The Business Decision Making Process

I have often wondered exactly how are business decisions really taken? I come into this question with  a background in industry and a post graduate education at a business school. One phrase and I heard it often, boiled down to ‘gut feel’. Which most certainly is the oppositte of careful anlaytical thought process or perhaps we combine a bit of both and call it gut feel!?

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Why did for example a recent e com major decide to go all app only ? And then revert that decision? What was the thinking to go against what seemed the normal grain and then come back to accept the truth perhaps and do a public roll back?

For that specific case, a lot I think can be pegged onto a few “new hire” situations, where expensive new recruits were expected to create and execute on earth shaking business plans. Something like if you had a football club and hired Gareth Bale for $100 million. If Gary did good you made money and if he did not, you lost a lot!! Thanks to all that pressure what if Gary made a self goal ?!

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Whatsapp – Email overload & Enterprise social networks!

The last few years I have been really getting acquainted with several companies in my line of a work as tech sales guy. I see several organizational problems that I see building up due to unfettered tech and its wrong usage.  I’d love to solve them and have a few suggestions and being who I am they are inevitably about the more adoption of technology! I mean hey Whatsapp just got bought for like $10 +billion and people have a huge opinion about it. But all it did there was just move text messaging from the voice on CDMA+GSM spectrum network to the Internet Protocol/data network on the GSM+CDMA spectrum and added a layer of take and share media and files, create private friends or family social networks and on the mobile!

Email overload at the workplace is the latest big thing now that I really want to handle – it is so current now that were you to type in that search word – damn there’d be an article an hour back like say this one when I started to type this out. The solution is not too tough really – all you have to do is move that traffic else where on other servers that can handle it and is not as crowded and with less noise.

Go Yammer  and the ESN way. ESN is something I think I coined if no one has used before: enterprise social networks. If you don’t want to use Yammer – you may as well use FB – create corporate FB Ids centrally etc. But the point is it is they are there and can be used. You could try moving to the sales force dot com platform and use that as your workflow and sales force automation systems also and create that process. People like it or not read their FB messages, twitter feeds, Whatsapp dialogues more than anything else. More than SMS perhaps! There is even bug report on mozilla asking to see if reddit can be used to replace yammer?

Also the medium makes it such that people are forced to stay on script; brevity is the soul of wit as said Polonious in Hamlet  – a Shakespearean play. People need to have to be brief by the urgency of the medium and the forced restriction of space. Occasionally it spawns it’s own language like BRB, IMO, IMHO; LOL; BTW! Plus it brings in the concept of presence ; you know who is logged in on a server somewhere on the internet and can send receive files etc!! There are also possible videoconferencing and tele calling available which makes ESN the best way to go to handle email overload. In a very Marshall Mac Luhanesque manner; the medium becomes the message! Also it is open source capable and can be mostly configured for free with admin levels rights requires payments but it gets the work done!

Strategic IT and you

Often at vendor meets I am told that corporate IT has to be a facilitator and an enabler for business and people ought to be able to use the technologies at our control and provide the best return on value and quickened decision making. The unsaid implication that corporate IT today is not. And corporate IT is a function of the geographical culture that operates the head quarters of that organization. American corporate IT operates with paranoia driving all decision making and best practice behavior. Europeans are free and far between with regulations and controls and believe in open systems and standards that are far better aligned towards serving as enablers and foster innovation and thinking out of the box. And not unlike geography and culture apart, there is also the industry that companies serve as part of their businesses that makes a huge difference in the way they perceive and approach corporate IT as a component of the firm’s business plans and processes. For a lot of manufacturers and product organizations, key but non core activities like manufacturing etc are totally outsourced to meet specifics of design and manufacturing standards. Non key and non core processes like Information Technology systems and management is usually haphazardly outsourced and there are usually no cogent strategic plan or outlook that when they put things together for the first time.

