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

Saturday, November 22, 2014

Leadership+: From Mentoring to Nurturing

Leadership is well researched and well written about. The ability to lead teams and organizations, or even lead oneself, in terms of vision, strategy and execution to accomplish sustainable, and in some cases transformational, business growth defines leadership. Leadership involves proactive recognition of opportunities and diligent overcoming of challenges. Leadership involves convincing, motivating and inspiring the team to follow his or her articulation, enabling the organization to move from the charted to the uncharted, and from the known to the unknown. Leadership rarely is singular; a leader typically requires a team of leaders to support him in the vision-strategy-execution paradigm. Typically, the leader contributes the most on an individual basis in sculpting a vision, but draws upon his leaders largely for crafting the strategy and relies upon them almost wholly to execute the strategy.

Given the huge responsibility and accountability of leadership, the qualities of leaders and leadership have been extensively studied and modelled. Several technical and behavioral competencies detail the desired characteristics of a leader, positioning leadership in management folklore as almost a superhuman capability. Equally, there is a theory that leadership is largely contextual and the required competencies could vary based on the organizational and business contexts; for example, leadership required for turnaround and growth needs could be vastly different, as would the needs for companies in generic space and innovation arena. The author has posted a number of posts in his Blog “Strategy Musings” in the past focusing on the different standalone and contextual aspects of leadership. One of the important components of true leadership is the development of leaders who can take on the leadership mantle but more importantly to persevere to grow the institutions.

Leadership dynamics

It is for this reason that leadership development has become a very important component of talent management in large organizations. Reputed organizations go an extra mile to showcase their leadership teams, executive councils or management groups by whatever name they are called. Such teams or councils are seen an institutionalized way of enabling leadership succession. Companies like GE were able to have leaders in-house. In several cases, however, the leaders in several organizations tend to come from other organizations. The cases of Tata Conglomerate or Infosys which had to scout for and zero in on external leadership talent in Cyrus Mistry and Vishal Sikka respectively are cases in point. That probably is not bad in itself. Had Steve Jobs not hired Tim Cook a few years ago and given him significant leadership responsibilities, Apple would have been without a timely leader upon the unfortunate demise of Jobs. At the same time, emergence of multiple internal leaders in an organization leads to succession tussles and eventual movement of the denied leaders to other firms, the case of GSK leadership succession being a classic case in point.

The role of an apex leader, the chief executive officer or the CEO, in preparing the other leaders in his or her leadership team to assume higher responsibilities of apex leadership is significant. Typically, the leadership team tends to be diverse in terms of key businesses, functions or regions depending on how the organization is structured. In the middle levels of an organization leadership development seems to be one of natural selection; however, at leadership team level which comprises leaders with well-honed capabilities and well demonstrated accomplishments, leadership selection tends to be synthetic and complex. In addition, the relations between members of the leadership team tend to be taut with competitive pressures, even though they may work collaboratively in pursuance of organizational goals and strategies. The role of the apex leader optimizing leadership dynamics to support current performance while enabling competitive superiority for leadership succession is easier said than done. The CEO is expected to be not only a leader but also a mentor to his team. N R Narayana Murthy popularized the title of Chief Mentor when he was at the helm of Infosys (that has not, however, helped in internal development of an apex leader in Infosys).   


Mentoring is the process by which an experienced person advises a less experienced person over a period of time. Mentoring is mentioned in the organizational leadership practice as an excellent process by which the wisdom and expertise of senior leaders is passed on to young professionals who tend to be capable but are yet to be attuned to the rigours and challenges of industrial and business life. Thomas J. DeLong et al in a Harvard Business Review (January 2008) article (“Why Mentoring Matters in a Hypercompetitive World”) extoll the virtues of mentoring not only for leadership development but more fundamentally to help young leaders develop roots to the organization. They propose that mentoring is a personal customized process, which is well merited. In the contemporary world, a full six years later, the concept of reverse mentoring whereby leaders can be mentored by youngsters having new and agile approaches has also come about. The core of mentoring is provision of positive and constructive feedback to transform others and the acceptance of the feedback to transform oneself.

That said, it has been a moot point if mentoring is effective in the C suite, which tends to be a leadership bench of equals, by and large. The experience with Infosys where N R Narayana Murthy being the Chief Mentor by title (and a mentor anyways regardless of a formal title) has not helped the other C suite founders adapt new styles or the ones below scale up to C suite positions. It seems a fair hypothesis to consider that mentoring is most effective when the knowledge, experience, expertise and wisdom levels of the mentor lead those of the mentee by a clear margin. The concept of mentor-mentee with the wise senior leaders anchoring and shaping the development of young aspirant leaders is well established in the Japanese system (‘senpai’ being the mentor or senior and ‘kohai’ being the protégé or junior). The seniority and experienced based Japanese organizational system seems to be particularly well suited to mentoring. The number of leaders who have the time and inclination to mentor seems to be reducing across the globe, unfortunately. 

