Feeds:
Posts
Comments

Archive for the ‘Retail and Consumer’ Category

IBM Professor of Operations Management and Information Systems

IBM Professor of Operations Management and Information Systems, Kellogg School of Management.

Following our previous post on FDI in India, we are happy to post an interview with Prof. Chopra who is the IBM Professor of Operations and Information Systems at the Kellogg School of Management. This interview will be published in two parts, touching various aspects like impact on the local ‘kirana’ stores and the evolution of the indian shopper’s mindset.

India @ Kellogg: Prof. Chopra, thank you for agreeing to do this interview for the India Business Club’s magazine India@Kellogg.

Prof. Chopra: My Pleasure.

 

India @ Kellogg: We would like to begin with an overview of Foreign Direct Investment (FDI). Could you tell us about the history of FDI in India and its significance?

Prof. Chopra: FDI in retailing has been allowed for a fair amount of time now. I do not remember the exact year when it was first allowed, but it has been allowed for at least 10+ years for single brand retailers. For example, if Zara wanted to open a retail store in India, they could have opened a retail store, but what was not allowed was Multi Brand Retailing. I think the logic used was that a lot of Indian retailers, depending on how you count the number could range from 10 to 50 million businesses, were very small. So I think the feeling was that we should give an opportunity for Indian brand retailers to establish themselves (before opening up the country to foreign multi-brand retailers).

Initially, multi-brand retail was allowed as cash and carry. The idea there was that the individual retailers might benefit from them. I think that was allowed almost at the same time as FDI was allowed in single-brand retailing. In 2011, the government of India approved Multi Brand Retailing and backed-off, and last year again it was introduced and approved by the Upper House as well. In the past 10 years, many large Indian companies have invested in Multi Brand Retailing with varying degrees of success. This includes Futures Group, a big player, Reliance, Mahindra, and several others.

 

India @ Kellogg: Why now? What makes India positioned to have Multi Brand Retailing in India at this time? Are Reliance and Big Bazar ready to compete against Wal-Mart for example?

Prof. Chopra: I think there is a more fundamental question (at play here): To what extent will Multi Brand Retailing succeed in India and what form will it take? After all, we are actually seeing the decline of big-box and Multi Brand Retailing in the US. Borders is bankrupt and liquidated, Best Buy, arguably in the next 3 years could be bankrupt and liquidated. These were the posted children of Multi Brand Retailing of the traditional sort. Let’s see in the US who is surviving. Costco is doing very well, Wal-Mart is doing very well, Ikea is doing very well, as is Amazon. In India, industry’s investment in Multi Brand Retailing has met with limited success. Some of them have deep enough pockets and they have hung in there but I will give you an example. My family home is in Jaipur where I saw that five grocery stores (supermarket) run by various Indian houses were opened. Over a few years, only one, Reliance, survived. Meanwhile, the small grocery shop near my father’s house has tripled in size. It used to be very disorganized, but now it is very organized and it has got fresh coat of paint! So I’d say the question to ask is what is the form of retailing that is likely to succeed and in particular, what is the role that FDI can play? I think there are certain companies and certain areas where foreign retailers can do very well. Just to give you an example, I think Ikea is one of them. Why? I think it brings products that people are not looking to buy on a weekly basis. It also is going to bring a price point that is going to be significantly lower than the prices currently available in India for that type of product. That sector in India is not very organized yet so I see a store like Ikea being very successful in doing that. On the other hand, when I look at Futures Group, I think some of the challenges they have faced is very high cost of real estate and great difficulty of transportation (for customers). This doesn’t mean people don’t go but the challenges with regard to transportation make it somewhat less likely that people would be travelling long distances for products that they need frequently.

I know the question you asked is why FDI now? I’d say that the experiments have been tried and at this point I am not that concerned about the Indian houses. If they don’t have their acts together they shouldn’t survive. But it seems that the existing small retailers can not only survive but also thrive. I gave you the example of the retailer across the street from my father’s house, and he has started to develop.

 

India @ Kellogg: You mentioned the example of Ikea, I can see them benefiting and being profitable in India but does that lead to a decrease in the creativity that is brought by the local furniture-wallah?

