CFO India - May 2011 by Bhupinder Sharma

IS YOUR EMERGINGMARKET STRATEGY LOCAL ENOUGH? P. 38

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&29(5 6725< ,1 35$&7,&( 26 EVEN THE LEADER NEEDS A BOOST - ESPECIALLY NOW Financial executives do not always assess their level of self-motivation on a daily basis. But now might be a good time to take stock and find out what truly motivates them.

,16,*+7 38 IS YOUR EMERGING MARKET STRATEGY LOCAL ENOUGH? The diversity of China, India and Brazil defy any onesize-fits-all approach. But by targeting city clusters within them, companies can seize growth opportunities.

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Yogesh Dhingra, COO and Finance Director of Blue Dart India talks about the reasons for the company’s success, the ‘firsts’ it has achieved and about his own ups and downs in life.

LeasePlan, the Indian arm of the Dutch car leasing firm, was in troubled waters when CFO Ajay Narain came in and stepped up a gear, restructuring the financial model of the company.

10 SUNAM SARKAR Inflationary trends, a slowdown in demand and his golf handicap keep the CFO of Apollo Tyres awake at night. P. 38

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/($'(5·6 :25/' 43 LESSONS FROM AN ELECTION There are many leadership lessons to be learnt from the results of the general elections in Singapore this year, says leadership and negotiation coach David Lim.

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34 A NEW LEASE OF LIFE

IS YOUR EMERGINGMARKET STRATEGY ENOUGH? LOCAL

The rules of the game have changed and so has the CFO’s role. From being ‘tightwads’ they have become saviours of sinking ships. We spoke to four CFOs who led financial turnarounds, to understand how they did it.

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Once grossly the finance undervalued, company’s team today are the considere CFO and fortunes. d critical of finance-led Here turnarounare four inspiring to a stories ds from India Inc. Pg 12

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Empronc Inside Front Cover | Financial Executive 02 | Sodexo Inside Back Cover | ICICI Bank Back Cover

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MANAGING DIRECTOR: Dr. Pramath Raj Sinha

Changing The Game A FEW DAYS BACK I met the CFO of a well-known Indian IT firm. We discussed how resilient Indian companies were and how our success stories were so grossly under-reported. We spoke of companies that faced seemingly insurmountable challenges and emerged out of them, bruised but fitter and stronger. Since CFO India was planning a cover story on the increasingly important and over-arching role that the finance function is playing in business today, I asked him: “Can you recall any examples of finance-led turnarounds in India in recent years?” He looked at me quizzically for a few seconds and replied: “Are there any other kinds?” Even if that was a bit of an exaggeration, since great marketing strategies, bold HR decisions and operational changes, too, have often seen companies emerge out of the red, it was, nonetheless, a very important statement, confirming just how powerful a role the CFO plays in any organisation today. There are numerous instances from India when the CFO and the finance team played a crucial, life-saving role for their organisation. So we asked those with far greater domain knowledge than ours – bankers, CEOs and corporate analysts – to come up with some of the best examples of such finance-led turnarounds. We then spent the next few weeks tracking down these ‘heroes’, the men and women who headed the finance function of the organisations during the ‘crisis years’. Mr B.R Jaju was CFO of Crompton Greaves when the company saw its market cap plunge badly in 2001. Now CFO of Welspun, he remembers every detail of how the challenge was met. At the other end of the spectrum, Mr Koushik Chatterjee, the young and multiple award winning CFO of Tata Steel, is predictably a bit more cautious. After all, the turnaround of Tata Steel, post the acquisition of Corus, is still ‘work in progress’, even though the rise in profit margins for the steel major has been significant in the past two quarters. I hope you find the four case studies that we have written about this month, not just good reads but also as a source of inspiration. Enjoy reading the issue.

EDITORIAL EDITOR: Anuradha Das Mathur MANAGING EDITOR: Dhiman Chattopadhyay 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, Vinod Shinde & 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 ASSISTANT BRAND MANAGER: Nisha Anand SENIOR MANAGER: Shreya Pilani ASSOCIATE: Deepika Sharma SALES & MARKETING 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 Bungalow No. 725, Sector - 1, Shirvane, Nerul, Navi Mumbai - 400706 Printed at Silver Point Press Pvt Ltd., A-403, TTC Ind. Area, Near Anthony Motors, Mahape, Navi Mumbai-400701, District Thane,

SUBSCRIBER SERVICES: Call +91-120-4010999 VISIT CFO INDIA’S WEBSITE www.cfo-india.in

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CFO INDIA

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Crisp and Relevant

I recently picked up an issue of CFO India. I really liked what I saw and read. I found the articles crisp, racy, good reading and relevant. I would like to subscribe to the magazine and would definitely enjoy contributing to it. —Joydeep Nag, CFO, GE Healthcare, Bangalore

05.11 TIMELY COVER STORY I enjoyed reading the cover story in your April issue (Infrastructure in India: Boom Time Ahead?). I think it was an extremely well timed piece. Most of the articles were relevant and discussed important issues. It would be good to have more such features on the financial challenges before different sectors, and opportunities that await India Inc. —Shirish Navlekar, CEO, Ariston IET Infrastructure Fund, New Delhi

SUBSCRIPTION QUERY I would like to be more involved with the CFO community you have created through the magazine and the institute. Could you also include me in your subscription list. I would love to receive regular issues of CFO India. —Gaurav Dang, CFO, ExxonMobil Lubricants Private Limited, Gurgaon

NOT GETTING REGULAR ISSUES I enjoy reading CFO India online, but unfortunately, I have not been receiving the hard copy of the magazine since February 2011. In fact, I had written to the publishers earlier, to send a copy to

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Your voice can make a change: Share your view point on what’s happening in the community and your feedback on the magazine at editor@cfo-india.in

my office address. It would be great if you could look into the matter. — Sunjoy Podaar, Head Finance, Ultra Tech Cement, Mumbai

MORE CASE STUDIES I think the ‘Case Study’ section in your magazine is the most popular one. One gets to learn about how others dealt with a certain crisis and the lessons they learnt. This genuinely helps many others who have not been in similar situations before, but could well be one day, to get a fair idea of what to expect and how to deal with it. Also it is always great to read inspiring stories of success, victory over adversity, where the finance team played a key role. You should have more such articles in CFO India. —Roshan Jahgirdar, Sr General Manager, Finance, Royal Plastics & Metals, Kolkata

LACKING ARTICLES ON TECHNOLOGY I have been reading CFO India for a while and I have noticed that you have very few articles on technological innovations or tech tools that CFOs or the finance function can use. It would be good if you could carry articles by CIOs or by domain experts on technology that CFOs must know about, or on technological solutions and how to optimise their potential. This will be of immense value to a large number of finance executives who are extremely good at their job but not necessarily technologically aware. —M Kumaran, Head of Accounts & Finance, Silicon Software, Pune

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Firms Hiring Social Media Spies

PHOTOS.COM

IF YOU THINK your boss will never find those revealing party pictures because you used a fake name, think again. Companies are hiring social media spies to scour social and other sites, using software that cross-checks email addresses and other electronic identification codes. They are looking for racy images, racist remarks or other offensive behaviour of job appli6

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cants and current employees, reports the New York Times. Many companies check the criminal and credit backgrounds of their applicants, so it is a logical next step to investigate someone’s online presence, says Max Drucker, CEO of Social Intelligence Corp., a web-checking company he launched last year in Santa Barbara, California, USA. Some clients are also using the service to monitor their existing workforces, Drucker says. They are looking for disclosures of confidential company information by employees or disparaging comments about the company in public forums. He declined to disclose how many companies have signed up to conduct the searches, which cost $20-50 ( 8702,220) each. But should employers be looking at these images? What if they reveal information about an applicant’s race, religion, marital status or other details that could launch a civil rights claim if they swayed hiring decisions? “I think it is really important to find out as much as you can about the CEO and other critical positions,” says David Barron, an employment lawyer who represents the management at the law firm Epstein, Becker, Green, Wickliff & Hall in Houston. But for lower-level retail or office jobs? It may not be worth the risk of facing a civil rights claim, Barron says.

WHAT’S AROUND ZONE CFObook .............................................................. Pg 08 Jargon Decoded: FAT ........................................... Pg 08 Billionaire Rulers .................................................Pg 09 A Green Porsche ..................................................Pg 09

THE CFO POLL RESULT

Do you think IFRS will enhance the financial efficiency of your organisation?

17% No 13% May be

70% Yes

CURRENT POLL QUESTION

Will rising inflation that is hampering growth be controlled by the end of 2011? 0123(415(62(5557891:4;2:2<23781=>?1@@

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Hunting for Mona Lisa

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PHOTOS.COM

64 Lakh Users 'Port' Numbers OVER 64.23 LAKH Indian mobile phone users have opted for mobile number portability (MNP). The figure comes from official data till the end of March 2011, released by the Telecom Regulatory Authority of India (TRAI). “Mobile number portability requests have increased from 38.33 lakh subscribers at the end of February 2011 to 64.23 lakh subscribers at the end of March 2011,” the TRAI statement mentioned. The service was implemented across the country from January 20, 2011. To opt for MNP, a customer has to pay a certain amount to the new operator for ‘porting’ the number and remain with the new operator for at least three months. The customer has to send an SMS from the existing phone to 1900. Based on this, a unique porting code is sent by the existing provider. The application then has to be filed with the new service provider, mentioning the code for transferring the connection.

A TEAM OF ARCHAEOLOGISTS, armed with a special radar device, have started digging inside a dilapidated convent in Florence where they believe the body of the woman who modelled for Da Vinci back in the 16th century is buried. The real Mona Lisa, art historians say, was Lisa Gherardini, the wife of a rich Florentine merchant named Francesco del Giocondo, who is thought to have commissioned the portrait, although there is no definitive proof. The researchers say that if they can find her skull, they will be able to reconstruct her face and compare it with the painting. Using radar equipment that can identify objects underground, scientists are scanning the church floor to pinpoint areas where they may start digging for Gherardini’s remains. “We have a document confirming the burial of Gherardini in 1542 here in the convent,” said Silvano Vinceti, head of the National Committee for the Promotion of Historic and Cultural Heritage. Researchers say Gherardini spent the last years of her life at the convent, looked after by her two daughters who were nuns, and was buried there. “To be sure we have to find the DNA in her bones, and once we have found that, we can compare it with the DNA of her children who are buried at the Santissima Annunziata convent,” said Francesco Mallegni, a palaeoanthropologist. Some of ‘Mona Lisa’s’ descendants however, have already expressed scepticism about the project. M AY 2 0 1 1

CFO INDIA

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Share Rajesh Pasari changed his profile picture May 19 at 10.30 pm · Comment · Like

!"#$%&'()(&*+&,#-.-/*&0&1234& H,$D#C&-( 5-*"678*9 Rajesh Pasari is enjoying the challenges of leading the finance function in a semi start-up situation :-$&'((;&0&2-7&'()(&0&123& Zodiac: Capricorn April 17 at 9.05 pm· 2 people Commented · 1 person likes this <+*%=8&1%-68$"=.&>&!8/8/?& Political Views: Liberal '((@A'((;&0&&5"*8+/"=& "#$% 1+66-#$8"=&!"/"?-#4&BC-/$-#D.& Rajesh Pasari believes that the CFO’s job has undergone a sea change in the last five years E-*"8= March 2010 to Present – CFO, April 012 at 11.00 pm · 5 people commented · Like Netambit )FFF&0&'((@&0&B#&!"/"?-#4& Dec 2008-Feb 2010 – CFO BothB-"?#"6 li Chemicals & Mining Manager,

,GI*&'E#C B.Com – St Xavier’s, Calcutta CA – Institute of Chartered Accountants of India Member - Institute of Cost & Works Accountants of India

I Read...

The Road Ahead by Bill Gates April 16 at 6.26pm · Comment · 4 people Like this

I Listen... Light classical music and old Hindi film songs April 14 at 7:14pm · Comment · 1 person likes this RECENT ACTIVITY Rajesh Pasari likes St Xavier's School Calcutta and 2 others

Sourav Ganguly, CFO India April 17, 8.55 pm · 2 Comments · 7 people Like this

D*E,C*,

Wisdom Teeth May Save Lives FOR DECADES, wisdom teeth were considered nothing more than a part of a painful rite of passage for many teens. But now, researchers are re-evaluating their function. Recent medical research shows that the soft pulp inside wisdom teeth contains a great store of stem cells, and it may soon be possible to store teeth after extraction and save them for later use, reports Crest-Pro, an American online medical journal. Studies have already shown promise that these stem cells found in wisdom teeth can regenerate damaged bones and cardiac muscle. “It is exciting, but there are still a lot of questions,” says T. Bob Davis, spokesman for the Academy of General Dentistry, USA. “We are just at the beginning of the curve.” 8

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THE USAGE Do not watch your weight, but watch your back, if someone tells you, “you failed the FAT”. It could mean a bad day at work.

