The 'Mistress Syndrome' in business decision-making

http://economictimes.indiatimes.com/articleshow/msid-2296364,prtpage-1.cms

When we were young, our elders cautioned us: “Remember, the grass on the other side always looks greener”. Yet, sometimes in taking business decisions we tend to ignore this advice. As I was watching (the movie) Life in a Metro some months ago, it began to make sense. What we exhibit in business decision-making is similar to a trait some people tend to exhibit in their lives — let’s call it the ‘Mistress Syndrome’.

Let me start with inorganic growth. For Indian companies to become global challengers, it is imperative that they acquire within India and abroad to get scale. However this cannot happen at the cost of defocusing on organic growth and the core business. One of the key reasons for the success of the Indian pioneers in globalisation other than IT has been strong and sustainable domestic business, which provide the resources and confidence to drive global acquisitions.

Yet I find a lot of companies which do not have sustainable domestic business models proclaiming three or four impending acquisitions. Both Jeffrey Immelt, CEO of GE and AG Lafley, CEO of P&G, are votaries of organic growth. They had used acquisitions to fuel some of their growth in the past, but they felt that just relying on deals could be dangerous. Immelt once commented “It’s so easy to overpay when buying growth, and experience shows that the bigger the deal, the bigger the risk”.

He is absolutely right. In most sectors, there is a lot of headroom for organic growth in India. One should not fall into the trap of buying growth at the expense of organic growth. It should be an add-on and not a substitute growth model. It brings an additional risk of complacency by targeting a lower organic growth post an acquisition. Remember it will not happen every year.

A similar ‘Mistress Syndrome’ is exhibited in new brand launches. A lot of marketers have the fetish to launch new initiatives in the name of innovation. The investments required are huge and if the innovation is not really incremental or radical it would be more sensible to direct the resources towards growing the existing power brands. The current trend is towards launching undifferentiated mass- premium niche brands.

In my opinion they are very much like the ‘Arm Candy’ one flaunts in some of the happening do’s in town. Leaders are far more tolerant towards these ‘Arm Candy’ brands or initiatives and they postpone a judicious stop-loss even in the absence of a long-term sustainable business model.



Unfortunately I have realised today’s boards are more tolerant towards leaders who promise light at the end of tunnel every meeting by conveniently shifting milestones as compared to someone who admits to a mistake and prevents further drainage of resources.

I have also concluded that marketers need to focus on a few ‘Big Bet’ new initiatives by committing investments instead of flirting with a large number of small initiatives while simultaneously working towards maximising the potential of their power brands.

Another instance of mistress syndrome is top-end focus. There is a lot of growth potential amongst the urban poor and in the emerging rural areas. Unfortunately they are not ‘Sexy’ enough and require much more hard work. So a new ‘Arm Candy’ in modern trade steps in. Some FMCG players have made a lot of disproportionate spends towards it without commensurate returns. However some smart players have managed to have win-win relationships with both modern and traditional retail since they believe that both will co-exist in the long term.

A lot of youngsters who do ‘Lateral Job Hopping’ demonstrate the syndrome. During the foundation years learning and professional value addition is more important than the employer label. After a few rounds of flirting with various organisations this realisation sinks in. But perhaps a trifle too late, just as in the movie Life in a Metro the protagonist realised this at the very end: was it worth the effort?

Let me conclude by emphasising that I am all for inorganic growth, new initiatives etc. as long as they make long term business sense and they are not funded by milking and weakening one’s primary resource engines. It is foolish to assume low organic growth potential in any category in India unless there is a strong environmental trend against it.

And it takes much less effort, risk and resources to drive organic growth instead of just trying to only chase inorganic growth. The same goes for betting on a few big initiatives as compared to flirting with countless incremental ones. Just as it takes much less effort to mend relationships at home as compared finding something outside.

The author is CEO, Consumer Products Division, Marico