Sunday, December 28, 2014

Good Governance in India: Gandhian Economic Philosophy with Digitally Connected India

One of the election planks of Narendra Modi’s campaign has been ‘Minimum Government-Maximum Governance’. It is befitting that the elected Government of Narendra Modi has organized an essay competition for school children on good governance. Governance is a word that has become important in a business context as well. Corporate governance, for example, is taken very seriously by all progressive corporations. Governance is applicable for any and every organization, for that matter. At a broader level, of course, governance at a national level is the most relevant factor for national development. This blog post seeks to delve into the definition of governance and explore what could governance for India’s development and strategies to secure and institutionalize good governance.

Governance defined

The word ‘govern’ is defined in a national context. It means legal control of a country or its people with the responsibility for introducing new laws, organizing public services and managing economy. Governance is the activity of governing a country in terms of its various facets. At a company or organizational level it involves setting its articles and memorandum of association, forming its code of conduct, and establishing and operating the company as per the articles, business code and all applicable national and international laws.  Governance at the country level is extremely important for India as governments are formed by the parliamentary and legislative representatives of democratic India elected by its people as per the constitutional processes. With 29 States and 7 Union Territories having local State level governments and the nation as a whole having the Union government at the Centre, governance in India, however, tends to be quite plural.

The central theme of good governance is economic growth with social equity. There are, of course, other supportive themes such as gender equality, poverty elimination, people empowerment, modernity with tradition, globalization, employment generation, universal education, healthcare and sanitation, housing for all, rule of law etc. All such themes can be defined as integral inputs or outcomes to the central theme of economic growth with social justice, and in short - development. While people’s aspirations are expressed through elections, they can only be achieved through governance by the elected representatives. The structure and processes of governance are determined by the constitution while the strategies to execute on governance are determined by various laws, policies, schemes and procedures (together, governance tools). While the bureaucracy both creates and executes the governance tools and is accountable to the elected governments, they, in turn, are accountable to the people.       

Gandhian Governance

Mahatma Gandhi advocated a concept of good governance that emanates from the grassroots level. He held that the village is the smallest microcosm of the nation which must reflect good governance through empowerment and self-rule. His concept of Panchayat Raj is the structural definition of his concept. Gram Swaraj for Mahatma was very much a part of his concept of Poorna Swaraj for the nation. In one of his writings, Mahatma said, “Panchayat Raj represents true democracy realized. We would regard the humblest and the lowest Indian as being equally the ruler of India with the tallest in the land”. Successive governments have tried to provide constitutional and legislative enablement to Gandhi’s concept of Gram Swaraj and Panchayat Raj. That said, even after several decades of Indian independence, the rural population and the underprivileged continued to be left out of the mainstream of development which is reflected in recent governmental initiatives such as Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

MGNREGA seeks to guarantee 100 days of livelihood security to the population meeting prescribed criteria. While it is welcome, Mahatma’s goal of generating wealth through economic activity and good governance remains unfulfilled. Gandhiji gave several avenues, under the broad umbrella of Sarvodaya, to achieve economic self-sufficiency at the village level. He advocated ending poverty through improved agriculture and small scale cottage industries across all villages. Gandhian Economics focused on economic self-sufficiency at rural community level. He not only advocated Sarvodaya but gave relevant tools such as Charkha and Khadi to generate employment. Large scale industrialization that emphasizes machine made products vis-à-vis handmade products has pushed Gandhian economic tools to the background. The call by the Prime Minister Narendra Modi for Indians to patronize khadi is indeed a welcome exhortation. Good governance initiatives of the PM have a greater probability of success with a digital connect that would restore both gram swaraj and Gandhian economics.

Five principles

Governance, in its fundamental ambience, represents universal inclusiveness, transparency, access, simplicity, objectivity and ease. If we agree that India still lives in its villages (as it is true) and true empowerment must start with the indigent and downtrodden, whether rural or urban (as also it is true), whatever ideal governance we have must satisfy the six principles of inclusivity, transparency, accessibility, simplicity, and objectivity. Law and procedures, projects and schemes, structures and processes, administrators and enablers must have a system of governance that works for the layman as much as it does for the erudite. This can be achieved by imbuing simplicity in each second component of the four pairs mentioned above. For example, while laws would perforce need to be complex to envisage and address all eventualities, procedures at least must be simple and intelligible.

Similarly, while projects must be based on an overall developmental magnum opus, schemes must be those that touch the lives of all in a simple manner in an immediate and recurring timeframe. Again, in a large federal country like ours political and administrative structures cannot anything but be complex. However, the processes must be simple and speedy. Administrators who are required to work with multiple political systems may be cautious by instinct and training but those who are heads of agencies (district collectors, departmental secretaries or public sector heads) need to focus on being in touch for speedy delivery. This duality of foundation and purpose or of the institution and the individual requires that the back-end of the governance mechanism could be as complex is the wont but the front-end of people contact must be as simple as it can be. This balance of internal complexity and external simplicity can be achieved only with digitization.

Digital governance

Digital governance is a system of governance in which all laws, procedures, projects, schemes, structures, processes, administrators and enablers are connected with each other and the individual across India in a seamless way. This requires that the whole of India is a wifi village with broadband, fibre optics and tower systems connecting all of India. This also requires that every individual has a Unique Personal Identification Number (UPIN) and every institution will have a Unique Institutional Identification Number (UIIN). Needless to say, India is moving into a new future in that direction with the Central Government sponsored Aadhar Project. The governments would like to connect subsidies and benefits to Aadhar number, for example. AP Government has made supplies of sand for construction purposes a digitally enabled process administered through women self-help groups. However, much more needs to be done for total digital governance at a national level, in terms of hardware and software.

In the full digital model, every individual will possess at least one electronic device, one smart phone and one tablet. He or she would have Internet access wherever he or she is in India. Every transaction requiring interface between the individual and government would have an electronic form and processing system. Every individual would have opened a new Jan-Dhan Bank account or would convert one of his available accounts into a Jan-Dhan account. The entire landscape of laws, procedures, projects, schemes, structures and processes would be in the form of multi-language ready access portals, with easy to manage forms and processes for applications and approvals, queries and responses, and self-certifications and random evaluations. Every minister and public official should have a position-linked email ID based on which he or she can be communicated with. Each Minister and Officer should have an information processing assistant to handle queries and responses on a prioritized basis. The objective would be to enable a person of even ordinary literacy be a helpful and helped member of pan-Indian digital governance.