Prof. Chopra: I think not. If you start looking at what Ikea brings to the table, it does not produce furniture that any of us is hoping to pass off to our grand children. Ikea really produces furniture, which is inexpensive and for people in transition. Whereas, there are many talented local furniture makers in different parts of India who produce a very different type of furniture. They produce furniture with a lot of artistry and it is meant to last a long time. What is missing in India, if you ask me, is the options. Who you call the furniture-wallah, cannot compete with Ikea on this side. Similarly, Ikea will find it hard to compete on the other side. Part of my thesis is that when you think of retailing, you have got to think of mass products and specialized products. And they need to be handled differently. And this is one example where I think a foreign retailer like Ikea can handle the mass products better than anything existing in India. But I can also think of other examples where the local kirana (grocery) store can do much better than the organized grocery store to handle the most frequently used items. I’d say the major reason why it works is because that’s not a purchase we do every week. I may be willing to drive outside Delhi, if that’s where Ikea locates, to get the lower price point. On the other hand, to buy my daily groceries such as rice or vegetables, I am not going to drive 4 miles.

You have to look at some parallels here: India bypassed certain aspects of telecom infrastructure. I think in retailing, we should be thinking the same way. We should look at what worked and what did not work. So today, how do we watch movies? Well, three ways – of course there is that Netflix type model which might have me getting the DVD at home or streaming, but there is also Redbox, where I just go to a local vending machine. What is the characteristic of the local vending machine, it is very low cost and it is very close to me. So I want to watch something inexpensively and quickly. What are the types of movies they keep? They really rent you hits, it is the fast moving stuff, the titles that everybody wants. Now, local Indian kirana store is a version of a vending machine. It just happens to have a human instead of a machine, but it does the same thing. If you look at the scale, they are the same. So if you look at here what eliminated blockbuster, it was not just Netflix, it was Netflix and Redbox. So I would ask the question when we think in India in terms of retailing, can a combination of our small local retailers for a lot of very common producers plus something like a Flipkart, a version of Amazon or several versions of Amazon owing to its sheer. But with that combination in place, would you need the best buys of the world? Would you really have to worry about some for foreign player coming in and setting up a big box store, which arguably in my opinion, will always see limited success in India? Of course, for certain product categories (e.g. Ikea) the situation will be different.

 

India @ Kellogg: We were puzzled who Wal-Mart might target – if they stay too close to city, they would have high real estate costs which may offset their profits. But if they go too far out of the city, people may not be willing to travel very frequently.

Prof. Chopra: You know where I see this functioning is parts of urban India. India, if you think about it, is not a tall country, that is from a real estate perspective. So things tend to be more spread out but now there are certain parts of India where things are going vertical. If you ask yourself which are the areas where Big Bazars succeed, I could say that in setting like that I can see a Wal-Mart, or some version of that, being successful because you have a large enough density. Landscape has changed – so you actually don’t have to travel a long distance from where you are – part of Gurgaon looks like that. My guess is that parts of Mumbai may look like that. But this is only a fraction of India but in large parts of India I just don’t see it being very effective. This does not mean that a store like that has not role. Going back to my parent’s home in Jaipur, one of the big boxes has survived, but there was a time when there were four of them. It is a combination one of these plus a whole bunch of smaller retailers that survived.

 

India @ Kellogg: This is very interesting, if what eventually may pan out is that these big box retailers only have a limited presence, what about the Indian government’s hopes of increasing growth and development through FDI? We are reading in the news growth has slowed down, inflation is high and FDI is expected to help?

Prof. Chopra: So in my opinion, which is not the most informed opinion or a deeply researched conclusion, FDI and Wal-Marts of the world can help, you have to think about the fundamental issues and the two parties that would matter in India – one is the small farmer and other is the small retailer. The fundamental problem is that the intermediaries control the supply chain. So for example, if you look at a farmer, he comes and sells to mandis (large open markets) and there are many parts of India where it is a requirement that if you are a retailer, you can only go and buy from the mandi. There’s a logic behind that and it made sense post-independence. There are lots of small farmers and how are they going to figure out what is the best price? So the idea was that if we create a market where buyers and sellers are coming together, price discovery should occur. This worked for some time but it has changed a lot because these mandis are controlled by the intermediaries and cartels have formed of a few intermediaries. So there is no price discovery happening because the intermediaries know everybody has to come to the mandi, so we will buy from the farmer and sell it to the retailer. If there are a few of them then essentially the role play disappears. So big chunks of the profits are kept by the intermediaries. The real issue is to break that down. Large players like Wal-Mart may help in that process. Initiatives like e-chaupal have the potential to offer a better price discovery to the farmer. Plus there is a second part, which I think is not as well developed in India. It is how can we then deliver this efficiently to the small retailer in India. I think arguably it should help the small farmer to the extent that there is direct purchasing.

