Subba’s Serendipitous moments

February 16, 2007

Two great visionaries chat with honesty

Filed under: Business,Competition,India,Inspiration,Leadership — Subbaraman Iyer @ 2:52 pm

It is rare to see 2 great Indian visionaries chat about a range of business issues with such honesty, clarity, mutual respect and share nuggets of wisdom.

Both of them have been role models for me. Almost 20 years back, when I was a rookie sales person for an indigenously developed CAD/CAM workstation (and Wipro was selling SUN workstations),  I walked over to the Wipro booth and invited Mr. Premji to visit our booth after giving him my business card at an industry trade show. Three hours later, he visited our booth and was looking for me. He spent close to 30 minutes, sitting on a very ordinary chair as I did the product demo and wished me well.

3 years later, I met him at the Mumbai airport. I went up to him and introduced myself. He immediately recognised me and enquired about me. It was indeed a great moment for me.

Though both of them are great business leaders, I think Mr. Murthy’s contribution is phenomenal. He has been a trend setter of sorts, and today he is not only the role model for all Indians, but could be called as an industry statesman. I can highlight many of the things for which I hold Mr. Murthy in respect, but the manner in which he gracefully retired and occupies himself with greater issues that plague the country qualifies him to be an icon. No wonder, Mr. Lee Kuan Yew (Singapore’s Mentor Minister and one of the founding fathers) suggested to him to run for a political office.

This interview is really an eye opener as these 2 great visionaries discuss what it takes to have the global mindset and how Indian companies are embracing that.

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February 14, 2007

Finding right metrics

Filed under: Learning,Perspective,Strategy,Winning strategies — Subbaraman Iyer @ 6:24 pm

Seth Godin has a wonderful post on metrics here. I also find it interesting that both companies and individuals rely on metrics. Metrics is a measure of tracking progress, towards the goal, but often assumes such significance that it becomes a goal in itself.

Just because something can be counted, doesn’t mean it counts, and just because something is difficult to count, doesn’t mean it doesn’t count.

Choosing the right metric to track is often a difficult art, while counting it accurately is science. We have so far advanced much in the science front, without improving the art aspect.

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Vodafone — Problems ahead..!

Filed under: Business,India,Model,Strategy — Subbaraman Iyer @ 4:33 pm

I talked about Vodafone paying what I consider a high price for Hutch Essar. An insider from Hutch Essar informs me that the current management (Ruia brothers) are not very happy with Vodafone as the majority shareholder, despite making contrary statements to the media.It also seems that the Essar group had preferred working with the Hindujas group.

I think Vodafone has to contend with some serious management issues — something they may have factored in, but clearly underestimated it. Read the latest story here. The Essar group seems to be in discussion talking to lawyers, bankers and even some key Government officials about some critical issues.

Cross border acquisitions bring their own set of issues. In this case, Vodafone is likely to flex their muscles much more and play the Big Brother. The Essar group and the chieftains don’t have a great track record in managing alliances.

So, stormy days ahead.

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Sun CEO believes the world is his classroom

Filed under: Learning — Subbaraman Iyer @ 4:24 pm

A couple of years back when Scott Mcnealy (the former CEO of Sun) was in Singapore, he talked about the world wide classroom initiative and his vision of creating a whole new paradigm. He talked about is as passionately as he does about technology and his arch enemies in the technology area — Microsoft.

Now he has come out with a very interesting model.

What I find it appealing is the co-operative approach that he has adopted which lends itself to constant change, making  it adaptable, and oriented towards the learning approach rather than the staid educational approach.

I am a strong believer in the philosophy of the open source world and the collaborative model. Hence this resonates with me strongly.

Further, I am more encouraged by the fact that there has been a lot of visitors from India. Given that there are many issues confronting the Indian educational system, I hope there will be increased activity,  contribution and participation from India.

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February 13, 2007

Does the Indian market reflect the wisdom of the crowds?

Filed under: Business,India,Perspective — Subbaraman Iyer @ 9:32 pm

Recently my learned friend Dr. Ananth Nageswaran raised a question in the MINT whether the Indian Sensex trading at an all time high is product of global liquidity or is it a reflection of India’s growth.

