Business Today

TK Kurien on Wipro's turnaround journey

Wipro's hard-driving CEO T.K. Kurien, who has revived the company's fortunes, speaks to Goutam Das and Josey Puliyenthuruthel.

twitter-logoGoutam Dasand twitter-logoJosey Puliyenthuruthel | February 7, 2012 | Updated 17:43 IST

Wipro's hard-driving CEO T.K. Kurien, who has revived the company's fortunes, speaks to Goutam Das and Josey Puliyenthuruthel.

Your views on moving people closer to the customer.
We should move people into locations which are closer to the customer. When you move a person closer to the customer, there is a subtle change that happens to his or her psyche. The person suddenly starts thinking of the customer more rather than the constituency that he or she has back in India. By sitting in India, you end up doing more and more delivery issues, and other back end stuff on a day-to-day basis.

But the power resides here.
It does. But I think it is moving. We are seeing a very subtle shift of power moving. We have told everybody in the company that if you want to grow, you have to do a client facing role. Otherwise, long-term, it is not going to work for you.

Is it why more people from functional roles are moving into business roles?
You will see more of that happening. I always believe that management is a journey. It is like building up muscles. You can eat all the protein capsules and get muscles short-term but in the long-term you have to work at it. For us, building the muscle in the company is very very critical. That will be a journey - you can't do it in short bursts.

We have done a couple of things. We have set up value systems. The values are things like speed (how quickly you are able to respond back to a customer, how quickly you are able to solve problems), accountability, personal energy, ability to energise teams; ability to get ahead of everybody else; competitiveness. We have very clearly articulated to people that if you don't hit values, you will not get promoted. You will be paid for performance. 

It is interesting to see the change that has happened. Whenever we do a review, and there is leadership out there presenting, I have a copy of their leadership qualities with me, their strengths and weaknesses. I tell them when you are presenting, I will really judge you on all these. Some people say some of these are actually correct and it is a longer-term story for me to change. That is a good answer. Some of them say they would right now in the presentation - that is a wrong answer.

You can quickly notice who the leaders are and who are not. People who really know what the issue is and are willing to change are the guys you want long-term in the company. Guys who want to get by with one presentation are probably people you don't want long-term. The long-term players are pulled out and made sure that they get responsibilities and roles which are going to be tough. It doesn't matter if they fail. What they do to succeed is more important than the failure itself. It is the path to success that is critical rather than the end point. That is what we are trying to drive as a culture.

It has been an interesting journey over the past couple of months getting them to think differently. 

Coming back to your commentary about being in front of the customer, was it the single biggest thing that was lacking in Wipro one year back?
I don't want to comment. I have stayed out of the past. When a manager gets a job, you get a deck of cards. You can crib about the cards you have or you can be happy. The reality is the deck of cards you have is what you play with. How you change that long-term is your impact on the marketplace. Right now, the endeavour is to get far deeper in front of the customer, start engaging with the customer.

Give me a couple of examples on how that is working on the ground.
In the past six months, one of the biggest change that has happened is that people are saying they will buy more from Wipro. It is not because we have done something dramatically different over the past couple of months. What we have done is that in terms of delivery, we have made sure we are absolutely consistent. Because if you don't deliver, you lose the right to talk. You earn the right by delivering to the customer everyday. We are in the services business.

Why is that different from the past?
It is not different from the past except that the emphasis on delivery is far far more. If you mess up on delivery, it is a sin not forgiven. Importantly, if somebody does mess up, it is the job of the leadership to go in front of the customer. You can't send somebody lower down and say that guy messed up so he will go in front of the customer. The guy who runs the business unit or the service line has to be in front of the customer explaining. That's the rule we have set up here. Once you have a senior person in front of the customer to say that he messed up and will solve it, the onus is on him to get the organisational might into solving the problem. Otherwise, you end up pushing it lower and lower down to a guy who cannot force the entire breadth of the organisation to solve a problem.

