There were many ups and downs on the way but one thing that remains intact is the ‘working together culture’. Not blaming each other became a new norm! People saw not the ‘people issues’ but they looked at it from a process perspective.
August 2022: In this insightful interaction with Manish Kulkarni, Director, Pro MFG Media, Amit Bhalla, CEO, Hercules Hoists, emphasises that ‘culture is the most important part, and we have built a winning culture. And that itself will take us to multiple fold growth’.
Congratulations on achieving robust top-line growth of over 40% in FY 21-22. Which are the key sectors contributing to this business growth for Hercules Hoists? Could you highlight major demand drivers?
This growth is across the sectors and it is a combination of a spike in demand (what we call pent up demand in FMCG) and of structural rising CapEx investments that happened across the sectors like engineering, metals, packaging, polymers, chemicals, pharmaceuticals, and so on. The best thing is that it is not just one sector or one industry segment; it is across and it is secular in that nature, barring maybe automobiles. It was very similar across the levels. It doesn’t look like it is going to stop even in the first quarter of this year. Of course, there are challenges related to inflation and rising material costs and supply chain issues. But the demand side, luckily, has been very robust.
The second part is how you address the demand because all of a sudden you start getting almost double or triple inquiries. Are we ready to serve that kind of demand? So internally, we did a lot of corrections in terms of processes to ensure that we capture what demand is available for us and convert that into sales. That is very critical, and that is why you see 43% growth over the last financial year. In this growth, a very critical role was played by our distributors, who are actually our centre. They are the ones who are closer to the market; they understand the inquiries very well. They understand what will work and what will not work. Equally important are our supply partners, who supplied us materials so that we could deliver. So it is a kind of contribution of all stakeholders including internal teams, outside EVPs, distributors, suppliers, and all those people have kind of made it like a win-win situation. I would say this is the ideal situation in which everybody grows, and the growth happens across the value chain. That is the model we would like to adopt even for the future.
Recently, Hercules Hoists partnered with KG International for its foray in international markets. Could you shed light on your export market strategy? What are the opportunities and challenges in selling Indian industrial equipment brands abroad?
Our company has had six decades of leadership in India. We completed 60 years in existence and we have not only survived but also thrived in. Brand Indef is very well known in the Indian market. When I joined the company around one and a half years back, the whole thought process was why we can’t go to the international market because the opportunities are unlimited. In that process, you also learn if there could be some quality improvement processes required, if there is a supply chain management perspective that is required. After all, the consumers are different and distribution is different. Moreover, this is a service oriented product. So, you also need to have a local service setup. In the Indian market, that’s our comfort zone and that is where we enjoy hegemony in the market. The brand actually stands for rugged German based designs, ease of use and very long life. Moreover, because of our distributors, there is very easy access to service and accessories for the customers.
Hence we thought of looking at the international markets and to start with closer to home. So we looked at Dubai. The partner that we have in KG International shares a very similar background. They complete 50 years and we complete 60 years the same year. They have had a presence in Africa for many years. Although they are not from the same industry I think they have the same values and the same growth oriented mindset. So we partnered and we have started investing together and building the market together. We are very hopeful that we will be able to create a very good win-win partnership, which will be a long-term strategic partnership.
In addition to that, we have also recently announced our partnership in Bangladesh. So along with these two partners, we are aiming to get approximately 20 percent to 25 percent of our business to come from exports in five years. Today, our exports are in the low single digit - less than 5 percent.
Could you share details about your new manufacturing unit in Chakan, Pune?
Chakan is an industrial area where most of the multinationals also have presence. We already had a facility there but with the kind of growth and inquiries, it was not sufficient and it was becoming necessary for us to move to a bigger place. The new place is three times the size of the existing facility and we are very hopeful to be able to deliver growth from there. The operations have started 1st July, 2022. So, it’s a very recent acquisition in that sense and the teams are very excited and ready to deliver growth of the crane business. We will make our crane kits and cranes out of this facility in Chakan.
How is technology transforming the material handling sector?
The manufacturing sector is going through transformation in a big way from a technology perspective. Today, we talk about automation, we talk about robotics and we look at Industry 4.0 requirements. Then there is Artificial Intelligence (AI), Machine Learning (ML) and the list doesn’t stop there. I think it is not only looking at productivity improvement but also at collecting, understanding and using data. This data is being utilized for productivity improvement, safety enhancement, preventive maintenance, cost reduction and so on. These material handling solutions can tell the user that a device needs a service technician’s visit. It can also send it to our customer service person directly or maybe to a nearby distributor, who also has a service setup. That’s a very different level of consumer experience that we are talking about here. For example, in an automobile shop or a steel plant, where there are hundreds of such devices hanging on the roof, if a company or application is able to provide that level of solution which is very real and very practical then the usability and the offer is very different.
Could you shed light on the service business and how technology is enabling it?
