The Strategy Wall || 31st Edition

WAZIR - THE STRATEGY AND CONSULTING CLUB OF IIM ROHTAK

“You are everywhere, but you don’t have to be. Strategy is a decision to take a path, to say no.”

— Kristina Halvorson

10 STRATEGIC IMPERATIVES FOR INDIA TO ACHIEVE ITS ENERGY VISION

In a new report, experts from Arthur D Little have analyzed India’s energy industry and its key ambitions, including the goal of becoming energy independent by 2047, meeting growing demand for power consumption, and boosting renewable energy

Based on their research, the consultants set out 10 key imperatives that will guide India in achieving its energy vision across the value chain of generation, transmission, and distribution.

Power generation

With about 405 gigawatts (GW) installed power capacity, India is the third-largest producer of electricity in the world

A range of factors – including population growth, digitization, technological advancements and growth of the middle class – is expected to grow demand for electricity consumption According to an estimate from NITI Aayog, electricity consumption will grow at a rate of around 5% per year up to 2047, creating the need for India to more than double its generating capacity in the next decades.

Scaling up green energy’s contribution for an affordable and cleaner energy mix – by introducing reforms to improve investors’ confidence, removing entry barriers such as difficulty in land acquisition, boosting domestic manufacturing of photovoltaic (PV) cells and wind equipment, and incentivizing adoption of rooftop solar

The industry should emphasize baseload technologies like offshore wind and nuclear generation, increasing nuclear energy production by establishing scalable small modular reactors (SMRs), utilizing locally available thorium, and building a regulatory environment conducive to these alternatives

Promoting green hydrogen as a carbon-neutral energy storage solution – by increasing the use of green hydrogen as a carbon neutral energy storage solution through financial incentives for stakeholders and by ensuring self-sufficiency in electrolyzer production Readily available biomass can generate green hydrogen as long as robust logistics are in place to support it

Accelerating carbon capture, utilization, and storage (CCUS) adoption for decarbonization – by accelerating adoption of CCUS for decarbonization via introducing financing channels for CCUS implementers, investing in R&D to identify cost-effective mechanisms, establishing a start-to-end governance framework for CCUS management, and participating in global forums to leverage recent developments.

Power transmission

In India, transmission of electricity bears a technical loss of 3.6%, which is high compared to other nations. Key will be to ensure the segment returns to profitability and is future ready to accommodate changing dynamics within the industry

Enhancing infrastructure development and capacity augmentation – by improving infrastructure through deployment of anti-theft and anti-oxidation cables to reduce theft and technical losses, shifting toward highvoltage direct current (HVDC) lines for long-distance transmission, imposing stricter penalties for transmission network developers upon default, and expediting development of interstate transmission lines

Securing future of national smart grid – by designing and implementing a strategy for a smart grid that emphasizes efficient data collection by installing smart meters at nodal points, securing data communications

by using narrow broadband technologies such as RF-2 4 GHz, building data concentrator units, and piloting dedicated systems like smart grid control centers (SGCCs) and outage management systems (OMSs)

Creating opportune deployment of microgrids – by deploying microgrids in coordination with local operators while retaining the possibility of complete integration into the national grid in the future

Establishing world-class grid congestion management – by acknowledging that more efficient use of available network capacity will become a necessity with an increasing share of renewable energy Unnecessary grid investments and ineffective grid operations must be avoided through the deployment of direct control methods (e g , peak shaving), market-based methods, or a combination of both.

Power distribution

In India, the distribution of power is the most troubled segment across the value chain. Of late, state distribution companies have been characterized by negative net worth (-$4.49 billion) and high debt ($62 87 billion), along with operational inefficiencies (aggregate technical and commercial losses of 21.6%). The need for transformation within the distribution sector is urgent.

Harnessing digital transition of power distribution through smart meters – by developing digital infrastructure like smart meters to transform energy distribution via designing consumercentric engagement strategies, phasing in nationwide deployment with constant feedback collection, and investing in a multilevel data security system using concepts like root of trust (RoT) and public key infrastructure (PKI).

Pushing for increased private player participation to improve efficacy – by increasing private player participation with the help of supporting regulatory frameworks as well as financial support in terms of subsidies and rebates for private entities

Scaling up adoption of power exchanges – by enhancing power exchange markets via introducing a market-coupling operator to discover a common market clearing price (MCP) across exchanges, initiating energy derivative markets with regulatory frameworks that support fair price determination and shorter credit lines, and considering a market-based economic dispatch model to prevent complete replacement of power purchase agreements (PPAs).

