Saturday, September 3, 2011
Eight Ways to Communicate Your Strategy More Effectively
Read this on the HBR blog
A frustrated CEO recently shared with me that her employees had lost their edge. They were internally focused, their speed-to-market was down, and they couldn't find a good balance between serving customers well while making healthy margins. The result was slow progress against the company strategy and an inability to profitably deliver on the value proposition. She had attempted to motivate employees and be clear about the strategy, but she was falling short and was looking for answers on what to do next. The solution in many cases is to overhaul internal communications strategies in order to convince employees of the authenticity, importance, and relevance of their company's purpose and strategic goals. Here are just a few communications approaches that will help you effectively reach your employees and encourage behaviors that advance your strategy and improve your results.1. Keep the message simple, but deep in meaning.
Most organizations have a deeper meaning as to why they exist. This tends to influence strategy, decision-making and behaviors at executive levels, but often isn't well articulated for employees. What you call it doesn't matter, your purpose, your why, your core belief, your center. What does matter is that you establish its relevance with employees in a way that makes them care more about the company and about the job they do. It should be at the core of all of your communications, a simple and inspiring message that is easy to relate to and understand. Strategy-specific messages linked to your purpose become tools to help employees connect their day-to-day efforts with the aspiration of the company.2. Build behavior based on market and customer insights
For employees to fully understand how your strategy is different and better than the competition they need to be in touch with market realities. The challenge is in how to effectively convey those realities so that your people can act on them. By building internal campaigns based on market and customer insights, you bring your strategy to life for your employees through this important lens. Package your content so that it can be shared broadly with all departments in your organization, but in a hands-on way. Expose managers first then provide them with easy-to-implement formats for bringing their teams together, with toolkits that include all the materials they'll need. The purpose is to encourage their teams to develop department-specific responses, and to generate new ideas and new behaviors based on what they've learned.3. Use the discipline of a framework.
Not all messages are created equal. They need to be prioritized and sequenced based on their purpose. I suggest using an Inspire/Educate/Reinforce framework to map and deliver messages on an annual basis.
Inspire. Messages that inspire are particularly important when you are sharing a significant accomplishment or introducing a new initiative that relates to your strategy. The content should demonstrate progress against goals, showcase benefits to customers, and be presented in a way that gets attention and signals importance. The medium is less important than the impression that you want to leave with employees about the company. Whether you're looking to build optimism, change focus, instill curiosity, or prepare them for future decisions, you'll have more impact if you stir some emotion and create a lasting memory.
Educate. Once you've energized your team with inspiring messages, your explanations of the company's strategic decisions and your plans for implementing them should carry more weight. To educate your teams most effectively on the validity of your strategy and their role in successful execution, make sure you provide job-specific tools with detailed data that they can customize and apply in their day-to-day responsibilities. It is most important for these messages to be delivered through dialogues rather than monologues, in smaller group sessions where employees can build to their own conclusions and feel ownership in how to implement.
Reinforce. It isn't enough to explain the connection between your company's purpose and its strategy — and between that strategy and its execution — once. You'll need to repeat the message in order to increase understanding, instill belief and lead to true change overtime. These reinforcing messages need to come in a variety of tactics, channels, and experiences and I've highlighted some approaches below. Ultimately, they serve to immerse employees in important content and give them the knowledge to confidently connect to the strategy. You'll also want to integrate these messages with your training and your human resource initiatives to connect them with employee development & performance metrics. Recognize and reward individuals and teams who come up with smart solutions and positive change.4. Think broader than the typical CEO-delivered message. And don't disappear.
Often corporate communications has a strictly top-down approach. I've found that dialogue at the grassroots is just as important, if not more so. Employees are more likely to believe what leaders say when they hear similar arguments from their peers, and conversations can be more persuasive and engaging than one-way presentations. Designate a team of employees to serve as ambassadors responsible for delivering important messages at all levels. Rotate this group annually to get more people involved in being able to represent the strategy inside the company. And when the message comes from leadership, make sure it's from your most visible, well-regarded leaders. Another mistake is the "big launch event and disappear" approach. Instead, integrate regular communications into employee's daily routines through detailed planning against the messages mapped in your Inspire/Educate/Reinforce framework.5. Put on your "real person" hat.
And take off your "corporate person/executive" hat. The fact is, not many people are deeply inspired by the pieces of communication that their companies put out. Much of it ignores one of the most important truths of communication — and especially communication in the early 21st century: be real. "Corporate speak" comes off hollow and lacking in meaning. Authentic messages from you will help employees see the challenges and opportunities as you see them and understand and care about the direction in which you're trying to take the company.6. Tell a story.
Facts and figures won't be remembered. Stories and experiences will. Use storytelling as much as possible to bring humanity to the company and to help employees understand the relevance of your strategy and real-life examples of progress and shortfalls against it. Ask employees to share stories as well, and use these as the foundation for dialogues that foster greater understanding of the behaviors that you want to encourage and enhance versus those that pose risks. Collectively these stories and conversations will be a strong influence on positive culture-building behavior that relates to your core purpose and strategic goals.7. Use 21st-century media and be unexpected.
The delivery mechanism is as important and makes as much of a statement as the content itself. Most corporate communications have not been seriously dusted off in a while, and the fact is, the way people communicate has changed tremendously in the past five years. Consider the roles of social media, networking, blogs, and games to get the word out in ways that your employees are used to engaging in. Where your message shows up also says a lot. Aim to catch people somewhere that they would least expect it. Is it in the restroom? The stairwell? On their mobile phone?8. Make the necessary investment.
Most executives recognize how important their employee audience is. They are the largest expense to the company. They often communicate directly with your customers. They single-handedly control most perceptions that consumers have about the brand. So if this is a given, why are we so reluctant to fund internal communication campaigns? I suggest asking this question: What am I willing to invest per employee to help them internalize our strategy and based on that understanding, determine what they need to do to create a differentiated market experience for our customers? Do the math and set your hoped-for ROI high whether it is financial performance or positive shifts in behavior and culture. If you choose not to invest be certain of the risk. If you don't win over employees first, you certainly won't succeed in winning with customers, as they ultimately hold that relationship in their hands.
Business Customers Are Digital. Shouldn't Your Marketing Be?
Read this on the HBR Blog
Are you skeptical about using digital and social media in business marketing? Think it's only for consumers, and that business customers don't have time for it? Your competitors don't think so. And they are gaining competitive advantage by embracing new digital and social methods of connecting with their customers.
Those tools are fast becoming the single most important way to attract new business customers and sustain old ones. Search has become one of the most efficient ways to create and optimize leads. Customers are hungry for more and different kinds of digital content, and new ways to network and engage online.
Increasingly, business customers create great content and experiences to market to their own customers, so they know what they want from suppliers when they themselves are the potential buyers. That doesn't mean Procter & Gamble expects to see the Old Spice guy selling enterprise software (although maybe it couldn't hurt). Business customers do expect to see the same unique and effective tools they use: from how-to videos on YouTube, to personalization tools, to employees as customer service reps, to intuitive design that rewards past activity and predictive data analytics.
At the heart of successful digital marketing to business customers are three core qualities: Radical Transparency, Micro-Relevancy and Open Collaboration.
Radical Transparency
There's no hiding in today's digital world. Your customers already know, or can quickly find out, everything about you and what you sell. They expect you to be honest about how your products and services stack up — by sharing detailed descriptions of features and applications, multiple opinions, and even negative reviews.
Google calls this the Zero Moment of Truth. We've seen Google sales leader Jim Lecinski challenge a room of business marketers to search YouTube for even the most obscure product. It never fails — some video always surfaces.
Dell has invested in ratings and reviews and received an unexpected positive customer response. IBM has empowered more than 100,000 employees to become experts on social media platforms, answering questions and becoming thought leaders.
Micro-Relevancy
Digital marketing tools bring us within reach of the ultimate dream of marketing: reaching the right audience with the right offer at exactly the right time. They reveal who is using your digital content, what they are doing with it, and what they want.
At GE, we call this micro-relevancy. Digital and social tools have enabled focusing on smaller, more meaningful segments of what was a broad, undefined "audience." So, success is no longer measured in millions of pageviews. A more useful metric would be actively engaging, for example, with a thousand university administrators looking to buy new power generation services.
