Strategy Wall - 5th Edition-The Strategy & Consulting Club | IIM Rohtak

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ETO N I L P I C THEDIS HE T E M O OVERC S S E N I S U FB O S T A E THR ION T P U R S I D


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Articles Marvel Comics: Blue Ocean Strategy and Building the brand By Zaid Bin Nafees and Anuj Agarwal, IIM Sambalpur Marvel did a successful stint in the comic books’ market till 1997, the comic collections were valued very much by the affectionados back in the days. This created a comic books bubble due to many customers collecting comic books in the hope of getting better deal in the future. But as an economics rule, as the supply grows the price goes down. Just like the famous Tulip mania of the dutch golden age, this comic books’ bubble burst post 1997. Sales of the comic books fell down, causing huge losses to marvel comics. The company went bankrupt in 1997 and Toy biz bought the Marvel Entertainment group. To earn extra bucks and to diversify, Marvel started to sell rights of its characters to movie production houses. These movies were, Men in black movie series in 1997, Blade movie series starting in 1998, X-men movie series starting in 2000, and Spiderman series starting in 2002. All these movies has been highly successful in the industry. Earlier people worldwide used to recognize Superman and Batman more than any Marvel characters, but slowly spiderman became a worldwide craze, the 2002 spiderman movie earned $ 822 million dollars at the box office. The huge success of spiderman gave a brilliant idea to Marvel to cash in on the rest of its characters. In 2005 Marvel comics had a major breakthrough, when it managed

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a deal with Merrill Lynch. Marvel gave its superheroes as collateral to the bank to take $ 525 Million over 7 years, which it could use in 10 movies based on its characters (ref. 1). Marvel Universe Marvel started to introduce its characters like Iron Man (2008), The Incredible Hulk (2008), Thor (2011), and Captain America (2011). After introducing the main characters of Avengers series, Marvel almost introduced the whole marvel universe to the non-comic lovers, who could not previously identify these characters. People started to identify their characters and started to relate with them. Several people chose their favorite superhero from one of those. All those who were fan of these superheroes were definitely going to see them fighting alongside each other. Hence at peak of the popularity of its superheroes, Marvel launched ‘The Avengers’ in 2012. This movie raked in $ 1.5 Billion, becoming 4th largest grosser of all time, till 2012. The same successes had been repeated in the later movies of the Avenger series, Age of Ultron (2015), and Infinity War (2018). Comparison with DC comics If we compare DC comics to marvel, DC could not successfully introduce to the world many of its characters apart from IIM Rohtak


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Superman and Batman. After seeing the massive success of the Idea of introducing multiple famous characters in a single flick, DC comics came out with Batman vs Superman in 2016. It did a business of $874 Million because the both the characters were well known to people and they were already introduced in several films before. However it failed to do the same magic as avengers. In 2016 and 2017, DC comics came with Suicide Squad and Justice League respectively but both were dud in front of Avengers series. The mistake with both these multiple superhero flicks was that most of their characters were never properly introduced to the audience before launching these movies. Therefore they could not build an aura of DC universe to the global audience before launching the flicks and introducing the lesser known characters of DC universe. They could have introduced the lesser known characters before releasing these two flicks. The Strategy lessons which we can learn from the turnaround and huge success of Marvel comics are the following.

the business, most of the business get saturated at the mature stage. Always look for opportunities and new avenues for growth. Marvel concentrated on superhero movies, because it knew that comics market is not going to be great again and superhero movies are more profitable in digital age. 2. Think strategically, think long term, build the brand: it did not cash in on avengers without building its individual character brands in movies before launching avengers. It is now milking avengers, as well as separate character brands. DC did a mistake of introducing all its DC universe characters at once in Suicide Squad and Justice League, and failed at it. References: http://www.denofgeek.com/movies/ma rvel/34092/how-marvel-went-frombankruptcy-to-billions

