Business Guru predicts future Indian Buzzwords

This whole business of picking shady old Indian concepts, and then presenting them as hi-funda new business buzzwords really has legs! If Jugaad can become a buzzword (see my previous post), why should other old desi concepts be left behind? What other borderline-morally-reprehensible activities will now be rebranded as business insight? We asked the experts.

2M1B invited the very famous desi Business Guru, Professor Gaurav Rastogi, to talk to us about other ideas that are likely to become global business buzzwords.

Hafta, (liteally, “weekly”) used to refer to the protection racket that local businessmen and beggers (see, Slumdog Millionaire) were subjected to. Prof. Rastogi says, “Time has come for this c0ncept of weekly payments of ‘insurance’ premiums to go global. The Indian merchant is used to paying a weekly insurance premium to the local insurance agent, who insures the merchant against vandalism and other ‘acts of goons’. This concept of mutual insurance protected entire markets, and provided the social cover that was needed to run businesses smoothly. We have seen businesses as far as the middle east and Africa asking us for advice on how to start their own hafta collections. This is the latest innovation from the Indian subcontinent after micro-credit and, in fact, much better for the society at large”.

Timepass, is the old desi tradition of whiling away time watching the cows chew cud, or watching dung dry, whichever is slower. Prof Rastogi says, “Modern society has put a high premium on time. No one seems to have time anymore. We are very busy getting to work, on conference calls and doing email. The society needs an outlet. The traditional Indian practice of timepass brings home the point of pointlessness.  The expert timepass practitioner can spend weeks without the need to do something mildly active, like changing the channel on their television, or changing the sand in their spittoon. Western society has much to learn from this ancient Indian tradition. We have done many 4-week seminars with Fortune 500 boards, showing them the power of no-action. Here, have some unshelled peanuts…”.

Chalta hai, (literally, let it go) is the Indian tradition of letting things happen with minimal intervention or protest. Internet service down? Relax, chalta hai! Death certificate will take 3 weeks? Take a chill pill, because Chalta Hai! Chief Minister stuffing billions into their swiss account? It’s OK Chief, Chalta hai! Prof. Rastogi says, “The oriental mind is more accepting of the situation, and this attitude of acceptance and forgiveness is exemplified in Chalta Hai! This attitude allows nature to work it’s course, and the eventual outcome is almost always the same. Why do something, when doing nothing will achieve the same result? For years, Japanese companies have been secretly visiting India and making videos of the legendary Indian worker practicing Chalta Hai. Toyota attributes much of their success with brake pads and fantastic auto acceleration to their recent lessons in this ancient Indian practice”.

Prof. Rastogi invites 2M1B readers to contribute their stories about famous Indian management practices that may have been given a bad name because of 2 centuries of oppressive British rule.

From QuickFix to Sexy: the story of “Jugaad”

I flinched when I read the first International business magazine article mentioning the “great Indian tradition of jugaad“. WTF!, I thought to myself, must be a slow news week.

Look, I wasn’t born yesterday, and I know that when a Delhi-wallah says “kuch jugaad hai” (literally, “I have a  fix for that”) he actually means that he has a really quick, and really dirty way of fixing the problem. It could be the use of boiled potatoes as glue to fix torn kites. It could even be the use of a washing machine to make milk-shakes (Extra large, for the whole village). It may have been the use of photocopied “Samantha Fox concert” tickets! It could be anything that requires the cutting of corners, and a blatant pursuit of short term fixes. A Jugaad, in other words, is a junkie’s quick-fix. A matter, in the early 1980s, of great national shame…as in “We have a “chalta hai” and “jugaad” mentality, us Indians, chee chee!!”. Many newspaper editorials would bemoan this collective lack of social consciousness and quality focus.

Imagine my surprise, then, when the venerable newspaper, The Economist, decides to honor the word with an article on “innovation in emerging markets”. This is probably the last step in the gentrification of a low-class word. Jugaad will now be completely acceptable in board-rooms as a legitimate business strategy. Awards will be given out for grass-roots innovation. Entire movies (case in point- 3 Idiots) will laud the hero who creates something out of nothing through the power of Jugaad.

You can see where this is going. The same editors who bemoaned the collective lack of social consciousness, will now claim this as an ancient and venerable Indian tradition. “Arrey! These ancients were great, you see, and they put the funda of  jugaad into the way of life for us Indians. Such foresight”.

Suddenly, I feel the jugaadu in me rising. I’m an innovator, and being a frugal innovator gives me the right to use this newly minted uber-sexy word. I, Gaurav Rastogi, specialize in jugaad. You read it here first.

