Konosuke Matsushita

When we think of Electronic gadgets if there is any brand that comes to our mind other than Sony, it’s Panasonic. Today’s Gyan is about yet another Japanese company and its founder who are living example of “never – say – die” and “Think Big” attitude. It is a story of Konosuke Matsushita who lacked formal education, wealth, charisma, connections and even a special talent. Yet, early hardships unleashed hidden strengths which opened Matsushita's mind to the collective wisdom of others. His lifelong thirst for learning fueled the passion that led this humble, shy, 5-foot-5-inch humanitarian idealist to pioneer management practices and advance his philosophy that the mission of a manufacturer is to relieve poverty and create wealth, not only for shareholders, but for the society as well.

Konosuke Matsushita was born on November 27, 1894 in a little village named Wasamura south of Osaka. His father was a small landowner and prominent member of the community, and Konosuke, the youngest of eight children, enjoyed a comfortable early childhood. But during the war between Russia and Japan, the family's fortunes turned when his father lost his property due to bad speculation in the commodities market. Soon, they were forced to leave their farm and move to a small house in the city. Sadly, Konosuke lost his 3 brothers in a flue outbreak, too.

Still only nine years old, Konosuke bid goodbye to his mother at the train station, and left on the long, lonely ride to the big city – Osaka in search of a job.

To help support the family, Konosuke worked as an apprentice to a hibachi (charcoal brazier) store in Osaka a few months before he was to graduate from elementary school.

But soon, even the brazier went out of the business and Konosuke started working in a bicycle shop for 5 more years to come. He wanted to quit the job at the bicycle shop to continue with his education, learning in the night school. But his father convinced him to stay at the bicycle shop, saying, "The skills you are learning will ensure your future. Succeed as an entrepreneur, and you can hire people who have an education." His father speculated absolutely correct this time around.

Konosuke’s instincts told him that Electricity is going to be the next big thing in future. Eager to join this field, he left the bicycle shop and joined Osaka Electric Company at the age of 15. Within years, he was promoted to the post of “Inspector” – the highest any technical person could think of achieving in the company!

In his spare time, Konosuke had come up with a new design for electric sockets. His supervisor didn’t show much interest in it. Dissatisfied by the lack of challenge in his job, Konosuke found his own company in 1917. Along with his brother – in – law Toshio Lew * and two other partners and with a capital of 100 Yen, the company started its operation from a small house in Osaka. After 10 months, the profit was 10 Yen only! The workers and partners left the sinking ship. Even, Konosuke himself was losing faith in him. In those hopeless conditions, a wholesaler came up with an order of 1000 electric plates. Depending upon that work, Konosuke would get a yearly order of 30,000 plates each. But the timelines were steep as Konosuke had to complete the order in a month. Moreover, no one from the company knew how to make them. But Konosuke somehow managed to grab the order! (Gee, the story so far sounded more like a typical Hindi Movie except that our Hero was already married at the age of 20!)

The company soon took off by manufacturing Attachment Plugs, Two Way light Socket. It also came up with electric lamp for bicycles that would last for at least 40 – 50 hours. None of the manufacturers entertained Konosuke because they couldn’t believe that it is possible to manufacture such a long lasting battery. Konosuke then directly marketed his product to the customers. The trick worked and thousands of orders started flowing in. The company was now known as “Matsushita Electric Works” with a turnover of 1.2 Million Yen.

The movie has not yet reached interval! Interval ke baad, there are more ups and downs twist in the story.

The 1929 Great Depression hit Matsushita too. Even Konosuke himself was bedridden due to illness. All the managers came around to see him and advised him to lay off half the people to keep the company afloat. Konosuke outrightly refused to do so and in turn asked the managers to halve the production and make people sell the products in the remaining hours. Again, the trick worked. The company soon managed to spring back to its feet. By 1932, there were 1000 people working in 10 different plants. The company also owned 280 patents for different electric products! By 1937, Matsushita Group comprised of 9 companies.

But the happy days were soon to go away as Japan jumped into the World War II. The government forced Matsushita to convert their plants to manufacture weapons and ammunition. After the fall of Japan in 1945, all the factories came under US Control. General McArthur came down hard on the manufacturing industry, resulting Matsushita losing 60 odd companies in a single go! Even, Konosuke himself was asked to step down, any other man who has lost almost everything would have surely given away to the pressure. But not Konosuke! He in turn convinced the US authorities why it is important to keep the plants running. To prove his point, he penned a 5000 page report and managed to get support from the workers union. Finally, Konosuke was allowed to continue with his company but all his personal estate and property was seized. Moreover, he had taken huge loans for his companies. People dubbed him “The Loan King”!

It took more than 5 years for the company to come back on track.

In 1951, Matsushita happened to visit America. He was totally mesmerized with its prosperity and decided to make his company famous not only in US but also in whole of the world. In July 1952, he started dealing for a joint venture with the Dutch electronic giant “Philips” to manufacture electronic parts. Philips asked for $500,000 + 30% stake in the new company and 6% consultancy charges! Konosuke argued that Matsushita was going to run the company is Japan and hence, deserves some Management Fees! Finally, Philips settled for 4.5% Consultancy Fees and Matsushita for 3% Management Fees. Back then, Philips was bigger than Matsushita but this did not deter Konosuke.

Matsushita went on to establish the famous “Panasonic” brand. The group bought the MCA Company in US at the same time when Sony bought Columbia Pictures. With a productline having popular brands in TVs, Tape Recorders, Cameras, the company’s net sales are over $81 Billion today. The Matsushita group of companies has 628 companies employing 334,752 people.

Konosuke retired officially from Matsushita in 1973 but continued as an advisor till his death in 1989.

Konosuke was as much a philanthropist as businessman. To him, entrepreneurship was a means to earn money so that it can be used to serve the employees and the society. Even while doing business, he always made a point to explain the workers why they are doing what they are doing because according to him, if the workers themselves are not aware of what they are doing, they won’t be able to suggest improvement and contribute to their fullest.

A man who didn’t even receive a formal education left lessons for today’s managers to learn. Sheer hard work, self confidence, entrepreneurship and patriotism drove him to become the proud owner of a group of companies. Somehow, I recollect words wrote on Andrew Carnegie’s grave and I find them apt for Konosuke, too. It goes something like “Here lies a man who knew how to make people work who were smarter than him”

Regards,
Abhishek

*: Toshio Lew went on to found another electronic company “Sanyo” with whom BPL had made a JV.

Made In Japan: Akio Morita and Sony

Listening to songs on my iPod, I always wonder how advanced the technology has grown over the years since the days The Early “Portable” Radio
of Gramophone, to Valve tubed Radios, to transistorized Radios and Cassette players. But, if there is one thing that has truly brought music into your pockets and made it portable for the first time – it’s the Walkman. Today’s Gyan is about one such personality and the company he founded that stands tall as an example of innovation, continuous improvement and the virtue I admire the most – the entrepreneurship. Yes, it’s the “Sony”

Born on 26th January, 1921 Akio Morita belonged to a family who were into the business of brewing “Sake” – an alcoholic drink made using rice – for about 400 years. Sake enjoys the popularity of the national drink of Japan and the families brewing Sake were revered for their profession and the legacy continued through generations. Kyuzaemon – Akio’s father was grooming him well to inherit the family business of Sake brewing and to become the next Kyuzaemon. Although, Akio belonged to this traditional Japanese family, his father had a modern vision. His uncle, especially, played a vital role in making Akio’s perspectives broader towards the western culture.
Akio was interested in Physics and Mathematics. He also enjoyed taking apart electronic gadgets and put them back together. Considering his likings, Akio got admitted in the Physics Department of Osaka Imperial University.