 

India @ Kellogg: There is the other issue of sovereignty. India is built on self-reliance. How might that change with FDI?

Prof. Chopra: There are pros and cons to being self-sufficient. I’d say Japan is a good example to look at. As a child, I remember growing up reading about how the Japanese stopped consuming some products just because all of it had to be imported. I think there are some clear benefits to self-sufficiency, but there are huge benefits to competition as well. For example, I would be completely honest, may be I am in the minority, but I personally see absolutely no problem if China is willing to produce something much cheaper and ship it to India. However, coming to FDI, with the way the transportation costs are rising, nine out of ten times foreign retailers will be better off sourcing from India. It’s a no-brainer, because you have cheaper labor and there is less to transport. So I am not particularly worried that if Wal-Mart goes to India, there are going to get detergent from the US and sell it in India. There are terrific detergent manufactures in India. So I don’t particularly see it as hurting from a products perspective. I see it as benefiting because these retailers will bring deep knowledge about how to manage supply chain, how to move products efficiently, they bring deep knowledge in that regard, so I see that as benefiting India.

 

India @ Kellogg: We agree, but where we were getting hung up is the whole thing about killing domestic manufacturing.

Prof. Chopra: Let’s look at manufacturing. Let’s take Ikea for an example. Let’s look at where Ikea sources its products from and if it were to come to India, is it possible that it could manufacture those type of products in India. In India, price is always going to matter. I cannot see how simply by importing the product from somewhere else and selling it in India, Ikea is going to be better off then actually sourcing from India as long as that ability exists in India. It could be an in fact an opportunity for Indian manufacturers in a variety of sectors to develop the products that these retailers will need. Can India product low cost good quality products? I am confident that such capability exists. I think buyers (retailers) of that magnitude didn’t exist earlier to make it an attractive business to get into. So I understand your concerns. Personally, however, I am less concerned about manufacturers, I am more concerned about the small retailer. I actually view it an opportunity for the manufacturer. Look at India’s exports; they have grown and India’s manufacturing sector has done quite well. The last five-eight years have actually been good for Indian manufacturing. I am also not concerned about the farmers. I don’t think they will be hurt, how much they benefit remains to be seen. It is the small retailer I am little bit concerned about. If I were the government, what infrastructure need to be put into place, so that they are able to reach their full potential in terms of what they are able to provide? That’s what I would worry about a little bit more.

 

To be continued…

Advertisements

Read Full Post »

The first Walmart store opened in North India in 2009. The arrival of the retail behemoth signaled how India has started to play increasingly with foreign entities and slowly but surely, opening up its guarded doors of yesteryears to the world.

1.2 billion people make for a very lucrative and appealing market. However, historically, this market had been closed to non-Indian MNCs. It was only starting in the early 90s that India finally started to open up its doors to let foreign goods come into the hands of the local Indian. This groundbreaking initiative was heralded by one man – Manmohan Singh.

Singh now sits as the leader of Emerging India – and is the core architect of another immense initiative. That to increase Foreign Direct Investment (FDI) in India. The locks on the various sectors are opening up one-by-one to let in foreign companies to establish shops within Indian grounds. One of the latest sectors to open up is the retail brand sector – which is the cause for entities like Walmart to place their foot in India.

FDI within retail has its supporters and its opposers. The pro side cites issues such as supply chain improvement as a strong basis to let big box retailers enter India. Currently, the Indian system is a mixture of local small-owner stores and peppered with some supermarkets. The way current system is laid out makes for a very confusing, messy system with many tangled wires. However, this system provides basis for some of the anti-arguments. The opposers are worried that with the arrival of entities such as Walmart, small-shop owners will be driven away due to pure price-based competition because of the the ability of Walmart to secure financially lucrative partnerships with its suppliers. To an Indian consumer, sensitive about price, this makes for a huge case to shift from his known local grocer to a much cheaper and reliable (in terms of quality of goods) Walmart.

