Interpretive structural modeling of growth enablers in construction companies.
The construction industry in India is booming. In the current situation, construction companies need to gear up to meet the ensuing challenges. The main challenge is to enhance their capabilities and successfully meet rising customer needs for quality and timely delivery of complex projects. This study first attempts to identify the enablers for growth through literature review. The systematic analysis of the enablers is expected to be of great value for the effective implementation of the growth strategies. A study of the linkages among the enablers can help in the understanding of the related issues, and the role of the various agencies involved. There is a need to understand the hierarchical relationship among the enablers, their driving powers, and dependence to arrive at an in-depth appreciation of the issues at hand. To achieve all the above, interpretive structural Modeling has been utilised to arrive at useful insights for the potential leaders in the Indian construction industry.
Key Words: Construction, Growth, Enablers, Drivers, Dependency
In order to exploit the developing economy, many foreign companies are extending or outsourcing their operations in India, providing significantly high margins for companies within the Indian construction and engineering industry. In such a scenario, the Indian construction companies have to roll up their sleeves and gear up to meet the challenges posed by the foreign companies vying for a piece of the infrastructure investment. To counter the foreign companies, it is of paramount importance that the domestic companies grow to match the size, volumes, and capabilities. The current gap is very evident from the following comparison between the top construction company of the world (Vinci) and the top construction company of India (Larsen & Toubro, L&T). It is widely accepted that L&T has a significant potential to become a major player at the world level along with a few other Indian companies. It is this prospect which provides the motivation for the current study. The data in
Table 1 illustrates the extent of growth necessary by the Indian construction companies to bridge the gap at the international level.
As growth is a necessity for the Indian construction industry, an attempt is made in this study to review related literature and key findings of research carried out in the field of growth strategy and thereafter to identify the important enablers of growth.
The strategic management process revolves mainly around strategy formulation and strategy implementation. However, growth strategy is different from stability strategy. Typical growth strategy involves strategic decisions around significantly increasing functional performance in major respects compared those achieved in the recent past. While a stability strategy involves an extrapolation of the growth based on the past performance, growth strategy involves comparatively exponential growth.
* Growth strategies involve typical decisions around significantly increasing relative functional performance.
* Growth strategies focus resources on seizing opportunities for profitable growth.
* Ambitious growth strategies aim to set company's goals and business processes that challenge the conventional wisdom, identify emerging trends, and build or acquire profitable new businesses adjacent to the core business.
Growth strategies are usually associated with strong managerial motivation (Troughton, 1970).
Objectives and Scope of Study
This study aims to broaden insight on the following issues:
* Identify the significant enablers and drivers affecting growth of companies on basis of literature survey.
* Evolve a hierarchical relationship among the enablers, their driving powers, and dependence
* Classify the enablers according to their dependencies and driving power, and to arrive at an in-depth appreciation of the issues at hand.
* Synthesis of a conceptual interpretive structural model (ISM) of growth enablers for construction companies.
Research Methodology and Data Collection
The study identifies the important enablers of growth through a literature review of publications on growth strategy. Later, four experts from the construction industry and academia took up interpretive structural modeling, ISM, of the enablers based on the interrelationships among the enablers.
Growth strategies have been researched from multiple perspectives. These may be organic or inorganic in nature. Organic growth involves growth either into new products or in new markets. Growth is realised through and mainly fuelled by (Groves, 2000):
* Geographic expansion of markets
* Higher market share in current markets, and
* New market share in new segments.
Diversification and integration are also types of organic growth. Inorganic growth on the other hand involves mergers and acquisitions and joint ventures.
According to a study on the information technology industry in India (Anandaram, 2003), growth is driven by:
* Leadership and vision
* Differentiated approach
* Marketing investment
* Alliances and partnerships, and
* Cultivation of local market.
Another study (Naidu, 2003) shows that large size gives a firm the flexibility in offering products and services. Acquisition of resources and skills is another path to expand capabilities.
Variants of growth strategy have been explored by strategists from other angles apart from the traditional ones. To implement Kaizen-based growth strategies, identify wastes, and minimise them in four business processes (Kotler et al, 1996) present in any business (product development process, inventory management process, order to payment process, and customer services process).
The innovative (also known as disruptive) strategies lay emphasis on creating sustainable competitive advantages though innovation---creating something new that is rare and inimitable. There are eight types of innovation (Moore, 2004): disruptive, application oriented, product related, process related, experimental, market oriented, business model oriented, and structural.
