Beating Technology Obsolescence: A Case Study
Atanu Ghosh
(Shailesh J. Mehta School of Management)

Many industries in India today are passing through one of the most difficult yet challenging phases. The forces of globalization have induced enormous changes in the respective industry and the market. The success of players in Indian industry would depend largely on their marketing and technological strengths. That is, on their ability to use their strengths to take on global competition in terms of costs, volume, innovation capabilities, channel partner, customer service and relationship management. The faculty at the Shailesh J Mehta School of Management (SJMSOM), IIT Bombay, have been engaged in providing consulting services to the industry on these issues. Recently, a division of a well-known Indian industrial group required assistance to guide them in formulating a strategy for ensuring viability and growth of the division. A faculty team from SJMSOM was inducted for this purpose through a competitive bidding. This article briefly recounts the case history.

The Background
   The division in question had several product groups related to communication and presentation equipment. Many of the products were procured from other Indian manufacturers or were internationally reputed brands. These were traded either with the company's own brand name, which is considered to be a strong and a respected brand name, or directly in the name of international brand. The division had its marketing team and sales personnel at all the branches spread over all important cities and towns in the country. The marketing and sales team was organized for each group of products. The entire division (as well as other divisions of the company, dealing with a range of consumer durables and office equipment) enjoyed a good reputation for the services provided by the company.

However, the demand for one of the product lines, which was contributing to 51% to the division's turnover, had been declining steadily and had reached the decline phase of product life cycle. During past 5 years, this product line had been able to achieve break-even only once. This was the only product line of this division, which was manufactured in their plant situated in Mumbai, a city with high labour costs. Though the plant and machinery was over 30 years old, they had been maintained very well. Also, the workers were very skilled; though many of them were left with 3-5 years of service.

To counter the losses, the company sought a new product line - a communication equipment, procured from a well-known international brand. This was introduced in the market with the company's brand name through a newly recruited marketing team. Also, measures to reduce the labour cost, which was about 30% of the cost of the older product were on the cards, i.e. a gradual introduction of a Modular Production System. It was at this stage that SJMSOM entered into an agreement with the organisation to formulate further strategies.

The Approach
   The entire work was carried out in four phases. In the first phase, the division's current activities, plans, and performance were studied. In the next phase all possible alternatives were explored for utilization of the existing manufacturing set up, either at the same location or at a relocated site. Also, alternate product ideas were generated. For this, SJMSOM considered closely the options that would be realizable through the technology existent with the company, or through partly modified or realigned technology.
The next phase focused on identifying opportunities for greater market development, and of ways to sustain a competitive advantage. And in the final phase, a set of strategic options for the division were developed and presented to the company. Overall, the organisation has responded to the recommendations positively. Currently, the division has started implementing some of the recommendations and others are under active consideration.

Comments
   The main issue in this case had been a rapid change in the technology, which had forced the primary product line of the company into obsolescence, and loss of viability. In addition, it had to contend with a surplus, costly labour force. For an organisation, successful products can foster an emotive association that can delay decision-making, in the event of obsolescence. The solutions to such a scenario require one to carefully craft a strategy for survival in the short term and achieve profitability & growth in the long term. This may be possible either by matching the strategy with the current resources and capabilities or by acquiring additional resources demanded by the new strategy.