Grit and Steel

In India, the main headlines of all the major dailies have one story in common nowadays – it is the battle of LN Mittal and his bid to buy over Arcelor. It is indeed a very interesting story to follow, however, there are some twists have been tough to predict even for the best of the analysts.

The story has taken on a political agenda with the Presidents and Foreign Ministers of countries playing an active role in the debate. Arcelor believes that with the takeover a lot of jobs will be lost and there will be a lot of work that is exported to other locations. Mittal however claims that this will not happen.

What I want to focus on is the calls of Xenophobia and racial discrimination by certain parties. In business there are certain codes of conduct and principles that we think the corporates adhere to – let me tell you once and for all that this is not true. However, having said that I believe that the voices raised against the EU on the basis of xenophobic decisions is absolutely baseless.

Lets not forget that the Indian government has claimed that the EU nations, Austria and France, are refusing to cooperate with LN Mittal’s bid only because he is Indian. Baseless? I repeat, Yes – most definitely.

There are certain strategies that companies adopt to ease their bidding process – and L N Mittal, one of the shrewdest businessmen, knows the games he has to play. On knowing that Arcelor had rejected his bid – his first stop was the Government officials. The steel magnate already has a considerable leverage with the Governments and harnessing the strengths was his move to a war footing.

Considering the deal proposed is for the largest steel maker to acquire the second largest steel maker in the world – the transaction has rightly received much attention in the global media.

One of the cards played by the L N Mittal camp is the xenophobic sentiments forcing the EU countries to clarify their statements and probably stare a prolonged debate in its face.

The Simple Analysis – Mittal is very sure of the bid going through. However, I am tad bit more skeptical. With international steel companies coming into the fray and competition rising in the once slow growing industry, there is bound to be hurdles that LN Mittal and gang are going to have to cross. My gut feel says that it is going to be tricky issue with companies from the developing world supporting the LN Mittal bid and those from the developed world supporting the Arcelor camp.

I predict that the bid will fall through and Mittal will come back after some time to try and conquer the same bull.

Free-them

What are you reading at the moment? It is a Blog – my blog, The Simple Analyst. Blogging has been popularized as ‘One-Click Publishing’. Still seems rather abstract and seizes to convey the ‘real’ meaning and impact of this tool.

If you closely observe the rising popularity of this communication tool – you will notice that it has been used as a medium where an individual, group or anonymous characters can communicate with the external world – without biases and most definitely by standing judgment.

It is beautiful only because it’s the true meaning of ‘No-Holds Barred’ communication. It’s all together a different matter that even Blogging is censored in China. However, the world around us sees millions and millions of bloggers. We are a unique community where some are frustrated with today’s journalism, others are frustrated with their lives, yet there are others who are just waiting to open up to the world with the new found freedom. What ever the reason for starting a Blog, it is an inevitable evolution in communication.

What institutions need to understand is how to tap this growing medium. There are two facets to it – at least from viewpoint.

• One is an avenue to identify growing trends and


• The other is an informal method to disperse messages to various stakeholder groups.

If companies consider these two options and design effective strategies around them – we could have an all new way for organizations to communicate with their environment. Work Culture, Transparency and Flat organization structures will result from this yet-to-be-utilized communication medium.

The Simple Analysis – It would serve companies well to take notice of this trend and new found freedom of individuals. After all the company is a sum of its parts!

You Decide

India and China are two of the most populated countries in the world – and most articles today have these two countries as a subject matter. Caterpillar, one of the world’s largest Heavy Equipment Manufacturers has China as one of its Critical Success Factors.

It makes me wonder why such an impetus has been given to these two countries – and why this has happened. I think the first part of that sentence has been covered in an umpteen number of articles, interviews and debates – what interests me more is the reason why India and China have emerged as such super-powers. Are we in a position to explore it further?

Has the large population size got anything to do with the fact that these two countries have emerged as the most important economies of the world? It has to be said that greater the numbers – greater the variety. And if your strategy is to corner both the intellectual and non-intellectual talent of the world, it pays to have a great diversity in skills.

