After long break I am back to blogging. It has been one full year now after my graduation and I must confess that graph of my intellectual curiosity is exponentially dipping with time. Unlike academic life, Professional life doesn’t give that luxury to experiment, learn & grow. The daily mundane task eats most of the time. But I have somehow continued my habit of reading universities blogs, business magazines etc which have been helpful to stay somewhat abreast with latest studies/researches, news etc.
Few days back I came across very interesting article in recent edition of HBR. Though I hadn’t been the big fan of HBR during MBA days but these days I do glance through the same. As always I found most of the articles uninteresting except one which caught my eyes. I had experienced the same in past one year. I can’t recollect its exact title but it was something like “Why are business leaders not ready to innovate pricing”. During MBA everyone is taught different methods of pricing (cost based, market based, value based etc.). Phew!! One year away from academics really makes it difficult to recollect all the jargons and methodology (Signs of becoming unemployable :( ).But just try your luck to implement one of them in real world and you will face the resistance. The same experience is narrated by the author.
I have read n number of articles and research in recent times on pricing in the recession etc (of course sources includes mother of all gas content Mckinsey & peers) but my success of implementing those or convincing people to do the same in my company is questionable. So why is this resistance? The fact is no one wants to take hard decision. No one wants to lose competitive edge and innovation can never come without risk of failure. Consider for instance IT outsourcing industry which went through the troubled times during recent crisis. Every CEO, CFO in their quarterly results were cautious and have made statements like we are experiencing pricing pressure and it has affected our margins by x basis points. But none of the analysts have asked them what they are doing to counter the same. Every company fears any change in their methodology might cause them to lose customer. But can’t there be win-win situation? There are such methods but companies are just not trying them. Why? Simply because they can get away easily and isn’t the matter of their survival.
Consider other industry where the case is not same-Telecom industry. Tata Teleservices came up with pay per second pricing. Was it good for the industry as such? Perhaps not. Was it good for the company? Questionable. Was it good for the customer? Certainly yes. So what was it that made Tata Teleservices to risk a change in pricing which IT outsourcing industry isn’t ready for? It was question of its existence in competitive market. In absence of any differentiation among players price is final weapon which they had and they used it. I am not here to justify their action or strategy but am providing only the situation when company looks for innovation in pricing.
Other situation when company is ready to experiment with pricing is when there is huge gap with demand and supply and its sellers market. Example of this can be realty pricing in Mumbai wherein developers started charging for built-up and super built up area and then it became norm. But such cases are not going to be more in future given nature of competition that exist today & our integration with global economies.
So what am I trying to suggest by these random examples. Put theory aside. In real world 99% of the company would resist any change in implementation of new pricing methodology until it becomes matter of its survival. This is hard truth. But given such situation arises in your industry would your company be able to suddenly come up with new pricing strategy or just wait for competitor to act and then copy if successful. Which one is good strategy? Latter can also lead to case where no one in industry is ready to risk itself causing industry wide slump (Airline industry). So isn’t it advisable to at least have alternate pricing strategies ready and tested so that it can be implemented any time. Isn’t it good idea to have dedicated team to look at innovative pricing models & be ready with its go to market strategy. I believe some more part of the R&D expense should be spent here. There is enough scope to learn from one industry and replicate in other. Why stick to well defined methodologies learnt in B-school or follow the market leader? Innovation in pricing is need of the hour along with product/service innovation. Corporate world please wake up!!!!
Finance in IT industry
This post is for all the finance graduates who are wondering about opportunities that are present for them in Indian IT industry. There is very less awareness about the roles for finance graduate in IT. It is common perception that only role available is that of business analyst who acts as domain expert for financial sector and plays key link between business and software engineers. This business analyst is expected to work from requirement gathering to testing. But this is just operational role from IT organization perspective. Of course then there are also roles which are present in any company irrespective of the industry like one of financial planning and budgeting etc. But other than these there are other exciting and upcoming areas which I guess should interest most of the finance guys and which are present in most of the companies which have attained certain IT maturity.I intend to just highlight this broad area in my post.
Assuming a finance graduate joins an investment bank/fund house; his success would depend on his ability to manage his portfolio of assets such that he provides higher returns to his clients. This requires skill-set that enables him to perform valuation of different available assets and which I believe is the one of the most difficult part of his job. So is there any opportunity for the such person in IT industry ? Is there anything which could be as challenging as this? And my answer is yes. In fact gravity of problem increases than in financial sector. There the aim is to do valuation of asset and manage portfolio of assets which are mostly tangible and quantifiable but in case of IT one must do valuation of services and manage portfolio of applications. This is certainly more difficult since its intangible. If asked to draw parallel with equity then imagine yourself trying to value equity offered by newly formed company in some very new industry with no existing comparables. Imagine if someone was asked to value google as company in say 1980’s. Yes now I guess one would understand the gravity of problem trying to value intangible service. So why is it required in IT to do valuation of services? Its answer is very simple: - for its existence. It is very common problem which many CFO and CEO face today. They unable to understand where does the money for IT go? And moreover what tangible benefits does IT provide to the company. If you put in more MBA terms how does IT help in increasing shareholders value? You may like stakeholder instead of shareholder then I am fine with it too!! The problem is more aggravated when IT is horizontal servicing different business units. No business units are able to determine financial gains from IT services and economic downturn like this certainly makes them prune their IT budgets. So it is required to determine value of the IT services. Now the next question is how. This is most difficult since there has not been any Damodaran born in the industry to help them. Though there are certain guidance provided by different governing body but literature and research is much sparse compared to one available with financial sector. So I think this is one of most challenging areas for finance guys with bit of IT knowledge and strong business fundamentals to look forward for in IT industry.
