Satyam Decides to Diversify, Then Changes Mind

Now this is a crazy story and almost a bit unbelievable. Per the PC World story Satyam Computers proceeded to buy assets in a construction company in an attempt to diversify and sail through the current economic crisis.

Diversification - I get. But in Construction?! A core IT services company getting into construction is like NASA diversifying into knitting....did not make sense to me.

But then, the WSJ in an article called "The truth about Satyam"came up with a much better explanation - and more details:

• The construction company that was the target was called Maytas - get it? Satyam spelt backwards
• The owners were already shareholders in this firm
• The diversification is power play by the owners who wanted to use company capital (of up to $1.6B USD) to but this up
• Investors are unforgiving to family owned businesses that have eventually gone public albeit that the company carries the name of the founder

This is a wake up call for all firms that believe that different rules apply simply because they carry their last name - after being traded in global markets. You serve a new master now - the shareholders. They may be a minority, but ignore them at your own risk... and implement your world domination plans on your own dime.

SAY chart.

Spurring Value Creation in IT Services

Excellent article by McKinsey - an interview with Satyam's Chairman (reg. required).

Excerpts:

On Org Design:

...traditional hierarchical models will not be effective in a knowledge industry. Rather than focusing the whole business on delivering value in one way, as you might see in a textile mill, at Satyam value was being delivered in many different ways, depending on the services our clients needed. To cater to these differences, we created an organizational design that distributed leadership more uniformly. Ownership of results shifted to leaders who were closest to the relevant stakeholders, which could be their colleagues, investors, clients, or even society generally.

On Value Creation:

... recognition that value creation follows a similar structure irrespective of industry, type of function, or level within an organization. For that matter, philanthropic undertakings also reflect the same value-creating structure. In that sense it is analogous to fractals in science and mathematics. Not to get too esoteric; fractals are self-replicating constructs that become increasingly small, like the sections of a seashell or the buds in a stalk of broccoli. While they are similar, they are not necessarily identical. You can look at a business in the same way and try to find a pattern for value creation, an essential DNA that repeats itself in every area and at every level.

On Leadership:
We consider ourselves in the business of building leaders. The most effective way of realizing our goals and objectives is to grow leaders faster than the competition. Taking a non-India-centric view in attracting leaders from all over the globe and growing existing leaders through focused leadership-development programs is paramount to our success.