November 2005 Archives

David Cowan of Bessemer Venture Partners has a few ideas on a concept called the Sales Learning Curve Who Has Time For This?: The Best Startup Advice I Have. The concept was developed by Mark Leslie of El Dorado Technology Ventures. Here's the link to his original paper The thing is - Sales and Marketing, stay highly subjective. It takes time, effort and science to probe and try different methods to reach your target audience. During that time, you need to keep your sales and marketing staff lean. To quote him:

As my erudite partner and Harvard Business School Professor Felda Hardymon likes to instruct, "run the business like a one story whorehouse" (with no fucking overhead). Hire only two or three creative, guerilla-style reps and a VP who knows how to experiment with multiple channels.

The amount of attention paid to pricing is turning out to be quite remarkable. Here we have Seth Godin weighing in on the stuff. Seth's Blog: On pricing I kind of agree on this view, but I feel that while pricing signals to customers the "value" of the product or service, it also signals back to marketers that some features that they thought were high value are now commoditised or not that valuable any more. Marketers need to come up with newer ideas to bump up the value of the service, communicate it effectively and thus maintain or increase price. In the case of the record industry, I'm pretty sure that iTunes will increase prices on some hot numbers. Music companies will go beyond just music. They will bundle other multimedia together with the song to create a richer download for the music lover. They will sell collectibles in stores that consumers who download from iTunes can buy at discounted rates.

There have been a spate of articles online with people telling other people how Drucker influenced their lives. I must confess - I've never read any Drucker. Of all the articles I read of people writing about Drucker, I liked the Businessweek one the best. So here it is: The Man Who Invented Management

Christian Mayaud pointed this out in his blog. He's got a very good commentary here. If you haven't added his blog to your blogroll, do so now! On my side, I must confess, I've never seen a pitch book before.. so this is what Investment bankers get paid for?? :-)) N.B. this is a "public" version. I'm sure there was some sensitive information withheld in this version of the presentation. But still, it's a pretty good read! Here it is:Ebay Skype pitchbook

Now this is very useful. It seems an assistant vice president of Citibank went around door-to-door selling business banking checking accounts: Seth's Blog: Not what it used to be. I think this is great! It's an excellent way to get to know your customers, and if you find someone who needs a bit more than a checking account, I'm sure that Citibank will respond quicker than before! A hell of a lot of very good people beat the street selling financial planning products. These people are folks who have worked in senior positions in banks. They now control client relationships. This is a good way for the bank to get back its clients.. :-) Another thing is that often enough - folks who join banks after a brief consulting career get appointed as Asst. Vice presidents. hmmm.. I doubt that those folks know a lot about banking per se, but they do bring a wealth of good network clients with them. Lastly, Just imagine the ideavirus he's unleashed - Move over from Everybody markets -- to -- Everybody sells. I salute this brave Asst. Vice President who in my eyes is a true entrepreneur, and a real sales guy.. I hope he gets to run Citibank some day.

OK.. this is a joke that's built into Google. Go to Google.com Type "failure" in the search window Click "I feel lucky" And laugh your guts out...

A really interesting article on trade pricing has been put on the BBC: BBC NEWS | Business | Firms 'ramping up online prices' The beef of the online retailers is - why are they being charged more than the high street retailer for the same product? I would argue that the product that a customer buys online is not the same as the product that she buys in the high street - purely because of the different shopping experience in both cases. Besides this, the two types of retailers differ in how they spend on product specific expenses, which affects the shopping experience. In the case of the high street retailer, the retailer holds inventory, provides shelf space for display and branding purposes, allowing customers to touch and feel products, and most importantly instant gratification to the customer. These are all "high value intangible components" of the "product" that a customer buys. These in turn fuel the brand of the product, and influence buying behaviour - not just in the high street stores, but also online. High street retailers are thus correct in demanding concessions off the list price of the product from manufacturers. Online retailers don't do all this. They require that manufacturers hold inventory. Thus they spend less "on behalf of the manufacturer" than high street retail stores. While recognising that they do have high costs - especially in customer acquisition and retention, they don't spend on branding the product. They spend on branding themselves. Thus I'd say that from a value perspective and an activity based costing perspective, manufacturers would be wise to give high street retailers greater discounts than online retailers off the list price, but calculate this after carefully analysing the impact this would have on prices that customers pay!

