Entrepreneurship Management MANAGING EARLY GROWTH Prof Bharat Nadkarni

Business Communication Survival Rate for Globalised Corporates Age in Years Percentage Perish Percentage surviving 5 62 38 10 79 21 15 86 14 20 90 10 25 93 7 50 98 2 75 99 1 100 99. 50 0. 50

• Managing organizations during Growth and Decline • A Model of Organizational Growth – as developed by Larry Greiner in early 1970 s. Phases of PLC 1. Growth through creativity : Crisis of Leadership 2. Growth through Direction : Crisis of Autonomy 3. Growth through Delegation : Crisis of Control 4. Growth through Co-ordination : Crisis of Red Tape 5. Growth through Collaboration : Crisis of Stagnation 6. Growth through Globalisation : Crisis ?

Managing early growth Growth cycle of a New Venture • Start-up • Early growth • Rapid growth • Maturity • Negative Entropy – Resist/ Delay Decline

Managing early growth Expand the venture through • Expansion – Concentric / horizontal / vertical • Diversification- related(Concentric) /unrelated (Conglomerate) • Joint venture • Acquisitions • Mergers • Leveraged buyouts • Franchising • Global ancillarisation • Digitalisation

Peter. F. Drucker’s tips for growth-oriented enterprises • • • The need for market focus Financial foresight Building a management team Where can I contribute? The need for outside advice

• Organizational Decline • The changing environment • Potential problems when organizations decline: Explaining cutbacks in the middle management Dysfunctional Consequences of organizational decline

Dysfunctional consequences of organizational decline • Centralization : DM passed upwards, less participation, control is emphasised • No long term planning • Innovation curtailed • Scapegoating : Blamegame • Resistance to new alternatives • Turnover • Low morale, Conflicts • Loss of slack ; uncommitted resources are used to cover operating expenses • Fragmented pluralism ; special interest groups organize and become more vocal • Loss of credibility, Nonprioritized cuts.

• Managers caught in the middle • Reducing organizational size / delayering for avoiding takeovers What is the Solution? • • Meet the challenge upfront Increase communication Increase participation for redefining strategy and goals Look innovative ways to deal with the problem.

Elements in Turnaround Management Khandwalla’s ten elements of a successful turnaround strategy. • • • Change in top management Initial credibility building actions. Neutralizing external pressures. Initial control Identifying quick payoff activities. Quick cost reductions Revenue generation. Asset Liquidation for generating cash Mobilization of the organization Better internal co-ordination.

SICKNESS IN VENTURE

RBI definition: principal or interest has remained overdue for two consecutive quarters in a financial year and there is an erosion in the net worth due to the accumulated cash losses to the extent of 50% or more

Impact – unemployment, nonpayment of dues, blockage of finance, non-utilization of assets

Causes of sickness • Personal – – – Lack of integrated knowledge/ training Incompatible personalities Health Shift in attitude Succession • Management – – – Form of ownership Wrong choice of product/location Team building Planning Management information systems Inability to manage growth

• HR issues – Faulty recruitment – Wage structure – Industrial Relations – Low productivity • Operational issues – Technology obsolescence – Quality up gradation

– Production Management • • Plant location & layout Quality Capacity utilization Inventory Maintenance Environment Waste management

• Financial – – – – – Capital structure Capacity to bring capital Poor resources management Costing/pricing policy Over-dependence on concessions & subsidies Diversion of capital Over-trading Unfavorable gearing Lack of tax planning

• Marketing – Over-dependence on a single customer – Marketing myopia – Sales &distribution set-up – Market feedback/ research – Marketing strategies

• Government – – – Changing policies Scale of economy Controls Fiscal policies Role as facilitator • Act of God – Accidents and injuries – Catastrophes and disasters

BIFR Board for Industrial and Financial Reconstruction

Prevention is better than cure

Entrepreneurship Management Business Process Reengineering (BPR) Definition by M Hammer. BPR is defined as the critical analysis or fundamental rethinking and radical redesign of existing business processes to achieve breakthrough or dramatic improvements in performance measures such as cost, quality, service and speed. BPR has often been confused with the quality movement. Quality specialists tend to focus on incremental change and gradual improvement of processes, while proponents of reengineering seek radical redesign and drastic improvement of processes.

Entrepreneurship Management It is based on four key words: 1. Fundamental Why do we do what we do? And Why do we do it the way we do? Why the old rules and assumptions exist? 2. Radical Disregard all existing structures and procedures, and inventing completely new ways of accomplishing work. 3. Dramatic Not about making marginal improvements. 4. Processes a. Dysfunctional b. Importance c. Feasibility

TOTAL QUALITY MANAGEMENT Prof Bharat Nadkarni

Total Quality Management : Prof Bharat Nadkarni Pillars of TQM 1. 2. 3. 4. 5. 6. 7. Customer Satisfaction Continuous improvement Company-wide quality culture Leadership & strategic planning Employee involvement and focus Stakeholder involvement and Focus Top management committment

Total Quality Management : Prof Bharat Nadkarni Total Quality Management (TQM). . . Contd. 1. 2. Broad Goal of TQM is continuous improvement. Aims to impress upon workers the importance of continuously improving the efficiency of the production process in order to a) Reduce Cost b) Improve Quality c) Reduce Waste 3. Workers in a TQM system are expected to make suggestions for improving all aspects of the work process and are expected to share their specialized knowledge with management so that it can be communicated through out the organization. TQM is a rational technique which is driven by hard statistical data on the need for improvement.

Total Quality Management : Prof Bharat Nadkarni TQM seeks to introduce improvements through four key components. 1. Systems The need for improvement in the system is revealed by statistical process control and benchmarking. Statistical process control is the accurate and continuous measurement of quality and is typified by the measurement of frequency of failures – how often and where failures are concentrated and the analysis of cause and effect. Benchmarking is the activity of using the achievements of some other organization that is very successful in delivering quality as a model of what company can achieve. TQM demands constant monitoring and awareness of best practices.

Total Quality Management : Prof Bharat Nadkarni 2. 3. After improvement has taken place in the system, TQM ensures the quality of operations through constant quality assurance and quality control. Processes TQM regards every activity of the organization as a point of a process. In so doing, it encourages the constant review of processes through project improvement, waste elimination, and process chain re-engineering. (revisiting the process from improvement angle) People Yet another component of TQM is people. TQM organizations value their employees both as individuals as well as for their contribution to the growth of the organization. The value placed on the quality of individuals is demonstrated through hiring the best, enabling life-long learning, elimination of specialization,

Total Quality Management : Prof Bharat Nadkarni 4. instituting suggestion schemes, and establishing quality circles. Management TQM requires at the top management vision and mission for the organization, commitment for quality, empowering employees, and open mind for recognizing and appreciating achievers.

The Success Trap All great companies have some kind of success formula. It could emanate from a unique set of strategic frames, resources, processes, relationships or values. But when the formula hardens, companies lose a vital ingredient for continued success

Is your company at risk? Symptoms of Active Inertia “Good is the enemy of Best” • Strategic frames become binders “We are a growth company” “We know our competitors well” “We are number one” • Resources harden into millstones “Our brand means the product” “We have it all” “Our technology is a fortress”

• Processes lapse into routines “We have a ‘bible’ for critical processes” “We hire and promote people like us” “We make our decisions by consensus” • Relationships become shackles “We know our place in the value chain” “We do the important tasks in-house” • Values ossify dogmas “We are a family, not a company” “We have a campus, not a headquarter” “Our competitors are our enemies”

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