Connected India

Connected India is possible with a mammoth collaboration between global and Indian digital giants. The recent days have seen such global majors making a beeline to the Prime Minister Modi, Central and State Chief Ministers and officials. India must conceptualize collaborations between global majors such as Google, Facebook, Twitter, Microsoft, Cisco and such other digital enablers on one hand and Reliance, Bharti, Idea, Tata, Infosys, TCS, Wipro, HCL Technologies, Cognizant, BEL and such other Indian telecommunications and information technology companies on the other to develop a digitally connected India. Just as ‘Make in India’, ‘Connect India’ must be a campaign and execution platform for global and Indian corporate majors to receive support from India’s Union and State Governments.

Connected India would fulfil the Gandhian economic dream of Sarvodaya whereby the most distant and grassroots individual could be connected with the rest of the country and the highest echelons of the governments. It will connect the producers with the marketplace, and help identify and integrate inputs for producers and outputs for users. India has wrought an information technology revolution for the world; it is time that India did something digitally for itself. The Government may need to establish a major collaborative fund, with contributions by global and Indian governments and corporations, to finance the Connected India program. The programs will provide economic returns to contributors in terms of hardware and software sales. The only ask should be that the costs of connectivity should be extremely affordable. Gram Swaraj, Poorna Swaraj, Sarvodaya and Gandhian Economics and Good Governance will merge with, and enable, each other in a completely Connected India.

Posted by Dr CB Rao on December 28, 2014

    

Thursday, December 25, 2014

From Being Different to Becoming Differentiated: A Cumulative and Aggregative Technological Model for Smart Differentiation

A popular view is that in an industry, there tend to be only a few leaders and several followers. Another view is that a typical industry structure comprises one pioneer, a few innovators and several followers. A more refined view is that a typical industry structure is better defined by a pioneering innovator, a few incremental innovators and several followers. In emerging markets such as India where barriers to entry are low and barriers to innovation are high, and where technologies are imported and replicated, the typical industry structure is fragmented with several look-alike players. Yet, industries in emerging markets are characterized by intense competition with look-alike products or services trying to be similar and different simultaneously. Some industries in India such as consumer goods and pharmaceuticals are archetypes of industries where look-alikes wage a no-holds barred war to be different.
   
The unique nature of industrial development in India (probably even in China and other Asian markets) which promotes small and medium enterprises facilitates regional development of local enterprises which clone a few national companies. The emphasis is on being different in terms of branding and packaging or in terms of marketing and promotion. Multiple brands with little to claim by way of differences in product characteristics compete to be different. In most cases, the channel becomes an enabler while packaging, promotion and pricing become differentiators; the core product or service has little to differentiate itself. Even highly technology driven products find it difficult to remain differentiated as technology and manufacture become commoditized. The smart phone industry which was a technology flagship is a classic example. This blog post proposes that an approach that accumulates and aggregates technological developments in terms of five smart differentiation principles is the key to sustainable differentiation.

Defining differentiation

Differentiation is not merely being different. When every smart phone has a rectangular profile, the beleaguered BlackBerry has come up with a square design. It is different certainly but is not seen to be offering a new benefit that could make it a popular smart phone. Samsung’s Note 4 has an edge design to bring differentiation to the ageing phablet line-up and so does LG curved smart phone. These are different designs certainly but are seen to be complex to operate. The rotary Wankel engine brought a revolutionary engine to automobile design but had little to offer as a differentiater to the customer. In contrast, the phablet, although in one sense a large scale small phone or a down-sized tablet, became a differentiated product. Extending 2 wheel drive to 4 wheel drive has become a differentiating factor for rugged all-terrain SUVs.  

Differentiation arises primarily from a unique combination of innovative product design and superior functional utility.  It can arise also from superior customer service which often emerges from deployment of unique technologies. In some cases, companies get associated with certain industry leading characteristics that extend beyond products. Good examples are Apple getting associated with product elegance, Toyota with product quality, Shinkansen (Japanese Bullet Train) with timeliness, L&T with construction quality, Tatas with ethical business, and Harvard with management education, for example.   All of these position the product or the company in a differentiated manner in the eyes of the consumer, evoking trust and confidence. Differentiation leads to respectful recall of a product or service by the customers at one level and expectant anticipation of a new differentiated product or service at another level.

Cumulative and aggregating  

Differentiation is rarely a one-time occurrence. Like learning, differentiation is a cumulative experience. Continuous differentiation alone can place a firm or a product line as truly differentiated. The challenge here is one of ensuring a raising bar of differentiation, and leveraging design, manufacture and marketing to raise above the raising bar through successive product introductions. One of the most striking examples of such differentiation has occurred in the field of medical imaging and radio/laser therapy domains, with successive developments achieving sharper imaging and more precise surgery respectively. Incessant march of technology is the principal support for continuous differentiation. This includes a clear understanding of the deficiencies of current technologies and development of gap-filling technologies.

Like learning, differentiation is a judicious combination of specialization and diversification. A door locking mechanism can become more specialized in terms of mechanical sturdiness, key grooving complexity and multiple turn locks. A door locking mechanism can also be made different through number locking or biometric locking (finger print or iris). By combining the features of all of the four approaches, however, a truly differentiated locking mechanism can be developed. The success of the lock maker as a differentiated lock maker would thus depend on specializing in the core locking technologies and integrating diversified locking technologies. The same has been true for watch making too. Mechanical capabilities are integrated with a range of digital technologies, including GPS technologies. The next frontier in watch making is opening up with integration of cellular and medical technologies.  Differentiation is a resultant of cumulative and aggregating technologies.

Smart differentiation

Differentiation would appear to pose challenges of a highly investment-intensive and design-specific technological process. Firms believe that huge upscale investments in R&D would be required to be a differentiated firm. As a result, many firms would choose to be fast followers or licensors rather than pioneering differentiators. The reality, however, is that differentiation is as much a function of smart use of technology as it is of intense development of technology. There are certain principles of smart differentiation which can help firms become and stay differentiated even with reasonable investments in technology. Observation, Sensing, Imagination, Learning and Timing (OSILT) are the key to smart differentiation.  The following five principles of the OSILT model of differentiation illustrate.

Observe a future

One of the fundamental drivers of smart phones has been the camera technology. Integration of camera functionality of increasing sophistication with higher megapixels and photo editing software has differentiated successive generations of smart phones. However, until recently all makers gave increasingly superior technology (up to 20 megapixels level) to rear cameras and allowed the front cameras to languish at a 2 megapixel level. Clearly, the established notion that cameras are only to take pictures of others has been so deep-rooted that even the most innovative smart phone makers perpetuated the past despite the hugely increasing popularity of selfies for the last few years. It is only now that a few makers are providing an equally capable front camera in smart phones. The lesson is that the key to differentiation could be so obvious that it escapes attention. Smart observation can help utilize available technologies to achieve substantial differentiation.

