What is Competition? An Out of the Box Approach!

This article is taken from Wall Street Journal's business section where Dr. YLR murthy of IIM Bangalore has written this article. The article was written in February 2010 but could still be found be found relevant. It explains the market approach to competition in an excellent manner.
The article can also be accessed at WSJ's website. 
After reading this, you might well understand why red ocean strategy, i.e. fighting tooth and nail with your competitor military style is no more relevant. Threats from substitutes has forced many a companies to venture into blue ocean strategy, i.e. to create demand by launching innovative products, thus creating a market. More on this in later blog posts.

Who sells the largest number of cameras in India?

Your guess is likely to be Sony, Canon or Nikon. The answer is: None of the above. The winner is Nokia, whose main line of business in India is not cameras but cellphones.

The reason is that cameras bundled with cellphones are outselling standalone cameras. Now, what prevents the cellphone from replacing the camera outright? Nothing at all.

Try this. Who runs the biggest music business in India? The answer is Airtel. By selling caller tunes (that play for 30 seconds) Airtel earns more than music companies do by selling albums.

Airtel is not in the music business. It is the mobile service provider with the largest subscriber base in India. That sort of a competitor is difficult to detect and even more difficult to beat. By the time you have identified him, he has already gone past you. But if you imagine that Nokia and Bharti (Airtel's parent) are breathing easy, you couldn't be further from the truth.

Nokia has reportedly acknowledged that it missed the smart-phone bus. It admits that Apple's iPhone and Google's Android can make life difficult for it in the future. But you never thought Google was a mobile company, did you? If these illustrations mean anything, it is that there is a bigger game unfolding. It is not so much about mobile or music or camera or emails.

Image Credit: South Carolina State House Report
Have you noticed that petrol bills get higher and phone bill gets cheaper these days!

The "Mahabharat" (the great Indian epic battle) in this context is: "What is tomorrow's personal digital device?" And, a related question: "Who is my competitor?"

In 2008, who was the toughest competitor to British Airways for international flights in India? Singapore Airlines? Indian Airlines? Maybe, but there is a more interesting answer: The videoconferencing services of Hewlett-Packard and Cisco.

Senior information technology executives in India and abroad were compelled by their headquarters to use videoconferencing to keep travel costs in check. Of course, there could be a rebound in travel. But to think that the airlines will be back to their previous business post-recession is something I would not bet on. In the short term, yes. In the long term, it is a resounding 'no'.

Remember, if there is one place where Newton's law of gravity is applicable besides physics it is in electronic hardware, where prices consistently fall. Between 1977 and 1991, prices of the now-dead VCR crashed to one third of their original levels in India. PC prices also dropped. If this trend repeats itself, then videoconferencing prices will also crash. Imagine the fate of airlines then.

India has two passions. Films and cricket. The two markets were distinctly different. So were the icons. The cricket gods were Sachin and Sehwag. The film gods were the Khans (Aamir Khan, Shah Rukh Khan etc). That was when cricket was fundamentally test cricket or at best 50-over cricket.

Then came the Indian Premier League and the two markets collapsed into one. IPL brought cricket down to 20 overs, reducing the game to the length of a three-hour movie. Cricket became a competitor to film. Desperate multiplex owners requisitioned the rights for screening IPL matches at movie halls to hang on to the audience. If the IPL were to become the mainstay of cricket, films would have to sequence their releases so as to not clash with IPL matches. As far as the audience is concerned, both are a three-hour "tamasha" (entertainment). Cricket season might push films out of the market.

Look at the products that vanished from India in the last 20 years. When did you last see a black and white movie? When did you last use a fountain pen? When did you last type on a typewriter? The answer for all the above is "I don't remember!"

One final illustration. Some 20 years ago, what were Indians using to wake them up in the morning? An alarm clock, that monster of mechanical springs. It had to be physically wound up every day. It made so much noise that it woke you -- and the rest of the colony. 

What do we use today? Cellphones. An entire category of clocks practically disappeared without warning.

The boss of an IT company once said something interesting about the animal called competition. He said "Have breakfast …or…. be breakfast"! That sums it up rather neatly.

What is Wrong with Indian Aviation?

Looking at the content found relevant to aviation on mediawebsites these days, it really remains a question, what is so wrong with all these companies suffering loss. Come on, 2 of them earn profit, 2 are in near break-even points and 2 of them have almost vanished in air (oh, not in air!)

Primarily, there are 6 major airlines in India carrying passenger traffic. Viz., Air India, Jet Airways, IndiGo, SpiceJet, Kingfisher and Go Air.

Air India, being a government owned entity is no doubt in loss and would continue to be as long as it is with government. Kingfisher has not witnessed a single quarter of profit but has dare to touch new heights by introducing international flights and aplenty of in-flight entertainment. On the contrary, the more quarters people have, United Spirits and United Breweries experience a great quarter! :D

IndiGo, GoAir are not publicly listed entities and thus, all their profit reports are to be taken with a pinch of salt.

