Making of Micromax and the future

How Micromax is gearing up to touch $1-bn mark
By Moinak Mitra, ET Bureau | 3 May, 2013, 10.08AM ISTPost a Comment

The challenge really is to add another Rs 650 crore on the quarterly turnover by sprucing up the product and process act to get near $1 billion mark.
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On March 31, the four co-founders and CEO Deepak Mehrotra, tossed up a rather unique challenge to two of Micromax's business heads. Ajay Sharma of the smart phone division and Khaja Muzaffarullah of feature phones were to rake in Rs 50 crore in revenues on Day One of the new fiscal.


All Fool's Day turned out to be a full working day and since banks were closed that day, on April 2, the collections for that day stood at a whopping Rs 50 crore-plus! A backdrop to this event: on March 31, 2013, the Micromax logged in a record Rs 3,168 crore in sales revenues for the financial year 2012-13. It was more than a 150% spike over the Rs 1,486 crore sales turnover it registered the previous fiscal.

Along with a sense of disbelief, came a determination to clock a billion dollars in record time. And that's what nudged co-founder and chief product officer Rahul Sharma to raise the bar the subsequent evening over cocktails and dinner. While the corporate office was celebrating a new high, Rahul threw in a fresh target - Rs 2,000 crore revenues in a quarter, in FY 2013-14. In other words, he wanted to attempt garnering 63.1% of the company's record Rs 3,168 crore annual turnover in just three months.

The next day, an email went out from Mehrotra's office to that effect and the whole buzz of the company now veered around WQ2K (which quarter 2000?). With half the month gone, a second round of meetings was called with the co-founders and functional heads to brainstorm on the feasibility of WQ2K. The decision that emerged was to collar Rs 2,000 crore in revenues in the very first quarter of the current fiscal. So the rallying cry in the group changed from WQ2K to FQ2K (first quarter 2000), which Mehrotra jovially claims is modeled around the FCUK uber-brand campaign.

Today, Micromax is trending at revenues of Rs 450 crore-plus a month. That makes a sweet Rs 1,350 crore quarter-on-quarter. So the challenge really is to add another Rs 650 crore on the quarterly turnover by sprucing up the product and process act to get near the $1 billion mark, and end the year at an even higher trajectory.

The new resolve is a far cry from 2011-12 when the device maker was floundering, to say the least. It lost its dominance in the dual SIM phone segment as its share nosedived from 13% in 2010 to 8% in 2011, according to Cyber Media Research. Overall sales revenues dipped from Rs 2,448 crore in 2010-11 to Rs 1,486 crore in 2011-12.


In contrast, Samsung's revenues were up 38% while Indian rival Karbonn attained 32% growth in the same period. Far from getting bogged down by dipping sales, Micromax upped the ante by hiring a clutch of talented professionals and spruced up its act on the distribution and IT fronts. It also decided that disruption and rapid turnaround were the twin pillars to succeed in an increasingly me-too handset market.

PRODUCT PROTOCOL

Much of the derring-do in the scaling up can be explained by disruptive product launches and aggressive pricing the company has demonstrated over time. As a device maker, it came up with a couple of handsets that really differentiated the market at a time when Nokia was the dominant player-a 30-day battery backup phone in 2008 was followed by a dual SIM in GSM and a phone that had a gravity sensor, which enabled GSM conversion to CDMA and vice-versa. "Micromax created a whole ecosystem of uniqueness other players had not touched upon," says Anshul Gupta, Lead Analyst, Consumer Devices, Gartner.


Back then, product in-charge Rahul Sharma used to stay 150 days outside the country, largely in China, nurturing the relationship with vendors based out of Shenzen and trying to incubate the brand in a factory ecosystem. Today, the 38-year-old still stays out for 150-odd days a year, but largely in the European market and the Bay Area. "Take the case of Sony," he says, "all the shots in the electronics major are now being called by its San Diego office rather than its Japanese headquarters." The premium undoubtedly is over the intellectual property that is still the domain of the western world.

With the Shenzen manufacturing ecosystem doing well with 30-odd vendors, Rahul's focus now is on IP offerings from the west. As the company scales up, it will typically deal with Tier I and II vendors, and not go below that. In the initial years, the volumes were much smaller and the Tier I suppliers from Shenzen were not much interested in a "small" player, explains Mehrotra. With 25 million handsets in the market today, Rahul has a one-year roadmap of some cutting-edge technologies the company will launch through 2013, including a 3D smart phone and an 8.9 mm phone with aluminium injection technology "that can take beautiful pictures in low light".

When coming up with specs for a new handset, at Micromax, a Kotlerian approach focused on consumer needs is followed quite unlike how the handset universe usually functions. While most players in the fray typically flood the market with two phones in every price brand, Micromax strategically opts out. "Whatever we will do, there has to be something unique....and so we keep finding components which will give a fantastic user experience, and simultaneously, we also keep the cost down," says Rahul.

Maybe, that explains why the company launches 100 new models a year vis-a-vis 30-40 models by any competitor in the same period. In order to maintain uniqueness, the refresh rate is obviously faster.

Alongside is the good-old Indian streak of jugaad. Take the case of their qwerty keypad offering, Q3. It was the first phone from Micromax that the company chased with a campaign, the promise being to be able to chat on Messenger and Gtalk at Rs 4,999 a pop. "Our thinking starts from the consumer and so we decide the market price first and the device later," says Rahul. At that time, the vertical LCDs for handsets cost $12 each. So Rahul & co just wrote the device driver-a program that acts as a translator between software and device hardware-and instead of putting up the LCD vertically, made it horizontal, the classical jugaad way. Immediately, the cost of the LCD dropped to $3 a pop.

