Random Thoughts - Amrit

Book Review- Halo Effect

2012-04-19T08:18:00.002-07:00

Halo Effect

By Phil Rosenzweig

The book talks about how different management gurus point to high financial performance of a successful company and then EXTRAPOLATE it to believe high on other counts – strategy, values, people and leadership. The author points out that our study of the successful companies is deluded based on HALO EFFECT. The author pokes fun at bad science of the management world and believes there is no publicly available secret to a successful company. In the preface the author writes “Most management books try to answer the first order question: What leads to high performance? This book sets out to answer- Why is it so hard to understand high performance?” Towards the end the book sets out to give some principles which are not guaranteed source of high performance but leads to a more thoughtful approach.

The book in multiple chapters take case studies of multiple companies whose policies were lauded when they were successful and then ridiculed for poor performance when they started showing losses - Lego (Danish toy company), Cisco, ABB, Intel to name a few.

So what exactly is Halo Effect – it is a tendency to make inferences about specific traits on the basis of general impression. As author explains in one of this example- George Bush’s rating rose after Sep 11 attack as country stood by their President which is ok. However, on a question related to handling of economy his rating increased from 47% to 60% as well. Now whether his handling of economy suddenly became better in weeks after Sep 11 is a question mark. The American public conferred a Halo on their President and made all favorable attributions to him. In business there are HALOS every where – in people, in leaders, surveys. When a company's sales and profits are up, people often conclude that it has a brilliant strategy, a visionary leader, capable employees, and a superb corporate culture. When performance falters, they conclude that the strategy was wrong, the leader became arrogant, the people were complacent, and the culture was stagnant. In fact, little may have changed -- company performance creates a Halo that shapes the way we perceive strategy, leadership, people, culture, and more.

In the appendix of this book there are tables showing the performance of the companies studied in "In Search of Excellence" and "Built to Last", two great management books of their time. It is interesting to note the difference in performance in the years before and after these studies.

Overall, highly recommended!

Nokia abandoning Symbian for Windows Phone

2011-05-10T08:06:00.000-07:00

It is interesting to read that Nokia is abandoning its mobile operating system, Symbian, for competing Microsoft's Windows Phone (See - Sinking Nokia Prepares to Abandon Symbian for Windows Phone) Both Nokia and Microsoft believe that by combining Microsoft's 'excellent' user experience with Nokia's 'excellent' hardware, they could be in a position where they can compete with iPhone and Google' Android. Well, makes sense :-), especially, when both these companies are not doing good in mobile market.

Personally, I think the most important thing that these companies have to realize is how soon can they build a community of 'free' programmers who would be willing to build mobile apps. The reason for success of iPhone and Android to a large extent has been because they have been able to position themselves as an excellent platform and monetary tool to programmers world-wide.

Indian domestic market- Numbers for Obama to look at

2010-12-20T00:11:00.000-08:00

While Obama is putting up policies for preventing any outsourcing to non-US company, a look at Indian IT domestic market would show that most of the work is being done by IBM with govt. being the major customer for IBM.

Reference - Indian Express

'Extreme Offshoring': Guess whats this?

2010-09-03T09:34:00.000-07:00

I don't know why some brands have a penchant for creating new words ! One such new word added to dictionary is "Extreme offshoring" used by Infy in its latest press release Infosys plans 'extreme offshore' model to tide over visa crisis.

Well, after going through the news article and subsequent googling, I figured out its nothing more than simple off-shoring, that is, moving jobs to offshore locations.

Well, probably I should put this word in my sales presentations :-)

Digital fasting - required?

2010-09-03T08:10:00.000-07:00

'Digital fasting' is a recent term which refers to withdrawal from all online identities, like the ones on facebook, orkut, blogs and twitter. Contemplating digital fasting: How much Internet is too much? talks about this recent trend in detail.

Knowingly or unknowingly, all of us are addicted to internet and our online presence. Personally, I don't see a problem in this. All web 2.0 tools are a good way to keep connected not only more frequently but also cheap (compare the price of a SMS to an international friend vs the cost of dropping him an elaborate e-mail). Blogs like this one are an important part of a virtual identity and a way to connect with unknown.

I guess the whole problem is one of 'excess'. People start their day with Facebook and twitter with updates as unimportant as "I hv got up" to "hate going to loo" with a friend list that responds to such tweets or updates ! Obviously, the time saved from such 'excesses' can be better utilized in making a face to face connection and face to face discussions.

