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Dipak Jain

Jeffrey Sachs

Marshall Goldsmith

Rs. 100

The Changing Face


with view Inter smith l Gold rshal Ma



S EP T EMB ER 20 07

From the

editors desk
Dear Reader, Marketing is a favourite subject amongst B-school students and the media. Its colourful, exciting, and touches peoples lives tangibly, everyday. With various new media to inuence people with, Marketing is growing more and more complex. The demographics of the bottom of the pyramid and the emerging markets, along with the World Wide Web, have made a marketers life extremely difcult. We bring the views of our faculty experts to you, neatly packaged and stamped worldclass, as they are all top-notch researchers and academicians from some of the leading B-schools around the world. We have had some senior visitors to the ISB of late Professor Jeffrey Sachs, Dean Dipak Jain from Kellogg, ISBs ex-Dean, Professor Vijay Mahajan, and many reputed academicians who attended the international Finance Conference held at the ISB. We bring some of them in this issue and promise to share expert opinions from the others in the next issue. India is a land of gurus. Yet, an Executive Coach has never before been a part of the CEOs resource to turn to as a mentor from time to time. The Centre for Executive Education took a bold step in offering Executive Coaching as a special course for would-be coaches and invited Marshall Goldsmith, one of the best Executive Coaches to have coached CEOs of leading Fortune 500 companies, as the teacher-coach. Little wonder then that the course got oversubscribed in no time, proving that there has been a long felt need for coaching CEOs to do better. We feature an exclusive interview with Goldsmith, who has many mantras from Buddhism for us to practice in our daily lives. To add spice, we share the experience of the ISB students exploring Salsa, theatre, and lms. We welcome your feedback, as always. So, please email me at

ISB Insight Team Bhuvana Ramalingam Mohan Chandran P Varshaa Ratnaparke Mrinal Kanti Ray Monidipa Mukherjee Madhavilatha G Pallavi Dutt Sulagna Bishoi Photography Kasarla Visual Communications Design & Cover Illustration Trapeze Resources Learning Resource Centre at the ISB Printed At Kala Jyothi Process Pvt Ltd Indian School of Business Gachibowli, Hyderabad 500032, India Phone: 91 40 23007000, Fax: 23007012 Email: Inside Cover The architectural spectacle of a student village at the ISB. Photograph by Kiran M Shete, President, ISB Photography Club, Class of 2008 For Subscriptions Contact Copyright, 2007. Indian School of Business (ISB). All rights reserved. All articles have been copyrighted by ISB and no part of this magazine may be reproduced either in part or full, or electronically stored into a retrieval system, or disseminated in any form (electronic, mechanical, photocopying, recording or otherwise) without ISBs prior written permission.

Bhuvana Ramalingam Editor

September 2007 | ISB

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4 Cover Story: Marketing The Changing Face With everything changing rapidly, and change being the only constant thing in this world, we examine how marketing has changed its face over the years and what organisations should do to cope with this rapid change. The 86 Percent Solution Destination India Professor Vijay Mahajan explains how India is changing the face of marketing by producing 86 percent solutions that cater to the problems of developed and developing countries of the world. 18 Brand Building: The Next Big Distributed Knowledge Process Professor Piyush Kumar explores how brand management in India could be developed into a distributed knowledge process to transform the Indian service sector into the Worlds Brand Ofce. 22 The Changing Face of Marketing Malcolm Frank, Senior Vice President, Marketing and Strategy, Cognizant, explains how marketing teams need to evolve and adapt themselves to rapidly changing technologies, markets, and customers. 26 ISB Insight Special: Marshall Goldsmith Interview Marshall Goldsmith, a leading authority in the world on Executive Coaching, shares his perspectives on leadership and behavioural change with Deepak Chandra and Professor S Ramnarayan. 30 Challenges of Sustainable Development in New India Professor Jeffrey Sachs, Director, The Earth Institute and Quetelet Professor of Sustainable Development, discusses how India can overcome the challenges posed by climate change and ensure sustainable development. 34 Beyond Micronance, Towards M-Finance Assistant Professors, Shamika Ravi, Mudit Kapoor, and Professor Jonathan Morduch delve into the possibilities of Mobile Finance in taking micronance beyond villages and transforming the nature of banking relationships.


Jeffrey Sachs, Director, The Earth Institute, with M Rammohan Rao, Dean, ISB

10 The Nanosecond Culture Dipak C Jain, Dean, Kellogg School of Management, in a tte--tte with K Ramachandran, Clinical Professor of Entrepreneurship at the ISB, discusses how emerging economies and organisations can cope with rapid change through anticipation and proactivity.
Dipak Jain, Dean, Kellogg School of Management, interacting with the ISB students

14 Online Consumer Behaviour and its Implications for Firms Strategies Professor Siva Viswanathan describes how tracking of consumers online infomediary usage can help traditional rms devise better strategies for market segmentation and pricediscrimination.

Meera Sanyal, Head, Asia Services, ABN Amro, at the ISB

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insight | September 2007

38 Towards Multisourcing The ISB organises an industryacademia meet on multisourcing to discuss the motivations and governance structures of multisourcing relationship, and vendors challenges in competing and cooperating. 40 Pioneering Executive Coaching in India The ISB hosts the most sought-after Executive Coach, Marshall Goldsmith, and organises an exclusive Executive Coaching Programme in India for CEO coach aspirants. 42 The Great Turnaround of Indian Railways Sudhir Kumar, IAS, Ofcer on Special Duty to the Minister for Railways, reveals how a debt-ridden public enterprise giant was transformed into a prot-making one. 45 Class Notes with Professor Amit Bubna Amit Bubna, Assistant Professor of Economics and Finance at the ISB, shares the secret of his inexhaustible energy inside the class and what keeps him going.

48 Creating a Barista of Cinemas Aditya Bhattacharya, Producer, Director, Actor and Writer, in a tte-tte with the ISB students, shares his perspectives on the business of lm-making. 50 ISB Happenings A potpourri of happenings activities, entertainment, visitors, social work, and talks at the ISB. 52 Book Review Dhiraj Sharma, Academic Associate at the ISB, reviews the book Conversations with Marketing Masters.
Marshall Goldsmith with participants at the ISB

ISB students enjoying Salsa

46 The Stage for Corporate Theatre The Theatre Club at the ISB unleashes the power of soft skills through theatrics to facilitate leadership enhancement and simulated learning experience.

N Viswanadham, Executive Director, GLAMS, planting a sapling at the ISB during World Environment Day September 2007 | ISB

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The Changing Face

Every business enterprise has two and only two basic functions: marketing and innovation, said marketing guru, Philip Kotler. Innovation itself implies constant change from the status quo. Today, everything is rapidly changing be it organisations, business environment, consumer behaviour, products, markets, or competition. Take for instance, the telephone. Few decades back, telephone was considered more as a medium of telecommunication. But, with changing time, telecom companies have been vying with one another, offering several hours of free talk time to users, and forcing them to talk, thus marketing telephone as a medium of tele-conversation. Similarly, fairness creams, once regarded as a bastion of the fairer sex, is no more so today, as companies are intensely competing for the attention of males, too, with a glut of mens fairness creams in the market. Organisations have turned their focus from being a mere provider of customer solutions (reactive) to being an anticipator of customer needs (proactive). There has been a paradigm shift from satisfying the articulated needs of the customer to foreseeing the unarticulated needs, and coming out with innovative solutions. Change is the only constant thing and the only reality in the world today. It is a sine qua non that signals rebirth and leads to growth. The average Indian consumer and his/her behaviour have changed drastically over the years. Rapid urbanisation has made the Indian consumer more trendconscious. Today, the Indian consumer does not base decisions on price alone, but also takes into account aspects such as design, quality, style, fashion, etc. There is a marked change in the mindset, too, from saving for a rainy day to living for the day.

With more and more banks and credit card companies extending loans generously, the distinction between necessities and luxuries is fast disappearing. The changing face of marketing is conspicuous from the way companies in various sectors such as airlines, hotels, tourism, telecom, etc., are changing their strategies and slashing prices to attract the low-end consumers in urban as well as rural areas. According to McKinseys forecast (The Bird of Gold: The Rise of Indias Consumer Market, McKinsey Global Institute, May 2007), the Indian market is expected to undergo a major transformation in the next two decades. Income levels will be trebled, and India will climb up from being the twelfth largest consumer market today, to being the worlds fth largest consumer market by 2025. More than 291 million people are expected to move from below poverty line to a more sustainable life. Indias middle class is also expected to expand ten times, from 50 million today to 583 million by 2025. Over 23 million people (outnumbering Australias population) are expected to be in Indias wealthiest list. The spending patterns of Indians will also undergo a transformation, with a shift from food and apparel to communications and healthcare. This issue features cover stories on Marketing and its changing face from some of the whos who of Marketing, including Dipak Jain, Dean, Kellogg School of Management, and Vijay Mahajan, John P Harbin Centennial Chair in Business Marketing and former Dean of the ISB. Industry executives also share their perspectives on the dynamic behaviour of Marketing and its implications for India. The author of the above article is Mohan Chandran P

The 86 Percent Solution

Destination India
This article is based on a talk delivered by Professor Vijay Mahajan to the ISB students in July 2007. Mahajan is John P Harbin Centennial Chair in Business Marketing, in the McCombs School of Business, the University of Texas at Austin, and Former Dean of the ISB. The talk was based on the book, The 86% Solution How to Succeed in the Biggest Market Opportunity of the 21st Century,authored by Vijay Mahajan and Kamini Banga, and published by Wharton School Publishing, 2006.

Vijay Mahajan, John P Harbin Centennial Chair in Business Marketing at the McCombs School of Business, The University of Texas at Austin 6 | ISB

ndia is changing the face of marketing by producing solutions that cater to the needs of consumers in developing countries, where 86 percent of the world population live. Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys, and Satyam have found rich opportunities by focussing the resources of the developing world (86 percent) on the needs of the developed world (14 percent). Indian ITES-BPO exports are growing at a rate of 33.5 percent annually. Over the last decade, India has fortied its leadership position as an offshore destination with an estimated share of 65% of global offshore IT and 46% of global BPO. Most of Indias software and IT-enabled services is exported to the developed world. These companies are helping raise their employees standard of living in a sector employing over a million people in India and improve their regions. Indian companies and Indian entrepreneurs, who had earlier offered solutions to 14 percent of the world, are now focussing on 86 percent of the world. Welcome to India, the destination for the 86 percent solutions! Indian enterprise is alive and thriving. Let us rst examine the 2x2 matrix as shown in gure 1. Firms face four paths - A, B, C, and D. Some companies from the 86 percent markets, eg. Infosys, focus on serving developed markets (D). Others such as two-wheeler maker Hero, in India, founded and led by Brijmohan Lall Munjal, is focussing on opportunities close at home or in other 86 percent markets (B). Many companies from the developed world from car companies such as Ford to FMCG

companies such as Unilever are moving into the developing world to seize the 86 percent opportunities (A). Other rms in developed countries, in the bottom-left corner (C), focus on 14 percent markets, where the eld is crowded, growth is slow, and competition is intense. These strategies have some public policy implications, because different regulations encourage different approaches. If developing countries have incentives that encourage exporting their goods and services to developed markets, companies tend to overlook opportunities closer to home. Regulations and trade policies need to be designed in a way that balances the pursuit of the 14 percent markets of the developed world with focussing entrepreneurial attention on the needs of markets at home. Although, there is no one path to prosperity and growth, companies need to recognise that bulk of the worlds population is in developing countries. Managers, particularly in developing markets, should look carefully at the opportunities that might be before them. Strategies For Developing With The Market How can companies recognise shifts and transformations in developing markets and take advantage of them? How can they export their successes from one culture to another? Strategy#1: Develop Solutions with Government, NGOs and Other Players As emerging markets develop, governments, foundations, and non-governmental

insight | September 2007

India is changing the face of marketing by producing solutions that cater to the needs of consumers in developing countries, where 86 percent of the world population live.

organisations (NGOs) play a central role in development. Public-private partnerships (PPP), such as Emergency Management and Research Institute (EMRI), are critical in addressing social and economic challenges. EMRI (, started in April 2005, by the Raju brothers of Satyam Computers, provides comprehensive emergency management services (medical, police and re emergencies) in the state of Andhra Pradesh (AP), India, using a single toll-free number (108). It receives an average of about 23,000 calls everyday, and takes an average of 15 minutes to reach the victim/site. EMRI deploys 380 state-of-theart ambulances, catering to a population of about 80 million. The Indian-made ambulance van used by EMRI is uniquely designed to handle 48 kinds of emergencies at an economical cost, and is equipped with latest and highly receptive communication equipment to

ensure patient and public safety. It contains extrication tools, re extinguishers, rescue blankets, shovels, public address system, debrillator, and ve different kinds of stretchers. A unique feature of this ambulance includes an oxygen cylinder behind the drivers seat. EMRI has leapfrogged the services offered to the developing world by entering into tie-ups with hospitals across AP EMRI also tracks the patients status . and records the number of lives saved. Unlike 911 services of the US, EMRI also focusses on providing research and training to doctors, paramedics, and other medical personnel. EMRI has proposed to increase the number of ambulance vans to about 500 by the end of September this year. Within just a year, EMRI has saved more than 13,000 lives. By working together, EMRI and the Government of AP created a win-win

Indian entrepreneurs, providers of 14 percent solutions hitherto, are fast emerging as dominant providers of solutions to the 86 percent world.

