FIVE REASONS ORGANIZATIONS IN PAKISTAN ARE NOT MAKING GOOD PROFIT

Most of us are aware of the last words, from Stephen Elop (CEO of Nokia) & this story is one of the starting points in most team development sessions. What he said was “We did not do anything wrong, but somehow, we lost”. This article will provide the answer along with reasons that why doing only

right is insufficient for sustainable business. Staying competitive in the market today not only requires to avoid mistakes but regular innovations to keep pace with the increasing awareness and continuously changing customer needs. It is also challenging to deal with upsurge in the cost of goods and economic instability with decreasing value of PKR. However, some organizations are thriving, but most of the organizations are struggling in their business. For some, generating demand is a challenge while for others manufacturing is a bottleneck. Its challenging to keep pace with rapidly changing customer needs and high level of consumer awareness. But those who have deployed system of aligning the customer need with their processes are coping up with these challenges and making sustainable improvement in business. While other organizations in Pakistan are struggling in business and are either in loss or attaining very low profit.

1- Customer is not considered as the “Ultimate Boss”

The first new car in our town was brought by Khwaja Manzoor in 1986. Being a millennial, I remember this because there is something special in the story. While returning home after many years of service in Saudi Arabia Khawja Manzoor booked a new Toyota car from Japan so that he can go home in a car from Karachi Air Port. Cars were rare at that time to such an extent that it was first new car in his town and when he was passing by the house of a minister, he came out to see that car.   After 2 years he received a package from Toyota containing a spare part of that car with a letter of compassion from the company that we have realized “this spare part is not meeting the quality standards and we want you to replace this part with this new one”. This company knew the value of customer. For most of the organizations in Pakistan customer service might be, roughly, “Get customers in and out the door as fast as possible, and try to smile.” But companies like Nordstrom has a different philosophy: “Make customers happy even at the expense of efficiency”. Jerry Porras, in their book “Built to Last”, describe stories told at Nordstrom about unexpected service by employees, who are known within the firm as “Nordies”:

The Nordie who ironed a new shirt for a customer who needed it for a meeting that afternoon; the Nordie who cheerfully gift-wrapped products a customer bought at another store; the Nordie who refunded money for a set of tire chains—although Nordstrom doesn’t sell tire chains (from the book “Made to Stick” by Chip & Dan Heath). Hence, the organizations which value their customer last longer and do sustainable and profitable business.

2- Lack of Strategic Alignment & Customer Centric Approach

While setting organizational goals, what should be the proportion of goals covering the customer perspective of your business? Also, what proportion of your goals is about capability building of your teams? These are the two major perspectives being ignored at strategic level and only operational perspective is focused. Strategic alignment is one of the most important factors for sustainability of the organization. Only focusing on operations to ensure first time right is not enough for sustainable business. The organization has to be agile to recognize & respond to the changing environment (digitalization, increased awareness, online shopping, deliveries through drones etc.) and changing customer needs and wants in a timely manner. As it is explained in the given picture of Kano Model that even if your customers are satisfied from the product of service you provide, still they want the WAO factor to be delighted and this WAO factor is going to become basic with the passage of time and you have to

find new factors that delight your customer. Customer will stay longer with you if you are able to delight them by providing something extra and unexpected to them and this guarantees your business to stay longer. Today some organizations, having customer surveys, may think the third-party survey of their customers and brands is sufficient, but it’s not. Even if organizations get good data form third-party surveys, its effective utilization is a challenge due to lack of experts, methodologies and capability. While most of the organizations neither have system to detect and respond to changing environment, customer needs and wants nor they focus on capability building to adopt modern techniques of customer identification & their integration in strategic goals.

3- Less efforts to reduce Waste in the value chain

Although the discipline of lean and Six Sigma is around 25 years old since it was adopted by General Electric in 1995 and is gaining fame across many industries but still, there is very low number of organizations measuring the 8 types of waste in the value chain and put efforts to reduce waste. Most of the leaders think that waiting, travelling, inventory, motion, overproduction, defects are inevitable in

our business rather beneficial for their organization and they are getting profit by actually producing these wastes. However, even if we admit that the leaders are aware and they realize that these are waste, still there are no practical efforts to reduce these wastes in the value chain. Because these wastes in the terms of their operational measures or key performance indicators seem to be negligible until they are converted in terms of value (loss). I have practically experienced in some organizations when we first time mapped the waste and calculated its value, the value of annual loss was more than the amount they paid to their employees as salaries for the same year.

4- Lack of Coaching and Support Culture

A friend of mine told me the story of his career’s first presentation. He has been working on a project at one of the Asia’s largest factory. While presenting first project update to the management, my friend was interrupted by the factory head and he rejected to see his presentation after a few slides, saying, “Did you come in the factory to tell us the issues here?”. Actually, the presentation was focusing on the process improvement through problem solving in the selected scope. He is not a single person; he is the leader of around 400 employees working in that factory and creating a context that will have long lasting impact on the organization. Here he creates the context that he only wants to see achievements and no opportunities. In such an environment it cannot be expected that problems will be brought to surface and improvements opportunities will be capitalized. It is natural tendency that people want to win, be successful and recognized. Such culture promotes this natural tendency and people use unfair means, they hide useful information to win from others and they use whatever it takes to win in number game. This situation creates a culture that lacks trust, team work and inspiration. The problems become secrets and there is nothing to improve. But this, seemingly all well, is not going to last longer, soon they observe surprises and the surprise of this story was observed after 6 years when the factory head was fired due to some big problem in the product quality. This was the result of hiding small issues. They surely had received the feedback that employees find ways to hide mistakes, fake numbers and try to win from others but they this is what they wanted to see only good. Such a culture will not give you business that can be sustained. Measuring performance may be great but context senior managers create in the organization has long lasting impact on the business.

5- People capability Building is not a priority

Do you know why Japan is world famous with consistent high demand of their products? People may have their own reasons, but in my opinion one of the most important factor is their investment on the employees. 380 training hours were recorded for new workers in the Japanese production system while it was 46 hours for US production system (The machine that changed the world, 1989). This investment on capability building enabled the Japanese organizations to deliver consistently superior products well within the specification limits and hence continuous growth enabled them to surpass US production system. Now we can realize how much we are focusing on the employee’s capability building. In a recent research, more than 80% of Pakistanis have not read a single extra-curricular book in the whole life. When it comes to reduce cost in the organization, training is the first thing for which budget is reduced. On the other hand, some budget is allocated for capability building, instead of training on functional competencies most of the organizations spend that on motivational and leadership sessions.

To cap it all, the organizations need to employ a context that creates culture of trust, support & motivation. The organizations should have a balanced score card while developing organizational goals, with a system in place that ensure the alignment between business processes and changing customer needs. Moreover, a continuous improvement system must be in place to update processes & reduce waste in value chain by empowering and enabling people in the organization.

Need help with how to avoid the above listed factors? Do not hesitate to contact us!