PHOTOS.COM

Becton Dickinson India 2006-2008 – National Commercial Manager, Spencer’s Retail 1999 - 2006 – Sr Manager, Seagram

THE DEFINITION A little less offensive than it sounds, it stands for a process known as Final Acceptance Testing. This is always costly and time consuming. This is also when you find out whether your product actually works and meets all of its QC (Quality Criteria).

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BILLIONAIRE RULERS TOGETHER, THEY CAN easily set up or fund what could (theoretically) become one of India’s largest corporate entities! Swiss authorities have announced that banks in their country had located almost $1 billion in assets of Libyan leader Muammar Gaddafi and the former presidents of Egypt and Tunisia. Financial regulators in Switzerland have identified assets worth almost $416 million that belong to the embattled Libyan leader; $474 million that is linked to former Egyptian President Hosni Mubarak; and $69 million

belonging to Tunisia’s fallen leader Zine el-Abidine Ben Ali. The announcement was made by Swiss President and Foreign Minister Micheline Calmy-Rey at a diplomatic meeting in the Tunisian capital Tunis and confirmed for the Washington Post by a Swiss foreign ministry spokesman. Switzerland, long considered a haven for stolen assets of autocrats, has worked to combat that reputation and last year passed an aggressive new law to give the government power to seize and repatriate stolen assets.

9:;66#!9 Less Left to Save The household savings rate of an average employee in metros has come down by 45 percent in the last six years due to an exorbitant increase in prices of essential commodities, fuel and education, claims an Assocham survey. A majority of the 5,000 employees who participated in the survey said that they were falling behind financially and their standard of living had deteriorated. In the last six years, the salary of the common man has gone up by 30 per cent but discretionary spending has shrunk by 35 per cent, PTI reported, quoting the survey.

Another Universe &I'#

A Green Porsche FINALLY, A PORSCHE that is environment friendly! Porsche has added diesel power to the Panamera 4-door GT range for the first time – with the new car boasting a remarkable economy figure of 43.5mpg. This makes it the most fuel-efficient new Porsche on sale. The new Panamera returns its impressive fuel economy thanks to a 3.0-litre V6 turbo diesel. It also emits 172g/km CO2. And if that is not green and fuelefficient enough, Porsche lets you go one step further: thanks to an optional low-rolling resistance tyre kit, economy can be pushed up to 44.8mpg, and CO2 emissions cut to 167g/km. That is identical fuel economy to a 1.4-litre Fiat 500. The total range from such amazing economy, says Porsche, is in excess of 1200 km: making it capable of taking four passengers in sporting comfort from Mumbai to Mysore without refuelling. The Porsche Panamera diesel goes on sale in the UK this August, with list prices starting at £62,134 (approximately 52 lakhs).

Scientists have created the largest-ever three-dimensional map of a distant universe using the light of the brightest objects in the cosmos. Scientists used light from 14,000 quasars, super massive black holes at the centres of galaxies billions of light years away, with the third Sloan Digital Sky Survey (SDSS-III) to construct the 3D map. “This is a potentially revolutionary technique for mapping the very distant universe. We are paving the way for future experiments like BigBOSS to follow suit,” said Anze Slosar of Brookhaven National Laboratory. BigBOSS is a proposed survey that will find precise locations for 20 million galaxies and quasars and go beyond BOSS to encompass 10 times the volume of the finished BOSS map.

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CFO INDIA

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PREVIOUS JOB: General Manager, Xerox PASSION: Playing golf

WHILE COUNTRIES AROUND THE world battle the challenge of no or low growth, India faces a different set of challenges thrown up because of high growth. Inflation, largely driven by supply side constraints, leads to a hardening of interest rates as the Reserve Bank attempts to cool growth. And the cycle becomes more and more vicious with every round of cost escalation. So demand too has its problems. In an industry where raw materials account for 70 per cent of revenues, the current commodity cycle is particularly crippling. In such a scenario there is only so much that one can look at for improving internal efficiencies and managing costs. The vast majority of input cost is driven by trends of global commodities like crude, steel and rubber which all have been heading northward of late, driven largely by robust growth in the Chinese and Indian economies. 10

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Competition from global players, inflationary pressures and a slowdown in demand have been worrying the Chief Financial Officer of Apollo Tyres these days. So is his current golf handicap.

IMPENDING SLOWDOWN If these were not enough, now comes the outlook of a slowdown in the overall economic growth. So most C-Suite executives in general, and CFOs in particular, now stare at the spectre of galloping inflation coupled with a demand slowdown. In many senses this will be similar to the months immediately after the collapse of Lehman Brothers in 2008. One can only hope that there will be no single

“One can only hope that there will be no single trigger this time, but a gradual cyclical change that managers can prepare for.”

trigger this time, but a gradual cyclical change that managers can plan towards and prepare for. The first signs are already visible, with the Chinese government determined to rein in the spiralling growth. Their monetary actions signal a clear shift in policy orientation. In my own industry the recently released industrial policy of the Chinese government clearly signals a shift away from the old school ‘scale at any cost’ mantra towards higher quality and higher technology facilities. The effect on tyre production has been almost immediate, with a rumoured 20 per cent of factories in China already shutting down or in the process of doing so.

POSSIBLE JOB CUTS? In India too the RBI has already stated that it expects growth rate to become moderate in fiscal 2011-12, and most economic indicators to slow down. How this will impact companies that

JITEN GANDHI

Facts & Trivia EDUCATION: La Martiniere for Boys, B. Com, St Xavier’s College, Kolkata MA in Management – Lancaster University

SUNAM SARKAR

have built up large capacities is going to be interesting to watch. From todayâ&#x20AC;&#x2122;s over-heated job market, and its consequent challenges of attrition, retention and wage inflation, are we looking at a reverse trend of large scale lay-offs staring companies in the face? Intensifying competition from global players, inflationary pressures,

demand slowdown and political inflexibility all appear to be on the next two to three-year horizon. Those companies who start preparing for these challenges today and have a clear strategic focus on addressing each of these will be the ones capitalising on the next growth phase. Great leaders will be burning midnight oil striving to posi-

tion their companies on solid ground and develop capabilities for the future. Finally, on a personal note, I shall continue to be kept awake by the steadfast refusal of my golf handicap to come down any further. It seems to have taken deep root and shows no signs of any desire to follow economic downtrend.

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)#*& !"#$%&'( Once grossly undervalued, the CFO and the finance team today are considered critical to a companyâ&#x20AC;&#x2122;s fortunes. Here are four inspiring stories of finance-led turnarounds from India Inc. BY BENNETT VOYLES AND DHIMAN CHATTOPADHYAY

CFO INDIA

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IMAGING BY PRASANTH TR

hey know their numbers, keep a tight leash on finances and help the CEO run the company. What is less talked about though, is their role in a financial turnaround. It is to them that the CEO and the board turn when in a tight spot. Take the case of a 3000 crore company that faced potential bankruptcy in 2004 after a 288 crore loss. It turned to its finance director as a last resort. A year later, following a massive Corporate Debt Restructuring plan and a series of bold steps, the firm reported a profit of 42 crore. Or consider the story of a large Mumbai-based manufacturing firm that saw its finance team swing into action after its market cap plunged from $1 billion ( 4500 crore) to $20 million ( 90 crore). The CFO took some hard calls, reduced expenditure by moving factories out of Mumbai, provided golden handshakes to some staff and closed loss-making units. That money was used to acquire new businesses. Two years later, the company returned a profit of $1 million ( 4.5 crore). Game changers? You bet! There was a time when the CFO and finance executives in general were considered loners, number crunchers who preferred to stay in their own world, did not communicate with the rest or bother to polish their knowledge about other areas of business. The marketing whiz who ‘understood the pulse of the client’ or the factory manager who knew every detail of the ‘product’, smirked at the ‘bean counters’. After all, these were the naysayers whose only job was to manage accounts, ensure budgets were in place and shoot down any innovative ideas for fear of loosening the purse strings. Today, the most talked-about difference in the

CFO’s role is the transition from being the company book-keeper to becoming a ‘partner to the CEO’. But, as example after example from India Inc. shows, the biggest change is the realisation that a good finance team and a great CFO at the helm brings immense value to a company. The two economic slowdowns in recent memory – the relatively less crippling one of 2001 and the global crisis of 2008-09 – brought out these benefits clearly. In several cases, companies facing a liquidity crunch, a huge debt or a possible shut down, survived and grew only because of amazing finance-led turnarounds. At a time when companies and investors are flocking for a share in the pie of the ‘India story’ and curious management students from Ivy League universities are eager to imbibe lessons from our success, there are some within the country who would rather focus on the negatives, writing or talking about frauds, stories of failures or errors of judgement. Our view is simple: Let us celebrate success instead. India Inc has, over the past decade, witnessed some remarkable examples of financial turnarounds where the CFO and the finance team have played an all-important role. These stories need to be told to a larger audience. In the following pages, read four such inspiring stories where the finance team under the leadership of the CFO, played an invaluable role in taking their companies out of the red. Certain sterling qualities that they possessed helped the CFOs in each of these cases. They were persistent, dared to think out of the box, took risks and communicated all important decisions to key stakeholders. Above all, they believed they could win. As B. R. Jaju, CFO of Crompton Greaves when it plunged into a crisis a few years back, says, “You have to have absolute commitment and abiding passion. You have to believe you can do it.” M AY 2 0 1 1

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.#/0 12'3* 4"& ,&#The market cap of Mumbai-based Crompton Greaves plunged from $1 billion to $20 million. That was when B. R. Jaju took over as CFO and, with his colleagues, turned things around.

ompanies tend to get into serious trouble, much like the way the character in Ernest Hemingway’s The Sun Also Rises said when he went bankrupt – “Two ways - gradually, then suddenly.” At Crompton Greaves, years of losses and failed strategies finally led to a sudden crisis in 2000-01. In 2001, when B.R. Jaju joined the firm as its CFO, things did not look good. Years of high costs and disappointing sales were leading towards an inevitable not-so-grand finale. As the stocks fell on what at one point had been one

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of India’s leading businesses, the market cap plunged from around $1 billion ( 4500 crore) to $20 million ( 90 crore). “The employees’ morale was low, customers’ confidence was low. The business outlook was also very weak. Things were not very focused and management and leadership synergy was missing,” Jaju recalls. Sales were so weak that the company could not even repay its loans regularly. Other borrowing was being done, but at very high interest. Structurally too, the company had some serious problems. The previous year, Crompton Greaves had invested heavily in new facilities ,but

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SNAPSHOT

JITEN GANDHI

!5678+691 )5:;<:= demand had not met expectations. Fifty percent of the company’s net worth, built over the past 50 years, had been destroyed in just a year. To cut a long story short, over the next two years, Jaju, who in addition to being an experienced finance hand is also an amateur magician, helped make all those problems disappear. How did he and his team work magic? “A lot of things had to be done,” says Jaju, looking back at the turnaround he executed with CEO Sudhir Mohan Trehan. The first and foremost was reducing excessive costs. The team began by relocating its Mumbai plants 300km out of Mumbai, which he describes as a move from “high-cost, low-productivity areas to lower -cost, higher-productivity areas.” Next, Jaju and Trehan had to reduce a bloated workforce of 11,000 to 5,000, which it did through golden handshakes and Voluntary Retirement Schemes. More trimming followed, including cutbacks in travel, exhibitions and high customer discounts. The team put a more disciplined inventory structure in place as well, which reduced the level of inventory from $60 million to $30 milion. The next item on the agenda was to generate better Returns on Investment (RoI) on the

Company’s market cap falls from $1 billion to $ 20 million in 2001. Jaju and top management decide to cut costs, relocate plants 300km out of Mumbai. Workforce is reduced from 11,000 to 5,000 through golden handshakes. Disciplined inventory structure reduces inventory from $60 million to $30 milion. Gradually 15 losing, non-core businesses are closed. These lands are sold to pay off debt and support new acquisitions. Two years later company reports profits of $1 million.

books. “A lot of our businesses were overdependent on government and semi-government bodies who were paying for the goods after three months to six months, sometimes longer,” he recalls. “So we changed the business model. Our sales strategy now was to concentrate on companies that had a cash surplus or good liquidity,” he says. Soon, the receivables payment cycle fell from 120 days to less than 20 days. Last on the to-do list: Gradually closing 15 lossmaking, non-core businesses and joint ventures. Many of these stood on valuable land which the company sold to pay off debt and support new programmes, such as an M&A war chest, in order to pursue an acquisition strategy designed to position the company not as an India-focused fan maker, but as a major global developer not only of fans but transformers, switchgear, circuit breakers and more. Two years later, the company turned a profit of $1 million ( 4.5 crore). The next year, $10 million. Eight years later, it is generating a $160 million annual profit and its market cap has risen from $20 million to $3 billion. One measure of his success came in the form of recognition from peers and the media – first for his well-executed defensive game, and later for an equally spirited offense as he pursued a number of global acquisitions. In all, Jaju won at least three ‘CFO of the year’ awards from different business publications during those few years. What does it take to be the financial architect of a successful turnaround? Beyond a solid strategy, says Jaju, now director and CFO at Welspun, you need a close working relationship with all business heads, particularly the CEO. Plus, there are two other special ingredients: “You have to have absolute commitment and be passionate. You have to believe you can do it,” Jaju concludes. M AY 2 0 1 1

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>?44?$% #$ 1;?' 83/0&4 HPCL’s Director Finance Bhaswar Mukherjee galvanised his team when volatility in crude prices saw the Fortune 500 company suffer heavy losses.

