CFO India - February 2011 by Bhupinder Sharma

FACE TO FACE TIM KOLLER ON CREATING VALUE p. 20

SANDIP CHATTERJEE CFO PROFILE p. 26

BEACH BLISS HAVELOCK ISLAND p.53

VOLUME 02 ISSUE 02 Rs.50 FEBRUARY 2011

CFO INDIA TIM KOLLER ON VALUE CREATION 20 | CFO PROFILE: SANDIP CHATTERJEE 26 | BEACH BLISS 53 VOLUME

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A 9.9 MEDIA PUBLICATION

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01 #'-$.%*&'./ !"#$%&'%!"#$ 20 LESSONS IN VALUE CREATION In an exclusive interview with CFO India, Tim Koller, coauthor of Value: The Four Cornerstones of Corporate Finance talks about the basic principles of value creation and their relevance, especially for companies in India.

()*(+,& 30 CREATING MORE VALUE WITH CORPORATE STRATEGY Few companies create strategies that deliver more value than the sum of their business unit parts, but those that do also excel at moving resources and removing barriers.

#!'%4.'!(5$ INKING A SUCCESS STORY

Sandip Chatterjee, CFO of DIC India talks about his vision for the company, the evolving role of the CFO and his passion for drums!

As India Inc. looks at double digit growth and global acquisitions, what are the qualities that one needs to possess to be a successful CFO?

'4()(') 38 THE DECADE IN TERROR Internal security expert Raghu Raman, on the ‘four world wars’ and how we have to look at tackling terrorism differently.

#!'%5'6)+$ 50 ON WHEELS | BMW X1

#"*$%*&67/ 46 A NEW BENCHMARKING MAP Rapid growth caught MapmyIndia unprepared with lack of processes and systems affecting it badly. That is when CFO Asheesh Awasthy stepped up a gear.

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DNA OF A CFO

52 GADGETS | HTC HD7 53 TRAVEL | HAVELOCK ISLAND 54 ART | PARTHASARATHY PAL

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12 GOPAL MAHADEVAN

03 EDITORIAL

What keeps the Executive Vice President and CFO of Thermax awake at night?

04 LETTERS TO THE EDITOR

FACE TO FACE TIM KOLLER VALUE p. 20 ON CREATING

56 NOT JUST THE LAST WORD

SANDIP

CHATTERJE CFO PROFILE E p.

CFO I NDIA

BEACH BLISS HAVELOCK ISLAND p.53

VOLUME 02 ISSUE 02 Rs.50 FEBRUARY

2011

TIM KOLLER ON VALUE CREATION 20 | CFO PROFILE:

COVER DESIGN JOFFY JOSE

SANDIP

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DNA CFO AD INDEX 26 | BEACH

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UNRAVELLED: and qualities The key skills a CFO needs, to be successfu l pg. 26

A 9. 9 MEDIA

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THE VALUE OF FEI MEMBERSHIP Financial Executives International (FEI) is the professional association of choice for senior-level finance executives.

"Member relationships with financial thought leaders from large, highly-diversified global corporations and conglomerates to smaller private companies and non-profits.â&#x20AC;? Mary Jo Green Senior Vice President & Treasurer SONY CORPORATION OF AMERICA

"Leading-edge content and objective research for the competitive advantage I need to meet the demands of a multinational computer technology corporation.â&#x20AC;? Taylor Hawes CFO Intellectual Property & Licensing MICROSOFT CORPORATION

membership A newly-established category of FEI membership that empowers talented, motivated financial professionals with ongoing opportunities for personal and professional growth as their careers advance Choose FEI to support your advancing career as a financial professional.

Interested in learning more about the Financial Executives International India Chapter? Contact Tom Thompson at tthompson@financialexecutives.org

More than 15,000 Members | 85 Chapters Worldwide | 79 Year History FINANCIALEXECUTIVES.ORG | MEMBER SERVICES 877.359.1070

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MANAGING DIRECTOR: Dr. Pramath Raj Sinha

The CFO Decoded

CONVENTIONAL WISDOM tells us that today’s Chief Financial Officers have to be superheroes (in fact CFO India had done a cover feature on CFOs as superheroes not too long back). Indeed we expect CFOs to be faster than a plane, more powerful than Tarzan and nimble enough to scale a tall building in a single leap! Don’t we also expect them to have X-ray vision, to understand the CEO’s mind? One school of thought argues the years ahead will be challenging and therefore, only those who who have gained experience in every area of the company, travelled the globe, and also held a CFO job somewhere else, will succeed as a CFO. Somehow, to me this seems an extreme view to take. As India Inc. prepares to take the great leap forward, will it become increasingly harder then, for those who haven’t previously been CFOs, to join the club? What is it that makes a successful CFO? What is in his (or her) DNA? These were the questions contributing editor Bennett Voyles asked when he ventured deeper for the cover feature this time (DNA of a CFO, Page 14). And as we learned through meetings and conversations with CFOs, CEOs, analysts and academicians, those with otherwise strong financial credentials can also find ways to make up for gaps in their résumés. Not that traditional wisdom is wrong, it just isn’t the final word. Even then, the CFO’s job is becoming an increasingly complex one. As Gopal Mahadevan, the Executive Vice President and CFO of Thermax mentions in his column (I Think, page 12), how to ride a risk and on a global scale, how to manage finances in an era when resources are scarce and terror attacks are everyday occurrences – are issues that will keep most CFOs awake at night in the years to come. How indeed will CFOs manage in this chaos? Read CFO India’s Editor, Anuradha Das Mathur’s exclusive interview with Tim Koller, a partner in McKinsey and Co’s New York office and co-author of the best-selling book Value: The Four Cornerstones of Corporate Finance (Face to Face, Page 20). We also have a detailed synopsis of the book inside, so you get a fair idea of what to expect when you buy it. This is a fully loaded, powerhouse of an issue. Over to you!

EDITORIAL EDITOR: Anuradha Das Mathur MANAGING EDITOR: Dhiman Chattopadhyay ASSISTANT EDITOR: Anoop Chugh CONTRIBUTING EDITOR: Bennett Voyles DESIGN SENIOR CREATIVE DIRECTOR: Jayan K Narayanan ART DIRECTOR: Binesh Sreedharan ASSOCIATE ART DIRECTOR: Anil VK SENIOR VISUALISER: PC Anoop SENIOR DESIGNERS: Prasanth TR, Anil T, Joffy Jose, Anoop Verma, NV Baiju & Chander Dange DESIGNER: Sristi Maurya, Suneesh K Shigil N & Charu Dwivedi CHIEF PHOTOGRAPHER: Subhojit Paul PHOTOGRAPHER: Jiten Gandhi THE CFO INSTITUTE EXECUTIVE DIRECTOR: Deepak Garg NATIONAL HEAD: Bindu Krishna SENIOR MANAGER: Shreya Pilani ASSOCIATE: Deepika Sharma SALES & MARKETING V-P SALES & MARKETING: Naveen Chand Singh NATIONAL MANAGER (SALES): Pranav Saran (+91-9811777113) NATIONAL MANAGER (EVENTS & SPECIAL PROJECTS): Mahantesh Godi (+91-9680436623) NATIONAL MANAGER (ONLINE): Nitin Walia (+91-9811772466) ASSISTANT BRAND MANAGER: Arpita Ganguli CO-ORDINATOR (AD SALES, MIS, SCHEDULING): Aatish Mohite SOUTH: Vinodh Kaliappan (+91-9740714817) WEST: Sachin N Mhashilkar (+91-9920348755) For any customer queries and assistance please contact help@9dot9.in PRODUCTION & LOGISTICS SENIOR GENERAL MANAGER (OPERATIONS): Shivshankar M Hiremath ASSISTANT PRODUCTION MANAGER: Vilas Mhatre LOGISTICS: MP Singh, Mohamed Ansari, Shashi Shekhar Singh OFFICE ADDRESS Nine Dot Nine Interactive Pvt Ltd Kakson House, A & B Wing, 2nd Floor 80 Sion Trombay Road, Chembur, Mumbai- 400071 INDIA. Published, Printed and Owned by Nine Dot Nine Interactive Pvt Ltd. Published and printed on their behalf by Kanak Ghosh. Published at Bunglow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Silver point Press Pvt Ltd, D107, MIDC, TTC Industrial Area, Nerul, Mumbai 400706.

Copyright, All rights reserved: Reproduction in whole or in part without written permission from Nine Dot Nine Interactive Pvt Ltd is prohibited. SUBSCRIBER SERVICES: Call +91-120-4010999 VISIT CFO INDIA’S WEBSITE www.cfo-india.in

FEBRUARY 2011

CFO INDIA

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Inspirational! I just loved the article on Mr Durgashankar and the feature on Satyamâ&#x20AC;&#x2122;s turnaround. It was inspiring and demonstrates how the finance function can make or break a companyâ&#x20AC;&#x2122;s future. The hard work that went in turning around the company was well captured along with the detailed interview of the man himself. Outstanding issue. Keep up the great work. â&#x20AC;&#x201D; Shilpa Vora,Senior Manager Finance & Accounts,UPS, Mumbai.

02.11

Your voice can make a change: Share your view point on whatâ&#x20AC;&#x2122;s happening in the community and your feedback on the magazine at cfofeedback@9dot9.in or editor@cfo-india.in

MORE ARTICLES ON TURNAROUNDS

AN ISSUE WORTH SHARING

The January cover feature was certainly arresting. Very well written and insightful. However, to be honest, barring the interview and the feature on Mahindraâ&#x20AC;&#x201C;Satyam, the other articles did not hold my attention. It would be good if you wrote on companies where the CFO or the finance function has played a crucial role in turning around the operations or the fortunes of the firm. â&#x20AC;&#x201D; Venkatesh Iyer,Head, Finance Lionbridge Technologies Private Limited Powai,Mumbai

I am one of the latest entrants to the growing group of CFO India readers and the CFO Institute started by you. I am extremely happy with the way the last three issues of CFO India have turned out. Congratulations on the January 2011 edition of the magazine. The turnaround story of M-Satyam was extremely well-covered. I am thinking of sharing the same with my entire finance team to inspire them to work harder as the article brings out the change which the finance function is capable of bringing about in any organisation. The first anniversary issue (November 2010) can safely be called a collectorâ&#x20AC;&#x2122;s item. I liked the concept of CFOs turning writers and most people wrote very well. I plan to have my article framed. â&#x20AC;&#x201D; Rajesh Pasari,CFO, NetAmbit,Pune

A GOOD READ I enjoyed reading the interview of Mr S Durgashankar on your website. What an amazing story of turnaround. I am particularly happy for Durga since he is an old colleague of mine. The magazine is looking better and better. However, I havenâ&#x20AC;&#x2122;t received the physical copy yet. â&#x20AC;&#x201D; Ravi Padaki,Head of Finance, India, Markets Global Finance Operations, Bangalore,Thomson Reuters,Bangalore

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NEED MORE â&#x20AC;&#x2DC;CASE STUDYâ&#x20AC;&#x2122; ARTICLES What an excellent issue! The interview of Mahindra-Satyamâ&#x20AC;&#x2122;s CFO was an eye opener and the twin cover features on Mahindra-Satyamâ&#x20AC;&#x2122;s turnaround and the lessons learnt from the Satyam and Lehman crises were well timed and crisply written. I also enjoyed reading the story of iYogi and how they scaled up in such a short time. The case study section has good articles. Can we have more of them? â&#x20AC;&#x201D; Jaideep Ghosh,C-Founder,The Street-Food Co.,Kolkata

FEBRUARY 2011

02.11 7+( /($'

The Business of the World Cup

IT MAY BE A GAME but this is serious business. The ICC Cricket World Cup is underway and everyone, from satellitle service providers and apparel makers to those manufacturing soft toys or even straw hats â&#x20AC;&#x201C; are cashing in. Take High Definition (HD) television for instance. By the time you read this, you may have already realised the difference. But in case you think your eyesight improved every time you watch a cricket match on Tv, here is a reality check: the picture quality on Tv screen has suddenly improved, even if it is the same old Tv set you have had for the past 8 months. The reason: all World Cup cricket matches are being shown on High Definition by leading Satellite television providers. At least three of them, Tata Sky, Airtel and Dish TV have acquired rights to telecast the ICC Cricket World 6

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Cup 2011 on HD, a spokesperson for ESPN Software India has confirmed, reports Mint. â&#x20AC;&#x153;We are talking to the other DirectTo-Home (DTH) operators and will sign other contracts shortly,â&#x20AC;? the spokesperson told the newspaper. HDTV will allow viewers to watch the cricket matches with substantially higher clarity. The pay-Tv providers may have paid as much as Rs 3 crore each for the HD feed, according to media buyers. Meanwhile, retailers and ,makers of everything from apparel to stuffed toys are preparing for a spurt in sales. A lot of theie sales and profit however, would depend on how Dhoni and his men perfom on field. Big players however, have jumped head-first into the fray. Big Bazaar, the Future Group hypermarket that is the authorised ,erchandiser for the Woirld Cup, has launched products accross a range of categories from personal care amnd clothes rto home linen! Others such as Smiba Toys, Hypoercity and Nike India too are hoping to cash in. Simba Toys that has made the World Cup mascot â&#x20AC;&#x2DC;Stumpyâ&#x20AC;&#x2122; has apparently shipped 50,000 items of merchandise featuring tyje little bluie elephant. These include soft toys, nursery bags, back packs and stationries priced between Rs 250 and Rs 2500, the firms business head Pradeep Parmar told Mint. Now only if India brings home the cup!

FEBRUARY 2011

WHATâ&#x20AC;&#x2122;S AROUND ZONE CFO book ............................................................. Pg 08 HTML5 to be ready by 2014 ................................ Pg 08 Voice buzz for Facebook ....................................... Pg 10 Mission Mars......................................................... Pg 10

THE CFO POLL RESULT

33% Will the recent No fuel hike affect the governmentâ&#x20AC;&#x2122;s attempts to curb inflation?

67% Yes

CURRENT POLL QUESTION

Will the govt. be able bring back the black money stashed away in European banks? 9RWH QRZ DW ZZZ FIRLQVWLWXWH FRP SROO

+($/7+

Working long, sleeping less is bad for bones! %86,1(66

Love Sells!

