Thursday, December 30, 2010



Loser! If that word stings you to the core of your heart, yet is the exact word that describes you completely, in every aspect, then this editorial is for you. Hello losers! Let me usher in the new year 2011 for you hoping that you never forget the feeling of being a loser, and that you always hate every moment of it. Before you start cursing my ten generations and beyond, let me quickly take you through the story of five losers who, for me, embody the spirit of despondent losers.

This boy from Syracuse (New York), was labelled a dyslexic when he was just seven. His friends would harass him, and his school teachers would humiliate him. This is how he describes his early days, “I’d try to concentrate on what I was reading, then I’d get to the end of the page and have very little memory of anything I’d read. I would go blank, feel anxious, nervous, bored, frustrated, dumb. I would get angry. My legs would actually hurt when I was studying. My head ached.” He went to three different high-schools and each time, he would try to hide his disability. Soon it would be discovered, and he would be sent off to remedial reading. He raised his hands very often in class, only to ensure that his teachers noticed him and gave him extra points so that he could just about make the passing grades. Even when he had to complete his homework, he would first dictate it to his elder sister, make her write it down, and then copy it word to word.

His parents got separated when he was just 12, and he along with his sister Lee Anne, moved with his mother to New Jersey, where she had to work in three jobs simultaneously to earn enough to feed the family. Everything in his life, besides playing baseball, soccer and football, seemed hopeless. He finally managed to clear high school but failed his undergrads as he was a “functional illiterate”. He loved to learn, wanted to learn but the dyslexia was debilitating (Many times, he would even forget that when the fuel gauge in the car falls to ‘E’, it needed refuelling). He decided to move to LA to become an actor. Even then, the loser in him found it hard to pass auditions, because he simply could not read the script. He started requesting others during the auditions to read the script and the directors to talk about the characters and the film. He wanted to give it all up many times, but whenever he did, all he remembered were his mother’s words – “You’ve got so much potential. Don’t give up.” In 1983, he landed his first starring role in the film Risky Business. He got noticed. Three years later, Top Gun was released, which grossed $343 million and made him a millionaire (he earned $2 million from the film)! Thomas Cruise Mapother IV is his name; Tom Cruise is how we know him – the winner of three Golden Globe Awards (and nominations for three Academy Awards). Tom Cruise, then a dyslexic with poor memory, and today, a certified-flying pilot, a millionaire- producer and one of Hollywood’s most powerful stars! And all that because the loser never gave up!

The second loser in my list was born to unwed, teenage parents at a farm in Mississippi. Her mother was an 18- year-old housemaid (named Vernita Lee), while her father was a 20-year-old freshman in the US army (named Vernon). Soon after she was born, her parents decided to part ways, and she was left in the care of her grandmother, with whom she stayed till she was 6. Her childhood days could simply be described in three statements – she was a female, she was black, and she was very poor. As a child, she used to “playact” before an “audience” of farm animals. She was a bright kid though. On her first day at school, she left her kindergarten class after writing a note to her teacher, where she expressed her intent to study in the first grade. She was promoted to the third grade the very next year.

At the age of 6, she was sent to a very poor and dangerous neighborhood in Milwaukee, where she lived with her mother and two half-brothers. There, she was repeatedly raped by her cousin, her uncle and her mother’s friend. And her mother, because she worked odd jobs during odd hours, and because of their massively disadvantaged background, could frustratingly do nothing. The girl’s sufferings did not end there. She disintegrated into a habit of repeatedly skipping school, stealing money, and running away from home. Fed up, her mother then decided to put her into a detention home. As luck would have it, there were no openings in the home – and so she was sent to live with her father in Nashville. She became pregnant when she was 14, and gave birth to a dead baby.

Raped, humiliated, without any future, she was devastated, but she swore to herself that she would never give. Her father somehow aided her financially, and through sheer gut-wrenching effort, she became an excellent student at school and participated in the drama and debate clubs. The following year, she won a full scholarship to Tennessee State University (TSU) – and the following year, she was invited to a White House Conference on Youth. Subsequently, she was later given a job to read afternoon newscasts by a local Nashville radio station. When she became Miss Black Nashville and Miss Tennessee during her freshman year at TSU, Columbia Broadcasting System (CBS) offered her a job. And all this while she was still nineteen. She worked at various TV channels and got her biggest break in January 1984, when she became the anchor on a morning talk show called A.M. Chicago. Given the popularity of the show, 20 months later, it was renamed to ‘The Oprah Winfrey Show’. The black, poor, loser had been noticed and was already on her way to becoming a global celebrity. Today, she runs a production house (Harpo Inc.), is the richest black billionaire in the world (worth $2.7 billion) and most importantly, the most powerful celebrity in the world (as per Forbes 2010 ranking). And all because she never gave up!

The third loser in my list was born to Elias and Flora d’Isigny in Chicago’s Hermosa community area. His father was a farmer and a worker at a railroad company. As a young man, he was fired from the Kansas City Star newspaper. Reason: his boss claimed that he lacked creativity. To fulfil his desire to become a full-time cartoonist, he started an animation company called Laugh-OGram Films in 1921. Though the start appeared bright (as he was able to raise $15,000 for the company), the New York distributor, with whom he had tied-up, went bankrupt. Result: end of Laugh- O-Gram. With a mountain of debt in his name, emotionally drained and financially broke, he barely earned a few dimes to pay his rent. Not able to afford proper food, this loser started eating dog food. But despite all that, there was one objective that the man nurtured all along, and that was to never give up.

By missing out on a few meals, he saved his last few dollars to buy a train ticket to Hollywood. And here, in 1926, he created an effervescent cartoon character named Oswald the Rabbit. When he tried to strike a deal with Universal Studios, without his knowledge, Universal went ahead and patented the Oswald character. Of course, the studio paid him nothing. He created more characters; but there were other rejections too. His Three Little Pigs concept was rejected for lack of more characters; filming of Pinocchio was stopped during production; his others creations like Bambi, Pollyanna and Fantasia were utterly disliked by viewers during those times. Fighting against all odds and bankruptcy, the man went on to make the animation film Mary Poppins in 1944, which became a blockbuster hit.

Today, we all know this loser more because of Steamboat Willie, a cartoon character he made – a character that came to be later known as Mickey Mouse. Walt Disney was the name of this loser, who fought failure and sketched his road to success. Although he died in 1966, he left behind a legacy of never giving up. The company he co-founded, The Walt Disney Company, is worth $71.4 billion in the stock market!

The fourth loser in my story is a woman, whose life went into a massive disarray at an age when most of us are well settled. An English teacher in Portugal, she married a TV journalist. But just four months after the birth of her daughter, her husband separated from her. At wits’ end, she left her teaching job in Portugal and decided to be with her sister in Edinburgh, Scotland. Recovering from the divorce was still too painful and the lady kept struggling to make ends meet for herself and her year-old daughter. She had only government subsidies for support. She thought of teaching in Scotland too, but was soon rejected as in order to teach in Scotland, she required a ‘PGCE’ (postgraduate certificate of education). And then, she was diagnosed with clinical depression, and even thought of committing suicide.

Through all this, her one unwavering lighthouse was a book she was writing; a book which allowed her to escape all her miseries; a book which encompassed her spirit of fighting against the worst that life could offer and never giving up. Despite her miserable real life existence, she continued writing the book, spending time in many cafés. After completing the book, when she presented it to publishing house Bloomsbury in 1995, the owner asked her to “get a day job.” Twelve other publishers rejected the book; yet, she continued resolutely. A year later, the same publisher that had rejected her initially, Bloomsbury, offered her a measly £1500 advance for publishing rights in UK.

Although that money wasn’t enough at all, she didn’t give up. In 1997, she applied for grants from the Scottish Arts Council to enable her to continue writing. She received £8000 in return. And then, in 1998, Scholastic Inc. bought the US rights to publish her book for $105,000. The book came to be known as Harry Potter and the Philosopher’s Stone. And she is Joanne K Rowling, the world’s richest author, worth $1 billion. Following are the excerpts from a speech that Rowling delivered to graduates at HBS two years back – “A mere seven years after my graduation day, I had failed on an epic scale. An exceptionally short-lived marriage had imploded, and I was jobless, a lone parent, and as poor as it is possible to be in modern Britain, without being homeless... By every usual standard, I was the biggest failure. Failure meant a stripping away of the inessential. I stopped pretending to myself that I was anything other than what I was, and began to direct all my energy into finishing the only work that mattered to me... And so rock bottom became the solid foundation on which I rebuilt my life. I was the biggest failure I knew. Failure gave me an inner security that I had never attained by passing examinations. Failure taught me things about myself that I could have learned no other way.” Her books have so far sold more than 400 million copies and her last four titles of Harry Potter have consecutively set world records as the fastest selling novels in the world. Today, the Harry Potter brand is alone worth $15 billion, with the seven Potter films having grossed close to $5 billion! All because the loser Rowling decided to not give up.