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MUKHERJEE,

HPCL

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ost of the time, big companies are like big jets – the ride might be bumpy, but they usually get where they are going, and even if something blows out, a second engine is there to keep the machine aloft. Only very occasionally will something in the atmosphere change without warning, the passengers’ coffee cups hit the ceiling, and the pilots start frantically flipping switches. That was sort of the situation in which Bhaswar Mukherjee, the Finance Director of Hindustan Petroleum Corporation (HPCL), found himself in the last quarter of 2008, when a freak spike in the price of oil threw the price of a barrel all the way up to $147 in July and down to $34 in December – the worst situation of all for the company, Mukherjee says, because volatility is typically much harder for the company to deal with than a high or low price itself. In the private sector, major fuel buyers typically hedge themselves against large price swings if they cannot pass the costs straight through to their customers. But as a state-owned company, HPCL had always been reimbursed in full by the government for its losses. But in 2008, the government balked, and decided to pay only a portion of the difference – in a year when its sales of petrol and diesel were growing by double-digits. If the government had changed the price-stability rules, the situation might not have been so serious, but the regulators kept most of the price restrictions. Forced by government regulation to sell many of its oil and gas products for less than the market rate, and at higher volumes than it normally would, in order to make up for shortfalls at two other state oil companies (IOC and BPCL), HPCL found itself in a bind. To make matters worse, government reimbursement was delayed that year, leading to a much greater need for working capital. By the

SNAPSHOT >8!@1 HPCL fails to use hedging as an option. Pays the price when the government, which always reimburses them in full for losses, pays only a portion of the difference in 2008. By third quarter of 2008, HPCL faces a loss of $1 billion. Finally the government gives HPCL a special subsidy. Mukherjee ensures greater operational efficiencies. Executives review company’s Balanced Score Card anew. A year later, the collective efforts reap benefits, company reports profit again.

third quarter of 2008, the state-owned oil distributor faced a loss of $1 billion. The amount might not sound that much, given HPCL is a global Fortune 500 company with $27 billion in turnover, but for a company operating in an industry where 95 per cent of costs is for the oil it buys, it is a fair amount to dig up. Finally, in the last quarter, the company’s fortunes reversed, and the company ended $350 million ( 1575 Crore) in the black. How? The first was what might be called a conversion of a good karma reserve to cash: the government gave HPCL a special subsidy above the same level of reimbursements it gave IOC and BPCL. To the media, government officials described the payment as ‘compensation for the damage the company had suffered’ in keeping fuel deliveries steady throughout the year. The finance team had stepped up a gear by now and, as Mukherjee recalls, it “took a hard look at the entire system,” looking for greater operational efficiencies. Ultimately, perhaps more important in the long run than the immediate results of the costcutting effort was making the rest of the company more aware of the finance department’s point of view. To begin with, executives reviewed the company’s Balanced Score Card. Mukherjee, a fan of the system, says it helps focus the company on creating not just greater sales volumes but more profitable sales. Mukherjee also embedded more finance people around the enterprise. “We had to make sure that finance did not work as a silo but that team members became actively involved in different areas of the organisation,” he says. The upshot: More awareness that profit is not necessarily a function of volume. “Before the crisis, there was not enough appreciation within the organisation about the profitability of the projects. It was assumed if they reached volume, profit would come automatically. The crisis changed that forever,” he concludes. M AY 2 0 1 1

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ought for $12 billion ( 54,000 crore) in 2007 after a bruising bidding war that forced the company to raise its initial bid by 33 per cent, the acquisition of AngloDutch steel giant Corus made Tata Steel CFO Koushik Chatterjee a hero of sorts. The young executive had pulled off India’s biggest foreign merger ever, catapulting the company from the 56th to 5th largest steel company in the world. Tata Steel is, by most measures, one of the most profitable steel companies in the world. But some analysts worried that in engineering the leveraged buy-out of the $18 billion company, Tata Steel (valued at just under $5 billion or 22,500 crore ) had bitten off more than it could chew. The 608-British pence-a-share deal was 18

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well above what Mittal Steel had paid for Arcelor – seven times EBITDA compared to Mittal’s 4.6 times EBITDA. It also plunged Tata Steel into massive debt, though Chatterjee took care to keep the loans well away from Tata Steel’s bond rating by raising the $6.17 billion the company borrowed for the acquisition through a new subsidiary of Corus, Tata Steel UK. Making matters much more precarious still, however, was the Western financial crisis of 2008 and 2009, which slashed global steel demand, and eventually drew Corus mills’ utilisation rate all the way down to 53 per cent. In March 2009, Moody’s Investors Service downgraded Tata’s stock to Ba2, two levels below investment grade. Moody’s cited the weakness of the steel market and the extent of the company’s debt as two factors leading to the downgrade.

MEXI XAVIER

The acquisition of the British steel giant Corus in 2007 saw Tata Steel’s fortunes nosedive. CFO Koushik Chatterjee and his team have however, managed to effect a significant turnaround in 2010.

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SNAPSHOT +;+;1=+::@

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Tata Steel acquires British steelmakers Corus for $12 billion. It plunges Tata Steel into massive debt. In March 2009, Moody’s Investors Service downgrades the company’s stock to two levels below investment grade. Chatterjee ensures the firm keeps $1 billion in liquidity on the books. In early 2010, he refinances the Corus debt into a five-year term loan of £1.8 billion. Utilisation capacity of Corus increases to 80 per cent in 2010. After losses of 4,526.06 crore for 2009, the companyturns in a 4707.32 crore profit for the last quarter of 2010. Returns from Europe and UK boost overall Tata Steel profits this year.

Two years later, the Corus acquisition is still a work in progress, but its prospects are looking considerably brighter following a bounce-back in world steel demand. After suffering a net loss of 4,526.06 crore for the last nine months of 2009, the company reported 4707.32 crore in net profit for the last three months of 2010. With more money coming in, Chatterjee has worked hard to strengthen the company’s financial position. These days, he keeps $1+ billion in liquidity on the books. Last September, he also refinanced the Corus debt into a five-year term loan of about £1.8 billion (approximately Rs 16,000 crore) and a £1 billion (approximately 8300 crore), seven-year term loan. “Returns from Europe and UK have been very good this quarter. In fact it has helped boost our profits. More importantly, the average utilisation of capacity in Corus will be 80 per cent from this quarter, a significant increase,” says Chatterjee. He sees a potential increase in EBITDA going forward. “The hedges are fixed and Corus is steadily giving us greater returns,” he adds. Once the full restructuring is complete later this year, he also believes there will be a positive impact on staff costs. Market analysis firm Standard & Poors in fact liked the way Chatterjee went about his business and inked a 13-bank deal in September 2010. “The new bank loan lengthens the repayment schedule and will enable TSUK to significantly reduce its repayment obligations for the next four to five years,” S&P analysts wrote in October 2010. Looking ahead, Tata’s exposure to input volatility may be changing. The company is working harder now on fixing more of its costs through long-term contracts and hedging, according to its 2009-2010 annual report. The report also notes that a feasibility study has been completed for a 502-million ton coal field in Mozambique, one of the largest coal deposits outside Australia, in which the company has a major share. But Chatterjee and his team’s real bragging rights comes from the fact that Corus has done remarkably well over the last two quarters and helped Tata Steel show a significant turnaround in its numbers. “Tata Steel UK has started to deliver,” says Chatterjee. M AY 2 0 1 1

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SEN, FORMER CFO, GSFC

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hen Managing Director A K Luke, company secretary V D Nanavaty and Finance Director Gautam Sen sat down to address the Board and key shareholders of the 3000 crore Gujarat State Fertilisers and Chemicals (GSFC) in April 2003, they couldn’t possibly have been smiling. GSFC, (where the government had a 38 per cent stake) was staring down the barrel following a massive 228 crore loss – the largest in its history. A profit making, listed firm, it had suffered a 88 crore loss the previous year. But this time, the directors knew that unless drastic steps were taken, many of its naphtha and gas producing factories would be shut and jobs cut. Worse, they feared they would have to file for bankruptcy. The situation was so bleak that the Board’s statement to stakeholders read: “In view of the losses, your directors are unable to recommend any dividend for the year under report.” It added that the Government of Gujarat had declared the company as a relief undertaking under The Bombay Relief Undertaking Act. “In the absence of corrective measures at this critical juncture by all the stakeholders, the cash-flow deficit may severely impact the sustained viability of the operations of the company,” the statement warned. Luke had just joined as the new MD and many of the directors, both government nominees as independent members, were relatively new. Finance Director Gautam Sen therefore realised, that in many ways, the onus was on him and the finance team to somehow, miraculously, turn things around. First therefore, the management decided to go for a comprehensive Corporate Debt Restructuring (CDR) Plan. “We worked through nights to prepare and submit a detailed plan to the CDR Cell of the RBI,” recalls Sen, now Director Finance at the Rashtriya Chemicals and Fertilisers Ltd.

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GSFC reports a 228 crore loss in 200304, the largest in its history. Finance team prepares comprehensive Corporate Debt Restructuring (CDR) plan. Interest on unsecured loans reduced, payments for secured loans reschdeuled. Expensive naphtha replaced with gas, deals struck and pipelines laid. Foreign bankers restructure loan. Company shows 42 crore profit in 2004-05.

“The company’s loan portfolio at the time was 1470 crore against a share cap of 79 crore. More importantly, a majority of GSFC plants were mixed feed – 50 per cent naphtha and 50 per cent gas. “The trouble was that the price of naphtha was six times higher than gas. We just didn’t have the money to run these plants if we had to buy more naphtha,” Sen says. The final nail in the coffin was when Sen realised that if things went the same way for another two months, plants would have to be shut. “Overseas supplies were hit and we also defaulted with our main German bankers,” he says. Luckily by mid-2003 the CDR operation had begun. “With the RBI stamp of approval in our pocket, we developed a package for loan restructuring,” says Sen. To begin with GSFC sought a 50 per cent waiver on the principal amount on all unsecured loans and a total waiver on interest for 2003-04. “Lenders realised this was the only way they would get back their money, so they agreed,” he smiles. All other loan repayments were rescheduled as well. Deals were struck with GAIL and Gujarat Gas to buy additional gas from them to replace the more expensive Naphtha. Pipelines were put in place and the gas started flowing – all within months. “I also visited our bankers in Germany and convinced them to restructure the unsecured part of the loan,” says Sen. Exactly a year later when the Board met for the next annual meeting, the smiles were back. From a loss of 288 crores in the previous fiscal, GSFC reported a 42 crore profit for the 2004-’05 financial year. “As a team, we achieved a mini miracle. It remains my biggest high till date,” he concludes. Sen left the following year, but his legacy remains. GSFC continues to grow and has never reported profits of less than 350 crores in any of the subsequent years. Without doubt this remains one of the finest examples of a finance-led turnaround in the recent history of India Inc.