The site has some problems and is still in beta and hence I quote below some salient points:

He posits:

“To reiterate, the reason central bankers hesitate to intervene when asset prices keep climbing is that they find it unreasonable that a few men could overrule the judgement of hundreds and thousands of market participants. Perhaps, the real reason is that it is also politically unpopular to throw sands under the wheels of asset markets. In any case, it is hard to say whether asset prices were in a bubble or were discounting rational optimism (an oxymoron?) until after the fact. Precisely such a debate is under way in India right now. The all-important question is whether the Sensex, at over 14,000 points, is a product of global liquidity or is a rational reflection of the current and prospective high-economic growth in the country.”

He further adds: “In a way, acknowledging the final authority of the market is equivalent to acknowledging the existence of a power that dominates and consummates human endeavours. That is the first step towards spirituality. Spirituality starts with the admission by our egos that our opinions are not the final word on the subject—whether it is in the world of investment or otherwise”.

Having read the book The Wisdom of crowds by James Suroweiecki, I am curious to understand its application in financial markets. The book’s primary tenet is that a crowd defined as a group of people(investors) will typically be smarter and make better predictions than any expert. In the technology area there are many examples. It also talks about how the collective opinion of the punters in the race course picks up the winning horse more number of times than the experts and why more than 90% of fund managers perform worse than the overall market.

Now societies as a whole and Indian society more so, have traditionally placed a significant premium on the opinion of experts or gurus. Since we never had the Internet till recently, this was justifiably so. Now, with the advent of Internet, and more importantly the rise of social networking, and a very diverse group of people participating, the wisdom of the crowds is becoming a reality and an opinion which in many cases seem to run counter to the expert’s view . So currently in many domains there’s a very interesting debate about whether the experts view / prediction is likely to prevail / proven right or the view of the crowd will prevail.

I would like to hear views on how the expert’s view and the wisdom of the crowds as defined by James apply to emerging markets. Are they more pronounced in emerging markets than well developed markets?

 

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Vodafone buys Hutch Essar — pays too much..?

Filed under: Business,India,Model — Subbaraman Iyer @ 9:14 pm

Was interviewed yesterday both on BBC and CNBC on the Vodafone’s acquisition of Hutch Essar. The questions asked were very similar, and here are my views:

For the record, Vodafone plonked $11 billion for the 67% stake in Hutch Essar. To keep that in context, Vodafone pays 9% of its market capitalisation acquiring the # 4 operator with 22 million subscribers.

Good deal..? It does not make sense to me..!

Vodafone paid $ 825 per subscriber when the annual average revenue per user (ARPU) is about $ 120 per year and an estimated churn rate of 27%. Vodafone would also have to pay for infrastructure enhancements with or without 3G. Incidentally when Cingular sold their stake in Idea Cellular in mid 2005, for $ 400 million, it worked out to $220 per subscriber.

Well, looks like Vodafone have not deviated from their practice of paying premium pricing.

Well, the Indian market is definitely sizzling with over 6 million subscribers being added each month. However the next 150 million subscribers are going to come from small towns and rural markets where the Average Revenue Per User (ARPU) is going to be lesser.

Well, for the other contenders Reliance especially it was a good game to lose.

But, guess Vodafone was faced with a Hobson’s choice. The management was under tremendous pressure to show growth and hence they have been looking at some of the emerging markets. Now, with this acquisition, the management has some breathing time. How long, is the billion dollar question!!

How such a premium acquisition translate into earnings is something that I haven’t figured out yet..!

Making the acquisition was easy. The tough part begins now.

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February 11, 2007

If Apple is there, can Microsoft be far behind?

Filed under: Business,Competition,Model — Subbaraman Iyer @ 11:01 pm

Looks like Microsoft is trying to just follow Apple’s footsteps. If Vista emulated OSX and the Zune wanted to take a crack at the iPod, we now have news that the Zune Phone wants to take a crack at the iPod.

Watch the story here.

