Three rules to achieve excellence – Mike Canning, National Managing Director, Deloitte LLP, USA

Mike Canning, National Managing Director, Deloitte LLP, USA

I want to discuss with all of you three topics. First, I want to talk about my observation as an outsider about what is happening in India, secondly to talk about the recently accomplished research of how do companies excel to grow and what are the key factors that drive them; and last but not the least, the strategies and options which companies consider to make a business decision.

It has been a wonderful growth story in India in the last 20 years through various forms of reforms that have been adopted and the ones proposed recently have been welcomed by other countries. It provides a mechanism and a way to further grow and invest in India. It is interesting that many Indian companies have grown to become global participants and players. When you are in global spot, there is much difference in responsibility in terms of opportunities to push, drive and innovate. You have to bear the risk of global market and the risk to ignore innovation. You have to navigate as a global citizen through different times. We are probably living in one of the highest periods of uncertainty globally.

As an outsider, I want to highlight the factors that impair Indian growth. Main issue is related to infrastructure. For India to grow further, there is a need to double, triple and quadruple the capabilities for shipping, airports, highways and other aspects of infrastructure. The second is around uncertainty in policy. When government policies are uncertain and in absence of relevant policies which contribute to the progress of the country, it causes companies to hold back and not invest in the country.

Companies don’t build great enterprises all alone; they do it with the support of the infrastructure and government policies that allow them to use their capital for success. The other key factor that I am worried about as an outsider in India is that there is a shortage of talent.  That seem like the most obvious statement in India, but I was going through the survey and analysis that was done by FICCI, the number of employable skilled workers is not what we think it is. Employers are finding a hard time to find people with the right skills for a particular job in India. I am facing the same issue; in fact retaining them in business is also a challenge.

We did a research on the concept of excellence. We started with a US database of around 23000 companies to analyze things that happen by chance, by luck and to understand the factors that drive the companies for excellence. Post researches, instead of asking what the companies do to achieve excellence, we asked what do they think and what is their management philosophy. When we looked at that perspective, we got statistically relevant insights, out of which came three simple rules.

The first rule is “better before cheaper.” Countries which strike a balance between quality and economy do well. Companies that build themselves to make better product vs. cheaper product consistently have better results. When you look at how you position your product in the market, there are two ways we can do it; one is based on price and the other is based on non-price. The price is based on value, and the non-price strategies include the branding, style and quality. Hence, non-price strategies are far more consistently valuable than positioning solely on price. The second rule is the profit formula, which is basically “revenue before cost”. Focus on revenue side of the equation rather that cost side and we can get better results. The third rule is to “be persistent”. However, we also found out that when the business and economic environment change, we need to change rule 1 and rule 2. That means how you operate in the uncertain environment and still being persistent. So to be successful in this changing environment we need to be different, get paid for it and stick with it. We need to be exceptional with reference to the recessionary economy, changing environment and new competitors to achieve excellence.

The above article is an excerpt from the speech delivered by Mr. Mike Canning, National Managing Director, Deloitte LLP, USA  at  AIMA’s 39th National Management Convention which was held in September 2012.