Yes, I know that the education system has a role to play in it as well – but I think that the diversity in skills added with the young population is a rather potent mix for any country.

However, what is interesting to study is the reason why China and India have blossomed. The Chinese government concentrated on working to build its own internal capabilities before extending its arm to the external world. The Chinese Communist government worked on reinforcing the infrastructure, software and technology for its own ecosystem before throwing open its door to the world albeit in a limited method.

Today, it has one of the strongest economic systems in the world and the country is enjoying rates of growth that are unparalleled across the globe. And mind you – it is not manufacturing that is the only booming sector.

Has the Communist – no one else has a view – System worked to the advantage of the Chinese economy? Yes it has its pros and cons – but is it the magic formula for the developing economies?

On the other hand if you look at India – it is the largest democratic system in the world. The Political System in the country is composed of a large number of parties and the entire political environment consists of small and large parties that are at each other’s throat to put their word in. This results in a lot of confusion and chaos.

However, when you compare the two economies – China has a distinct advantage over India because they spotted the opportunity and worked on building their own skills before offering their talent and skills to other companies. Is this the magic formula for up and coming economies such as Brazil, Argentina and the likes?

The Simple Analysis – I believe that a heightened sense of urgency and unequivocal support are most important for a common path to development. Whether you have a Communist regime or a democratic regime, one thing is for sure – You have to develop your basic environment before opening it to others. (I am well aware of the fact that this might be a controversial subject!)

The Tombstone Philosophy

The impermanence or transience felt in the present generation is nothing new to any one of us. Impermanence is omnipresent - in the growing middle class, the global economic situation, prices in crude oil and the lifestyle we lead. In this fast paced ever-changing life each one of us has set out to achieve our goals and ambitions.

The corporations that often push/pull the global economic growth line has similar ambitions to each one of us. Its simple formula for success is to source, at the lowest rates – human, monetary, natural resources - from its environment and sell them as finished goods and services to its consumers. This seems simple enough except when you take a moment to note the drastic rate at which man has ‘evolved’ or changed. Technology is responsible for the massive industrial explosion and the subsequent ever-increasing demand for resources. Progress has been at the cost of human relations, degradation of the natural flora and fauna, social conflicts, and economic disparities.

This has resulted in the birth of Corporate Social Responsibility (CSR) and Sustainable Management programs. Companies have been forced to clean up their act and do away with their ‘irresponsible’ and ‘unethical’ practices. There have been a lot of research papers and books written about this strategic transformation. CSR consultancies have sprung up in all parts of the world. This is the reality – a reality that is soon becoming an unofficial and unwritten standard or law. However, the wide scale integration of sustainability in organizational operations has been minimal and implementation has taken place at a speed that is wanting.

This perplexed me and I did some of my own research and subsequent concept building to decipher this slow rate of ‘CSR execution’. Using the information gathered and knowledge on the job, I came up with the concept of ‘The Tombstone Philosophy’.

The Tombstone Philosophy ‘is an attitude amongst the leadership that negates the need to integrate sustainable practices in organizational management until, the need is abruptly forced upon by activists or certain stakeholder groups.’

In the aviation industry Tombstone Technology is not a new concept. After an aircraft accident, research and development is kicked into high gear to make sure that the same type of accident does not happen again. Consequently the technology developed to prevent that type of accident is adopted and installed in all aircraft fleets and also goes on to become an industry standard.

The Corporate Social Responsibility ‘movement or integration’ has gathered momentum in similar fashion. ‘The Tombstone Philosophy’, as defined above, is an attitude shared by most companies and organizations across the world. CSR was an alien concept to the world before certain companies were pulled up for their irresponsible and unethical practices. Today, CSR is fast gaining space in journals, magazines and research centers across the world.

The incidence of Tombstone Philosophy has been diminishing and more companies have been initiating Social Responsibility programs as a risk aversion strategy. The Tombstone Philosophy is very much present even today, however it is being used to avert potential uprising that may result from the company’s operations. Are companies moving in the right direction? What would be the impact of social responsibility programs initiated as the risk aversion strategy?