Those were the days of World War II. Japan was fighting a losing battle against the allies on several fronts. After graduation in 1944, Akio joined Navy's Wartime Research Committee. This is where he found Masaru Ibuka.

The nuclear attack on Hiroshima and Nagasaki left a paralyzed and humiliated Japan. The country had no choice but to surrender. Every plant, factory and industry was now either destroyed or was under US control.

Akio returned to his family in Nagoya once the war was over. He was now ready to take up the job of a professor in Tokyo Institute of Technology. This was when he read about the research laboratory founded by Ibuka in Tokyo. Reading the article, Akio met Ibuka and together they founded “Tokyo Tsushin Kogyo Kabushiki Kaisha” (Tokyo Telecommunications Engineering Corporation) on May 7, 1946, with approximately 20 employees and initial capital of 190,000 yen. At that time, Ibuka was 38 years old and Morita was 25.

The “headquarters” of Tokyo Tsushin Kogyo K.K. was in a war struck, dilapidated Departmental store. The main gate was kept closed at night. So the employees would go in and out through the fire escape. Many a times, the police had mistakenly arrested the employees thinking they are burglars!

Morita and Ibuka started selling converters for Radios so that people can listen to Short Wave Bands banned earlier by the Japanese Government. Then they tried their hands at making electrically heated mattresses. But the mattresses used to get so hot that nobody could get a good night’s sleep! After this failed attempt, they tried selling electric cooker which was fairly successful.

The company was soon to see success when in 1949 it developed magnetic recording tape and in 1950 sold the first tape recorder in Japan.

Music had always been passion for Akio. In his childhood, his uncle would bring him records of Beethoven, Bach and young Akio would wonder how to improve their sound quality. Years later, his company started manufacturing Tape Recorders. In 1957, it produced a pocket-sized radio. The company tried making Tape Recorders and Radios as small as possible so that they can fit in the shirt’s pocket. The pocket radio was a little bigger in size than the usual shirt pockets. So they even sold shirts having pockets befitting the radio!
This was when Akio decided to change the name of the company from “Tokyo Tsushin Kogyo Kabushiki Kaisha” (hush!) to “Sony”! Akio wanted to make his company a global organization and he knew that US was their primary market. The current name would not go well in that country. So, deriving from Latin “Sonus” – Sound and “Sonny” – American Slang for “Whiz Kids”, Akio renamed the company to “Sony”, in spite of the opposition from his own employees!

While technical part was Ibuka’s forte, Morita would worry about how to sell the products to the customers and would handle the marketing of the company.

Sony was and still is very keen about the quality of their products. But back then, anything that is made in Japan was considered inferior. So the “Made in Japan” tag would always be in small fonts somewhere at the corner. A custom officer once scolded about this fact and since then, the “Made in Japan” and “Sony” would appear prominently.

Akio Morita always thought big. Once, a US company named Bolova placed a huge order of 100,000 transistors to Sony. But there was a condition that Bolova would sell them with their brand name. It was a major breakthrough for Sony but Akio politely turned down the offer saying he wants to make a World Class company! In another incident, another company asked Akio to quote the prices for 5000, 10000 and 50000 transistors. Morita quoted a discounted price as the quantity went up. But when the customer asked for a 100,000 transistors order, Akio quoted it much higher. On being asked why the price was quoted higher when in fact it should have been less, Akio replied that to provide that much amount of transistors, he would need to set up another factory, hire more people. In Japan, there was no tradition of firing people once the job is done. So, even when the order was completed, Akio couldn’t have fired the extra employees. Hence, to take care of all these factors, Akio had quoted a higher price. The incident truly depicted Akio’s caring nature towards his employees and his respect to the Japanese Management.

Morita explains this basic difference between Japanese companies and their American counterparts. In other countries, they hire people who are already good at one or two things and then depending upon the work, they are used. But in Japan, good people are selected, trained and used to carry out the task. It’s like building wall using stones of different shapes. If you wish to create a wall of different shape, you don’t need to throw away the stones; just rearrange them and they would fit together!

In 1960, Sony produced the first transistor television in the world. 1960 was also the year when Sony Corporation of America was established in the United States. It was soon followed by Sony applying for American Depository Receipts (ADRs) in 1961. Sony was the first Japanese company to be listed in NASDAQ. Morita’s vision not only helped Sony build up the much needed capital but also paved way for other Japanese companies to go global.

In 1968, the company entered the music software business in Japan by establishing CBS/Sony Group Inc. jointly with CBS, Inc. of the U.S. Then in 1979, Sony entered the financial business in Japan with the founding of Sony Prudential Life Insurance Co. Ltd., a 50-50 joint venture with The Prudential Life Insurance Co. of America. Furthermore, Sony acquired CBS Records Inc., the records group of CBS in 1988. The following year, Sony acquired Columbia Pictures Entertainment, Inc., enabling the company to become a comprehensive entertainment company that owns both quality software content and a wealth of hardware.
At Sony, much stress was given on inventing products that couldn’t be imagined by the common man. Walkman* was one such example. Even the people from Sony itself questioned Morita and Ibuka why anyone would like to buy an electronic gadget just to listen to music while doing his work, walking, working out. But, both Morita and Ibuka – well in their sixties by now – were firm on their decision. Sony brought in the Walkman and rest all is history.

Today, Sony is a leading manufacturer of audio, video, communications, and information technology products for the consumer and professional markets. Its music, motion picture, television, computer entertainment, and online businesses make Sony one of the most comprehensive entertainment companies in the world. With the annual sales of approximately $67 Billion in the year ending 2005, Sony employs 151,400 people.
Akio Morita resigned from Sony’s chairmanship in 1994 following a cerebral hemorrhage while playing tennis. In 1999, he – a man who always remained young at heart - died at the age of 78, leaving behind a great legacy of “Thinking Big”, Self Confidence and Patriotism.


Regards,
Abhishek

P.S.
There is an autobiography of Akio Morita titled “Made in Japan: Akio Morita and Sony”

*: Launched on July 1st, 1979, Walkman was the brainchild of both Morita and Ibuka. The Walkman was initially launched as 'Soundabout' in the U.S., 'Stowaway' in England, and 'Freestyle' in Australia but it soon got recognized as “Walkman” throughout the world making its way in the Oxford Dictionary in 1986. The court battle for the patent of Walkman is won by one Andreas Pavel who invented the concept and the first walkman a year or so before Sony. The article appeared in 18th December’s Times of India.

Journey through Netalands and Babudom

It is my immense pleasure to present you today’s “episode” (as one reader called it) as “Gyan For The Day” achieves a milestone – the 25th Article in this series. It is really heartening to see this initiative crossing the boundaries of companies and states as people, not only from Infosys but also from other organizations like IBM, Geometric, situated at different locations across India and the Globe look forward to the article everyday (342, to be specific). This is just a humble note of thanks to all of you for your support, encouragement and suggestions that has kept my spirit afloat to write everyday!

