Is your social strategy in place?

Despite all the euphoria about economic growth, the obstacles in India’s path remain formidable. One of the most difficult issues to tackle would be the increasing level of economic disparities. So while there are 53000 households with annual incomes of more than 1 crore, 400 million go to bed hungry. These 400 million are below the poverty line which by definition means that they do not get enough to eat everyday. The simmering violence of a hungry stomach can be explosive. And a large alienated mass of people is a potential tinder box if they are mobilised. History has shown that such disparities are socially unsustainable.

When a large section of the society is disaffected then it tends to retaliate against people who it thinks are exploiting them or the society. The consequences of such conflicts are enormous and problems become intractable. We have seen that the population of NE and Kashmir have felt alienated(though for both economic and political reasons) and it has led to a spiralling circle of violence and resentment. This has had catastrophic impact on the economic activities. Despite the best efforts of the government and parts of civil society business has not recovered in NE. We are seeing the increasing influence of the naxalites in a broad swathe of Eastern and central part of the country. The dangers of such inequality are multiplied in India because of lack of a proper justice system and endemic corruption in the law enforcement circles. The lack of justice and the unfairness around make the deprived sections more volatile and violent.

In these circumstances, it is even more threatening for the key organs of the society which are seen to be exploiting the society. So the rich landlords were the targets in the naxalite movement and the government or security forces in Kashmir or the tea gardens in Assam. In these times of increasing disparity, many people have started seeing the corporate sector as flourishing at the cost of poor people by charging high prices or making money unethically. This is reinforced by the visible lifestyles of executives and owners.

The typical response of businessmen to this would be that they need to reap the rewards of their talent and hard work. The executives also need to be paid international salaries as the country becomes more competitive and the companies need to retain talent. While these are valid reasons, the corporate sector needs to also take steps to assuage the concerns of large sections of society. This can be best achieved by being a good corporate citizen . Good corporate social responsibility can act a protection against the vicissitudes of the social dynamics and make the companies less immune to violence and subsequent losses. The steps taken today can prevent bigger disasters tomorrow. One shudders to imagine what would happen to FDI or venture capitalists if the CEO of a multinational is kidnapped and beheaded for a ransom.

Corporate social responsibility implies a) Being honest, doing everything legally
b) Fulfilling all obligations and commitments towards all stake holders(including society at large)

Sadly, many corporates in India fall short of expectations even on being ethically proper. In the past, we had examples of companies not paying the employees their providend fund dues which has fortunately got corrected. Many corporates go to great lengths to avoid taxes, duties in collusion with government officials. They shamelessly degrade the environment knowing fully well that it is a treasure to be fully protected. There are several instances of crooked businessmen not clearing the genuine dues of their business partners and associates. The consumers getting cheated by cynical manipulation of licenses with the help of politicians is an accepted practice in this country. No wonder in surveys of respectable professions ,managers and entrepreneurs still figure very low.

This aspect of corporate social responsibility should be a given. In fact, the corporate associations like FICCI and ASSOCHAM or CII should be pro-active in ensuring minimum level of ethics like watchdogs. Any member flouting or sidestepping the law should be censured by its peers. Necessary inputs and systems for getting information and acting on them should be put in place. The government has to be more concerned about this and should tighten laws for evaders.

It is also important in the era of globalisation to be ethically above reproach especially for companies which have global aspirations. The consumers worldwide expect ethical behaviour and can with the power of internet or alert citizen groups or individuals can destroy companies. . It cannot be just an offshoot of the benevolent intentions of the CEO. This also has to be in the DNA of every employee or dubious acts by sections of the company like in Arthur Andersen can lead to collapse


The second aspect of corporate social responsibility then assumes importance. It is about giving back to the society from where one draws sustenance. The Tatas have done it widely in different fields and the goodwill they enjoy today is partly an outcome of this. The benefits for business from this dimension of CSR are enormous. No government or political party in Jharkhand today can think of unduly harassing TISCO. Similarly, Infosys by the simple act of funding the expansion of the premier pediatric hospital in Bhubaneshwar today commands huge goodwill in Orissa. Fortunately, many corporates today have embarked on programmes to give back to the society.


