Financial Daily from THE HINDU group of publications
Tuesday, Nov 02, 2004
Industry & Economy
`Deliver value to all stakeholders first before owner benefits'
Chennai , Nov. 1
THE biggest mistake that budding entrepreneurs commit is indulging themselves as soon as they make some money rather than satisfying other stakeholders in a business, said Mr C.K. Ranganathan, Chairman & Managing Director, CavinKare Pvt Ltd.
He was speaking to over 300 students of the Department of Management Studies, Sathyabama Institute of Science and Technology last Friday under the aegis of the BL Club, a forum for industry-academia interface.
Speaking on the theme `building an enterprise' Mr Ranganathan said that an entrepreneur must first look at what value he can deliver to the various stakeholders: customers, employees, suppliers, banks and institutions, government and shareholders.
A company must give customers a compulsive reason to buy its products. For that, products must be differentiated. Drawing on the example of the launch of Chik, CavinKare's successful shampoo brand, he said that the company used fragrance as a differentiator by importing it at several times the cost of what competitors used.
That apart, CavinKare also gave incentives to the retail channel with some innovative schemes to push Chik trials in its initial days.
"It's important to have hands-on experience and interact with customers," emphasised CavinKare's youthful CMD.
On employees, Mr Ranganathan made a telling comment: "If you want to run a business, hire a professional, if you want loyalty, hire a dog!" The point he made was that most people confuse loyalty with competence.
Loyalty should not be the factor to confuse your relationships with employees.
It is important for an entrepreneur to pay employees well and on time. An organisation, he said, grows exponentially to the proportion of the value that it adds to its employees.
Mr Ranganathan emphasised the importance of keeping suppliers happy as a stakeholder group in one's enterprise. At one time, CavinKare had almost 150 units from which it outsourced. "Focusing only on marketing and being a company that builds brands has helped us tremendously," he said.
In the company's early days, it even borrowed from other sources to pay vendors on time.
A fallout of that was the ability to bargain with suppliers increased substantially and the company also got some preference from the suppliers in times of material shortage or rush orders.
Being prompt with bankers also helps a business enterprise.
He recalled his experience with a financial institution - always prompt with payments, CavinKare got a `green card' from it and could even access a loan in 24 hours because it stuck to its payment schedule.
He exhorted businessmen to pay their taxes. "It's a trap not to pay taxes; it's against organisation building. You can, perhaps, lead a good life, but you cannot build an enterprise," he emphasised. The last stakeholder to be rewarded after others are the shareholders.
"Organisations should be larger than the individual," he stressed. Only after all stakeholders are satisfied can an entrepreneur enjoy the fruits of success.
His talk to the students was followed by a lively exchange of questions and answers where students asked him about his foray into foods while it was a predominantly cosmetics company, and the role of an entrepreneur in taking a business forward.
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