Finally, I come to the fifth loser – and that is you! Every person in this world has had failures, some small, some big. There is no individual on this planet who has been a born winner and one who has never experienced any failure – from Steve Jobs to Bill Gates to Mahatma Gandhi to Nelson Mandela, all legendary icons have been as legendary in being failures at some point or the other in their lives. But the one common quality amongst all of them has been, that they’ve never given up. The resolve to fight each failure – however harsh it might be – with conviction is the attitude that these losers have had. And that’s exactly the attitude that you should cherish for the new year of 2011.

May you not be the biggest example of success ever, but be the biggest example of how to fight the worst failures. May you succeed in inculcating the right loser’s attitude. May you always be the loser that I wish you to be. Wishes for a fantastic new year, my dear losers!


Friday, October 8, 2010

Long live Bruce Lee!

Why in heavens would I decide to write about China when everybody around has been harping on China almost day in and out. Because while everybody around has been simply comparing Chinese growth and India’s growth (and complimenting China to no ends about it), I find no economic commentator exhorting Indian firms to partake of Chinese growth by thinking about setting up companies in China, or by selling their products and services to Chinese consumers! Each day that passes with you as a CEO not thinking about setting up a business in the world’s fastest growing market – and the largest in a few years – is a day lost with criminal intent! The statistics are devastating – if you have even an iota of cash to spare, go the China way... immediately!

Just a few decades back, marketers would have ridiculed the very idea of setting-up shop in China, where per capita income stood at a sheepish 1% of USA’s. Not to say that during those days, the Chinese GDP was one that was consciously ignored during discussions in economic forums, more so due to the defiant communist regime, which was more intent on autocratic uplifting of masses than on blindly promoting capitalism. But China was growing because of that same upliftment of masses.

After having broken through the $100 billion ceiling in 1988, the foreign trade figure of China ran past the $500 billion-mark in 2001 and the trillion dollar mark in 2004. Today, it has touched $2.21 trillion (figure for 2009, as per WTO), and much water has fl own under the Shanghai bridge, bringing in a dramatic macroeconomic improvement. China is now arguably the second-largest economy in the world (having surpassed Japan’s GDP during Q2, 2010, though Japan still leads in terms of total GDP during H1, 2010), and is the world’s second largest trading nation, and its per capita income as a percentage of that of USA’s has increased to 14.2% (quite a rise from a value of $180 in 1990 to $6,567 in 2009; IMF data).

That China is turning into a huge consumption behemoth – one that Indian companies should most selfishly exploit to whatsoever extent – is supported by many economic indicators. The rise in per capita income (a jump of 3,548% over the past 19 years!) becomes an electrifying consumption increase jump when seen in the light of the fact that this growth happened for a gut wrenching 1.4 billion! China is also now the world’s second-largest importer of goods (the value of which stands at a no less handsome $1.01 trillion, as compared to USA’s $1.56 trillion during FY2009).

In support of China’s domestic consumption comes a September 2010 paper by McKinsey Consultants John Horn, Vivien Singer and Jonathan Woetzel, titled, A True Picture of China’s Export Machine, which shuns the age-old method used by the government to calculate the contribution of total exports to GDP growth. As per the paper, “Net exports have contributed to only between 10-20% of China’s annual 10% GDP growth in recent years,” while “domestic value-added exports” (DVAE; which is the net of total exports and those imports used in the production of goods & services exported), contributed to between 19-33% of the total GDP growth. This is much lower than what many agencies have claimed, including the Chinese government (according to them, exports contribute to almost 60% since 2000 till date). To sum up the discussion in favour of the Chinese domestic market, the report which uses the McKinsey Global Institute (MGI) China urbanization model, concludes, “The most common wisdom overestimates the role of exports while underestimating the role of domestic consumption for China’s growth. Any Chinese or MNC that currently manufactures goods in China and primarily exports them to other countries should ask itself whether it needs to scale up its domestic strategy to get a bigger piece of the pie.”

The truth, which the tallest of sceptics concede, is that China is the next powerhouse for the world’s sellers, across industries. Pulitzer Prizewinning Thomas L. Friedman wrote in an NYT column from Tokyo, “Those leaders of Japan, America, Australia, Taiwan, Malaysia, Russia, Thailand, Indonesia, Singapore, the Philippines, or the European Union, who are not going to bed each night saying a prayer for China are not paying attention.” The 2010 China Consumer Survey report by Credit Suisse explains how, “Chinese households are earning more but saving less.” Household income of the bottom 20% has risen by 50% since 2004, while the top 10% has grown 255% to around 34,000 yuan per month. The savings rate has dropped from 26% to 12% during the same period. Credit Suisse expects China’s share of global consumption “to increase from 5.2% at US$1.72 trillion in 2009 to 23.1% at US$15.94 trillion in 2020, overtaking US as the largest consumer market in the world!”

We take a look at specific industries and the lessons that corporations which have paid due respect to the Chinese domestic market have to impart. In 2009, China became the largest auto manufacturing nation in the world, with 13.79 million units rolled out, thereby surpassing Japan as the largest automobile maker in the world. No surprises there as most of these would be exported subsequently, right? Wrong. Of these manufactured cars, only 369,600 units were exported – which accounts for just 2.7% of the volumes produced. In simple mathematics: 97.3% of the cars manufactured in China are sold in China! And if the 100 km long traffic jam that made global headlines in August this year was some indication, China has also become the world’s largest auto market in terms of annual domestic sales, having overtaken US in this respect in 2009. The number of registered vehicles with Chinese number - plates are forecasted to grow from the present 62 million (as per China’s State Statistical Bureau) to 200 million by 2020 (as per China’s Ministry of Industry and Information Technology).

Talking more about cars, here are some interesting facts. In the first half of 2010, GM sold more cars in China (1.21 million units) than even in its largest market so far – US (1.08 million), making it the first time that any overseas market outsold GM’s domestic market in its 102-year-old history. The company plans to touch 3 million in annual sales count in China by 2015. Moving on to its Detroit cousin, Ford, the company also set a new record in half yearly new car sales in China this year (301,524 units, up 53% y-o-y). German Audi is also geared up to set a new annual sales record this year, boosted by deliveries in China, where it presently sells more vehicles than it does in Germany. In fact, as per a Deutsche Bank report, by 2016, China will become the largest export market for German automakers, surpassing France. Going forward, given by the fact that 44.3% of cars sold in China are local brands, including names like BYD, Chery, Geely, Hafei, Jianghuai, Chang’an, Great Wall, Roewe, et al, there lies great opportunity for global auto makers to make the most of their Chinese odyssey.

New research by the McKinsey Global Institute also throws light on the emergence of the Chinese urban middle class, whose consumption power will soon redefine the Chinese market. The report claims that, “These consumers earn more than $12,500 a year and command nearly 10% of urban disposable income – despite accounting for just 1% of the total population. They consume globally branded luxury goods voraciously, allowing many companies to succeed in China without significantly modifying their product offerings or the business systems behind them.” This strong 1% of the population may be just the tip of the iceberg, and that’s the most likely possibility. While describing her confidence on the Chinese consumer at a Leadership dinner held recently in New York, Andrea Jung, CEO & Chairman of Avon Products Inc., said, “We’ve been on the front lines of this market for a little over a decade. We’ve identified it as probably the fastest-growth market. From a consumer point of view, I hope that we have proved, and are still proving, that China’s growth is a domestic story. Our focus has been not so much on the manufacturing side, although we have a wonderful plant there, but on the consumer side.”

There are many other names whose walk in the dragon’s den tell you why China is the next place to bet on and sell. The Fortune 500 #4 and the largest conglomerate in the world, GE’s revenues from emerging economies are set to increase from the current 22% to 30% by 2014. And in its attempt to make China count, the company plans to increase this market’s contribution to its topline from the current 4% to about 25%. P&G, the world’s largest producer of household and personal care products, which is increasingly focusing on the Chinese market, has now got China as the #2 contributor to its sales volumes and #4 in terms of toplines for the company. Today, the company commands 50% of the shampoo market and 40% of the personal hygiene market in China, a market which accounts for 25% of the 4 billion customers that P&G has globally.

The world’s second-largest manufacturer of aircraft, Airbus, which expects 20% of its revenues to come from China during FY2010 (as compared to Boeing’s 4%) also has big plans for China. The European manufacturer, which expects a total of $349.3 billion to be spent by the Chinese airline companies on acquisition of new aircraft over the next 15 years (second highest after US airlines, which is expected to spend $538.1 billion; by 2030, as per its competitor Boeing’s forecasts, China is expected to spend $400 billion in acquisition of 3,770 new planes), is smiling at the moment. Reason: Though Chinese airline companies at present operate 766 Boeing aircraft as compared to 547 Airbus planes, the orders received so far are in favour of Airbus – 418 as compared to Boeing’s 284.