I just can’t see this making much headway. It seems to depend on Nextel’s 4G network, when their 3G network itself is not ready. And will they make the investment and roll out the network just for Zune?

Are there any WiMax chip out for the mobile phone? I doubt it!

I personally have doubts about Apple succeding in the mobile hand set market. Microsoft has a whole different and additional set of issues to contend with !

Somehow, I get a feeling that this whole thing is a hoax!

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What determines learning behavior?

Filed under: Business,Competition,Innovation,Learning,Stories,Winning strategies — Subbaraman Iyer @ 10:36 pm

Someone sent me the following story and this led me thinking:

In early 1900s, milkmen in England, would deliver bottles of milk to the door of each country home. As the bottles didn’t have any cap, the titmouse and the red robin (2 British garden songbirds) siphoned the rich cream from the top.

Then somewhere around WW II, the milk bottles started having aluminium caps. Well, for a start both the bird species occassionally figured how to pierce the seals. However by the early 1950s, the entire titmouse population almost a couple of million birds had learned how to pierce the seals. And as far as the red robin was concerned, though some individual birds managed to pierce the seals, as a group they could not break the seals.

The scientists were clearly intrigued because both the titmouse and red robins being songbirds, they had the same range of communication. It was after a long time, that they figured out the reason.

The difference between the titmouse and the red robins was not in their communication abilities, but in their social organizations. Red robins are intensely territorial in nature, do not allow another male bird easily and the communication style is clearly antagonistic. The titmouse on the other hand are very social birds, who move from garden to garden in groups. Their communication is a lot more friendly and they seem to learn faster. They hence increase their chances to survive and evolve faster.

Learning and adaptation can only proceed only so far independently. As organizations try to become learning organizations, it pays to watch what and how information is shared between groups. If best practices need to be shared and adapted, is it because of a top down approach or because there’s a shared identity and a shared view of the future amongst people in the trenches.

Will learners "flock"or will they be dictated or mandated to fly in a particular direction?

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Oracle President — Charles Phillips Jr. envisions Oracle’s future

Filed under: Business,Leadership,Model — Subbaraman Iyer @ 10:22 pm

Recently had a chance to ask questions to Charles Phillips Jr. — President of Oracle when he was in Singapore last week to receive Leaders and Visionaries award in Singapore. I was an invited guest of BBC World who were one of the sponsors.

Question: Over the last 3-4 years, Oracle has spent close to $20 billion making both big and small acquisitions. Recently it has also announced a Linux initiative and apart from making some major horizontal acquisition like Siebel, Peoplesoft, it also has made acquisitions in the vertical segments like banking (iFlex), telecom (Portal), retail (Retek). So, what’s the Oracle’s strategic architecture for the future?

His answer: Oracle intends to dominate the IT space. He believes CIOs spend a lot of money writing applications, customizing them and integrating various aspects of the business. Oracle wants to dominate the entire stack from operations systems to applications and offer that to customers and allow businesses to focus on their domain.

My view: While this does seem to be the intent, the days of an integrated software company succeeding is over. Much as they want to deal with lesser vendors and focus on business issues, not technical issues, I can’t see CIOs giving the keys of the kingdom to one specific vendor. Even today, many of the CIOs are pretty nervous about dealing with the large software vendors. Currently they are all locked in because of maintenance, and despite the software companies using low cost labour for doing their maintenance, the cost savings have not been passed to customers. Despite spending over $20 billion on acqusition and also integrating them effectively in reasonable time, their market shares have not grown significantly over the years. Even the stock price dont seem to reflect the future potential.

Question: Given your past experience at Wall Street (Charles Phillips was a Wall street banker for several years before he came to Oracle), would it be possible for you to comment on the implications and effects of private equity players entering the enterprise software space? In 2006, private equity firms made a significant play on many enterprise software companies and I believe that the trend is likely to accelerate in 2007. So, what does it mean for users and the industry at large?

His answer: He didnt believe that private equity players are significant players in the M&A space. He also believed that for most people in the M&A space, Oracle is the first call because of technology and the kind of market opportunity it provides.

