7 Great Strategies to Succeed

Gita Piramal, The Smart Manager, June 23, 2005

The author is Managing Editor, The Smart Manager

Ajay Piramal, Chairman, Nicholas Piramal India Limited, reveals

how he achieved

phenomenal corporate growth in a new industry by

implementing a differentiated strategy

You cannot fool yourself, reality will strike.

Five years ago, my management style was radically different from

what it is today. I was a hands-off manager and had entrusted the
running of the company to a professional manager. However, over a
period of time I realised that though the company was profitable it
was not performing to its fullest potential. Delving deeper into the
issue I recognised that the company was not moving in the right
direction in terms of sustainability of profit levels, quality of people
and retaining market share.

The first thing I did was to change the CEO and personally get
involved in the management of the company. I took a step back,
understood the basics, hired McKinsey to evaluate our strategy and
then implemented it. My top management was restructured and we
improved the quality and depth of management across the company.
We got out of unprofitable businesses and worked on maximising the
value of the assets we owned. This was a huge challenge for me and
it made me more detail-oriented and quantitative. I spend a fair
amount of my time now in planning and thinking in order to identify
performance levers, growth engines and the root causes of poor
performance.

1. You have to think big. Because ultimately you are what

you think you are.

For a good organisation to become great it should first have the

courage to think big and challenge the rules. In 1988 when nobody
was investing in the pharmaceutical sector we acquired Nicholas. We
were a product of what the strategists would call 'unrelated
diversification' -- a textile group diversifying into pharmaceuticals
with no apparent 'synergies.' However, I pressed ahead because of
my conviction in my actions.

Another myth we debunked is that an acquisitive strategy cannot be

sustainable or value-adding. We defied the market rules in every
possible way and went ahead with our strategy and that has enabled
NPIL to attain its current position. We rewrote the recruitment rules
of the pharmaceutical industry by handpicking our senior
management members from varied fields such as management
consulting and FMCG, in addition to the pharmaceutical industry. This
has brought in diversified, out-of-the-box thinking and varied
perspectives into the organisation.

Secondly integrity of the top is vital. According to me integrity is

demonstrated when management says what it thinks and does what
it says. And unless you find this integrity across the organisation you
cannot get superior performance. It is the responsibility of the
leadership team to set the tone of integrity and ensure that it seeps
across the company.

Third comes execution. It is not enough if a company just has a great

vision and a strategy - it is equally essential to build a system that
enables focus on excellent execution. The human factor comes
fourth. It is essential to choose the right people for the right jobs. I
believe that it is the people of the organisation who actually
differentiate a good company from a bad one.

2. The values of the employees should be harmonious with

those of the organisation.

The biggest change that has occurred over the last few years at
Nicholas Piramal is improvement in the quality of the people. To be a
world-class organisation we felt that we needed better managers. So
we have raised the bar across the board -- in our recruitment,
performance management and compensation systems. Getting the
right person is really a difficult process. It is difficult to understand
or assess a person in the one, two or three interviews that we
usually get. When recruiting a person I usually try to find out the
basic value systems of the person because for us integrity is
important.

I then try to judge the person's attitude: 'Is he a risk taker? Does he
have the hunger to achieve more?' This is essential to us because we
are an organisation with a healthy appetite for taking calculated
risks. We believe in looking for the big breaks. Our policy is to get
the best people, pay them best-in-class salaries and demand superior
performance from them. Thus, we have not only increased
compensation levels, but also increased our performance
expectation. We have a more rigorous performance evaluation
system to measure and deal with the consequences of both good and
bad performance.

Feedback is usually given across the table. If a person is not

performing well then we give him clear feedback. We explain what
was expected out of him and where he has fallen short of the mark.
If we find no change in his performance after some time, then he
may be asked to leave.
3. You must keep stretching your employees more and
more.