But in India the corporates need to also go beyond the above traditional understanding of the corporate social responsibility to ensure that they actually work as a powerful force for the good of the society. Today the best and brightest join the corporate sector with idealism in their hearts. They look upto their leaders .At the top there are crooks but there are also men of iconic stature and unimpeachable integrity like Premji and Murthy. There are some top level professionals chief executives who command a great deal of respect in the society. They need to dynamically influence policy and be more engaged with society. It is in the interest of the business that they speak up on behalf of the silent masses of society. The civil society needs people who have the courage to stand up. Many arms of the society (academia or media)in the face of consumerism can wilt because many times they are not financially independent or there is a quid pro quo with the powers that be. It is on such issues that the corporate leaders of the society should stand up. Today, they have the strength to not to succumb to pressure. But they do not stand up and only seethe silently. So it is sad to see that the Gujarat riots are not censured by the corporate community in general or Gowda’s antics are being handled with kid gloves.

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So corporate social responsibility which is ethical behaviour and fulfilling obligations towards all stakeholders is not just a feel-good activity to draw talent or build up reputation .For the Indian industry the significance of corporate social responsibility goes beyond the traditional underpinnings. It is a strategic necessity from several angles. The corporates need to have a sound social strategy as part of their business strategy.

Innovation and FMCG industry in India

Background

The Indian FMCG market has slowed down in growth for sometime. From a growth rate of excess of 12 percent in early 90’s, it has registered only 4.4 percent odd so in the last five years.
In the last five years , the GDP has grown by a CAGR of close to 6 percent at real prices. So FMCG business is not even growing at the pace of the domestic economy. One would have thought that in a country where penetration and consumption are still low by international standards, this industry catering to basic necessities would have registered higher growth. But in the last decade sectors like telecom and durables have grown spectacularly but not FMCG.

The reasons for the slow growth have been discussed and debated endlessly. Primarily a) The housing, telecom and durables sectors had a latent demand which ensured explosive growth. b) The easier and cheaper availability of credit supported this growth. c) The consumers started spending more on products of these sectors and had lesser money for FMCG products and so downgraded in FMCG.

To counter this, most companies have got into a battle of market share and aim to differentiate themselves on trade reach or advertising efficiency. The route to winning has been believed to be better distribution, operational improvements or outflanking the competition on pricing and promotions. However on hard evidence, these directions have delivered incremental growth and also not helped in exploding the categories.

Failure to exploit trends

In general however, the sector has been unable to exploit the key demographic and sociological trends of the last decade. Within the sector, the companies which have done so have reaped dividends.

The most significant demographic trend in the recent years has been that Indian consumer is getting younger. The average age of the population is amongst the lowest in the world. The youth has far more purchasing power than before and a different attitude towards life in the post-liberalisation era. So sectors which have captured this trend in products and communication have grown like lifestyle apparels, shoes or even trendy watches. In FMCG , Perfetti has done well growing at more than 30% CAGR in the last decade by mainly focussing on youth with hip products and edgy communication targeted at them..

The second important trend has been that families have become increasingly nuclear and urbanised. This has necessitated the need for convenience foods and saving of time. One outcome of this has been the restaurant boom. But convenience foods are yet to take off more due to issues of taste and right price rather than cultural factors. Largely, the industry has missed the bus here.

The other major trend of higher consumption potential due to both rising incomes and increasing consumer base hence has anyway not translated into corresponding growth.
Any sector or company which wants to grow spectacularly has to exploit the inherent potential in the above three defining trends a)Younger population with a different attitude b)Need for convenience and c)Increasing consumption potential. The visible and existing models of behaviour and organisation and strategy in most FMCG companies do not suggest that they are trying to ride these trends and hence it is difficult to anticipate any major change of trend in performance.