Omni Hotels & Resorts used a blogger outreach program to promote its meetings and events business to a micro-audience of influencers ignored by its competitors, leading to hundreds of conversations and direct sales leads. Accenture Management Consulting used LinkedIn to set up a careers group — when the group ballooned to more than 5000 members, Accenture subdivided it into separate, micro-relevant groups aimed at specific kinds of potential customers.
The more precisely targeted the audience, the more effective recommendations on social platforms can be — after all, businesspeople tend to value the opinions of colleagues and industry professionals, especially specialists in the relevant area.
Open Collaboration
Open collaboration is where the digital promise transcends what was possible even a short time ago — conjuring a world where businesses and customers work together to create something of value that might not have existed otherwise. We're now having constructive conversations with our most knowledgeable and committed customers, whether through a customer advisory board, a user group that regularly gives product feedback, or an online customer-innovation center. That feedback makes later iterations of our products better, faster. It can also open up entirely new pathways of innovation.
One of the oldest methods for encouraging technological innovation — competition — is enjoying a well-deserved comeback thanks to new digital and social tools. Cisco's iPrize is an open innovation competition designed to find an idea that could be the basis for a whole new business unit. Microsoft annually awards its $25,000 Imagine Cup to a student team that best uses technology to solve a real world problem.
At GE, we've enjoyed the unprecedented success of the ecomagination Challenge, where we invited business plans for new inventions to power the smart grid in return for investment funding. We were overwhelmed with the response — 5,000 business plans from innovators in 150 countries, and active participation from nearly 100,000 enthusiasts. The results speak for themselves: new partnerships with start-ups, venture capitalists and retailers, and the ability to bring new offerings to our existing customers.
Digital marketing takes investment, experimentation — even a degree of faith — before specific goals can be met. But results are stacking up. Your customers are digital. Shouldn't you be too?
The Rationale for an acquisition
Read this on Qfinance
Definition
Companies and businesses are bought and sold regularly all over the world. Acquisition is a complex and expensive process that influences both the business and financial future of the buyer. Why would a person either physical or legal decide it is time to acquire a company or business? Which factors drive its decisions and define its thought process?
A person with no experience of running a business may find it difficult to assess and scale the difficulties and risks of an acquisition. At the opposite extreme, an experienced business person may readily understand and be able to assess more clearly the reasons for an acquisition. It may be that the buyer wants to develop his existent interests and the acquired business will provide the key technology to help with the expansion of the overall operation. The business to be acquired may bring to the buyer the perfect supply chain, which otherwise will take time and expense to set up from scratch. It could well be that the workforce of the company to be acquired has such specialist skills and knowledge for these to be the main incentive for the acquisition, as an alternative to instigating a training programme for existing employees. Another reason could be that the brand and customers of the business to be purchased are of such value that they justify the acquisition rather than the time and expense of the buyer building its own.
Whatever the reasons for an acquisition, a buyer should consider the following practical suggestions.
Advantages
- Any existing, successful business will already be functioning and properly set up.
- The workforce of the business will already be in place and well organized.
- The business’s marketing and contacts will be established.
- Its customer base will also be well established.
- Acquiring a well-developed business or company will make it easier to borrow money, because the company will already have a good business plan in place and will offer credibility to the lender.
Disadvantages
- The acquisition of an existing company or business could have a negative effect on the business’s reputation within the market if the acquisition is not done professionally, with due diligence and care.
- An acquisition can negatively influence a business’s staff, who are usually excluded from any negotiations.
- The cost of an acquisition is usually high and will have to be paid all at once.
- Contracts with suppliers and contractors may have to be reassessed and renegotiated.
- Any missteps in integrating the new business can be costly.
Dos and Don’ts
Do
- Carefully balance the implications of a developing business against the advantages and disadvantages of acquiring an existing one before committing to any expense.
- Obtain relevant advice regarding the acquisition.
- Research the market carefully before making a decision.
Don’t
- Don’t rush into the unknown without a proper plan. It is easier to make a good decision in a market and area of business to which you are already accustomed.
- Don’t underestimate the need for proper research and professional advice.
- Don’t ignore the importance of integrating the new operations within the existent business, otherwise the consequences could be costly.
- Don’t be afraid to decide against the acquisition if the signs are that it will not be a good investment. However, make sure that no commitment to buy has been made in the relevant jurisdiction.
Business Trends: Zuckerberg's Facebook helps small town entrepreneurs fuel ambitions
Read this on Economic Times
MUMBAI | BANGALORE: Mona Sandhu, a lecturer turned costume jewellery designer, set up a jewellery store in her home city of Karnal, Haryana, in 2006. The five-year-old store was doing well, selling about 70 pieces a week, but the limited pool of customers was stifling for the ambitious businesswoman.
On a whim, Sandhu set up a profile on Facebook at the end of last year with photographs of some of her products. To her surprise, she bagged an order the same day from a customer in California. Ten months on, Sandhu, whose social media page has been liked by 17000 visitors, is busy planning exhibitions in the US and UK.
As business on social media gains rapid acceptance, small-town entrepreneurs are securing customers from across the world. Sandhu gets over 100 orders a week mostly from customers in the US, Canada and the UK. On an average, individual customers order 5-10 pieces at a time, while a wholesale order starts at 40. "I have international recognition which has helped increase sales by 20 times since the launch of the page," says Sandhu for whom the Facebook page is the sole link with her customers.
For scores of entrepreneurs like Sandhu living in non-metros and towns with tight marketing budgets and no experience of running a commercial enterprise, Facebook has emerged as a significant marketing and sales tool. In fact, many of them are using their Facebook page as a substitute for a proprietary website. It costs nothing to set up a page, profile or group and it provides space for displaying photographs to boot.
Location of Business Does not Matter
The social networking site also gives an opportunity to interact with customers and provides instant access to millions of users worldwide.
"Location does not matter if the entrepreneur has the infrastructure to deliver products across the country," says Advit Sahdev, founder of social media marketing venture Odigma. A recent study by global workplace solutions provider, Regus, states that 83% of firms in India agree that social media activity is essential for the success of marketing strategies.
The report also says that 61% of Indian firms, which participated in the study, were successful in getting customers through business social networking in 2011, compared with 51% in 2010. While any large company or start-up can use social media as a brand building or marketing device, it is the creative entrepreneur, located in non-metro cities and towns, who has found Facebook most useful.
"If an entrepreneur is using Facebook as her sole marketing medium, she need to be selling a unique product to stand out of the clutter," says Sahdev. He adds that entrepreneurs in creative industries such as fashion and jewellery design and handicrafts have a natural advantage over others.
A case in point is Ahmedabad-based student-entrepreneur Kavya Agrawal, who started Kaagazi three months ago to sell uniquely designed handbound books. Kaagazi started as a classroom project for Agrawal, a final year graphic design student at Ahmedabad's National Institute of Design.
Based in a non-metro city, she knew selling her products though traditional means would be an uphill task. As a fulltime student, she also could not travel to metros where she knew her products would find a clientele. "Facebook was the logical choice as I did not have any money and I wanted to showcase my products and get feedback," says Agrawal, whose page has 400 'likes'. She started selling in the first week of August this year and has already sold 20 products.
Now, she plans to set up a production unit. "In the next two to three years, I intend to make Kaagazi products available in stores all across the country," Agrawal adds.
Agra's Neha Vij is also busy mapping out expansion plans. She had dabbled in candle making as a hobby and started participating in exhibitions in 2008 under the brand name of Auro Candles. But one-off exhibitions did not provide regular business and living in a non-metro city made customer interaction difficult.
In 2009, she started a Facebook page. Today, the Auro Candles page has over 1,500 'likes' and Vij now regularly receives orders and customises products. She has a team of six and a small manufacturing unit in Agra and has sold designer candles priced between Rs 15 and .`1,500 a to stores across the country. She declined to reveal her company's revenue, but said sales have jumped by almost 25% since she started the Facebook page.