Prahlad and Hamel (1990) asserted that growth moves inside the core competency are accelerating innovation in R&D, new corporate ventures, speeding up company's metabolism by speeding operations, and hiring more people. Zook (2004) prescribed six ways to move into adjacent space: expand along the value chain, grow new products or services, use new distribution channel, enter new geographies, address new customer segment, and move into a new space with a new business built around strong capability. In leveraged growth strategies (Hagel, 2002), the thrust is on expanding sales without sacrificing profits, by adopting "outsourcing". To grow, many companies have turned their value chain into revenue chain thereby generating a continuous stream of revenue. Some companies have dared to break the compromise (Stalk et al, 1996) imposed by the industry and thus been able to attract consumers for growth. Strategic logic of high growth has been explored by Chan and Mauborgne (1997) by focusing on value innovation.
The McKinsey Growth Pyramid model (www.tutor2u.net/business/ strategy/mckinsey_pyramid.htm) argues that businesses should develop their growth strategies based on:
* Operational skills
* Privileged assets
* Growth skills, and
* Special relationships.
Research has also revealed that the growth pattern should facilitate the firm's increase in output in line with the increase in demand in the external environment. (Kefalas, 1979). Only then can the growth be sustained. Conversely, it may also be stated that a firm desiring to grow fast should also operate in regions of fast development or hubs of economic activity. Hence, the developing countries provide an avenue for faster growth. This forms the basis of adopting one of the propositions for investigation. Finally, one should also appreciate that growth matures but what should continue is
* tough processes of screening
* acceptance of lower growth in matured/developed economies
* looking for a new growth platform, and
* deeper appreciation that growth too follows a mature and die cycle.
Growth is sustained through
* Value addition
* Increase in productivity via operational efficiencies and technical skills acquired
* Vertical integration
* New production techniques
* Acquisitions, and
* Partnerships and collaborations.
Growth strategies should revolve around
* Building and defending dominate market share in geographical areas
* Market expansion to other geographic market segments
* Profit maximisation and risk minimisation thru selling of existing product in new market
* Attract new socio demographic segments
* Develop new core services--innovate new products
* Move towards concentric diversification, and
* Conglomerate diversification.
Ahmad et al, (2004) proposed a Five-I Framework for Winning (inspiring leadership, innovative strategy, internal and external stakeholder relationship, identity, implementation). The CEO of General Electric, Jeffrey Immelt (2006) considers organic growth a six part process involving innovation, technology, globalisation, commercial excellence, leadership, and customer satisfaction.
The literature on growth strategies in the western countries is dated to the years when these countries witnessed exponential development in their economies. These countries are growing at a slower rate and hence these strategies are relevant to the developing nations.
Buzzel et al (1975) in their study have found a positive correlation between growth and effectiveness as a measure of profitability and other indices.
Peter Gutman (1964) found that growth rates ranged up to 76.7 per cent annually. Firms with highest growth rates were those which:
a. Chose industries where sales increased more rapidly than the economy as a whole.
b. Concentrated on market segments within the industry, which grew more rapidly than the industry.
c. Entered the market earlier than the competing firms.
d. Operated in multinational markets.
A study by Chevalier et al (1974), which included three United States industries, revealed that some growth strategies were more effective than others:
a. Strategy that focused on products whose markets are growing.
b. Strategy that involved assuming leadership role in a market segment which is growing.
c. Strategy that involved competing in specific market segments rather than trying to compete with giants.
The importance of a well-chosen strategy that is being well executed to deliver strong financial results in the present and future has been recognised. The growth of the various companies is usually financially evaluated on the basis of various models such as sales revenues, compound average growth rate, return on capital employed, economic value added, market value added, and long-term capital invested. Lately, a new metric called relative value of growth (RVG), has been proposed by Mass (2005). However, all the respective models of evaluation could not be employed in this study due to the lack of data. The available data have been best utilised to investigate the various hypothetical propositions that have emerged from the literature review.
On the basis of the literature review carried out, it can be summarised that the growth of any particular company is boosted significantly by some or all of the following enablers:
E1 Value Innovation E2 Customer Centric Approach E3 Operational Efficiencies E4 Human Skill Management Flexibility--and Scalability E5 Inspiring Leadership E6 Technical Capabilities E7 Financial Strength E8 Collaborations in New Markets E9 Mergers and Acquisitions in Segments of Low Growth E10 Global Operations E11 Cost Leadership E12 Diversification E13 Operations in Sectors of High Margins
To obtain further information on the enablers and their respective interrelationships, it was decided to carry out an analysis on the basis of ISM.