Criticality of Innovation

So the sector needs to look at significantly different ways to participate in India’s boom. It need not be dependent on the monsoons or minor price-cuts to drive its growth. These new ways should exploit the key demographic and economic trends. The companies cannot depend on existing products and communication strategies to drive their business. And only new and innovative ways in the sector can rapidly leverage these broad trends for growth.

The other industries have seen spectacular growth due to innovations which have exploited these trends. Some of them which have changed the rules of the game are a) The consumer financing boom changed the way durables could be bought b) The technological changes leading to crash in rates of calls and equipment altered the way cellular telephony is perceived and experienced.

Similarly in FMCG, innovation as played a key role in the outstanding growth of some companies. Frito lay has experienced spectacular growth with an innovative product Kurkure. The caps in sachets by Colgate, the introduction of “lite oils”, the sachet revolution by Cavincare have fundamentally altered the rules of the game and delivered spectacular growth to the companies.

But for most companies, innovation though important, is not a key strategy in performance. There is no premium on innovation. The companies remain hostage to analysis and stability. The R and D centres are not the leading edge departments. The structures do not support innovation. The cultures encourage conformity. Innovation is not on the agenda of most senior managers where as it needs to be the prime driver for their performance.

It is important to realise that the innovation will play the most critical role in rescuing the industry from lack-lustre performance. It is also important that this percolates to every level of the organisation. The processes starting with appraisals, brainstormings and feedback loops have to be in place. The innovation has to be across all dimensions starting with product development, distribution, communication, people strategies and manufacturing. It needs to be pervasive and a very powerful element in the fabric of the organisation.


It is time the industry moved to innovations as the prime platform to ride on the broader social and economic trends .

The Book Capital of the World

Make no mistake about it. Delhi is the publishing and information capital of India too. Most publishers like Penguin, Oxford or Rupa are located here. The top news magazines like India Today and Outlook run from here. The daily fodder of the Indian news fiend NDTV operates from Delhi. The organisations, which decide what our children are going to read like NCERT, are based here. The weighty intellectuals who give us our daily spiel in newspapers and TV channels are mostly based in Delhi. But the Delhite has been known for his groping in DTC buses, chhole bhaturas and robust dancing but never for his books.

I had joined a company in Delhi and then was studiously concentrating on a problem in my cabin when I overheard some colleagues discussing about the new bloke. I was being described as nice, sincere blah blah and also quirkily as one who also reads books as if it was like having a cow in the flat. I was the odd man out in the office where they could not believe one could spend money on buying books rather than gold or a new large fridge. Not a surprising behaviour, considering that the reading habits of the charismatic head of the office were limited to ruffling through Debonair in railway platform Wheelers.

The place in South Delhi where I stay has possibly the lowest ratio of bookshops and magazine stalls to total shops for any city in the world. I am also sure that the percentage of expenditure on books to the total household income in Delhi must be 0.0000001%, again a world record low. Here in a three km radius from where I stay, I can get Hitachi plasma TVs in five shops, Rado watches in fifteen places and Lebanese food in seven joints but I have only three street side magazine stalls and two bookshops. Out of these two, one is good and all of forty sq feet and the other stocks books in only thirty five percent of its space.

But the times they are a-changin’.

The Delhite now has heard that knowledge is a critical ingredient to push ahead in the modern world. He also knows that it has become a status symbol. And nobody can hold a candle to Delhiwallahs as far as status symbols and pushing for success go.


