Revolution: Overthrowing Segmentation through Breakthrough Products

Segmentation is the process by which a marketer decides which specific customers will buy his products. In text books, Segmentation and Targeting are separately defined. Segmentation is the process by which a market is divided into smaller pieces on the basis of a few attributes, for example age, gender or income. Targeting is the process by which a customer in a particular segment is convinced to buy a product. In practice, the process works in reverse. Segmentation is a given; hugely influential pundits of marketing pronounce on the most relevant segmentation in the market. Products are designed with specific attributes in mind based on a segmentation that is already decided upon.

There is no better place than automobiles to see such classical marketing at work. There are well defined segments based on income and there are well defined products that address those segments. So Mercedes makes C Class, E Class and S Class cars, which go head to head with BMWs 3, 5 and 7 series and Audis A4, A6, A8. Each has some sort of a sports variant: AMG for Mercedes, M for BMW and R for Audi. And then there are a number of exotics that are cheap to make because they share the same platform – for example convertibles and super-performers. This kind of granularly defined, almost theocratic head to head competition is good in steady times, but it makes companies very vulnerable to innovative disruption.

Once in a while comes a product that is so innovative it overturns the existing order. There is no better place to understand product focused marketing than Technology. Apple’s I-Phone completely destroyed the Mobile phone hierarchy, so solidly established by Nokia. There was a time for Nokia 3XXX, a Nokia 4XXX, a Nokia 5XXX, a Nokia 7XXX, and so on. These were for casual users, camera users, regular users, office users and so on. Nokia had the entire marketing segmentation completely worked out. Now none of that matters.

This is an old and well learned lesson that all of us periodically forget. The map is not the world. Segmentation is a way to analyze the market, but the market does not exist because of the segmentation. Segmentation is the map; the market is the real world. Nokia’s casual user, office user and all those segments still exist in the sense that those people are still there. Their needs and desires and motivations and incomes remain the same. But today someone who Nokia believed would spend between Rs. 5,550 to Rs. 7,549 per phone is willing to pay Rs. 20,000 for an I-Phone.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

The great debt restructuring: can we go on like this?

By most accounts over Rs. 2 Lakh Crore in debts has been restructured in India in the last year. This is a massive amount of money that will ultimately weaken our banking system and will have to be made good by the tax payer if credit growth is to resume in the future. One must therefore pause to understand why this happening and what we can do to prevent it.

Indian banks are solid institutions with robust lending practices. While they will, like all other banks, make poor decisions about who to loan money once in a while, the losses from these decisions are usually more than covered by the profits from the interest rates charged on other successful loans. The existence of such a massive amount of potentially defaulting loans means that either something has gone terribly wrong with our banks, or with our banking system.

It is not very hard to find out why this is happening. One contributor is government policies and pressure that inhibits good lending – priority sector lending is a good example. The government forces banks to make loans to farmers that are usually unrecoverable. These loans are then written off in huge “Loan Maaf Yojanas” announced around the time of elections. In effect banks are used to subsidize. This in itself is not a bad practice, but it has the potential to grow into a massive problem if proper checks and balances are not maintained. This is exactly what happened with US Subprime lending, which grew so big that it finally caused a global financial crisis from which we continue to suffer.

But the really big problem this time is massive government policy failures in areas such as power, infrastructure and mining. These failures have contributed to large losses which you and I will pay for through our taxes.  Project plans approved under government policies were partly implemented.  And then work on the projects was halted because the government changed policy, or some pressure group exerted influence to stall land acquisition or because environmental clearances were not granted. Examples of this abound: Singur, Lavasa, 2G and Noida Extension, to name a few.

Clearly things cannot go on like this. There is no point in trying to increase credit growth if the government itself has become the greatest impediment to implementation.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

The question of income inequality

Income inequality and the related inequality in wealth have become the defining features of our times. Across countries like USA, India, China, UK, even the former communist Russia, there is a clear, large and overwhelming trend towards income inequality. What it means is that very few individuals are gathering staggering amounts of wealth even as a large part of the population is left bereft of money to fulfill even its basic requirements.

It was not always the case. Till a few decades ago income inequality was not a big problem. The gini coefficients for most nations were well within reasonable limits, implying that wealth was evenly distributed. But how times have changed in the last two decades!

