On 9 July 2010 at Tasmac, Pune our MBA strategy class discussed a very interesting case – ‘Silvio Napoli at Schindler India’.  The case is brilliantly written by Professors Perry L. Fagan, Michael. Y. Yoshino and Chris A. Bartlett. Its a favorite in B Schools to understand the complexities of India entry strategies. The highlights are presented below for academic learning.

The group

Strategic leadership

Schindler Group was founded in 1874 by Robert Schindler in Switzerland. It comprises two core areas of business: Elevators & Escalators. Alfred Schindler assumed the role of Chairman in 1995 and decided to take a six-month “sabbatical” to step back and review the long-term strategy of Schindler in the Far Eastern markets. He saw a huge growth potential in India second only to China. “India will be our Formula One racing track.” In the auto industry, 90% of all innovations are developed for and tested on Formula One cars and then reproduced on a much larger scale and adapted for the mass market. We are testing things in India – in isolation and on a fast track – that probably could not be done anywhere else in the company. The expectation is what we prove can be adapted to the rest of the group.” It was decided to strengthen Schindler presence in India.

Schindler Groups India opportunity

Silvio Napoli a 33 year old Harvard Business School MBA joined Schindler in 1994. As head of

Arjit introduces

corporate planning he reported directly to the CEO. The corporate executive committee (VRA) chaired by Alfred Schindler asked Napoli to formulate the India strategy. Napoli contacted experts in India to assess the elevator market demand. It took 9 months for the business plan to be approved. Napoli accepted the challenge to create the Indian subsidiary. His colleagues felt such a high-risk decision was crazy.

As vice president for South Asia he was responsible for India and few nearby export markets in Schindler’s elevators and escalators division. Negotiations to gain more control (51%) with their JV partner Bharat Bijlee (BBA) broke down and BCG could not find another suitable alternative. A Greenfield route appeared inevitable. Napoli relocated to India and began the task of building the task of building the company that would implement his business plan. Napoli and his family were based in based in New Delhi, where he opened a marketing and service office, but spend most of a typical week in Mumbai at the company’s HQ. It was quite a battle shuttling between settling the family in Delhi and the start-up challenges in Mumbai.

Team India

Top class global executive search consultants Egon Zehnder helped Napoli to select his team.

(a)               Mehar Karan (MK) Singh, 42, IIT Delhi & IIM (A) as MD reporting to Napoli and eventually to head the subsidiary. Patient, easy going and friendly. Tough at times.

(b)               T.A.K. Matthews, 35 to head field operations. 9 year direct elevator experience with Otis India.

(c)                Ronnie Dante, 39 as GM Engg. Several years hard-core elevator experience at Otis.

(d) Pankaj Gupta, 32 as HR head. In Napoli’s words “Mr Schindler had convinced me that the company really needed a front-line HR manager who was capable of developing a first-class organization. But I certainly did not want a traditional Indian Ivory tower personnel director. Pankaj convinced us to hire him through his sheer determination to care for our employees”.

The India Business Plan – Challenges

Napoli worked to gain commitment to his business plan that had two basic elements: the need to sell a focused line of standard products (different from competitors strategy of

Sameer - on the challenges

customization), and the ability to outsource key manufacturing and logistics function.

Competition was quite fierce – Otis (50%), BBL (8.6%, Finland’s Kone (8.8%) and ECE (8.4%). Indian market was highly price sensitive. Service was an important factor in buying decisions. The elevator life cycle had seven distinct phases: engineering, production, installation, service repair, modernization and replacement.

Napoli was shocked when he saw the transfer prices on the standard elevators were 30% above the costs he had used to prepare his plans as costs had increased. The import duties were increased sharply by the Indian government.

Napoli decided on an outsourcing strategy to keep overheads low with neither in-house manufacturing nor a logistics infrastructure. This would help maintain low costs as the import duties had also been increased. He believed he could set up a local manufacturing network that would preserve Schindler’s quality reputation.