IT MAY BE impossible to measure love. But it certainly costs money. According to a study by the Associated Chambers of Commerce and Industry of India (Assocham), under the aegis of Social Development Foundation, the total total business done in India during Valentineâ&#x20AC;&#x2122;s Week is a stunning Rs 12,000-crore or $2.6 billion! The two-month long study, which was conducted in 10 major cities from December 2010 to January 2011, ascertained the extent of over-spending among the young and even middle-aged people to make their partners feel special. According to D.S Rawat, secretary general at Assocham, the spending on Valentineâ&#x20AC;&#x2122;s Week in 2011 was around 120 percent higher than last year. The biggest chunk of the earnings come from the staple greeting cards, followed by flowers, chocolates, toys, and moves on to more exorbitant stuff like diamond rings, bracelets, necklaces, readymade garments, cell phones and electronic gadgets. Sounds like a lucrative business to get into.

CFOâ&#x20AC;&#x2122;S AND OTHER senior executives working for long hours and sleeping less due to stress, take note! Researchers have found that poor sleep quality is associated with higher levels of depressive symptoms, greater pain severity, increased fatigue, and greater functional disability in patients with Rheumatoid Arthritis (RA), reports ANI. The study conducted at the University of Pittsburgh, School of Nursing, suggests that addressing sleep problems via pharmacological or behavioural interventions may have a critical impact on the health and lives of patients with RA. The study represents a cross-sectional examination of the relationship between sleep quality and functional disability in 162 patients with RA. The sample had an average age of 58.5 years, and 76 percent were female. All patients had been diagnosed with RA for at least two years; on average, patients had RA for 14 years. The results provided input on their sleep quality, depression, fatigue, and functional disability and pain severity, respectively. Patients also provided sociodemographic information and their medical history. Results show that sleep quality has an indirect effect on functional disability after controlling for age, gender and number of comorbities. According to the results, 61 percent of patients were poor sleepers and 33 percent reported having pain that disturbed their sleep three or more times per week. FEBRUARY 2011

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Whatâ&#x20AC;&#x2122;s on your mind? Attach

Share Anil Saxena believes four elements (Trust, Care, Goodwill and Fortune) perfectly combine in the emblematic and rare, four-leaf clover to visually symbolise the values that bind together and form the core of the Religare vision. january 13 at 10:50pm Âˇ Comment Âˇ Like

3(5621$/ Zodiac: Cancer Political Views: Reformist

:25. 2010-Present -- Group CFO, Director and Member of Shareholders/Investors Grievance Committee, Religare Enterprise Limited 2007-Present -- Non Executive Director and Member of Shareholders/Investors Grievance CommitteeReligare Technova Global Solutions Ltd Former Director Religare Wellness Limited

('8&$7,21 B.Com- Delhi University CA - Institute of Chartered Accountants of India

Anil Saxena believes todayâ&#x20AC;&#x2122;s CFOs act as a glue that binds a company together. january 3 at 7:30pm Âˇ 5 people Commented Âˇ Like

Anil Saxena listens to old Hindi songs to break away from monotony. january 1 at 1:10pm Âˇ Comment Âˇ 2 people Like this

I Read...

Too Big to Fail January 29 at 1:35pm Âˇ Comment Âˇ 3 people Like this

I listen Kishore Kumar January 05 at 06:20 am Âˇ Comment Âˇ 5 people Like this RECENT ACTIVITY Anil Saxena likes CFO India and five others...

Australia, Indian Food, 3 Idiots, The Economic Times, Narayana Murthy January 15 at 11:00pm Âˇ Comment Âˇ 5 people Like this

THE DEFINITION To have or do a bake-off is basically a side-byside comparison of two products or people, or a face-off to use a phrase from the world of sports and politics. THE USAGE And you though your colleague had lost it when she told you: "Have you done a bake-off between the shortlisted vendors?" Now you know what she meant! Next time, nod sagely and reply that you need to bake some more!

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Html5 to be Ready by 2014 WORLD WIDE WEB Consortium (W3C) has announced that HTML5 version will be finished by 2014. HTML5 is the latest revision of the Hyper Text Markup Language, (HTML) standard. It offers easy way to add semantic markup and application-like features such as video without proprietary plug-ins, drag-and-drop, offline data storage, and more. The versions of browsers like Chrome, Firefox, Internet Explorer, and Opera have different degrees of HTML support and also they have many innovative features which can be very useful, but these features may not support the final HTML5 version. The W3C has extended the character of HTML working group that comprises of more than 400 members from browser vendors, software developers and other organisations reliant on the Web. 8

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FEBRUARY 2011

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VOICE BUZZ FOR FACEBOOK

61,33(76 Not so smart

OZONETEL SYSTEMS HAS LAUNCHED â&#x20AC;&#x2DC;Voice Buzzâ&#x20AC;&#x2122; application for Facebook through which users can update their Facebook status in their own voice from their landline or mobile number. This service is completely free for its users. To register at Ozonetelâ&#x20AC;&#x2122;s â&#x20AC;&#x2DC;Cloud telephony platformâ&#x20AC;&#x2122; one has to log on to the Voice Buzz application and have to provide their phone number will not be shared with anyone .While logging on Facebook the user has to sync his Facebook account and to post the voice message one have to call 040-30512834 from his registered phone and can

leave the voice message which will be instantly appear on Facebook feed. Murthy Chintalapati, Founder & CEO, Ozonetel Systems, said, â&#x20AC;&#x2DC;Voice Buzzâ&#x20AC;&#x2122; is exciting cloud telephony applications that will enable users enrich their social media presence and experience by connecting in their own voice. It also attests to the potential of cloud telephony technology in the area of business to consumer applications which has not been adequately explored in the Indian market. We began with Facebook as it is the single largest platform in the world today and will add more in the near future.â&#x20AC;?

This is not yet a problem in India, but could soon be! Smartphones are blocking the worldâ&#x20AC;&#x2122;s mobile networks consuming five times more data than normal mobiles. Though mobile operators are trying to improve the performance of networks and they have invested billions on it, still there is blockage in the network availability in New York, London and San Francisco. The head of the International Telecommunications Union in Geneva has in fact warned that concerned governments should take action quickly to support wireless broadband growth.

Ancient posthesis (19,5210(17

Electric Cars to Fight Crude Oil Reign IN A BID TO END their slavery towards crude oil and its by-products, Israel will deploy a massive army of electrical vehicles that take less than a minute to be refuelled. No drums, no trumpets, just the whirr of a robot changing batteries and an electric car silently gliding around the test track. These are the final touches as entrepreneur Shai Agassi prepares to deploy a fleet of electric cars later this year, hoping to break Israelâ&#x20AC;&#x2122;s dependence on oil. But as similar projects get under way in Australia, Canada, Denmark and Hawaii, there are a few issues casting a shadow over his vision of making the world a better place. Rivals and experts have expressed doubts over the technical aspects, particularly the ability of Israelâ&#x20AC;&#x2122;s electric grid to handle a sudden increase in demand from electric cars.Still, Agassi - a hi-tech multi-millionaire and former number-two at software group SAP - remains optimistic about the success of his project and the inevitability of its global impact. â&#x20AC;&#x153;We decided to do something that will make the world a better place,â&#x20AC;? Agassi told AFP. 10

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Washington scientists say they have found the worldâ&#x20AC;&#x2122;s earliest prosthetic body parts. According to the experts, who tested replicas on volunteers, two artificial big toes - one found attached to the foot of an ancient Egyptian mummy, may have been used as artificial body parts in earlier times. The toes date from before 600BC, predating what was hitherto thought to be the earliest known practical prosthesis - the Roman Capula Leg - by several hundred years.

Mission mars?

Two volunteers in Moscow, cut off from the rest world for eight months stepped out to a Marslike atmosphere in mid February, reaching the half-way point of their experimental â&#x20AC;&#x153;voyageâ&#x20AC;? to the Red Planet. The â&#x20AC;&#x153;Mars walkâ&#x20AC;? is part of an experiment to test how humans respond to the pressures of a â&#x20AC;&#x2DC;there-and-backâ&#x20AC;&#x2122; voyage to Mars.

FEBRUARY 2011

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PROFESSIONAL QUALIFICATIONS: ACA & ACS from Institute of Chartered Accountants of India FIRST JOB: Sanmar Group as finance executive. PREVIOUS JOB: CFO, Amara Raja Batteries Ltd

IF SOMETHING KEEPS me awake at night, it is only because it merits thought and not because it worries me. Worrying is useless. In our personal and professional lives, we are obsessed with only one thing – creating and enhancing value – for oneself, for one’s family, for the team and for the organisation. I keep wondering how can one keep adding value in one’s organisation? We could not have asked for a more happening space and time. India is the place to be in and this is the time – when we are proving to the world that a country that taught the world to count, gave the concept of atom (bindu) and was the richest country till the British invasion, will bounce back. India has changed dramatically. From a Hindu rate of growth to a blitzkrieg 9 per cent, having one fifth of the world’s population and one twentieth of its energy resources is no small matter. There is a paradigm shift in the way we are doing business today 12

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How to ride a risk? How to plan long term strategy? These are some of the questions that makes the EXECUTIVE VICE PRESIDENT & CFO OF THERMAX think hard.

and the risks that are associated with it are hitherto unseen, fast and furious. Every turn in the corporate highway affords new opportunities, threats and risks. How can we survive, leave alone grow, amidst all this? Anticipation, evaluation and management of risks have become

“Anticipation, evaluation and management of risks have become primordial. Firms that anticipate and evaluate risks better and therefore ride on them, are and will be successful.”

primordial. Firms that continuously anticipate and evaluate risks better and therefore ride on them, are and will be successful. Organisations that learn to evaluate them and develop strategies of defence will barely survive, if not perish. And that is the challenge. How do you ride a risk? How do you know if to mount and when to dismount? We are in the age of uncertainty - whole economies and governments are collapsing. We are seeing resources becoming scarce and global food prices going through the roof. We are seeing that size and scale matters a lot. We are seeing that one’s country is not enough as a market place. Frankly we are seeing a lot. So how do we manage all this complexity? This is one thought that keeps me awake. Believe me - the answers to this question also have the same effect on me. First, the impact of what you do needs to be felt by the world at large. Progress has to be inclusive. Otherwise it will be short lived.

JITEN GANDHI

Facts & Trivia

GOPAL MAHADEVAN

, 7+,1.

Second, it is the people who can and will do it and will have to do it. This is going to be the era of “The Power of People”. That’s why Facebook has a valuation upwards of US $ 50 bn - higher than Time Warner and Yahoo! Organisations would need to be cutting edge – what does that really mean? It means having or making

people that are cutting edge. Companies that are respected for operational efficiency have people driving it. Here I am not talking about the head honchos or the senior leadership team – but about the huge mass that runs the engine. The process of training, motivation and the reward & recognition system

will undergo change. Organisations have realised this and are working towards flatter structures. Empowering people with knowledge and processes is one of the most important things we can do to create leaders and leading organisations. Here’s to another decade of uncertainty and excitement. FEBRUARY 2011

CFO INDIA

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DNA

CFO

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The species has evolved over the years and the CFO has had to constantly learn new skills to reinvent himself. Now, as India Inc. looks at double digit growth and global acquisitions, what are the qualities that a successful CFO needs to possess? BENNET VOYLES

ears ago, the Chief Financial Officer was mostly the ‘bookkeeper-in-chief.’ That is still part of the job, but increasingly, India’s CFOs are being pushed to do far more. At many companies, CFOs and corporate finance consultants agree, the role has evolved from simply being a

trusted record-keeper for the company to being a trusted partner of the CEO. And tomorrow, they expect it will change even more. “The CFO who would come to the board meeting every month and sit there and reply to questions when asked, a very introverted sort of person who saw their job as being a steward of the company’s assets and the guardian of the company’s cash and FEBRUARY 2011

CFO INDIA

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The more important part of finance is now moving deeper into the business and becoming a much more effective business partner.

The survey noted that in 2008, over the previous five years, companies where the finance function is most efficient and able to contribute the most intelligence and insight to the executive team experienced earnings growth 20 times greater than a conventional company, generating 49 percent more revenue and 30 percent greater return on invested capital. Other companies are running scared. In that same survey, more than

—JEREMY HOPE, co-author,Reinventing the CFO.

reporting systems -- and to be fair, the guardian of the company’s ethics -- that sort of person is not the CFO that forward looking companies in the Internet age are now looking for,” says Jeremy Hope, co-founder of the UK-based Beyond Budgeting Roundtable, and co-author of the 2006 book Reinventing the CFO. Indeed all over the world, the CFO role is changing. “It is no longer just about getting the month-end done and the accounts prepared …” adds Hope. “The more important part of finance is now moving deeper into the business and becoming a much more effective business partner.” In a recently released survey of 1000 CFOs, Accenture found that 80 percent of the executives felt they had been asked to take on additional responsibilities in the last 12 months. The shift in the CFO’s role stems from two long-term trends. First, the controlling function is becoming less of a focus now that so much of the work is automated or outsourced. What control work remains for the CFO tends to be more on the order of making sure that 16

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The CFO has to keep a constant tab on regulatory compliance norms and ensure that adequate in-house knowledge exists. the plumbing of the IT systems is arranged properly, not directly reviewing the accounts. Second, executive teams have realised over time that the CFO is perhaps uniquely positioned within the company to understand the workings of the business, from raw materials to profits. “The need for quick turnaround of ideas and support of strategic vision have become important,” says P. Thiruvengadam – Leader, Human Capital Advisory, Deloitte Touche Tohmatsu India Pvt Ltd. in Delhi. The CFOs who are farthest along in making the adjustment, are not coincidentally, working for the fastestgrowing and most dynamic companies, according to a recent IBM study of 1,917 CFOs and finance directors.

—ANIL CHANANA, CFO, HCL Technologies

45 percent of CFOs admitted to their interviewers that their finance teams were not effective in the areas of strategy, information integration, and risk and opportunity management. As the job description changes, so do its requirements. Of course, many of the qualities and skills needed have remained, but a new level of imagination and dynamism is also needed. So, what really does it take to be a successful CFO? And what is likely to be required tomorrow?

