Monday, September 27, 2010

Heading to WIMWI for the weekend

WIMWI aka IIMA for the following
Dear Nitin,
Congratulations! Your team has been selected for the next round of Bone of Contention. It will be held in IIM Ahmedabad's IMDC on October 2nd, 2010.

Somehow, me and my partner Trinadh have this knack of getting through to the big ones (remember Tata crucibles) with shoddy preparation. This time the number was around 200 entries and on top of that, we submitted it late!!!
Maybe they considered our 1st place in the marketing quiz and accepted it!
The elimination round was a 300 page up write up on FOR/AGAINST Telemarketing! We wrote FOR telemarketing...Pardon the rural bias..but this is what we wrote
Hello marketing executive! Are you listening? There is Bharat beyond India! To make it simple, India rests in its 6, 00,000 villages rather than a handful of metros. This bharat is now adding millions of mobile subscribers every month. Mobile is now part of the great Indian dream of roti kapda, makan.
Marketing companies are only focusing on urban customers. The same customer who already owns three credit cards, is called by five salespeople selling five different bank credit cards! And in rural hinterland, you have millions of customers who are waiting for loans, bikes, soaps, plasma TV! And some are rich enough to pay for foreign trips (Thomas Cook, are you listening?). And they are more trustworthy. Proof? 99% repayment in microfinance industry! And yet calls are made only to urban customers who are fed up and now have availed themselves of the Do not Disturb Service (DND). So let’s stop disturbing them! The rural consumer is waiting!
But we understand the problems of reaching out to these customers. They are spread over a large geographical area, and are not physically connected due to inadequate infrastructure! BUT, they have the ubiquitous mobile phone! And incoming is FREE!!
So what are you waiting for? Refresh your database, let the urban consumer enjoy his privacy, call up his rural brethren and he will not only entertain your call, but also ensure that it is a win-win-win situation. The agency gets the commission, the consumer gets the product/service and the marketing guys get their sales.
The late C.K.Prahalad gave us the identity of the fortune at the bottom of the pyramid; we just gave its phone number! Contact them to make your fortune.

Saturday, September 25, 2010

Mare ghar jhanjar laxmi ke baje......

Loosely translated it means "in my house, the bells of wealth ring". This is a line from the "Amul Song" which was featured in the 1976 movie "Manthan (The churning)"
I had heard about the movie before coming to IRMA. In IRMA, which probably has the longest induction process, given its unique status as a RM school, this is one of the several movies which is screened during the induction process.I watched it without applying any of the "collective action logic" or the co-operative logic that I was to learn later. I saw it again after it was used beautifully by Prof.Raju in his co-operative class. This time there was learning in viewing that movie.
The last time I saw the movie was when my sister, who believes that I am a one stop shop for everything rural, asked me whether I had watched "Peepli Live". And as any 'urban, middle class, more in the know of whats happening in USA than in rural India' person, went on a diatribe against the Barkha Dutts, and the Rajdeep Sardesais of the world.
Fresh as I was from my internship in Vidharbha, I was interested in watching that movie.And I did. However I could not appreciate the message (if there was any) from that movie. And in fact, it made me go back and watch Manthan again!
We have largely believed that rural India is one of poverty, despair and we conjure up images of wrinkled faces standing on dry patches of land looking upwards for some relief.Peepli Live showcases that! And that has been the case for a lot of rural reporting too.Credit of course goes to P Sainath for having started this crusade against State apathy in rural India.
Peepli Live is a story of despair! Manthan is about "collective might".It is not that rural India was all about prosperity in the 70s and the situation has worsened now.
There are enough success stories in the hinterland of people using collective action.Take Niyamgiri for example. However Mr. Gandhi flew off to Orissa and made it sound like that he and his mother were responsible for the verdict and not the collective might of the tribals.
I think we have been fed too much of "rural distress" that we will never be entertained with stories depicting rural prosperity. And that is why I urge those who watched Peepli Live to go and watch Manthan. And maybe we will appreciate that it is not always outside intervention, but self intitiated action that acts as a powerful catalyst for change.