True cost of hedging

2010-07-24T12:28:00.000-07:00

An interesting article from McKinsey on hedging (The right way to hedge) tells that apart from general buy and ask spread cost that's associated to hedging, there are more indirect cost to it as well which needs to be considered. The following exhibit shows the other variables.

The details of what these indirect costs mean and what should the overall strategy for hedging should be has been discussed in the article.

An Intro to Social CRM

2010-07-24T11:26:00.000-07:00

In nutshell, Social CRM adds the 'social' angle to traditional CRM. 'Social' means use of web 2.0 concepts such as blogs, wikis, social networking, twitters etc. Social CRM does not replace existing CRM efforts – instead it adds more value. In fact, Social CRM augments social networking to serve as a new channel within existing end-to-end CRM processes and investments.

For a company, it means -
1. How it intends to participate in the ongoing conversations taking place in the industry.
2. How it embrace non-traditional influential people like popular industry bloggers, and social sites on the web frequented by audience.
3. How it engages in discussions on social networks to help build the kind of reputation needed to become a valued member of the online communities important to the business.
4. How it adds information from the social network to find out how successful a campaign is running and/or the chances of an account success.
4. How a company uses customer feedback to improve existing products and find innovative ideas on new ones.
5. How to respond to customer tweets in real time and also incorporate them into the knowledge base as well as share them with partners

A more formal and high level representation of social CRM is explained in this diagram from Deloitte.

In the long run, I believe, social CRM will likely just become part of CRM and no distinction will be necessary.

Arvind Eye Hospital- another innovation

2010-07-24T08:21:00.000-07:00

Arvind Eye Hospital is an example of how low cost, self-sustainable CSR (corporate social responsibility) models can be built. I remember Arvind was my first case study that I deliberated upon in my MBA program at XLRI. Today's concept of CSR is not about doing a charity which is funded by big corporate houses but one where a corporate provides a kick start and then the whole model works on its own to generate money for itself and serve the cause of society. There are number of examples of such CSRs. Coming back to Arvind, for people unfamiliar with this name, it provides free and paid eye care facilities where the paid eye care subsidizes the free. The health-care facilities at the hospital is world class and there is no difference between whats available to paid patient and to free. The hospital also runs manufacturing facilities where they manufacture glasses which is one-fourth the market-price.

The latest innovation from Arvind has been low cost maintenance of high-end equipments. These equipments were traditionally managed by costly technicians most of which took up contracts of similar equipments in an area introducing delays in servicing in case a complaint arose. Arvind started training some low-end support staff of their hospital leading to most of the maintenance work being done in-house than outsourcing it. As the word spread, more such hospitals from India started sending their folks to Arvind for training and soon Arvind had a dedicated center for training. This center today trains people from other third world countries too including Vietnam, Nigeria etc.

I would suggest readers to read more about Arvind. Obviously, there is more to read and learn from such CSR models.

Banks going forward + Links to previous article

2010-06-26T07:11:00.000-07:00

An article on how mobile banking is playing an important role in getting more financial inclusion for the people has appeared in HBR. See - Do We Really Need Banks? This article talks about the m-Pesa concept which I had blogged a while ago. See this - m-banking for the BOP.

Reliance in Shale Gas - Acquires US Co. for 1.3 bn USD

2010-06-24T19:19:00.000-07:00

I had blogged a while ago on the Shale gas technology and how is it gonna be the future of oil industry. (see Shale Gas Technology ). The announcement from Reliance Industries Ltd. (RIL) for buying of 45% share in Pioneer Natural Resources, a company involved in shale extraction, for $ 1.3 billion gives some credence to that. This comes close on heels of similar acquisition by RIL for $ 1.7 billion in the another US company's shale-gas assets in Pennsylvania.

The reason for sudden interest for RIL in such technology is probably because India supposedly has lot of shale assets and as this technology matures (the cost of extraction gets cheaper), a petrochemical company like RIL would be best suited to exploit the situation.

IT companies and calculating environmental impact

2010-05-28T05:31:00.000-07:00

Typically for an IT companies, the impact to environment from their operations or products is relatively very low. Whatever it is, comes from following -
1. IT Servers and user computers
2. Facilities/ Offices
3. Use of products (like some hardware) at customer' end

Look at these links from leading IT companies on how their operations cause environmental impact and what steps have they taken to mitigate the same -

1. Apple's environmental impact

2. SAP and Greening of Service Business

Wazup with UID - Updates

2010-05-26T22:28:00.000-07:00

I found an interesting article which gives an update on UID, one of the most ambitious IT project of Govt. of India. Details can be found here --> UID Round-Up: All The News on AADHAAR : For IT, Against It?

