News Details

 
       Saturday 29 September 2018

Keynote address by Dr. Raman Ramachandran Head South Asia, Chairman & Managing Director, BASF India Ltd.

    

Keynote address on the occasion of 54th AGM of Process Plant and Machinery Association of India - 29th September 2018 at Hotel Courtyard by Marriott, Mumbai.


I am very privileged, honored, delighted to be invited to this Association with a history of 54 years.  An association with an estimated capacity of 6 Billion $ and vision to become preferred supplier of systems, equipment and services to global process industry.  I believe this association and its members have already made a mark on global arena and my congratulations to all members and past and current office bearers and to you Mr. Suri for leading such an illustrious association.  Like the chemical industry which I belong to, you are also a”traditional” industry which will continue to be the bedrock of any economy, particularly developing economy.  I hope to share some thoughts this evening on what I think it will take to sustain success in future.


To my utter surprise, I learnt the other day that it took India, 6 decades after independence to achieve a GDP of 1 Trillion dollars.  This happened only in 2008.  The next 1 trillion dollars was added in 7 years in 2015 and currently we are just over 2.5 trillion.  The next trillion dollars we expect to add in 6 years by 2021 the fourth trillion dollars it is forecasted will be added in just 3 years.  This should give you some idea of the speed of growth that we have achieved and likely to in future – 60 years for the first trillion, 6 years for the 3rd trillion and just 3 years for the 4th.  India will soon be one of the top 5 global economies in the world.  So, there is no better place to be in that India now and for the next couple of decades.  Yes, we are not without challengers, yes there are dark clouds that loom-global trade wars and the reversal of globalization, ballooning oil price not bad for some of you as investments start to happen in oil industry), depreciating rupee, NPA’s of banks reducing liquidity to name a few.  These factors may have temporary dampening effect but the trajectory of growth of our country is unidirectional and unstoppable.  Not just the growth of the economy but the composition of growth planned is of interest to all of us.  As you are aware, there is a vision / target to have manufacturing GDP to contribute to 25% from the current 15%, this translates to a manufacturing economy of 1 trillion dollars by 2028 from the current 300 billion dollars.  In other words, we will need to add 700 billion dollars of manufacturing GDP which by most conservative estimate will require at least a trillion dollar investments in assets.  As members of PPMAI this is indeed a great opportunity.  We in the chemical industry are excited about this prospect.


That is the opportunity but how do we capitalise on this opportunity and excel in what we do.  This is the topic that I wish to spend some time as I believe that what we did to succeed in the past will not necessarily be a receipt for success in the future.  To do this, I am going to borrow lessons from one of the world’s most robust economy – Germany and more importantly the mid size companies of Germany better known as “Mittelstand”.  By the way, Germany today is the world’s second biggest exporter after China despite high labour costs and strong currency.  Many of these companies survived two world wars and several economic booms and busts.  So what makes them so successful?  Surprisingly there are only a handful of research that has studied the enduring success of these companies.  I have largely borrowed from two sources: A book “Hidden Gems” by Hermann Simon in 1996 and research of Professor Chistoph Muller of St. Gallen Business School in Switzerland.


One of the first lessons or feature of these companies is that they occupy a Niche and excel in what they do – For example, Dorma makes doors and all things related to doors; Muehle which makes shaving brushes. Tente specializes in Castors for hospital beds, Koenig & amp printing presses. Utsch in license plates, Aeroxon in fly catchers, Industrial chains (RUD) and high pressure cleaners – Karcher.  Wiesheu, a company that makes ovens for in-store bakeries, decided over 30 years ago to specialise in this machinery having previously made butchery equipment.  With this niche approach and a B2B business model, these companies avoid head on competition with big players.  In fact, the motto of these companies seems to be “Don’t dance where the elephants play”.  Niche markets may seem tiny in one individual market but can be very attractive at global or regional levels.  It is no surprise that many of these companies are global leaders with more than half their revenues coming from outside Germany.


A second feature is that they continuously focus on new technologies and improving what and how you produce.  German Industry association, the BDI says that at least half of these companies work continuously on innovations and leading SMEs have at least five times as many patents as ordinary companies.  They do not necessarily do all this themselves but in close collaboration with academic institutions.  Plasmatreat which makes plasma surface treatments for various products, cooperated closely with researches at the Fraunhofer Institute for Manufacturing Engineering and Applied Materials Research to refine the processes they sell. We have excellent academic institutions and talent that can do world class research.  But their contribution to helping shape industry has not been significant as one would have expected.  Academia-industry collaboration in our country is woefully poor.  A key reason is that we don’t necessarily speak each others language nor understand each others needs.  Our educational system which kills most of our inherent curiosity renders most of us blissfully isolated in our own worlds.  However, I believe this is changing. (Anecdote on meeting with DG of CSIR).  Today there are start up ecosystems being created at IITs.  IISc and even business schools. Last week I was at the launch of an initiative called THINKAG, a platform to bring start-ups and innovators in agricultural area with established players, private equity players and angel investors.  May I request PPMAI develop a platform which will foster collaboration with Academic institutes.  I am convinced such a move will be a key to taking this industry to leadership position in the years to come.


