A pleasant surprise to the sustainability movement

Wal-Mart announced that it is committed to developing a universal rating system to measure the environmental impact of every item it stocks on its shelves.  There couldn’t have been better new than this to groups and individuals interested in reducing the negative impact of consumption.  A typical Wal-Mart stocks close to 100,000 SKU’s and rakes in revenues of about 100 million USD a year.  With sales surpassing 400  billion USD Wal-Mart has a big impact on how other large retailers conduct business. 

If Wal-Mart pulls this stunt successfully then it would have helped energize the revolution in the corporate world.  Yes, many firms have had starts in this direction but the impact that Wal-mart’s decision may cause is manifold.  Its entire supply-chain consisting of many thousands of suppliers would be forced to cough-up information.  Such disclosure would create more competition among suppliers to create products that have a lower negative impact on the environment.

Arguments against the sustainability movement include high costs and a move such as this which leads to higher competition among firms will force them to innovate and hopefully reduce manufacturing costs.  Three cheers to Wal-Mart!

What is a good product?

Gone are the days, when firms made a good product, communicated to the customer, made it available and offered financing options towards purchase.

Competitive dynamics, market clutter among other things have forced firms to rethink how they can sell a consumption experience rather than a product or a service.

Latest in this stream of product design innovations is the new offer from Hyundai that comes with a pricelock guarantee on gasoline.  Well, definitely not pioneering because Chrysler used it previously, but, it is definitely a more aggressive tactic in the time of a recession.

Hyundai has clearly shown its intention to grab market share as GM and Chrysler struggle in and out of bankruptcy.  They have adopted a multi-faceted approach that includes product innovation, warranty and now this.

I have used a similar pricelock guarantee when I was a customer of Time Warner a couple of years ago.  However, this is new because the price of the underlying good, gasoline, changes everyday unlike Time Warner’s case.

The company behind this offer describes itself as a technology and risk management company.  The logic is simple – they have hedged their risk against the price of gasoline and can therefore afford to cap the price. 

From the customer’s perspective, there is clearly a nice inventive here.  What is more interesting is if these price guarantees will find their way to other consumption contexts in which a primary good + secondary good together determine the overall utility of the product.

Think of the razor + blades. 

Premier Passenger  status – purchased a priori and then a guarantee of low fares.  Far fetched, maybe …but what else is innovation!

Taking care of the customer

Believe me, when companies want to screw up -  by God, they will.

I had to make a short and unplanned trip to Detroit recently, and tried to make a rental car reservation.  To my dismay, not a single rental agency had any cars available o location. Anyone who has been to Detroit before will realize that getting to the suburbs without a pick-up or a rental car will leave you poorer by about 80 dollars, the amount you will spend on a taxi.  Not willing to spend that kind of money, I decided to gamble and go directly to the rental offices to figure out if I can get a car.

What I did not know was that the Baptists were having their convention in the city and for some godforsaken reason, the rental agencies had blocked every single car for this convention.  I could not believe that their planning was so dismal.  They were not willing to rent a car for a higher price either.  So, eventually I found no cars to rent and took a taxi to my destination.

I tried looking up the internet in the afternoon for a late night rental car pick-up and presto, they were available now.  An economy car, think Chevy Aveo, was going for hundred dollars a day!  With no choices, I got a ride to the airport from my wife's brother-in-law and managed to get an economy car.

Now, the point I am trying to make is this - the rental agencies had cars sitting on their lots all through the afternoon.  However, they were supposedly on reserve for the convention.  They were willing to turn down walk-in customers who are likely to pay a lot more in favor of a group that may never turn-up!

Taking care of customers - it must be some kind of a joke.

A 'king"fishy tale

People were taking to the planes in hoards, I was told back in the summer of 2006 when I was in India on a short trip.  I did not get the chance to fly a domestic route in that trip, but got my chance when I had to fly to Mumbai in December 2007.  The (old) small hyderabad airport in the heart of the city was so crowded that it looked like a local bus stand called "Imliban". 

People who don't look anywhere like the frequent flyers in the US were sitting on the floor waiting for their flights to Bangalore, Vizag, Mumbai and other cities.  I was even amazed to learn that th flight to Rajahmundry was full.  Air Deccan.. my friend, had changed the rules of the game.  Through it low pricing and a loss-leader strategy it grabbed a nice market share of a fats growing market.  There were other similar firms - SpiceJet, Indigo which followed a similar low price strategy.  I deliberately use price, instead of cost because operating an airline at low cost is a myth, at least during the period when oil prices where at a peak. 

The incumbents were the state owned Indian Airlines and a couple of large private operators - Jet, Sahara and Kingfisher.  The entry and success of of low cost operators such as Deccan and SpiceJet set forth a wave of acquisitions and eventually Jet Airways ended up buying Sahara and Kingfisher snatched the real prize - Air Deccan.

What Mr. Mallya did not realize was that he wouls have been better off waiting it out and letting Air Deccan collapse due to its low-priceapproach. An implosion that was bound to happen, given the strategy Air Deccan had adopted.  He could have snatched Air Deccan for a much better price today.  However, hubris as they say may have played its role in the King's acquisition of Air Deccan.  He purchased Air Deccan on the premise that the market would continue to grow and that he would be able to somehow integrate Air Deccan's low-end positioning with his airlines' premium positioning and also end up gaining market share.  Surely, wrong timing.