Some keywords from the article- Ernst & Young, MindTree, 3000 crores, 600 million Aadhaar numbers, finger printing, iris scans, government kiosks, Citizens against UID

StanChart IDR - Money raising as well as branding

2010-05-24T04:53:00.000-07:00

London based StanChart' IDR (Indian Depository Receipt) today came out with an issue for raising money from Indian market. The bank is offering a price band of Rs 100-115 per IDR and 10 IDRs would map to a single share of the bank. At Rs 50 per USD simple conversion, this maps to Rs 975-1125 as premium for a single share of the bank.

The issue from the bank which operates as a branch in India and not as subsidiary is first of its kind issue of raising money by a foreign company in India. Once this is complete, this should become a trend setter and open up similar issues by other companies wishing to raise money. This hopefully would improve the overall image of Indian market in global landscape.

Besides raising money for the bank, it serves as a good branding exercise for the bank too. With Government inching ahead with plans to liberate the financial services industry, this issue would help bank establish a more market-visible commitment to Indian market. This should also help Indian people see the bank as a more trusted option for savings and investments.

Few more details about StanChart Indian operations- The bank’s profit in India rose 19 per cent to $1.06 billion (over Rs 4,600 crore) last year, contributing 21 per cent of group earnings. The Indian operations rank fractionally behind Hong Kong as the biggest profit contributor. Most of the Indian earnings came from wholesale banking, where profits grew by half to $1 billion while consumer banking, which had been hit by bad debt, declined around 25 per cent to $54 million (around Rs 250 crore).

Blog has a new URL

2010-05-24T02:52:00.000-07:00

I bought a new URL for my blog yesterday. So from now on, you can access my blog as either of the following-
1. http://amrit-singh.blogspot.com/ (Existing)
2. http://www.amritpalsingh.com (New)

Kites is such a disappointment

2010-05-20T18:25:00.000-07:00

Ah, Kites.. first I dont know why is this name ... except that I got to see some kites flying as the movie began, there was no co-relation with the movie story line..

two, this movie is such a bore .. unless u just recently got in love and have 'filmy' notions about romance, u wud find for most part, this movie a complete dumb ! Characters played by Barbara (Linda in movie) and Hrithik (J in movie) fall in love for no obvious reason .. and no, its not love at first sight or something of DDLJ types, the guys just fall in so called 'love' .. and then they keep fighting the world to keep together their love.. some of the action scenes look so childish.. remember all those 10 cars chasing your car and u making them fall over each other types.. or the ones where gun shots are fired and u wud escape unhurt .. oh, let me mention comedy too.. theres just one scene which tries to make u laugh.. where Linda playing a Spanish girl trying to speak Hindi with 'mein ullu ki pathi hun'... again one of the ideas picked up from some old movie..

three, things that u wud probably like.. dance is good.. songs are too.. US and Mexico or wherever its shot, the scenic beauty is awesome... Barbara's smile looks good and so does Hrithik's toned body ....

To sum it up, I guess the story line has taken its toll on the movie and taken its sheen away...The entire movie looks like a collection of few short stories picked up from old movies with predictable love, action, comedy scenes .. Its like selling a product in market with nice packaging, good advt. for promotion, discount to traders and all but the product doesn't do what its supposed to. My rating for this movie would be 1.5 out of 5 of which 0.5 is just for Barbara ! :-)

I am with Adobe on Flash vs Apple case

2010-05-18T03:32:00.000-07:00

Ever since Apple didn't come out with Flash support on 'i' products namely iPhone, iPad etc., Adobe has been fighting its case vigorously for its presence on these gadgets. Recently, Adobe has launched 'I love Apple' campaign as well highlighting its arguments. The reason for all this comes from losing market share in the mobile space for Adobe. Apple too has posted its arguments here -> Thoughts on Flash.

Broadly, the arguments are on these lines-
1. Closed vs open standards
2. Support for touch screens
3. Security vulnerabilities
4. Flash vs H.264
5. Performance

Well, I am not a techie (as in one who has worked on Flash or iPhone development) to understand lots of these stuff but from an end-user, my point is that I don't care if Flash is 'bad', I want it to be running when I buy an Apple product ! Flash has been in internet for a while and a world without Flash is hard to imagine. I wouldn't want myself to be constrained from viewing certain website content just because my device doesn't play it.