From engines in the air to air waves – Nokia. If you thought that India was all that Nokia had left to hinge its hopes on, rotate your globe a little to the left. The world’s #1 seller of handsets today commands a 35% market share in China (FY2009), a geographical market which contributes to 16% of its annual revenues ($8.6 billion in 2009), even bigger than India’s 7.4%; surely, anything that happens in the Chinese mobile market would trouble the Finn doubly than it would if its Indian elephant ride goes awry! The dozens of steel-making companies to the chipmakers and software producers of the world, from fast-food chains to the biggest of retailers and toy-makers, from far-away America to close neighbours, marketers across companies and continents are fast realising that one big learning of their career remains the Chinese consumer tale, and if they lose out on it, they’ll have little left to survive on later. Two decades back, the Chinese low-cost manufacturing prowess took the world by storm. It’s the Chinese consumers who are on fi re today. Sadly, there are not many Indian case studies to write home about – and that is what I call criminal.

Till the time every Indian firm’s CEO believes passionately in having the vision of tapping the Chinese market, India can in no way think of beating the Chinese bandwagon. Learn to read Chinese, learn to write Chinese, learn to speak Chinese, go on and watch cheesy Bruce Lee movies in Chinese for whatever it’s worth – just do it!

Long live China! Long live Bruce Lee!


Thursday, August 12, 2010



For the sake of technical differentiation, Vision statements are not the same as Mission statements. To give a quick glimpse of the essential difference, a Mission statement represents the reason for the existence of the organisation. It’s a feel-good statement that is ethical, motivating, and talks ‘generally’ about the current & future of the organisation. A Vision statement is necessarily about the future. Vision statements are aggressive and are mostly meant to be viewed as reasons for ruling the world in the future. That’s not the case in Mission statements.

Glueck & Jauch say, “The mission can be used to legitimise the organisation.” In other words, its profits – because the external environment is always questioning organisations that earn large, abnormal or supernormal profits. But then, there are organizations like Maruti Suzuki (India’s largest car manufacturer with a 47% market share as on June 30, 2010), along with companies like Wipro and Reliance, that either have no mission statements (umm, don’t confuse advertising slugs with mission statements please) or have hidden the statements in various jargons. The question then is, does the mission statement really matter?

In small companies that are privately held, the need for a publicised Mission statement is very low as the management can keep a tab on all stakeholders at close quarters themselves. But in large organisations, the answer is “Very much!” The Mission statement is unarguably one of the most important public relations exercises undertaken by any organisation to be accepted as ethical, society friendly, value based & for the benefit of stakeholders. In fact, it’s extremely necessary for any large company’s management to implement this amazingly vibrant PR hype focused on prime stakeholders and other entities (customers, societies etc). Large companies have more branches, more employees, more customers, more need for government interaction, more necessity to show Corporate Social Responsibility; in summary, more need for having a standard PR effort. With so many stakeholders, it becomes tougher for management to keep a direct tab on each and every relevant group. Managers should be very convinced that Mission is the strongest tool they have to maintain a wonderfully pervasive PR hype about the corporation. Even General Electric – a company which people said never had a mission statement – has had a ‘value statement’ for decades (see box on the next page). Jack Welch was no ignoramus.

Unfortunately, sometimes the Mission statements of various organizations end up being mirror images of each other rather than displaying the required inimitable uniqueness in culture. Let’s look at the Microsoft mission statement: ‘To enable people and businesses throughout the world to realize their full potential’. Look at what the mission statement (or the purpose statement) of GM was at one point of time: ‘The fundamental purpose of General Motors is to provide products and services of such quality that our customers will receive superior value, our employees and business partners will share in our success, and our stockholders will receive a sustained, superior return on their investment’ If one were to change the name of General Motors to IBM, the statement would still be extremely appropriate.

Are these companies to blame? Not at all! The folly of Mission statements is in their creation itself. In striving to be looked upon as society friendly, most of the Mission statements of organizations now contain standard words & similar phrases in order to not be off the beaten track. Given the true need for a Mission statement, the deliberation within any organisation while developing the Mission statement should ensure that the statement remains on the beaten track, lest the corporation be seen negatively by outsiders. Microsoft is an extremely intelligent firm that has realised long back the irrelevance of wasting time in developing nouveau Mission statements.

The mistake that modern business corporations are making is to not market and advertise the mission statement appropriately. In other words, you as a CEO have the prime responsibility to advertise the mission statement in a similar manner as you would when you advertise a product; albeit with reduced budgets of course. You might not be able to really “Save our tigers,” but the least you would have managed would be to ensure that companies like Aircel get a societal friendly image for the next few quarters.

Below, I list out the three most frequently asked questions on mission that I have been asked by CEOs through my past years:

Why cannot Vision statements be used as PR hype instead of the Mission statements?
Vision statements can be used as PR hype for internal stakeholders (most importantly management, shareholders…). But for external stakeholders (customers, government, society, regulators etc), dramatic Vision statements of the organisation might be interpreted as being unfriendly to society and aggressive beyond requirements.

Like Sub-Vision statements, are different Mission statements required at different levels of the organisation?
Technically speaking, the answer depends upon the organisation’s need. Organisation’s that have expanded globally or have many operationally diversified divisions have a bigger need for localised mission statements, like Mc- Donalds – which has different mission statements for its various operations.

How frequently should I modify my company’s Mission statement?
Given the objective of a Mission statement, and given the fact that the Mission statement should have been constructed to last a long-term, it should not be changed frequently. At least, not unless the founders of the Mission statement were really stingy with the words they used…

Even my employees don’t know my mission statement. Is that a problem?
Yours, not mine!


Friday, July 16, 2010


For today’s marketers, new brand failures imply burning shame. But many in the past have learnt lessons and succeeded after the great tumble; the failures were worth it!

A whole generation of thoroughbreds has been evangelised to practice perfection. Getting it right, every time, has become a religion. Amelioration is the word for the present. It’s really not an age for failures – not for men, not for companies, and worse, not even for the most generic of brands. For marketers, failure of a brand means nothing less than blasphemy! But do such outcomes call for unforgivable sentences for the makers of brands? Granted, no brand failure is praiseworthy, but lessons on “how to succeed” that can be learnt from most brand failure tales are worth a read.

LESSON #1: Don’t kill an established brand simply to introduce a new one; brands take years to build and are invaluable.
The most classic example when it comes to failure of a brand is the case of the New Coke in 1985, which is quoted by some as the biggest brand collapse of all times. 100 years after Coke was launched, things had changed; competition had. There was Pepsi-Cola willing to fight Coke. By the time Roberto Goizueta became the CEO in 1981, Coke’s numero uno status had started appearing vulnerable. Coke was fast slipping and the prime reason was Pepsi- Cola. Pepsi had already proven to the world in the 1970s with its Pepsi Challenge, how blindfolded drinkers preferred the sweeter Pepsi-cola over Coke. It was only Coke’s superior distribution network that was keeping it ahead (for instance, there were still more Coke vending machines in US than Pepsi-Cola’s). Goizueta deciphered the problem to be the ‘product’ itself. He assumed that Coke would lose out to Pepsi soon because of its taste. That was 1984. A year later, the Atlanta-based giant decided to give to the world the ‘New Coke’, which was sweeter and closer to Pepsi- Cola in taste. Coca-cola conducted 200,000 taste tests in the pilot testing stage. The results made Goizueta smile. The research had proven how the New Coke was preferred over Pepsi-cola. Goizueta, drunk on the forecasted success of the New Coke, even decided to halt the production of the old Coke. Following the April 23, 1985, launch, a large percentage of Coke-drinkers in US decided to boycott the new product. A few days later, when the production of the old Coke was halted, this further angered the masses – a double blow! New Coke didn’t sell, and Goizueta was forced to get the old version back. “We have heard you,” confessed Goizueta on July 11, 1985. Even Donald Keough, the-then COO of Coca- Cola, publicly said, “All the time and money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to the original Coca-Cola felt by so many people.”

So, what was wrong with the New Coke? To begin with, the 101 year-old ‘Old’ Coke defined American glory and the passion for it was what had kept the brand on its wheels despite its taste being inferior to its rival’s. Coca Cola’s top brass forgot in one instant that it takes eons to build a brand; and dramatic one-trick-ponies, like the New Coke, stood no chance in front of the Old Coke due to this outstanding brand value. Coca Cola in reality should have concentrated on the original brand’s perception and simply delivered what the consumers needed without trying to over-innovate. They should have not looked around for problems with the product when it didn’t have any – having an inferior taste is not an issue, having an inferior perception is; as Jack Trout, author of Differentiate or Die, writes, “Marketing is a battle of perceptions, not products.” Any attempt to foolhardily copy rivals is wrong. With New Coke, the company was simply trying to clone Pepsi-Cola. But what Goizueta got right is that he showed fearlessness when it came to reverting to the classic Coke. That helped establish a “New” bond between the brand and its consumers. Today, Coca-cola is the most valued brand on the planet, valued at $64.9 billion by Interbrand (as of 2009).