I believe that you should give greater responsibilities to your

employees and then judge their performance. I have found that
talented people like being given more responsibility -- that is the way
they learn and develop their professional skills. Given the spiraling
cost of good talent, it has become imperative to embrace the concept
of lean management that says, "Hire the second person when you
need the third." Though it is a risky proposition I have found this
exercise worth experimenting. I have been in the business for the
past 27 years and I have made my share of misjudgments with
people. But it has also served as a process of learning and growth for
me.

4. It is essential to break barriers.

We are now working towards a more focused organisation. We have

discontinued peripheral ventures and pumped in more resources-
human, technological and financial - in areas that we found are really
important to the future of the organisation. We always look out to
share and implement best practices from the industry. In order to
keep up the flow of ideas, we recruit people from different
backgrounds. As they are from different companies they bring in
their own set of ideas.

We interact with different people from different industries and also

organise management learning programs. During the course of these
programs different people from varied industries are invited to share
their ideas with us. A programme called 'Breaking Barriers' has been
designed for this purpose. In fact, we have asked each of our
strategic business unit to look at the best practices of other
companies (from pharmaceutical as well as other industries) and find
out the feasibility of adapting them into our company.
5. Every company reinvents itself over a period of time.

When we acquired Nicholas we were in the early stage of growth.

Having come thus far, I believe that we are in the early growth stage
of another horizon. We have attained a certain size over the last
sixteen years and keeping up the same growth rates is now a greater
challenge. In the last three years we have evolved into a company
that is quite different from what it was twelve years ago. For a
company to grow it needs a healthy mix of all four routes: organic,
diversification, alliances and acquisitions at all stages.

In the last sixteen years, we have consistently maintained a sales

growth of 37 per cent and profit growth of 39 per cent per annum. To
be able to maintain this pace in the future, we have to not only grow
organically but also through acquisitions and alliances.

6. Believe in your strategy and stick to it even if you are

criticised for it.

Since inception as well as in the recent past, we have stuck to the

strategy that we found convincing, even though other people insisted
that we were not in the right space. We have always followed a
differentiated strategy and are now convinced more than ever before
that we are on the right path. For instance, everybody in the
pharmaceutical space looked at generic exports as a way of growth.
We were hammered down by the analysts, consultants and
journalists for not looking at the generic market and leaving out a big
export opportunity.

Our international strategy is to collaborate with the innovator

pharmaceutical companies in process development and custom
manufacturing rather than compete with them in their home markets
-- something that other Indian companies of our size are actively
doing. This was not looked upon as a great strategy at that time.
But now people appreciate that this strategy offers greater
sustainability and growth potential in the long run, with lower risk
levels compared to other export strategies. The same is true of our
domestic strategy. When we talked about M&A in the domestic
market, earlier people did not think that it was right. But now people
are moving around it. So we have had a differentiated strategy in
every sphere and our experience of the last three years shows that
we are on the right path.

7. It is important to have milestones to motivate your

employees.

All our strategies are drawn up for the long term and will easily need
a 3-5 year time frame to yield results. In such a situation it is
essential to have annual milestones to sustain the employee morale.
For example, in the collaborative model of exports when we get a
large order from a big company today it is clear that we are on the
right track. It may take two or three years for the first shipment to
move after the order, but at least employees and the management
knows that we have a firm order and the strategy is working.

Or for instance if you take research, it may take many of years to

launch our own molecule. But there are clearly defined milestones in
between, and if we measure not just the 'big bang' output, but also
the interim milestones, we know if we are on the right track and
people also get motivated to continue to work on the project.

I feel that people today are more convinced within our organisation
that the strategy is right -- more than ever before. When we
developed our international strategy, there was not complete belief
from all quarters of the organisation because we were all victims of
what we read and heard from the outside world. And when it was
differentiated not many believed that this was the right thing to do.
So we had to do a big process of concentration, communication and
information. And now as they see results coming through, they also
believe that this is indeed the right strategy to follow.