The way the story FDI in India will unfold is still somewhat unknown. One can look at trends from other countries that have undergone similar transformations. However, since India is itself an interesting market – certain challenges will mark the course for how the country embraces FDI. For example, all has not been smooth sailing for Walmart India as it tries to understand the bribery system within the country. It has, at the time of the publication of this article, suspended its employees in India as it investigates accusations of bribery within its Indian (and some other countries’) operations.

However, all in all, this does not discount the fact that India is ranked among the top 3 countries to invest in according to different surveys. Over the course of the last decade itself, India attracted a cumulative amount of FDI equity inflows of US$ 186.79 billion. It will be intriguing to see the evolution of FDI as the country evolves its core business methods through partnerships with foreign MNCs.

Sources:

Read Full Post »

Kunal Bahl is the co-founder and CEO of Snapdeal.com, India’s largest group-buying platform. Snapdeal was started in June 2008 by Kunal and his close friend, Rohit Bansal. Kunal manages the strategic vision, key business relationships, fundraising and growth plans for Snapdeal. He has a degree in Manufacturing Systems Engineering from the University of Pennsylvania and a business degree from the Wharton School of Business, and attended the Executive Marketing program at the Kellogg School of Management.

Kunal visited the Kellogg campus in mid-November and candidly spoke to us about his experiences, ranging from his desire to start his own business at a young age to future plans for the portal. It has been an exciting year for Snapdeal – in January this year they closed a $12 million investment round, led by Nexus Venture Partners and IndoUS Venture Partners and in July they raised $40 million from Bessemer Venture Partners. While couponing businesses have continued to spring up and be the subject of intense media scrutiny, Snapdeal has been successful in scaling up its business. The team is currently actively recruiting world-class candidates to join their Indian business.

Following his interview with India@Kellogg, Kunal went on to give an engaging and interactive lecture to students at the Kellogg School of Management – speaking openly again about his experience at Snapdeal, future plans for the business and the emerging dynamic and young culture of the company

You started your entrepreneurship journey by starting a detergent company while still being a student. Please tell us a little more about that experience and your learnings.

With respect to developing my professional career, I have long had the belief that I have nothing to lose and a lot to gain – this motivated me to take risks and start a business at a young age. During my final year of college in the US, I started a detergent business. The highly concentrated laundry detergent capsules produced from this business were eventually sold in 4,000 stores in the US, and went on to be featured in QVC (the US’s leading home shopping television platform), New York Times and The Oprah Book club. While considering different marketing strategies for this business, we issued a lot of coupons and allowed people to sample our products and this was my entry into the couponing business.

Despite globally powerful US brand names on your resume you decided to go back to India. Could you tell us a little bit about what led to that decision and your experience to date?

The answer to that question is pretty simple –while working for Microsoft, my H1B visa ran out and I had no other option but to relocate to India. While I was in the US, the Indian retail landscape had changed and we saw an opportunity to introduce couponing to the market. When we started Snapdeal, it was an offline couponing business, not an online one. In February 2010, we had the offline business running and we decided to test out an online portal. We had a website running in 8 days flat.

Building a strong sales force appears to be a challenging, but yet critical aspect of local deal business. Can you share with us your experience in this regard?

We have invested heavily in building the sales force side of the business, and now have more than 200 people, who are working on the ground and speaking with local merchants. Our sales staff typically consists of young sales talent with a lot of energy and perseverance whom we have been able to train very well.

Can you throw some light on what you mean by ‘Mass customization’?

The Indian consumer market is different from that of the typical Western market. Unlike western cities, Indian cities consist of hyper-local markets such that there are several different markets even within a certain city. Within large cities, customers will be unwilling to travel long distances. Hence, it becomes critical to customize the deals with respect to the specific location and preferences of the customer.

Can you talk more about your plans for the business going forward?

We already operate in 50 cities in India and internationally (Snapdeal has started in Sri Lanka, Nepal, Bangladesh, Maldives and Singapore) and as we scale we are expecting to move the company towards a broader retail-buying platform, without being restricted to couponing alone. We will continue to develop this general ecommerce platform for the Indian market and act as a marketing powerhouse for merchants and retailers.

