EA RESEARCH EXECUTIVE VIEW OM MANCHANDA

We are the single largest brand in the Medical Diagnostics and Testing space in the country in terms of the number of reports being sent out under the name of Dr. Lal PathLabs.

 

How has been your journey so far in India and what have been your major highlights?

I have completed 10 years with Dr. Lal PathLabs and I am really enjoying myself. It has been a different kind of an experience. Dr. Lal Path Labs is entrepreneurial and somewhat unstructured and unorganized; an environment which I was not used to while working with companies like HUL and Monsanto. Here we needed to create a lot of systems and processes rather than just refining them; which has been good learning.

Another important aspect is that in MNCs, we work on a lot of things which create incremental value, but here, things have been more entrepreneurial and we have taken step jumps which have led to visible results.

The decision making is fast at Dr. Lal PathLabs owing to its lean structure which has led us to do some PE transactions and our results have been very good. We have sustained close to 25% CAGR over the last 9 years in terms of revenue and our stocks have grown beyond 30% CAGR.

How is Dr. Lal PathLabs different from other players in the market? What is your key focus area and differentiation strategy?

There are 2-3 broad differences between us and our competitors. We are the single largest brand in the Medical Diagnostics and Testing space in the country in terms of the number of reports being sent out under the name of Dr. Lal PathLabs.

Another major difference is that most of our competitors have grown through acquisitions while we have grown organically. Also, 70% of our business is through walk-ins and we operate in the B2C space against the B2B space where most of our competitors operate in.

Our management depth is also very diverse and we all come with experience from large companies across sectors, which has helped the company to scale up to different levels. Our strategy has been very focussed on our strengths. For Example, in our first phase of growth, we expanded largely in North and East India and in our second phase, we aim to target West and South.

What have been your most significant challenges during your tenure with Dr. Lal Pathlabs?

There were several challenges I faced initially. The first challenge within a small entrepreneurial setup that is transforming is getting used to the hierarchical structure because the focus is always on one man. However, in order to build an organization for the future, we needed to build structure and layers and therefore getting the organization aligned to a structure was a challenge.

Also, the finance and business decision rigour needed to be brought in. The decisions which were made on gut feel had to be based on data and analytics and bringing in this culture was a major challenge. Another area of concern was building the team. We were not a start-up where we could get in fresh talent who could be trained. We needed to bring in people who were willing to undo a lot of things and in the process also get along well with the new network and the old network.

How is it different from your experience of working with companies like HUL and Monsanto?

It is similar to being on a ship and being on a boat. The first challenge for me was on the personal front. Earlier I had a security net of working in companies like Monsanto and HUL and to transition myself into something like a Dr. Lal PathLabs was a challenge initially.

In companies like HUL and Monsanto a lot of things happen automatically and you don’t realise that those small issues could also be challenges for you; something that I learnt at Dr. Lal Path labs. Here it was more hands on and we got into things like looking for office space, signing lease agreements etc; things which happened on its own at companies like HUL. Although the learning experience here was great, the differences of working in a global MNC and an Indian entrepreneurial company were clear.

Does the medical diagnostics industry face any significant people related challenges in terms of talent availability, training & attrition? How does your company manage these challenges?

I think, the healthcare industry in general faces a dearth of managerial talent and the problem is not limited only to medical diagnostics. The challenge is that we don’t have enough people who are at the front end of the business. Ours is an insulated industry and is also a little technical in nature therefore we have a dearth of leaders. Most hospitals are also promoter driven and these people have not been able to attract professional talent like in other sectors.

My biggest strength on the other hand has been the ability to attract people from other sectors largely due to my own profile. I have been in the system for a long time and being a Vet by profession, I do understand the medical side of the business as well. I have therefore been able to integrate the medical side with the non medical side of the business; something which has helped us to an extent to deal with talent related issues.

What is your expansion strategy in the medium to long term? Where do you see your company by 2020?

We see great potential for our company. Even with our current numbers, we are just scratching the surface. The market opportunity is huge and there are large areas where we are not even present; which offers a huge opportunity to us. There are two ways businesses can grow and it is seen that people follow both organic and inorganic strategies. In the past, our strategy has been that we would grow organically in our traditional strong areas like North and East and will grow through inorganic ways in South and West. We have realized over time that Inorganic is highly unpredictable and uncertain and therefore we are not going to be dependant on inorganic going forward. We are now going to look for organic growth options pan India and by 2020, I foresee that we will have big labs like the one in Delhi in all the 4 corners of the country. We also hope to continue growth momentum like the one we have seen in the past

How do you maintain Quality in all your centres?