Inter-company collaboration to the new low-cost subsidiary was sporadic, delays in parts lists, design specifications and engineering support. This added to the woes of the local manufacturers.

Managing a team in India

Napoli was known to be a “strong-headed and single-minded manager. He wants everything done yesterday. And in India things don’t get done yesterday”. Napoli acknowledged that “To survive in India you have to be half monk and half warrior; I was more inclined to the warrior side”. When he left Switzerland for India Luc Bonnard, Vice Chairman Schindler Holdings advised “You will have to work on your monk part.”

As said by an Indian executive “Silvio was clearly the driver and the boss but MK was great in helping Silvio understand the Indian environment.” Out of this interaction emerged a company culture that was ‘informal, open, responsive and proactive’.

Napoli’s new management team questioned him on the feasibility of his plan of selling only standard elevators. They also worried about the outsourcing strategy.

When Napoli had traveled to Italy for urgent family reasons he was informed that the company had accepted an order for an expensive glass pod elevator that was to be imported from Europe. His reaction – ‘I was first just surprised and then pretty angry, since it clearly was a violation of the strategy we had agreed on’. He could not stop it as it was too late – the project was committed. Once again for the second time in two months his Indian managers had submitted an order for a nonstandard product – to put a glass rear wall in one of the standard elevators.

Reflections of an expatriate manager

Napoli reflected, “You know the expression, ‘it’s lonely at the top?’ Well I’m not at the top, but I feel lonely in the middle …. I have to somehow swim my way through this ocean. We have yet to install a single elevator and have no maintenance portfolio.” The first-year sales

Dheeman on lessons learnt

objective was planned to be 50 units.

Thinking back on the eight months in his new job, Napoli described the multiple demands. On one hand he had to resolve the challenges he faced in India. On the other he had to maintain contact with the European organization to ensure the support he needed. On top of both these demands was an additional expectation that the Schindler’s top management had of this venture.

It was November 1998 and Luc Bonnard the Vice Chairman was visiting New Delhi for the first time to review progress on the start-up. Things were not going according to plan and he asked – “So, how are things going so far, Mr. Napoli?”

Postscript – Schindler’s success

The company is now present in more than 140 countries and employs 45,000 persons worldwide.  60% of Schindler’s core business in India and other countries in South Asia.

What lessons can we learn from this case?

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About dilipnaidu

An open mind! Love to share my thoughts and a keenness to learn. An engineer and a MBA I had a wonderful innings in the Army and later moved to consultancy and teaching. My current interests are reading, music, growing culinary herbs, playing golf and yoga. I am serious on "Living life less seriously". A warm welcome to you be well and be cheerful always.

17 responses »

  1. Interesting article, Dilip.

    Over here I have been hearing about in the news that many British retailers are now breaking into India due to the market liberalisation over there. In reverse the Indian conglomerate Tata now own a car company and the Tetley tea brand in the U.K. It seems everyone wants a piece of the global business pie now.

    Vijay

    Like

    • dilipnaidu says:

      Very true Vijay in a globalized world International strategies makes it necessary for all MNC Companies to be present in different countries. Yes Tata did buy Tetley and Jaguar-Landrover (JLR) as also the Anglo-Dutch steelmaker Corus.

      I am glad you read the case analysis. Thanks,
      Dilip

      Like

  2. sepidday says:

    Hello Sir,
    It’s such an interesting case. I would like to put some inputs.

    – Napoli could be a good strategist, but he wasn’t a good executor and he didn’t have entrepreneurship skill. He couldn’t identify tasks which had to be done, prioritize them, assign them properly and evaluate the outcome of them. He had planned for the company to manufacture s001 (outsourcing) in India, but by the time Schindller India received it’s first orders they were not ready to manufacture them. Therefore, they had to import the units. He did’t even check transferring costs with the HQ, although the HQ should be blamed as well for it’s poor communication avenues.