Any advice for students who are considering returning to India?

I think this is a great time to go back to India, given the vast amount of opportunities that exist. In many ways, the Indian consumer market today is similar to that of the market in the US a decade ago and offers immense opportunity to those who are willing to go back and start a venture.

Read Full Post »

Phanindra Sama, “Phani” is the Co-Founder & CEO of redBus.in, India’s largest bus ticketing company. Founded in Aug. 2006, redBus today has operations across 22 states and offers services for ~19,000+ routes and has built relationships with about 700+ bus operators and 40,000+ travel agents.

redBus is among Forbes India top 5 startups to watch in 2010. redBus is ranked no#1 among the fastest growing companies in India in a survey done by All World Network. Phani was ranked no# 3 among India’s Most Promising Entrepreneurs by Business World. He has been chosen as a Global Shaper 2011 of the World Economic Forum.

Phani graduated with distinction from BITS-Pilani and worked with Texas Instruments, Bangalore before he co-founded redBus.

Could you tell us a bit about your background and your motivation for starting redBus.in?

After graduating from BITS Pilani in 2002, I joined Texas Instruments in Bangalore to work in chip design. I was an incidental entrepreneur. About five years into my job, I was trying to go from Bangalore to Hyderabad for Diwali. While every travel agent claimed that there were available seats on some bus, none of them could book it and kept asking me to try another agent. I ended up not going to Hyderabad. I was intrigued by this experience. I told myself that these available but un-booked seats were a lost opportunity for the customer and the travel agent. As an engineer, building a better system was an obvious solution.

In the early days, my plan was to build an open source solution. I liked my job at TI and did not want to leave it. I thought I could do it on a part time basis. I got my housemates also interested in the idea. Since none of us knew software engineering we bought books to read up on databases and .NET. We thought it was a hobby and we could work on it over the weekends.

Once we got into it, we could not leave it. After 5 months, we had a basic inventory management system ready. We went to the bus operators and pitched it. We had received some interest from them while building the product, but now they were not at all interested. Fortunately, we got some really valuable advice from our mentors and VC investors at this juncture. They pointed out that neither our software nor we had any credibility in this market and we had to establish that first to generate any demand. So we changed track and focused on building redBus.in, the consumer portal to create interest in our service. We started by getting just two seats from an operator and tried selling it on the site. When that worked, we slowly increased the number of seats and that was how we got our initial traction. Now with customers buying tickets off our site, we went back to the bus operators to sell our inventory system. Deciding to focus on the consumer rather than the bus operator was a critical insight and crucial to our success.

What is redBus’ revenue model?

Today redBus has three lines of business. BOSS or the Bus Operators Software System is an ERP platform that gives bus operators access to their inventory. redBus.in is the consumer facing travel booking site. And Seat Seller is a workflow system for travel agents. With BOSS, we charge a subscription fee per month while for Seat Seller we levy a transaction fee. For redBus.in, we earn a commission for each ticket booked. There’s a nice network effect between these three, with say for example, more operators using BOSS leading to a larger inventory available for the redBus.in consumer.

Interesting, could you tell us how you marketed and grew this service in its early days?

Our initial marketing was completely offline. We stood and distributed pamphlets outside technology parks in Bangalore. Interestingly, since we were doing this ourselves, we could therefore answer people’s numerous questions about this service. More crucially, there was also an emotional connection with these people. They connected with us, a group of engineers trying to launch a business and were willing to give us a try. They would go back to their cubicles and talk about redBus to their colleagues.

Regarding the bus routes, we initially focused on just a few routes and tried getting 1-2 operators per route. That helped us do some very basic targeting. An interesting observation was the concentration of communities in Bangalore. For example, you will find a lot of Tamilians in HSR and BTM layout and we targeted these areas since we were selling tickets for the Bangalore-Chennai route.

India has seen a splurge in the number of startups catering to the online booking of hotels, airlines and buses. In your opinion, why have some of these failed and what has been redBus’s competitive edge?

I think the Indian railways booking site (irctc.co.in) established ecommerce in India. Today it is the largest e-commerce site in Asia. Indians became comfortable booking things online and this was a big boon to the Indian e-commerce industry. When I look at other markets in Asia, there is still a fair amount of resistance in booking tickets online.