Just don’t tell my colleagues yet! Wait for the word to become sexier. Maybe an article in the Wall Street Journal!

Quote from The Economist:

Indians often see frugal innovation as their distinctive contribution to management thinking. They point to the national tradition of jugaad—meaning, roughly, making do with what you have and never giving up—and cite many examples of ordinary Indians solving seemingly insoluble problems.

Follow up post is here.

Data Post: How much do artists make online

In response to Amit’s posts on the future of music. Here is a fantastic post on how much artists make online. The data visualization is very well done! It talks about how many songs the artists have to sell on a specific medium in order to make “minimum wage”. Forget rock-star earnings! 😉

http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/

This image is based on an excellent post at The Cynical Musician called The Paradise That Should Have Been about pitiful digital royalties. (Thanks to Neilon for pointing that out). I’ve taken his calculations and added a few more.

The economic conundrum of CRBTs

For the uninitiated – CRBT stands for Caller Ring Back Tone.  It’s the wonderful song you hear in lieu of a ring tone when you dial into someone’s number.

CRBTs are expensive.  Here’s how much it costs:

* Cost of calling into a chargeable IVR system to select your music – Rs 10

* Cost of downloading a CRBT – Rs 15

* Monthly rental for playing a CRBT – Rs 30

* Average frequency of changing a CRBT – 0.8 times a month

* Total monthly cost = Rs 30 + 0.8*(10+15) = Rs 50

So, this is expensive right?  In a market where few people pay Rs 75-100 for a legit album, there’s a bunch of people paying Rs 50 p.m. for a song they don’t even listen to!

How big is this?  Very.  Mobile music revenues account for 50-60% of several music albums, and CRBTs are a dominant contributor to that number.

Now here’s the conundrum.  Who actually downloads these tunes?  If you checked on the average office-going city slicker, you’d probably find a 10-20% probability of these persons having a CRBT.  But if you went lower down the SEC ladder – to the carpenters, drivers, household help, coffee boys etc – you’d witness a 70-90% penetration of what is probably the most expensive music in the world.

Why do people with an average income of Rs 3-10K p.m. spend so much on a tune meant for others?

Data Post: India’s cellphone subscribers and average revenue

Here’s some interesting data to sink your teeth into. I am sure you already know that India is the second largest mobile market in the world, and is expected to become toe largest market soon, as it overtakes China.

There’s some great quality data available on the telecoms industry in India. Some of the data is posted by the Telecoms Regulatory Authority of India (TRAI), and other data by the COAI (Cellular Operators’ Association of India).

The one that caught my eye was the data on the number of subscribers and the average revenue per subscriber. The ARPU, as it is called, is one of the lowest in the world, and falling. The worldwide telecom game really is to drive down the costs of operating a cellphone service in order to make money on a much larger subscriber base. This cost game is what’s driving the developing country mobile providers to merge into each other (as in the case with South Africa’s MTN’s attempts to merge with Bharti and Reliance).

Here’s a data table, complete with bars. Raw data is available online as well. As an aside, I had a tough time getting to build a useful XY plot. Some other time, perhaps! 😉

Paying for an MBA

Back when Amt Grg and I did our MBA at IIMA, the program was not too expensive. As salaries have risen in India, the cost for an MBA have also gone up. While an MBA is still worth it, many people might find it hard to pay for an MBA.

Here’s an interesting article about how to pay for the rising MBA fees in India.

Several IIMs recently increased their fees by 100,000 rupees or more. A two-year management of business administration program at the coveted IIM Ahmedabad now costs around 1.4 million rupees ($31,500), while the fees are 1.35 million at IIM Calcutta and 1.3 million rupees at IIM Bangalore. Only a small percentage of students qualify for breaks in fees at these schools.

Luckily, there’s help at hand.

India’s banks have been increasingly boosting their education loan portfolios and new players are entering the market. In December, home loan giant HDFC Ltd. bought a 41% stake in non-banking financial company Credila Financial Services, which specializes in giving education loans. HDFC hopes to eventually buy out the entire company.

@Amit, I am not sure if there are any people left in India who question whether an IIMA MBA is worth it. Do you think we still need to make a “business case”?

Explaining India’s Airport Gap

Following up my previous post on airports in India, I spent a fair bit of time looking for statistics on air traffic in India, and the airport capacity. The biggest scandal, in my opinion, is that India puts out pitifully low quality data on almost all spheres of public life. That’s another post.

Here, I would like to post my conjecture on why India’s infrastructure lags behind demand. The culprit is poor planning on account of problems with data, 5 year planning horizons, the approval process, and the natural time it takes to build something big.

