Global Brands: Importance of Branding for Consumer Goods

That reach is king is well-known and affects technical and non-technical businesses alike, albeit in different but very crucial ways. For a purely technology business, being accessible and customer friendly may take precedence over perceived quality or benefits, i.e. a client is more likely to invest in systems and technologies that promise to be reliable and are easily maintainable, even if they are not as efficient as other "transient" alternatives. Efficiency and quality is good to have, but mean little in the absence of a strong support structure of distribution and maintenance. Brand management, then, becomes a function of this image: branding is both functional and perceived in almost equal measure.

For consumer goods, on the other hand, brand management is a different ball-game. Due to lack of concrete differentiating factors in general and lesser protection in terms of patents, perceived benefits may take precedence over functional ones. In fact, as the author asserts, food and drinks sector is the most "brand managed" and can have very tight margins. This is highly applicable to the Alcoholic Beverages industry as product life-cycles are larger and differentiating factors fewer. Players in this industry try to ensure survival by clubbing both Marketing knowledge and distribution networks. It is common to find consolidation and cooperation even with rival firms to build a economical and reliable distribution channel. This has been brought out very nicely in this book.

Global Brands: Introduction

Currently I am reading "Global Brands: The Evolution of Multinationals in Alcoholic Beverages" by Teresa da Silva Lopes. As the name suggests, this book focuses on the development of MNCs in Alcoholic Beverages from 1960 to about 2003. Here, it focuses on an industry that has been traditionally dominated by family-owned businesses and relies heavily on marketing: managing brands and distribution channels more specifically.

Why does purely professional management that seems to outshine family-dominated businesses in other industries lag behind here? The author believes that this happens because there is a strong element of heritage and pride in this business, which makes it more than just a "money-spinner" for the family. This ensures that the family tries to take decisions keeping in mind the long-term consequences. For this, they are prepared to bring in professional managers but maintain a controlling stake in the company. Managers, on the other hand, may focus on short-term results to demonstrate performance. While this may work very well for industries with a small product lifecycle (like technology), it is not as effective for the Alcoholic Beverage industry where brands sometimes outlive the company. The business is also marketing-intensive and needs sustained brand management, perhaps more than any other product from the food and drinks industry. The book explores the critical role of effective and consistent distribution channels along with the optimum use and nurturing of the Marketing knowledge. I am impressed with the effort put in to produce this exhaustive research. Overall, as a data repository it is an excellent source to get a bird's eye view of the alcoholic beverages industry and in the process learn some important bits about consumer goods based businesses.

Of Lehmans and Goldmans

Mr Dick Fuld is unrepentant and will portray Lehman Brothers as a "victim" of the crisis. He claims that if other banks were denied the government support, they would have collapsed like Lehman Brothers. Further, he asserts that Lehman was justified in using Repo-105 as it is legal and the regulators knew about it.

Where do I even begin... The defence given by Mr. Fuld is alarming as it implicates the government, the regulators and the big banks in a scam of unprecedented levels. His argument is simple, let the one who has not sinned cast the first stone at Lehman. In other words, Mr. Kettle please don't call Mr. Pot black. It just turns my stomach to think about how deep the rot runs. So deep that it gives somebody the audacity to defend a wrongdoing because it was done with the permission of the authorities, or at least by keeping them in the loop. This is going to prove mighty embarrassing for SEC. Taking down Lehman and then going after Goldman Sachs will not help the cause of economy but will perhaps help the governmental bodies to escape blame. Allowing a misdemeanour and then punishing it; I think relevant SEC officials should be tried for criminal negligence. But, like that's going to happen any time soon. Authority without responsibility or accountability seems to be the defining factor of government bodies around the globe. How many government employees have you heard of who got fired due to lack of performance?

The final word is that big thieves hang the small thieves. So goes the law of jungle. I increasingly feel that it is useless to expect any concrete justice because that would mean prosecuting too many powerful people together. The government is simply in a hurry to find a scapegoat and then continue with its disastrous business as usual. In fact the cancer has been allowed to go so deep that it is difficult to even talk about from where to begin a possible reform. I guess that in God we trust, but the Devil is a good business partner as well. Amen.