While these entrepreneurs can market products through Facebook, the site does not have payment options. A customer might express interest on the site, but the entrepreneurs follow up over email. "This is not a major issue as there are many other payment options available," says Vij.
Even stores with strong offline sales in smaller cities are finding out that a social media presence has its advantages. Madhavi Kuckreja started a handicrafts store, Sanatkada, in Lucknow over five years ago. Apart from selling craft objects, Sanatkada is also a venue for many cultural events. Two years ago, Kuckreja set up a profile for her store and she received a number of queries through the site from artisan groups, NGOs and other stores for displaying their products in her store, which has a turnover of Rs 3 lakh a month.
"People might not have an email id or check email, but they have a Facebook profile and constantly check it, so I have to just put up the event details on my page and people attend," says Kuckreja. Lucky Khan, who started Angel Tattoo Parlour in Indore in 2009, started putting up pictures on Facebook and realised customers were coming to his parlour after chancing upon his Facebook group. His business makes close to Rs 80-90,000 a month and Khan says almost all his customers come to him after discovering him on Facebook.
Many small-town entrepreneurs now vouch for the business opportunities Facebook offers. "It's a permanent exhibition that can be accessed by anyone 24 hours a day, 365 days a year. I do not plan to start a website or sell through another," says Mumtaz's Sandhu.
On a whim, Sandhu set up a profile on Facebook at the end of last year with photographs of some of her products. To her surprise, she bagged an order the same day from a customer in California. Ten months on, Sandhu, whose social media page has been liked by 17000 visitors, is busy planning exhibitions in the US and UK.
As business on social media gains rapid acceptance, small-town entrepreneurs are securing customers from across the world. Sandhu gets over 100 orders a week mostly from customers in the US, Canada and the UK. On an average, individual customers order 5-10 pieces at a time, while a wholesale order starts at 40. "I have international recognition which has helped increase sales by 20 times since the launch of the page," says Sandhu for whom the Facebook page is the sole link with her customers.
For scores of entrepreneurs like Sandhu living in non-metros and towns with tight marketing budgets and no experience of running a commercial enterprise, Facebook has emerged as a significant marketing and sales tool. In fact, many of them are using their Facebook page as a substitute for a proprietary website. It costs nothing to set up a page, profile or group and it provides space for displaying photographs to boot.
Location of Business Does not Matter
The social networking site also gives an opportunity to interact with customers and provides instant access to millions of users worldwide.
"Location does not matter if the entrepreneur has the infrastructure to deliver products across the country," says Advit Sahdev, founder of social media marketing venture Odigma. A recent study by global workplace solutions provider, Regus, states that 83% of firms in India agree that social media activity is essential for the success of marketing strategies.
The report also says that 61% of Indian firms, which participated in the study, were successful in getting customers through business social networking in 2011, compared with 51% in 2010. While any large company or start-up can use social media as a brand building or marketing device, it is the creative entrepreneur, located in non-metro cities and towns, who has found Facebook most useful.
"If an entrepreneur is using Facebook as her sole marketing medium, she need to be selling a unique product to stand out of the clutter," says Sahdev. He adds that entrepreneurs in creative industries such as fashion and jewellery design and handicrafts have a natural advantage over others.
A case in point is Ahmedabad-based student-entrepreneur Kavya Agrawal, who started Kaagazi three months ago to sell uniquely designed handbound books. Kaagazi started as a classroom project for Agrawal, a final year graphic design student at Ahmedabad's National Institute of Design.
Based in a non-metro city, she knew selling her products though traditional means would be an uphill task. As a fulltime student, she also could not travel to metros where she knew her products would find a clientele. "Facebook was the logical choice as I did not have any money and I wanted to showcase my products and get feedback," says Agrawal, whose page has 400 'likes'. She started selling in the first week of August this year and has already sold 20 products.
Now, she plans to set up a production unit. "In the next two to three years, I intend to make Kaagazi products available in stores all across the country," Agrawal adds.
Agra's Neha Vij is also busy mapping out expansion plans. She had dabbled in candle making as a hobby and started participating in exhibitions in 2008 under the brand name of Auro Candles. But one-off exhibitions did not provide regular business and living in a non-metro city made customer interaction difficult.
In 2009, she started a Facebook page. Today, the Auro Candles page has over 1,500 'likes' and Vij now regularly receives orders and customises products. She has a team of six and a small manufacturing unit in Agra and has sold designer candles priced between Rs 15 and .`1,500 a to stores across the country. She declined to reveal her company's revenue, but said sales have jumped by almost 25% since she started the Facebook page.
While these entrepreneurs can market products through Facebook, the site does not have payment options. A customer might express interest on the site, but the entrepreneurs follow up over email. "This is not a major issue as there are many other payment options available," says Vij.
Even stores with strong offline sales in smaller cities are finding out that a social media presence has its advantages. Madhavi Kuckreja started a handicrafts store, Sanatkada, in Lucknow over five years ago. Apart from selling craft objects, Sanatkada is also a venue for many cultural events. Two years ago, Kuckreja set up a profile for her store and she received a number of queries through the site from artisan groups, NGOs and other stores for displaying their products in her store, which has a turnover of Rs 3 lakh a month.
"People might not have an email id or check email, but they have a Facebook profile and constantly check it, so I have to just put up the event details on my page and people attend," says Kuckreja. Lucky Khan, who started Angel Tattoo Parlour in Indore in 2009, started putting up pictures on Facebook and realised customers were coming to his parlour after chancing upon his Facebook group. His business makes close to Rs 80-90,000 a month and Khan says almost all his customers come to him after discovering him on Facebook.
Many small-town entrepreneurs now vouch for the business opportunities Facebook offers. "It's a permanent exhibition that can be accessed by anyone 24 hours a day, 365 days a year. I do not plan to start a website or sell through another," says Mumtaz's Sandhu.
Why Africa is leaving Europe behind
Read this on Financial times
Africans are relishing something of a reversal in roles. The former colonial powers in Europe are wrestling with debt crises, austerity budgets, rising unemployment and social turmoil. By contrast much of sub-Saharan Africa can point to robust growth, better balanced books and rising capital inflows. There is an opportunity in this novel scenario: for Africa to assert itself on the global stage, and for European countries to take advantage of their historic footprint in Africa by stimulating commercial expansion to their south. But it is far from clear either side will grasp it.
The problems faced by western governments are all too familiar to African countries. They too found their public services hollowed out in the 1980s and 1990s under the strict conditions of World Bank and International Monetary Fund bail-outs. In the worst instances, state authority was fatally weakened as discontent boiled over on the streets.
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Today, by contrast they can point to improved economic figures, a reviving middle class and arguably, in places, more effective social control. Even Lagos – much rougher, larger, poorer and unequal than London – has never witnessed looting on the scale that took place in the former capital of empire last week, although inhabitants of the Nigerian mega-city have certainly competed when it comes to arson.
Africa has been enjoying this reversal of roles. As rioting spread from London to other cities, South Africa’s foreign ministry took the unusual step of issuing a travel advisory warning its citizens against visiting the UK. There was also retaliation for past jibes about their country’s capacity to organise the 2010 football World Cup, by questioning whether London can be trusted to host a safe Olympics.
The response from Westminster’s politicians also failed to serve as much of a model. As one veteran Nigerian diplomat wryly put it to me, Prime Minister David Cameron seemed to echo Libya’s Colonel Gaddafi – who blames “terrorists” for the insurgency on his doorstep – when he blamed the worst violence on the UK mainland in generations simplistically to “criminals.”
If British society is sick, and the European project is flailing, there are of course patients in Africa in far worse shape. It only took the improbable appearance this week of Andrew Mitchell, Britain’s development secretary, in Mogadishu – a city no UK minister has visited since 1992 – to serve a reminder.
Mr Mitchell’s visit would have been bolder if it had taken place last year, when the seeds of the current famine were already sown and the absence of a functioning state was blighting the region with piracy and Islamist extremism. But it did serve as a contrast to the abnegation of responsibility in the crisis in the Horn of Africa by regional leaders.