"We made huge money on that since we saved a lot on flipping the screen size," says Rahul. Again, he's now negotiated hard with a leading chipmaker to come up with a phone by Christmas at the Rs 10,000 price point. "They had put multi-mode bands in the machine and I told them that for India, we need just 2300 MHz frequency, and once convinced, they have taken out all other antennas from the set," says Rahul. At a higher price point, addressing 2-3% of the marketplace is no fun, he states, asking, "Why should you give Ferrari when the roads are not good enough for even driving a Mercedes?" The ability to refresh models faster gives Micromax nimbleness to react to market conditions.

Three weeks ago, it launched Canvas Viva, a 5-inch smart phone without 3G, at Rs 500 apiece. "Initially, we thought it would do well but after putting it in the market, realized that the activation was not great," says Rahul. He's now contemplating scaling the price down by another Rs 500 to turn it into a "rocket". On the basis of that, his team will take a call on the product-whether to order 1.5 lakh or 45,000 units, since getting stuck with over a lakh of units in inventory, is sacrilege.


CROSSING THE CHANNEL

Cut to the homegrown 'activation' software of the company that gives it a tremendous edge over inventory management. The brainchild of co-founder and chief technical officer Sumeet Kumar, the geek in the system whom other co-founders and functional heads dotingly call 'Munnabhai' for his inventiveness, the software was devised in the initial days when the company had not ventured into handsets and was working with a Hyderabad-based ERP solutions provider. The deployment was done in phases from 2011.

Simply put, when an end-user inserts a SIM card in his phone, an SMS gets triggered and reaches Micromax via its virtual server in the US. It gives the company vital geo-coordinateswhich operator's network has the customer latched on to and which Base Transreceiver Station it got triggered from-and enough rich data, which the company uses to map its presence at a district level. "The activation software is kickass because we are also on the board of ten other consumer companies but no other company has this kind of hold....they have built a phenomenal feedback system," says Sequoia's Mohit Bhatnagar, an investor in the company.

So Micromax started loading the activation software across its handsets and by November last, all its devices were software-enabled. Today, it enables the company to see the number of activations per model real-time and gives it a leg up on distribution, both state and districtwise. The transparency in the numbers game is evident as the trade, both distributors and retailers, cannot bluff the company with inflated or below par figures. Plans are afoot to go even beyond the district level, right up to the taluka, informs Mehrotra.

The activation software even allows the management team to make sense of which model is moving faster and link it back to the supply chain to ramp up delivery. Staying on the infectious innovation verve of the group, Kumar is not resting on his laurels. "We're going to the next level of integrating the activation software for feedback to CRM, which will actually create a new area for us to understand the behaviour and usage pattern to improvise on the services and products that are on offer," says Kumar. Simply put, Kumar has now linked each device to the field failure rate, which will now enable him to point out why the device is failing-is there a user issue, an environment issue, handling problem or customer education issue.

DISRUPTIVE DISTRIBUTION

On the distribution front, both feature and smart phones are treated as distinct SBUs within the company. While feature phones follow a three-tier distribution approach with a super distributor, micro-distributor and a retailer touching the lowest price bands, smart phones maintain a two-tiered approach with just the distributor and retail. "We follow an FMCG model when it comes to distribution and the logic is that even in the most inaccessible parts, you should get a Micromax," claims Co-founder and the financial brain behind the venture, Rajesh Agarwal.

With 120 SKUs at any given point, the investment in the trade channel is actually a function of the turnaround time, or how quickly the company is able to rotate the products. Since the smart phone vertical is leaner, it rotates at least twice a month, while it is 21 days in the case of feature phones. Mehrotra has it all cut out. He claims that in order to touch FQ2K, or Rs 2,000 crore in revenues this quarter, his distributors and retailers need to bring in at least Rs 125 crore one-time investment to the brand and with 4-5 rotations of this additional capital, it will get him the incremental Rs 500 crore.


That added to the current Rs 1,350 crore quarterly revenues, would take Micromax to Rs 1,850 crore, close enough to the Rs 2,000-crore mark in three months. "Even if we don't get to the exact Rs 2,000-crore mark in the first quarter, we'll at least raise the bar," says Mehrotra. And the only way to do so is by either asking existing distributors to pump in more capital or adding to the distribution chain. So from 160-odd distributors in early March, it now boasts 200 distributors, a 25% jump in under 2 months!

CONSUMER INSIGHT

On the consumer behaviour front, co-founder and business alliances man Vikas Jain is getting a handle on consumption niches. As he rightly says, "The final delight is neither the software, nor the hardware but the experience you're providing." On average, 22% of Micromax buyers spend approximately 26 minutes on its VAS portal watching TV. If that's what prompted Jain to collaborate with Zenga TV last year, he's busy nowadays enriching content flow into YouTube. Currently, the Micromax VAS pipe gets about 1.8 crore page views a month, a number that no appmaker can overlook.

Along with mobile phones, Micromax manufactures tablets and LED TVs in significantly smaller volumes. As Jain stitches alliances for the growing tablet market very differently from the handset category, he's driven by the edutainment quotient of each device. While feature and smart phones will be high on entertainment content, he's in talks with a clutch of education players to be present on tablets. Clearly, it's the nuanced understanding of the device and the way the market will respond to it that is fuelling category growth.

So while the conversation revolves around hitting a billion dollars "much before Diwali", Rahul readies for his flight to London to catch the next wave from the West. As a parting shot, he asks, "Why can't a company from India go out and attack US and European markets? There are no hardware companies that have gone out of India and made an impact." With scale and presence in 9 neighboring countries, that could well be the next frontier.

Source : Economic Times

Philip Kotler's 5 marketing & B-school mantras for India

What Indian marketers can teach the world

> Offer good products to core consumers.

> The number of innovations one has seen in this country is great. One of these is sachet packaging. At one time, they (Indian marketers) were also selling one cigarette at a time.

> India has great ideas on how to make products affordable. If they (companies here) can figure out how to bring costs down, they can sell a lot more TVs and phones.

