I had written Why Independent Directors are ineffective here sometime in May 2009.

Some time ago I read about Relics in Board rooms, where the types were categorized by a Prime Database study that classified in 4 broad types

75% Home directors - known personally to promoters - relatives, friends. Several loopholes exist in the Companies Act allowing their induction.

15% Value directors - people that either bring knowledge and expertise to the company - lawyers, technocrats etc. or provide it with a strong network.

5% Celebrity directors - inducted to add an aura of respectability & news value to the company including film stars, sportsmen etc.

5% PSU directors - typically appointed by political high command or ministers concerned, most are either politicians or bureaucrats.

So finally except 10-15% do Independent Directors really add value? And why does the Companies Act not get modified? Everyone I spoke to really had no answer.

Post Satyam, there has been a lot of debates, discussions on “Are Independent Directors effective”? Everyone has had something to say about this.

YES! there are some reputed people who have been extremely effective over the years, however the general perception has been to the contrary. There are numerous reasons for this, common which I personally feel are listed below:

1)     A fair number of them have full time responsibilities and are also on several boards, which makes it difficult to do   justice to all of them in the right manner.

2)     They have little on stake in the company on whose board they sit.

3)     Mostly, they are friends of the promoter, other board members.

4)     Little experience in the industry of the company on whose board they are on.

Whilst these are factors that can be overcome, only specific guidelines, laws would ensure this really happens. As also the internal need of wanting this to happen shall play an important role.

With everyone talking about economy, recession, job cuts & what have you; the scenario sounds depressing, whereas it actually is not.

Talking about this with friends from various industries, though primarily from the Jewelery business, advising them, I decided to pen down the basics, because even in such times a winning strategy can be executed, keeping the fundamentals of business in mind always.

Some basic mantras that can help tide you over:

1. PRODUCT - stick to the basics

i. Focus on profit, not volumes - The time is to rein in the volume push, concentrating on profits. It would be better to maintain profitability on existing volumes, rather than grow volumes.

ii. Innovate within existing Formats - Take cognizance of the different formats of sales/distribution. Aligning & offering more products, offers at a S-I-S (shop in shop) may be much better than trying to push a high street/stand alone store during these times.

iii. Maintain standards - Continue maintain laid standards, do not start switching off AC’s, lights (instead tone them down; use reflective visual merchandising to help). Do not compromise on service levels, staffing drastically.

iv. Let product innovation take a back seat - Continue investing in innovation, but do not invest time, effort, money into completely new products that may only be on the shelves after a couple of months or next season.

2. Promotion - Focus & Creativity

i. Do not blindly take decisions on cutting down advertising & promotion. Take a step back, analyze & implement.

ii. Yes all experiments may be held in abeyance OR better still targeted at niche, catchment areas before being rolled out.

iii. Above all do not get into deep discounting, just because everyone is doing so. It is the worst decision to get into herd mentality.

3. Price - Be determined.

i. Sure, create a lead in price but always keep competition in mind. Studies, Analyze but never blindly follow them.

ii. A good idea would be create closer price ladders in similar products, designs.

iii. And create, increase opportunities for standard pricing across designs, sub brands, collections.

4. Proposition

i. Communication is the key here. During tough times, customers look for a tangible benefit & hence imperative to give them a good - great value proposition.

ii. Also deliver a much higher perceived value by add on and other related adjacencies.

5. People - recognize, own, connect, cherish, celebrate, reward - This goes for consumers as well as own people.

i. Take the lead in identifying changes of consumer behavior.

ii. Keep a constant & consistent dialogue about brand, product, and industry.

iii. Consolidate distribution

iv. Continue investing in the team; creating a sense of joint ownership.

v. Celebrate people’s (own & consumer) achievements.

vi. Infuse pride in people.

I am sure, there would be more points & would welcome inputs, thoughts.

I had become a member of ryze.com way back in 2004 after receiving umpteen invites as is the wont when some new fad takes over.

Whilst I am not completely technologically challenged, I prefer my Networking to be off line, face to face….you probably get the point.

However, I attended a couple of Business Mixers as they are called offline, the first one being in Bandra on the corner of hill road opp. Globus. There were some 70+ people (if my memory serves me right). Meeting them, exchanging cards & more improtantly thoughts, views the evening flew past - never managed to try out the starters & just barely managed to have a drink.

Over the next 2 years, attended other mixers - bindas bol; rum mixxa - but they were more fun evenings rather than really networking so to speak.

