This post is about a book that is based on a very popular elective for the MBA programs at IIM Ahmedabad. The book is “Elephants and Cheetahs – the beauty of operations”, the same name as the elective and is written by Prof Saral Mukherjee who also teaches the course.

One day not too long ago, me and my friend Abhishek Pandey were taking a stroll after dinner in the old campus of IIMA. The fourth session of Prof Saral Mukherjee’s Elephants and Cheetahs class had finished that day in which we had learnt about the art of closing doors – a mind blowing lesson on strategy. Our discussion turned towards the program and Abhishek said – “I want all business leaders of India, ALL, to go through this program. If they understand this one lesson fully, the Indian businesses will lead the world in next decade itself.” I agreed.

But not everyone can go through the program for various reasons. The next best thing to do is to read the book. It starts with the question – “What is a system?” Can a system exist without a constraint? Prof Mukherjee introduces “System-Constraint duality” where one cannot exist without the other. A system needs to be there for a constraint to exist, and without a constraint there is no system.

Next question to ask is – “What is a living system?” If we take the ability of a system to reproduce itself as the benchmark then a computer virus becomes a living organism and a mule becomes non-living. To resolve this issue Prof Mukherjee introduces us to the concept of Autopoesis as defined by the Chilean biologists Humberto Maturana and Francisco Varela. Autopoesis refers to a system’s ability to produce and maintain itself by creating its own parts and is taken to be a determinant of a living system. In the organizational context it becomes a question of whether your organization is autopoetic? If it is, then the organization will also have a purpose. How it decides to serve that purpose is what is defined under the area of Operations Strategy.  

Before we get to analysis or design of the Operations Strategy for an organization, we have to learn what is Strategy. Prof Mukherjee says – “Strategy is the art of closing doors. Every closed door is a constraint. A strategy is the set of self-imposed constraints which we choose to abide by.”

As in business, so in life – the resources at our disposal are limited in nature. None of us have infinite resources to deploy as we please. Even if someone can claim to have infinite physical resources, the mental resources are limited. There was a reason we were discussing this course after the session on closing doors. A lot of us have struggled with keeping up with everything that is going on in our lives everyday. We have our interests in so many things that things catch up to us in the form of emergencies rather than us catching up to things in the form of planned action. The closing of doors then is a conscious choice that all of us need to make, if we want to serve our best interests. From an organizational perspective, Prof Mukherjee shows what he calls an existential view of business. He says –

“It is this process of reflection of the top management of the organization itself which creates the consciousness of who we are, why we exist, which customers we choose to service, what value we provide to them, which partners we choose to serve value to customers, how do we choose to create value, how we differentiate our offering from competition and how we create value for our shareholders. Inherent in these reflections are the alternate personas of who we could have been, the customers we chose not to serve, the customer value propositions we chose not to offer, the partners we decided not to have, the value creation processes we chose not to adopt, the competitive positions we chose to ignore, and the shareholder value increment options we chose to forego. These choices were made by us and not forced by anyone else.”

As we decide to define ourselves, we also define who we are not. I have seen that being conscious of who we are not is a much more effective way of utilizing time and resources. If you know who you are not, consciously, you will save a lot of time and resources when the opportunity to explore those dimensions present to yourself. If you have not defined this clearly, then your life may become a series of exploring all of the open doors that you encounter. A concentrated effort towards a goal will become impossible. As in life, so in business – 

“A set of closed doors allows the will of the organization to flow in certain channels.”

The book has the title of Elephants and Cheetahs, but those are not the only animals that you encounter in it. Prof Mukherjee’s zoo has a variety of animals – from a very protective Turtle to a blood sucking Leech. The world of management literature is filled with books on large firms and their management. Almost all of management science is devoted to the study of large firms. But the marketplace has a lot of smaller firms run by entrepreneurs who are competing through cost cutting. They don’t have any fixed cost, the shop floor is just the front of their house. In the marketplace, they do exist and in the society they bring in value by offering their services cheaply. Prof Mukherjee calls them the Insect firms.