Conclusion

Energy independence, efficiency and sustainability is of growing importance to leading nations By leveraging the 10 key imperatives outlined, India can drive strategic reform and achieve its energy vision

UK CONSUMERS STILL WARY OF SOCIALISING VIA METAVERSE

The metaverse may take longer than five years to become mainstream, according to 28% of UK consumers Meanwhile, only 15% said they would be comfortable socialising via the technology –something which may slow its widespread use even further

A concept historically more linked with sciencefiction, the ‘metaverse’ has become the latest technological trend to excite investors around the world Metaverse technology seeks to build a network of 3D virtual worlds focused on social connection, and is forecast by some as the next iteration of the internet – with the global network finally manifesting a single, universal virtual world

The concept of the metaverse has long been the preserve of science-fiction dystopias, but it came to prominence as a business concept far more recently. The metaverse was brought to many people’s awareness when Mark Zuckerberg announced that Facebook would rebrand to Meta – a Metaverse company, in 2021 While the move prompted a veritable gold-rush oflarge companies throwing even larger amounts of money at their own metaverse preparations, however, just what the metaverse is, or how it could be of practical use to most people, is as vague as it was two years ago.

Cutting through the hype surrounding the metaverse, its primary promise was to build a network of 3D virtual worlds focused on social connection – but where users could also invest their money, or function as part of a remote labour force. This seemed an attractive prospect to many businesses, not only because in the wake of pandemic lockdowns illustrated the need for some ‘shared space’ to command remote workers from, but because ‘metaverses’ suggested the potential of monetising the concept of human social interaction, in a way never before seen.

Actually making that sale has always rested on the general public seeing the metaverse as an exciting platform, where they would actually want to spend time – and not just a 3D marketplace for NFT grifters, and lowresolution mini-games they could get on their phones New research from KPMG suggests that the billions sunk into Meta’s metaverse, and many more like it, have so far struggled to have that impact Indeed, while a headstrong cohort of 2% of respondents assured KPMG that the metaverse would become widely used before the end of the year, less than one-third of British consumers could see it catching in the next five years. Meanwhile, a sizeable 14% chunk did not believe it would ever become mainstream

Even when the metaverse does catch on, it seems unlikely that it will be in the way many of its proponents had hoped A 37% portion of the 3,000 UK consumers KPMG polled said that they did in fact have positive opinions of the metaverse, just ahead of the 31% with negative opinions, and the 32% who did not know enough to form an opinion However, even with this thin level of positivity, those consumers who were happy to engage with the metaverse suggested it would be in ways which were far from interactive A 36% portion of respondents said they would be willing to seek out entertainment via the metaverse, but that fell steeply when less passive modes of use were suggested

Critiques of the technology’s poorly populated and abusive environments seem to still be at the front of most consumers’ minds. Previous research suggests that 67% of users have found the metaverse is “hostile to women, people of colour, and sexual and gender minorities ” As such, it may not be surprising that only 15% told KPMG they would be “open” to using metaverse platforms for socialising. At the same time, just 19% indicated they would be willing to use the metaverse for work purposes. Worse still, the largest group ofrespondents said they would not be interested in using the metaverse “for anything in particular”. This 49% cohort included the people who said they would not use the metaverse at all

Ian West, Head of Technology and Alliances at KPMG UK, commented, “Perceptions of the metaverse from UK consumers seem broadly positive but there is more to be done by those who seek to pursue metaverse applications to persuade potential customers of its benefits. Ultimately for the metaverse to become a success, it needs to convince a mass audience Businesses can invest in the technologies but unless there is customer demand for it, it won’t be as successful as the potential it holds ”

With consumers still unconvinced of the metaverse, the idea of being able to monetise social interactions remains a distant promise With huge investments having yielded little to that end, the likes of Meta have already announced they are now prioritising investing on AI as opposed to the metaverse – suggesting its hypetrain may be swiftly running out of steam, and leading some commentators to have pronounced the concept ‘dead’ KPMG’s analysis might not have arrived at such a dramatic conclusion – but the prognosis for the metaverse is not bright, if it cannot shake off the its reputation as a drab, legless space filled with bigots

INVESTMENTS IN ESG BOOST REVENUE AND EBITDA GROWTH

Companies which take environmental, social and governance policies most seriously enjoy enhanced results, according to a new study Firms with the best gender diversity on their boards doubled their growth rate, while firms with better sustainability credentials had a 3% greater EBIDTA margin

“Our findings provide much-needed perspective in the debate as to whether ESG activities correlate with financial performance,” said Axel Seemann, advisory partner at Bain & Company. “This new data shows that positive ESG outcomes are a trait of successful companies This should encourage private companies and investors to confidently double down on ESG efforts. We only expect this correlation to strengthen as ESG data becomes richer and more nuanced ”

Bain undertook the research in partnership with EcoVadis, assessing how ESG activities and outcomes have impacted 100,000 companies. The research examined how various aspects of ESG activities revealed in EcoVadis scorecards including implementing practices to reduce carbon and improve DEI, embedding sustainability into management processes and procuring sustainably correlate with both ESG outcomes and financial performance.

