Game changing transformation in DPSUs

Tags: Opinion
Game changing transformation in DPSUs
AFP
PLAN AND PLOT: Indian army soldiers demonstrate combat skills during the Army Day parade in Delhi on January 15. Defence production industry is characterised by high-end technology, high-risk and high-investments, among others
Game changing transformation (GCT) is necessary when industries (and within them, the firms) face disruption usually from technological breakthroughs, government policy, or markets and consumers. There is no single set formula for transformation since industries and firms differ from each other, however, from experiences and logical deduction, we can develop a broad template. As usual, the key to a CEO’s efforts lies in execution and not mere planning.

GCT is about achieving large-scale organisational objectives within a given timeframe, and therefore firms have to immediately shift their working mindsets to project modes, with close watch on timelines and deliverables. This results in major change in working relationships and the top management has to gear the organisation for it. Organisational restructuring is almost a rule, with some parts strengthened and others dispensed with.

The starting point of any major change effort has to be what is termed in Sanskrit as samyak eikshena — developing insights and total comprehension of the new dynamics. This thoughtful approach enables a CEO to appreciate the new variables surrounding the firm. The top management team can then work on the new industry-level critical success factors and new mindsets required for internal transformation. In many cases, a fresh organisational purpose is needed in which the employees have a belief, and feel like contributing to its success.

While this is happening, the management simultaneously has to carry out an unbiased and detached audit of the vital gaps in critical areas of functioning such as technology, customer service and satisfaction, organisational culture and cohesion, knowledge, product portfolio, as well as employees’ skills and capabilities. Organisational resetting has to move beyond usual postings to ensure efficiency through collaboration, accountability, and employee ownership.

Two of the world’s oldest industries are the ordnance (defence) production, and postal services. Firms in both these sectors indeed have faced several near-death experiences from external environmental disturbances, such as from industrial revolution, technological discontinuities and innovations, government policies, and more recently, digital revolution. Postal services are still reeling from web-based applications like WhatsApp and Skype. Telegraph is already extinct.

High-value defence production industry (such as submarines, missiles, aircrafts, artillery guns) is characterised by high-end technology, high-risk, high-investments, long-gestation periods, close interaction with customers and government, among others. At the same time, the performance is related much beyond individual economic profit and losses; it has to do with the security of the country and life-and-death of the users (armed forces personnel). Thus, the critical success factors of their equipment’s performance are highly complex — ruggedness (all-weather), precision, fail-proof, getting it right the first time (remember the structural failure of British Overseas Airways Corporation’s comet aircrafts), battle-ready maintenance and availability of spare parts and ammunition for extraordinary long number of years, just to name a few. Thus, the defence equipment industry is a bundle of ‘beyond normal’ factors.

For GCT, rendering new skills and competences in employees is crucial, yet it is something where often training receptivity and information retention is difficult. This is because of entrenched mindsets and slower reflexes in mature adults. Hence, even the training programmes have to be customised and built around internal and external success stories, as well as new skills synced with their existing knowledge.

There is no denying that high-technology companies (say in aircraft, IT and telecom industries) must acquire and develop technological prowess. As examples of companies operating in dynamic and ever-changing environment, the cases of Spain’s Telefonica de Espana (TdE) and EMC of the US are particularly illuminating. Just like BSNL in India, Telefonica was losing market share in fixed line business, and technology was rapidly changing. In 2000, EMC’s market capitalisation was at $225 billion — more than the combined share value of the six leading global auto manufacturers — but fell by more than 90 per cent over next one year.

Both the companies went about GCT through a painful process. The effort required extraordinary energy from the top management led by the CEO. They created a compelling organisational vision, and focused on stronger customer orientation. Concurrently, strategic change programmes that affected people, processes, structures, technologies, suppliers, and business partners were implemented in modular stages. On the softer side, strategy execution teams displayed empathy and communicated the tangible benefits of the new strategy to all primary stakeholders. Both firms developed new products and services around core business, across organisational and geographical boundaries. The results of GCT were sweet: the companies are now thriving and leaders in their respective businesses. Turnover, profits and cash flows have climbed, and the workforce stands drastically reduced. EMC has transformed from an information storage equipment maker to provider of information technology as a service (ITaaS), and R&D services and TdE is one of the leading global telecom companies.

GCT programmes require decisive and determined actions (beyond plans). Leadership credibility is a key element in garnering support from all the important stakeholders particularly employees, customers, and government. For defence PSUs, if the cards are played well, global opportunities beckon, given India’s unmitigated advantages in low-cost production, knowledge and talent pool, government policy support, and huge domestic demand.

(The writer is a professor of strategy and corporate governance, IIM-Lucknow)

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