While the Elephant competes on Cost Leadership and the Cheetah on Time Responsiveness, the Insects compete on Cost Cutting. There is no rent to be paid, because the property is owned, probably bought/built generations ago. There are no wage expenditures, because the family works whenever they can. Overall, there is a philosophy of contentment associated with the Insect firms. They are not looking for growth, because to grow they have to invest and they don’t have either the surplus cash to invest, or if they have the cash then they lack the intent. For some who have surplus cash and if they choose to invest and simultaneously choose to dilute the control of the firm as they expand, they can become an Elephant in due course of time.

While thinking about this evolution of an Insect into something else, I was struck with the thought that almost all of the ethnic clothing and jewelry chain stores that we see across multiple cities in India must have started as a single shop. I have been to many cities in India, and specifically in smaller cities there is always a jewelry shop which is considered the best of the place. Across generations, some choose to open more shops in the same city or neighboring ones by investing the cash surplus and over a couple of generations they get to have a substantial presence. On the other hand, there are shops which have been there for generations – considered best in the city and are content with that, they will remain there. To any change in their arena, their response will be to cut costs.

From an entrepreneurial perspective, if you see over the past couple of decades – a lot of businesses have been built around consolidating the function of these small firms in a big operation. It is generally called as the formalization of the unorganized sector. There are still plenty of players in unorganized sector and if I had to take a guess, the next decade will see a lot of Titans taking advantage of the formalization. But, do not shed any tears for the insects, they always survive.

Evolution of firms –

A firm may have multiple divisions serving different sets of customers. We often see this in conglomerates. Prof Mukherjee has spoken about these firms with the metaphor of following multiple paths simultaneously. At times, a firm needs to change drastically from an Elephant to a Cheetah or vice versa. Such a firm which disrupts itself to change its soul is a much more difficult proposition. He says –

“Disrupting oneself implies fighting against one’s own autopoiesis; it is possible but very difficult to achieve. An Elephant is likely to adopt incremental innovation arising from exploitation and discontinuous innovation arising from exploration to become an evolved Elephant while a Cheetah is likely to adopt incremental innovation arising from exploitation and discontinuous innovation arising from exploration to become an evolved Cheetah. An Elephant evolving into Cheetah or vice versa is perhaps a much more challenging kind of ambidexterity to handle.”

The question is why will an Elephant try to evolve into a Cheetah or vice versa. I thought about it and came to a probable explanation. I think that the customers served do not change for the firm, but the way they are served changes. To take a simplistic example, if we consider a large bank whose customers have expected certain value from the bank for decades change the way of value delivery with the advent of new technology. The customer who was comfortable with multiple days to remit a certain sum of funds to different countries now wants the service to be done instantly. Earlier, low fees and reliability of transfer were the differentiating factors – now they are a given, what matters is how soon can the transfer take place.

As I thought about it, another metaphor came to my mind – of a family across generations. I believe that this metaphor represents one of the ways for a firm to change its soul. As a mother holds a child, an Elephant firm can incubate a Cheetah child within its body. For a certain period of time, the firm will have two souls serving the same set of customers. The firm may then see whether the basis of competition has changed. If the customers, who are the masters of the arena, choose to be served by the Cheetah over the Elephant, the growing child will be a better competitor in the arena. In case the customers further segment and choose to be served by both for different segments, the firm may choose to keep both of the souls in the family and each of them can compete against their type in the market place. If the original competitors have stayed Elephant and the customer preference has shifted, the Cheetah child will bring in their dissatisfied customer to the evolving firm. If the marketplace so evolves that the Elephant is no longer competitive – that soul will go away and the Cheetah will continue the firm.

Once you have seen your organization from these new eyes that Prof. Mukherjee gives you, you won’t be able to go back to the old ways of seeing. In this post I have just given a glimpse of the vast areas he has spoken about in the book. If you are associated with any kind of organization, you will do yourself and the organization a huge favour by learning what Prof. Mukherjee has to teach.

May we keep inspiring each other.