Mistakes by Indian marketers

> The basic mistake some make is not knowing how to engage with customers' beliefs, values, needs and aspirations. 

> Sometimes marketers fail to segment effectively. They've got to decide what type of consumers they are looking for. 

> If marketers are in a service industry, they need to stay focused on employees, sales force - these people are the ones who deliver to consumers. 

> They need to be aware of new channels of communication - there's always this danger of complacency. They are not asking enough - can our product message be disrupted by changing technology?

What marketers can do to make a global impact

> Right now there aren't Indian brands that are truly global. You can say Tata, but the average American doesn't know a Tata Nano (but again, Americans are insular). I believe Asia will spawn a lot of brands that will become global. 

> Isn't it interesting that some of the smallest countries in the world have the most brands, like Switzerland. Yet they are able to create the brands differently. 

> Many people say marketers are just promoters. But they are the ones who can segment, target, position brands. 

> I want marketers to be proactive, not just reactive. An interesting example is that of the old GM - they made a car but didn't know who it was for. That's not good. Every good brand should start with a concept. Once that happens, the advertiser already knows what to say... he has to only figure out how to say it. Globally, Unilever and Nestle really know what to do or what to say.

How Domino's CEO Ajay Kaul makes sure the 30 minute promise is kept every time

As Steel Authority of IndiaBSE -0.78 % Limited's Rourkela steel plant started cranking up its best ever production numbers in the summer of 2012, a bespectacled Kashmiri executive revisited his hometown and amid memories and memos, inaugurated the firstever Domino's pizza store in the steel city. Eight years in the top job as CEO of Jubilant FoodWorks, Ajay Kaul is anything but a corner office stereotype. Before opening the store last April, decked up in the trademark blue-andblack Domino's tee-cap-cargo combo, he essayed the role of an SDP to perfection. The acronym is a homegrown term for Safe Delivery Persons, or the delivery boys, who zip from door to door with boxes they call 'warm bags'. And the prefix 'Safe' conforms to the speed governor attached to every bike that maintains a maximum speed limit of 40 kilometres/hour.

But Kaul had a different calling. Along with the local team, he rode a D o m i n o ' s -branded Hero bike into every possible direction with the store as the locus. They rode for 8-9 minutes in each direction and returned to the store. He defines that time-bound journey the "lakshman rekha" for any SDP. That is, the Domino's delivery boys will strictly toe the line and not serve houses that take more than 8-9 minutes to reach from the store.

Here's why. Domino's pizza comes with a 30-minute guarantee from the time an order is placed. If the time taken to deliver the pizza is more than 30 minutes, the pie comes free if it costs under Rs 300. And in case it costs more than that amount, the company subtracts Rs 300 from the bill. In case it is more than 4 pizzas, it is regarded as a bulk order and the guarantee does not apply. So by and large, all processes at Domino's are geared to meet the 30-minute deadline.

Frontend Frisbee

When a customer calls, the order is flashed on the kitchen screen. The pizza maker looks at it and gets down to the job at hand. There is the obvious dough stretching, saucing and cheesing, and depending on the nature of the order, 'itemizing' or topping, before it goes into the oven. Baking takes 6 minutes from where it goes to the cut table. Finally, it lands up on the routing table where it is packed as per order in pizza delivery boxes (read: warm bags) that SDPs carry to the last mile. "On average, we deploy 6-7 people on the process depending on the store size," says Harneet Singh Rajpal, VP-Marketing, Domino's Pizza India.

So this is how the 30 minutes divvy up. From order to oven, it should not take more than 4 minutes. Since the oven takes six minutes to bake; cutting, packing and pick-up make up for, say, another five minutes. And delivery time should never exceed eight minutes. Add all that-it's a neat 23 minutes. "We're designed to deliver in 23 minutes and give a seven minute buffer to our employees for unforeseen traffic, rains etc.," says Rajpal. The 50-year-old Kaul's calling is thus justified.

With 20,000 employees across 552 stores spanning 118 cities, the process is performed de rigueur day in and out. But the story doesn't end there. In the backend, materials need to move from the 180-odd business partners or vendors to the four factories or 'commissaries' as they are called inhouse, before landing up at the stores. This is where each ingredient in the supply chain comes under sharp scrutiny.

Backend Bulwark

Kaul signed up with Domino's Pizza some eight years ago but even then, pizzas as a category hadn't quite caught the fancy of the average diner. "The ecosystem did not exist and there was no mozzarella or sauce supplier and we had to import everything initially," he points out, adding that today 100% of the procurement is localised.

Elaborating on the chain, Harsharan Marwah, Sr.VP-Supply Chain, Jubilant FoodWorks Limited, claims that all goods in the system need to necessarily move between 1 and 4 degree Celsius. "There are 80-90 frozen trucks dedicated to us countrywide," he says. The first step is aligning vendors to the Domino's way. Company executives visit each vendor regularly and Kaul emphasizes that they have to be in sync with the vision of the company for the next five years. In the process, some of the vendors are literally hand-held by Domino's in their growth curve.

Take the case of the Chandigarh-based Chattha Foods. They broke into the scene 3-4 years ago supplying chicken to Domino's. Prior to them, Venky's was the sole supplier of chicken toppings to the pizza giant until constraints on supplies prompted Domino's to add Chattha Foods to their list of suppliers. Today, about 60-70% of their produce is picked up by Domino's. Again, the Manesar-based Ample Food is the sole supplier of pepperoni to Domino's. From Rs 5 crore in revenues in 2008-09, it has clocked Rs 20 crore in 2012-13.

The Last Mile Dash

Kaul insists that 80% of his vendors are HACCP-certified and that in the next 6 months, all 180 vendors would receive the certification. Again, once a quarter, there are random unannounced audits and vendors must keep complying to be on the supply map. So cheese, poultry, lamb, pepperoni, sauces, canned veggies and condiments, dips and a bevy of choices move from vendor factories to the four Domino'sfactories or commissaries in Noida, Mumbai, Kolkata and Bangalore.