More technological innovation and wave upon wave of privatization has created a few spectacularly rich class of people. Think about Mark Zuckerberg, who now owns Facebook, a company that is reportedly worth $ 100 billion – Rupees five Lakhs and sixty thousand Crores, because his idea of a social network clicked and was very successful. This is the superstar effect in action. Businesses are globally integrated, so instead of dozens of individuals leading an industry in different countries or regions, we have one or maybe two individual superstars that rule the world. In our own everyday experience you can see this effect. Observe that Campa Cola and Thumbs Up and a host of other Colas have given way to only Coke and Pepsi the world over. When businesses become global, then there are very few but very big winners.

Apart from the superstar effect, government policies have created billionaires. Some of these policies have been less than transparent, such as privatization of great swathes of Russian Industries at throw away prices that created overnight billionaires. In our own country, something similar is suggested about the way telecom spectrum was auctioned. Other policies have had their effect too. Capital gains – the money made because of the appreciation of capital invested in a business is typically taxed less than income so that people are encouraged to take risks. But the absurd effect is that the richest are taxed at rates lower than the middle class.

The results of income inequality are stark and unavoidable. Social turmoil, resentment and the rise of extremist ideologies such as communism and fascism are linked not just to poverty but to inequality. We can ignore it at our own peril.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

Who pays for the research?

Any new medicine that comes to the market costs billions of dollars to create. A part of this cost is the research and development effort needed to develop molecules and then screen them and test them. A large part also comes from the extremely difficult and time consuming process of clinical trials and other studies that determine if a medicine is safe for human consumption. This is what makes medicines prohibitively expensive. Companies charge high prices for their medicines because they have to spend a lot to create them. Companies also charge high prices because they can – life saving medicines are priceless and people will pay anything to be spared from their diseases.

Determining the right price for a medicine is a very contentious issue. Companies do not want governments to dictate prices, and governments do not want to give pharma companies a free hand to charge as much as they want, especially because pharma companies are very profitable.

In India the government has decided to intervene in a big way to force compulsory licensing and cheaper prices for medicines that they deem to be critical. Most governments in developing countries prefer to use this route. But there is a cost, and that cost is paid in the developed world.

When medicines become cheap in India, companies have to raise prices in the USA to finance their research, or at least that is what pharma companies are complaining about to the US government. It is therefore a matter of time before serious trade disputes result because of the pricing of medicines.

The basic question remains: should the rich pay for medical research, or should everyone pay?

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

What makes online marketing the next big thing in marketing arena

Internet marketing in now valued at around $ 75 billion per year. Ten years ago the field did not exist, and I have no doubt that in the next ten years we will see online marketing emerge as the biggest slice of the advertising market. You can find detailed statistics on the market here. But the numbers tell only part of the story. It is not only the huge size of the online advertising market that is significant, but also the way it is changing the field of marketing by making customer targeting more accurate, positioning more customized and promotions less intrusive.

The internet is an interactive medium that collects data about you, and there are specialized programs that store data about your online habits. This data is run through powerful programs that predict, with a surprising degree of accuracy, what you are likely to buy, when, and from where. You can try it out yourself. Spend some time looking at watches online, and notice that when you get onto the internet the next time from your computer, any newspapers, magazines, blogs or other sites you may visit will be dominated by advertisements of watches. In the real world the equivalent would be unthinkable. For example if you were to go to a Titan showroom, it is not that advertisements on all your TV channels will suddenly start showing you more ads for watches. But this is exactly what happens online.

We are already at a stage where the internet has become unique to each user. Everyone sees different products and special ad versions for products. The more sophisticated online shopping websites, for example amazon.com do not exist! There is a special amazon.com laid out for each visitor.

Interactivity and targeting are too powerful to be ignored. New technologies, especially IP TV will extend interactivity to TVs and make TV advertising act more like internet advertising. This is the way of the future, and it has the many advantages of focused, efficient and cost effective advertising.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

Communication – The Missing Link in Management Education

Many Indian Technology and Management Graduates cannot read or write a single coherent sentence in English. Given that all Technology and Management texts used in India are in English, it is very hard for a prospective employer to believe that the person sitting across the table at a job interview, incapable of speaking or reading rudimentary texts in the main medium of instruction, knows anything about his field. In simple words: if you cannot speak or read English, you cannot be a good Engineer or Manager.