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Faster, Higher,

It maybe the undisputed market leader in India, but Yogesh Dhingra, COO and Finance Director, Blue Dart, is determined to make the firm a financial powerhouse and bring in the latest technology to make its service faster and better in the days to come. DHIMAN CHATTOPADHYAY

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WHEN YOGESH DHINGRA, fresh from a sixyear stint at PriceWaterhouseCoopers, joined Blue Dart in its Delhi office back in 1992, few had heard of this small courier company, generating less than 150 cores in revenue. What happened in the following two decades is the stuff novels are made of. And as the man who led the finance function for 12 of those years, first as the CFO and now as the COO and Director-Finance, Dhingra deserves at least some of the credit for helping Blue Dart become a 1000 crore giant. Blue Dart, which is now part of the global DHL empire (DHL has an 81 per cent stake in Blue Dart) is by far the largest courier firm in south Asia, with over 40 per cent market share in India alone. Interestingly, much like the company’s rapid rise, Dhingra’s own growth has been spectacular, an indication perhaps of the sharp mind that this Delhi University alumnus possesses. “Even as a student, I would never focus on just one thing. I was interested in a variety of subjects. I remain equally inquisitive about different

JITEN GANDHI

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0%&'*1#.'* FIRST JOB At PriceWaterhouseCoopers in New Delhi BIG BREAK When I was appointed CFO of Blue Dart in 1999 shortly after moving to the Mumbai headquarters from the Delhi office. A HA! MOMENT During the mid to late 1990s our cost of funding was around 21 per cent. I took up the challenge, cut a deal with ICICI and reduced the cost to less than half. LITTLE KNOWN FACT: When I need to de-stress, I play squash alone! DREAM To one day head an NGO and work to improve the world we live in. It is payback time. M AY 2 0 1 1

CFO INDIA

!"# !"#$%&' areas of business today and I think this trait has helped me to a large extent,” he says. As a youngster, Dhingra says he was a bit of a ‘jack of all trades’. “Unlike my elder brother who routinely topped his class, I was just a good student, largely because I would do five things at the same time,” he laughs. Then, however, the expected happened. His brother, five years his senior, took up commerce at the under graduate level. “It was almost a given that I would take it up as well. And I did, even though at that stage I was more keen on becoming a lawyer,” he recalls. There was no looking back, though, once he passed his CA exams. “I cleared the exams in my first attempt. With that went my chances of becoming a lawyer,” jokes Dhingra. He spent the next six years learning the fine art of auditing. “I landed a job with PwC in Delhi and, between 1986 and 1991, audited results of several companies,” he says. Positive feedback from some clients helped and by 1991 he had been promoted to manager. “The pay was not that great, but the job taught me a lot. I was enjoying life,” recalls Dhingra. Once again, though, fate conspired to change his career track. “In 1991, the economy opened up and new players came into India. Like my colleagues, I too received offers where the pay package sounded incredible,” he says. But after taking one of those offers and working with a French firm (that gave him a salary three times more than his PwC package) he realised that job satisfaction mattered more than a hefty salary. Luckily, offers were still coming in, among them one from Blue Dart, a small, decade-old courier firm. “It was a gut feeling,” he says, “I somehow felt I would be happy here. I also liked the job role they had in mind for me.” So in the summer of 1992, Dhingra joined Blue Dart in Delhi, as regional controller for the North Zone. Under him the region rose to one of the biggest profit centres. The management took note and in 1996, he was transferred to the HQ as corporate controller. Three years later he got his big break: the board decided to appoint him as the CFO, a position he held for the next nine, extremely eventful years, a time that saw Blue Dart rise dramatically to pole position in India, get into a global sales partnership with DHL and finally sign an M&A deal that saw DHL acquire an 81 per cent stake in Blue Dart. 24

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DHINGRA IS A HANDS-ON LEADER WHO IS KEEN, EVEN TODAY, TO LEARN NEW THINGS IN DIFFERENT AREAS OF THE BUSINESS.

It was also a period when Blue Dart became the first ever courier firm in India to have its own fleet of aircraft, revolutionising the way letters and packages would be delivered across the country from then on. Today with a fleet of seven Boeing aircraft and nearly 6000 trucks, Blue Dart can deliver packages to 27,000 cities, towns and villages in India and 220 countries, faster than anyone else.

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“We had a fabulous 2010 when revenue grew by 30 per cent and profits by 55 per cent over the previous year.”

It was the deal with DHL, though, that really transformed the company’s fortunes. Earlier, Blue Dart had an alliance with another global giant – Fed Ex, an agreement the former terminated in 2002. “It was a tough period for us since it coincided with the economic slowdown of 2001. We desperately needed a global tie-up. In DHL, we met a perfect match,” recalls Dhingra. At first, a global sales alliance was signed. Within a year, it became clear that DHL was interested in more. The timing was perfect since the original promoters of Blue Dart were looking for an exit. “It helped that the DHL management had a vision similar to ours. Post the acquisition in 2004, their message to us was clear: they would not interfere in the India operations, apart from placing a few of their executives on our board. It has been

a happy marriage,” smiles Dhingra. Since then, the company has grown to become a 1000 crore firm (In 2010 it generated revenues of 1100 crore with net profit of just under 100 crore). “We had a fabulous 2010 when revenue grew by 30 per cent and profits by 55 per cent over the previous year,” Dhingra says. It was also a year when Blue Dart started its much talked-about new product: the Cash on Delivery (COD) sceheme that gives customers a chance to pay only after they receive a product. While as COO he also looks at IT and operations today, purely from the finance perspective too, his role has changed over the years. “First we were the number crunchers. Then compliance, risk management and other areas came under the CFO. Now we are not just ‘partners’ but expected to look into

the future and come up with business plans for the next 5 years. We need to be visionaries,” he says. His own vision is ambitious: to grab at least half the market share in India in the next two years. A strong believer in technology, Dhingra also wants to bring in the latest tech tools to speed up operations. “We are getting a new machine which can scan thousands of barcodes at one go. Imagine the time we would save,” he says. Speed, after all, is everything in this business. “Another dream is to be able to deliver to every corner of India at a faster pace,” he adds. With new airports coming up around India, that day is not too far off. And when it happens, one can be sure that Dhingra will be there to ensure all deadlines are met, costs kept under a tight leash and returns on investments are fast. Really fast. M AY 2 0 1 1

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EVEN THE LEADER NEEDS A BOOST – ESPECIALLY NOW Financial executives do not always assess their level of self-motivation on a daily basis. But — on the heels of an economic slowdown — now might be a good time to take stock and find out what truly motivates them. ELLEN M HEFFES

trong, decisive leaders are highly valued in the corporate world, in personal interactions and in politics, as well. Many people aspire to possess the traits of strong leaders, which can include exhibiting an aura of self-direction and self-assuredness. That may well be true. But occasionally and particularly following the difficult economy and business environment of the past few years, even the most selfmotivated executives may be questioning their individual resolve. Sometimes even the leader needs a boost. To provide this boost, we asked self motivation guru DENIS WAITLEY to step in. Waitley is a highly respected expert and author in the field of selfdevelopment who has worked with and counseled Fortune 500 leaders, Olympic gold medallists, Super Bowl champions, astronauts and prisoners of war. He says today’s executives are “concerned about remaining competi26

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tive, about their job and about their company not being downsized.” So how are they kept motivated? Waitley says to start by understanding the basics. Motivation, he says, is defined as “a motive by action.” It is an inner force that compels behaviour. In other words, “real motivation drives you from within; it compels you to do something.” And, he cautions, there are good motivators and bad motivators — but they are the drivers. In Waitley’s many years of research, backed up with research by Harvard and other top universities, he finds that motivation falls into two categories: intrinsic and extrinsic. Intrinsically motivated people do things because they just love to do them; the involvement is its own reward, like teaching or being a scientist. Extrinsic motivation, the more popular model, refers to the force that pulls one forward by the power of some external benefit or a tangible reward.

For example, if I do this I will get this — a kind of a quid pro quo. He gives as an example professional athletes. Once they leave college, many are driven by a big pay check — “that’s why the free agency rule drives them to go to other teams rather than stay with the one they were with.” This extrinsic motivation, Waitley says, is very strong. “Just look at people who go to a job every day that they don’t like.” They may hate their work, but they still “punch the proverbial clock” every day, he says, because of the external force of getting paid. So when it comes to “real” motivation, Waitley says, “You cannot intrinsically motivate greatness. If you want to be the best at anything you really have to light the fire within yourself.” When you know where you are going in life, you have an obsession or a compelling image inside. This inner motivation, he adds, is much stronger than a bonus or a quota. Basically, he says, “we

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Waitley has identified four types of external motivations. The first is status with experts. We all want to gain recognition as someone important in our field, he says, and want to be looked at as somebody who is authoritative or an expert. The second is what we have. It is the

acquisition of something tangible to show for our work. For example, we do something, we get paid. We do something that many people want, we get paid more. Many people, he says, live for the things they love and they also donâ&#x20AC;&#x2122;t want to lose those things, so M AY 2 0 1 1

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per because they help foster the return on invested capital. More importantly, they know there is some accountability for making decisions that will help the enterprise grow. It boils down to achievement via independence. That type of internal motivation, he says, is inherent in most people. “You want to achieve on your own skill and merit.” So, ask yourself: Am I motivated more by money or concern over keeping a job? Do executives want to be competitive, adopt a “take no prisoners” attitude, or be loved and appreciated by peer groups? Or do they really have an internal concern for excellence? Waitley likens concern for excellence to playing a difficult piece on the piano when no one else is listening. “You’re doing it for the sheer exhilaration of doing something difficult that you couldn’t do, and yet no one is there to applaud your efforts other than your internal feeling that you’re doing something really good.”

That, he says, is what drives people to be educated and to have self-esteem because they believe they have potential. “You would never try to do anything unless you believed you were worth the effort and that maybe you could get there.” Bottom line, Waitley believes that “one of the strongest motivators of all is the belief in your own potential — even though you haven’t performed well yet.”

STAYING MOTIVATED The past few years have been difficult. The economic recovery is tentative and many believe it’s now a case of “the new normal.” Leaders have had a tough time, too, having to do more with less, having to lay people off — and some being laid off themselves — and having to work much harder while often watching their nest eggs shrink substantially. It’s been challenging, and has likely affected a lot of people deeply.

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acquiring financial security is extremely strong. The third external motivator he characterises as status with peers, which differentiates from status with experts. Bluntly, he says, “we live in a skin-deep culture in which we’re motivated by how we are regarded by our friends, the group we run with and fellow employees at work.” The fourth motivator is competitiveness, and the desire to achieve better than others or over others. And that’s been miscast, says Waitley, who explains that the original Olympic idea was to come together and get an olive branch and see how good you were against a fast field of really good people — using some kind of global standard of excellence. He recalls David Sarnoff, the founder of the National Broadcasting Corporation (NBC), who said competition brings out the best in products and the worst in people. What Sarnoff really meant, says Waitley, was something much deeper. He explained that the quality of one’s life is in direct proportion to the commitment to excellence, regardless of your chosen field. When the internal or intrinsic concept is applied to selfmotivation — whether for children or executives — Waitley says, “If they had more intrinsic motivation and less extrinsic motivation they would be a lot more competitive.” This is because the big internal motivator is a concern for excellence. Thus, he explains: “You are motivated every day to be the best you can in whatever you do and you are eager to study because you want to learn, not because of the good grades or not because you are going to get in a good college.” A scientist is a scientist because he or she loves the challenge of discovery, not because he expects to win the Nobel Prize. Waitley says people become financial executives because they love being part of an organisation that provides a product or service that’s valuable. And financial executives make it possible to continue to grow and pros-

!"#$%&'(!') The external environment can impact performance, cause a malaise. How can executives mitigate personal performance problems resulting from external factors they may not be able to control? Waitley says rapid and sudden change can paralyse people, putting them in a situation where they feel out of control and that there’s nothing they can do to change it. “You get caught in your tracks, kind of dancing on peanut butter and running in place,” he says. As a native Californian, he says he doesn’t know anyone who lives in that state who isn’t worried, for example, about bankruptcy. He says more people are now leaving per day than moving to California. What that creates, he says, is a feeling of helplessness, that “there’s nothing I can do about it.” To deal with this helplessness, he says, we need to step back and ask: “Is it true that the playing field will never be level again?” He notes rising expectations of people in developing nations who have been seeing a different life on television and the Internet and they want it, so there’s much unrest around the globe. Waitley says there can no longer be a guarantee of employment. So, while guaranteed employment is no longer a given, employees can make themselves as employable and desirable to businesses as possible. Thus, assumptions need to be challenged. In such an environment, Waitley says, having a lifelong learning organisation is critical. “We have to realise that every 30 seconds there’s a technological breakthrough with something that will completely change what we just thought, and understand the shelf-life of formal education is only about 18 months. So, you’ve just received your MBA or your CPA, but those milestones are only about 18 months in terms of what you’ve learned.” Indeed, he adds, “unless you’re learning, you’re falling behind.” Waitley attributes his own experience working in China during his career as having created his own sense of urgency, which he’s been explaining to his children and

*+,#>60D4#804380:8>6..5# =+482641#9316401::?#!<# 5+,#-604#4+#;1#471#;1:4#64#605E 47809#5+,#316..5#7621#4+#.8974#471# <831#-84780#5+,3:1.<? grandchildren — the need to get the “eye of the tiger” back, recalling the main character in the boxing film “Rocky.” So what should already-successful people keep in mind? They need to understand that success doesn’t make you happy necessarily, he says, and success isn’t a status. It’s not a perch. It’s a process. The old cliché for motivational speakers, says Waitley — a renowned motivational speaker himself for more than 30 years — is that “the road to high achievement and peak performance is a toll road. It’s not a superhighway or a freeway, and it’s always under construction.” In other words: don’t ever rest on your laurels. You want to spar with success but never embrace it. The minute you embrace success and believe you have arrived — that is the most dangerous moment of all, that moment when you are at the top, he says.

