Excerpt from SPONGE - Leadership Lessons I Learnt from my Clients
03 August 2018
What happens to the costs that your vendor partner incurs? Where does it get added to your bills? Have you ever wondered about the implications of these hidden costs?
We got a lesson on cost management some years ago from someone who knows more about this than any of us — Mr Azim Premji.
Our agency had been working on the Wipro Consumer Care division from the late ’80s and there was a great deal of mutual respect and regard between the agency and the client. This led us to being called to work on the corporate advertising account of Wipro in 1998.
As Wipro’s business had started to change dramatically in the late ’90s, the company had engaged a famous designer, Shombit Sengupta to revisualise what the company should stand for. After much consumer and customer research done across the country, the company decided to go with the ‘Rainbow Flower’ logo created by Shombit with the tag line ‘Applying Thought’ (the company has gone in for a new identity since, in 2017).
We were tasked with creating an advertising campaign to promote the new logo and to link it to the various aspects of the businesses of Wipro. The first campaign the agency team created was presented to Mr Premji and the consumer products marketing team. While the response from Mr Premji was positive, it was dismissed by some of the other key members of the Wipro IT leadership team.
To be fair, some of the most difficult ad campaigns to sell to a client are corporate campaigns. For one, there is no real metric to measure if it works or fails. Secondly, there is no single divisional head or divisional marketing head who owns such campaigns and therefore wants to see it out so that he can get an uptick on his sales numbers. Finally, the CEO often seeks the opinion of so many team members that it is a miracle if a campaign can get past the gate in a year. Jokes aside, I know for a fact that agencies have worked on corporate campaigns for months without them leaving the agency studios.
This case, though, was a little different. Since there was a new logo being unveiled, there was some urgency around the campaign and there was a need felt to communicate with a larger audience about the new Wipro.
After two attempts we managed to create a campaign that was liked by almost everyone. Mr Premji wanted some small changes to be made and the campaign was re-presented to him in Bangalore. For some strange reason I could not make the trip to Bangalore and Mr Premji was kind enough to allow one of my senior colleagues, Santosh Menon, to travel to Bangalore and present the final versions of the campaign.
Remember, the campaigns could have been sent by courier or email (which had just about started making its presence felt), but good clients and good agencies prefer a face-to-face meeting, especially when the matter under discussion is creative.
Mr Premji’s office had confirmed a 5 p.m. meeting on a Friday and Santosh had planned his Bangalore trip accordingly.
The meeting went exactly as planned. The six ads were discussed threadbare and the body copy was also agreed upon. When the meeting ended it was 8 p.m.
It was then that Mr Premji politely asked Santosh, ‘You are from the Mumbai office of the agency, aren’t you? When are you heading back?’
Santosh replied that he was planning to take a morning flight back to Mumbai the next day (Saturday).
Mr Premji interjected, ‘Why are you spending the night in Bangalore? I know there is a 10.30 p.m. flight to Mumbai. My office can book you a seat right now!’ Santosh, smiled and thanked Mr Premji and said that he would figure out a way back to Mumbai quickly.
As Santosh narrated the incident to me the following Monday, he even mentioned that Mr Premji had even dialled the airport booking office of the airline (secretly, I think that was Santosh’s imagination getting the better of him, but that’s another story). What he told me and he did not tell Mr Premji was this: he had been planning on meeting up with some of his old Mumbai friends, now in Bangalore, and go on a late-night pub crawl.
The incident stuck in my head. Not the pub crawl but the fact that Mr Premji suggested that Santosh head back the same night. Why did Mr Premji ask Santosh about his return trip? How is that he was aware of the late night flight? And what lessons can that teach us?
A decade later at a board lunch meeting in Navi Mumbai, the topic of the cost consciousness of WalMart came up. ‘Kas’ Kasturirangan who is one of the most revered marketing leaders this country has produced, narrated an interesting insight into how WalMart managed its vendor relationships. They were focused on helping their vendors manage their costs better and were open to helping their vendors, if they were willing to share their costs.
One other cardinal rule that WalMart followed was that all the vendors, or should we say Principals, who fly down to the WalMart head office at Bentonville Arizona, are politely pushed to fly out the same night and not stay the night at Bentonville. They are expected to fly into Bentonville in the morning and fly out the same evening.
Meetings are all scheduled to end in such a way that visiting executives can fly out the same evening. We got talking about this and realised that WalMart did not want its suppliers to spend money on hotel and overnight stay because they realised that all these extra costs incurred would finally be loaded on to the cost of the material and get billed to WalMart and to its end customer. So not only was WalMart careful about looking at stuff like raw material costs, they were also acutely conscious about the overhead costs of even their vendors.
Thanks to these lessons, I have maintained a habit of minimising overnight stay at hotels and prefer a morning-evening trip if that can be managed. I should admit that with airports now located far from the heart of cities like Bangalore and Delhi-Gurugram, this is becoming a challenge. I also realise that an overnight stay adds other costs to the trip in addition to the hotel cost; the cost of the taxi for the next day, meals, etc.
Business Class travel is yet another habit one did not get into, thanks to the lessons learnt from clients like Wipro. And this habit was percolated right through the organisation and it was embraced with a lot of conviction, not just as a diktat from the CEO.
The Economic Times once had an interesting article entitled 7 Lessons from Frugal Habits of the Rich. Six of those lessons were:
1. They live below their means.
2. They spend less on clothes, shoes and food.
3. They save and invest first and spend later.
4. They don’t carry much cash and use credit cards wisely.
5. They look for discounts, coupons, and other ways to cut costs.
6. They value quality over cost.
A seventh lesson that I found surprising was that they also give lesser percentage of their income to charity. I am not sure if that is a ‘lesson’ in the true sense of the term, but that was what was mentioned in the article.
The article also profiled what they call the ‘Thrifty Rich Club’. Quite naturally, Mr Premji featured prominently in the list, as did Warren Buffett, N R Narayana Murthy, Mark Zuckerberg and even Rajnikant, the Tamil superstar.
While outlining Mr Premji’s habits, they mentioned that he flew economy class and didn’t stay in flashy hotels and drove modest cars like the Ford Escort. Unlike the seventh ‘lesson’ though, he has earmarked 39 per cent of his stake in Wipro (worth about Rs 50,000 crores) to a charitable trust.
I sometimes wonder if such strong focus on cost control can be counter-productive to an organisational culture. For example, a company cannot allow cost to dictate its safety or health standards. Better-run companies ensure that all women employees get company-arranged taxi cab service when they travel. Some companies insist that executives should travel business class if the length of travel is over four hours.
Obviously, there are many factors that need to be considered as one lays down policies and those may not all point in the direction of ‘low costs’. But nevertheless, a focus on costs is important.
What one needs to remember is that what can be dismissed as a small cost item, can in fact balloon into a significant cost, in the bigger scheme of things. So if you can fly back the same night, please do. It is also likely that you will be able to sleep better on your own soft bed.
(Read interview: Sponging off your clients)