Mapping is called evolution”
by Varun Chugh