SpiceJet and Jet Airways, are on and off with profits and loss like heads and tails every quarter. However, I do not understand with all of them hiring IIM grads, what really goes wrong? Aviation is oft discussed industry in B-Schools across the globe. SouthWest Airlines and RyanAir case studies are something that every MBA grad has gone through.

Image Credit: The 2010 Photography Project 

Just to answer a simple question, what are the critical success factors for an airline? It would boil down to following things: 

Low turnaround time: i.e. The airlines should be in air for maximum time possible which brings in revenue. Minimum time parked in hangars at airports means lesser charge to be paid to airport.

Higher Occupancy: Yes, the aircraft needs to be in air for maximum time possible, but of course, with maximum passengers in it. If it starts flying with lesser number of passengers, imagine the kind of boomerang it would be in terms of revenue!

Sure, there are many other best practices that these airlines could follow learning from there western counterparts. But, it is more of a will than anything else!

Howsoever good practices these airlines would follow, there are problems in the external environment that they face. We must discount all Indian airlines for this. Their costs are definitely one of the highest in the world (jet fuel is costliest in India) and they are in pursuit of offering one of the lowest costs in the world.

Some best practices followed globally in the airline industry would be followed in a different article. However, having the same kind of aircraft, smart employee management, no complication of classes, minimum weight on aircraft, using smaller airports for saving cost (not applicable in India though), collecting waste from customers, one flight going to multiple destinations, low turnaround time, timeliness, high occupancy with help of codesharing, lease of aircraft, total productive maintenance, etc. would be helpful for any airline. I would love to elaborate on this in a different article.

BTW, based on any random parameters of your choice, who is your favourite airliner? I personally love Jet Airways. Be it JetKonnect, JetLite or the usual Jet Airways flight, I do not differentiate much. IndiGo is a public favourite but I find it the best one among all the low cost ones. Indigo and SpiceJet give a feel of travelling in a government state transport bus, Jet, Air India and Kingfisher give a very good feel and GoAir does not make you feel that you are travelling in a low cost carrier. But, Jet Airways gets the vote for service, convenience and one of the most aesthetically appealing (the image does some justice probably) air hostesses! :D

Why Working For An Indian Company Doesn't Work!

Most Indians have a dream to work for a foreign multinational. It is beyond understanding why is it really so?

Having experienced working in an American company and an Indian company, both publicly listed and more than $1 billion in turnover (revenue), I have my own unique experiences. I had discussed this with a lot of colleagues and I couldn’t really come to any conclusion. The only solid inference that I could come down to is, culture.

There is a huge difference between western professional culture and Indian work culture.

Western culture has historically been individualist and America is known for its very high level of individualism. I guess that helps a lot when it comes to professional sphere of life, ie work.

Innovation has historically happened from individualist societies. Individualist societies have also been one of the happiest countries in the world, whatever survey you might consider or experience empirical evidence for the same.

Image Credit: Bottoms Up!

Hence, I think it is pointless to understand when many Indians complain, or rather talk on stuff like, ‘the western world does not enjoy or they are not happy people’.

Just a few pointers on the basic stuff that I intend to write upon, the difference between American and Indian firms…

American/Western firms:

•        More importance given to a person’s professional life than personal life
•        Timings are secondary, work is primary
•        Flexibility when it comes to leaves
•        Objectivity everywhere
•        More respect for the individual
•        Efforts always on to make a ‘fun workplace’
•        Devoid of hierarchy
•        No issues with regards to compensation, pay on a higher side
•        International travel encouraged
•        Autonomy/decentralization; more power to employees
•        Work hard Monday to Friday
•        Firing the non-performers

Yes, for most who have been familiar to this debate must have realized that this is purely a contrast to what Indian firms are. In fact, just write the opposite sentence of what you read for American firms above and you will inevitably land up writing characteristics of Indian firms.

Take reputed Indian companies like Tata Group and Reliance, even they are no exception this behavior of Indian firms. A few have revamped their business processes and operations and are scaling to meet the standards set by foreign multinationals. But, they are worth counting on fingers, say like ICICI Bank. They are typically young start-up companies and are listed on NASDAQ or NYSE. A case in point is MakeMyTrip, a young Indian company consistently rated as one of the best places to work in India.

Now, I will elaborate on the characteristics of an Indian company…

Indian firms:

• ·        More importance given to a person’s personal life than professional life

In a collectivist society like India, people love to gossip, talk behind each other’s back. ‘Ah, you know she has an extra marital affair going on’ is more important for them than knowing how well performing and helpful the employee might be.

• ·        Timings are primary, work is secondary

You got to swipe in at 8:30 am in the morning and swipe out only after 6 pm in the evening. Those are the official timings and one has to abide by it, come what may. What happens in the midst of those 9.5 hours is not so important. Compare and contrast this with American firms where an employee’s presence for just 3 hours is also OK at times. But, get the work done, no other problems.

