Interview with Ranjan Pant of Bain and Co.
N Nagaraj
The theme for the forthcoming annual convention of the Madras Management Association is `Prophets on Profits'. The first presentation is `Sustained Profits in Turbulence', by Ranjan Pant and Paul DiPaola, both vice presidents and partners in Bain & Co Inc, the Boston-based management consulting firm. Business Line's N. Nagaraj spoke to them the day before their presentation.
Here are some excerpts:
On Bain & Co's plans for India
Ranjan Pant declares that they are evaluating the market and the timing of their entry into India. He adds: ``There's a lot of clarity in Bain that India is a critical market, and it has a priority.'' One of the reasons that Bain need an office in India is almost 30 of its MNC clients are already present in India. Pant adds: ``We are also looking at family businesses and PSUs.''
On the fact that companies typically tend to underestimate the investment on profit improvement programmes
Pant agrees that it's true. He presents the positive experience of a Paper Company client in North America. The company was being subsidised by the holding company and would have been bankrupt if it had been a separate entity. Its product was a commodity and the company was limited by scale. ``What Bain did was carry out an operations audit and set a target for profit improvement. We tested it and re-evaluated it internally and put it at a cost savings of USD 100 million. We also put part of our fee at risk, to be decided by the client's CEO. We saw the potential to improve profitability in three places: the supplier side, the utilisation of available resources, and the product mix. By this time, we had exceeded the initial target. The key was not to stop there. We defined over 200 specific programmes to sustain the movement.'' Commitments just in terms of money is not enough. ``Commitments in terms of incentives, time, effort and people are necessary. In the case of the Paper Company, I had a CEO and the General Managers totally committed to the effort.'' Paul DiPaola adds: ``A lot of clients come to us for strategy. What we do is start with operations. We start with solid diagnostics of operations.''
On Strategy: Edward De Bono says that strategy is nothing but good luck rationalised in hindsight. Another approach is the chess game approach where we have a history of games and each move contributes to the strategy and onecan develop new variations as one goes on.
According to Pant, ``Bain's approach to strategy is developing a proprietary point of view to capture value, basically throught understanding customers and offering them differentiated and superior products. Another aspect of strategy is allocating scarce resources across businesses.'' He also adds: ``Analogies/ historical events do provide an understanding... costs, substitution, price-experience curves, do provide tremendous insight.'' Strategy cannot be viewed as a static picture. Strategy needs to be updated continuously to capture value. DiPaola adds: ``The key word here is `pattern recognition'. Patterns play out across industries depending on the life cycle. The patterns are not exactly the same but are similar.''Pant intervenes: ``I have applied my experiences in airlines to the telecom industry... my experiences in the steel industry in the paper industry. It just depends on the competitive environment.'' DiPaola adds: ``Most consultants have vertical segments, in terms of industrial specialisation... but what happens in times of turbulence is that experiences in another industry come in handy.''
On Vision and Visioning
Pant declares that he doesn't belive in workshops. ``We would rather look at it from the operations perspective. There is no point in looking at the long term if you aren't planning to improve in the shrt term as well.'' DiPaola explains: ``We use the term `full potential' in terms of operations rather than vision.''
On Customer Loyalty: Is Bain&Co's work survey based or based on experience?
Pant replies: ``That is fifteen years of work that has been synthesised.'' DiPaola carries on: ``Five years ago, when we were studying profitability in banking, we found that the acquisition cost is very high in any relationship business.
On Customer Satisfaction and Delight/Loyalty
DiPaola answers: ``Satisfaction is a passive experience. You never get to know the real feelings experience. Study loyal customers. Then, the key is to study defectors. There you have an active experience where the defector is eloquent about why he moved away because it is at the top of his mind.''
On Management Consulting: Many managers percieve that consultants learn without risk; they are paranoid.
Pant replies: ``I am paranoid about going to my doctor. My wife pushes me to it. The paranoia is natural. What one has to realise is that we have a reputation to keep. We share the risk that way. And about leaving a share of our fee at the discretion of the client... well, if we recieve 99 per cent of our fee, we have failed. Many of our clients are multi-year clients and are sophisticated. They understand...''DiPaola intervenes: ``We are also very particular in screening our clients. We look for a substantive issue to deal with. The CEO, the company wants to change, And lastly, the company *has* to change.''Pant sums up: ``Our incentive is to create success stories.''