I'll be the first to admit it. I've been lazy today. I was thinking of how to help a prospect collect information - Whether to use excel sheets, build a database powered website, install a wordpress blog. I had heard about wikis being used as knowledge management systems, and thought hmm what's that all about? Well I paddled over to wikipedia to get some info on wikis and to while away my time, I searched for pricing. And guess what.. I found a really nice introductory resource on the subject. Take a peek! Someone worked hard on this. Pricing - Wikipedia, the free encyclopedia

I attended an information session at my old alma mater - the Rotterdam School of Management, and found that my favourite professor was teaching an elective at that time on investment management. So I ducked into the class to relive the experience again.. One of the topics covered was how to pick mutual funds based on factor and style analysis. Well, to cut a long story short, she told us that a very distinguished Nobel laureate called William Sharpe who's studied funds in depth suggested that the best ways to pick a mutual fund were in this order of descending importance

Expense ratio

Churn of stocks held

... The message was - find the funds that have the lowest operational and transaction costs. Amazing isn't it? The market and the fund's mandate makes sure that no one fund can beat the market at all times. So effectively, funds will yeild the same return on investment - in the long term. The only way an investor can get above average returns is if the fund's costs were lower... :-) I wonder if I can use this principle in pricing other physical products and services. (Any ideas would be appreciated here) When I worked in India for an outsourcing firm, there was tremendous cost control.. The message being - the lower your costs, the more value you can provide to a customer, and the better the chance you will survive in the long term. Lessons that are tough to forget. But it was nice to hear them again in a totally different context.

Seth Godin pointed a manifesto written by a friend of his called Ira Williams on bringing back humility to our lives. It's quite thought provoking - even for the secular among us!! :-) What's even more intriguing is this website ChangeThis :: View manifestos which has a lot of high-value ideas for free download. Hope something out there changes your life!

I was looking for knowledge bits on pricing and ran into a post on John Clingan's blog: The Clingan Zone. John works at Sun Microsystems, and is one of their evangelists. He also points out their shortcomings, so he's one of the good guys... :-) The question was: Are there any new insights to price new software? Here are some of my thoughts I haven't dabbled with software pricing, but have worked as a programmer (on Unix and Windows), I did have an experience that I'd like to tell you about. Normally, most software vendors assume that the useful lifetime of their software is around 3 years, seen that most people also upgrade their hardware in 5 years, and if it's leased, they upgrade in 3 years. This may not be the case! I visited a client who was running Windows 2000 on some machines and Windows NT on some others. Instinctively, I told her to upgrade - to a non windows platform of course. But on the long ride home, I got to thinking. In a lot of places, especially India, the price of a license of a windows operating system of the "previous generation" which is still supported falls drastically. So when the Windows 2000 system costed x amount, the cost of a Windows NT was x/5! Given that you can find a lot of people who can administer such a system well, their cost falls as well. So upgrading to the older operating system becomes incredibly financially attractive - for people who use it for normal office type applications AT WORK. (Most folks who use it at home in India pirate the latest version.. no question of that.) The second thing was - if you compared feature to feature on a pretty high level - Wordprocessing on a previous platform versus Wordprocessing on a new platform, there isn't that much value addition for a basic user. And given that economic advantage of older platforms, the cost to consumer of a new platform actually increases. So here's my notion - Make newer releases of platform software cheaper (for some customer segments) than the original ones. Stick the higher value add-ons in a separate bundle, which can be purchased if someone buys utility computing or support contracts or so. High value applications should never be introduced in a suite, since a suite automatically becomes a platform. They should be on the utility computing / Application service provider model. Once you find that the rate of subscriber growth on that service has flattened, and has stayed there for awhile, move the service to the suite. Could this perhaps be a case for software companies like Oracle - not to acquire smaller companies?

Another irresistible titbit from Christian Mayaud. Apparently NBC has been sticking yellow "removable" stickers on dollar bills and passing them out in department stores, and other places. These stickers have advertisements to shows on NBC or other marketing messages. People tend 'not' to remove the sticker from the dollar bill, and pass it on. Each person who gets the bill will be exposed to the message. Think about it - This is literally "putting your money where your mouth is". Christian has analysed this "pretty old" trend. Do take a look at this link! Sacred Cow Dung: Let George Washington Spread Your Message | A Clever Analog Promotional Technique

Christian Mayaud's blog has always been a pretty good source of information, that usually isn't really useful to me at that moment, but always gives me an aha moment a couple of weeks/months on. A friend of his - Dave Pollard came up with what he thought folks on the blogosphere wanted to see. Now the way I see it, readers of blogs are folks who could be termed as "early adopters" in the area of "knowledge gathering", and quite similar to consumers of consulting services. Take a look at this link! Sacred Cow Dung: FIND OF THE WEEK - Dave Pollard's "WHAT THE BLOGOSPHERE WANTS MORE OF" Sidebar

We did a huge amount of work on process redesign/re-engineering/engineering.. Choose whatever you'd like to call it. Along the way, we learnt a few things, that we used to prevent ineffective design. We'd like to share those thoughts with you in this document The overall theme is this

Keep things simple & reduce distractions

Reduce rework

Help employees get work done faster

Hope you like it...