When you say 'mess up', what are the red flags which get the entire organisation or your office behind it?
Very simple. If we have a customer escalation of any sorts…I talk to customers very frequently. I get a sense of a couple of things. One, the biggest problem that you have in a position like mine is that you never hear the bad news. You only hear the good news. Nobody wants to tell you the bad news. I have told all my direct reports, shit happens everyday whether you like it or not. So first thing in the morning, tell me the bad news. Because it is good to know about it. And the minute you know about the bad news, you can do something about it. That is one part; you still don't get everything. The minute you talk to customers, they tell you stuff that is partly what they want to tell and partly what is left unsaid.

In our business, what is left unsaid is far more important than what is (left) said. You have to track what is left unsaid. A customer says, you guys are winning a lot of my regular business but you are not winning my transformational business. That is a red flag for me. It means that the kind of people we have in front of the customer are either not domain experts, who are able to understand the customer issue, relate to that and create a technical solution behind it, or they are not listening. Or, it could be a combination of both. When I get this kind of response, I usually go and talk to the guy who is running the account. Sometimes, you find completely different points of view.

Second, if you commit on something, you have to deliver on it. If you promise and do not deliver, it is a cardinal sin. Otherwise, don't commit. I am okay with not committing. The whole concept of accountability is something we are trying to drive across the organisation. In a software business, it is a little funny. The moment you say accountability, it is a team. If you are not careful about where you pin accountability, it is very easy to pass the buck. The team is supposed to solve the customer problem. If you fail, your entire team is accountable. If you succeed, the entire team succeeds. That is the culture we are trying for.

So the axe never falls on one account management guy?
Generally, there is a view that after I have come, the axe has been falling on a bunch of people (laughs). Not necessarily true.

But hasn't that perception worked for Wipro - the fact that you are a ruthless head honcho? Employees are no longer complacent.
I don't think you can drive an organisation by fear. I think accountability is a very key trait for everyone. And accountability means standing up and taking responsibility for your actions. It doesn't mean getting fired. People who don't perform long-term, will leave. I don't have to fire them.

Has your approach got something to do with your GE background? Vivek Paul was from GE as well. Is your working style any different from Paul?
It is a difficult question to answer. Our personalities are different. I am a very hands-on kind of an individual; love to get into details. That is probably part of my training. When you are an accountant by training, you can't afford to be sitting at 30,000 feet. You got to be in the details. That is one trait that I have. I look at numbers every second. Everything has to have a dashboard. Because of that I am able to get a sense of how the business is running. It is not P&L. What you do on the ground reflects in the P&L statement. You have to look at lead indicators. They are a very good way of measuring how you are doing.

What do you mean by lead indicators?
A good example is a CRM that we had. People fill up data such as pipeline, activities they are doing within 24 hours of a meeting they have had, etc., in the CRM on a regular basis. When I started, the CRM adherence was running at nine per cent. Five months later, we are running at 100 per cent. (Laughs) Not a single guy has defaulted. This was for the sales guys.

How many sales people are there in the organisation?
Pure sales would be about 900 people. We had 960 last year. We shrank sales initially. We went through a performance review in February and we separated close to 260 people who were not performing. We invested in domain and consulting. Therefore, the total number of people in front of the customer has increased. The total number of people that we had in front of the customer was running at 1,200. It has gone up to 1,800.

What do the domain guys do? They go along on sales calls?
No. Our business is built on the premise of sense and responding. You have to sense what the customer wants and you have to respond to the customer with a set of service offerings and solutions. For a person to sense, he needs to understand the domain issue. Let me give you an example. Look at a transportation depot where you have a warehouse and trucks moving out every second. The most important part is the printer that sits in the front of the dispatch desk because that's where your bill is going to be printed. You can say that in the back end you have 99.9 per cent uptime but if the printer fails, all the trucks are going to back up. Till you have a person who has worked in a warehouse environment, he will never be able to understand this. That's why we need domain experts to really figure out in that particular industry, what are the issues that can come up, what are the changes that you can make, what are the best practices in the area. It is the job of these guys along with the technical guys to create a business solution.