LESSON #2: Don’t over-innovate and provide to consumers features they do not desire.
The legendary Ford Motors also went through an expensive embarrassment, known to be the most hyped-up failure in the auto industry till date. ‘There has never been a car like the Edsel’ is what Ford promised through its ads. The publicity began an year before the Edsel was launched (in September 1957). To increase crowd curiousness, even dealers were strictly warned to keep the cars “under covers” till the time they were given the permission. Expectations were high. The pre-publicity initially showed promise and people rushed into Ford’s showrooms on the date of launch to catch a glimpse of the new model from Ford, which was supposed to be revolutionary – the footfalls touched 3 million in US, in just the first seven days post-launch! The model was supposedly an example of innovation in the car industry. It had a number of new features which were the first in the industry – a rather “different” front-end grille, self-adjusting brakes, an electronic hood release and an extremely advanced and powerful engine for a mid-segment car. It was meant to be a treat for auto-lovers.

The market however didn’t want the “new” features. The car disappointed the potential buyers, who in turn disappointed Ford. Edsel sold just 64,000 vehicles within a year of its launch, which spelled a big failure for the brand (as opposed to a sales target of 200,000 units). Henry Ford II tried harder, made more changes, innovated the model further and launched two new versions of the Edsel in 1959 and 1960. Result: sales fell further (the Edsel 1959 version sold 44,891 units, while the 1960 model sold a shameful 2,846 units). The Edsel had to be relegated to the grave. The last advertisement of the model was seen in November 1959, post which, Edsel was scrapped.

So what were the mistakes? With the new model, Ford offered too much to buyers, which automatically resulted in Edsel’s price tag shooting northwards – unreasonable for the sceptic buyers. There was inadequate market research conducted and Ford failed to understand what the customers really desired. Surprisingly, the company spent millions of dollars on collecting possible names for the new car before coming up with a ghastly pale one like Edsel (which was the name of Henry Ford II’s father!). Secondly, the company created a hype around an ‘untested’ product. Gayle Warnock, PR Director for the Edsel launch, said thus in a confession much later: “I learned that a company should never allow its spokespersons to build up enthusiasm for an unseen, unproven product.” Edsel also fell fl at on the “Style” differentiation front, and ignored visual appeal completely – a huge mistake, especially when we talk about cars. However, Ford learnt its lesson soon and made no mistake with the Mustang, which became one of the legendary trademarks of Ford. It was launched in 1964, and sold 500,000 units in just the fi rst year of its rollout. A better name, less experimentation with innovation, better looking (rather simple looking), and most importantly, it was affordable for the technology and style it offered.

LESSON #3: Providing the best quality product in the industry will get you nowhere, unless you remember Kotler’s basic ‘P’remises and accept that the ‘product’ makes up only one of the Ps in the marketing mix!
For this, a brilliant failure has been in the consumer electronics domain. In 1975, Sony developed a home video recording equipment for consumers, which ran on Betamax technology. It sold 30,000 units in US in the first year. Over the next two years, five companies, which were Sony’s rivals, released the Video Home System (VHS, initially patented by JVC). The sound and video quality of the VHS launched were inferior to that of the Betamax, but the convenience of use and wide availability made it a more attractive buy for the consumers. By 1987, VHS had captured 95% share of the US market. Sony finally withdrew the Betamax and announced plans to get into the VHS market in January 1988. The mistake that Sony made was that not only did it refuse to associate with any other electronic major (while JVC shared its VHS technology with others), it also refused to look beyond its product quality. Kotler didn’t make his millions for nothing. He proved long back that the product only accounts for that much. There are many more Ps that play significantly greater roles, if not more, than the quality of the product.

LESSON #4: Diversify yes, but with some transferred competencies; doing otherwise would be a sure shot failure.
McDonald’s learnt a lesson with the failure of its Arch Deluxe burger (which it marketed as the ‘Burger with the Grown-up Taste’) in 2001. The core concept was to bring-in “sophistication” into the brand, so that it could provide a burger which was not linked to kids. Even the ads showed children ignoring the product. Did McDonald’s succeed? Surely not. The exercise was one of the biggest disaster launches of Mc- Donald’s. And clearly because the global giant forgot to transfer competent strengths in their attempts to diversify. A saying goes that you can sell new products to your old target group, you can sell old products to your new target groups, but you simply cannot sell new products to new target groups that easily. McDonald’s forgot that its brand offerings stood for “simplicity and convenience” and not “sophistication”, and especially when for ages they had developed their competence in understanding the buying behaviour of kids. As I mentioned, diversification is great, provided there is some sense to it – in other words, a leveraged competence.

All the above examples were failures, but surely, lessons learnt. It doesn’t matter if any of your brands have failed. It’s not some hazard that has struck an adventure-seeking corporation for the first time. Your shareholders and employees know that there is as much chance for your new product to fail, as there is for a snowfall on a cold Christmas night in the Alps. Remember, Thomas Edison conducted over 10,000 experiments before he managed to invent the light bulb, which brought him much fame and wealth. It was also his first success, which ultimately led to what we know as the fourth-most valued brand on Earth today - GE (valued at $47.8 billion in 2009 as per Interbrand). Experiment. Fail. Learn. Experiment again. Don’t repeat your failure. Succeed! It’s that simple with a brand.


Friday, June 18, 2010


Product recalls have earned much criticism over time. First, it was considered a taboo with consequences that could spell doomsday for the accused. Then, it made the shareholders utterly uncomfortable. Today, the CEOs are being forced to embrace it as a part and parcel of their lives. After all, is a product recall so unforgivable an act?

What’s it with product recalls that gets the world staring at the accused with a frown-filled skeptical look? Profit-seeking investors count such actions on behalf of the corporations as just another signal of failure heaped upon failure. But the inevitable truth is – the buck stops at the CEO, or in other words, the man at the top! My discussion focuses on the recent slamming of Akio Toyoda, whose family-founded Toyota Motor Corporation has amassed recalls of 8.4 million vehicle units so far during the year, which included the iconic Prius, Corolla and Camry models. The US government, of course, gave him a stick of its own – $16.4 million in fines payable to US Safety Regulators for failing to warn about the defects on a proactive basis. Meanwhile, work went on at Toyota’s plants.

A majority of the studies conducted over decades on product recalls comment that recalls, in general, tear down both investor and consumer sentiments. Some have gone to the extent of even quantifying how disastrous recalls can prove to bottomlines and share prices. One such report published in the Quarterly Journal of Business and Economics claims after analysing 269 product recalls over a period of 20 years that the mean cumulative abnormal returns (MCAR) were negative over the post event period, hovering around 3% from day 13 to 36, with the largest MCAR being -3.55% on event days 19 and 20. Several studies in the past by Jarell & Peltzman (1985), Pruitt & Peterson (1986), Hoffer (1987), Bromiley & Marcus (1989), Davidson and Worell (1992), Thomsen & McKenzie (2002), Chu, Lin & Prather (2005), Heerd, Helsen & Dekimpe (2007), Chen, Ganesan & Liu (2008), Zhao & Stephen (2009) have also proven that product recalls are associated with decrease in shareholder value.

But that’s where I realised that many of these studies, perhaps all of them I dare say, got it critically wrong. All these abovementioned works suffered a common ailment – the observation window was “limited” to anywhere between -1/+1 (days) and -60/+60 (days) of the recall announcement. What about the longer term effect? The fact is that contrary to what these reports mention, product recalls in fact should have been improving the customer perception about a corporation’s commitment to quality. Especially as the company helps ‘correct’ a past mistake transparently and truthfully. Was this hypothesis of mine correct?

I decided to do a deeper and a wider time window analysis of the fi ve most publicized product recalls in history (considering volumes as well), and see whether these recalls added to or negated from the company’s future performance.

1. TOYOTA’S RECALL OF 8.4 MILLION VEHICLES IN 2010: After posting losses of $4.8 billion in FY2009, the Japanese carmaker had the worst start to the new year amongst all automakers, at least as far as brand image and goodwill were concerned. But that’s where the black suit ceremony ends. The Japanese car manufacturer is extremely confident about a quick recovery and has predicted a net profit of $892 million for FY2010 – a far improved situation as compared to the previously forecasted loss of $2.2 billion by the company. Better still, as per estimates by Thomson Reuters, the automaker is set to

record $1.74 billion in net profits during 2010, a figure which will skyrocket to $8.32 billion by 2011. And here’s a treat for shareholders who have been plagued by hearsays about how recalls lead to value erosion. Even as news of how Toyota planned to exceed its initial recall estimates started doing the rounds on February 5, 2010 (with an additional recall of 270,000 Prius units in US & Japan, to fix their brakes), the company’s share surprisingly rose 4.1% to close at $74.71 on the NYSE. That was a day when even the Nikkei 225 fell by 2.9% to a 60-day closing low. The
five year comparative analysis of the Toyota share performance on NYSE vis-avis the S&P 500 shows that the automaker has beaten the benchmark index consistently over the past half-a-decade, and that the recalls haven’t spoilt Toyota’s game. Lesson learnt – if you’ve earned a goodwill already, even a couple of record-setting recalls won’t hurt, as Bob Johnston, Deputy Dean (Operations and Finance), Professor of Operations Management of Warwick Business Schools puts it in a line: “Companies can get away with recalls once or twice in a period of time!” I should add, “Too profitably!”

