FOREWORD

Dear Reader, Warm greetings from the Consulting Club, Faculty of Management Studies! As goes the famous saying, let change be the rule but not the ruler, current times amidst volatility and concerns over slowdown call for vigilance and action. As it challenges economies and industries globally, it also provides innumerable opportunities to accelerate growth in near future. In light of the same, The Consulting Club presents the next edition of Consilium focused on opinion of faculty, students across B-schools and professionals regarding the current scenario and its potential impact on a diversity of sectors. Looking forward to receiving your feedback and invaluable suggestions to help us make the journal better and more informative. Feel free to write to us at conclub@fms.edu. Hope you enjoy reading it.

Dr. Jagriti Gupta President, The Consulting Club, FMS Delhi

EXECUTIVE MEMBERS K. Ashok Chakravarty Prannay Vats Rohit Chaudhari Seher Contractor

ASSOCIATE MEMBERS Aastha Sharma Aditya Gupta Aravindodar Reddy Mridul Gandhi Naheed Shoogufan Nikhil Nathani Pratik Singhania

CONSILIUM

FMS DELHI

Rewiring HR Page 1

The Rising: Part 1 Page 5

Restructuring of the organised industrial sector Page 9

Gaining A Value Creation Advantage in Volatile Times Page 11

Interview with Mr. Arsh Maini Page 14

Business of climate change Page 17

Marketing in the times of recession Page 20

FDI in Retail: Risk or Value Creation Page 25

Gaining a Value Creation Advantage in Volatile TimesThe Banking Sector Page 30

How Efficacious Team-Work in SCM can help Organizations gain Value Creation Advantage in Volatile Times Page 34

Business Strategies for Sustainable Innovation Page 37

Changing Face of Consumer Goods and Retail in volatile times Page 44

NS Raghavan co-founded Infosys and is currently the chairman of the advisory council of the N S Raghavan Centre for entrepreneurial learning at IIM Bangalore

REWIRING HR

Smart Manager
Sustained long-term growth for any organization can be achieved only by effective human capital management strategies. However, developing effective strategies is becoming more and more challenging given the increasing complexity of human behaviour. Fortunately, neuroscience and brain research have started providing us great insights into the workings of the human brain. Our brains, in computer parlance, are wired in three different ways. The hard-wiring, which is genetic and inherited, controls to a large extent, our individual traits, preferences and dispositions. The firmwiring that is shaped by our childhood environment stores away social and emotional lessons from our early years. Finally, the brains soft-wiring is shaped by our formal and informal education, observations and experiences which get continually updated thanks to the neuroplasticity of our brains.

Influencing Social Behaviour

Organizations striving to get the best out of their people can therefore obtain optimal results by consistently fine-tuning the soft-wiring of its people. This is best done by a strong organization culture that promotes the right kind of values, attitudes and behaviors. It is well established that good or bad behaviour is contagious, which makes it important for all senior leaders to reinforce a cooperative, collaborative and healthy organization culture by their exemplary display of right behaviour. That bad behaviour begets bad behaviour is well proven by a series of experiments in Groningen in the Netherlands designed to test the broken window theory. The theory posits that if someone sees, say, graffiti scrawled on a building wall, he or she will be tempted to do the same or commit some other illegal or mischievous act. In fact, sociologists often cite this theory to explain the substantial drop in crime experienced in New York City in the 1990s after the city authorities took the initiative to scrub the graffiti out and clean all buildings, trains, buses, walls etc. Similarly, observing a senior leader publicly blaming an individual in an organization for a problem is adequate to greatly increase such practice in the organization, which can spread with the tenacity of an epidemic, according to new research from the USC Marshall School of Business and Stanford University.

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Stranglehold of human bias

There is widespread acknowledgement that the coping behaviours that we all learn during our childhood have great strength and persistence, and, more critically, we can change such behaviours only with considerable amount of effort. What is stored in the brains firmware is the subconscious cataloguing of stratagems that did or did not work for us while we tried to cope with our environment during our childhood. These beliefs are so strongly embedded in us that they become our subconscious behaviorcontrolling programming. Let me give you an idea of the stranglehold that our internal belief systems have on our thinking and behavior. The evidence is overwhelming that something in the way our brains function causes us to be biased - and makes us respond to ideas impinging upon existing beliefs irrationally and quite often emotionally. Further, whenever our beliefs are opposed, our biases drive us to become polarized to migrate to an extreme position. Bertrand Russel had the wisdom to appreciate this behavioral underpinning when he remarked, It has been said that man is a rational animal. All my life I have been searching for evidence which could support this. What I need to emphasize here is that we do not rationally choose to persist in blind, one-sided views of those things that we believe in. We also do not choose to become upset and angry when our beliefs are challenged. Our internal programming compels us to do so without our explicit awareness. Timothy Wilson of the University of Virginia in his book Strangers to Ourselves argues that our unconscious minds are inaccessible to self-analysis, no matter how hard we try. Stanford professor Leon Festinger introduced the concept of cognitive dissonance: the more committed we are to a belief, the harder it is for us to relinquish the same, even in the face of overwhelming contradictory evidence. This dissonance does not permit us to acknowledge that there was an error in our judgment and therefore there is a need for us to change our opinion. On the other hand, this cognitive dissonance encourages us to develop a new attitude or belief that will somehow justify retaining our existing beliefs. Professor Steven Hoffman, Buffalo University has proposed that the cognitive theory of motivated reasoning makes us bypass any rational evaluation of a new or contrary belief and instead encourages us to seek out information that supports and con firms what we already believe in. For the most part, he argues, we will completely ignore information that does not support our beliefs.

Social needs trump rewards

All organizations strive to develop appropriate kinds of reward and incentive systems to keep their employee motivation levels high. Brain research is questioning the basis of such reward systems. The primitive part of our brain (called the limbic system), which we share with animals, is programmed to respond with a minimize the danger or maximize the reward plan when aroused. New research is pointing out that this neurological mechanism of threat and reward response is as strongly triggered in social situations as it is in physically threatening situations. Measurements of brain activity taken through fMRIs, EEGs or hormonal secretions demonstrate that the very same neural responses that drive us either away from predators or towards food are equally at work when we are treated harshly by seniors or encouraged by others in the organization. These studies suggest that the brain equates social needs with basic survival demands, raising their importance beyond monetary and other rewards. More critically, financial rewards and incentives are effective only when they are perceived to support social needs. Neuroscience also suggests that organizations that try to pit people against one another on the theory that competition will make them work harder unfortunately reinforce the notion that there can

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only be some winners but many losers. Such a feeling evokes a threat response that completely undermines the morale in the workplace. In his excellent article Managing with the Brain in Mind, David Rock says that [r]esearch into the social nature of the brain suggests that five particular qualities enable employees and executives alike to minimize the threat response and, instead, enable the reward response. These five social qualities are status, certainty, autonomy, relatedness, and fairness. His article has suggestions on positively influencing these five parameters. I will just touch upon one social quality, fairness, which I believe is the most impactful.

Emotion and fairness

The perception that an event has been unfair generates a strong response in our limbic system, stirring hostility and undermining trust. The cognitive need for fairness is so strong in us that we will be willing to ignore other negative factors. There are examples of employees staying for more than 25 years with a company simply because they felt that their organization always did the fair thing. Neuroeconomics, a combination of Neuroscience and Economics, demonstrates that the brain is hardwired to handle some economic problems through emotion rather than number crunching. Interestingly, it has been found that human brains seem to respond with special emotional vehemence to social cheating. Let us examine what happens in our brains when we make an economic decision. We tend to believe that we calmly weigh the alternatives available to us and try to figure out what is best in our self-interest. Generations of economists and policymakers have relied on this very hypothesis. But this traditional model of a rational economic man is now being severely challenged by neuroscientists. First, let us look at what researchers call the Ultimatum Game. Two people are involved in an economic transaction over a resource of value; let us say $1000 in cash. In this game, only one person, let us call him the proposer, controls this cash. The structure of the game is that the proposer will offer some portion of this cash to the other person; let us call him the responder. If the offer is accepted by the responder, then both people get to keep their portions. On the other hand, if the offer is rejected, then both proposer and responder get nothing. Let us analyze this game from the traditional perspective on the rational economic man. This holds that a normal person ranks potential outcomes and takes decisions that will maximize some utility functionin this case, taking as much of the $1000 cash as possible. From this economic perspective, the proposer should make the smallest offer that he believes the responder is likely to accept, trying to maximize the amount of cash that will remain with him. The responder should accept whatever offer he receives, because he will then at least get whatever the proposer has offered. On the other hand, thinking that it is an unfair offer, if the responder rejects the offer, he gets nothing. Yet, the results of this Ultimatum Game tell another story. Most often, in these types of behavioral economics experiments, it was found that the proposer offers half the resource, rather than a small slice of it. It was also found that if the offer was not at least half of the resource, the responder, most of the times, rejected it, even though by doing so he ended up with nothing. Alan Sanfey and his colleagues at Princeton University examined the Ultimatum Game with nineteen subjects in the role of responders and used fMRI to observe their brain activity. They found that when unfair offers, defined as those that were less than half the resource, were made, responders often rejected them. As they did so, the area of their brains associated with negative emotional states (bilateral anterior insula), rather than those associated with complex cognition (dorsolateral prefrontal cortex), were most active. The more the offer deviated from what is considered fair, the more active was the emotional part of the brain when such an offer was rejected. Anger at being treated unfairly by other players appeared

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to override rational economic reasoning. Interestingly, in the minority of cases, when the unfair offer was still accepted, the reasoning part of the brain of the responder was most active. Sanfey and his team took their experiment one step further. They had the same subjects play the Ultimatum Game against a computer that did exactly what the proposing human partner did. In a testament to the remarkable finescale social distinctions that we humans make, the researchers found that the responders were more likely to accept an unfair offer from a computer than from a human partner, and the activation of the emotional area of the brain was lower when unfair offers were made by the computer. In other words, although the monetary calculations were exactly the same in both conditionsand hence a rational person should respond similarly in both contextsthe responders were much more likely to view an unfair offer from another human as a violation of social norms, and hence responded emotionally.

Conclusion
Better understanding and appreciation of why people behave the way they do will help us formulate potentially more successful strategies that address the critical social needs of people in the organization. I would like to emphasize a time-tested principle: all HRM professionals, leaders and team managers need to appreciate that human behavior is driven by a very complex set of variables, including genetic influences, childhood upbringing, learning experiences in the growth period and cultural environment. While each individual behavior needs to be understood in this context and dealt with appropriately, the organization, nevertheless, has a very potent tool to positively influence good behavior among its entire people by creating and nurturing a supportive organization culture.

Note: Published here with permission from The Smart Manager - India's first world-class management magazine. For more details visit www.thesmartmanager.com

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B Karthik is the General Manager Corporate Brand Management and Business Transformation at Mahindra & Mahindra Limited.

