Monday, July 05, 2010

Sun Tzu - War On Business Part 9 (Meru Cabs)

Part 9 of the very interesting and insightful Sun Tzu series brings us to Mumbai, India, where James meets up with a budding entrepreneur called Neeraj Gupta (“Neeraj”), who is tackling the bustling city’s transportation issues by setting up a luxury taxi service called Meru Cabs. Meru Cabs is a modern taxi service which relies on clients calling up the call centre at Meru to book a taxi in any part of Mumbai, and a taxi will be sent to their chosen location within half an hour. Neeraj had this idea to take advantage of India’s growing middle class population, and started the company 10 years ago as a garage centre. 3 years ago, it converted to a taxi service company. Their target market does not just include middle to upper income clients, but also corporate clients.

But first, a little background on India’s taxi industry. The state of taxis in general is in really bad shape and the Government wants to revamp the taxi service. Competition is intense only in New Delhi as there are no other major players in Mumbai (Meru is the largest player). Neeraj wants to scale up quickly and provide good service to the locals, in order to take the business to new levels.

James decided to test out Meru’s service quality himself and called the hotline for the taxi service. The call was answered within 4 minutes (James considered this acceptable as Mumbai was a very large city), and a cab duly arrived in 30 minutes to pick him up. He noted that black and yellow taxis were indigenous to India but they are mostly in very bad shape, hence will not prove to be much competition to Meru (as it could not serve corporate clientele). James described the cab as being cool (good air-conditioning), and it also had a navigation system plus a metre to clock up the taxi fare. The cab driver was well-groomed, experienced and also wears a uniform, symbolizing professionalism. In short, it had all the features of a premium service.

The call centre is named the “Subscriber Relations Centre” (“SRC”), because Meru views all its cab drivers as “subscribers”, and the Company spends US$200 on each recruit for training and testing. With this kind of money spent, it is important for employee retention as it would be a costly affair if there was high staff turnover at the SRC. But according to interviews with some of the subscribers, they felt as though their grievances were not heard.

James paid a visit to the corporate office of Meru, and he saw a nice corporate office environment; but a visit to the SRC painted a different picture as the conditions there were more “shabby” and less professional as compared to the corporate office. The office was rather cramped and felt over-crowded, and this did not make for a pleasant environment for the subscribers to work in. Also, in India, there was personal pride derived from being part of a good organization; therefore an employee’s self-worth was intricately tied up with his/her morale. In short, the employee’s morale is largely contingent upon his work environment. Thus, there existed a dichotomy in terms of managing the expectations of the subscribers, who can be seen as a key pillar of Meru Cabs.

James Sun invited Anu Sharma, an entrepreneur, to act as an advisor to Meru Cabs. She recommends the Company take up relationships with its employees, most importantly with its “subscribers”. Though demand for Meru’s service is high, it was equally important to be able to retain its drivers as well. James and Anu then suggested that Neeraj undertake a 360 degree “subscriber retention program”. A merit system would be set up to recognize and reward long-serving and outstanding subscribers; and a dinner would be thrown for all subscribers to include their families as well, in order to instill pride in them on being part of a successful organization (this is leveraging on cultural norms). During a Management Meeting, Neeraj manages to convince the rest of the Management team of his ideas and they agree to produce certificates to commemorate long service, to be given away at the dinner.

With short notice given, it was a challenge to find a suitable venue to host the dinner, but in the end a suitable location was sourced for and a buffet dinner catered for all subscribers and their families. Some of the subscribers interviewed expressed surprise and pleasure at receiving awards to recognize their hard work, and also appreciative of the Company’s gesture to throw a dinner for them and their families.

Quite a few lessons can be learnt from this insightful episode:-

1) Importance of assessing the competition – It’s prudent for a company of Meru’s size which wishes to expand into other cities in India to first size up and check out the competition. In Meru’s case, Mumbai did not have a significant player who was able to provide the same quality and service levels which Meru was offering, hence they were “safe” in their home territory.

2) Employee retention is as important, if not more, than customer retention – As can be seen, the drivers were the important catalyst which enabled Meru Cabs to be such a successful business. Neeraj was neglecting their welfare, which caused them to become disgruntled and unmotivated. This could result in high employee turnover which would do the company no good.

3) Goodwill is inherent in high employee morale – To add on to the second point, high employee morale also translates into intangible goodwill for the business. A happy and well-treated employee will spread good things about the company he works for, which in turns will raise the profile of Meru Cabs through word of mouth.

4) Look for Cultural Cues in handing out incentives – India’s case is unique in that much of an employee’s self worth is tied to the company he works for; hence Neejar (who is an Indian himself) should have known this and taken advantage of it by recognizing the subscribers’ contributions much earlier.

5) Ensure equality for all employees, as far as possible – It would be a very distinctive internal corporate problem if two different batches of office workers had two vastly different working environments, one of which is spacious while the other is cramped and uncomfortable. Since Meru Cabs prides itself on being professional, it should standardize the treatment of all employees and accord them the same working environment.

The next episode will feature another Indian company, this one is also located in Mumbai, India and is a film school called Digital Academy. It’s interesting because it produces films and serials in classic “Bollywood” fashion, many interesting sets and dramatic acting!

Check out the website for Meru Cabs over here:-

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