Thursday, August 16, 2012

Intensity Towards Competency (how better to define ITC)

Business jargon and some of its understanding came into my life only after I started working at the age of 22 in GE Healthcare. As much as we hoped for our machines to be the mark of technology, it was the reputation of the company that outperformed. These were the day when I got exposed to terms like global sourcing, core competencies, diversified business and consolidation through almost every central communication. Reason- these were lessons learnt the hard way and screaming out to everyone; beware: that this is what we had tried and failed, try not to do the same mistakes.

Since I have learnt this, I have tried to look at Indian corporates which have tried to diversify, streamline to core or tried things, failed and renewed themselves. Of course, what I looked in each case was the element which I could say could be the core competency of the corporate.

One of the best examples of diversification I have seen is that by ITC Limited. The company is over 100 years old and for 60 years the company did nothing but made and sold cigarettes. Even today, it has almost 60% revenues coming in from tobacco sale. But they have diversified smartly into businesses like hotels, paper, foods & confectioneries, clothing, personal care products and stationery. Not to mention smaller businesses like agro, retail and IT. What I admire so much about ITC is its commitment towards building on competency with every new vertical and living by its motto- Create Value.

In 1970 it went into Hotels - unrelated to the tobacco business but the ITC Sheraton Chola in Chennai was nothing but the best in the sector at a time when there were no big hotel chains in India. The fact that today ITC Grande and ITC Fortune are brand which have stood the test of time is only due to the fact that they stand for something unique in their offering.

The next diversification was paper and paper board. Okay, there is connect with tobacco as both utilized organic plant origins and - after all, a cigarette is basically tobacco wrapped in paper, packed in a paper box. But ITC paper is renowned all across the industry for industrial as well as regular printing. Sure, clothing, personal care products and foods are an offshoot which is not entirely in coherent; but the way these products have been developed and marketed is a master class in understanding consumers.

Typically, a cigarette vendor has a small shop where tobacco products, mints n toffees, small quantity pouches of snacks n biscuits, soaps and oils, sachets of shampoos, playing cards, ball pens etc. That’s a huge range of categories considering nothing here costs in excess of Rs 25. Margins are low but volumes are high. It is like a poor man’s supermarket.

So, for 60 years you have been in the tobacco business. In the process, you have established a distribution network unrivalled by anyone else in India. Go out to the most rural parts of India and you will still find a cigarette (so what if it chota Goldflake) from ITC available. Come to the semi urban and urban space and the product mix spreads from the Goldflake to the Classic range and further on to the premium brands like Insignia.

Now what does every smoker need which can be easily distributed along with the cigarettes???- a matchbox and mints. ITC entered into the marketing and distribution of a cottage industry like match boxes with AIM and Mangaldeep as two brands. While the need is catered for its customers, ITC also moves into essence sticks with Mangaldeep, a support extended to the same people manufacturing the matches. There is Candyman with mints. A long shot, but a smoker can very well be in need of finger snacks to go with a drink. There comes in Bingo. Most of these shops are open since early morning or run till late evening. The Superia range of personal care products serves the travellers and small quantity consumers to perfection.

ITC is not just a brand for the common man- it also serves a life style. The hotels are a statement. The clothing range and personal care products often remind me of the way Dunhill business suits became a rage in Japan in the 60s. Wills Lifestyle, Essenza Di Wills (premium), Fiama Di Wills are all brands which talk of a lifestyle a person with a Wills Insignia in his fingers will desire.

While all the lifestyle talk, ITC e-Chaupal combines the farm produce sourcing with IT efficiency so that farmers get the best value for their produce. On the other end, buyers also get access to the best agro products eliminating middle men. This is the most successful online mandi in India at present. Add to it Chaupal sagar- an agro supermarket to sell farm produce eliminating the complete chain of bulk buyers who cut commissions from producers to consumers.

A wide range of products and excellence in each one; a strong sourcing and distribution chain- ITC has it. Call some of the rural initiatives as CSR or Bottom of the Pyramid approach- it all does make an impact on every life. ITC truly Creates Value…