Sunday, 23 February 2014

CEOs - Follow traditional advice & make your companies fail

"Doing business has become a tedious job today, and on the top of  it,  if shareholders want their CEOs to make their businesses successful not only in short run but in long run than this in itself is a ‘business'. Business has in real sense become very unpredictable in today’s  circumstantial perspective where you even do not know what is in store for you when you get up tomorrow morning."

But I do not believe what I said above. Business is very easy to do, only thing one has to follow is not to follow ‘Traditional Advice’.

You hear talking business honchos, saying that a company has to go for Mergers & Acquisitions, or grow ‘Organically’ to increase footprint or revenue.  On M&As, advice like ‘acquire, the right way’ is quite common.

Sometimes you hear someone saying a company failed as it did not compete with its competitors in bringing in new products continuously in the market, as the company was not very innovative.

Other common but very emphasizing advice is ‘to remain Customer-Focussed’. No doubt, customer is very central of being in business. But, focus on the right customers in the right way’ does not ensure your business successful now and in the future.

Another, generally unsolicited advice, one come across is that a company should be ‘Risk Taking’ in its approach. I could not till today understand the meaning of being ‘Risk Taking’. Is it vandalizing thoughts of customers not to purchase your product/s???

A company can only ensure success for itself by ‘Leveraging Non-Price Value to Price-Value’. A very basic principle to follow - ‘A Price Value is nothing but to get more value at less price'.  It does mean that at lesser & lesser price, more & more value, one expect for and that too always, everywhere across the globe. And, I have not come across a single person or an organisation which does not look for more value at a lesser price.

‘Non-Price Value’ like quality, style, brand, even convenience on the other hand, is a perceived benefit other than price.

CEOs need to understand that a Company creates a ‘position’ for itself in market depending upon how much of each of price and non-price value a company provides to its customers in comparison to its competitors not by M&As or being simply Customer-Focussed or for that matter Risk-taking or Innovative. There are thousands of companies which were exceptional in one or many of above quoted fields but still failed to create a sustainable position for themselves in the market.

The challenge is, generally seen struggle in the minds of CEOs or promoters to choose for short term success on the pretext that no one can see future, so get whatever is possible now. Resulting into companies going for reducing cost and try competing on price value and not on increasing service levels and competing on non-price value - what I call a ‘Middle Path’ to be seen successful as a CEO who is generally in a driving seat for few years only.

It’s not therefore ‘middle path’ but go for ‘non-value price path’.  It thus means that a company has to stand with its customers when the customers need it most. Individual or for that matter an organisation as a customer is willing to pay ‘Premium’ for this act of service provider only.

Check this fact yourself, when you decide paying more to any of your service provider in your personal life – be it your driver or maid at home.

Customers pay more for ‘Superior Non-Price Value’ than ‘Price Value’.  It is found that when ‘exceptional companies’ abandoned a non-price position, their performance goes down initially and they get scrapped from the horizon of markets, entirely.

Summarizing my views on making a company successful in short or long term is that whatever a company does - from diversification to M&As, from risk taking to innovative but never forget to protect or exceed ‘ non-price value’ to its customers. A company has to remain consistent with increasing ‘non-price value’, may be at the cost of being price-competitive.

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