Beyond mentoring

There is a need to develop a construct beyond mentoring; not merely because mentoring may not impact peers with close competencies but because mentoring does not go beyond developing personal leadership competencies. Exceptional Indian leaders like V Krishnamurthy, S V S Raghavan, A N Haksar, N Vaghul and H C Parekh mentored many young professionals who served as their executive assistants or young managers in their respective companies and helped them become better leaders. Evidently, but for the mentoring by such stalwarts their successors would not have been able to scale up their competencies and in some cases even step into their shoes. However, not every leader so developed continued in the parent organizations. A classic case is that of ICICI Bank where following the elevation of Chanda Kochhar to the CEO position to succeed K V Kamath, the other two mentees of Kamath, Shikha Sharma and Kalpana Morparia left the Bank to become CEOs of Axis Bank and JP Morgan India respectively. In contrast, the entire C Suite of Infosys headed by NRN Murthy preferred to be associated with only Infosys or be on their own (but not join any other firm).   

The insight is that mentoring can make a lot happen in competency related development but there is something beyond mentoring that can make leaders and managers stay together. Aggressive mentoring can make firms CEO factories but may not create an ecosystem of high-competency peer co-habitation in a firm. Such a phenomenon of continuous co-habitation is mostly visible in the academia where scholarly professors tend to spend their full careers in their institutes whether or not they become deans, directors, rectors or chancellors and whether or not they deserved Nobel Prizes better than their co-Professors who received. There are four variables in any ecosystem; the individual, the institution, the respective values and the respective performance. Exceptional leadership does not merely mentor the individual but more importantly nurtures the relationship amongst all the four variables. The interesting aspect of nurturing is that unlike mentoring which is highly selective, nurturing can be, and needs to be, a more inclusive and natural process of organizational ecology.

About nurturing

Nurturing is the process of caring for and protecting something or someone as they are developing or growing. Nurturing also involves enabling a feeling, idea, plan or relationship sustain for a long time and encouraging it to develop continuously. Mentoring enables development of individual leadership competencies. Nurturing, in addition, develops the whole gamut of relationships between the individual and the institution as well as between, and with, the respective value systems. In a well nurtured leadership model, the institution (and not any particular leader) remains the anchor around which individual leaders not only develop themselves but stay united and stay together in the institution to take it to greater heights. In the newly independent India of 1947, relationships nurtured by Mahatma Gandhi enabled stalwarts such as Pandit Jawaharlal Nehru, Sardar Vallabhbhai Patel, Babu Rajendra Prasad and C Rajagopalachari as well as B R Ambedkar grow not only as leaders in their own right but stay together to bring the best of their faculties for India’s governance.  It is the love of these leaders to the nation more than the leadership positions that bound them together in the governance.

Nurturing, as contrasted with mentoring, sustains and develops not only competencies but also relationships. Nurturing facilitates leaders, whether they are mentored or self-taught, to respect and develop lasting relationships within, and with, the organizational ecosystem. This involves bonding the individuals and the institution mutually and inclusively based on certain values which are distinctive. Values such as serving the customer, acting with integrity, being a corporate citizen, empowering employees, for example, are generic foundation values that are, and ought to be, universally applicable. More precise values such as getting the best to the customer, extending integrity to all internal and external stakeholder relationships, dedicating part of business to social service platforms, enabling employees incubate their ideas, for example, are more differentiated values that nurture lasting individual-institutional relationships. Institutions such as Stanford and Karolinska abroad and the Indian Institute of Science and the Indian Institutes of Technology (to an extent in India) have succeeded in evolving such higher purposes as the basis for nurturing of leadership relationships. 


Leadership’s ultimate frontier, therefore, lies in going beyond the vision-strategy-execution paradigm, and even beyond mentoring of future leaders; it lies in focusing on nurturing an organizational ecosystem in which everyone feels attached to the ecosystem with a sense of pride, ownership and oneness in a culture of competency, performance and mutual relationship. This is a unique interconnected paradigm. An individual cannot have the pride of existence in an organization unless he or she has a sense of self-worth, which in turn cannot come about without competency, which again is of little benefit if it is not translated into performance. An individual cannot have a sense of ownership unless he or she becomes a part of the thought, expression and action processes in a project; integration of strategy and execution helps ownership. A culture of oneness cannot be institutionalized unless a sense of relational belonging is first created in the organization, and with the society.