The service business is the most attractive from a P&L perspective; it gives you a good opportunity to not only make better profits but it also gives you an opportunity to engage with the customer on a very regular basis. The trust of service people as advisors is much more compared to the sales people. So the service business is not only a spares business or an AMC business but it is also a kind of a business development wing. In cases where there are legacy service issues, where we think that a strategic service call would help, we actually do a joint call with sales and service together. Many times customers actually have a service issue to talk about. Irrespective of whether your service is good or bad, they always want to talk to a service person in terms of suggestions and recommendations. Today, this business is around 6 percent to 7 percent of our total business portfolio but we would like it to become significantly bigger and more strategic in nature. I think we would like to make it closer to 15 percent of our business in five years is what we are planning to achieve. We are also investing into it and we are very bullish on the service part of the business. As of now, we don’t service other companies’ products but in the future we could consider that. As of now, we have enough installations of our own products to cater to and our customers to cater to.
Your previous role within Bajaj Group was with Bajaj Electricals for over a decade. How does the distribution channel sales of B2C FMEG products differ from B2B industrial products? Could you share key lessons in effective channel management?
Very interesting questions! First of all, it takes me back down the memory lane about 10 years back. Of course, things have now changed. Let’s look at the difference first; the scale is very different. If you look at the scale of Bajaj Electricals distribution, they were having 500 distributors and we are talking about 40 distributors on the B2B side. Also the throughput of the business, the rolling of the stocks is very, very quick because it’s, of course, FMEG. So, that’s a very different mindset; the speed, the throughput and availability are very high compared to our business. Having said that, there are some similarities as well! The mindsets of consumers and the mindsets of distributors are the same. In Bajaj Electricals, you will find distributors who are third generation into the business and you will find a similar situation with our business too. So that legacy, the relationships and the mindset is the strength of the company; they are the length and breadth of the organization. More than the ROC and the ROI, they look at the trust, the interest and the respect from the principal. They are more interested in understanding whether the company is really appreciating their efforts and whether it appreciates that relationship, and gives the due respect that they totally deserve. When I joined the company, for the first three months, I met all of them, all 40 of them. I asked them what I need to do because I don’t come from the industry and I don’t know anything. I took their advice and suggestions because they are the representatives of our business in the market along with our sales people and service people who are on ground. I promised that within nine months we will correct all that is required to be corrected. And this is exactly what we have done; we have removed their pain points. So the 40 percent growth actually has come just by doing this; we have not done anything. It is not some high level growth strategy or anything like that; we have just removed the stone from the magnet and magnet has gone to the right place! And the growth has gone through because of the positive energy, the relationship, and the winning mindset. With that, all of our distributors have grown more than 40 percent on an average. Some of our distributors have doubled their business; they are making more money. It fuels the future direction of the company. I would say that 100 percent copied and pasted from my previous experience of distribution.
There’s a famous saying, ‘Culture eats Strategy for breakfast’. As a strategy practitioner, could you share your views on bringing change in culture for strategy implementation to drive business transformation?
I think a very important data point is that the same team has delivered this 40 percent growth! We have added maybe two people for service and strategy. I have added the strategy person in my team, more from our execution perspective so that he can help me. Apart from that, by and large, the team is the same. The only thing that has changed is ‘working together’ as a culture. Three months into the company, I used to jokingly say internally - after we took feedback from our distributors - we know all the problems, we know all the solutions and we don’t have to go outside for anybody. I said, we don’t need anybody’s help; I would totally 100 percent bank on all of you to understand what needs to be done. And in that, if you need any help, support, investment or approvals, I would be the one who would provide all that to you. And luckily, in no time, people started working together because they knew that this is what we need to do. One thing which worked in my favour and the organization’s favour is that it’s a very young team. Although the organization is six decades old the average age in the company is in the bracket of 25 years to 27 years. It’s a very young team from that perspective. They were looking for that change to happen and they were looking for that growth to happen. They were very happy when they saw this customer centricity coming in and that people wanted to work with each other. We worked with a solution oriented approach rather than looking at mistakes. We kept all the channels of communication. I have a very strong belief that individually everybody comes to work with a very positive mindset saying that I want to actually contribute to the company’s success. There were many ups and downs on the way but one thing that remains intact is the ‘working together culture’. Not blaming each other became a new norm! People saw not the ‘people issues’ but they looked at it from a process perspective. And processes need to be improved. So, the Peter Drucker statement remains true even today. Culture is the most important part, and we have built a winning culture. And that itself will take us to multiple fold growth.
The story about the 40 percent growth is very interesting. One of the simplest things that you have done is that you have been a good listener. You have implemented what people have told you. Do you also intend to do the similar thing with customers directly?
Very good question! So I hundred percent agree with you that you should go to customers yourself and try to understand their mindset. How do you basically look at their preferences and tastes and then try and learn from there? How can you modify your products and services based on that?
So as part of the process, we looked at our salespeople, where we went over distributors, and along with the distributors, we went over the key accounts. Maybe I missed that point earlier. Key accounts are typically the biggest company clients. Over the last one year, we have added 20 key accounts who, for two years, are now buying from us. However, earlier, they were not buying from us because of some XYZ reasons. So we started solving those pain points. Even customers like Maruti, who were not buying from us and have now, started buying from us over the last six months.
We are also looking at engagement through our revamped website and to create a community, which I am very bullish about. We will be able to create some community where industry leaders, customers and users can come together and share their knowledge not only on our products, but also on what’s coming up. Industry 4.0 demands us to work together and we know that we wouldn't be able to do it alone. We want to create a B2B company that is as good as a consumer company from a customer centricity point of view.