Recently, a couple of news caught my attention. One was about the Netas accepting bribe to ask questions in the parliament. As expected, it has created a lot of brawl these days and more food for the News hungry media. And I’m equally sure that it’s just a matter of time that the dust would soon settle down and the Janata would forget about all that happened. The other news that did not quite appear on the first page was about the IAS officers getting appraised at certain points (15, 25 years) of their career. This was under consideration for a long time to instill some efficiency in the “Sarkari” organization. The news headline read something like “Now, Babus won’t afford to relax” or something on the similar lines.

Incidentally I happened to read a book titled “Journey through Netalands and Babudom” penned by T.S.R. Subramanian who himself has served the Indian administration through his stints as a district magistrate, State Secretary, Cabinet Secretary at various stages during his career.

T.S.R. Subramanian is a Math Graduate from UK and joined Indian Administration as an IAS passout of the 1972 batch. During his interview, the panel of judges asked him why he wants to join IAS service. TSR replied,” I want to serve India” A clichéd answer today but it appealed the panel back then and TSR joined the UP cadre. I wonder who would believe to that answer today, however genuine it may sound!

The book, then, takes you from places to places where the author was posted to perform his duty and you get to see how rotten the system has gotten over the half century or so. Anecdotes portraying the first hand experience the author has gained make you wonder how India has survived for these many years. An amusing, yet disturbing story goes like this.

Generally, the rookie officer was used to get a posting as additional district magistrate in his early days. During his tenure, TSR took special efforts to see to it that the pending cases are quickly cleared. Most of the cases were petty land disputes and could have been judged without much hassle. He did manage to decrease the number of pending cases drastically, by giving just and quick decisions, taking into consideration plea of both the parties.
Soon, he got promoted to some other district. The Bar council organized a function to felicitate TSR. The president of Bar Council was lavish in his praise saying he hasn’t seen such a great magistrate in his own life and that all the lawyers would remain in debt for all of theirs. Other members promptly nodded in agreement. TSR was touched by this gesture, thinking that, at least, these people understood and appreciated his efforts to clear the pending cases. The president then further went on to say,” Thanks to the District Magistrate’s quick decisions, we lawyers have found new opportunity to earn more. Hurt by the decision, one or the other party would surely appeal to the higher court. There, it would remain for years to come and would insure a steady income for all of us. If it hadn’t been for TSR, we lawyers wouldn’t have seen such a golden harvest!”

TSR had to see more of the bureaucracy in his coming years. He would see thick skinned politicians who would not let go any single opportunity to take advantage of the situation or to promote their yes – men. He would also see good, upright officers getting transferred and failing prey to the dirty politics so many times that they would eventually quit, leaving the system to get even worse. Although, the author puts across what he saw of the system in his tenure, the tone is not complaining – rather sarcastic and humorous.

Later, getting promoted, he got to see the likes of Sucheta Kriplani, Indira Gandhi, Channa Reddy et al. He also served in UN as a representative of the Ministry of Commerce and would get more insight into the International Politics. During the NAM movement and the later years, India enjoyed the leadership position of most of the developing and Asian countries. Indian bureaucrats were respected and feared for their rationality, ability to lead the debate and fighting for just demands of the developing countries, without getting bogged down by the stance of the Developed countries. But this edge was soon lost due to the lack of political determination and vision during the coming years. He would also get to see how developed countries use their positions to pretend their generosity in helping the third world countries to progress. And at the same time, they would forcefully or otherwise make the developing countries sign treaties and pacts. Spineless people would get promoted to represent India at the forums like UN just because they had absolutely nothing much to do in India and foreign postings would serve as a safe way to cut them off from the system back home!

After coming back to India, TSR was made the Chief Secretary of UP State Government during Mulayam Singh Yadav’s administration. During this tenure, he was to handle the Babari Masjid disaster. He worked hard to maintain the Law and Order situation but the politicians managed to depict a different picture altogether for their own petty benefits. In his book, TSR has also appreciated the then Chief Minister Mulayam Singh Yadav for his administrative capabilities. I would like to share a quick anecdote TSR wrote: A conclave of all the IAS officers, who had served and are serving the UP state, was arranged. Addressing the audience filled with these men, Yadav said,” You all are the brightest minds of India. Your education so far has made you intellectually higher than any other officer or politician in the country. You have the managerial and administrative potential and the constitution has empowered you with the authority to change India for good.” And then he asked, “Then why do I get to see these officers coming to me asking for some petty favour!? I’ll surely grant it because then even I can force you to dance on my tunes later on! It is really disgusting to see such bright and upright minds compromising with their values…”!

With the I.K. Gujaral and Devegowda government coming into power at the center, TSR was handpicked for the post of Cabinet Secretary. I’m not sure if it’ll be appropriate to put TSR’s political views in a forum like this but the essence remains that politicians successfully manage to manipulate the system and every next government tends to undo, be it for good or bad, whatever the earlier administration has done. So in short, it’s like 2 steps forward and a step backward!

TSR also compares post independence era with the good old British days and comments that back in those days, the officers were paid handsomely and given a free hand at putting their plans in practice for a longer duration. The high wages insured that they won’t need to compromise with their values for quick money and longer tenures would make the officers learn the system first and implement the changes they want to see in the system.

The author summarizes his experience in the form of 4 Laws of Administration:

1. Administration is conducted for the benefit of the administrators.
2. In a conflict between private interest and public interest, the former shall prevail.
3. The country belongs to the “haves” and the “have nots” do not exist.
4. A public servant's work output and rewards are inversely related.

Well, I still wonder what makes India survive and progress at such a rate in spite of the rotten system of administration and lack of political will power. And, all I can think of is a slogan I had read at the back of a truck (They are, in deed, quite an interesting piece of literature!J)

“Sau (100) meinse nabbe (90) beimaan…phirbhi Mera Bharat Mahan”


Regards,
Abhishek
P.S.:
Let’s go East tomorrow…

BPR: Business Process Reengineering

In an earlier Gyan, I had briefly explained the various theories of management and how it evolved. Management, perhaps, is as old as the Human race itself. Be it the construction of huge Pyramids or that of Taj Mahal, be it the gruesome battles and wars fought so far in the human history or be it the ancient empires and cultures, Management existed, though not being termed explicitly so. It was with the advent of the Industrial Revolution that a huge class of labourers and workers came into existence. Thinkers like Adam Smith had envisioned the concept of work distribution amongst these workers, laying up the foundation for Management. Every worker was supposed to carry out a certain set of tasks repeatedly. This repetition of tasks would eventually lead to specialization in performing that particular task, “Skill Set” as one would like to call it now! What Smith envisioned was further extended by people like Frederick Taylor and Henry Ford who invented the “Assembly Line” and succeeded in “Mass Production”.


The underlying principle was that the workers can not think or plan and need to be constantly monitored to get the job done. The strategy, planning and rest all things are for the Top Managers to worry about. Now that, it was assumed that the workers are no better than human robots, the “Middle Managers” were appointed to keep an eye on the workers. They worked as a link between the higher management and the workers. The task for the middle management was to execute the strategy decided by higher management and manage the workers. Slowly but surely, the middle managers started expanding themselves both horizontally and vertically.

