Managing Fast Growing High Technology Companies

Venu Payyanur

Never in the history of India, we experienced such dramatic growth in our economy resulting in the creation of millions of new jobs every year. This is both an opportunity and a challenge. Management of high technology companies are fast paced, complex and highly risky. Success requires skills and abilities that are very different from those required in other industries and other economies, because high technology business in a high growth economy has some very unique challenges. There are many Indian start-up companies as well as subsidiaries of large multinational companies operating in India in these technological and business spaces struggling to manage the growth and survive, even though the external environment and market conditions are conducing for their growth.

All high-technology businesses are based on a set of underlying technologies. These technologies are usually complicated and they advance rapidly. They must be planned, developed and replaced. High technology executives have to understand these technologies in order to make the appropriate judgements and decisions. This skill set adds a challenge that executives of non-technology companies do not need to manage.

High technology companies are typically high growth companies, particularly in a growing economy like India. But managing growth is a precarious act. If a company grows too fast, it risks getting out of control, if it does not grow as fast as competitors or expectations, it risks becoming a loser. When a business grows too fast, the resulting strain on management processes, organization and systems can be tremendous. Management capabilities must grow and develop as accompany grows. It is easy to manage when the company doubles in size in 7 years but not in two years like what is happening in India. Rapidly growing companies quickly exceed the capacity of their managers and often suffer from ineffective management in key positions, high turnover and lack of continuity as they continually bring in new managers with inconsistent approaches and experiences.

The high levels of technical and market uncertainties that characterize high technology product or services marketing have resulted in shortened product life cycles, collapsing markets and rapidly declining prices. Short product life cycles require that emphasis be placed on having the right products at the right time. Successful executives know they need to “manage” their future or it will manage them. This means proactively understanding tomorrow’s markets, forecasting changing customer preferences, anticipating potential competitive offerings, interpreting the impact of emerging technologies and defining the strategy for future products. Conventional strategic analysis tools such as SWOT analysis, Michael Porter’s industry structure analysis model and product positioning matrix, etc. by themselves are inadequate for developing comprehensive marketing strategy for innovative high technology products and services.

The increasingly rapid dissemination of new technologies and the continual change, both of which require constant adaptation, are a challenge for society as a whole. Innovation is a precondition for an SME’s growth, employment and competitiveness. In the era of globalization, SMEs play an important role in the overall growth of the economy of India.

The challenges being faced by the managers of medium sized high technology companies based in India are many fold whether they are in the area of human resource management, technology management, marketing and sales management, customer management and  managing growth.

Managing growth – most companies experienced on an average a compounded annual growth rate anywhere between 30 to 50% during the past 10 years. While this is exciting, the associated challenges of creating systems and processes, talent management, market management, human resource management, etc. are humongous.

Marketing and sales management – with fast growing opportunities and market growth company’s ability to address all the market segments become difficult. Equally challenging would be the threat from new entrants who are eager to take share from the market already developed and established by the leaders in the field. How to protect share from the existing market and expand reach to new market is one of the biggest challenges being faced by the management team of such companies.

Technology management – high technology companies are known for introducing breakthrough or disruptive technologies faster than well-established larger organizations. This is very exciting as well as equally challenging. Users of existing product/technology may be just getting used to that and in many cases may not be willing to change to a new product, even if it means cost or time saving in their operations. In some cases there could be regulatory controls such as in the pharmaceutical industry. Being a highly cost conscious society Indian customers  also show resistance to change due to cost of new acquisition while the existing product or technology is not fully utilized or cost not recovered.

Human resource management – probably this is the biggest challenge. High technology companies need highly qualified and talented manpower to manage most of their technical functions in R&D, product development, manufacturing, marketing, sales and customer support. In some cases special skills, knowledge or talent is needed, which is very difficult to acquire. Since most companies are growing and new companies are coming up every day, the demand for specialized manpower is high but the supply very limited. This leads poaching and artificial rise in salary and compensation that could impact the profitability of the company in the short as well as long run. Managing 30% or more attrition levels are challenging in any company more so in a high technology company. Education systems in India currently do not support some of the human resource challenges when it comes to modern technology. In many cases the knowledge and expertise available to effectively utilize the technology is not available within the users and neither the suppliers have adequate resources to educate and train the entire potential customer base.