THE RISING

Smart Manager
The line between smart thinking and gimmickry often becomes finer with growing ambition, and for a $12.5bn tractors-to-tech companypresent in over 100 countries through 137,000 peoplethe choices can be frighteningly overwhelming. For the said company to then distill everything to one simple wordRiseis potentially a cynics dream. What would be even more audacious is for the company to issue a war crySpark the Riseon the Internet, and claim that it echoes in Indias teeming broadband-dark homes with equal force. Part I of the story of Mahindras Rise campaign talks about how the company is keeping things real...and hoping to disappoint cynics in the process. What is Rise? Is it a program to uplift the underprivileged? Is it a CSR program? Is it a Mahindra initiative for its BoP (Bottom of the Pyramid) customer segment? These are some of the questions that people ask us when we talk to them about Rise. Rise is not any of the above. It is a brand initiative. Most businesses deliver on their promises through their products and services. For example, if we as a brand promise reliable transportation solutions, it is the vehicles that we produce that will fulfill it. Rise, though, is not a rational idea; it is open to an individuals interpretation. It could mean anythingto succeed in life, to come out of poverty, to grow richer, to be independent, to be empowered, etc. It is the ambition or fire that burns within each one of us. So we had to provide an experience for people to really understand what we mean when we saywe enable people to Rise. To deliver on a promise such as this, we explored options other than goods and services. And when the campaign was launched in January this year, we also realized that communication through the usual media instruments (newspapers and magazines, and the like) would not be enoughwe needed to give a touch and feel experience. And thus the Spark the Rise platform/portal was born.

Why did we choose the Internet as a platform?

Our primary platform should be able to connect likeminded people; be flexible enough to allow participants to enter details and modify those later and also allow us to store details of all the projects we have received in the same place. A medium that satisfies all these requirements is the Internet. Now, having said that, we have made ample and more provisions for people to participate through an offline

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process as well. So, we have printed copies of the submission forms which are available at our various touch points across the country. Let me explain how this works. Assuming that there is a Mahindra dealership in rural India, where Internet connectivity is either poor or absent, a person wanting to participate in this program can pick up the entry form off the shelf, fill it and then send it to us. We then key in the details here. We have received quite a few submissions through the offline process. However, the ultimate objective of involving the public (not just in judging but also as volunteers) necessitates that all these projects are available in one space where they can be readily accessible by people. That is also one of the reasons for choosing a digital backbone for this project.

Is non-English speaking, non-Facebook savvy rural India at a disadvantage?

It is a myth that rural India is at a serious disadvantage because the platform is in English. Firstly, we have printed the offline entry forms in almost all the regional languages. We have received entries in Tamil, Malayalam, Bengali and Hindi. We translate these entries and then upload them on to the Internet on behalf of the project owners. Secondly, we have just started this program. We are working on language sites that will allow the users to choose their language. Probably when Season 2 opens, the site will be available in at least three or four languages, allowing participants to submit entries, update projects and also follow other projects. Thirdly, we are also considering a mobile version. With affordable mobile tariffs, the proliferation of smart phones and the increasing reach of cost-effective broadband connectivity it would not be amiss to assume that connectivity in rural India is as good as in other parts of the country. Google analytics tells us that the site has visits from about 100 towns and cities in India. Even if you eliminate the top twenty, tier 1 or metro cities, the penetration is pretty significant. We have also received entries from semi-urban/-rural areas of India such as Bagalkot in Karnataka, Durg in Chhattisgarh, Jabalpur in MP, parts of Eastern UP, and the interiors of Jharkhand and Bihar. Most of these are online and a few entries are offline, but by and large I would think that the mix is pretty healthy. Further, to ensure that rural India is not left out of the program, we have enlisted the services of our salespeople: if you consider a business like Mahindra Finance alone, they have about 6,500-7,000 people working in semi-urban and rural India. Over the last one month, we have traveled extensively, met people and have equipped the sales force with the skills needed to spread awareness about the program in rural India. So, at our end, we have put in place systems to ensure that the lack of connectivity does not prove to be an obstacle. And we are hoping that when the local language and mobile versions come up, the whole process will be further democratized.

Are the funds sufficient for a spark to be fanned into a flame?

The core objectives of the program clearly state that this is not a business plan competition. There are other similar programs that are sponsored by either the government or by corporates. They are all excellent programs, but their objectives are probably different. Most of these programs have a start and a finish date and after that the projects and the project owners are on their own. An unarticulated objective or credo of this program is to inspire people to help others to rise. For example, let us assume that X is planning to set up a solar energy generating facility in a large industrial township and has applied to Spark the Rise. We understand that the project will need funding beyond the initial Rs. 400,000 that we are giving every month or even the Rs. 4,000,000 that we give the winner. We think that winning the grant is not the only objective. The objective should be to build a network of likeminded individuals and through this network execute his or her plans. The money from Mahindra is just seed funding. We are

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not under any false illusions, nor are we pretending to be the benefactor that will fund the entire requirement of any project. Recently, on our Facebook wall a participant who had submitted an idea pertaining to the use of cloud technology to offer to schools put up a post saying that he had received several requests for partnerships and involvement and also received enquiries from different schools about the service offered. Such developments will ensure that projects do not die. What we are hoping for is that a combination of exposure and engaged people tracking the program (in the first month itself we had about 200,000 unique visitors) will help in sustaining a project. We are also working on partnering with service providers in two broad areas. Firstly, we are talking to organizations that will guide and mentor innovators and entrepreneurs. For example, X may have the technology but is not entrepreneurial enough. Y on the other hand will have the entrepreneurial bent of mind needed to commercialize the project, and thus the association would be mutually beneficial. The mentor organizations will provide their services on a voluntary basis. This platform will merely connect them. We are not going to coerce the participants to take advice. The choice is theirs. We are attempting to promote a culture of volunteering through this exercise. Secondly, we are also planning to partner with agencies that provide testing and implementation-related services. This means that a participant has a mentor and guide to advise him on the business aspectssetting up, scaling, venture capital funding, etcand an implementation partner to test the product and provide feedback. We are trying to build a complete ecosystem where people who want to drive change are able to focus on their objective without having to worry about the daily grind.

The first right of refusal?

Mahindra is just like any other member of the public that follows a project. There are no stipulations that we should be first approached with the technology or project. In fact, we accept all entries. Everyone with an idea can log in and submit their project. We have tied up with TiE (a non-profit organization that fosters entrepreneurship) for the initial pre-screening process. The pre-screening is not about judging the quality or the lack in a project. It is more to ensure that the information needed for the public to make an informed decision is provided. The details are given to the primary jury who are listed on the site, who then take a call. We do not get involved in the process at any stage.

The strings attached?

None at all. We have a simple verification process. Once a winner has been announced, we expect people to come to us with proof of identity. We then verify whether the infrastructure claimed by the person actually exists. Once this is done, the grant money is disbursed. We do not want to monitor the progress of the project once the grant is giventhe platform is built on the idea of good faith and trust. On and off, we probably may ask our closest sales office to go have a look. We are not going to ask how the money is going to be spent to the last decimal pointthis is just an ignition grant. We also believe that the process will become self-regulatory over a period of time. For example, if someone who wins a grant does not continue the work after the money is given, we expect the public in the vicinity who are following to write to us about it. However, even if it is brought to our knowledge, we dont plan on suing the participant. We have factored into our plans the possibility that a certain percentage of the projects will tank. And there could be various reasons other than the intentions of the project owner (good or bad) for a project to not to take off. For example, he or she may have closed

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down operations in one area and set up a bigger facility somewhere else. We are also aware that sometimes, the project owner may have a different intention/agenda for the grant money. So, yes, it would take away some of the credibility from the project. Our endeavour is to ensure that the needle is always on the side where projects are doing well, with the entrepreneurs doing what they said they would. So out of 48 grants, even if ten fold up, there are still 25 that will have done well. It is akin to the pharmaceutical industry: they screen thousands of compounds, at the end of which they could get nothing or they could get one blockbuster drug which pays for the 10,000 that failed. Secondly, we do not have the bandwidth to monitor 48 projects this year and 200 the year after and check whether they are fulfilling their promises. We are not going to play the role of a principal checking on students. We think it will become a self-regulatory process. If people actually notice so much good work happening, ten other programs could spring up, you and I would be inspired. Can this movement spread? That is what we are really hoping for. What are the challenges for us? Even today the number of skeptics and cynics outnumber the number of believers (in a program such as Spark the Rise). Most people still think of it as just another business plan contest. Some expect us to lose interest in another six months. So the first challenge for us is to prove that this is not a passing fad for us. The second challenge is to get on board innovators and entrepreneurs. Most innovators are hesitant to showcase their product or idea on a platform such as this due to the fear of replication. And the third challenge is to reach every nook and corner of this vast country. The solution to all the three challenges is this mysterious element called time. If we are able to showcase our commitment and not chase the next big thing within six months of launching thiswe already have defined a three-year horizon and plansand are able to attract a fairly decent amount of projects which drive change on the ground, and if with time we get more people hooked on the platform who start nominating and referring projects, then we probably would have addressed all the challenges. Finally, it is a question of motivating and exciting the vast network that we havewhether it is our employees in rural India or our dealers, vendors or our partners in semi-urban areasand making them evangelists. This is an on-going process and it will take time, we have around 60,000-70,000 people in India. With all this and since we have commitment coming from the very top, I do not see why we cannot reach the majority of the people. Note: Published here with permission from The Smart Manager - India's first world-class management magazine. For more details visit www.thesmartmanager.com

Marketing in Tim

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Dr. Vijay K. Seth Professor FMS Delhi

Restructuring of the organised industrial sector
The economic environment created after the adoption of structural adjustment programme in 1991 took the organised industry by surprise. Since then the government has delicensed investment and capacity creation in most industries. Delicensing removed institutional barriers to entry. The government has reformed Monopoly and Restricted Trade Practices Act to facilitate the organised industry to take advantage of economies of scale and specialisation. Foreign Exchange Regulation Act has been redesigned as Foreign Exchange Management Act (FEMA) to facilitate the inflow of foreign capital and technology. Significant reforms have been introduced to make financial and capital markets more flexible. The government reduced tariff and non-tariff barriers and introduced policies to encourage foreign direct investment with majority control except in certain strategic industries. These policies on the one hand provide new opportunities for growth Indian organized sector and at the same time, increased the vulnerability to forces of increased competition from domestic as well as global players. These forces generated by new policy regimes are compelling the organized industrial sector to restructure itself not only to survive but also to grow. Strategies adopted by enterprises belonging to the organized industry have significant repercussions for demand for labour in the short run as well as in the long run. Some scholars believe that successful restructuring of the organized industry can occur if labour market is made flexible. Despite the pressing need for labour market reforms, the government has not changed the functioning of labour market. The Public sector enterprises, which are the most important component of the organized industry in India needed maximum restructuring because they have been maintained despite the inefficiencies, accumulated losses and waste of resources. Most of these enterprises have gone for financial restructuring through disinvestments. Disinvestment has been preferred to privatization because privatization is a sensitive issue for public sector trade unions. The dominant form of restructuring in Public enterprises has been man power restructuring because most of the public enterprises have excess manpower which may further increase if these enterprises go for technological upgradation. The private organized sector has adopted several modes of restructuring. Some of them closed down and sold their assets and goodwill because they found it difficult to withstand the emerging competition. Some of them entered into foreign collaboration to acquire new technology, brand names or organizational structure, to equip themselves to face competition. The extent of corporate restructuring through foreign collaboration and acquisition of technology can be seen in terms of inflow of foreign direct investments since 1991. Foreign direct investment has been accompanied by increased import of capital goods. There have been increased incidents of corporate mergers and