WHAT YOU MUST KNOW ABOUT SELF-MOTIVATION While most financial executives likely don’t think on a daily basis about whether or not they are self-motivated, Waitley helps to put the concept in perspective. “The important battle cry is to chase your passion, not your pension. Status is important. Peer approval is natural. Competing in a fast field of champions keeps you prepared and on your toes. And acquiring wealth is universal,” he says. But it is intrinsic motivation, he says, that is the key to last-

ing success. Intrinsic motivation is all about having a burning internal desire for excellence, to be able to act independently without having to be told to do so. It’s the most powerful motivation of all, says Waitley, and “the rewards are much greater.” Fear, he explains, can compel and inhibit. It is desire that propels and ignites people, to put the reward of success and the desired result ahead of the penalty of failure. Also, he adds, people need to understand the world around them. “Yesterday’s world records are today’s entry level requirements, and seniority is actually vulnerability,” he notes. “The more senior you become the more vulnerable you are because young people coming in understand technology. So because you have tenure does not mean that you’re set in place.” He adds, “You must embrace lifelong learning.” People will be much more motivated, he advises, “if you’ll take some time out and dust off your childhood, do what you love, what you do well, instead of just doing what other people tell you to do. Try to do things that are more exciting.” “So keep your yearning and learning ahead of your earning,” he concludes. ELLEN M. HEFFES IS EDITOR-IN-CHIEF OF FINANCIAL EXECUTIVE. © 2011 FINANCIAL EXECUTIVES INTERNATIONAL | WWW.FINANCIALEXECUTIVES.ORG

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WILL AIR TICKETS BE CHEAPER, OR LAPTOPS COST ME LESS ? An interesting look at Expense Management systems. ILA IMANI

PHOTOS.COM

n my various discussions with CFOs on the topic of curtailing expenses, especially in the context of an automated Expense Management system, I have come across varied responses; ranging from being astonished, to being cynical, to being delighted at the possibilities. I have shared below some useful discussions, which I have had, which I think might interest a financial controller looking at better controls and compliance, or a CFO looking to reduce expenses. Firstly, on the procurement side, including vendor invoices, there is definitely an expense reduction. For example, when you know how many laptops are required next month across your five offices, you can certainly buy laptops at better rates, or better delivery or other terms. You would find that the requirements shrink, where there are redundancies, simply because approving business heads now know the cost impact on their cost centre, and want to keep expenses low. You find that you can stagger some purchases. You also find that vendor advances are controlled

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better, that is, they are settled faster, and total outstanding advances reduce. Vendor invoices are approved through a more stringent process, which prevents mistakes like over-payment. Exceptions, like an expense in a branch office which shoots up dramatically catches your attention, and it enables you to take corrective action quickly. On the employee initiated expenses, like travel for example, accurate spend analysis definitely helps you source better. Are you saying there are frauds happening in my organisation, which I donâ&#x20AC;&#x2122;t know about? Well, frauds, if at all they happen, are below the radar level. The question is,

what can we do to prevent activities like employees inflating their expenses in their claims, managers approving higher amounts than what should be approved, vendors charging two times for the same service, and so on. Just as most stop at a red signal, knowing that there could be a traffic cop around the corner, similarly, with an automated system, the sheer visibility makes employees think twice about doing any wrong practice. So now will we do away with all paper based forms, including paper-based expense supporting? Well, for filing, and to maintain a paper record you would still file the supporting paper with employee claims, in a file. However, on one hand you want to

!"#$%&'(!') make the approval process more stringent, across locations and business managers, and on the other you need to find a way to reduce the turn around time. Supporting bills can be attached on a selective basis into the automated system, and you have the best of both worlds – quicker turn around times since you don’t need supportings going from office to office, or desk to desk, and yet they are available for filing and audit purposes. My biggest expenses are Manufacturing Costs and Staff Salaries. How will a System reduce costs for me? Well, one way of looking at expense control is that if I can’t reduce certain large expenses why do expense control at all. The other way of looking at it is that since I can’t control certain large expenses, atleast let me control that which I can! And yes, an automated system surely reduces costs, and these costs are worth reducing! If nothing else, the cost of processing employee claims and vendor bills could come down to half! Will employees travel less, or spend less when they travel if we have an automated System in place? In the area of Travel Expense control, there are many ways in which you reduce costs. Once you know you typically spend 20 room nights in Bangalore & Delhi in a quarter, you can get better hotel deals. You can also ensure employees and your travel team uses these negotiated deals only, and not other higher cost options. Employees spend and claim within entitlement limits – this too saves costs. Time spent with employees, their managers, travel team, and accounts payable department – could reduce to half. Reconciling travel bills becomes easier. Trip cancellations result in less wastages now. I always wanted a system like this. But do people adopt it easily, or will I need to coax them to use it? That’s the easy part actually. Give employees an easy to use system, give

WHAT IS AN AUTOMATED EXPENSE MANAGEMENT SYSTEM?

hat an automated Expense Management System typically does is: it enables the process of approvals required at every stage of an expense, be it committing an expense, incurring it, or payment stage. It enforces policies which decide which employees can spend how much on what, based on their role or seniority. It automates the rules for deciding who should be the approvers for what kind of expenses, esp. when a procurement has to be made. Finally, it gives MIS which enables accurate provisioning, expense planning, budgetary control, and spend reduction. It facilitates audits for spends and payments.

them visibility into what expenses they have already claimed, and who’s desk the current claims are lying on, and once they know that follow ups are not required too – you have full hearted support! My expense data is in my ERP/Accounting Package. Why would I need an Expense Management System? ERP handles “post-facto” transactions, i.e. after a transaction occurs it records it. Few people in the accounts department use ERP for expense accounting or procurement. On the other hand, an Expense Management System is a “pre-facto” control system, i.e. you control an expense before it is committed or incurred, not after. Also, all employees use it, i.e. not only the accounts department. Expense control is possible only pre-emptively, and since all employees use the system, the accounts team gets a visibility into the expense, as soon as anyone even thinks about it! My team really doesn’t have time to take on large projects, especially after we just finished our ERP implementation. When is the right time to take on such initiatives? First of all, a well designed system, if implemented by a skilled team, is nothing like an ERP implementation – its quick, its painless, and its cost-effective. If your company is expecting growth

then it’s the right time to put a system in place. If your company is facing challenges like higher turn around times for payments, large teams being required to process payments, expense policies not being complied to, or your auditors are not satisfied with their audits, it’s the right time. What is the response of companies in India to Expense Management? Companies in India have become more cost conscious, especially staff costs, compared to the a few years ago. Smaller teams result in lower costs, and a system which lowers staffing requirements is desirable. Secondly, companies have become more aware of the need to minimise risks i.e. loopholes. Prevention is being preferred, over cure. Lastly, Indian companies tend to have more offices, in more locations, and are looking at more growth. This initiative becomes a growth-enabler, and a critical one. We expect 30% growth this year. Our budgets are in place. Is this the right time to look at this initiative? Without an expense budgeting control system, there is a high probability that by the time you see your P&L, its too late, and you’ve already overshot budgets! Surprise expenses, unplanned expenses, etc. all have a way of jeopardizing your best intentions. A system which prevents expenses from overshooting, is the only way you can be sure of staying within budgets. So will I get cheaper laptops or cheaper air tickets with Expense Management Systems? Maybe. But that’s not the only expected outcome of an automation initiative.

MRS.ILA IMANI IS CEO, NEXSTEP INFOTECH PVT. LTD.

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MAKING YOUR MONEY WORK FOR YOU:

SMALL STEPS TO INCREASE PROFIT

Smart thinking and new marketing tools can reduce cash outflow on brand building, and leave more cash in the bank to spend elsewhere. SRIKANT SASTRI

hile most CFOs and CMOs believe that half of their advertising money goes waste- and moreover, not knowing which half –we may now have a solution. By taking a close look at the line-items underlying the two broad P&L heads of ‘Advertising & sales promotion expenses’ and ‘Selling & distribution expenses’, one can identify areas where spends can be optimized. These savings lead to Profit After Tax (PAT) improvement, or get reallocated to innovations that fuel growth. Today, one also gains by using ‘new age’ marketing, i,e. digital tools, that not only ensure money spent on brand building gives you more bang for the buck, but also provide an opportunity, hitherto unheard of. An opportunity of measuring ROI on such money spent. Together, these approaches are helping CFOs improve PAT and Enterprise Value, while helping CMOs enhance their Brand Equity.

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THE NUMBERS A typical medium sized organisation spends between 5 – 15 per cent of its turnover on advertising and sales promotion. This easily translates into an amount anywhere from 5 cr to 75 cr per annum. With increasing instances of convergence of various marketing services (like advertising, media planning,

below-the-line, digital marketing, PR) under a single umbrella, agencies are able to reap benefits of economy of scale and pass it on their clients. Even a conservative estimate of 10 per cent savings could add significantly to the bottom line of the client organisation. A recent survey of SMEs threw some light on the current trends of adoption of new media (illustrated on the

100% 80% 60% 40% 20% 0%

Internet marketing

Mobile phones

Social media Others like (facebook, iPad or twitter, etc) digital kiosks

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PHOTOS.COM

Benefit: Huge impact on stock availability and visibility, that has led to sales increases, and accountability of the sales team.

right). Though, most of the marketers have jumped on the internet bandwagon; there’s still a lot to be leveraged through other digital channels, which can improve the ROMI.

HOW ARE MARKETERS SAVING MONEY? One needs to look at its P&L’s line items like, (a) Advertising expenses and (b) Sales & Promotion expenses and then further drill down the components adding up to the total figure. A typical expense sheet will throw up the following components: (1)Advertising spends (media buys across print, radio, digital et al) (2)Agency retainer fees (for ATL, Media planning, BTL and Digital) (3)Sales promotion expenses (channel rewards, MICE) (4)Below the Line activation (on ground events) (5)Loyalty programmes, CRMs Once you are able to put numbers against most of them, you need to look at innovative ways to shave off 5 – 20 per cent against each item. For example, can better media planning shift your ad

spends from traditional media to new age and give you better ROMI? Can your agency be made more accountable for ROI and your business results? Can consolidating all work under the same agency group save you time and effort, which is a huge cost factor? There’s plenty that one can do to save money and utilise it effectively elsewhere with smart marketing decisions.

REAL LIFE EXAMPLES OF INNOVATIONS (1)Using digital solutions for retail efficiency and impact Challenge: A FMCG major wanted to enhance the availability and visibility of its products at retail counters across the country, and evolve a robust incentivize mechanism for its sales force based on achieving this. Solution: Customized hand-held digital devices were used to measure and report retail inventory, visibility and competitive status (including pictures) on a real-time basis across 200 towns in the country. This has empowered the company’s sales management to take corrective measures on a real-time basis.

(2)Using new-age media to interact with hard-to-reach Decision Makers Challenge: A large international IT major wanted to showcase its high end solutions to its Target Audience. Attracting senior C-level executives from across the country at one single location would have been difficult, both in terms of availability and willingness to travel, as well as high cost of hosting the event. Solution: The IT major used a highly impactful and engaging presentation on the subject matter and created various time slots to showcase it through web seminars and engaged with its target audience. The C-level executives were invited through various forms of direct marketing to register for the webinar and attend it free of charge, at their time of convenience Benefit: They were able to engage with many executives, across areas of interest and expertise, with very low investment. The executives on the other hand were happy and eager to interact and learn through this medium without actually stepping out of their cabins While there are many real life examples which can create better ROMI for all of you, the challenges particular to every organisation are different and require a customised solution and there is no ‘one-size-fits-all’ kind of solution. We urge you to take the first step of analysing your Brand-wise P&L to see if you have already made sufficient efforts to reduce costs and improve efficiency. If you feel that the mediums have already reached the level of optimum efficiency, try and re-arrange them till not only all the mediums become efficient independently, but also the overall strategy becomes not just brand focused, but also business-focused. THE AUTHOR IS COUNTRY CHAIR, VIVAKI INDIA HE CAN BE CONTACTED AT: SRIKANT.SASTRI@VIVAKI.COM M AY 2 0 1 1

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&'()*+",-.& THE CHALLENGE: To bring in new technology for better cost management. Also, restructure the business model TIME PERIOD: 2006-07

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PEOPLE INVOLVED: Top management and core finance team KEY TAKEAWAYS: Communicating a decision and convincing all stakeholders about it is very important. Also, there is no substitute for teamwork.

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LeasePlan India, the Indian arm of the Dutch firm, was in troubled waters when Ajay Narain, the new Director-Finance, teamed up with the new MD and senior colleagues to restructure the entire financial set-up of the company. Here is how they set things right. DHIMAN CHATTOPADHYAY

SUBHOJIT PAUL

ess than a decade after arriving in India, LeasePlan, the Dutch automobile leasing firm, found itself caught in technological and cost related challenges that impeded its growth. It was also, as later events were to prove, stuck with a business model it had outgrown. It was at this time that LeasePlan India saw a change at the top, with a new MD and a new DirectorFinance taking over. While some others may have seen the challenges as too hot to handle, this new team decided to tackle them head-on. In less than two years, some amazing teamwork within the firm saw them emerge ‘victorious’, with the

company making significant profit. As the Director-Finance, Ajay Narain played a crucial role in this turnaround.

bers Narain. However, the young CFO decided to look at the challenges as ‘opportunities’ rather than hurdles.