The third lesson that emerges from the study of these successful mid-sized German companies is a culture of striving for and focus on continuous improvement.  Theodore Levitt, one of the doyens of Harvard Business School observed that “sustained success is largely a matter of focusing regularly on the right things and making a lot of uncelebrated little improvements every day”.  A challenge for all of us is to remain “unsatisfied with start-quo” in what we do.  It is this state of mind that will inculcate the culture of continuous improvement.


Listening to customers, co-creating to meet their needs is the fourth important success factor of these companies.  BHS corrugated with 1900 staff in US, China, Brazil and Czech republic makes machinery for producing corrugated cardboard.  The company head spends at least quarter of his time travelling the world to understand customer needs in different countries.  BHS corrugated has discovered that even such a standardized product has to be manufactured differently in different regions, with European and US customer wanting high performance machines with lots of settings, while customers in Asia and Africa are willing to accept slower machines that are cheaper.  At one time, BHS had trouble getting orders from Chinese customers.  Since they adapted their machines for that market, though they have had no problems.  The CEO argues that “you won’t become a world market leader with one product for all markets”.


Thus far I spoke from what I read and now let me shift gears and share some perspectives as a customer of this industry.  BASF is today the biggest chemical company with a global sales of 60 Billion Euros and product portfolio ranging from commodity chemicals to high end speciality chemicals used in Auto, electronics, construction and agriculture to name a few.  We are classic brick and Mortar company with 350 manufacturing sites across the world and with a capex spend on an average of 4 Billion dollars in a year.  In India, we have invested 2000 crores in the last 4 years in creating assets for speciality chemicals.  In addition, BASF in India is increasingly becoming a global service provider for several functions which includes Design, Engineering, Project Management and procurement of fabricated equipment.  So I and my team have a keen interest in your success, so we can bring more sourcing to India.  In our experience, following are some areas of that if focussed will help this cause even more.


For example, improving project management and planning skills which will help to deliver on timelines promised.


Better and honest communication with customers – credibility is built when there is honest communication and full transparency.


Right staffing – In his famous book, Good to Great, author Jim Collins says that successful leaders first make sure that the right people are in the bus (bus here being an analogy to your business) before deciding where you wish to go.  Hiring right people means hiring the right share or “Thinkers” and “doers” and creating an organisational culture where employees can excel.


Good safety practices – recognising that safety is more of a behaviour and organisational culture topic which is inculcated through training and rigorous practise that has made some behaviours part of the DNA.  For example most of us at BASF automatically hold the railings when we climb up or down stairs. (Hikal story).


Eliminate waste, efficient use of space and resources and housekeeping. (QB House – Japanese hair cutting saloon reduced haircutting time to 10 minutes by a standardised approach which maximises use of space, eliminated use of water, eliminated periodic cleaning by sucking all hair through modular vacuum.  With this they were able to increase revenue per barber by > 50%).


Finally, key to sustained business success also is how we anticipate, and adapt to new trends.  Today, two key trends that cannot be ignored in any business are sustainability and digitalisation.  Sustainability concerns are bringing new regulations that are making products / practices redundant while opening up opportunities for new innovations – plastic, chemical industry in China, Bharath VI impact on auto industry.  Digitalisation is changing almost every aspect of how we innovate, manufacture and sell.  It is redefining markets creating transparency that was unimaginable a few years ago (track and trace on transportation), am sure PPMAI and members are awake to the new possibilities and are evaluating how to leverage these trends to leapfrog to the new world.


 In conclusion, I believe we are on the threshold of another phase of accelerated growth in our country which will open up many opportunities for all of us.  However, winners of tomorrow will be ones who identify and excel in a niche as opposed to being one of the herd; Winners will be ones who listen to customer and market needs and adapt their product and services,  Winners will be those who constantly innovate, Winners will be ones who have safety and continuous improvement in their DNA.  I have no doubts that each and every one of you will be a winner with the support of PPMAI. 


I wish you the very best and god bless.

Website Designed & Maintained by Dotcom Services India Pvt. Ltd.