Does it make business sense to alter a company’s perspective and view these initiatives as Sustainable Management programs that ensure long-term benefits and permanence for the organization? I am of the opinion that integrating Sustainability in an organization’s processes and technologies results in long-term benefits and assures permanence through continuous engagement with all of its stakeholders.

If this opinion is shared by organizations all across the globe the term Tombstone Philosophy will no longer be pertinent or relevant. But until then we can use Tombstone Philosophy as an attitude that still exists in the corporate approach.

Experience your Purchase

The Apple iPod is a rather interesting product for more than one reason. These reasons are why it has created such a media blitz and you see so many articles written about it. Sometimes you wonder if these articles about the iPod will ever stop. And then you see my blog which has a lot of articles about Apple as well. Why is there so much of a fuss?

It is called creating a positive ‘Customer Experience’ and this is soon becoming the differentiator in the already over-crowded and highly-competitive Consumer Electronics industry.

If you look at the iPod it is a rather simple design – minimilistic to be precise and the functionalities, controls and usability are not the best in the market. However, the over Customer Experience that it creates is unique in its offering of both the player and the iTunes service. The consumer does not need to bring in any other element creating a seamless and compelling experience for the consumer.

Ikea, the furniture major, is also another stellar example of a company that differentiates through Customer Experience. Walking into an Ikea store, the individual is transported into an environment that shows them what can be. Ikea stores are spread over a rather large area and they mock build-ups of living rooms, bedrooms and other parts of the home. It creates an experience for the customer – an experience that he wants to replicate at his own home.

With PC Majors such as Microsoft, Toshiba, Apple and others battling on the same turf as Consumer Electronic majors such as Sony, Panasonic and Philips – the differentiating factor of how well products perform will depend on the Consumer Experience that they create.

The Simple Analysis – I believe that this year will set the tone for the next 2-3 years where convergence becomes a reality in majority of the homes. Customer Experience will differentiate the heightened senses of success from the sore feeling of disappointment and failure.  

Rural Laurels

Mumbai is the Indian sub-continent’s Financial Hub. I am in this city today and when I look out of a rather glamorous building, I see never-ending traffic jams, people everywhere as if they were ants and poverty and slums.

It gets me wondering how such a disparity exists? On the one hand you have all the biggest companies of the nation headquartered in this ever expanding city and on the other hand you have people who are barely surviving. Yes, such disparities exist in even other countries – however, I was caught wondering why this happens?

Is it because not enough opportunities are available in the Rural sectors – which is why you have people moving away in desperation?

The government has various rural development initiatives in its ‘Five-Year Plans’, however there is still a LOT to be done. And the ‘global corporations’ of the world have to understand that this is where their next market lies. The rural market is overflowing with opportunities for the consumer packaged goods, retailers, manufacturers and other industries to establish themselves. This will result in the even-spread of the population of the country – rather than a ‘concentration of many’ in the metros.  

The Simple Analysis – I believe that the next 2 years is going to see a major impetus in the Rural Development initiatives of global corporations. Inventions and Innovations harnessed for the Rural community are going to used as learning for other markets across the globe.  

Customization at the Floor

Recently, I was on a mission to buy a suit – and what a tiring mission it was. I wanted to purchase a suit that was unique and not like that ones that everyone else wore to meetings, or the ones that my granddad would have worn to his meetings.  

I wanted a suit that was unique to me – and that got me pondering on the importance of a concept – Customization. Can companies that sell products to me customize their products to suit my needs? However, if they were to do that – then they would have to do that for all the consumers… hmm... Is that possible?

The answer is a resounding YES!! It is possible and companies today are doing just that. Supply Chains, Demand Analysis, Flexible Manufacturing and other such concepts and tools are being employed by the biggest companies to customize their products to suit yours and my needs.

However, what you and I have to keep in mind is that what I buy is NOT going to be the only piece in the world – at least not for some time. What this means though, is that I have the choice of buying a suit that is far less replicated than today’s designs. The manufacturer spends more of his time and money in understanding those small groups of individuals who share some common tastes or needs and customizes products to suit them.

