Ready Steady Go

While retail brands have acknowledged that its time for an omni-channel approach and we can now see Indian e-commerce brands building an offline presence, Amazon is finally ramping up the pressure on the likes of Walmart, Trader’s Joe and finally on Indian chains like Big Bazaar.

While Amazon Go or to be more precise, the idea of automation is here to stay, I think retail firms must first consider how they can implement or fight the model. It’s essential retail firms identify whether they stand for a savings or premium approach. By defining their brand and identity, retail chains can best figure how to take the fight to Amazon. At the same time, retail chains need to consider how to mitigate risks (shoplifting, fraud etc). The absence of a physical person also brings into question the ability of brands to create a better shopping experience by stepping in at crucial moments of the purchase process.

But first – Lets look at why Amazon is adopting the offline route. Part of it is about being able to reach out to a larger audience – probably looking at developing markets such as Asia/ Africa where retail space is cheaper and people still prefer a physical shopping experience to online purchases( as Big Basket and Flipkart have learnt the tough way).

Amazon may be approaching this from 3 perspectives –

  1. Hit the likes of a Walmart/Tesco/ Macy’s before they ramp up efforts to provide a better omni-channel experience for their customers and pull them back from Amazon
  2. Acquire massive tomes of data on shopping preferences of customers from physical interactions at a store level
  3. Build a retail infrastructure which can be licensed out to other retail chains, much on the lines of AWS

While the first is more in the lines of a red ocean strategy, it doesn’t tie in with Amazon’s long term plans. However it could still make these companies bleed further and may create a point of consolidation where some of the smaller players look at getting acquired by Amazon or move into a different model.

The 2nd model can help Amazon in it’s long term growth opportunities by enabling better personalisation for online/offline customers and also help them identify how customers approach the offline purchase process. It can also help create a moat against future plans of Google/ Alibaba/Microsoft.

The 3rd strategy  speaks about Amazon’s long term cloud vision where it acts as a multi-user platform enabling higher adoption both by customers and vendors. Through this model, Amazon is creating a situation where retail chains will have to consider divesting their vast legacy systems built with the likes of IBM/Microsoft/Oracle and adopt the new technology to stay relevant to consumers.

It’s also imperative for Google and Oracle/SAP to look at reaching out to retail chains to promote an alternative solution. With Google’s expertise in applying Machine Learning and Data science towards targeting Big Data problems, they can act as a smart enabler for retail chains currently utilizing an existing solution of Oracle/SAP. By linking it to their existing cloud strategy, Google can also subsidize access to data storage for retail chains and help keep the legacy systems relevant for clients. By accessing millions of photos of brands and SKUs, Google can train their algorithms to provide a real time alternative to Amazon Go.

The key here is to see whether Google/Oracle/IBM consider Amazon’s strategy as a customer acquisition strategy or a blue ocean strategy. There is a vast opportunity for Amazon to build the next AWS through this strategy and accumulate enough customer purchase preference information to guide them on becoming a monopoly.

Reforming Indian business and politics

It’s been a week since the concept of demonetization has been implemented. While there may be much debate about the viability and implementation of the concept, it’s here to stay. But maybe we should look at what it implies for both financial intermediaries and for businesses, at large.

Banking Sector Reforms 

It’s a great opportunity for the likes of banks and fin-tech companies in the payment space. While banks have lost out in the initial round to the likes of PayTM, Freecharge, Mobikwik and others, they have a great opportunity to drive adoption of mobile banking applications, UPI infrastructure and RuPay cards. In fact, this is a glorious chance for the government to create a push for deployment of UPI and RuPay among the financially underserved. With Jan Dhan Yojana accounts getting used and a large number of the masses having to access banks/ postal bank, it’s a chance to drive financial inclusion policies and connect it to building a money multiplying effect.

From the PSU and private bank’s perspective, this is also a great way to re-connect with the younger generation who might use an ATM when forced to, but stick with the likes of PayTM and Uber. By providing viable options and creating an ecosystem of local vendors (in the dining , travel and grocery space), banks could leverage their knowledge of the local vendors and businesses to provide greater value to both established customers and add new customers in the millennial segment. This can work much better than the Social Media and Hashtag banking efforts tried in the past to get people to connect with the bank.

Local Business Reforms

Apart from the obvious threat to jewelers, real estate developers and small time contractors who operate on a cash only basis, the policy is a huge threat to e-commerce companies and lifestyle brands. With COD being given a death strike, it’s going to be tough for e-commerce companies to push up revenues in the next quarter. However it’s a good time for e-commerce firms and retail brands to stop discounts and focus on customer experience and build lifetime customer value.

It’s a great opportunity for local vendors, be it dining / grocery/ service providers to break the hegemony of the aggregators such as Swiggy/ HouseJoy/ Big Basket. By partnering with local banks and other B2B payment players, local vendors can provide a personalized touch with a cashless experience for customers.