Typically, each commissary covers 30,000-40,000 sq.ft. of area with 45-50 people. This is also where Domino's makes its proprietary dough from the flour that comes in. It's like the Coke formula-they'll die but never divulge! Essentially, there are two divisions in a commissary-dry and cold warehouse. Dry ingredients land up on the dry side but most action is now centered in the cold warehouse, which further has twin buckets-a -18 degree Celsius store for the dough and a 1-4 degree Celsius store for most other ingredients.

From here, the ingredients are loaded on to frozen trucks, which maintain the 1-4 degree Celsius temperature band, and taken to the stores. "Each truck is enabled with GPS trackers, which enables our area logistics managers to access the temperature status in any of these vehicles," says Marwah.

Tracking is essential since offloading ingredients from the frozen trucks needs to be done in 30 minutes flat as after that, the temperature rises to 5 degree Celsius. This is how the backend complements the frontend that practically gets the dough rolling.

Tantalizing Topping

Today, all that activity translates into 70-80 lakh pizzas a month for Domino's. The master franchise for Domino's Pizzas in the Indian subcontinent rests with Jubilant FoodWorks Limited and its network of 552 stores does twice the orders booked across the US. In fact, the top 10 stores in the world by the number of pizzas sold in a year are from India-and they're all from Domino's.

As many as five of them are from Delhi NCR and sitting at the third store by way of ranking at Noida's bustling Sector 18 market, at least for as while, the footfalls seem to fly. "We churn out 3.74 lakh pizzas a year and in December, we did ` 70 lakh worth of sales," says the very peppy store manager of the Sector 18 store, K Kashi. Roughly, the 2,200 sq.ft. store logs in 12,000 footfalls a month!

Bottomline, the system is designed to deliver in 30 minutes with a 99.6% success rate that Kaul tracks religiously every day. With revenues at Rs 1,017 crore (FY 2011-12) and EBITDA margins at 18.7%, the dough for sure is rising. About 50% of the revenues come from casual dining and takeaway and delivery makes up the remaining half. Though online ordering was launched just two years ago, it accounts for 15% of the delivery revenue pie. And despite launching mobile applications about four months back, they contribute to 2% of the delivery revenues and about 10% of the online sales. "We have more than 5 lakh apps downloaded and are among the top players in m-commerce countrywide," says Rajpal.

Sunil Jasuja, CEO of Levitate Mobile Technologies, got into a business partnership with Domino's a year back and developed their mobile ordering platform which is fully integrated to their backend. "The accuracy of ordering has increased with m-commerce because you are seeing what you are ordering instead of talking to someone over the phone who just may make a mistake," says Jasuja.

Novelty Nirvana

Sure, the supply chain complements delivery in every aspect of technology and so do the range of annual offerings in Domino's stores. Twice a year, about 10-12 people huddle in a room for a day-long exercise they call 'customer to customer'. Basically, the exercise is an internal brainstorming to gauge what products will work for customers. And typically, the group comprises people from marketing, the operations team and the NPD (New Product Development) team.

Rajpal attended such a meeting 6 months back where the group thrashed out some 50 ideas. "We have to launch pizzas and sides and need such blue sky sessions where we don't have any blocks," says Rajpal. So the ' C h e e s y Boloroni Pizza' launched in November last was a result of that blue sky session. Rajpal explains that since Domino's launched pastas three years ago and already has a 'Cheese Burst Pizza', wherein liquid cheese is filled into the pizza, they decided to combine the two. The result: Macaroni and Bolognese sauce stuffed inside the crust with bar-be-cue flavoured liquid cheese and mozzarella as toppings.

Clearly, on product strategy, the key driver is the novelty factor of the product. So products not doing too well are taken off the menu since there is limited space on shelves. For instance, Domino's launched calzone in 2007 which was discarded in 2009; it got in a pizza with Chinese ingredients as topping only last year and decided to pull it off the shelves as it did with one '3 Cheese Pizza'.

With 3-4 new offerings being launched every year, it becomes even more critical for the 4-member NPD team to work closely with the vendors detailing size, storage and smooth passage. Overall, in linking up the chain, CEO Kaul has been on the ball as Domino's notched up a 62% share in the organized pizza market and 70% share in the pizza delivery segment countrywide. Besides, over the last 5 years, the pizzamaker has registered a 48% CAGR that makes it the largest quick service restaurant network in the country, clearly drawing the 'lakshman rekha' for the competition.


For Whom The Pie Rolls

About 3-4 years ago, Sandeep Mittal, Managing Director of Cartesian Consulting, met up with the then Marketing head of Domino's India Dev Amritesh, who's now looking after the Marketing activities of licensee Jubilant FoodWorksBSE -3.80 % Limited's other brand Dunkin' Donuts. Amritesh was particularly drawn in by the Cartesian Consulting tagline—Precision Marketing. That's because there exists an in-house designation at Domino's India which goes by the name 'Precision Marketing Manager'. Ever since, Cartesian has stuck around as the pizza-maker's data custodian. "In India, it is difficult to pinpoint customer profiles and so we relied heavily on billing data and campaign response to segment customer types," says Mittal. For tyros, billing data would reflect things like what the customer orders, the type of orders, the time of ordering etc. And campaign response takes care of how consumers use coupons, whether they actually go through emails and how they respond to them, so on and so forth. Based on such "exhaustive" information, Cartesian helped Domino's identify 12 customer types: Couponos (Order with coupon only)

Grandos (Large size pizzas)

Loyalos (Order same pizza type every time)

Partios (Sometimes party size orders)

Nostalgios (Haven't come for a while)

Nightos (Order at night)