Global Electrification: Conclusion

As electricity started playing a critical role in industrial, military and civilian life, it came to be viewed as an indispensable strategic resource. This, combined with rise of nationalism and intensive capital requirements of the industry, led to the "domestication" of electric utilities and hampered the development of international electric grids. American and Foreign Power, which had come to dominate the electric utility scenario post WW1, lost sizable assets in Latin America and Cuba. Post WW2 big names like Sofina became investment houses. This decline continued well till end of 70s, when barely 1% of the world's electric generation was in private hands. The big Belgian, American and Canadian names lost their considerable clout. Post 70s, the world has witnessed a trend back towards globalization and private ownership. The trend has accelerated considerably after the collapse of erstwhile USSR and the end of cold war. The multi-national organizations entered the arena again, with separation between generation and distribution becoming sharper, and their presence over multiple countries and complex cross-shareholding patterns have re-emerged. It seems that for now the balance has once again tilted towards globalization, a long time after the first great war. For how long it will stay this way is something to look out for.

This book demonstrates the effective use of holding company structure for entrepreneurial activity in capital intensive sectors. It also brings out the political risks inherent to capital-intensive sectors that grow on to become strategically indispensable. The critical role of international finance in the growth of such sectors is also explained nicely. In my view, in the current age a lot of lessons from the book may be applicable to the telecommunications industry. All in all, an excellent book that will give you a good understanding about the development of global enterprises in the last century despite of political risks, set-backs and uncertainty.

My VICTOR Framework

How does one get the best performance out of the team? This is a fundamental question with no definite answers, a question to which considerable academic research and books have been dedicated. For the uninitiated it can be like the search for an ever elusive fountain of youth. My thoughts on it out of my experience. I believe keeping an eye on the following is necessary to maintain a top level of performance (my VICTOR framework!):

1. Vision: What does your company stand for? If your company has no concrete vision, what do you think your group stands for? If you can articulate it in few words and communicate it effectively to your team, and then go on to implement it in every aspect of your functioning; you will be able to build a strong team. Your hiring needs to be careful and needs to carefully consider the culture of the company.
2. Individualization: You have to remember that what motivates and drives you does not necessarily drive everybody. Spend time with your team, get to know how people fit and what they can do best. Focus on strengths and put people in the right place instead of picking on their weaknesses.
3. Consistency: Whatever you do, you will have to be consistent with it. Random changes (changes that appear random to your team) can confuse and demoralize.
4. Transformation: If you talk, walk the talk. Make real changes, put systems on the ground and take people into confidence. Else you will loose credibility sooner than later.
5. Output: Put in place ways to measure the output,without which there is no way to credibly measure the success of the changes.
6. Reward: Encourage positive behaviour by rewarding it. Take the career of each member of your team member seriously and let them know that what kind of growth path you have in mind for them

I will expand on this more in my future blogs. I will end with saying that any development methodology and any process can do only so much. Without the passion of the leader, consistent top-level performance is only a pipe-dream. If you cannot nurture talent, the talent will leave you. Especially in sectors like IT, where the demand is much higher than the supply, understanding and nurturing your team is of paramount importance.

Importance of CRM

When your wife is a Marketing Manager, there are always some interesting bits to learn. Often we discuss office situations and see what we can learn from it. In one such recent discussions, I realized how important a CRM system is to a company. Even before talking to her I had envisioned of something similar for my company (when I start it), but talking to her not only helped me to get the "technically" right words for my ideas but to also see the practical implications of the same with a real-life case study.

There are two critical functions that can be made hell lot of easier by automated CRM systems like Salesforce: tracking Sales and measuring Marketing.

Keeping track of the sales data can be a herculean task. If a CRM system has not been incorporated right from the start, the sales executives and managers may get really insecure about sharing their contact lists one fine day. Implementing CRM retrospectively can antagonize people and needs a major internal marketing initiative, after all you will be selling to a sales guy! The sales team needs to understand that their confidentiality will be respected and the CRM system will help them to track and serve the clients in a much more effective fashion. If they are not convinced about this, there is little chance that the organization will be able to benefit from the CRM implementation. Hence, get it in as soon as possible and keep it. Sales professional may feel that such systems would make them "dispensable" by making hand-overs easier and by ensuring that the company does not have to worry too much about a huge portion of sales disappearing with a sales executive. They need to be reminded that sales is, anyway, a strongly personality based activity. Hence dependence on the executives cannot disappear and they will always be invaluable. The CRM would, however, discourage any kind of rent-seeking or unethical behaviour and make Sales more robust. Ultimately, it is good for the company and would make Sales more effective.

