 Namaskar. I'm Professor Devadeep Purghasta from the Indian Institute of Technology, Bombay. Welcome to my course, Business Fundamental for Entrepreneurs, Part 1, Internal Operations. As part of the course, it is my honour and pleasure to welcome Professor Ramesh Mangala-Sharan for a module and for sharing his experiences. As background, Professor Ramesh is an alumnus of IIT Bombay and he has finished his MBA after that from IIM Ahmedabad. He had a long and illustrious career with Mackenzie, one of the largest and most reputed consulting firms globally. He served in various pillars within Mackenzie and now he is an emeritus partner of Mackenzie. He also teaches and mentors entrepreneurial students at IIT Bombay School of Entrepreneurship. So let me hand over to Professor Ramesh for his module. I would like to share my experiences on strategy development and this comes from 30 years of experience working with corporates in India and elsewhere in the world on strategy development and more recent years working with a series of startups in my personal capacity as they have gotten started. Multiple reflections, I think the first and foremost is that strategy should be anchored in what I call purpose, vision, mission and values. Now this means different things to different people but for me, purpose is why companies exist or why organizations exist. Vision is what they want to achieve, mission is how they want to achieve it and values if you will is the boundary that everyone in the organization should always confirm with. Let me just start in reverse order, simplest way to describe values to me is what do you do when nobody is looking. So in a company say that is spread all over the world, how is it that people follow the same thing? We can go into many, many examples, you know the values of the Tata group, values of Mackenzie and company, values of PepsiCo, values of Starbucks but there are a set of behaviors that people have around the world. Let's move to purpose. I think purpose is score, purpose is not about making money. Purpose is usually more than making money. If we take examples, take Coca-Cola for instance. Coca-Cola's purpose is refresh the world, make a difference. Take another company, take a company like Danahar which is a manufacturing company. Its purpose is helping realize life's potential. Move to something else, move to a car company say Ford and they will say that we are here to drive human progress through the power of movement. So the why is very important, why can exist for human beings also, why can exist for companies also and that is where strategy always begins. So the first point I would like to make about strategy is anchor it in these words, anchor it in the why, the what, the how and the values. This is very critical as per my experience. The second and this is very important that strategy is an integrated set of consistent actions, integrated and consistent. So let's take an example, let's take an example like Toyota. Toyota has created a brand around a very efficient functioning car. Mark the words, it is efficient functioning car. So everything that they do has that as the core theme. So their plants are lean and efficient, their procurement is efficient, their dealerships are simple, they are not very flashy. So when Toyota wanted to address another segment which is the premium segment, they came up with a brand called Lexus. Lexus has a very different set of actions, their marketing budgets are higher, their dealerships look different, their engineering and components are different. However they still maintain the core of efficient manufacturing. So the second observation I would like to make on strategy is that it is integrated and it is consistent. The third and this is to me most important. I always say that strategy is as much about choosing what not to do as what you choose to do. I'm just now working with a startup that makes robots. Now they have a choice. Do they only sell the robot as a product or do they actually provide the services of the robot and become a services company? This is a very important choice according to me. It is a strategic choice on whether to stay a product company or to become a services company. If you want to do both product and services, it is best to probably think about it as two different companies. So strategy is a choice particularly around what you do not want to do. Finally, strategy is never in the air. So some people would say that strategy is 10,000 feet thinking, 20,000 feet thinking, 30,000 feet thinking. I disagree. I think strategy is really around anchoring it in reality. And what are the two realities that you have to anchor it in? The first reality is what I call the market context. The second reality is the ability to differentiate. Let's spend a minute on market context. Market context has two different elements to it. The first element to market context is market attractiveness. Here you look at things like market size, market growth, local market, global market. So what is the market and what is the attractiveness of the market? The second element of market context is what I call competitive intensity. Who is already doing it? How are they doing what they are doing? How are they getting the market share that they are getting? So market context has the element of market attractiveness and competitive intensity. But that's only one dimension of the anchoring. The second dimension of the anchoring is the ability to differentiate. Ability to differentiate is really to say what is my right to win? Is my right to win that I have proprietary IP? Is my right to win that I have access to low cost resources that will give me a cost advantage? Is my right to win that I have this incredible culture that I attract the best talent in the country and they do the best? So these two things are very important that you anchor your strategy. So anchor means that you link it to the ground. You're linking it to the ground. It is not flying in the air and you link it to the market context and the ability to differentiate. Now people say where is making money? Making money is an outcome of all this. If you have anchored your strategy in purpose, if you made a good set of integrated choices, if they are internally consistent, if it is well anchored in market context and ability to differentiate, then the fact that you make money or create value is an outcome. And creating money is an outcome for commercial enterprises. You can do a strategy for a not for profit. You can do a strategy for a person. So strategy does not mean that it is only for companies. You can do a strategy for any context. You can do a strategy for a country. You can do a strategy for a government. So therefore for commercial enterprises value creation becomes an objective. So these are some of my first reflections on strategy. Now let's move on to some other reflections on strategy. And here these are some what I call practitioner tips. The first thing I want to talk about is the bifocal perspective. What is bifocal? The ability to simultaneously have a telescopic view and a microscopic view. Telescopic view allows you to look far, allows you to look very, very far. Microscopic view allows you to