ISM is an established methodology for identifying relationships among specific items, which define a problem or an issue (Warfield, 1974; Sage 1977). ISM methodology helps to impose order and direction on the complexity of relationships among elements of a system. The ISM is interpretive as the judgement of the selected group for the study decides whether and how the variables are related. This tool is primarily intended as a group learning process but can also be used individually.
The enablers for growth were identified through the literature review. The systematic analysis of the enablers is expected to be of great value for the effective implementation of the growth strategies. A study of the linkages among the enablers can also help in thorough understanding of the issues relating to the various enablers, and also the role of the various agencies involved, and an appreciation of their problems. The idea is to develop an integrated approach. There is also a need for a hierarchical relationship among the enablers, their driving powers, and dependence, to arrive at an in-depth appreciation of the issues at hand. ISM is a tool for assessment of all the above. The information available after such an analysis is expected to be extremely useful in policy formulation and strategic planning.
The need of hierarchy is pressing as often the enablers considered together may seem equally important and sometimes overriding each other. Such a situation makes it difficult to have a clear mental model. The development of a hierarchy helps in the classification and categorisation of the enablers, and thereby formulate their respective strategies and policies while providing a clarity of thought. Further, when resources are scarce, this hierarchy is expected to facilitate the allocation of resources in a rational manner and to achieve the maximum leverage out of the resources employed. The hierarchy identified can also help control the situation in times of crisis. In other words, the hierarchy ascertained will help to achieve effective planning, scheduling, monitoring and control, thus helping top management.
Interpretive structural modeling is defined as a process that transforms unclear and poorly articulated mental models of systems into visible, well-defined models useful for many purposes. The method is interpretive because a group of identified experts decides whether and how the enablers are related. It is structural as the overall model structure is extracted from the complex set of enablers on the basis of the decided relationships. Modeling suggests that the overall structure is representable in form of a directed graph (digraph) model.
The selection of experts is done on the basis of their knowledge on the subject, the industry, and the ISM theory and its application. Two enablers are picked in turn and paired comparisons are made. A group judgement on the paired comparison is determined by consensus majority or by picking the mode.
Briefly, the various steps involved in the ISM technique adopted in this study are
1. Identify the elements, in this study the enablers, which are relevant to the problem or issues. They have been listed on basis of the literature review.
2. Establish a mutual relationship among enablers with respect to which pairs of enablers are examined.
3. Develop a structural self interaction matrix (SSIM) of the enablers, which indicates the paired relationship between them.
4. Develop a reachability matrix from the SSIM and check the matrix for transitivity. Transitivity of the contextual relation is a basic assumption in ISM which states that if element A is related to B, and B is related to C, then A is necessarily related to C.
5. Partition of reachability matrix into different levels.
6. Based on the relationships given above in the reachability matrix, draw a directed graph and remove the transitive links.
7. Convert the resultant digraph into an ISM by replacing enabler nodes with statements.
8. Review the ISM model to check for conceptual inconsistency and make the necessary modifications.
The main objective of utilising the ISM methodology is to identify the enablers that significantly affect the growth of a construction company. The opinions of the four experts, two each from construction industry and academia, have been used in developing a relationship matrix. For analysing these enablers in developing the SSIM, the following fours symbols have been used:
V = Enabler i will help achieve enabler j
A = Enabler j will be achieve if i is achieved
X = Both enablers will help achieve each other
O = Both enablers are unrelated to each other
The SSIM is represented in Table 3.
Finally, to convert the SSIM into the binary reachability matrix with the dependence and enabling power all V, A and X is replaced by a digit 1 and O by 0 (zero). The substitution of l s and 0s are according to the following rules.
* If the (i,j) entry in the SSIM is V, the (i,j) entry in the reachability matrix becomes 1 and the (j,i) entry becomes 0.
* If the (i,j) entry in the SSIM is A, the (i,j) entry in the reachability matrix becomes 0 and the (j,i) entry becomes 1.
* If the (i,j) entry in the SSIM is X, the (i,j) entry in the reachability matrix becomes 1 and the (j,i) entry also becomes 1.
* If the (i,j) entry in the SSIM is O, the (i,j) entry in the reachability matrix becomes 0 and the (j,i) entry also becomes 0.
The reachability matrix developed on the basis of the above procedure is presented in Table 4.
The various levels of this analysis involve the enabler reachability set, antecedent set and intersection set. The reachability set consists of the enabler itself and the other enablers, which it may help achieve. The antecedent set consists of the enabler itself and other enablers, which may help achieving it. Thereafter, intersection of these two sets is derived for all enablers. One by one the enablers having the same reachability set and intersection set are eliminated in each iteration. The results of the iterations are reproduced in Tables 5 to 12.