&#'($)!"#$% RUNNING FINANCE IN 2011 Today the CFO needs to think more about bigger-picture issues. “A 70 mm view, not a tunnel view,” says president of SRF capital Rajendra Prasad. All in all, the mindset is much more on the order of former IBM chief Louis Gerstner’s quip when he came aboard the badly flagging business in the early 90s: “you no longer get points for predicting rain. You get points for building arks.” But it’s not just about risk avoidance. CFOs are pushed now to help the company deliver growth too. “Reducing risk is not the challenge. Managing and assessing and evaluating risk is what he should be doing,’ says Prasad. This leaves the CFO in the difficult position of being responsible for both the brake and the gas pedal. Stay too conservative and you’ll lose your job. Get too creative and maybe you’ll end up like Andrew Fastow, the former CFO of Enron – once CFO of the Year, now prisoner #14343-179. Anil Chanana, as CFO of HCL Technologies, deals with all kinds of com-

plexity all the time. “Today’s CFO in a technology company is dealing with a multiplicity of issues namely, the economic factors which impact the customers, the partners; those impacting the human resources; and the global regulatory regime,” says the Noidabased executive. For Chanana, structuring deals with customers is an important part of the job. “The CFO has to keep himself informed of the specific economic environment the customer is operating in, and come up with a commercial solution which would suit the particular customer’s requirements while not compromising on the risk to margins and cash flows,” he says. “On the cost side, the CFO’s role is to assist the business by constantly pointing out the opportunities to optimise on the costs of running the business. On the regulatory side, the CFO has to make sure that he keeps a constant tab on regulatory compliance norms and that adequate in-house knowledge exists,” he adds. Others agree that a holistic view is critical. “A good CFO brings a detached

Make it clear that you have the technical knowledge and the qualifications. But the area that you really need to focus on is your ability to lead a team, be a team player and a good communicator.

attachment, to the job, doing everything he can to make it a success, while being able to look at the company’s condition holistically and objectively,” says J.K. Jain, CFO & Senior VP, DCM Shriram Consolidated in New Delhi

WANTED If this sounds tough, it’s because it is. Globally, average tenure of the CFO of a major company has declined substantially in the last five years, from 5.5 years to 4.5 years, according to several surveys. But while there does seem to be more convergence now between the work of CFOs at Indian companies and foreign multinationals, Prasad Kaipa, CEO of Self Corp in California, a consulting firm that follows both India and the US, believes the roles remain quite different in some respects, and demand somewhat different personalities. The Indian CFO tends to have a more dynamic sense of what the market needs, and what the company and managing director need. In an American company, on the other hand, the CFO’s work tends to be a bit more generic, he says. Often, says Giri Giridhar, President Finance, Wockhardt Limited in Mumbai, the Indian CFO’s role tends to be broader than finance jobs in multinationals, where finance functions tend to be much more compartmentalised within different functions. The Indian CFO also tends to be more aware of tax laws and loopholes and market conditions. Overall, a lot more jugaad is required to handle finance at an Indian company – and flexibility. Bending the rules goes on everywhere, Kaipa says, “but in an Indian company, it is more appreciated.”

—JK JAIN, CFO and Sr VP, DCM Shriram Consolidated

FEBRUARY 2011

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THE CFO UNPLUGGED A July 2010 report by Ernst & Young, titled The DNA of the CFO, challenges the assumption that all CFOs are aspiring CEOs and instead finds that the majority see their role as a vocation of its own. Of the 669 CFOs interviewed across Middle East, India, Europe and Africa by the Economist Intelligence Unit for Ernst & Young, 73% saw their role as a career destination of its own with just 10% aspiring to be the CEO. Over 60% of CFOs have seen their standing within the organisation elevated in the past three years. CFOs identified cost management, risk management and cash flow as their top three business priorities in

Now, however, at least some of that may be changing. As the tax laws become more simplified, Giridhar notes that the challenge is less working with complexity than finding ways to simplify structures. Sometimes, a short-term advantage a complex structure might yield isn’t really worth the trouble. But P. Thiruvengadam – Leader, Human Capital Advisory, Deloitte Touche Tohmatsu India, believes that the skills required are actually not that different. The two main differences he sees is that first, the Indian CFO needs to be more aware of the business environment than his counterpart in a more level playing field economy, and second, that the working relationship with the CEO tends to be closer. A US

the wake of the financial crisis. Almost two-thirds of respondents said they now act as the face of their company on all financial matters and performance Less than half of the respondents say that their relationship with investors is good or excellent Just 21% said the same for their relationships with governments and 25% for their relationships with the media.

multinational will want a CFO who is imaginative and yet detail-oriented, charismatic and yet able to work closely as a partner with the CEO and the other stakeholders. In India, however,

the CFO requires all that and more – particularly in terms of flexibility and imagination, Kaipa says. Others say that the difference is mostly a matter of the speed of growth. Managing a company that is growing 30 percent a year requires a different sensibility than managing a mature company where the work is mostly maintaining market share. It’s increasingly important to be a good communicator as well, able to articulate very complex financial topics in simple terms that can be understood outside the finance department.

GETTING TO THE TOP So how do you reach the CFO’s office? It depends on whom you ask. Jain of DCM Shriram advises thinking first about who you are. “In growing markets like India, there are every kind of requirements and every kind of company, so all kinds of skills will have a place,” he says. “I think the key part is …to understand what your interest is, what is it

They need to understand that it is not all routine work, and see that there is an opportunity to really learn and grow in the finance maze in India, —PRASAD KAIPA, CEO Self Corp, California

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&#'($)!"#$% that you like in the job, and to match your requirements and interests with the characteristics of the company you want to work with.’ Often, a promoterdriven company demands a much different character than a public company, according to Jain. Typically, a CEO or a CFO will serve five to seven years. By contrast, the promoter may be there for a very long time – and that security means they may not budge if they won’t feel like it. “Sometimes it takes time for people to move .. and there is a limit up

Ultimately one has to be smarter than the rest, extremely energetic and hardworking, with a problem-solving attitude to be successful. —TV MOHANDAS PAI, Director HR, Infosys Technologies

Don’t hesitate to take roles which help you build those capabilities, even if they’re lateral movements. —GIRI GIRIDHAR , President Finance, Wockhardt Limited

to which you can go on pushing your point,” he says. The finance knowledge is essential, but for Hope, the key to a promotion to the top job has much more to do with leadership skills. “Make it clear that you have the technical knowledge and you’ve got the qualifications, but the area that you really need to be sharp and focus on is your ability to lead a team, be a team player, be a good communicator,” he says. For Kaipa, the candidate has to start out as a creative person who hap-

pens to get interested in finance. “They need to understand that it is not all routine work, and see that there is an opportunity to really learn and grow in the finance maze in India,” he says. The second essential is accepting promotions less on the basis of money than on the potential educational value of the experience. These days, breadth often counts more than depth, and a lateral promotion that gives you experience with a new part of the business can sometimes be more valuable than a senior, vertical promotion. “Don’t hesitate to take roles which help you build those capabilities, even if they’re lateral movements,” says Giridhar of Wockhardt. However, knowing the particular industry in detail is also important. “Don’t get stuck in the monotony of accounting. Know the business processes, know the drivers, read about the drivers from sources other than within the business,” advises Rajendra Prasad.

That kind of knowledge pays off, as it makes you much more valuable in strategic discussions. It’s not just numbers. It is a storyline and while understanding the detail is a one time exercise the benefits of it are felt every time. At the same time, the candidate needs to be ready to give up his earlier departmental perspective. If he was in charge of tax before, he has to think beyond tax considerations. He has to become non-biased and non-parochial. He has to change from being a department head to becoming CFO. He has to walk an extra mile and leave the baggage behind, is the advice most seasoned CFOs have to give. In the end, the formula sounds pretty simple, according to T.V Mohandas Pai, director of HR at Infosys in Bangalore and its former CFO. “Ultimately one has to be smarter than the rest, extremely energetic and hardworking, with a problem-solving attitude to be successful,” he explains. In other words, just be the best and you’ll be a shoo-in. FEBRUARY 2011

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“CFOS NEED TO HELP FIRMS THINK MORE SYSTEMATICALLY ABOUT GROWTH.” In India for the launch of Value: The Four Cornerstones of Corporate Finance, TIMOTHY KOLLER, one of the co-authors of the book and a partner in McKinsey’s New York office, talks about the basic principles of value creation and their relevance, especially for India Inc. ANURADHA DAS MATHUR

As you watch the landscape internationally, do you see a difference of opinion between CFOs, CEOs and other CXOs? And when this happens, does it lead to deals that get done for the wrong reasons? I would not necessarily call it a difference of opinion. It is just that there isn’t a common framework or language that the CXOs have in a company to discuss strategic issues, and that is one of the reasons why we wrote this book (Value: The Four Cornerstones of Corporate Finance). We feel one of the roles of CFOs is to alert their colleagues on how companies create value, and whether their strategies are likely to create value or not. In order to do that the CFO has to increase awareness around what drives value creation, and that is what we see as the evolving role, and an opportunity for the CFO.

Can you illustrate that? Many executives without finance training assume that they should focus on, say, earnings per share and, in some 20

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cases, that is what their compensation is based on. Value, in fact, is about a combination of growth and return on capital. Companies also have a tendency to veer towards one or the other. Companies can grow their earnings by increasing their revenues organically, by improving their operating margins and cutting costs, or by repurchasing shares. Each of these methods will have very different impacts on the company. Should one focus more on growth or return on capital, and why? These are areas where CFOs have an important role to play, steering the fundamental decisions made by the company.

Do you believe that CFOs themselves understand these issues, or do you think more often than not they get carried away too? What I find is that CFOs often have a good intuition about what does and what does not create value but they do not have a formal way of communicating it. What we are trying to do is help them make themselves more explicit.

There is a lot of pressure on CFOs to be more business oriented. As a CFO, does one stick to one’s core understanding of what influences the business and communicate that? Or do you think CFOs are getting so influenced by their business roles that often they also overlook some of the fundamentals? I have not seen that necessarily. I think that many CFOs are still trying to figure out what their role is as a business partner. Over the last several years, there have been a lot of very important financial issues that companies have had to deal with. In the US, we had changing reporting regulations earlier in the decade, after the Enron scandal. Then we had the economic crisis. There were a lot of things on the CFO’s mind that had to be dealt with, and took up lot of his time. So, I have not necessarily seen the balance between switching from a corporate perspective to running their basic finance function as that much

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India is a market that didnâ&#x20AC;&#x2122;t slow down that much in the

last few years. Do you have a broad overall view of where things are in this market and what is going right in the context of your book? Based on the conversations that I have had over the years with either Indian executives and or my colleagues in India, I think Indian businesses are much more open intellectually than in other places, though I do not know why that is the case. But many of the

CFOs I have talked with are embracing new ideas, and many of these ideas are beginning to take hold.

What advice would you offer CFOs in terms of where the stock market should figure in their decision-making process? First of all, I think that companies need to better understand their share price. What I often find is that they say that their share price is not high enough, FEBRUARY 2011

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!"# or their earnings multiple is too low relative to their peers. Most of the time when we analyse these companies in detail, we find that these superficial differences disappear, and you can explain why the PEs are different when you look at differences in capital structure, accounting, etc. So part of it is just being more sophisticated about understanding how you are valued.

Is it sophisticated or inexplicable? There are companies that, at one point, will say their share price is too low, and later when their share price rockets due to external factors, they generally take advantage and suggest that the rise is related to their internal expertise. What can this do to the internal decision-making of the company? I don’t think that share price should necessarily influence your decisions. It should be other way around. You should be thinking about how you are going to create value and what is the right thing to do. Our belief is that share prices will take care of themselves, over time.

But do you see the reverse happening? Yes, I do see the reverse happening. Bubbles in the stock market are not that frequent, and they are typically isolated pockets, but there are institutional reasons why they occur, and you need to know not just if ‘I am undervalued’ but if ‘I am overvalued’. If you are overvalued, your share price will eventually come down. One of the things that I have learned over the years is that markets do not do a very good job of predicting inflexion points or giving credit for stuff you have not done yet. So, if a company is going to accelerate its organic revenue growth, the company will not get credit for it until they start showing it. You have to be realistic.

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While the whole framework discussed in your book seems to be about much better governance in the decision making process, CFOs are often faulted for becoming the naysayers. How can they use this framework, and still not become bigger naysayers, in some ways? CFOs need to help their companies think more systematically about growth. Realistically, a lot of the ideas that come up are often not that great, so you continue to have to be a naysayer at times.

in the organisation, and I know a number of companies that are systematically trying to upgrade the quality of the CFO’s office. You have to be as efficient as possible at accounting, but you also need people in the field who are partners to the business unit.

What are two or three things that come to your mind in terms of what the CFO’s office should be trained in or exposed to, to be able to do their job better? One is to bring up the level of sophistication about defining the value of dif-

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What does that say for skilldevelopment and training for CFOs?

ferent types of growth within the business, so the business unit heads grow their businesses efficiently. The other thing CFOs can do is prioritise the different types of growth, and educate managers as to which ones are likely to create more value. What are the characteristics of the more valuecreating growth opportunities versus those that are less likely to create value, and why.

One of the things we advocate is skill development, not just for CFOs, but their whole staff. You have to embed it

On one hand there is this huge focus on the synergies

Your job should be to determine how to improve the quality of what does come up, not you personally necessarily, but through your organisation, so that you can have more superior sets of options. That is really what the CFO’s job should be.

!"# between a business - adjacent businesses, backward and forward integration, and that really contributes to a holistic view of your corporate performance. Whereas if you actually start being pure and granular at the base level, you could lose synergies that the whole business would throw up. How does one deal with this? You have to be thoughtful about the way you break up the reporting, and the reporting formats do not have to be permanent. There may be certain phases of a product for which you want to make sure that its budget is protected. Once it reaches a certain stage, it can then get folded into a business unit. It is really just about being thoughtful, and not being dogmatic.

Are you pointing towards governance issues, especially in developing markets where 80 per cent of the market is still in some shape or form, ownermanaged? I think that the governance issue is bigger in the developed markets. When you have the 1st generation or even the 2nd generation owner-manager, you tend to see a greater focus on long term value creation and more granularity. As you get further away from that, governance becomes more of an issue. For example, in the US and Europe, much of the limited time spent by boards of directors of very large companies is on legal and compliance issues, as opposed to strategic issues.