Selling From 14% 86% A

Ford India, Mercedes Unilever

86% B
Hero, Shantha Biotech, Bharat Biotech, Reva, Apollo Hospitals, Basix Destination India

Marketing To 14% C

Satyam, Infosys

Figure 1: Matrix showing companies offering 14 percent and 86 percent solutions to 14 percent and 86 percent of the world

September 2007 | ISB

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Break-up of Emergencies Treated by EMRI


40 35 30
Percentage 34

Injuries Cardiac Suicides Stroke Paediatric

14 15

Respiratory Diabetes Epilepsy Pregnancy Electrocution Fall from height Drowning Other accidents


25 20 15 10 5 0
Emergencies 5 6 5 3 5 3 1 2 3 1 1 1 1

Abdominal Burns Animal Bites

Chart showing the break-up of number and type of various emergencies catered to by EMRI

situation for the people, where over 30 percent of the population fall below poverty line. By 2010, EMRI plans to extend its services across India and save 1 million lives a year. Strategy#2: Export Successes Solutions for one developing market can often be exported to other developing markets that have similar income constraints and environments. Hero Cycles ( have been a hit in India, and its various models and bicycle parts have been exported successfully to about 89 countries, including developing countries such as Paraguay and other African countries, and developed countries such as the US, the UK, Japan, and Germany. Hero collaborated with Honda Motor Company of Japan in making motorcycles, and one of its models Hero Puch is exported to developed countries such as Mexico, Argentina, Turkey, Holland, Spain, and others. The vehicles, designed for its domestic markets (India), also appeal to the broader developing world. Strategy#3: Import Customers from the Developed World In addition to exporting products to the developed world, digital technologies
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and inexpensive travel allow developing countries to import customers from the developed world. Developing nations are becoming hot destinations for medical tourists, not only from other developing nations but also from the developed world. Thailand, Malaysia, Jordan, Singapore, and India collectively host more than 1 million medical travellers each year, earning more than $1 billion in treatment costs alone. The market in India alone is expected to reach $2.3 billion (Rs.100 billion) by 2012 The medical tourism industry in India, with global revenues of approximately $20 billion, is one of the worlds largest industries, with an annual growth rate of about 30 percent. The cost of surgery in India can be one-tenth that of the US or Western Europe, or sometimes, even lower. About 10-12 percent of all patients in Mumbais top hospitals are foreigners. It is estimated that there are about 20 million NRIs or Persons of Indian Origin (PIOs), spread across 110 countries, who are potential customers for medical tourism in India. In 2006, about 150,000 medical tourists came to India. Apollo hospitals (www.apollohospitals. com) in India, started by Dr. Prathap C. Reddy, have created the largest chain of

hospitals outside the US by focussing on the needs of developing nations and international visitors. About 10-15 percent of Apollos total patients constitute medical tourists. They have treated about 100,000 international patients. Apollo caters to about 60 countries, including medical tourists from developed countries such as the US, the UK, and Canada. Apollos network also include retail pharmacies across India, and Health and Lifestyle Franchise Clinics, with global presence in developing countries like Sri Lanka, Bangladesh, Nepal, Ghana, and Nigeria, and developed countries such as the UAE, the UK, and Saudi Arabia. Apollo offers everything from hospital back-ofce data processing to surgery in a chain of 38 hospitals, with over 7,000 beds across Asia. It has a range of customised packages exclusively developed to cater to the needs of a diverse cross-section of individuals. The specialists in Apollo have performed about 200,000 major surgeries of various kinds. Strategy#4: Address the Growing Pains Development brings with it many challenges and growing pains. The path to development is often lined with political and economic

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turbulence, strains on fragile infrastructure and environmental challenges. AIDS/HIV is a growing concern in many developing countries, including India. Estimates by UNAIDS/WHO for 2006 year-end indicate about 39.5 million people globally suffering from the silent killer. Of these, adults amount to 37.2 million. Young people (below 25 years) account for half of all HIV infections globally. In South Africa and Zambia, about 15-20 percent of adults are infected with AIDS. In the US, AIDS has killed more than half a million people, with about 40,000 new HIV infections annually. The Indian condommanufacturing company, Hindustan Latex Ltd. (HLL), has been developing solutions to address the growing pains of the developing (86 percent) as well developed nations (14 percent) of the world. About 75 percent of the companys total production is supplied to the government and international institutions like the UN, WHO, IDA, etc. HLL is targeting to achieve sales of Rs. 10 billion by 2012, considering that around 2.5 million people in India are affected with AIDS and 70 percent of Indian population are less than 30 years of age, of whom one-third are potential users of the product. HLLs sales went up from Rs.1.05 billion in 2000-02 to Rs. 2.43 billion in 2005-06. Also, about 100 million pieces of condoms are exported to the African continent, where the fear of AIDS looms large. Today, HLL has emerged as the largest condom manufacturer in the world, with a production of about a billion pieces per year. India: An Emerging Economy Offering 86 Percent Solutions Indian entrepreneurs, providers of 14 percent solutions hitherto, are fast emerging as dominant providers of solutions to the 86 percent world, as can be seen in cell B of Figure 1. Indian entrepreneurs are coming up with innovative and cost-effective solutions to problems. The 86 percent solution is competitive, quality-driven, and economical.

Bangalore-based company, Reva (www., launched Indias rst electric car in Hyderabad in September 2003. Reva offers 86 percent solution to the developing and developed nations. Over 500 Reva cars are exported to the UK. Reva cars are operational in the developed countries such as the US, Switzerland, Japan, Australia, etc., and in developing markets such as Cyprus, Norway, Nepal, and Sri Lanka. Revas running cost is approximately 40 paise per kilometre the lowest in the world! Bangalore has already carved a niche for itself in the IT history as the Silicon Valley of India. Total software exports from Bangalore went up 33 percent to $11.3 billion in 2007. Hyderabad has taken the mantle in IT from Bangalore. Software exports from Hyderabad for the year 2007 witnessed a 48 percent increase to $4.5 billion from the previous year, contributing 14 percent to Indias total exports. Hyderabad is taking the lead in offering 86 percent solutions to the world be it in pharma, education, banking, software, IT, hospitality, or tourism. Without exaggeration, Bangalore and IT, and Hyderabad and 86 percent solutions have become synonymous in India. No wonder, India and Indian entrepreneurs are changing the face of marketing by offering 86 percent solutions to the rest of the world. Several Indian companies, particularly from Hyderabad, are leapfrogging the global competition by offering 86 percent solutions to both 86 percent and 14 percent of the worlds markets. Several additional examples from various sectors include: Dr. Reddys, Aurobindo Pharma, Matrix laboratories (pharmaceuticals); Medwin hospitals, LV Prasad Eye Institute (hospitality); Shanta Biotech, Bharat Biotech, and Ocimum Bio Solutions (biotech). India is indeed heading towards becoming a sought-after destination for The 86 percent solutions.

EMRIs unique state-of-the-art ambulance van with ability to handle 48 kinds of emergencies.

Several Indian companies, particularly from Hyderabad, are leapfrogging the global competition by offering 86 percent solutions to both 86 percent and 14 percent of the worlds markets.

September 2007 | ISB

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The Nanosecond

Dipak C Jain, Dean, Kellogg School of Management, in a tte--tte with K Ramachandran, Clinical Professor of Entrepreneurship at the ISB, talks about the rapidly changing face of marketing, and explains how important it is for marketers to anticipate customer needs and be proactive rather then being predictive and reactive. Here are some excerpts.

Ramachandran: In this rapidly changing socio-economic environment, very often, people including experts say that strategic planning is not possible, and that you cant nd any patterns. Is it really possible to identify mega trends? Dipak Jain: Yes. There is a term that Professor Philip Kotler and I use The Nanosecond Culture. Nanosecond Culture means things are changing very rapidly. Not only is change inevitable, but change is happening at an accelerated speed. So, when the world is changing so rapidly, anything that you predict is going to be wrong. By the time you predict, things would have changed. We believe that rather than prediction, you need to focus on anticipation. Anticipate the mega trends and prepare for it in a proactive way. That is leadership and vision - that you have anticipated a trend and are prepared for it even before the market has identied it. In this way, you are always close to customers, but ahead of competition. This is the simple mantra of success Close to customers but ahead of competition. Rather than being market-driven, be market driving. Drive the market towards the trend. I always tell my students never to jump in the same river twice. The river is the same, but the water has changed. Anticipation rather than prediction, and

anticipation of mega trends are areas where good visionaries have made a difference. The emerging economies are rapidly changing and the socio-economic platform is also changing. In context of emerging economies, can you elaborate on mega trends and its relevance? First, I dont like the word emerging economies. I think a better word would be economies in transition. India, China and Vietnam are all economies in transition, though at different scales. When there is an economy in transition, I put my marketing head in position, see the demographic prole of people and examine their demographic evolution. This is the rst thing you have to anticipate. The second part is to look for the purchasing power. We have a large number of poor people, but we still have a fairly large middle-class segment. Middle class is the engine that keeps driving the economy and, as a leader, I want to make sure that this economic class remains stable and stronger. When it comes to economies in transition, you have to look at what is changing and how the economy can cope with the change. Rather than looking for growth in economies in transition, you should look at disciplined growth. By that, I mean, having the infrastructure to manage

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Dipak Jain, Dean, Kellogg School of Management, in discussion with K Ramachandran, Clinical Professor of Entrepreneurship, ISB.

growth. Otherwise it can get chaotic. The economies in transition should have an entrepreneurial mindset. They need to make the best return of their limited resources. So an entrepreneur should create a small team, and seek venture capital that can put the seed capital. Because, with venture capital, you not only get the captain but also get the management. This is what I call control. When you are in economies in transition, you need to create alliances with countries, where they can come and do that part of work. In many countries, where they are investing in other countries, they took the liberty to create the infrastructure. I have been told that China is spending lots of money in Africa building roads and dams because they think that tomorrow Africa will be the largest source of natural resources. But, in order to extract things from mines, you need to have roads. Yes, China is investing lots in Africa. That raises another question. We have most of the frameworks of marketing principles of the developed countries, largely in the western context. If you take economies in transition, including places like, say, Africa, the context is different. To what extent are these principles or framework or theories of marketing, lets say functional areas, relevant, especially, as you have also added

the entrepreneurial dimension? The rst point is that the marketing principles or concepts would remain the same. But what would change is the execution. Because, execution depends on the context. Execution is not context independent. That is why they say think global and act local. Thinking global is thinking of global concepts. Act local means implement those concepts depending on the local conditions. Thus, the marketing concepts are global concepts but they need to be executed with local data or local conditions. If you have to apply that in Africa and say that you want to have a look at the database of all the customers there, its a foolish question to ask, because we dont have the database. But that does not mean that segmentation cannot be done. You might have to use adhoc or other proxy measures. You should do segmentation with whatever data or information you have. Like in India, you can go and talk to the village leader. He will give you the insights and direct you. There are other sources and resources that we can tap into in order to get a better understanding of these concepts. If we look at marketing and talk about segmentation, targeting and positioning, we have to do that whether we go into emerging economy or a developed economy. The notions of segmentation, targeting and positioning

Nanosecond Culture means things are changing very rapidly. Not only is change inevitable, but change is happening at an accelerated speed. So, when the world is changing so rapidly, anything that you predict is going to be wrong.
September 2007 | ISB

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My rst message is not to think of marketing as a functional expertise. Marketing is a mindset. Mindset means you have to think in terms of customers and segmentation. Thinking is independent of context.

are still the same. You still have to position the product, look at the kind of people, anticipate what they would look for, and what you can give them. As economies are in transition and if I am a Marketing professor I would still teach the same concepts. But I wont teach a case on Citibank credit cards, because that may be irrelevant for them because there is no credit card there. Now, people talk about micro les. You have to bring the examples which are relevant to the context today but also give few examples of the future. According to me, the context in the developed economies will not be entrepreneurial but the mindset will be. For economies in transition, not only do you need to have an entrepreneurial mindset but you also have limited resources. To me, entrepreneurship means that you have to go beyond boundaries to get your work done albeit bureaucracy is stopping you. Because, in an entrepreneurial world, there is no bureaucracy, to start with. Mobile penetration is signicant even in villages, and to a large extent people have started using mobile for the promotion of the product, branding, etc. Is there any learning coming out of all this? Do you think there is any major theoretical contribution emerging from these economies from this context? There is a big difference here. Text messaging is so popular in India and it is
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virtually non-existent in the US. Why? First, the penetration of cell phones may be high in the US. The use of mobile phones is very limited as compared to countries like China and India. So, how do we keep in touch in the US? We go for the alternate technology, which is the Blackberry. People nd that Blackberry is more convenient than text messages, because one not only gets messages sent through email but can also send emails to others. Now for that system to work, other person also has to have a Blackberry. The penetration of this product is higher in the US as compared to Indian context. Now about the missed call concept in India. India is a country where the incoming calls are free. In the US, if you make a missed call, you are charged the moment the computer accepts that call. And that is the reason people in India give missed calls because they know that nobody is going to be charged. In the US, both the caller, and the receiver pays. Here, in India, only the caller pays. Secondly, they might say: for you it is free and for me it is money; so you call me. But the real brilliance here is that you have communicated without communication. In developing countries or economies in transition, rather than focus on product innovation, we need to focus on processing. A missed call to me is a process innovation. I believe that there are two new innovations that will happen in economies in transition: one is process

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Marketing is just not about marketing a product or service. Marketing means enhancing total customer experience. Focus on the total customer, not just on your product.

innovation and the other I call is business model innovation. It is the new way of doing the same business. This leads me to the other question. Do you nd any of these learnings coming into the MBA classroom? Take entrepreneurship, which is today all-pervasive and is entering into all functional areas - not only in the start-up stage, but every stage of organisational growth and it is a continuous change. Does it get reected in the MBA curriculum at either Kellogg or other leading business schools? The answer is yes. Its not that you create another course. In marketing course, you should pick up a case, which deals with economies in transition. Because, if you create a whole course of economies in transition, then you dont have the body of knowledge. So, I think that rather than creating a course, the more important thing is to show how the same thing can be done in a different context. When you build these things into the curriculum, the standard practice is to add another course called Economies in Transition or Managing Economies in Transition. Of course, students may feel that same marketing is applied to Vietnam, Cambodia and similar countries, and they may not be interested in working in those countries.So, they may think, why should I take care when I have not come to Kellogg to study about Bangladesh or Vietnam!