Revisitos (Come back after a break)

Relaxios (Weekends)

Randomos (Unpredictable)

Varitios (Try a wide range of things)

Starios (Best customers) Pamparios (Needs indulgence, responds to offers)

Source: Economic Times

CEO coach Ram Charan on how to win in a changing world

Last few years have seen multiple forces change the global business landscape. Through the noughties and thereafter, the common refrain has revolved around the shifting economic locus from the developed world towards the emerging pack. And because change confuses, constricts and cripples, it is important to understand the nature and extent of its impact. So when one of the world's best-known business advisors, Ram Charan, decided to study the flow of jobs, wealth and power to the newer worlds, it was bound to be a path-breaking deep dive into the once-in-centuries phenomenon. In his latest book, Global Tilt, Ram Charan studies the North to South (countries below 31st parallel) power shift, what it means for countries and companies, and how to deal successfully with the great power shift. In an interview with CD, Ram Charan discusses the Global Tilt, the forces shaping it and how to win in a tilted world. Edited excerpts:

What is 'Global Tilt' all about?

The world has changed dramatically since the Chinese began to create economic growth in China. There has been a permanent shift in terms of jobs, economic growth and political power. All companies in the world must come to terms with these shifts - which I call as 'the tilt'. They must understand what does this tilt mean, how to thrive in it and how to deal with it. It is more demanding on companies in developed countries like America, Japan, Europe, who need to learn to deliver their shareholder value in times of permanent economic power shift.

So what are the drivers for 'the tilt' phenomenon?

I see five drivers. The first one is the rise of China, which has largely been built by western countries. Western companies went to China for labour arbitrage and used the low-cost labour force to export out of China to more developed nations. The second major shift is the composition of the GDP, which is changing because of multiple factors, which include digitization, mobility, sensors, cloud, mathematics and software. That is a different kind of a tilt. Third is that the Chinese, in particular, have amassed a large amount of foreign reserves, close to 3 trillion dollars, that gives them substantial economic power. However, the opportunity for growth is in the south, which is seeing a population growth and rapid emergence of the middle-class. It is interesting to see that China has now managed all the resources they need; they do not have to beg from the western world anymore and are not dependent on Japan any longer. Today, the Chinese can get the best consultants and the best talent. They still need a few things from America, particularly the market, technology and some managerial know-how.

Another important development has been the financial crisis that accelerated the tilt because it undermined Northern economies by vastly increasing government debt, raising unemployment, stifling consumption and shrinking investment.

Enter The Draqgon

Going forward, innovations will come from all around the world. We will witness the invention of a type and scale never before seen. Major innovation in the latter part of the 20th century was for most part, institutionalized: highly concentrated in companies such as Intel, Motorola, Bell Labs etc. But then, American tech entrepreneurs, like Steve Jobs, Marc Andreesen, Jeff Bezos, Mark Zuckerberg, have been changing the world. The new innovations will come due to real-time openness and democratization of knowledge and availability of startup funds in a digitized world.

What does this tilt mean for India and what do Indian CEOs have to watch out for?

First, in India, entrepreneurship is alive. Second, we have state governments, like Gujarat, that are changing the game. I saw big ads from the Uttar Pradesh government too. States can do a lot. If they begin to look at the globe as a whole and then say how they can get a fair share in the global GDP, India will have a very good future. Many things do not require a parliamentary pulling as we have seen in the case of Gujarat and Tamil Nadu. The states can achieve a lot without having to worry about anything. At the same time, we need to get more FDI; FDI brings talent, technology and management expertise, but we need to think with a global mindset.

Just like Godrej has 3X3 strategy (expanding into 3 continents in 3 categories)-looking at it, going at it, managing it. But there is no hurry, whatever Indian business people do, you would find that there is expertise and reputation for three things: execution, developing employable talent and continued innovation and productivity. We do not need Government of India at the Center to do those things. Therefore, when you look at the situation from this lens, we are better than China in many areas-like software and mathematics. We can do better manufacturing in a new way because it is expertiseoriented. Nonetheless, we need to go and knock at the doors of the companies outside India who want to come here and assure a stable policy environment.

How ready are leaders of companies for this new reality?

The reason this book was written is that I began to see a very high proportion of companies in the US and Europe not attuned with this tilt yet. The reason? They have inertia; they are hung up on the core competence concept. They are going inside-out and are unable to see that the core competence has a life. It is never for eternity. Further, the executives of these companies do not travel. They are unaware of what is really happening. They use West-based consultants and do not keep a tab on what is happening outside their own turf/country. Another reason is that it is a low-margin business in this part of the world. But that is the reality. It is in their interest to enter the market and convince the shareholders that by not making inroads, the shareholders will lose in the long run. On the other hand, you would see that there are many western companies that make good money here. So the blind side is there, ignorance is there, but the larger problem is the inflexibility to make shifts. For example, let us say there is a company that has 20% of their sales outside America and 80% in America. They know the future is to go 50:50, yet they are hesitant to cut the number of officers in that country and double the number of officers in emerging countries. That is the reality!

What is the whole outside-in strategy that you talked about?

Most strategies have been inside-out so far. People look at it from 'what's my core competence' perspective and where can it be applied. They do a SWOT analysis, in which threats are looked at from the inside lens. Outside-in means that you look at the external landscape first. It does not matter who you are and you look at the external landscape from different multiple lenses and different industry lenses. If you are a global company, you look at the lens through China, through India, through Brazil, not just the headquarters in New York. By outside-in approach, you are looking at the landscape as a picture; asking that if I had no core competence and I was entrepreneurial, where I would position myself and how I would position myself. That would require a very different mindset... It's a 180-degree change in the mindset from the leader and his team. So I have this 98:2 rule. Two per cent of the critical leaders in the company have 98% of impact of the company's survival and thriving. If they do not change their mindset, the rest will not.