Even if we assume that Flash has poor performance and is vulnerable, we still need to give the Web world enough time to move to a new standard or technology. Stopping support for a technology just because one has the power to do so is not ethical.

Shale gas technology

2010-05-12T09:48:00.000-07:00

My friend from XL pointed me to this article on Shale gas (WSJ: Shale Gas Will Rock the World) and how it is going to be the future of gas extraction technology. Readers interested in learning more about this should read this article as it provides an interesting view point of how this balances out the world (li'l exaggerated though). More details are available on wikipedia: Shale oil extraction also.

The biggest problem per me with this is the high cost of oil extraction which is sustainable only when the prices of oil are in the range of $90 plus per barrel and the environmental impact of polluting water when the gas is taken out.

International travel and people culture

2010-05-10T10:15:00.000-07:00

Somethings never seem to change. I traveled to US last month and noticed the same odd things that give a bad impression to the country and its people culture. See a sample of what we are good at -

Rushing to get into line the moment boarding announcement is made irrespective of the fact whether our seat number is called for or not.
Using the maximum capacity of our hand bag to our advantage and get in whatever we can in that bag.
Occupying not only our luggage compartment but also making sure that our neighbor's is occupied too.
Once on board, ordering for whiskey, scotch or beer whatever the airline has to offer for free and then drinking it to the maximum.
Belief in the fact that announcement for cell-phones turn off when the plane takes off or lands is something that is to be ignored.
Cribbing about anything and everything - so, no matter if we had to stand for half hour at New York for security checkup, we would crib about standing for the same time for immigration here.
Getting in some reference of higher up to allow for expedited immigration, quick baggage clearance, bringing in items with value higher than allowed by customs, so-on and so forth.

Guess, there are many more items to the list which can be added. The idea for me is not to criticize something but to open up a channel for introspection !

UPSC civil services results- Source of inspiration

2010-05-06T21:08:00.000-07:00

This year UPSC Civil Services results are a source of inspiration on at least two counts -

One, a candidate from Kashmir who had lost out his father and brother to militancy made to the list as topper.

Two, the percentage number of candidates who attempted more than once to clear the exam. Among first 25,

six have made to the merit list in their first attempt - 24%
four in second attempt- 16%
eleven in third attempt - 44%
three in fourth attempt- 12%
one in seventh attempt - 4%

God, and how soon did I give up !

McKinsey and consulting

2010-05-06T20:34:00.000-07:00

I have high regard for consulting companies because they employ the best of talent. Not only in India, but world over best b-school grads' first choice is a consulting company and McKinsey tops the chart. Yet, looking at articles on McKinsey Quarterly often makes me wonder is this what they do. For example, look at this article "Three trends in business-to-business sales" - it talks about the following trends in B2B sales (abridged for copyright issues) -

First, customers have become more demanding. Second, B2B companies are exploring lower-cost ways to make clients happier and to generate sales growth. Third, B2B companies are making smarter use of customer data to predict behavior, drive sales, and deepen relationships.

Now, except for second point what's new in this? Customers have always been demanding, every basic sales and marketing book would tell you that. And which company doesn't analyse customer data? Again basic marketing book would tell you about this. Well, McK has figured this out by talking to senior executives with 150bn USD combined B2B sales. Come on McK, tell me something new !!

Greece Debt Problem- One of Solvency

2010-05-05T20:26:00.000-07:00

Well, this was gonna happen. During recession most government across the world followed Keynesian economics of boosting growth by spending more. To finance such spending, governments borrowed heavily from the market. And when the government cannot repay back, it becomes a problem. That’s what has happened to Greece.

To summarize in financial terms, the Greece debt problem is one of solvency and not of liquidity. Picking up dictionary meanings for these-

Solvency comes from Solvent which means a liquid substance capable of dissolving other substances, in a way, which in finance would be like something that can help or dissolve obligations.
Liquidity comes from Liquid which means something fluid that has a property of flowing easily, which in finance would be something that can easily be liquid like.

Elaborating more and relating to Greece situation this would mean that the Government’s balance sheet had more of liabilities than assets and it was in a situation where the interest to be paid on loans was higher than receivables for the government. That made it insolvent. Government could have still converted most of its liquid assets into cash (which is liquidity) but that would not have solved the problem either.

