Stretch & Leverage (C.K Prahlad) as a strategy with Reference to Reliance group’s strategy

It is generally believed that corporate races like quality, efficiency, growth etc. have no finishing line. But it is also true that it’s very difficult to motivate people to run in a race that will never come to an end. Reliance is running same race for growth. Their corporate ambition is obvious from their punch line “Growth is Life”. To motivate their employees run this unending race what they have done is they have decorated each milestone with a finishing tape. Apart from that they have strategically separated monotonous less crucial parts or the racetrack into separate race to be run by separate runners.

According to Hindu Mythology the job of creation, maintenance and destruction has been divided among three gods Brahma, Vishnu and Mahesh respectively. In the similar fashion Reliance had separated the job of creation and maintenance. Job of creation is given prime importance at Reliance and had been traditionally headed by Dhirubhai Ambani and now is being headed by Mukesh Ambani. Maintenance job is given a step motherly treatment at Reliance and is generally headed by professional managers while member of the Ambani family get involved in only exceptional cases. This separation of task help them to saturate resources for achieving the critical goals at the same time managing to stretch the resources.

As stated earlier Reliance group prime focus is on creation job. Creating new projects bigger than any previous project handled by them is what drives them. The strategic intent is to build grassroot Greenfield projects that are of global standards. And this challenge of creating something globally benchmarked is what drives the team emotional and intellectual energy for the journey.

For the creation business they are ready to commit most of their resources that make the resource not only ‘fit’ with the emerging opportunities but also at times ‘saturate’ it. On the other hand they stretch the resources to the maximum possible in the maintenance business. They have created a team of their best people into a project implementation team who run the growth race with the imported shoes and equipment. For this team organization’s best resources are committed. For them each project is like a milestone which is celebrated when reached and a new race to the next milestone starts immediately afterwards. It is best brought out by Anil Ambani’s words when he was explaining the critics why they took up Infocomm project after the Jamnagar project. His explanation was “ After Jamnagar Infocomm is like Viagra for our project implementation team.”

To explain how it operates we take an example. Initially when Dhirubhai Ambani turned bullish on Polyester, polyester market in India was almost non-existent. Apart from setting global scale polyester capacity he needed to create demand for his products. He committed all his resources. He went to the wholesalers and retailers with most lucrative offer. He offered them 90 day credit period for selling polyester and at the same time offered to bear all losses in case wholesalers has to face one but let them keep all profit. As a result traders started promoting polyester and soon polyester gained the confidence of the market. Once the market creation job was over he soaked away all his resources and diverted it to other creation business. Now Reliance was offering his goods only against cash upfront but as the market has been created there were enough takers. The control was now in the hand of maintenance guys.

Another way to look at their saturate-soak-stretch strategy is to look at their debt equity ratio. Reliance group due to its founder philosophy has been a conservative player when it comes to debt-equity ratio. When the group is in process of creation of a global scale project the group debt ratio stretches to the maximum tolerable level because they stretch its financial powers to saturate the project. But as soon the project is over the resources are soaked away and again debt- equity level is brought down to the acceptable level.

They operate on the general military philosophy that no matter how strong you are you never open too many fronts for war. And when at war your best people are out there fighting the war while home affairs can be looked into by lesser mortals. Building global project always suffer from natural stretch like lack or experience and expert manpower, lack of technical skills, uncertain environmental factors etc. which are more or less beyond the control of most players. They make it up by saturating resources, creating redundancies to keep a tab on uncertainty. The best people who may have done a better job in the maintenance business are called to fight the war i.e. to work on creating the global scale projects. While people who are left, are made to look into the home affairs i.e. do the maintenance job or look after the regular running of established business.

This is how Reliance manages to achieve what appears to be impossible given the resources on hand. It’s the resourcefulness of the management, ability and technique of allocation/deployment of resources that help them stretch their resources into achieving the group’s growth intent.