What is the new leader like? How will he have to think differently in this scenario?

The new leader and his team have to spend a significant portion of his/her time in the external social networks. He has to try and create a picture of the external landscape before he thinks about his company. If people say what is your vision for the company, then I am saying before you do that, you got to have a vision of the external landscape, how dynamic is it, how it is changing, what are the catalysts to change.

You have to answer these and that is an outside-in approach and leaders got to invest in it. In other words, I am also saying that perceptual skills of the leader and of the team have to be honed over time and perceptual skills are worth 1,000 IQ points! No schools train it. It is critical to build the mechanism to do that.

In this new world how important is digitization?

I just think every single industry is going to be totally transformed by the combination of six factors and they are all here, you do not have to forecast. These are digitization, mathematics, known algorithms, software, cloud and mobility.

They all converge. They are changing the location of profit pools. They are changing the value chain by eliminating intermediaries. If you get it right, you would have built a flexible organization; with standardization, you build speed, lower cost and lower intensity. The best examples are Amazon and Best Buy.

I am sure CEOs must be asking you some questions about the tilt. What is the most pertinent question that comes to you regarding the tilt?

I think if I look at the companies in the West, their most pertinent question is how do they make money here (in emerging markets).

Source: Economic Times

N Sathyanarayanan's startup Central Parking Services making millions through car parking solutions

At social gatherings when people ask N Sathyanarayanan, an engineer from Bharathiar University in Coimbatore, what he does for a living, he tells them he is a "parking guy".

"Most people in India associate the parking business with ruffians," says the 42-year-old, whose company, N Sathyanarayanan's startup Central Parking Services making millions through car parking solutions, provides parking facilities for cars and two wheelers in India's malls, airports and large scale weddings.

Braving preconcieved perceptions is paying off for the Bangalore-based entrepreneur, whose company aims at clocking revenues of about Rs 140 crore next fiscal. More so, as the business is one that he discovered quite by chance.

In 2005 he was running a technology services venture, Building Control Solutions that provided system integration facilities for large buildings. When Bangalore's first shopping mall, The Forum, was setup, the developers approached Sathyanarayanan to take over the parking systems.

"In building management we would install systems and then earn an annual maintenance but in parking management there is daily cash generation," says the intrepid entrepreneur who had to learn the ropes from scratch. On an average one parking bay generates around Rs 2,500 per month with a few busy lots like those within airports generating up to Rs 2 lakh of cash every month.

His initial stint at the Forum mall proved to be a success and brought in newer projects from new clients such as the Select City Walk in New Delhi and Amanora Town Centre in Pune where over a lakh people visit malls every month. "We don't have the bandwidth to manage such traffic and it best outsourced to outside parties like CPS," says Tushar Mehta, Centre Director at Pune's largest Mall Amanora Town Centre.

Buoyed by this growth in the consumer retail sector, CPS soon emerged as the flagship division for the company. "It is a capital intensive business.

We have to invest Rs 6-7 lakh per parking bay in any retail mall to make it functional," says Sathyanarayanan. The leap into the big league however came with the contracts to manage parking for Terminal 1 and Terminal 2 at Delhi Airport. In the same year, the young company also bagged the contract to manage 3,000 car slots at the Bangalore Airport. CPS now manages about 65,000 bays across 32 cities now.

Strong growth has helped the company attract the attention of risk capital managers. In 2010, early stage investor, Venture East put in $5.5 million (aboutRs30 crore now) in the company. CPS is also trying to change people's perception towards the business. Last summer, a customer's shirt was torn during a brawl in a parking lot managed by CPS in Greater Noida.

The customer asked CPS staff to sew the buttons. "Unlike the unorganised parking guys, our staff sewed the shirt just to demonstrate customer service," says Sathyanarayanan.


Another big challenge is retaining trained staff as semi skilled youth trained by CPS often switch jobs to food courts or air conditioned shops inside the same malls where they are employed."Its a dangerous job for staff in some of our installations in towns of Uttar Pradesh where goons take out country pistols when asked for parking fee," adds Sathyanarayanan. The company monitors parking bay occupancy at each of its installations through a command and control centre in Bangalore.

With about 26 lakh new cars on Indian roads every year, demand for parking spaces is at a peak in India's metros. Growth of about 25% in organised retail sector has led to similar companies like Secure Parking, Wohr, FAAC, Tenaga emerging in the parking solutions business.

Besides malls, CPS also earns from large day-long events such as political rallies, religious congregations or marriage functions of high profile industrialists which require management of over 4000 cars with valet service.

Next on the agenda for CPS India is toll and traffic management. CPS is aiming at earn revenues of Rs 250 crore in FY 15. "We aim to grab the majority market share of this business and becomes a billion dollar parking business in India," says Sathyanarayanan

Source: Economic Times

Management Mythos: The role of a leader is about outgrowing fear, not amplifying it

My company has a policy of weeding out the bottom 10% performers. I don't agree with the policy because the appraisal process of the company is not robust enough to capture a true and fair picture of the contribution of employees. In order to have a solid employee base, is it necessary to fire people every year?

There is no right way to do business and there is no wrong. There are only actions and consequences. This is the very Indian approach to do business. A Western approach seeks to do the right thing, and in doing so they rationalize cruel practices, such weeding out of the bottom 10% of performers. Appraisal processes notwithstanding, let us appreciate what is actually happening over here. The organization imagines itself as a pack of predators out to hunt. To ensure you are 'lean and mean', you need to rid yourself of laggards who hold you back. You need the strongest in your team. By that logic, this approach makes sense.

This action also instills fear in the pack, fear that you could be next to be fired. Fear is a powerful motivator. We work harder in fear. We are always on our toes. The pack of predators exists to capture Lakshmi, goddess of wealth, from the marketplace. Those who are unable to capture Lakshmi or contribute to the capture of Lakshmi are seen as losers or not fit for the pack. They have to be discarded.