In the Indian context this is only partly true. There are many great Technologists and Managers in India who are not fluent in the Language of international business. While texts and readings are in English, very often instructions in class are provided in a mix of English and local languages. It is not hard to see a good technologist emerge without a good grasp of language.

But it is a handicap that sooner or later stunts career growth. Without English, future trainings are not accessible, there is little chance of international exposure and even working with international teams becomes difficult. English is just a starting point for developing communication skills that include very basic but very critical skills such as writing emails, recording voice mails, public speaking and presentation. Modern business simply cannot be conducted without these skills.

We should stop beating about the bush on the non employability of Indian graduates. A significant part of our unemployment problem is simply a lack of good communication skills, and it can be rectified easily through proper guidance and training in the English Language and using the tools of modern business communication. India is brimming with enthusiastic, creative and dedicated minds that are frustrated in their endeavors because they lack a tongue, and that deters them from achieving success despite having brilliant minds. As a country, we need to take definitive steps to do something about this problem, and rectify the current situation.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

The big online advertising battle: Search or Social Networking?

During the Facebook IPO process, a lot of thought went into answering the question whether Facebook could generate enough revenue to justify its valuation. The fundamental question was this: would Facebook, which currently has 900 million users and makes $ 4 per user per year in revenues, be able to scale up to get $ 20 per user per year in the next five years?

There are many who believe Facebook will not make that much money per user. Their views are useful for online marketers, because they are saying that Facebook is primarily about meeting your friends and connecting with people you like. So an advertisement in Facebook is a distraction and is likely to be resented by users. On the other hand, Google is a search engine where people go to look for things, and so its advertising has possibility of being liked by the users. Therefore, Facebook will ultimately fail because they will not be able to make much money.

The counter to this argument is also fascinating for online marketers. The opposite view is that Facebook is a very engaging platform where people spend hours of their day connecting with friends, gossiping, making shopping choices and following their chosen celebrities for trends. Therefore, Facebook is much more powerful at retaining the interest of its users and so a better platform for contextual advertising. So it should be more valuable than Google Search. This camp has no doubt that Facebook is going to generate more than $20 per user per year.

In deciding between the two opinions, we cannot help but think of the similarities between the comparison of Facebook and Google with the comparison between TV and newspapers. We turn on TV for entertainment, and it bombards us with messages to buy. TV beats Newspaper in advertising rates, and yet people do not turn it on for information; rather it is used for entertainment.

The good thing is that unlike equity analysts, online marketers do not have to make a choice. They have to be experts at both Google adwords and Facebook and also at LinkedIn and Google Search optimization.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

Is India a Start-Up focused Country?

There is a new buzz because India is emerging as a potent start up hub and this can only be good for India. Innovation and entrepreneurship have been part of India’s business culture for centuries. We do not need to instill an ethos of risk taking in our people because they are already enterprising and avid risk takers. What we need to do is to channel risk taking to create productive capacity, and it is here that management and technology education plays a big role.

While traditional entrepreneurship in India has been concentrated in the areas of sales and trading, truly great opportunities in entrepreneurship today exist in the domains of design and technology. What we need is not only entrepreneurs who can start up a new venture in an established area based on tested business models, but also entrepreneurs, who can revolutionize an industry, or better still, start an entirely new one. This is the challenge – get people to think and implement big. Don’t just think soapandshampoo.com, think iPad.

What do we need to create disruptive startups in India?

Three things. First, we need quality technical education that creates technology visionaries. The ideas for tomorrows’ start ups are present today – in scientific journals, in technical papers, and in the minds of young technocrats with ideas. Second, we need to create management expertise for startups in areas such as IP protection, company set up, venture funding, scalable hosting and utilizing third-party shared services. And then finally, we need to set up sources of capital, such as venture capitalists, that can finance a start up through its phase of explosive growth. Once we have these three things in place, we will see the emergence of many more credible start ups in India.

Until then we are only partly utilizing the creative energies of Indians. The typical start up in India remains a company that requires little capital investment, is profitable very quickly, is incremental in its innovation and addresses a niche rather than a broad market. In effect, such a company is just an application of a traditional sales and trading focus to the internet. This is a waste of talent because Indians are capable of far more and are willing to take risks. We need to turn our ambition to big returns in order to convince our entrepreneurs to take big risks.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

Ways to Improve India’s Economy in the Next ten years

With real GDP growth down at 5.3%, the Indian economy is in poor shape. The Government has kept to its tired refrain that 5.3% is still one of the fastest growth rates in the world. But that is not relevant, because Indian per capita GDP is amongst the lowest in the world, and we have no excuse for not growing at anything but the fastest rate in the world.