THE CHALLENGE

HOW IT WAS TACKLED

When Ajay Narain arrived in India in 2005 after a six year stint at the Amsterdam headquarters of LeasePlan, he walked right into what seemed like a financial muddle. LeasePlan, still a relatively young company in India, faced many bottlenecks, some related to automation in finance, others to poor cost management. “When I came, LeasePlan India had just moved to an ERP platform. There were challenges pertaining to controls, processes and performance,” remem-

Narain realised that there was no one solution to the problems and that it required a structured, multi-pronged approach. “A business turnaround is not only about creating processes and enabling systems to work towards enhancing quality and controls but is also about changing the attitude of employees and an alteration in the culture of the organisation,” he says. So, one of the first steps the finance team took was to draw up a strategic M AY 2 0 1 1

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3!4.56+%7.5.6+8+59%0/% /:;;+//1:<%01%.5%2=6.50/.9025%;.5% 2>+=;28+%=+/0/9.5;+%92%;4.56+% ?@%;25>05;056%+8A<2@++/%94.9% /:;4%.%;4.56+%0/%=+B:0=+C%12=%94+% ?+5+109%21%94+%2=6.50/.9025DE plan. Narain teamed up with the Managing Director and his senior finance colleagues and together they set about defining the vision and mission of LeasePlan India. From this emanated the strategic objectives. To achieve such objectives, strategic actions were identified. One of the first such actions was to go for more automated processes, thereby ensuring an enhanced functionality of the ERP platform in order to reduce manual intervention. Fortunately, automation helped the organisation bring about a semblance of control including better checks, validation and improved efficiency, resulting in saving time and cost. Narain’s next step was to inculcate a sense of cost-consciousness across the organisation, with the objective of bringing about better cost management and control. So the concept of departmental budgets was introduced. 36

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However, Narain also realised that the need of the hour was multi-tasking. In other words – the simultaneous execution of actions and not just improvement in the use of technology. During one brainstroming session, realisation dawned that the financial structure they were following was not in sync with LeasePlan’s business in India. “When we started in India in 1999 as a market entry strategy, we offered finance leases for which there was a requirement to have an NBFC license. However, by 2006, there was no longer any need to conduct business as an NBFC since a majority of our business, both in terms of revenue and asset base, was operating leases, an activity not regulated by the Reserve Bank of India,” recalls Narain. Therefore, in consultation with the Board and the Head Office in The Netherlands, it was decided to file for

de-registering LeasePlan India as an NBFC. The RBI agreed to cancel its NBFC license, thereby paving the way for the de-registration of LeasePlan as an NBFC. Soon it moved from being a 51:49 joint venture partner to a wholly -owned subsidiary of LeasePlan Corporation in The Netherlands and the organisation was converted from a public to a private limited company. Thus, the organisational structure was simplified, enabling better focus on the business. The final challenge now was to strengthen corporate governance. Narain wanted to create an environment conducive to voluntary compliance. So, apart from various tools to ensure compliance, he implemented a risk-based approach using the ERM methodology. “Today, decision-making within LeasePlan has become more proactive and informed as a result of this step,” claims Narain.

THE LESSONS Narain attributes the organisation’s success and rapid growth since 2007 to a well-knit management team, continuous support and guidance from the regional management and committed and understanding employees. “In a turnaround, you will have key players but a successful turnaround is always a result of a sustained and effective team effort,” he says, adding that the exercise taught him a lot about teamwork and effective communication as well. “Change Management is only successful if an organisation can overcome the resistance to change by convincing employees that such a change is required for the benefit of the organisation. Hence continuous communication is the key to success,” he adds. The experience also made him realise the redefined role of a CFO in an organisation today. The new generation CFO, he says, needs to emerge as a thought leader by taking sustainable measures in linking the 3 Ps – the people, planet and profit.

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IS YOUR EMERGINGMARKET STRATEGY LOCAL ENOUGH? The diversity and dynamism of China, India and Brazil defy any onesize-fits-all approach. But by targeting city clusters within them, companies can seize growth opportunities. YUVAL ATSMON, ARI KERTESZ, AND IREENA VITTAL

reating a powerful emerging-market stratoften the focus of many of these companies. For sure, the top egy has moved to the top of the growth agendas of many mulcities are important: by 2030, Mumbai’s economy, for example, is tinational companies, and for good reason: in 15 years’ time, expected to be larger than Malaysia’s is today. Even so, Mumbai 57 percent of the nearly one billion households with earnings would in that year represent only 5 percent of India’s economy greater than $20,0001 a year will live in the developing world. and the country’s 14 largest cities, 24 percent. China has roughly 150 cities with at least one million inhabitants. Their population Seven emerging economies—China, India, Brazil, Mexico, and income characteristics are so different and changing so rapRussia, Turkey, and Indonesia—are expected to contribute idly that our forecasts for their consumption of a given product about 45 percent of global GDP growth in the coming decade. category, over the next five to ten years, can range from a drop in Emerging markets will represent an even larger share of the sales to growth five times the national average. growth in product categories, such as automobiles, that are Understanding such variability can help companies invest highly mature in developed economies. more shrewdly and ahead of the competition rather than Figures like these create a real sense of urgency among following others into the fiercest battlemany multinationals, which recognise fields. Consider Brazil’s São Paulo state, that they aren’t currently tapping into where the economy is larger than all those growth opportunities with sufficient of Argentina’s, competitive intensity is speed or scale. Even China, forecast to crehigh, and retail prices are lower than ate over half of all GDP growth in those elsewhere in the country. By contrast, seven developing economies, remains a in Brazil’s northeast—the populous but relatively small market for most multinahistorically poorest part of the country— tional corporations—5 to 10 percent of the economy is growing much faster, global sales; often less in profits. competition is lighter, and prices are To accelerate growth in China, India, higher. Multinationals short on granular Brazil, and other large emerging markets, 1 insights and capabilities tended to flock it isn’t enough, as many multinationals to São Paulo and to miss the opportunido, to develop a country-level strategy. ties in the northeast. It’s only recently Opportunities in these markets are also that they’ve started investing heavily rapidly moving beyond the largest cities, 1 In terms of Purchasing-Power Parity (PPP)

In 15 years,

57%

of households with earnings greater than $20,000 a year will live in the developing world

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!"#!$%& A recent analysis of China revealed 22 distinct urban clusters. Urban clusters and their hub cities Clusters are grouped by size, based on average 2015 urban GDP as % of national urban GDP (in 2005 renminbi) Small

Large

Harbin

Mega

Changchun Beijing Shenyang

Shijiazhuang Hohhot Dalian Tianjin Taiyuan Qingdao Zhengzhou

Jinan

Xi’an Nanjing Hefei

Shanghai

Wuhan Hangzhou

Chengdu

Nanchang

Chongqing

Fuzhou

Changsha

Xiamen

Kunming

Guangzhou Shenzhen Nanning

there—trying to catch up with regional companies in what is often described as Brazil’s “new growth frontier.” As developing economies become increasingly diverse and competitive, multinationals will need strategic approaches to understand such variance within countries and to concentrate resources on the most promising submarkets—perhaps 20, 30, or 40 different ones within a country. Of course, most leading corporations have learned to address different markets in Europe and the United States. But in the emerging world, there is a compelling case for learning the ropes much faster than most companies feel comfortable doing. The appropriate strategic approach will depend on the characteristics of a national market (including its stage of urbanisation), as well as a company’s size, position, and aspirations in it. In this article, we explore in detail a “city cluster” approach, which targets groups of relatively homogenous, fast-growing cities in China. In India, where widespread urbanisation is still gaining steam, we briefly look at similar ways of gaining substantial market coverage in a cost-effective way. Finally, in Brazil we quickly describe how growth is becoming more geographically dispersed and what that means for growth strategies.

TARGETING THE RIGHT CITY CLUSTERS IN CHINA By segmenting Chinese cities according to such factors as industry structure, demographics, scale, geographic proximity, and consumer characteristics, we identified 22 city clusters, each homogenous enough to be considered one market for strategic decision making (Exhibit 1). Prioritising several clusters or sequencing the order in which they are targeted can help a company boost the effectiveness of its distribution networks, supply chains, sales forces, and media and marketing strategies. More specifically, this approach can help companies to address opportunities in attractive smaller cities cost effectively and to spot opportunities for, among other things, expanding within rather than across clusters (Exhibit 2)—a strategy that requires a less complex supply chain and fewer partners. Companies that nonetheless want to expand across clusters may find it easier to target 50 to 100 similar cities within four or five big clusters than cities that theoretically offer the same market opportunity but are dispersed widely across the country. Another major benefit of concentrating resources on certain clusters is the opportunity to exploit scale and network effects that stimulate faster, more profitable growth. Because M AY 2 0 1 1

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()!(&*" most brands still have a relatively short history in China, for example, word of mouth plays a much greater role there than it does in developed economies. By focusing on attaining substantial market share in a cluster, a brand can unleash a virtuous cycle: once it reaches a tipping point there —usually at least a 10 to 15 percent market share — its reputation is quickly boosted by word of mouth from additional users, helping it to win yet more market share without necessarily spending more on marketing. Here are four important tips to keep in mind when designing a city cluster strategy for China.

FOCUS ON CLUSTER SIZE, NOT CITY SIZE It’s easy to be dazzled by the size of the biggest cities, but trying to cover all of them is less effective for the simple reason that they can be very far from one another. Although Chengdu, Xi’an, and Wuhan, for example, are among the ten largest cities in China, each of them is about 1,000 kilometers away from any of the others. In Shandong province, the biggest city is Jinan, which is barely in the top 20. Yet Shandong has 21 cities among China’s 150 largest, which makes the area one of the five most attractive city clusters. Its GDP is about four times bigger than that of the cluster of cities around and including Xi’an, as well as three times bigger than the cluster of cities surrounding Chengdu.

Clusters vary considerably in their share of urban GDP and in the relative importance of their hub cities. Top two clusters in each size category, projected 2015 urban GDP as % of national urban GDP (in 2005 renminbi)

Mega 11.0

Cluster: Shanghai

5.4

Hub city: Shanghai

10.4

Cluster: Jingjinji

7.2

Hub cities: Beijing, Tianjin

Large 4.4

Cluster: Nanjing

1.5

Hub city: Nanjing

4.1

Cluster: Xiamen–Fuzhou Hub city: Xiamen–Fuzhou

1.3

Small 1.6

Cluster: Guanzhong

0.9

Hub city: Xi’an

1.6

Cluster: Hohhot

0.4

Hub city: Hohhot

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LOOK BEYOND HISTORICAL GROWTH RATES The growth of incomes and product categories is another variable that must be treated in granular fashion. Extrapolating future trends from historical patterns is particularly suspect—however detailed that history may be—because consumer spending habits change so rapidly once wealth rises. In some clusters, many people are starting to buy their first low-end domestic cars; in others, they are upgrading to imports or even to luxury brands. We expect sales of SUVs to increase at a 20 percent compound annual growth rate nationwide in the next four years, for example, but to grow as quickly as 50 percent in several cities and, potentially, even to decline in some where penetration is already deep. Similar or even sharper variance held true in almost every service or product category we analysed, from face moisturisers to chicken burgers to flat-screen TVs. Yogurt sales in some cities are growing eight times faster than the national average. The Shenzhen cluster has the highest share (90 percent) of middle class households—those earning over $9,000 a year. In other clusters, such as Nanchang and Changchun–Harbin, more than half of all households are still poor. As a result, people in the Shenzhen cluster are already active consumers of many categories, and the potential for growth is fairly limited. In the poorer clusters, many categories are just emerging, as larger numbers of people pass the threshold at which more goods become affordable. From a strategic viewpoint, the richer cluster could still be a major growth market for premium goods but not for most mass-market ones.

DON’T BE FOOLED BY GENERALITIES Talking about Chinese consumers and how they shop is a bit like talking about European consumers. While some generalisations may be fair, certain very strong differences, even within regions, go well beyond the already significant economic variance. Guangzhou and Shenzhen, for example, are both tier-one cities, located in the same province and just two hours apart. But Guangzhou’s people mainly speak Cantonese, are mostly locally born, and like to spend time at home with family and friends. In contrast, more than 80 percent of Shenzhen’s residents are young migrants, from all across the country, who mainly speak Mandarin and spend most of their time away from their homes. To be effective, marketers will probably have to differentiate their campaigns and emphasise different channels when reaching out to the people in these two cities. That’s why we suggest managing them in different clusters, despite their proximity. The need to localise marketing activities also results from the limited reach of national media. China has over 3,000 TV channels, but just a few are available across the country. In some areas, only around 5 percent of consumers watch national television. Other media, such as newspapers and

()!(&*" radio (and of course billboards), are even more local. Very few companies can craft their entire strategy at the level of a cluster—those that do are usually its regional champions. But with differences such as the following common ones, some tailoring is critical: Every second consumer in Shandong believes that wellknown brands are always of higher quality, and 30 percent are willing to stretch their budgets to pay a premium for the better product. In south Jiangsu, only a quarter of consumers preferred the well-known brands, and only 16 percent were willing to pay a premium for them. In the Shenzhen cluster, 38 percent of food and beverage shoppers found suggestions from in-store promoters to be a credible source of information, compared with only 12 percent in Nanjing. In Shanghai, 58 percent of residents shop for apparel in department stores, compared with only 27 percent of Beijing residents. With such diversity being common, even merely fine-tuning the marketing mix and channel focus by cluster can pay enormous dividends.