Sense a future

Sensor technologies are emerging to be game changers as computer chips have been. Virtually any product can be refined or re-engineered with sensor technologies. Some of the earliest applications have been on the shop floor with sensor driven line logistics.  Today, driver-less cars are a practical reality due to sensor technologies (coupled with imaging, navigation and telecommunication technologies). Biological sensors would be the next frontier in sensory technologies helping the individuals and healthcare sector provide proactive and effective healthcare delivery.

Imagine a future

Differentiating individuals or entities are good in imagination. They constantly imagine how life can be made better. Magnification technologies have revolutionized surgeries. Cellular labeling could provide even greater precision in future. The emerging use of drones for a number of applications is a practical example of how imagination provides new differentiated solutions.  One may imagine how a Bed and Pillow Combination (BPC) could move from being just a sleep aid to being a health monitor and wellness provider. Given that sleep of 6 to 8 hours, on an average, is the typical daily routine of an individual it is easy to imagine that BPC has a much better potential to provide wellness than an annual medical check-up!

Learn a future

Future is built by individuals who learn constantly. Learning comes from a host of inputs. A designer who is entrusted with differentiation, however, has a special responsibility. While books of science and engineering, design laboratories, simulators and testing arenas are all essential for the designers to learn and develop, the greatest learning comes from the practical behavior of current products in the field. The linkage between the designer and user has to be set in the real time world rather than through observations and analysis of market researchers. In differentiated companies, individuals of all departments, including the CEO, learn from the marketplace on a continuous basis.

Time a future

There are two views on innovation-led differentiation. One is that an innovation would be off mark if it is commercialized ahead of market preparedness. The other is that prompt introduction of innovations creates its own markets. If any or all of the above four methods of are utilized to develop a differentiated product or service, it would be an injustice to socio-economic development to hold back on such differentiation. That said, certain geo-political or socio-economic considerations dictate or influence the timeliness of innovations. Given India’s developmental aspirations, innovation and differentiation that support development of smart cities, good governance and Make in India would be timely for a new future for India.  

OSILT as a design faculty

Competitiveness of a business accrues from superior faculties. Adoption of methods of sharp observation, sophisticated sensing mechanisms, imagining the use of ordinary to deliver extraordinary, learning from the past as well as the present and timing the innovations ought to be developed as a core faculty for designers. This would imbue them with the ability to make products or delivers services that are not merely different but more importantly truly differentiated. Development of such an OSILT faculty needs to be a strong cultural facet of differentiated organizations.  

Posted by Dr CB Rao on December 25, 2014           
  

  

Saturday, December 20, 2014

APT (Andhra Pradesh – Telangana) Model of Development: Apt for the Whole of India?

‎Ever since the constitutional division of Andhra Pradesh took place early this year in June 2014 with the carving out of a separate State of Telangana, an interesting competitive battle of development aspirations has been going on between the Government of Andhra Pradesh (GoAP) and the Government of Telangana (GoT). This battle is based on models of economic development being pursued by the respective governments. Although appearing to be competitive, the two models actually reflect a single integrated model that has socio-economic development ramifications for India as a whole. This blog post names this model as the APT Model of Development (APT being an abbreviation of Andhra Pradesh - Telangana)‎ and examines if the APT model is also apt for the nation at a macro level.

With the formation of the State of Telangana, India has 29 States and 7 Union Territories. The organization of India into several States based largely on linguistic and micro-ethnic considerations got challenged as a concept in November 2000 with the carving out of certain regions of the large States of Uttar Pradesh, Madhya Pradesh and Bihar into the States of Uttaranchal (later renamed as Uttarakhand), Chhattisgarh and Jharkhand, leaving the residual states as well in each case. The linguistic basis has been challenged even more with the recent AP and Telangana division. Some believe that this trend towards smaller States could continue in future. Political considerations apart, the APT division brings out an economic model of development that needs to be understood better in the Indian context.

Aspirational icons

The APT model has been driven by developmental aspirations and political expressions thereof. The respective Chief Ministers, Nara Chandrababu Naidu (NCN) of Andhra Pradesh and K Chandrasekhara Rao (KCR) of Telangana became iconic leaders aspiring for, and articulating, transformational change in the two States. NCN and KCR have been aggressive in talking about development and welfare schemes almost on a daily basis. Given the natural endowments on one hand and the development deficit on the other in the residual AP, NCN has felt inspired to conceptualise more schemes than his counterpart. In fact, he calls the State of AP as the Sunrise State. Some of his aspirations have been economically compelling as well as financially audacious; development of a chain of 12 ports on the Eastern Bay of Bengal corridor, creation of a new super capital in the Guntur-Vijayawada region, development of multiple smart city, metro rail and airport projects, for example. 

Although having Hyderabad as the continuing capital, business hub and wealth generator, KCR does not wish to rest on the past laurels either. He has dreams of a magnificent Hyderabad with the world's tallest tower and a host of skyscrapers around the Hussain Sagar Lake, establishment of a new pharma city and development of multiple industrial parks in and around Hyderabad. On the development front, both the Chief
Ministers are committed to write off the loans of indigent farmers (this being their principal election plank) and provide a host of updated welfare schemes (health and water, for example). AP has since tasted some success in securing some greenfield manufacturing projects in the largely agrarian regions (eg., Hero Motor project) while Telangana is hoping to build on its strong business and industrial base (eg., Amazon in Hyderabad). Clearly, both the CMs are leaving no stone unturned to keep developmental aspirations high on people's agenda.

Development passion

This aspiration-articulation model is a sort of role reversal for the traditional polity. For the first time, super-projects of a mega scale are being talked about, almost on a daily basis. Also, for the first time, silent functioning on electoral promises has been replaced by articulate focus on the promises made, and more. Apart from the traditional “look towards the Centre” approach for funds the two States have been trying to directly canvas with developed nations like Singapore and Japan (and industries therein) for development of super-projects in the States. AP even wants China to look at a bullet train project for the State. Part of this new approach may be attributed to the desire of the NDA Government at Centre to enable greater financial and economic devolution to the States. That by itself does not take away the merit of the self-inspired passion for development that the leaders are projecting.

Development is at the centre stage of political debate and economic governance in the New India. ‎ The programmes, projects and schemes announced by the Prime Minister Narendra Modi such as Make in India, 100 Smart Cities, Jan-Dhan Yojana, Swatch Bharat have led to a new renaissance in economic thinking as a driver of political consolidation. However, at the APT level, development has assumed greater focus and urgency given the local issues and higher visibility (of either performance or non-performance). There is an effort to implement in five years clearly visible development projects that could support electoral wins in the next elections. This approach is both laudable and self-propelling. Clearly, what does not exist in India but has propelled growth elsewhere (bullet trains, broad band, smart cities, 24X7 power, for example) must come to India but without any disadvantages that have been noticed elsewhere.

