What Vishal Sikka's Bumpy Infosys Tenure Shows About 'Strategy'

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Recently Wipro's Azim Premji and Infosys's Vishal Sikka made joint statements about the stresses and tough times that lie ahead in the Indian IT sector and how global factors have caused immense uncertainty. I agreed—for two years, in this blog, I have been making a case that greed, unsound economic decisions and self-fulfilling political pursuits by nations and central banks have pushed the world to the brink of dangerous unanticipated consequences and that the present prices of pretty much all asset classes are unsustainable.

Strategy is fashionable, it sounds great—but in reality it's meaningless. As Peter Drucker says, "Culture eats strategy for breakfast everyday."

But this piece is about strategy. I read this word so often that I am now quite fed up of it. Speak to an over-enthused student at a business school, and he wants to excel in strategy and make a career out of it, speak to a new CEO and she will talk of a 10 year strategy and vision and make the incumbent employees feel scummish for their lack of strategy and vision, speak to a consultant (highly paid youngster at probably the big four with all authority and no responsibility) and he will regurgitate so much on strategy through his 100-page presentation that the customer will really start cursing the historical past, when the consultant wasn't on board.

Well strategy is fashionable, it sounds great—but in reality it's meaningless. As Peter Drucker says, "Culture eats strategy for breakfast everyday."

Two hundred years ago, when nations orchestrated wars to take over other nations and land masses across the oceans, strategy made sense. A strategy once made could remain relevant for 50 years as letters and information could be sent/received over sea/horses at most twice a year. Officers of invading nations had orders to execute a decision and the same could be reviewed only after a few years. Results to judge successes or failures were possible—at best—over a decade.

Today all it takes is a tweet by Trump to make the price of a Fortune 100 company crash or a claim by Wikileaks to make Hillary lose a winning US presidential election or unfounded misinformation that encourages a nation to invade another and create global havoc that is likely to have a century-long ramification.

Now, a disclaimer: I don't know who Vishal Sikka is or what he stands for or what he brings to the table and I have nothing against him. He is just a case in point because I remember him as a non-promoter Indian who got the highest salary in India—about $7.4 million in 2015-16. And because I read enough newspapers to have formed an opinion about him.

Sikka's rhetoric of his vision became louder and the performance became quieter...

When Sikka joined Infosys somewhere in June 2014 as the first non-promoter CEO, he was the next big thing in India. He talked of strategy and he talked of vision and the world took notice. The stock price of Infosys soared and he became the poster boy. At the time of his joining, the annual revenue of Infosys was about US$6.9 billion and he talked of a six-year 2020 vision of US$20 billion in revenues— approximately US$2 billion increase in revenue each year. And he maybe got more as a bonus. Many of the rockstar executives who built Infosys over last two decades, allegedly quit out of frustration.

This reminds me of the despicable Jack Welch who made a fortune for himself but made the most ruthless organisation by firing 5-10% of workforce every year. As Simon Sinek says, companies that sacrifice their people for numbers rather than numbers for people aren't built to last.

So as time progressed Sikka's rhetoric of his vision became louder and the performance became quieter at about US$7.9 billion in FY 2016. He still maintained the force of his rhetoric. Stock price of course grossly underperformed.

The last Q3 FY17 results of Infosys are due on 13 January 2017 (oops that's a Friday) and Sikka already warns of tough times ahead and by the way all of it is the fault of Brexit and Trump.

And going by the HY (half year) run rate of FY17 Infosys will achieve about US$9.5 billion in annual sales. With three years to go for 2020—a 3+ billion USD per annum increase.

So, what's the point?

It's not Sikka's fault. He has no role to play. The multitude of global factors and externalities are so diverse that any CEO or alleged strategist who talks of a 10-year or a five-year strategy is only fooling himself or the board.

Having a strategy and promise for five-10 years can help you get a bonus—but fact is, all that matters is the next few quarters.

It's good to have a general aspiration (call it vision) for next five-10 years. Having a strategy and promise for that length of time can help you get a bonus—but fact is, all that matters is the next few quarters.

Companies are wasting too much time on vision and strategy, and not realising that merely a tweet, a simple geo-political externality or an event on which no one has control can change the dynamics of our aspirations and strategy overnight.

Boards must realise and encourage the following:

1. Growth is important—and imperative. But don't put so much pressure on CEOs that they are forced to make specious commitments.
2. Preserve cash. When a Brexit or a Trump may hit you no one knows. Cash is king and cash is the one that will help you survive in tough times.
3. Leveraging created on the assumption of "future growth of present revenue run rates" (sounds almost as exotic as the CDOs of 2007, right?) is a sure shot recipe for disaster.
4. The baniya style of business has stood the test of time for over 200 years, until Goldman arrived on the scene and changed the rules of the game. Live within your means and borrow what you can pay from present income—not future income.
5. Every decision maker must have a skin in the game. Convert the decision-making executive's present bonus and compensation into future equity if you want the organisation to survive.
6. Conservatism isn't a bane, it's a virtue. For fools are full of confidence and the wise are always in a state of doubt.
7. Every present expense must pay for itself—strategic decisions taken in the present for the future, over which there is no control, are likely to be disastrous and not reflective of a sense of ownership or good leadership.
8. Stop expecting month on month or quarter on quarter. Allow your CEOs to work in peace and keep a quiet watchful eye. Fire them if you don't like them but don't create noise and disturb them every single day.
9. In an ever-connected highly efficient world, make a three-six-month strategy—if at all. Anything more than that is gas.
10. Keep a watchful eye on people talking of 300 years of vision and balance sheets. Anyone reading this will probably be dead in less than 40 years and anyone talking of 300 years probably has no plan at all.

And lastly for god's sake—stop talking about strategy and start working on culture.