Business Networking Mixers happened pretty regularly & attended them, never for a moment looking at them as a business opportunity, more to socialize, observe people, understand the entrepreneurial bent of mind - since most of them were that..

Met people like Unni, Rajesh, Ranten, Ian, Soeb, Sailesh the SAI, Jiten, Venkatesh, Lalit, Ivan, and others too numerous to name, though remember most of them except the ones I don’t need to.

As we became friends, maybe did business together, if relevant, started an informal off line network MNDFCK - read about it here & here. BUT they became an important part of my Rolodex.

2006 onwards till March 20, 2009 I was completely off Ryze, its Mixers & what have you. There were a variety of reasons for this:

• Too many mixers - most of them sub sets - you ended up meeting the same people, chewing the same fat - not worth the time & effort.
• Too many groups, sales pitches & not enough substance.

AND my personal Peeve!

As one of the few people who worked for an Organization, I became the target - the moment I walked in - a lot of people became extremely pushy - trying out their aggro sales pitch - give them your card finally & they immediately asked for your mobile number/direct number etc. And then without even understanding the position would start badgering you for something you already had, did not need or could not help them.

• Just a presentation about something completely irrelevant (hello! first research the needs)
• Use your name, when they met someone in the organization (don’t allow my family to do this)
• Used you as a reference without checking with you (the bane of my existence)
• Friend, Relative introduction to you or for you (Don’t I have enough of my own???) And so on.

All this was as if they were doing you a favor!!! (as if I need one without asking for it) When you did not entertain, promptly start bad mouthing you.

During the time I went off Ryze also; I heard, learnt from the Network Owners of the losses they incurred because of people who promised, did not turn up & did not pay!! irrespective of the announcement etc.

A couple of weeks back, I received a message on FaceBook from Unni about a Mixer. Ignored it for the most, though circulated it around. Got some responses also….I have urgent meetings; Flying that night; travelling; is the price not too expensive; how many will come….most of these I ignored:)

How many will come? Go register & find out!!!

Expensive - Yes! for those who are going to measure ROI instantly. Attending for the first time with lot of expectation. For others, who commit & never attend how does it matter? And because there has to be a commitment on number of people to be given, the expense goes up!

A couple of days, speaking to Unni on some other matter, he said why have you not registered?? forcing me to get off the fence & say AYE…..

And so the evening began…..Pictures tell the story…..but some observations……

40 confirmed & 22 maybes = 32 attended, (out of which 8-10 were gate crashers) with a variety of out landish excuses thrown in or phone un reacheable, by the others.

Felt like a Private Party.

Quite a number of new people around, some of them extremely enthusiastic, so much so somebody had printed special visiting card.

Were unable to understand some pitches.

Guess food could be had at leisure & there was enough for everyone.

AND YES! the organisers made a substantial LOSS

Some offered to share the losses which was gracefully refused!

However, this has not diminished Unni’s passion! He has committed himself to a June Mixer that has some value proposition & would like it to be smaller.

History of gold prices (in rupees):

1930: 180 per 10 gram
1940: 360 per 10 gram
1950: 1000 per 10 gram
1960: 1110 per 10 gram
1970: 1840 per 10 gram
1975: 5,400 per 10 gram
2000: 3,000 per 10 gram
2006: 5,400 per 10 gram
2009: 15,700 per 10 gram.

The above example whilst may not be perfect in prices suffices to illustrate that Gold surprisingly gave 300% returns from 1970 to 1975 when the world suffered worst ever recession after great Depression. Will history repeat? That is the reason behind current “Mad Gold rush”. But if you invested in the Gold in 1975, your investment gave negative returns for the next 25 years.

Two things to remember:

1. Gold generally trades in the lower range around March and July. Generally, it is the best time to buy gold and marriage season is the best time to sell God.

2. Below 11,000, Gold is a safe investment but above 15,000- it is only for traders but not for investors.

Future of Gold:

When stock markets were down in 2002, Gold was at Rs 5,400 per 10 gram. Don’t forget that Gold traded below 9,000 per 10 gram till 2007 means you might have got routine returns from Gold investment.

But investors who made investments in gold in mid-2007 are now making 70% returns in just 20 months. But I don’t know what will happen to gold investors who bought it at above 15,000 but they remain in loss even after 3 years. Why?

Gold will recede to 11,000 levels once equities make comeback. What happened to crude oil will repeat in case of gold also. Don’t forget that Gold is not even an essential
commodity. But Gold is a less volatile investment.