    – The problem wasn’t only the implementation. During the strategy planning he had also made some mistakes. Targeting a risky segment with stiff competition for an entrant wasn’t rational. Moreover, situation analysis had not been done properly. For instance, it’s so obvious that when a country’s economy is growing, one of the typical government moves is to make barriers for imports.

    – The strategy he’d made suffered from lack of flexibility. Each unforeseen situational changes caused a big difference between intended and realized strategy. The strategy should have made in such a way that it could be altered in relation with the environmental changes.

    – He wasn’t able to sell his strategy to his employees, the first thing a manager should do while implementing a new and fresh strategy. In my opinion he wasn’t able to be fit in India’s culture.

    – The main problem was that he believed in his strategy too much that he couldn’t see the reality and hear others. Although it’s necessary for top managers to be committed to the strategy more than any one else in the organization, not seeing the reality is not acceptable. The problem comes from here that he’d made a success in Swatch project before and because of that he’d fell in love with it. He couldn’t accept that this strategy might not work in other situations. He even didn’t want to communicate with HQ and report the problems he’d encountered ( like high transferring cost) worrying about he might be forced to revise the strategy or might be replaced by other person. He was a young manager who had been offered a position he’d been dreaming about. He didn’t want to see the reality and instead tried to insist on his opinions. The board should be blamed also because of choosing a wrong person and approving a wrong strategy.

    Thank you so much for reading,
    Pooyan

    Like

    • dilipnaidu says:

      Dear Pooyan,

      A brilliant and insightful response indeed!

      The golden rule of strategy according to me is ‘there is no one right way’. While I appreciate your reservations on Napoli’s planning and execution of strategy it is necessary to highlight the positive aspects too. Only then can our analysis generate a balanced solution.

      In this case it is quite natural for us to observe the obvious flaws. Yet there is a need to view the entire happenings from the highest level i.e., the Chairman and board global vision ‘vis-à-vis’ the India entry. Remember Michael Porter’s definition ~ ‘strategy is about being different’.

      The case highlights Alfred Schindler’s statement “India will be our Formula One racing track.” In the auto industry, 90% of all innovations are developed for and tested on Formula One cars and then reproduced on a much larger scale and adapted for the mass market. We are testing things in India – in isolation and on a fast track – that probably could not be done anywhere else in the company. The expectation is what we prove can be adapted to the rest of the group.” This could mean that Schindler will test its India model thoroughly and learn, only then will they leverage it worldwide.

      An important international strategic objective of MNCs for gaining competitive advantage is ‘worldwide learning’.

      Re: transfer pricing Napoli’s assumption at the time of strategy formulation would have been based on the then prevailing rates. Therefore being a start-up the adjustment of charges between the two could have taken this into account. In case of any differences HQ could have stepped in to reconcile the same as a stop-gap.

      Also remember an important prerequisite for MNCs in global expansion is the ability to manage risks. Faulting the strategy on this point is somewhat debatable as risk-taking becomes an inevitable possibility.

      Schindler had observed that the Indian economy was opening up and liberalization was a driver. In such times barriers are pulled down for accelerating growth.

      However notwithstanding the above all the other points highlighted by you are valid. Yes the communication of strategy to the stakeholders seemed to fall short of expectations. Also the deficiencies in entrepreneurial skills were quite evident. Napoli had wisely assigned world class consultants BCG to get most competent members for his team as such effectively utilizing their tremendous talent was imperative. Trust and faith in their abilities to deliver is very important.

      Also it was a great opportunity for Napoli to learn the ‘Indian way’ with an open mind. In a globalized world change has become an important force as such your point on tweaking the planned standardized model and building some flexibility in execution assumes great significance. One of the main sources of global competitive advantage is to manage global standardization and national responsiveness simultaneously.