Having identified the levels of the enablers through a number of iterations, the relationship between the enablers is drawn indicating the serial number of the enablers and the direction of the relation with the help of an arrow. The digraph drawn thus is examined to eliminate transitivity of relationships. The final model arrived at is represented by Figure 1.
[FIGURE 1 OMITTED]
Classification of Enablers
As a further step it was decided to classify the enablers on the basis of their driving power and dependencies. Based on the driving power and the dependence, these barriers have also been classified into four categories of autonomous, dependent, linkage, and independent barriers, as shown in Figure 2.
[FIGURE 2 OMITTED]
According to the theoretical explanation, weak driver and weak dependence enablers are called autonomous variables. These enablers are relatively disconnected from the system. They may have only a few links.
On the other hand, strong dependence and weak driver enablers are called dependent enablers.
Strong driver and strong dependent enablers need to be studied more carefully. These are known as linkage variables and are unstable. Any action on these enablers is expected to have an impact on the others and have a reciprocal effect on themselves, which may amplify any moves or measures.
Strong driver and weak dependence enablers condition all the other enablers while being unaffected by them in return. They are also known as independent enablers.
Discussions and Conclusions on ISM
The ISM suggests that top driving power lie with the two enablers, namely, inspiring leadership and human skill management. Inspiring leadership which has emerged as having the maximum driving power in the ISM-based model has to be considered as a key differentiator between successful and unsuccessful organisations. All the top companies in the Indian context, irrespective of the industry they are in, are glowing examples of exemplary leadership based success, be it the Reliance Group, Aditya Birla Group or Bharti.
The leaders always exhibit a proactive and positive mindset, making the first moves in the market. Bharti's landmark deal with WalMart into retailing is a highlight of such a mindset. It is the passion to win and the ambition to achieve, which makes these leaders drive their companies. The leaders have a continuous hunger to learn and an uncanny ability to see the future. Bold and concerted leadership is what drives all, enabling a company to tackle large and major changes. Leadership is seen to drive all other enablers and affect them, while itself not being dependent on them. Hence, having a good leadership in a construction company is of paramount importance for its success.
Human skills management (HSM), the enabler with the next highest driving power deals with integrating decisions about people with decisions about the goals, that an organisation is targeting to achieve. By integrating HSM into the company planning process, emphasising human resources (HR) activities that support broad company goals, and building a strong relationship between HR and management, companies are able to ensure accomplishment of their mission. It is, therefore, emphasised that it is not just financial and technological capital that provide companies with the competitive edge, but people, or human capital probably plays an equally crucial role if not more. Without attracting and retaining the right people, in the right jobs, with the right skills and training, an organisation cannot succeed. Therefore, people are a company's most important asset.
Not only do human resources provide the competitive edge to the construction companies, but the quality, training, and innovation of HR practices impact business results. Among other benefits, HSM alignment with the mission increases HR's ability to anticipate its customers' needs, increases the company's ability to implement strategic business goals, and provides decision-makers with critical resource allocation information. HSM is also a key driver shaping corporate culture, spread best practices, and drives enterprise-wide consistency of important shared values and messages. It can play a major role in creating a performance and accountability culture, opt-out programmes, recruiting, and continuous learning processes, which are inseparable in the context of a construction company. The emergence of HSM as the second most important driver in ISM duly justifies this line of thinking.
The middle level enablers are those which drive the institution processes and systems towards execution or achieving the goals and objectives of the companies. These having medium driving power and medium dependencies concern both, the top level and the personnel at the operating level. They are also responsible for the creation of the hierarchical structures and coordination mechanisms within the organisation.
Value innovation deals with the contribution of ideas, exercise initiatives, and pursuing continuous improvement. It involves all creative processes adding value to the services and products, and the development of new technologies. Operational efficiencies are achieved through benchmarking, adoption of best practices, business process reengineering, total quality management, and six sigma quality. Technical capabilities and competencies help develop unique abilities or better the performance of the value chain activities for competitive advantage over the rivals. Collaborations, diversification and mergers and acquisitions all involve either development of new products or access to new markets or both. Financing is pivotal to the strategic success and to catalyse execution of the strategy, and drive the operational efficiencies in a construction company.
The high dependence enablers like customer centric approach, cost leadership and operation in high margin sectors are important for managers at the practising levels. These are the ones which have the maximum dependency to achieve the final goals to the satisfaction of the stakeholders of the company. These enablers are driven by all other enablers for a win-win outcome for all stakeholders, be it the customers who are looking for better value or the owners and shareholders who are looking for better profitability and returns. Their high dependence highlights the fact that these have to be sensitive to the community and the environment to a large extent. Cost leadership is considered a potent and sustainable basis of mounting a price aggressive challenge to hit competitors. In the construction industry where the basis for the award of contracts is often competitive bidding, this has as important role to play. Construction companies try to provide better or same features and services at a lower cost that are acceptable to the customer. The development of capabilities at lowest cost, consistent with the quality, should always remain the priority of the construction companies.
