Ever since India-born Rakesh Kapoor took over as CEO of the UK-headquartered 9.5-billion-pound Reckitt Benckiser Plc in August 2011, the company - behind brands such as Dettol, Disprin and Cherry Blossom - has been restructuring itself to tap more aggressively into opportunities in emerging markets. Kapoor recently spent 10 days in Delhi during which he spoke with Shamni Pande. Edited excerpts:
Q: How do you see the growth agenda of your company?
A: Till recently, we used to define our world as made up of three halves. The world of Reckitt Benckiser (RB) was Europe, North America and the developing markets. When I took over as the CEO, we wanted to make sure our next decade is as successful as our previous one has been. I was keen to lay the foundation for the next decade to outperform.
So we asked ourselves some basic questions: What was our purpose and what did we stand for? What should be the inspiration that not only makes our people say 'that's why we come to work for RB', but also becomes an inspiration for setting strategy? At that point in time we said, we want to be a company which stands for healthier lives and happier homes. It is very simple, yet a very powerful uniting purpose and vision for our company… Health and hygiene are very important subjects for everyone across the world. We know that good hygiene practices are the foundation for good health. We know that healthier homes are happier homes.
So we said the lens we will apply to manage our business will be health, hygiene and home and that's what we did when we clustered our power brands around these objectives and said these are brands which are going to get the highest priority for investment and growth. We also, at this point, decided to take cognizance of the dramatically changed market place.
Apart from our portfolio of power brands, we also devised the idea of power markets. For this we used the yardstick of places where absolute growth will be the highest, not percentage growth only. Where the absolute growth potential will be the highest and where we have the capabilities to succeed.
We named 16 power markets around the world where we wanted to deploy significant additional resources. So the focus was Health, Household & Hygiene (HHH) for power brands, and power markets for extra focus because it creates absolute growth rates and opportunities for growth are higher.
The next question was: what sort of organisation do we need to succeed in the next decade? To my mind, most organizations around the world are shaped for the last decade...In our case we were inspired by the one thing that matters most to us, our consumers.
We needed to shape our business and organisation structure around consumers. We identified six major consumer clusters in emerging markets, as the idea of just one emerging market was too superficial. We called it BRICAM - Brazil, Russia, India, Africa and Middle East. Then there was Europe and North America. Traditionally, these have been treated as two different markets because there is something called the big Atlantic Ocean between them, but I don't think companies of tomorrow should organise themselves using geographic boundaries or oceans. They should organise themselves according to those they are trying to serve. In our case, it is consumers. And we felt that, there was more in common between European and North American consumers than was not common. There is more in common between the UK and North American consumers than, I could argue, between north Indian and south Indian consumers. So, we put Europe and North America together. Further, Russia, the Middle East, the Arab cluster and Africa became the second area called RUMEA and the third area became LAPAC - Latin America, Asia, Asia Pacific. So we actually, with the stroke of a pen, managed to create not just three different consumer-based organisational structures, but also substantially change the organisation focus from developed markets to emerging markets.
Q:So what has changed? How is the organisation working differently today?
A: We have put the main offices of these areas in their market, so they are no longer based at headquarters. So the head of LAPAC, for instance, sits in Singapore, the head of RUMEA in Dubai and the head of ENA (Europe and North America) in Amsterdam. They are a lot closer to their consumers. I am big believer in the game of snakes and ladders and in every organisation you have this game. So the more the number of snakes, the more the chances you have of getting bitten and coming down to the bottom.
Earlier, for instance, you had two different area heads for Europe and North America and if you wanted to launch a new brand, you would have to go to both these areas and convince them why it was the right thing to do. One often had to test the idea twice over as one would say, you tested it in Europe and not in North America, the latter are different …and you have all these games taking place in the organisation. I think when they have more in common than not in common, by cutting down these extra layers in decision making touch points, you speed up the organisation.
So, tangibly, I would say those are the benefits I am seeing. I am also seeing benefits where by being closer to market we are talking much more to consumers, and some of our innovations at the pipeline stage have much more emerging market feel to them.
Q: You have over 300 brands, is your portfolio getting unwieldy?
A: Yes, but we have identified 19 power brands which make up more than 70 per cent of our business. Underneath these are our local heroes. For instance, Cherry Blossom is a great brand in India, but it is not a global or a power brand, but a local hero. We want to nurture it so we can serve the consumer needs through some of these brands.
Let's face it, at a single-country level, we do not have 19 power brands which is a great opportunity. If you look at it, our brands are in more than 200 countries around the world, but the best penetrated brand, if you want, is only in 75-odd countries. So, on average our brands would be in 45 to 50 countries. Even the UK and the US do not have the full portfolio of 19 power brands. So, I see a very big opportunity for 19 brands and do not consider it an unwieldy portfolio.
Q: What other measures were taken since you took charge?