Fundamentally, why does the organization exist? Is it a pride of lionesses that exists to hunt prey, so that the lion (shareholders) feast on it? If yes, then the weak will be kicked out. This approach visualizes the market as a jungle full of rival competitors and prey who can outrun the predator. This is rana-bhoomi, the battleground where there is no room for weakness. Here, the organization has to survive and be willing to get rid of weak links.

But we can see the organization as an ecosystem that helps people grow and thrive, a place where the strong help the weak rather than rejecting them. Where appraisals are a way to figure out what more needs to be done to enable even the weakest member of the pack to hunt. Here the organization turns into rangabhoomi, a nurturing playground, an ecosystem that you enter in order to grow. But the risk is that people can turn complacent here, take advantage of the kindness of the leader and not be paranoid about succeeding. Some may even dismiss this idea as utopian. For the cynic, battlegrounds are truth; playgrounds are fantasy.

When the battle is announced, Ravan kicks out those who do not fall in line with his appraisal ( Vibhishan) and wakes up those who sleep (Kumbhakarna). Ravan is a great king who grabs and captures Lakshmi. But in the Indian way, he is unworthy of worship, for the purpose of an organization and the role of a leader is about outgrowing fear, not amplifying it.

Devdutt's new book 'Business Sutra — a very Indian approach to management' is due out in March 2013.

Source : economic times

How Asus is challenging established PC firms and what India can learn from it

Jerry Shen's face lights up when he speaks of more than 150 million notebooks sold since the product's launch in 2007. And for good reason. It's a category he created along with Asus Chairman Jonney Shih. Shen, the then president of the ASUS Open Optimal Platform (AOOP) group, started work on the project sometime in 2006 and after four months of discussions with Shih, they greenlit the product.

Their insight: PC users were using just 20%-30 % of the total computing power available on normal stuff like browsing, mail, working on MS Word or watching videos. Their solution: To create an affordable product with just enough computing power to perform these routine tasks. The Asus Eee PC (Personal Computer) project was formally kicked off in March 2007. In August , Shen called in a thousand Asus employees to test early versions of the new product - Eee PC.
Satisfied with the feedback, Shen knew it was going to be an exciting launch. Two months later, the Euro 500 product that rolled out of Asus factories was lightweight, ran on an easily navigable version of Linux which nevertheless also accorded it some geek cred and had a solid state drive. The product's tagline said it all: 'Easy to learn, Easy to work, Easy to play'. And rest as they is history; notebooks took the PC world by storm. "The results were beyond our imagination," says Shen, CEO of Asus. And then, "I wish we had also thought of a touch interface," he guffaws.
For a company that was started in 1989 in a single apartment by four computer engineers-Wayne Hsieh, Ted Hsu, MT Liao and TH Tung-to etch its name on the global tech leader-board is a testament of their incredible journey led by Eee PC-like innovations. An oft repeated story in ASUSTek Computer goes back to the founding year 1989, when the founders decided to create a new 486 motherboard design without having access to a 486 processor that Intel wouldn't give to Taiwanese firms. And during a visit to Intel office, the co-founders found the engineers at the chipmaker grappling with a problem that the newbies fixed in minutes. But that was 1989. Intel now gives Asus top partner status.

"Now the chipmakers seem to think we are the company that will help the industry fight Apple," says Shen who takes pride in Asus being called 'affordable Apple' .

Game Changer

Glance the company's numbers to gauge how well it has done in a cut-throat and stagnant category, like PCs despite a modest OEM (Original Equipment Manufacturer ) background. Asus closed 2011 with revenues of $11.5 billion. And that is the revenue only for the ODM (Asus-branded products) business.

Back in 2008, Asus split its manufacturing and brands business. Today, the combined revenues of both businesses would exceed $45 billion. On the mobile PC front, Asus' worldwide market share is pegged at 11.7 per cent, up from 9.8 per cent during the same period last year. And it is currently No. 5 in the PC pecking order. In tablets, again, it holds the No. 5 place and sales were up 216 per cent with 23,50,000 units shipped in Q3 2012. And, just for the record, before the company split in 2008, one in every three PCs was using an ASUS motherboard.

So how did Asus manage to crack the tough computing business?

Lesson No 1: A LOW MARGIN BUSINESS CAN ALSO BE A MONEYSPINNER 

Asus is amongst the new crop of Taiwanese technology companies, like HTC and Acer, which have risen in the last 15 years or so to challenge the dominance of established tech giants , like HP and Dell. Ask Shen the reason for his success in a stagnant PC market when traditional giants like HP and Dell and the Japanese companies like Sony and Toshiba are struggling . He is quick to put it down to the way they approach the business and agility.

"The PC market is mature and in such markets margins are thin. For US companies, margins of 3-4 per cent are very low. Also, the American and Japanese companies are too slow to react. Companies like Asus moves fast and that speed to market gives us maneuverability even in a low-margin business ," he says.

Lesson No 2: INNOVATE EVEN AT TOUGH TIMES 

With the commoditisation of PC business and slow growth, the American and Japanese companies have focused heavily on managing cost. During that time, Asus has attacked the market with a slew of new innovative tablets (Transformer), ultrabooks (Zenbook) and hybrid netbooks (Taichi); all pushing the boundaries in performance and usability. Shen says even during the tough market situation when global PC growth has been stagnant, Asus has grown every quarter in 2012 due to the innovation focus.

"Two years back, I saw that the market was changing after Apple launched iPad. I told my people we have to be original. While the western companies were talking about cost to their OEMs, we were talking about innovation and perfection. We talk about innovation first, then cost," says Shen.