It is Western governments and charities, along with the UN, that have stepped into the African breach, providing the finances and expertise to manage a crisis has already claimed thousands of lives and may have repercussions in the region for years to come. For all Africa’s failures, however, the west must not draw the wrong conclusions. It is tempting to see only a familiar picture of African weakness. But in some ways the famine is a chapter that ill befits the times.
In the decade and more since China began sketching out the terms of its new engagement with Africa, the continent has undergone a transformational shift in its relations with the outside world. A stage once dominated by cautious western donors and jaded former colonial powers now hosts Brazilians, Indians, Russians, Turks and others queueing up to seize the opportunities of African resources and markets. The relative decline of western influence and commercial dominance forms part of the same narrative.
The contours of this new order are still being defined. Yet neither European nor African governments appear to have seized the opportunity presented: for African governments to stake out a more independent role and greater say in world affairs, and for Europeans to unshackle themselves from the unhealthy paternalism of the past and compete on more equitable terms for the business opportunities provided by rapid economic expansion to their south.
Mr Cameron appeared to have at least half understood this on his recent trip to South Africa and Nigeria. He dropped the habitually hectoring tone in favour of an upbeat assessment of Africa’s trading potential. But in comparison with the relentless pursuit of African attentions by Chinese and other emerging power officials, his visit was a barely perceptible blip in between domestic crises.
Many of his western peers still appear unaware of how grating it is for Africans to be lectured on poverty reduction, corruption and financial probity in the light of recent governance failures on their own turf. Africans can, after all, legitimately ask what if not a failure of governance caused the global financial crisis in 2008, among the many other problems that best western governments.
Europe has surrendered moral high ground as well as commercial dominance in Africa. But it is not too late to reverse that. On the former, at least, Europeans and Americans have remained by far the biggest donors during the famine, where African and emerging nation voices have been absent. On the latter, Africa’s economic recovery has only just begun.
Scanning 2.4 Billion Eyes, India Tries to Connect Poor to Growth
Read this on the New York times
His name, year of birth and address were recorded. A worker guided Mr. Gangar’s rough fingers to the glowing green surface of a scanner to record his fingerprints. He peered into an iris scanner shaped like binoculars that captured the unique patterns of his eyes.
With that, Mr. Gangar would be assigned a 12-digit number, the first official proof that he exists. He can use the number, along with a thumbprint, to identify himself anywhere in the country. It will allow him to gain access to welfare benefits, open a bank account or get a cellphone far from his home village, something that is still impossible for many people in India.
“Maybe we will get some help,” Mr. Gangar said.
Across this sprawling, chaotic nation, workers are creating what will be the world’s largest biometric database, a mind-bogglingly complex collection of 1.2 billion identities. But even more radical than its size is the scale of its ambition: to reduce the inequality corroding India’s economic rise by digitally linking every one of India’s people to the country’s growth juggernaut.
For decades, India’s sprawling and inefficient bureaucracy has spent billions of dollars to try to drag the poor out of poverty. But much of the money is wasted or simply ends up trapping the poor in villages like Kaldari, in a remote corner of the western state of Maharashtra, dependent on local handouts that they can lose if they leave home.
So now it is trying something different. Using the same powerful technology that transformed the country’s private economy, the Indian government has created a tiny start-up of skilled administrators and programmers to help transform — or circumvent — the crippling bureaucracy that is a legacy of its socialist past.
“What we are creating is as important as a road,” said Nandan M. Nilekani, the billionaire software mogul whom the government has tapped to create India’s identity database. “It is a road that in some sense connects every individual to the state.”
For its proponents, the 12-digit ID is an ingenious solution to a particularly bedeviling problem. Most of India’s poorest citizens are trapped in a system of village-based identity proof that has had the perverse effect of making migration, which is essential to any growing economy, much harder.
The ID project also has the potential to reduce the kind of corruption that has led millions of Indians to take to the streets in mass demonstrations in recent weeks, spurred on by the hunger strike of an anticorruption activist named Anna Hazare. By allowing electronic transmission and verification of many government services, the identity system would make it much harder for corrupt bureaucrats to steal citizens’ benefits. India’s prime minister has frequently cited the new system in response to Mr. Hazare’s demands.
The new number-based system, known as Aadhaar, or foundation, would be used to verify the identity of any Indian anywhere in the country within eight seconds, using inexpensive hand-held devices linked to the mobile phone network.
It would also serve as a shortcut to building real citizenship in a society where identity is almost always mediated through a group — caste, kin and religion. Aadhaar would for the first time identify each Indian as an individual.
The identity project is, in a way, an acknowledgment that India has failed to bring its poor along the path to prosperity. India may be the world’s second-fastest-growing economy, but more than 400 million Indians live in poverty, according to government figures. Nearly half of children younger than 5 are underweight.
India’s expensive public welfare systems are so inefficient that warehouses overflow with rotting grain despite malnutrition rates that rival those of sub-Saharan Africa, and much of it is siphoned off to the private market long before it reaches hungry mouths. The government builds sturdy classrooms but fails to punish well-paid teachers who do not show up for work. These systems fail to connect citizens’ most basic needs with help that is readily available, either through government handouts or the marketplace.
“One cannot improve human beings,” said Ram Sevak Sharma, the director general of the identity program. “But one can certainly improve systems. And the same flawed human beings with a better system will be able to produce better results.”To build the database, the Indian government has created a highly unusual hybrid institution: a small team of elite bureaucrats who are working with veterans of Silicon Valley start-ups and Bangalore’s most-respected technology companies. Despite the scale of its task, the organization has deliberately been kept small. At its peak, no more than a few hundred people will work on the project, and private contractors will do much of the work of enrolling citizens. It costs the program about $3 to issue each Aadhaar number, Mr. Nilekani said, and more than 30 million have been issued so far. The process is free and voluntary.
The operation’s tiny footprint and seemingly technical mission have kept the project from drawing much scrutiny so far. Just as the information technology industry grew stealthily beneath the nose of the bureaucracy that had traditionally smothered private enterprise, the identity database is quietly embedding itself in India’s bureaucratic fabric even as other efforts to reform India’s government and economy seem to have stalled.
Century-old labor and land laws stifle industry and mobility, making it hard to build factories and create jobs. Restrictions on foreign investment protect small shopkeepers and domestic industries but also hamper investment that could modernize agriculture. Yet efforts to change these rules often fail to overcome entrenched interests.
The identity database has so far met only muffled opposition. Privacy watchdogs worry that the identity numbers will be abused by a snooping state that cares little for civil liberties. Leftists fret that the database will lead to an erosion of the state’s role in helping the poor. But powerful and corrupt bureaucrats, politicians and businessmen who thrive on the current system’s opacity have yet to object publicly, though they almost certainly will once the challenge to the way they do business becomes evident.
India’s identity database will be an order of magnitude larger than the world’s largest existing biometric database, the US-Visit program for visas, which has data on about 100 million people. To register all 1.2 billion Indians, the system will need to collect 12 billion fingerprints and scan 2.4 billion irises. It is a project of epic proportions — not unlike the challenge of governing the world’s largest democracy.
A Start-Up in Spirit
With its grid of chest-high cubicles in cheerful colors, the suite of offices could belong to a high-tech start-up like so many others in the booming city of Bangalore. On the second floor of the Touchstone Building, part of a nondescript technology office park off a traffic-choked ring road, the government’s own start-up is at work.
In one glass-walled conference room, bankers on leave from their jobs in finance were planning how to use the Aadhaar and hand-held mobile technology to bring banking to India’s 600,000 villages without laying a single brick.
In another, programmers worked out how Aadhaar’s open software architecture could be used to build an ecosystem like the ones Google and Apple created, embedding the number in every aspect of life. That could eliminate trillions of pages of bureaucratic paperwork, remnants of the License Raj, the old system that governed India’s closed economy. Indians face obstacles almost every time they ask anything of their government — a driver’s license, subsidized grain, a birth certificate. Digitizing these systems would eliminate countless opportunities for graft.
A typical government office this is not. There are no peons in white Nehru caps shuffling between offices with bundles of dusty paper files tied with string. The standard uniform of the tech company employee — khaki trousers and polo shirt — is de rigueur.