As the structure of the industries grew more complex, various departments like HR, Purchase, Sales, Marketing, and Finance etc. were created to handle different aspects of the industry. This only helped the middle managers to occupy more space and gain importance in the system. Thick, high walls rose up between various departments, leading to a big chaos in the companies as a whole. The communication gap between them increased. Middle Managers made sure that it only widens because all they were interested in was the well being of themselves and their respective departments. Tedious and rigid processes made their way, thanks to layers after layers of Middle Managers. But, finally it was the customer who had to pay the price.

Let’s take a few examples of these rigid processes we always get to see almost daily.

You want to apply for Home loan. You go to the bank and stand in the queue where a man is giving away the Home Loan forms. You fill it and hand it over to the peon who in turn, sends it to another official who checks if the form is filled properly and all the documents are attached. He, in turn, sends it to another official who checks your credit history and other transactions to make sure that you can afford to pay the loan back. If satisfied with the documents, he forwards it to the Branch Manager who signs off the form if the loan amount is as per the bank rules. If he doesn’t have the authority to approve, he forwards it to Head office. Head office would then scrutinize the documents all over again and would, then, order the accounts department to disburse the loan. In the “process” of getting the loan, the documents changed hands so many times!

Another example: you go to the bank to withdraw some cash. You, again, stand in the queue to get the withdrawal slip. You fill it and submit it. The person sitting at the counter makes an entry in his register and hands over a token. Then you wait for another 15 – 20 minutes more for the cashier to announce your token number and only then that you get the cash. The whole “process” of getting cash took on an average half an hour.

What was that that took the task of approving loan or getting cash so long? Wasn’t the intention of the customer just to get loan or cash quickly? What stood as an obstacle – instead of facilitator – between the customer and his objective? It was the “Process”!

The Process got prolonged because the system is made up of so many intermediate persons – the middle managers. One way to speed up the process could be to get rid of one or two middle layers. But what if a radical design or major changes were made to the process so that it drastically reduces the turnaround time? This is exactly what the underlying principle of “Business Process Reengineering” is.
In their book “Re – engineering the Corporation – The Manifesto of an Industrial Revolution”, authors Michael Hammer and James Champy from Harvard stressed the point of how effective radical changes and redesigning of the business processes is, compared to traditional incremental improvements preached by Total Quality Management. It started the BPR (Business Process Reengineering) movement.

BPR professes drastic change in the processes and involves use of technology and especially IT, to speed them up. It also assumes delegation of tasks and empowerment.

In case of the first example, the objective was to give the customer the loan he needed… with minimal time. Now, how a reengineered process would have looked like?
Michael Hammer James Champy
There would be a single form capturing all the information about the customer the bank needed. An official, who is “empowered” with the authority to grant the loans as per the bank’s rules, verifies the form and checks the history of the customer on his computer. If he finds the document to be proper, he can quickly ask the accounts department to disburse the loan amount. The redesigning of process and introduction of computer not only reduced the turn around time but also cut the number of people required for serving the same purpose!

Similarly, the use of ATM machines has almost made the concept of cashier obsolete and at the same time has reduced the turnaround time 20 – 30 times! Today, to promote usage of ATMs, some of the banks even charge you extra if you, at all, end up at their branches to withdraw cash!

As we all know, it takes around 3 days for a cheque to transfer from the branch, where it was submitted, to the clearing center and then to the branch from where it was drawn. And it is only after 3 days, that the customer can use his own money.

The terrorist attack on 9/11 had halted the airline business in US for many days continuously. In a country like US, where 40% of the transactions are made through cheques, the sudden stoppage in the flow of cheques (stuck in those planes) made a big impact on the economy. So much so that a new act named “Truncation Act” was brought into immediate action. According to this act, every cheque would be “scanned” and the scanned image would be sent directly to the branch from where it was drawn. When the green signal was received from that branch, the cheque is immediately encashed within a day. In a way, the disaster had indirectly forced the authorities to change the way they did their business for years! If I’m not mistaken, the same act is soon going to be introduced in India.

I have deliberately explained the concept of BPR with examples of banking as they are quite a routine thing for us but it can be very well applied to any other business. BPR resulted in downsizing and flat organizations. Following BPR, many UK banks laid off around 80,000 people, P & G got rid of 13,000 personnel, GTE reduced its workforce by 17,000!

But in spite of all this, BPR is not considered a popular and successful movement. I believe, for any business to become successful, it is important to have development of 3 P’s: People, Process and Product. If and only if there is an all round development of all these P’s, the fourth P – Profit increases!

But in case of BPR, even when the Processes were made better, the most important part – the People and their emotions were neglected. Although, it was quite a logical and radical concept, it couldn’t quite take off as it failed to handle the human emotions…

Regards,
Abhishek

Hershey's

This is a routine sight for us working in software industry. Whenever someone arrives from onshore, not only his/her team members but anyone and everyone on the floor rush to get a chocolate brought from there. I know it sounds a bit weird but the only metaphor I can think of is that of the hoards of Piranhas finishing off the prey. And what remains is the empty box that a while before had some of the sweetest and delicious chocolates. Among them, the most sought after chocolates are the “Kisses”. Today’s Gyan is a sweet story – as sweet as those chocolates – of the man who not only brought the sweet taste of his chocolate to us but also helped in bringing happiness in many lives through his philanthropic deeds. Yes, it’s Hershey’s!

Born in 1857 to a farmer father, Milton Snavely Hershey didn’t receive a formal education as his father was always on the move. One fine day, his father left him and his mother alone, only to see them again when Milton became 18 years old.

To earn living, Milton started working for a printer but somewhere, the art of preparing candies had fascinated him. So, on the occasion of Centennial Exposition of US Independence i.e. on 4th July 1876, Milton Hershey established his candy business. The candies were made using Caramel. The job of mixing hot caramel is very cumbersome. Prolong handling and mixing the hot caramel made Hershey’s left hand permanently deformed. In spite of his hard work and financial backing from his mother’s family, the business never quite took off and failed after 6 years. So finally, his father pulled him along in the Silver mining business in Colorado. Milton gave in but his true calling would always remain Candy Business. This is where, while working with a Denver candy maker, he learnt the magic of adding fresh milk to caramel.

The stint at the mining business was also a failure. After a few months, he left Denver and arrived in the city of New York – the biggest industry and market for Chocolates. Hershey’s efforts to restart his candy business failed here as well. Dejected, he returned to Lancaster, Pennsylvania in 1886. He was aging 28 by now and literally penniless. But if there was one thing that was in abundance in him, it was his never – say – never attitude.

Again, in Lancaster he started fresh efforts to build his own Chocolate Company. This time luck seems to have turned his way. A British confectioner was very impressed with the quality of candies prepared by Hershey’s and offered him a huge order. Although, Hershey didn’t have the required capital with him, he managed to convince the bankers to lend him the necessary sum. Within 4 years, Lancaster Caramel Company became one of the biggest Caramel manufacturers, employing 1400 people and exporting Caramel to other manufacturers in US and Europe.

Hershey was placed firmly in his Caramel business by now. But soon the year 1893 was to change his life forever – for good.

In 1893, Hershey along with his Brother – in – law Frank Snavley happened to visit an exhibition in Chicago. One exhibit of a German manufacturer was a Chocolate maker. Seeing the equipment at work, Hershey was convinced that this is the future of Candy business. Snavley was taken aback when Hershey told him that they were now going to jump into the Chocolate business. Hershey got the equipment shipped to Lancaster, installed it in a corner of his factory and started producing Chocolate to coat the Caramel. Consequently, the company was renamed to Hershey Chocolate Company. Initially, the Hershey Chocolate Company produced sweet chocolate and cocoa for the flavoring and coating of Hershey’s own caramels. But soon, Hershey began selling his excess product to other confectioners.