Nurturing as a leadership task involves increasing proportionality with increasing scale and scope of organizations. Start-ups and entrepreneurial ventures almost invariably are founded and scaled up on nurtured relationships. Management thought (more so, the Western thought), somewhat impersonally and clinically, advocates substitution of relationships with structures and processes as a firm evolves and grows. While structures and processes are important as an institution grows, the relationships remain even more critical. Denying the importance of relationships in organizational evolution would tantamount to unnatural self-denial. It is, however, important to reinforce the institution building relationships (based on growth and service) that are critical, and eliminate any cartel building relationships (based on biases and cronyism) that are erosive. The ultimate leadership legacy is an unshakable individual-institutional relationship that outsmarts competitive needs, outlives business exigencies, and outlasts career tenures.

Posted by Dr CB Rao on November 22, 2014

Sunday, November 16, 2014

Supply Chain in Contemporary Organizations: Conceptually Connected but Practically Disconnected?

Unlike science and technology which keep getting enriched continuously with new developments, management of organizations, by its very nature, has little to show in terms of continuous original developments over the years. Yet, in an effort to stay relevant, management tries to reinvent itself or its functions through new nomenclature, and its processes through new jargon. At a very gross level (of course, in a subtly misused manner) management has carved out a new space of leadership. As contrasted with the earlier days when leadership is all about the one and the only one at the helm, today scores of managers are allowed to call themselves leaders. At a more detailed level, old functions are renamed; long range planning as corporate planning, business planning or strategy, time and motion study as industrial engineering, productivity management or operational excellence, and personnel as human resources management and people management, for example. Some core functions like manufacturing, quality, sales and marketing or research and development, in contrast, could see no semantic innovation, mercifully.

There has, however, been one discipline that seemed in the 1990s to revolutionize the field of operations management which comprised multiple functions such as sourcing, purchase or procurement, production, production planning and inventory control (PPIC), scheduling, warehouse management, supply, distribution, logistics and delivery under one umbrella concept called supply chain management. This has been evolutionary, in that initially purchase, PPIC, and warehousing got clubbed under materials management. Amalgamation of inward-oriented materials management with outward-oriented distribution, logistics and delivery led to a broader concept of supply chain, which promised to bring hitherto unseen connectivity and efficiency to management of firms. The concept became so fashionable, as with many a managerial nomenclature, that some companies began to include even manufacturing as a part of the supply chain organization in the 2000s. Yet, a full two decade plus later, supply chain in most organizations remains only an outbound function; ie., from one plant to the other or from a plant to the warehouse and a warehouse to the customer.

Connected disconnect

The concept of identifying and procuring the entire bill of materials of a product and manufacturing the finished product through in-house or outsourced facilities and delivering to the customer in the most efficient manner, all of it supported by optimized inventory management is clearly a well-merited concept to optimize an important part of a business’s value chain. The Japanese have recognized inventory and planning as the key drivers of such integration regardless of whether supply chain is christened as a department. Pull-type demand cum production planning and just-in-time (JIT) inventory had, for long, been, integrated in their production and sales systems. The Western management model which seeks a clear structure and process for everything, existing or new, had embraced supply chain as an integrating or connecting concept. Again, as is the wont with the Western models huge expectations preceded the evolution and institutionalization of the supply chain concept. As a result, and also due to certain specific factors discussed below, an integrated, monolithic supply chain organization continues to be more an exception than a rule in contemporary organizations.

Three factors that took shape in the 1990s and 2000s have, in fact, created some dampeners for an integrated supply chain function. The first is the rapid emergence of the globally dispersed organization with multiple sourcing, manufacturing and marketing locations across the nations with establishing local organizations becoming one of greater priority. The second is the emergence of information technology, more specifically enterprise resource planning (ERP) systems, as a connector or integrator of all functions, even globally. The third is the unpreparedness of the educational and career systems to develop competencies that integrate the specializations as varied as purchase, production, distribution, quality etc. These factors ensured that heads of operational management continued to operate with functional specializations rather than with a broader function that corresponded with a logical value chain. Given that the first two factors are now an established reality, it remains to address the competency based dampener in greater detail.