2. FORD’S RECALL OF 14.1 MILLION VEHICLES IN 2009-10: Another auto major, another record. Having recalled 4.5 million vehicles in October 2009, Ford Motor Company recorded the highest aggregate number of recalls in history in a single stretch. The record – 14.1 million units. That should have destroyed all hopes for the Detroit carmaker, which was supposedly in the worst shape when 2009 began, having made $17.3 billion in cumulative losses during FY2007 and FY2008. But instead of moving downhill, the figures climbed and share prices shot up. In the past one year, the Ford stock has gained 98% in value, outperforming the S&P 500 by a long way. When FY2009 came to a close, instead of recording a negative bottomline (as was anticipated amidst the recalls), the Alan Mulally led giant got the better of cynics, scoring a positive bottomline of $2.71 billion. Even the first quarter of FY2010 was good news, with the company announcing $2.09 billion in profits. Learning: Having a super dual-role perfoming man on top (CEO & President) like Mulally helps. Recalls do too!

3. JOHNSON & JOHNSON’S RECALL OF 84 MILLION UNITS IN 1982 AND 2010: Within a span of a week in 1982, seven Chicago dwellers died without a serious ailment. Reason: they had consumed the ‘Extra Strength Tylenol pain-and-fever reliever’. The catch? It was cyanide-laced. This forced McNeil Healthcare (Johnson & Johnson’s consumer healthcare subsidiary) to recall 31 million units of Tylenol. The move was made with all haste. By the time the year ended, J&J’s stock had actually gained 38.9% in value to touch $1.75 on the NYSE! The year 2009 and 2010 saw a repeat. The company recalled 53 million units of Tylenol on two occasions – December 18, 2009 and January 15, 2010. The stage was set for the recalls to fracture the first quarter results and share prices of J&J. Worse, unlike eighteen years back, the company had withdrawn the compound after 20 months of complaints. It had acted slowly. Critically, the troublesome consumer healthcare category contributed to 24.12% of total revenues from J&J’s overall portfolio. But the markets chose to move against expectations. There were immediate positive gains. A day following the recall of December 18, 2009, the J&J stock climbed by 0.25%, and following the recall of January 15, 2010, the stock gained 1.23% in the next trading session! As far as financials are concerned, J&J recorded a 29.1% y-o-y increase in quarterly profits, which touched $4.53 billion for Q1, 2010 and a 28.6% increase in EPS which stood at $1.62. Learning: Be truthful to the public, publicise your recalls fervently, and see such moves as invaluable marketing opportunities!

4. MERCK’S RECALL OF ARTHRITIS DRUG VIOXX IN 2004: Within five years of receiving the FDA approval, Merck recalled the Vioxx drug, which had earned it revenues totalling $2.3 billion in 2003. The drug was known to double the risk of sudden cardiac attacks leading to deaths than those who took Celebrex (Vioxx’s main rival). FDA researcher David Graham, who was the lead scientist testing the dangerous side effects of the drug, after an analysis of a database of 1.4 million patients also proved that same year that Vioxx had led to more than 27,000 sudden cardiac- arrest related deaths in US, since it was launched in 1999. On September 30, 2004, Merck was forced to remove the blockbuster drug from the market. When news of this reached the bourses, the stock plunged 26.77% on that fateful Thursday, stripping-off $28 billion of shareholder wealth, leaving Merck’s Mcap battered at $75.41 billion. Three years later, the stock was at a historical high and its Mcap had climbed to $134.22 billion! And for the record, Merck’s revenues for FY2004 rose by an unexpected 2.01% to touch $22.94 billion, with net profits touching $5.81 billion. And these figures have been rising steadily since then. For FY2009, Merck’s revenues touched an all time high of $27.43 billion, with a record of profit margin of $12.90 billion (and all this despite having paid up upto $4.1 billion to settle about 50,000 liability lawsuits in the past five years). Learning: Disbelieve critics who claim that one blockbuster drug recall can kill your future – bet on the long run.

5. MATTEL’S RECALL OF 20 MILLION TOYS IN 2007: In what is by far the largest recall in the history of toy-making, Mattel’s recall of 20 million toys in a span of just two weeks surprised many families who had trusted brands like Barbie, Hot Wheels, He-Man, Dora the Explorer and Elmo for years. The first lot was a 1.5 million units recall on August 1, 2007, which was followed up with an 18.2 million units recall on August 14, 2007. Reason: the extremely harmful toxic lead paint that was used on the toys. So, did it lead to what we call shareholder wealth erosion? Actually, no! In the trading session that followed the first announcement, the Mattel stock gained 1.62% on the NYSE. Similarly, the stock gained 1.83% in the second instance. And if financial performance is some justification that product recalls actually help stem consumer faith, here is one shining example – for FY2007, Mattel recorded a 5.66% increase in revenues to touch $5.97 billion and a 1.2% increase in bottomline that touched the $600 million mark for the first time ever! Talking about the recall, Prof. John A. Quelch, Lincoln Filene Professor of Business Administration at Harvard Business School, praised Mattel to no ends in his August 2007 paper titled, ‘Mattel: Getting a Toy Recall Right’. “Mattel deserves praise for stepping up to its responsibilities as the leading brand in the toy industry. The CEO has taken personal charge of the situation. The CEO knows that Mattel’s brand trust – built up over 62 years – is at stake. Mattel is effectively getting the word out about the recall. Mattel’s recall Web site is a model of excellence,” he wrote.

There are many other product recalls that you can perhaps recollect. Why is it that despite Coca-cola having recalled 30 million cans and bottles of Coca Cola in Europe in 1999 and 2000, it still entered the first ever global valuation ranking by Interbrand a year later on the “number one” spot, a position it holds till date? Why is it that despite tens of thousands of battery recalls by IBM in 2005, 2006 and 2009, it still ends up as being the second most valued brand in the world, a brand valued at $60.21 billion with an Mcap of $167.08 billion? Why is it that Microsoft, despite the Xbox recall fiasco in 2007, is still is the third most valued brand at $57.65 billion, and bears an Mcap of $232.05 billion – the third most valued company on the planet?

Truth is – product recalls actually work to build consumer and investor confi dence in the long run if the company handles it “positively” and acts in favour of the shareholders. It’s also true that simply recalling your faulty product is not a guarantee for future success – as competitive leadership in a cutthroat market can be obtained by well defined strategic plans. But it is an undeniable fact that a significantly larger number of product recalling companies seem to be coming out better off than companies that have been more or less noncontroversial. So does this mean I’m recommending that you should simply start recalling your products, irrespective of whether or not they’re faulty? Obviously not... But then again, why not?


Friday, May 21, 2010


Many companies commit the mistake of equating ‘differentiation’ purely with ‘providing better quality’. There’s much more you can do with this thrilling strategy of differentiation.

Walk into the International Supermarket and Museum in Naples, New York, and you’ll learn how to pay your humblest tributes to “failed products”. About 60,000 products that failed in US supermarkets find a place in the museum. Hear out their names – Clairol’s Touch of Yogurt shampoo, Gerber Products baby food, Captain Cat Cat-Litter Deodorant, Gorilla Balls (a vitamin-rich candy), Yogurt Face and Body Powder, Gimme Cucumber hair conditioner, Soaps for Lovers, Moonshine aftershave, Buffalo Chip chocolate cookies, Batman Crazy foam, Hagar the horrible Cola, Kickapoo Joy Juice, Sudden Soda, and many more. Actually, how many of them have you heard of? None, because their ‘formulae’ – as in branding mix – failed to hit home their relative superiority to consumers. They were undifferentiated and therefore undervalued by the “quick to form a perception” consumer market. They were simply “commodities”. As Jack Trout writes in his book ‘Differentiate or Die’: “While categories are expanding thanks to the law of division, something sinister is happening. More and more of these categories are sliding into commoditisation. In other words, fewer and fewer of the brands in these categories are well differentiated. In people’s minds, they are there, but that’s about all!”

But then, what is differentiation (as opposed to selling the cheapest products – or price leadership)? Differentiation is simply ensuring that your prospective consumers are convinced that your product is superior relative to competitors. Nobel Prize winning theorists have proven that even if your products are in reality ‘not’ superior, as long as the consumers are convinced about the same, you’ve done your job and hit bull’s eye! But then again, what factor do you differentiate on? Obviously quality, right? Wrong! Or rather, not necessarily. While companies globally make the mistake of equating differentiation with ‘providing better quality’, the fact is that differentiation can be as successfully attempted on certain other key parameters. Here’s a primer with my most loved examples.

Every one who wishes to fly to London wants to be aboard the Virgin Atlantic. Not that it has more comfortable seats, not even that it has better planes and so flies faster; the reason is simple – unlike competitors, it has set itself apart as a brand that delivers superior “service”– 30,000 feet in the air. Little touches prove that – on a Virgin flight, underneath the salt and pepper shakers, modeled on mini-airplanes, you’ll find the words “Pinched from Virgin Atlantic.” The butter knife is engraved with the words “stainless steal”. And there’s always a bar in the upper class cabin so that its travellers can chat and socialise. The airline was the first to really stretch the grade of what is called service in air to the next yard. It was the first to put in seat-back televisions, and serve ice-creams while mid-flight. “We did everything we could to lighten the mood and the experience. Twenty-five years later, the airline retains that very same sense of fun and the true ability to surprise and make people smile,” says Sir Richard Branson, Chairman of Virgin Group of companies.