Attracting and retaining highly qualified, skilled and experienced knowledge worker is one of the biggest challenges of a fast growing medium sized high technology company. The cause of India’s talent management dilemma is in many ways tied to its most valuable asset – a national demographic where more than half the country’s population (54%) is under 25 years of age, and 60% of people in the workplace are between the ages of 15 and 59. With four generations in today’s workplace, most companies are struggling to create an employee experience that appeals to individuals with diverse needs, preferences and assumptions. Although India is home to nearly 500m young, mostly English-speaking workers, finding the right talent to meet the high technology industry’s immediate and long-term needs is proving difficult. This is especially true in light of the fact that large numbers of college graduates prefers to pursue careers in the more lucrative salaries offered in software development and information technology.

Managing expectations – all stake holders of the company keep raising their expectations year after year. Customers want better product and support at a lower cost, shareholders want better return on their investments, employees wants better salary and pay packages and better work life balance, authorities are looking for increased tax revenue and the company must also meet its corporate social responsibilities. Some of these are conflicting and difficult to manage.

Even though the general perception is that in a growing economy every company grows is not true, even if one is operating in the most admired high technology sector. There are multitudes of examples of once successful companies closing shop or lagging behind late entrants in India. Even companies operating in same technological sphere with similar or equivalent products or services shows contrasting growth stories is certainly an interesting scenario in India.

Fast growing business needs dynamic leaders with vision and commitment to manage the growth and take it to the next level and we see a scarcity of such leaders in the Indian market. Leadership roles are thrust into young professionals who do not possess adequate knowledge and experience and are struggling to cope with increasing demands on their competence and capability. Aspiring managers must understand the dynamics and complexities of managing fast growing high technology companies in India and be able to create applicable strategies and prepare action plans to execute those strategies effectively.

Preliminary studies indicate the following deficiencies and requirements for Indian managers in the fast growing high technology sector.

Vision – a leader with vision has a clear, vivid picture of where to go, how to reach there and what success looks like when you reach there. They must also be able to share and communicate the vision to the entire organization. Set high expectations, even unrealistic at times, and demonstrate personal commitment and involvement in achieving the same.

Execution – creating a strategy is probably the easiest thing for someone with reasonable knowledge in management, economy and markets. And most companies operating in the same space have similar strategies too. But what makes one company more successful than others is their ability to execute the strategy well. Execution is a systematic process of rigorously discussing how’s and what’s, questioning, tenaciously following through and ensuring accountability. It includes making assumptions about the business environment, assessing the organization’s capabilities, linking strategy to operations and people who are going to implement and linking rewards to outcome. Leadership without the ability and discipline of execution is incomplete and ineffective.

Managing change – as the scale and scope of business increases every day, change becomes inevitable. Change management is defined as the continuous process of aligning an organization with its marketplace and doing it more effectively and responsively than its competitors. The key management levers, strategy, operation, culture and reward must be synchronized and aligned continuously. The biggest challenge would be to adjust your own management style and approach.

Team building – attracting and retaining the best talent available and investing in their continuous development is fundamental to any organization’s success and growth. Even with a billion population, you will find it extremely challenging to get the right candidate for the job and once you hire a person, train him to be successful; he is already on the lookout for the next job. Attrition levels are amazingly high, as high as 40% in many organizations and the old concept of lifelong employment is passé when you have multiple opportunities to choose from. Once you have assembled the team, motivating, instilling a sense of purpose and getting the job done is the next step. Generally people are capable of remarkable achievement if they are provided with the right work environment and collaborative leadership.

Managing expectation – as the organization grows, expectation of the stakeholders also grow, at times more dramatically than the business itself. Shareholders expect higher profitability and return on their investments while employees are looking for higher salaries and benefits. Customers demand the best product at the lowest cost with unprecedented levels of service and support. Balancing these conflicting demands and yet sourcing enough funds for investments for future growth is like tightrope walking.

Besides the above, every business leader must develop certain fundamental traits to be successful such as Business acumen, managerial courage, integrity and trust, composure, perseverance, humility and ethics & value.