I hope I pointed to some new areas for most of you guys who are not well versed with this industry and an opportunity for 2010 graduates. I know it doesn’t look as sexy as working in investment bank but for someone like me who passed out in 2009 and was forced to join IT industry it looks really exciting. From the day I joined industry my aim was to leverage my finance knowledge and provide new perspective in IT and am atleast satisfied that in my 6-7 months I have been able to research and work on this area. This is how I have made my knowledge relevant to my company and “am trying to create value for shareholder/stakeholders and who knows I may be damodaran in making for this industry." :)
This post is also answer to lot of questions which my friends are trying to figure out like what am I doing in an IT company. In fact one of them was shocked to know that even after MBA Finance I have rejoined IT industry. He glanced at me with a look as if I was black sheep in finance community and must be stripped of my degree. For him it was demeaning of the esoteric financial knowledge by working in an IT company . I hope that this awareness will help me to salvage some pride in eyes of such guys.
Assuming a finance graduate joins an investment bank/fund house; his success would depend on his ability to manage his portfolio of assets such that he provides higher returns to his clients. This requires skill-set that enables him to perform valuation of different available assets and which I believe is the one of the most difficult part of his job. So is there any opportunity for the such person in IT industry ? Is there anything which could be as challenging as this? And my answer is yes. In fact gravity of problem increases than in financial sector. There the aim is to do valuation of asset and manage portfolio of assets which are mostly tangible and quantifiable but in case of IT one must do valuation of services and manage portfolio of applications. This is certainly more difficult since its intangible. If asked to draw parallel with equity then imagine yourself trying to value equity offered by newly formed company in some very new industry with no existing comparables. Imagine if someone was asked to value google as company in say 1980’s. Yes now I guess one would understand the gravity of problem trying to value intangible service. So why is it required in IT to do valuation of services? Its answer is very simple: - for its existence. It is very common problem which many CFO and CEO face today. They unable to understand where does the money for IT go? And moreover what tangible benefits does IT provide to the company. If you put in more MBA terms how does IT help in increasing shareholders value? You may like stakeholder instead of shareholder then I am fine with it too!! The problem is more aggravated when IT is horizontal servicing different business units. No business units are able to determine financial gains from IT services and economic downturn like this certainly makes them prune their IT budgets. So it is required to determine value of the IT services. Now the next question is how. This is most difficult since there has not been any Damodaran born in the industry to help them. Though there are certain guidance provided by different governing body but literature and research is much sparse compared to one available with financial sector. So I think this is one of most challenging areas for finance guys with bit of IT knowledge and strong business fundamentals to look forward for in IT industry.
I hope I pointed to some new areas for most of you guys who are not well versed with this industry and an opportunity for 2010 graduates. I know it doesn’t look as sexy as working in investment bank but for someone like me who passed out in 2009 and was forced to join IT industry it looks really exciting. From the day I joined industry my aim was to leverage my finance knowledge and provide new perspective in IT and am atleast satisfied that in my 6-7 months I have been able to research and work on this area. This is how I have made my knowledge relevant to my company and “am trying to create value for shareholder/stakeholders and who knows I may be damodaran in making for this industry." :)
This post is also answer to lot of questions which my friends are trying to figure out like what am I doing in an IT company. In fact one of them was shocked to know that even after MBA Finance I have rejoined IT industry. He glanced at me with a look as if I was black sheep in finance community and must be stripped of my degree. For him it was demeaning of the esoteric financial knowledge by working in an IT company . I hope that this awareness will help me to salvage some pride in eyes of such guys.
Marketing lessons for political parties
This 13th October,2009 I performed the duty of responsible citizen of democratic India. I casted my vote for first time for Maharashtra state election after having missed it during last two occasions. Was I excited? Not sure about that but certainly wanted to feel the experience. So what did I discover? Nothing significant about elections but lot of lessons for political parties though. These are the various marketing lessons for them. I know I should not compare the business to election but still MBA cannot think anything other than that I guess. This post I would dedicate to my all marketing friends at B-school with whom I have fought relentless battles, that typical Finance Vs Marketing once.