And if you’ve ever heard of a company named Maruti Suzuki, you’ll know very well that the world buys Maruti cars purely on the basis of the geographic expanse of Maruti’s service outlets, rather than the design of its cars. That’s differentiation for you!

For the world Nokia stands out for quality; truth is, that’s not the truth! As per the most recent Gartner study (May 2010), Nokia commands 36.4% of the world’s mobile device market share, while its next closest competitor is Samsung at 20.6% and the third is LG, with 8.6% global share. In India, Nokia fares better. As per the most recent ORG survey made public, Nokia rules with 59.5%, Sony Ericsson comes second with 8.1%, while Samsung is third with 7%. Now here’s the most recent shocker of 2010 for you – according the 2010 Wireless Traditional Mobile Phone Global Evaluation Study by J.D. Power and Associates, LG was ranked number one by customers in terms of “overall wireless customer satisfaction amongst all traditional handset brands”. This is the fifth year that LG has won the crown since 2003. Nokia was #7! The secret is, Nokia knows mobile consumers love newer designs, newer models, newer rehashes of the same old ‘stuff’, and Nokia rules on that differentiation: style!

Apple, a name which you often hear being associated with innovation, or technology for that matter is again one clever differentiator. Steve Jobs is cleverer. His company didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed better! His iPod, iMac, iPhone have become bestsellers, but were never the ones which innovated technology. Jobs simply gave the products a better appearance, a better interface, a better style. In short he gave it a better overall design. That’s a style differentiator for you.

How many of you know whether Intel chips are faster or AMD? The fact is, AMD Athlon chips have even beaten Intel’s comparable chips in lab tests – and vice versa too. But right from the start, Andy Grove, the former Chairman of Intel (who wrote: Only the Paranoid Survive) realised that it didn’t matter what was true, it mattered what consumers believed. Through perceptionbuilding exercises, Grove managed to keep consumers convinced that Intel’s processors were technologically faster and superior than those of AMD. Since 1971, it has introduced 662 “unique” versions of the microprocessor; AMD has introduced just 79 versions since 1975! Intel has changed its logo four times; AMD has done it just once. Everyone wonders now it’s “Intel Inside”; how many ask if it’s “AMD Inside”? Nobody! For 2009, research firm iSuppli puts Intel’s share in the PC market at 80.6% (as opposed to AMD’s 12.1%), while IDC research puts Intel’s share at 80.5% (as opposed to AMD’s 14.4%). Even Fedex differentiated using technology rather than just service, where they were the first ones to provide customers with an online package tracking system.

After the setback caused to the Toyota brand post 8.4 million recalls in the beginning of 2010, none would have given the Japanese automaker a chance in the 2010 J.D. Power and Associates’ Vehicle Dependability Study, which was released in March this year. But Toyota’s longstanding belief in quality being a differentiator paid off. The study, after measuring and analysing drivers’ experiences after three years of vehicle ownership, gave Toyota the top spot in four segments – more than any other auto brand. While the Toyota Prius topped the list of the Most Dependable Compact, Toyota Sequoia was the Most Dependable Large MUV, Toyota Tundra was the Most Dependable Large Pickup and Toyota Highlander the Most Dependable Midsize MUV. You want to learn what quality differentiation is? Ask Toyota, which manages it despite multi-million recalls.

What do you do when your product cannot be differentiated on any factor? Then go for the simple and straightforward strategy of brand recall. Bombard the consumer ad nauseum with advertisements. He’ll hate you – yet, he’ll buy your product. Brand recall is too powerful. Be the Nike, which sells more not because it’s superior, but simply because it advertises much more than its counterparts like Adidas, Puma, Reebok, Converse, K-Swiss, Skechers, et al. Be the Procter & Gamble, Unilever, PepsiCo, Coca-Cola – each spend more than $2 billion each in advertising – where all you see in their ads are either celebrities or spanking humour (or both). Well, now you know why your wife hates you, yet still can’t let go of you :-)


Thursday, April 22, 2010


CEOs come in many flavours. While some are plain vanilla, others are charismatic. While some fail, others redefine success. And while some hide, others believe in the fact that “seeing is believing”. Which one are you?

Undercurrents of controversies have always chaperoned the question: Should a CEO’s face represent the company and vice-versa? The answer is, yes – for good or for worse! That black and white photograph of Henry Ford, standing next to the ancient Model-T will always represent what Ford Motors was during its glorious heydays. Bill Gates will always be the representative of the might of Microsoft, all across the world, despite his giving away all his executive powers. Carly Fiorina will remain in the memories of thousands, for having been the loud public CEO, who created the much criticised HP-Compaq giant (the world’s largest IT company today). And whose face do you recall when you think of Dell Computers?

Much has been written and discussed about the Fed’s unceremonious firing of Rick Wagoner (the-then CEO & Chairman of General Motor Co.) in March last year, after he came under heavy criticism for allowing GM to bloat beyond logical dimensions, thereby paving way for $82 billion in losses since he took over as its CEO in June 2000. The Harvard Alumnus scrapped the EV1 electric- car program and diverted resources away from hybrids (his biggest mistakes as he confesses), but had built enough credibility to carry all shame on his strong shoulders. And to give what’s due to him, he became the symbol of the imperial auto manufacturing American nation called GM, so much so, that the Fed practically had to ask him to step down in lieu of further aid to GM. Wagoner represented brawns; the man who had worked for 32 years at GM, ever since he earned an MBA degree, represented GM. [For the critics, under Wagoner, GM had more cars that exceeded 30 miles-per-gallon than any other automaker in the world!]

To many, Akio Toyoda, the President of Toyota Motor Co., represents nothing but a meteoroid. Toyota surpassed GM in 2009, to become the world’s largest producer of automobiles for just a year before it got off to the worst possible start to 2010. To many more, he still cuts that sorry figure who apologised before the US Congress for his act of recalling 8 million vehicles this year, while taking home a $16.4 million slap. To most, the only picture that comes to mind when you imagine what Toyota is, is its three ellipsical logo. Toyoda was a character unknown to the world; no doubt, even when he testified how the company was committing to recalls in all good faith, he failed. You don’t believe a CEO whom you’ve never seen before – neither as a customer, nor as a Senator!

“If you get your face and your name out there enough, people will start to recognise you,” says this flamboyant CEO of over 200 branded companies. Over the years, he has launched costumes to amuse his business partners, customers and the media. He has thrown himself off tall buildings, hung off bridges and taken deep sea dives – all to grab attention. He had the gall to drive a tank into Times Square and fire at the Coke signboard to launch the challenge against the big cola maker. His bet – Virgin Cola. The CEO – Richard Branson, who’s flamboyant smile represents his group of over 200 companies – the Virgin Group. “A young girl once came up to me and told me I could be famous because I looked just like Richard Branson,” says he. That’s the power of being a CEO brand.

Larry Ellison, the highest paid CEO of 2009 is the poster boy of Oracle. Not easy to become a recognised face amongst the masses, especially when your company has a B2B business structure, but Ellison, born out of wedlock to a 19-year-old Jewish mother, had managed his public image quite well, despite having been married four times! He started Oracle in 1977 (the same year when Wagoner joined GM), investing $1,400 of his own money. Today, it is worth $131 billion on the bourses, and Ellison is the sixth richest man in the world. Ellison has suffered a series of personal mishaps, but has managed to cover it up well, for the sake of his corporation, which has grown in leaps by the years. Today, he is known for his extravagant lifestyle, his $200 million real estate, his fleet of exotic cars and his personal aircrafts. What he is known for most widely is for being the poster CEO of Oracle.

Jeffrey Immelt is another name that has earned a huge critique following –for converting GE into more of an Automated Teller Machine that a manufacturing giant (close to 50% of GE’s 2009 revenues came from GE Capital Services). The slowdown hit it hard, washing away close to $100 billion of its Mcap. It wasn’t an easy task to become the GE ambassador to the world, but Immelt, minus all his shareholder wealth destroying acts, has done his bit to play it to the galleries. Some blame him, some praise him, but everyone knows him.

Larry Ellison’s good friend Steve Jobs is no different. From being the brand ambassador at the launch of every iconic Apple product to fi ring employees at will, his fame has grown over time, at manifold the rate at which he has lost pounds. If it’s not Steve, it’s not Apple!

The list of CEOs who have led from the front, both in the boardrooms and outside in the open isn’t short. From Warren Edward Buffett (of Berkshire Hathaway) to Rupert Murdoch (of News Corporation), from Larry Page and Sergey Brin (who are known for their product Google, unlike the founders of Orkut, LinkedIn and Twitter) to Mark Zuckerber (the 24 year-lad founder and CEO of Facebook and the youngest selfmade billionaire in the world), from Indra Nooyi (“The Iron Woman” who is not just the most powerful woman in the world on many lists, but also one who has transformed PepsiCo’s portfolio, and publicly so, leading the aggressive expansion of PepsiCo into nations like Brazil, Russia, India and China; not many would recall who CocaCola’s CEO is!), the list is long.

