Saturday, June 28, 2008

Alternative. Entrepreneurial. Community service.

I just read about this IIMA graduate from Bihar who has gone back to his village in Nalanda to sell vegetables.  He has designed an ice-cooled pushcart in order to market them and hopes to do so across the country.  Read the whole article here.


Our studies at Euro RSCG India have been looking at some trends among Indian youth.  We keep talking about Indian youth looking for alternative career options.  We believe that Indians are entrepreneurial (jugaadu).  And we believe that today's youth wants to serve society if he can (Rang de basanti, Munnabhai).  

This one story highlights all the three trends.  Its the sweet spot of the three trends.

I was attracted to this story because it is so different, but also because of my IIMA and Bihar connections.  So that's another sweet spot!

Saturday, June 14, 2008

Indian are like a chest of drawers

Pawan Varma said that Indians were like a chest of drawers.  Different aspects of their personality are kept separate and do not conflict with each other.  What better way to prove this than this piece from The Economic Times.  Scientists offer prayers before they launch rockets.  If you think there is no contradiction in that, then Congratulate yourself.  You are still an Indian in spite of your education!

Here is the full Eco Times article.

Indian scientists secular, but firm believers in god
14 Jun, 2008, 1304 hrs IST, IANS

NEW DELHI: Indian scientists are very much secular but that doesn't go against their belief in god. A survey has found that many of them seek divine blessings before embarking on major scientific missions. 

The study, "Worldviews and Opinions of Scientists in India", carried out by the Trinity College of the US with help from Centre for Inquiry (CFI) India, a non-profit organisation, has found that 49 per cent of scientists believe prayer is "efficacious as therapy". 

Though most of the 1,100 Indian scientists surveyed described themselves as "secular", they refused to be called irreligious. The survey came out last week. 

"In 2005, space scientists went to Tirupati to seek the blessings of Lord Venkateswara before launching the rocket and satellite," the study reveals. 

It also found that only eight percent of the scientists said they would refuse to work on stem cell research because of moral or religious beliefs. 

Nearly 83 per cent of respondents described secularism as the "separation of religion from state and government" and 93 per cent termed it as "tolerance for religions and philosophies." Only 20 per cent considered that secularism means atheism. 

"Indians are by nature god believing people. They don't put spirituality versus science. Our ethos is broad - while we are rooted to our belief we are also open to new ideas, knowledge and innovations," renowned scientist Y.S. Rajan said. 

"There is broadly no conflict as we are for religious plurality. Let me be clear, there is no basic dichotomy between science and god," he added. 

The study found that a majority of scientists believe in the existence of god or "some higher power". Some even said that they don't know whether there is god or not. "The majority of scientists think they are spiritual," the study found. 

Placid Rodriguez, former director of Indira Gandhi Centre for Atomic Research, said religion or belief in god is a part of the Indian value system. "It's a part of our family value and social need." 

"I as a Christian have broken coconuts at the beginning of some programme (though it's a Hindu practice). God or religion is an inbuilt belief," Rodriguez, who is currently a Raja Raman Fellow and distinguished professor at IIT Madras, said over phone from Chennai. 

The study found nearly 75 per cent of these top scientists - whom the survey termed as "elite" - said they believe in the Hindu cycle of life. At least 29 per cent believe in karma, 26 per cent in life after birth and 20 percent in reincarnation. Similarly, 38 percent said god performs miracles. 

"I don't think, we can call the karma and rebirth theory unscientific. The belief helps us do good work and leads us towards ultimate equality. It's a beautiful imagination to improve yourself," Rajan explained. 

The study sampled participants from 130 universities and research institutes in India between July 2007 and January 2008. 

Barry A. Kosmin, the lead researcher of the study, said, India was chosen because of its increasing scientific and economic importance on the global scene." 

Family run businesses - A good perspective

I just read this very interesting article by T N Ninan in the Business Standard on the Ranbaxy deal.  I liked it so much, that I am reproducing it in full below.  Before you go, here is one thought from me:  Why is corporate India / Indian media so upset that a good Indian company has been bought by a foreigner?  Is that we can only dish it out (buy other's companies) and not take it?

Here is T N Ninan:

A friend commented that it must be nice for Malvinder Singh of Ranbaxy to pocket Rs 10,000 crore and also get nice things said about him by the media. Perhaps, but it is instructive to look at all the families that did not sell out when the going was good. Many of them are still in control of their companies and groups, but these are pale shadows of what they used to be at the height of their glory—and many of them live and work in the same city as the Ranbaxy chief executive. There are the Nandas, for instance: two brothers who have had their differences, who have parted ways, and whose companies are a far cry from their father's Escorts that Swraj Paul raided a quarter century ago because it was (among other things) the country's leading tractor manufacturer and also its leading motor-cycle company. Escorts no longer makes motor-cycles. It has got into a series of other businesses, none of which have done particularly well, and it finally resorted to converting a charitable trust (which ran the Escorts hospital) into a company in order to sell it and make some money.

There is the other company that Paul raided: DCM. The brothers who ran it had squabbled for years, and the company was split into many parts, some of which have done quite well and others have not; one even defaulted big-time on deposits taken from the public. The combined sum of the parts today is a far cry from the DCM that used to be the country's fourth or fifth largest company. At its core, the company's decline was a failure to recognise that all the members of the third generation were not equally endowed and therefore fit for business responsibility.