In India, focusing on city clusters helped one technology company reduce its customer service costs dramatically. . Cost to serve as % of sales 11 8 5

Company’s target threshold: 6%

200 cities % of potential market addressed

10 states

8 clusters (67 cities)

In Brazil, consumer preferences can vary dramatically across regions. Example: consumer preference for name-brand detergent’s pack sizes,1

ALLOW YOUR CLUSTERS TO BE FLEXIBLE

pack size as % of total sales

Some companies may want to merge or divide clusters for strategic-management purposes. A company could, for instance, merge geographically nearby clusters, such as Guangzhou and Shenzhen or Chengdu and Chongqing, if its supply chain was well positioned to manage these proximate clusters as one. Other companies, highly driven by the media market, would find it sensible to split the Shanghai cluster into subclusters, because some markets within it are still quite different in their TV habits and other choices. By contrast, people in certain clusters, such as Chengdu or Guangzhou, watch similar TV shows across the entire cluster, so intracluster expansion allows companies to make more effective use of the media spending needed to attract consumers in the big cities. The actual number of submarkets a company opts for will depend in practice on its needs. That number should be manageable—most likely, 20 to 40. Fewer wouldn’t be likely to produce the required degree of granularity, though a company might have logistical reasons for taking this approach. More would probably be too many to run effectively.

Brazilian consumers overall

COST-EFFECTIVE MARKET COVERAGE IN INDIA Often, the challenges of accessing consumption growth cost effectively are even greater in India than in China because India is less urbanised and at an earlier stage of its economic development. Companies would need to reach up to 3,500 towns and 334,000 villages, for example, to pursue opportunities in the 10 (of 28) Indian states that by 2030 will account for 73 percent

Large 5

80 Medium

Small 15

Consumers in northeast Brazil 0 Large

Medium 4

96 Small

1 Small = ! 500 grams, medium" = 1,000 grams, large = >1 ,000 grams. Source: LatinPanel

of the country’s GDP and 62 percent of the urban population. To allocate financial and human resources smartly and make things more manageable, companies need to walk away from averages and adopt more granular approaches. Some companies will be well served by focusing on 12 clusters around India’s 14 largest cities. Those clusters will provide access to as much as 60 percent of the country’s urban GDP by 2030, when the 14 largest cities are likely to account for 24 percent of GDP. True, India’s major clusters won’t cover as much of the economy as those in China, where they will encompass 92 percent of urban GDP by 2015. Yet a hub-and-spoke approach in India should provide similar opportunities to optimise supply chains, as well as sales and marketing networks. An established technology player formerly operated in 120 cities M AY 2 0 1 1

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()!(&*" all over India, for example. Recently, it shifted to focusing on eight clusters with a total of 67 cities, which still gave it access to 70 percent of its potential market. One benefit: customer service costs fell from a rapidly growing 9 to 10 percent of sales to a more acceptable 5 percent (Exhibit 3). Alternatively, a company might improve the economics of its Indian business by focusing on a handful of states, an approach recently adopted by a retailer that had previously been pursuing a national footprint. Another company, this one in the consumer goods sector, recently decided to pursue opportunities in eight cities where consumers earn over $2,500 a year—more than twice the average for India—and the retail infrastructure suits its products nicely. Without this more granular analysis, the multinational would have stayed on the sidelines in the mistaken belief that Indian consumers weren’t ready for its products. It would therefore have missed the opportunity to challenge a competitor rapidly gaining the lead in those markets.

outlets spread all over the region, packaged-goods companies must develop third-party networks specialising in frequent deliveries of goods and small drop sizes. What’s more, in Brazil as a whole, many consumer goods companies found that they had focused too much on hypermarkets when designing assortments and promotions. One company, for example, discovered that Brazil’s expanding drugstore chains were the fastest-growing channel for personal-care and beauty products. Some leading consumer goods companies have now created specialised organisations that execute distinct channel strategies in different regions and categories, with tailored product portfolios and displays. Many packaged-goods companies see detergent powders as a developed category in Brazil. But relatively affluent consumers there are upgrading to larger and more sophisticated washing machines, and many consumers in the northeast are buying their first fully automated machines. New detergent formulas therefore have enormous potential—annual consumption in the northeast is less than half of what it is in the south. Seizing this opportunity requires an understanding of the regional consumer, however, particularly pack size preferences (Exhibit 4). Consumers in the northeast also want a strong perfume and great quantities of foam but care less about whitening power. Brazil is distinct from China and India in many respects. But as these examples suggest, there too identifying growth opportunities increasingly requires a detailed understanding of vast regional variations in competition levels, income, product growth rates, consumer preferences, and retail channels. There is no one-size-fits-all strategy for capturing consumer growth in emerging markets. What’s clear, though, is that traditional country strategies and other aggregated approaches will miss the mark because they can’t account for the variability and rapid change in these markets. As the battle for the wallet of the emerging-market consumer shifts into higher gear, companies that think about growth opportunities at a more granular level have a better chance of winning.

2030,

By Mumbai’s economy is expected to be larger than Malaysia’s is today

(out of 28) Indian states will account for 73 percent of the country’s GDP by 2030

SEIZING NEW REGIONAL OPPORTUNITIES IN BRAZIL In contrast to China and India, Brazil has been open to multinationals for decades. But during much of that time, most large companies in sectors such as consumer packaged goods focused on the southern (and most affluent) parts of the country. With just over half of the national population, this region includes São Paulo city and state, Brazil’s financial and industrial center. As economic growth accelerated in recent years, many consumers started upgrading to more sophisticated products. But growth has also been moving beyond the south and a few large cities, becoming more geographically dispersed. In the populous northeast, for example, income per capita is only half of its level in São Paulo, but the economy is growing faster than it is elsewhere in Brazil. Succeeding in new regions like the northeast requires a fresh approach for many companies. Consider the following: Many global companies still make the mistake of doing their consumer research in São Paulo when they are designing new products or national marketing campaigns for Brazil. They don’t realize that cosmopolitan São Paulo probably has more in common culturally with New York than with any other city in Brazil. Modern-format stores account for 70 percent of retailing in Brazil overall, but for only 55 percent in the northeast. To reach thousands of small (and often capital-constrained) 42

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YUVAL ATSMON IS A PRINCIPAL IN MCKINSEY’S SHANGHAI OFFICE, ARI KERTESZ, A PRINCIPAL IN SÃO PAULO, AND IREENA VITTAL, A PRINCIPAL IN THE MUMBAI OFFICE.THIS ARTICLE WAS ORIGINALLY PUBLISHED IN APRIL 2011 ON THE MCKINSEY QUARTERLY (C) 2011 MCKINSEY & COMPANY. ALL RIGHTS RESERVED. REPRINTED BY PERMISSION.

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Listen, communicate well and use technology to good effect. These are some of the leadership lessons to be learnt from the elections in Singapore. 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 reached at his blog http:// theasiannegotiator. wordpress.com, or david@everestmotivation.com

A GENERAL ELECTION was held in Singapore on May 7, 2011. For most international news media owners, the elections of an authoritarian capitalist state of 5 million people would not hold much interest. After all, the same ruling party has been in power since independence in 1965, and the most number of seats won by the Opposition has been four (of about 80 electoral seats) back in 1991. So what has made the 2011 campaign different, and what are the leadership lessons we can learn from what turned out to be the most dramatic elections since 1963? After all, when the dust settled, the ruling Peoples Action Party (PAP) still held 81 of the 87 seats. For starters, the PAP won about 60 per cent of the popular vote, its lowest share since 1963, and with a vote swing against it of 6 per cent. Second, for the first time, a group constituency, where people elect not one, but a team of four to six Members of Parliament (MPs) was lost to the Opposition and, with it, two prominent ministers and a possible future Speaker of Parliament. Third, it was an election where closely-fought wards were won and lost using a combination of new media and rallies. For decades, the PAP had entrenched itself in institutions which would be otherwise bi-partisan, as the Civil Services, town councils and, to an extent, the stateM AY 2 0 1 1

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$*0%*#12/!"#$% supervised media. Debilitating defamation lawsuits filed by the ruling party’s key ministers post-elections served to further cripple key Opposition leaders and dissenters, and dissuaded many from being involved in civil society and politics. Based on their sterling past performance in delivering good, honest government and progress, studious tweaking of electoral boundaries at each elections, dominance in the media and broadcast tools, the PAP romped to resounding victories for decades. However, this 2011 election provided a startling wake-up call to the PAP in the light of deep resentment over cost of living issues, public housing, and a lack of meaningful response through feedback. On top of these issues was deep resentment on issues like ministerial pay – where the PAP-led ministers peg their salaries to the GDP of the nation, and where they are paid several times more than the President of the United States. In addition, a champion of globalisation, the PAP’s policies of freely welcoming new immigrants was seen as depriving many Singaporeans of job opportunities and creating congestion in local housing markets. Here are some of the most powerful leadership lessons from the election.

“Merely deciding on policy and then telling the people why it is good for them is grossly insufficient.”

FOCUS ON THE MESSAGE AND WORK ON THE HEARTS

The Opposition’s most influential party, the Workers Party, spoke about a “First World Parliament” in Singapore, promising to listen to people and a future where the people would be more engaged in the making of their destinies. The PAP pooh–poohed it as being “out of touch” with the people on the ground, but they ignored the power of aspirational political messages. These resonated with a public fed-up of not having a sympathetic ear. Worse, the PAP conducted a confused campaign where ministers sent threatening messages, and then conciliatory messages, to people. For the first time in living memory, Lee Hsien Loong, the Prime Minister, apologised for the mistakes made by some of his millionaire ministers, including, though not mentioned specifically, harsh comments by his father, the legendary Lee Kuan Yew, who ruled Singapore with an iron-fist until the 1990s. THE LESSON: As a corporate leader, would you prefer to create a culture of fear and respect, or one of respect and love? I guarantee the latter will get you people who will go the extra mile for you and your cause. 44

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BRING YOUR GAME TO THE TABLE, DO NOT DILUTE FOCUS

This point has precedents in military history, and at critical moments, generals like Napoleon and Alexander the Great have beaten their often larger opponents by concentrating forces and setting them upon their opponent’s weakest points. In a masterful campaign in the Group Representation Constituency of Aljunied, the Workers Party took a big gamble by placing all their top candidates in one team of five persons to challenge a minister-led PAP team. Aljunied became the confluence of the opposing forces. While the PAP was trying to fight the battle there on a constituency level, banking on its past performance, this time, it was overwhelmed by the tide. By failing to listen and respond to the electorate on national issues, the electorate’s feelings far surpassed any localised benefits the PAP might have had. The Workers Party played the game at a higher level, raising national issues such as the glaring lack of alternative voices – and they won not narrowly, as predicted, but by a full 10 points. THE LESSON: As a leader, try and understand how much of your energy is being focused on the most critical aspects of your business versus the daily fire-fighting.

COMMUNICATION COULD BE WHAT YOU HEAR, NOT JUST WHAT YOU SAY

A day after the elections where a key national complaint was the ruling party’s inability to listen and respond to the people’s pains, only one of the outgoing Aljunied MPs, the much-liked

$*0%*#12/!"#$% foreign minister George Yeo, admitted that the PAP really needed to listen and shake-up its feedback mechanisms. And yet, other ministers – mostly in wards polling less than 60 per cent, were reported as saying that they would ‘meet the people and find out what was troubling them’. This irony was not lost on commentators. After all, if they could not read the writing on the wall, how could they respond effectively afterwards? THE LESSON: As a leader, do you truly listen at meetings, or merely wait for your turn to speak? Try and find out.

THE USE OF NEW TECHNOLOGY CAN BE AN ADVANTAGE

Despite their lack of financial resources, access to government machinery and a media used to serving the PAP’s interests, the Opposition adopted a nimble campaign, making extensive use of social media networking such as Twitter and Facebook and streaming live video feeds, marshalling volunteers and supporters to their cause. One 24-year-old Opposition candidate created such an impact that she obtained over 100,000 ‘likes’ on her Facebook fan page, exceeding any PAP

minister’s page. Although PAP committees had been set to exploit the new media, they were clumsy in their execution, with their pages often being a one-way communication tool. For the first time since 1963, almost every single ward was being contested; a watershed for Singapore politics. With more than double (2.2 million versus 1.1 million) the number of citizens being allowed to vote in 2011, many voters, frustrated by the years of walkovers by the PAP, came out in force. With a large number of GenY voters who preferred news from alternative media, the Internet helped the Opposition’s cause. THE LESSON: As a leader, are you looking at cutting edge technologies to help vault your business to a higher level? How are you engaging and winning over the Gen Y employee? The 2011 elections in my island state is over, but the fight for the minds and hearts of its people will continue. DAVID LIM IS A LEADERSHIP AND NEGOTIATION COACH AND CAN BE FOUND ON HIS BLOG HTTP://THEASIANNEGOTIATOR.WORDPRESS.COM, OR SUBSCRIBE TO HIS FREE E-NEWSLETTER AT DAVID@EVERESTMOTIVATION.COM

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HYUNDAI VERNA

Verna: Version 2.0 In its 2011 avatar, Hyundai’s upgraded Verna is a fantastic car to drive. Competition better beware! Amit Chhangani HYUNDAI HAS ALWAYS been known as a maker of fuel efficient and affordable small cars in India. Thanks to some very successful cars such as the Santro and i10, Hyundai’s small cars command some of the highest valuations in the used car markets. However, even with its impeccable reputation among the small car buyers, Hyundai has not been able to make a mark for itself as a premium car maker. The Korean company’s efforts to establish itself in the big car market with products such as the Terracan, Sonata and Elantra didn’t quite fructify in the past.

