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Management lessons from Dunlop

AN IMPORTANT object of this column is to draw, to the extent possible, generalisable managerial lessons from recent happenings in the business world. The recent collapse of the fortunes of General Motors was one such. The effort underway to revive and manage the stalled Dunlop India Limited is in a similar vein. Senior managers would remember what a blue chip name Dunlop was in the tyre market. Dealers in the auto-trade surveyed years ago on behalf of another, now dominant, tyre brand said, "Sir, these Indian brands will come up only if Dunlop is closed down, not otherwise. So forget all your marketing theories!".

With over 50 per cent market share, Dunlop, the British company, looked as invulnerable as the Empire once had been; and the sun eventually set on it, as it did on its Imperial parallel. When this nearly happened to IBM in the US, Robert Heller, editor of Management Today, wrote a book on it in which he attributed the decline to `corporate arrogance'. More than half of the Fortune 500 companies since the War have died, been bought over or changed shape beyond recognition.

To Indian graduates in the early 1970s, the list of leading companies included Binny's, DCM, Calico, Sarabhais, ICI, Metal Box, Shaw Wallace, Mafatlals, Tata Oil Mills, Swastiks. Of course Infosys, Reliance or Wipro were nowhere in sight yet. Interestingly, only a few, for example L&T, Hindustan Lever, and Glaxo, have figured continuously in the list; and even these have undergone fundamental restructuring through divestments and acquisitions. The gentler critic of management may dispute the accusation of intentional neglect.

He may protest that long-term secular factors in the business contributed such as consumer demand, fixed cost escalations, irreversible changes in technology, trade union-related problems and an unfriendly regulatory environment.

But certainly ignorance of market reality and an overweening stance towards the market did contribute to the downfall of many organisations. Any similarity in worldwide lessons from such events is not accidental.

The classic work of scholar Arie De Geus, not-so-well-known in India, The Living Company, examines the common threads of corporate longevity. De Geus, who led the scenario-building initiative for Royal Dutch Shell, finds the oldest companies in the world such as Sumitomo and Mitsui of Japan, Stora of Sweden have lasted 600-700 years, while the average life of the 20th century corporation is less than 40 years. In many case studies of the changing business landscape, board room conflicts, genuine ignorance, promoter-family problems and short-sightedness towards new competition are commonly cited. Leadership wearing blinkers, sticking to old fashioned technology, unwilling to take tough decisions and inability to face competition are also generic problems.

Those pointed out by De Geus are, however, worth pondering over deeply: A stable, long-term view, compassionate capitalism that is sensitive to the environment, conservative financing, tolerance of differences and of innovative behaviour, and preserving coherent identity through a few principles and values. Above all, we have to learn to view the company through an organic, biological lens not looking at it as a piece of machinery that is assembled from its parts. Acquiring this point of view needs humility. It is perhaps the greatest challenge to minds trained to worship the Gods of Physics, Technology, and the Prediction and Control of everything under the sun.

(Feedback can be sent to srchander23@netscape.net)

S. Ramachander

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