1. Blue ocean strategy: Always look for new avenues for the growth of

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THE DISCIPLINE TO OVERCOME THE THREATS OF BUSINESS DISRUPTION By Rohit Dudi and Mehali Biswas, IIM Lucknow

“Strategy is not the consequence of planning, but the opposite: its starting point.” –Henry Mintzberg It is possible to start a business from grassroots level and catapult it to the height of achievement by crafting proper strategies, detecting the discontinuities that may pose a real challenge for the business in future. In business, when we speak of disruption, it actually means “Disruptive Innovation”. This term was coined for the first time by Clayton Christensen of Harvard Business School in his magnum opus “The Innovator’s Dilemma” in 1997. Disruption is not as scary as it sounds. It actually means an advancement in the age of globalization and industrialization. Disruption aka “disruptive innovation” depicts the creation of new markets, which earlier no one had thought of. It means understanding not only the present demands of the people but also having knowledge and insights about their future needs and demands. The theory of Clayton Christensen also throws light on the way small enterprises or firms with minimal resources entered the market, created new customers, attracted old customers, and finally disrupted the established market system.

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Image source: Google.co.in || the new model disrupted old business models||

Some well-known Disruptions of the existing business that we use in our dayto-day life. APPLE

FACEBOOK

4 Highly Disruptive Business Models

AMAZON

UBER

What Disruption poses for the business owners of today? Disruption has become a jargon in the entrepreneurial world. With the rapid emergence of disruptive business models, IIM Rohtak


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the existing scenario of business functioning and engaging the customers is undergoing a transformation.

So let us look at some of strategies and changes to cope up with disruption in the business competition.

However, the concept unlike innovative businesses is not new. With the advancement of technology, and rapid evolution in knowledge; wants and demands of people are changing. This is driving the business models to change in order to keep up with the pace of change. In this competition, the firms that could not match up the speed of evolution, failed like “Lonely Planet” but at the same time, start-ups like “Trip Advisors” snatched all the followers.

 To ensure business is ready for digitisation – it is vital to understand and accept that the current period is of digital disruption. So, for businesses it better to stay focused, innovate and collaborate instead of fearing or rejecting the new change. This will boost the effectiveness of the business; provide an exciting path for customers, offer them better, real time communication, and finally opening up some new market segments.  To ensure collaboration in different business teams– in the age of disruptive innovation, collaboration will act as the key to success. The team leaders of the business need to encourage communication and collaboration of inter-departments like heads of marketing and Information technology need to work hand in hand to embrace the changes. The firm should also pair up with the right consultants and technology provider to embark upon a seamless journey of disruption.  Taking advantage of the internet speed and rejuvenating the subscription model – gone are the days of DVDs and cassettes, even saving music in external hard disks or pen-drives, as the massive internet speed and mobile tech-advancement helped in streaming of high quality videos and music contents for a monthly payment of fees. Ganna.com, Wynk Music etc. are two of the many that supply millions of listeners for

In the 21st century what we think of mere disruption are actually catastrophic changes that are revolutionising the way firms engage with their customers, creates seamless and memorable experiences for them by understanding their wants. For example- the 3600 video launch by YouTube gives the experience of virtual reality that was once only a dream. The official VR channel of YouTube has many attractive offers for the viewers including music performances, news events, sports, racing and films. Now, this is not only a disruption but a remarkable shift in business plans to engage the customers.

Abilities to overcome the disruptions in business For any business owner it is perilous to underestimate the power and magnitude of disruptive models of business. No business wants to suffer the phase suffered by Kodak, once a market leader and now an extinct brand. The Strategy and Consulting Club