The driving power and dependency matrix plotted reveal that there are no autonomous enablers as well as no linkage enablers, among the ones considered in this study. Autonomous variables are weak drivers and weak dependents and do not have any significant influence on the system. Having no autonomous enabler shows that none of the enablers are relatively disconnected from the growth system, and all the enablers considered have relevance in the growth of construction companies. Attention should be paid to all of them.
Customer-centric approach, cost leadership, diversification, operational efficiencies, global operations and operating in high margin sectors, may be classified as highly dependent enablers. These are not major drivers of growth, but the operating levels of a company substantially depend on these enablers. These enablers are at the top of the ISM hierarchy. Besides according high priority to these enablers, the management should understand the dependence of these enablers on lower level enablers, in achieving the organisational goals and objectives.
There are no linkage enablers in this study. Usually these kinds of enablers require regular joint meetings, deliberations and discussions, among all the stakeholders and agencies involved in the execution of projects.
Inspiring leadership, human skill management, value innovations, technical capabilities, financial strength, collaborations and mergers and acquisitions, are classified as highly independent enablers, which have high driving power. These are the root cause of all other enablers and hence all the major stakeholders of a construction company should take extra initiative to address these enablers. Without resolving these growth enablers successfully no company can expect to succeed.
To establish the driving power and the dependencies of the enablers identified, the technique of ISM was utilised. The high dependence enablers like customer centric approach, cost leadership and operation in high margin sectors were found to be important for managers at the practising levels. The highest driving power lies with the two enablers namely, inspiring leadership and human skills management. It is these enablers around which the top management growth strategies should develop.
On the other hand, value innovations, technical capabilities, financial strength, collaborations, diversification, operational efficiencies, global operations and mergers and acquisitions were classified as medium dependency and medium driving power enablers, which are important for both the top management level and the operating level.
Customer-centric approach, cost leadership, diversification, operational efficiencies, global operations and operating in high margin sectors, were classified as highly dependent enablers. The operating levels of a company depend on these enablers substantially. These enablers are at the top of the ISM hierarchy. Besides, according high priority to these enablers, the management should understand the dependence of these enablers on lower level enablers, in achieving the organisational goals and objectives.
Limitations of the Study
For establishing relationship through ISM, only the expert opinions of four persons have been considered and that too in local Indian scenario, and hence the study may be constrained by their level of knowledge and experience. The limitation of this study is that it is not based on a wide cross-section of persons representing the global construction industry. The ISM model developed has not been statistically validated.
Scope for Future Research
Fuzzy ISM, a step ahead of binary ISM, may also be carried out. The ISM model considers the presence or absence of an interaction. There is also a possibility that the interaction may be defined by qualitative considerations on a 0 to 1 scale.
Further superior approaches and tools of management to structural analysis like the Micmac analysis may be utilised for an in depth analysis of the enablers. Micmac is a method where the importance of the enabler is expected to be measured less by their direct relationships and much more by its many indirect relationships.
Since, the ISM model developed has not been statistically validated, Structural equation modeling also commonly known as the linear structural relationship approach, may be used to test the validity of such a hypothetical model. A model for growth can be developed for the Indian construction companies to enable them to grow and subsequently successfully compete on the world stage, for long-term sustainable competitive advantage.
Ahmad A and OP Chopra, 2004. Passion to Win--New Winning Companies Develop & Sustain Competitive Edge, New Delhi: Excel Books.
Ambastha A and K Momaya, 2004. "Competitiveness of Firms: Review of Frameworks and Models", Singapore Management Review, Vol 6 No 1, pp 45-61.
Anand M, NV Moses and R Viswanath, 2006. India's Infrastructure Builders, Business World July 31, pp 30-38.
Anandaram S, 2003. "Issues Facing SMITs", IIMB Management Review, March, pp 92-95.
Ansoff I, 1957. "Strategies of Diversification", Harvard Business Review, September-October, pp 113-124.
Buzzell RD, BT Gale and GM Sultan, 1975. "Market Share--A Key to Profitability", Harvard Business Review, January-February, pp 97-106.
Chart KW and R Mauborgne, 1997. "Value Innovation: The Strategic Logic of High Growth", Harvard Business Review January-February, pp 172-180.