What is your message to the marketing executives who are working in this kind of environment? My rst message is not to think of marketing as a functional expertise. Marketing is a mindset. Mindset means you have to think in terms of customers and segmentation. Thinking is independent of context. Second, marketing is just not about marketing a product or service. Marketing means enhancing total customer experience. Focus on the total customer, not just on your product which means before the customer buys the product, while the customer is buying the product or using the product, and after the customer buys the product. The total experience is where you need to nd that differentiation. Third, I believe that marketing does not mean huge expense. Many people think of marketing only in terms of price. To me, a simple denition of marketing is how I make the product cheaper than others. So I say price is transparent, value is opaque. All customers can see the price tag but many customers cant see the value. When I have to dene marketing, I give a simple denition: educate the customer of the value you are offering. So, marketing is nothing but customer education. Whether you are in Africa or elsewhere, you have to show the same thing to the customer what the value is. And once the customer perceives that the value is greater than the price they have to pay, they will go for it.
September 2007 | ISB

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Online Consumer Behaviour

And Its Implications For Firms Strategies

In this article, the author, Siva Viswanathan, Assistant Professor of Information Systems, Decision and Information Technologies, Robert H. Smith School of Business, University of Maryland, describes a recent study that examines how tracking of consumers online infomediary usage can provide valuable insights into underlying consumer differences and help traditional rms craft better market segmentation and price-discrimination strategies.

Siva Viswanathan, Assistant Professor of Information Systems, Decision and Information Technologies, Robert H. Smith School of Business, University of Maryland

ver the last few decades, developments in information technologies have dramatically increased the amount of information available to consumers. The Web, in particular, has emerged as the primary source of information for consumers in various product categories, and in industries as diverse as auto-retailing, brokerages, real-estate, mortgages, and insurance, among others. Most of this information is provided by third-party online information intermediaries (or infomediaries), who have not only established themselves as pivotal and trustworthy sources of information, but also led to the creation of new linkages with the potential to disrupt, and fundamentally change the dynamics of traditional business. The growth of online infomediaries has given rise to new and interesting information seeking behaviours, which has only recently begun to garner the attention of researchers. As consumers increasingly begin to rely on online infomediaries as their primary source of information, these online intermediaries provide traditional rms new avenues for segmenting consumers and formulating strategies based on their online behaviours the analysis of which forms the primary focus of this study. In particular, this study examines differences in consumers online information seeking behaviours, and seeks to understand how rms can actively leverage this knowledge to devise effective marketing and pricing strategies. The auto-retailing sector provides the research context for this study. Estimated

at around a trillion dollars a year, autoretailing is the biggest retailing sector in the US. While there are over 22,600 new car dealerships, the market is mostly fragmented and sales largely localised. In addition, the presence of franchise laws has helped strengthen the position of dealers in the retail value chain. Added to the lack of transparency in the pricing and purchase process, signicant differences exist among cars in terms of performance and features as well as in the pricing strategies of dealersmaking the car buying process a complex decision for most consumers. However, over the last few years, the advent of the Web, has led to the rapid growth of several online intermediaries (Online Buying Services) that have emerged to improve overall market efciency through better information availability. These OBS (Online Buying Services) such as AutobyTel,,, not only serve as infomediaries providing information on various facets of the purchase, but also act a referral intermediaries by referring consumers to dealers. As in other sectors, these online infomediaries typically provide price and product comparison information, enabling consumers to nd the right product and negotiate better prices with dealers. Prior studies examining the implications of the increased availability of such information have typically found that the increased availability of price information leads to lower average prices in the market, resulting from greater price competition among sellers. In addition to price information

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Effective market segmentation, which is vital for price discrimination, can also play a critical role in a rms protability and survival.

given the heterogeneity of consumer preferences the high involvement nature of the purchase and the high degree of differentiation among cars, productrelated information is also very valuable to consumers, enabling them nd products that better match their preferences. While the increased availability of price-related information to consumers leads to lower prices, the increased availability of productrelated information is thought to decrease consumers price sensitivities and lead to higher prices on an average. Our study begins by examining whether these differential impacts of price and product information availability on outcomes are indeed borne out in the market for new cars. Data drawn from an annual survey of new vehicle shoppers, conducted by J.D. Power and Associates, forms the basis for this study. A random sample of new vehicle purchasers and lessees, based on registration data, was taken to reect actual sales of new cars. A response rate of 24 percent was achieved for 116,317 surveys mailed out. The dataset also reects details of online information sources used in the consumer search process, as well as detailed consumer proles, which are linked to a recent automobile purchase. Consumers answered questions relating to their usage of specic online OBS, the specic type of information found through the different OBS, price paid, vehicle choice, and satisfaction, among others. Other measures in the study included consumer demographics, psychographics (price sensitivity and involvement with the

product), internet usage, and technical competence. Key Findings Our preliminary analysis uses a 3SLS (threestage least squares) systems estimator to examine the relationship between the type of information obtained by the consumer and the resulting price paid, controlling for individual and vehicle characteristics. These results (based solely on the type of information found irrespective of the specic source used) show that nding more price information results in the consumer paying a signicantly lower price, while nding more product information results in the consumer paying a higher price, on average, for the same vehicle. While this nding points to the existence of distinct consumer segments, this knowledge is of limited practical value without a viable mechanism that enables rms to specically identify and target these customer-segments. Given that different OBS provide different types of information, a natural question that arises in this context is whether consumers usage of OBS can be used as a viable mechanism to identify these consumer segments. To answer this question, we examine consumers OBS-usage patterns and their consequences in greater detail. Interestingly, our data shows that consumers typically visit more than one OBS during their vehicle purchase process, and a pair-wise analysis of OBS-usage allows us to examine if particular pairs of OBS tend to be used together by more (fewer) consumers than would be expected if
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Dealers and manufacturers can design their value proposition and marketing strategies and allocate their resources in an efcient way to deliver the maximum value to these different consumer segments by tracking their online infomediary-usage.
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selected at random. A Chi-square distance metric is used as a measure of proximity among OBS pairs and a cluster analysis helps us uncover the presence of three distinct clusters of OBS. OBS within a cluster are used together more when compared to those across clusters. Cluster 1 consists of OBS such as Edmunds, Autobytel, KBB, etc., while Cluster 2 consists of OBS such as Motor Trend Online, Car & Driver, Road & Track Online, etc. Cluster 3 consists of OBS such as Lycos Autos, Netscape Autos, Yahoo! Autos, etc. We further nd that using Cluster 1 results in consumers nding more price information, while using Cluster 2 results in consumers nding more product information, and using Cluster 3 results in consumers nding less of both. Given the differences in the type of information found by consumers using these three clusters the price, product, and portal clusters we then examine the outcomes - the price paid, vehicle choice, and customer satisfaction related to the use of these OBS clusters. We nd that the usage of these different clusters is associated with signicant differences in consumer outcomes. In particular, we nd that the price paid by consumers is systematically related to the type of infomediaries they visit in their search process, implying that all referrals dont have the same value for dealerships, and pointing to a new basis for consumer segmentation. We also nd that the users of the product cluster were more satised with the product t, although they paid a higher price compared to the price cluster users. The users of the portal cluster were the least satised with their price as well as product choice outcomes. In addition, we also nd that the observed behavioural choicesi.e., consumers use of OBS clustersare related to underlying systematic differences in consumer characteristics and the properties of the information found. These ndings have signicant implications for traditional rms as well as online intermediaries. Effective market segmentation, which is vital for price discrimination, can also play a critical role in a rms protability

and survival. However, although price discrimination can boost a rms prots, it is very challenging to identify the right consumer segments. Compared to other segmentation and price discrimination strategies such as versioning, product line extensions, or couponing, our ndings suggest that segmentation based on OBSusage can serve as a low-cost, effective, and robust self-selection mechanism. Dealers and manufacturers can design their value proposition and marketing strategies and allocate their resources in an efcient way to deliver the maximum value to these different consumer segments by tracking their online infomediary-usage Our ndings also show that consumers using price and product OBS clusters differ in their psychographic proles, but are demographically similar. While differences in demographics characteristics are usually more easily observable by sellers, attitudinal differences as revealed by psychographics are less conspicuous. This makes the ndings of the effectiveness of using online infomediary clusters for segmentation and price discrimination more compelling. Our ndings also have interesting implications for dealers partnerships with online infomediaries. Contrary to conventional wisdom about the optimality of exclusive referral arrangements between an OBS and competing dealers in a given geographical area, our results suggest that a traditional dealer can benet from using these different categories of infomediaries as complementary referral mechanisms. As for OBS, given that consumers are clearly differentiated on their underlying needs for the different types of information, OBS would benet by better highlighting their domain of specialisation. Greater specialisation and differentiation of OBSs clusters would help facilitate consumer self-selection and enable OBS and dealers to more effectively understand the value of a referred lead. (Viswanathan S, Gosain S, Kuruzovich J, Agarwal R. Online Infomediaries and Price Discrimination: Evidence from the Auto-Retailing Sector, Journal of Marketing, Vol. 71, No.3, July 2007.)


insight | September 2007



Brand Building:
The Next Big Distributed Knowledge Process

The author, Piyush Kumar, Associate Professor of Marketing at the Terry College of Business, University of Georgia, and a consultant in the areas of brand strategy and service management, explains how brand management could be developed into a Distributed Knowledge Process in India, transforming the Indian service sector from the Worlds Back Ofce to the Worlds Brand Ofce.

ccording to a recent news story, Lenovo is setting up a global marketing hub in Bangalore for its brands. The hub will formulate and track its brand strategies and help optimise the use of the rms brand assets deployed across the globe. While the news may not be completely unexpected, what is certainly surprising is the amount of time it has taken for brand management to be widely recognised as a business process that can be de-linked from a corporations headquarters and even outsourced. Over the last decade or so, we have seen the emergence of what could be called a brand-and-source global economy (BSGE). In this new and still emerging environment, a separation is taking place between brand owners and what we could call product fulllers. Today, the owners or holders of brands are increasingly less likely to be the producers of the products or services that are marketed under it. For example, a brand owner in the US may design its products in Europe, manufacture them in Asia, and distribute them globally. This trend has resulted in a structural shift in what a corporate entity is, and what it does and does not do. Many entities have undergone organisational peeling or an unbundling of the tasks that they perform as an organisation, and the associated competencies that they need to develop internally. In a BSGE environment, many

tasks that were traditionally performed within are increasingly being distributed and spun off to where they can be performed best and often at lower cost. And, because some of these processes have been distributed to entities across national boundaries, terms like outsourcing and off-shoring have become a part of everyday management vocabulary. However, it is perhaps ironic that globalisation and outsourcing are often talked about in the same breath. Globalisation represents the move towards a unied singular market for both production and consumption and the notional dissolution of national boundaries. The concept of off-shoring, on the other hand, is tied to the acknowledgement of the importance of national boundaries and a clear separation between what is inside those boundaries and what is outside. And when the intellectual component of what is developed outside is high, it gets labelled as an outsourced knowledge process. However, if consumption and production markets are becoming truly global, then it is perhaps inappropriate to strategise in terms of outsourcing versus in-sourcing. Instead, an organisation should be thought of as a combination of a holding entity and distributed processes. And, with the emergence of cost-optimised centres of excellence for a variety of processes, including design, manufacturing, customer

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Over the last decade or so, we have seen the emergence of what could be called a brand-and-source global economy. In this new and still emerging environment, a separation is taking place between brand owners and what we could call product fulllers.

relationship management, software development, customer service, accounting, and nancial portfolio development, there is increasingly less need for holding entities to develop a range of competencies and deploy a variety of assets. Specically, with regard to processes that require a high intellectual component, it is important for these entities to think beyond knowledge process outsourcing (KPO). Instead, they should think more generally in terms of core knowledge processes (CKPs) and distributed knowledge processes (DKPs). CKPs are those that are strategically important and best performed within the holding entity. On the other hand, DKPs are those that may be reasonably critical for the organisation but can be spun off to entities beyond the organisational boundary. Over time, the holding organisation should evolve into a network where few processes are performed within the organisational entity and most others are spun off to specialist entities located anywhere. Brand Management as a Distributed Knowledge Process Traditionally, branding has been viewed as an endowment process whose purpose is to separate competing products or services from one another in order to maintain differentiation and extract a price premium from the marketplace. This has resulted in a product-plus mindset for

the conceptualisation, development, and management of brands. Under this paradigm, a product or service comes rst and it is later branded appropriately to achieve certain strategic objectives in the marketplace. As a result of this product-plus mindset, brand management has been largely held within the connes of the holding organisation and has been thought of as a CKP which cannot be easily distributed to external entities. However, the process of brand management shares many characteristics with other processes that have been successfully distributed or outsourced. It requires a blend or a combination of three core skills: analytics, mathematics, and aesthetics. The analytics pertains to the logic of brand management and the selection of good versus bad strategies. The mathematics pertains to the sizing of brand management problems and the evaluation of the quality of solutions based on data and models. And nally, the aesthetics pertains to elements of creativity as well as the knowledge of product category specic issues such as being able to identify good package designs from bad ones. If we view the brand management process not merely as a creative process but as one requiring these three skills, then it is easy to see that it is ripe for being treated as a reasonable and strategically important DKP. It has all of the following characteristics that have been associated with business processes

Piyush Kumar, Associate Professor of Marketing, Terry College of Business, University of Georgia September 2007 | ISB

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The process of brand management shares many characteristics with other processes that have been successfully distributed or outsourced. It requires a blend or a combination of three core skills: analytics, mathematics, and aesthetics.