For years, he worked at perfecting a viable recipe for making milk chocolate -- a process which up to then had been kept a closely guarded secret by the Swiss. Finally, through trial and error, he hit upon the right formula of milk, sugar and cocoa that enabled him to realize his dream of mass producing and distributing milk chocolate candy. In 1900, the company began producing milk chocolate in bars, wafers and other shapes. With mass-production, Hershey was able to lower the cost and make milk chocolate, once a luxury item for the wealthy, affordable to all.

The success in professional life was soon going to follow Hershey in his personal life as well. Aged 40, Hershey was still unmarried. This is when Catherine Sweeney – better known as “Kitty” entered his life. The romance between this Irish girl from a worker family and Milton Hershey blossomed and culminated in their marriage.

In 1900, Hershey sold his Lancaster factory for a whooping $1 Million. Those were the days when even $10 salary was considered good. Hershey reinvested the money to build an even bigger factory in Derry Township, a town in South Central Pennsylvania. The easy availability of labour, milk and accessibility to ports like Philadelphia and New York made it the most suitable place to start the business. In 1903, Hershey broke ground for the factory and by 1905 it was rolling out delicious chocolates. Looking to expand its product line, the company, in 1907, began producing a flat-bottomed, conical milk chocolate candy which Hershey decided to name Hershey’s “Kisses” Chocolates. Story goes that they were named after the noise they used to make while rolling over conveyor belts!

The next two decades saw even more products added to the company’s offerings. These included Mr. Goodbar (1925), HERSHEY’S Syrup (1926), chocolate chips (1928) and the KRACKEL bar (1938). Despite the Great Depression, these products helped the newly incorporated Hershey Chocolate Corporation maintain its profitability and avoid any worker layoffs. During the World War II, Hershey provided nutritious chocolates bar to the army. The company even earned five Army-Navy “E” Production Awards for its exceptional contributions to the war effort.

Hershey believed that workers who were treated fairly and who lived in a comfortable, pleasant environment would be better workers. Accordingly, he set upon building an infrastructure to take care of his employees. He had plans drawn up for a model community that included housing for executives and ordinary workers alike, schools, churches, parks, recreational facilities. As time went on, Hershey saw to it that the town (named Hershey) added a community building, a department store, a convention hall, an amusement park, a swimming pool, and schools… Lots of schools! Both Milton and Kitty loved children but as fate would have it, they didn’t have one of their own…

The post-war period saw the introduction of a host of new products and the acquisition of an old one. Since 1928, H.B. “Harry” Reese’s candy company, also located in Hershey, had been making chocolate-covered peanut butter cups. Given that Hershey Chocolate supplied the coating for REESE’S “penny cups”; (the wrapper said, “Made in Chocolate Town, So They Must Be Good”), it was not surprising that the two companies had a good relationship. As a result, seven years after Reese’s death in 1956, the H.B. Reese Candy Company was sold to Hershey Chocolate Corp.

Today, The Hershey Company is the leading manufacturer of chocolate, non-chocolate confectionery and grocery products. With approximately 13,700 employees and net sales in excess of $4 billion, the company offers more than 114 different brands of chocolates like Hershey’s, Reese’s, Hershey’s kisses, Kit Kat, Almond Joy, Mounds, York, Jolly Rancher, Twizzlers, Ice Breakers, and Bubble Yum as well as innovative new products such as Swoops and Hershey’s S'mores.

Hershey continued with philanthropy, opening an asylum and a trust. He gave away $600 Million to the trust in the memories of his wife Kitty. She died in 1915.
Today, the trust owns 65% share in the company. Hershey later on went to Cuba to build another such empire but failed. He returned to America and spent his remaining years alone. In 1945, at the age of 88, Milton Hershey – a man who fought against all odds and stood firm on his position – finally gave up to the ultimate truth. But he has left behind a legacy that still brings the sweet memories of the dreams he had once envisioned…

Regards,
Abhishek

Idli, Orchid and I: Vithal Kamat

For some reasons, we don’t have a Restaurant chain like McDonald’s or Pizza Hut started by an Indian. But, if there is one name that can get closest to the popularity of McDonald’s or can be called as Indian McDonald’s (though a hyperbole!), it’s the Kamat’s chain of restaurants. Today’s Gyan is based upon the captivating Marathi autobiography “Idali, Orchid aani me” (“Idali, Orchid and I”) by Vithal Kamat who owns the chain of restaurants and the famous 5 Star “Ecotel” - environment friendly hotel “Orchid” in Mumbai.
Born in a Gaud Sarswat family of Kamats, Vithal Kamat grew up along with 5 siblings under the strict discipline of his father Venkatesh Kamat. Venkatesh Kamat owned a couple of hotels “Satkaar and “Sanmaan” in Churchgate, Mumbai. Vithal used to help his father in handling Hotel business, learning first hand how to run the catering business. For some reasons, they had to sell of the Hotel “Sanmaan”.

Venkatesh Kamat had created a lot of goodwill amongst his customers through prompt service and quality of food items. He instilled the same qualities in Vithal, too.

One day, A tailor having his shop adjacent to their hotel, stitched a Safari suit for little Vithal as a goodwill gesture. Vithal gladly accepted this generous gift worth about Rs.200/-. But his father didn’t quite appreciate this, he barked at Vithal,” If you yourself are not worth Rs.200/-, you don’t deserve to wear a suit like that” Hurt, Vithal decided to prove himself. He started selling Glycerin and also appeared in an interview at a company. When the interviewer told him that he’s selected and will get a salary of Rs.50, 000/- per annum, Vithal politely refused the offer saying he just wanted to test how much worth he really is. Gaining confidence in himself, he asked his father to sponsor his one way ticket to UK. He promised his father that he would manage on his own and would prove himself.

Within 3 days after landing in London, Vithal managed to get a job as a cook in an Indian restaurant named “Shaan” run by one Mr. Tanna. Although, Vithal himself wasn’t great at culinary skills, he had the business mind to figure out what would appeal most to the customers. He introduced Idli with the name “Indian Rice Pudding” The renaming and improvement in quality quickly made “Indian Rice Pudding” – the Idli very popular among the English customers. One day, a Punjabi came asking for 2000 “Bundi Laddus” for a marriage. The hotel owner refused to prepare them. Vithal quickly grabbed the opportunity. The Punjabi offered to pay £200 for the order. Now, Vithal didn’t have the necessary expertise for making the Laddu but took this as a challenge. He persuaded the owner to let him use the kitchen overnight. He got a couple of Englishmen to shape the Laddus once he prepares them. But as soon as, the English assistant caught hold of the hot Bundi to roll it, his hands started burning. Vithal quickly remembered that his mother used to apply spirit to her hands so that they shouldn’t burn. He sprinted to a nearby bar and brought “Bacardi Gold”. The assistant applied it and managed to give the required shape to laddus. Finally, they could deliver the laddus the next morning. After a couple of days, the Punjabi came running to Vithal. Vithal thought that the Punjabi came to know about the Bacardi thing and is going to beat him to death. But as it happened, he congratulated and thanked Vithal for the Laddus. He said that his mother was so impressed with the taste and the added “Kesar” that it reminded her of the laddus back home in India! Well, the credit goes to Vithal as much as to Bacardi J

Vithal didn’t settle in London. He moved on to Italy and other European countries to learn their delicacies and managing business. Soon after he came back to Mumbai, he was given an offer to open a restaurant in Japan. “Namaskar! Indian Restaurant” was launched in Japan and became an immensely popular. Vithal made sure that the food items are customized to suit the Japanese eating habits. To cook Naan, they were using a Bhatti – a hearth. The Japanese authorities objected to that asking for certificate. Vithal, then, asked a Japanese coworker to operate Bhatti, and published photos of him operating it along with the hotel’s advertisement. This publicity stunt not only gave good publicity to the hotel but also got rid of the license problem as it portrayed bhatti safe to handle.