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acquisitions in order to achieve economies of scale, market penetration or core competencies. Organized sector also adopted the strategy of outsourcing and flexible manufacturing to reduce overhead costs to achieve competitive advantages. Most of the companies in the automobile sector, consumer durables, electrical and electronics manufacturing have adopted this strategy. Organized industrial sector in India which grew primarily through import substitution and government regulation and protection, without considering economies of scale and scope, specialization and technological change, has experienced significant changes since the adoption of structural adjustment programme. The process of restructuring followed all possible strategic options available in the market economies. This process of restructuring has intensified the process of death of old firms and birth of new firms and process of job creation and job destruction. These changes have significant repercussions on demand for labour in the organized industrial sector. There is a pressing need on the government for restructuring of enterprises in the organized industry to achieve competitiveness in the labour market regulations. Changes that are expected by the employers are related to making manpower structuring legal, less expensive and less time consuming. Through these changes, employees want to achieve flexibility of labour market. Therefore several labour market regulations are under attack for policy makers and employers who want to introduce second generation economic reforms which include amendments in the Industrial Dispute Act, Trade Union Act and Contract Labour Act. Changes in the industrial dispute act must reduce the cost of retrenchment and layoff. Similarly amendments must be made to the Trade Union Act to make unions less powerful so that they can stop retrenchments and layoffs. Such changes will facilitate the employers to enter into flexible contracts with their workers. This will convert most the workers into contractual labour. At present, the contract Labour Act, 1970 regulates the practise of Contract labour. The objective of this legislation was to abolish exploitative working conditions of the contract workers and provide them comparable social security. However manpower restructuring can be achieved only through contractualization. In July 2002, the second national Labour Commission had submitted its report which dealt with possible restructuring of the labour market institutions. In each country, labour market institutions work within a particular social framework, with the interest of the different stake holders are differently harmonized through social contract. Differences in social settings are so important that it can transform visible rigidities into informal flexibilities. This emerges when there exists a lack of commitment on part of political class to implement the existing regulations in letter and spirit. Some scholars believe that Indian labour employers are able to close down enterprises and retrench and layoff workers. Therefore, scholars believe that whatever enterprises were practising informally will be formalised through labour market reforms.

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Gaining Value Creation Advantage in Volatile Times

By Mr. Somnath Mitra
Mr. Somnath Mitra is a Senior Process Consultant and Delivery Manager at IBM. He is a management graduate with specialization in Service Innovation activities with over seven years of experience in the Indian telecommunication industry and a total of more than fifteen years of work in IT industry. He is a senior IT professional, manager & a budding researcher. He also possesses a strong business to business experience in exceeding targets and objectives. He is also a Doctoral Candidate at the IMT-Ghaziabad/ National Law University, India in the area of Information Management. His research interests include Global Initiatives of IT firms Innovation and Strategic Management Social Entrepreneurship, and Clean Energy Technology.

Renewable Energy sources have to leverages both in rural and urban India. With correct incentives to renewal energy producer, consumer, and vendor, government can show the way towards a sun-rise industry. Consumer should be able to produce power, thereafter consume and sell to the pan-India grid based on pre-agreed feed-in-tariff, a common practice in Germany, and Norwegian countries. For decades the story of technology has been dominated, in the popular mind and to a large extent in reality, by computing and the things you can do with it. Moores Law in which the price of computing power falls roughly 50 percent every 18 months has powered an ever-expanding range of applications, from faxes to Facebook. We are, or at least we should be, on the cusp of an energy transformation, driven by the rapidly falling cost of solar power. Thats right, solar power. If that surprises you, if you still think of solar power as some kind of fantasy, blame our fossilized political system, in which fossil fuel producers have both powerful political allies and a powerful propaganda machine that denigrates alternatives. A large part of our political class is deeply invested (in terms of time and money) in energy sector dominated by fossil fuels, and actively hostile to alternatives. This political class will do everything it can to ensure subsidies for the extraction and use of fossil fuels, directly with taxpayers money and indirectly by letting the industry off the hook for environmental costs, while ridiculing technologies like solar. The world hit seven billion people last week, and I think I met half of them on the road from New Delhi to Agra. They were on foot, on bicycle, on motor scooters. They were in pickups, dented cars and crammed into motorized rickshaws. They were dodging monkeys and camels and cows. Somehow, though, without the benefit of police or stoplights, this flow of humanity that is modern India, impossibly went about its business. But just when your mind tells you that this crush of people will surely overwhelm all efforts to lift the mass of India out of poverty, you start to notice a pattern: Every few miles theres a cell phone tower and a fresh-looking building poking out of the controlled chaos. And the sign out front invariably says school engineering school, biotechnology school, English-language school, business school, computer school or private elementary school. India is still the only country I know where you can find a billboard advertising physics degrees.

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All these schools, plus 600 million cell phones, plus 1.2 billion people, half of whom are under 25, are Indias hope because only by leveraging technology and brains can India deliver a truly better life for its masses. There are a million reasons why it wont happen, but there is one big reason that it might. The predicted reality is happening: Indias young techies are moving from running the back rooms of Western companies (who outsourced work here) to inventing the front rooms of Indian companies, which are offering creative, low-cost solutions for Indias problems. The late C.K. Prahalad called it Gandhian innovation. An Indian company has built a software program that runs on the cheapest cell phones and offers illiterate farmers a voice or text advisory program that tells them when is the best time to plant their crops, how to mix their fertilizers and pesticides, when to dispense them and how much water to add each day. India has to increase farm productivity, but our farms are small, and advisers from the Agriculture Department cant reach many of them. So they go for hearsay methods of planting, which leads to low productivity and soil desertification. Using cloud computing, we can tailor its advice to each farmers specific soil, crop and weather conditions. Some 12,000 farmers are already subscribing (Rs 250 for one year), and the plan is set to grow to 15 million in five years. A quarter of the worlds blind people, some 12 million, are in India and more than 80 percent of those are blind as a result of a lack of screening and a lack of ophthalmologists in rural areas. In the past, comprehensive screening required multiple expensive diagnostic devices to check for diabetic retinas, cataracts, glaucoma, cornea and refraction problems, all of which cause 90 percent of the avoidable blindness in India. So an Indian company has developed a single, portable, intelligent, non-invasive, eye pre-screening device that can identify all five of these major ailments and also provide an automated Normal or Needs to See a Doctor report; it can be run by a trained technician, who through tele-medicine connects patients to a doctor. The company works with a Dutch company on optics, and the University of Texas supports us in business development. The company is talking to a Brazilian company that it is interested in manufacturing our technology and selling in Latin America. Outsources are becoming outsourcers. A travel search service can run on the cheapest cell phones and help Indians book the lowest-cost fares, whether it is a farmer who wants to go by bus or train for a few rupees from Chennai to Bangalore or a millionaire who wants to go by plane to Paris. The company now has one million unique users a month and is growing. The company used free open-source software, Skype and cloudbased office tools like Google Apps and social media marketing on Facebook to build his software platform and grow his company. That enabled them to grow so much faster with no money. Historians have noted that economic clusters always required access to abundant strategic inputs for success. In the 1800s, it was access to abundant flowing water and raw materials. In the 1900s, it was access to abundant electricity and transportation. In the 2000s, it will be accessible to abundant bandwidth and abundant human intellectual capital. But we need many more of these. As the world gets wired together through the Web and social networks, and as more and more sensors run machines that are talking to other machines across the Internet, we are witnessing the emergence of Big Data. These are the mountains of data coming out of all these digital interactions, which can then be collected, sifted, mined and analyzed like raw

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materials of old to provide the raw material for new inventions in health care, education, manufacturing and retailing. Were all aware of the approximately two billion people now on the Internet in every part of the planet, thanks to the explosion of mobile technology, erstwhile I.B.M.s chairman, Samuel Palmisano, said in a speech last September. But there are also upward of a trillion interconnected and intelligent objects and organisms what some call the Internet of Things. All of this is generating vast stores of information. It is estimated that there will be 44 times as much data and content coming over the next decade, reaching 35 zettabytes in 2020. A zettabyte is a 1 followed by 21 zeros. And thanks to advanced computation and analytics, we can now make sense of that data in something like real time. The more information and trends you are able to mine and analyse, and the more talented human capital, bandwidth and computing power you apply to that data, the more innovation youll get. Those are real Indian innovation stories for smarter solution for various consumer segments. Indian society, business, and environment is undergoing change. So we need evolutionary strategy, and not revolutionary strategy. As strategy (which works for the society, business and environment) we need to have smarter cities, smarter logistics management systems, smarter tax collection, smarter law enforcement, smarter health care, smarter skill development and education, smarter diaries, and smarter farming (agriculture, horticulture, floriculture, fisheries and animal husbandry) to deliver more with less. How do make a smarter and sustainable public delivery system? This is can happen when we leverage the economies of scale. The innovation will be to transform fixed cost to variable cost. We have to develop sustainable solution in education, health care, and employment for The bottom of the pyramid, using clean energy sources.

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INTERVIEW WITH MR. ARSH MAINI

Mr Maini at present is the Strategy Director, AMEAA Region, Serco Group Plc. and member of Global Management Team He has also held illustrious posts in the past such as Director of Deloitte Consulting and Principal consultant/Manager at Pricewaterhouse Coopers

25th JAN, 2012 ConClub: You have an illustrious career in the field of consulting; for the benefit of the readers could you give a summary of your professional life? Mr Maini: I worked with two very good consulting firms - PricewaterhouseCoopers and Deloitte Consulting; prior to which I worked in Marketing and Corporate Development. I joined PwC to work in the area of Performance Improvement and led a practice in North India. We advised large corporate across India, Singapore, Japan and Europe on country entry, performance improvement and risk management. In 2005 I was transferred to the US firm to help set up the Outsourcing and Shared Services advisory practice out of New York. I worked for companies across Auto, Financial Services, Technology and Consumer Services sectors providing me with invaluable experience. In late 2007 I came back to India to set up a consulting practice for Deloitte Consulting which was focused on Strategy, Outsourcing and Shared services, and Post Merger Integration (PMI). On the 1st of January 2011, I joined Serco Group plc a FTSE 100 company that improves the quality and efficiency of essential services that matter to millions of people around the world, as Strategy Director for the AMEAA (Africa Middle East Asia and Australia) Division. I was inducted into the Board of the division and to Global Management Team. As the Strategy Director for the Division I am responsible for creating a strategic growth plan based on both organic and inorganic levers, planning and delivering mergers and acquisitions, as well as ensuring an optimal operating model to meet both growth and profitability targets. My focus includes new markets and services strategy aimed at expanding the AMEAA footprint. ConClub: You have worked in companies like PwC, Deloitte and now Serco, how has the work culture been different in these companies? Mr Maini: To be honest I found each of these organizations espousing a culture of meritocracy and entrepreneurship. Each of them of course have their own unique cultures. Both PwC and Deloitte provided me with huge global exposure and what I enjoyed most was the rich tapestry of work that one

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did. The exposure I got across sectors, geographies and functions was invaluable. They is always something cutting edge, something new. Serco provided an immense sense of ownership and is an organisation with very strong fundamental values that we see and live every day. When you see that what you do every day impacts millions of lives you have a sense of achievement and pride that is difficult to match

ConClub: Unlike in FMCG companies where marketing and advertising play an important role, how does a consulting firm develop and maintain its brand image? Mr Maini: Multiple things. People tend to think that brand management is somehow limited to advertising and marketing. But that is just a minute part of building a strong brand. Ultimately brand management is about the day to day interaction with the brand itself. For a consulting firm, whom are we selling to? They advice other companies small, medium and large corporate. A consulting brand is built on the quality of the people that work for the company and their ability to live by the values of the organisation and deliver excellence on a day to day basis. One must ensure that the clients receive consistently high quality of output. The second point is your ability to showcase thought leadership. Consumer goods are often pushed to customer. Consulting firms do well in a pull driven model, where your clients seek you out. To create this pull you have to be able to consistently showcase your capabilities and your thought leadership. One piece of sub standard work, and it easy to ruin a reputation built over year. So you have to ensure that everyone in the firm lives the values, and teams consistently deliver high quality output. ConClub: You must have come across projects which were dull and not to your liking. What was your approach for succeeding in such projects? Mr. Maini: You have to ask yourself a fundamental question. How is the work were doing adding value to our client? If I am adding value then I am doing the right thing. I dont see one work being more or less exciting than another. In the consulting world, if you are adding value to your clients then they will respect you and you will enjoy your work. The work itself may vary - risk management, performance improvement, cost reduction, functional transformations, M&A, post merger integration... and none is more or less exciting. Its about staying true to the mantra of adding value. In any case one has to enjoy what one is doing. And that enjoyment comes from what you learn every day; working with colleagues who are intelligent, driven and share your values; from a sense of pride and ownership... and these dont have any correlation to the type of work one is doing. ConClub: How have you handled demanding clients or clients who are difficult to work with? Mr Maini: There would always be people whom one would consider to be difficult customers, but then that is where maturity and experience counts. Again it comes back to adding value to your customers. First, you must set appropriate expectations and then you have to go out of your way to exceed expectations. If you have done that then there would be very few clients in the world who would be difficult to please. I havent found anyone being difficult for just the sake of being difficult. ConClub: Which sector do you think is difficult to get involved in and which sector has maximum growth opportunities?