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their songs demand. Nowadays daily use materials to vital medicines all can be obtained by online subscription and shipped directly to customers. Examples of Grofers, Lenskart, and even beauty parlour services like UrbanClap are new disruptive models working in different cities. Thus, existing business firms need to extend their arms in the new markets created to prevent from being endangered.  To cope up with changing definition of consumer convenience – as the definition of convenience is changing for customers with the changing era, businesses are fighting hard to come up with better seamless services to satisfy them. For instance, anyone who had once stand in a long queue outside airport or railway stations to book tickets know the pain of it. But now with the different applications (like IRCTC app, Goibibo, Paytm) in our smart phones we can book tickets with preferred seats anytime, anywhere. Similar is the case for hotel booking or movie show booking, etc. Companies need to come up with even better solutions to give utmost convenience to customers.  Introducing gamification – this technique involves the use of different elements of a gaming strategy by certain companies on their own brand interface or platform. This includes points, rewards, stars, etc. to engage

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and attract customers to buy more products or services from them. For instance, Big Bazaar has its own card where points get added on each purchase and customers can redeem it on any next purchase. Starbucks has its own reward system where customers on buying certain products can earn points for future purchase. All these are to increase the number of visitors to the stores.  Self-disruption – till now, the best business strategy to live up to the expectation of consumers is selfdisruption. All the big players in market like Apple, Amazon, etc. follow it. The steps are to find new ways to adapt, evolve, and then recapture the market to stay relevant. Companies should follow this model where they should understand the need of customers before customers themselves and come up with solution to provide the instant they feel for it. Thus for any business or company, whether small medium or large, new or existing, all require focussing on the customers and their experience to thrive in the competitive market. This includes spending more resources and capital on research and development to think and solve problems anticipated for future; or else the business themselves will become the victim of disruption.

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5 Problems in HR Analytics – and how to solve them By Abhinav Mahapatra, ISB Hyderabad & Ridhima Walia, SIMS Pune One of the biggest talking points in the HR industry in recent times is ostensibly about nomenclature around analytics – namely HR analytics vs. people analytics. While many commentators have written it off as semantics, what is overlooked is that the scope of both varies. HR analytics is often focused on the efficacy of policies of the HR department which essentially is a subset of people analytics which focusses on both the policies and execution of the same by people managers. This brings us to the interesting quandary which is the first problem regarding HR analytics namely the definition of scope of HR analytics.

Image 1: Varying Scope of HR Analytics (Source: Self-generated) Image 1 is to be viewed not just as physical concentric subsets, but philosophical ones as well. Essentially it points out that there are two issues in defining the scope of HR analytics – (a) the people involved and (b) the type of policies impacting the people. The fact is we can never get down to a “one set, one type” definition. HR has various The Strategy and Consulting Club

facets – recruitment, engagement, training & development etc. and each of these requires a distinct handling. For example, it wouldn’t work to look at one’s own employees for recruitment as a consideration set. Naturally the relevant talent pool will be a better set to consider. Also, for training, would you consider only the efficacy of the curriculum which has been set by the HR department or also the way functional managers convey it? The truth is that the scope must be tailormade to specific functional needs and customized to each company. Recruitment will require a larger consideration set, while other functions could require a smaller one. In the same way engagement will be largely around HR department efforts, while training could involve functional managers as well. And based on company practices, a startup could have a very different accountability structure than a large MNC. This brings us to the next issue, namely how will one isolate HR policies impact on metrics. Looking at a single metric like revenue generation for salespersons for instance, there are multiple factors which would affect it. Far too many HR organizations would run a simple correlation (not causation), between the introduction date of a HR policy and a spike/fall of sales and reach a conclusion. But spike/fall in sales depends on multifarious factors from seasonality, industry growth rate, government policies, compliance etc. Therefore, it is important to isolate these factors from HR impact.