From PPP to GTG

The history of economic development in India has started largely in the public (government) sector in the 1950s but moved to public-private partnership from the 1990s. There is, however, a perception that even the private participation is backed only by funding from State-owned ‎banking system (the latest being a plea for bailout of the financially distressed low-cost airliner SpiceJet by Banks!). With the banks already burdened with stressed assets as a result of backing private and public sector infrastructure, the need to find the required resources of mammoth proportions is a huge challenge. If the external diplomacy of the Prime Minister and APT Chief Ministers is an indication, there is a well merited intent to move towards a global Government to Government collaboration to meet the funding needs. All international governments recognize that India is the only emerging market that is set for strong and sustainable growth, which realisation must be leveraged by the Indian governments, Central and States, as a new model of Government to Government (GTG) collaboration.

While the advanced nations may have a lower ability to import and absorb Indian products‎ due to their lower economic growth, they are in need of finding new markets for their infrastructure equipment and capital goods. Bullet trains and metro rails as well as power, mining, drilling and construction equipment are prime examples. India needs to find a new paradigm by which Indian development needs provide a market for such industrial and infrastructure products but are also made in India to the extent possible. The good old phased manufacturing programmes of the 1970s and 1980s that were successful in getting new technologies for the Indian automobile industry need to be revived in an appropriate capital goods format model. Starting with Completely Built Units (CBUs) through Semi-Knocked Down (SKD) to Completely Knocked Down (CKD), phased manufacture is the way to go. However, CBU and SKD imports should be tied to long term interest-free aid, and only CKD imports should be allowed on commercial basis. 

Growth with division

The APT model has certain important lessons, each with latent pointers. The lessons are as follows. Firstly, division of States could lead to a competitive urge for development. Secondly, smaller geography, in each case, could lead to greater governance. Thirdly, natural resources hitherto neglected in a broader State emerge as ready reckoners for development. Fourthly, the development deficit stares at the people more starkly bringing out a greater development urge. Fifthly, the resource crunch brings out novel models of development. Sixthly, people and governments no longer see development merely as a transaction; they would like to remain as long term stakeholders to enjoy fruits of development. Seventhly, politically triggered division could be accompanied by economic sops. These lessons have certain pointers too.

The pointers are as follows. A competitive passion for development need not necessarily wait for a division of the State. For example, even in the erstwhile combined State, building of new capitals (for the regions of coastal Andhra and Rayala Seema) could have been considered. Development of coastal and industrial corridors or new industrial and business hubs should have been as relevant in the undivided State as they are in the divided States. Long term stakeholder concepts could have been part of all development projects (dams, SEZs and capital cities). If Centre had the financial wherewithal to grant new IITs and IIMs post-Division and grant special financial packages, they could be provided even otherwise.  There is a factor, therefore, that is beyond all this that is making the APT Model work despite all the financial challenges. And, that is iconic leadership.

Iconic leadership

In a recent event at Visakhapatnam (“Andhra Talks Business” organized by Fortune India), the Chief Minister of AP unveiled his mission to make AP the best destination in the World in stages. He said that he wanted to make AP one of the three top States in India by 2019, the best State by 2029 and the best destination in the world by 2050. He referred to his characteristic of converting challenges into opportunities and outlined various missions and development projects he had in mind for the State of AP. He also disclosed that various international governments such as Singapore and Japan are keen to collaborate with, and invest in, AP. He also brought out his camping in Visakhapatnam in the wake of Cyclone Hudhud and working ceaselessly with his government agencies and people to restore power, telecommunications, water and food supplies and, more importantly, public confidence in a manner that no national or international Government could do thus far. The progress and success of APT Model and the Sunrise State concept of AP as a preferred global destination will be keenly watched by experts and laymen alike.

India is a land of natural resources and enterprising people. India is peace loving and growth oriented. The developmental aspirations that were triggered, and further unleashed, by the division of Andhra Pradesh into two States of Andhra Pradesh and Telangana are common across all the States of India. India needs every infrastructure and every development that is promised in the APT Development Model by the CMs of AP and Telangana. APT Model of creating new capitals, new smart cities, new industrial hubs, new business districts, new entertainment parks, new coastal corridors, new metro rails, new bullet trains, new power plants, new IITs and IIMs, so on and so forth is indeed apt for the whole of India. It is apt to leverage India’s huge land, water, solar, wind and mineral resources for development. It is also apt for the Governments, Central and State, to consider global governmental collaborations to generate the massive investments and access innovative technologies. However, nothing is more apt than having iconic leadership that is passionate, expressive, committed and diligent about India’s development options. In the overall, the APT Development Model is certainly apt for the whole of India.    

Posted by Dr CB Rao on December 21, 2014    



Sunday, December 7, 2014

Stress-free Living in a World of Continuous Change: Five Attribute Pairs that Could Significantly Help

Stress has emerged as an important characteristic of contemporary living. Many medical experts consider that stress, with its collateral outcomes, has been a major contributor for metabolic disorders and psycho-somatic diseases. However, there are also some who believe that a certain level of stress is required for an individual to perform at his or her full potential. Whatever be the truth of this concept, it would certainly be better if one’s full potential is achieved without stressing oneself. To appreciate this, one needs to delve into the real meaning of stress. Stress is pressure or worry on a person caused by problems and difficulties in life. Stressed individuals suffer by themselves, fighting unseen (and unnecessary) battles with invisible (and unreal) enemies; sadly and inevitably, they also cause suffering by causing stress in, and to, their families and teams. There is a debate whether such perceptions of stress are real or self-inflicted. CNN carried a very nice analysis of stress as a new universal phenomenon and approaches to cope with it. (http://www.cnn.com/2014/11/19/health/stress-free-acceptance). It considers stress as an internal factor which can be moderated by the individual rather than blamed on circumstances imposed on the individual externally. A central theme of the article is that pleasure or pain, joy or sorrow, peace or stress – these are not found in external objects or beings but instead are found in the relationship one has with those things. The article also makes two other important points. One’s relationship with the world is entirely dependent on the nature of one’s inner personality, which comprises the mind and the intellect.

