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The Rediff Business Special/ R Gopalakrishnan

It takes competensity for corporates to succeed

These things have happened in India also. Of the top 50 Indian companies in 1939, 32 were British. Not one of them has survived today. It is true that the events of 1947 have influenced this.

But consider the national business houses. Only seven are still in that list. I will tell you their names and no doubt, you will have a view about how well prepared they are to stay in the top league in the coming years.

The names are Tata, Birla, Lalbhai, Wadia, Walchand, Mafatlal and Shriram. The point is that corporate mortality is not some Western issue, it is universal. The commercial corporation is a product of capitalism, and capitalism is a process of creative destruction.

Competensity -- a simile: In the new Indian business environment of the '90s, three words are used more frequently: liberalisation, deregulation and globalisation. These mean specific things to the academic, but to the practitioner, they mean huge change, tectonic change.

There are two aspects of this change -- firstly, the removal of obstacles or restrictions, and secondly, a new arrangement of connectivity among organisations and economies.

It is common to think of this environment as competition. I call it competensity. Competensity is the paradigm which brings together competition, intensity and competence. The idea is not original; if at all, the term is unusual.

My idea is to refocus our attention on something we are not sufficiently focussed upon. The spirit of intense competition that competensity tries to capture can be understood through a sports simile.

Sport has five essential elements -- players, tools, grounds, scoring systems and umpires. So has business. The players are the competitors, their factories and distribution systems are the tools, markets are the grounds on which they play, share prices and market shares are the scoring systems and regulators are the umpires.

When we talk of competensity, we need to understand that all these five elements are necessary to get the same drive for excellence as we see in sports.

I would like to develop five statements that are, in one sense, self-evident but in another sense, are often overlooked. These statements bring out some of the critical elements of competensity environment and the shift in attitude required to survive and prosper in this environment.

1. Competensity requires regulators and regulations: There is a perception that liberalisation means totally free markets. This view manifests itself with statements like ''Get the government off our back'' or ''Let the marketplace decide''. This is like trying to play on the tennis circuit without linesmen or umpires.

Consider two huge markets in our country which are currently getting deregulated -- power and telecom. We are learning how to deregulate, indeed, governments all over the world are learning how to deregulate. Everyone has realised the need for a dispute settling regulatory body. Even in opening up world trade, the World Trade Organisation has set up a Dispute Resolutions Body.

Having regulators means having regulations. We should not think of regulations as unnecessary and be careful not to throw the baby out with the bath water. For example, in the early '90s, we dismantled monopoly legislation. So, marketeers can now theoretically acquire a very large market share through mergers and acquisitions. At some stage in this process, this freedom could be misused and become detrimental to the consumer. That would not be in tune with competensity.

2. Competensity means unlevel playing fields: In our competensifying market environment, there has been much debate about level playing fields. I have some difficulty in appreciating this. The level playing field argument states that foreign players should not be allowed easy entry and time must be given to local players to develop a minimum capability.

Apply the sports analogy; international sport is conducted on different surfaces. You can be a very good grasscourt tennis player and a not-so-good player on clay. In that situation, you don't blame the clay court! If markets are the grounds on which play is conducted, they cannot be perfectly level. They will never be so. How long is the adjustment period? Ten years, 20 years?

India introduced small-scale reservation in the early '70s with precisely this type of level playing field thinking. Government felt it should give small scale industries time to build strengths against the large and predatory business houses. For almost 30 years, the list of items reserved has increased in length. It now covers 800-plus items. And who can say that our SSI is now better prepared?

Likewise, through the Industrial Policy Resolution and the Foreign Exchange Regulation Act, foreign investment was ''controlled'' for several decades. Yet, business houses argue that they are not yet ready!

Consider an aspect of public policy outside the business world -- job reservation. For 50 years, we have had a job reservation system which has only become wider and more rigid, with very arguable result to show as to the benefits of job reservation.

You make world class players by letting your players play world-class opponents on world-class grounds. Only out of such a grind only can we be successful, not by arguing for level playing fields.

3. It is about intensity of competition, not about the number of players: Classical economical thinking argues that if there are many players in a market, then there is a lot of competition. That may or may not be so. In fact, the unstated approach in our industrial licensing / monopolies restrictive trade practices was exactly this: don't let a market have a few players, ensure that there are a large number of players.

Government reports on industrial sectors often began with the statement that this market had eight or hundred manufacturers. After so many years of this type of competition, the world of competensity has arrived at our doorstep.