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Mr. Maini: Youngsters always tend to look for one sector where there would be an easy life. But there is no one sector which is easy to get into or excel at. For a young consultant to do well in any sector one has to gain an in-depth understanding of the sector and how companies in that sector create value for their stakeholders. Over a period of time you build experience in that sector and can then offer advice and support that truly makes a difference to the client. Technology, outsourcing and infrastructure have been the sectors that have seen huge growth in India. Infrastructure especially social infrastructure and citizen services- will be the next big thing. Healthcare, education (especially vocational training), transport services... are going to see a transformation in India. ConClub: How do you think the consulting world has changed post the 2008 crisis? Mr. Maini: You only get to see how much one is wearing when the water goes down. In good times you dont know who is in how much trouble. The crisis showed the difference between good and not so good organisations. The chasm was now clearly visible. There would always be ups and downs in an economy cycle but companies that are good will come out with glowing colours in times that are not good. In good times everyone will make money. Many consulting firms have made fundamental shifts to how theyre structured (both organization and cost structures) and how they leverage talent from countries like India. While we did see offshoring and back office support from India in consulting firms pre 2008, we now see significant scale being built in India. These resource and talent pools are not just providing back office support, but providing front end customer and client services. ConClub: On a more personal note, we would like to know what do you like the most about being a consultant and what do you like the least? Mr. Maini: Well what I like most is the variety of work. Ive been exposed to such a wide variety of organisations. I am not sure I dislike anything about consulting work. Many people say that there is a lot of pressure and travel involved but why should these things be a megative? If I am going to become a doctor, then I know I will have to do night shift. People wont get just unwell during the day because its more convenient for the doctor.. If youre going to be a management consultant you have to enjoy challenging assignments and to travel. You have to enjoy being able to be a doctor to organization. ConClub: It is considered that consultants have a hectic schedule and busy life, so what do you do in the free time that you can squeeze in that busy life? Mr. Maini: I would say reading and creative writing. Years ago I used to write the humour column for a newspaper. I also enjoy travelling and photography. I am one of those people who want to be informed of everything. So I have an inherent urge to read a lot and know more about as many things as possible. ConClub: Any message to future consultants? Mr. Maini: One must enjoy the journey. It is the most important thing. Dont just be driven by end goal and certainly not by position and compensation. Enjoy the work. Set the very highest standards for yourself and live up to those standards to build a good career.

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The Business of Climate Change

Krishna Tiwari XLRI Jamshedpur
Climate change promises to be a key issue of our times. This issue stands at the cross roads of a host of other crucial areas: public policy, science and technology, industrial development, upliftment of millions from poverty, public health and future of human life itself. For an issue as multi-faceted, the solution needs to be addressed with an equally dynamic approach. There are two broad ways in which businesses may create value in a volatile environment: a) by predicting how the volatility is affecting their processes and changing accordingly and/or b) by predicting how the volatility will affect their consumers and providing unique solutions to manage such uncertainty. In either case the value created will benefit the consumer. Value creation in a changing environment requires two inter-linked things: a) recognising what factors are will cause the most crucial changes, b) understanding how those factors may be affect your value chain, c) putting into place mechanisms to take on those challenges.

Nature of volatility due to climate change

At a first glance the nature of volatility appears to be on a macro level. It is still deeply mired in policy issues and even with numerous protocols and treaties, no clear agreements seem to be in sight. On a macro level, the uncertainty for businesses is about how the regulatory environment might change especially in developing countries. Changes in regulatory environments to meet international treaty requirement will require changes in production technologies and logistics management. Another uncertainty will be regarding sourcing of raw materials. This will be an especially important driver for agri-product based industries. Due to climate changes, shifts in cropping patterns and intensities are to be expected. This combined with other events like fuel price changes are likely to push up raw material prices. This trend is already being seen in many industries like food, paper-based industries etc. While all businesses attempt to understand the value chain to better predict the price trends of their raw materials, the real challenge lies in understanding and isolating the effect of climate change. This is important because in the future governments will put into place new regulations to meet their quota of emissions (one of the core aspects of climate change management). Businesses need to be prepared for such changes.

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Public opinion
Climate change is still being debated by millions across the globe. In fact, one of the biggest challenges being faced by climate crusaders is securing positive public opinion for the battle. Various studies by MIT and Stanford scientists have confirmed that public opinion is still divided on the issue of climate change. In a survey conducted by Howard Herzog, senior research engineer in the MIT Energy Initiative in 2009, it was found that Americans considered the topic of climate change less urgent than they did three years earlier(similar survey was conducted in 2006 ). The findings though specific to USA are relevant as they track the evolution of public and political opinion on this crucial topic. The researchers found for the first time some correlation between political parties and views: Democrats were found to be more serious regarding this issue than Republicans. Public awareness of technologies like carbon capture and storage was also found to significantly higher1. However, its acceptance as a viable strategy was also found to be low. Public opinion is important because it will showcase the leaders and businesses a direct demand for new policies, processes, products and eventually a new way of life. Climate change by nature is a long term process its effects manifesting surely but slowly over time. Therefore, asking people to change lifestyles in short term to prevent something that would happen after their time is an especially tricky scenario. This question is grappling policy makers, organisations providing renewable energy solutions and behavioural economists. The various wind and solar energy solutions are expensive for individual consumers. Thus, they are mostly not adopted unless given enough subsidies or mandated by governments. But populist governments are usually grappling with other pressing social and economic problems. Thus, a vicious cycle is created where for all three key players: the public, the government and businesses, investing in climate change management is the last priority. Many among the research community say that the blame for inadequate public support lies with the scientists themselves2. The published matter on this issue is too technical and factual for the message to percolate to the grassroots. According to Prof. Sterman at Sloan School of Management, telling people facts rarely changes their beliefs. The opinions are usually at the extremes of either very flippant or too catastrophic. This situation should be of particular concern to the marketers. It converts the issue to an unsought good the need for a solution exists but the consumer blocks recognition and doesnt wilfully seek it. The situation is not helped by the fact that very powerful business lobbies are also at work to create further confusion in the public sphere.

Value creation by at the fore front of climate battle

Value creation in this sphere is possible on many fronts. To start with, responsible communication by research labs and governments regarding the threat and consequences of climate change is required. Businesses have the onus of changing processes and practices to have a meaningful impact on climate control (whether reducing emissions, using recyclable and less packaging, sourcing fair-trade and

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organic raw materials, finding sustainable substitutes). But they should also responsibly report such initiatives to the public and not just lip-service through CSR. It is easier for big brands to lead in value creation. Since, consumers already have strong affiliations and emotional connections with them, these brands can induce responsible consumption and recognition of this issue. For businesses involved in climate control technologies and renewables, effective marketing is especially important. Only education and green marketing will not lead to wide-scale adoption of such technologies. One of the major barriers to adoption is high price. It is necessary for businesses to understand the psychographics and demographics of their consumers and segment them into groups based on their green intentions as well as purchasing power. One such initiative was taken by Roper Starch Worldwide of New York City when they published the Green Gauge Report. They classified consumers into 5 clusters and identified the market size as well as willingness to pay a premium for green products3. Such an exercise should be undertaken in other markets also, especially in developing countries. The global businesses must keep in mind that value drivers for consumers of emerging markets are often very different from those of developed markets. Hence, the products must be tailored or at least marketed uniquely across regions. The capital markets can often play a very important role in value creation. Inadequate financing options are a big barrier for consumers. Also the current system doesnt internalise the true costs of conventional energy as well as the true benefits of renewables4. These costs and benefits must be reasonably quantified. These might then provide ways to push green solutions to the public and governments. However, green marketing myopia must also be avoided. According to Ottman et al5, green marketing must serve two provide a) improved environmental quality and b) customer satisfaction. Misjudging either or overemphasizing the former at the expense of the latter is called green marketing myopia. They explain the success and failures of various green products launched over the years. Often, the key to push wide adoption of green products is the emphasis on non-green benefits. For eg: while CFLs are greener than normal bulbs, it is primarily the promise of savings in electricity bills that led to their popularity. Similarly, the success of Toyota Prius is not only due to its greener nature. Despite high prices and long waiting lines, it was successful due its quirky design and initial buzz. It offered consumers a way to be distinctive and was adopted by famous people. Obviously, its target market was quite niche. Value creation for such products and services usually revolves around five common benefits efficiency and cost effectiveness; health and safety; performance; symbolism and status; and convenience5. However, when these five consumer value propositions are not present in the green product, to be successful, a green marketing program may bundle desirable non-green consumer values to increase appeal and adoption.

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Marketing in Times of Recession

Mayank Mahajan, Anuj Kapoor University Business School, Chandigarh

(Recession curve-Trick lies in harnessing the trough period)

Economic Downturns are tough times, not only for individuals but for the companies on the whole. While all the functional wings are contemplating a cut in their spending, austerity drives are seen as the need of the hour, its a catch twenty two situation for the marketing wing. Marketers often find themselves in muddy waters because of differing nature of any two downturns. How a marketing manager needs to react? Which marketing approach to follow-slam-on-the-brakes or Pained-but-patient or comfortably well off or just live for today? In the following paragraphs we try and gauge into how marketing acts as the one department which identifies recession as an opportunity to gain some more ground at the competitive level. McGraw-Hill Research analyzed 600 companies from 1980-1985. The results showed that b2b firms which maintained or increased their advertising expenditures during the 1981-1982 recession averaged

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significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales increased over 256% for companies that increased recession ad spend than those who slashed ad spending.
500 400 300 200 100 0 1980 100 100 137 96 1981 159 88 1882 195 89 1983 283 375

106 1984

119

1985 Eliminated or Decreased Advertising in both '81 & '82 Maintained or Increased Advertising in both '81 & '82

Market Sense compared 101 household name brands during the recessionary period 1989-1991. As per Market Sense data, Jell-O, Crisco, Hellman's, Green Giant and Doritos saw sales drop by as much as 2664%. Jiff peanut butter increased ad spending and sales went up 57%; Kraft salad dressings saw a rise of 70%. In the beer category, overall spending was down 1% while Bud Light and Coors Light, each spending ahead of the category, saw sales increases of 15% and 16% respectfully. Pizza Hut sales rose 61% and Taco Bell's 40% thanks to strong advertising support, with McDonald's volume down approximately 28%., primarily due to marketing spending cuts. Still not enough food for thought that marketing serves as a saviour during the recession? Read further General Motors' Chevrolet division abandoned its traditional practice of setting its advertising expenditures as a fixed % of sales. While volume fell 10 % because of the economic slowdown, Chevrolet maintained its ad budget and increased advertising for its fuel-saving economy models. Ford Motor Company, on the other hand, slashed advertising by 14 % in an attempt to shore up profits. As a result Chevrolets market share increased by 2%.