Political Funding Reform

With political parties losing access to black money for rallies, helicopter rides and pompous posturing, this is a great opportunity for India to establish protocols for donations to political parties. Either  on the lines of PACs that are created in USA or having clear defined rules for political donations and funding. By creating transparency in the political funding process, it can be easier for us to see how the donated money is utilized.

The next step could be empowering the Lokayukta to investigate not just politicians and public officials but also how public projects are being implemented. This can be a check on impromptu projects such as the Bangalore flyover which came up alarmingly close to a set of elections and had no logic for a two fold increase in the funds allotted.

 

The struggle to stay relevant

It’s been a veritable bloodbath this year. Cisco is firing around 7% of their workforce and Microsoft , HP and Intel have also announced that they will be streamlining their workforce. In India, IT behemoths like Wipro, Infosys, IBM and others have also announced that they are looking to automate many roles and make middle and lower level employees redundant.

While there is a lot of outrage amongst employees about how it is unfair to remove jobs or fire people, they fail to understand that this is just part of the usual technological upgradation cycle. Be it the introduction of spinning jennies which disrupted the lives of cotton weavers, to industrial automation which led to the firing of thousands of factory and foundry workers, every technological innovation has an effect on employment.

To stay ahead of the bloodbath which will happen in the Indian IT and industrial sectors, it’s important we turn towards new skills, soft or technical. Students should move away from joining engineering and look at focusing at UI/UX and design courses. They could also look at understanding how the application of automation and artificial intelligence/ data science is going to change existing roles.

For example, if we look at the traditional role of a business analyst in many organisations, it requires understanding an industry and then analyzing and representing data to identify insights and drive business decisions. However this can also be accomplished by artificial intelligence and IBM Watson and Wipro Holmes are already attempting the same. So it’s essential we understand what are the drawbacks of AI / data science so we can build up expertise which will be relevant and complementary for organisations.

Another key area for India to focus should be hardware design and manufacturing. While the Make in India initiative has just started, it should be a priority to convince major semi conductor companies to start R&D and manufacturing units in India. States should look at not just providing land and tax benefits but also pair these companies with educational institutions ( IIMS / IITS/ IISERs) to increase the no of research publications from both students and researchers.

figure-4

If we were to compare China and India, we lose not just in terms of access to organisations like Intel/ Samsung but also in terms of research conducted. Similarly if we are to take the lead in research in AI/ Data science/ Deep learning, it will be a great opportunity to create a rival ecosystem to Palo Alto, which will in turn drive investments and create opportunities for Indians, whether it be in terms of jobs or in terms of career growth.

 

Pissing in the pool

UberPool or OlaShare, aim to change the mentality of people using both personal and public transportation in India. By providing fares at 30-50% discount of their regular fares, which are themselves subsidised, they have become an attractive alternative for people in urban India.

However, I have heard complaints of how these carpooling initiatives often end up wasting time and money for people. Some stories speak of drivers waiting way beyond the stipulated time for passengers and often turning back to add an additional passenger. Others are disgusted about fellow riders and often feel uncomfortable having to travel with strangers.

The true challenge for both Uber and Ola lies in the sales incentive structure that has been built. Designed to enable both customers and drivers to push carpooling, it rewards drivers who take up car pooling by considering each passenger as a ride, and customers get a discounted fare. This results in drivers often going way out of their route to pick up additional car poolers , even if that inconveniences the existing passengers.

At the same time, passengers have not been informed of the risks of carpooling. They expect the service to be an extension of the current services and are dismayed by the difference in service quality. This can have a impact on future usage of carpooling and the cab service itself.

The answer lies in technology. While both Ola and Uber are using machine learning algorithms and data science to help improve efficiency, they need to improve the algorithms and build in features to avoid wastage of time and petrol. After all improving the time per ride allows drivers to pick up car poolers and build on their incentives.

Similarly carpooling firms need to incorporate customer satisfaction into the incentive mechanism. If drivers realise that an unsatisfied customer will also impact their sales incentives, it might help reduce some of the incidents. However customers also need to understand that if they do not turn up on time, they can lose the fare / can be penalised by not being allowed for future car pooling rides.

The challenge lies in marrying technology with the human touch. Understanding not just the patterns of rides but also the subtle tricks played by drivers and customers. That’s where Uber can potentially use the data of a Didi Mau while Ola still lacks access to the data and talent pool who can suitable make sense of such data.

While driverless cars are still some time away, I foresee a point where we may have automated shuttles with no drives plying on roads.At this time, rather than rebuilding Indian cities to accommodate new modes of public transportation, maybe it’s time we focussed on how options like carpooling or driverless shuttles may help reduce congestion, along with an approach of charging drivers of cars , a la Singapore.