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From a statistical point of view, one must understand that HR policy cannot be a coefficient which represents its efficacy. One, it is abstract and two, it cannot be considered in isolation. One must add as many factors as possible into the equation and the residual error factor is the abstract HR policy impact on the metric. For the above example, an equation could be as follows: Sales = α + β1*Seasonality + β2*Client Growth + β3*Salary +……………+ e α is constant sales that would happen even without a rep. β values correspond to the impact of each factor, external and internal, impacting sales. e is the what is left out, the unquantifiable, the abstract. And this is essentially what needs to be considered to see the impact of employee satisfaction. However, if there is a definite policy which can be quantified, even by dummy variables, they must be quantified and checked for relevance. A holistic approach therefore, will give the best picture of each factor’s efficiency. The third issue is what would be the benchmark for efficacy of people policy. The problem with market research is that the data is very broad. Why should a startup in IT/ITES with 2 HR resources compare its efficacy with an average for IT/ITES companies in India? The truth is competitive benchmarking doesn’t make sense in the long run. It condones a lower performance level as well in case your peers are not performing very well. Benchmarks must always be subjective and flow from business needs. If a churn rate of 5% is what give best results for a firm, then that should be the target. HR often is subsumed by competitive numbers rather than work closely with business and understand what it expects.

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Another issue which is very relevant is where to source data external to the company from. It is alright to look at data inside the firm, but where can one get data (in an ethical manner upholding data privacy) from external sources.A low hanging fruit is to leverage the firm’s ATS data which focusses on a larger set than just employees. The biggest problem is ATS data is often static. Therefore, companies like LinkedIn which are uniquely placed with access to fresh data are pushing a Talent Intelligence narrative which is essentially going to help companies with data on Talent Pools and at an industry level. The final issue is HR not understanding analytics. HR professionals can look at metrics and how it impacts overall employee parameters. But when things veer into the realm of statistical correlation and predictive analysis, it is generally beyond what HR can understand. Experts need to be brought in and in big firms that is essentially the analytics department. For smaller firms without analytics team or bandwidth, it needs to invest in some off the shelf software which can help it in advanced analytics, especially predictive. What is the point of finding all the data and analyzing it, if it doesn’t hint to where things are moving towards. For example, one should know how many employees and if done properly, exactly which employee, is prone to leave the firm in the next 6 months. This helps planning and resource allocation tremendously. Modern business is war, not from a competitive point of view, but from the strategic planning point of view. Battles are tactical and are fought well enough today, but no one is preparing for the more strategic war. And as Napolean Bonaparte famously quoted, “War is ninety percent information.” IIM Rohtak


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IOT based solutions in Fleet Management (Telematics) By Akash Singh, IIM Shillong For fleet operators, heavy vehicle manufacturers and market researchers collecting operational data has been a standard practice for years. In order to optimize operations the transportation industry has been using technologies like Telematics i.e. storing remote truck data. Various observations like location, driver behavior etc. continue to drive direct business transformations and processes.

In case a heavy vehicle viz. truck goes

One of the transportation industry’s primary concerns amidst others is estimating the vehicle uptime and technology has made it possible today to build on the existing data systems to deliver these key performance indicators. To make it happen, advanced fleet management in integration with Internet of Things (IoT) comes into picture. But to estimate its actual potential, it’s essential to understand the relevance of technology in the transportation industry.

sunk cost. Both service centers and owners

down for a week or so, the revenue lost is huge. Transferring the truck to a repair service station with an expertise to handle the damage is a challenge in itself, keeping in mind the logistics involved. And to pay the drivers meanwhile, so that the driver does not opt for another offer involves a lose as well, if repair time stretches as capacity and potential revenue is lost for both parties involved. Telematics have been used to monitor data to collect information to assist optimize uptime. But it has struggled to provide some substantial insights on monitoring vehicle

operation.