In the context of numerous corporate and political scams that have come to light in India in the last few years, do you have any piece of advice for the CFO ? One of the reasons we do not have too many formulas in this particular book, compared to our earlier book (Valuation: Measuring and Managing the Value of Companies) is that a lot of

these ideas are useful to frame your judgement. For example, boards should not just ask questions if a companyâ&#x20AC;&#x2122;s profits are down. The bigger issue is when the profits are high. Understanding what is driving profits, what is driving that growth, is imperative. Is it healthy or unhealthy growth? Is it growth because our customers are loving our products, or is it growth because we are cutting cost too much? That is where judgement plays a key role.

have to surmise that in a big economy where banks are really facilitators and normally earn somewhere around 20- 25 per cent of the profits of the entire economy, something is not normal when earnings are disproportionately high. This should raise red flags. It cannot be sustainable, given that banking is also a highly competitive industry.

Are you saying that you need to question the good as much as the bad?

They are both hard to do.

Absolutely.

Is that based on observation that the good is questioned less than the bad? Absolutely, you see it all the time, and not necessarily related to scams. For example, in 2006, just before the crash, bank profits in the United States were getting disproportionately high. How could banks be earning such high returns? Is that sustainable or not? You

It seems that sustaining value is the a bigger challenge compared to creating value. When you look at emerging markets, most young companies are looking at creating value in the short term and not really concerned about sustaining that value. Do you have a view on this phenomenon? It is pretty common for large companies as well. Prior to selling off a business unit, they will dress it up and make it look attractive. That is always happening, and more sophisticated buyers are aware of it.

A piece of advice each for CFOs and the rest of the C-Suite.

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They go together and I would tell them two things. Firstly, companies need to do a better job of understanding how they create value historically, and therefore how different decisions will create value. It is not very difficult to do. It is not complex. The ideas are pretty simple, but it is something that we need to make more explicit. Finally, and this is a corollary to my previous point, you must understand the kind of things that are not likely to create value and not spend too much time on them. I find companies spending way too much time thinking about issues like capital structure, dividend versus share purchases, when their efforts should be spent identifying value creating drivers. FEBRUARY 2011

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CREATING AND MANAGING VALUE In Value: The Four Cornerstones of Corporate Finance, authors Tim Koller, Richard Dobbs and Bill Huyett, partners at management-consulting firm McKinsey & Company discuss how to build lasting corporate value. DEEPAK GARG, ANOOP CHUGH

HE FINANCIAL CRISIS OF 2008 rendered us all shy of taking risks. After all, the experience, observation, and intuition everyone seemed to have developed before the recession didn’t count for anything. The run-up to the financial crisis of 2008 is but one example of how easily financial myths, fads, and misconceptions overwhelm wisdom. Will life, henceforth, for stakeholders and investors be governed by the play-safe formula “low-risk, lowreturn,” as we are still nursing our wounds from the downturn? Not necessarily, if the four cornerstones of finance are kept in mind while taking financial decisions, believe Tim Koller, Richard Dobbs and Bill Huyett, partners at management-consulting firm McKinsey & Company, in their ready-reckoner on long-term value creation – Value: The Four Cornerstones of Corporate Finance. When this piece of advice comes from the most trusted external advisors to top management, you know it is to be trusted. The authors have zeroed in on four cornerstones of finance that should act as catalysts for more constructive value-oriented dialogue among executives, boards, investors, bankers and the press – resulting in courageous and even unpopular decisions that build lasting corporate value. The learning from the latest financial crisis, and periods of economic bubbles and bursts throughout history has taught 24

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!"#$%&'(!') us that the laws of value creation and value measurement are timeless. The four cornerstones of value propagated in the book are in line with the timeless law of value creation – when people invest, they expect the value of their investment to increase by an amount that sufficiently compensates them for the risk they took, as well as for the time value of their money. The first and guiding cornerstone is that companies create value by investing capital from investors to generate future cash flows at rates of return exceeding the cost of that capital. Named, the core of value, it signifies the faster companies can grow their revenues and deploy more capital at attractive rates of return, the more value they create. The second cornerstone of finance divulged in the book is a corollary of the first: Value is created for shareholders when companies generate higher cash flows, not by rearranging investors’ claims on those cash flows. The authors have named it the conservation of value, or anything that doesn’t increase cash flows via improving revenues or returns on capital doesn’t create value. The third cornerstone is that a company’s performance in the stock market is driven by changes in the stock market’s expectations, not just the company’s actual performance. It has been called the expectations treadmill – because the higher the stock market’s expectations for a company’s share price become, the better a company has to perform just to keep up. The fourth and final cornerstone of corporate finance is that the value of a business depends on who is managing it and what strategy they pursue. Named the best owner, this keystone says that different owners will generate different cash flows for a given business based on their unique abilities to add value. These frameworks provide a stable frame of reference for making sound managerial decisions that lead to lasting value creation. On the contrary,

ignoring the cornerstones may lead to decisions that erode value or lead to outright corporate disaster. The book cites the example of leverage. As the market heated up in 2007, many savvy financial services firms thought leverage could be used to create (as opposed to merely redistribute) value. The misconception clashed with the four cornerstones leading to higher risks, and the resultant fall. The second part of the book establishes how stock markets and real economies are typically aligned, hardly ever perfectly aligned, and rarely very misaligned. Executives and investors who understand this are better able to make

share price, not whether it’s 5 or 10 per cent undervalued this week. Part three of the book deals with managing the value that has been created for the company. The book refers to how we miss value creation opportunities because we can’t identify the one or two most important factors that influence the company’s ROIC – namely, what is the business’s competitive advantage and how is it affected by the industry’s structure and competitive behaviour? It is often competitive advantage, industry structure, and competitor behaviour that drive ROIC; probably, why some companies earn 10 per cent returns

(*+#,--.#/011#203+#4-5#6*+# 7-5892+#6-#:-;+60;+:#2-# 9290<:6#6*+#<-8;=#9<>#977+?6# 6*96#6*+8+#98+#<-#@8++#15<7*+:A# !6#/011#*+1?#4-5#6-#6*-52*6B @5114#9<914:+#6*+#7-;?+60603+# >4<9;07:#-@#-<+C:#0<>5:684=#9<># ;9.+=#9<>#>+@+<>=#>+70:0-<:# 6*96#/011#78+96+#3915+#@-8#0<3+:B 6-8:#9<>#:-70+64#96#1982+A value-creating decisions. Conversely, ignorance of the linkages between the market and the real economy can lead to questionable decisions by executives. The book further cites the importance of distinguishing between stock market bubbles, bubbles in other assets, and financial crises. Though, it’s considered difficult to analyse such bubbles because there is no inherent value against which to compare the market value. The chapter instructs executives to take strategic decisions based on an intrinsic discounted cash flow (DCF) approach. After all, what matters is the long-term behaviour of any company’s

while others earn 50 per cent returns. In all likelihood, the most difficult part of creating value, and applying the four cornerstones, is getting the right balance between delivering near-term profits and return on capital, and continuing to invest for longterm value creation. The book will give you the courage to sometimes go against the norm, and accept that there are no free lunches. It will help you to thoughtfully analyse the competitive dynamics of one’s industry, and make, and defend, decisions that will create value for investors and society at large. FEBRUARY 2011

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SUCCESS He has successfully led the finance function of DIC India, the Indian arm of Dainippon Ink & Chemicals, the world’s largest producer of printing ink, for the last few years. SANDIP CHATTERJEE, CFO of DIC India, talks about his vision for the company and how he sees the role of the CFO in the years to come. DHIMAN CHATTOPADHYAY 26

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BEING A SENIOR government officer’s son has some distinct advantages. One of the less tangible ones, though, is that people from many walks of life and professions come visiting your father on work, even at home. So while his mother, a homemaker, looked after such guests, Sandip Chatterjee, then a teenager studying at Kolkata’s Nava Nalanda School, spent time asking them about their profession. “I loved math and the more I spoke to some of my father’s friends - many of whom were chartered accountants - the more I liked what I heard about the work. So, very early on in life, I decided that being a CA would be my aim,” recalls Chatterjee, sitting in his spacious CFO’s cabin at the Kolkata-headquartered India office of Dainippon Ink & Chemicals (DIC India), the world’s largest producer of printing ink — a company he joined 22 years ago as an accountant. Born in Kolkata in 1962, Chatterjee had a pretty regular upbringing, playing cricket, bunking

JITEN GANDHI

STORY

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1%&'(/#*'( FIRST JOB With accounting firm Lovelock & Lewis in Kolkata BIG BREAK In 1988, when the offer letter came from Coates of India to join the firm as an accounts executive A HA! MOMENT Turning around the companyâ&#x20AC;&#x2122;s fortunes post the downturn, as CFO LITTLE-KNOWN FACT Somewhere down the line, I want to play the drums or the octopad and be a part of a band DREAM To make DIC the best place to work FEBRUARY 2011

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!"# !"#$%&' school and just being a naughty child, till he was in class IX. His parents, who had moved to India from what was East Pakistan in 1947, had set up home in Kolkata, where his father worked for the state government. “I probably did everything except study till Class IX when, suddenly, (and I still have no explanation for this), I did really well and ranked among the top five in the class. This was really the turning point for me academically,” he recalls with a smile. It also helped that the boy went to a coaching centre which admitted only toppers from different schools. “It obviously helped me improve as a student. Even today I cherish the memory of those days and that experience,” he says. After school, Chatterjee took up commerce and enrolled in Goenka College for his Higher Secondary and then joined what is now regarded as India’s best place to study commerce – the St. Xavier’s College in Kolkata, for his graduation. “It was at the same time that I sat for my CA entrance exams,” he says. Then, he managed something rather rare even today: he passed his CA final exams within days of giving his graduation exams! At 21, therefore, he was a CA, ready to face the world. Early on in his career, Chatterjee figured he wanted to play it big. So, after two years at Lovelock & Lewis he quit and joined Shalimar Tar to get some “industry experience”. Here, he worked in the internal audit department – a stint that helped him pick up a few tricks of the trade. Then, four years into his career, came his big break in 1988 - an offer from Coates of India (currently DIC India Ltd) to join as an accountant. “When I joined, Coates was a British company. It was subsequently taken over by Total, a French firm. Finally, in the mid-1990s, the shares changed hands and we became a part of the world’s largest printing ink firm, Dainippon Ink & Chemicals, Tokyo. The experience of working with three different cultures is one that I am really proud of,” he says. An industry veteran with over 25 years of experience, Chatterjee has worked in probably every division of the finance function at DIC during his 22 years at the BSE and NSE-listed firm. As CFO he has played a pivotal role in the company’s rise in fortunes, closing the 2009-10 financial year with a total turnover of a little over Rs 570 crores. 28

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The Economic Times MAGAZINE

HBR and CFO India MUSIC

Kishore Kumar, ABBA and Richard Clayderman

CHATTERJEE NURTURES A SECRET DESIRE TO PLAY DRUMS FOR A MUSIC BAND ONE DAY!

DESTINATION:

The forts of Rajasthan BOOK: ‘The Future of

Competition’ by CK Prahalad. Also, ‘A Bias for Action’ by Sumantra Ghosal

The current fiscal has been even better, says Chatterjee, as he prepares for the annual general meeting of the company to announce the performance for the 2010-2011 fiscal. “Our industry is very working capital-intensive and for 2010-11, with increasing raw material prices and gradual increase in interest rates, the challenge was to manage the working capital, where the topline is growing. It was a challenge I relished. The main lesson from the experience was realising that communication from the finance team to the rest of the management has to be continuous and effective, if all departments are to work in a perfectly synchronised manner,” he says.

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“Apart from growing the business, my vision is to ensure that every employee feels happy to work here. This will bring the best out of them....”

Over the next few years, Chatterjee sees DIC growing bigger. But like a true modern day CFO, he wants to look at the big picture as well. “Apart from growing the business, my vision is to ensure that every employee feels happy to work here. This will, to a large extent, bring the best out of them and contribute to the growth of DIC. We have a very good working environment and we need to sustain this,” he says. So, does he see himself as a ‘partner’ to the CEO, as the saying goes? “Much has been written about the changing role of a CFO but honestly, the role has changed manifold, from

an accountant to a strategic partner of the CEO with updated knowledge on the relevant industry, economy and the business process. We also have to look at our role as leaders for implementing changes in direct and indirect taxes, international taxation as well as implementation of systems and processes,” he says. Going forward, he feels the CFO’s job will get even more complex with the DTC, GST and IFRS coming into play. As of now, though, the 48-year-old is not letting any of this rob his sleep. A committed family man, Chatterjee still makes sure he spends quality time

with his wife, a home-maker and his children – a teenage daughter and a pre-teen son. “When I need to relax, I enjoy listening to instrumental music or reading a book. Normal stuff really,” he adds. And with two of India’s best golf clubs located not far from his office, can the sport be far off his mind? “I love to play golf whenever I have time,” he admits with a smile. At the moment, though, he is preparing to tee off at work – to ensure DIC emerges as a financially bigger and stronger player in the Indian market in the years to come. FEBRUARY 2011

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CREATING MORE VALUE WITH CORPORATE STRATEGY Few companies create strategies that deliver more value than the sum of their business unit parts, but those that do also excel at moving resources and removing barriers. MICHAEL BIRSHAN, RENEE DYE, STEPHEN HALL

PHOTOS.COM

HE DEVELOPMENT OF A corporate strategy should amount to more than the aggregation of business unit strategies. The best corporate strategies, in our experience, force a multi-business company to make clear choices about its portfolio and the allocation of its resources. Yet the results of a recent McKinsey survey show that just one executive out of five says his or her corporation fully addresses strategy in this way. What’s more, more than a quarter of executives at multi-business companies say their corporations lack a consistent process for developing strategy. In this survey, we asked executives at multi-business companies how they approach the development of corporate strategy—the frequency with which they review it and the amount of time they spend on it, the inputs of the process and the resulting activities, the barriers to reallocating resources, and the talent and other management processes they apply to overcome these barriers. 30

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A small group of 151 respondents emerged who rate their companies’ approaches to strategy development as very effective and also say their profit margins are higher than those of competitors. Executives at companies that are “effective developers of strategy” are twice as likely as their peers to say their companies apply a distinct corporate strategy process (38 percent compared

with 18 percent of all other respondents). Furthermore, 97 percent of these respondents view their companies’ processes for developing corporate strategy as consistent, compared with 59 percent of others. Executives also say these companies spend more time developing strategy, review strategies more frequently, and are much better at eliminating barriers to implementation.