      As per the case Napoli was a versatile and well qualified physically robust young man. He had guts to accept challenges. Moreover there are several instances where the person who plans strategy is also offered to execute it. The results however are mixed depending on the leadership abilities of the individual. Yes during planning ground knowledge and actual conditions must be understood to the extent feasible by visits. Depending only on consultant’s assessment is fraught with risks.

      Pooyan I appreciate the interest and effort you have taken to study this case in depth. Thanks for sharing your thoughts in an open forum and to enrich its learning value.

      Well done & Namastey 🙂

      Like

  3. Dilip Sharma says:

    Dear sir

    I have read the case posting sir,its an great effort done by the group.

    Regards

    Dilip Sharma

    Like

  4. Gaurav R Arora says:

    Dear friends,
    its always fun to give presentation at Sir’s class. It involve lot Learning and development feedback. I am sure it must have been a wonderful experience for you all too.

    I hope to join you all for presentation in next class.

    Best regards

    Gaurav R Arora

    Like

  5. Dilip says:

    My dear friends,

    It is very gratifying to read your responses. They add aimmense value and fill the learning gaps effectively. I say hello to you with my thanks below:

    @ Hi Dheeman – your observation on Sivio’s leadership is quite pertinent . I hope Manasa has read you answer to her question that it is always the lady of the house ‘who calls the shots’ 🙂 And Dheeman I am thrilled to know that you are my favorite ex-student Amlan’s younger brother – that too through his comment above. Wow how wonderful.

    @ Hi Manasa – your comments and questions are stimulating and provide useful clues to some of the key issues in this case. Thanks so much.

    @ Dear Geetha your have touched upon the core startegic issues which will be very helpful to all of us in further analysis. Thanks for adding value.

    @ Hi Pankaj a warm welcome to you and thanks for the good words. It encourages me. Do visit again.

    @ Hey Sameer am so happy that you have appeared at last. Your presentation as well as your comments are impressive – organization structure – standardized products versus customised and Mehar Karan’s strengths. Thanks and best of luck.

    @ Oh my dear Sashi – I am delighted to read your comments. Your analysis is brilliant. After all you were a top student in you times and now ‘going great guns’ in your company. Your comments insightful and will surely be appreciated by our viewers. Thanks.

    @ My dear Amlan what a pleasant surprise – I have come to know Dheeman is your brother (little) 🙂 He is such a mature young man, keen to learn and brilliant.

    @ Hi Arjit … great to read your comments and my compliments on a fine presentation of the case … thanks

    I remember the good days when you were here and your project on “Incredible India” that was a great success. I am sure you are doing well in ‘work and life’. hanks for calling on.

    Best regards,

    Dilip

    Like

  6. Arijit says:

    Silvio Napoli, a young Italian Harvard MBA graduate, working for a Swiss multinational elevator company is sent to India to establish a subsidiary and implement the strategy Napoli prepared at Schindler’s headquarters as head of corporate planning. This case focuses on three strategic decisions Napoli must make as his plan is challenged by Singh, Mathews, Dante and Jena, his local Indian management team and Schindler’s European plants supplying him. The case analysis will identify specific underlying causes or root cause, of Silvo Napoli’s plan and operations at Schindler India. The case analysis will provide recommendations for the correction of Mr. Napoli’s operations and also for the prevention of recurrences.

    Like

  7. Nice post! I always knew Naidu Sir as a motivator and creative Mentor. I had him, now u TASMAC folks hav him, being TASMAC. Great to see my li’l bro Dheeman presenting in Naidu Sir’s Strategy Class. I miss those classes…

    Like

  8. Hi Sir,

    Your blog has become a great learning source for me at the time of working . Grateful to you.

    Thank you for posting such a nice practical case study .

