C K Ranganathan, promoter and CMD of CavinKare shares his business success with Venkatchari Jagannathan.

Chennai: Forty-five year old C K Ranganathan, promoter and CMD of the Rs572 crore CavinKaregroup, is a master differentiator. At a time when the tough fast moving consumer goods (FMCG) market was dominated by multinational companies (MNC) and Indian corporate giants, Ranganathan spotted opportunities in unconventional areas and exploited the same.

In the process Ranganathan, a teacher's son - his father Chinnikrishnan was a maths school teacher in Cuddalore - taught industry giants the business basics. Today the group's cosmetics company CavinKare Private Limited logs a turnover of Rs400 crore.

For him problems are actually opportunities for improvement. For instance when he found the transition from Tamil medium schooling to English medium in the college difficult, he made it a point to choose two new English words and frame five sentences daily. "I also read lots of English magazines. Extensive reading of autobiographies, books on economics helped to improve my speaking and writing skills in English."

He started business with an investment of Rs15,000 in early '80s. Here he shares his views on leadership. According to him a leader becomes obsolete when he stops to enthuse, energise his team members. Excerpts.

What are the principles on which CavinKare is built?
The first rule is: Have faith and don't be a doubting Thomas. The two words that can create magic are We can. Ever since the company was started it has grown in size. Never in its existence was there negative growth. This was possible because everybody in this organisation believes in the we can concept and not the conversely can we?

When you believe in the we can concept then you will look at ways and means to achieve the goal. On the other hand, if there is a doubt, can we, then one will always find reasons for not achieving targets.

The second rule is to be innovative and continuously so. When sachet shampoos are becoming an industry norm, the other innovative idea was the launch of Meera herbal hair-wash powder that offered the benefits of traditional shikakai as well as the modern shampoo foam. Even in sachet shampoos we brought different perfumed shampoos. Similarly, we had also launched pickle in a sachet.

The third is, differentiate your product from that of the competition. Differentiation is the fundamental principle in running a successful organisation. If you do what you always do, you will get what you always got. We consider our products are not properly differentiated when sales start to stagnate or do not reach our expectations. Differentiate or die is the credo here.

In our product segments we compete with MNCs and other big domestic companies with deep pockets. Similarly there are several unorganised players enjoying cost advantages, as they do not pay taxes. Both are facts of life and are not acceptable reasons for slower growth. For me the real issue is lack of ideas in putting across the value proposition to a customer. So we look at ways to differentiate our products and spot those positions that we can exploit.

The fourth, persist for a solution. Do not accept No as an answer when the possibility of Yes is clearly ruled out. We are the first ones to launch sachet pickle packed in automatic machines. But packing pickle is not simple like shampoo. The main problem was consistency in packing. Each packet should have uniform number of pieces - lemon, garlic, mango - and should have the right amount of oil and the mass. Undeterred we persisted with the machinery manufacturer, gave him the drawings and got the machine designed to our specifications.

The fifth rule is having a strong belief or conviction in following good value systems. It is possible to do business with dignity. The values should be laid clearly like rails. And practice this with all the stakeholders and associates uniformly. As a leader your actions should be on predictable lines. Everybody in the company should believe that the leader would not do anything unethical, come what may.

We pay our tax dues. Not that we do not resort to tax planning. What we don't do is tax cheating and bribing. For instance in one state owing to change in product classification our tax liability came to Rs1.5 crore. The tax official asked for a Rs5 lakh bribe so that the company could save that amount. The accountant who was new to our company seems to have agreed to the proposition.

When the matter came to me the next day, I told my accountant clearly that this was not done in CavinKare. We paid up the tax charged. Actually sticking to laws has other benefits - you get competent people. If I don't pay taxes then I will have only loyal people who may be incompetent. So by being honest the company may seem to lose money in the short run. But in the long run it is actually the company and the employees who would gain. We have a strong legal department that has won several landmark cases.

Is CavinKare a price point player?
That is not true. We always differentiate ourselves based on the target market. Our fairness cream 'Fairever' was priced higher than 'Fair & Lovely'. Pricing is a strategy but not a differentiator. What we do is to spot opportunities in a domain and exploit that.
In personal care space there are some businesses that MNCs will not enter as they offer only single digit or even negative gross margins.

On the other hand we look at the affordability levels of a consumer and work backwards to see the margin available. Once we are convinced about the potential we enter that business. For instance when we launched 'Nyle' shampoo the gross margin available was between 7-12 per cent. Three years down the line the margin went up to 64 per cent. Similarly when we launched 'Chik' shampoo priced at 0.50 paise, the industry questioned our wisdom.

For me, the shampoo penetration in the country is low. I wanted to increase that. The gross margin initially available was 9 per cent and later it went up to 40 per cent. Similarly in our 'Chinni's' sachet pickle, the initial margin was 14 per cent and now it is between 30-35 per cent. The margins increase not only due to increase in volumes but also due to our ability to scan the various operations to unlock the hidden margins.

On the difference between an entrepreneur CEO and a non entrepreneur CEO…
An entrepreneur is one who sees what everybody sees but thinks differently. Plus he is ready to take calculated risks.

What is your people strategy?
The rule of the game is to hire people better than you. It is for the leader to inspire, motivate and manage his people. People do not work for money alone. So a leader should spot what motivates an individual and feed it to him. He should give his employees more challenges along with the necessary ammunition / authority and resources. And in the case of failure a leader should be sympathetic and supportive. At the same time learn and articulate the lessons from that failure. In most of the cases the cause of a failure lies in the corporate office. In one instance when there was an issue with our Uttaranchal unit, I accepted a corporate office's failure. After that the deliberations were on solving the problem rather than looking for the reason for the failure.

Can leadership be copied?
It is not possible. A leader is a human being. And human beings are a bundle of emotions. Each person has various levels of thinking and understanding. One can try to imitate another, but at some point of time, the core style will be known.

Looking back, would you have succeeded as much in a different segment?
I am sure I would have succeeded. Perhaps the quantum of success would have been different. May be, if I had entered the software sector I might have grown much bigger than what I am now.