The study found that companies which scored highest on the S component of ESG had higher executive team representation for women on average The firms which excelled in this regard also tended to have better financial results. According to the study, companies that rank in the top 25% of their industry for executive team gender diversity had annual revenue growth of 4%, compared to the worst performers, whose growth was just 2%. Their EBITDA profit margins were also beefed up by the practice – with the leaders sitting at 12%, and the laggards on just 9%.

ESG leaders also had higher employee satisfaction, something which is proving increasingly important in the global economy. Firms with higher staff satisfaction tend to have lower rates of attrition – with staff focused on growing their careers within the firm, and therefore improving the firm. Bain found that, in line with this, firms with higher employee satisfaction had three-year revenue growth as much as 5% higher than those with less-satisfied staff.

Factors which helped to improve employee satisfaction ranged well beyond the basics of fair pay and ensuring a safe work environment, too Top benefits may include career training, mental and physical healthcare, childcare, and educational opportunities, all of which boost employee satisfaction and, as a result, productivity and retention These findings emphasize the opportunities for private companies to improve their ESG efforts, which currently lag those of public companies Only 35% of large private companies achieve top scores for carbon management in their supply chain, compared to 53% of large public companies, the research found.

As pressure mounts on firms to do more on sustainability and climate change, it is also becoming more apparent how early movers on environmental policies are feeling the benefits. Laggards on supply chain sustainability typically enjoyed EBITDA margins of 11% between 2019 and 2021. In the same period, leaders enjoyed a 14% margin

Of the firms to score highest for EcoVadis ratings on carbon management, 53% of public companies are in the highest bracket, compared to just 35% of large private companies This presents an opportunity for private equity investors, looking to quickly add value to their properties. This will likely be buoyed by another statistic pointed to by the researchers – some 93% of limited partners surveyed by Adams Street previously said that investment returns are enhanced by incorporating ESG factors into their decision making

“These findings should motivate companies at all levels of ESG maturity to redouble their investment in accelerating their sustainability journey,” commented Sylvain Guyoton, Chief Rating Offering at EcoVadis. “For companies in nascent stages, this means developing sustainability management systems with policies, action plans and reporting. Companies at mature stages can pursue more advanced capabilities such as regenerative resource management and product circularity Ultimately, cascading these practices into their value chains can support, for example, Scope 3 decarbonization and circularity initiatives, and also puts those trading partners on the same path to value creation. Our research shows this hard work will be well worth it ”

THREE REASONS WHY BUSINESSES STILL DISTRUST THEIR DATA

Internal appetite for trusted operational data has never been greater, so why are there still trust and quality issues in many organisations, asks Rajith Haththotuwegama, Data Analytics & Automation Manager at Tecala.

Six years is a long time in technology Reflecting on that timeframe, one is likely to characterise it as a period of incredible change.

And yet there’s one constant issue that’s nagged at business teams and leaders across this whole period of time: data quality Indeed, as far back as seven years ago, data quality was identified by KPMG’s Global CEO Outlook as a key concern among C-level management

This is similarly reflected today in recent MIT Research, where data quality is second only to a related data domain – governance – in the priority list of chief data officers.

Today, Australian businesses have renewed their focus on data quality in the first part of 2023. This is being driven by a sharper need to understand what’s happening in different parts of operations and to use that to drive better business decision-making.

During challenging operating circumstances, accurate data is naturally in high demand to help businesses and leaders make more data-informed decisions Trusted data is a crucial input into restructures, relaunches and refocuses, into growth ventures or pivots, into achieving efficiency and navigating the challenges of staff shortages In short, good data can be used to drive great outcomes.

However, it’s clear not every business has good, clean data. It’s clear that many have fallen, and will continue to fall, short of the mark in terms of achieving a level of data quality that everyone in the business trusts

Businesses typically fall short in three key areas. They do not have a way of getting information in a timely manner; they do not understand the provenance of the data – where it came from, who touched it and how it was influenced by different business rules; and they don’t fully comprehend the risks to the business of using or interpreting the data in certain ways.

Data quality may be a difficult challenge to solve, but it’s not impossible. It’s worth digging into each of these three key areas in more detail to raise awareness of these pitfalls and to drive actions that can either build or enhance quality – and trust – in internal datasets.