Lesson No 3: MANAGE CUSTOMER NEEDS AT RIGHT COST 

Given that being cost competitive is a hygiene factor in a hyper-competitive industry like PCs, the challenge is to do that smartly. Asus follows W. Chan Kim and Renee Mauborgne's Blue Ocean principles of Eliminate-Reduce-Raise and Create Grid to create differentiated products.

"We look at the product features closely. We enhance and raise the cost of the features that the customers want and we eliminate the features that customers don't care about," explains Shen.

Asus engineers works on the simple principle of add and minus management: add features like Audio, Touch Pad and Keyboard that increase customer satisfaction but subtract features that customers don't care about to balance the cost. "R &D is also not only for innovation but is also important for cost management," says Shen.

Lesson No 4: RESTRUCTURE TO ENHANCE COMPETITIVENESS 

Asus was originally a hardware vendor manufacturing motherboards, laptops and graphic cards for other leading PC manufacturers but later the company also started selling PCs under its own 'Asus' brand. In 2008, as the company grew, the business was split into brands and manufacturing with Asus keeping the brands and the newly-formed offshoots Pegatron and Unihan, focusing on manufacturing. The leaders restructured the businesses for better competitiveness and also to minimise potential conflicts of interest (Pegatron works with competitors , like Apple and HP).

"For an OEM, scale and efficiency is important, and for a brand, innovation and perfection. So we split the company to achieve more single-mindedness in our operations ," explains Shen.
While splitting the business worked for Asus, the leaders at another tech competitor, HP, think otherwise. The new CEO Meg Whitman refuses to part with the PC and printing businesses. "It is the heritage of HP. We are market leaders in the business and we are good at it. We have fantastic supplychain that helps us in our server, storage and networking businesses," she explains.

Lesson No 5: EVERY PRODUCT SHOULD PUSH BOUNDARIES 

After Apple launched its game-changing iPad, tablets have been one category that every PC company has targeted and struggled with. HP even pulled back after spending millions on its Touchpad and even players like Dell and Sony are struggling. Last year, Asus launched its EeePad Transformer, a tablet with an add-on keypad and EeePad Slider, a hybrid of a tablet and portable PC that tried go beyond the tablet format. Recently, the company launched Taichi, a dual screen, multi-touch fusion of netbook and tablet, another first. The strategy going forward is to target aggressively the 2-in-1 (notebook-tablet ) but also 3-in-1 (notebook /tablet/smartphone ) category.
"This year, we have sold more than 7 million tablets. The top players in the tablet market , apart from Apple, are one PC player (Asus), one smartphone player ( Samsung) and one content player (Amazon). We believe the PC background gives us a unique advantage to play across categories and across multiple platforms," says Shen.

Lesson No 6: DESIGN THINKING IS A COMPETITIVE ADVANTAGE 

With a new avatar in 2008, Asus' top management started pushing a design thinking culture throughout the organisation. Shen says it took two years of constant efforts on the part of the top management for design thinking to percolate down to each person of the organisation.

"Now we are trying to grow our brand through 'experience branding' . We want people to be moved and touched by the beauty and usefulness of our products," says Shen. Handling the Padphone 2 (smartphone/tablet combo), Shen demonstrates how the sleek smartphone slides into the tablet to become one working unit. "It weighs just 649 grams and it's thinner and sleeker than its earlier version. It can be turned into a notebook too," says Shen.

At the Taipei headquarters , the company has more than 100 designers working on different facets of design: material, industrial design and usability.

Lesson No 7: REIMAGINING OLD PRODUCTS 

A lot of Asus' growth can be attributed to its ability to re-imagine already existing products. Shen recalls how they are ready to think out of the square in PCs and that has helped the industry grow too, like with the Eee PC. In an incident that's reminiscent of the past, a few months back Shen and Shih flew to San Jose to meet Intel's Paul Otellini and his team with their new Zen Book, an extremely stylish ultra thin, ultra light notebook. "The Intel guys changed the name of the segment to Ultrabook. That means we also try and help the industry by evolving new segments," says Shen. The Intel marketing team had earlier coined the Eee PC category as Netbook.

Lesson No 8: BE ALWAYS PREPARED FOR DISRUPTION OR BIG SHIFTS IN MARKET 

The PC makers have to be war-ready all the time with the post-PC era looming over their head. The popularity of newer devices, like tablets and smartphones, is changing the rules of the game. And the rules of change are brutal: adapt or die. Michel Dell explained his rationale to transform his hardware company into an IT solutions provider to CD in an interview few months back. "I think all business are seeing some greater change accelerated and that to some extent is driven by IT itself. So every business has to evolve and understand how it is going to stay relevant, affordable , valuable and create things which are going to be important to their current and future customers," he said.

How is Asus preparing for that era? Shen feels the PC industry is converging. Companies will need to have expertise in tablets, notebooks and smartphones to succeed in the future marketplace . And if the company has expertise only in one category, it will spell trouble in the near future. Asus already had a very strong engineering background due to its OEM background but today employs more than 4,000 engineers (more than 20 IITians included) in its R&D centers in Taipei and China who are constantly working on new innovations and new designs to keep one step ahead of the market.

But entering newer adjacencies is a dangerous exercise. PC makers who have tried to enter into tablet space (HP) and smartphones (Dell, HP) have failed. Will Asus succeed? Shen gives Asus a chance. "If we sell only smartphones, we will fail. But with the 3-in-1 innovation (tabletsmartphone-notebook ), it will work. We have spent two years to make the 3-in-1 platform perfect . After spending two years, we think we can go to the mainstream market. We are betting on the platform," says Shen.

The coming two years will be tumultous for PC makers as intense competition, newer devices , a fast rate of obsolescence and newer operating systems change industry dynamics. Shen feels they are on strong ground. "After the launch of Windows 8, big changes will happen from now to the end of 2014 in the PC industry. There will be consolidation and it will be clear who the winners or losers in the PC race are. Hopefully, we will be one of the winners ," Shen says.

source: economic times