Why Some Companies Make a Huge Leap and Others Don’t?
Ms Sangeeta Shankaran Sumesh, business & leadership coach, speaker & author; Independent Director, IFB Industries Ltd., in conversation on the theme of the book with Mr Murugavel Janakiraman, Founder and CEO, Matrimony.com and Dr Aravindan Selvaraj, MS FRCS Ortho, Co-founder and Executive Director, Kauvery Hospitals.
Sangeeta: Have you ever wondered why some companies make a huge leap and others don’t? What are the differentiating factors for such companies? How do you turn a good organisation into one that produces sustained results? As part of a research, the team led by the author Jim Collins scoured 1435 companies and came up with just 11 companies as Good to Great. According to the findings, the 11 great companies turned an investment 6.9 times more than normal companies. They achieved sustained results for 15 years. So it’s not just good performance in one or two years. What made them different from the other companies that they were compared with? They came up with seven concepts that the good-to-great companies followed.
Level 5 Leadership: It is a blend of personal humility and professional will. Level 5 leaders have the larger goal of building a great company and the ambition is to put the company first and not the individual. The five levels of leadership are:
- Level 1: A highly capable individual
- Level 2: A contributing team member.
- Level 3: A competent manager
- Level 4: An effective leader.
- Level 5: The Executive
First who? Then what? Get the right people and figure out what they will do with it. Take the wrong people off the bus. It is important to put the right people in the right seat and that’s when the business will keep growing. The right people keep motivating themselves. They are focused in their work and giving their best.
Confronting the brutal facts: To make a great company, you need to make great decisions and for doing that, you need to know the brutal facts of your company and accept the harsh truths. Lead people with questions. Don’t give the answers. Engage in dialogue and debate and do not coerce your people. Do not play the blame game. Build red flag mechanisms. Whenever something is not right, the system should automatically be able to pick it up. The good-to-great companies use the Stockdale paradox, which is accepting the brutal facts and navigating the challenges with unwavering commitment and faith that they will prevail and get over that.
The hedgehog concept: The fox knows many things but the hedgehog knows one big thing and manages to win despite the fact that the fox is cunning. It is a very simple concept and it reduces all the challenges and the dilemmas to see what is really relevant for the business. It ignores the rest. The hedgehog concept is the intersection of what you can be the best in, what all you do, what drives your economic engine and what you are deeply passionate about.
A culture of discipline: Having a right culture of discipline helps to solve business problems. Great companies build a culture around the idea of freedom and responsibility. They give the people the freedom they want. At the same time, they make them responsible. The culture of discipline is not to be confused with tyrannical disciplinarian approach. One small step that is added to other smaller steps and doing that consistently gets you into a super discipline mode.
Technology as an accelerator: Good-to-great companies avoid the tech fads. They don’t go totally by tech. They ask the right questions like how can technology help my business to grow? How does it enhance my cash flow, my top line and bottom line? Use technology as an accelerator but remember technology alone cannot build great results. So don’t rely totally on technology.
The flywheel and the doom loop: Good-to-great companies come up with a cumulative process. It’s not just one single thing that overnight changes them to be successful. But it’s step by step, action by action or decision by decision process that turns the flywheel and leads to spectacular results that they produce. The doom loop is a misguided use of acquisitions and selection of leaders who undid the good work of the previous leaders. They want to do things by themselves and reinvent the whole thing.
It is much easier to become a great company. But the challenge is to remain great.
Murugavel Janakiraman: The level five leaders may be very quiet and sometimes even shy but in terms of executing things, they are relentless. One of the key learnings for me is the Stockdale paradox. In the last 22 years, our organisation went through various challenges but we always had the belief that at the end, we would prevail and become much more successful. At the same time, we faced the brutality of the facts. The hedgehog concept talks about focussing on the area where you are the best. As an organisation, we may be good at doing many things but we need to find out what we are really the best at doing. I posed this question to my leadership team as to why we are the number one in the world. They were not able to come up with answers. We need to brainstorm and figure this out.
Dr Aravindan Selvaraj: When this book was written, technology was used mainly as an accelerator. That is very relevant to our healthcare industry. But today, a lot of new age companies have come as technology disruptors. The other reservation I have on the findings is using market capitalisation as the lone benchmark to judge a company.
We started our hospital as a small 30 bed hospital in Trichy in 1999. In 2011, we came to Chennai and it was our first city, outside Trichy. We had the best of tertiary and clinical care at an affordable cost. Healthcare—though a service industry—has to be run financially well, so that it can be expanded. The care has to be world-class but the cost has to be optimal.