The strategic players who see in Information Technologies sustained competitive advantage work towards ensuring that this tool of management is used in the best possible way to derive the highest possible returns on the capital employed. It is all in the strategic bent of mind, a desire to make the investment actually pay instead of becoming a build out a scope of crawl where you have the technology and you have the means yet you have messed up in the implementation in such a way as to make the entire build out, the spend become a waste. To buy and invest and implement technology and business initiatives based out of technology it is necessary that the scope of what is being proposed and what is being expected are scoped out and aligned. Management and stake holders need to be today really clear about whey they are doing this and in simple terms what the value will be – what will be any advantage that they will drive out of it and how will it progress, next steps – what will be the scope of this technology things build out as it gets along? Today technology offers a very unique spot in the buying cycle – called he refresh – that one time in the technology and purchase life cycle where you need to accept what you have may be a fair lot woebegone and needs to be refreshed, bought anew and you throw the old stuff out of if you are any good you recycle and then get along with buying the new stuff. Manufacturers and tech vendors look at these ‘recycle’ the way TV and brown goods manufacturers that wait for festival weeks and months to sell their stuff in larger numbers than usual! Like at the festival times vendors try to build a lot of faux excitement around these events like it were Christmas! Some of the excitement catches on and a lot of people get into the evaluation mode and sales develop.

 

Buyers and customers understand or have been made to believe that refreshing or getting new stuff and doing
platform changes and a move up on the technology scale and more expenditure is a good thing. You get new laptops and gear and stuff and there are buying, vendors sales people spend on entertainment and social events to get a lot of people drunk and well fed. The long term validity and effectiveness of all this technology has been debated and naysayer academician like Nick Carr have gone out and agreed to what may seem like a counter intuitive concept but that there is no benefit and spend on IT gives no greater advantage than any thing else! But the economy being what it is – we need companies and enterprises to spend some of the money that they made so that the economy chugs alone fine, we need spending and we need production and we need to keep that fine engine running. Apple does not just make all the newer version and newer technology and shinier stuff and more bells and whistles just because they want to make more money, some of it is also so that you get newer and shinier stuff and get into the whole continued upgrade and long sustainable and ever lasting and replenish able deferred revenue stream. Giving the long term trajectory of the entire exercise it is very necessary that the buyers approach with a caveat in mind and attempt to derive total and more value from their purchase at a level that they can make this last longer if need be and thus defer the next renewal cycle a bit and thus somehow make the investment pay for itself without draining more resources and costing more to run than what was needed and could be sustained. It is a good place to be but not yet easy to reach. Most companies buy their IT in a knee jerk manner, they have to play catch up even if not out there against anyone but at least in their heads. To derive value since they are afraid that their may not gave to start of anything a value proposition at all they need to also but this cheaper than anything else. Trying to drive the prices down is a good strategy when everything is standardized but works less effective when it has to be bespoke – made to order and IT can never be a one size fits all as people do have common areas of what kind of problems they may have but the solutions always vary as per where the problems are. There are multiple thoughts and processes and multiple aspects that need be aligned and it is never an easy tackle and often compromises creep in and thus sow the seeds of this systems inevitable failure and blame cycle. What is needed at the very first step of the process is a clear and concise statement of purpose and what is that needs be achieved and what are the bare minimum standards and deliverables that will be provided as a result of this system rollout and adoption. If we know where we have to go as the purpose statement would provide us, we have a better chance of figuring out a way of getting there in the most optimal method. From this we move to the next logical step and figure out what this is going to cost and who the stakeholders are and who will be now responsible or own the process to get it to completion! Once we have the resources identified and allocated we need next a few small incremental steps and goals that we must be very certain to reach. We need to have a certain service level acceptance – a measure of how much service level deterioration is the last and final number in the scale that we have in place and is unacceptable. Enterprise IT and its strategic benefit can only happen when the services are available, just thinking them up and then implementing them aren’t the only measures of successful deployment and this is why setting a benchmark that you will reach is very critical to make the
project outlay deliver true strategic value.