1) Timeliness matters

A common problem in businesses is data jobs such as collation across silos for reporting purposes is a largely manual task that can take weeks to complete By the time a formal report is pulled together and is ready for consumption, the data and insights contained within it are dated

Given business pressures to use data to drive decisionmaking, data access needs to be real-time or near realtime in order to be a trusted input into decisions

2) Data provenance (data lineage)

Provenance combines the (related) problems of data governance and quality To ensure a dataset can be trusted, the lineage of the data needs to be both established and documented in a way that anyone can review it and use it with the same high level of assurance

How do you know where the data came from, who touched it, and what business rules or transformations were applied to it before it came to be in your possession? Is the data complete – for example, if certain fields were incomplete or blank at the time of collection, how is this handled? Are these line items included or excluded in the full dataset, and does this have a material bearing on the aggregate result?

Without transparency into the history, lineage and treatment of the data, it becomes difficult to trust that the dataset is accurate, and therefore that any decision made with reference to the data is accurate as well.

3) Accounting for other risk factors

One of the challenges of using time series data today is that data collected before 2020 may now be outdated or irrelevant, because the pandemic has changed operating conditions and ways of working to such a significant extent Businesses that thought they had a deep multi-year dataset that could be used to identify past patterns and predict future performance, may now only have a couple of years of useful, stable data on which to base their decisions.

Organisations should also consider how the tools they use collect and store data. A common error experienced by Australian users of US-hosted SaaS applications, for example, is that the data may be created with a US timestamp, leading to day-of-the-week trends being misinterpreted. Any pattern and trend analysis on the data needs to either take into account timezone conversion, or better yet, the data should be standardised before it’s ingested by a reporting suite.

Building trust in data

Improving data quality and governance requires appropriate resourcing and the support of systems that implement and maintain appropriate guardrails and standards According to the Data Management Body of Knowledge framework, the following goals should be established:

Develop a governed approach to make data fit for purpose based on data consumers' requirements

2. Define standards, requirements, and specifications for data quality controls as part of the data lifecycle

3 Define and implement processes to measure, monitor, and report on data quality levels.

4. Identify and advocate for opportunities to improve the quality of data, through process and system improvements.

While data quality dimensions such as accuracy, timeliness, lineage and consistency are crucial, other dimensions also advised by the Data Management Body of Knowledge framework can include:

• Completeness – degree to which all required data is present

• Integrity – referential integrity or internal consistency

• Reasonability – data pattern meets expectations

• Uniqueness/Deduplication – No entity instance occurs more than once within the data set

The list can vary based on which data quality framework is referenced Mid-market organisations often do not have the budget or the constant flow of interesting work to have their own data teams. Additionally, the systems containing source data, especially SaaS platforms, may not be set up with APIs or other simple ways to export data for centralised analysis and reporting purposes.

It can make sense to put this in the hands of an experienced partner that has access to sophisticated tooling and the depth of resources required to manage data infrastructure end-to-end and streamline data extraction and ingestion processes Business users can then simply focus on finding meaning and making decisions from a starting point of having trusted data

SUPPLY CHAIN HAS EXCESS CAPACITY FOR FIRST TIME SINCE EARLY STAGES OF PANDEMIC

Global supply chain capacity in April was underutilized for the first time since June 2020, according to the GEP Global Supply Chain Volatility Index – which tracks demand conditions, shortages, transportation costs, inventories, and backlogs.

The index fell from 0 32 in March to -0 04 in April on the back of 10 months of depressed global demand. An index value above 0 means supply chains are being stressed, while a value below 0 represents supply chain capacity is being underutilized The GEP index reached a peak of over 6 points in late 2021 and stood at 4 61 in April 2022

Global demand for inputs continues to remain subdued, especially in Europe. This largely attributable to companies’ drawdown of their inventories and safety stocks as concerns toward inflation and supplier delivery times have eased

"After months of companies aggressively destocking, there is now excess capacity in the world's supply chains, providing buyers with greater leverage to extract favorable prices and terms for the second half of 2023 and into 2024,” said Volker Roelofsen, vice president, supply chain consulting, GEP “The good news is that companies' demand for components and raw materials, while subdued, is holding steady, indicating that central banks are, at least for now, successfully engineering a measured slowdown "

Reported material shortages were at their lowest point since September 2020, though poor availability continues to affect semiconductors and electrical items As has been the case since the start of 2023, labor shortages are having little adverse effect on suppliers

Supply chain pressures have also eased in Asia – with the least amount of strain since August 2020 – as the economic rebound following China’s Covid-19 reopening has petered out.

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