    Great learnings like :

    Unveiled qualities Of Strategic leader Mr Napoli which admired most like:

    1. Courage to head a subsidiary holdings in the country like India( Cross culture based).It was really challenging .
    2. Building a world class core working team those who are flexible and complementing
    In nature.
    3. Approach like “things to be finished yesterday”.
    4. Be patient while things doesn’t go on its way

    Drawbacks like as:

    1. Excess aggressive without understanding Indian market.
    2. Attitude. Instead of being a team member in team, he was single minded manager which
    created a barrier in understanding the culture of a abroad market. Inspite of presence of local
    ( World class ) executives , he couldn’t be able to take full fledged advantages of them.
    3. Ignoring to the view of experienced and senior most vice-president’s regarding
    Indian wrking culture.

    4. Lack of foresightedness about Indian market nature.(In term of PEST factors.)

    Above factors are responsible for failure of strategy planning of Mr Napoli.

    Warm regards,

    Your dear Sashi.

    Like

  9. Sameer Shaikh says:

    Dear Dir,
    It was a great opportunity to do the Schindler case study. The organization was much of divisional organization. The products were Standardized not customized comes to know from the first order which Napoli got from India. Mehar Karan Singh was a great guy who helped Napoli to understand the Indian culture. Napoli plans were affected by high export duty and some other reason because of which plan proved touch to the Indian elevator market.

    Thank you,
    Sameer

    Like

  10. pankaj thakur says:

    dear sir,
    it was a fantastic topic chosen by you for explaining strategic leadership
    it gave me insights that how leaders use different strategies to explore new
    opportunities.
    strategies are the core components of success and maintaining strategic
    competitiveness of any business.
    it will help me a lot in my subject of strategic management of MMS.
    thank you
    warm regards

    Like

  11. Geetha says:

    Dear Sir,

    Lovely post and thank you for the same!

    The lessons that I can think of from this case are:

    The importance of : excellent leadership qualities, effective communication, inter-cultural competence, rational logistics (shuttling between Mumbai and Delhi must have been a big drain on Mr. Napoli’s energy!), having a core team with complementary skills, collaborative efforts..

    Thanks and regards,

    Geetha

    Like

  12. Dheeman Bhattacharya says:

    Schindler’s decision of starting its own operations in India was an excellent one by Alfred Schindler. However, the expected fruit was cut short by the man upon whom the responsibility of executing the plan was given. we cant really blame Mr. Napoli, Who prepared a thorough business plan to invade India’s elevator market, but his plans lacked the touch of a visionary who would have looked into the future of a country which has recently opened up its markets. The export duty was bound to go high which had an adverse affect on Mr. Napoli’s plan. Too bad.

    Like

    • Manasa Konda says:

      Hello Dheeman,

      Its a very good presentation by your team which helped us to get the gist of the case Silvio Napoli. There are few questions which are rounding in my mind after reading your comment…

      You said that its not Napoli’s mistake… but he did mistakes like
      1) Why did Napoli set his family far from his head office?
      2) Not able to utilize his resources and conquer the market and reach their short term goal with his excellent team?

      So seeing above two small questions is Mr. Napoli not a good leader in leading his team? If Yes, then Mr. Alfred is wrong i n choosing them… If the answer is No, then what made Napoli to fail..?

      Would be grateful if you could spare some of your valuable time and just get me out of these doubts. Thanks in advance!!!

      Like

      • Dear Ms. Manasa,

        Allow me to answer your questions one by one:

        1. Napoli did not choose where to live; his wife did. It is mentioned in the case study, its mentioned that ” She liked New Delhi than Mumbai and decided to stay there”. As we all know who controls matters like these in a family, we cant really blame Mr. Napoli.

        2. He had resources; acknoledged, he had a good team: also very true, but the thing that he lacked is the power to change their policy and to maneuver in the industry at his whim. added to that, he was facing severe communication problems with his superiors, which in turn helped the matter slip out of hand further. one important skill that a person needs to start a business is practical knowledge to realize and recognize the threats, which Mr. Napoli lacked, and which in turn led to the poor performance of Schindler India.

        If u want to discuss further, please raise this matter in class.

        Regards,

        Dheeman Bhattacharya

        Like

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