Business expansion ideas for mid sized IT companies- Dataquest

Outcome Based Planning- Article Published in Dataquest 31st Jan 2013

Outcome Based Planning

By

Sudhir Ahluwalia Ex Indian Forest Service officer who in the past has been head of Government Consulting in TCS and is now a freelance business expansion consultant

(www.sudhirahluwalia.com)

Amartya Sen has singled out Kerala as one of the States in India which has Human Development Indicators comparable to those prevailing in middle income developed countries. Of course we have our West Bengal, Bihar, UP, Rajasthan and many others that are vying with sub Saharan Africa for the bottom rank on HDIs.

Kerala was also one of the first states in India that sought to bring about outcome based planning and monitoring in India. In most states and in India overall, planning and monitoring is output linked. Outputs are quantifiable physical achievements against money spent. For example Rs x crores is allocated to build y number of low cost houses for the weaker sections of society. Outcomes ask the question on usage, if the house is occupied, what the occupant feels about the quality of construction and infrastructure created etc.

Result Linked Outcome based Planning and Monitoring:

The social sector allocation and planning was restructured and a planning and monitoring system was created to quantitatively improve quality of governance in Kerala. Restructuring entailed dividing Government functions into themes, sub themes, initiatives for action and results.

One of the key government function identified was access to quality services. Access to quality services were divided into sub themes:

1.     Minimum needs program

2.     Local self government

The Minimum needs program was divided into a number of sub themes. For illustration sake some of the sub themes identified was:

1.     Standardizing health services

2.     Selected initiatives in Education

3.     Community level interventions

4.     Integration of Water and Sanitation into water resources

Initiatives for action in each of the subtheme like community level interventions in Health would include among other things:

a)     Greater financial autonomy for health institutions

b)     Community led health audit

c)     Training of health professionals as institutional managers

d)     Strengthening of health extension interface with Self Help Groups

Against every initiative for action a plan is prepared collectively by all stakeholders. In the plan effort is made to clearly define, as far as possible, quantitatively answers to the following questions:

–       Who will benefit

–       What are the benefit /outcome they will receive?

–       How can the outcome be verified?

–       What are the outputs required to deliver this outcome?

Monitoring of these outcomes is done with the help of an IT program and performance monitoring system that is implemented down up to village Panchayat level.

The movement to outcome based planning was part of the   Modernising Government Program approved by the Government of Kerala in November 2002. The Asian Development Bank funded the program in the initial stages. Outcome based plans were prepared in eight departments - Revenue, Food and Civil Supplies, home, health, Local Self Government,             Education, Social Welfare and registration. These plans formed the basis for the grass root service delivery framework that was implemented by Village Panchayats. This led to the creation of a truly grass root planning and delivery program. The Rs1195 crores World             Bank funded local self government project started in 2011 is the successor to this project. This is one the successful initiatives in India and is a contributory factor to qualitatively better grass root governance in Kerala and the continued highest Human Development Indicators in the country.

Many States have tried to emulate the Kerala example to move to outcome based planning but most have not been able to bring about structural changes critical to implementation of such a program.

Out of the total annual Central Sector Plan outlay of Rs651509 crores nearly 40% of this amount is spent on social sector programs. These impact the poorest segments of society and leakages in each of the programs are well researched and commented upon. Outcome based planning and monitoring forces implementation agencies to look at results. This change leads to improved governance, better program targeting and improved HDIs.

The IT in support of governance is a critical element of governance reforms. The current National E Government Program of the Govt of India aims to provide the implementation framework to implement major IT initiatives in government. NeGP is focused more on service delivery programs than intra government reform.

Maybe this is because deploying IT to improve intra government functioning would entail substantial restructuring of the budgeting, planning, implementation, supervision and measurement processes. The latter is tough to do and tougher to sustain. Teaming up of the Department of Administrative Reform and Public Grievances (DARPG), the department charged with helping in bring in administrative reform, the Department of IT in the Ministry of Telecom and IT and the Planning Commission is required to usher in this fundamental change in governance. 