• ·        No flexibility on leaves

I cite the example of Tata group in this. Their leave system is just weird. There are only 12 casual leaves and 15 sick leaves that are allowed per year. Of course, one cannot apply for ‘sick leave’ in advance! In case of casual leaves, suppose there is a Sunday and Monday off. An employee decides to take 2 leaves on Saturday and Tuesday off and enjoy a long weekend. Going by the Tata’s ethics, it is not counted as 2 days off but 4 days off!! Lesser said, the better. Oh, and I forgot to mention, Saturdays are working days in Indian firms!!! God knows what they expect from their employees on the 4 hours of work on a Saturday.

• ·        Subjectivity everywhere

Guess this has again got more to do with the collectivist nature of society. A female boss finds a female subordinate smoking, drinking and coming to office in flashy hours. ‘Oh, she must not need a promotion ever, she is already rich enough!’ That is the kind of stuff that DOES happen.

• ·        Less respect for the individual

No matter what culture of the country says, life of an individual is not looked towards as something very important. He must say, ‘Sir’ to his boss or else face the problems of being in boss’ bad books!!

• ·        Efforts always on for a ‘dull workplace’

Everyone keeps a mask and tries to be serious in their work while in office. The fact of the matter is, it is pointless to expect employees to do some serious brain itching work for 9.5 hours a day in weekdays and for 5 hours on Saturday. Although employees may chitchat around, everyone is willing to show that we are serious. The boss will keep surfing internet for the entire day, but wants to keep a serious ‘computer face’ as if he is working on some complex spread sheets.

• ·        Hierarchy everywhere

The subordinate must say, ‘Sir’ every time or else he might face unforeseen problems in his life! The juniors get bored of saying the word, ‘Sir’ hundreds of times in a day. Compare and contrast with American firms, where the junior most 20 years old can address the senior 60 year old by his first name!

• ·        Pay less, pay less

The business communities are known for their stingy behaviour when it comes to paying their employees. American firms would simply pay more and save on attrition, employee insurance, training costs, etc. Indians firms love to lose their employees, waste time in interviews, searching for new candidates, etc. Most western firms pay higher and recruit less number of employees for more efficiency.

• ·        International travel!   :O  

Oh, it is such a high cost to send employees on an international assignment.  They would love to look at the cost, but not at the returns it could bring in return. Sending employees onsite to client locations in USA or other countries is discouraged at every possible junction!

• ·        Bureaucracy/decentralization

For any new proposal, say an outbound activity for employees, approvals are required from 10 different people. The appointments with them would take time, followed by everyone’s suggestion, budget issues and what was planned for say, 1 September would get executed in October last week. Red tape is so dear to hearts!!

• ·        Saturdays working

I suppose that speaks it all! Saturdays would have 5 hours of work where no one is in a mood to work. Virtually, nothing happens on a Saturday but employees have to come to office with restrained eyes and thinking about their friends working in American who are enjoying slumber.

• ·        Do not fire the non-performers

      Non-performers should not necessarily be fired. Instead, the people whom you hate, those who are in       bad books should be fired. Leave aside performance, that’s secondary. The senior and old people who are working from years or decades in a company should be promoted, leave aside the young performers. Respect to elderly, eh!!

Two Democracies Never Have A War?

The notorious North Korea and prosperous South Korea have come close to a war once again. This time, it is said that this attack is the strongest after their 1953 war..

Who is the culprit? That would be too broad a question to ask. In other words, who attacked first this time? If you are regular reader on geopolitical issues, it wouldn't take you much time to point out North Korea. Not because of notoriety, but it is the non democratic country between the two. If you observe of all world conflicts in the present as well as the past, one out of the two countries involved is a non-democratic country, owned by a ruler, monarch or a fascist. It is always this side that has got something to do with creating trouble.

To mention a few recent examples, Saddam Hussein when ruling Iraq created trouble for the entire region. Mahmoud Ahmedijenad is out there to create trouble for Saudi Arabia, Israel and US. Pervez Musharraf, in his time, created unnecessary tensions for India. In case of India china 1962 war, China was the authoritarian state.

So, it's time for North Korea to create trouble. It is an open fact their only motivation to live is for North Korean military and beating South Korea, as they got no other option.

Image from New York Times

The map above shows the island in red which was attacked (it is disputed), whereas the island with black plane, Inchon was the one where people fled.

"Never At War: Why Democracies Will Not Fight One Another" is an interesting book written by Spencer Weart explains marvelously why two liberal democracies never have war. Sure, there are exceptions as always. But then, th argument that one of the two countries is not indeed a democracy. That is specifically true in case of India Pakistan wars, where Pakistan did have a democratically elected person on power, but it was flawed. To be more clear on this, the way Democracy Index is calculated by Economist Intelligence Unit, there are many a 'hybrid regimes' where a namesake democracy exists but rule of law does not necessarily rule. Examples would be Russia, Pakistan, Turkey, Lebanon and Palestine where a democracy is on the cover, but ruler is different. The book gives excellent examples on wars fought in history, medieval era and modern era along with the voting rights of the people in these countries.

To get an alternative view, try reading the book, 'Democracies at War' which goes further one step and analyzes why democracies win 80% of the wars fought by them!

You might be interested in going for a Google search of why 'no two democracies ever had a war', I found the first page of ten results itself very interesting.

More interesting facts regarding this topic would be written in coming posts. So, keep visiting!