Function is business

The important aspect of supply chain management that the function as a whole (or in its competent parts) deals with external businesses on a wide range of techno-commercial parameters. Several of the functions have hues that are deeper and broader than the traditional ones. For example, sourcing is not just scanning a supplier directory and choosing someone who offers a material or component at the desired price. Sourcing is truly vendor development, which develops the material or component supplier’s capabilities in a holistic manner. Similarly, distribution is not merely choosing a delivery trucking operator for the least cost. Distribution is the science of operations research at one level and the discipline of good transportation practice at another level, both of which require enlightened business management on the part of distribution provider. Even the seemingly number oriented functions like PPIC cannot be effective unless they understand the nuances of product-market segments (and not merely the SKUs) and the subtleties of manufacturing processes (not merely processing times). While every function in an organization needs to have a business perspective, the functions in the broad group of supply chain need to have the techno-commercial perspectives of their stakeholders’ businesses as well.

The above indicated aspects of supply chain have found their early roots in the Japanese automobile industry. The practice of concurrent engineering and collaborative planning that knits together all the internal functions of automobile and ancillary companies, amongst themselves and between themselves, has been a great enabler for integrated supply chain management. Issues such as new product, material and component technologies, material substitution, tool and die development, facility upgrades, resource requirements are placed on the table to develop feasible and viable solutions. This level of enlightened collaboration becomes even more inevitable when proprietary product development is involved. This requires the vendors to appreciate that their long term business is protected not by the supply rate contract for materials or transportation but by the business success of the end-product.  Similarly the end-product company would need to appreciate that procurement economics of the materials, important as they are, need to be supplemented by the business economics of the vendors. In fact, progressive vendor development is the core of successful supply chain management.

Vendor development

Most organizations tend to have multiple buyers but few vendor development executives; in fact, in many organizations vendor development may not exist at all. This situation is ironical because the work and challenge involved in vendor development is many times over the work involved in negotiating a rate contract. Vendor development ensures that the supplier becomes a micro-replica of the principal in terms of having good R&D, manufacturing and quality capabilities, among others. The principal by investing its own techno-commercial resources in the vendor may add to its operating costs but would ensure longer term business competitiveness. In some cases, the vendors tend to have good technical ideas but lack the managerial will or financial resources to evaluate and upscale their ideas. Under such situations, the principals could take on the role of venture capitalists to take the ideas forward. Many Japanese automobile companies take direct stakes or indirect stakes (through their trading or investment conglomerates) in their component suppliers which meets the need for such vendor support.

Vendor development, even in those organizations that house such function or in supply chain treatises, tends to be viewed as a functional activity and not as business enabler. Typically, either a buyer or a designated vendor development executive identifies potential vendors and selects the appropriate one through due diligence studies by other functions such as quality and business development. This process may identify a vendor (who will be transferred to, or assigned with, a buyer) but will not make the vendor a fully competitive and sustainable vendor. Vendor development in an organization needs to be handled by a fully institutionalized team with multiple skills resident or deputed on a continuing basis. Vendor development must cover not only suppliers of components and raw materials but also providers of distribution and logistics service providers. Proactive and objective vendor development ensures the most effective procurement relationships, logically and automatically.

Re-positioning supply chain

The foregoing discussion leads us to two important aspects of repositioning supply chain as the effective enterprise connector. The first relates to developing the required supply chain competencies through educational and career options. There is need to develop supply chain educational stream on par with other established streams such as financial management, operations management or marketing management. It should also be developed as a multi-domain skill set with blending together of technology and non-technology subjects, and quantitative and behavioural subjects. Contract management and business development should be part of the essential toolkit in the supply chain program. The second relates to providing the appropriate career options, from foundational careers to rotational careers across all the functions of supply chain such as sourcing, vendor development, purchase, production, production planning and inventory control (PPIC), scheduling, warehouse management, supply, distribution, logistics and delivery, eventually leading on to the top job as the head of supply chain, and even to higher positions thereafter.  

The re-positioned role of supply chain would be one of developing a total organizational ecosystem of all the vendors and input providers who understand and support the value chain of the organization with ownership and oneness so that the firm and its stakeholders can participate in the combined prosperity. The head of supply chain in this re-positioned supply chain function would be a strategic leader who understands the techno-commercial needs of the firm but also the various vendor firms who provide the inputs and deliver the outputs. He or she would also be a leader of balance who understands the benefits of scale economics but also recognizes the need for risk mitigation, both through demand and supply assurance to and from the vendors. Though not much known in the global strategy literature, the eco system of India’s leading commercial vehicle manufacturers, Ashok Leyland and Tata Motors, with pervasive component manufacturing and logistics groups such as TVS is a great proof of how integrated supply chain is not merely a transient conceptual vision but a durable practical accomplishment. It is time that management institutions and leading corporations appreciate the need for re-positioning supply chain as a leading new age integrative discipline.