Preparing for consolidation of the IT industry

The Indian IT industry market, just like the global IT market is full of start ups- brilliant minds, entrepreneurs, fast buck seekers, frustrated IT professionals fed up with routine tasks etc etc. Many of them fail, others give up unable to take the pressure of building a company, some continue and overleverage themselves getting into severe debt, a few succeed and build an Infosys.

In the hugely competitive IT industry opportunity and technology growth is being matched by numbers of entrepreneurs. In such a scenario, the big will eat the small fish and the law of jungle will prevail.

As India develops and more opportunities for better employment and business become available in diverse sectors the fittest will survive. Consolidation is inevitable. Some of this will happen naturally often the big guys will force this to happen through poaching of the best in a company, outcompetiting the smaller companies with niche technologies and using their brand as a sledge hammer to secure business.

Survival will require companies:

To build durable assets
To focus on sectors and technologies
Resist over leverage pressures
Hold onto quality manpower by adopting people friending practices

 

Brand building for mid sized companies and startups

Brand building is at the heart of expanding a corporate business. More often than not companies look to only business growth to increase top and bottom line.

Focus only on top and bottom line often leads to managers seeking to cut corners to improve project profitability. This opportunistic model of growing a business rarely leads to long term and sustained growth.

Brand building is all about building customer trust. Trust generates repeat business. Companies that feel for their customers and go the extra mile are able to win customer trust and build their brand.

Brand building entails taking a company's value system to the market. If the company ethos is to make a fast buck this will rarely lead to building the brand. Often company's seek brokers to fix deals for them. Word travels and impacts the brand leading a company to either stagnation or downward growth path.

Company vision and ethos are not just holy statements that are put out on the front page of a company web site but it is a window to the entrepreneur's thinking.
 

Why start ups are unable to grow

I notice a lot of start ups desperately looking to establishing themselves and make a mark for themselves. The entrepreneurs invest a lot of their time, treasure and energy into making their companies successful.

Finance seems to the most common perceived challenge to start up growth. They look to Angel investors, friends, relatives to support them in their formative stages. While the need for money cannot be wished away, I believe that there are other more important contributory factors. Let me list a few of them:

1. Inability to keep cost under control
2. Absence of long term vision, strategy and plan
3. Focus on immediate revenue gain
4. Unwillingness to invest time and energy on building the brand name of the company
5. Resorting to short cuts, using brokers to win jobs etc

A start up who takes care of not committing the above mistakes repetitively has a greater likelihood to grow and mature into a full fledged sustainable business.

 

Why companies stagnate

Companies that start quite well, often have a mid life crisis and start stagnating. Growth rates drop, operational performance gets impacted due to lower margins and reduced cash flows.

The response to stagnation and reduced cash flows is often cost cutting, reducing bench strength, hiring new managers, firing below par performers, restructuring operations, strategy sessions, hiring consultants etc. But stagnation continues.

Growth is a function of leadership. Owners and CEOs often refuse to accept that the problem lies at their doorstep.

Possible solutions could be to find a guru or a mentor who works with the CEO or the owner and has in confidence discussions with him. Close door sessions, heart to heart talk, honest conversation is a good way to restore owner confidence.

More mundane solutions could be working a new business acquisition strategy, improving delivery processes, re-structuring, decentralized decision making, empowerment etc.

India business expansion- overseas start ups

Many a times start ups especially those located outside of India look to short cuts to expand their business. They look to instant strategic alliances and tend to believe that local companies will sign on the dotted line set by them. This is due to insufficient knowledge of current trends, practices and maturity of Indian IT companies be they start ups or mature mid sized companies.

Any strategic alliance arrangement with a company should be preceded by a robust business due diligence exercise wherein not only the capability of both parties is understood but also the vision, business model and culture is understood. Alliances are between people- the company only provides an institutional arrangement. Rushing through increases the likelihood of failure.

A step by step approach to deal making lays the path to successful deal making.