Using

Diagnostic

Trouble Codes (DTCs) as a gauge to understand vehicle health has been the cause of trouble in telematics. DTCs are

Relevance of Vehicle Uptime

just alerts to point that a sensor is picking In this industry the entire revenue chain is dependent on reliability and uptime. As long as vehicles are running, they are rolling assets representing direct revenue. In order to ensure on-time deliveries along with

improved

customer

relations,

consistency in performance of vehicles is

up some unspecified probable problem. Manual interventions like mechanics and all is needed to determine the nature and severity of problem, if any at all. With the size and data volume of a large fleet the time and henceforth cost involved can be enormous.

equally important as to retaining a dynamic and productive workforce. The Strategy and Consulting Club

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software of workflow to DTCs, past repair Utilizing Telematics Data

histories etc. for enhancing fault guidance

Without context there is no point relying on

systems. As a result, repair time and rates

telematics data on its own. To improve fleet

have

uptime

environmental

diagnostics provided by IoT solutions

conditions and other additional vital

prevent failures more efficiently. IoT

information can actually provide the level

systems use machine learning to enhance

of deep insights needed. IoT solutions

and hone diagnostics and repair processes

provide data driven insights for a business

over time. Better quality repairs in a lesser

transformation and hence the transportation

time owing to predictive maintenance

companies who have already turned to

schedules, involving mechanics who know

these solutions will definitely have the first

the fault in the engine beforehand owing to

mover advantage. IoT can help companies

data mining from the whole fleet and

transform from reactive to predictive

updating data as the vehicle moves through

analytical strategies. To understand how a

its service life, provide the companies an

vehicle

added advantage that acts a differentiator to

historical

is

data,

performing

can

help

manufacturers predict potential failures and

reduced

significantly.

Accurate

increase customer base.

allows them to take an approach that is more proactive and prescriptive to achieve

Adopting IoT

and even exceed their objectives. IoT in

Stiffening

fleet

regulations such as stringent emission

management

has

innumerable

government

standards

repair time, validating data for audit trails

manufacturing, management and servicing

to systematize incident resolution and

across the transportation industry. New

documentation, improve route planning,

technology requirements will evolve as the

change resting points for better driver

best solutions over time. IoT can provide

alertness etc.

the opportunity to improve critical KPIs uptime

affect

by

heavy

and

advantages viz. saving warranty costs and

like

will

standards

enhancing

vehicle

existing

Peterbilt, for instance has successfully been

diagnostics and telematics systems with the

deploying

data analytics.

analytics

and

automation

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Real-Time Marketing Vs. Right Time Marketing By : Rohit Khanna, IMI New Delhi

Today’s consumer expects brands to be more responsive and reach when he/she needs them. Marketers work on different strategies to reach their consumer effectively but often get bemused if they want to reach their customer in real time or right time. Real-time marketing is a kind of marketing which is based on up to date events. The market plan is not created in advance and is focused on immediate and relative trends. The marketers need to base their content on real-time trends and stay updated on any upcoming event. In this type of marketing, marketers need to respond quickly with relative content. For example, in 2011, Pepsi hurled their Diet Pepsi Skinny during Fashion Week. The product was not advertised before and was directly affiliated with the event. To have interactive communication, the content needs to be shareable. We all remember how Oreo grabbed the opportunity that in 2013 Super bowl during the temporary blackout with a notorious tweet that created a buzz postevent.

The content posted by the company was undemanding, distinctive and unique which is one of the major requirements in Realtime marketing. Since this type of marketing is spontaneous and might lose context in a short span of time, it is necessary that marketers spread the relevant content using the correct platform and target audience. Recently, Mother Dairy’s social media team took advantage of a hilarious meme, which is going viral all over the internet.

Image: Mother Dairy promotion using the viral meme Source: Mother Dairy facebook page Contrary to real-time marketing, it is important in Right time marketing to identify a right person through a blend of digital data and in-purchase signals. The marketers should focus on the right channel The Strategy and Consulting Club