Again, after coming back to India, he opened a restaurant on the Mumbai – Ahmadabad highway near Wapi. “Kamatani Wadi” became extremely popular amongst the travelers and rose to become a famous rendezvous point for dealings etc. The billboard would advertise, “ramat gamat ane Kamat”!

Vithal, by now, was well established in the hotel business owning about 50 hotels in and outside Mumbai, sharing the ownership with his brothers. He could have easily managed the existing restaurants. But that was not quite like him. And another opportunity was knocking his doors.

A hotel near Sahar airport named “Airport Plaza” was up for sale. Vithal wanted to buy it but his father out rightly refused the proposal. Finally, after much persuasion, he bought the Airport Plaza and renovated it to “Kamat Plaza” Vithal believed that rather than advertising better customer service results in more goodwill. Usually, passengers used to wait for an hour or so in the transit period. Kamat kept a couple of shuttles ready at the airport to carry the passengers to and fro from the airport. Quality food, clean rest rooms, toys and other games for kids, in short, all the amenities guaranteeing a total family satisfaction quickly made Kamat Plaza a favourite hopping point.

But Vithal was aiming even higher. He decided to totally rebuild Kamat plaza into a five star hotel. Many of his well-wishers tried persuading him against scrapping Kamat Plaza. But Kamat was determined. He also managed to get loans from various banks. Of course, everybody was willing to give him as much money he wanted, thanks to his brand name

And then came the major setback. His brother made his father write off all the hotels to him and Vithal was left with nothing! Moreover, he already had a loan of staggering 100 Crores for building his 5 Star hotel. The banks and friends who were ready to pay him any amount of money turned their backs.
The story of his sacrifice, dedication and determination is really touching.

Fighting against all odds, Vithal again rose back to his feet and opened “The Orchid” – the first environment friendly hotel in India in 1997. Every thing used in Orchid, right from the Cement and bricks used to the Garbage Management, is eco friendly. Orchid went on to receive lot of accolades including Green Globe award (in 1998 and 2000), Green Hotelier Award and Industrial Pioneer in 1999. It also went on to achieve the prestigious “Best Ecotel in the world” award in Durban.

The key to success of Kamat lies in maintaining quality, cooking innovative food items and putting the Customer Service first. Even today, Vithal Kamat tastes the food left by the customer to see why he didn’t eat it completely and if something was missing in it!

The man famous for selling Idli Sambar finally became a world acclaimed 5 Star Hotel Owner, representing a country whose motto for centuries had always been “Atithi Devo Bhav ”.

Regards,
Abhishek

McDonald – I’m lovin’ it.

I just happened to see a new McDonald outlet coming up at Kothrud. I wonder how they manage to capture such strategic spots right in the heart of the city or in the newly developing suburbs. Whatever may be the tricks they might use to own/ lease those places; it surely turns out to be a big crowd puller. Especially, amongst the college going students and other young people, the McDonald Outlet becomes a favourite rendezvous point. If there is anything in the Food industry that is as American as Coke, it’s McDonald.

Richard and Morris McDonald – better known as Dick and Mac were born in 1910, in New Hampshire. Their father was a foreman in a Shoes factory. McDonald family was no exception to the Great Depression, soon resulting in McDonald Sr. losing his job along with thousands others.

Dick and Mac moved to Hollywood to try their luck at Cinema. But they were given some paltry jobs of Spot boys etc. They even made a futile attempt to run a theater in Glenn View.

Depressed, they finally decided to run a Hot Dog stand named Airdome in Arcadia, California. Even though, the Airdome wasn’t like a typical fashionable hotel, it became quite popular. Both the brothers were very particular about the cleanliness and quality of the food items. And these were the basic ingredients for the recipe of success. The secret behind their popularity was in the selected items. The menu consisted of 25 odd food items, with Hamburger costing just 15 Cents. Paper plates and plastic cups were used instead of traditional steel accessories. This helped in maintaining clean environment and cutting the unnecessary costs of using and cleaning steel amenities. In short, the philosophy was “KISS – Keep It Simple, Stupid”! McDonald brothers effectively used the “Assembly Line” technique in cooking. As soon as the customer places his order, it would be relayed to the first cook who would quickly fry the meat strip, in the meantime, other cook would butter the bread and the third cook would put the meat strip in the bread and by the time, the customer gets out of the queue, he would get his order delivered neatly decorated in clean plates!

With the increasing popularity, McDonald Brothers moved the Airdome to a 600 sq. feet building in San Bernardino, California. This was the first McDonald’s. McDonald also used effective ways to advertise their success. By 1950, they would proudly put the billboard “Over 1 Million Hamburgers Sold!!!”

In 1953, MacDonald brothers “franchised” McDonald to Neil Fox. Opened in Phoenix, California, this was the second McDonald restaurant. It was, also, the first to use the famous “Golden Arches” which later on became the logo for McDonald. It was soon followed by another outlet in Downey, California. That year, McDonald posted total turnover of $350,000 and a net profit of $100,000!

1954 was the fateful year for McDonald’s. A man who was to be known as “Father of the Fast Food Industry” later made his entry this year. Born in 1902, Ray Kroc grew up to sell restaurant products including paper cups and milk-shake mixers. His trips to coffee shops, diners, and other inexpensive restaurants around the nation gave him deep experience in the industry, and a well-honed sense of what constituted successful management. Yet it was not until he was 52 years old that he had the idea that would transform the existing franchise fast food industry. He became fascinated by the McDonald Restaurants who had placed a single order for 40 Milk Shake mixers with him. The simplicity of operations, absence of the wait staff and utensils and the assembly line for hamburgers really took him by pleasant surprise.

Kroc was experienced enough to recognize the potential of McDonald Brothers. He soon offered them a deal to buy McDonald’s and start their franchise business all over the nation. McDonald brothers quoted a price of $1 Million each. Kroc was infuriated with the price quoted by the brothers because he didn’t have enough money to close the deal.

This is where another character - Harry J. Sonneborn made his way. He opened a “Franchise Reality Corporation” who would buy vantage places in the cities and sell/lease them to the McDonald Franchise. This explains how McDonald manages to capture key places. The activities of Franchise Reality Corporation resulted in McDonald acquiring valuable real estates and at the same time, rents by leasing out these spots to the franchisees.