Consumer behavior:-
I think political parties need to undertake this course for sure. They need to understand shelf space concept from HUL and P&G. Now what has it to do with elections? Let me explain. It is known fact that FMCG companies fight for the ideal shelf space in retail store to ensure that their products are sold more. Even in election the same principle applies. The person who is not sure about his vote would not go through entire list of 20-25 candidates. He tends to view the candidates from 3rd-4th to maybe say 9th-10th in the list. This set of candidates fall right under his eyesight by default. These candidates have more probability to being voted by undecided candidate. So I believe political parties must fight for the order of their candidate in the list.
Parties must also understand the simple concepts like person tends to favor the product whose advertisement he sees just at time of buying. It is very important marketing concepts and that is why one finds lot of advertisement by companies in shopping malls. So what should political do? They are not allowed to put posters in 100 mts or so near election center but they can cover entire area before that with their advertisements, billboards etc. I didn’t find it at all.
STP :-
I know our political parties have been very good at this. They have segmented people based on religion and have accordingly targeted them. But is this only segmentation possible? These segments were identified by British or maybe even before that. I think there is further scope to even segment each of the segments to yield better results. In fact past experience also confirms that. The success of Rahul Gandhi targeting youth in last Lok Sabha election, the success of BJP targeting middle and upper class in previous elections. In fact present demographic clearly indicates the age group 20-40 can clearly win election for any party. I believe marketers can really help in this pursuit.
Branding:-
Let us compare our election with American Presidential election and you would clearly note the difference in this aspect. Obama’s slogan “We can” and his brand was very strong which made Americans vote for him. Did we notice anything like that in this election? Certainly not. Parties still persisted with old icons and old slogans. They didn’t even package old stuff in new wrapper. At some places ‘gas’ really works.
Analytics :-
This has become integral part of marketing and political should fast catch up with this. There is some level of win-loss analysis being done but analytics would help to solve most of their problems. No efforts are being made in this direction.
I know this post would not go in national interest and I am not sure whether these suggestions are ethical to be implemented. Further they would not have any bearing if citizen has firm belief on particular candidate. But I believe there are good numbers of people who go to vote without being strongly aligned to any party and this suggestion can certainly influence them. I have identified need of marketers in political parties and it’s up to these marketing graduates who are searching for job to create demand for them in this altogether new industry.
This post is one more evidences about the way management studies have shaped my thinking. I could not have gained these insights without the help of the marketing courses undertaken by me during my course of study. The fact is that I am also shocked that pro-Finance guy like me also can write so much gas.
Consumer behavior:-
I think political parties need to undertake this course for sure. They need to understand shelf space concept from HUL and P&G. Now what has it to do with elections? Let me explain. It is known fact that FMCG companies fight for the ideal shelf space in retail store to ensure that their products are sold more. Even in election the same principle applies. The person who is not sure about his vote would not go through entire list of 20-25 candidates. He tends to view the candidates from 3rd-4th to maybe say 9th-10th in the list. This set of candidates fall right under his eyesight by default. These candidates have more probability to being voted by undecided candidate. So I believe political parties must fight for the order of their candidate in the list.
Parties must also understand the simple concepts like person tends to favor the product whose advertisement he sees just at time of buying. It is very important marketing concepts and that is why one finds lot of advertisement by companies in shopping malls. So what should political do? They are not allowed to put posters in 100 mts or so near election center but they can cover entire area before that with their advertisements, billboards etc. I didn’t find it at all.
STP :-
I know our political parties have been very good at this. They have segmented people based on religion and have accordingly targeted them. But is this only segmentation possible? These segments were identified by British or maybe even before that. I think there is further scope to even segment each of the segments to yield better results. In fact past experience also confirms that. The success of Rahul Gandhi targeting youth in last Lok Sabha election, the success of BJP targeting middle and upper class in previous elections. In fact present demographic clearly indicates the age group 20-40 can clearly win election for any party. I believe marketers can really help in this pursuit.
Branding:-
Let us compare our election with American Presidential election and you would clearly note the difference in this aspect. Obama’s slogan “We can” and his brand was very strong which made Americans vote for him. Did we notice anything like that in this election? Certainly not. Parties still persisted with old icons and old slogans. They didn’t even package old stuff in new wrapper. At some places ‘gas’ really works.
Analytics :-
This has become integral part of marketing and political should fast catch up with this. There is some level of win-loss analysis being done but analytics would help to solve most of their problems. No efforts are being made in this direction.
I know this post would not go in national interest and I am not sure whether these suggestions are ethical to be implemented. Further they would not have any bearing if citizen has firm belief on particular candidate. But I believe there are good numbers of people who go to vote without being strongly aligned to any party and this suggestion can certainly influence them. I have identified need of marketers in political parties and it’s up to these marketing graduates who are searching for job to create demand for them in this altogether new industry.
This post is one more evidences about the way management studies have shaped my thinking. I could not have gained these insights without the help of the marketing courses undertaken by me during my course of study. The fact is that I am also shocked that pro-Finance guy like me also can write so much gas.