A business solution will have a whole bunch of components in the back. Our delivery model is going to be highly standardised in the back; because in the back end you can't have too much of differentiation. Because the minute you have too much of differentiation in the back end, you lose on industrial scale capability. Replicability goes through the roof. The job of the domain guy and the technical solutions guy is to figure out what is the customer issue and then go back to figure out what service widgets you can put together to create a solution. That is how the business is evolving. So while we are cutting back on the number of sales guys, we are investing far more in consulting and domain guys. The domain guys get paid on sales.

Are you investing more in sales and marketing than before?
Significantly. We have to invest much more. I think we are under investing in sales and marketing. If you look at the past eight years, we have invested between two per cent and 2.5 per cent in sales and marketing. At least two per cent more - 4.5 per cent.

Gross profit gives you a sense of the quality of business. What happens below the line is a structural cost you can either adjust or pull back. You can manage it. While we over invest in the back end in terms of structural cost, specially on sales and marketing, we have to do something about the quality of revenue. It has to change to give us a higher mix of higher value added revenue. That is what we will drive towards. Volume is important to keep you relevant. But at the end of the day, in front of the customer, the impact is value.

There are two parts of the revenue that you get. You can play on the cost side and revenue side of the customer. If you are on the cost side, long-term, you will be in a situation where the customer reduces costs every year. Your piece of the pie will reduce year on year. So you have to play on the revenue side. Now, you have to call outside the CIO's office. You have to call the business guys. If you send a software engineer there, he will get thrown out. You have to send a guy who can understand the customer's business and add value. This is what I call domain-led or consulting-led services.  

We are measuring how much are we selling to the sell side of the business rather than the cost side of the business. Today, the ratios are not pretty. That is what we are going to change. There is a lot of work to be done. The industry in India would be more or less similar. Accenture is a better benchmark. The ideal mix should be 50 sell side-50 cost side. The cost side gives you long term revenue; annuities. Sell side revenue is more short-term, programme-based. The delivery model has to be different for that. But long-term if you don't play here, you cost side will suffer.

What kind of organisational change is required for sales side engagement versus cost side?
A couple of changes are required. One is culture. Traditionally, we have had a very strong outsourcing business. It runs on predictability of revenues and outcomes. The CIO shop is moving to what can I do from a business perspective or how can I be more relevant for business?  The SLAs that most CIOs had a couple of years ago were purely based on input measures - what is the downtime. They are moving to more output-based measures which are based upon the business process of the company. That shift we have started making.

All our metrics in the back end on the cost side of the business is typically moved towards business metrics. That has already happened. But what happens is when you have a bunch of people who are running business metrics at the back end, their ability to go and talk to business users is still two steps removed from the ultimate customer. By getting a mix of people who are domain, consulting, process and back end guys, we are putting them into virtual teams. These teams would drive transformation sitting in front of the customer. That is the first thing.

But to do this, we need a basic competence. One, domain competence. That can be done. However, the biggest issue that you have is self-confidence. If you are sitting two steps away from the customer, your self-confidence to go and talk to the customer is significantly vitiated by the fact that you are removed. This means you have to now define self-confidence as a value. The minute you say I treasure self confidence as a value, people will start role modelling against that. One of the measures that we have put in place is that a Wipro leader has the self-confidence to confront customers that he believes is wrong from a customer perspective. It is a value.

The second thing is the cultural component. If you have a guy who has come from a rural school, and you transport him to the middle of mid-west, he can't handle it. You have to train them culturally to manage that or simpler still, you have to recruit locally so that the front end is culturally aligned to the customer.