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to target their prospective customers. Today’s customer makes online as well as offline purchase. The concept of Show rooming has confused the marketers in term of their channel strategy. Marketers also need to identify the right moment to market their product or services to a customer. For example, Johnson & Johnson’s headache tablet Tylenol ad appeared on e-broker websites when the stock market fell more than 100 points. Many marketers might prefer to use Remarketing in case of right time marketing strategy which involves displaying ads to people who have already visited your website but didn’t make any purchase. Most of the travel apps use this strategy to attract customers. By incorporating the correct data across diverse channels to comprehend consumer’s behaviours at the moment, business’s can discover the right answers to meet the customer expectations. When it comes to real-time marketing, it is always solicit of viral shifts. Since many people want to be part of the latest craze, the product or service has a tendency to become popular in the crowd. Social media provides brands with idiosyncratic shortlived moments to connect with audiences. Many brands have tried to use real-time marketing by flooding banner ads during any major events which have proved to be unsuccessful. It is important to remember that brands should not spring on every trend as it may simply add noise, but no value to

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the conversation. The social media team must be competent enough to ensure that any such post does not dilute the brand equity. In 2015, Lenskart was forced to apologize when it came out with a promotional message based on Nepal earthquake. As compared to real-time marketing, the right time marketing is driven by context which helps in the better interpretation of your customer behaviour and use data to interact with customers uniquely. It is longer –term and pensive approach as it involves researching thoroughly. The requirements of the customer are given priority rather than events that are not pertinent to your customers. Apart from timing, right time marketing is also based on customer-centric interactions. For example, when a customer adds items to the cart while shopping online and logs out before placing a final order, the seller might attract customer by suggesting complementary items or might appeal through a sense of exigency – ‘Only three items left, Order soon!!’ With new social media platforms emerging at a faster pace, marketers and brands must be ready to make changes in their strategies with time. As the quote says that chance favors the prepared mind, it is important to be marketers to have proper planning to capture every opportunity that comes through either type of marketing.

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Container Shipping and Blockchain By Kartik Mahajan, Indian Maritime University The block chain symbolizes a shift in power from the centers to the edges of the networks. - William Mougayar

Maritime sector is a vital part of the supply chain network. Be it unitized cargo, breakbulk cargo or liquid cargo one of the most cost effective modes of transportation has been shipping. Transportation cost plays a major role in deciding the cost of the commodity and ultimately the entire transaction cost. The ratio of cost per tonne movement of cargo by sea, rail and Air comes to be .50paisa: 1 Rupee: 4Rupee.Till early 1970’s the major cargo movement was in form of break-bulk where the cargo was packed into sacks or carried in bulk. To make the carriage of cargo easier and safer the shipping containers were introduced and since then they have become the lifeline of international trade. To ensure the compliance to various rules of carriage and international trade laws, the entire container shipping is governed by number of important documents which carry utmost relevance. These documents include Bill of lading, Shipping bill, Bill of entry etc. The requirement of accurate documentation and internationally compliant procedures makes it a specialized system, which requires assistance of certain dedicated professionals. These complexities in the system gave rise to intermediaries like freight forwarders, customs brokers, cargo agents etc. The forwarders and brokers entered into the business and lived up to the expectations of the industry, to act as a catalyst for cargo carriage. But as the shipping grew as an industry so did its scale of operations. Today merchant The Strategy and Consulting Club

shipping is a truly global industry which is involved in cargo throughput of 10.3 billion tonnes. According to UNCTAD in 2016 (UNCTAD) the world sea borne trade volume accounted for 90 percent of total world merchandise trade. With scale of operation appraisal and drastic technological advances the stakeholder has started to feel that the intermediaries are no longer adding as much value. The recent discussion on the dwell time analysis has backed the stakeholder’s view that the presence of multiple intermediaries slow down the entire operation. “Dwell Time,” refer to the amount of time a container waits to get picked up at a marine terminal after being unloaded from a vessel. Dwell time is an indicator of how efficient the ports are operating and how quickly the containers are flowing through the terminals. (PACIFIC MERCHANT SHIPPING ASSOCIATION ) Block chain technology has took the world by storm and various businesses are coming up with ideas how this technology can give impetus to their business. Container shipping industry is more than keen to take advantage of this technology to improve its operations. As discussed earlier the documentation / paper trail in processing of a shipping container from its origin to its destination is enormous and requires multiple intermediaries to complete it. To take an estimate of this in year 2014 Maersk (shipping company) did a research. IIM Rohtak