Two years ago, when the government decided to create the identity database, Mr. Nilekani stepped down as chairman of Infosys to oversee the effort, forging an unusual path in Indian public life from business to government.“I am an entrepreneur within the system,” he explained in an interview in his office in New Delhi.
The very notion of a businessman in government was once unthinkable. Mr. Nilekani, 56, came of age in an era when almost all private industry in India was smothered under the License Raj’s heavy blanket of government regulation. This meant entrepreneurship was almost impossible. For a young man in the 1970s with elite credentials, going abroad to work for a private company or getting a posting in the elite Indian Administrative Service were the two most attractive options.
Mr. Nilekani was a founding member of a second elite, the one created when a handful of brainy graduates of India’s top technical schools set up companies in Bangalore in the 1980s.
Over time, India’s technology elite has transformed not just India but the world, sending its brightest engineers to Silicon Valley and beyond. India has become the back office to the world, not only handling customer service calls and insurance claims, but also composing legal briefs and performing complex quantitative analysis for investment banks.
But even as it made global business more efficient and profitable, this technological class was cut out of India’s political system.
In 2008 Mr. Nilekani published “Imagining India,” a wonkish book that elucidated a set of ideas he thought could transform India. A best seller here, it was the type of policy book an American businessman might write if he aspired to high public office. But India’s hurly-burly political system has no place for men like Mr. Nilekani.
“This was not the United States, where a Michael Bloomberg could be the C.E.O. of a large company one day and get elected as New York’s mayor the next,” Mr. Nilekani wrote. “Being an entrepreneur automatically made me a very long shot in Indian politics, and an easy target for populist rhetoric.”
A deep suspicion toward private enterprise, a result of decades of socialist politics, permeates public life. Political parties are intensely hierarchical and formed along family, religious and caste lines, making it all but impossible for an outsider like Mr. Nilekani to win an election.
Still, he pined to serve somehow, and his chance came when the Congress Party was re-elected and formed a strong coalition government in 2009. Rahul Gandhi, the tech-savvy scion of India’s leading political family and the presumed prime minister in waiting, wanted Mr. Nilekani to join the government.
At first Mr. Gandhi asked Mr. Nilekani to transform the dysfunctional education bureaucracy, according to a senior government official familiar with Mr. Gandhi’s thinking. But Sonia Gandhi, Mr. Gandhi’s mother and the leader of the Congress Party, along with Prime Minister Manmohan Singh, concluded that such a move would cause too much of an uproar.
When the government decided to create the unique-identity system, Mr. Nilekani leapt at the chance to run it. Though he would hold cabinet rank, he would be in charge of a small and seemingly arcane government authority. No one would notice that he was working on a revolutionary project, the Gandhis and Mr. Singh concluded.
“People don’t fully realize what can be done with this,” said a senior government official working on the identity system, who requested anonymity because the scope of the project is a delicate subject. “People who are not familiar with technology don’t understand how big this is.”
India lacks robust laws to protect privacy, though Mr. Nilekani and others have urged the passage of strict legislation to govern the use of information the government collects. The database has been designed to contain as little information as possible — only a name, date of birth, sex and address. When anyone tries to confirm a person’s identity using the number, the database will supply only a yes-or-no answer.Many influential critics of the identity system argue that it is costly — $326 million is budgeted for the next financial year, and the project will take a decade to complete — and unnecessary because there are easier ways to check corruption in antipoverty programs. Chhattisgarh State, in central India, has drastically reduced waste and fraud in its delivery of subsidized grain using a system of smart cards.
“This is a solution in search of a problem,” said Usha Ramanathan, a lawyer who works on civil liberties.
Because Aadhaar will be linked instantly with a bank account, some social activists suspect that the government is seeking to replace its current system of in-kind benefits — like distributing grain and creating state-supported jobs — with direct cash transfers. Many on the left oppose such a shift because they think handing out cash from the public till would create a backlash and undercut support for poverty programs.
But the project has enjoyed an unusual degree of support from the highest officials in India. When the program was inaugurated, Prime Minister Singh and Mrs. Gandhi, the Congress Party’s left-leaning leader, attended the ceremony. Several influential members of the National Advisory Council, a kind of kitchen cabinet that advises Mrs. Gandhi on social policy, were deeply wary of the project, but she overruled them.
“Mrs. Gandhi normally consents to discussions on a number of issues we raise,” said Harsh Mander, an activist and member of the council. “But on this she said, ‘No, we are going ahead with the idea.’ ”
The Invisible Man
Under an overpass near the fetid bank of the Yamuna River, in the shadow of New Delhi, the homeless lined up to be counted.
Mohammed Jalil, a rickshaw puller dressed in his best shirt, hair freshly washed and neatly parted, sat uneasily behind a computer screen, waiting to be registered for an Aadhaar number.
Though he has lived in Delhi more than half his life, Mr. Jalil may as well not exist. He is homeless. For two decades he has worked as a rickshaw driver, delivering heavy loads of wooden furniture from a market to homes across the city, earning about $100 a month. Labor is so cheap in India that it makes more sense to use a man as a pack horse than to expend fossil fuel.
He left his village in the impoverished state of Uttar Pradesh, hoping to find a better way to make a living than farming a scrap of land. But the lack of identity documents has been a fundamental hurdle. “When I first came to Delhi I thought I would earn big money, build a house in my village and educate my children,” he said.
But he has no bank account, making it hard to save money. When one of his children got sick, he took a loan from a moneylender at an onerous interest rate. Poor people like him are entitled to subsidies for food, housing and health care, but he has no access to them.
Mr. Jalil hopes Aadhaar will allow him to open a bank account. He could get a driver’s license and a cellphone.
“That will give me an identity,” he said, gesturing at the computer station where he had just completed his enrollment. “It will show that I am a human being, that I am alive, that I live on this planet. It will prove I am an Indian.”
Mr. Jalil’s number has yet to arrive, but he is waiting.
A great game for India's energy
Read this article on the Wall Street Journal: Business Asia
A new version of the Great Game is afoot. Or so New Delhi believes, as it has nervously watched Beijing acquire energy assets from Africa to Central Asia over the past decade. Now India is belatedly trying to get into the same game. The latest gambit came last month when Montek Singh Ahluwalia, India's Planning Commission head, said the government was looking into forming a sovereign wealth fund (SWF).
That might make good politics at home. But is it good business sense from the perspective of how best to secure India's energy needs in the future? Almost certainly not.
To be sure, India's private-sector energy companies have enjoyed success venturing overseas. Reliance Industries has taken stakes in U.S. shale gas ventures to gain know-how about the latest revolution in global energy. Adani Power has gotten into deals with coal-miners in Indonesia to beef up its supply chain against the possibility of supply disruptions within India.
But that's very different from the Chinese model some in New Delhi now want to emulate of foreign investment driven by state-owned companies for strategic aims. India has tried this by mobilizing the state-owned Oil and Natural Gas Corp., or ONGC, with far less success than the private sector. An SWF would likely meet the same fate.
The first problem is state capacity. India lacks China's top-down culture, which can mobilize the state's diplomatic and financial wherewithal to lobby a foreign government for a big asset. Hence ONGC has lost when bidding in Kazakhstan and elsewhere.
Yet even if this weak and decentralized state could be revamped, it still wouldn't be worth it. Proponents of state-led investment argue that if international crude oil prices were to move up dramatically, so would the valuation of the oilfields in which, say, the SWF had purchased equity. India would reap a windfall that could be distributed as a subsidy.
The problem, as former IMF chief economist Raghuram Rajan pointed out in a 2006 essay, is that this means states almost always use such windfalls to bankroll preexisting inefficient uses of energy. India's subsidies cloud market signals that would encourage greater efficiency. This arguably is a step backwardfor energy security.
Instead of trying to beat China at its own game, India would be better off doing something completely different: meeting India's energy needs by allowing the market to work.
The first step would be to gut the subsidies to consumers, a lot of which is paid for by oil companies. Producers could then keep more of their profits when prices are high and have more capital to deploy for further exploration and production.
In other ways too, overreliance on the state sector has contributed to Indian energy insecurity. Consider the case of coal, which accounts for 40% of Indian energy consumption.