The development of viable brand solutions would provide a proof of concept for the notion of a brand as a platform and would spur further brand building activity.
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that have been successfully distributed in the past: 1 Separability: A key feature of a DKP is that it can be separated from the rest of the organisational activities of the holding entity, conducted at a different location, often by a different enterprise, and then integrated back into the holding entity. If we move away from a product-plus mindset, we can easily think of brand building and management as an almost holistic, independent, and complete process that can be executed by an external provider and then folded back in. In fact, much like a software product, a brand can be fully developed by an external service provider and then marketed to holding entities for merging with a product or product class to create integrated branded offerings. 2 Arbitrage: One of the objectives of migrating processes outside the organisation is to lower the cost of production by taking advantage of specialised, low-cost providers. Brand building and management is a knowledge process that lends itself well to being conducted by specialised entities at lower cost than by holding entities that ultimately deploy these brands in product markets. These entities can therefore take advantage of the lower cost of brand development by specialised entities anywhere around the world and then unleash them in

markets where they could be harnessed for maximum value extraction. Leverage: A knowledge process is especially worth distributing if the holding entity can leverage the benets of superior performance. Processes that have little magnication or leverage effects from improved quality are worth outsourcing only because there might be savings in the cost of capacity. Brands tend to have a strong magnication effect because the market and pricing power they are capable of generating far outweighs the cost of developing or rening them. Scale effects: It is prudent to outsource those processes and tasks where the concentration of capacity, in terms of either the physical assets being deployed or the intellectual power being harnessed, results in signicant cost savings. Brand development and management requires the interaction among specialists in areas of analytics, mathematics, and aesthetics and synergies from close interactions among them would result in cost savings from these skills being amassed in centres of excellence.

Developing Brand Management as a DKP So what would it take to set-up the brand building as a viable and vibrant DKP here in India? First, it would require a change in mindset from thinking of brands as productplus to that of products as brands-plus.

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Brand builders will have to embrace evidence-based marketing and adopt brand building not as a creative process but as a strategic process.

This change should unleash brand building as an independent and standalone business process, where brands could be developed as platforms even without a client or product in place. The development of viable brand solutions would provide a proof of concept for the notion of a brand as a platform and would spur further brand building activity and help holding entities migrate towards accepting branding as a DKP . Second, brand builders will have to embrace evidence-based marketing and adopt brand building not as a creative process but as a strategic process. They would have to treat a brand as an engineered product whose feature set can be unbundled and developed in parts and the development process itself can be modularised. The benet of this approach would be twofold. On the one hand, it would help subject the elements of a brands feature set to evaluation metrics and assist in the re-engineering or renement of the brand. On the other hand, it would facilitate the evaluation of the team members involved in the development of the individual modules that are integrated to create a brand as an engineered product. Third, unlike what has been witnessed in many sectors where KPOs are ourishing, developers who participate in brand building as a DKP will have to resist the temptation of treating their service as merely distributed knowledge producing capacity. If they do, this DKP sector will become commoditised and largely provide only arbitrage benets to its client sector. The service providers

should instead aim to deliver productised capacity wherein their knowledge capacity is converted into appropriate intellectual property that can be deployed to serve the holding companies that would be their clients. The productisation of knowledge capacity will help maintain separation among DKP service providers, prevent the migration of clients to lower cost centres over time, and increase their own valuation because of the presence of intellectual property component. Finally, these rms will have to support the cultivation of a focussed talent pool that is indoctrinated with the brand-plus mindset, and trained for the creation of productised brand building capacity. This set will have to be complemented by an army of what could be thought of as brand application engineers, who will customise these productised offerings to a global client base. As we have seen time and again, there is no shortage of raw intellectual power in the country. If it is organised and harnessed correctly, there is no reason why brand management cant be created as a vibrant DKP right here. And, if done well, then the Indian service sector can migrate from being the Worlds Back Ofce to the Worlds Brand Ofce. Copyright, 2007. Piyush Kumar. All rights reserved. No part of this article may be reproduced either in part or full, or electronically stored into a retrieval system, or disseminated in any form (electronic, mechanical, photocopying, recording or otherwise) without the authors prior written permission.





The Changing Face

Of Marketing
The author, Malcolm Frank, Senior Vice President, Marketing and Strategy, Cognizant, explains that as markets shift, technologies change, and customers gain superior information in new ways, marketing teams need to continue to evolve and adapt.

arketing, particularly in IT and IT Services, has been in crisis for some time. With the rapidly evolving nature of markets, client needs, technology and most importantly how clients make buying decisions, most marketing departments have not kept pace. There are myriad reasons for these failures, but ve of the key ones that must be addressed are: 1 The You Are Here dot: The role of strategic marketing in determining your market position 2 Build your Brand: Make a choice, take a stand 3 Naked Marketing: How one markets in fully transparent environments 4 Flat World Marketing: Translatable messages and marketing approaches 5 Get a (Second) Life: Leveraging new technologies

Malcolm Frank, Senior Vice President, Marketing and Strategy, Cognizant 22 | ISB

The You Are Here Dot: The Role of Strategic Marketing I love the You Are Here dot. You know it - the dot that one nds on the map of a shopping mall, zoo, or airport. That dot provides a sense of clarity, which is rarely found in life, and certainly not in our markets. Our markets are increasingly dynamic, and the mistake that many marketers make is that they never know where they are. Is your market an emerging one, or is it mature? And if its mature, specically, what is its level of maturity? How much is the economy (good or bad) impacting your messaging and value proposition? How has the competition hurt, or helped, you in the past few quarters? What are customers really looking for now?

At the end of the day, do your marketing messages and your marketing methods t with your current market position? Some rms never nd the dot. Others nd it once, but then dont recognise that it has moved and are stuck with marketing messages and approaches, which no longer resonate. Sam Walton, the founder of Wal-Mart, was once asked about his marketing budget. He responded by saying, I know I have to cut 50 percent. I just never know what 50 percent. What he was really saying is that, Some of our marketing is on the dot, other aspects are not. As a marketing leader, if you dont understand all these contextual issues and then properly place your rm over the right spaces with the right messages you will most certainly waste more than 50 percent of your marketing budget on useless campaigns. To nd the dot, take a continual walk through your rm and your industry. In both formal and informal ways, poll employees, customers, analysts, competitors, economists and thoughtleaders. Understand how other industries might be inuencing your own. And stay humble in this journey, being open to new information along the way, always remembering you were born with two ears and one mouth. Make a Choice, Take a Stand to Build Your Brand If one looks at the worlds great brands, theyve all made choices. They have consciously decided that they will appeal (in the strongest sense possible) to a minority of their target market. This seems counterintuitive in its nature. After all, why ignore the needs of the majority of your buyers?

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Marketers must lead in dening and driving the brand. The marketing department must force the company to make hard choices on which customers they will create unique value for.

But the simple fact is that if you attempt to appeal to everybody, you will appeal to nobody. I refer to this problem as lowest common denominator marketing, and its a marketing death-trap. Unfortunately, far too many rms are wallowing in this trap. However, great brands such as Apple, Starbucks, Nike or Harley Davidson have decided on distinction. They have decided with amazing success to appeal to their target buyers in ways that no other rm can. And once they make this decision, they will not deviate. Could one imagine Steve Jobs standing for mediocre, run-of-the-mill, mass-market products? Its inconceivable. And because its inconceivable, the brand builds distinction and ongoing trust with customers. These customers become amazingly loyal, raving fans, who in the case of Harley Davidson, tattoo the brand to their bodies. Ask yourself the question: Would any of your customers tattoo themselves with your logo? Professional services marketing, in general, is so horrid specically because of this lowest common denominator trap. By and large, these rms attempt to appeal to all potential customers in the Global 2000 market segment. This occurs due to human nature and the distributed structure of these rms, for the sales group in Los Angeles will want to position one way for their 25 target clients, as will the groups in Paris, Mumbai and Tokyo. As a consequence, the rm provides no overall distinction at all. Thus, marketers must lead in dening and driving the brand. The marketing department must force the company (yes, force) to make hard choices on which customers they will create unique value for. As Scott Bedbury (former head of

marketing at Nike and Starbucks) likes to say, when it comes to your brand, you need to know it to grow it. First, know what makes your rm truly special, and then build upon that. The marketing group must start this process by asking a set of tough questions, such as: What do we do better than anybody in the world? What can we deliver that others simply cannot? What is our organisational culture, and whats our passion? Whats our unique story as a company? Hopefully you can answer these questions. If you cant, then bring in the senior management team and have them attempt to answer them. For without these answers, your marketing group (and the rm overall) is a rudderless ship, blown in the winds of your market, and unable to raise itself above the pack. Naked Marketing: Winning in Transparent Environments The world is becoming more and more transparent. Spin no longer works. Claims are easily corroborated or rejected. Therefore, you must be genuine, for things cannot be faked. Why is the global world more transparent? Because the medium has changed, turbocharged by the Internet (and associated Web2.0 models, blogs, online communities and second life). With these platforms, information about your rm is continually racing around the world at light speed, and there is no way the marketing department can contain or control such a spread of information. The simple fact of the matter is we live in a fully naked economy now. Transparency reigns. What was once containable information inside your rm is now available

The world is becoming more and more transparent. Spin no longer works. Claims are easily corroborated or rejected. Therefore, you must be genuine, for things cannot be faked.

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At the end of the day, marketing is a form of education. You need to grab the attention and imagination of your potential buyer, and then inform them on your offer, working with both their logic and emotion to make a decision to choose your company over others.

instantly almost anywhere. And marketing departments must fully appreciate how this works, adapt to it, and work with it. Your customers may know more about certain aspects of your company than you do. The same is true with your recruits. As such, a successful marketing organisation must fully understand, and then represent, the true nature of their organisation. To do anything to the contrary simply comes across as disingenuous, making the marketing group look like the designated corporate liars. How fast does this information move? For example, just over a year ago, I delivered a speech at Syracuse University, in upstate New York. It was a moderately sized audience of about 100 people, and I shared perspectives on the at world economy. A few hours later, at the reception, I looked at my BlackBerry. On it was a note from an associate in Chennai, who was taking issue with a point I had made in my speech just three hours earlier on the other side of the world! It was a truly global and transparent moment. (It turns out a reporter from a local newspaper wrote a story on my speech, immediately put it on the papers website, which was then picked up by Google). You must approach your job with the assumption that everybody knows everything. As such, you need to speak to the market particularly potential clients and employees not in the patronising ways of the past, but with a very human voice in a peer-based manner. These people are out there in the blogosphere, continually researching you, developing a full picture. To not speak to them in a similarly candid and human voice is to be discredited. Flat World Marketing The at world is posing signicant challenges to marketing departments. After all, in a rm that has a global reach, how do you communicate in a style that is clear and compelling across myriad cultures? In short, can you craft and convey culturally translatable messages? This is harder than it seems. At the end of the day, marketing is a form of education. You need to grab the attention and imagination of your potential buyer, and then inform them on your offer,

working with both their logic and emotion to make a decision to choose your company over others. This needs to t within their personal patterns of learning and thats where the challenge resides. For example, as an American with deep experience in India, Ive learned that the fundamentals of the American and Indian educational systems are quite different. That is, the American system (with a liberal arts bias) tends to be very tops down, in that students are shown the concept or the general picture, and then start to investigate the supporting detail (if they wish). On the other hand, the Indian system (with a bias towards math and science) is more bottoms up, in that students learn the fundamentals (in great detail) and then with that foundation work their way up to understanding the entire system. As such, simple messages (which often leverage metaphors) work well with American customers. On the other hand, more content-rich (and to the point) messages work well with Indian customers. For example, look at the websites of Accenture ( and Satyam ( These are both successful and respected companies in the same industry, but their marketing approaches are very different and reect their cultural roots. The Accenture website takes the American approach (leveraging Tiger Woods as a golng metaphor for business performance, utilising pictures and containing precious little content). Satyam takes the Indian approach (where the homepage is very text-heavy, full of content, and very straightforward without leveraging imagery or metaphor). These are global rms that have erred on one side or the other with this global challenge. There are many other examples in many other industries and as a marketing leader, you must be aware of how your customers learn and then communicate to them in that manner. Get a (Second) Life: Leveraging New Technologies As a nal point, we are in the midst of a fundamental transition in individual



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technologies. While were yet to give this new wave a name (similar to what we had in the client-server or Internet waves), its happening and its big. This movement is being fuelled by Web 2.0 models, the broadband and mobility explosions, and the recent yet powerful emergence of models such as second life. These platforms are enabling an amazing powerful and rich way to communicate with your clients. However, too many rms continue to have a brochure mentality in this day and age, through which they speak at their potential customers instead of engaging with them. Recently, I was at a major IT industry trade show. I spent more than four hours walking the oor, amongst over 10,000 other attendees. While the event was

terric for social networking, it turned out to be simply pathetic as a platform for gaining information on the presenting vendors. I went to booth after booth, and instead of engaging with people who could provide in-depth (and objective) product information, I would meet with junior sales or marketing staff members who couldnt articulate much more than the corporate brochure. Fortunately, my hotel room had broadband access, for in the following hour at my PC in my room, I gained far more information and insight on these vendors than I did downstairs at the tradeshow. It was something of an epiphanous moment for me, in realising the current superiority of online channels over traditional (and very expensive) physical channels.



Role of Strategic Marketing Keep the firm over the right markets with the right messages.

2 3 4

BRAND Building a Brand

Make choices to build the brand.

Naked Marketing Understand transparency, and turn it from a threat into a weapon. Flat World Marketing Build fully translatable messages for the flat-world economy.

The Changing Face of Marketing

Leveraging New Technologies Harness new technologies to evolve and adapt.

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Feed Forward
to Get There
ISB Insight: How has your experience at the ISB been during this programme? Marshall Goldsmith: The participants are very impressive, dedicated, and hardworking. They came from all over India, and have great backgrounds top HR people, executive coaches, and executives themselves. Are Indian participants similar to those from other countries? I found excellent work ethic here, a very strong focus on business, and lots of respect for education and educators. I did an exercise on team building without time wasting, and had the group rank their teams on teamwork in terms of how they should be versus how they actually are. The scores were virtually identical to participants across the world. So, in some areas, the group was different; in others, they were similar. Any areas of improvement for Indians or Asians? There are lots of very smart people here, but there is a tendency to think too much getting lost in analysis and complications, as opposed to cutting to the chase and guring out what is really important, and move on.
26 | ISB

Marshall Goldsmith, ranked one of the top ten executive educators by the Wall Street Journal, and a world authority in executive coaching, visited the ISB to conduct an Executive Coaching Programme for CEO Coach aspirants. The ISB Insight team, comprising Deepak Chandra, Associate Dean of Centre for Executive Education (CEE), and S Ramnarayan, Professor of Organisational Behaviour, ISB, interviewed Goldsmith. Here are some excerpts.