105 100 95 90 85 80 1974

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(Chevrolets ad) (Comparison of Chevrolets growth share with Industry growth average)

During the Great Depression, both Kelloggs and Post were tied for market share in dominating the breakfast cereal category in the 1920s. Post cut their ad budget while Kelloggs increased theirs by 1 million $. After the recession, Kelloggs profits improved from $4.3 million a year in the 1920s to $5.7 million in the early 1930s, beating out Post. Do we observe a particular pattern in these cases?

Lets not go further back into the history, putting things into perspective by looking at some recent responses to recession by top companies. During 1990-91, Pizza Hut sales rose 61% and Taco Bells increased 40% with strong advertising, while McDonalds reduced advertising and their volume decreased 28%. In 1991, advertising in the computer hardware category was down by 17.5% over the previous year. Apple, Digital, IBM and Tandy - category's leading spenders - all made significant spending cuts in the range of (-25%) to (-40%). But Dell increased its marketing spending from just $1.4 mn in 1990 to $6 mn in 1991, a 346% increase. Thereby marketing cut backs by its competitors followed with its own increased spending led Dell to be included for the first time in the Fortune 500 roster of the world's largest companies. By 1993, the company was among the top 5 computer system makers worldwide, and in 2001, Dell became No. 1 in global market share. Times change, but trends seldom do?

150 100 50 0 2000 2001 Industry Dell

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Similar trends followed when another FMCG giant, P&G increased spending on marketing during recessionary times. P&G realised the importance of radio spending on ads & harnessed this potential of this field with launch of first P&G radio soap opera "Ma Perkins," sponsored by Oxydol in 1933 followed by "Vic and Sade" for Crisco, "O'Neill's" for Ivory Soap and Forever Young" for Camay. By 1939, P&G was sponsoring 21 radio programs, and virtually doubled its radio spending every two years during the depression. In 1935, P&G spent $2 million on radio. Its radio spending increased from $4.5 million in 1937 to $8.8 million in 1939.P&G was the only marketer among the five biggest U.S. advertisers to increase spending in 1991 & increased sales and earnings during the late 1980s to early 1990s surpassing $30 billion mark in 1993 & thus emerged out of recession with flying colours. Intel, made similar moves & reaped the benefit of enhanced marketing spending during recessionary times with increased sales margin & profit.

Rosabeth Moss Kanter, Professor at Harvard Business School stresses that In a recession, everyone should be in marketing& suggests five basic principles, namely, Increase customer contact and communication , Hunt for new markets, Invest in employee morale, Emphasize and reward small wins, Stick with your values. John Quelch, Professor, Harvard Business School also emphasizes on eight points for managers looking to plan ahead:-

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1. Focus on high potential customers i.e. strong relationship building with cash rich or long term
oriented customers in growth industries where pent-up demand will happen, once recession period gets over.

2. Dont assume a return to normal Permanency in consumers attitudes & behaviours, ingrained
coping mechanisms. Thus consumers tend to look at firms products & services through new lenses indicating need for firms to revise their market segmentation assumptions

3. Assess your target customers trust in your brand Consumers trust in financial firms decreases.
Firms need to add service support & pay more short term attention towards customers, assuming service quality remaining unchanged.

4. Stay focused on costs Excess inventories in supply chain preventing customers from tightening
cost controls & improving productivity.

5. Know your lead indicators Firms need to be aware of lead indicators which predict demand in
next term, both at macro & micro level.e.g. if Wal-Marts parking lots look less crowded, some consumers are probably migrating back to Target & vice-versa.

6. Develop scenarios Know how you can source supplies & expand distribution in a hurry if demand
suddenly increases.

7. Dont wait for permission Getting ahead of the crowd, focusing on your lead indicators & crafting
your recovery plan.

8. Smart hedging has outweighed smart marketing Economic recovery will bring greater
commodity price & exchange rate predictability. Marketing will be the differentiator between successful businesses & also run outs. In the end, it can be ascertained that although its wise to contain costs, failing to support brands & device winning strategy for marketing, or gauging customers changing needs during recessionary times can affect firms long term performance. As John A Quelch mentions Companies that put customer needs under the microscope, take a scalpel rather than a cleaver to the marketing budget, & nimbly adjust strategies, tactics & product offerings in response to shifting demand are more likely than others to flourish both during & after a recession. i.e. While businesses are putting customers under a microscope, their customers are, in turn, examining them more closely than ever.

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FDI in Retail: Risk or Value Creation

Kriti Sondhi and Rohit Jain, FMS Delhi

Retail Sector Overview

Retail is A sale to the ultimate consumer. According to a research report named Retail Sector in India by Research & Markets, Indian retail sector accounts for 22% of India's GDP & contributes to 8% of the total employment. It thus acts as a shock absorber absorbing unemployment from various sectors of economy. The Rs 18,673 billion (US$ 401 billion) Indian retail market entails only 6% of itself as organised retail segment as of 2010, according to Booz & Co (India) Pvt Ltd. Hence, there is a great potential to be explored by domestic & international players.

Trends in the Retail Sector

Driven by the growth of organised retail coupled with changing consumer habits, food retail sector in India is set to be more than double to US$ 150 billion by 2025, according to a report by KPMG. The total retail sales in India are expected to grow from US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015.

Some of the key factors behind the forecasted growth are robust economic growth, high disposable income with the end-consumer, the rapid construction of organised retail infrastructure, the expansion in middle & upper class consumer base, the potential in Indias tier-II & tier-III cities as well. The greater availability of personal credit & a growing vehicle population providing improved mobility also contribute to a trend towards annual retail sales growth of 12.2%.

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Evolution of FDI with regard to the Retail Sector

As per the Indian cabinet perspective , the FDI policy has been moving away from the license raj mentality of protection against imagined foreign dictators towards a more open, healthy & competitive environment. This policy will provide a window for the world class retailer chains like Carrefour, WalMart, etc. to set their foot in the booming Indian retail sector.

1991: Indian economy opened FDI up to 51% allowed under the automatic route in select priority sectors

2006: FDI up to 51% allowed with prior government approval in 'Single Brand Retail'

2011: Government approves 51% FDI in multibrand retail and 100% FDI in single brand retail

1997: FDI up to100% allowed under the automatic route in Cash & Carry (wholesale)

2008: Government mulled over the idea of allowing 100% FDI in single brand retail and 50% in multibrand retail

FDI in Retail: Why Risk?

The examples of few South East Asian countries show that after allowing FDI, the domestic retailers were marginalized & this led to unemployment. The concerns & risks regarding FDI in Retailing are: Retail sector employs 8% of the population, & FDI may cause underemployment when the local retailers are displaced by organized retail. For a government aiming towards welfare, this situation becomes complicated. Indian retailers have yet to consolidate their position as they might not be able to survive the competition from global players as the existing retailing scenario is characterized by the presence of a large number of fragmented family owned businesses. Major Retailers such as Wal-Mart & Telco already have established procurement centers & significant investment is needed in supply chain for a large scale procurement process. This is a major reason for their keenness towards entering India. Global retailers might resort to predatory pricing. Due to their financial clout, they often sell below cost in the new markets. Once the domestic players are wiped out of the market foreign players enjoy a monopoly position which allows them to increase prices & earn profits. Since lending rates are much higher in India, Indian retailers, especially small ones, are at a disadvantageous position compared to foreign retailers who have access to International funds at lower interest rates. High cost of borrowing forces the domestic players to charge higher prices for the products. Proponents of FDI claim that organized retail would improve the incomes of small producers & farmers by doing away with middlemen. However, American studies have shown that the retail chains are in no way less explorative than the middlemen themselves. It can upset the import balance, as large

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international retailers may prefer to source majority of their products globally rather than investing in local products. Globalization has opened the world for organized retailers to source from anywhere in the world. This has shifted negotiating clout in the hands of the retailers. The producers are struggling to be up with the retailers. The retailers can resort to cost cutting to exploit the suppliers which is borne by workers in the form of lower wages, poorer working conditions. FDI in retail trade would not attract large inflows of foreign investment since very little investment is required to conduct retail business. Goods are bought on credit & sales are made on cash basis. Hence, the working capital requirement is negligible. On the contrary; after making initial investment on basic infrastructure, the multinational retailers may remit the higher amount of profits earned in India to their own country. FDI in retail thus has an adverse effect on the primary & secondary sectors along with domestic retailers. It will also affect the Manufacturing Sector as the products for which the competitive advantage lies in countries such as China, Bangladesh etc. will be sourced by the retailers from there. This leads to unemployment even in the secondary sector. Too much exposure of our sectors to FDI can be dangerous in the sense that they increase the dependence to the outside world. One of the key reasons of stability of our economy during The Great Depression was the strong domestic economy. What is required is to lock the foreign investment such that it is reinvested into the country itself & are not taken outside. A form of agreement should be entered into which entails that the money generated is reinvested for say a period of 20 years.

FDI in Retail: Why Value Creation?

Retail Industry has made India, the cause of a good deal of excitement & cynosure of many foreign eyes. FDI in retail is a welcome step in strengthening Indias FDI regime with making it in tune with countrys needs. The Indian Government believes that FDI in retail & further liberalization retail trade will facilitate greater FDI inflows providing new opportunities & benefits besides quality improvement. At a time when declining investments have led to slower GDP growth, the entry of foreign funds would go a long way in boosting confidence. "It is a win-win situation for everyone. With the amount of money to be invested in back-end, supply chain & farm sector will benefit, even the small & medium enterprises will benefit. Eventually consumers will get a lot of choices & they will get products at better prices, "Future Group Chief Executive Officer Kishore Biyani said. Shoppers Stop Vice Chairman B S Nagesh said: "I welcome FDI in retail. Capital is required for the market whether it comes from domestic or foreign investors; it will help grow the sector in the next 3-5 years. There will be no impact on the domestic industry as there is enough market. At the end of the day the consumer will benefit." "This would allow substantial investment in the back-end infrastructure like cold chains, warehousing, logistics & expansion of contract farming," CII President B Muthuraman said.