Despite holding the world's fifth-largest proven reserves, India is a net importer of coal. One reason is evident. In 1973, the government nationalized all coal mines and created a new firm to manage them. The resultant Coal India Ltd. today controls all the mines in the country whose coal can be sold in the open market—this accounts for 82% of the country's mines. The private sector is only allowed into captive mines, where the coal has to be used for an attached power or steel plant.
Beholden to unions, the state-owned behemoth spends nearly half its costs on a bloated labor force. Without competition, it can afford to fall behind production targets, so it does. Though coal prices were officially deregulated in 2000, Coal India doesn't change them without political approval. Domestic prices are far lower than global ones.
One bright spot came last year when New Delhi privatized 10% of the firm. The government is also contemplating legislation to scrap its monopoly. If policy makers gathered the will to push their own measures through, Coal India, already the world's largest coal producer, could become a world-class miner. With deregulation, price discovery will improve and send the right signals for new producers to make the best of this geological blessing.
The predicament of the two other fossil fuels—oil and gas—is similar, with administered prices and excessive regulation dissuading producers. No surprise that 34% of India's sedimentary oil basins lie unexplored or poorly explored, according to Gokul Chaudhri of BMR Advisors. India has 50 trillion cubic feet (tcf) of proven natural gas reserves and 300-1200 tcf of shale gas, according to exploration firm Schlumberger's initial estimates in December. Yet global majors stayed away from an exploration auction this year. Exports of oil and gas produced domestically are forbidden, so multinationals would be forced to market the product within India at uneconomical prices.
Beijing is making a costly bet that it can't trust markets to meet China's energy needs. But India doesn't have to play the same game. Rather than racing against China in a futile effort to gain access to every last oilfield abroad, India would be better off playing to its strengths as an increasingly market-driven economy. That includes encouraging the development of a true market for energy.
GMR to focus on emerging mkts for airport business
Read This interesting article in Business Standard:
GMR Infrastructure, which runs four airports across the globe, is looking at emerging markets in South East Asia, South America and the African continent for expanding its airport business, a top company official said.
GMR Infrastructure, the flagship company of infrastructure conglomerate GMR Group, is currently developing four airport projects, including two in India -- Delhi and Hyderabad -- and one each in Male and Istanbul.
"We are looking at opportunities for expanding our airport business in the international market. We will be focusing on emerging markets, including South East Asia, South America and several African countries. We have not identified any particular project as of now," GMR Chief Financial Officer A Subbarao told PTI here.
The company is also looking at developed countries, including the USA, among others, for expanding its airports business, he said.
The BSE-listed company made its maiden international foray by winning the bid to develop the Istanbul Sabiha Gokcen International Airport (ISGIA) at Istanbul, followed by the Male airport project in the Maldives.
GMR, which reported a consolidated net loss of Rs 66.69 crore for the quarter ended June 30, mainly on account of lower revenues from the Delhi airport, high interest costs and increased tax outgo, has planned a capital expenditure of around Rs 15,000 crore over the next 12 months on executing existing projects.
"We have set a capex of Rs 15,000 crore for implementing projects in road, energy and airport businesses. We will be spending over Rs 8,000 crore on our road business, Rs 3,000 crore on energy and rest on our airport business," he said.
The Bangalore-based company has started construction of a 1,370-MW thermal power plant at Chhattisgarh, while its two existing gas-based projects, the 388-MW Vermagiri plant and 220-MW Kakinada plant, have been achieving a higher plant load factor (PLF).
"Around 1,600 MW capacity will be fully operational this fiscal and we will add another 2,000 MW by September, 2012," he said.
GMR Energy, the group's energy division, has acquired a stake in two coal mining companies of Indonesia -- PT Barasentosa Lestari and PT Golden Energy Mines Tbk -- and one South African company, Homeland Energy Group, to scale up its energy business and secure fuel supplies.
"These acquisitions will provide fuel security for our power plants under construction and also support further capacity addition and trading," Subbarao said, adding, "We will continue to look for similar acquisitions in future."
However, he said the company has no plans to expand its energy generation business in the international market.
"There is huge demand for power in India and hence, we will concentrate on the domestic market," he added.
Why Coca Cola should raise prices
Read this on the HBR blog
Even as a kid growing up in Cincinnati, I was interested in pricing. I remember the grand opening of a new superstore in the early 1980's: two-liter bottles of Coca-Cola were on sale for 88 cents. "Wow, that's cheap," I recall thinking. Thirty years later, the sales price for two-liter Coca-Cola products remains under a dollar. Just recently, my local supermarket in Boston held an 88 cent Coke sale. So much for pricing power...
It's not surprising that earlier this summer, analysts claimed "100% of the questions" they receive from Coke investors are about its U.S. pricing strategy. In particular, why isn't the company able or willing to charge more?
Despite its flat pricing in the U.S., Coke has kept profits growing by steadily increasing sales volume. Coke's recent Q2 financial results reveal 7.5% volume growth in Continental Europe, and sales of my personal favorite—Coke Zero—rocketed by 15%. Coca Cola is the number one U.S. soft drink, with a 17% share. Last year Beverage Digest reported that Diet Coke (9.9% share) surpassed Pepsi (9.5% share) to become the industry's number two brand. Remember those famous "Pepsi Challenge" commercials where Pepsi confidently encouraged consumers to make their buying decisions after sampling both Pepsi and Coke? Well, the people have spoken: Coke is the clear winner.
Enter any retail establishment and you'll likely find identical prices for Coca-Cola and Pepsi products. Maintaining price parity is a safe strategy. But safety isn't necessarily what Coke investors want. That's why I think Coke should premium price its products. At the very least, it should increase prices on its more differentiated drinks such as Dr. Pepper, Zero, and Sprite. Ditto for Pepsi: Since its Mountain Dew (6.8% share) soft drink is differentiated, there's probably a pricing opportunity too. In soft drinks as in other markets, companies that achieve product innovation should command higher prices.
That's true only at the retail level, however: I'm not advocating similar hikes for Coca-Cola's large volume syrup sales to say, fast food restaurants. Why? In the wholesale syrup channel, Coke and Pepsi are virtual commodities; buyers like restaurant chains shop on price, because they know few people will switch preferences because a store switches from Coke to Pepsi. Differentiated food products are what matter to diners —not the soft drink provider.
For Coke, this situation may feel like a managerial conundrum: its product is a commodity in one market, and a premium product in another. That situation is not unique to Coca-Cola. Most products have different pricing opportunities based on channel and geography. The key to better pricing is to embrace and capitalize on these market nuances. And while it's easy for executives to realize and execute on "higher prices will be more profitable" advantages, the flip side is more challenging. Companies tend to take pride in high margins as a signal of "we are better," but even if that's true, there are some markets where you can't command that premium. My advice is to set aside pride. Lower your margins in these commodity-like markets and enjoy the resulting increased growth and profit. Profit trumps margin-based pride.
If a brand like Coke increased its prices to be slightly more than Pepsi, would you switch? Should Coca-Cola charge premium prices in the retail channel? What instances do buyers view your product (or service) as highly differentiated or a commodity? I'm eager to hear your opinions.
Even as a kid growing up in Cincinnati, I was interested in pricing. I remember the grand opening of a new superstore in the early 1980's: two-liter bottles of Coca-Cola were on sale for 88 cents. "Wow, that's cheap," I recall thinking. Thirty years later, the sales price for two-liter Coca-Cola products remains under a dollar. Just recently, my local supermarket in Boston held an 88 cent Coke sale. So much for pricing power...
It's not surprising that earlier this summer, analysts claimed "100% of the questions" they receive from Coke investors are about its U.S. pricing strategy. In particular, why isn't the company able or willing to charge more?
Despite its flat pricing in the U.S., Coke has kept profits growing by steadily increasing sales volume. Coke's recent Q2 financial results reveal 7.5% volume growth in Continental Europe, and sales of my personal favorite—Coke Zero—rocketed by 15%. Coca Cola is the number one U.S. soft drink, with a 17% share. Last year Beverage Digest reported that Diet Coke (9.9% share) surpassed Pepsi (9.5% share) to become the industry's number two brand. Remember those famous "Pepsi Challenge" commercials where Pepsi confidently encouraged consumers to make their buying decisions after sampling both Pepsi and Coke? Well, the people have spoken: Coke is the clear winner.
