Balancing innovation with risk

Balancing innovation with risk

'If you are constantly running, your competition will bite you sooner or later. But if you stand still, the competition will definitely swallow you.' That is how Anupam Mittal, chairman of People Group - better known for its offering - put the problem of business.

"If you are constantly running, your competition will bite you sooner or later. But if you stand still, the competition will definitely swallow you." That is how Anupam Mittal, chairman of People Group -- better known for its offering -- put the problem of business. K.K. Modi, chairman of the K.K. Modi group, Daljit Singh, president of Fortis Healthcare, and B.S. Nagesh, MD & CEO of Shopper's Stop, agreed with Mittal. Together, they constituted a panel of CEOs that exchanged views on balancing growth, risk and innovation, and the role that CIOs play in enabling growth. The discussion was held at the CIO 100 Symposium and Awards Ceremony 2007, and was moderated by Vijay Ramachandran, editor-in-chief of IDG Media. Modi, Singh and Nagesh echoed the sentiment that growth is the mantra for any business before proceeding to their experiences.

The sky is the limit for growth in the nascent healthcare sector, said Daljit Singh. As the captain of one of the fastest-growing healthcare organizations in the country, Singh said he looks forward to going from 13 to 40 hospitals by 2010. That's about seven new hospitals every year until 2010.

Shopper's Stop's Nagesh also faces a future where only imagination limits business. "Organized retailers, who enjoy only 4.5 percent of the US$350 billion retail industry, are looking for a much larger share," he said. "We are looking at every avenue of growth," asserted Singh, summing up the need for growth.

Innovation Is the key

Not all companies have been so lucky, as Mittal noted. "In India, Internet penetration did now grow at the rate we expected. Even today, the number of regular online users is too low to give rise to a vibrant online ecosystem," said the head of People Group that has developed a series of websites around weddings, including astrology and wedding planning, and has even expanded to mobile content and real estate.

So, what's his way out of this growth dead-end? Innovation.

"You can strategize all you want but if the industry isn't growing fast enough, you will have to find different ways to grow. For us, growth is a combination of two things: innovative strategy and opportunity. Both have to go hand-in-hand," said Mittal. "Our business is driven by innovation. We don't have a separate innovation strategy to launch new products or services. It is the very foundation of our business. We cannot grow without constantly innovating," he added.

Until a few years ago, Mittal said they worried about running out of online users at In 2004, they introduced a brick-and-mortar concept. It took them a year, but they broke away from the school of thought, which believed that the online business wouldn't cope with the additional overheads of traditional business. "At centers, we took the Internet to users," he said.

By the next year, Shaadi's competition had opened its own centers. But the People Group wasn't standing still. It started, an online real estate business. "We analyzed brokers since they would be major revenue drivers. We found that only 15 percent of half a million brokers in the country have email addresses. We had two options: target only that specific part of the market or innovate and come out with a portal that was accessible to everyone," he explained.

"We introduced a mobile application so that a broker never has to actually get online. They just use their phones," said Mittal. Innovations like these, he added, will hopefully bring his company closer to the growth rates they have defined.

Singh concurred: "It is important for us to recognize that innovation is a key driver of business. It is a process that creates commercial value, preferably at zero costs. Sometimes, the simplest idea can give maximum value," he added. Propagating the organization's DNA across enterprise was the biggest challenge Fortis Healthcare faces, he said. To address the problem, Singh ushered in an innovative solution: the Fortis Operating System. It would ensure uniform patient experience across all its hospitals. "We used to run a hospital at Mohali (near Chandigarh). We ran it well, but when we moved to Delhi and opened three to four hospitals and added five more hospitals with the Escorts acquisition, the complexities increased multifold," he recalled.

The new project will break the hospital down into several asset classes, each with about 20 processes. Each of these processes is being reengineered and documented. "We are beginning to measure every aspect of the patient's interaction with us. For example, the time a patient waits to see a doctor. Why can't we have an outer limit on how long it takes a doctor to see a patient? With the new system, we will be able to systematically identify and remove bottlenecks, and create an ecosystem that will ensure that a patient can access a doctor in, say, less than 10 minutes," Singh pointed out.

Balancing innovation with risk

With growth opportunities and associated innovation comes risk. How does an organization mitigate these?

Modi felt that when an enterprise is strategizing to mitigate risks, survival must be of utmost importance. "There are two aspects to risk: survival and growth. Managing the risk of survival takes top priority. For instance, we compete with ITC, which has a market share of 76 percent. The risk of a monopoly gobbling us up exists. For survival, the cost of investment is immaterial. In today's economy, there is no survival for smaller companies unless there is high growth involved. Even traditional companies are looking at 25 or 30 percent of year-on-year growth," said Modi.

Nagesh tied in survival with a company's preparedness. "When you're in the consumer space, you need to be prepared for what's going to happen three years down the line. You need to know how your consumers behave and how their habits are changing. That's why we have always been an early adopter of technology. In 1997-98, when our turnover was Rs 28 crore, we implemented a Rs 10-crore system. Newspapers called us mad, but the system ensures an extra edge of information to mitigate these risks," said Nagesh.

Mittal too underlined the need for innovation via IT. "Being close to your customers all the time and figuring out their evolving needs is critical to adopting innovation. Your opportunities grow through IT systems, as they give real-time feedback. With technology, we can also get real feedback, which tells whether things are working or not. We give our innovative strategies a second chance, and if things are still not working, we pull out," said Mittal.

Nagesh felt that a combination that always works to balance innovation with risks, is: a sound strategy and a progressive approach backed by gutsy decision-making. "For some reason, when it comes to anything else in the business, it is the heart that is used. When it comes to technology, people stop using their heart and only their minds. I think we should use a combination of both. I believe that it is a fantastic enabler, and I am yet to see a business that cannot make IT work for its customers," he stated.

Can innovation be outsourced?

With any innovation that can increase customer satisfaction and better the business, said Nagesh, "it doesn't make a difference whether it is outsourced or stays in-house. You can outsource as long as you can connect the customer back to the innovator. Innovation is also not one person's domain. It is about teamwork and it is important for every team member to know about the entire business, rather than being a functional specialist. As long as all your processes are linked, I don't think there is an issue with outsourcing," he said.

Singh believed that business heads and CEOs should be able to understand what technology can do for their organizations. "If a CEO doesn't have deep understanding of what technological developments exist and how these can be innovatively applied, he will never champion it," said Singh.

He then spread the responsibility downwards. "It is also important for a CIO to understand the business," Singh continued, "as he can be the biggest driver of productivity to the organization.

Companies will not survive if CEOs and CIOs don't work together, asserted Nagesh. "A CEO is fooling himself if he thinks he is not dependent on his CIO to run his business. The reason CEOs depend on CIOs is not to ensure that technology runs smoothly. CEOs seek insight from CIOs. If CIOs can make a transition from chief information officer to chief insight officer, then I am sure the top management and board will love CIOs even more," said Nagesh.

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