A Story of Transformation
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Leadership » Lead Speak » A Story Of Transformation In conversation with Ramanathan Ramanan, CEO, CMC, People Matters discusses the winning recipe of combining innovation, processes and people to completely transform an organization CMC was a Public Sector Enterprise until 2002, what were the major challenges the company faced in transitioning to a privately managed company? Before 2002, 90-95% of CMC business was domestic of which 90% came from the government. The government was our largest client. The major changes were firstly, to transform ourselves into a more agile and customer focused organization and secondly to develop a global mindset. Previously, we were inwardly focused on government projects; over the years, we drifted from solution services to boxselling, which was the lowest end of the value chain. These two things meant that the mindset of the sales force had to be changed. Sales had to understand and communicate to clients what the real differentiator of CMC was. Our SBUs have, in fact, since then changed their offerings to customers as this focus started coming into the organization. I think this is what is reflecting today in the confidence of our shareholders and the high stock price as well. Today, there is focus on two things – accountability of Research & Development as well as continuous innovation, and to have solution orientation rather than being mere box sellers. Our business results have changed dramatically. Where is CMC today in this process of transformation? In 2002, our net operating margins (EBIDTA) were 3-3.5% and today they are 18-20%. Only 5% of business in 2002 came from overseas in 2002 and this has increased to 50% now. In terms of people, we have probably doubled in size from about 3,000+ people in 2000 to 6,000+ people today. In addition, CMC’s customer focus is also reflected on our wider customer base now – from 90% of the domestic business coming from the government in 2002, we now have 50% of the domestic business coming from sources outside the government. In 2002, 50% of our business was low on the value chain of solutions for customers – we were selling a lot of hardware etc. and today, only 10% of our business comes from such areas. This small portion cannot be eliminated since as part of large integrated projects, one usually has to be able to provide services from the lowest to the highest end of the value chain. These are all enduring changes, long lasting. It has helped us build a lot of credibility in the sector. For example, we did the passenger management system for the railways which carries millions of passengers across the country. We have also IT enabled the law and order systems in some states as well as the tourism ministry. This is actually a huge transformation that seems to have come about in just 6-7 years. How did CMC become an “agile” organization from one that had a steady customer base in the form of the government? We did this through focus on processes and innovation. We decided to focus on the “bottom of the pyramid” innovation that can improve the lives of thousands of people. We also had to ensure that we were cost competitive in order to be able to reach such a large base. Many times this meant that at lower costs than our competitors, we were forced to provide the same quality of service to our clients. There was no compromise on quality and we aimed at excellence in three areas: 1. Processes: Training people on high-quality processes like CMMI5 (Capability Maturity Model Integration) and Balance Score Card brought about international acceptability for CMC. Once processes are in place, people can focus their energies on innovation, which was our next focus area.
2. Research & Development of core products: We discerned an emerging need for control in the market. For instance, we created a GPS based system for tracking vehicles for logistics companies / large companies that transported goods from one location to another. We also created an e-governance platform for the state of Chhattisgarh, which was also a job creation platform for the internet-kiosk runners – this is a self-sustaining solution for which we recently won the CSI award as well. We have also done the computerization of VAT for the state of Kerala, which is being now asked for by other states as well (as they see the success of this in Kerala). 3. Training / Development: We built new skills among our people. A new embedded systems team has been started, which now comprises of more than 1,000 people. This young team has already got international credibility and some global clients. How did CMC manage its people to achieve these results? I think what worked for us is that we treat all our staff equally. We have a large portion of our workforce that is on contract and they have access to the same infrastructure, same trainings and same responsibilities as full time employees. We also launched the PCMMI (People Capability Maturity Model) which looks at tapping the true potential of all employees. Sometimes, people have certain skill sets that are ignored due to project pressures or just lack of information. Other times, people’s potential can be tapped with a little bit of support from the organization leading to growth in performance and responsibilities. At CMC, there are many channels to ensure communication at all levels and all employees have one-on-ones with their managers to discuss their skill sets and aspirations, which is then matched to training programs and project allocations. We aim to do one training per person in a year, in reality we have been able to do much more than that. Additionally, there are many programs to engage not only employees but also their spouses and families. What is the vision that CMC is working towards in the future? How will your people help you achieve that vision? Our vision states that we want to be one of the Global Top 20 systems engineering and integration companies by 2020. Our people are aligning themselves to this vision. Our three areas of focus for meeting this goal are Providing Solutions, Integration and a Service Mindset (where any large project is followed by a few years of service and maintenance). A global outlook is necessary to achieve our vision for 2020. In addition, continuously innovating and having a strong process capability will ensure we achieve our mission. As long as we can put in place strong employee engagement systems, our people will work towards this mission. There is, of course, always resistance to change. By the same token, there are always people who will welcome change. We have to create a joint movement of all people at CMC. There is already an aspiration of wanting to be the world’s best solution providers