After much debating with the McDonald brothers, Kroc bought the business, including the name and the now famous golden arches logo for $2.7 million. Finally, the first McDonald's franchise under Kroc's management opened in his home state of Illinois in 1955. Ray Kroc registered "McDonald's Systems, Inc." as a legal organization for his planned franchises. The company's literature usually refers to this date as the "beginning" of the company, then already 15 years old. The company still refers to this restaurant as "McDonald’s #1"!

Kroc introduced strict processes and norms to be followed by all the franchisees. Anyone who would not conform to these norms would lose his franchisee. Some of the rules were like the meat strip should contain 19% fats and should weigh 1.6 Ounce. A single pound of meat should accommodate only 10 such strips. The burger’s diameter should be 3.875 Inches and should have 178 sesames! Similar processes were followed in preparing French fries like the colour of the fries after frying, the temperature of the boiling oil, time to fry the cut potatoes and even the air required to dry the potatoes…everything was detailed and followed religiously! So much for the processes…

In early 60’s, a franchisee sponsored a show called “Bozo’s Circus”. The main character of Bozo was played by Willard Scott who was later on hired by McDonald to portray the company mascot “Ronald McDonald”

In 1967, the company went global with opening a McDonald’s in British Columbia – first branch outside US.

The 70’s saw McDonald’s opening new avenues for success in all the continents across the globe. The company stood as a symbol of American Culture. But at the same time, it faced a lot of opposition for the same reason. Many countries saw it as an invasion of American culture and the company was targeted by various movements and political powers. To value the local systems, McDonald was prompt to change their menu a little, to suit the local choice. The Veg. Burger and McAaloo Tikki introduced in India are one such good examples of McDonald’s flexibility.

In 1965, the company had 1000 outlets – the year when it went public. The number soon doubled in 1971 and by 1984, McDonald had 8000 branches all over the world.

Today, McDonald's brand operates in 122 countries around the globe. 30,000 McDonald’s serve 51 million customers each day. US, alone, has around 12,000 McDonalds. More than 70% of McDonald's restaurants are run by independent local businesspeople. As on 2004, the company’s turnover was $19.07 billion, with net income at $2.75 Billion!

Ray Kroc died in 1984. Harry J. Sonneborn became the CFO of the company, before resigning in 1967. McDonald brothers were happy with their $2.7 Million. Had the brothers maintained their original agreement, which granted them 0.5% of the chain's annual revenues, they would have been adding a $100 million per year! But then, they weren’t quite after money. However, both of them used to buy a Cadillac every year, without fault.

There were a lot of similarities between McDonald Brothers and the Wright brothers, apart from being the pioneers in their respective industries. Both pairs remained unmarried. Both of them weren’t hungry for money even when they could have made a lot. Both pairs had the passion for perfection. They only had a single difference: Whilst Wright brothers made the first human flight, McDonald Brothers used to get scared to death with flying! J

Regards,
Abhishek

The Col(a)d War

Well, the “Cold War” between Coca Cola and Pepsi has a long history. 10 years after Coca Cola came into existence, Caleb D. Bradham produced first Pepsi, in 1898. Twice the company was almost on the verge of going bankrupt. But it still survived the competition against Coca Cola.

Till 1963, Pepsi was nowhere near Coca Cola. With a modest $300 Million turnover, Pepsi had a market share of merely 20%. At Coca Cola, Pepsi was referred to as an “Imitator” – another “Also ran”. Coca Cola had kept its formula and their trademark bottles unchanged over the years whereas Pepsi had unsuccessfully tried number of sizes and shapes for their bottles.

But the situation was soon going to change.

In 1963, Donald “Don” Kendall became the president of Pepsi. Under the able leadership of Kendall, the company steadily started making progress. The market share rose to 40%. Late 70s saw the rise of another star for Pepsi – John Sculley*. An architect turned marketer, Sculley was the youngest Vice President in Pepsi. Incidentally, while completing his MBA, Sculley had worked with Coca Cola’s Advertising Agency – McCann Ericsson!

As the Marketing Head of Pepsi, Sculley portrayed Pepsi as the Drink of the Generation Next. While Coca Cola was enjoying the status of the American Symbol, Sculley wanted Pepsi to be the icon of young exuberance. In association with advertising agency BBD & O (Baton, Bargin, Dussenberry and Osborne), Sculley successfully carried out the “Generation Next” campaign. This made Pepsi so much popular in young people that even middle aged and old people started having Pepsi instead of good old Coca Cola. Suddenly, Coca Cola became old fashioned!

The next blow by Pepsi was even subtle. It was the “Blind Test” or “the Pepsi Challenge”. The participants were blindfolded and asked to taste a set of samples having Coca Cola, Pepsi. Appropriate publicity was given to it, with event happening in front of the cameras and audience gathered to see it at the public places. Pepsi would emerge as the obvious choice selected by even the ardent Coke fans! ** John Sculley

This further increased Coke’s paranoia. The final alarm went off for Coca Cola when, in 1978, the Nielsen numbers (Survey results for Soft Drink consumption) came out, clearly showing Pepsi taking over Coca Cola. Pepsi had a 30.8% market share compared to 29.2% for Coke and this difference of 1.6% was of staggering $3 Billion!

Something had to be done about this “Pepsi Challenge.” Coca Cola urgently recalled Bryan Dyson*** from their Brazil Operations to fight against increasing threat of Pepsi.

But before Coke could take on Pepsi, it had to sort out its own domestic issues – the bottlers. Unlike Pepsi who owned all the bottlers, Coke had made a contract with bottlers in 1921, already outdated. The Bottlers’ association was adamant on not renewing the contract. Finally, Coke thought of buying the biggest bottler – the “Crass Bottling”. Coke used every trick of the business to convince the bottlers. Finally, in 1978, at a big convention of 3000 bottlers and Coke officials, the deal was struck and the matter ended.

Coke decided to take on Pepsi on the “Diet” front. Diet Pepsi was convincingly beating Coke’s “Tab” So, Coke decided to launch “Diet Coke” Coke’s management was also a big worry. Due to old age, Robert Woodruff was almost out of the active business. The then Chairman Paul Austin was diseased with Alzheimer’s disease and couldn’t remember his decisions. So they found a managing committee of 6 executives. The 6 headed monster was busy fighting internally. Finally, Woodruff had to intervene and select Robert Guizeta as the chairman.

Guizeta immediately started with Diet Coke Project. Sergio Zymann was made the head of the project named “Project Harvard” Every formula was researched and refined. Blind tests were carried out and plans were made in case participant selects other products. Diet Coke successfully passed the test. Then came the positioning, marketing and branding. Coke made McCann Ericsson hire John Bargin (the second “B” in BBD & O) to handle the Coke account.
Guizeta invited 50 top executives to a meeting and asked them to take head on with Pepsi. The design for the Diet Coke packaging was given to one Schechter who had earlier made popular package design like Budweiser Beer and Camel Cigarettes. He prepared about 150 designs with utmost care for single line, curve, font etc. To mislead the people, Diet Coke was named as Lucy, Shrimp, BPS etc.

Bargin thought of many punch lines and finally settled with “Coke is it” In another convention of about 2500 bottlers and officials, the Atlanta Symphony played the fast paced song launching Diet Coke. Same night, at 9:15 PM, the ad was shown across all the national networks. Soon, Coke launched another advertisement featuring many film stars. It ad apparently cost Coke $2.5 Million! Instead of opting for conventional “Test Marketing” in small test markets, Coke directly launched the “Diet Coke” in big malls and super markets. This was a very bold move to make.