Tuesday, September 21, 2010

I am still a management graduate

Those reading my blog might be convinced I am a development wallah , I am essentially a management graduate!
Proof of that is the results of an IIMA marketing quiz held on the 20th of September 2010. (Please click on the picture to enlarge)

Saturday, September 18, 2010

Corporate Social Responsibility: An effective business strategy

Adam Smith, in his book ‘An Inquiry into the Nature and Causes of Wealth of Nations’ wrote “It it not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest” (emphasis mine). That was in 1776 at the height of mercantilism marked by small scale producers using traditional means of production. Thus each man’s self interest manifest in the invisible hand of the market advanced public interest. Corporations, as we know them now, did not exist then.
However beginning from the late eighteenth century, the invisible hand of the market was tamed by “visible hand” of managers who came to work for large corporations. Today, many business corporations are larger than many nation states economies. They have assumed a dominant position in society. Instances of power abuse by corporations as seen in cases ranging from Enron to British Petroleum’s oil spill and not forgetting the “too big to fail” financial institutions, have created a negative image of corporations among members of society .
In light of such negativity surrounding business corporations, Corporate Social Responsibility (CSR) is seen by people as an attempt by corporations to prevent backlash from governments at best and to create barriers to entry for new players at worst. (The latter part can be explained by an example of a big organisation lobbying for strict environmental stipulations so as to prevent smaller organisations from entering the business due to high capital costs of buying eco friendly machines). There are also those who feel CSR is nothing but a waste of money. They argue that the purpose of business is business. A corporation’s aim is to maximise shareholder value and any attempt to indulge in CSR is a symptom of the principal- agent problem as defined in agency theory (managers undertake CSR using shareholder money to further their own social and political interests).
The above views (one that sees CSR as nothing but a fa├žade and the other as an agency theory problem) do have some merit. This is largely due to the fact that CSR is seen as a residual activity-something that is done after profits are earned and shareholders are rewarded; or as a Public Relations (PR) tool. Until organisations understand that CSR can become a source of sustained competitive advantage, and incorporate it in their business processes, the above views will continue to hold merit.
In light of above arguments, it is pertinent to ask, “What is CSR?” CSR can be defined as actions that appear to further some social good, beyond the interests of the firm and that which is required by law. Companies that are able to leverage this “social good” will earn higher profits when CSR is incorporated in the business strategy.
This requires a fundamental shift in how businesses view “business” and also how they perceive “CSR”. Business is not only about shareholders. The exclusive focus on shareholders has been criticised in management literature. In fact the view of CSR being a principal-agent problem has been negated by the stakeholder theory which views that firms have relationships with many constituent groups (society, employees, suppliers, customers) and that these stakeholders affect and are affected by the firm’s actions.
So how does CSR make an effective business strategy? If seen from the stakeholder theory, the ethical behaviour of firms will enable them to achieve a competitive advantage, because they will develop lasting, productive relationships with these stakeholders. Management researchers have argued that Corporate Social Performance (CSP) (CSP is wider term than CSR and also includes social responsiveness and social issues) can constitute a source of competitive advantage especially in high growth industries.
Reputation building is an integral part of strategy formulation. CSR helps companies build reputation. The success of the Tata group , Body Shop, Health Valley confirm the importance of CSR in reputation building which leads to sustained competitive advantage.
Also, CSR allows a firm to follow the differentiation strategy route to high profits. A firm can create a certain level of CSR by embodying its products with CSR attributes (such as pesticide free fruits) or by using CSR-related resources in its production process (using organic fertilizers).Thus CSR becomes a mechanism for differentiation. Firms are already doing it. In India, Fab India and Jaipur Rugs are doing it in the traditional crafts business. Globally, Body Shop follows CSR-related resources in its production process (no animal tests). These firms have been able to differentiate their product and charge premium prices.
The case of ITC e-choupal which eliminates middlemen and allows ITC to procure agricultural commodities directly from farmers is an example of CSR which is benefiting both-the farmer through high price realisation and ITC through consistent quality and reduced procurement costs. Thus CSR can also be used and in fact is being used as low cost strategy for competitive advantage.
In the labour market, it has been proved that firms in industries with skilled labour shortages have used CSR as a means to recruit and retain workers. Also CSR allows firms to build a good reputation in the eyes of government and regulators thus leading to a positive correlation between government contracts and the provision of CSR.
Thus it is evident that CSR when undertaken as part of business process creates value. Self enlightened managers will realise that business models like ITC e- choupal where ITC’s need for creating shareholder value is enmeshed with that of local communities in a mutually supportive, interlocking and interdependent partnership are the business models for the future. Merely paying lip service and writing a check has attracted severe criticism. It would therefore be correct to state that corporate philanthropy is bad CSR, making profits is good CSR. Models that enmesh business & community interests is the best CSR!

