Category Archives: Business

Why India Needs Swiggy More Than Ola

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© Priya Narayanan, Assistant Professor of Marketing, IIM Kozhikode. Views are personal.

Before I begin this post, let me confess that I use Ola once in a while. In fact, I was sitting in an Ola cab at a traffic jam when the scene I am about to narrate happened. The vehicle in front of me was a medium-sized truck, and from the exterior it was clear that this truck carried garbage. In that case, why did I give it a second glance? Because there was a man inside! In the garbage part of the van (not the driver side which I anyway couldn’t see), beside the pile of black garbage bags with their mouths tied, this lanky guy stood bent over, his jeans pushed up to his knees, his hands working furiously. He picked out mineral water bottles – the smaller kind that we usually see at parties and throw away so casually – and dropped them into a big grayish bag. Each time he saw water in a bottle, he would pour it on his feet and wipe it down (to cool the heat of standing the entire time in that airless shaking truck?). What he didn’t pick from the black bag were largely paper plates and paper cups, most having some leftovers, so the waste was probably from a party. This activity went on even as the signal changed to green.

Despite all the cynicism that India’s cities (Gurgaon, Mumbai, Delhi, Bangalore, and Noida) have taught me, and despite being told that “this is how the lower classes live, what is your problem, isn’t the AC in your cab running?”, I was shocked. Right in front of me stood a guy who made a living sorting out plastic bottles from garbage, standing inside a moving truck. It made me wonder: is there anything that any of us, seeing and then quickly unseeing the reality in front of us, can do? It might help to segregate waste so that workers like him do not have to repeatedly dip their hands into garbage to retrieve bottles. But segregation would relieve him of his job! Imagine we all decided to segregate our plastic and paper and wet waste. What would happen to our waste workers?

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Better before Cheaper

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The last post highlighted an HBR article that mentioned that for companies which wanted to become truly great – to grow and sustain over long periods of time – it was essential to focus on revenues first and costs second. The same article mentions another key factor underlying the greatness of companies: focus on “better before cheaper.”

Better before cheaper means these companies concentrate their energies on coming up with a good product and selling it to their customers much more than they focus on coming up with a cheap product. Yes, there could be market situations where a cheaper product sells much more than a slightly pricier one. But if the price advantage comes at the expense of product quality, then it is unlikely to provide sustained benefits.

One of the classic examples that comes to mind is that of Apple which charges a premium for its products, and, despite this, has cultivated a herd of followers! Had Apple focused on lowering its costs or coming up with cheap products, it would have been just another brand, fading into the background as soon as it came into the limelight.

A possible example for the other extreme could be the Mahindra Stallio where product quality suffered when the company tried to focus on lowering costs. Despite good marketing (see a clutter-breaking TVC here featuring movie actor Aamir Khan) the product had to be withdrawn from the market. Mahindra is, nevertheless, back with a new bike, the Centuro, and it remains to be seen where this product is headed.

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Revenue before Cost

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A Harvard Business Review article by Michael E. Raynor and Mumtaz Ahmed titled ‘Three Rules for Making a Company Truly Great‘ suggests that companies that are truly exceptional (which have done well over a long period of time) prioritise revenue over cost. They call this as the rule of “revenue before cost.”

Revenue before cost means that these companies focus on the topline rather than on the bottomline. This is not to say that they don’t try to minimise costs. They do that as much as or better than their peers. But they make sure that they pay enough attention to revenue generators. In effect, they focus on capitalising on tomorrow’s opportunities rather than on solving today’s problems, which is something companies are increasingly realising as important.

For a typical manufacturing company, “revenue before cost” might mean spending more on a specific sales force who bring in new customers, rather than on a new machine that reduces manufacturing cost of parts. However, some online sales companies seem to take this principle too far when they focus on sales even as sales-returns and related costs mount.

Indeed, like any business principle, “revenue before cost” will be an effective strategy only if it is implemented well.

Growing with Integrity

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“You have to be in Germany to understand what Bosch means,” a friend told me recently. “They are like the Tatas in India,” he continued, “big, well-respected, old.” He was referring to the engineering and consumer goods company Robert Bosch GmbH. And comparing it to a large Indian conglomerate.

Both of them are standing testimony to what it means to grow without sacrificing values. As they grew, they would have made tradeoffs, they would have learnt the meaning of tough choices. Not all companies can do that. Many companies, at some point or another, give in to the pressure of shareholder results or top management self-aggrandisement. That is why we feel a strange sense of respect for companies that have maintained their values through thick and thin.

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The Benefits of Switching Off

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As incredible as it sounds, there are benefits of switching off connectivity to your mobile phone. There are at least two instances of doing this in a typical working life. The first is to go completely switched off on weekends. This is ideally done with a couple of like-minded, and preferably sports-loving, people (to keep boredom at bay) and/ or with a good book. By Sunday, you feel refreshed. Of course, this works only if you have aligned in advance with your manager and other critical stakeholders.

The second is to pay complete attention during conversations and meetings. That means keeping your phone in silent (ideally with the vibrator off) while talking to anyone, and during any meeting that you care to attend. Nobody I know does that. Nobody except myself! I find it very distracting to glance fleetingly at my phone while someone is telling me something important, and I value the present. In meetings, this practice of keeping my phone in silent mode lets me listen clearly. In conversations, this lets me value the other party. And then I call back the interrupter.

It is not that I ignore what my phone says. I just like my time and attention as interruption-free as possible.