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The Reserve Bank Friday expressed hope that FDI in retail will help in bringing down inflation. "Certainly FDI in retail would help improve supply chain & we hope it should also contribute to reducing inflation, It is a visible measure (taken by the Centre) that will bring in right capital in the country " RBI Governor D Subbarao said. FDI in retailing is favored on following grounds: The entry of foreign retailers can have optimistic results on the economy initiating momentum in the long run leading to greater quality, efficiency & improved standards of living. Big companies cant set up shop & drive out smaller players overnight they have advantages in some areas but that doesnt mean that the smaller players are completely at their mercy. FDI flows are a lot more stable than FII flows. Even now, organized domestic retail players are present in the market, but local stores are not going out of business because of them. I think this will hold true in the future as well, & allowing FDI will be a big net positive for everyone. Getting efficient supply chains & eliminating middle men is good for both consumers & farmers as this will give both parties a better price. Getting more of the retail sector under the organized sector is also good because it leads to more employment & also of a better quality. The global retailers have advanced management know how in merchandising & inventory management & have adopted new technologies which can significantly improve productivity & efficiency in retailing. Joint ventures would ease capital constraints of existing organised retailers Entry of large low-cost retailers & adoption of integrated supply chain management by them is likely to lower down the prices. FDI in retailing can easily assure the quality of product, better shopping experience & customer services. As multinational players are spreading their operation, regional players are also developing their supply chain differentiating their strategies & improving their operations to counter the size of international players. This will encourage the investment & employment in supply chain management. FDI would lead to development of different retail formats & modernisation of the sector They promote the linkage of local suppliers, farmers & manufacturers, no doubt only those who can meet the quality & safety standards, to global market & this will ensure a reliable & profitable market to these local players.

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As shown in the above graph, we still have extensible opportunity for organized retail sector compared to other countries & FDI is a welcome step for it. Moreover, India is not the first one to do this, & what it has done is not unique either. Many developing countries have much more liberal policies than India. These countries include China, Brazil, Mexico, Thailand, Russia, Singapore, Argentina & Indonesia among others. In fact China started out in much the same way as India allowing 51% foreign equity & confining them to large cities. They only removed these restrictions in 2005 after having them in place for more than 10 years. They gave the domestic players enough to time to get up to speed with the western model & then allowed free competition. It has turned out quite well for them as most of the top 10 retail companies in China are local & not foreign. This clearly shows that Chinese companies didnt let much bigger foreign players compete them out of the market, & the Indian experience shows the same thing in areas like telecom where foreign & local players co-exist. Whats even more fascinating is that the number of Chinese equivalent of Kirana stores rose from 1.9 million to 2.5 million after the liberalization of its retail sector! This is because of economic growth & also because big players dont have a magic wand that they can use to ouster other smaller players as soon as they enter any market. Many of their strengths in their home countries are based on factors that are totally absent in other countries. Wal-Mart is able to drive costs down because of its incredible logistics & supply chains which are absent in India as they were absent in China. Then there is the question of physical infrastructure like roads & ports that are not to the same level as they are in the US & they simply wont have the kind of scale that they have in the US to negotiate & bargain with the suppliers & drive down the cost. In nutshell, allowing FDI in retail can bring about Supply Chain Improvement, Investment in Technology, Manpower & Skill development, Tourism Development, Greater Sourcing From India, upgradation in Agriculture, Efficient Small & Medium Scale Industries, Growth in market size & Benefits to government through greater GDP, tax income & employment generation. Conclusion Like each coin have two sides, so does this. While there is risk of unemployment, import imbalance, predatory pricing by global retailers, threat to the domestic retailers, too much exposure of the retail sector to foreign markets etc. There is also value creation in terms of greater quality, efficiency & improved standards of living, efficient supply chains & elimination of middle men, lower prices, improved productivity, modernization of the retail sector etc. Thus, though it poses risks in the short term, it will create value in the long term.

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Gaining a Value Creation Advantage in Volatile Times: The Banking Sector Sudhanshu Suman- FMS, Delhi

Background:
Gaining a value creation advantage in volatile times has become a need for companies in current economic context. Since 2008 recession, the statics and dynamics of world economy have changed. The economies of developed nations are growing at a minimal rate. The government and the central bank of respective nations have to resort to expansionary monetary policy and a series of quantitative easing. The governments of the countries had spent close to $6 trillion to take their economy out of the recessionary mire. Therefore, they are highly indebted and are bare exposed to sovereign risk. In fact, whole Europe is juggling to save their unified common currency. Developing economies have displayed a greater degree of resilience and registered average annual growth rate of 5.5% combined. However, the inflation in these nations are touching sky. In India, central bank has hiked borrowing and lending rates 13 times since March 2010 and by cumulative 475 basis points. Summarily, it can be said that the world economy is at the brink of another long slow down. In such volatile times, the companies are facing challenges in creating value for all stakeholders. Shareholders have not got their due return on their investment post recession. There is downward trend in the stock market and dividend given by the company has not been as much as it were prior to economic recession. Customers are marred by the huge price increase of goods and services and they are facing decrease in their wealth. Suppliers and vendors too are having tough time negotiating a profitable deal with companies.

Value Creation in a past couple of years in Indian Banking Sector

Shareholders: The value created by Indian Banks for shareholders can be depicted through the capital

gain, dividend payout and Earning per share.

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From 2007 to 2011 Banks SBI Canara Bank PNB ICICI Bank Axis Bank HDFC Bank % Capital Gain 33.16% 32.92% 24.79% 7.55% 32.11% 26.61% Sales: % Change 19.69% 19.08% 24.15% 2.51% 37.43% 30.50% EPS: % Change 7.69% 27.26% 30.10% 6.64% 28.86% 18.16% Dividend: % Change 20.99% 11.96% 21.79% 8.78% 32.81% 23.91%

Despite 2008 economic recession, banks have been able to give shareholders an aggregate positive return. In recent times, due to hike of repo and reverse repo rates by RBI, the banks have registered decent net profit margin (NIM) in the range of 2.5-3%.
Risk Exposure: Gaining return for Shareholders taking high-risk exposure does not augur well for

shareholders in this highly volatile condition. A few state run banks are facing increased Nonperforming assets (NPAs) on their Balance Sheet. SBIs gross NPA increased to 4.19 percent of total assets at the end of September, from 3.38 percent a year ago. The highest percent of NPAs come from real estate sector and unfortunately it accounts for 17% of the groups total loans. For other state-owned banks, real estate accounts for 13.2% of the loan book. This is high time for banks to rejig their policies related to loan portfolio and maintain a balanced loan portfolio.
Services to Customers: Easy loan policy, high interest rates on deposits, good services, wide network of

ATMs, online banking facility, and regular updates about new financial innovations are what a customer desire from the banks.

How Banks can create advantageous value for stakeholders:

Investment Challenge: How to invest a companys capital are always difficult. Generally, decisions

regarding this are taken using suboptimal compromise rather than a strategically sound consensus. Managing asset and liability to keep interest rate risk under control even during high volatile situations like India is facing right now. RBI has hiked interest rates 13 times since March, 2010 and rupee has depreciated to very low Rs 54. FIIs are fleeing from India. Therefore, how to invest deposits to get high return for shareholders is of high challenge to Banks.
Wide outreach to new banking customers: RBIs appointed Khan Commission report, 2005 clearly

says that India lags behind by a huge margin when it comes to financial inclusion. Nearly 70% of the population do not have bank account and close to 90% are not in position to avail bank loans. Unfortunately, this is the scenario when 40 years have passed after nationalization of banks in 1969. KYC norms have been subsequently relaxed and Government has passed new regulations for microfinance, which has helped farmers and small businessmen to avail easy bank loans.

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It will be of great value to banking sector to outreach the untapped market. It may not be very much profitable in the short run but in the coming years, it is going to be of great value given that every year 5 crore people move into middle class segment. Microfinance has helped farmers, small businessmen, and women to set up small shops and so will Micro insurance be a game changer. SBI, largest bank of India, has helped people in opening up no-frills account and currently it has 2.5 million such accounts. These banks are adopting correspondent banking system which is the intermediary between banks and farmers. This has helped SBI to increase its presence in 12000 villages in 2008 to 50000 villages. Migratory labour can be targeted as they sent huge chunks of money back home and currently it occurs majorly through informal channels.
Financial Innovations: Financial innovation is one major thing, which can be leveraged to gain first

mover advantage. As Indian is moving towards cashless money transaction, developing transaction system with which transaction can be done easily will attract the customers, will boost customer base, add up in revenue and will strengthen its brand image.

Breeze, a mobile application was

developed by Monetise for Standard Chartered Bank. This has been brought into specifically for Indian market. It helps in tracking bank and credit card accounts, transferring funds, pay utility bills, locate nearest bank branches and ATMs.

Using technology, banking sector can streamline its processes and adds value to the services provided to the customer.
New Financial Products: We have diverse kind of people with diversity in their income, variation in the

income schedule, and different financial obligations and necessities at different time. Making the banking system much more flexible than what it is today, focusing on innovative financial product can give a company an advantage. Providing special type of savings solution to the daily wage earners can give bank to the access of new customer base, which may not be very much profitable initially but given the rate of growth of middle class population, it can be beneficial in the long run. Banks have come up with diverse and sophisticated products. SBI brought a product in the market where in a customer deposits up to $21 at any time for one to five years and will earn an interest rate of 6% to 8%. SBI has also come up with new innovative insurance policy Grameen Shakti, a dual benefit

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life insurance product. Chota SIP (Systematic Investment Plan), an equity-based mutual fund plan with minimum monthly investment of $2 over at least five years, is another instance of innovation for financial inclusion. The bottom line is that India is a land of diversity be it socially or financially. Innovation in financial product to meet special demands of each and every corner of the society can help gaining a value advantage.

Rejig Loan portfolio: Less exposure to long term and high risk lending
Given the high exposure of Banks to infrastructure, telecom and loss-making aviation industry, banks are exposed to high default risk. For national banks like SBI, it is mandatory to have 40% of their loan portfolio for agriculture sector and SMEs. According to the fact published by SBI, NPAs of the bank in the farm loan segment rose nearly four fold to Rs 13,545 crore in the first six months of this fiscal. In the recent times, due to hike in interest rates and economic slowdown, chances of default of home loans have increased. The SBIs group exposure to realty has grown by 43.4% int he last fiscal year to $1.7 trillion from $1.17 trillion. However, the industrys average growth rate to exposure to real estate sector for the same financial year was 23.2%. The bottom line is that it will be of prudence to overhaul the loan policy for the banks. Proper scrutiny of the project and the borrower will be of great value especially in default prone sectors- Real estate, Telecom, etc. It will help banks to keep their balance sheet neat and clean, no provisioning, and easy adherence to the rules and regulations regarding capital adequacy. The extra load on other borrowers due to high NPAs will be minimal. Altogether, this is the one of the best ways to create value for customers and shareholders of the bank alike.

Adherence to Basel Norms:

Adherence to Basel-2 norms was made mandatory by RBI for Indian banks. In the near future, now it will be turn of Basel-3 norms. These banking regulations have been made to keep the banking sector safe from volatile and tough economic situations. Strict adherence to it will help banks insulating itself from economic turmoil and creating value to depositors and shareholders alike.

Conclusions:
Gaining value creation in current volatile times is on every companys mind. The requirement is to, prudently, chart a map for that and then strictly follow it. Banking sector, in India, has huge potential for growth, but at the same time, it needs to take every single stride cautiously. Thus, it will be able to create value to customers, employees, shareholders, government and the whole economy.