Exhibit 1

Developing a distinct strategy % of respondents, 1 n =,2 1 74 Which point on the spectrum best represents your company’s approach to corporate strategy development? 22

19 14

14 6

A distinct exercise that level strategy, portfolio composition issues !"Respondents

who answered “don’t know” are not shown.

An aggregation of business unit strategies, with no separate attempt to address corporate-level strategy questions

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SLOW AND STEADY DOESN’T WIN In both the boom of the mid-2000s and the financial crisis that followed, many companies did not (or could not) make critical portfolio choices and trade-offs. This may be why so few—just 19 percent of all respondents to this survey— say their companies have a distinct process for developing corporate strategy (Exhibit 1). Nearly a quarter, however, think their companies should engage in corporate strategy development on an ongoing basis (as opposed to episodically), compared with only 8 percent who say they currently do so (Exhibit 2). The small group of respondents at the effectivedeveloper companies is ahead of the pack: 19 percent say their companies currently review corporate strategy on an ongoing basis. A similar pattern emerges with regard to the amount of time a company’s senior-executive team actually spends—and ideally should spend—

Exhibit 2

Few revisit strategy regularly % of respondents, 1 n = 1,944

Actual Ideal

How often does your company engage in corporate strategy development? How often should it? 8

On an ongoing basis More than once per year Annually

25 25

Every 2–3 years

Every 4–5 years

8 34

Less than every 5 years

8 2

1"Respondents who answered “other” or “don’t know” are not shown.

on developing corporate strategy in a typical year. No more than one in seven respondents say their companies’ senior leaders currently spend more than 15 percent of their time on this activity, but nearly three times as many describe that as the ideal time commitment. Among respondents at effective developers, a quarter say senior leaders currently spend more than 15 percent of their time on corporate strategy development.

WHAT GOES INTO STRATEGY Financial projections are important for allocating capital to businesses in the existing portfolio. But the importance of trend analysis grows when it comes to adding corporate value by creatively reallocating resources and by changing its composition through mergers, acquisitions, and divestments. Yet executives rank financials as their FEBRUARY 2011

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%$'%&() companies’ most important input when developing corporate strategy—23 percent of all respondents rank it first, followed by the performance of the overall portfolio, which 21 percent of all respondents rank first. Interestingly, executives at effective developers rank financial projections lower and macro level trends significantly higher (Exhibit 3). Furthermore, when asked what triggers a review of corporate strategy, more respondents say the trigger is their internal planning cycle rather than any external event, regardless of whether they work at effective companies or not.

Exhibit 3

Prioritising financials, macrotrends 1 % of respondents

Respondents who say their companies are ‘effective developers of strategy,’ n = 149

Top-ranked inputs considered by company when developing corporate strategy

Macrolevel trends

Performance of our overall portfolio

Industry dynamics

Financial projections Competitors’ current strategies, known plans

Operational benchmarking

Our talent pool

Investor expectations

Extent of regulation in the countries where we operate

2 0

Analyst expectations !"Respondents

All other respondents, n = 1,743

24 5 3 1 8 2 2

who answered “don’t know” are excluded; respondents who answered “other” are not shown.

IMPLEMENTING STRATEGY Frustration about implementing strategy is evident among almost all respondents. For example, 40 percent say that ideally, their companies should fully engage in making major shifts in talent across the portfolio—five times as many as those who say their companies currently do so (Exhibit 4). The most striking contrast we found between most executives and those at effective-developer companies is the latter group’s apparent success at dismantling barriers to the implementation of corporate strategies. For example, when asked which barriers (such as risk-averse decision makers) interfere

()*+,-./0'1)234'4)'1/33'5)' 4/0.6-',-')-6).-6'7)8+)8,5/' 058,5/69:4/;/3)+*/-5'+8)7/00' 5<,5'5,7=3/0'=/9'7)8+)8,5/:3/;/3' .002/0>'027<',0'8/0)287/'8/,33): 7,5.)->',-4'5<,5'48.;/0')-'*,?)8' /7)-)*.7'58/-40@ with reallocation of their companies’ resources, 32 percent of the effectivedevelopers group claim to have no bar-

Exhibit 4

Dissatisfaction with status quo % of respondents, n =1,944

Actual Ideal

Activities in which my company currently engages fully, and ideally should engage fully, as a direct outcome of its corporate strategy development 26

Acquiring new businesses

Entering/exiting major markets Restructuring the organisation Driving performance transformation Making major changes in operating expenditures across the corporate portfolio

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49 39

20 18

51 36

Divesting businesses

Making major changes in organic capital expenditures across the corporate portfolio

Redesigning key processes

Making major shifts in talent across the corporate portfolio

35 33 41 40

riers, while only 11 percent of others say the same (Exhibit 5). Similarly, 38 percent of respondents at effective developers say their companies face no barriers of any kind to implementing strategy, compared with only 7 percent of others. The secret of effective developers’ success may be the extent to which they integrate their corporate strategy processes with key management processes. For example, 49 percent of respondents at effective developers, compared with 22 percent of others, say their corporate strategy processes are fully integrated with the approval and allocation of capital expenditures. As for talent development and assignment, 31 percent of effectives, but only 6 percent of others, integrate it (Exhibit 6). Indeed, 60 percent of executives at

%$'%&() effective companies say their companies are extremely effective at translating corporate strategies into day-to-day implementation. Just 6 percent of others say the same.

Exhibit 6

Better strategy through integration % of respondents

The management processes that are fully integrated with decisions resulting from my company’s corporate strategy process

Respondents who say their companies are ‘effective developers of strategy,’ n = 151

Operating reviews

Approval, allocation of capital expenditures

49 31

Talent development, assignment Investor relations management

Analyst communications

Incentive structure, compensation

allocation of capital expenditures, to ensure that their strategies translate into meaningful action.

Managers should forge much stronger links between corporate strategy and other key management processes, such as talent management and

The contributors to the development and analysis of this survey include Michael

Exhibit 5

Better strategy through integration % of respondents1 Which situations, if any, are your company’s biggest barriers to making substantial funding shifts across its portfolio?

Respondents who say their companies are ‘effective developers of strategy,’ n = 151

Business units feel entitled to the same level of funding they received in the previous year

We have no barriers to reallocation of our resources

People are reluctant to relocate

Other

Funding is distributed based on the size of the business unit

By conclusion of strategy development process, changes in operating environment have made strategy obsolete

All other respondents, n = 1,793

Decision makers are risk-averse and see emerging business opportunities,

22 32

Budgeting

Companies would do well to design an ongoing corporate strategy-development process that explicitly tackles key corporate-level issues, such as resource reallocation, and that drives on major economic trends and other external factors.

Transactions (eg, M&A, divestitures)

Many corporations have emerged from the hunker-down mentality of the financial crisis with strong balance sheets and profits. Robust corporate strategy development will be essential to charting a future path to successful growth and returns.

n = 1,793

Business unit strategy reviews

LOOKING AHEAD

All other respondents,

18 22 6 15 12 8

Birshan, a principal in McKinsey’s London office; Renee Dye, a consultant in the Atlanta office; andStephen Hall, a director in the London office. The online survey was in the field from December 7 to December 17, 2010, and received responses from 2,313 executives around the world, representing the full range of industries, regions, tenures, and functional specialties. Of those, 1,944 respondents are at multi-business companies and can describe their companies’ process for developing a corporate strategy. THIS ARTICLE WAS FIRST PUBLISHED IN JANUARY 2011 ON THE MCKINSEY QUARTERLY WEB SITE, WWW.MCKINSEYQUARTERLY.COM. COPYRIGHT © 2011 MCKINSEY & COMPANY. ALL RIGHTS RESERVED. REPRINTED BY PERMISSION.

7 32

1"Respondents who answered “don’t know” are not shown.

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SPEND GOVERNANCE THROUGH IT-BPO CONVERGENCE Having an independent IT solution for your firm and outsourcing some work can cut cost and time. But CFOs need to plan this well. JAYANT DWIVEDY

HE ROLE OF THE Chief Financial Officer (CFO) is a rapidly evolving one. The ‘partner to the CEO’ also looks at risk, spend governance and takes an active role in deciding strategy for the company. Given this scenario, it may be pertinent to discuss what CFOs necessarily need to manage dynamically in today’s scenario. Here are a few key broad issues CFOs need to focus on:

PHOTOS.COM

Support business growth by increasing transactions and document management without necessarily adding headcount Use automation/ IT to integrate the organisation beyond what has been achieved already Outsource progressively: This will improve productivity, reduce turnaround time and optimise costs; It will also progressively eliminate nonvalue added work Examine and adopt best practices not prevalent in the organisation but available in a BPO. These need to 34

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be understood well and packaged to meet industry requirements Spend lesser time to generate relevant integrated reports even for businesses that are currently disintegrated Be ‘audit ready’ to significantly reduce extra hours put in for an audit preparation The problem area has been the use of technology as a tool and not as a solution. IT tools deliver to a limited

design scope. Huge chunks of the organisation do not reap the benefits at all or only receive partial resolutions to their problem. This leads to a number of unwanted mechanisms coming in to work. If unattended, they remain in suspended animation for years and become ‘pain’ points. Don’t be surprised if the top management is unaware of this ground reality. Can an organisation use external IT tools to provide solutions to internal

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problems? The answer is ‘yes’. Multiple options are available as SaaS and cloud -based solutions. Can these solutions automate areas that are manual, without disturbing the existing core IT configuration? The answer is again ‘yes’. Focus on areas that are manual and low on productivity. Can an organisation reap the benefits of an independent IT solution combined with the benefits of outsourcing (BPO)? Of course it can. But convergence is a term that needs discussion.

CONVERGENCE Convergence refers to previously separate bits such as productivity applications, processes improvements (that encompasses documents and transactions) and governance (policies and regulations) that now share resources and interact with each other in prefect synrergy, thereby creating new efficiencies. The convergence of IT-BPO is a very valuable proposition for the industry in the area of spend management and

spend governance. An independent software vendor (offering a large suite of functionalities), coupled with a large BPO outfit, can bring in significant value to an organisation in about three months time. The key points to examine would be : a) Is the solution just a work flow? That will not suffice. b) Does it provide a full-fledged accounting framework that matches my organisation’s current financial system? c) Does it also give me a spend governance platform for audit readiness? d) Does it allow control from a distance, even as the outsourced operations take place? Convergence, in this instance, is also defined as the interlinking of computing and other information technologies and communication networks (including Internet) to provide a larger solution to the organisation. The point to drive home is that an existing system should not be a deterrent to the wider use of standard and well-tested solutions across the organisation.

India still leads the global IT outsourcing market and its advantages are distinct. However, if we were to obtain the percentage of operations outsourced by organisations in India, the number would be dismally small. A large part of transactions pertaining to ordering, invoice processing, payment processing and document management unnecessarily happens in-house. This, in spite of the organisation realising that resources and headcounts can be better utilised in revenue generation and value creation.

EVALUATION CRITEREA FOR IT-BPO SOLUTIONS Assurance: The assurance factor is determined by the competency to deliver for large and geographically-scattered organisations. Volume of transactions handled and availability of Business Continuity Plan (BCP) are also salient aspects. Quality: Robust spend management software can deliver a six sigma quality in FEBRUARY 2011

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!"#$%&'(!') transaction processing. The quality of the system documentation, ability to capture detailed relevant information and the retrieval process are vital selection criteria. Service: A new solution brings in the energy to review existing “as is” scenarios and sets demanding Key Performance Indicators (KPIs) for the “to be” implementation. It will be reasonable to expect 35-50 per cent reduction in turnaround time for key transactions in a good and well-resourced implementation. Cost: The payback on such implementations is usually less than a year. Use of a SaaS model can reduce the operating

Organisations can save considerable amount to time internally as the necessary knowledge and capability to deal with such changes exists at the service provider’s end. The organisational awareness about outsourcing allows the delivery of capability, which goes beyond the ‘known’ business requirement. It enables a service-oriented architecture. The ability to do shared services, centralised sourcing and consolidation of categories/ spend becomes a reality. Deskilling of tasks perceived to be difficult and people-specific is another revelation in such an exercise. Over-engineering within an organisation is a waste. It is also a known risk

&552930,-./.01#,3>#04,3;8,4+351# ,4+#<245.37#-9;.3+;;#/+,>+4;##02#-+# A24+#?25,/#23#0*+#;8+3>#72?+4: 3,35+#,;8+50;#8,40.59/,4/1#6*+4+# ?,4.+01#,3>#?2/9A+#5,3#/+0#,3# 247,3.;,0.23#>263= expenditure almost instantaneously. Capital cost can be avoided. The ability to interact with the larger population in an organisation for online transactions, brings in tangible benefits. The intangible benefits are around spend governance, control and reporting. Innovation: Innovation is the key to success. The environment is changing too fast to allow complacency in system availability. Lack of innovative solutions can retard growth and considerably slow down organisations. Regulatory factors: The combined solution of IT-BPO should enable quick course corrections for regulatory changes and such changes should get handled effectively and completely. 36

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and is best avoided, as such internal exercises tend to become team specific. The residual hazard in situations where the person (or a team) moves on is huge. Solutions to difficult endto-end operational problems are, in most instances, readily available in the market. Simplicity should be the chief criteria in an IT-BPO implementation move. The focus has to be on completing the value chain in the process and no part should be allowed to remain disintegrated or manual. With rising salary bills and real estate costs, elimination of every manual effort contributes to the margin of the business. Accountability and transparency in business are forcing business leaders to be more vocal on the spend governance aspects, particularly where

variety and volume can let an organisation down). The desire to be compliant is being translated into enforcing compliance through automated systems and procedures. Use of IT-BPO combine to deal with spend management is a valid option that brings in new energy, deals with the aspects around change management, removes unwanted old practices and makes the operations productive and transparent. All this, while the organisation can still focus on its core business and revenue growth. In conclusion, to ensure you get optimum value from such convergence, these are some of the things to keep in mind: Look out for a BPO organisation that has a large geographical presence, F&A team and a spend management software Look at existing scale handled by the spend management software (make sure that it is not just a document work flow but a software that can handle transactions and provide a spend management framework) Look at offerings that can be either on capital expenditure mode or Software as a Service (SaaS) Look out for a structured short term project that delivers in about 3 months Evaluate an IT-BPO combined solution and implement. That would get you ‘three birds with one stone’- spend management software, related outsourcing and structured consultancy. A convergence in the true sense! A large BPO expertise combined with electronic spend governance technology provides a potent solution for addressing typical issues around costs, productivity and compliance. JAYANT DWIVEDY IS CEO, EMPRONC SOLUTIONS AND CAN BE CONTA C T E D AT J AYA N T. D W I V E D Y @ EMPRONC.COM BAZ THE FLAGSHIP PRODUCT FROM EMPRONC SOLUTIONS IS A LEADING SPEND MANAGEMENT SOLUTION FOR THE INDUSTRY.