Enter any retail establishment and you'll likely find identical prices for Coca-Cola and Pepsi products. Maintaining price parity is a safe strategy. But safety isn't necessarily what Coke investors want. That's why I think Coke should premium price its products. At the very least, it should increase prices on its more differentiated drinks such as Dr. Pepper, Zero, and Sprite. Ditto for Pepsi: Since its Mountain Dew (6.8% share) soft drink is differentiated, there's probably a pricing opportunity too. In soft drinks as in other markets, companies that achieve product innovation should command higher prices.
That's true only at the retail level, however: I'm not advocating similar hikes for Coca-Cola's large volume syrup sales to say, fast food restaurants. Why? In the wholesale syrup channel, Coke and Pepsi are virtual commodities; buyers like restaurant chains shop on price, because they know few people will switch preferences because a store switches from Coke to Pepsi. Differentiated food products are what matter to diners —not the soft drink provider.
For Coke, this situation may feel like a managerial conundrum: its product is a commodity in one market, and a premium product in another. That situation is not unique to Coca-Cola. Most products have different pricing opportunities based on channel and geography. The key to better pricing is to embrace and capitalize on these market nuances. And while it's easy for executives to realize and execute on "higher prices will be more profitable" advantages, the flip side is more challenging. Companies tend to take pride in high margins as a signal of "we are better," but even if that's true, there are some markets where you can't command that premium. My advice is to set aside pride. Lower your margins in these commodity-like markets and enjoy the resulting increased growth and profit. Profit trumps margin-based pride.
If a brand like Coke increased its prices to be slightly more than Pepsi, would you switch? Should Coca-Cola charge premium prices in the retail channel? What instances do buyers view your product (or service) as highly differentiated or a commodity? I'm eager to hear your opinions.
Wednesday, July 20, 2011
Diageo in India
A growing economy, expanding middle class and rising disposable incomes have given the Indian spirits market significant growth potential. India is home to 17% of the global population (close to 1.1 billion). India is now the largest international whisky market by volume, reporting 8-10% growth annually. This makes India one among the fastest growing whisky markets anywhere in the world. Diageo is the world‘s largest wine, beer and spirits company. It owns the brands like Smirnoff, Johnnie Walker, Guinness, Baileys, J&B, Captain Morgan, José Cuervo and Tanqueray. Diageo launched its operations in India in early 1990‘s. But, the UK headquartered giant, yielded ground to French ri4valPernodRicard in the early round of the Indian conquest. In the past 4-5 years, Diageo has taken a number of steps to revive its marketing strategies in the country. The biggest growth drivers for Diageo in India have been Johnnie Walker (Premium Scotch Segment) and Smirnoff (Premium Vodka Segment). In 2006, Diageo claimed to control 80% and 90% of the two respective segments with these brands. Diageo spotted two major trends in India markets – urbanization and premium-isation (based upon the aspiration levels of the people). Thus, they created price segmentation. There was a big gap between the prices of IMFL and premium alcohol. Haig was launched to target aspirants. So, there are different segments the takers for Haig, for existing brands like Black and White and VAT 69 and finally for Johnny Walker at the top-end. The aspirants eventually graduate to Johnny Walker. Similarly, in vodka, Shark Tooth which is mid-price, on a par with Fuel and Magic Moments and Smirnoff which is slightly more premium and Smirnoff Black which is at the top-end. So, here also three segments were created. Under its Smirnoff brand, the company introduced an array of festive drinks with Indian ingredients like Smirnoff Masala Marke, Smirnoff Jaljeera, and Smirnoff Katha Pudina esp. to cater to Indian taste buds. In 2001, Diageo had hurriedly exited Indian-Made Foreign Liquor (IMFL) to focus on its imported international portfolio but revised the strategy with the domestic market witnessing sustained robust growth. In 2006, Diageo announced a joint venture with homegrown liquor company RadicoKhaitan targeting the IMFL segment. Brands of RadicoKhaitan include 8 PM Whisky, Contessa Rum, Old Admiral Brandy and Whytehall Whisky. Bollywood king Shahrukh Khan was roped in as the brand ambassador for its first offering Masterstroke deluxe whisky. In Sep, 2006 Diageo decided to launch the indigenously develope5d vodka brand called Shark Tooth aiming to position it at prestigious vodka segment. In June, 2009 the Tamil Nadu government had cleared the decks for Diageo to start bottling in the state, making it the first MNC drinks company to list brands in the local retail trade. The company had sold its most successful brand Gilbey‘s Green Label to the country‘s largest spirits maker, UB Group, for Rs 60 crore in 2001. Diageo is also bringing back the Gilbey's trademark to India through the Tamil Nadu foray. Sources said that Gilbey's is now being readied as a brandy flavour as the drinks giant works on leveraging its brand equity in South East Asian markets. The company entered into the Indian beer market with its globally top-selling premium stout beer brand Guinness. Diageo bought a strategic stake in Nasik-based Sula Vineyards. They entered the Indian Rum market with their brand Captain Morgan. Despite the continuous efforts, the market share of Diageo in these other segments continues to be low. Roland Abella, managing director of Diageo India is clear that value, and not volumes, will drive Diageo India's growth, hence its focus on premium products. It has reorganised its product basket and has exited the wine business in India. It has taken off its only wine brand Nilaya (priced between Rs 395 and Rs 500) from the market so as to focus on its iconic brands like Johnnie Walker Scotch whisky, Vat 69, Ciroc and Smirnoff vodka. Now, says Abella, ''For us, the centre of gravity is spirits.‖ Diageo like other luxury retailers is betting on India's young demographic, rising consumer standards and exposure to sophisticated products. Another reason for Abella's optimism is that premium brands are less vulnerable to the fluctuations of the global economy. Diageo has made significant noise in India during the past two years in a bid to boost presence across trade channels for lifestyle drinks. In November, 2007 Diageo tied-up with 6retail giants Reliance Fresh and Shoprite Hyper to distribute its wines portfolio in cities like Mumbai and Pune. UB and Diageo initiated trade marketing activities with the alcobev channel in early 2008. Diageo helped revamp local wine shops and re-branded them as JW Select outlets. From a push effect earlier, Diageo initiatives like JW Select create the pull effect. Once the experience is created, offtake happens,‖ said Santosh Kanekar, then marketing director, Diageo India. Clubs like Johnie Walker Club & Lounge, Smirnoff Cafes were launched as a part of the surrogate advertising. These clubs aimed at giving the experience of drinks along with brand associated music, art events and Formula 1 races. Johnnie Walker Bartending Academy‘ was launched aiming at introducing world-class standards of bartending.
Art of War: A Book Review
The Art of War, is a Chinese military treatise, written by Sun Tzu, the sage Strategist, Military General and Philosopher. This book is speculated to be written somewhere in the 6th century B.C though the exact date is still considered to be a matter of dispute as different historians have different takes on the same. That was the time when Mainland China was fragmented into a number of smaller nations (some Chinese historians put the number at 7) and the nations were at constant war with each other in order to conquer control over a vast expanse of fertile territory in the Eastern China. Sun Tzu was the Military General of one of the warring nations named Wu, which was very successful in not only wading off the attacks from other aggressive nations but also many wars that it fought. The book is divided into 13 chapters where Sun Tzu writes about the nuances and knittygritties of warfare at great length. In the initial chapters, he talks about the traits that a General has to possess Wisdom, Sincerity, Benevolence,Compassion and Strictness. Sun Tzu focuses on the Deception as one of the primary weapons of military warfare. Some of the quotes on deception are:
“All warfare is based on deception.”
“Pretend inferiority and encourage his arrogance”
“Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent's fate.”
“If you are far from the enemy, make him believe you are near.”
If one tries to draw an analogy to the real life business scenario it is pretty evident that, the advantages that one stands to gain out of keeping one’s opponent in the dark and mislead them are immeasurable. Here one has to remember that one can deceive or mislead someone only up to some point of time. One day the cloak of deception will fall down and may lay you bare. But it is here one needs to understand that the calculated and careful you are, the more one can extend the duration of keeping one’s opponents into believing something that’s not true and in the process draining their resources. Sun Tzu also focuses immensely on understanding one’s enemy as much as you understand yourselves.