A: (Laughs) Let me just say that in the last 12 months we have gone through more change than we have in the last five years. We have also announced a series of programmes that will enable the company to compete effectively over the next decade. In India, for instance, I was talking to my people and we are discussing how to upgrade our system in distribution, logistics, warehousing. Other than basic things like that... we are also talking of upgrading our system in field sales and making sure we deploy the most modern technology and information to become a better business. So there is a substantial upgrade taking place in our infrastructure and system in markets like India, where we are deploying SAP which is going to be the new ERP system for RB on a global basis.
Q: How would you describe your leadership style?
A: In the past, the CEO was seen as the God of the company. He was the one who knew everything, decided everything... it was a command-and-control kind of leadership. That model is clearly over. The model for the future involves leaders who have vision and a clear sense of purpose and know the kind of values they want to see in their organisations. The CEO has to embody those values and live those values. People come to work for money, but they also come to feel fulfilled, to feel they have to achieve a higher purpose. It is the CEO's job to provide the organisation with that higher purpose.
When you are CEO, you don't have anything called individual success...in a way you are more humble: Rakesh Kapoor
It is a choppy world we live in now and it is a CEOs job to have an eye on the short-term, without losing sight on the medium and the long-term. Very often, the urgency of the short-term overtakes the important bits that are part of medium and long-term objectives. The CEO has to strike an optimal balance. So if you look at my leadership, I do believe in value-led leadership, I believe that strategy and vision are very important to energise and inspire the organisation. I also believe in having a clear line of sight of the short, medium and long term. I listen a lot more than, I believe, than average CEOs would. I am very external, I spend time with people. Not making big, global presentations, but meeting customers and shareholders to understand them. Q: So how are you changing the company?A:
CEOs become role models. So when you are listening to people, it means you are not telling them and becoming the 'Mr. Know-all'. This changes the way everyone embodies that leadership behaviour. It is important to be a role-model and in our company we also have had a series of leadership charters for the kind of leadership we would like to see in the company and we are all very aligned on this. Q: What has changed for you since you came to the No.1 position? A:
It is the final position where your personal ego gets submerged in the organisation's progress. I don't think I dissociate myself from my own, personal achievements versus what the company achievements are. To be simplistic, if I was head of supply or marketing, I would look at how my market share is doing, how my brand doing, that is how I would measure my success. But when you are the CEO of the company, you don't have anything called individual success, there is only success of the company and that's the first change you need to make. Your ego has to go, in a way you become more humble. As a CEO as there is nothing called individual success. That is one major mindset change CEOs must go through and I have certainly gone through it.Q: Is there a sense of loneliness at times? You have seen the data, heard the call of your lieutenants, but it is a final call you need to take?A:
Yes, there is. The world is not in black and white these days - if it were so then someone down the line could make those decisions. Most decisions that CEOs take are actually not black and white. This is the interesting part of our world today, with so much access to technology, information, analytics, things have become black and white in many cases, but it is those grey areas that come to the CEO for decision-making, the rest have been taken in any case.Q: Any examples?A:
Well, just now the buying of [dietary supplements manufacturer] Schiff Nutrition. It was an open acquisition, the deal was done and now the question was should we go and buy Schiff? The price to pay...these are not black and white decisions. The CEO has to take a final stand, no matter how much good advice he gets. I had great advice, but eventually I have to make that call, of course, with the board's support and all the disclaimers. You live by those decisions.Q: Lots of CEOs ask their wives before taking the final call, do you?
Ask their wives? Well, I am going to tell you a secret you should not publish because my wife will kill me. I did not tell my wife about my appointment for many weeks. Actually I was scared she might go and tell her mother who, in turn might tell her neighbour and it might become public information. I am gifted only in that respect - I can keep my business away from my personal life. Not gifted, I am blessed. My wife plays a huge role in my life, my family life, but not when it comes to work. I am worried about her sleep. I sleep well, but not everyone can.Q: So the role of the manager is definitely more complex today?A:
The role of the manger is easier in some ways, but also complex in some other ways. We did not have access to enough information, technology, data earlier... these tools and technologies enable the manager to have so much more information at his command to actually do great stuff.
It has become tougher because, with so much of changing technology and platforms, everything has also become more unpredictable. You see transformation in business models - your business could become irrelevant in the next 12 months, if you are not up to scratch. Q: Are you particularly tough on India? A:
Yes. But other markets would say the same as well (laughs). At RB being unreasonable is part of your success. Being reasonable is not a good idea to be successful at RB.Q: It is good for CEOs to be unreasonable?A:
Yes, it is good quality to have. The problem is when you ask people why this did not happen, they will give you five reasons... Many times you should not get into too much detail of why things did not happen, as you would end up agreeing with why they did not happen. So I am sometimes not very interested in the why. I am only interested in the how.Q: There was a lot of attention when you took charge. But how do you explain the 'surprise' and the market's negative reaction?
It is very easy to understand that reaction, actually. In fact, we thought the reaction would be even more extreme internally than it was...I don't think the previous CEOs retirement plan was well-known and, therefore, the market was caught by surprise. Also, I was not very well-known to our shareholders or to the media at that time. Having said that, the internal surprise was a lot less, I am known, having been around for 25 years and I was prepared for the job even if the external market was not.