According to the CNN post, the mind desires and feels while the intellect reasons, judges and decides. Stress gets generated when the intellect loses control over the mind’s desires. The article hypothesises that the fundamental requirement for a stress-free life is to develop a strong intellect and control desires. The article also emphasizes that intellectual strength is distinct and different from intelligence. Any amount of intelligence, which is knowledge acquired from external sources cannot, per se, develop one’s intellect which can only be developed by individual effort through exercising one’s faculty of questioning and reasoning. Wrong assessments of the external world are also proposed as an important cause of stress. The author of this Blog (“Strategy Musings”) commends the cited CNN article, which reads and feels almost like Hindu spiritual philosophy, as a must-read for its simplicity and relevance. That said, the capitalistic, competitive and volatile nature of the contemporary world makes it necessary for individuals to have attributes that can help them avoid or manage their stress, should the above spiritual approach is not followed. This blog post proposes that individuals must try to develop five pairs of attributes that could help them avoid difficulties and worries in life. These are: Aspirational and Adaptive, Aware and Academic, Alert and Attentive, Communicative and Corrective, and Primal and Philosophical. These cannot be useful individually or even as single pairs; they are effective only as a holistic combination of all the five pairs.

Aspirational and Adaptive

Aspiration is at the root of human behaviour. Some individuals are bold or blasé to declare their aspirations while some are reticent and circumspect to do so. Aspirational means wanting very much to achieve success in one’s career or to improve the social status or standard of living. Stress gets generated as one works to achieve aspirations, more so against odds. When achievements trail aspirations a debilitating circle of increasing stress comes into play. All aspirants tend to choose certain means to achieve their aspirations but somewhere along the route miss the wood for the trees. Take the case of students who aspire to join an elite educational institution, in India or abroad. They typically miss the point that acquiring academic excellence regardless of the institution is more important than wanting to join the elite institution or losing motivation when the admission is missed. Same is the case of professionals who seek to join top-rung corporations; in the process, they miss their own ability to impact positively any institution they are eventually able to join with the right professional skills. Aspiration must be accompanied by an adaptive attribute. Adaptive means being able to change when necessary in order to deal with different situations. Individuals as well as organizations frequently encounter situations which are quite different from those envisaged when they would tune in, and scale up, their aspirations. Being adaptive does not mean scaling down aspirations. The boom in shale gas does not mean that the CEO of the organization that set out to make his company a crude oil behemoth needs to give up; it, however, requires being adaptive to retool the strategy in favour of shale gas exploitation, including new cost-effective shale oil exploration technologies such as fracking. The ability to be aspirational and adaptive comes from an ability to be aware and academic.

Aware and Academic

Stress gets generated when people get into situations without requisite knowledge or capability to handle. Smokers who are unaware of the dangers of tobacco or people who are unaware of the deleterious effects of junk food are just examples of how individuals who rely on them for stress relief would eventually be stressed out because of the resultant ill-health. Aware means knowing and realizing something, for the good or for the bad. Awareness is the basic minimum attribute of an individual or an organization that saves a situation. Lack of basic awareness leads to considerable stress as one would get into situations, the gravity or requirements of which one does not simply know. An individual, for example, needs to be, at the minimum, aware that handling chemicals could be dangerous. The awareness would lead to a reference to the knowledgeable experts who can advise on the dangerous chemical reactions and the ways to avoid or control them. Being aware is the first step to being adaptive. Adaptive behaviour, especially to changing environment, eliminates or reduces many causes of stress. Awareness needs access to expertise to be meaningful. Expertise comes from ceaseless academic quest. Academic means a lot of reading, studying, experimenting or research to enhance knowledge. Plastic was a wonder material that ushered in a revolution in the consumer goods and food processing industries. Yet, only subsequent academic studies, decades later, could bring out out the harmful effects of certain types of plastics and the ingredients that are used in plastic manufacture (or remain in the plastic products). Whether it is the harmful effects of tobacco and alcohol or the beneficial effects of herbs and spices, all agrarian in origin, academic development continues to identify new problems, provide new solutions or revalidate ancient knowledge. By being aware generically on a broad spectrum and being academic in the chosen profession through continuous learning one would be in greater command of one’s career and life. As the CNN article points out, however, knowledge and intelligence by themselves are of little use without application which requires one to be alert and attentive.

Alert and Attentive

In the contemporary information society, it requires a particularly isolated and cloistered life not to be in the path of informational torrent. The flood of information numbs the ability of any typical individual to prioritize, let alone be discriminatory or incisive in analysis. Information overload and the conflicting interpretations that emanate with or without expert scrutiny, especially on the Internet, leads to stressful perceptions and dilemmas of “to do or not to do”. Yet, some of the information pieces are true nuggets of wisdom (as the cited CNN post).  Being alert and attentive helps one cope with the stress of being overtaken by progressively or rapidly changing situations. Alert means the ability to think quickly and being quick to notice things. Alertness equally enables a person to judge the nuggets for their true worth quickly and develop response plans. Alertness is reinforced by attentiveness. Attentive means listening or watching something carefully and with interest. Significant stress is generated when people are not attentive and either pass up opportunities (pointers from placement talks by companies, for example) or get into difficulties (not heeding to traffic signage, for example). Typically, all of us get but a few seconds to note each information bit of the scrolling information package of the day. One needs to be alert and attentive to make the best use of such seconds and the information bytes. At the other pole position, being alert and attentive is the only way to remain safe (protected from danger or harm) and stable (steady and undisturbed) through anticipation and caution, whether old or young.

Communicative and Corrective

Unreasonable external environment could sap one’s energies and make unreasonable demands on one’s ability to cope with pressure, leading to stress. All of us would have lived with unpardoning teachers or autocratic bosses. The more volatile the external environment, the less resilient one’s internal faculties become.  This coupled with the traditional Indian mind-set of just taking orders from superiors (reference Vishal Sikka, Infosys CEO’s recent observation) rather than debating contrarian viewpoints results frequently in people building up stressful and bottled up emotions within themselves. As the CNN post says, communication and correction are necessary when the external dependencies warrant it. One’s ability to be effective in communication depends on one’s maturity. Maturity is the quality of thinking, expressing and behaving in a sensible manner. Maturity helps individuals take the adversity in one’s stride and look beyond the problems for opportunities. Correction would, in this context, mean self-correction too. Ability of mature communication flows from a strong sense of reasoned self-worth. Respect (and not arrogance) for one’s capabilities results in authenticity to the communication. Mature and authentic communication results in better receptivity to correction, and has a calming influence on the stress levels. On the other hand, arrogance in one’s capabilities leads to abrasive communication which is, in itself, a trigger for stress build-up.

