The Arvind Sekhar masterclass: The Theory of Knowledge - The Noel DCunha Sunday Column

Using an interactive poll with the audience, Arvind Sekhar, the director of Sai Packaging, established that India ranks very low in terms of profitability compared to any other region in the world. He said, “In the packaging industry, the print industry in countries like Indonesia, Pakistan, Sri Lanka, and Bangladesh sees a far higher return on capital as compared to India. You would find them upgrading their machines much more frequently than the print fraternity in India.”

He said that this is the reality within which Indian print entrepreneurs must find ways to survive. He went on to highlight the various concerns of the printing and packaging industry members — economies of scale, pricing, power costs, logistical expenses, low profitability, high working hours, expensive machinery, and high foreign exchange rates.

Sekhar highlighted how, despite these concerns, industry leaders are expected to forefront sustainability initiatives, anti-counterfeiting, and innovation. He asked the audience, “Where do you get the human capital to think of these ideas?”

Should the onus of ideation be solely on industry leaders, many of whom are part of this industry because it is all they know? By popular demand, Sekhar used the occasion to speak about the viability of this industry for the next generation in family enterprises.

His first question was, “Why does your company exist in the market versus competition?” He gave the example of Rajiv Bajaj, the CEO of Bajaj Auto, whom he dubbed his industry guru, who had said, “It’s not what you do, it’s what your competition allows you to do.” Therefore, it becomes important for a company to articulate how it is different from the competition.

Sekhar said that a company can exist and survive for three reasons. “One, it is far more innovative than the others in the market. Two, it is the most inexpensive producer combined with economies of scale and services available at multiple locations. Three, it boasts supply chain excellence, whether with quality assurance or high on-time in-full (OTIF) scores across the board,” he said.

According to Sekhar, identifying and understanding a company’s strengths is the first step. Quoting Azim Premji, he said, “We spend far too much time worrying about our weaknesses. Forget about it. Focus on your strength, and build that strength.” Sekhar said that this identification is the first step in equipping your company for the next generation. 

He emphasised that a company must decide its focus. “It cannot specialise in multiple things.” He gave the example of Vijay Mallya, who tried to run an aviation company and a beer company at the same time. According to Sekhar, that was his undoing.

Sekhar also said that it is a big risk to confuse cause and effect. He said that unless we find a solution to existing problems, expecting the next generation to want to join the enterprise is unreasonable. “The conversations and environments in each company will be different, based entirely on what its focus is.”

Sekhar said that whatever a company’s specialisation may be, it is a people business at the end of the day. Attitude is what matters most. He said, “When I hire people, I am looking at hiring somebody to serve that specialisation better. Suppose I hire someone extremely creative in design. In that case, they may feel like a fish out of water because they are unfamiliar with the regular conversation that’s happening inside the organisation that has taken its focus on supply chain excellence. So, the culture in your organisation will be different based on the pillar you have chosen to focus on.”

An audience member pointed out that the people in the organisation should support the management in achieving the company's aim. Sekhar responded by referring to W Edwards Deming. Sekhar said that Deming inverts the organisational chart and puts the onus on the management to ask themselves what they are doing to earn the trust of their people. While quoting Deming, Sekhar said, “85% of the problems in a company are caused by the management, and not by the lower-level employees.” 

Therefore, Sekhar said that management has to make an effort to “fix themselves.” After this, the company should consider the next generation. 

Sekhar lauded the effort required to start from scratch and stated, “Don’t let the magnitude of this change fool you into thinking that you have done better than the previous generation. So, this requires an honest assessment of the ambition of the next generation. We need to probe this deeply.” 

He said that a company can shine in a tough industry, but if it has not answered these questions, it will face challenges and dissatisfaction. That is why, according to Sekhar, it is helpful in a family business to have an external, trustworthy member who will facilitate these difficult conversations.

Sekhar gave the example of Autajon Packaging, whose CEO and chairman is Gérard Autajon. According to Sekhar, the company has only grown through acquisitions. “Autajon’s children are not in the business. The company's strength has been letting the existing promoters continue, even after the acquisition,” he said.

Another question was posed to Sekhar: “How do you convince the previous generation to stay updated on current trends and technology?” To this, he said, “When I face a problem like this, I try to articulate what is bringing us success today and what we are trying to build using this technology. Once the answer to these questions is found, the usage of these technologies will fall into place on its own.”

Next, Sekhar spoke about the only two recognised quality awards he has encountered in the world—the Malcolm Baldrige National Quality Award and The Deming Prize. These awards are not just about product quality but also about organisational quality. 

Sekhar highlighted Deming’s theory of knowledge. He said that experience adds value when you’re able to predict the performance of your systems. This ability to predict means that you have the wisdom of experience; otherwise, it is the arrogance of experience that makes people use their time in the industry as a reason for credibility in terms of problem-solving. 

In conclusion, Sekhar said, “If you analyse your company the way I have discussed using a systems thinking method, your company can be widely successful despite competition — provided the right questions are asked.”