Chevalier M and B Catry, 1974. "Don't Misuse Your Market Share", European Business, Winter-Spring, pp 43-50.
Datamonitor, Global Construction & Engineering 2006, May, pp 1-17.
Day GS, 2004. "Which Way Should You Grow?", Harvard Business Review, Jul-Aug, pp 24-26.
Greiner LE, 1972. Growth Phases Model, (www.12manage.com/methods_greiner.html Accessed December 2006.
Groves FL, 2000. "The Road That Lies Ahead", Professional Builder, July, pp 83-84.
Guth WD. "Corporate Growth Strategies in the 1980s", in William F Glueck, op cit, pp 264-270.
Gutman P, 1964. "Strategies of Growth", California Management Review, Vol 6 No 4, Summer, pp. 31-36.
Hagel III J, 2002. "Leveraged Growth; Expanding Sales Without Sacrificing Profits", Harvard Business Review, October, pp 69-77.
Hamel G, YL Doz and CK Prahlad, 1989. "Collaborate with Your Competitors--and Win", Harvard Business Review, January-February, pp. 133-139.
Kefalas AG, 1979. "Towards a Sustainable Growth Strategy", Business Horizons, April, pp 34-40.
Kotler P and G Armstrong, 1996. Principles of Marketing, Prentice Hall of India Pvt. Ltd. Mass NJ, 2004. "Relative Value of Growth", Harvard Business Review, April, pp 102-112.
McKinsey Growth Pyramid (www.tutor2u.net/business/strategy/mckinsey_pyramid.htm) Accessed December 2006.
Moore GA, 2004. "Darwin and the Demon: Innovating within Established Enterprises", Harvard Business Review, July-Aug, pp 86-92.
Naidu BV, 2003. "Relevance of SMITs", IIMB Management Review, March, pp 96-98.
Prahlad CK and G Hamel, 1990. "The Core Competence of the Corporation", Harvard Business Review, May-June, pp 79-92.
Sage AP, 1977. Interpretive Structural Modeling: Methodology for Large-scale Systems, McGraw Hill, New York, NY, pp 91-164.
Stalk Jr G, DK Pecaut and B Brunett, 1996. "Breaking Compromises, Breakaway Growth", Harvard Business Review, Sep-Oct, pp 131-139.
Stewart TA, 2006. Interview of Jeffrey R Immelt, "Growth as a Process", Harvard Business Review, June, pp 60-70.
Troughton F, 1970. "Growth and Organisation in Business: Their Roots in Nature", Management International Review, Vol 10 No 2/3, pp 85-96.
Tulacz P and GJ Reina, 2005. "The Top 225 International Contractors: By ENR", Engineering News Record, Vol 255, Issue 8, pp 40-54.
Warfield JW, 1974. "Developing Interconnected Matrices in Structural Modeling", IEEE Transcript of Systems, Men and Cybernetics, Vol 4 No 1, pp 51-81.
Zook C, 2004. Beyond Core--Expand Your Market Without Abandoning Your Roots', Boston: Harvard Business School Press.
Zook C and J Allen, 2003. "Growth Outside the Core", Harvard Business Review, May June, pp 79-92.
Jaipuria Institute of Management
Indian Institute of Technology, New Delhi
Table 1: The Gap and Motivation Criteria Vinci 2006 2005 1. Global Ranking 1 1 2. Sales Revenue 1264.14 Bn Rs. 1145.43 Bn Rs (21.543 Bn Euros) (19.520 Bn Euros) 3. Nett Profit 51.11 Bn Rs. 142.95 Bn Rs (871 Mn Euros) (732 Mn Euros) 4. ROCE % 8.51% 7.75% 5. Employee Strength 142000 128000 6. Productivity per Employee 8.90 Mn Rs. 8.95 Mn Rs. 7. Business within Country/Outside 62/38% 62/38% Criteria Larsen and Toubro 2006 2005 1. Global Ranking 54 -- 2. Sales Revenue 148.837 Bn Rs.l 132.546 Bn Rs. 3. Nett Profit 110.121 Mn Rs. 9.838 Mn Rs. 4. ROCE % 17.45% 21.69% 5. Employee Strength 22175 19848 6. Productivity per Employee 6.71 Mn Rs. 6.67 Mn Rs. 7. Business within Country/Outside 82/18% 87/13% Source: ENR 2006 Table 2: Framework of Growth Strategies Variants of Mode Proposed by Growth Strategy 1. Organic * New Products Traditional Theories, * New Markets Ansoff (1957) * New Pricing * New Uses * Diversification-- Horizontal, Concentric, Conglomerate. * Integration-- Vertical, Forward, Backward. 