Primal and Philosophical

Failure is easy to read but success is difficult to fathom. Ironically, people read too much into failure as if it is the end of life, and become too smug with success as if it is the proverbial (and automatic) stepping stone to success. Both the approaches lead to needless stress levels. Research is a classic example of how failures lead to pioneering successes. Almost all great inventions and discoveries were based on multiple failures of experiments. The decline of successful leaders and businesses, on the other hand, points to the possibility that success could be a quicksand-like experience; it could result in irrational exuberance which makes one less prepared to confront new challenges. Preoccupation with failure and exultation with success are respectively leading and lagging triggers of stress. The way to cope with the failure-success cycles in life is by being focused on primal needs at all times and being philosophical when all of the above four factor pairs do not yield the anticipated results. Primal means certain very basic and fundamental needs which must be taken care of at all times in life, for oneself and for all those under one’s caring and protection.  Philosophical means having a calm attitude towards a difficult or disappointing situation. This combination of primal-philosophical attributes certainly helps one cope with failures and successes without stress. One who relies on the least of materialism and the most of spirituality enjoys life as no one else would. Unfortunately, only a wise few are blessed to live like that; hence the need to rely on the paired attribute kit as discussed in this blog post!


Posted by Dr CB Rao on December 5, 2014 

Sunday, November 30, 2014

National Competence Consistency: Key for Global Leadership through “Make in India”

There is perhaps no nation that has as much history of pioneering knowledge, dating back to several centuries, in eclectic sciences and technologies as India has but has struggled so much to rediscover and fulfil the potential in recent past (despite some significant achievements in certain areas of industry and infrastructure). Prime Minister Narendra Modi’s clarion call to global investors and global industries to “Make in India” resonates well with India as a resurgent nation that believes in self-reliance and global leadership. Modiji has also rightly laid stress on skill development as the basis for building scale and scope in the manufacturing, research and other areas. Though the national goal and the enabling strategic direction are well understood, the need for an almost revolutionary transformation in the competency paradigm is perhaps not fully understood. Successful nations on global missions have achieved such status based on making the required competencies a national comparative advantage.

India’s industrial development has been on fragmented lines as is well known. It is characterized by a few big capable firms with national competitive posture and several mid and small scale firms with regional or sub-regional presence. The former are able to develop or access, and compete on technology while the latter struggle to access, let alone develop and compete on technologies. This does not mean that a firm has to be only big to be competent; as Japan and Korea illustrate it is possible for even small and medium companies to be technologically competent. Many times the lag of the latter in India is attributed to scale related investments and finance; on the other hand, the lag is due to a managerial and leadership approach that fails to utilize all factor sets optimally. This lacuna needs to be addressed because global leadership can come about only when competencies are pan-Industrial and reflect a national characteristic of consistency. That India has some distance to go on this aspect is illustrated by a just published survey on India’s travel experience.

Unreasonable spread

Key findings of a survey by the leading travel website TripAdvisor listing Indian airlines preferred and shunned by passengers, and the reasons thereof, have been published in The Economic Times Magazine, November 30-December 6, 2014, pp 10 and 11. While the study on a travel service may apparently seem to have no nexus with the Make in India hypothesis, relevance does exist. Clearly, all the airlines have invested in having a fleet of modern planes, and all the associated piloting, crew, ground handling, maintenance and ticketing infrastructure. Yet, the way the individual airlines utilize the respective infrastructure and organization to deliver the ultimate services is paradoxical, to say the least. The survey generated ratings on twelve performance parameters. These are on-time performance, value for money, in-flight entertainment, in-flight food/beverages, cabin crew, landing/take-off, check-in, baggage delivery, cabin maintenance, seat comfort/leg room, website, and overall experience. Given the sophisticated nature of the airline industry, one would expect the airlines to uniformly meet certain base metrics.

The results of the survey bring out a huge variation in performance as perceived by travellers. For example, with reference to on-time performance the approval ratings ranged from a measly 0.4% to a respectable 69.6%. Except two airlines (the second trailing at 16.3%), all the others had a very low range of 0.4% to 6.3% on this factor. In fact, on each of the other eleven parameters too, the spread has been inordinately high. In terms of overall experience, the pecking order has been 42.0%, 37.8%, 10.6%, 5.5%, 2.0%, 1.0% and 1.0%. Even more tellingly, on safety too, the approval ratings showed a dangerously wide range from 0.8% to 31.2%, with only 14.9% of the respondents deeming all the airlines to be equally safe. Clearly, same or similar assets and talent base has been resulting in radically different perceptions of performance. If the survey brings out one factor as a common theme, it is the lack of consistency in competence as reflected in performance delivery and user experience.

National consistency

If a nation has to qualify as the world’s destination for any competitive activity it must first qualify as a consistently competent for that activity. India has been able to do that in the field of information technology. From the established metro cities to the emerging urban regions, aptitude and skillsets for information technology became available, making computer coding and system architecture a nationally consistent competency. In respect of manufacturing, however, India has been able to develop at best certain regional clusters of competency. Notable among these are the clusters for automobiles, auto components, steel making, shipbuilding, defence equipment, heavy engineering, pharmaceuticals, jewels, watches, movies, collieries and a few other sectors. On the other hand, certain industries have been just firm-specific and not even region-specific. Modern and safe construction industry has been more a firm-specific phenomenon than even a regional competence. Probably, construction safety by its absence is an unfortunate national consistency.

National or regional consistency has, to-date, been a resultant of top down initiatives. The establishment of heavy engineering and steel companies in public sector and the other noted companies in public/private sectors has created a pull factor for the generation of competencies in the 1950s and 1960s. Initial training by overseas collaborators followed by indigenisation of skills has helped development of regional clusters. As India looks at a new wave of Make in India none of the previous strategies would be good enough for the task ahead. Consistent competency development has to be a simultaneous nation-wide effort. It is not impossible. The new waves of the Indian Institutes of Technology (IITs), Indian Institutes of Information Technology (IIITs) and the Indian Institutes of Management (IIMs) that have been so successfully set up in tier 2 cities and in the far flung regions of the nation indicate that Indian population is always game for creating new centres of excellence, whatever be the domain.

Make in Education

An effective Make in India initiative can happen not in India’s industries or firms but only through India’s schools and colleges. The Indian educational system needs uniformity of high standards, encouragement of creativity, openness of evaluation and continuous bridging of theory and application. In the current India, quality is heavily tiered in terms of classes of schools and colleges. While some differentiation across institutions is inevitable even in advanced nations (like between Ivy League and other institutions), the kinds of differentials that are allowed to perpetuate between different boards of education, different types of public and private educational institutions and institutes of national importance and several other tiers in India are so huge, and in many cases so discriminatory, that a uniform quality of education on a pan-India basis has been elusive. The educational system is in urgent need of reforms ground-up in terms of building national competencies.