The credit crisis, high oil prices, fall in demand and oversupply all semm to cause a problem of demonic proportions for many airline operators including Kingfisher.  I wouldn't be suprised, if the only choices woudl be Jet and Indian Airlines at the end of the day.  And, maybe one low-cost operator.

Mr. Mallya is still denying that his airline is in trouble but if the current downturn continues then there is no way Kingfisher can come out of this mess.  When Mr. Mallya launched his airlines, I presume he was trying to emulate Mr. Branson, or maybe not.  Whatever maybe his reasons for starting an airline, he sure quite a few reasons for not being able to manage it well.

Google’s money making machine

Have you ever wondered how Google makes money. Yes, we all know that they do by placing ads – strategically. However, I always found irrelevant funny ads that were totally out of place – Here's one that I found recently on CNN's website:




Well, the first ad for lowermybills.com does not look like an ad placement. But, I was not sure why that ad popped up there and why those two girls were dancing. Secondly, the ads by Google indicate how much more work is needed before customized ad placement becomes successful.

The original article was reporting protests in Iran and there is an ad for Iranian personals, chronic back pain relief and heart attack survival.

No space for mypsace

The social networking world is crowded. I had blogged about how MySpace a very weak generic positioning that may stop it from becoming a dominant player. If the recently announced layoffs are any indicator Myspace may have more bad things coming their way.

It seems to me that there are too many platforms and too much easy money chasing the wannabes. A classic run-up similar to the heydays of the Morgan Stanley financed B2B exchange for plastic bolts. There were other similar euphoric dramas of course, like the thirtieth online pet food store financed by VCs. I do not buy the argument that because some high-profile VC firm financed a start-up it has future, or because Fox took interest. Most successful ventures are under the radar - just as Google was during the internet boom. I predict that by the time the current economic downturn ends many of the SN wannabes will be gone. I still place my bets on Linkedin and then, Facebook. Linkedin because it gives social networking a clear purpose - maintain professional contacts and thereby possibly benefit from them. This notion seems simple but is elegant and has been studied quite a bit in sociolofgy by great scholars like Mark Granovetter and Ronald Burt. Facebook because it is the most well thought out generic platform for maintaining personal networks.

God's credit crisis

It is said that Lord Balaji had to borrow millions of rupees from Lord Kubera to pay for his grand wedding many thousands of years ago.  Taking inflation into account that must be godzillions of rupees by now.  Devotees make contributions to the Lord so that he can continue to make interest payments to Lord Kubera.

Even God had to be bailed out, no wonder General Motors and Citibank need one.  It is usually the taxpayer who steps in.  Well, I take that back - once in a while a rich devotee such as Mr. Reddy makes a big donation.  A diamond studded gold crown that weighs 34 Kg and costs over 45 crore rupees (about 8 M USD).  I guess Mr. Reddy expects a ticket to heaven or wherever he thinks he will end up after his life here on earth.  What he does not realize is that he is not helping the Lord by any means.  Buying assets for a person who is in deep debt does not help that person. Will Kubera take it easy if Balaji wears a gold crown instead of making payments? It is like a homeowner in Michigan buying a Ferrari - does that make any sense to you.  Throw in the eccentricities of the commodities market and gold may not seem like a good bet if stocks start rising!

Even if we try to convince ourselves that by heaping carbon stones on God we get in his/her good books, we should not forget Economics.  Lord balaji must be cringing looking at the crown and what Mr. Kubera's reaction to the crown will be.  If you believe in God, make a cash donation - so that it will get used in some public works project and at least go to Kubera's coffers and make the Lord's life easier.

Disclaimer: I am an atheist falling off a cliff and therfore have no interest in the credit score of any person real or fictional mentioned in this blog post. 

A not so forgetful past

I graduated from IIM Lucknow and I am proud of it.  Whenever someone asks me where I got my MBA, I don't say India and neither do I say IIM - I make it a point to say IIM Lucknow.  A recent email on our IIM alumni list motivated this post.  A guy who graduated a long tiem ago from IIML was appointed as a Senior VP or something at a US firm and he forwarded the press release to the IIM L alumni list. However, this press release said his MBA was from Dearden and never mentioned IIM L. I was wondring why in the hell did he post it on the list and another alumnus popped the question on the list :)

I have known a number of people who get an MBA from one of the IIMs and for whatever personal reasons decide to pursue another MBA from one of the top US schools. I don't have a problem with that, but being an almnus of one of the IIMs I feel sorry for the person who tries to hide the previous MBA, particularly if it is from an IIM.

I had exhilirating fun when I was a student at IIM L.  I think I met some of the brightest of minds including Abhijit Rey, Jayarama Krishnan, Shashank Rathi, Puneet Satyawadi, Rohit Sood, Rahul Jain, and Niraj Kumar Singh, just to mention a few.  I also met some of the most balanced people including Neeraj Aggarwal, Gautam Mehrotra, and Akhila Patlolla, among others. And there are many such Raghu who will probably remain friends for life. IIM L offered me a chance to interact with these guys and learn from them.  IIM L offered me a direction in my life, an ambition and a purpose.  I cannot imagine people can spend two years of their life at an institution such as an IIM and not credit it for who they are.  IIM L shaped who I am right now and offered me two of the best years in my life. If there is anything I have accomplished in my life, I would credit tit to the two years that I spent at IIM Lucknow.  I son't feel sorry for those who try to forget such a wonderful past.