We have a programme this year to recruit 200 (individuals) from colleges overseas. We are bringing them to India for six to nine months. We will send them back to their home countries where they will work for six months doing different roles. Then we will send them to another country for them to apply the skill they have learnt. After another six months, we will send them back to their home countries where they will get a permanent job. For the first six to eight years of their career, they will go through rotations every two years. Change is easy to understand if you are working across boundaries. It is important to be local in some countries. You can't take away jobs every time from a country and expect to survive.

What does this do to your margin profile when you hire more onsite resources?
It doesn't change too much. It depends on what category of people you are hiring. If you are hiring at the junior level, it doesn't change your profile too much. If you are hiring at the senior level, it does. Today, because we don't have junior level profile, we tend to hire laterals. To that extent, we are messing up our cost base in any case today. It is a misnomer to say that if you hire on-site, you will kill your margins. Two things happen. Your sales go up because you are able to relate more with customers. Second, don't forget that most businesses are global (businesses). Mobility of people is a big thing is for the customer.

You are investing in front end. In terms of results, what are you seeing on the ground? Is it visible internally?
Early indicators. In the short-term you will have ups and downs. What we have to look at is the trajectory. The biggest thing I watch everyday is the state of my pipeline and where it is in terms of closure. I watch that in a fairly frequent basis.

What's you sense of the pipeline?
Positive. Even more positive than last quarter.

What's the update on big deals?
It continues. Part of the journey is done. The biggest issue is to culturally transform the sales force to listen more and sell less. Which is what we are right now doing.

Is it ingraining the 'the customer is always right' kind of an attitude?
It is not always 'the customer is always right'. The customer is telling you stuff that you need to listen to and respond to. In most cases, we sell what we have. We don't sell what the customer wants.

But are you worried about the fact that your competition has double the number of big deals that you do? Infy has 11 $100 million customers, you have five. Why has Wipro not gone after large deals in the past?
I can't change the past. We can at best manage the future. Why haven't we done that? I think all of us have been focused for quite some time but we have not done well. We are trying to change that now. The early indications are still positive from where it was a year ago.

Another issue is the structural issue with Wipro which is 27 per cent BFSI versus TCS and Cognizant, which have more than 40 per cent in the vertical. The upswing post downturn was in the banking part of the BFSI world. How fast can you swing the needle from 27 per cent to say 35 to 40 per cent?
Is 40 per cent good? I am not sure about it. I think that kind of exposure is dangerous to any industry. When you look at a portfolio of tomorrow, you ask yourself: you never play a portfolio based on the past. You play it based on what you see happening in the future. The banking industry has a structural challenge long-term. Short-term, it may give you a big bump up.

There are two places where we become important for a customer. One, we find stressed industries and go in with a cost play. Tell them we can help you cut costs versus somebody else. For instance, banking in Europe is structurally challenged. There we can play the role of a disrupter. The second part of the industry is trying to see what it can do to get to market faster. When you look at the ease and speed of markets and cost of access to markets. In energy, speed and access to markets are going to become very critical.

If you look at natural resources and oil and gas, these are industries where you have a great degree of civil governance. Or the resources are controlled by government agencies. Playing in that market requires a very different skillset. It is not a skillset we are used to. It is the ability to do joint ventures. Oil companies do JVs on the fly. We tend to look at JVs like a marriage.  So natural resources, oil, agriculture -- these are segments where you will always have natural scarcity. Then retailers and CPG companies have to handle price volatility at one end and handle markets that will start pushing back on volumes because of price. Then you look at the ageing population - if you are not in heathcare, long term you will not be in this game. 

Is it correct to see Wipro having two verticals - momentum and maintenance? So will the maintenance verticals fund the momentum verticals going ahead?
Maintenance is the wrong word. We call it momentum and others. It is about cash cows and growth. For us, there are growth areas where we want to reinvest in and there are areas where we want to get cash from existing business. Telecom on the equipment provider side is structurally challenged. If you build a business saying I will have growth in telecom, and build the same sales structure as in retail, we are fooling ourselves. You are over investing in an area. But does it mean that we will vacate that market? The answer is no. You may pick the five best areas where I am best in telecom and beyond that I will not compete.