Dr. Lal Path Labs is the only player in the Indian market that has been accredited by the College of American Pathologists, the highest accreditation in the world and we have very strong focus on quality. As CEO, I ensure that there is no compromise on quality and we have departments like Quality Assurance, Quality Audit and have a significant number of people focusing on quality control and monitoring controlled both at collection centre level and at lab level. We spend the first few hours every day on the quality aspect of business.
We are fully aware that as an organization grows, these areas run the risk of getting diluted, but as an organization we are fully committed and have enough resources to ensure that the quality parameters are met.

Also, the entire testing cycle is highly automated and now with the advancement in technology, it is possible that before the reports are released, we can have the report validated by our doctors sitting elsewhere; something which has allowed us to put validation as an added step of checking. Also, any abnormal values need to be verified and passed by a doctor before being shared with the patient. We therefore have several quality checkpoints, but I do accept that this is an area that constantly requires attention.

The Indian economy is now looking positive after a slowdown. How do these phases impact your business in India?

Our business is not affected too much by the economy although there is an indication that when the economy is doing well, people become more aware of lifestyle related disorders and testing of such problems rises. People start focusing on wellness and preventive health checkups and there is a positive rub off on people who become more focused on being healthy.

In a price sensitive market like India, do you feel that it is limiting for players like you to come up with better services or better patient experience?

The problem of pricing is not a uniform challenge that we face across all markets, but definitely in Tier 2 and Tier 3 cities it is a significant challenge. We compete with a lot of local players; which is technically not a level playing field in terms of quality processes that they follow. But as an organization scales up, we can get the economies of scales moving to our advantage and are in a position to match their prices. However, we are at a certain price point which is premium, but pricing is definitely a challenge as we cannot ignore this significant variable in India.

How do you see the diagnostics industry shaping up in the next 24 months? Do you foresee some major changes in terms of regulations or overall strategy of players in this sector?

I do see that number of labs increasing and the organized sector grow even faster in the short term. There may be a rise in M&A activity over the next few years as everybody is currently trying to build scale and in 2-3 years most of the large players will have to grow in their non traditional markets. All major players have done well in their strongholds and as they start playing in each other’s areas, there could be M&A activities. I also see that perception towards branded players will improve as patient awareness improves.
In terms of regulation, I don’t really see any major changes happening despite the fact that there is a lot of talk about it.

What are the key aspects you look for in an individual when hiring for leadership positions?

There are certain expectations when a person looks for a change and the first thing I look at is if the person would be able to transition from a large setup to a small setup. We look for people who are willing to roll up their sleeves and are not used to an armchair kind of culture where everything is done for you.
Another thing I look at is how a person deals with his own motivation and how engaged is he as an individual. I also give a lot of emphasis on understanding if the person would be willing to work with us for a long term as we don’t have strong bench strength and therefore it is important that the person has a long term vision.

Finally on an informal note, how are you when you are not at work?

I do a lot of trekking to the Himalayas whenever I get the time. I am also very connected with nature and every year I ensure that I take a 2 week vacation with my family. I read a lot of management books.

Mr. Om ManchandaOm Manchanda is the CEO of Dr Lal PathLabs. He established the company in 2005 and in this short span of time, has transformed it into India’s largest medical diagnostics company. Dr. Manchanda has in-depth Cross functional, multi cultural and multi sectoral experience across FMCG, Agri Biotech, Pharma and Medical Diagnostics and is currently scaling up business for Dr. Lal Path Labs.

An alumnus of IIM-Ahmedabad, Dr. Manchanda joined Hindustan Unilever in 1990 and over the next 10 years, he received in-depth exposure in consumer products sales and marketing. Dr. Manchanda moved to Monsanto as the Head of Marketing and later became the Head of Sales in 1999. While at Monsanto, he was nominated for Global Leadership Exchange Programme. He also spent close to 2 years with Ranbaxy before to Dr. Lal Path Labs.

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