The Delhiwallah has discovered books and is buying them! It is becoming a revered status symbol like a Skoda or a Rolex. I was talking to some guys from Time- Life publishing who sell educational books for children-very good and very expensive. The full set costs a whopping 1.25 lac rupees. They sell it on EMIs too. But the biggest market in the country by miles is Delhi where most sales happen on cash. In the other towns in India, most sales happen on EMIs. So what is the secret? Here, rich businessmen and contractors who proudly display it in their drawing rooms buy most sets. Imagine the status value when Mrs.Chopra tells her friend from Shalimar Bagh that her son reads about alligators from such big, expensive books and not from something published by Navneet.

A similar tale from my friend in Oxford University Press. They were confused for a long time when their leather bound books started flying off the shelves in Delhi. Several months and consumer studies later they discovered that the books were being bought as artefacts for drawing rooms.

So I was not surprised to see an article which said that now interior designers get mandates from their clients to select suitable books for display along with dining chairs and divans.

So there is now money in selling books and I heard that the sanitary ware shop across the street selling glass shower cubicles is now being demolished to turn into a bookshop.


To encash on this newfound craze for the status symbol, I suggest three ideas:

a) The travel agents start offering a complete set of works from an author where people go to - so travellers to South Africa will get a complete set of J.M.Coetzee or travellers to Prague get a set of Kundera.

b) In the busy marriage season the booksellers can pitch for sending the invitation along with leather bound classics.

c) For every five hundred and seventy mithai packs you give in Diwali, gift one book.

Soon Delhi will become the book capital of the world.

Calcutta Conundrum

There are many people who are trying to understand Calcutta and unravel the mystery behind the thinking of its people after the Saurav Ganguly episode.

Saurav was kept out of the team after perfectly justifiable reasons. In fact, the performance of the team in the last two series amply demonstrates the validity of the move. The team actually looks much more positive and hungrier. Its fielding is outstanding and it has in large patches looked like the Australians in attitude. Saurav brought an infusion of guts to the team but that does not mean eternal selection.

Most people I speak to are very happy with his exclusion but the Calcuttans would have none of it. They booed Dravid and the Indian team though out the Eden match. Assorted celebrities from the world of cinema and arts come on television and protest against his exclusion. The city, which paints its walls with pictures of Ronaldo and Ronaldino during a world cup, jeers its own team. It justifies the superiority of its emotions over loyalty to country or civility.

Calcutta though has never reconciled the loss of its status as the pre-eminent city of the sub-continent. It still seethes over the perceived injustice of shifting the capital to Delhi. It is sensitive to issues, real and imaginary .It does not accept anything, which does not follow its way of thinking and living. In reality, this precludes this from being a great city. Great cities are known for their tolerance and universality of spirit, their ability to accept diversity of thoughts. Bombay lost its claim to being a great city the day it had the riots.


But it is not so easy to explain Calcutta. It celebrates Christmas and Durga Puja with fervour. Every family in Calcutta tries to buy cakes for Christmas. It has the some of the lowest communal hatred amongst Indian cities. It has a large heart. But the city also is a bundle of contradictions. I remember the issue of the person who was getting hanged after having raped and murdered a thirteen-year-old girl. There were candlelight marches and processions in his support. The newspapers were full of front-page stories with sympathy about this man. And this in a place, where diseased and dying masses confront you at every stop. In my stay in Calcutta, I have not seen the average Calcuttan exhibiting this trait of compassion over the people he sees everyday. But when it comes to deaths supposedly over a principle (death penalty), he is all eager to hit the streets. They fill up concert halls to listen to classical music and book fairs to buy Kafka and Camus showing their proclivity for fine things in life but they do not mind living with filth on the roads outside their doors.


So the Saurav episode is also another page in the book of contradictions that is Calcutta. There is no point in trying to understand it because it can never be understood.

Manjunath

Manjunath’s murder is symptomatic of the malaise in the system.