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THE DECADE IN TERROR RAGHU RAMAN*

PHOTOS.COM

he past decade, 2001- 2010, was one during which World War IV began. Over the last 100 years, the world has witnessed three major “world wars” and we are now at the beginning of the fourth one. The world was largely oblivious to the cataclysmic changes during the world wars even though the signs were there for all to see. Unfortunately, very little has changed. Each of these four world wars—of which two are well known—had peculiar characteristics. The First World War began in the summer of 1914 and ended four years later with millions dead, wounded and displaced. Devastation of this scale was possible because of technological advances in weaponry characterised by their automation. Technologies such as machine guns and artillery barrages essentially automated killing to an extent unimaginable until then. The Second World War (1939-45) was characterised by mobility. Fighter aircraft, long-range bombers, submarines, fleet carriers and blitzkriegs enlarged the theatre of operations. At its peak, World War II saw more than 100 million military personnel mobilised all over the world and every major nation participating in the conflict. With over 50 million fatalities, this war was the deadliest conflict in all history. Automation which was predominant during WW I was refined and provided mobility during WW II. The crescendo of this lethal combination was best demonstrated by the atomic explosions in Hiroshima and Nagasaki, where more than 200,000 were killed by a nation attacking them from halfway across the world. 38

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!"#$%&'(!') The Third World War or the Cold War began immediately after the victors of WW II divided up the spoils of the war and continued the bifurcation across the globe. East and West Germany, the Koreas, the Soviet Satellites, Vietnam, Cuba, most parts of Africa and many parts of Asia were forced to join this proxy war between the two superpowers and their allies. The essential characteristic of the Cold War was subterfuge. Cloak and dagger operations, murky overthrowing of governments, funding of terrorist movements (who would, of course, be rechristened as freedom fighters if they won), deniable black ops and unsavoury links between causes ranging from ideological to downright criminal were the essence of this war. While the Cold War may not have caused as many casualties in a similar time frame as both the earlier wars, its damage potential has been very high and exacting. Virtually every conflict in the world today can trace its roots in the Cold War and many of those conflicts will continue to take their toll for the foreseeable future. The Cold War ended with the fall of the Soviet Union in early 1990s, and had the unintended consequence of laying the foundation of World War IV—global radical fundamentalism and terrorism. With the Soviet Union crumbling, the sole remaining super power could project its power unopposed into any part of the world that suited it, and the US did exactly that. Former global powers stood mutely as the US demonstrated that it could attack any nation unilaterally without even the fig-leaf of a UN sanction. Until, on 11 September 2001, the Al Qaeda struck back and sounded a rallying call of “franchise” terrorism. It is not that terrorism had not been used before this instance. West Asia, Sri Lanka, and, at closer home, Punjab, the North-East and the Kashmir valley had echoed with blasts and terror attacks, but 9/11 was a harbinger of WW IV in many other ways. To begin with, the sheer scale, elaborate planning and audacity of the

attacks were without precedence. Secondly, the Al Qaeda had taken the battle into the strategic base of their enemy instead of limiting it to a theatre defined by them, thus out-flanking considerably superior forces. Thirdly, it had used a small body of troops to achieve an objective far beyond its capabilities in conventional terms. These three subtle elements indicated the paradigm shift of the new war that we face now. Essentially, the terrorists had managed to pull off an operation that combined the guile and planning of Cold War operatives, the cold professional execution capability of Special Forces and demonstrated the strategic ability to mount a “turning move” by open-

units. The London and Mumbai attacks reinforced this shift when countries with some of the most powerful armies of the world were cumbersome in their response to this new paradigm. The rapid growth of terrorism as a preferred tool of waging war is testimony to its efficacy and a guarantee of its sustained proliferation. Thus demanding that in-depth intelligence and surgical utility of force be the essential characteristic of WW IV—rather than absolute superiority of force. There is reasonable certainty that the years to come will see an escalation of strategic terror that will affect the whole world directly and indirectly. And yet, we fight WW IV with the same structures

(*+#,-./0*#.1#0+--.-234#53#5# 6-+1+--+7#0..8#.1#/5,29,#/5-# 23#0+3024.9:#0.#203#+112;5;:<# 5#,=5-590++#.1#203#3=30529+7# 6-.821+-502.9> ing a new front in the ground of their own choosing. The punch drunk reaction of the most powerful country in the world wasn’t because of the power of the punch; instead it was testimony to the fact that the US was fighting WW IV with the doctrines and structures of the previous wars. The US carpet bombing of Afghanistan and its vision of WMDs in Iraq were manifestations of not having made the orbital shift between the old and the new wars. But the US was not alone in this time warp. The Madrid bombing indicated another surprising paradigm shift of the global terror war. Unlike conventional forces, which seek strong command and control channels, the Al Qaeda and other terrorist groups encourage loose affiliations and “cut-outs” in its command and control structures, providing the broad philosophy and resources and leaving the actual operations to local

that stood us in good stead during the previous wars. The focus of most nations is still on adapting the conventional structures rather than developing more suitable ones from scratch. Our armies and para-military forces are still organized and trained based on erstwhile “allout decisive war” doctrines rather than newly developed ones that focus on preemptive action rather than overwhelming force. And until we go back to the drawing board and redevelop structures based on intelligence rather than force, we will continue fighting the war on terror with sub-optimal results.

*RAGHU RAMAN IS AN EXPERT AND A COMMENTATOR ON INTERNAL SECURITY. THE ARTICLE HAS BEEN REPRODUCED WITH PERMISSION FROM MINT (WWW.LIVEMINT.COM). IT FIRST APPEARED IN THE FEBRUARY 1, 2011 EDITION OF THE NEWSPAPER. FEBRUARY 2011

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RESPONSIBLE ACQUISITIONS YIELD GROWTH Acquisitions following a downturn generally yield strong returns. Success however, depends on a balance between growth and caution. JANICE DIPIETRO

PHOTOS.COM

OR COMPANIES SEEKING TO grow through acquisition, there’s good news: The recession has created a strong buyer’s market. Research has shown that acquisitions immediately following a downturn yield strong returns. On the other hand, growth in a sluggish economic era can be tricky, and aggressive pursuits can be dangerous, even disastrous. Companies that emerge stronger will have an acquisition strategy that balances the need to grow with caution and responsibility. A first step is to evaluate the company’s appetite and readiness. Before entering any transaction, first determine if there is the financial wherewithal by performing a thorough financial health check. Since the recession, most organisations have shifted their focus away from profit and loss statements toward liquidity. Does the company have enough liquidity to carry off a transaction successfully? If not, consider the company’s sources for funding growth

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before defining the acquisition strategy and the plan for recognising value postacquisition.

SOURCES OF FUNDING Funding can come from a variety of sources — internal liquidity, partnership, liquidity from debt or equity.

INTERNAL LIQUIDITY One of the quickest and easiest ways to generate funding is by building

internal liquidity. This involves a faster turnover of critical balance sheet items and improving processes like collections, inventory management and supplier settlement. The company could downsize to a smaller-scale version of the business or reshape it by outsourcing non-core functions. In addition, it could shift from a fixed-cost structure to a variable one, particularly to help weather weak markets. When considering options, first understand the customer base and what matters most to them. For exam-

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ple, Dell Corp. was able to cut prices and gain market share by dropping free after-sale customer support. Customers now have the option to pay for the level of support they desire and no more.

PARTNERSHIPS New opportunities may also exist to gain new alliance partners, to move into adjacent markets, to adopt new pricing models or to enter new channels. Some of these opportunities may be created by the failure of competitors or by a new customer appetite for solutions that show measurable return on investment or reduce the risk. For existing key customers, relationships can be deepened by working together to improve each otherâ&#x20AC;&#x2122;s performance. For example, are there aspects of supply chain logistics that could be handled for the customer that reduce

overall costs and improve profitability for both entities?

LIQUIDITY FROM DEBT A third option is renegotiating debt. Talk to lenders and update them about the companyâ&#x20AC;&#x2122;s assumptions for the next six to 12 months. Be sure they understand any improvement initiatives in place to increase cash flow. This conversation will help determine when the company might be in a position to renegotiate existing credit terms and/or expand borrowing capacity. Establish relationships with new lending sources before they are needed. Doing so enables the financial executive to best understand the competitive market lenders are facing and what alternatives might be available and when. Match short-term debt with the need for working capital and longer

term debt with the need for growth capital. Be sure to limit the use of debt for permanent needs â&#x20AC;&#x201D; these are better financed with equity.

EQUITY Nearly 80 percent of private equity investors surveyed by the Bank of New York said they would increase or maintain their current level of investing in the future. Private equity offers a potentially rapid infusion of cash for companies that are just beginning their growth trajectory. There is much competition, and only the best deals are being financed. To stand out, a company must have a true growth story, initial traction in the market and readily available financial information. Agreeing to private equity financing is likely to bring with it a host of changFEBRUARY 2011

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$%&'(#)*$)+ es, including how the company is governed. So it is vital to understand and be prepared for the changes that would occur if this option is chosen.

WHY CONSIDER AN ACQUISITION? With funding sources in place, it is time to consider an acquisition. Many companies are timid when it comes to major transactions. But mergers and acquisitions are the lifeblood of growth. Darrell Rigby, author of Winning in

liquidity is loosening, it is important not to rush into an acquisition, particularly for first-time acquirers. Be sure the strategy in identifying an acquisition target is clearly understood. Ensure that the team in place has the experience to assess a transaction, complete the investment process, forecast its performance and tolerate sensitivities around the results. External advisers with the right experience are often necessary. In all, make certain that the projected benefits, synergies and savings from the transaction can in fact be realised.

(<.#FG&#25/+5.-3#2<01*7#25.:# 4/0:#+,#+,+*3262#04#5<.#80:?+,3H2# 81//.,5#80:?.5656=.#?026560,#+,7# 652#4151/.#0>I.856=.2A#(<+5#:.+,2# 1,7./25+,76,-#B<+5#5<.#>126,.22# 62#706,-9#B<./.#652#*.+7./2#B+,5#50# -0#+,7#B<+5#5<.3#=+*1.#:025A Turbulence, writes that acquisitions completed during and immediately following the recession of 2001–02 generated almost triple the “excess returns” of those made during the preceding boom. Recessions reshape industries faster than strong economic times because long-established business models have been weakened, and competitors have lost customers. Predictably, M&A activity is on the rise. Robert W. Baird & Co. reported an impressive 93-percent increase in United States middle market M&A transactions in March 2010, the largest monthly deal count since June 2000. And the second quarter of this financial year was the strongest M&A quarter since the beginning of the credit crisis, with 175 deals done, amounting to approximately $26.7 billion in capital deployed. Though opportunities are ripe and 42

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DEFINE GOALS AND SUCCESS FACTORS The M&A strategy should stem from an analysis of the company’s current competitive position and its future objectives. That means understanding what the business is doing, where its leaders want to go and what they value most. Just what is the company trying to gain through an individual transaction? Is it increasing market share, entering contiguous markets, increasing economies of scale to be the low-cost provider in its market, eliminating a competitor, expanding a product line or achieving vertical integration? Whatever the rationale, be sure it is well understood and translated into specific, measurable goals and success factors. Through the process, focus on goals relentlessly. The acquisition should be a

way to bridge the gap between the company’s current state and the future state desired. Align decisions to this future vision throughout the process. These factors become the items to test for in screening for prospective targets and performing due diligence.

DUE DILIGENCE Due diligence is more than an audit or a financial exercise of checking historic results. When done properly, due diligence should test the strategic fit of the acquisition to the original goals as well as map out what it will take through the integration process to make this a reality. There are a number of important factors to consider in screening acquisition targets, including integration feasibility and developing revenue and cost models for the combined organisation. When searching for candidates, avoid becoming too enamoured of any particular one; search for alternatives, understanding the pros and cons of each. Becoming too personally attached to any one opportunity can cloud judgement, and a negotiator must be prepared to walk away if necessary. Another useful technique is to write a mock press release announcing the acquisition. It’s an exercise that forces the focus on the relevant factors related to the acquisition and encourages thinking about the negotiation process before it actually begins. Also, plan generously for transition and closing costs, making sure the deal is financially viable, pre-purchase. As a rule of thumb, integration will cost at least 10 percent of the acquisition price. If the company cannot absorb a wide swath of sensitivities around forecasted performance, it won’t succeed. Pre-close planning should include performance tracking measures that will help monitor the transaction’s success post-close.

$%&'(#)*$)+ INTEGRATION More M&A deals fail due to poor integration than any other factor. In fact, experts estimate that almost as many as 50 percent of post-merger integration attempts are poorly executed. To ensure a successful integration, begin planning as soon as a target is identified.

PLANNING FOR INTEGRATION Major transitions require strong leadership, so it is critical to create a transition steering committee and a functional team. These groups should engage leaders from both sides and understand their role in realizing value assumptions. They should set their expectations high and work from a well-defined project plan, revisiting it as conditions on the ground change. The integration team must include line managers closest to the action, who can see problems brewing. For example, in General Electric Co.’s integration team concept, major players from both the buyer and target work together to ensure that the integration will work at all levels. In 2010, Tyco International Ltd.’s ADT division acquired Broadview Security Inc. The divisional chief executive, a former GE executive, formed an integration team with members from both companies, representing all functional areas. Former senior members of Broadview also became members of the CEO’s senior management team. Although it took some time, the best practices of each group — including cultural — were used for the new entity. This appears to be a continued strategy for a successful integration. Another key aspect of integration planning is to ensure the integration accounting team has a detailed understanding of how the purchase price accounting will be applied. This allows the books to close and reopen on deal day with all the necessary adjustments posted, instead of trying to

THE M&A CODE Research has shown that acquis tions immediately following a downturn yield strong returns. Before entering any transaction, determine if there is the financial wherewithal by performing a thorough financial health check. Ensure that the team in place has the experience to assess a transaction, Plan generously for transition and closing costs, making sure the deal is financially viable pre-purchase. To ensure a successful integration, begin planning as soon as a target is identified.

