1. The Sun Rises with Disciplined Focus
Tracking and Demystifying Secrets of Industry Leaders
First Draft
Needs Editing
With this article we start tracking Industry Leaders. Here is from Pharmaceutical
Industry.
Key words:Sun Pharmaceuticals, Focused Execution, Business Excellence, Pharmaceuticals, Pharma,
Leadership, Dilip Shanghvi, Teva, business growth
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1st Nov 2011
Today, Sun Pharma stood full pager on Economic Times. It is not difficult to understand,
why the most valued Indian Pharma company is way ahead of its competitors, although
its revenues are not the highest.
There have been regular full page coverage on industry leaders (including Pharma) in
various business magazines, but this article stands apart, for it depicts exactly why Sun is
different and why it is, what it is.
Pharma continues to be a high margin business. When gross margins in business is over
50%, there is a normal tendency to excessively rely on exploiting clients, product
portfolio, geographical expansion and regulatory framework, and build shameless
complacency in operational effectiveness. Additionally, given the advantage of cost
structure in India, you got to be taking things for granted and become careless.
Sun is doing something different that gives it cost advantage also, and not the other way.
It is not wasting its effort, diluting its attention or creating self-inflicting uncertainty. And
even though Sun’s Gross margins has been over 70%, (Gross margins=Sales- material
cost), it has not allowed dilution of its focus and discipline to operate the business
effectively and efficiently.
Sun is an extremely focused company. It knows that the market is big enough. While
competitors have been chasing every opportunity and the obvious directions (antibiotics
and easy to make drugs in India), Sun chose to be different (building competencies in
chronic diseases). It adopted blue ocean strategy, choosing exactly where it could add
significant value (instead of risking its money all over world). It did not try to imitate
competitors.
In the words of its Chairman and Managing Director, Shanghvi, “We compete with
ourselves”. He knows that you do not need to compete with others, when the market is
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2. big enough. Also, if you try to compete with others, you would only be where they are
and, when things change you would be lost. Though, competing with yourself, is not a
stage that you could build quickly and easily. The ability to come to this enviable level,
where you can compete with yourselves, is dependent on consciously building
capabilities that are different and far superior to others.
Sun in one Pharma company that has developed the ability to crack complex molecules,
the area that is often left by others, who took easier route for harvesting patent cliff and
gambled their efforts in opaque and risky ventures. And thus it has developed an ability
and a confidence to do business on its own terms. Today it is considered an example in
‘business excellence’, that has created a huge organic growth potential within. Even
look at its acquisitions, it did not go blindly to access full global markets. Nor did it go
with the sole objective of buying companies to gain foreign foothold and transfer
products back to India for low cost manufacturing. Rather, it bought a series of poorly
performing organizations, and turned them around by placing its own operating system.
This is a rare capability that hardly any other competitor in Pharma industry has.
Also when Shanghvi says, “We do not want the process of growth to be stressful,” people
look at his approach not just as a personal habit but a strong organizational belief that it
has experienced working year after year.
Sometimes or may be often, people feel that he is conservative and not so aggressive.
Actually, it is not about being conservative or aggressive. It is about being aggressive
when you need to be and conservative when you need to be. Leaders and organizations
often put their aggressive bets where they should not and succumb to grave undesirable
effects.
Now take the case of Shanghvi. When he says ‘growth without stress’, he is talking about
the ‘commitment’ that one makes to the stakeholders (market, clients, employees
included). The commitment should not be out of over enthusiasm, nor with a view of
short term gains, nor to lock customer with aggressive promises, nor promising
hyperbolic story to analyst to spike up valuation. It actually means to being closer to
reality and giving certainty to your stakeholders.
Of course, he has his eyes firmly on bottom line and cost. He means business and he is
certain what he can deliver. He is not conservative because he does not often follow the
crowd and conventional wisdom. But he certainly follows a rare discipline. He knows
that the market is big enough, not just for one company like his, but for several. And
therefore, he does not follow the conventional wisdom to try to grab everything available.
He is disciplined enough to identify just a few Blue Ocean opportunities and pursue
them with rigor. His pursuit for Taro and Coraco is an indication of this. He is very
aggressive. Of course, taking sick organizations and turning them around is not
conservatism, rather it calls for significant aggression in ‘Execution’. For that matter
Sun’s unassailable position as a specialty Pharma company is attributed to this focused
approach and aggressive execution. Of course, specialty comes from expertise and from
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3. inception, Sun has made focused effort in developing generics in specialty areas, and
created ability to crack difficult to mimic generics based on complex technologies.
Shanghvi has a wide portfolio of products and has a remarkable pipeline of new product
filings in US. But he is not relying on any one of these, when it comes to promise. Just
because he has a huge war chest, he does not go to war and acquire things blindly. He
does not want to add numbers just for the sake of a position in the market place.
He is promising on ‘execution’ and ‘operational’ capability of his people. He is relying
on the capability to work with complex molecules and the ability to lead in specialized
therapeutics. He is relying on ability of his team to transform performance of his existing
plants and any new acquisition. He is relying on the deep inroads he has made within
India and the alliances he is building with distributors in the US. Most importantly, he is
looking to unleash significant capacity organically.
In today’s time where Pharma industry is at cross roads especially because of growing
complexity of blockbuster R&D model, onslaught of Innovators into generic space,
tightening control of government and regulators, shifting customer base and the fading
Sales Centric model; it becomes important for organizations to make execution and
operation excellence central to their business model. Sun’s ability to respond faster to
change comes from the ability to turn things around quickly; whether within existing
organization or in an acquired one. Shanghvi has shown that his team has perhaps
significant edge over others. And aspiring to be the Teva of India, is only for it to aim for.
And the reason… his discipline to choose stress free growth… by bringing aggression
where required. We call it focused execution and now look forward to tracking
remarkable growth path of Sun.
Clet:31-11
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