look deep. And there is no conflict between the two. It is absolutely possible to have this bifocal perspective. In the context of strategy, what does bifocal perspective mean? Bifocal perspective means the ability to have a three to five year view on the rough direction you are heading in. But to also have a view on what do you want to do in three months? And I think this is quite important. In fact, I would say so that in the current context where the world is changing quite fast, it is quite important to have this two-part view. And say this is the rough direction. Like in it to a journey, like in it to you going from place A to place B. You are saying, okay, I'm heading out from Mumbai. I want to go to Pune today. So you know what direction you're going in. You roughly know that I want to get to Pune and say three to four hours time depending on conditions. That is the telescopic view. The microscopic view is okay. In the first 30 minutes, I'm going to get to New Bombay. I'm going to take a tea break. After that, I'm going to head on to the expressway. I may take another break. I don't know what the traffic in the expressway is. I may come off the expressway earlier. Those are all adjustments you make. But you don't change your direction. You're still going in the direction of Pune. That's the base of short term beds. So this is very important. And in the context of strategy of companies, it is to say that this is what we want to do. And what I have found very helpful is to break it up into three sets of initiatives. One is what are you doing for today? Which is with your current assets, with your current products. What are you doing to create bottom line today? So the first category is that second category is. What are you doing today for tomorrow? So what are you doing in terms of new products in new markets? So where am I getting revenue? I may not yet be getting profit, but that revenue will become profit over time. And three is what am I doing today for three to five years out, say new product development, new market evaluation. Now these are still initiatives. These are still initiatives that you are testing it out. And a good bifocal perspective is at this point in time, can you take all three views? Can you take a view of today for today, today for tomorrow and today for day after tomorrow to simply put it that way. So zero to one year view, one to three year view and a three to five year view. And that is the essence of the bifocal perspective. Second is strategy is to me not doing more of the same thing. If you do more of the same thing then over time you are likely to lose relevance because markets are changing, competition is changing, customers are changing and therefore staying where you are is never a good thing. So therefore strategy should have an element of continuity, but it should also have an element of change. Element of change is to do something different and the change I am talking about is not incremental change. I am talking of breakthrough change and change remember is quite difficult. Think of this as almost a solar system. If you want to go from one orbit to another orbit you need a little bit of a propulsion that takes you from one place to the other. So the change is anything that does the shift from one orbit to the other. Continuity is if you stay in one orbit you will keep spinning in that orbit. So once in a while you need to get off to another orbit and to get off to another orbit. So as you think about strategy think about what is doing more of the same which is preserving your core and what are one or two step outs and why are you doing the step outs because customers are changing, competition is changing, regulation is changing, market needs are changing and therefore you need to make the change. So the second element as I think about strategy is continuity and change. The third one which is quite important is therefore if you want to do change be clear that there will be a set of things that you do that are fixed and familiar to you. You know how to run your plants, you know how to do sales, you know how to deal with customers, you know how to do R&D. However there will also be a set of things that are unfamiliar to you and when you are dealing with unfamiliar things to you you cannot have a fixed mindset. When you are dealing with unfamiliar things you need to have a flexible mindset. Let's take an example. Let's take an example of banks in India. Ten years ago banks were all physical and you had to go to a branch and you had to draw money. You had to get a demand draft. It was all the traditional thing. Look at what has happened now. There is the advent of the digital bank. You don't need to go to the bank. Ten years ago a banker could have said, oh my God this is not how we do our work. But the wisdom of the bankers was they had to create a digital bank and they created it in a completely new way. In some cases they even created a separate team. They put in it in a separate organization. They gave them different salary structures. They looked at technology differently. So they had to deal with the unfamiliar which was necessary from a strategy point of view with a very flexible and open mind. And that's quite important. The other thing I want to talk about and this is linked to the earlier point on change. We are not talking about incremental change. We are talking about big shifts. If you make big shifts it will typically require a big investment. It will require either investment of capital or it will require investment of human resources. If you are making big shifts therefore you have to say what do I do if it goes wrong? So for instance you should say okay I am making this big bet but I am going to stage get my bet. I am going to control my investments and based on how things progress I will give more but I am committing to it. Or I am going to increase the profitability of my core business so that it allows me to make the big shift. So every big shift comes with safety nets. The last point I would like to make around strategy is you have to measure it both in terms of inputs and outputs. What is the classic example of an input and an output? An output is market share. Input is whether you are calling on the right customers and whether you have the right sales force and it is quite important. So one of my reflections on strategy is it is a combination of these two ads. It is a combination of the near term and the long term what I call the telescopic and the microscopic perspective. It is a combination of continuity and change. It is a combination of doing the familiar and the unfamiliar. It is doing things that are fixed and having a flexible mindset. It is a combination of making big shifts but supporting it with safety nets and it is a combination of measuring it with inputs and outputs. So in summary what I would say is that there is a lot of jargon around strategy. There is a lot of confusion around strategy but strategy in my mind is very simple. Strategy is really anchored in the why of a company. It is a set of consistent actions that are integrated. It is about choices and it is about these things that I said. Hope this is useful and best wishes on your journey. Thank you.