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Cover Story
 

Enter ‘Tactical’ Strategy
In a Superlative & most Insightful analysis, B&E Documents how Corporate Leaders have Transformed their Organisations & Implemented continental strategic shifts that have Rewritten Global Management case books
Issue Date - 17/02/2011
 
Behind this well publicized external exercise, the crux was whether Godrej could actually transform from within, and that’s where the true story of grit, determination and planning comes into play. The company decided that its strategic shift would require working on 4 broad areas – defining the (new) vision, making choices on where they want to play, how they execute it and how they organize and align for the future. The vision was aligned with the theme of ‘brighter living’ for all their stakeholders, particularly in emerging countries. When it came to deciding their play, they concluded that they wanted to make further investments in their consumer oriented businesses – agri, FMCG & real estate, and have a sustained momentum for chemicals. They also decided to clip off businesses like pest care and enter into JVs for poultry and rural retail (Aadhar). In terms of execution, the endeavour has been firstly to be far more strategy oriented in terms of even quarterly meetings, where updates are no longer just taken to merely discuss numbers. According to Vivek Gambhir, Chief Strategy Officer, Godrej Industries, “The only real debate we have during our meetings is regarding the pace at which we want to grow. We do feel impatient, but we have to let them take their course of time.” He admits that making cultural change on such a huge scale cannot be an overnight endeavour. But he also opines that it is in fact easier to do it in a family run set up.

Secondly, a greater focus is being given to having a systematic innovation pipeline and to create a strong employer brand, with a distinctly entrepreneurial culture. As is well known, Godrej also initiated a sustained M&A drive – going by its 3 by 3 focus, which targets acquisitions in emerging markets in Asia, Latin America and Africa and in the categories of household care, hair care and personal wash. This has led to brand acquisitions like Genteel and Swastik, acquisition of remaining 51% stake in Godrej Sara Lee Curtis and companies like Argentinian hare care firms Issue group and Argencos (combined revenues of $45 million) and Nigerian beauty products company Tura. The company has maintained a very disciplined approach to M&A, wherein they only go for deals that they expect will be value accretive within a year. Rather than following the traditional BCG Matrix, which takes into account relative market share and market growth, Godrej looks primary at EVA (Economic Value Added) to measure the viability of a business.

The company was targeting an annual revenue growth of 20-30% with the strategy shift, and the results are impressive, if you consider the latest results for the 9 months ending December 2010. Revenue stood at Rs.25.76 billion, a yoy growth of 68% (including acquisitions) while PAT grew by 48% to Rs.3.66 billion. Surely, the company seems to be young again from the perspective of growth. And the very fact that they chose to change in letter and in spirit has worked in their favour.

 
“You need a playbook in today’s time!”
Vivek Gambhir talks to B&E on how Godrej managed to reposition itself in the eyes of its stakeholders

B&E: How dynamic has the process of strategic change become in your view?
Vivek Gambhir (VG): In the old way, people were very comfortable having three year or five year kind of strategies. Due to competitive intensity, pace of globalisation, and just the sheer pace of how quickly things are changing, the entire approach is now a lot more dynamic. The process of strategy effectuation needs to be a continuous process with a fair bit of scenario thinking built around it. Rather than just one strategy, you need a playbook in today’s time!

B&E: What have been the key shifts for Godrej Industries over the past few years?
VG: We have looked at three shifts over the past few years. The first one involves much greater focus, going back to basics, investing and retooling core businesses, improving relative competitive cost positions and innovating with respect to deep customer needs. The second is expanding into adjacencies, and looking for repeatable growth formulae. Thirdly, we have gone for a complete redefinition in our positioning. India has grown with Godrej soaps, hair colours, refrigerators, et al. Around 500 million Indians use Godrej and identify it as a great product and great value for money. But as India is evolving and Indians are getting younger, we are actually trying to relish being young again as a group. The challenge has been to make ourselves relevant to a more vibrant and younger India while retaining the glory of our legacy.

B&E: How did you go about the execution of the shift?
VG: The steps towards execution involved defining the vision, making choices of where we want to play, how we do it and organising and aligning for the future. Our vision was redefined to be ‘brighter living’, creating a brighter vision for all our stakeholders in emerging and developing geographies. We resolved to create brands that consumers trust and love, provide products that are affordable and of great quality, create an inspiring place to work, ensure superior value creation, make a meaningful impact to communities, et al. Then we defined goals like being among the most trusted brands in India, being entrepreneurial in true spirit, et al. Then we looked where we want to play in our portfolio and where we want to double down, so as to allocate resources accordingly. We decided to make strong bets on consumer oriented businesses like agri, real estate & FMCG, and ensure sustained momentum in chemicals. We hived of the pest care business, formed a JV with Future Group for Aadhar and a JV for poultry with Tysons. We got back to focusing disproportionately on the businesses where we saw future potential. We have a philosophy CREATE – C for consumer & chemicals, RE for real estate, A for agri, T for transformation across the group and E for emergent businesses that we incubate for the future.

          

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