The earnest officer was being honest and fearless. He was perhaps too idealistic in the state of U.P. Here, you are expected to buckle down and accept injustice and unfairness. Here, you are expected to only see all the corruption and decay around you silently and possibly crib about this to your wife and friends. You are expected to slowly become a part of the same rotten system and start making money by being a player yourself. You are expected to throw the teachings of your conscientious parents and maybe Ayn Rand into the nearest dustbin and start chasing the average Indian dream of a three bed-room house with two airconditioners and one sedan. So what, if on the way to the dream, you do not recognise yourself in the mirror and you just see hollow eyes and a charred heart.

Manjunath refused to do that and he paid such a heavy price. I am appalled that the perpetrators of the crime even thought of committing such an act in cold blood and then getting away with it. In the process the utter lawlessness in the state of UP has been exposed.

It is a tribute to the Indian media that they have painstakingly followed up the story and given it the necessary exposure. NDTV and other channels besides several leading newspapers (led by Indian Express) have played an outstanding role in building up public consciousness.

However the IOC management and the government remain silent. Is it the silence of the guilty or the silence of the cornered?

The other question is that obviously the adulteration is not happening for the first time. According to some news reports, it is a racket of ten thousand crore rupees. So for the scam to be of this extent 1) either the other persons in charge have turned a blind eye out of fear and/or self-interest 2) or, the checking processes are inadequate. On both counts, it indicts the IOC top management and the oil ministry.

Manjunath’s sad end can be sanctified only if these larger issues are addressed.

HDI and GDP Growth

The joyful pandemonium over economic growth faintly amuses me and reminds me of the games that able gentlemen play in the corporate boardrooms and corridors. It goes like this.

When we are talking about the progress of the country we must consider the overall growth not only economic. This holistic growth status is better described by Human Development Index in a very useful annual exercise by UNDP. This is a composite indicator which captures the achievements of the country on three basic dimensions of human development namely income, health and education. It is a much more comprehensive indicator than simple GDP growth.

Economic growth is one of the requirements of poverty reduction and human development. It is probably a very good indicator for developed economies which have reached desired levels on parameters like infant mortality, life expectancy or literacy. So in one sense, the only play the developed countries can actually have is economic growth. But poor and developing countries have a lot of work to catch up on the other parameters and the obsessive focus on economic growth alone after ignoring other indicators of progress is callous and insensitive.

It is analogous to the situation, for example ,in FMCG companies where the progress of the brand is projected depending on the requirements of the managers. So based on the context the state of brand could be described by a) current marketshares(ms) b)ms growth over last year c)urban ms d)growth in urban ms e)growth in ms vis-à-vis last quarter f)primary sales growth (sales from company depots to distributors)g)offtake (sales from outlets to consumers) and several others. So in most likelihood, some factors would be showing high growth or a positive trend and the trick is to focus on those factors, hide the unpleasant indicators thus ignoring the holistic health of the brand.

Similarly, economic growth today is being focussed on because it is positive and it induces a feel-good factor. The media is the champion of this drum-beating and I almost see the country’s politicians and industrialists thumping their chests with pride when they meet their counterparts in various seminars and conferences and saying “Mera economic growth tera economic growth se zyada hai”.

They tend to forget that four hundred million of their countrymen go to bed hungry everyday and 2.5 million child deaths ( the highest in the world and one fifth of it) occur in India every year. They forget that even though we are making progress, in absolute terms we have only dented the mammoth poverty obstacle.Illiteracy, hunger, pregnancy related deaths, gender inequality and incidence of disease are rampant and we fare just above sub-saharan Africa on these parameters. The situation in Bihar, MP, Rajasthan and UP are almost as sorry as sub-saharan Africa. These unpleasant truths are captured by HDI but hidden in the metric of economic growth.

So even though India is amongst the top ten countries in economic output on purchasing power parity basis, it is an abysmal 127 on the HDI rankings.


Maybe, it is time the states are ranked on these parameters and they are incentivised on their performance(if not being done already) and this is given wide publicity. ‘India today’ attempts a ranking on these but awareness about it needs to be spread more. At least, the middle classes could use this as pointers to their voting.