2. Inorganic * Mergers Traditional Theories, * Acquisitions Hamel Doz and * Collaborations, Prahalad (1989) Joint Ventures, Alliances, Partnerships 3. Kaizen based * Product Kotler et al (1996) (for Development processes) * Inventory Management * Order to Payment * Customer Services 4. Innovative * Disruptive Moore (2004) (eight types) * Application Oriented * Product Related * Process Related * Experimental * Market Oriented * Business Model Oriented * Structural 5. Core Competency * Research and Prahlad and Hamel based Development (1990) * New Corporate Ventures * Speeding Operations 6. Beyond Core * Expanding along Zook et al (2003), Growth Value Chain Zook (2004) * Grow New Products or Services * Use New Distribution Channel * Enter New Geographics * New Customer Segments * New Space or Business 7. Strategic Logic Value Innovation on Chan Kim and of Value Platforms Maubourgne (1997) Innovation * Product * Service * Delivery 8. Leveraged * Expanding Sales Hagel III (2002) Growth * Adopt Outsourcing Strategies 9. Breakaway * Breaking Compromise Stalk et al (1996) Growth * New Customers 10. Phased Growth Growth through Greiner (1972) * Creativity * Direction * Delegation * Coordination and Monitoring * Collaboration * Extra Organisational Solutions 11. McKinsey Growth through http://www.tutor2u.net Growth Pyramid * Operational skills * Privileged assets * Growth skills * Special relationships Table 3: Structural Self Interaction Matrix of Growth Enablers Enablers 13 12 11 10 9 8 7 1. Value Innovation V V V O O O O 2. Customer Centric Approach O A A A A A A 3. Operational Efficiencies V A V A A A A 4. Human Skill Management V V V V V V O 5. Inspiring Leadership V V V V V V V 6. Technical Capabilities V V V O O A O 7. Financial Strength V V V V V O X 8. Collaboration V V V V O X 9. Mergers and Acquisitions V V V V X 10. Global Operations V O V X 11. Cost Leadership O A X 12. Diversification V X 13. High Margin Sector Operations X Enablers 6 5 4 3 2 1 1. Value Innovation X A A V V X 2. Customer Centric Approach A A A A X 3. Operational Efficiencies A A A X 4. Human Skill Management V A X 5. Inspiring Leadership V X 6. Technical Capabilities X 7. Financial Strength 8. Collaboration 9. Mergers and Acquisitions 10. Global Operations 11. Cost Leadership 12. Diversification 13. High Margin Sector Operations Table 4: Reachability Matrix of Growth Enablers Enablers 1 2 3 4 5 6 7 1. Value Innovation 1 1 1 0 0 1 0 2. Customer Centric Approach 0 1 0 0 0 0 0 3. Operational Efficiencies 0 1 1 0 0 0 0 4. Human Skill Management 1 1 1 1 0 1 0 5. Inspiring Leadership 1 1 1 1 1 1 1 6. Technical Capabilities 1 1 1 0 0 1 0 7. Financial Strength 0 1 1 0 0 0 1 8. Collaboration 0 1 1 0 0 1 0 9. Mergers an Acquisitions 0 1 1 0 0 0 0 10. Global