Posted by Dr CB Rao on November 16, 2014


Sunday, November 9, 2014

Coincidence, Connectivity and Correlation: The 3C’s of Perceptive Observation and Research

The other day, a very striking research finding that turned conventional wisdom and generational practice upside down was published widely ( It said that those who drink more than three glasses of milk (700 ml), instead of facing a lower risk of fractures as believed hitherto, faced instead a risk of higher mortality. This, obviously, is counter to the received wisdom that it is beneficial to drink more milk as it leads to greater calcium intake and thus leads to healthy bones, apart from it being a wholesome food for general human development. The study was carried out by the reputed Uppsala University of Sweden and covered 61,000 women and 45,000 men of certain age groups for more than 20 years. This study caps a series of such studies which question the past precautions, biases and beliefs on a variety of subjects, ranging from eggs and coconuts to salt and cocoa (one such study is that intake of certain types of fat is good for brain health!).

At the end of the milk research summary, however, there was a caveat that the study pointed to an association rather than a link. It suggested more investigations to conclude on the topic. This caveat is not surprising given the diversified nature of human genetics, the multi-factorial nature of human aging and disease affliction. Identification of the core ingredients of prophylactic and therapeutic potency as well as side effects and adverse effects of natural or synthetic ingredients is wrought with great complexity. Potentially, these research journeys would continue, leading one day to more conclusive and more validated hypotheses on what causes what. While the complexities of understanding these bio-chemical challenges at molecular level are understandable, it is intriguing that apparently simpler and more visible aspects of human relationships should threaten the stability of, and cause volatility in, human relationships at family, organizational, social and national levels. This blog post presents certain models of researching and understanding human behaviour as a way of development.    

Individuality and conformity

The evolution of one’s personality over the years is the result of continuous interplay of one’s quest for individuality and the individual’s ecosystem’s norm for conformity. The ecosystem could variously be the family (pre-marriage and post-marriage), the school and college, the organization and the society. At every point of time, the individual is simultaneously advised to be expressive and empowered as well as conformist and compliant. While absorbing this indoctrination, the individual also constantly observes the players and role models he or she encounters in the various ecosystems. The observed behaviours are much like the various items of food that one ingests for biological development; they are the complex ingredients of food for emotional health. Much like the example of milk above, the behavioural inputs that are embedded as features of ecosystems are akin to  inner ingredients like lactose and galactose sugar in milk that are now found to cause oxidative stress and inflammation for individuals. There are more complexities, in addition.

Nations with developing and diversified habitat conditions such as India have multiple and diverse ecosystems at different points in scales of extreme polarities; poor and rich, rural and urban, squalor and luxury, unemployed and unemployed, and so on. Amidst all this diversity, there are two common national cultural trends; aspiration for growth and passion for equity. Each individual develops his or her own personality that expresses individuality and conformity that are not only influenced by the observed behavioural inputs but also the embedded factors of the ecosystems. These influences on individual personality development and collective social motive force are rarely appreciated with the needed perspicacity so much so the pressures get built up to alarming levels. Sudden and volatile expressions of resentment in families, institutions, firms and societies are a result of insensitivity to what could constitute an optimum balance of individuality and conformity on one dimension and economic growth and social equity on the other dimension.

Observation and research

Unfortunately, by the time one gets to recognize the need for personality optimization, much of one’s personality gets formed. The only way one rebalances and optimizes one’s personality is through observation and research. And the start point of one’s observation and research must be revalidation of the hypotheses that have been allowed to embed themselves over the years; like the several food and nutrition examples that have led to contrarian conclusions through more objective and intensive observation and research. Observation is the act or faculty of watching something or someone carefully for a period of time, especially to learn something. Research takes observation to the next level. Research is the careful study of a subject, especially with a view to discover new facts or information about it. Observation and research are an essential component of personality redevelopment that has several facets to it. Observation becomes relevant only with an open state of mind while research becomes helpful only with an analytical bent of mind.