It is well known that Growth as an objective cannot be a motivator in itself as employees can’t see the finishing line. Growth has to be defined into milestones that are challenging enough and can channelize the emotional and intellectual energy of the employees to achieve the organization goals. Hence projects like cracker at Hazira, integrated grassroot refinery at Jamnagar, state of art optic fiber infrastructure for Infocomm, deep sea Oil exploration or biggest gas based power plant act as goals which motivate the whole team to stretch beyond what is considered realistic to achieve the impossible. For the team it becomes the ultimate goal, till they achieve it, while for the organization its just another milestone, which motivate it to dream even bigger.

On the other hand the maintenance team has to run the monotonous race. Neither milestones are as clearly defined nor they are celebrated in the similar fashion. Apart from that, the work is also not that challenging. What motivate the employees more than the financial or productivity target here is individual target of graduating to the celebrated team of creators. This is the reason while performance of Reliance creation team (project implementation team) is way above industry standard the performance of the maintenance team is just around average.


Although Reliance practices resource leverage both in creation business and maintenance business it is more evident and more rewarding in the creation business. In maintenance business method of resource leverage is more or less similar to what other business houses practices. They hire experienced people at the least cost possible, expedite the cash flow cycle, try to operate the plant and machinery at more than the capacity, recycle the skill and expertise gained by an employee in one job for another. They pay the employees less and make them work longer hours. This is complimented by advanced plant created by the project implementation team to produce above average operational results.

For Reliance the real leverage benefit come from the creation business or from project implementation job. Aspects of their resource leverage in project implementation is discussed as follows:

The first step to resource leverage involves targeting, focusing, and converging. Separation of the project implementation team is the result of consensus building on strategic goal. Achievement of Convergence is not difficult at Reliance as such decisions are taken at the top by the Ambanis. At the project creation stage itself they create capacities more than the market can absorb. Hence subsequent investment in the current business is not a high value addition investment and they know that. Hence they Target new business that can give them super or more than normal growth. While their project implementation team is working on ‘the’ project, management is strategically conducting a pilot study in other business opportunity by investing a small sum. Till the current project is not completed the Focus stays on that project and as soon the project is completed the focus sifts to the next project.

The learning at Reliance is high because turnover in Reliance project implementation team is very low and the same team or project implementers work on all new projects using learning of previous project in the new project. At the same time, as they create the project and shift to the next project (don’t do the maintenance job), unlearning is not a problem. Reliance had been able to implement project in high technology area like Telecom with a team with experience only in petro-chemical area because of this reason. Unlike the common belief the team developed expertise not in petrochemicals but in project implementation that was leveraged for other project implementation in completely different fields. For this they borrowed the best technology available from the Bechtels and Duponts of the world. They rather then taking them as partners purchased these technologies from them adopted the technology to Indian condition and innovated using these technologies to get better results. It was the competence of their project implementation team to learn the expertise of these international giants fast and internalize it. This helped them lower the costs in the long run at the same time it help the organization accumulate expertise in project implementation. This was also made possible as top management had faith in their team and had the confidence to give them liberty to innovate. They recycled the project implementation expertise developed by the team for creation of many mega projects leveraging on the skills learnt on the last job. Reliance paid the members of the project implementation team better than industry standards, which helped them in protecting the project implementation (skill as a resource) from their competitor. Apart from this ability to come up with new challenging projects on a regular interval also helped the company in retaining its talented manpower. This is in contrast with the treatment the members of the maintenance team get.
In their whole strategy of resource leverage the most important chain is the strategy of expediting things even at the cost of other resource. When it comes to project implementation they consider time to be the most important factor and don’t believe in optimization of other resources at the cost of time. In fact at times they are ready to accept certain amount of ‘slack’ in order to make sure the project is expedited. By expediting they are not only able to run resources like cash flow few extra mile they are also able to leverage their most critical resource – the project implementation team by making them working on more projects. The focus on time and targeting of completing the project in the shortest possible time also provide other advantages like first mover advantage, product to market time saving etc.

The above-described ability of Reliance to stretch and leverage its resources is the reason why Reliance had managed to become the biggest private sector company in a short period of 27 years.

Neeraj Gutgutia