The Simple Analysis - I believe that going forward companies will start initiating ‘Customization at the Floor’ – where products, just before they are sold, will be customized to suit the individual’s needs and tastes. However, don’t expect this to happen sooner than mid 2007 or 2008.

The Hotbed of Innovation

There is a lot of hue and cry about the emerging economies of India and China. An Indian myself, it always excites me tremendously to read such articles – aah!! That is what you long to read every morning – another article that emphasizes the great country that you belong to.

However, there is a reality that still strikes you when you are headed towards a state-of-the-art building in the Silicon Valley of Asia – Bangalore. That reality can be seen as a cup which is Half-Full or one that is Half-Empty. I see it as One BIG Opportunity that the ‘entrepreneurs’ of today have still not stumbled upon.

C K Prahlad in his book, ‘The Bottom of the Pyramid’, has talked about the potential that lies in servicing that part of the population that forms the greatest part of the country’s numbers – the so-called poor.

It is my belief that creating or customizing products for this large segment is where the next opportunities for global companies lie. I know that I am not talking about a prediction that will shock the world – however, it is surprising that not much is happening on this front in spite of all the excitement and possibilities. And I often ponder upon this – investment is being driven into IT and more IT and some more IT – but how about some for those entrepreneurs that have a plan to tap this segment. For one there aren’t many of these entrepreneurs!! They are a rare breed.

However, it makes most sense for the large companies in Consumer Packaged Goods (CPG), Manufacturing, Retail and Textile industries to pay serious heed to the individuals in this segment. New retail formats, clothing lines, product innovations and process innovations are waiting to be discovered. This is one of the biggest hotbeds for innovation in the future! Pay heed now or ‘follow’ someone else forever.

The Popularity Contest Goes To

Have you stopped and thought about something very simple – how do brand names come to define the product category? When you take Xerox as an example – the brand name has today become a generic term for the product category. I am sure all of us have asked for “one Xerox copy” of a document.

Similarly today we have ‘Google’ - the divine incarnation of what Search should be. When you have a question, query or a doubt all you have to do is log onto the web and ‘google it’.

I have often pondered why such brand names become the generic name for its product category. Most often – these brand names are the ones who have created a new market or a completely new business model. This is the one differentiating factor between super-star brands and followers.

Therefore does it mean that to be the next Google, Xerox or Scotch-Tape do companies have to create new business models? Yes.

The Battle for Business Models

As a business analyst it is important to understand the subtle seismic shifts that take place from day-to-day in the world of business. However, at times you come across a very subtle change that will drastically shift the way business is done in the future.

Some very fascinating examples come to mind when we talk about Business Model Transformation. Take the case of Google Inc. – the world’s largest search engine and among the fastest growing companies in the world. It is a company that has shown tremendous resilience and fighting power in the technology world. The dot-com bust has not slowed this company – in fact the growth has been witnessed post this period.

Google is a company that has defined a new realm. ‘Search’ had never been bigger than before the company came into the picture. Its search algorithm, a highly guarded secret, has been the corner stone for all its success. The efficiency, accuracy and comprehensiveness with which Google searches the web is unparalleled even till this date. However, the company’s shrewd business sense in creating a new market – Contextualized advertising.

It is no doubt that with the mountains of data being collected today, ‘search’ is going to be the cornerstone for most operations in the future. Whether it be sifting through data online or on your desktop, searching for places in the borderless world or searching for your favorite videos and books, Google’s much revered search algorithms play the most important role.

It is applying this very same technology to deliver targeted advertisements for its consumers. The advertisements bring in the revenues for the company. This sort of an application is that small seismic shift that is going to drastically shift the business models for the future.

Delivering highly targeted advertising that is contextually relevant to the search, has revolutionized the online advertising industry. In fact, Google has created this model from scratch. Today all its competitors from the largest software company Microsoft to the online portal Yahoo, are playing catch-up.