The title of your recent book What Got You Here Wont Get You There is interesting. What should leaders do to get there? I teach leaders to get condential feedback from important stakeholders. They should pick the most signicant behaviour to improve, follow-up with key stakeholders on a regular basis, and realise that the same behaviours that led them to where they are, will not necessarily help them get to the next level. It is very important to get into a disciplined habit of continuous learning, continuous leadership development, reaching out, asking people for inputs, continuously educating themselves, realising that in the new world everything is changing, and that What Got You Here Wont Get You There. What would be the most important demands or skill-sets for the leaders of the future? One of the most common issues I work with, is the issue of winning too much. You want to win all the time whether it is important, or meaningful, or trivial. The more successful you become, the more you want to win. I use a case study in class. Its a lot of fun. Lets say, you want to go to dinner at a restaurant X. Your partner wants

insight | September 2007


Marshall Goldsmith in an interview with Deepak Chandra, Associate Dean, CEE, and S Ramnarayan, Professor of Organisational Behaviour, ISB

to go to restaurant Y. You go to restaurant Y, but it is not your choice. The food tastes awful and the service is terrible. What do you do? Option A: critique the food and prove your partner was wrong; Option B: shut up, eat the stupid food, try to enjoy yourself, and have a nice evening. When asked, what would you do? 75 percent of the class said, critique the food, and when asked, what should you do? they said, shut up! Only win the things that are worth winning. If its not worth it, take a deep breath, and let it go. It sounds so simple. Why then do successful people nd it so difcult? Understanding the theory is easy, but changing behaviour is very hard. My CEO clients have spent their entire life winning all the time. The more successful you become, the more reinforced it gets. So, you fall into the delusional trap that everything you do is leading to your success. You forget that you are successful in spite of doing things that dont make any sense. Tell us about your coaching process. My coaching process is very straightforward. I do not get paid before the client gets better. The client is not judged by me, but judged by his own people. My client gets condential

feedback from his key stakeholders. If you are not the CEO, you and the CEO agree on an important behaviour to improve. I teach people to use something called the feed forward where they dont ask for feedback about the past, but ask for ideas for the future, or suggestions to improve. They dont promise to change everything, but promise to do what they can. We have a rigorous follow-up system, which, though not time consuming, takes a lot of discipline. I talk to the stakeholders and share the feedback. Clients get better, I get paid, and life is good. So, the process depends a great deal on the person being coached and not on the coach? Entirely. The key variable for success is not the coach, but the client. The success or failure of this process is not about me, but it is about you. You do this stuff, pick your stakeholders, and follow-up. You learn from everybody around, and you get better. Your measurement of success is based on the perception of key stakeholders. What if the perceptions are not in tune with the actual behavioural change? I am often asked the question, do people really change their behaviour or, are they

There is no xed identity; there is no xed you. You changes constantly. Therefore, anybody can change at any time in their life, and at any time in their career.

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Only win the things that are worth winning. If its not worth it, take a deep breath, and let it go.

Marshall Goldsmith

only perceived to have changed? The opposite is true. It is much easier to change behaviour than to change perception. The reason follow-up is so important is that the key stakeholders begin to believe that my clients have changed, when the stakeholder says theyve changed, not when the client announces that he or she is changing. Through follow-up, you start hearing that you are getting better. Your stakeholders start believing it. This brings not only the change in behaviour, but a change in perception as well. Can you get feedback through the 360degree approach? My preference is to learn from the people around you, not do a self-assessment of how you can learn. The reality is: if by selfassessment you automatically get better, why arent you better in the rst place? How has Buddhism inuenced your thinking and your work? Buddhism has played a central role in my work. Buddha said, Only do what I teach if it makes sense in the context of your own life. Dont do what I teach just because I teach it. I ask my students to do what I teach, only if it makes sense for them. If it doesnt, dont do it. This saves a lot of arguments, justifying and rationalisation. I teach people to accept the ideas as a gift, not to dump or critique them. If I allow people to judge or critique the ideas, we will spend twice as much time in debating the value of the ideas, instead of doing something about the ideas. Another Buddhist concept

I build on is the concept of change or the concept of emptiness. It means ever changing, a lack of permanence. I believe people can change. I believe every time I take a breath, it is a new me. There is no xed identity; there is no xed you. You changes constantly. Therefore, anybody can change at any time in their life, and at any time in their career. In your own evolution as a coach, who have inuenced you most, and what did you learn from them? I was very fortunate to work with several very top people. I was on the Board of Peter Drucker Foundation for about 10 years. I had the opportunity to spend about 50 days with him. Drucker said, We spend a lot of time teaching leaders what to do; we dont spend time telling leaders what to stop. That comment was the title to one of my best-seller books. A lot of what I said in that book, I got from Peter Drucker. Another one of my great teachers is Paul Hersey. Paul gave me the opportunity to work with very high executives of very big companies, at a very young age. He also taught me the importance of using simple language, not to sound smart or academic and impress oneself, but to speak in words that normal people can understand. I try to do that in my writing as well. Another great teacher was Richard Beckhard, a friend of mine, and one of the worlds experts on organisational development. We coedited six books together. I have been very fortunate to have wonderful teachers over the years, who made a big difference in my life.

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You said that as a human being, you have your own coaching needs. How do you go about fullling that? I have my own peer coach my friend Jim, former Chief Operating Ofcer for Bell South, Sun Micro Systems, etc. Jim and I talk daily. We have a peer coaching process. Everyday, he asks me 24 predetermined questions, and I ask him 17 questions. These questions relate to our values. Each question is answered with yes/ no or a number. It takes three or four minutes a day, and its amazing how well it works. Sometimes, I am asked, why do I need to do this, as I already know the theory? I know the theory; thats why I need to do it. I know how hard it is. What are the benets of this approach? To me, there are two major benefits. It helps me have a better life; it helps the people around have a better life; and the company will have a better life. Most of the problems that we have at work, we have at home, too. So, if you are stubborn and opinionated at work, you are not going to be excessively open-minded when you go home. The thing I love about what I do is, when people achieve lasting positive change in behaviour, it helps and benefits all the people around your friends, family, co-workers, and organisation. What would you advise leaders to setup an effective leadership development programme? The big weakness with most leadership

development is that it is based on an incorrect, invalid assumption if they understand, they will do. Research shows that if leaders who go through training, dont talk to people, dont do follow-up, and dont do anything when they come back to work, then they dont get any better. They might as well have been watching sitcoms. It is very important to build in follow-up, build in measurement, and document long-term change in leadership effectiveness not as judged by the leader, but as judged by the people around. You have written 22 books, work with high-profile CEOs, have endless number of speaking engagements, and are constantly travelling around the globe. Yet, you are always smiling or laughing! What is the secret of your energy? Two secrets. First, I am a Buddhist. My school of Buddhism is very simple. You can summarise it in three words Be Happy Now. This is Heaven; this is Nirvana its not outside, its inside. Second, I am very focussed on personal contentment and happiness. A very Western disease which has totally infected India is Ill be happy whenwhen I get the money, when I get the status, when I get the new car, when I get the BMW, etc. To me, the secret of life is that happiness is not out there; happiness is in here. The only time we can find happiness is now. The only place we can find happiness is here. It is very important to make peace with what is, and find happiness where you are.

A very Western disease which has totally infected India is Ill be happy whenwhen I get the money, when I get the status, when I get the new car, when I get the BMW, etc. To me, the secret of life is that happiness is not out there; happiness is in here. The only time we can nd happiness is now. The only place we can nd happiness is here. It is very important to make peace with what is, and nd happiness where you are.

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Challenges Of Sustainable
Development In New India

This article is based on a talk delivered by Professor Jeffrey Sachs to the ISB students in August 2007. Sachs is Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at the Columbia University.He discusses the strategies to address the various challenges posed by climate change to ensure sustainable development in India.

hen one sees a good idea, that is actually working, one delves into its essence, and then asks the question, Why isnt it being applied everywhere? This, I believe, is the heart of the challenge of sustainable development. Sustainable development places equal weight on both terms. Development is the challenge of meeting basic needs, ending extreme poverty and having the opportunity to improve material conditions over time. Sustainability, of course, means many things: how all the above can be achieved over a long-term. In our time, it also implies environmental sustainability. India has achieved a rapid economic growth in the last few years. But it has, ironically, not met the basic needs of the population, and has certainly not achieved the growth in an environmentally sustainable manner. India has to face and is already facing massive environmental challenges that are not being attended to. India is right up there in difculty because this is just about the most crowded place and the most densely populated rural environment in the whole world. There is tremendous environmental stress on almost every front right now land degradation, soil degradation, destruction

of natural habitats, and biodiversity loss. But, the two most severe ones are water stress and climate stress. The water challenge here exemplies what is true about almost all environmental challenges that are multi-factorial. There is no one simple stressor underway in Indias worsening water situation. On one hand, there are massive oods of unprecedented dimensions, and on the other, there is a worsening water scarcity that has not been confronted. Ground water depletion, denitive massive pollution of waterways, land degradation effect on river ows, major downstream ooding, diversion of rivers, destroying downstream ecologies, and climate change are some of the great unknowns. It is known that climate change will alter the precipitation and evaporation cycle, but whats not known is the manner, and what it would mean for the monsoons, their locations, timings, and intensity. The rising temperatures in the Himalayan region will change the water runoffs from the Himalayas dramatically, and a very signicant part of Indias water supply for agriculture depends on that. So, both the timing and the amount of water ow from the great Himalayan rivers will change over the next 50 years. One part would

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Jeffrey Sachs, Director, The Earth Institute and Quetelet Professor of Sustainable Development.

be increased river ow for 20 or 30 years, as glaciers melt sometime in the next half century. Many factors are going to exasperate the water stress in the country. Ground water depletion, river run off, abstraction, upstream degradation of lands (implying more ooding), changing snow melt patterns, disappearing glacier melt, etc. And, most governments around the world, including Indias, are not yet well-equipped to face such problems. They cut across many departments, involve land management, water management, ecological management, agriculture development, and so on. There is no ministry including the water ministry that brings the pieces together adequately. Climate change is an even more complex problem, and is pervasive in its effects. It can have negative ramications for agricultural productivity. If we continue to use current technologies in the way that we are presently, and if the climate worsens by another one degree centigrade (which is almost bound to do), then Indias crop productivity is going to suffer tremendously. First, the local increase of temperature would be much more than one percent (thats a global average), and the consequences of an

already heat-stressed environment could be very severe because, there are sharp nonlinear responses to crop productivity that come with rising temperatures. The climate is moving several kilometres north every year, but species cant move at the same rate. If you happen to be a species that lives on the mountain, there is no place to go once you have reached the top. Thus, ecosystems go haywire because the species ranges are completely deranged by climate change. The basic mechanics of the problem are quite clear. There is a challenge to mitigate the greenhouse gases that are causing climate change, mainly carbon dioxide, and also methane, nitrous oxide, and some uorocarbons. No matter what we do, the climate has already changed, and will continue to change simply by whats called Thermal Inertia, which implies that the world is continuing to warm, given the amount of greenhouse gases emitted into the air. There is another half degree warming, or maybe, even 0.8 to 1 centigrade degree warming happening at present, even if we did not add even one molecule of greenhouse gases to the atmosphere over the next 50 years. This is because the oceans are still catching up with the warming implicit in

No matter what we do, the climate has already changed, and will continue to change simply by whats called Thermal Inertia.

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Jeffrey Sachs with Rajat Gupta, Chairman of Governing Board, ISB, and M Rammohan Rao, Dean, ISB

We need strategies of mitigation and strategies of adaptation. The challenge is to reduce the greenhouse gas emission in a way that does not stop economic development.

higher greenhouse gas concentrations. India does face a problem. Indias per capita emission is the sixth, or the last of what they are in the rich countries. India is so big and its growth is so fast that there is no solution to this global problem without India mitigating its emissions compared to a businesss usual course quite signicantly. In other words, certainly an emission per unit of GNP will have to be far lower than they are right now. The emissions will have to grow much less rapidly than GNP growth. We need strategies of mitigation and strategies of adaptation. The challenge is to reduce the greenhouse gas emission in a way that does not stop economic development. One has to gure out a way to reduce the greenhouse gas emissions at a low cost, consistent with India still achieving doubledigit growth rates over the next 30 years. This, I think, should be this countrys goal, and is an achievable goal. There are two big challenges to the goal technological development and technological adoption. Technological development is a public-private partnership problem. It is never just the problem of

private sector or the public sector alone. The nature of innovation entails public good, and needs public support as well as private motivation. It is certainly true for low emission technologies. We need public-private partnerships to get them done. The adoption challenge is setting an economic incentive framework requiring businesses and households to adopt more expensive and low emission technologies in the future. Alternative technologies are not more expensive than the standard technologies. The rich world would help the poor countries to pay part of the price of adopting them so that nothing is crippled in terms of the equitable, political, and social requirement of the living space for rapid development of countries like India. I believe that the solution for this is a whole range of technologies. We need to plug in hybrid vehicles, alternative energy resources and to some extent nuclear and solar rather than bio-fuels, simply because of the land issue. We also need to ensure safe, clean fossil fuel use by capturing and sequestering the carbon dioxide that comes from the combustion of fossil fuels. Carbon capture and sequestration technology is the

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I have undoubted condence in this country. Seeing what economic reform and business leadership together can do, is inspiring for the world. I believe that India is going to solve all the problems.

idea of capturing carbon dioxide produced at a power plant, putting it into a pipeline, deep underground. What needs to be done is to demonstrate the feasibility of this carbon capture and sequestration technology, not as a magic bullet, but as a vital component of a broader portfolio. And then, create a set of economic incentives both regulatory and taxed so that new power plants are compelled in

essence to adopt this technology over time. I have undoubted condence in this country. Seeing what economic reform and business leadership together can do, is inspiring for the world. I believe that India is going to solve all the problems I discussed, and is also going to be a role model for places on earth, like Africa, which are the hardest of all the sustainable development challenges on the planet.