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How Efficacious Team Work in Supply Chain Management can help Organizations gain Value Creation Advantage in Volatile Times
Saumya Jain, MICA
We may have all come on different ships, but we're in the same boat now- Martin Luther King Jr. Be it distribution strategy or inventory management or maintaining healthy relationships with customers as well as suppliers, all fall under the purview of supply chain management. This labyrinthine network indeed needs a well-managed system, wherein all the elements function together in unison. It is also known that the feeling to work closely with everybody and in favor of them as well as the organization should come from within. Besides, the environment should be amicable enough to boost that cooperative feeling. Else every attempt to make an employee work whole-heartedly will go in vain. Valuing and acknowledging your colleagues hard work and contribution is important not only in formulation of congenial terms, but also in providing a nudge to that person to substantiate himself in a more promising way. This indirectly is beneficial for an organizations sustained growth. I used the word sustained, because in todays competitive scenario, it is very easy to dissuade any employee involved at any stage of the production of a product, starting from development to marketing to sales, into a completely different territory. For any company, its employees are its assets. Thus, it becomes very necessary to hold them back, either by favorable company policies or by providing enough lucrative. Cohesiveness of the entire team should be the mantra of the day. But, egotism is the thirst which is way too difficult to quench. Appreciating the efforts of ones co-workers is a situation rarely witnessed these days. Admittance of others accomplishments is the seed which has to be incepted in all the people associated with the organization. It should not be overlooked that a persons maximum potential can be extracted when he feels at home at his workplace and where his confidence is boosted by a dose of admiration at regular intervals. Thus, the feeling of integrity should be leveraged amongst the employees for a satisfactory output.

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Nowadays, dependence on your team mate or any person working up-the-line or bottom-of-the-line is looked down upon and poses a question on your abilities. It is mandatory to do away with this prejudice amongst every correlated section in the company for it to prosper. Today, it is not only the role of marketers to create brand differentiation or specialization, but also the function of distributors, sellers, retailers, advertising agencies, information technology department, human resources department, logistics and inventory section to create a relevant brand perception. All have something or the other to offer to. Let us take the examples of specific product categories. Say, for instance, soaps and detergents. They need considerable product visualization and shelf space for marking their presence amongst the gamut of products available. Here, the role of advertising agencies and retailers is emphasized. If they do not perform well, due to personal grudges with the marketer or the logistic head, the visible range of the product becomes like a flash in the pan. Now, when we move over to the automobile sector, here we find that there is no role of a retailer. It is taken over by the distribution and service sector. More satisfied and spirited are the employees, higher is their efficiency, better is their convincing power, and more is the increment in the sales. Another important component in the supply chain management is the business partners. They mould the structure of the entire system in a well-disposed manner. They are influential stakeholders of the company, and thus maintaining consonant relationship with them assumes prominence. Also, at times the company wishes to widen its range of products by collaborating with other companies and running the organization as one. This calls for respecting each others decision, while acknowledging them and giving each other sufficient space to contribute properly. The concept of single partner has now given way to multiple partners. And if all of them are beneficial, the task becomes more strenuous. Building up of a strong relationship is dependent on maintaining transparency by the authorities. This helps in imparting trust throughout the chain, and thus acquiring loyalty from them in return. Initially, thrust was on to creating and enhancing customer value. It is still there, but now the focus has also shifted onto how to keep every employee in the supply chain and logistics elated and contented. This is backed by a tacit understanding amongst all of them, regarding the task each one has to manage and the area of the other subdivision where one is not supposed to intervene. Nobody can survive alone. Dependency always comes into the picture. Same applies with the functionalities of any organization. If this concept is understood by all, it becomes very easy for it to operate. It should be noted that, if any single element doesnt perform up to the mark, the entire unit suffers. Whatever hard work is put in by the others, it all goes unnoticed and wasted, and lethargic attitude of one section creates nuisance for all. In the competitive scenario of today, where no domain can afford to dawdle, optimization is the key to success. And this level can be achieved only by incorporating the feeling of oneness in all the elements of a growth-oriented organization. Esprit-decorps stance of one and all will help in going a long way and in achieving the desired profitability. To fetch that number one position, every management tries to gain competitive advantage. If it is able to strike a difference from what its competitors have to offer, it then hits the bulls eye. Offering an exemplary supply chain can be one of the factors to demarcate its position in the market. For this, the

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authorities should continuously do a performance analysis of each element in the chain, to find out the loop hole and rectify it accordingly and at the earliest. Imagine a scenario, when the advertisements of your products promise and claim to fulfill your needs, whenever you desire, but the actuality is far from what is projected. In this festive season of Diwali, customers were asked to wait for months for purchase of things like refrigerators, automobiles, RO water purifiers due to limited stock. Why was this ambiguity between the promotional campaigns and the product delivery? Was it the fault of the logistics team or the material management team? What attributes did BASF impart in its structure for it to be glorified with the award of the Best Supply Chain Management in April 2011? And what will you have to say on $1 billion loss of Boeing 747 and 737 airplanes, due to delay in providing specific parts from the supplier side? As per your product demand, the company should either follow just-in-time [JIT] methodology or keep sufficient stockfor inevitable circumstances. Supply chain executives should understand the business strategy in order to deliver value and stand intact in the sea of competitors. For this, a sound communication process is needed. The policy, the new strategy to be implemented should be communicated properly and well-in-advance to everybody in the chain, so that synchronization is observed in the product development and delivery. Outsourcing has become a common trend these days. It becomes very necessary for external division to interlink well with the internal ones; else severe repercussions ought to be followed. The gap has to be bridged effectively for smooth transactions to occur. The appraisal of one should not be at the cost of undermining the efforts of the other. Be it tracking of orders or provision of an expert for support services or research and development, all has to be collaborated efficaciously. Other aspect which cannot be overlooked is the globalization of firms. When the business crosses national boundaries, it becomes more constrained environment and the sync of each one becomes too demanding. Language is not the only barrier. The regulations differ, the approach differs. And if the manufacturer and seller happen to be in different countries, proper co-ordination pushes its way through a lot of pressure. The click is to get connected! This connection itself improves quality and ultimately, profitability. It is all about respecting others capabilities and not hesitating to render your services in other departments when needed. At the end of the day, it is not the individual work, but what the organization has to offer as a whole which matters. The administrative department should understand that the relationships within the supply chain tend to fade soon, so their consolidation is required from time to time. Misunderstandings ought to be resolved instantly to prevent them from assuming immense proportions. The managers and the planners at the authoritative level should be pragmatic in decision making and should reciprocate what its employees have offered it for its prosperousness. This is what is the essence and bottom line of a successful business entity, with a successful supply chain management.

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Business Strategies for Sustainable Innovation

Gurkirat Singh- NITIE Mumbai

INTRODUCTION
Implementing sustainable business models necessitated the initiation of corporate strategic change and the development of sustainable innovations. The current business instabilities are the result of unsustainable strategy making processes along with under regulated economy built on an ideology of free market capitalism and unlimited economic growth. Since the onset of industrialization and conceptualization of strategic theories various externalities are not considered a part of preview. They were assumed to be relatively small and solvable. The consequences that declare a strategic model unsustainable always followed with a lag and unpredictably. Gradually the planning and decision making on various fronts has always considered an incomplete picture. But considering various strategy failures in the new context, we have to remember that the goal of the business-strategy designing is to sustainably improve human well-being and quality of life. Ultimately we have to follow innovative approaches while designing new models that consider various outcomes in entirety. The indisputable truth is that for economic growth we have to juggle among various scarce resources, but final aim is to reach for new strategies, which help us to conceptualize sustainable business scenarios. According to Brundtland Report sustainable strategic development means meeting the needs of the present without undermining the ability of future generations to meet their needs. For such a sustainable model to exist various financial practices, human cost factors, and existing economic models need to be considered collectively. The strategy making practices that are useful today may become sustainable by supplementing them with new innovations.

Various Structural Innovations Highlighting Sustainability-Oriented Business Strategies

Sustainability-oriented strategic change embraces the strategy content along with a strategy formation process. This process encompasses proactively spearheading a transition in strategy building processes. The conditions for the emergence of proactive strategy formation process and those containing a high sustainability impact are a conceptual framework, considering factors encompassing various fields.

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Companies where sustainability-oriented strategies were initiated and carried out

At Philips, the life cycle concept, reinforces in the production concepts, was integrated with the Eco Vision-Program as a specific program to mitigate the far reaching effects of anthropogenic activities. At Novamont the strategic renewal is based on the principle of circular flow economy and its pioneer role is located in the area of using renewable resources.

Bedminster focuses on zero emission concepts.

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Let us understand the way the businesses can integrate sustainable oriented content in its strategy formation process by generating models considering factors for the occurrence of sustainable strategic change process. An Indicator based improved approach to monitor progress towards sustainable strategy is required. United Nations CSD (Commission on Sustainable Development) indicators of sustainable development can be used to understand scope of innovations.

Strategy formation encompassing Economic development

Strategic Indicator Factors Macroeconomic Per-Capita GDP Performance Scope for Innovation in strategy Developing models that can balance the impact of social & environment cost of production and consumption.

Impediments to the Reform of National Economic Indicators

Innovative and holistic approach to internalize environment cost in a companys accounts is required. It will apply environmentally adjusted economic indicators to the strategy making processes. Doing so would mean a major reduction in the level of margins, which few businesses would want as it will present a poor grade report. Also, the lack of regulatory coordination hampers the development of an across-industry comparable framework for internalization, which prompts many strategists to take a wait and see attitude. So to internalised environmental cost into existing system of business indicators innovative rollouts require systematic implementation at industry/sector level. This will provide an appropriate valuation of natural resources and will make business considerations more comprehensive. Even when the existing SNA (System of National Accounts) remains in place across various business environments, efforts to internalize environment costs in business indicators can at least provide information on the real costs of a strategys rollout which is not available now.

Japans experience at reforming SNA

Net National welfare was calculated as an adjusted GNP. Actual pollution abatement costs were identified and deducted from GNP, so were the potential costs of meeting environmental standards for specific pollution problems. The value of non-market activities was added to GNP. This approach helped in determining the level of sustainability of the business strategies.

Strategy formation encompassing Governance

Strategic Indicator Effectiveness and Technological Provisions Factor Scope for Innovation in strategy Higher Tele density, Innovative technological implementations Internet connectivity, and provide critical support for sustained Resilient Cyber Security strategic development.

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Innovating network security models ensures controlling any vulnerability and maintains sustainability of ecommerce, and monetary scenarios. Absence of secure systems leads to improper decisions and undetected risks during rollout of strategy. In todays globalized market, defences at the physical borders are not enough to achieve sustainability. The flow of transactions and critical information needs high level Growth in the number of financial institutions whose clients were of targeted using malicious programs designed to steal data Source: Kaspersky Lab defenc e settings. This calls for continuous innovation in technology so as to guard off any threat on cyber frontiers.

Strategy formation encompassing Environmental health

Environment provides various resources required for economic development. Unsustainable strategies often results out of improper planning and forecasting due to ignorance of certain factors that are not directly related to production. Hence scope for innovation lies while Table 2: Alliance to save energy(India Fact Sheet) designing the simulation models which can bring together various departments to act in unison to gauge the impact of any strategic change. This can uncover a huge scope to reduce load on resources and to promote long term unbeaten strategy. Industrial society must innovate better production processes that are energy and material efficient. This approach must avoid wasteful consumption and consumerism. The supply chain of goods must include parallel running reverse salvation chain to collect the discarded material. This can be done by innovating and organizing the model for scrap industry.

How innovation can solve economic issues at micro level.