“If you know the enemy and know yourself you need not fear the results of a hundred battles.”
“If ignorant both of your enemy and yourself, you are certain to be in peril.”
Sun Tzu writes about knowing one‘s enemy at great length as in order to outsmart our enemy one needs to know about him inside out. He also goes on say that-
“Keep your friends close and your enemies closer.”
Sun Tzu discourses about strategy by saying that the one who makes more number of calculations before the war has more number of chances of winning the war. Strategy is not all about sticking to one‘s plans but it‘s more about thinking on one‘s feet and to change it accordingly to suit to the ever changing scenario. If we try to draw a parallel with the real life business world where the situation changes faster than one could imagine, it makes all the more sense to immaculately strategize and implement it meticulously taking into consideration all the possible factors and variables involved. It goes without saying that the more holistically you look at the problem and plan accordingly the more are one‘s chances of avoiding the pitfalls of it. In this seminal work Sun Tzu also talks about the lead leadership qualities that are supposed to be possessed by a general (read as business leader) and the management of one‘s resources.
“A leader leads by example not by force.”
“Management of many is the same as management of few. It is a matter of organization.”
“Treat your men as you would your own beloved sons. And they will follow you into the deepest valley.”
“If words of command are not clear and distinct, if orders are not thoroughly understood, the general is to blame. But if his orders are clear, and the soldiers nevertheless disobey, then it is the fault of their officers.”
These are some of the quotes that one can find in this masterpiece regarding the characteristic traits that are to be possessed by a leader. He delves in depth as to how to manage one‘s resources and it is not a function of the amount of resources but it has more to do with the organization skills of the leader. These are some of the many things that the author has talked in the book. The book is as relevant today as it was when it was return speaks volumes about how farsighted the author is. This book is 7 highly recommended for Business leaders around the world because of the timeless pieces of wisdom the book provides. Such is the popularity of the book that it has seen a spin off in the form of Art of war for business, Art of war Executives, Art of war for Managers, Art of war for women, Art of war for teachers etc just to name a few. This book rightly places Strategy on the altar of business.
Strategic Brand Management: Creating The Mist
This is an article that one of our recent alums (Amritanshu Pandey) wrote last year. hope you enjoy it
When presented with the more tangible‘ elements of sales and distribution management, the realm of branding strategy can often seem vague and misty. After all, how does one strategically‘ decide whether the logo‘s color should be green or red? What strategic models go into deciding whether to be a hip‘ and trendy‘ brand or a ‗sturdy‘ and ‗reliable‘ brand? Given that a brand is essentially the sum total of perceptions and attitudes towards a name, can there ever be a strategic approach to brand management? These are some of the questions that we are likely to face as we grow in our marketing education. The sales related experiences of the summer further seem to reinforce that barring sales all marketing is essentially a gut-feel‘ matter. We couldn‘t be further from the truth, for if strategic brand management was as flaccid as it seemed, then the value of the Coca Cola brand ($70 million) would not have been half its entire stock market value ($136 million1).
Why does branding strategy seem so vague? Increasingly the marketing paradigm is shifting towards the view that understanding consumers is the key to building great brands. In her ten steps to building a brand DNA, Carol Chapman2 observes the first step to be identifying
the perception that consumers hold about one‘s brand. Therein lies the problem. Our educational growth so far, and indeed professional conditioning, has more or less turned us away from the psychological and sociological towards the rational and empirical. This would be very fine if our subjects were the ‗rationally behaving‘ units of any economics model. The problem is that our subjects are real world consumers, and they cannot be counted on to be rational‘- consumers buy products with their minds, but they buy brands with
their hearts. The implication here is that strategic brand management involves a very penetrative understanding of both psychology and sociology, with all their precursor influences. The reason why the rational manager shouldn‘t worry however that branding strategy is still works on the same principles as any other strategy. This can be put into 3 steps:
Identify all the influencing variables
Determine which variables are pertinent in the decision making process
Take the Decision!
Let us take the case of conceptualizing a new logo for a brand- an exercise in brand revitalization. To make our job easier, let us assume that the logo has been created and we merely need to decide its final colors. What is the strategy? How can we strategically determine the optimum color combination? We take step one identify all the influencing variables. In this case the variables could range from local perceptions of color to the color schemes of competitors. Either way our goal is the same- to determine which color combination would best appeal to the consumers. It may seem like this is a matter of creativity and aesthetics, but it rarely is. Imagine selling agarbattis to Banarasi pundits in dark green packaging- in their minds it forms an instant association with another religion, and they will turn away from it. Imagine selling a children‘s toy brand with a logo that‘s color scheme is brown and black. These may seem like intuitive and common sense examples after
all everyone knows that to sell to children one must use bright and attractive colors. If you knew this too, then you‘re already on your way to understanding strategic brand management. In the above example our consumers were children, and the understanding is common that bright colors lure children. But what if our consumers are middle aged housewives? What if the target group is bald men in rural India? Then, understanding and knowing the consumers isn‘t so natural- but equally pertinent. Every individual‘s mental make-up is the sum of all nodes and associations that have formed in his/ her brain since the process of learning began- this explains why books on consumer behavior seem more like books on behavioral psychology. The chief element of branding strategy is to uncover these associations. In the larger context it is these associations that form the bulk of our influencing variables. All associations a consumer may have in his/ her mind can significantly influence the selection and purchase behavior. For example, if a consumer associate‘s pink with feminity or even a lack of masculinity, then it‘s probably a bad idea to sell him a brand with pink themes. He is very unlikely to form a relationship with such a brand. The implication here is that branding decisions are rarely whimsical and arbitrary- there is an underlying understanding of the target group
behind them. Step two is to determine the pertinent influencing variables. There may be some associations in the consumer‘s mind which are irrelevant to our brand, but there would be some that are highly critical. The brand manager‘s job is to separate these two and identify the critical associations. For example for a target group comprising largely of adventure sports enthusiasts, the associations formed towards personas and endorsers might not be as critical as their associations towards quality and reliability. In this case one need not
concentrate on choosing the right brand ambassador but on conveying to satisfaction the brand identity of being quality driven and reliable. Here again the key is in understanding the consumer. The implication is that
branding strategy is a rational process based on the identification and manipulation of emotional elements. But the last and final step is equally important- take a decision. There is no right and wrong in branding strategy, that luxury is available to us only in hindsight. But there is a veritable list of dos and don‘ts that act as guiding
principles in the formulation of a branding strategy. Once you‘ve understood your consumer- understood what motivates him and how, how he learns and from where, what is his attitude and how can it be changed (if need be), and what are his perceptions then you‘ve crossed over most of the vague and misty parts of branding strategy. The process of data gathering and assimilation is over and the stage for taking a decision is set. In choosing your logo color, ask yourself what color ignites what associations in my target group? If I choose red, does that evoke an aggressive or negative emotion or is it suitably attractive? If my color is blue,
will that put off the female consumers or is its association far too subtle for that? When determining the brand
identity you must go through the same series of questions, but the prime directive remains the same- filter every decision through the prism that is your consumer. For every decision variable, ask yourself what associations would it form in your target group‘s mind? How does your target group look at itself? Is its self-perception based on dynamism or more on stability and Constance? Remember that consumers are attracted
towards brands that reflect their own aspirations. To have your brand mirror them you must clearly identify those aspirations. Once that is done however, take your decision and stick with it. Sometimes the most thought-out strategies will fail before swiftly put together marketing mixes, but you can be sure that you‘ve learnt more about your consumer than the competitor- and are thus better prepared for round two. To conclude, strategic brand management is a process of understanding the psychological and sociological undercurrents in one‘s consumer base. The remaining is simply a process of implementation. This aspect of strategy can seem vague and misty because it borrows its learnings from disciplines based not on ‗rational assumption‘ but on ‗emotional assessment.‘ But once a process is put in place the steps can be as tangible as
those for any other aspect of strategic decision making.
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