A cross-section of the huge gathering at the ISB during Jeffrey Sachs address


Beyond Micronance,
Towards M-nance

Even as its most ardent advocates assure, Micronance is really no panacea. Moving ahead, with easy access to a more reliable, exible and cost-effective mobile technology, M-Finance shows possibilities to alter the nature of banking relationships. It has the promise to take micronance beyond the bounds of villages and neighbourhoods, and create banking services that move with customers. The potential for these applications is ample, as is the demand, say Shamika Ravi and Mudit Kapoor, Assistant Professors of Economics and Public Policy at the ISB, and Jonathan Morduch, Professor of Public Policy and Economics at the Robert F. Wagner Graduate School of Public Service at New York University.

Catch Word Mobile Banking It took years to get a new telephone line installed, until recently. In 1990, for every 1000 people, there were just 10 telephone lines in the Philippines, 7 in Kenya, and 6 in India compared with 441 in the UK or 545 in the US. For decades, public sector telephone companies in developing economies seldom had incentives or budgets to expand land line networks, and the private sector has had even less motivation to serve the costly-to-reach. The advent of mobile telephones changed the equation. Mobile technologies allowed countries to leapfrog over existing technologies. In January, this year alone, Indian companies added 7 million new subscribers. The spread of mobile technology involves, in part, an expansion of human interaction, changing the nature of interaction as well as its level. The mobile element has undoubtedly made communication more exible, reliable, and cheap. Logically, thoughts turned to whether mobile telephones could have explicit economic applications. Muhammad Yunus pitched his plan to sell mobile telephones to telephone-ladies in rural Bangladesh as a way to multiply the reach of a single phone. Today, nearly half of Bangladeshs villages have mobile access via a telephonelady and over a quarter million phones have been sold under the programme. In this vision, access to phone improved

price information, competitive position and earning capacity of the villagers, which in turn, has made access to loans more powerful. A Vodafone study, similarly noted that 62 percent of small businesses in South Africa and 59 percent in Egypt, increased their prots as a result of mobile phones, in spite of increased call costs. Other players have moved further in coupling telephones and banking. Mobile telephones have been imagined as devices to complete banking transactions directly. M-Pesa in Kenya, G-Cash and SMART Money in the Philippines and Suvidha/ BEAM in India are some examples of banking innovation. It is easy to see the appeal as many of the unbanked are poor, and mobile technology offers the possibility of both lling nancial gaps and improving the economic lives of the customers. The core of businesses like M-Pesa rests with facilitating nancial transactions via mobile telephones. In the most common application, micronance customers can pay loan installments via telephone by entering a code that transfers funds from a personal account to the banks account. Transactions can also ow between customers directly, as long as the two parties are in the M-Pesa network. These transactions are facilitated by mobile phone agents in commercial areas. Banking via mobile phone thus offers features of automated teller machines (ATMs), internet kiosks and pointof-service devices like debit cards technologies that collectively represent a

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M-Finance has the potential to take micronance beyond the bounds of villages and neighbourhoods and create banking services that move with customers.
Shamika Ravi, Assistant Professor of Economics and Public Policy, ISB

new wave of devices to bank low-income households. The M-Finance appeal rests on two possibilities. First, it allows banks to do their existing business more costeffectively. The second, and more interesting possibility, is that mobile phones and related technologies alter the nature of banking relationships themselves. The Human Touch Robert Annibale, Head of Citigroups Micronance Group, notes that there are two populations in the world who routinely meet with their bankers the very rich and the very poor. The very rich are served by private bankers and the very poor have micronance. The typical mode of micronance has been highly handson and sustains on a high level of touch. Interactions are face-to-face, and customers who come up short on their required payments must be dealt with directly and immediately. Loan ofcers spend time hearing out problem cases and resolving disputes. In reality, the loan ofcer also plays the roles of social worker, book-keeper, mediator, detective, and coach. On the other hand, banking by mobile telephone, or leaning heavily on related technologies like ATMs and internet kiosks, is low-touch. A big question for technology enthusiasts is to gauge how much is lost in translation, though it is proven that gains in service quality due to the technology outweigh losses. Or, there may be hybrids in which traditional banking models are

combined with M-Finance. Re-imagining Micronance Re-imagining micronance means to draw from the narrative of micro-credit for micro enterprise, as proposed by Yunus. It basically implies small loans to support small businesses of poor entrepreneurs. The rst step in assessing possibilities for M-Finance is to open that box. Evidence shows that micronance customers use loans to meet widely-ranging needs. The list includes paying for health emergencies, school fees, and putting food on the table. M-Finance holds the potential to create nancial products that better t with these needs, as well as to create more exible products to nance small businesses. With M-Finance, for example, it would become easier for the micro bank to extend emergency loans to its clients. The leading micronance models have been highly atomised: dominated at rst by non-governmental organisations, which seeded village-based or neighbourhood based organisations. Even as for-prot organisations have edged in, the community focus remains. If a villager wants a loan, most often they must get it from their village organisation. If they want to save, they must also do it locally. Loan ofcers come to the villages at set times and carry out transactions locally. M-Finance can increase the reach of micro banks. While international remittances get increasing attention, within-country remittances also

The shift to M-Finance facilitates easy access to hard information especially on the history and timing of credit and saving transactions.

Mudit Kapoor, Assistant Professor of Economics and Public Policy, ISB September 2007 | ISB

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Cost saving is one of the big promises of M-Finance. Developing workable business models have been challenging for micro banks and the future of MFinance will rise or fall with its cost implications.

The power of mobile transforming banking

play important roles in poverty reduction. The Coalition for the Urban Poor (CUP) in Bangladesh, for example, estimates that migrant workers in Dhaka send approximately 60 percent of their income to relatives. M-Finance can ll the gap by providing cost-effective, secure and fast remittance services, as a matter of course. Group Learning Vs Individual Operation Opening these boxes will be easier by shifting away from the practice of group lending in micronance. The shift away from groups stems from the stresses attached to group guarantees, coupled with the fact that group meetings consume time. In regions with low population density, groups may also be costly to attend. A micronance initiative in China eventually closed as customers dropped out due to the high costs of group meetings. Grameen Bank has sworn off the idea of holding customers liable for the troubles of fellow group members. So has ASA, a large competitor in Bangladesh. BancoSol now has almost no loans under group guarantees. CARD in the Philippines is now experimenting with dropping group guarantees. The trend is toward individual loans with individual responsibility for repayment, and this opens possibilities for M-Finance, given its personalised, individualised mode. Group meetings, of course, have advantages. The meetings can be social occasions, and the groups can offer economic, emotional, and strategic support to customers. The meetings may also be venues for training and for marketing new products. The public aspect of loan repayments may also help ensure timely repayments. The local elements and the

Jonathan Morduch, Professor of Public Policy and Economics, Robert F Wagner Graduate School of Public Service, New York University 36 | ISB

use of groups also allow loan ofcers to efciently acquire soft information on customers: Who is energetic? Who is sensitive to peer pressure? Who has the entrepreneurial edge, etc. The shift to M-Finance facilitates easy access to hard information especially on the history and timing of credit and saving transactions but at the expense of these kinds of soft information. A hard information, once fed into creditscoring models and the like, can adequately substitute for the soft information. One asks: is it possible to create structures in which M-Finance is integrated with traditional modes of micro banking, so that important aspects of touch and soft information are retained? The regular repayment schedules favoured by most micro banks have advantages, but they add to costs. Most micro banks insist on frequent meetings in order to closely monitor clients, provide necessary training and to pick up early warning signs of trouble. But, to the extent it is needed, the monitoring is most helpful in the early phases of relationships. One possibility is to phase in M-Finance gradually, such that successful clients graduate to individualised mobile phonebased operations. An additional prospect for M-Finance is that the telephone can be used to remind customers of upcoming deadlines an application that does not rely on the other parts of the banking infrastructure. Customers can be aided in saving through friendly reminders, for example. Or they can be advised of upcoming dates for loan repayments, payment of insurance premiums, utility bills, etc. In a pilot study in the Philippines, a simple reminder to save is making a positive impact on accumulated

insight | September 2007

savings. This is an instance where mobile telephone technology replaces the human touch and maybe, is even superior to it. Expanding Access Cost saving is one of the big promises of M-Finance. Developing workable business models have been challenging for micro banks and the future of M-Finance will rise or fall with its cost implications. Micro banks have found that the costs of high-touch operations for traditional micro banks have been hard to spread over small-sized loans. Interest rates thus have often been high (often 30 percent per year and higher), especially for institutions serving the poorest customers. A hope with M-Finance is to speed up routine processes so that eld staff can focus more heavily on problem areas and new opportunities. It also aims to cut the costs of dealing in

small quantities and help expand operations in remote or sparsely populated rural areas. The big question here is whether the automation inherent in M-Finance can eventually bring a compensating drop in interest rates. Micronance proves helpful for customers, even if it is not the panacea that its most ardent advocates promise. M-Finance has the potential to take micronance beyond the bounds of villages and neighbourhoods and create banking services that move with customers. And it can be a platform for developing new products like emergency loans and exible savings accounts. The potential for these applications is ample, as is the demand. MFinance, like micronance, will only succeed, if it rests on a deep realistic understanding of the nancial needs, constraints, and opportunities of poor households.

The M-Finance appeal rests on two possibilities. First, it allows banks to do their existing business more cost-effectively. The second, and more interesting possibility, is that mobile phones and related technologies alter the nature of banking relationships themselves.

Learning in a group September 2007 | ISB

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Towards Multisourcing
Moving beyond traditional single vendors, large corporations are increasingly looking to outsource their IT needs with a multi-vendor approach. CITNE, at the ISB, organised an industry-academia meet to examine this shift from monolithic sourcing to multisourcing the industry experience, the operational concerns, the relationship factor, challenges met, and best practices followed.


uring an Industry-Academia Panel Discussion on Multisourcing Towards Next Generation Outsourcing, organised at the ISB, by the Centre for Information Technology and the Networked Economy (CITNE), two interesting topics were dealt with, indepth, by an eminent panel the motivations and governance structures of multisourcing relationship, and the vendor side challenges while simultaneously competing and cooperating.

The panellists, both from the client and vendor side, were prominently from the banking and telecom domains, and focussed on best practices, while identifying current challenges of multisourcing. Meera Sanyal, Head of Asia Services, ABN AMRO, Siva Ganesan, Global Relationship Director, TCS, Mritunjay Singh, Divisional Manager, Infosys, Abhay Kelkar, Senior Executive, Accenture, Satish HC, Associate Vice President and Divisional Manager, Infosys, V Shankar, EVP Prime Sourcing, iFlex Solutions and Pari Natarajan, CEO, Zinnov, were some of the renowned industry faces. The panel was moderated by Professor Ravi Bapna, Executive Director, CITNE, and Professor Anitesh Barua, University of Texas at Austin. Professor Bapna, in his inaugural address, outlined CITNEs research involvement with various facets of multisourcing. CITNE is developing a research agenda around issues relating to multisourcing. Our initial interest is in exploring the antecedents of successful

outcome, when a client engages with multiple IT/ITES partners to achieve their business needs, he said. Sanyal presented a multisourcing vendor model, which covered the entire gamut of software, hardware, infrastructure management, telecom services, etc. She also explained about the role of the guardian vendor and relationship management, both crucial to multisourcing. All multisourcing is a very simple principle of competition. If you have more banks or more providers you often get a better deal, not just better in terms of cost but also service. There is one message you can take away from all of this apply common sense; if it works for you at the individual level, it will work at the corporate level too, she said. Ganesan laid stress on the need for speed, exibility, efciency and agility to manage challenges in tandem, with other players. He said that there was a need for strong global and local governance for effective multisourcing. There are several verticals in the way business is done. I think when it comes to software services, per se, the uidity of the service, the intangibility of the product, and the customer experience from a business side, imposes a lot of challenges on how these various suppliers converge together for minimal disruption from end business perspective. What that means is certainly a lot of communication, he explained. The discussions endeavoured to put across a new mindset and frameworks for an integrated and holistic sourcing strategy across all services and the end result was a cross-pollination of current challenges and best practices.