The Japanese became world-class because they competed very fiercely in the domestic market. Unilever and P & G compete head-to-head in detergents and the global marketshare of these two players together in the world detergent market is increasing. Unilever and Nestle compete fiercely in ice-cream and together, their global marketshare is inching up.

One measure of competitive intensity is whether the aggregate share of the top three or four players is increasing: that is, instead of being a multi-polar market, it is becoming bi-polar or tri-polar. Of course, that is not a conclusive measure by itself.

Another measure is whether price increases to the consumer are lower, or at best, equal to inflation. A third measure is whether the consumer gets a disproportionate amount of innovation and consumer news.

One example. Go back to 1990. Although P & G and Unilever are global competitors in detergents, for some historical reasons, Unilever was zero in Arabia and P & G was zero in India. At about the same time, Unilever mounted an assault against P & G in Arabia and P & G did so on HLL in India. In both markets, the intensity of rivalry increased sharply and the consumer benefit out of this rivalry was very good.

4. Competensity welcomes new players: There is a mindset issue. Indian marketeers have been trained to recognise the benefits of a monopolistic market and in this view of the world, new players are ''blocked'' from competition, that is, by preventing him from getting a licence, by lobbying the government, by invoking nationalism, just anything that works. A competensity mindset says there is a skill improvement opportunity with new players or existing players who are trying to get stronger.

Brooke Bond and Lipton were the only two players in packaged tea in the early '80s. In the mid-'80s, Tata Tea successfully entered the packaged tea market. Due to a variety of market-driven factors, by the mid-'90s, there were 250 brands of packaged tea. The market got redefined as Organised Players, Others One and Others Two.

Brooke Bond Lipton re-assessed its position in a very fundamental way and set out a gutsy new strategy. Their strategy recognised that these new and small players could not be wished away, they would always have a lower cost structure and they may not play the game with the transparency that they themselves would. In this way, strategically speaking, Brooke Bond Lipton changed the mindset from cribbing about competition to actually welcoming competition. What followed was a focus on the consumer, innovation, cost rationalisation and the kinds of things that make marketeers competensity-oriented. The results have been very good.

5. Accepting inadequate competence is the first step in competensity: I hope that by now, there is some agreement that competensity is a more powerful expression of what competition is all about. A big barrier is in accepting one's organisational inadequacy to meet the competensity situation. Aristotle wrote several centuries ago: ''Whom the Gods want to destroy, they first send 40 years of success.'' And so it is with the marketplace. Success breeds complacency.

Hindustan Lever required Nirma to shock it, inspire it and convert its outstanding managers into competitive managers. Currently, Colgate is challenged by Pepsodent and the outcome will be interesting to watch. Steel and auto majors in India have had a rude wake-up call, and are busy adjusting to the new situation. Bajaj Auto required Hero Honda and LML to shake it out of complacency. And so the list goes on.

We under-estimate how difficult it is to accept inadequacy especially when the company and its brands have been successful in the past. It is so much easier to give speeches and say the right things about being customer-oriented. I have found it very helpful to answer some questions about the customer responsiveness of the organisation.

The initiative for this effort has to come from the chief executive officer. He must personally visit customers and travel in the market. He must actively institutionalise a mechanism to listen to the customer. He must help managers to admit weakness without feeling threatened. I can tell you that these are very, very difficult things to do and require enormous changes in the marketing orientation of corporate chieftains.

6. In conclusion: I reiterate the aptness of the simile between business and sport. Sport is characterised by global standards, unlevel playing fields, intense rivalry, referees, winners and losers and constant improvement by the players to stay on top. Business is like tennis because those who don't serve well end up losing. It is also like golf because the distance a person goes is not as important as the direction. The famous Czech athlete Emile Zatopek said to his wife, ''You see, Dana, it is the hard times that give you strength. You can cheer victories, but you only learn from defeats.''

Indian marketeers have to recognise the ocean of competensity, which has opportunities disguised as problems. As a Tamil proverb goes, ''If we wait for all the waves to subside before we enter the ocean for the purpose of taking a bath, then we will never be able to enter the ocean at all. We have to brave the waves and enter the ocean.''

R Gopalakrishnan, former vice-chairman, Hindustan Lever Limited, is executive director, Tata Sons Limited. He delivered this keynote address at the 13th Deccan Herald Advertising Seminar 1998 held in Bangalore last week.

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