Interestingly, Mckinsey and Co has published a special report on India: a series of articles about Indian business and the future of business, reform, and opportunities in India. It's called Fulfilling India's promise, and is a really interesting resource, especially if you're looking for some long term ideas.

Market roundup Diwali - the festival of lights is finally upon us. Typically in the week before Diwali, there is a rise in the Sensex. Popular belief in India goes that if one makes money on Diwali, one makes money all through the year. Well, to no surprise, the Sensex went up by 200 points, It also fell 176 points the very next day! Over the last month, the stock market fell in the first week, and slowly inched up in the remaining three weeks. In my previous article last month, I had mentioned how there was a disconnect between volume growth (negative) and sensex increase (positive). That never happens. It's a tipping point for a fall. That was borne out, and the stock market then fell. There were some reasons though. It seems that most of the stocks were being priced at 18 -20 times FY2005 earnings. In the second quarter (equivalent to the third quarter in the US, as Indian companies close their books on March 31st), Companies other than the IT majors didn't do too well - the EPS in some cases (Grasim) fell by 20%, and in one case, Ranbaxy made a loss of Rs. 100 million in the quarter as compared to a Rs. 750 million gain in the same quarter last year. This pushed down all stocks. Another reason was that FIIs have been gradually withdrawing money (booking profit) and reacting to rising interest rates in the US. This interest rate hike caused the Rupee to depreciate against the dollar, which impacted earnings. Indian Mutual funds have stepped in to partially offset the loss in volume, but the Indian stock market still remains a relatively shallow market. Some important sector news:

The automotive sector BMW confirmed that it will invest Rs. 1.1 billion to build a factory in Chennai, India to produce 3 series and 5 series cars. The production is meant for the local market. All over Asia, BMW sells around 95,500 cars of the BMW, Mini and Rolls Royce brands. The plan is to bump this up to 150,000. All auto manufacturers reported double digit sales growth. Maruti, which had underperformed the last quarter was back with a 14.7% yoy growth in October. The sweet spot seemed to be the Alto, WagonR, Swift and Zen models which clocked a 35% growth. Cheaper models like the 800 and expensive models like the Esteem and Baleno had a 17% growth. Tata Motors had a sales growth of 17% in October as compared to the same period last year. Most of this came from the sales of buses and trucks - the commercial vehicles segment (18%) In comparison, the cars segment grew by 5.4% Bajaj Auto had vehicle sales increase of 37% in October as compared to the same period last year. Motorcycle sales were up 43%, three wheelers (called auto-rickshaws) were up 15%. Exports were up 49%. A little statistic: If the GDP falls 2%, the automotive components business falls by 10%. I feel that the same measure could also hold for the car and motorcycle businesses. Tyre manufacturer Goodyear will invest $18 million in expanding its factory in India. This will be done in 2006. It has just completed an investment of $ 30 million in capacity increase. The company has a 15% market-share in India, and will increasingly use it's Indian factory to supply tyres globally, besides meeting the growing domestic requirement. After this capacity expansion, production will be 10,000 radial tyres per day.

FMCG A normal monsoon, good economic growth and strong consumer confidence are helping all consumer products companies do well. Hindustan Lever (a division of Unilever) invested in product improvement, advertising and managed to increase profits by 17% in the last quarter. Proctor and Gamble on the other hand managed to increase profits by 21%. Growth was in all sectors - washing detergents, cosmetics, food, and healthcare. Marico grew net profit by 14%.

Healthcare While the domestic market is pretty stagnant in healthcare - as seen by flat sales and low revenues of medical equipment sales, medical outsourcing continues to boom. Here's an example: Max Healthcare has a division called Neeman, headquartered in North Carolina, which is involved in clinical research services. It has established a link up with several hospitals in the US, Western Europe, Nicaragua, India. It has recently entered into an alliance with Sinequanon, a clinical research organisation that provides clinical trial services to pharma companies in Brazil, Argentina and Chile. They feel that they can increase revenues to $100 million in 3 years and the total opportunity in backoffice processing of clinical research - hospital site management, database management and monitoring is worth $ 1 billion.