But a year has gone past and you can see already that the stock prices have been the highest they have ever been. I have met a number of investors many times and I do believe they feel assured that the current CEO has done the right thing in terms of the new direction, strategy, and what we are trying to achieve.
In fact, the market was assured that the organisation has internal readiness and hence the reaction was a lot less intense than we assumed it would be. And in the last 10 months our top 10 shareholders have bought more shares, with the exception of one, than they had 12 months ago.Q: How efficient was the Paras deal [RB bought Paras Pharmaceuticals in December 2010]? You had to offload many brands to Marico? Going forward, what is your plan for Schiff Nutrition buyout?
We got our hands on Paras only in April 2011. In Schiff's case, the transaction is not yet complete. We have had ownership of Paras only in the last 18 months. It has performed very well, I am happy with the way we have expanded the distribution of these brands... But the basic idea behind Paras is bigger than managing these brands better than previous ownership was doing. The bigger idea is to create a substantial health-care platform in India with health being a very significant dimension of our purpose and strategy. It is not okay to operate in the platform and not have some of the categories that operate therein. Paras has given us that platform, it has allowed us entry into analgesics with Moov, it allowed us entry into cold and flu with D-Cold...
With Schiff, the purpose was not to create a healthcare platform in the US, which we already have. The purpose was to enter a vast and fast-growing category called VMS - vitamins, minerals and supplements. It is a $30-billion category around the world. I am very excited about the VMS category and the potential for growth for RB in the segment both in developed and developing markets. Q: Any potential of taking any of the Paras brands overseas?A:
Moov is already present in the Middle East and Africa. We will always look at these things, but it is not the primary purpose of buying Paras. Q: What would be one of top products you are likely to bring here?A:
In the last 12 months we have launched Gaviscon and Mucinex, which are market leader in US. Both were in test stage and results of Gaviscon are encouraging and we plan to roll it out nationally now. Q: Are you getting more aggressive in India, now that there is competition from the likes of Hindustan Unilever in some of the niche categories you led in?A:
I think our company has always been very aggressive… I mean it in a positive way. Our company is very entrepreneurial. It has this edginess where it is able to take risks. Of course, these are considered risks that allow you to win big and fail small.
About being in niche category, well, it offers us a good opportunity to grow for a very long time. The other thing I would like to say is that RB alone will not solve all the health and hygiene issues of the world, so the more people get engaged with this matter, the better it is for everyone in the world. Let us face it, health issues are not only about happiness, they are also linked to economic prosperity. So the more people get into it, the better for everyone.
Having said that, I don't think we should ignore the fact that Dettol is in a very different stratosphere... It leads across the world, and that is because of the kind of programmes we run. I don't want to disparage our competition, it is fantastic. But I don't think they match us on the kind of massive touch-points we have. We have programmes for new mums, schools, we engage key opinion leaders, the Indian Medical Association... We run it not only in India, but across the world. At last count, just for Dettol, we had the new mums' programme in more than 35 countries around the world. So the scale, scope and reach is of a different order of magnitude. Yet we are not the only ones who are responsible and will be in this area.Q: RB has received some negative publicity in the case of overcharging in the UK. There was also the price fixing allegation in Germany for dishwashing detergent. Also with the CFO leaving the company, there was the talk of the 'marmite' culture of the company. How do you deal look at it?A:
First of all, let us disassociate two issues, as they are different. The first one is about cases filed against the company many-many years ago. It only got settled over a period of time. We are not the only company that has been embroiled in competition cases, like the one you mentioned of detergents, there were many other similar companies, which I don't want to name. We have fewer cases than other peer companies, although I do not condone any of those cases. But they happened at a time when companies did not have the same strict governance processes, training and awareness programmes around what constitutes competitive and uncompetitive behaviour as they do now. We take these things very seriously and we have now in the company a very strong culture and training around behaviours.
But do I like it? I don't. We are ensuring now that every employee, every year, goes through the training, even if he has been trained before,. And that includes me. If they don't clear those tests, they have to restart.
The CFO case is very different and the 'marmite culture' actually points to the uniqueness of RB. We are not ashamed of the culture, we are proud of it. I think, every company must find its own unique culture to succeed.
In our case, we go through painstaking processes to ensure that the people we get in our company are those who will succeed in the medium and long term with the company. And the only way we can guarantee that is if they have the same cultural values that we want to see in the company. But that does not mean we don't make mistakes.
In this CFO's case, she was appointed 18 months ago, she did well during the whole leadership transition process from the previous CEO to this one. But sometimes it is difficult for people to adjust to a certain culture, especially if they have worked elsewhere for a long time. Both of us came to the conclusion that although we were happy with each other, RB is not the place where the kind of CFO she is would thrive and we came to the common conclusion...it was a mutual decision. And because of the person I am and also the company we are, I chose not to make some banal statement and said it as it was. We should not be penalised for telling the truth. You should expect me to be authentic, transparent, that's how leadership should work in the next decade. Those days of saying one thing and meaning another are gone. I can't tell people to have integrity if I am not willing to show up when it is time to say something.