We have another stellar example in eBay. The company created the online auction market which has today, caught the fancy of most markets across the world. Online Business-2-Business (B2B) transactions were common place at the time of entry; however, eBay saw what no one else had seen previously – a new business model.

eBay was quick to realize the potential of creating a new business model that was also a service that customers were looking for. However, if eBay had tried to answer those needs through the conventional business models of those days – the venture would have failed. It was imperative for the company to innovate on the Business Model itself and not just the processes.

Business Model Transformation or Business Model Innovation is the Holy Grail that all businesses should be in search of. It is the emerging sphere within which all the biggest, smallest, and innovative and conventional companies are going to have to battle in. The rules of the game have changed from Product Innovation to Model Innovation. Top-Line growth for companies is going to come from creating new markets and new business models.

Process Innovation is only a step in Business Model Transformation. It is critical for the business to take a holistic view of changing the entire business model, if required, to address the customer’s needs. Business Model Innovation or Business Transformation holds the key to a new world out there.

They are coming for your Entertainment

It is interesting to note the developments that have been taken place on the PC and computing front. On the one end there is the Hardware – where players like Intel and Apple – have come together to co-create. And on the other hand you have software and internet players like Microsoft, Yahoo and Google who are trying to get your machine to play only their products.

There is also a raising debate whether Mac should introduce Dual Operating Systems – those that will support even the Microsoft Windows platform. Steve Jobs, the legendary CEO of Apple, has maintained that market share in the hardware space is not of the greatest concern for him. However, with the recent Intel tie-up does he intend to garner market share from the other players? It is a paltry 3% at the moment and analysts are of the opinion that if such a Dual OS was launched, it will result in greater sales of the Macs.

There is an alternate opinion which states that Mac should maintain its present business model but introduce its popular software suites – such as the iLife – for the Windows platform!!

These are two contrasting views however if one takes a closer look at the subtle changes taking place across the two dimensions of Hardware and Software – you will notice that all these big guns are targeting your ‘Entertainment Equity’. By this what I mean is that the focus has shifted from your workplace and casual computing needs to building a holistic and comprehensive entertainment solution for you and your family.

This is the next platform where the battle will rage between Microsoft, Sony, Apple, Google, Yahoo and other players. 2006 has already seen the Xbox 360 come alive and get cleaned out of the shelves just as quickly. The next awaited product is the Sony Playstation 3. There is a lot of expectations resting on the Sony shoulder to out-do the Microsoft challenger, however, MS has gone one step further – they have already introduced the Windows Media Center that has the capability to practically take over your entire entertainment needs.

Look out for a very ‘entertaining’ (pun intended) 2006. I predict that this is where we will see most of the action in the next 12-14 months!

The Uneasy Government

Governments across the ‘developed world’ are facing a rather unique crisis – unprecedented aging of the population. A majority of the productive European population is growing older and there is a minority of youth coming into the economic fore. This gives rise to a couple of rather daunting questions,

• With a minority of productive workforce on the lookout, how will Governments maintain growth in Economic productivity and GDP?


• How will the Governments handle the added levels of social services for its citizens?

At the forefront here is the looming talent shortage. Added to this is the movement of talent to Knowledge-Based industries. Growth and development of the markets are a concern for the Governments – whose own stability is a reason for anxiety.

I will cover this topic more in detail at a later date.

Technology connecting the World

Some very interesting figures that I read on a McKinsey Quarterly article.

12 percent of US newlyweds last year met online.
More than two billion people now use cell phones.
We send nine trillion e-mails a year.
We do a billion Google searches a day, more than half in languages other than English
Source – McKinsey Quarterly – Ten Trends to Watch in 2006

30000 feet and Rising

The battle for supremacy 30,000 feet above the air was hotter than ever in 2005. Airbus and Boeing have been fighting for market share to fly the skies, while the airline companies have been riding on the booming demand.

However, with December being one of the busiest months of the year, we have seen Airbus taking the prime spot by garnering majority market share over Boeing. It has bettered Boeing’s orders and deliveries.

One thing is for sure – we are going to see the fight go on through this year. And for us mortals, who sit inside the mechanical marvels built by the two companies, we are more than happy with the price wars that are a result.

There is always a lot more coming

Keep on a daily watch-out for more new and analysis from The Simple Analyst.