It is generally best to integrate operations and culture first and wait on information technology systems. Do not be timid when it comes to modifying plans if that’s the right move

determine how to apply the accounting procedures many months later.

EXECUTING THE INTEGRATION Organisational and cultural issues are the most significant factors as to why deals succeed or fail. Yet they are often the most overlooked. Contrary to what most people think about integrations, it is generally best to integrate operations and culture first and wait on information technology systems. Businesses that have survived due

diligence begin with using the existing IT systems first and spend the initial integration thriving in the marketplace rather than drowning in a new IT system. A system implementation can always be done at a later date. Remember that no matter how thorough the due diligence, what’s actually purchased is generally not known until the post-merger integration process has begun. Seeing a business from the outside is often very different than seeing it from the inside. As integration begins, revalidate the plans developed since the deal was first considered. Continue to evaluate what drives value, what is working and what is not. Do not be timid when it comes to modifying plans if that’s the right move. Be sure to communicate, communicate and communicate even more. Members of both teams must understand — as quickly as possible — the direction to be taken and how they play (or not) so as to maximise value to both sides. Throughout integration, remember speed is crucial at this stage — delay drives failure and may cost key people. Mergers and acquisitions will always be a critical step on the path toward growth. To ensure success, know well the organisation’s identity, resources and goals. Plan carefully and thoroughly. Before any action is taken, evaluate every alternative. Be aggressive in pursuing and negotiating, but remain conservative in forecasting and integrating. With an intelligent, measured approach to acquisition, the risks can be overcome, the company’s growth trajectory can be accelerated and it can land on top of the pile — even in this volatile buyer’s market. JANICE DIPIETRO (JANICE.DIPIETRO@ TATUMLLC.COML) IS NATIONAL MANAGING PARTNER OF CONSULTING FOR TATUM AND BASED OUT OF THE NEW ENGLAND PRACTICE IN BOSTON. WWW. FINANCIALEXECUTIVES.COM FEBRUARY 2011

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A Leaderâ&#x20AC;&#x2122;s

Guide to

2011

Predicting the future is risky but some trends are more than likely to dominate our work lives this year. DAVID LIM

ABOUT THE AUTHOR David Lim, founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader. He can be found at his blog http://theasiannegotiator. wordpress.com, or david@ everestmotivation.com

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WHAT IS IN THE crystal ball for 2011? And what are the leadership trends that will make a difference to you? As I have mentioned many times already, you need to lead yourself effectively before leading others. The trends below are based on my thoughts as well as those based on reports and research that have appeared on the web. But before we get to the top leadership trends for 2011 that everyone in positions of influence need to know, let us talk about CFO leadership more specifically. More than in recent times, 2011 will be racked with some volatility in the markets, despite a broad global recovery. And CFOs who lead well, will be well-advised to do the following: a) No more Death by PowerPoint: Communicate more effectively to the Board, specially about changes taking place that are affecting jobs, out placements, currency shifts and anything that impacts the strategy and thus the bottom-line. The second most underrated leadership skill is managing expectations. Do it well here, and it is likely that the Board will accept upcoming changes and actions. What is a good start? No more death by PowerPoint. Instead, if the Board needs numbers, give it to them. But your expertise lies in making sense of it. Be bold enough to summarise the salient points in 3 â&#x20AC;&#x201C; 4 factoids or graphics b) It is a war out there: Manage international finance and hedging more

!"#$"%&'()*%!$ effectively as the threat of currency wars loom ahead; consider this a major player affecting the day-to-day issues such as managing budgets and keeping a healthy cash flow. c) Think like a CEO more often: The numbers are critical – but where do they lie in terms of the overall strategy and goals? Leading is about inspiring, taking calculated risks and swift action. d) Spend time crystal ball-gazing: Who said scenario planning was only for the CEO? Bring the key concepts of scenario planning into your team so you can better analyse your vulnerabilities, and possible consequences of a number of key risk variables. If you are satisfied with your responses and reactions to the points above, here are what other experts and yours truly think are the most important trends in general leadership in the corporate world.

To maximise their productivity, leaders need to rethink how they communicate with the Millennials on a daily basis, constantly stimulating and challenging a generation that cannot think of a workday without the Internet.

Values-based leadership More organisations will be pushing for higher transparency, accountability and a systematic concept of leadership based on the right values. There will be more pressure on fulfilling other bottom lines than just the revenue bottom line. In India, as it is in any corporate market with moral hazards, how you project the integrity of your finances and deal with suppliers and business partners, are key to sustaining brand reputation.

Leaders will reward more, and more innovatively Salaries are recovering, but the huge shakeup in job losses and insecurity from the GFC will mean that to retain staff and to maintain staff numbers, leaders need to think about rewarding their people with more. The good news is that it does not have to be with just cash. Studies at Standard Chartered Bank show that giving staff 3 paid days off to do volunteer work, increases staff satisfaction, engagement and (hopefully) reduces turnover.

Engaging the Millennials will be a leadership imperative Those born between 1979 and 1996 are now heading into the workforce, or are already beginning to influence people at the junior and middle management levels. Gen Y, as they are also known, are impatient to succeed, techsavvy, have high expectations of themselves and like being team players. To maximise their productivity, leaders need to rethink how they communicate with the Millennials on a daily basis, stimulating and challenging a generation that cannot think of a workday without the Internet.

Training and development for leaders will be top priority This will need to be more outcome-focused, and the results more tangible. Return on Objectives may include intangibles that have to be measured with different metrics – like team engagement, improving negotiation skills, and intra and inter team communications.

Leaders will need to be more innovative… seriously! “Thinking out of the Box” is passe – as a phrase anyway. The Centre of Creative Leadership’s 2007 survey of 247 global executives (93 per cent of them being CEOs or senior VPs) showed that the #2 priority was innovation. This can be a problem in risk-averse Asia which has tended to follow, copy or ape norms and ideas rather than generate them. If you are not failing fast enough – which is what innovation demands – you are not winning fast enough. Peter Drucker recognised the need to innovate a long time ago when he said there are only 2 reasons for a company to exist – 1) to market its products, and 2) to innovate. What has been your most recent financial innovation to drive the organisation forward? Think about it.

DAVID LIM IS A LEADERSHIP AND NEGOTIATION COACH AND CAN BE FOUND ON WEBSITE HTTP://WWW.EVERESTMOTIVATION.COM FEBRUARY 2011

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THE CHALLENGE: Benchmarking the finance function

PEOPLE INVOLVED: CFO and the entire finance team

TIME PERIOD: January to December 2010

KEY TAKEAWAYS: Set clear, short deadlines.

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Steering towards a new Benchmarking Map A rapid rise in fortunes saw MapmyIndia’s finance team faced with unexpected workload. Lack of processes were beginning to hit them hard. That is when CFO Asheesh Awasthy and his team decided to put systems and processes in place. DEEPAK GARG

veryone at MapmyIndia was on a high in 2008. The digital navigation service provider had witnessed over 100 per cent growth over the previous two financial years. In a short span of three years, it had shifted from being an enterprise solutions provider to a retail one, offering mapping and tracking solutions to a wide variety of clients. But, like many other startups before

them, they landed their punches but left their defences open (to use a boxing jargon). So, while the transformation was a success, the fast-paced growth saw MapmyIndia’s relatively lean finance team dealing with utter chaos. Responsibilities and processes had not been defined, resulting in the team functioning quite inefficiently and haphazardly. It was, in fact, a scenario quite similar to that faced by most startup companies that witness high growth.

THE CHALLENGE Over the years, MapmyIndia’s finance function had evolved from being responsible for just rudimentary matters such as raising invoices, handling payables and providing monthly sales reports to the management, to that of getting involved in strategic decisions and having all finance information available at a moment’s notice. This added and expanded role, coupled with the sudden expansion of business, creFEBRUARY 2011

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%*+,-.///%0123%14%546715438% 9:;<:73%=>%.3<%?3490@17A./% &05.%B1.%9;317;C%;19A546%1<% D1E@CF4851/%F<%B1.%1%?56% 901;;3463%<=%63<%.5@5;17%.C.<3@.% 148%E7=93..3.%54%E;193%0373/G ated a level of pressure that was fast affecting the team’s and therefore the company’s overall performance. It was at a strategic juncture in early 2009 that Asheesh Awasthy joined MapmyIndia as Chief Financial Officer, bringing with him a decade of experience in the BPO industry. “BPOs have evolved to have an ingrained culture of set processes and benchmarks. I was used to having such systems in place and this was clearly lacking at MapmyIndia. It was a big challenge to get similar systems and processes in place here,” he says. Awasthy knew from experience that functions without defined responsibilities, processes and targets can lead to dissatisfied employees and undue 48

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stress, leading to subprime performance. He was determined to benchmark his team’s responsibilities and hopefully ‘get more with less’.

HOW IT WAS TACKLED The benchmark standards put in place at BPOs are clearly different from what was required for the MapmyIndia finance team, but the fundamentals were the same. Through 2009, Awasthy researched existing standards and developed his own benchmarks for his finance function. He decided to start with the accounts payable and accounts receivable functions, and set out to put the systems in place. The process of setting the benchmarks and implementation took time,

and involved regular discussions and debates with his team. “Convincing them of the benefits was a challenge, but over time, the benefits became apparent. In fact, the entire exercise forced the team to look into each and every process in detail,” recalls Awasthy. As communication levels improved, as did an understanding of the overall situation, it enabled the team to identify areas where automation was desirable, thus enabling process efficiencies through the installation of software. The result is visible today. MapmyIndia’s finance team is not just working more as a cohesive unit now but also in a far more positive and less stressed environment. Quality rigour across the functions also resulted in substantial increase in compliancerelated issues. To put it simply, everything is on time today. The exercise of creating process flows has also greatly simplified the auditing process, says Awasthy. As the overall team efficiency improved, MapmyIndia has also managed to increase productivity, doing away with the need to hire additional people to handle the increasing demands on the function.

THE LEARNINGS Overall, the process of benchmarking has been very positive, feels Awasthy. The CFO and his team is now keen to start benchmarking other functions. One of the key takeaways from the experience, he says, is that any benchmarking process should have a defined time frame, with clear timelines and milestones for implementation. “This period should also be kept as short as possible, to avoid the risk of the exercise losing its relevance and importance due to delays,” he says. Today, MapmyIndia is witnessing high growth and the process of benchmarking has helped the company cope with increasing demands on the finance function. The CFO, it seems ,is ‘steering’ the company in the right direction.

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BMW X1

Dude looks like a lady A hulk of an SUV and a pretty hatch â&#x20AC;&#x201D; The X1 is a wonderful combination of the two, says Anoop Chugh THE X1 IS truly a modern automobile â&#x20AC;&#x201C; high on innovation and small in essence. The luxurious hatch is what the X1 can be best described as. It has been bestowed with titles like quasi-SUV, mini-soft-roader or an urban SUV. So what exactly is an urban SUV anyway? Something that offers as much space as a hatch would. Something that costs you four times a hatch. Something that guzzles fuel like an SUV. And something that is luxurious and attractive to look at. We drove the cheapest BMW ever to hit Indian roads to find out if the X1 re-

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FEBRUARY 2011

ally fits the true urban SUV tag and if owning one is a good idea.

Looks This baby is attractive and luxurious. After the first glance, I admit to having given it a second

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The Roundel logo on all BMW cars stems from the days of its aircraft heritage, and symbolizes a spinning propeller. A large part of the logo are the blue and white, colours inspired by the Bavarian flag.

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:9$#(<<=> and a third look. She may not be as stunning as Jessica Alba, but, this is as pretty as a crossover gets. At first glance the X1 looks like a compact model. As I explore it further though, subtle characteristics strike home. The rising lateral lines lend the X1 a dynamic shape, while short overhangs and a sloping rear windscreen create a sporty shadow. But, zoom out a little and you would realise you are admiring a dwarf X3. At the front, the distinctively shaped hood and the three-eyed look of the headlights talk about the BMW pedigree, while the L-shaped taillights in conjunction with the horizontal flow of lines visually broaden the rear. Yes, it attracts eyeballs.

Interiors With no competition in this category from either Audi or even Merc, the X1 is the benchmark in interior luxury. Other similarly priced SUVs – the Fortuner, or the Endeavour are no match in interior styling, comfort or gadgetry. But more on performance a little later. The X1’s ergonomic design needs no lengthy explanation; it’s something you sense immediately. The leather upholstery and a three-series kind of dashboard — all add to the feel-good driving experience. The raised seating position in the X1 compensates for the lower stance of the wannabe-SUV. The X1 uses the same underpinnings as that of the 3-Series, and hence there’s a little compromise on the space; it isn’t generous especially when you stack three adults in the back seat. Ideally, it’s a four-seater, hence a luxurious hatch. But what you lose in space, you gain in gadgets. This car has iDrive, a push button start and dynamic traction control along with flexible interiors and a multitude of pockets and trays. Though, the rear space isn’t what you’d expect from a half SUV, the rear seat bench can be split 40:20:40, or completely levelled to create more space.

FLASHY INTERIORS, A SLOPING REAR WINDSCREEN , LEATHER UPHOLSTRY AND A PUSH BUTTON START, ALL MAKE THE X1 AN APPEALING CAR TO DRIVE

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Rs 22 lakhs

Engine

1800cc

Max Power

150bhp

Max Torque Gear Box

200Nm 6speed GT

Wheelbase

2815 mm

Top speed

210kmph

Cylinders Fuel efficiency

5 in-line 10.5kmpl

Turning circle

11.9m

0-100kmph

8.9sec

POSITIVES

Well designed, flashy interiors, lots of gadgets inside. The push button start is a good add on. NEGATIVES Not much space at the rear. Also the 18i is not quite the roaring, growling BMW. VERDICT The X1 doesn’t quite have the powe rthat you would expect from a BMW, but looks awesome and has enough gadgets and toys inside to keep you occupied.