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They followed a refrigerated container filled with rose & avocado from Kenya to Netherlands. It was found that almost 30 intermediaries & organizations were involved in processing of the container. Further the shipment took about 34 days to get from the farm to the retailer. These 34 days included 10 days wait for the documents to be in order and processed. (Opensea pro)This experiment highlighted the inefficiency which container business is facing. Maersk has since joined hands with IBM to come up with a block-chain backed solution for container shipping business. The system is expected to enable peer to peer network which is a must for container shipping. Further the electronic approvals for the shipments by the authorities and further execution of smart contracts is expected make the entire system seamless. The paper trail would become nonexistent which will improve the overall efficiency of the system assuring speedy transactions. Also what Maersk believes is that this system would improve the transparency whereby all the parties involved can have end to end visibility of consignment throughout the supply chain. (IBM) Though major stakeholder feels that blockchain is a right solution the container industry needs at this point but the industry veterans have a certain apprehensions too. The first issue is that shipping is a specialized industry and uses certain terms / conditions and contract which are not commonly know. They apprehend that the block-chain system may not be able to adapt and recognize such terms. For example there is a term called lay-time

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which accounts for the time allotted to vessel to load the commodity at the port, if it surpasses this time its liable for demurrage. The second concern which is much more serious is that since the starting of trade among humans the business has been carried out by the virtue of trust and flexibility. Each party in the business has its own terms of carrying out business and from centuries negotiations and counter negations prelude any business transaction. Will the universal system of block-chain provide flexibility required for business transactions? .It’s important that system needs to be configured to include special terms and conditions at inception, otherwise the parties’ liability exposure will be even higher than the liability saved by the system’s use. (Opensea pro) Like any technology that has ever come into existence this one too carries the equal magnitude of expectations and apprehensions. There is no two ways to the fact that container shipping is in a dire need of improvement in its current process. Block-chain technology is expected to provide this solution by creating a system of trust and transparency. Once it comes into the process the long waiting times for the cargo at the port due to documentation will be reduced which in-turn will make international trade more lucrative. Though there are certain apprehensions and questions in mind of certain stakeholders but the technologies’ advantages surpass the apprehensions. It’s left to see how and when this technology be accepted by the industry but it is sure to change the system for better.

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How can AI be harnessed to create value for today's businesses By M Kanagarjun, IIM Indore A convergence of improved algorithms (from tremendous increases in computing power) and training methods, availability of large amounts of data (that can be fed into these algorithms) in the cloud, has propelled AI from hype to reality

witness their revenue increase by 6%-10%. 

Operations: Since operation practices and processes generate a wealth of data and provide measurable outputs resulting from similar routines and steps, they are naturally suited for AI. Many AI concepts related to Operations like predictive maintenance and nonlinear production optimization are not industry specific and work across Industries, and hence can be procured from an AI vendor and subsequently trained with their company specific data sets to achieve the desired outcome.

Procurement and Supply Chain Management: Given the rich availability of structured data and repeat transactions in the domain of procurement and supply chain management, AI’s potential in the same is immense. Sourcing recommendations based on analysis of a host of governing factors like weather, social media, macroeconomic factors, news, and supply-demand dynamics, chatbots, and semiautomated contract design and review are some of the popular applications of AI in procurement. The profuse availability of historical data for supply chain management renders the application of AI in SCM even more simple, as the learning is simplified in this scenario.