Team Configurations for Startups

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Startups so young they haven’t even started officially using the term “team configuration” still need to decide their team configuration. They ask themselves:  what team do we start with? Very often the answer boils down to the answer for what team can we start with. Startups don’t have the luxury of choice primarily because they are constrained monetarily. At the same time, though, they also face the constraint of wanting team members who are aligned on long term objectives.

There are five startups that I now have the good fortune of watching develop into full-scale companies. All of them face their own unique situations. Specifically with regard to team configuration, these startups face different problems.

The first, a project management consultancy (with which I am engaged in an advisory role), wants fully committed hands-on people even when the work is project-based. The second startup, a financial literacy and online trading interface firm, needs people who can work on exactly what the company is doing, but without the same grade of pay as large financial companies. The third, an advertising firm, needs good hands for web-based ad development. The fourth already has a 4-member team in place, what it now needs is to move into a field that will utilise their diverse strengths. The fifth is sure of neither its field, nor its team members, and so it is still in an incubatory phase.

Looking at this from the recruit’s side, working for a startup is an investment. The big question to be answered is: am I willing to invest my next 2-3 years (at least) working for this company, and tie my fortunes to its?

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Tell Stories to Sell

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Nobody sees the whole, nobody can, at least. And so we extrapolate without even realising we do so. Very often, it is this extrapolated version of reality that determines our action and reactions. In business, this means that companies end up telling stories in order to sell.

Both brands and their buyers (customers) tell stories to each other, about each other. A brand that provides a coherent, consistent story to its buyers finds that the customers stay loyal. And this, despite there being strong competitive pressure, and minor market mistakes on the brand’s part.

Telling the right story is as important as providing the right service or the right product. A Cafe Coffee Day experience consists of the not just the coffee, and not even the ambience. Today’s customers view the brand in the context of their own lives. For instance, a birthday celebration at Cafe Coffee Day as compared to one at an Indian food place. And then the photos posted on Facebook with comments.

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Business Schools – Training for What?

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Business schools across the world are finding themselves in a situation of introspection: what exactly is the need for their existence? More importantly, what do they teach?

Applications for this  year’s Common Admission Test (CAT) that is used as one of the key parameters for admission to the elite Indian Institutes of Management (IIMs) came down to a record low of 190,000 this year. For whatever reasons, students seem to be finding b-schools less attractive compared to other options.

To the first question of what b-schools are needed for, there are a few things that business schools can teach. Firstly, there are the business subjects: marketing, finance, operations, human resources and systems, as any first year b-school student would be able to tell you.  Secondly, there is another subject that b-schools try to teach but don’t do so well: strategy. And the top strategy consulting firms end up trying to follow an apprenticeship model so that they fill the gap.

Besides the above, something that b-schools are yet to do well, is being a manager and a leader. That there is strong demand for people who can manage a good business and take all steps required to get things done is very real. Similarly, there is strong demand today for another factor that b-schools are not in the perfect position to teach: leadership.  And women’s leadership as well. Today, all of us – at least those who care enough to have a say in the matters – tend to preach the same old advice about leadership because we haven’t seen what true leadership can do. There is some hope here, though, as b-schools recognize the situation and respond to that.

As the first step, we need to realise that tomorrow’s leaders will face a completely different set of situations today. As I brought up in this thought experiment.

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Family Businesses in Transition

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In my previous post, I had pointed out cyclical changes in economies. Here, we look at family businesses and how these are undergoing times of transition. Unlike in the Western world, India has a large set of family businesses, although we now prefer to call them promoter-driven businesses. These are essentially businesses built up by the father (often alone), brought to maturity, and then handed over to the eldest son, or divided up among the sons.

There are some promoters who realise that the handover needs to be professional in order for the company to succeed in the new world. They also realise the value of a good education — both in a good institution and in the company playground — for the son or daughter to lead the company towards success.

Yet again, there are some promoters who realise that they know how to run the business even when others have mishandled it. These are the likes of Infosys. The company was built up by a team of five or six software engineers, so it was not seen as a family business. But when push came to shove, it was the Narayana Murthy who acted as if he had his own blood in the business. And it is he who has stepped in to put things right, along with his son. It is now a matter of waiting and watching to see what happens.

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Many thanks to the unwitting scion of a family business who talked to me all through a Mumbai-Delhi flight, rather than listen to music or play on her iPad, for helping form this post.

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Cyclicality in Economies

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The imposition of custom duty on flat panel televisions last month is seen in some quarters as a signal that the government is serious about trying to reduce the current account deficit. Similarly, the increase of import duty for gold, twice in fact, during recent months is being seen as a signal that the government does care about the economy.

However, these moves have not been without negative effects. Signalling could be either ignored or misinterpreted. In either case, it might not achieve its intentions. Not all of these signals reach their aim. For instance, the higher import duty on gold has led to instances of  smuggling of gold.

At times like these, it takes guts to say that India’s crisis could be a good thing, and to take the effort to explain why. Prof. Jayanth R. Varma of the Indian Institute of Management, Ahmedabad has done exactly that in his post dated 29 Aug. The same post also points to three other links that are equally worth reading. His blog is worth following even for those who are not in the world of finance and business.

Besides this, there is also the history of other countries that we can consider in order to understand our own economy better. There is cyclicality which is seen in several economies. There are periods of booms and busts, and very often the cyclicality is something policy-makers might find difficult to act upon.

One country whose history is interesting for us to understand is Argentina. Apparently, Argentina is a country that has seen strong growth followed by political deterioration accompanied by economic decadence. For those who are even mildly interested, the Wikipedia page of the economic history of Argentina makes for very interesting reading. Many thanks to the person who pointed this out.

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