Specifically at redBus, we have always been very cost conscious. We always felt we were more of a travel agent than an e-commerce site. To keep costs down, we compromised on quality in certain areas. We didn’t set up the best call center or use air-conditioning. I think that every business is unique. We’re in the business of selling bus tickets and our costs need to reflect that. Several people doubted our ability to make money in this sector with small transaction amounts but we’ve managed to do that. Today, we’ve also benefited from efficiencies of scale with in our back end systems and call centers.

The other factor has been our transparency. In this business, its common once you start making money to go back and ask the operator for higher margins. Everyone does that. We have been different. We wanted to be a platform for bus ticketing. Our pitch to the operator has always been that give us an x% commission and unless the industry moves drastically, we will not charge higher commissions. This has built tremendous comfort and today while some operators even do as much as 80% of their business with us, they are not worried about the concentration risk. They look at us as less of a business and more as an organization that sticks by a set of fair rules and regulation. If we didn’t have that kind of credibility, we wouldn’t have survived.

redBus has rapidly scaled up in last couple of years. How have you achieved this and what were some of the operational issues you faced?

We are constantly trying to fix customers’ pain points. Customers often find that they’ve not been allotted the same seat they had been promised. And you’ll find that each bus operator has a different seat numbering system. So we added features such as seat layout and seat numbers. The other feature we added was return tickets booking. Whenever I went to Hyderabad, I had to ask my parents to book my return ticket. Return seats are somehow not available or very expensive when booked from Bangalore.

We expanded offices wherever there was logical connect in terms of routes and where we were sure we could generate demand. Today, for example, we’re selling tickets for buses plying between Kolkata and Dhaka too. Several operators run buses on the return route and want us to support that as well. So Dhaka, might be our first international office!

I would like to mention a final point that every budding e-commerce entrepreneur should leverage. Do a lot of what is called AB testing. There is no scientific way to explain consumer behavior over the internet. Sometimes just changing the color of a button improves that page’s conversion by 10%. The only way to find this is by live empirical testing. The good thing is that the cost of this experimentation over the Internet is very low.

You and your co-founders moved from comfortable corporate jobs to starting your own business? How has the transition been?

The challenges have been very different. They say as an entrepreneur you have high highs and very low lows. Its very clichéd, but very true. When you face the lows, you often begin to wonder what you are doing here. There are huge tensions every single day. People resign, competitors become aggressive, bus operators need to be managed and you then have the half percent of customers who have unreasonable expectations. It’s a crazy demand on your time as you deal with all these issues. Also as we’ve begun to scale up, the complexity and decision making has become tougher.

We have also been a very unusual set of co-founders with very little complementary skills. We couldn’t have been more alike. We went to the same university; we are engineers that lived together. However, I now realize that the level of trust that we enjoy has been way more important than any complementary skills. There have been huge stresses as we’ve built this business. Having this level of comfort and trust has been wonderful.

Where does redBus go from here and where do you see it in the next 3-5 years? What are some of the initiatives that you are currently working on?

We currently do about Rs. 350 – 400 crore (US$ 70-80 million) in gross bookings. Our target is to do Rs. 1000 crore (US$ 200 million) next year. Currently, we only have 2.5% market share and I know we can achieve a 25% market share in the future. In the next 3-5 years, we are going to be working on making this 10X growth happen. If we can achieve that, we’ll be a billion dollar company and that’ll be absolutely fantastic.

Finally, could you share any advice for students at Kellogg that are considering paths in entrepreneurship?

Entrepreneurship in India is at its best. As a community, we have become more open to entrepreneurs and there’s an incredible ecosystem that is emerging with supportive VC investors, media and events. No company can be built in isolation. You need policies, board members, investors and employees and all these resources are getting easier to find in India. Let me end by sharing another fact. The Indian domestic market is huge, just Mumbai is almost as big as the entire Malaysian market. This market offers any consumer- focused company access to a tremendous customer base that is hard to find elsewhere.