But all that seems set to change now, once the company launches the new edition of the Verna. The product looks great thanks to the hard work Hyundai has put into its R&D. The company has made sure that the Verna’s engines and the automotive technology consistently matches and exceeds its European and Japanese counterparts. Hyundai has also given a definitive shape to its directionless design department by developing the ‘Fluidic Sculpture’ philosophy for all its modern cars.

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The Verna, sold in most parts of the world as Accent (in India the Accent is a different model), is considered a ‘premium segment’ car, or a ‘large’ car here. However, Hyundai promotes the model as a ‘small family car’ in all other key markets .

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43(5!7789 THE LOOK The New Verna (known as the new Accent internationally) is a massive improvement on the current version of the car. With Fluidic Sculpture written all over its sheet metal, the Verna is a blend of flowing lines and muscular creases. A trademark hexagonal Hyundai grille, wolf-eyed headlamps, L shaped fog lights, a prominent crease running through the sides and a stubby boot define this athletic looking car. The new Verna looks like a premium product and is draped in clothes which reek of its cosmopolitan pedigree.

A CHOICE OF 4 ENGINES, SAFETY FEATURES SUCH AS 6 AIRBAGS AND PARKING SENSORS AND ADDED TECH TOYS MAKE THE NEW VERNA A VERY GOOD BUY

FEEL POWERFUL But it’s not just the visuals which are creating waves for the Verna. Hyundai is all set to serve on your platter a choice of four engines – the widest choice in its class. With two petrol and two diesel units on offer, the Verna covers the segment like no other car. Throw in a wide variety of trim and equipment levels and you have a car that can pretty well cater to every customer from the entry level to the top-end bracket in its category. The smaller 1.4-litre petrol and diesel engines will be available only with the standard 1.4 badge, which means that high-end features won’t be available as an option for the small engine variants. However, the 1.6-litre engines, for both petrol and diesel will get four variants. This will include a standard 1.6, a middle of the road 1.6 SX, a top of the line 1.6 SX (O) and finally the automatic transmission version with 1.6 SX (O) AT badge. The AT version will be available only as a top of the line variant, with all the features.

LUXURY AND SAFETY Hyundai is offering some really great additions in the new Verna. For example, the top of the line SX(O) will have as many as 6 airbags – a safety feature not seen before in the segment. Apart from this, the top end

:!7(375( )7;3< Engine

1.4 and 1.6 petrol

Power

107PS / 123 PS

Torque

90Nm / 128 Nm

1.4 / 1.6 diesel

Expected Price

10-11Lakh

(depending on the variants) POSITIVES Choice of four engines gives buyers a lot of options, while safety features such as 6 airbags and parking sensors add value.

SX (O) variant will boast features such as rear camera display and parking sensors, fully automatic temperature control for AC, electric ORVMs, push button start, proximity sensors for keyless entry and ipod / USB connectivity for the audio system. International NEGATIVES The absense of rear variants of the car also feature advanced active safety map lamps and rear AC features such as Traction Control and an Electronic vents, features which its Stability Programme, but there is hardly any chance rivals boast of, could be of those features making it into the price conscious a dampner. Indian market. VERDICT There are, however some features which a few rivals The airbags and addi- in the segment (Honda city, SX4 Diesel, VW Vento) tional safety and luxury have and the New Verna doesn’t. The most glaring ones features as well as the new powerful engine, of these include a glass antenna, rear map lamps and make it a good buy if the rear A/C vents. car is priced at around The price has not been announced yet, though 10 lakhs. Hyundai would probably announce it by the time this magazine reaches you. If priced competitively, there is no reason why the executive-class customer won’t look at the Verna as a great buy! M AY 2 0 1 1

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Dell Venue Pro A second sighting Michael Browne

Sony NEX-C3 Judging by leaked images, the NEX-C3 may pack in the same 16.2 megapixel image sensor used in the Sony Alpha A55 DSLR, as well as HD video capture and the new flash. The camera may sell for around $500, with lens at launch.

Fujitsu LifeBook S761/C THIS IS ONLY the second WP7 phone that we’ve reviewed, the HTC HD 7 being the first. The Venue Pro is a large, heavy (192 grams) phone, and feels thicker owing to a concave display. The screen is touted as gorilla glass, but picked up scratches. The top and bottom of the phone are wedgeshaped and with the chrome-rimmed 3.5mm jack adds some style. The bottom slideout QWERTY is about the sexiest form factor ever, and the mechanism is quite slick. The battery cover is glossy, a shame since we loved the matte one on the Dell Venue. We’re not going to get into the benefits and pitfalls of WP7, for they alone could span several pages, but for normal consumer (as opposed to corporates), the Venue Pro has a few serious limitations – Bluetooth transfers, OS X connectivity to name a couple. We also had issues pairing with a couple of Bluetooth headsets that were on hand. Then there were Venue Pro-specific issues – like our test SIM getting locked without a password or the Internet refusing to

work after disabling and re-enabling data connections – an issue that a restart finally resolved. The display is advertised as AMOLED, and while the blackness level is good, and the colours are better than the Dell Venue, we still find the contrast slightly lacking. Sunlight legibility remains poor. The QWERTY keypad is a plus. The touchscreen is very sensitive, and the on-screen keypad works flawlessly. The Venue Pro is a reasonably speedy phone and we faced no slowdowns despite the fact that it runs a somewhat ageing SoC (Qualcomm QSD8250). The Venue Pro is a good attempt from Dell, especially given their relatively short time in market with smartphones, and if you’re looking for a WP7 device with a good QWERTY, this is a viable option. SPECIFICATIONS:Display: 4.1-inches, 480

x 800 pixels; OS: Windows Phone 7; SoC: Qualcomm QSD8250; RAM: 512 MB; inbuilt storage: 8 GB, micro SD expandable; battery: 1400 mAh; weight: 192.8 grams PRICE: 34,990 (MRP, 8 GB)

Though not very nice to look at, the latest Fujitsu notebook has a unique feature – an integrated pico projector instead of the optical drive. It also packs in a Core i52520M CPU and 160GB of storage, at $2,675

Razer Hydra

Razer’s Hydra controller brings motion gaming to the PC. Piggybacking on the launch of Portal 2, the controller comes with support for 125 other games. The device is set to be priced at $139.99. POWERED BY

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Coffee in the Rains

THE COORG REGION OF Karnataka (known locally as Kodagu), with their rich forests and plantations, offer an idyllic retreat during the monsoon months from June to September. Lying in one of the wettest sections of the Western Ghats, these hills turn lush green during the rainy season and water bodies seem to spring up everywhere. Another advantage is that Coorg is not far from Bangalore and Mangalore airports, making this region an ideal holiday destination. We drove from Mangalore to Madikeri, the capital of Coorg which is situated 1500 metres above the sea level. Away from the bustling marketplace, Madikeri is a pleasant hill town and the hotel we had selected, Heritage Resort, was located right on top of the hill, with a panoramic view of the hills. After a few hours rest, our driver took us through the town to a road leading to the Abbi Falls. We walked through plantations and greenery to see the powerful, multi-tiered falls, heeding the notices posted along the trail not to pluck anything as this is a private plantation. It had been raining for a few days and the falls were impressive.We could hear the water much before we reached the location. Next, we visited the historic fort of Madikeri which houses a museum in the old St Marks Church. The museum is a storehouse of information about Kodagu culture and the achievements of icons such as Field Marshal Carriapa, the first army chief of independent India and a ‘local boy’. After 50

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a quick look at the lovely Omkareshwara temple which blends Kerala wooden temple architecture with Islamic domes, we headed for Raja’s Seat which is a park with a pavilion that offers a superb view of the hills around Madikeri. Later in the day we visited the estate of Mr and Ms Bidappa, one of the planter families who have opened

DINESH SHUKLA

The hills of Coorg are a dream destination, especially when it is pouring. Anil Mulchandani

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LEFT: MONKS AT THE NAMDROLING MONASTERY, THE WORLD’S LARGEST CENTRE OF NYINGMAPA BUDDHISM. BELOW: THE MAJESTIC ABBI FALLS IN ALL ITS GLORY

ABOVE LEFT: THE OMKARESHWARA TEMPLE AT MADIKERI IS A MUST VISIT FOR THOSE INTERESTED IN ARCHITECTURE ABOVE RIGHT: THE LUSH GREEN VALLEYS AND MISTY HILLS OF COORG OFFER PICTURE-POSTCARD VIEWS DURING THE RAINS

their plantation houses for tourists. Located just a few minutes from Madikeri, their house, called Dhyan’s Den, has simply decorated rooms. We had booked lunch with them and it included pork, bamboo shoots and seasonal vegetables with ghee rice. On our return journey, we visited Madikeri’s down-town area where we bought locally-produced honey, fresh Coorg coffee, a variety of tea and pickles. The next morning, we set out to visit Talacauvery, a park set around one of the source points of the Kaveri river. A

short drive from there brought us to Bylakuppe, an area with important Tibetan Buddhist settlements. We entered the Namdroling Monastery, the largest teaching centre of Nyingmapa Buddhism in the world. This complex has the jaw-dropping Padmasambhava Buddhist Vihara, called the golden temple because of its gilded walls. Inside the Vihara is a hall with huge glistening Buddha statues. Thousands of monks were praying in this hall. After lunch, we continued to Mullayanagiri, the highest peak in Karnataka. Nearby is the Baba Budangiri peak known for the dargah of the person who is said to have brought coffee to this region in medieval times. Some of the country’s best coffee still comes from here. Amazing coffee, leisurely walks, lush green hills, temples, waterfalls and some wonderful food - Coorg provided just the relaxed holiday we were looking for. HOW TO GET THERE: Madikeri is about a 3 hours drive from

Mangalore and 5 hours from Bangalore. WHERE TO STAY: Orange Country Coorg: Luxurious cottages set

in 300 acres of plantations with modern conveniences. HERITAGE RESORT COORG: Cottages set at different levels of a hilltop and the dining area and swimming pool on the crest of the hill. M AY 2 0 1 1

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For the Leaders of Tomorrow

In his new book, Ravi Chaudhry discusses some vital leadership traits to ensure success. RAVI CHAUDHRY’S new book, Quest for Exceptional Leadership: Mirage to Reality outlines the emergence of a new fifth phase of human enterprise that is redefining the criteria of success as well as re-configuring the routes to success. The author analyses the changing paradigms and provides a down-to-earth, realistic blueprint to acquire relevant leadership traits. Corporations do not have the option to wait; they have to re-align themselves with the new reality now. Based on substantial research and analysis, the book introduces some innovative concepts such as: Seven prime realities that adversely impact our businesses and lives. Seven allies to catalyse change that can augment social consciousness in business. Five circles of leadership attitudes to assess where you are. The journey from base camp leadership traits, to the summit of exceptional leadership. The author makes a compelling case claiming that those who embrace the new realism will achieve sustained profitability for their companies and “triple top line of joy, peace, and contentment” in their personal lives. It also focuses on corporate governance and ethics, an attempt to create a critical mass of today’s as well as tomorrow’s leaders to start pursuing the path outlined. It analyses the business-politics nexus and other prime realities that have virtually brought the world to its knees. For instance, in the first chapter Chaudhry says: “We no longer have a government of the people, by the people and for the people. It is a government of corporations, by corporations, and for corporations.” Chaudhry also identifies seven key players that could help bring about a transformation to “dissolve the unholy alliance between corrupt business and corrupt politics.” The 52

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book presents a new look at leadership and attempts to address two key challenges: how to transform today’s leaders and how to transform today, the leaders of tomorrow. In practical terms, this means: how to de-corrupt the minds of today’s leaders and how to make the minds of coming generations incorruptible. It has been well received so far. “In his book, Chaudhry has stressed the quest for exceptional business leadership that recognises and acts on the basis of the new realities and challenges of the 21st century,” says Jean-Pierre Lehmann, Emeritus Professor of International Political Economy, IMD, Lausanne, Switzerland. Others such as industrialist Ratan Tata too sound impressed. “I hope the book reaches out to enlighten the citizens of our country about the ills that are prevalent and helps in building a better society for the coming generations,” he writes. Chaudhry, the founder Chairman of CeNext Consulting and Investment Pvt Ltd, a firm that provides strategic advisory services to corporate boards, has indeed written a masterpiece worth reading.

Book: Quest for Exceptional Leadership: Mirage to Reality Author: Ravi Chaudhry Publisher: Sage Publishers Price: 375