Think about it, American CEOs, you’ll know a dime a dozen. But if I were to ask you to name a few Japanese CEOs, apart from Akio Morita (and perhaps Toyoda too), you would know none. Is that the reason why for the past many years, Japan is suffering from a debilitating recession? I don’t have the answer to that, but what I can surely say is that Japan lacks CEOs not only at the corporate level, but even at the country level (for example, the US has Obama) who would be able to jumpstart the economic growth by individually becoming the face of change. Clearly, the term ‘leading from the front’ was not made for no reason. on. 4Ps


Thursday, April 8, 2010



The global business acumen is populated with a multitude of mildewed and hollow adages that fail to equip companies with knowledge to reap extraordinary benefits; First Movers’ Advantage is one such hogwash. Over decades, there have been entrepreneurs who have been washed away by this cliché, that once promised them a blue ocean. And most often than not, they ended up wasting truckloads of dollars in inventing the next unimaginable business bet, and building the platform for the late coming slumber-jacks, who eventually walked away with all the goods – the revenues, the profits, and in most cases, even the innovator’s future!

Henry Ford, who himself was a first mover (having pioneered the automobile), had once proclaimed, “I believe that the best strategy for the first per son is to be second!” He was right. Today, Ford Motor Company, his brainchild has not only slipped from being the world leader in automobiles, which it was some decades back (Toyota, GM & Volkswagen with respective market shares of 13.7%, 12.2% & 9.5% are the top three as per the December 2009 World Motor Vehicle Production OICA Survey), but has also become the champion of automobile recalls, globally! If you thought that the $16.4 million fine imposed on the late-mover Toyota Motor Co. by the US government, following its monstrous recall of 8 million vehicles since January 2010 was a fair punishment, how much would you recommend for the first mover Ford, which in 2008 recalled 14.1 million vehicles, after recalling 8 million in 1996?

What’s common between Vivola, Erwise, Midas and Mosaic? All four, individually claimed that they created the browser market. Their hard work translated into a business idea for late-mover Bill Gates. As of February 2010, Microsoft’s Internet Explorer commanded a 65% control over the global browser market (data by Janco Associates Inc.).

Being the first to stake a claim on a new territory doesn’t ensure sustainability. Sadly, it doesn’t even guarantee advantages as was originally believed. Take the case of the lesser known Prodigy Communications. It was an early bird in the business of online connections, which it entered in 1984, along with huge brand names to guarantee it success: there was IBM leading technology for its operations, Sears Roebuck heading its online retail and CBS was roped in for news coverage and selling of ad-space. Twelve years later, it was sold to a private investor group for just $250 million. Similar was the case with the Graphical User Interface, which was developed by the Xerox Corporation at their Palo Alto Research Center (PARC) in the 1970s. Steve Jobs, co-founder of Apple Computers, visited PARC in 1979 and was impressed by the Xerox Alto, the first computer with a graphical user interface feature. He offered Xerox a chance to invest $1 million in Apple pre-IPO stock, in lieu of two visits to PARC with his engineers. Today, none remember that the Xerox Alto was the first computer with a GUI; for the world, it is the Apple Lisa, which simply “copied” the technology which Jobs saw at Xerox. It’s interesting how one man can prove the case for the late movers so well. Steve Jobs didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed right! His iPod, iMac, iPhone have become bestsellers.

There are many examples of how the first mover lot has been one which has been long forgotten. Names like King Kullen Grocery Inc. (which pioneered supermarkets in America in 1884), Minnetonka (which produced the world’s first liquid soap), Ampex (maker of the first VCRs, which lived for just two decades), Chux (from J&J, which was the first disposable diaper brand), Micro Instrumentation & Telemetry Systems (which pioneered personal computing with the Altair), Visicalc (the first desktop spreadsheet program), Atari (which brought to market the first video game), Dumont (which led the way in selling television sets), and many more, have been relegated to the dust-laden history books. And to talk about the new age champions, they are all those which learnt from the mistakes of the early birds.

Walmart was not the pioneer of retail. Excel was not the first spreadsheet to hit desktops. Commercial aircraft were not the brainchild of Boeing or Airbus. Neither did Disney start a theme-based park, nor was Starbucks the first to sell gourmet coffee. It’s true: they were not the first, they had learnt well and did better!

The criticism is supported well by research too. Researchers DavidMontgomery (Stanford University) and Marvin Lieberman (University of California), in their paper titled ‘First Mover Advantages...’ stated that the ability “to ‘free ride’ on first-mover investments and resolution of technological and market uncertainty” comes as an advantage to second movers.

“Pioneers often miss the best opportunities, which are obscured by technological and market uncertainties. In effect, early entrants may acquire the ‘wrong’ resources, which prove to be of limited value as the market evolves,” added the duo. And to talk about numbers, the fi nal nail is hammered in by Richard B. McKenzie of the University of California, who proved through an extensive study how failure rates across traditional industries for pioneers, was a 71%, with their lot controlling just a pathetic average market share of 6%.

A research by professors Markus Christen (INSEAD) and William Boulding (Duke University) also testifies thus, “We found that pioneers in consumer goods had an ROI of 3.78% lower than later entrants. And the ROI of first movers was 4.24% lower than followers in the industrial goods sector. Bottomline: Pioneers were substantially less profitable than followers over the long run…

Once upon a time, long long ago in Bethlehem, the wise men said that competition was like a 100 meter race – the first off the blocks is the one who has the biggest chance of winning the race. What they unfortunately forgot was that competition was more like a 40 kilometer marathon, where it matters more how well would you last the whole distance and learn from the mistakes of those ahead of you. Imagine driving a car at 120 miles an hour on a completely pitch dark highway in the middle of the night. Now, wouldn’t you give a king’s ransom to have another car ahead of you tasting the bumps and ditches first?


Thursday, March 11, 2010


From Socrates in 400 BC to Barack Obama in contemporary times, the teaching profession has given more transformational leaders than any other profession.

The correlation was known for many years. But it took a spate of recent examples for pushing the premise beyond argument. Call them spiel gurus or spin doctors or plain and simple professors, the fact is that the teaching profession has regularly, over centuries, provided transformational leaders unmatched in the history of mankind.

Of course, the supremely confident and inspirational Barack Obama is the most recent and perhaps most brilliant example of this qualified hypothesis. Obama, a graduate of Columbia University and Harvard Law School, used to teach constitutional law for more than 12 years (1992-2004) in the University of Chicago. But if the 2009 Nobel Prize winning Obama is impressive, you’ll be amazed at the number of trailblazing tutors in history who’ve moved mountains and masses in their endeavours to changes the world.

Socrates, an iconic Athenian philosopher who lived around 400 BC, was a teacher who spawned students equally iconic, like Plato, and value systems that have become legendary discourses of today – one, which holds relevance till date and beyond, without any footnotes to the preacher, is where Socrates implores the community to focus on self development rather than on the objective of gaining material wealth.

America is replete with similar examples. The most charismatic William Jefferson Clinton, better known as Bill Clinton, went to law school and after passing out, became a law professor at the University of Arkansas-Fayettville. His teaching career is said to have contributed significantly to his political career. He’s one of the few Presidents of the United States who were elected twice to the position. It’ll be hard for any person to deny the command Bill Clinton holds over masses till date. Dixy Lee Ray was the 17th Governor of the U.S. State of Washington. She was Washington’s first female governor. After getting a master’s degree and later a PhD from Stanford University, Ray became a marine biologist and was a professor at the University of Washington for 26 years till 1972. James Abram Garfield (1831-1881) was the 20th President of the United States. In his earlier years, not getting his preferred job as a principal of a high school in Poestenkill, New York, James joined the Eclectic Institute teaching classical languages. For that matter, John Quincy Adams, the sixth President of the United States, was a professor at Harvard. The list of member representatives within the US Senate, who have been or still are professors in American universities (Vernon James Ehlers, Berkeley; Samuel Hayakawa, University of Chicago etc), is growing by the day. The Federal Reserve head, Ben Bernanke, used to teach at the Stanford University’s Graduate School of Business.

Even beyond America, the essence of education and belief in professors is noteworthy. The largely anti-American Mahmoud Ahmadinejad is the current President of Iran and enjoys an unassailably huge majority within Iran (despite all talks to the contrary by western media). He’s into his second term and is none the better when it comes to diplomatic talk. This son of a blacksmith holds a Ph.D from Tehran’s University of Science and Technology and used to teach in the University as a lecturer before becoming Iran’s premier. In the same breath, Vaclav Havel – the tenth President of the Czech Republic – is a close qualifyer being a chemical laboratory assistant for almost four years.

In the corporate front, Dr. Craig R. Barrett, retired CEO and Chairman of the Board of Intel Corporation used to work as an assistant professor in Stanford University before joining Intel. Post retirement, he has now joined the faculty at Thunderbird School of Global Management in Arizona. Barrett ushered in what is considered the most dynamic times in the history of Intel.