Read Full Post »

R. Ramakrishnan serves as President and Chief Operating Officer of Bajaj Electricals Limited. Mr. Ramakrishnan has been an Executive Director of Bajaj Electricals Limited since October 26, 2006.  Mr. Ramakrishnan was awarded the “Indira Super Achiever Award” by the Indira Group of Institutes, Pune in August 2004. He holds a B Sc (Rons) and PGDBM from XLRI Jamshedpur.  Our intrepid interviewers Nikita Mody-Patel and Anand Shekhar seized an opportunity to have an intimate conversation with Mr Ramakrishnan when he visited Kellogg.  We gained insights on wide ranging topics from career advice to perspectives on working in India. Extracts from the interview are provided below.

 What is your view on building a career path towards CEO ? What are your recommendations for students at Kellogg ?

 

There is one school of thought that recommends changing jobs quickly, moving across the organization, up different levels and make it to the top as fast as possible. I have followed a different path.  I spent 17 years with Asian Paints.  It was a $15M company when I joined and became a $300M company by the time I left.  I then joined my second company,   Bajaj Electricals.  I came in here when were $60M and this year our market capitalization will be $600M.

If I look back, I believe depth of varied experiences is most important. While it is important to move across functions, it is more important to build depth in each area whether it is manufacturing or marketing.  I came in as President, then Chief Operating Officer and I am now Executive President.  All three positions gave me an opportunity to build indepth experience.

Satisfaction comes from creating something.  Your heart has to be in it.  You need to add value for others and for yourself.  Ultimately, these qualities will help you move ahead in the organization.

What are your views on working in an Indian family owned business versus a multinational corporation?

I have worked in two family owned businesses.  Both have been highly ethical, with great respect for professional management.  I have experienced the right blend of qualities a professional brings as well as those that an entrepreneur brings to the table.  This has truly allowed the firm to grow tremendously.

I also believe that working in an Indian family owned business gave me the opportunity to make a difference through speed of decision making, speed of acquisition and speed of implementation of new ideas.  Indian companies tend to be more caring and more personal in their approach than multinational firms.  On the other hand, multinational firms are more structured in processes and methodologies.  This allows them to survive centuries, but they often get straight-jacketed by their own policies.  Once they decide on a direction, they head towards it like a bullet.  This approach has inherent limitations and constraints.

I personally believe that working for an Indian company is a fantastic opportunity.  There is greater independence, autonomy and an opportunity to be an “intrapreneur”.

Where do you see the future of Bajaj Electrical in the next few years ?

The Bajaj group  has  moved  away from being a scooter company to a ‘two  wheeler’ company.  Bajaj is also coming up with an economy car – priced slightly higher than Tata Nano through a partnership with Nissan Renault.  Bajaj has also made a thrust in to the insurance business as most indians typically lack insurance.

There is a tremendous opportunity in the financial services space to bring better products and better value to Indian consumers.

Bajaj Electricals  is riding the crest of  the domestic consumption story.  Our consumer business takes advantage of this dramatic increase in domestic consumption in India.  On the infrastructure and industrial side, our Luminaire business is delving into areas like rural electrification.  We are uniquely positioned to take  advantage of the rural growth story.

How do you see your domestic business penetrating the rural sector?

Only a few FMCG companies have gone truly rural. In India, the definition of rural is 75% of the population practicing agriculture or a population of 1000  – that is really rural.   Bajaj Electricals gets about 20% of revenues through what we call ‘close to rural’ markets.

There are three key challenges I see in penetrating the rural market:

  • Value proposition needed in this market is different from the urban proposition
  • They need a lower price point (affordable)
  • Difficult to access in terms of distribution

We are thinking of creating a group special business unit that will address the rural challenge.  It will cut across business lines to address the products and price point value proposition in the rural sector.  One example is that we are entering the LED torch and lantern businesses because the rural segment  needs it.  We are bundling other stuff with it such as economic mixers and fans hoping to increase sales of regular consumption.

It has to be bottom up thinking and a different model of distribution.  That is the only way we can succeed.

What is your parting advice for students here?

I would encourage students to take a philosophical perspective.  Those who are significantly better off need to look at the have-nots and do something about it.  Not everyone needs to get into the social sector directly.  There is so much poverty and economic deprivation resulting in several issues for us to address. There are too many eyes with tears that need to be wiped.  Too many stomachs go hungry.  There are too many people with far less.  I would strongly recommend giving one’s time.  Spend 10% of your time in giving back to the community – the rewards of doing that far outweigh any other material benefits.

(Photo Courtesy: The Hindu)

Read Full Post »