Customer-oriented companies have better chance to succeed

Customer-oriented companies have better chance to succeed

Jacky Mussry
Contributor
Jakarta

What impression do our state-owned companies make on the
public at large? The prevailing perception is one of endless
bureaucracy; of slow-moving, service providers that are far from
satisfactory.

Those who often deal with state-owned companies know which fit
this perception and which are contrary to it. A number of these
companies have made improvements; some on a small scale, others
implementing an overall corporate transformation. Such changes
were made obvious after the country was hit by the economic
crisis several years ago.

During the New Order era, several state-owned companies
attempted to carry out a corporate transformation, but partly due
to the highly centralized government their efforts were not much
of a success. Given that the economic situation was relatively
calm at that time, their CEOs were not so concerned with creating
solid strategies for the huge corporations they ran.

The companies also had to carry a kind of "social burden" for
the government. Profitability was not a high priority as most of
them did not have to worry whether their customers were satisfied
with the kind of services they provided. Years ago, the state-
owned electric company Perusahaan Listrik Negara (PLN), for
example, simply cut off electric supplies without prior notice.

This was a disservice to their customers and caused heavy
losses, especially to the industrial sector. As they were the
only providers of electric power, the impression was that the
public had no choice but to stick with them. Often state-owned
companies in the country did not face challenges from
competitors, because none existed or were allowed to operate in a
similar line of business. For years, until recently, theirs was a
captive market.

However, in the past few years, the business landscape here
has drastically changed. The type of "protection" that these
businesses previously enjoyed has gradually been reduced. Capable
players are given an equal opportunity to enter their field. The
ensuing competition has naturally created a higher level of
professionalism and efficiency within the state-owned
enterprises. Thus, modern company management has become the order
of the day -- to make profits and to survive.

For the time being, state-owned companies assigned to handle
infrastructure-related business, such as water and electric
supply, or management of airports and seaports, still enjoy some
privileges. However, in other business sectors, like
telecommunications, insurance, banking, hospitals, airlines,
pharmaceuticals and several others, the stiff competition, from
domestic as well as multinational companies, keeps state
companies on their toes.

One of the competitive state-owned companies here is Garuda
Indonesia. As the country's flagship carrier, in the beginning it
enjoyed an "unfair advantage", as it was the only commercial
airline allowed to use jet planes. The other airline at the time,
Merpati Nusantara Airlines, without jet planes in their fleet,
was limited to marginal routes. It had another "mission" to carry
out: Opening up and serving pioneering routes. Up to the 1980s,
facing no intense competition at home, Garuda enjoyed a thriving
business. Huge numbers of passengers had no other alternative
than to take its average and frequently not-on-time flights.

However, deregulations started to be implemented and the now
defunct SempatiAir entered the picture. Plying the "fat" routes
with its jet planes, SempatiAir posed a real challenge to Garuda.
Soon afterward, the deregulation made it possible for new players
to enter the airline business. For some time now, excellent
service, on-time flights, a high level of safety and other
customer-satisfaction producing elements have been instigated.
For Garuda, this means an active positive response to its
competitors, who act like "sparring partners" and keep Garuda
alert. For everyone in the airline business, this is no longer a
period of complacency.

PT Telkom, another state-owned company that specializes in
telecommunications, is another exemplary giant that has taken
major strides of improvement.

To be more prepared for the ever increasing competition,
state-owned companies have to go through the following steps.

First, is to review its vision and mission and check whether
its is relevant for at least the next five years. Second, is to
analyze the implications of new technology, government
regulations, political, socio-cultural and economic developments
that might impact on their line of business. Third, is to
identify the existing and potential competitors and what they
offer, followed by the deep research of customers and their
expectations.

Fourth, is evaluating core competency and finding out whether
further improvements can be made here -- instead of getting
trapped in a kind of core rigidity. Fifth, the company sets its
strategic intent, that contains specific goals and objectives.

Step number six comprises of the development of a relevant
strategy along with its detailed action plan. The last is
naturally the implementation of all the previous steps -- as well
as strict monitoring and evaluation -- to provide room for quick
adjustments if required.

All this may sound easy. However, a new mind-set or major
revamping may require not only a new set of visions and missions,
but a totally new or restructured organization. This is just as
Alfred Chandler -- the American business historian and emeritus
of the Harvard Business School -- said decades ago: Structure
follows strategy. An organization evidently also needs a new soul
-- a change in corporate culture, that is.

The elements of state-owned companies' corporate culture that
need immediate attention are those concerning their consumers.
Customer-oriented thinking and actions plus a sense of urgency at
all levels of management, staff and employees, are necessary for
the creation of new values. The spirit of entrepreneurship, and
not that of bureaucracy, is called for here. Resistance may occur
at certain stages or levels. Thus, a change of management can be
the only option. Probably, the sort of leadership emanated by
Robby Djohan, the former CEO of Bank Mandiri, is a good example.

Only state-owned companies that possess -- next to
theoretically great-sounding visions and missions --
implementable strategies, a solid organization led by a strong
CEO, and, most importantly, a customer-oriented corporate culture
can be assured of success in today's highly competitive business
environment. Such companies even become lucrative investments
when they go public. Bank BRI is one recent example. Its solid
fundamentals, strong focus on microfinancing and commendable core
competency resulted in oversubscription of the shares offered to
the public. To ultimately satisfy customers, an inarguable main
direction -- in any kind of business, including state-owned
corporations -- is the only answer. Opting for this solution may
eventually help the Ministry of State-owned Enterprises in
reaching its eight trillion rupiah target for its privatization
program. -- The writer is partner and head of consulting
division at MarkPlus&Co