As this would inevitably take time, there is an urgent need for some top-down reforms too. One way would be to dedicate the final semesters of each course to finishing courses which align the students to the industries of their choice rather than to desultory project assignments in which the randomly matched firms and students have no shared interest.  The finishing courses would comprise generic toolkit such as communication, collaboration, project management and networking skills and specific industry specific toolkit such as advanced computer languages in respect of information technology industry, international regulatory compliance in respect of pharmaceutical industry, mechatronics in respect of machine tool industry, genetics and epigenetics for biotechnology industry, and so on. The finishing courses should be nationally standardised and should be of such rigor that student of any institution should be on par or above the best of global educational standards. Availability of such skill optimization would make India a natural destination for Make in India realization.

Together we succeed

While India has many industry associations, almost all of them have agendas related to policy reforms. Macro-economic factors remain their paramount engagement. Skill upgradation is seen to be the task and responsibility, or even a unique competitive advantage, of each individual firm. Many firms are reluctant to open themselves to the pathways and success factors that determine competitiveness through intra-industry collaborative dialogue. Let us take the example of upgrading rail infrastructure to a level of bullet train network. This would require most modern track making and coach making technologies. If the existing railway wagon firms such as Integral Coach Factory, BEML, Kalindee Rail, Texmaco, Stone India and Titagarh Wagons (and 12 others) do not upgrade their capabilities together there is little chance of Make in India being successful in this sector.  Similar logic would apply to indigenous manufacture of new generation telecommunication gear, defence equipment or power plants.

The national psychology must change from one of exulting over the indigenously benchmarked relative superiority of the leading firms to one of demanding absolute superiority of global standards. When there are reports of certain indigenous cars failing safety tests or certain products lagging packaging requirements, the industries as a whole must collaborate to develop and validate templates that meet global customer standards.  Even granted that some of such global concerns tend to be subterfuge for non-tariff barriers, there is merit in industry-wide analysis of causes and development of solutions. Higher level of skills when pursued by individual firms may make individual firms competitive relative to other Indian firms but industry-wide actions make the entire industry competitive relative to global firms. This transformation would influence global industries as a whole to move into India as their preferred manufacturing destination. Consistency of competence across the industries as a national comparative advantage is key to the success of Make in India revolution.

Posted by Dr CB Rao on November 30, 2014
     


Sunday, November 23, 2014

Nilgiris in Biyani Shelf: Scaling the Retail Heights for a New Azure Future?