Strategic Indicator Factor Scope for Innovation in strategy Research & Efficiency levels of energy Expanding knowledge base and developing development consumption new and improved products. New product innovations can reduce the cost burden from a strategic model by decreasing the demand for energy. This is explained in the below cases: Case 1: Innovating efficient lighting systems (Refer Table-1) Case 2: Innovating Architecture designs for self sustained cities.

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Centralized development model has led to rise of mega cities at the expense of rural areas. This resulted in high levels of unemployment and poor quality of life in rural India and large scale migration of the population to big cities. This migration is a result of lack of sustainable agriculture in rural area. Hence we need to look for decentralized model of development successful strategies. A sustainable city can feed itself with minimal reliance on the surrounding countryside, and power itself with renewable sources of energy. It involves a city designed with consideration of environmental impact, inhabited by people dedicated to minimization of required inputs of energy, water and food, and waste output of heat, air pollution - CO2, methane, and water pollution. Examples from around the globe United States: Coyote Springs Nevada largest planned city in the United States. Denmark: The industrial park in Kalundborg is often cited as a model for industrial ecology. India: Manimekala is Hightec Eco city projected in Karaikal. It will be first of its kind in South India. Table 3

Case 3: Alliance to Save Energy (India Watergy-Program) (Watergy =Water+Energy) This innovative strategy led to the creation of an Alliance to Save Energy, in partnership with the U.S. Agency for International Development. The alliance is designing sustainable Watergy solutions for municipalities to take advantage of opportunities that reduce energy use, water waste and costs, while at the same time improving water services. The approach is to enter into partnerships with state-level urban development agencies, in parallel with interventions on the municipal level. (Refer Table-2) Strategy formation encompassing Global Trade partnership: Demand and supply patterns Huge scope of innovation in Supply Chains is feasible to optimize the transportation of goods and to collect & salvage the scrap. Efficient trade partnerships do contribute to strategy and make it sustainable by reducing inflation and fluctuation in prices by ensuring timely supply of commodities. Example: ITCs e-Choupal agri-business strategy for rural communities ITCs Agri-Business Division, has conceived e-Choupal as an innovative and efficient supply chain strategy aimed at delivering value to its customers around the world on a sustainable basis. It leverages an innovative IT model to virtually cluster all the value chain participants. It unshackles the potential of Indian farmer who has been trapped in a vicious cycle of low risk taking ability - low investment - low productivity - weak market orientation. Such a market-led business strategy can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher incomes, and enlarged capacity for farmer risk management, larger investments and higher quality and productivity. This sustainable trade model has led to a growth in rural incomes and will also unleash the

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latent demand for industrial. This will propel the economy into a higher growth trajectory.

Strategy formation encompassing Education and Human Resource Development

Education for Sustainable economic Development (ESD) is the practice of teaching for sustainability. UNs Agenda-21 was the first international document that identified education as an essential tool for achieving sustainable development. On similar guideline a country can innovate its education system to design macroeconomic strategies as per the changing social and economic needs. Few methods that have undergone strategic innovations are: Liberalise and deregulate the education system to encourage promotion of new schools, colleges, vocational and other institutions of higher education. Central and state government should change their roles within the education system, reinventing themselves as facilitating and supervisory organisations. Devising a common schooling system and updating teacher training curriculums. Using computers and technology - Indias Rs. 3 K tablet, is such an innovative concept. Innovation in education For capacity building (i.e. creating awareness) in the young generation, MOEF has designed a strategy called a National Green Corps (NGC). This provides opportunities to children to understand the environmental issues through school eco-clubs. During the tenth plan, 50,000 schools are expected to participate in NGC related activities. Moreover, 3000 eco-clubs have been set-up in schools in MOEF assistance. Strategy formation encompassing Tourism

Strategic Indicator Tourism

Factor Number of domestic and international tourists

Scope for Innovation in strategy Relevant contributor in an economy. Tourism model can be innovated to increase the revenue out of this sector.

Example: French Agency for Tourism Engineering (AFIT) The French tourist industry has followed an innovative strategy by redesigning the model and developing the infrastructure to support this sector. The AFIT undertakes several dozen new initiatives a year. These initiatives are organised according to several main lines of approach: Understanding of customer bases and activities. Public management of tourism. Development of tourism projects. Marketing of tourism supply. General perspective Strategic Indicator Factor Sustainable Public Inflation rate Scope for Innovation in strategy Creating provisions for cushioning high and

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Finance Employment

unanticipated inflation. This includes innovating warehousing and cold storage infrastructure. Debt to GNI ratio, High debt ratio is an indication of unsustainable Labour productivity public finance and a rise in labour cost decreases and unit labour costs international competitiveness. Innovation can be done in the manufacturing processes to reduce the production cost and hence achieving sustenance.

Lopsided strategies in industrialisation have created significant challenges for managing pressures on resources. An example of unsustainable strategy of economic development is the green revolution, which made a beginning in 1966 and by 1985 it had reached saturation level and has been seeking a new direction. Water depletion in the tube well irrigated lands and water logging in the canal irrigated ones have emerged as serious problems. Later this was followed by providing free electricity to farm sector. It was expected that it would increase the development of the agriculture sector, but this unsustainable strategy disrupted the entire economy at the state level and the consequences have spilled over to other sectors. Recognizing these challenges the government of India has articulated the National Environmental Policy (2006) which calls for a fundamental shift in the priority given to the environment and the regulatory approach to environmental management. Sustainable agricultural strategies have led to the innovation of practices under the organic farming. Various innovations in this sector are: Breakthroughs in Irrigation Technology (Sprinklers, Drip, Microdrip methods) Breakthroughs in Food Processing and Handling industry. Conclusion The long term solution to the unsustainable strategies is therefore to move beyond the "growth at all costs" model to a model that recognizes the real costs and benefits of growth/change. Hence innovation on various fronts to develop sustainable strategic models is the way ahead. This ensures to the degree possible that present and future generations can attain a high degree of economic security and achieve democracy while maintaining the integrity of the ecological systems upon which all life and production depends.

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Changing face of Consumer goods and Retail in volatile times

Esha Sharma- MDI Gurgaon

Changing face of Consumer goods and Retail in volatile times The year 2008, marked with the financial crisis not only has shaken the consumer confidence in the Governments, businesses and economy but has also shown a change in the consumer behavior which has thrown up challenging expectations in front of the consumer goods and retail business. Although we have surpassed the crisis, we are left with huge debts, sluggish growth and a fundamentally weakened financial sector. The impact of these changes on how the consumer companies will create value and by how much they create will be paramount. Such turbulences only make the companies revisit their business strategies for value creation, rethink their targets and revise their strategic planning to contain the risk. The following are the major after effects of financial crisis on the investors or promoters: - Increased sensitivity to risk - Emphasis on value - Focus on Value- based investment strategy From the perspective of the consumer, the companies should work on the following dimensions: Shorter cycle times for innovation and imitation: Considering the changing consumer behavior, retailers are cutting on the SKUs and reducing the merchandise on shelf, in such a scenario brands should invest on packaging, price points and customer touch points to increase the brand recall. Different strategies for different markets/ geographies: In the developed markets, due to the drastic slump in the growth, the markets have become saturated; capturing the market share should be the point of focus. This can be achieved by reducing the costs through efficient supply chain, changing the layout and working on different promotional schemes. While on the other hand, in the emerging markets, the demand is still rising, so the companies should focus on creating a pull factor in the business by playing

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with the 4Ps of marketing efficiently. The bundling of the products, freebies, discounts and promotional schemes can play a major role in emerging markets which have become more oriented towards value for money. Use of IT in value creation: Considering the abundance of options in front of the customers together with sluggish demand, it becomes really challenging to target the right segment, convert the prospects into customers and finally customers into loyal clients. In such a scenario, IT plays a very important role in creating numerous touch points through mail, newsletter, SMS and targeted campaigns. The use of business analytics can equip the retailers in a fluid and rapidly evolving environment, the ability to analyze and adapt quickly can be competitive edge to the retailers. Gear up for competition against innovative business models: The post crisis period is donned with increased use of Internet, Social media, Reviews and Online Advocacy marketing. This has led to new business models followed by companies like Amazon which is increasingly able to deliver orders without charging the shipping charges, FlipKart offering pay on delivery; this poses serious challenges to the brick mortar companies. Furthermore, retailers have a chance to make the experience of the customer pleasing by increasing customer touch points in order to improve the brand recall. Advocacy marketing in the Virtual world: With the widespread prevalence of digital revolution, companies can manage its relationships with suppliers and customer very well. The influence of advocacy is playing an instrumental role in any and every purchase of products. Now, it is at the disposal of the company whether it uses the power of advocacy in creating long- lasting competitive edge by transforming recommendations and reviews into rich and fruitful relationships. The most attractive point about advocacy marketing is advocates increase in geometric progression. The role of advocacy is not just confined to writing reviews about the products but also promoting the products, rescuing the inferior products or services, generating ongoing conversations between companies and customers. But advocates can continue with their conversations only when the companies come up with new deals, new product lines, brand extensions or may be new campaigns. This implies companies need to keep feeding meat to the infotainment hungry customers. Investment challenge: I think a public consumer company also has aspiration for the kind of shareholder returns that they hope to deliver. They have a certain amount of capital, in the form of companys cash flow, cash on hand and access to debt, to invest in order to generate returns. In order to grow the economic value of the business, they can invest in business units, functions or other operating units. Leadership by example: In the turbulent times when the foundations of the consumers trust are shaken, we need to look beyond the negative connotations, predictions and fads. It is crucial for any organization to understand the initiative taking and risk taking attitude of its leaders in restoring confidence and revitalizing organizations. I think leadership by example has the biggest impact on the peoples performance. One cant change peoples behavior by just telling them, they need to be shown in practice. Moreover, a lot has been said and done regarding the organizational values, but very little on personal values which have a much more direct impact on the employees. The leaders in any organization should get clarity on their own values and principles so that they can show full commitment towards organizations during times of crisis.

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Measuring and Analyzing: Apart from the benchmarks set by the companies, the consumer goods and retails firms can also set their own metrics like sales turnover per employee, lead conversion per salesperson, performer of the month etc. in order to boost the motivation level of employees and also to help the management keep an eagles eye on the market dynamics. KPIs arranged in a Balanced Scorecard can help the business in managing its performance during a financial crunch. Personnel cost management and innovative pay models: Whether the companies will be adopting flexible or a restructuring approach, they can definitely take steps like postponing tenure based hikes depending on the market conditions. Sustainable implementation: Culture becomes the most important thing during turbulent times. It can act as glue that can hold company together and they should focus on honesty, loyalty and collegiality and soliciting the support of employees and unions. The times to come will reveal the fruits of the efforts put in by the consumer goods and retail companies.

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CONSILIUM
Consulting Club: Grooming "The future consultants" at FMS
The Consulting Club is a student-run organization with the agenda of liaising with Global Consults to increase their presence at FMS, while working towards preparing the students for a career in consulting. In addition to providing practical experience through workshops, guest lectures facilitation, the Club serves as the nucleus for pioneering strategy games and consulting projects and has developed a reputation for unmatched innovation, with activities spanning several spheres like Management Consulting, Risk Advisory, Process/Operations Consulting, IT Consulting, Benchmarking Advisory.

THE CONSULTING CLUB

Email: conclub@fms.edu http://www.fmsconclub.com/index.html

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