4 reasons for a company to fail

Is leadership failure causes a company to go bankrupt?

After last month course on leadership, we were debating what are the main reasons for a company to become sick. After a lot of debate we picked one company which was number 1 in its industry in 2003 and now number 6. It’s a classical case on how once a profitable company becomes so sick now that it is forced to stagger the salary of its people across the month. 

We debated several reasons for the failures of the company. Here are top 4 reasons

1. Company management took highly leverage position. Management increased foreign currency debt with an assumption that Indian Rupees will appreciate but actually INR depreciates almost 40% since then. It is a huge dent in operating cash flow for the company.

2. Management failed to attract and retain proper talents. They recruited few highly paid people with a big hope but those people actually delivered a big zero. According to me the company lost its heart and brains both with the hands of these immature top executives.

3. Management promoted few people in top positions who are very average and not have a track record of success.  They just decided to cut cost without bringing synergy to the entire organization. They failed to lead and deliver.

4. Management failed to make a strategy to win the minds of its customers. They tried to compete with price war but that's a self-destructing technique. Almost 50% fall in revenue in last few years coupled with appreciating Dollar almost put a death knell to the profitability of the company.

In short, decision makes the company successful and the job of a leader to take correct decision with the best available information.

6 ways to increase revenue

6  Strategy to increase profitability of Telecom Company in India

I was always wondering what would be the correct  ”Blue Ocean Strategy”  for Indian Telco who normally operates in a large oligopoly & highly competitive low margin market.
 

Is the strategy to beat the competitors correct?

From my experience I found this herd mentality only shrinks profitability. This is dangerous strategy for a highly leveraged company considering depreciation Indian currency.

I really wonder why these companies do not give priority to their customers. Few industry house runs pan India Telco operation only for making money. Result poor customer satisfaction.

Today, I got a call from customer care stating that my GSM line will be disconnected due to nonpayment. Irony is that I have already requested for service cancellation almost a month back. Company even did not check that I don’t use their services for last few months.

As a customer I would have been happy if customer care lady enquired whether I’m facing any difficulty so that I’m not using their service. I think the telcos should rename “customer care” to “customer torture” department because they call to follow up for payment or for blunt promotion.

1.    According to me the first strategy will be enchant the customers because Teleco can distinguish their services from their competitors only through superior customer experience.  A great customer friendly service earns free marketing as a bonus from happy customers.

2.    In this difficult days, telecom operators recruit so called experts, management graduates or engineers from premium institutes with a belief that this smart & genius will increase profitability with a simple swing of magic wand.

My working experience proves that most of the time these so called experts can’t work in an operator environment. These smart high fliers are good for only making power point presentation. Most of these smart guys seriously lack basic execution skill. Without execution skill they can never bring success for the company albeit they make fortune for themselves.

More than often, these experts get a very fat salary compare to other people that destroy the synergy amongst the team. I think human resource department of Telco need to be more sensitive. They really need to recruit street smart A+ people who will work for the company and grow with the company.
Second strategy should be recruit quality people to build a strong cohesive team. Avoid recruiting experts & MBAs because sometimes experts might be clueless.

3.    CEO needs to take more ownership. They are the leader and they just can’t sit in AC room and think for strategy on white board. CEO/Chair man need to recruit great people and should empower them instead of micro managing them always. They should adopt direct selling techniques from Amway, QNET , Tupperware where people. These companies made billion dollars using motivated team without paying a dime for salary or large infrastructure.

Third strategy should be recruit quality team whom he should delegate work. Manager should be proud of the quality & productivity of the team not the numbers.

4.    Companies should take one step at a time. They must adopt analytic for sound fact based decisions to improve business in steady state. Customers can’t say what they need. Telco should invest and try new strategy. They can’t work on a fixed strategy. They have to work on various options. There will be only two options whether this will work or this will not work. This thoughtful openness requires for bigger success in this competitive market.

So, fourth strategy will be to challenge you to innovate because biggest challenges beget the best work.

5.    Companies should try to improve not by 10% but by 10 times. Last March I attended Annual Operation Meet of a large Telco and I was surprised to see CEO of that company is aiming to increase AOP by modest amount 12% as he believe beyond that is not possible.

Idea is nobody’s monopoly. Business leaders need to think how to push the boundaries and create a new market. They have to create demand and enough excitement in market just like “Monsoon Hungama” by Reliance Infocomm in 2003.

Companies need to expand horizontally in a closely related market. Telecom companies should not remain as a simple network provider because in that case they are leaving huge money on the table.
Fifth strategy will be creating unique value for customers. Apple proved over and over again people do care for values and people definitely pay for true value. Unique value does not mean complex offering. Any proposition to customers should be simple and easy to understand.

This unique value and high profitability will help the companies to jump curves i.e. from orbit to other which means more customer satisfaction and more money. Business should have an intention except only making money. This should be the mantra of CEO or chairman.

6.    CEO should lead the entire team instead of doing hour long closed door meeting and seeing dumb presentation. They forgot people spent hours to make those presentations only for them. Those ppt has no reusability. Anything not reusable has zero ROI.

How many of those executives give a dynamic presentation where they collect & present data in real time from field? Probably none.

Disclaimer - This is solely my personal opinion.