Measuring Marketing is increasingly seen as a way to rationalize marketing costs and get "greatest bang for the buck". Many organizations, especially the small and medium sized, tend to see Marketing as a cost and a luxury. Then there are professionals who exactly do that: talk and not back it up with data. This can lead to politically very uncomfortable situations for Marketing and it may struggle to explain the necessity of its existence. No wonder in down times it is one of the first to face the axe. Let us try to understand this with an example. Lets say that the Marketing Department of a company A organises a series of seminars that help the Sales to get an average of three new customers per seminar. The CRM would enable to easily track the sales generated by these leads. This would not only help Marketing to understand the success of the event in terms of ROI but to also tailor future events to be more cost-effective. Additionally, it would provide the necessary political cover to advocate the existence and growth of the department.

Concluding, if I am made in-charge of a Sales and Marketing Department, I wouldn't even touch it with a six-foot long pole if it does not have a proper CRM system in place. In fact, it will be my biggest priority to get such a system up and running before I try to implement anything.

Global Electrification: The Proliferation of Electricity

Electrification initially followed settlements around railroads, energy intensive industries (like nitrogenous fertilizers, electroplating, smelters), mining operation, plantations besides in capitals, large cities and port cities. By 1939, however, it had become a part of the "modern" living and critical for industrial progress. In fact, the writers wonder if the reason behind the downward spiral of a once prosperous Argentina was related to its lack of electrification. The growth of this capital-intensive industry started with the invention of arc light, electric bulb, electric motor and electricity generator. It is notable that Edison, commonly thought of as the inventor of the electric bulb, was not the inventor of the electric bulb: the concept had been demonstrated and used by others before him. What he did invent was the use of high resistance filaments like tungsten (instead of carbon) to enable having electric bulbs connected in parallel instead of in series. This enabled the birth of first electric utility and enabled proliferation of electricity supply as a business. Initially, both AC and DC current were produced. The invention of transformers, transmission lines, DC adapters and AC motors tilted the balance towards AC power.

Electricity generation, I understand, is capital intensive. Nevertheless, it appears to be a deceptively one time investment. The engineering, financial and management experience required to run a widespread electric utility is considerable. I came across, what is referred to as, "a holding company" structure that was used to mobilize the gargantuan resources needed for such ventures. Such holding companies comprised of respectable names in the domain (to inspire trust for investments) and typically domiciled themselves in business centres that had deep capital markets and were tax friendly. The most popular destinations before WW1 were UK, Canada, Switzerland and Belgium. Additionally, there was a significant level of cross-holding amongst various holding companies and ownership was often cloaked to avoid any country-specific bias (for example, Germans established a holding company in Switzerland to invest in France and vice-versa as there was fierce German-French rivalry). This made a complex pyramidal structures with a lot of investment often being controlled by similar set of companies and investors. Further, these activities were carried in two models: entrepreneurial and buy-outs. Rings a bell? These are two major investment directions in the Private Equity world as well. This helped me to understand that many activities considered almost vintage Private Equity are in fact much older.

Technology, Design or Something Else?

I recently came across a blog discussing the importance of technology vs design for a product. I beleive that such discussions show how living in one particular domain can seriously hamper the breadth of vision. Like the classic blind men interpreting the elephant in different ways, each person tends to interpret his or her interpretation as the most important one. When you are talking about a product, you are talking about business. And business is a sum of parts. Nevertheless, from business point of view, elements like marketing, service and reach will always dominate either technology or design. Technology and design have to pass a minimum threshold. Beyond that the client retention and longevity of a business is too deeply dependent on the above mentioned key factors. A business is made by the people who run it, who have a vision to find innovative use of design or technology.

Not many engineers or designers go on to become the CEO of a company (unless they start their own company or get business education). This is not a co-incident. Technology and design functions require lesser people management than most other functions. They are also, generally, least political. To research and to simply come up with ideas is not enough. The ability to find practical uses for the ideas, to be able to take them to people profitably, manage people and then sustain the process reliably over a significant duration defines business. Any successful entrepreneur can tell you that technology or design is but a small, though important, part of the whole equation.

Global Electrification: Introduction

Now, I have started reading "Global Electrification: Multinational Enterprise and International Finance in the History of Light and Power, 1878 - 2007" by William Hausman, Peter Hertner and Mira Wilkins. In the last century, electricity and railroads were two prime forces that changes the face of earth politically, socially and economically. Hence, I am pretty curious about the journey of global electrification and the role of international finance in its development. And so far I find the book pretty interesting.