With AI beginning to realise its potential in achieving human like capabilities if not exceeding, the time is ripe for business leaders to harness the specific strengths of man and the machine forming a complimentary fit between them and it is also critical for companies to figure out how humans and computers can play off each other’s strengths as intertwined actors to create a competitive advantage. Investments in Artificial Intelligence/ Machine learning can be broadly classified into the following: 

Process optimization

Product Innovations

Process optimization Productivity

and

increased

Adoption of AI across the different components of the value chain / core business process and operations of a business can help create substantial business value 

Marketing: Personalised services, interactions and advertising can be offered to customers through AI and it is forecasted that brands that create personalised experiences for its customers by integrating advanced digital technologies

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According to a report by McKinsey, annual AI driven revenue growth is forecasted to be around 50%, due to its enormous potential to drive significant productivity improvements through the automation of manual/physical tasks in a predictable environment, but the automation is subject to a subtle interplay between the factors (listed below) and the trade-offs among them: 

Supply and demand dynamics of the labour market (availability and cost of manual labour, when the required labour is cheaply available, then the costs of automation should be below the labour costs in the foreseeable future to justify the investments in automation

Even though popular belief posits that automation will primarily replace low-skill, low-wage activities on the front line, the existing technologies are also believed to be likely to impact a significant percentage of the activities performed by even those in the highest-paid occupations (physician, risk analysts etc.,) with a study by Bain & Company estimating that activities consuming more than 20 percent of a CEO’s working time could be automated using current technologies from analysing reports and more routine ones. AI investments in the workplace is all about machines enhancing human brain power for the reason that capabilities such as creativity, sensing emotions, out of the box thinking are difficult to automate and are core to human experience, but surprisingly the time spent on activities requiring these capabilities are extremely low and hence, with automation of more routine and repetitive tasks, there is a potential to generate a greater amount of meaningful work allowing employees to focus more on tasks that utilize creativity

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and emotion and focus on work of higher value.

Product Innovations The concept can be developed into a product provides it satisfies the seven factors listed here: •

switching barriers (also includes the emotional barriers of the consumer)

receptiveness of consumers to using AI in a particular category or mass adoption (for ex., are people ready to accept the idea of pilotless aircraft even though auto-pilot does most of the flying)

its ability to deliver a better/improved TCO (total cost of ownership)

universal utility scalability

the presence or likelihood of introduction of relaxed regulations regarding the technology

ecosystem compatibility

They should also consider alternate sources of revenue stream from the product like monetizing the huge sets of raw data collected from the device/application which can offer valuable insights into consumers and hence, the possibility of forming strategic alliances with firms which are dependent on this data should also not be ruled out. To ensure that the product innovation/ new product serves the customer needs to pinpoint accuracy, they need to understand their consumers better by improving the quality of data collection, where they may have to rely on firms which have access to the necessary data and this also calls for development of standards across OEMS to enable data sharing

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forming different kinds of partnership models. With regards to product innovation, every firm will face gaps in its capabilities during the phase of product development, which include computing power, algorithms (which lack the requisite sophistication to deliver the results) and data availability (lack of quality labelled training data). To address these gaps, the executives have to make a decision about investing in the different layers of the machine learning and deep learning technology stack. It’s worthwhile to note here that companies that restrict their investments to specific layers amongst services (solution and use case), training (data types and methods), platform (Architecture, algorithm and framework), interface, and hardware are at a disadvantage since it handicaps their ability to deliver end-end solutions. Since, this

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entails significant investments and commitment from the management, firms can pursue end-end solutions through strategic partnerships, alliances or acquisitions. AI application development, more often than not, involves capabilities that are not available in-house which implies that for applications related to new product innovations, which are likely to serve as sources of differentiation for a long time , firms need to foster a partnership ecosystem with AI specialist firms in order to gain access to the required technology, overcoming their propensity to own the algorithms and data which is not economically feasible due to the gaps in vital talent and technological know-how.

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The Strategy and Consulting Club Indian Institute of Management Rohtak Team Members Ijas MC Lavesh Bhadada Mayank Banka Nishant Garg Taslish Chadha Varun Parvathaneni

Disclaimer: The views and opinions expressed in this magazine are those of the authors and do not necessarily reflect the opinion of the stakeholders of IIM Rohtak

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IIM Rohtak


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