 

Falling to bits

In the last few months, I have come to read some interesting reads on Bitcoin and Ethereum. On one side, you are seeing more investments in fintech startups in India, both in terms of wallets, p2p lending and financial technology firms, while on the other front, both bitcoin and other financial innovations seem to be facing challenges, whether it be from a security perspective or from adoption in emerging marketings.

While I have spoken about this in the past, I keep wondering whether this leapfrogging of regular financial systems to pure play digital approaches can return to bite us in the long term. While banks and new age companies speak glowingly about new technology(be it blockchains or mobile wallets), few seem to want to acknowledge the fundamental issues in emerging markets. Equally importantly, a lack of regulations opens up customers to exploitation.

Firstly, i foresee poor liquidity for bitcoin and other virtual currencies in India. Even if we were to have server farms churning out bitcoins, it’s not going to drive a proper exchange , which allows people to perform transactions without fear of facing delays in payment/ withdrawal.

Secondly, how do we ensure this is not exploited by hawala networks/ criminal networks and politicians who might consider this a great way to whitewash money collected through illegitimate means?

While the RBI has brought in regulations for mobile wallets and p2p lending companies, I wonder if these regulations are aimed more at helping established institutions to catch up with startups, then helping customers. Rather than focusing on educating customers about the benefits and pitfalls of fin tech, the RBI and the GoI seems to be focused on helping banks and financial institutions reach parity.

We have seen PayTM extend loans to individuals and tie up with retail and offline institutions. Insurance companies are looking at pay as you want policies, modeled on the sachet approach of FMCG companies. While these incremental steps are useful, there is yet limited focus on extending financial access to rural and semi urban regions. Maybe instead of focusing on the urban middle class, it may make sense for some of these fintech companies to understand how the other half of India banks.

Remittances, household purchases and savings need to be the focus on new age fintech startups. Be they in cryptocurrency/ lending / payments, the key is to understand how we can tap into these and provide a secure yet intuitive setup. For example, WeChat enables Chinese p2p lending while providing a secure infrastructure to enable transparency and ease of access for liquidity. Maybe India should consider something similar using WhatsApp (but without Facebook forcing their version of free internet on people).

It’s come out that rural folks consider access to Internet using data packs as importance as certain neccessities. Maybe it’s time India enshrines this right to Internet as a fundamental right, ensuring that it becomes the base of an efficient and transparent digital currency initiative.

 

KISS

This is not about Emraan Hashmi movies. The acronym KISS stands Keep it Simple, Stupid.

Uber has just completed a rebranding activity spread over the last few years. The logo looks very weird and the different colors make me wonder if the app will burst into a Bollywood song and dance next. Overall, I am disappointed that Uber has chosen to forget it’s origins and make life more complicated.

Simplicity seems to be underrated in the startup space. Everyone wants to be in multiple categories and spread their eggs across different baskets. A Flipkart is present in 20 + categories and is now even selling cars and motorcycles. Some e-commerce websites have sold flats in the past. Ola wants to ferry people, set up shuttles (which seem more like BMTC buses without the branding) , delivery groceries and food. Probably the only thing they have left out is delivering babies. Mobile apps have ballooned into resource hogging monstrosities which aim at giving the user the chance to purchase anything except ease of use.

From a risk management perspective, maybe it makes sense for startups to be in multiple categories. However from an operational perspective, it doesn’t make any sense. It’s tough implementing their operations properly in 1 category. Spreading yourself thin makes it tougher for your core audience to trust your brand and makes it tougher for your partners to accept you.

I think it’s high time startups decided to put their best foot forward in 1 space. Then they can consider encroaching on the space of other startups

The need for CSR in unicorn startups

In the last few years, a lot of “unicorn” startups have sprung up. With insane valuations and a lot of PR around them, they seem to be the pathway to a new future where we will have self driven cars, intelligent homes and mobile phones which can probably do our work better than us. But in the middle of all this, I see something lacking – a dedication to improving the lives of those not so fortunate.

While certain occasions (natural disasters like the Chennai floods or acts of terrorism like the Paris attacks) do seem to bring out the best in these brilliant companies, there is no systematic approach to employing the skills of these startups for a greater good. While each startup claims to want to change the world, none seem to have a small program to do pro bono work which will change a small neighbourhood or a small town.

There are multiple ways in which startups can help the disadvantaged or the unemployed. For example, say startups in the food space could donate excess food at restaurants to food clinics or homeless shelters. Alternatively startups can look at vocational training for orphans / underprivileged children. In fact startups could even look at donating a lot of the old technical equipment/ excess stationary to schools and vocational institutes.

The possibilities are endless. It takes but some time for each startup to possible come up with ideas on how they can use their operational expertise to come up with a part of a solution to a larger problem.