 

The Indian Mobile Phone Industry

There I was standing in line one day to pay my mobile phone bill at India’s largest cell phone service provider and I started to wonder at the great Indian mobile phone industry. I recall the first ever cell phone call I made in 1996 which had cost me Rs. 16 then plus taxes for a minute and it had been a local call then and those were the prices. Today for that much money I could probably speak for 26 minutes at a paisa (less than a cent) per second. Which brings us to the average revenue per user or ARPU in the telecom industry terminology and we at India have the lowest in the world.arpu The graphic below shows the comparative ARPU figures for the world and the only place that is lower is Brazil – which by the way has a population of 191 million only. The country with the highest is Japan where they use their cell phones more like personal computers and where the penetration of computers compared to cell phones is in fact lower. The interesting fact is that entering 2009 there were over 105 million mobile subscribers in Japan. Though the 2G mobile telephone sector in Japan has entered a maturing market phase, the overall Japanese mobile market remains in a dynamic period of activity, especially given the evident popularity of 3G services. By 2011 it is expected that the market to would grow to 120 million connections equivalent to 93% penetration of the population, driven largely by take up from the youth and elderly consumer segments.

To get a comparative idea of where we are – as of third quarter 2009 and as per the latest press release from the TRAI (telecom regulatory authority of India – a little bit like the FCC of the USA) the number of mobile connections in India as of November 2009 is 488.4 million. The size of the market as estimated by Gartner in 2009 is  in India is projected to grow at a compound annual growth rate (CAGR) of 12.5 percent from 2009-2013 to exceed US$30 billion, according to Gartner, Inc. The India mobile subscriber base is set to exceed 771 million connections by 2013, growing at a CAGR of 14.3 percent in the same period from 452 million in 2009. This is off course down from their estimation in 2008 of $37 billion by 2012 but yes estimation is a tricky business as the one paisa per second regime has indeed brought average prices down a fair bit.

The current market has 16 players listed as below running a mix of CDMA and GSM with 3 running CDMA only networks and 12 running GSM only networks and one one player doing both the technologies. All of them do not however operate in al the ‘circles’ and some like HFCL operate only in one circle. The chart’s (from the TRAI performance indicator report) for the ARPU’s for GSM and CDMA shows that GSM is slightly higher at Rs. 205 per month while 95% of the market is in fact pre paid. The ARPU for the post paid users are off course a bit higher at Rs. 539 per user per month and this has shown a lower decline.

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Operator Network technology
Bharti Airtel GSM
Reliance Communications CDMA & GSM
Vodafone Essar GSM
BSNL GSM
IDEA Cellular GSM
Tata Teleservices CDMA
Aircel GSM
MTNL GSM
Spice Telecom (now part of Idea Cellular) GSM
Loop Telecom (including BPL in Mumbai now rebranded Loop) GSM
HFCL Infotel CDMA
Sistema Shyam MTS CDMA
Datacom Solutions GSM
Unitech now known as Uninor with Telenor of Norway GSM
S Tel GSM
Swan Telecom now known as DB Etisalat GSM

This is indeed a pre paid market and very price sensitive with the share of incoming to outgoing at 51% to 49%. What is interesting however about this very competitive market is that everyone from NTT Docomo of Japan to Etisalat of the UAE and Telenor of Norway want a piece of it. The reasons are not hard to find because even with ARPUs at one of the lowest in the world – the EBITDA of these telecom companies with their services here are comparable to the companies from the developing world. This is due to an unique blend of outsourcing and infrastructure sharing that brings down operator costs and practices that leverage technologies that allow for on the air charging and a bevy of other techniques that can decrease operational losses significantly. To remain successful in the long term, therefore, operators will need to take advantage of economies of scale to increase their profitability. One of the key cost-saving approaches that has been growing in popularity is infrastructure sharing, and several operators are dividing their mobile base station assets into individual business units. Those units will focus on managing tower-sharing agreements with other operators so that they can expand their geographic network coverage without having to deploy more base stations. In several of these initiatives India has led the world. All new operators today have totally outsourced their network IT operations to a number of companies like IBM , Tech Mahindra and Wipro with multi million year on year deals. The prime IT applications involve components in Business Support System (BSS) and Operating Support System (OSS).

Bharti, one of the biggest players in India has invested in real-time charging systems to help reduce operational costs and decrease time to market when launching new, advanced mobile data services. The operator currently relies on a real-time charging and control system called Charge it, which is the flagship product of French-based mobile charging vendor VoluBill, in order to charge for its WAP and SMS services. The Charge It  system has successfully given Bharti more control of its operations – allowing the operator to quickly and efficiently implement sophisticated, value-based charging strategies that help to differentiate between innovative packages, bundles and promotions. Charge it uniquely delivers "on the network" mobile data charging through its ability to access customer information in real-time, and then using this information to perform real-time charging and session control. This approach cuts costs and allows the operator to use its extra time and money to grow the business while offering very competitively priced services to customers.