Ravi Bapna, Executive Director, CITNE, interacting with the panellists during Multisourcing Conference 38 | ISB

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Pioneering Executive
Coaching In India
Executive Coaching is not just managerial frill and fancy. Today, it is widely accepted as a necessary learning, needed to augment businesses. It has made its presence felt in India too top corporate honchos now acknowledge the invigorating role that a coach plays. The Centre for Executive Education (CEE,) at the ISB, recently hosted accomplished and most soughtafter Executive Coach, Marshall Goldsmith, to interact with a spectrum of participants during the Executive Coaching Programme.

hat is common to GEs Jack Welch, IBMs Sam Palmisanio, and e-Bays Meg Whitman? They all had to seek the expertise of an executive coach in order to strengthen their vision, performance and capacities. A Chicago Tribune article once quoted, Who exactly seeks coaches Winners who want even more out of life. Executive coaching has become more mainstream today. It is accepted as part of standard leadership development for elite executives and talented up-comers. It is a one-to-one collaboration between a certied coach and an executive, who wants to generate positive personal changes, inculcate greater adaptability, better his leadership skills, access new perspectives, and above all, reach maximum potential. Executives should seek coaching when they feel that a change in behaviour either for themselves or their team members can make a signicant difference in the long-term success of the organisation, says Marshall Goldsmith, coach to top executives in many of the worlds leading companies. However, there are not enough professionals who can don the garb of a CEO coach. It was this lacuna which the CEE, at the ISB, wanted to address. An exclusive Executive Coaching Programme for senior professionals, who want to be CEO Coaches, was held at the ISB, between August 20 and 22. It is the rst time that such a Programme is being

conducted in India. Said Deepak Chandra, Assistant Dean, CEE, at the ISB, It was during a Leadership Skill Programme, conducted by the CEE, when we received a feedback about the felt need in the industry for a cadre of executive coaches. It was then we conceived this pioneering programme to help people, within or outside an organisation, to become good coaches. Speaking about the relevance of such a programme in the Indian context, Chandra said, As a concept, Executive Coaching is still new in India. In our past, the Gurukul system was an example of a one-to-one coach for individual students. It was built on a deeper inter-personal relationship. In todays world, the concept of hiring a personal guide and coach is not often possible. However, the growing complexity of businesses in this era of globalisation, has prompted senior management to counsel, seek, and simply talk to a person who can be an amalgam of a sounding board, a critic, a seer, a friend, etc. Usually CEO coaching focusses on three aspects strategy, organisational change, and behavioural coaching. The Programme at the ISB concentrated only on behavioural change. The Programme aimed towards improvement of positive and measurable behaviour of the participants, by identifying specic behaviours to improve upon and choosing concrete methods of change. Coached by

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Marshall Goldsmith teaching the Executive Coach aspirants at the ISB

none other than Goldsmith himself, the Programme rested on Goldsmiths favourite line The same beliefs that lead to our success can make it very difcult for us to change behaviour, and as difcult as it is to change our own behaviour, it is even more difcult to change others perception of our behaviour. Goldsmith has been ranked by The Wall Street Journal as one of the top 10 executive educators. He is one of the foremost authorities on how to help leaders achieve positive, measurable changes in their own behaviour and in the behaviour of their people and teams. The Pedagogy Based on an empirically-tested method of executive coaching, Goldsmith devised a straightforward and highly effective process that has consistently delivered successful results across a large population of leaders in a broad spectrum of professions. Goldsmith, during the programme, explained why leaders, who are becoming increasingly successful, can also face increased difcultly when they need to change. He discussed how the behaviour that led to their present level of success might not be the same behaviour that is needed to reach a higher level of success. Participants got to practice feed forward a positive, simple and focussed tool for development. Next, he shared the results of his research on leadership development that involved over 86,000 participants from eight

major corporations. He also communicated his proven pay only for results coaching process and taught participants how to use new applications of coaching such as peer coaching that have been proven to create better leaders. Participants also took part in various team-building exercises and learnt about team building without time wasting. Said participant Vicki Nicholson, Managing Director, CW Solution Private Ltd, and an Executive Coach herself, What stood out was the simplicity of Marshalls approach. I got to learn how easy it is to apply a process like this and make a difference in terms of peoples behaviour. Prasheel Pardhe, Assistant VP HR, at Bennett and Coleman, , vouched, Marshall gave us tips about a positive way of looking at life managing it for oneself and for others. The Programme saw a host of important portfolio holders from companies such as Raymond Ltd., Aditya Birla Management Corporation Ltd., Godrej India Ltd., HDFC Bank, etc. Goldsmith rated the group as more focussed on education and having more respect for the educator. He however detected the groups shortcoming of over -analysing and over - complicating simple matters. As a parting shot, Goldsmith personally signed copies of his new best-seller on leadership development, What Got You Here Wont Get You There, for each of the participant. Time to get there!

Executives should seek coaching when they feel that a change in behaviour either for themselves or their team members can make a signicant difference in the long-term success of the organisation.

September 2007 | ISB

insight | 41




The Great Turnaround



Of Indian Railways
Sudhir Kumar, IAS, Ofcer on Special Duty to the Minister for Railways, who is credited to have turned around a goliath from a debtridden enterprise to a dynamic prot-making unit, explains the synergy between social obligations and commercial objectives of the worlds largest utility employer the Indian Railways.

From Red to Black The story of Indian Railways is one where social obligations of a public utility have been integrated into the commercial objectives of a business organisation. We have formulated an equation, which is populist and at the same time prudent, pragmatic, viable, and protable. Our solution is a win for Railways, double win for customers, and a triple win for the economy. In 2001, it was said that the Railways would declare a bankruptcy of $15 billion (Rs.61,000 crores) and that we were in a terminal debt trap. But, last year we made a cash prot of $5 billion, and a net prot of $4 billion. The operating ratio was recorded as 78 percent the best operating ratio anywhere in the world, surpassing the operating ratio of the exclusive railroads of the USA. Faster, Heavier, Longer Trains If I have to summarise this turnaround in three words, it is: faster, heavier and longer trains. Each of these words is worth $2 billion so far, and it can be more in years to come. We have a total holding of 4,000 freight trains. If we turn them around every seven days, we can load 550 trains per day. If it is turned around every ve days with the same stock we can load 800 trains per day. To say that the additional 250 trains is worth $2 billion is a gross understatement. Each train is worth Rs.600 million. It means a topline growth of Rs.150

billion. One can then imagine the bottom line growth. In an organisation where the marginal cost is substantially lower than the average cost, the incremental cost of the incremental train is next to nothing. This is the meaning of faster. Now, what is heavier? If we load one additional ton in every wagon, it means an incremental earning of Rs. 6 billion (Rs. 600 crores). We decided to load every wagon with an additional 10 tons, which is Rs. 60 billion (Rs.6000 crores). Now let me explain longer. There is a perception that the Railways is bleeding because of low passenger fares, huge manpower base, and the interference of politicians. Keeping all factors constant including low passenger fares we decided to manipulate the length of the train. We increased the average length of passenger trains from 14 coaches to 16 coaches. We discovered that we achieve break-even only with a 20-coach train, and earn prots when the length increases to 24 coaches. By increasing the length of the train from 14 to 24 coaches, we transformed a lossmaking passenger business into a protspinning business. We then concentrated on the layout of the coach. While we operate on a broad gauge in India, the rest of the world operates on standard gauge, which is 20 percent less than ours. Yet, our seating and berth capacity are 40 percent lower than the trains in Germany. This is because we

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insight | September 2007

Sudhir Kumar, IAS, Ofcer on Special Duty to the Minister for Railways, addressing the ISB students

do not optimise the layout of the coaches. Such an optimisation would bring down the unit cost from 58 paise to 34 paise a good reduction of around 40 to 42 percent. About Footfalls and Eyeballs In Mumbai, about seven million passengers board the train everyday. This can be translated into 14 million eyeballs, 14 million footfalls, and seven million mouths. We decided to leverage the eyeballs to multiply advertisement and publicity earnings. Our next strategy was to leverage the footfalls and multiply earnings from services like parking, cyber caf, telephone booth, ATM, etc. The ambience of the station also improved. We went on to leverage these mouths to earn from catering. You now nd services like IBM, Airtel, etc operating on the platforms. We transformed a loss-making business into a prot-making one by simply leveraging eyeballs and footfalls. Our earnings have galloped by over 10 times in the last three years. In a turnaround scenario, one must have an acute perception of business environment, apart from an understanding of the socio-political context. The co-structures of business like variability, sensitivity, the demand side, and the elasticity of demand to price or non-price factor, should be properly understood. Consider this: The unit cost for a passenger train, per kilometre, is Rs.500. For a goods train, the cost is Rs.694. This implies that the unit

cost per train kilometre of a goods train is 40 percent higher than that of a passenger train. In a typical passenger train, the gross load is about 800 to1,000 tons. The gross load of goods train is 5,000 tons ve times more than a passenger train. But, the unit cost has escalated by 40 percent. The nding of this analysis is that cost is sensitive to distance, but not to gross load. More train kilometres may mean more losses, but more passengers within the same train kilometres imply more money. Lets take another example. Air-conditioned rst class fare is 30 times higher than the suburban fare. Sometimes, we think that 30 times higher fare means 30 times higher yield per coach kilometre or train kilometre. But, in reality, 30 times higher fare does not yield two times higher earnings. Thus, it is not tariff that matters, but the yield per coach kilometre and the yield per train kilometre that can turn the Railways around. Leverage, Synergise, Optimise Leveraging, synergising, and optimising these are the three words which will summarise the entire strategy for operationalising those goals of faster, heavier, and longer trains. When we mean resource leveraging, the resource covers all assets the human assets as well as the physical assets whether it is rolling stock, signal, tracks or bridges. The key element of resource leveraging is

If I have to summarise this turnaround in three words, it is: faster, heavier and longer trains.

September 2007 | ISB

insight | 43





Our vision for the Indian Railways is to invest more amounts over the next ve years, than what we invested over the last 154 years.


Leveraging, synergising, and optimising these are the three words which will summarise the entire strategy.
44 | ISB

getting more bang with the same buck. You have to get more out of less and multiply scarce resources in the short-run. When we took charge at the Rail Bhavan, we had a reserve cash of Rs.3 billion (Rs.300 crores). But, the real challenge of leveraging was to multiply it into Rs. 200 billion (Rs.20,000 crores). We identied that the length of a typical freight train which is 686 metres is the biggest multiplier of all investments. Railways dont accept goods that are 20 miles long or a wagon load, but accepts nothing less than a full train load. We made the terminals 686 metres long, because we have good sheds, with lengths of about 200, 300, and 400 metres. When the train arrived on the outskirts, the goods were placed in the train not in a single installment but in two to four installments. This was because the length of the platform was only 300 metres, and every installment took 24 hours. We decided to extend the length of the platform in the rst phase, and invested Rs. 2 billion (Rs.200 crores) on the extension of land. We also decided to increase the length of the goods sheds that handled 30 trains per month. So, we had to prioritise according to the availability of the resources. For us, this was a low cost investment for a short gestation (about three to four months), with rapid payback. The day the length was extended, the turnaround time of wagons and trains had a

benecial impact and high returns, yielding Rs. 3 billion (Rs.300 crores) and Rs. 100 billion (Rs.10,000 crores) respectively. Rail Roads to Future Our vision for the Indian Railways is to invest more amounts over the next ve years, than what we invested over the last 154 years (1853-2007). It is our dream to overtake China in Railways. China invested about $10 billion annually in the 90s, while, we invested $2 billion annually, which was ve times lower. This year, we will invest about $10 billion, and our target for the 11th ve-year plan is to invest, on an average, $12 billion per annum. With annual surplus, we plan to generate an internal surplus of Rs.900 billion (Rs.90,000 crores). We can leverage this amount to easily raise Rs.1.8 trillion (Rs.180,000 crores). When Railways annual surplus was Rs.2 billion (Rs.200 crores), we were borrowing Rs.40 billion (Rs.4000 crores). Now, our annual cash surplus is Rs.200 billion (Rs.20,000 crores), but we are borrowing Rs.30.5 billion (Rs.3,500 crores). If you observe the contrast, the potential to borrow is far more, and therefore can be leveraged. To sum up, the central objectives of this expansion are: reduce unit cost of appreciation, double throughput, increase the trains speed, and provide world-class facility to customers.

insight | September 2007

Often mistaken for a student, youthful and vigorous, Amit Bubna, Assistant Professor of Economics and Finance at the ISB, is energy personied. Inside the classroom, he is mentor, ally and an equal to the excitement he generates.

tudents rate him approachable, articulate and full of verve. They get a taste of him on their very rst day at the ISB, as he introduces the students to the nuances of micro economics. Economics is a course in tools and can be very abstract. I am trying innovative ways to make these abstractions seem more real-world, says Professor Bubna, a PhD holder in Economics from the Stanford University. Inside the classroom, he decides to introduce an auction game, to help clarify the key insights of a market and the role of prices. He divides the class into bidders and sellers and simulates a trading pit. The students experience the existence of a real market, going beyond theory. They notice rst hand that a lot of transactions take place at the same price, much like in a stock market. This simple game helps me to introduce the concept of taxation a few classes later, explains the Professor. Professor Bubna shares his other attempts at imparting the extra edge to classroom teaching. The Class Economist Contest is one of them. It is an open contest where groups of students discuss topics online, learning how to apply even basic economics to real world issues. For instance, he initiated the topic on why banks give students study loans? This is a voluntary contest. No points allotted. I constantly endeavour to generate more class

Amit Bubna, Assistant Professor of Economics and Finance, ISB

participation, moving beyond points and grades, he says. Prior to joining as faculty at the ISB in 2004, Professor Bubna served as a Senior Managing Economist with LECG, LLC, a leading economic consulting rm based in California. His return to academia and to teaching was a natural move. The challenge on the teaching front at the ISB, he feels, is in designing the course and determining the depth and the breadth of what to teach. However, the task of a teacher, he feels, does not end with the course design. Inside the classroom, what keeps me ticking is the fact that I can be questioned. I keep the discourse open to queries all the time. The apprehension, that I can be challenged by any of the 400 plus students at any time, gives me an adrenaline rush and helps me perform, he says. A visiting Professor at the University of California at Berkeley and more recently at the Wharton School,

he confesses that each day he takes to the classroom, he still gets those knots in his stomach. I think thats a sign of a good teacher, he laughs at his own trepidations. How does the mentor, sitting within his academic fort, keep in touch with the real world of business and nance? Constantly being in touch with news and research, retorts Professor Bubna. This also helps him maintain an archive of articles of importance and interest to his students. Even simple concepts in economics, such as elasticity, make more sense to students when supplemented with a related article on a real world issue. Professor Bubnas research interest covers a wide spectrum ranging from applied microeconomic theory with applications to credit markets and venture capital, to empirical research on Indian capital markets. He has written research papers on venture capital syndication, micronance, role of kin in credit markets, among others. To some extent, there is a schism between the theoretical research I do as an academic, and how much of that I can actually bring into my classroom teaching, especially in a purely tools-based subject like micro economics, admits Bubna. When he does teach a course in Corporate Finance, he hopes he can assimilate his research ndings on Initial Public Offerings (IPOs) in India into his lectures. The future reads full for the young Professor. Research and more research, teaching and more teaching, he sums up. I am an opportunistic researcher and nd current topics fascinating. At the moment it is all aspects of the capital market. That is the Professors next shot for some time now.
September 2007 | ISB

insight | 45

Class Notes With

Professor Amit Bubna



The Stage for


Corporate Theatre
The softer side of business inuencing, communication, team management, delegating, appraising, presenting, and motivating is now recognised as key to making businesses more protable and helping future leaders walk through the corporate corridors with greater condence.
onsider this roleplay situation given to a group of management students, during a workshop on Dramatic Skills for Business, conducted by the ISB Theatre Club: Enact a typical job interview scene of a group of lm producers looking for an action hero. When the interviewees broke out into an impromptu dance steps, other participants revelled in that easy and enjoyable moment. Theatre has always been a key component of Leadership Development Programmes at top B-schools, globally. Theatre techniques help facilitate leadership enhancement and provide a simulated learning experience to the students. The Theatre workshop at the ISB too, aimed to develop certain key soft-skills, essential for leadership development. Our primary intention, through this workshop, was to expose the ISB audience to the power of theatre and its direct application to the real corporate world. This is Corporate Theatre, as we call it, said Achint Setia, President, Theatre Club. The softer side of business inuencing, communication, team management, delegating, appraising, presenting, and motivating is now recognised as key to making businesses more protable and helping future leaders walk through the corporate corridors with greater condence. Increasingly, progressive companies are looking for multi-culturalism and diversity as key characteristic of senior managers. Managers who have a host of soft competencies ability to communicate with clarity, listen and respond with empathy, exible and adaptable to the changing needs of an organisation, collaborative with others, and those who can inuence decisions through lateral and more creative thinking are hot catches.