At last, Diet Coke entered the market with all its guns blazing.

Of course, Sculley was not behind to retaliate with launching “Caffeine Free” Pepsi the very next day at New York.

How Coca Cola then came up with “New Coke” in 1985 and how it bombed and resulted in Coke losing big share of the market and moreover faith of its loyal customers, how Coca Cola had to revert their decision are all well known. The “New Coke” disaster now stands as a lesson to learn for all the Marketers.

Even when Coca Cola has now established itself as the undisputed leader in the soft drinks industry, the fight still continues to date…

Regards,
Abhishek

Note:
*: John Sculley left Pepsi in 1983 to join Apple. Legend goes that Steve Jobs had convinced him saying,” Would you like to continue selling sugarated water or would you like to change the world?” Finally, Sculley chose the latter one.

** In a book named “Blink”, author Malcolm Gladwell claims that Pepsi is sweeter than Coke. So when participant tastes just a sip, he/she finds it better than Coke. But if the participant were to consume the whole bottle of Pepsi, he would have found it annoyingly sweet. So even when Pepsi had won the Blind Test, in the daily usage over a longer duration Coke was the preferred choice)

*** Brian G. Dyson, vice chairman and chief operating officer of The Coca-Cola Company, joined the Company in Venezuela in 1959, working in South America, the Caribbean, and Mexico. He held several positions in the Company, including president of Coca-Cola USA, the Company’s U.S. soft drink division; president of Coca-Cola North America; president and CEO of Coca-Cola Enterprises (CCE); and vice chairman of CCE. Dyson retired from the Coca-Cola system in 1994, but remained active as a consultant to the Company. In August of 2001, he came out of retirement and accepted the position of vice chairman and chief operating officer of The Coca-Cola Company.

Coca Cola… Enjoy!

“America se leke Amritsar tak… Coca Cola ki hai ek hi quality... ek hi standard…Toh Piyo sir uthake! Thanda matlab Coca Cola” The ad featuring Aamir Khan flashes on the TV, showing how Coca Cola is associated with every human emotion that makes him feel proud. Well, this has really been the theme around which most of the Coca Cola ads revolve. A telling story goes that in the World War II, the Japanese soldiers mistakenly blew away a drum filled with Coca Cola. The American soldiers got so infuriated with this wrongdoing that they literally slaughtered every Japanese soldier. In fact, General Eisenhower, himself was a Coca Cola fan and used to openly support the idea of Coke being served to soldiers. According to him, Coke would make the soldiers miss their homeland, their country, their dear ones and they would fight more fiercely!

If there is one liquid that is second only to water in consumption, it’s Coca Cola!

In May 1886, a pharmacist named John Pemberton was preparing a motley mixture of many chemicals in his backyard in Atlanta. Basically, he was trying to invent a medicine on “Hangover”. He added Cocaine to the mixture. Cocaine was supposedly having healing properties! Until 1905, the soft drink contained extracts of cocaine as well as the caffeine-rich kola nut.

To get rid of the bitter taste, he added a bit of Lemon Juice, Vanilla etc. It was then that Coca Cola came into existence. Of course, Pemberton was not the first to produce a soft drink (In fact, he himself was marketing it as a tonic and not as a soft drink.) Many other people had tried their hand at making soft drinks like Ginger Beer, Spruce beer etc. But then, no one could achieve the widespread popularity Coca Cola was to achieve in future.

It was Pemberton’s bookkeeper – Frank Robinson who christened the drink as “Coca Cola”. He was also good at calligraphy and designed the Coca Cola’s famous logo that still continues even after a century!

The soft drink was first sold to the public at the soda fountain in Jacob's Pharmacy in Atlanta on May 8, 1886. About nine servings of the soft drink were sold each day. Sales for that first year added up to a total of about $50. The funny thing was that it cost John Pemberton over $70 in expanses, so the first year of sales were a loss!

But, as fate would have it, Pemberton died in 1888, without realizing the potential of what he had left behind. So, in 1988, Asa Candler bought the Coca Cola formula. He got rid of the Cocaine and improved its taste. He called the drink “Delicious and Energizing” It was Candler who made Coca Cola a national success.

Till the turn of the century, Coca Cola was available only at Soda Fountains. The legend goes that two avid Baseball fans, Benjamin Thomas and Joseph Whitehead had to fill in their bottles at the Soda Fountain outlet to carry them for the game. This gave them the idea to sell Coca Cola in bottles. Thomas and Whitehead then bought the exclusive rights to sell bottled Coca Cola. Soon, after Candler died, his family sold the business which was later on bought by Ernest Woodruff – a financier and a successful entrepreneur of many companies like Atlanta Steel.

It was in late 20’s that for the first time, Bottled Coca cola sales eclipsed that of Soda Fountain Coca Cola. But, the company as a whole wasn’t doing good. The share price continued to drop from $40 to $19! In 1923, Ernest Woodruff frantically called in his son – Robert Winship Woodruff to take over the controls of Coca Cola.

Robert W. Woodruff was not a good student back in his school days. He used to pay poor students to get his homework done. Justifying it, he would say,” Give your job to someone who does it better than you could” I guess, he understood Delegation better!

Born in 1889, Robert Woodruff started his career at White Motor Company as a Truck Salesman and soon rose to General Sales Manager. It was then that Ernest Woodruff asked him to run Coca Cola. Woodruff introduced revolutionary merchandise concepts such as the six-bottle carton, which made it easier for consumers to take Coke home, and the metal, open-top cooler, which made it possible for Coca Cola to be served ice cold in retail outlets.

In the meantime, a lot of Soft Drinks companies sharing the same name as Cola had mushroomed. There were Rola Cola, Celery Cola, Coke – a – Cola and so many of them. So in 1926 and 27, Coca Cola sued them all and won exclusive rights to use the name Cola. The number of cases filed by Coca Cola against these companies was 7000!

Robert Woodruff
While Candler had introduced Americans to Coke, Woodruff would spend his 60 years as a company leader introducing it to the world. Advertising was the key and Woodruff saw opportunities everywhere. In 1926, he established a foreign department, which in 1930 became the Coca Cola Export Corporation. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy and South Africa. Woodruff captured these foreign markets with innovative campaigns, sending Coca-Cola with the U.S.

In World War II, he sold Coca Cola to the soldiers at a minimal rate of 5 Cents. This further popularized Coke in US and rest of the world. Even, Hitler used to call US as “The nation of Coca Cola”! Woodruff set up war time bottling plants in most of the countries US soldiers fought. They were promptly converted into civilian plants once the war was over. WW II clearly established Coca Cola as a true American patriot company – a symbol of American Culture.

Woodruff also introduced innovation in packaging in the post war era. In 1956, canned Coke was introduced. Brands like Sprite, Fanta, TAB, Freska, and Diet Coke were added to the Coke product line.

Robert W. Woodruff was later on succeeded by Robert Goizueta.

Today, the company has more than 50,000 employees and the turnover is $ 21.962 Billion in 2004. It’s the biggest soft drink maker in the world. Even after almost 100 years, the formula for Coca Cola is still a secret, securely guarded in an Atlanta Bank. Very few from the company know about it!


Regards,
Abhishek
P.S.:
The “Cold war” was soon going to hit Coca Cola… and the enemy was not Russia!