Operations 0 1 1 0 0 0 0 11. Cost Leadership 0 1 0 0 0 0 0 12. Diversification 0 1 1 0 0 0 0 13. High Margin Sector Operations 0 0 0 0 0 0 0 Dependence 4 12 10 2 1 5 2 Enablers 8 9 10 11 12 13 Driving Power 1. Value Innovation 0 0 0 1 1 1 7 2. Customer Centric Approach 0 0 0 0 0 0 1 3. Operational Efficiencies 0 0 0 0 0 1 4 4. Human Skill Management 1 1 1 1 1 1 11 5. Inspiring Leadership 1 1 1 1 1 1 13 6. Technical Capabilities 0 0 0 1 1 1 7 7. Financial Strength 0 1 1 1 1 1 8 8. Collaboration 1 0 1 1 1 1 8 9. Mergers an Acquisitions 0 1 1 1 1 1 7 10. Global Operations 0 0 1 1 0 1 5 11. Cost Leadership 0 0 0 1 0 0 2 12. Diversification 0 0 0 0 1 1 4 13. High Margin Sector Operations 0 0 0 1 0 1 2 Dependence 3 4 6 11 8 11 Table 5: Iteration 1 Enabler Reachability Set Antecedent Set 1 1,2,3,6,11,12,13 1,4,5,6 2 2 1,2,3,4,5,6,7,8,9,10,11,12 3 2,3,11,13 1,3,4,5,6,7,8,9,10,12 4 1,2,3,4,6,8,9,10,11,12,13 4,5 5 1,2,3,4,5,6,7,8,9,10,11,12,13 5 6 1,2,3,6,11,12,13 1,4,5,6,8 7 2,3,7,9,10,11,12,13 5,7 8 2,3,6,8,10,11,12,13 4,5,8 9 2,3,9,10,11,12,13 4,5,7,9 10 2,3,10,11,13 4,5,7,8,9,10 11 2,11 1,3,4,5,6,7,8,9,10,11,13 12 2,3,12,13 1,4,5,6,7,8,9,12 13 11,13 1,3,4,5,6,7,8,9,10,12,13 Intersection Enabler Set Level 1 1,6 2 2 1 3 3 4 4 5 5 6 1,6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 Table 6: Iteration 2 Enabler Reachability Set Antecedent Set 1 1,3,6,11,12,13 1,4,5,6 3 3,11,13 1,3,4,5,6,7,8,91,012 4 1,3,4,6,8,9,10,11,12,13 4,5 5 1,3,4,5,6,7,8,9,10,11,12,10 5 6 1,3,6,11,12,13 1,4,5,6,8 7 3,7,9,10,11,12,13 5,7 8 3,6,8,10,11,12,13 4,5,8 9 3,9,10,111,213 4,5,7,9 10 3,10,11,13 4,5,7,8,9,10 11 11 1,3,4,5,6,7,8,9,10,11,13 12 3,1,2,13 1,4,5,6,7,8,9,12 13 11,13 1,3,4,5,6,7,8,9,10,12,13 Enabler Intersection Set Level 1 1,6 3 3 4 4 5 5 6 1,6 7 7 8 8 9 9 10 10 11 11 2 12 12 13 13 Table 7: Iteration 3 Enabler Reachability Set Antecedent Set 1 1,3,6,12,13 1,4,5,6 3 3,13 1,3,4,5,6,7,8,9,10,12 4 1,3,4,6,8,9,10,12,13 4,5 5 1,3,4,5,6,7,8,9,10,12,13 5 6 1,3,6,12,13 1,4,5,6,8 7 3,7,9,10,12,13 5,7 8 3,6,8,10,12,13 4,5,8 9 3,9,10,12,13 4,5,7,9 10 3,103 4,5,7,8,9,10 12 3,12,13 1,4,5,6,7,8,9,12 13 13 1,3,4,5,6,7,8,9,10,12,13 Enabler Intersection Set Level 1 1,6 3 3 4 4 5 5 6 1,6 7 7 8 8 9 9 10 10 12 12 13 13 3 Table 8: Iteration 4 Enabler Reachability Set Antecedent Set 1 1,3,6,12 1,4,5,6 3 3 1,3,4,5,6,7,8,9,10,12 4 1,3,4,6,8,9,10,12 4,5 5 1,3,4,5,6,7,8,9,10,12 5 6 1,3,6,12 1,4,5,6,8 7 3,7,9,10,12 5,7 8 3,6,8,10,12 4,5,8 9 3,9,10,12 4,5,7,9 10 3,10 4,5,7,8,9,10 12 3,12 1,4,5,6,7,8,9,12 Enabler Intersection Set Level 1 1,6 3 3 4 4 4 5 5 6 1,6 7 7 8 8 9 9 10 10 12 12 Table 9: Iteration 5 Enabler Reachability Set Antecedent Set 1 1,6,1,2 1,4,5,6 4 1,4,6,8,9,1,0,1,2 4,5 5 1,4,5,6,7,8,9,1,0,1,2 5 6 1,6,1,2 1,4,5,6,8 Enabler Intersection Set Level 1 1,6 4 4 5 5 6 1,6 Table 10: Iteration 6 Reachability Antecedent Intersection Enabler Set Set Set Level 1 1,6 1,4,5,6 1,6 6 4 1,4,6,8,9 4,5 4 5 1,4,5,6,7,8,9 5 5 6 1,6 1,4,5,6,8 1,6 6 7 7,9 5,7 7 8 6,8 4,5,8 8 9 9 4,5,7,9 9 6 Table 11: Iteration 7 Reachability Antecedent Intersection Enabler Set Set Set Level 4 4,8 4,5 4 5 4,5,7,8 5 5 7 7 5,7 7 7 8 8 4,5,8 8 7 Table 12: Iteration 8 & 9 Reachability Antecedent Intersection Enabler Set Set Set Level 4 4 4,5 4 8 5 4,5 5 5 9