Examples:

1. Crude oil prices moved to $147 per barrel and Goldman Sachs people gave $200 per barrel target. It is now trading below the fundamental price at $35 per barrel.

2. Sensex moved to 21,000 and analysts and analysts gave 30,000 target. It is now trading at 9,000 levels.

3. Real Estate prices reached astronomical levels in 2007 but people bought land as if there will be no land available for purchase in future.

So what do you want to do with your accumulated GOLD?:)

Arvind Singhal: Subhiksha and the Indian retail story

An interesting opinion by Arvind. However there are many aspects that bear some thoughts. When the going was good - India shining; Retail Rocking….everyone jumped on the bandwagon - consultants offering India on a platter, companies that had no clue about consumers (having spent a decade or more in the B2B space)started announcing 10/100/1000 stores in 3 years or maybe less; the search for retailers began (in a country where organized retail did not exist beyond the past 5-7 years), so bring in expats (expect them to learn India & deliver in a year) so on and forth.

This actually spawned a industry by itself:

Consulting on entry strategy/liaison/funding, property etc.
Search for people
Training
Realtors, Builders
Furnishing, Merchandising you name it.

We had experts all of a sudden with a bidding war being waged. A lot many employees took advantage of this shifting jobs every couple of months.

In all this euphoria everyone forgot/pretended to/avoided the fact & number game. So the 1st year losses accumulated & with a bit of creativity (maybe accounting/inventory management etc) it carried on to the next year & maybe another year; till the bubble burst from below.

Except for the funding companies; nobody was really in the finance business, so when bottom up everyone started asking for their money, the pyramid started collapsing. And there poor subhiksha was caught!

Whilst trying to understand their plight, the fact also remains that there was the board of directors who obviously met if not monthly, once a quarter; their auditors, bankers, vendors who all knew about this collapse - structured or otherwise. Here probably, everyone thought ‘why spoil a good thing’ someone is bound to take care of it….unfortunately that someone was no one.

And there endeth the first lesson for organized retailers!

I am not an analyst, industry leader or similar, however would like to ask…

How is this different from Satyam?
Even @ average of 5 people per store we are talking about 5000 minimum without a job, salary till may if they are lucky.

Take my word for it: There is going to be a Satyam in every industry to ensure CORRECTION for the rest of the players in that particular industry, which may not be bad at all in the long run.

However expecting people/companies to learn from this is a DREAM:)

After weeks of listening to depressing news, rumors, discussions; on recession, inflation economy, sensex, problems Saturday November 22, 2008 turned to be a day that lent credence to my constant refrain, that ‘It is a much needed overdue Correction that is taking place’. Read the rest of this entry »

A couple of weeks ago, Charu Bahri who writes for a variety of online & Offline magazines called up to get some input on the above subject, based on my experiences.  This has now been posted on The Daily Retail.com

Do go through it & share your experiences, views with me.

As a leader, your word is only as good as your last promise kept …. or broken

This thought has been relevant in the past, but more so in today’s scenario. It does not matter whom you lead, whether you are a parent, teacher, manager, CXO, CEO, politician so on & forth….. this is applicable.

In the employee focused environment of today, where the knowledge perception is extremely high & you hobnob with extremely bright youngsters who know exactly what they want in life, it is extremely important to have a clear communication line constantly open, sharing thoughts, worries with them openly. They are no longer willing to accept just because the leader has said so!

And it is here, it becomes imperative to think your promise before you give it & more importantly once given, follow it thru to ensure it does not break.

Over the years, this principle has brought & caused me grief, though to be honest I have not been able to keep to it every time.

A man eats two eggs each morning for breakfast. When he goes to the
grocery store he pays Rs. 6 a dozen. Since a dozen eggs won’t last a
week he normally buys two dozens at a time. One day while buying eggs he
notices that the price has risen to Rs. 7. The next time he buys
groceries, eggs are Rs. 7.5 a dozen.

When asked to explain the price of eggs the store owner says, “The price
has gone up and I have to raise my price accordingly”. This store buys 100
dozen eggs a day. He checked around for a better price and all the
distributors have raised their prices. The distributors have begun to buy
from the huge egg farms. The small egg farms have been driven out of
business. The huge egg farms sell 100,000 dozen eggs a day to
distributors. With no competition, they can set the price as they see fit.
The distributors then have to raise their prices to t he grocery stores.
And on and on and on.

Read the rest of this entry »