What happens to the motivation of people who work in the other verticals?
Some guys have to focus on broad growth and some guys have to focus on specific solutions. For leadership, they have to prove themselves in both and come up. If you don't work in a stressed industry, you never understand the pains and doing lot more with very little. It is a different psyche. Once you put the same guy in a growth vertical, his eyes open. He is able to see opportunity right across which he never saw in a smaller business. All leadership has to go through both momentum and slow growth businesses.

And you have refined your bets on three areas - cloud, mobility and analytics - as opposed to the previous strategy of placing your bets all across?
That is clear. The IT industry is always looking for a disruptor. Mainframes got disrupted by minis. Minis got disrupted by desktop by computing. It got disrupted by tablets. In the services industry when offshoring came in, it was a disruptor. We got a share of that business. For us to succeed in the long-term, we have to be part of the disruption.

Does this mean you have to whittle down your bets as opposed to taking a portfolio approach?
You can't take a portfolio approach. Between cloud, mobility and analytics, there is a play out in intersections.

In terms of your longer-term bets, agriculture is one?
It is a big one for us. It is a very long-term play. It is like healthcare. Once you get in and develop competency in that area, it is very difficult for people to take you out.

How do you expect to open the market up in agriculture? Who will be your typical user be?
Today, you can figure out the soil characteristics and what kind of fertiliser you need to use. We are landing in a world of scare resources. The delivery mechanism is where the real value is going to come in. The question is who is going to pay for it? If you don't track your pool of revenues, it is not going to work. The biggest pool of revenues would be in areas of seeds, fertiliser delivery.

We have done an interesting piece of work for a tractor company. We built a small device. It gives out stats in terms of what kind of fertiliser you require depending on soil characteristics. You can improve crop yields this way significantly. 

Wipro was one of the earliest players in the healthcare market. Yet, it is not the leader…
We were in and out. We were never consistent. We got into healthcare way back in 1996. Then we got in 2001 and in 2003 I shut it down because we were losing money. We again resurrected it in end-2004. You can't run a vertical like that if you don't have long-term perspective. You have to remain invested.

How do you know healthcare will not be another telecom?
There is a very big difference. What is the telecom guy selling? Fibre optic capacity and airwaves. In healthcare, number one is demographics. Then genomic data is the future of healthcare. It has huge business for analytics. That's the investment we have to make.

How many times in a day do you think about Cognizant?
I do when I compete with them. But otherwise, hardly ever. I respect all my competitors - you don't know where they will come and hit you from. But you can't worry about them. You have to look at them competitively and say how do I compete against them. That's what keeps you awake at night.

When you took the job, what were your conditions with (Wipro Chairman) Mr (Azim) Premji?
There were no conditions. When I got the job, it was such a big surprise for me - I was partly shocked, partly surprised. So I didn't think I had time for conditions. I just had a job at hand to do. Was there a little bit of apprehension? The answer is yes. I was enjoying myself in the previous job - disconnecting from that was a tough one for me to do mentally. 

Talking about phases of change…
During change, an organisation first goes through a shock. Then, as deal wins come in, there is a phase of super confidence. The the again go to depression because they hit a massive capability gap. You tell yourself I am not capable of doing this. Then, you bring in people from outside. At this stage, the organisations start seeing this and say I can also compete. Then it goes through one more level of confidence. Then you hit the third big wall - what is the disruption I am going to play? Then you hit the depression of differentiation. Then you go past that with new solutions. Then you go back to the first cycle.

Right now, we are hitting second cycle - the capability issue. Shock is over, confidence is gone. We have to bring in people from outside.

Any lateral hires now?
Absolutely. Watch this space.

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