My view: While that may be true, the actions of private equity becoming active in the M&A space actually has broad implications. Innovation is likely to slow down further amongst the bigger companies as the focus would continue to be on maintenance revenues. There is some opportunity for start ups here, though the odds are difficult.

Like other Oracle executives, he did make snide references to the other industry heavy weight — SAP, something which I thought took away some points from what I saw was a very good session.

Looks like there’s a BEAT SAP culture within Oracle!

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Is Apple overly optimistic with the iPhone?

Filed under: Business,Innovation,Model,Strategy — Subbaraman Iyer @ 10:10 pm

It’s been a month that Apple announced the iPhone, amidst a lot of expectations. Steve Jobs took the world and especially his fans by storm in his inimitable way. Everyone has talked about the “cool” factor, the visual voicemail, and the great user interface, for which Apple is really famous. However several doubts remain about whether Apple will indeed ship 10 million phones in 2008? What’s the iPhone’s long term future?

Will Apple create the same success with iPhone, as it did with the iPod?

The iPod succeeded partly because the existing incumbents in the media player segment was weak. It also introduced iTunes and it succeeded surpassing everyone’s expectations as it was just coming out of the Napster era. it was just the combination of the iPod-iTunes that made it a great success. But now, will Apple create killer applications that will provide the much needed ARPU for the mobile operator and how will the sharing of such incremental revenues be effective? Hence, clear challenges ahead!

Will Apple beat the competition?

The Big 4 (Nokia, Samsung, Motorola and sony Ericsson) account for 75% of the billion phones shipped in 2006. Even in the Smartphone segment (about 5% of the overall phone market), Apple has to contend with the likes of Nokia, RIM, HP, HTC, Sony Ericsson who together hold more than 80% of the Smartphone market. They are no ordinary pushovers, having known the market, channels, and the consumer for a long time. Hence interesting wars ahead!

Is iPhone all that revolutionary?

  • Great user interface and feature integration of MP3, WiFi, phone — YES
  • Visual voicemail — YES. (Is that revolutionary?)
  • HSPDA,UMTS, VoIP, 3G , GPS — NO.
  • Expansion slot — NO (comes with built in 4GB and 8GB memory. But dont’t people want more with falling memory prices?)

The iPhone will hence find it difficult to drive traffic to the mobile operator’s network and increase the data usage. Hence it remains a seek sexy 2G phone and simple applications.

Is Cingular good enough?

Cingular has a 5 year contract with Apple, and Apple has managed to get Cingular to re-engineer its infrastructure to accommodate the iPhone’s visual voicemail. An optimistic forecast is that just less than 4 million of the 60 million subscribers in 2008 (Cingular’s customers) constitute the total target market for iPhone. Hence Apple will have to woo other mobile operators. Can it woo 400 other GSM operators across the world to change their infrastructure if it indeed sees the iPhone as a global offering ?

Is iPhone a consumer phone, a business phone or just a ‘cool’ toy?

  • A Business phone — NO (RIM / Blackberry is deeply entrenched for the typical road warrior segment and there are other contenders as well)
  • A Consumer phone — YES (But why pay so high a price)
  • Cool Toy — An emphatic YES and an expensive one at that ($ 499 for the 4GB model and $599 for a 8GB model). Apple fans will definitely like to have one, though the price would be a deterring factor.

Hence, interesting times ahead for Apple as it takes on a whole new set of competitors in a completely new market.

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As an aside, I heard this story from an old Apple fan about the history of desk top publishing and hence can’t vouch for it accuracy.

When the original Mac was being released there was a big discussion and debate about its positioning and all options were being considered — including selling to enterprises, extending its hold on education (where it was strong) and so on..! Steve Jobs framed the debate brilliantly — Instead of having a 5% market share in a large market, he wanted to look for a market where he could have a 95% market share. The search began and ended with the creative market and with a whole new set of tools like the Page Maker, the laser printer, the desk top publishing market was born.

  • So, with the iPhone is Apple trying to play in a crowded market or create a niche market?
  • Can it rest content with creating a niche market after it has created a mass market with the iPod?

Over to you, Steve !

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