Thoughts after The Great Indian Butterfly

2010-05-05T19:45:00.000-07:00

I just completed watching movie The Great Indian Butterfly. Well, if you leave all the name calling in this movie aside, this movie has wonderful message of finding the happiness within oneself. One of the characters in this movie says we have a habit of turning away the peace when it knocks our door saying we are looking for peace. So true and relevant ! The protagonists in this movie are characters just like you and me probably, ones who are so busy and engrossed in their professional lives and successes that they hardly have any time for each other or for themselves.

Well, as I saw the movie, thoughts ran in my mind of how I have been living so far, whether I truly enjoy what I do now, have I truly enjoyed what I have done so far, whether am I more proud of personal stuff or my professional stuff, where does it take me from here to and many others.

And, I remember watching a not very similar but a related movie, 'Dasvidaniya', while I was at XL which talked of defining 10 things that you would want to do before you die. The main character played by Vinay Pathak had a moron life until he discovered that he was to die and after which he set out to accomplish each one of his ambitions. Well, I cannot say that I have accomplished all 10 of my ambitions in life but yes, I did achieve one of doing a Masters in Business ! :-).. So at least, I am not gonna die disheartened !

Changing the flavor of the blog

2010-05-04T17:28:00.000-07:00

To my regular readers,

I am gonna change the flavor of the blog a little. I realized that probably I had more to share with my friends about what I am doing and what I feel rather than having just a kind of 'academic' blog. So while all my financial and social media blogs would continue, I would tend to write on more topics, somewhat more general in nature. If you don't like that, do let me know.

- Amrit

m-banking for the BOP

2010-04-05T22:37:00.000-07:00

The McKinsey article on financial services using mobile for the people devoid of banking, referred as unbanked, (Capturing the promise of mobile banking in emerging markets) provides an interesting insight to how mobile phones can be used to integrate a wider population into banking net. Not only social inclusiveness, it also brings in a large portion of informal money into the formal system thus helping the overall macro-economic indexes of the country. There are no two opinions on how banking inclusiveness reduces the risk to the saver and the borrower.

There are successful models on m-banking which have been used across the world, especially, by M-Pesa in Kenya and Smart Money and GCash in Philippines. Please see that m-banking here refers to micro-money on mobile, something of the range of Rs 50-500 in Indian context which is uneconomic for banks of today to work with. And that is where a mobile comes in to reduce the overall cost of banking. Given, the bank penetration rate in India at less than 25% compared to mobile penetration rate at 46%, Indian market can be an ideal ground for such mobile banking for the people at bottom of pyramid.

The model as followed by m-Pesa is illustrated below –

As pointed out by mcKinsey too, for the m-banking model to succeed, the provider needs to have skills in both telephony and banking. In India, people trust and recognize the mobile brands more than bank brands. So the initiative has to be from mobile operator. Given their reach, I personally feel, BSNL, Vodafone and Airtel could be possible players in this arena. And yes, first mover advantage should definitely accrue !

And before I end, a note on some progress in this area- Nokia Money has tied up with Yes Bank to provide such services. Read here -> (http://telecomtalk.info/nokia-to-launch-mobile-payment-facility-nokia-money/19875/). More details on what is on offer is yet to be seen.

Bond STRIPS allowed in India

2010-04-04T23:37:00.000-07:00

An interesting development has taken place in bond market in India. The RBI has allowed ‘stripping’ of bonds from April 1, 2010. For the uninitiated, STRIPS, or Separate Trading of Registered Interest and Principal of Securities (STRIPS) refers to a process of separating principal and coupon payments on bonds and turning them into zero-coupon securities.

The advantages that accrue from STRIPS is multiple – One, it allows corporate to plan their payments and receivables for required amount per the STRIP that they buy/ sell. Two, it allows for a more accurate price determination in the market as the strips provide liquidity. Three, there is no reinvestment risk arising from coupons.

To start with, here is what RBI has allowed-

1. 1.  Stripping for bonds with coupon or maturity dates of Jan. 2 and July 2, irrespective of the year of maturity.
2.  Minimum amount to be submitted for stripping will be INR10 million and subsequently multiples thereof
3.  Reconstitution, which is the reverse of stripping, allowed. That means the coupon and the principal are reassembled into the original government security.
4.  The stripped financial instruments will be reckoned as eligible government securities for statutory liquidity ratio (SLR) purposes.
5.  RBI will not charge any fees for stripping/reconstitution of Government Securities.

Among the existing bonds, the 6.35 percent 2020 bond and the 9.39 percent 2011 bond are eligible as per their coupon dates.