Students learning the nuances of soft skills through theatrics 46 | ISB

Theatre is a popular and time-tested approach to teach future and current managers the softer skills of business. Theatre works around inhibitions and ingrains the art of leading people, negotiating skills, communication styles, team-motivating skills, etc. Theatre also replenishes what a leader-in-making needs to add on to his persona. A leader needs, for sure, more inter-personal skills in his repertoire and more control over his action. Theatre can help interweave the required need for control, articulate, negotiate, overcome conict and overall, bear the necessary charisma to be in authority. At the interactive two-hour workshop, future leaders at the ISB were introduced to various nuances of standard theatrical techniques, such as voice modulation, facial expression, body language, role plays, etc. The facilitators discussed the link between theatre and the corporate world and displayed to the audience, the power of emoting. The next step was audience involvement and it focussed on three specic skills Effective Voice (including breath control, voice clarity, pronunciation and tone modulation), Facial Expressions (things such as taking command, looking condent and composed in non-comfortable situations) and last, Body Language (use of postures and gestures in sending the right signals). Student participant, Abhishek Bhide, noted, The workshop helped us in understanding the role of voice, expressions and body language in effective corporate communication. Enthusiasts at the Theatre Club want to take their histrionic itch a little ahead. More such workshops, stage and radio plays, and then we also see the feasibility of integrating theatre into the management curriculum here, discloses Setia.

insight | September 2007

September 2007 | ISB

insight | 47


Creating A Barista Of Cinemas

Producer, actor, director, Aditya Bhattacharya, in a tte--tte with students from the Class of 2008, Ralston Sequeira and Vinay Rajpal Raj, shares his perspectives on Bollywood feudalism, piracy, Italian lm making, and the need for youth-based niche markets in cinema.

ISB Insight: You have been in the lm business for a long time now. The management of lm business is very different today. How has it evolved since? Aditya Bhattacharya: I dont think management of the lm business has evolved at all. It is just that, at the moment, there are more people into the business, getting higher salaries and learning on the job. This is simply because most lm specic professionals, say in the administration side, line producers, production managers, etc., are not people out of an institute like the ISB. They dont usually speak English, but they are very good at what they do. Right now, we are in an awkward space, where we are still teething. The hardcore work is being done by the same people who did it eight years ago. We just have some more people who come in fancy cars, sit around, and make marketing projections, which are a lot of hogwash. A lot of artists have beneted from piracy and have actually thanked it. What is your take? That is actually a very myopic way of looking at things. I believe in the unique contribution of a lm-maker towards the lasting value of the lm in the market place. I believe thereby that a piece of the action needs to keep going back to the lm-maker even after a hundred years or so. That cannot happen if piracy prevails. In piracy, the pirate makes the money and thats it. If we want to replicate or get anywhere close to combat Hollywood, we have to absolutely maximise revenues from every

single viewer around the world. Right now, I would imagine that we do not get to see about 60 percent of our global revenue. Thats a serious thing. Does the whole economics of the lm really depend upon the star? Depends on the kind of lm. If it is starbased lm, then yes. I think it is an unhealthy and temporary thing. All the stars have raised their price. They know that sooner or later things will change so hard and so fast that they better get what they can now. In the past when you saw a Basu Chatterjee lm, nobody asked who is in it. He had his core audience. He made his lm within that framework. Today, if you have a Mani Ratnam lm, nobody asks who is in the movie. It does not actually matter. If he has big stars, yes, but even if he has one little girl and an old man, he still has his bible. It is terrifying for a lmmaker to be stuck in a situation where his casting has already been pre-decided. Yet, Shah Rukh is still the Window of that world he is the brand, he can still ll up a stadium bigger and better than anybody else can. We have to continue to live with the fact that we are going to have some superstars. You made an Italian lm, Senso Unico. How different are the economics of movie-making in Italy? It is much more protected. All European economies take benet of this idea of ghting off American global power. So, they all have subsidies. All Italian and European

Aditya Bhattacharya, Producer, Director, Actor and Writer. 48 | ISB

insight | September 2007

Aditya Bhattacharya in an interview with the ISB students, Vinay Rajpal and Ralston.

television companies are told that they have a quota. This protects them but has harmed the industry. If somebody gave you a subsidy to make shoes, you would slowly not care about how good the shoes were, because you are not dealing with the real market. If you notice, except for the French who have somehow continued to make exportable lms, the others have actually suffered. Their cost is about 35 percent more than Indian lms of the same scale. This is interesting because somehow in theatrical runs, they manage to earn back from their successful lms up to 10-12 million Euros from 55 million people. However, they make very few movies, possibly 30-50 movies yearly. It is not a thriving industry. They actually look at India as a great hope. We can build twice the number of multiplexes and still be able to ll them. That is the statistical power that India has. The sad thing is that we dont make movies that the world wants to watch. How come we make 1,000 movies a year, and the Mexican lms have more entry into America and the Oscars? I think our being a feudal industry is what has made us suffer. What would you say are the entry points for management students to get into the lm business? I would say pick up areas which have not been dealt with by the traditional lm business. For example, how would one do a theatrical release of a Hindi lm in North America? We need innovative ways of maximising demand, merchandise, tieups, etc., with a science to it. Minimising

loss in terms of money, that keeps falling through the holes every time you are doing sales is another area. Then, one can work on how to make a global rights break up for a smaller lm. Because if you have a smaller lm, the traditional distributor is not going to release it theatrically, but if you have the rights to it; you can go ahead. There are lots of opportunities for people who are looking from outside. For example, how do you service, how do you create urban youth-based niche markets etc. Is there a way of going into, or buying or hiring old cinemas in certain areas and creating something like a Barista of cinemas a cool place to hang out, and which plays a certain kind of movies. Obviously, lm makers cannot think of all these. Actor, producer, writer, director you have been all of these. Which role do you enjoy the most? Filmmaking. Its a bit like, if you really like fast bikes, it is not enough to know how to ride it. You also have to know a little bit about how it works. It helps you to ride the bike better. I have been a producer by default because I have had to package and put together my lms. I would love a time when I can have somebody else to do that. Its a very privileged and expensive business. I believe that if you are not responsible with the money, at a certain point, it will dry up. I am glad that I did other things. I am looking forward to applying that knowledge to produce other peoples lms. I know how the bike works.

I dont think management of the lm business has evolved at all. It is just that, at the moment, there are more people into the business, getting higher salaries and learning on the job.

September 2007 | ISB

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ISB Happenings
A volunteer donating blood during a blood donation camp at the ISB

ISB service providers felicitated during Sahayak Divas

JJ Irani, Director, Tata Sons, at the ISB

Celebrating Sahayak Divas On Sahayak Divas, close to two hundred service providers of the ISB community were felicitated for their round-the-year effort in maintaining world class facilities at the ISB. The Sahayaks help maintain an impeccable campus, comparable with the best in the world. In a small honorary function held at the ISB, prizes of appreciation were given away to all the Sahayaks. Google Team Interacts with Students The Global University Relations team from Google, headed by Director Yvonne Agyei, visited the ISB to interact with the student community. Some of the proposed areas of future interactions like speaker series, workshops to explore on what it takes to execute product development in the technology sector etc, were discussed.

JJ Irani Visits Campus J J Irani, Director, Tata Sons Limited, was invited as the guest speaker for the Accelerated Management Programme, designed by the Centre for Executive Education (CEE) at the ISB. His take on ISB was simply They are fortunate, who come through these quarters. The ISB, he said, was definitely one of the best amongst the 30 odd B-schools of reckon in the country. A Talk on Identity Conflicts Professor Hillel Levine, Founder and President of the International Centre of Conciliation (ICfC), and Poonam Barua, Director of Public Affairs Management (PAMASIA), shared a talk with the students on the issues of global conflicts and their impact on business organisations. Levine urged students to come to the next level of confidence in resolving these conflicts by using the tools they have. Do not just be managers, but be leaders and shape your environment, he said.

Blood Donation Camp Sets Record Enthusiasts of the Net Impact Club, at the ISB, organised a Blood Donation Camp on campus, where a total of 204 donors donated blood. The event registered record participation exceeding all previous statistics, during similar camps held at the ISB. Donors poured in from the student community, spouses, staff members, and faculty members.

Wharton undergrads at the ISB

Wharton Undergrads Tour ISB A group of undergraduates from The Wharton School visited the ISB, as part of the Wharton International Programme (WIP). Escorted by Amy Pollock, Director of Student Life, Wharton Undergrad Division, the students spent an educative and enriching time at the ISB. The School regularly hosts students form Wharton, Darden, Haas, Bocconi, Cox, Kenan Flagler, etc for different learning and exchange programmes

50 | ISB

insight | September 2007

Professor Vijay Mahajan, after planting a sapling at the ISB on World Environment Day.

ISB Goes Green This year ISB celebrated World Environment Day with a mass tree plantation programme. The entire ISB community joined in to do their bit to make the world a greener place. The event saw energetic faculty members, staff, students, spouses, and little children, planting saplings in hope of a healthy tomorrow. Indeed an excellent opportunity to contribute to one of the good causes the ISB strives for.
Students at the ISB falling in step with Salsa

Just Salsa!
Professor M Rammohan Rao, Dean, ISB

ISB Dean is Director GMAC Professor M Rammohan Rao, Dean, ISB, has been elected to the Board of Directors of the Graduate Management Admission Council (GMAC) for a three year term, starting from July 1, 2007. Amongst other key roles and responsibilities, the Board of Directors is expected to develop and implement strategic plans that leverage the Councils core competencies and focus on service to GMAC constituents. The Board is also responsible for developing policies which ensure effective legal, ethical, and nancial operations of the organisation.

Nowadays, the School Atrium wears a different hue, as the Salsa wave sweeps the campus. The air resounds with vibrant Latino beats, as eager Salseros students, spouses, and faculty at the ISB fall in rhythm with the Salsa magic. What started as an initiative by a couple of dance enthusiasts on campus, soon became a rage, a statement. Students admit it is a complete package of togetherness, creativity and love for dance, all which is going to last a lifetime. The sight of young leaders of tomorrow, falling in step with the tunes of Salsa, is awe-inspiring. For some, the dance is just an excuse to meet, connect, and go beyond assignments, scores, and exams. Some find it therapeutic and a few cherish a secret desire to do a stage performance one day. Salsa brings home a tip to all the future leaders and path-breakers at the ISB See Salsa with your soul, not the mind.

September 2007 | ISB

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Book Review
ritten by Laura Mazur and Louella Miles, co-partners of Writers 4 Management, UK, Conversations with Marketing Masters is a grand work that brings ideas, opinions and experiences of living legends of marketing in a book. The book has tte--ttes with twelve masters, viz. Philip Kotler, David Aaker, Jean-Claude Larreche, Regis McKenna, Don Peppers and Martha Rogers, John Quelch, Al Ries, Don Schultz, Patricia Seybold, Jack Trout and Lester Wunderman. The book is organised in 11 chapters, each of which is dedicated to a master, except Don Peppers and Martha Rogers, who share a chapter jointly. Each chapter is divided in to three parts: about the master, followed by the interview and his/her selected publications. Each interview takes us through professional journey of the master, his/her current views on marketing and nally more personal questions like what makes them tick? Conversations with Marketing Masters spells clearly the different perspectives of the masters on marketing issues. For example, few key responses by the masters on current challenges of marketing were: growing ineffectiveness of mass media (Kotler, and Aaker), achieving customer centricity (Pepper, Rogers), capturing consumer insights (Seybold, Trout, and Wunderman), developing loyal insight | September 2007 relationship with consumers (McKenna), and rising power of distribution channel (Ries). Each one of these is justied by masters through emphatic arguments and relevant business examples. A few other books like The Guru Guide to Marketing by Joseph H Boyett and Jimmie T Boyett (Wiley, 2003) and Gurus on Marketing by Sultan Kermally (Thorogood, 2003) also discuss the ideas of marketing masters, but in the words of the author(s). The former tries to classify and compare most of the masters ideas, whereas the latter brings out a few selected masters contributions to the marketing world. Here, Conversations with Marketing Masters stands out as an original description of masters views in their own words, progressing in a conversation mode. Since the book follows an interview format, it captures candid responses, which even biographies could not have come out with. In interviewing masters on contemporary marketing practices to memories of their personal life, the author maintained the spontaneous ow of conversations to make it read like a novel. The book, powered with academic and consulting experiences of masters, is a must read for academicians and marketers alike who are sure to gain not only in terms of contemporary marketing insights but also by learning what established themselves in their professional and personal life.
Conversations with Marketing Masters By Laura Mazur and Louella Miles Publishers John Wiley & Sons Ltd., 2007 Pp.: 236 Reviewed by Dhiraj Sharma, Academic Associate, ISB.

52 | ISB

Colourful glimpses of the ISB captured by the ISB Photography Club of 2008