Ask yourself. Do you remember anyone in your life, apart from your family and close friends, who has been a significantly large – if not the biggest – influencer in modulating the way you think, and in the way you perceive situations? High chances are that you’ll have a school or college professor in your mind, one whom you would not forget even after years of disuse of the topics taught.

Millions across the globe idolize Mohandas Karamchand Gandhi, Mahatma to all of us. Single handedly, he generated a revolution out of the weakest link in our personalities, that of non-violence. His charisma and vision are what India owes its existence to. Given that, not many know that Mahatma Gandhi once wanted to take up a job as a high school teacher.

Looking at more recent times, this man is an MA, DPhil (Oxford) and DLitt (Honoris Causa). He was a senior Lecturer in Economics (1957- 59), Reader in Economics (1959-63) and Professor in Economics (1963-65) at Punjab University. Later, he became the Professor of International Trade in the intellectual hub Delhi School of Economics, University of Delhi. He further became an honorary Professor at Jawaharlal Nehru University, New Delhi, in 1976. The man is none other than Prime Minister Dr. Manmohan Singh, who led the globalisation wave into India and earned an image that is highly value based.

Clearly, if a country wants a radical and transformative change amongst its citizens and within the nation, it has to focus first on generating outstanding quality professors, without whom the change exercise is futile. To that effect, honourable Union HRD Minister Kapil Sibal has a hitting point when he says that there is a huge dearth of quality teachers in the Indian education system. This is actually an extremely worrisome issue as not only does it hinder the generation of quality professionals to join the corporate industry, it also stymies the nation’s development considerably as there are fewer and fewer thought leaders who can say, “Yes, we can,” and move a nation ahead with them. And that is the call of the day that India needs to address if it wants a revolutionary approach to developmental issues.


Friday, January 29, 2010


Promises of combined superpower financial strength aside, the terrifyingly benumbing question was posed to me by one of my closest friends, who had found time within his desperately busy business schedule to get engaged through ‘arranged’ channels with a wonderful lady (a brilliant attorney at- law!), whose first advice post the engagement to my beloved comrade was, “Let’s get our finances together and start a joint account... Asap!” Blast freezing couldn’t have chilled me to the bones faster than the lady’s statement! But incredulously, my besotted cocker bum of a buddy seemed so deliriously fascinated by the fiancées proposition, that all my pleadings and entreaties to influence him to not ‘give in’ were either flatly shoved away or angrily dismissed as being “hysterical!” To a point, where my utterly bewitched friend literally screamed at me to back off, shouting, “Why the hell are you stopping me? Wouldn’t you merge your finances with your wife’s?

Well, would I? Corporate research teaches well, and to married men, I say it teaches better; because much that happens in the corporate world applies lock, stock and a beer barrel to the personal lives of married men! And I had known for years the answer to the beguiling question of whether one should merge finances – or for that matter operations/ branches/employees... M&As for short. In one word. “No!”

Mergers – used as an inorganic growth strategy – rarely work. And the faster managers realise that, the better! I start with the authoritative IBM Global CEO study 2009, titled ‘The Enterprise of the Future’, which, after interviewing more than 1,130 CEOs globally, reports that a smashing 67% of the CEOs voted for growth through “organic” routes, with another 81% voting for “partnering extensively,” rather than M&As. In another 2009 survey finding from Deloitte Consulting’s CEO Survey, ‘Now is the time when winners stand out’, four out of five CEOs surveyed voted in favour of organic growth being the path to their companies’ future growth, with just a paltry 16% voting in favour of M&As. There seems to be increase in the number of those whose blindfolded faith in the power of M&As is rightly being wiped out, with the most contemporary 2009 dose coming from PricewaterhouseCoopers in the name of its 12th Annual Global CEO Survey, which states how “only 6% of CEOs think that M&As currently offer much potential for growth.”

The 2010 NYSE Euro next CEO Report titled ‘The Road to Recovery’ proves empirically that today, the percentage of CEOs who believe that “M&As, as an external factor, will impact the company’s overall growth through calendar year 2010”, has fallen by 16%, as compared to the figure three years back. In fact, 76% of the CEOs surveyed confirmed how M&A market opportunities are “not exceptional” through 2010. In a classic M&A global research report furnished by KPMG, all optimism regarding M&As is buried deep: “53% M&As had actually destroyed [shareholder] value, and 83% of mergers were unsuccessful in producing any benefit to shareholders…” The IABC Research Foundation report, ‘How Communication Drives Merger Success’ interestingly combines five different studies over a period of two decades, conducted by McKinsey & Co., A.T. Kearny, Business Week and Fortune, and concludes, “A majority of today’s mergers will fail. 1/3rd will be sold within 5 years, 90% will fail to live up to financial expectations, 50% will destroy shareholders’ wealth, 60% will see their stock price fall behind peers” within 2 years, and 2/3rd could have earned more simply by putting their money into certificates of deposits!

To put all heavy-duty research aside, let me give you a very interesting piece of information that may set your think tank rolling. During the year 2006, when sentiments in the global economy were on an extreme high (a year when even India Inc. saw its biggest billion dollar deals ever!), the top seven names on Dealogic’s M&A dealmakers list were Citigroup (having spend a continental $296.28 billion on 51 deals during the year alone), Goldman Sachs (spent $296.26 on 70 M&A deals), JP Morgan ($271.93 on 96 deals), Lehman Brothers ($255.57 on 47 deals), Merrill Lynch ($227.90 on 67 deals), UBS ($204.83 on 85 deals) and Morgan Stanley ($184.06 billion on 56 deals).

Strangely, the amount of money they spent on deals only increased their respective debt loads and weighed heavy on to their portfolio of non-performing assets. Just two years later, the largest of the M&A dealmakers, Citigroup returned losses amounting to $99 billion in 2008 – the highest ever for any company in the history of capitalism! Beat that for positive returns with $230 billion worth of shareholder wealth erased in the two years following the deal!

A study by the University of Exeter’s new Centre for Finance and Investment also revealed how in the five years post-deal, the ROI for merged entitites underperformed by an average of 26%, compared with shares in companies of A study by the University of Exeter’s new Centre for Finance and Investment also revealed how in the five years post-deal, the ROI for merged entitites underperformed by an average of 26%, compared with shares in companies of and this is precisely how Daniel W. Rasmus, Director of Business Insights, Microsoft Corporation quotes him in his 2009 report titled ‘Working in a blended world’: “Between 65 percent and 80 percent of M&As destroy shareholder value, rather than enhance it.” Explaining the reasons for failures, the white paper by Professors Ulrich Steger and Christopher Kummer of IMD Lausanne, titled, ‘Why M&A Waves Reoccur – The Vicious Circle from Pressure to Failure’ elaborates, “Synergies [of functioning together] are frequently overestimated – they look good on paper but are not realized…”

Having said that, I would put forward the proposition that M&As are not growth strategies but survival strategies – meant for drowning entities, who latch on to each other to live another day. That means that during the times of economic slowdown, M&As should have increased, especially in the companies floundering to survive. Unfortunately, the corporate world remained blinded and in fact reduced the number of M&As during this period. According to a January 2010 Global M&A Report by data monitor ZEPHYR, the value of global M&A declined by 15% to $3.62 trillion in 2009 (from $4.24 trillion in FY2008 and $5.61 billion in FY2007). The number of deals reduced to 64,981 in 2009 from 66,472 in 2008. Private equity deals declined in every outlined region by both volume and value.

Even in India, total value of M&A deals announced in 2009 was $21.20 billion against $41.54 billion in 2008, according to Grant Thornton’s Deal Tracker report 2010 – a drop of 49.01%. There were 488 deals in 2009 as against 766 a year back. While on one hand, domestic M&A volumes dipped to 142 from 172 last year, outbound M&A was down at 64 (as against 196 last year) while inbound M&A fell to 61 (as against 86 last year).

But brilliantly, the ever-solid Towers Perrin 2009 report titled, ‘M&A in the post-Lehman world’ proves my conjecture by stating, “Companies that completed M&As since the beginning of the downturn are outperforming their non M&A peers by 6.3% globally.”

Dionysius Exiguus initiated the BC & AD dating systems. For the contemporary mergers world, there’s one such Exiguus – and he’s called Warren Buffett, who in 1981 had narrated the momentous constitution regarding the futility of M&As, when he said, “Many top managers apparently were overexposed in impressionable childhood years to the story in which the imprisoned handsome prince is released from a toad’s body by a kiss from a beautiful princess... We’ve observed many kisses but very few miracles!” Mergers rarely work, and those that are undertaken in a rush of ego, infatuation and blindsighted power hunger, will fail!

All said and done, I knew that the battle to influence my unsuspecting friend’s mind had been lost the day he had set eyes on the lustrously effulgent solicitor. I scraped back what was left of my ego and decided to trudge back to my own turf – my home – where the rules were all mine. Entering home, I was just about to take off my coat, when my sweet wife shouted from across the hall, “Tell me, who is the nominee on your life insurance policy?” I could swear I felt a freezing blast from somewhere down the hall...