A few key patterns emerge and re-enforce themselves across various business history books I have read (including the current one). The key time periods that emerge are pre WW1, WW1, roaring 20s, Great Depression, WW2, post WW2 in cold war and post cold war. The whole world saw a lot of change across this timeline. Let us see what we can pick up about electrification and the evolution of business across this timeline.

The countries that played a predominant role in global electrification include Germany, USA, UK, Canada, France, Belgium and Switzerland. Especially Belgians had the first-mover advantage in the domain and continued to be pretty influential well until 1940s (the point till which I have read the book!). The names of Sofina and the Empian group particularly stands out as an influential Belgian holding companies. Germany, pretty predominant on the electrification scene before WW1, rapidly lost its influence after the first Great War and was thrown into a very turbulent time that just kept getting worse. Nevertheless, German manufacturing did reasonably well and some German firms like AEG and Siemens managed to invest internationally either directly or through association with Swiss/Belgian holding companies. The war also saw US getting cash rich and then investing its big piles of cash to electrify communities around the globe. In fact, by 1930 utilities were numero uno in terms of foreign direct investment from the US. UK was not able to capitalize on the decline of Germany and saw its power declining rapidly post WW1. It electrical industry remained mediocre at best. London, however, had the deepest pockets till WW1 and most entrepreneurs who wished to invest in electrification registered their company in UK or Canada to tap these funds easily. Post-WW1, US rapidly displaced UK as the number one destination for raising funds for electrification. UK itself turned more inwards, with the Government feeling that any external international investment would perhaps come at the cost of any internal domestic investment. There was clamour about replacing dependence on finance with dependence on manufacturing of "real" goods (which, strangely, does not sound too different from what I hear today after the recent economic crisis). This, overall, made UK influence on electrification weaker. Even with soft-loans to promote sales of capital intensive equipment for electricity generation, UK electrical manufacturing industry did not do particularly well. Even their massive investments were either sold off or overshadowed by Americans. The role of Canadian entrepreneurs and holding companies in electrification also stands out. In fact, even though US-UK were main source of cash, Belgium and Canada were the main sources of dynamic entrepreneurs, management talent, engineering resources and holding companies. The book is ambivalent about the role of France as I don't see any particular strengths or weaknesses emerging out of the description of their electrification activities. Nevertheless, they did invest in electrification of their own country and their colonies.

Are B-Schools Failing to Produce Business Leaders?

One of my friends brought to my notice this topic for a debate that took place recently in a business school. What are my thoughts about it?

I believe that leadership is the ability to guide a group through difficult situations without seriously compromising the cohesion of the group and keeping in mind the long term consequences of the actions. Extrapolating it a bit further, I would say that leadership is a direct function of the willingness to take responsibility, decisiveness, perseverance, clarity of thought, empathy, self-awareness, reasoning, integrity, openness to change, ability to moderate tense discussions and lack of hubris (please feel free to add if you think I missed something!). And this, I believe, cannot be taught though it can be learned, i.e. somebody who wants to become a leader can possibly cultivate these traits over a long time, but you cannot teach them to somebody in a year or two. Leadership, talking in mathematical terms, is the vector resultant of a personality that cannot be altered overnight.

Elite B-Schools attract top-notch talent, but does it really translate into great leaders for the society? Let me play the devil's advocate and talk about the possibility that business schools are indeed not producing as many business leaders because they do not need to produce that many leaders: not all roles assumed by MBA graduates require strong leadership skills. How much of a leader does an Investment Banker needs to be? Similarly being a technically brilliant manager is not always the same as being a natural leader. A people-person could excel and even grow in sales, marketing or HR without actually being a good leader. An analytical, people person could excel as a consultant. And so on. Leadership is good to have, but is it mandatory for graduates to be economically successful? Moreover, elite B-Schools can, and do, build a mentality of entitlement in their graduates which can be totally anti-leadership. Hence, in all possibility, the assertion may be quite true: B-Schools are indeed failing to produce business leaders for the simple reason that they were built to educate brilliant people to contribute meaningfully to a business, and many such functions can be achieved without strong leadership skills.

I think that business schools are excellent facilitators of the talent. In fact, they can nurture it and provide an excellent network to support some brilliant minds. Hubris, however, can be the bane of elite business school graduates. Most of the people would like to think of themselves to be leaders, but very few really are. Of those that are, very few would like to take the hassle of exercising it. In fact, fat salaries and corporate growth is possible without good leadership. Business schools can be excellent learning grounds for people willing to grow as a leader, but I am not sure if that would really happen. Good leadership is simply a scarce commodity.