'David can attack Goliath'-how relevant do you think is this in the case of Nirma?

David attacked Goliath and emerged as a winner vanquishing his much stronger opponent. However, in the
case of Nirma versus Hindustan Lever it is a continuing warfare between the two. Goliath is yet to be
vanquished and is making it difficult for David to win. An allegory that seems more relevant to me in the
Nirma-HLL case is a fight between two lions vying for hunting space with each jealously guarding its own
turf.

Going back to the heady days of 1990s when Nirma was making rapid forays into the markets and
challenging HLL, one can recall the euphoria that Nirma generated not only in the markets and industry, but
also in the academic circles. Business cases were developed illustrating how a homegrown, entrepreneurial
venture could take up the cudgel against a well-established multinational corporation. These ideas were also
picked up by MNC-haters around the world, and Nirma soon became an icon of the small, nimble local entity
fighting valiantly against the big, bad MNC wolves.

Behind the initial success of Nirma, in my opinion, was the down-to-earth approach of its founder,
Karsanbhai Patel. How Patel could translate his keen understanding of the production process and marketing
of detergents on an industrial scale, despite his modest background, is now a part of the corporate folklore
in India. That this happened in Gujarat-the home of entrepreneurs-is nothing surprising. Gujarat showed the
way earlier in the white revolution that took place in India.

From a strategic point of view, everything that could be done by Nirma to create a low-cost product was in
fact done: A high level of backward integration leading to captive supply sources, in-house manufacturing
and packaging design, direct distribution channels, personal and trust-based relationship with distributors,
and sustained, enduring, and lowkey promotion. In retrospection, one could discern an integrated approach
in the panorama of activities that Nirma performed. Such a strategic approach yielded handsome results.
As it is said, within the success lies the seed of failure and vice versa. I sometimes feel that too much of a
good thing may turn out to be bad: Nirma is facing its present troubles owing to its initial successes.

Drucker talked about implicit and explicit theories that organizations develop for their business wherein they
incorporate assumptions about the environment, specifically the markets, customers, and important
technologies they deal with; the mission and purpose of business; and the core competencies required to
fulfill the mission.

Karsanbhai's implicit and explicit theories related to Nirma served it well until the initial assumptions
changed as they inevitably had to. I cannot say that Nirma did nothing to respond to those changing
assumptions; it did a lot. Nevertheless, it seems these are now proving to be inadequate.

Take the case of its legendary lowcost leadership strategies. I think they outlived their utility long back to
the type of business environment that is emerging. Yet Nirma continued to insist on replicating its proven
formula for success. The marketing environment was changing yet Nirma did not react fully to it and did not
change its assumptions. Is the customer, who relished buying Nirma's product in the 1990s the same as
today's customer? I do not think so. Therefore, a mismatch has occurred in what Nirma offers and what the
customer really wants. Obviously, the customer is now demanding enough to expect not only low price but
better quality too - an area where Nirma, owing to its misdirected attitude to cost cutting, is not able to
satisfy.

What according to you are the strategies Nirma should adopt to retain its customers' loyalty and
regain its No.2 position in the market?

Conventional wisdom could say that Nirma can embark on a series of short-term measures to tinker with its
strategy and manage to keep afloat. However, that is the worst thing that can happen, though I feel it might
also be the most likely thing to happen since that seems to be the obvious solution. In my opinion, ideally
what is required is a fundamental shift in its thinking, whereby it revises its assumptions that makes it
rethink its implicit and explicit theories about its business.

Going back to the heady days of 1990s when Nirma was making rapid forays into the markets and
challenging HLL, one can recall the euphoria that Nirma generated not only in the markets and industry, but
also in the academic circles
Take for instance the case of customer loyalty. Just like employee loyalty, customer loyalty is a chimera. I
think any company trying to gain or regain customer loyalty is living in a fool's paradise. The Indian market-
as is the case with Indian society - is fast becoming a transactional market. Customers do not buy a product
because it is from company X or Y. They buy it, since it satisfies their needs and wants. So who is Nirma's
customer? Is she/he the same person who was the customer earlier in the 1990s? Or is she/he a different
person? If yes, then how should the realignment in the strategy take place to make her continue buying
Nirma's product? That is the route to rethinking about the assumptions that govern business. That is the
type of rethinking that I am proposing for Nirma.

Any other thoughts/views you would like to share with our readers?

Corporate affairs are too complex to capture by means of a single or a few strategies, or some programs
and plans. I will just take up a few issues and write out my thoughts about Nirma.

First issue that I would like to write on is the size of the company. Nirma has undoubtedly grown into a big
corporation, and has ventured into so many different areas by means of a variety of strategies like
integration and diversification. With size, arise the challenges of organization and control. Nirma needs to
focus on these challenges and see how it can retain some of its nimbleness and yet reap the advantages of
size, such as the scale economies.

Secondly, Nirma has reached a stage in its evolution, where it seriously needs to rethink its vision and
mission. Here, I do not mean that it should rewrite its mission statement in more beautiful words. I mean
that it should think seriously, what has made it reach the stage where it is. Nirma focused on the customer
whose basic requirement was an acceptable quality product available at an affordable price. This customer
still demands that. But, a slow change has been taking place all these years especially in post-1991 period
in India. The indices capture much of that change, yet some escape attention. The customer, in the
segments that Nirma served, no longer wants just a cheap product. She/he demands quality too, and is
willing to pay a bit higher for that. That means there is a requirement for the best value product: A product
that offers quality that would be an 'aha' experience at that price.

Nirma needs to resolve this dilemma: Does it want to serve its original customer segment that still wants a
cheap product and may be even ready to compromise on quality; or does it want to move up serving the
value-conscious customer (that was its customer in the 1990s)? If I were asked which direction Nirma
should go in resolving its dilemma, I would unreservedly say it should remain in the direction of its original
customer segment. Why? Because, the value-conscious customer-that Nirma struggles to serve, and that it
can't do as well as its rivals can do-has a choice. Leaving Nirma aside, she/he can move to Hindustan Lever
or Proctor & Gamble or Wipro. That is what has been happening. In the segments that Nirma has moved up,
owing to the initial momentum of following its customer, it has too much competition to handle and is clearly
not up to the task.

By bowing down to serve its original customer, Nirma would be creating a space for itself, where many will
not be willing to come. This customer is the poor customer who needs to eke out a living and buy the
necessities at a low price to make both ends meet. She/he lives in the vast expanses of India where life is a
daily experience of struggle to somehow keep body and soul together. She/he is a part of a 600+ million
customers market. To do this means that a company like Nirma needs to leverage on two things: Scale
economies and low-cost operations. Nirma has accumulated enough learning to undertake low-cost
operations. What it needs is to build scale economies with a sharp focus on a limited range of
complementary products.

If I would frame a vision for Nirma, it would go something like this: "A big company dedicated to serving
continually the daily needs of the small woman and man."

What I am proposing in not an original idea. C K Prahalad has been recently writing about the fortune that
lies at the bottom of the pyramid. The pyramid is the distribution of income among the people of the world.
Very few people are at the top echelons of the pyramid, while a disproportionately large number lie at the
bottom layers. Prahalad's prescriptions to focus on the poor as a potential market are mainly directed at the
MNCs. What I propose is that a local Indian company can do that as well, maybe even better.