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