Bad Data: It’s shameful that the Directorate General of Civil Aviation’s website lists the latest data as being  from 2003-04! That’s absolutely crazy! Rip Van Winkle would have better access to data. It’s no wonder that the airport authorities, and the ministers making decisions, have no reliable recent data to make their decisions. In a country that is growing as fast as India, having the latest data is the only way of knowing what the current situation is, and what needs to be done.

Look at the Hypothetical Chart below that tracks the annual demand and supply for passenger capacity at, say, Delhi’s airport. We are assuming that the planning team meets every 5 years to consider whether to expand the airport, and that it takes 3 years to bring new capacity online. Also assumed, is that the demand for capacity continues to grow randomly between 10-20% annually.

The obvious conclusion is that the planning team is chasing it’s own tail. By the time the new capacity comes online, the airport is already under pressure to add more capacity.

This is a very realistic description of the problem that India’s airports face. In the model above, between 2005-2020, the airport has adequate capacity for ONLY 4 out of the 15 years. In all other years, the airport is trying hard to catch up, but the incremental capacity addition falls short of the demand.

Here are a few links that I found useful for my research:

– Delhi Master Plan (unreadable website, but typical of sarkari websites)

– Air Traffic News Report

– Directorate General of Civil Aviation’s “latesht statistics” page (has 2004 data in Apr 2010)

Getting efficient about education

This government really seems committed to fixing our education policy and systemic beliefs.  In the last week, I came across two cool pieces of news.

1. The govt. plans to truncate P.G. courses to one year: This is really a great step.   This allows us to double the post-grad infrastructure and also reduces the economic c0st for a person who wishes to do pursue higher studies.

2. The IITs are being asked to expand into universities and offer medicine, law, social science and even literature.  Fantastic!  The IITs have the infrastructure (land, facilities), brand (which brings in funding, teachers and students) and a culture that are unrivaled in India.  Why restrict them to being engineering schools?

One can argue that these two moves hold the potential of diluting education and institutions in the country.  Not necessarily.  It may, in fact, force us to think of efficient ways of delivering high quality education and better leveraging the assets we have – rather than bemoaning the dearth of infrastructure.  If we are to push for a higher level of education, we will need more such ideas to free up capacity and create institutional leverage.

More bad news for music

How does one make money from music anymore?

1. The traditional model of selling an album around one or two great songs doesn’t work anymore.  People can legally download a copy of the single from itunes.  So, instead of $ 14.99 for an album, you have to be content with $ 0.99 for a song – although its likely that you’ll sell a lot more singles.  Still, the gains are hardly likely to make up for the loss.

2.  Sales cycles are incredibly short.  I did a post on the New Product Life Cycle sometime back – music is a classic representative of this cycle.  True block-buster albums are rare.  Most music has to be be sold within a few months of launch and then milked from compilations.

3. Piracy is rampant.  And there is precious little one can do about it – though that doesn’t stop the industry from trying!

I can go on.

But along the way, a few good internet models started emerging – like itunes, Rhapsody and Spotify.   This was good.  There was hope for the industry.  As long as an economic engine finds its place, one could keep the consumers and the labels happy.

Now it turns out that some of these models aren’t so good for the artistes.  Apparently, Poker Face played a million times on Spotify in the last 5 months – and all Lady Gaga got was the princely sum of – hold your breath – $ 167.  (You’d spend more money than that on coffee at Heathrow waiting for your flight to take off!).  This is a problem.  As the Guardian puts it:

“Spotify is the cool company that keeps the Kids happy, but also signs contracts with the Man…And if this is the best Good Cop can do, God help us all”

Is Spotify ripping off the labets?  The labels ripping off the artiste?  Or, a business model that doesn’t work?  That music will survive is a given.  The question is – with what business model?

Can the post office reinvent itself?

The humble post office is in trouble.  Consider the following:

1. Courier companies have usurped the business mail segment – which was an overcharged and/or under-serviced segment

2. Email has replaced letter writing, telegrams and greeting cards.  The younger generation sees no need to enter a post-office

3. Electronic banking has eaten into money transfers – a business which has scale benefits

4. Post-cards/inlands continue to be subsidised, in order to fulfill the social objective of the post office

5. Salaries are linked to government pay scales and cause the wage bill to rise year-over-year

6. Rental costs continue to rise

In effect, the post office has lost its most profitable customers and businesses, has had massive shrinkage in its volume business, continues to provide subsidies and has an increasing cost structure.  Ouch!

Can the p.o. reinvent itself?  It’s possible.  They have unrivaled reach, a large workforce, deep knowledge of customers and government support.  Powerful ingredients for any business.  We just need someone to start working on it!