The triggers for an individual to be motivated to observe and research are rooted in relative success of others and one’s own outlook. At a national level, countries aspire to achieve a national comparative advantage to achieve superior economic growth; but a few countries like India tend to be sensitive, rightly so, to social acceptance of economic platforms. At an entity level, firms seek to achieve firm level competitive advantage to achieve superior business growth. At an individual level, people seek to achieve personalized intellectual advantage to achieve superior career development. These are achieved not merely through past achievements but more through contemporary benchmarking and futuristic aspiration. Korea needed to observe and benchmark with Japan to develop itself as an Asian Tiger. India desires to observe and benefit from multiple national models, from China and Singapore to USA and Japan. The US automobile industry observed and learnt from the Japanese automotive industry to rediscover itself. An NITian (a student of National Institute of Technology) observes and wonders why he or she cannot be better than an IITian (a student of the Indian Institute of Technology). The whole group in any typical class wonders why all of its constituents cannot land themselves into plum jobs offered by Google or McKinsey.

Coincidence, connectivity and correlation

The processes of observation and research have three nuances. These are coincidence, connectivity and correlation. Coincidence is the fact of two things happening at the same time by chance, in a surprising way. Life, it is said, is full of coincidences. The occurrence of someone putting in low effort and achieving high success is more a coincidence than a law (possibly related to a more compassionate evaluator rather than anything else). Connectivity is the state of two things being associated together; it is a state of association by which one causes the other. Passive or active smoking and development of cancer are connected events. Make in Japan is, for example, associated with higher quality and high cost. Correlation is a variable state of connectivity where a change in one factor is accompanied by a change in the other factor. The incidence of diabetes in a society is correlated with an increase in consumption of junk food, for example. The processes of observation and research must learn to differentiate between coincidence, connectivity and correlation. In a meritocracy, getting handpicked for performance based on random interactions would be a coincidence while knowledge and experience would more surely get connected with performance and reward. At a micro level, multiple factors like nature of qualification, type of institution, depth of experience, nature of industry etc., get statistically correlated with career advantage.

While life does have a fair share of coincidences, in so far as performance is concerned, it is best to assume that there can be no coincidence. Many people confuse opportunities with coincidences. An aspirant job-hopper travelling by plane for a scheduled interview may happen to be seated next to a CEO of a different organization in a plane; this “coincidence” may lead to a conversation and a job offer if the CEO is impressed. The opportunity may seem to be a coincidence or a matter of luck but underlying the opportunity lies the ability of the individual to network and impress, the openness of the CEO to be inquisitive, and the willingness of both to make a considered choice. Life may be full of incidents and occurrences like the one mentioned but it is the connectivity between ability and accomplishment that matters. Oftentimes, a simple two factor connectivity may not suffice. In the case of a firm, for example, a firm’s performance may be correlated to its product diversity, geographic diversity, capital expenditure premium talent pool, export share etc., different firms may have different equations of correlation for the same independent variables. Right optics and smart analytics are required to ensure that the processes of observation and research are effective.

Discrimination, differentiation

As an individual observes his or her role model or as an organization observes its industry leader, it is important to develop the right optic (the right sense of sight) to observe, and the right analytics to differentiate between coincidence, connectivity and correlation. Fortunately, both right optic and smart analytics have one faculty in common - discrimination. Discrimination is the ability to recognize differences, and more importantly, the ability to judge the good quality of anything or anyone. Discrimination comes in multiple hues. One set of hues relates to an ability to discriminate between data and information, information and knowledge, and knowledge and wisdom. Another set of hues relates to an ability to discriminate between revenue and profitability, growth and sustainability, market share and revenue share, focus and specialization, and enterprise value and market capitalization. National set of hues relates to an ability to discriminate between economic growth and per capita economic growth, employment and inflation, and economic equality and social equity. Even regulators have the needs to discriminate; for example between monopoly and monopsony, premium and predatory, private weal and public good, and proprietary protection and corporate veil.

The moment an individual, entity or nation decides to become superior, association (and correlation) between enablers and outcomes needs to be established. The correlating variables and the factors of association or connectivity need to be established. The observation and research may lead from the macro to micro as in the case of the Uppsala University’s milk and mortality study wherein the connection between higher milk consumption and higher mortality was first established and then probable contributory causes such as lactose and galactose sugar were later drilled down. In the study of leaders, an association between the leadership styles and firm performance may be first established at a macro level and the more impacting correlations established later. Firms may identify an association between operational excellence and firm performance at a macro level and seek multiple correlations thereafter. The blog post has proposed observation and research, enhanced by right optics and smart analytics and bound together by discrimination as the fundamental tool kit to think beyond coincidence, and establish connectivity and collaboration for development of individuals, entities, societies, and nations.

Posted by Dr CB Rao on November 9, 2014   


Sunday, November 2, 2014

Buying and Selling in a Digital World: From Instant Satisfaction to Distant Nirvana?