Wednesday, September 15, 2010

Direct Cash Transfers for Rural Development

(As part of my RDI course project, my group chose an intervention to solve a development problem in rural India. The intervention was direct cash transfers. What is published below is the concept note submitted to the instructor. Though the feedback was positive, the real work begins now.Any suggestions, links are welcome)
There are few countries where the state and the policy and the intellectual community have been as committed to poverty reduction as India-both in terms of rhetoric and through a range of subsidies and an array of targeted poverty reduction programmes (Kapur, Mukhopadhyay and Subramanian 2008).The irony is that inspite of hundreds of schemes and thousands of crores of rupees being spent on poverty alleviation, the number of poor people in India is extremely high. Certainly, something has not worked.
While the State has exited several sectors of the economy after 1991, the delivery mechanism used for channelling welfare scheme benefits to the beneficiaries is still in the hands of the State. These delivery channels are controlled by the bureaucratic system and are seen as clogged pipes which have several attendant problems. There are several reports which point out the colossal waste of money in implementing the schemes. This is because most of the benefits do not reach the poor and also because administrative cost is very high .
Our intervention is simple yet radical in nature: Direct (or unconditional) cash transfers to the “beneficiaries” of various schemes of the government. We state that hard cash be handed out to the poor and let them decide what to do with it. We consider it to be one of the most extreme form of “bottom up approach” –an oft quoted word by policy makers who then go on to design “top down” programmes which never involve the poor.
The Objectives of the project is as follows:
1.Understand the current delivery mechanisms of various schemes in the Government and critically analyse them.
2.Build an argument for direct cash transfers. This is to answer those who see direct cash transfer as an idea which reflects great intellectual, policy and political eenui. See (Shah 2008) .
3.Compare direct cash transfers with conditional cash transfers and other similar schemes which seek to cut down leakages, corruption and other problems which plague the current scheme.
4.Analyse cases where direct cash transfers have been used.
5.Present the drawbacks of the intervention.

The methodology would include a comprehensive literature survey regarding the proposed intervention and several of its variants.

Jhabvala, Renana, and Guy Standing. “Targeting to the 'Poor':Clogged Pipes and Bureaucratic Blinkers.” Economic and Political Weekly, 26 June 2010: 239-245.

Kapur, Devesh, Partha Mukhopadhyay, and Arvind Subramanian. “The case for direct cash transfers to the Poor.” Economic & Political Weekly, 12 April 2008: 37-43.

Ministry of Finance, Govt. Of India. Economic Survey 2009-10. Annual Survey, New Delhi: Ministry of Finance, Govt. Of India, 2010.

Shah, Mihir. “Direct Cash Transfers:No Magic Bullet.” Economic & Political Weekly, 23 August 2008: 77-79.

Tuesday, September 14, 2010

I am not THE 'Nitin Pai'

One of my friends sent me a link via an e-mail to an article written by Nitin Pai.
Though I have an interest in public policy , I am not as worthy as THE Nitin Pai to have the opportunity to interview famous people like Nandan Nilekani.
The only other common link we have is, according to a comment he left on a post of mine,a similar experience with Mani Shankar Iyer.

Thursday, September 9, 2010

The poverty muddle makes it to the editorial

M.K. Venu, Editor of Financial Express, presents his views on the "poverty muddle" in India in today's Indian Express.His criticism was restricted to the 27, 37, 70 per cent poverty figures being bandied about by the economists.
Though he does call for a people approach in estimating poverty, his article is silent on the "hows" of it.

Wednesday, September 8, 2010

More of the Same...again and again

Its frustating! The number of rural poor is a staggering 22 crores (GoI figure). In terms of Rural Development Interventions, we commit the same mistakes again and again.
Take self employment programmes/missions and projects. First we had programmes like Training Rural Youth for Self-Employment (TRYSEM), Development of Women and Children in Rural Areas (DWCRA) under the Integrated Rural Development Programme of GoI.These programmes miserably failed as only 14% of poor households covered under the programme were able to cross the poverty line.
One of the reasons for failure was that, surprise surprise, they were seen as separate in nature and not INTEGRATED. Funny, since the programme itself was called INTEGRATED Rural Development Programme.In the late nineties, the babus in Delhi dovetailed all these programmes into a grandiose programme called "Swarnjayanti Gram Swarojgyari Yojana (SGSY)".
In SGSY, they blindly adopted the SHG model which had seen success in the microfinance sector. So the idea was to get all the poor (the households identified as poor) into groups of ten, adopt a cluster approach and provide backward and forward linkages to ensure these enterprises would become successful, self reliant, sustainable business enterprises.
The main difference between SGSY and IRDP was the emphasis on social mobilisation through the SHG approach.The babus thought that the SHG mobilisation is an easy thing to do and envisaged it being done by "prominent" NGOs.
The result? Everyone took a target approach and went on forming SHGs.No one knew how activities were to be chosen. In the end, the SGSY was plagued from problems like uneven spread of SHGs, high attrition rate, poor accessibility to credit,lack of training and capacity building, and lack of dedicated implementation structure.
So the babus recast SGSY into NRLM. The draft of this Mission is silent on why SGSY failed. And as Prof.Shylendra of IRMA says NRLM is merely a rehash of SGSY.
What that means is some more hundreds of crores will go down the drain without any tangible benefit to the poor of this country.
If we have to come out of this problem, we need radical measures to attain elimination of poverty. Merely addressing problems in the schemes, programmes, etc is treating the symptoms. We need to address the systemic issues, and these can only addressed through radical measures. If not addressed in time, extreme scenarios as seen in Dantewada will be a common sight in rural India.