 

So what dos the future foretell for these innovators who have kept prices down in a very controlled regulatory environment and have yet shown profitability while continually driving prices down for the end user? The direction points to Africa for the next level of expansion and where the ARPUs and usage patterns are as low or similar to India. Bharti once again the trendsetter made an attempt to merge itself with the S. African telecom major MTN for a deal that was expected to be nearly $23 billion in size but failed ultimately.

 

That is not the last one has heard of the African ambition. Indian telecom players are surely and certainly Africa-bound. The telecom arm of Essar group recently expanded its footprint in the continent by picking up a majority stake in Warid Telecom Congo and Warid Telecom Uganda, owned by Dhabi Group of the UAE this month. Though the deal size was not disclosed, the enterprise valuation of the Uganda and Congo operations is collectively pegged at $318 million. Essar already holds a majority stake in Kenya-based Econet Wireless International (EWI). Essar Telecom Kenya, which operates through ‘yu’ brand, has 600,000 subscribers and claims to be one of the fastest growing telcos in that country.

The Tatas buy Landrover & Jaguar

It is not often that things like this happen but it did now and it was announced with quite a lot of fanfare. They have done it many times before with Tetley and Corus and an attempt at the Orient Hotels; still pending I believe in spite of a rude rebuff. The Indian story is still up and running and the worthy have argued that the takeover of Jaguar and Land Rover would be good for the both of them. As a Tata Automobile user, I own and drive one everyday, I just look forward to this deal and off course are extremely happy. I am hoping for a slightly cheaper Land Rover will hit my town and I cannot wait for it enough. I am certain they will have a vehicle under the sub ‘Defender’ range for us.I think the data will bear us out – they will do an admirable job of it and as a proud customer of theirs (I own their products & not their shares) I think they will do a good job.

In the automobile industry – the Tata’s have crashed prices down to less than $3000 for a four seater mini vehicle. I daren’t comment any more on it than that as I have never really seen one yet but I am certain it will be quite a wonder. Truthfully speaking I would say that the Tata’s in automobile making are a bit like Microsoft – the first version really is never the best and they need retrofitting to make their version 1 stable. This is from personal and documented experience off course having been one of the first lot of buyers of a new Tata engine – their common rail diesel engine SUV. The ‘build’ if I may call it that took 6 months to stabilise but when it did – it has been ok and I have manhandled the product a bit. Their version 2 release with a smaller more powerful engine killed me, they had a better product and version out in a year after I bought my version and there was no way to upgrade except to get a new one! And yes I am speaking of a machine here not a software application; but they made the deal really as painful as buying software! But yes; I am a satisfied customer – not perhaps delighted, but definitely ok I bought a Tata. I also hope Jaguar Land Rover teach Tata Motors a bit about making body cladding fit tighter with the metal and better plastic quality.

I think the stock’s also doing well; my tracker doesn’t seem to show so much red in the little index of their scrips that I have set up. The terms of the Jaguar Land Rover deal is complex but the Tatas are expected to take a bridge loan of $ 3 billion to fiance this deal which  they then have committed to refinance through stocks and debt within a year. The British may not like it said – but having seen the way the Tatas have grown – Sir Ratan deserves a knighthood! I don’t if it can be done; but it is a thought whose time has come. If a corporate buy can have any more a resonance as  this buy of what are rather British heritage automobile symbols and technology power houses than this does, I haven’t yet heard of it. Once upon a time, long back as a front line sales person at Mumbai, I used to work in an office in the shadows of  Bombay House, the HQ of the Tatas (Tata Sons.) and always looked upon it in awe. When one begins to understand the variety of enterprises  they are involved is enough to make minds spin. Power; IT; Retail; Realty; Automobile & components manufacturing; Insurance; Satellite TV services; hospitality; commodities. It is no wonder that the company fought a legal battle with a cyber squatter for the rights to tata.com – which is more like a portal than a website!