Performance If it’s a BMW, it has to be a stormer on the road. However, the X1 is no roadster. Not in a way we know the X5, or the 6-Series. Out of the two engine options available – 18i (4-cylinder 1.8l Petrol, 150bhp, 200Nm) and 20d (4-cylinder, 2.0l diesel, 177bhp, 350Nm), the latter is a better performing and proven combination, but a tad expensive. And, sadly it’s no creamy six-cylinder horse pumping machine. As we found out, the four-cylinder 2.0l diesel engine isn’t the most refined way of converting thermal energy into mechanical energy, but again it beats other full-fledged SUVs at basic torque and bhp numbers. Of course it comes at a steep Rs 30-lakh price tag. The humbler of the two engines – 18i, drives you around smoothly but lacks the BMW joy. But it is surely a BMW at a bargain (Rs 22-lakh for 18i.) Overall, the X1 doesn’t give you that powerful feeling that its bigger cousins do, but it is still a very good car thanks to its outstanding suspension tuning, optimal axle load distribution and low centre of gravity. FEBRUARY 2011

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LG Optimus Pad tablet

Pretty Woman HTC HD7 Is it worth the money?Anoop Chugh THE HD7 IS a beautiful-looking phone - black and dark grey with slim side bezels and a handset that is dominated by a 4.3-inch capacitive touchscreen. This, indeed, is the selling point of this phone. Or it might just prove to be its undoing. We would have loved the ultra-sharp super LCD technology of the HTC Desire to make a second appearance here, but that has not quite happened. The touchscreen is very sensitive, and owing to this, navigating around is spontaneous. WP 7 has a nice flowing menu system, consisting of large tiles. This is the default homescreen. The second screen, that is just a side scroll away, contains all possible options like alarms, calendar, games, browser, messaging and MS Office, all in a single vertical-scroll list. The phone is easy to use. Even while playing games, scrolling through long mail lists or checking images, we had absolutely no issues with speed. The QSD8250 processor running at 1GHz, coupled with the monster 576 MB of RAM keeps 52

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everything running smoothly. The battery life is decent, considering the paltry 1230 mAh powerplant. The huge screen is a drain, as is the processor. With the usual messaging and an hour of calls, you will need to charge the phone every evening. The camera is decent. It provides good contrast, the flash is reasonably powerful and seems to tone down when shooting bright subjects against a dim background. Inevitably, as it is with all cellphones, their USP comes down to a combination of price, features and usability. At an MRP of Rs. 29,990, the HD7 isn’t cheap. Neither is it perfect. The platform seems good and stable. The device is solidly built and gorgeous looking. However, it remains an expensive gadget.

SPECIFICATIONS: OS: Windows Phone 7; CPU: Qualcomm QSD8250 (1 GHz); RAM: 576 MB; Display: 4.3-inch, 480x800 pixels, capacitive; battery: 1230 mAh; weight: 162 grams

The 8.9-inch Optimus Pad is an Android Honeycomb-based tablet running an Nvidia dualcore processor. The Pad includes a full HD camera in the back to allow for a 1080p experience. The tablet actually has two 5-megapixel cameras in the rear to allow for 3D video capture. Price: N/A

Xperia Play Available in black or white, CDMA or GSM, the Xperia Play will be launched in Europe and the US sometime in March. The Play will come pre-loaded with “legendary” PS1 games, as well as a variety of popular Android games. Price: N/A

Samsung Galaxy S II The Galaxy S II is making headlines as the thinnest smartphone in the world, measuring in at 8.49 mm in width. Price: N/A POWERED BY

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HAVELOCK ISLAND, ANDAMAN

Eat. Laze. Gaze. Anoop Chugh gains a few pounds on a lonely island.

WINTER IS ON ITS way out, and it is time again to make hay while the sun shines. So we did just that and escaped to the less trodden beaches in the Andaman Islands. Port Blair, the Union Territory’s capital, is the entry point for any of the beaches or islands you wish to explore. We could have chosen to hop on to the Kolkata-Port Blair or the ChennaiPort Blair ship service (not a cruise) which takes around two days to reach the islands. But a tight itinerary meant we had to choose the more expensive but faster route – by air. After landing at the airport, while the foreigners queued up to get their 15-day tourist permits, we stepped out for a quick visit to the infamous Cellular Jail (where many of our freedom fighters were imprisoned during British rule) and then headed to the local dhabas for our first taste of sea food. Talking of sea food, however, would remain incomplete till we talk about our stay at Havelock Island. The Red Snapper in Burmese garlic sauce - both at ‘Benny’ and ‘Lynda’s Wild Orchid Beach Resort’ - were perfectly cooked, moderately spicy and mouth-watering. Small wonder, then, that it features in every traveller’s bucket list. Having heard so much about the food there, we rose before the sun on our second morning at Andaman and took the first ferry to Havelock. After the 90 minute voyage, we made our first discovery about the place: each beach here is known by a unique number. Probably, the municipality is too laidback to name them! So, after disembarking at beach#1, we hired a two-wheeler (Rs 250/day) and rushed to beach#7 in Radhanagar – the ultimate place to be if you like tranquil surroundings. There were designated areas here for swimming and zones where the coral reefs made it ideal for snorkelling. Not for us, though, for we chose to sunbathe and sleep on the beach! And that is when we learnt our next lesson about Havelock: the last ferry leaves for Port Blair at 4 pm and unless you have reservation at a

ISLAND OF BLISS: (ABOVE) LAZE ON THE TRANQUIL BEACHES AT HAVELOCK ISLAND OR WATCH THE FISHERMEN RETURN WITH THEIR CATCH. (LEFT) IF YOU WANT A LITTLE ADVENTURE, GO SNORKELLING OR SCUBADIVING TO CHECK OUT THE WONDERFUL UNDERWATER FLORA AND FAUNA HERE.

hotel here for the night, watching the sunset (stunning as it is) from the ferry would be a wiser idea. My advice will be to stay back for a few days at Havelock, laze around, snorkel and watch the sun set as you sip beer and munch on some fresh fried fish. If you are a bit adventurous, try trekking and scubadiving as well. Kingfisher, Jet and IA operate daily flights to Port Blair from most metros. You can also take the passenger ship service from Chennai, Vizag or Kolkata. WHERE TO STAY: Budget: Cafe Del Mar (beach#3), Sunrise Beach Resort (beach#5) Luxury: Barefoot Resort (beach#7) FEBRUARY 2011

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The Essence of Life Artist Parthasarathy Pal presents an ode to ‘Mother’ in many forms. By Anoop Chugh

Parthasarthy Pal did his diploma in Art from The Shankar’s Academy of Art, New Delhi. That proved to be a turning point for this commerce graduate from Delhi University who till then pursued art merely as a hobby than a profession. In the last couple of years he has participated in various group shows across the country including IIAF, Pragati Maidan and at Lalit Kala Academy among others. His work is mostly acrylic on canvas and can be seen at a group show at Epicentre, Gurgaon on March 11.

CFO INDIA

PARTHASARTHY PAL HAS presented life through a woman’s soul in his latest exhibition titled Insight. The artist has tried to depict the overwhelming power in every sphere and genre of life, kindling the cult of creative imagination. Pal’s inspiration for ‘Insight’ has been ‘Mother’, the creator of life. The sheer ability of women to create has empowered the Delhi-based artist with an expression to weave his brush to capute ‘mother’ in many forms. In a male-driven world, his work is an attempt to capture the contribution of women. It’s an awakening of sorts as life swirls, we open the eyes of our souls and surrender to the magnificent grandeur of womankind. Pal’s work talks about how women teach us the exordium of existence from where the spirit of being flows. The paintings beautifully depict the insights of a mother, the creator. Looking at the paintings one can’t help but see a drop from heaven resting gently upon the earth beneath. The paintings talk of unprecedented melodies of kindness and love, cherished dreams of bravery and glory, and eternal waves of joy and peace. A painting simply titled ‘Mother’ shows how mankind has embraced the graceful woman and lifted her to the glorious pedestal of knowledge, wisdom and confidence. The many splendoured colours of the Mother come out clearly in this work of art. The artist has done true justice to womankind, by showing her in many forms where

FEBRUARY 2011

COMPASSIONATE SOUL: IN INSIGHT THE ARTIST HAS EXPLORED THE MANY QUALITIES THAT MAKE UP HUMANKIND

PAL PLAYS WITH COLOURS AND FORMS AS HE DEPICTS ‘MOTHER’ IN MANY MOODS

she waves humanity in her lustrous curls. Her womb is shown cradling the human race that tread the earth from where we grow. Her roots have explored deep to bring forth unrevealed beauty of love, knowledge and wisdom. The eternal saga of life begins with her, burgeons with her, flows around her and returns to her. She is projected as the unshackled melodious essence of life. In one of the untitled paintings the artist has depicted a lady, who is worried, morose and depressed as she is watched by a devil whenever she is there in the crwods. If a single hair is picked and left in the sea of hair, it can’t be identified; similarly she’s unable to identify the culprit who is camouflaging himself amongst many.

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The Boss is not your Friend APPALLED BY THE latest Radia

From Drinking to Serving Lattes Michael Gill’s story of riches to rags has many hidden lessons. By Anoop Chugh HEARD ENOUGH OF ragsto-riches stories? We believe this autobiography would be a routine breaker from the run-of-the-mill sagas. This is the story of Michael Gill who was sacked, 25 years into a highly successful career, when in his 50s. Then, after trying his hand at other stuff, Gill faced his most daunting challenge at 70 – re-evaluating his life and values. And no, there is no fairy tale ending here, for Gill then manages to get a job at Starbucks as a barista to regain peace of mind and self-respect. As a reader, you might be shocked at the lack of awareness a seasoned creative director (Gill worked with JWT) displays. At times, it seems as if the author is feigning ignorance to garner some sympathy as he sets foot in the real world post his sacking. Having said that, the story of a talented advertising professional, fired by a young executive whom he had once hired, because the latter now wanted a “young team”, touches a chord. The books also ends up being a great branding exercise for Starbucks. This has the makings of a Hollywood movie and we hear Tom Hanks has already bought the rights for it. See you then, Mr Gill, at a cinema close by.

Book: How Starbucks saved my life Author: Michael Gill Publisher: Harper Collins Price: Rs 250

revelations about your corporate heroes? Sick of the ‘nurturing talent like tiny plants’ spiel doled out by most management manuals? Wondering why they never acknowledge the ugly truth about success: that the trick is either to use your cunning and flattery to rise to the ranks of those who lay down the rules, or at least learn how to massage the egos of the rule makers? Here finally is a candid, hands-on guide to surviving in the Indian corporate world, complete with a questionnaire to help you identify the particular malevolent subspecies your boss can be classified under. .

Publisher: Hachette India Price: Rs 295 #-.)0$0)%)12)2

The tell-tale Brain THE BRAIN REMAINS a mystery to us. How can a three pound mass of jelly that we can hold in our palm, contemplate the meaning of infinity and even question its own place in the cosmos? Eminent neuroscientist V.S. Ramachandran takes us on a fascinating journey into the human brain, studying patients who exhibit bizarre symptoms to understand the functions of the normal brain.

Publisher: Random House Rs 499

Going Places THIS IS THE STORY OF a small town cricketers like MS Dhoni, Virender Sehwag, Harbhajan Singh, Suresh Raina, Munaf Patel and S. Sreesanth who made the leap to centre stage. Difficult as it is to become a top-flight cricketer in India, it is doubly so for those growing up in small towns. A perfect read as you brace up for the World Cup in India.

Publisher: Penguin Price: Rs 199 FEBRUARY 2011

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",-$./01234$ 05$/01236 I have been negotiating my way through the maze of information and sentiment around the global financial crisis to figure where I stand on it - who was to blame and who was the real victim? Could it be attributed to America’s finance industry as was being widely suggested? Was I justified in feeling that there was something different this time compared with other crises, for example, the dotcom bust or the South Asian crisis? In the early days of the Obama regime, as I watched him go after Wall Street and all big businesses, I wasn’t quite sure he was being fair. I was acutely aware of the fact that every American has benefited, hugely, over the years from what the financial services industry had facilitated. For that matter, so has the rest of the world. And it, therefore, seemed unfair to single out the bankers, fund managers and insurance companies for everything that resembled a crisis. I must admit, this was my trained mind – not my intuitive one which having grown up in socialist India – does find it hard to digest the ‘ultra-right’. However, when I met gelled 20-somethings who sounded affronted that they had been done out of their large (often undue) bonuses in a year when doom was on the horizon for a majority of others – something didn’t quite add up. They seemed to suggest that they had worked hard and that was reason enough to be compensated handsomely. Never mind everyone else! It smelled of a worldview that was bereft of context, proportion or accountability. Was there some merit in their expectations – despite my predilection? I have debated this for a while and then last week I saw the ‘Inside Job’ – a popular and award-winning documentary on what lies behind the meltdown of the last few years. Even more importantly, it deliberates at length on what might lie ahead. And the penny dropped. Many disasters are caused by personal dishonesty, greed and corruption. Often, they are the result of incompetence. Unlike them, the recent crisis was – quite shockingly - the result of high degrees of competence coupled with ‘institutional’ greed. 56

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The need to make more money, and the temptation to ignore what was going on year after year – is unprecedented in scale and overall impact. If the movie is to be believed, the people who participated in and/or caused the crisis in the first place – continue to decide and lead America’s economic destiny. The regulators included. Scary, at the very least. India’s current state of governance has similar characteristics. We have seen scams before, as we have corruption. But the ‘institutionalisation’ of these is a more recent phenomenon. Traditional checks and balances that came to the rescue of the system seem to have died a natural death. The magnitude and depth of the malaise can inspire corrective action or kick-in a sense of helplessness. We don’t have the luxury of the second response. And therefore corrective action it must be. Institutional greed or corruption has to be dealt with, with an institutional response. At home, we have remarkable examples – the Satyam case and the Sukhna land deal scam are both role models on how deep-rooted problems can be addressed. Whether Wall Street or closer home, it is time to demand and deliver a clean-up. Can we as professionals play a role? Non-participation is one way, is there any other?

Anuradha Das Mathur, Publisher CFO India