Tuesday, September 7, 2010

Dare to think beyond IIMs..but not beyond IRMA..please!!

Some mails just make you fall from the chair and roll onto the floor with laughter. This was one of them. It was from IIPM inviting business plans for their competition. I thought they had gone far enough by having Shahrukh Khan host a business quiz, but alas! Here is what the plan is all about..
IIPM's INCEPTION aims at finding a solution to end poverty through a business plan and hence the theme –‘A billion bootstraps–The Business solution to end poverty.’The vast untouched Indian consumers; not yet part of the urbanisation, represent an outsized business chance and challenge. The business and other associated economic challenges to reach and leverage this large market segment are enormously diverse and daunting in comparison to the presently exploited markets. It is definitely an unchartered territory in many facets. Yet, the opportunity is real and here.

Even a self confessed neo liberal like me scoffs at this proposal.As if the poor are waiting with money stuffed in their pockets waiting to "consume". Conceptually that is what they mean.And if that is the case, there is no poverty!
Certainly IIPM should add "free village trip" along with the "free laptop+global tour" to its promotional campaign.

Sunday, September 5, 2010

Too Big to Fail-A book review

This is the second book on Wall Street that I have read. The first one was "Barbarians at the Gate". That was about the madness surrounding the leveraged buyout of RJR-NABISCO. "Too big to Fail" by Andrew Ross Sorkin, a NYT reporter, is a book about madness at the systemic level.
This book covers the period from March 2008 when the first major institution Bear Stearns went under to the time the US Government decided to buy directly into banks, in effect nationalising them.
Its about the people at the top;Hank Paulson, US Treasury Secretary, Geithner, then the NY fed President, Ben Bernanke, the FED chairman and the CEOs of Banks that were considered "too big to fail"
The book covers the fall of four big finanical institutions during the finanical crisis and the role played by the government officials, wall street bankers and Congressmen in preventing another Great Depression by enacting the Troubled Assets Relief Programme (TARP).
The first one is Lehmann Brothers. In this the CEO, Dick Fuld is the villian. He has been portrayed as someone who was too proud to realise that his company will go under and resisted ideas of merging or being acquired by bigger banks. Till the realisation sunk in, Lehmann was in some way "forced" to declare bankruptcy by the government.
The next bank to face the music was Merill Lynch. This time however the guys at Merrill sold out to Bank Of America. Along with Merill, AIG was also into deep trouble and had to be helped out by the Federal Reserve, raising the issue of moral hazard.
After Merill, Morgan Stanley had to ask the Japanese company, Mitsubishi to help them out by selling a stake of USD 9 Billion. This amount could not be wired as it was a holiday in America and hence a check was written of the same amount.
The book uncovers the greed that one associates with Wall Street. Greed that undid a lot of bankers.
It gives a good account of how intertwined the financial system is, not only in terms of banking transactions but also in terms of people. One day, a bank is advisor to another bank, and the next day becomes a potential acquirer!
This crisis was yet another jolt to the "American Free Market System". Just like the Great Depression, this crisis required massive government intervention to normalise things.
Though its a 600 odd page book, its not heavy reading. Written in simple plain English without using complicated financial terms, this book is modelled on the "Barbarians at the Gate". A good read for those who want to understand how Wall Street works and how twenty odd people and the institutions they headed went to hell and back within a year!

Saturday, September 4, 2010

A book I will never write

Given the fact that I have not made many friends in IRMA, this is what a good friend of mine put for me in a video which depicted where our batch guys would end up.

Wednesday, September 1, 2010

Another lesson learnt at IRMA

When a person is making a huge blunder, dont correct him......if he is so foolish to make that blunder, there is no point in correcting him!