We had a few high profile hires at the CXO level. They wanted to change everything and bring in new ways of delivering health care. As founders, we were not exposed to those ways. Their approach set off the doom loop phenomenon. The promoter directors intervened and decided that the doctors are the best in running the institution. Now we don’t have high profile, flamboyant CEOs with us. Cultural fit is very important.
At the same time, in an organisation which is used to one culture, we need change management as well. It has to be handled carefully. Any organisation is complex and more so, a multi-speciality hospital. If change management is not monitored properly, it will lead to chaos. Between 2012 and 2016, we needed a personal branding for people to accept us. So I stepped in and did that. According to us, a Level 5 leader has to be home-grown within the company.
Murugavel Janakiraman: In Matrimony.com, we are passionate about people getting married and leading a happy married life. But we are not sure if we are implementing the hedgehog concept. We have not figured out what the best metric would be to correctly measure our profitability/growth. But in one of my friend’s companies, I can see that they are doing what they are good at doing. They are also passionate about doing it and the unit economics are great. In their industry, they are world-class.
Sangeeta: What would be a good economic indicator for your business?
Dr Aravindan Selvaraj: Even a charitable institution has to be financially run well. We started our hospital in 1999 with four doctors. At that time, we did not start a business organisation. We started the hospital to practise the art and science of medicine and to deliver the highest quality of healthcare. If I am a good doctor, my expertise should reach as many people as possible. So, the number of beds occupied is the single economic indicator for us.
Sangeeta: Would you relate yourself as a doctor or an entrepreneur?
Dr Aravindan Selvaraj: When we started in 1999, all four of us hardly knew about entrepreneurship. We were doctors. As we grew, we realised that it had to be run like an institution. We brought in people for finance, operations, audit and so on. I still practise my orthopaedic surgery and also manage the organisation and lead its expansion. My profession is still the core. Entrepreneurship is the key to growing our organisation.
Sangeeta: Technology alone cannot produce great results. How would you relate this to Matrimony.com?
Murugavel Janakiraman: Those days, technology was a mere disturbance but today it is a disruptor. If we don’t adapt to the evolving technology, chances of our survival will become a question mark. Twenty years ago, who would have thought that Apple would get into the phone business? Nokia missed the smartphone evolution and we know what happened to them. The storage medium evolved from floppy disk to CD to USB drive. The leader in floppy disks did not become the leader in CD drive. The leader in CD drive did not become the leader in the USB drive. When technology changes, you need a different set of mindset and approach.
Companies that provide services to meet the core needs of people like a pharmacy or grocery can adopt technology and grow. We started Matrimony.com as a desktop-based internet company. We have now adopted mobile technology. If you look at the petrol car-to-EV evolution, you can see that hardware is the key in a petrol car while software becomes the key in an EV. There is a fundamental shift happening in the business.
As an organisation, we must be equipped to handle this fundamental change. For example, you now have both online and offline companies. I feel that in the long run, online companies supplemented by their own offline companies will be much more successful than offline companies supplemented by their online companies. Technology is no longer a mere enabler or accelerator but it can be a great transformator also.
Sangeeta: Do you have any stop-doing list?
Dr Aravindan Selvaraj: Once we become a good organisation, a lot of opportunities like expansion or an allied vertical, keep knocking on us. As leaders, we get carried away by these. Periodically, a good leader must revisit the things they are doing. The stop-doing list is a very important part of any assessment in any organisation and for leadership.
Covid gave us unsurmountable challenges and it also gave us many opportunities. At that time, digital disruption was also happening in our healthcare industry. After Covid, we started 15 new initiatives like remote monitoring, home delivery of medicines, etc. We revisited all these digital initiatives and asked the questions, “Are these really making a difference to the patients? Are these really making a difference to the doctors and healthcare service-providers? If both these boxes are ticked, are they really cost-effective?” With this approach, we narrowed down to just 5 initiatives. We scrapped the other ten initiatives. We are just going to focus on the 5 big digital initiatives.
Also, during the peak of Covid, we started a small centre in Rwanda based on the request from a delegation from Rwanda for a gastro surgery hospital. We sent our doctors periodically but after 18 months, we noted that it was not fitting into our overall organisational perspective. We stopped that as well. We have occupational health centres in many industries. We are revisiting this also, as it is not our core. The stop-doing list has to be prepared periodically. Every three months, a good organisation must revisit their list.