India can regain economic growth and grow spectacularly in the next decade because its problems are largely self created and can be solved without extremely painful adjustments. There is no dearth of savings, and we are blessed with a resilient banking system that is still posting good credit growth. The problem is in utilizing capital for delivering growth. It is here that we hit bottlenecks.

The first is lack of policy direction and transparency in core sectors. Mining, Refining, Power, Roads and Railways are the backbone of any economy. Without growth in these sectors we can expect power shortages, inflation, lack of scale and therefore total inability to grow industries downstream. In simple terms – there can be no malls without power plants and there can be no power plants without coal mining. More transparent policy necessarily means less political and bureaucratic power. To a great extent our economic growth will depend on whether people punish those political parties that do not deliver economic growth, but depend on patronage to retain power. Only then will the policies change.

The second is a lack of leadership and trust in the political process to deliver social change. Our people are not willing to allow mining in their districts. People are not willing to part with their land. People are not willing to have nuclear power in their vicinity. And people are not willing to let rivers be utilized for hydropower. Beneath all this unwillingness is a complete lack of faith in our administrative apparatus. People will not part with land because they fear that they will never be compensated. Their fears have a solid basis in experience. It is the main responsibility of the political class in the next ten years to convince people to make the change from agriculture to other employment.

The third is lack of education and training. A modern economy depends totally on the quality of its workmanship. Whether it is retail, BPO, Financial Services or health care, the ability to grow depends on the quality of customer experience at the ground level. This quality depends on education and training. We are fortunate to have a large young population, but that is not enough to sustain growth. We need to provide quality training to this population and set up a virtuous cycle – good training leading to fulfilling employment and a prosperous life. Vague concepts of learning and intellectual emancipation need to give way to a practical focus on employability and relevance.

If we can get these three things right: right policy, right politics and right training, nothing can stop India growing.
About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.

The Present Education System in India

The Indian Education system is producing a large number of graduates that are unemployable. They lack basic communication and problem solving skills that are needed for even the most elementary jobs. The problem is not infrastructure or money. Indians are willing to invest in education and this investment is more than sufficient to create infrastructure for most Bachelor or Masters level courses. Except in very few technical fields such as medicine, fees paid by students are sufficient to provide good quality education. But clearly this is not what is happening. The problem is that a vast majority of Indian colleges lack the focus to create employable graduates. Their task, as colleges see it, is to help students go through a curriculum and pass an exam. After that, the student is on his own.

To change the way we treat education, we need to change this focus. Institutions that are involved in education must consider gainful and appropriate employment as the primary goal of their courses. This is especially true of courses in Technology and Business Administration, where colleges need to have strong and continuous interaction with companies that will employ their graduates, to understand what they require from their employees. Colleges must then make sure that their graduates have those skills. In today’s world, even a brilliant technologist will struggle if he is not proficient in English. A talented animator is no use if he cannot understand instructions. This is the way it is, take it or leave it. Most Indian colleges do not focus on employability and therefore are of no use to their students.

Building this focus requires three things: additional training, industry stints and real life exposure. We at NHSMT provide just these three things.

The current curriculum in India is out of date. It has great content from thirty years ago and does not take into account the fact that the world has moved on. Educational institutions have a choice – they can stick to the old curriculum, or fight a long and probably futile battle trying to change it. We at NHSMT believe that the most urgent need is to supplement the curriculum with additional training in new technologies such as online advertising, cloud computing and mobile apps development. We provide Earn while you Learn options with our industry partners that helps reduce students’ financial burden of education and at the same time enables them to gain precious industry exposure.

Changes will come to education in India, but they will take time. You, as a student, do not have the luxury to wait for education to catch up with the real world. Take your future in your hands and invest in skills that enhance your employability.

About The Author

Mr. Bhuwan Singh Atri is the Head, Academics at NH School of Management and Technology.He has a B.Tech degree from IIT Delhi and an MBA from IIM Ahmedabad. He also has 12 years of rich industry experience in top notch international organizations including Goldman Sachs, Infosys Technologies and Evalueserve where he has assumed leadership positions and contributed in a noteworthy manner.