Economic and social development is based on exchange transactions; more specifically, buying and selling transactions. Every moment of our lives, we buy or sell something. Most times such buying and selling transactions cover tangible products and services but they also cover intangible factors such as goodwill and brand equity. Many times, buy-sell transactions get known under different nomenclatures such as deposits and loans, in the context of a banking transaction, for example; but a closer look will reveal the embedded buy-sell nature of even a banking transaction. In certain other times, the presence of intermediaries and channel partners obscures one from the realities of buy-sell transactions. From the very established situation of physical buying and selling that has been in vogue till recently in an exclusive manner, electronic commerce has brought in completely varied hues to buying and selling. Two ubiquitous variables, one an outcome variable called value and the other a process variable called bargaining, influence the arithmetic of buy-sell leading to either profit or loss.

The buy-sell transactions are a key aspect of human, organizational, social and national behaviour. Like a coin has two sides, all these entities have buying and selling as the two sides of their personalities. Resources, especially natural and financial resources, being finite it is impossible to specialize and excel only in buying or selling. One needs to be adept at both simultaneously. Organizations tend to believe that buyers and sellers have characteristics that are different and differentiated; rarely one does see a head of procurement becoming a head of sales, and vice versa! There are some who believe that the underlying characteristics are the same, the differences are caused by the respective universes that the buyers and sellers operate in; the buyers operate in a limited supply pool and the sellers operate in a huge market place. In respect of a bank as an example, the buyer of a fixed deposit has only a few banks to choose from while the bank has millions of customers to sell its deposits to.  

Buy-sell characteristics

Buyers do not exhibit homogeneity. A buyer who is part of an organization tends to be methodical seeking high quality for low cost. The same person as an individual tends to be less analytical and more emotional while exercising his or her buying decisions. An organizational buyer tends to operate within a budget while an individual buyer prefers to be influenced into purchasing with elastic budgets. An organizational buyer tends to be a responsible and held-accountable buyer while the individual buyer tends to be a responsive and self-empowered buyer. The organizational buyer is motivated to save costs and increase profits for his organization as part of an integrated organizational goal system. The individual buyer is inspired to fulfill needs and increase esteem as part of a diversified social aspiration system. Industrial buying and individual buying have completely different ecosystems and behavioural triggers even if the operating person is the same.
Sellers also do not exhibit homogeneity. A seller who is part of an organization tends to be methodical seeking high price despite low cost. The same person as an individual tends to be less analytical and more emotional while exercising his or her selling decisions. An organizational seller tends to operate within a budget while an individual seller prefers to be influenced into selling with a view to deleverage, save or buy something else. An organizational seller tends to be a responsible and held-accountable seller while the individual seller tends to be a maverick and self-compelled seller. The organizational seller is motivated to offer discounts and raise volumes or prices for given volumes with a view to increase profits for his organization as part of an integrated organizational goal system. The individual seller is inspired to fulfill needs through better buys later and increase esteem as part of a diversified social aspiration system. Industrial selling and individual selling have completely different ecosystems and behavioural triggers even if the operating person is the same.

Premium-discount-loyalty-volume mix

A trained organizational buyer and an experienced individual buyer have one common characteristic though. He or she invariably seeks premium at a discount. A trained organizational seller and an experienced individual seller have also one common characteristic in a similar manner. He or she invariably seeks volumes at a premium. Both premium and discount generate loyalty. Loyalty, in turn, generates volumes. The buyers and sellers have a convergence play in how premiums and discounts are structured for a given specification and quality level. The selling strategies of organizations and the buying strategies of individuals vary depending on how the premium-loyalty, discount-loyalty and loyalty-volume relationships are structured. It appears that within this convergence, a divergence is developing between physical stores and virtual stores (or brick & mortar sales and electronic sales). There are essentially two points of view; one from a premium repositioning angle and the other from a discount repositioning angle, both of which attempt to increase purchases and sales, without losing the premium tag or accruing discount scorn, respectively.

The premium repositioning hypothesis is that the higher the perceived premium in a product or service and the higher the discount obtained on such product or service the greater is the value (and the volume). Even entities and channels which wish to play on premium are therefore forced to simulate, if not exactly offer, discounts.  The increasing trend of same store gift or discount certificates of premium retailers (Lifestyle, Home Centre, Shoppers Stop) or the same channel loyalty points of premium corporations (Taj Hotels, Sheraton Hotels and Lufthansa) are designed to encourage long term repetitive buying behaviour on premium products without sacrificing the short run profitability that could have come with discounts on premium pricing. The discount repositioning hypothesis is that the lower the perceived premium and the higher the discount obtained on such product or service the greater is the value (and the volume). Even channels which wish to play on discounts are therefore forced to continuously enhance the discount experience. The increasing trend of flash discounts by e-commerce channels and Uber style cab services are designed to continuously refresh the value-volume equation even with discounts.

