Seven ways to reinvent business for the age of capability

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Knowledge & SMU:

The seven ways

So, what should companies do to "reinvent" themselves as they gear up to meet these new challenges?

First, companies need to freely challenge the industry dogma. To Sheth, an industry's legacy and heritage is more of a liability than an asset. The reluctance to change, the natural tendency to follow a "prevailing wisdom", is a behaviour not restricted to a narrow group of companies. "Companies are able to thrive under tough times by challenging existing dogma," he said. For example, banks were reluctant to take part in micro-banking - the lending of small, miniscule sums of money to the poor and disadvantaged. But with a net margin of at least 40%, micro-banking is proving to be even more profitable than even investment banking.

Second, business leaders need to make "ordinary people extraordinary". "The best talent lies not at the top of the organisation, but at the foundation level. How you nurture them, how you bring them up, actually becomes a requirement for businesses, and there are companies that have done it," said Sheth, citing India's Wipro Technologies, one of its largest technology services firm, as an example. "Think about the value-add of a grain of wheat: when you make it into bread, the value-add is about five times. But if you take a human being, which is the best resource you can ever get, and polish him, nurture him, educate him, the value-add is infinite," said Sheth, a member of Wipro's board of directors since 1999.

Next, companies should learn how to be "world class customers". Many large corporations are great marketers, with the skill and savvy to produce goods that people are all too willing to buy. Yet, these very same companies are also the "worst buyers", with corrupt procurement departments and not nurturing their own suppliers positively, said Sheth. In a typical large manufacturer, the company's own value-add is only 30% of the total costs, including labour and capital investments. The other 70% are the costs of materials procured from the company's suppliers. Thus, "if you treat them with respect, just as you treat your customers, you will get an enormous leverage out of your suppliers," said Sheth. "But, I've not seen that in most companies."

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This page contains a single entry by Jim Zellmer published on June 26, 2009 12:25 PM.

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