For those living in South India, Nilgiris has been a highly visible and iconic brand that brought style and substance to purchases of day to day food product, grocery and general merchandise needs of the population. The retail format popularized by Nilgiris over the last several decades ensured convenient availability of high quality products, both third party branded and self-branded, in neighbourhood communities. As a result, Nilgiris, founded in 1905, has become a household name in the South, with stores in all the five states. The company sells a wide range of products, including an assortment of dairy and bakery products churned out by its manufacturing facilities in Bangalore. No wonder then that the large customer base of Nilgiris would have been saddened that the heritage brand of Nilgiris was acquired by Kishore Biyani’s Future Group on November 20, 2014. Future Group informed the BSE that it has bought a 97.97 per cent in the retail chain. According to press reports, the deal is estimated to be worth around ₹300 crore. Future Group is understood to have acquired a 65 per cent stake in Nilgiris from PE firm Actis Capital and the balance from the company’s promoters, the Mudaliar family. The Nilgiri Dairy Farm, the retailer’s operating company, will now become a subsidiary of Future Consumer Enterprise, the acquiring company of the Future Group.
The first attempt by Nilgiris to significantly scale up its retail presence came in November 2006 when it accepted an investment (of $65 million, then worth about ₹300 crore, for a 65 per cent stake) by Actis. At that point of time, Nilgiris had just about 30 stores, built over 80 odd years. The Actis investment helped the chain to grow nearly five-fold to 150 stores as of date (adding nearly 120 stores in just 8 years), besides strengthening Nilgiris’ dairy, bakery and food manufacturing operations. The exit by Actis is reported to be related to the differences between the promoter family and Actis on a number of issues including a move to get into large-format stores. For Biyani, the acquisition could be synergistic helping the Group expand its footprint in Kerala, Karnataka, Andhra Pradesh, Telangana and Tamil Nadu, where it lacks a broad presence, and also through franchises. Typically, Biyani’s group believed in centralized large format, multi-line stores such as Big Bazaar, and the convenience chain retail format of Nilgiris could, therefore, be quite complementary. In addition, it provides a foothold in food processing by virtue of Nilgiris manufacturing operations. In an era where even globally iconic brands such as Nokia are acquired (and eventually phased out), the acquisition of Nilgiris may not seem surprising. However, like all heritage stories Nilgiris has its lessons which the Future group may need to be cognizant of, if it is keen on ensuring a new future for Nilgiris, and for itself.
Humble beginnings
Nilgiris has had a humble but focused start nearly 110 years ago! In 1905, Muthuswami Mudaliar, a mail runner, used to carry butter and dairy products from the foothills of the Nilgiris, from Mettupalayam, to the English living in the picturesque hill stations of Ooty and Coonoor. Later, after acquiring a butter business from an Englishman, Mudaliar moved to Ooty in 1922 and then to Brigade Road in Bengaluru in 1936, where the Nilgiris supermarkets story really began. In many ways, Nilgiris was a forerunner of the organised retail chains one sees today which had to do with the visit of Mudaliar’s son, Chenniappan, to the US where he saw the supermarket model at work. In 1945, Nilgiris revamped its Brigade road store to set up a milk and ice cream parlour and added grocery and general merchandise to its portfolio in addition to the bakery and confectionery it was selling. Perhaps it was the first ‘modern’ retail store which also had its own private label with its dairy products. Its dairy offerings were further enhanced with the setting up of a dairy at Erode in Tamil Nadu in 1962. In 1971, its stores moved to the self-service format. At present, Nilgiris produces, procures and processes 50,000 litres of milk a day, a bulk for its own dairy products, and sells milk in some markets.
In 2006, the family owning Nilgiris sold a majority of its stake to private equity fund Actis. Actis owned 65 per cent, while a section of the family retained the rest of the stake. Actis brought in professional CEOs to run the business and the past eight years also saw rapid expansion. In September, Nilgiris opened its 141st store in a new location on Chennai’s Radhakrishnan Salai, where it ran a store for 32 years before the erstwhile store closed down. Five more stores are due to open, three in Tamil Nadu and two in Karnataka. Today, Nilgiris has a strong private label in foods, which constitute 30 per cent of its turnover in the foods category. Dairy products constitute 30 per cent of the chain’s overall sales. The chain has followed a franchisee model of expansion where franchisees pay royalty for use of the Nilgiris brand and stock their stores through a central purchasing model. The chain achieved overall revenues of Rs 765 crore for the year ended March 2014. As The Hindu Business Line observed, Mudaliar could never have imagined his small butter business would one day be a pioneer in modern retail; however, that is how heritage stories are made of! Like another iconic heritage brand, MTR which also got acquired with its business, Nilgiris stands out as an example of how tradition and modernity can be blended on a platform of quality and convenience to keep growing, albeit at a scale just possible.
Principles of principled success
Although an annual turnover of Rs 765 crore and a deal value of Rs 300 crore may not appear awesome in relation to the potential of the food processing sector in India, Nilgiris deserves praise for not only being a pioneer but holding on its own over a century, despite the entry of large business houses and corporate firms into convenience retailing. Reliance and Birlas as well as Heritage (besides Biyani himself) brought scale to convenience retailing but could not displace the brand equity of Nilgiris. Part of the reason, if not the whole, is that unlike these competitive ventures, the Mudaliar family knew the food processing business thoroughly through its experience. In a period of time when logistics were poor and the concept of cold chain was less heard of, Nilgiris brought fresh processed produce and products to the customers over long distances overnight. The decision to strategically locate the manufacturing operations with geographically contiguous expansion of the retail stores helped the chain preserve its uniqueness all through the years. Unlike other chains which have had poor reception to self-labels, Nilgiris could leverage its industrial knowledge to develop its own brands of dairy products, processed foods and groceries, competing with other well-known brands. For Nilgiris, if the milk and butter business was its bread, its grocery and processed foods business became its butter!
The marketing approach of Nilgiris has been simple; self-selection by consumers with a little locational help by the stores personnel. Each store has typically a manager who volunteers to find the products a consumer wants even if there are stores personnel to do the job, lending huge customer-centricity. Nilgiris understood that the success of retail marketing would come about only when the visits to the store become a part of the consumer’s regular life. By offering additional and independent selections like vegetables and bouquets within the premises Nilgiris became a one-stop shop in one’s life. Nilgiris provided support to novel concepts such as pre-cooked chapathis for lunches and dinners, and ready-to-convert batters for breakfast needs like idlis and dosas, developing local supply sources in each case. Nilgiris also appreciated that to be a retail icon one needs to be a locational landmark. The company took particular care to choose highly visible and easy to access locations for its stores. It was always keen to venture into newer suburbs, with developing gated communities and suburbs quoting the location of Nilgiris in the vicinity as an added plus for their real estate projects.  Despite a principled approach of product quality and customer care, and despite pioneering in India several principles of retail success, Nilgiris had to accept an acquisition which points to certain other influencers on indigenous business development.
Founders’ dilemma
The Nilgiris episode brings to the fore (yet again!) the dilemma of the founders of a successful indigenous business with high growth potential but with low financial resources to grow. This is particularly true in emerging markets such as India which provide niche footholds for initial success but present multiple barriers for logical scale-up. When, how and to what extent to dilute the founders’ control in the equity of the firm constitutes the founders’ dilemma. For Nilgiris themselves, whether the sale of a huge chunk of 66 percent in the first stage itself to a private equity firm is open to question. This contrasts with the Western start-up approach of diluting less (usually even cumulatively to a level less than the threshold of majority control) with high increasingly higher valuations in multiple rounds of fundraising as the value gets built up. Quite possibly, even an initial public offering would have laid a more value building pathway.  That Nilgiris has not been able to do that could relate another aspect of the classic founders’ dilemma. The dilemma also encompasses when and how to induct as well as how to utilize professional talent to resolve the founders dilemma and also build greater value in the business.
Admittedly, in founder-led businesses with thin margins it is difficult to get professional leaders who have the passion to take forward the founder’s dream, balancing the founder’s values and aspirations with the business potentialities and needs. Having such professional leaders, however, can be of great help in identifying multiple strategic choices and selecting the optimal ones. They could also be of significant help in developing the right financing and dilution strategies for the firm, enabling the founders to stay on longer and build greater institutional value. Companies such as Priya Foods seem to be taking a more calibrated approach by deploying professionals or getting the family members trained in technology and business management. There are many other successful niche businesses in the indigenous business sector in India, especially in the food processing, food product marketing, restaurant and multi-brand retail space which could benefit from resolving the founders’ dilemma in a win-win manner. Hopefully, the higher management institutes such as the Indian Institutes of Management (IIMs), Indian School of Business (ISB) and SP Jain Institute which have custom courses for family businesses would not only develop solutions but also encourage the graduates of mainstream programs to enter the indigenous family businesses to upscale them.  
Future choices
It is not that Nilgiris has reached the final lap of its growth phase with the acquisition by the Future Group. For one, the Future Group is by itself not too financially strong, having built up huge debts on multiple initiatives and having been forced to divest a few non-core businesses to pare down debt to some extent. It has also multiple store formats such as Big Apple (acquired in 2012) and Kishore Biyani’s FairPrice and Aadhar. The retail formats will cross-sell each other’s products and they will also be sold through the Future Group’s retail outlets such as Big Bazaar, Central and Foodhall. It is important for Biyani to figure out the best way to harmonize all the retail businesses and leverage the brand equity as well as the manufacturing and marketing capabilities of Nilgiris. It would be tempting for the professionals in the Future Group’s management to overwhelm, if not belittle, the native wisdom of Nilgiris that has seen generations of success. Scaling up the Nilgiris plants, distribution network and retail network and adding new product development capabilities with the requisite investments in a positive frame of mind must merit high priority.
Equally, learning from MTR and Nilgiris cases, Biyani must put in place a virtuous cycle of incremental value creation and reinvestment in the Nilgiris business so that its organic growth impulses are preserved. It is not clear from the reports if the Nilgiris brand has been acquired by the Future Group for perpetuity or for only a limited period. The respect the Future Group would give to the Nilgiris brand could well determine how the loyal customers and the past owners, the Mudaliyar family, would respond to the treatment of the Nilgiris brand by Biyani (By way of a comparison, Microsoft may not admit it but Nokia getting into the tablet space based on rival Android platform within days of Microsoft phasing out the Nokia brand of smart phones is not a great signal for Microsoft Devices business!). The stakes for Biyani and the Future Group are high. If the acquisition is handled poorly, the retail business could be at crossroads in not too distant a future again; on the other hand, as the well-wishers of Nilgiris and the Future Group desire, if the acquisition is integrated harmoniously and scaled up judiciously it could help the Future Group scale new azure heights (Nilgiris, as freely translated in Sanskrit) and the acquired Nilgiris business could move into a new future of sky-high potential!
Posted by Dr CB Rao on November 23, 2014