Operational Excellence in India: Interview with Pankaj Aggarwal
How does operational excellence in India compare with its counterparts in Europe and the United States? Pankaj Aggarwal shares his views in this PEX Network interview.
Pankaj has nearly two decades of experience working in Operations, Operational excellence and Supply Chain Management roles. He’s worked at leading companies like Lufthansa, Delphi, Suzuki Motors and GE and had extensive international experience, working in over 50 countries at sites in Europe, the United States, Mexico and Asia. He’s recently returned to India to take up his new position as Regional Director at telecommunications giant Indus Towers Limited.
PEX Network: From what you’ve seen, how would you describe the differences and approaches between operational excellence, between, say, Europe, North America and even India?
P. Aggarwal: I think to answer this question we need to examine it by understanding the economic background and development levels of industry in different countries and how this ties into the maturity level of companies in each region. If I were to look at US and Europe, for instance, industry is very mature. Many companies – especially in manufacturing - have a long history of automation and have done a lot of work to make operational improvements. This has improved their efficiency, quality and profitability over time.
Companies in these mature markets are now looking to operational excellence as a method to achieve transformational and breakthrough improvements. German car-maker Porsche is a very good example, for instance. They completely transformed their business in the 1990s using Lean. They took a holistic approach to change the way they were making cars versus making some improvements here and there in pieces.
Once companies reach a certain level and have captured all the low hanging fruits they have no other option than to make transformational improvements in order to continue to reap the results
Clearly it’s a continuum - and many companies are at different stages of the journey – but I think the fundamental shift we are seeing in Europe and the US is that many companies are moving away from piecemeal approaches to this transformational view of process improvement.
PEX Network: In other words, once a company has reached a certain level of efficiency they can no longer do piecemeal bits. Instead, they really have to transform their business in order to actually continue improving?
P. Aggarwal: They still can do piece meal bits here and there but to truly drive profitability and breakthrough improvement they need to switch to this transformational approach. Remember, companies in the Western world operate at very low margin levels. To truly gain mileage and improve profits, it’s not as easy as reducing your costs and liabilities - you have to think outside of the box. I think this need is driving a new kind of behavior and way of thinking about process improvement. It’s not only about efficiency and reducing variation but about coming up with new ways of doing things and completely transforming your business.
For instance, if I look at the level of tools and methodology that are used in these countries, they are much more advanced. That’s because you may not be able to solve chronic problems with the simple tools. Afterall, the low hanging fruit have been picked in many industries and there is already a high level of automation.
We’re also a seeing increasing efforts by companies in Europe and the United States to focus on the design process using Design for Six Sigma and other tools to avoid creating the problems in the first place.
PEX Network: Where would India be on this spectrum?
P. Aggarwal: India has a great diversity in the maturity levels within different industries. There are certain industries which are very mature, such as the automotive industry. Many car manufacturers were set up with joint ventures by foreign car companies from Japan, Germany and the US and have been operating in India for a couple of decades now. These companies were heavily influenced by Japanese philosophies in the 80s and 90s.
But I would say that many Indian companies are still at the stage where they are driving operation excellence in a more piecemeal way. In other words, although they might have an operational excellence program their approach is not really driving the improvements in the way we understand it in Europe or North America. There are a lot of improvements happening but it’s taking place at a lower level of processes and operations. By that I mean that there are many levels to operational excellence. The first is that you are doing spot improvements - a little bit here, a little bit there. The second is that you are doing spot improvements, but the intensity is quite high and you are doing it in many places. And the third is that you are really undergoing a complete transformation.
PEX Network: What would you say are the prevailing methods or models of operational excellence? Are people focusing on Lean and Six Sigma tools, a blend, or is BPM and process automation the big thing? What are the methods that people are deploying?
P. Aggarwal: Six Sigma has been very prominent. There was a lot of focus in the nineties on quality and the implementation of certain standards like ISO 9000. As a result you will find thousands of companies in India that are ISO 9000 companies.
And then, Six Sigma started to gain ground at the turn of the century (around 2000). That’s when Six Sigma started to get traction in various industries in India, but again, at a project level. We’d do a little bit here and there and that is how it remains today. Lean implementations are also very fragmented. Lean people make use of quite basic tools – a Kaizen here or a little bit of Value Stream Mapping there – but are not undertaking massive transformation activities.
PEX Network: What, fundamentally, is driving process excellence in India?
P. Aggarwal: I think Indian industry has been influenced by a lot of foreign investments over the last two or three decades. There’s been a lot of foreign investment in India and many of today’s operational excellence programs have been heavily influenced by foreign companies – they’ve been the catalyst, so to speak.
Indeed, there has been a lot of recent improvement activities in India that started under the influence of foreign collaborators, foreign partners. But once the activities have been started, you start to get benefits. And once you start to get benefits, it’s a little like starting a fire - it begins to take on a life of its own and spread throughout the organization.
PEX Network: So people saw the benefits of it, and now it’s embedded in the culture of a lot of companies?
P. Aggarwal: Yes, it’s starting to bubble up slowly in Indian industry. Indian companies are going through a period of very high growth – around 10-15% year on year we’re seeing in various industries. So although I would say that now they currently thinking more about scaling up for growth, when the growth settles down, they will also be thinking about transformation. I believe that the melting point will come suddenly because along with high growth we’re also experiencing a period of high inflation – running at around 9% inflation in India. This is rapidly increasing the cost of labor and means that companies can’t just keep throwing people at problems.
There’s also the question of international competitiveness. The savings that foreign companies used to make by outsourcing into India, have decreased dramatically over the last couple of year as the cost of doing business has gone up. Some themes that will be familiar to readers in Europe and North America have started to emerge. People are now talking about headcount reduction, for instance, and they’re talking about cheaper costs.
To remain competitive, Indian companies have to work on these because cost can slow down growth. If you continue on the growth path but are not able to control your costs then your profitability starts to dip very fast. There is definitely a compelling need for Indian companies to look at greater efficiencies but not to the level that European and US companies have experienced over the last ten years.
PEX Network: Where do you think Indian companies should they be focusing their efforts in terms of operational excellence? What should they be starting to think about, in your opinion?
P. Aggarwal: I would say the first thing they need to look at is to how they are able to meet their customer requirements and focus on improving customer delivery first. You can expend lot of efforts inside an organization but when you’re doing these kinds of activities, you need to really look long and hard at your focus. Is it relevant? Does everyone understand why it’s important? It could take many years until you really feel an impact.
You also need to really look into adopting a "small growth big hit" philosophy by looking at what are the key issues of the customer for the business; start to fix those so that you have a very high impact. That will give you two benefits: one is, people around you will be able to get a convincing reason why they should do this; and your customer will also feel it. But it has to be done in a very scientific, structured way; not just anybody can just start training people and start doing something.
At last, I would reiterate that now is the right time when industries in India have to look hard on their transformational strategies so as to gain another big mileage over the competition not only within India but also from around the globe.. We have to think out of the box and transform our business faster than the changes taking place in global economy.