Close touch to virtual scan

Electronic commerce, including electronic auction, has redefined the buy-sell characteristics. The foundations of close look and trial performance of physically available goods that have been the solid foundations of physical buy-sell experience have been replaced with the 360 degree compasses of universal scan and analytical evaluation of endless arrays of portal-linked goods. The physical buyer has become a more focused and circumspect consumer while the digital buyer has become a more empowered and maverick consumer. The physical seller is challenged with the task of re-establishing the relevance of brick and mortar store while the digital seller is challenged with the task of delivering to promise of digital platform. The physical buyer and seller are in a state of rediscovery for the next level of interaction with the physical sellers attempting to find other value enhancements besides look-feel (digitized shopping follow-up, for example) and the digital buyers seeking to find other credibility alternatives besides direct interface (digital price matching, for example). The digital buyer and seller are in a state of evolution with the digital sellers attempting to find other value enhancements besides discounts (same day delivery, for example) and the digital buyers seeking to find other credibility alternatives besides discounts (reseller warranties, for example).

The big corporations and the small consumers in both physical and digital buy-sell relationships are thus in a state of evolving expectations. As the chairman of Hindustan Unilever, Harish Manwani, stated recently electronic commerce cannot be wished away. The physical sellers may decide or influence their channel partners to list what can be sold through digital channels; the long term success may, however, lie in supplementing and complementing rather than in competing and substituting one for the other. This could include own e-commerce sites or contractual tie-ups with independent e-commerce sites to make available what is not physically available. As the consumers of e-commerce sites recently experienced what is most sought after digitally is rarely available freely. The digital buyers may patronize the digital portals for instantaneous buying gratification; the long term satisfaction may, however, lie in bringing in some of the discipline and practices of physical buy-sell to digital platforms. This could include more voice-verification opportunities, product reservation facilities, cancellation options and product return policies. Both flash sales in digital platforms and progressive sales in physical platforms require media advertisements, a trend likely to continue for long time – until a time point is reached when buy-sell is as embedded and as contractual phenomenon as a family, school, college, club or job relationship is. A completely integrated buy-sell ecosystem is what the future evolution is likely to be, as Apple Pay and Google Wallet may indicate.
Digital nirvana

In the extended digital age of the future, buy-sell will undergo a major transformation. A few principles of buy-sell nirvana will determine the evolution. Firstly, all buyers will be sellers, and vice versa. Buying intentions will be to buy as now but only to use temporarily and sell eventually.  Selling intentions will be to sell as now but only to induce repetitive buying through a variety of means, including buyback. Secondly, all physical will be digital and all digital will be physical. Buyers will seek seamless transfer between digital and physical buying and selling. Sellers will redesign and throw open their call centres and warehouses to buyers (akin to factory outlets). Thirdly, modularity and scalability will be used to extend product lifecycles. Designers will be encouraged, or even required, to use as much portability as possible. Fourthly, value will be determined by neither premium nor discount; it will be determined by exchange feasibility. Fifthly, buyers and sellers will weave themselves into integrated ecosystems in which phones, tablets and computers with banks and telecommunication providers will connect the buyers and sellers. 

These principles could lead to a new ecological logjam. The more one buys the more one will sell, and vice versa. With digitization while paper and trees are saved more plastic, metal and rare earths are potentially being generated, consumed and wasted.  If this trend accelerates, as it looks to, the planet could be burdened with profligate consumption of resources and excessive hoarding of products of multiple generations. As buyers keep looking at the earliest points of sale and resale, rather than maximal points of use and extended use, and as sellers keep looking at the earliest points of purchase and repurchase, products will only multiply exponentially.  Accelerated buy-sell (of a range, from physical goods to financial instruments) which is seen today (and possibly for several years, and even decades to come,) as an inevitable driver of socio-economic development will be seen as a fit case for accepting some philosophical and spiritual caveats relating to the limitations of the planet. A buy-sell nirvana could be a theme that would encourage ‘optimum development-optimum conservation’ (if not, ‘minimum development-maximum conservation’). Nations would have ombudsmen, corporations would have offices, societies would have crusaders and families would have thinkers who will reflect the principles of a responsible universal digital age that focuses on design optimization and resource conservation.

Posted by Dr CB Rao on November 2, 2014