There is also the saga of the Modis, nine brothers and cousins who once moved ambitiously into an impressive array of businesses, most of which have fallen by the wayside. Modi Rubber used to be the king of the truck tyre business, Xerox was a Modi partner in India and so was Blue Circle, once the world's leading cement manufacturer. You don't hear much about the Modi businesses any more, other than for BK Modi wanting to sell his stake in Spice and Lalit Modi organizing cricket's Indian Premier League.

These Delhi examples can be multiplied in other parts of the country, almost ad infinitum. Ahmedabad's Sarabhais, for instance, were among the country's premier business families, so were Mumbai's Mafatlal and many of Kolkata's Marwari clans. None of this is to argue that there is something wrong with family-run businesses, because the evidence is that they often do better than the ‘professionally' managed companies. The issue therefore is to recognize that the interests of a business and those of its controlling family are not identical. Also, whose interests do you put first: that of the family, or of the business that has other stake-holders? If the operating principle is that all members of a family must be given an equal role in the business and that they will not make way for better managers who are not members of the family (in other words, the feudal principle), it is hard to see such a company prospering for long in a competitive market.

The vindication of Malvinder Singh's action is that the new owner of Ranbaxy wants him to continue as the chief executive. If all the businessmen who have presided over the decline of their companies had asked themselves whether they would be able to retain their corner suites even if the company passed into other hands, the history of Corporate India would have been different.

Thursday, June 12, 2008

Evolution of our business model

The biggest change in the communications industry over the next 4 years is going to be in our business model itself.  I think it is going to look very different from the way it is today.  In this piece, I shall examine the factors that are causing the change and the possible direction that the change may take. 

The biggest challenge facing the industry is getting good talent.  The challenge in getting good talent is that we are not paying them enough especially when you compare our pay scales with that in media, retail, IT and other sectors.  The reason we are not able to compete is because our clients have squeezed our margins.  Our margins will only improve if we add dramatically new value to clients.  So that is one set of factors that will force our business model to change.

The second set of factors relates to our client’s business needs.  Their business models have evolved rapidly as well and most marketers are faced with new challenges that do not have enough precedents.  So they need to have trusted advisors who will help them in navigating through these storms and air pockets.

The third set of factors relates to technology.   The internet, video conferencing technology, the mobile phone (including the Blackberry) and the laptop have dramatically changed the supply side of the industry.  The effects of all this on our industry is only just beginning.  In future, agencies will be able to have larger catchments than simply their own cities, regions or countries.  Also it will be easier and cheaper to set up agencies than ever before and so agencies will face greater competition than ever before.

To summarize, we have to increase our margins by adding value to clients.  Clients need more and better advice. And technology will change the scope of our markets as well as bring in new competition.

Clearly therefore agencies have to move from earning most of our revenue from execution to earning most of our money from consultancy and ideas.  This seems obvious, but I would like to outline some of the deeper issues involved.

As an industry we think we earn on the basis of ideas just because we may have moved from a commission based remuneration model to a fee based one.  But that is not true.  We still justify our fee based on the number of people and man-hours that we will spend on the business or on the basis of the output these people will create.  We never base it on the quality of our ideas.  How then are we really in the ideas business?

Our processes were created in an era where we earned commissions and we haven’t changed them after we moved to a fee based structure.  We still wait for client briefs and tend to be reactive.  Consultants are more self driven and work according to well defined deliverables and milestones.  We have yet to learn how to do that.

Also, while at a top management level, we talk about integration and 360 communications, we don’t actually walk the talk.  We still have divisions based on our specializations and each of them have business targets.  Thus their advice tends to be highly skewed towards their own disciplines.  This makes the client suspicious of our recommendations.

Given all this, here is what I think the business model of the future would be.

Agencies will organize themselves around industry verticals – rather like the practices that consultants have, rather than around their service offering.  Thus we will have divisions like retail, technology, healthcare, consumer goods, durables etc.  Each of these divisions will develop proprietary knowledge into their industries.  This knowledge will enable them to provide advice with confidence to their clients and actually command their respect.

Our remuneration will grow to much higher levels but will carry more risk.  We will no longer get assured fees at low levels, but high fees that are indexed to the outcomes for the client.  A kind of pay by results model that the internet has taught us. 

Agencies will then need to plan their portfolios well.  They will need some clients who will perform steadily with low risk, others who will perform brilliantly but with high risk.  Each agency will have to balance these types of clients according to their own risk appetites. 

Very few clients will be able to afford the integrated service model that agencies will offer.  Only the really large clients or clients in complex competitive situations will sign on as integrated clients.  Most clients will focus on specific areas where they need high quality help.  For every thing else, they will be able to access commoditized services off the net.  So in effect, our industry will evolve into two – a customized, high price model and a mass produced, low price one. 

I am really looking forward to the next few years as these changes unfold.  Advertising is still the activity where you can have the “most fun with your clothes on”.  Only now it is going to evolve into a slightly different kind of fun. 

Put your seat belts on.