Archive for April, 2009

How IIM Calcutta Fared in Thought Leadership in 2008

Speech I made at the IIMC Convocation April 2009

     What an extraordinary year this has been!  Iconic companies, the ones who set benchmarks for management practices, companies like General Motors, Citibank, Meryl Lynch and Royal Bank of Scotland have been felled and now exist because of the kindness of their governments.  World over, there is a sudden loss of faith in the power of markets, in the sagacity and expertise of corporate chieftains. The very role of the private sector as an economic institution that benefits society is being questioned. Is a new world in the making where there will be a new balance between the role of the state and that of the market? Will the present world economic system that is driven by what some call “excessive” consumer consumption, particularly in the United States, be replaced by some new architecture?
     Clearly, thoughtful people throughout the world are reflecting on all this.

     Today I will walk you through some of the thinking that is going on within the IIM Calcutta faculty and graduate students as our contribution to this discourse. As you will see, the quality of this thinking is high indeed as some of the most prestigious journals in the world have published this work.

     As a first example, let’s take the extraordinary turn of events in which Indian companies long used to playing a defensive game in our domestic markets are taking the battle abroad and in the process transforming themselves in to multinationals.  Raveendra Chittoor, M.B. Sarkar, Sougata Ray, and Preet Aulakh looked at a specific case of this  phenomena, the story of Indian pharmaceutical companies stepping out into the world in their , ‘Third-World Copycats’ to ‘Emerging Multinationals’: Institutional Changes and Organizational Transformation in the Indian Pharmaceutical Industry. This found a place in the world renowned management journal, Organization Science.

     Then there is an equally extraordinary phenomenon, the acquisition activity by Indian companies in international markets. Sathyajit Gubbi, Preet Aulakh, Sougata Ray, M.B. Sarkar, and Raveendra Chittoor took a look at this and their paper, “Do International Acquisitions by Emerging Economy Firms Create Shareholder Value? The Case of Indian Firms” has been accepted for publication by Journal of International Business Studies, one of the highest rated journals across all management disciplines. What is significant here is that Sathyajit is the first ever doctoral student from India to get an acceptance in any “A” rated journal before completing the dissertation.

     Does the founding context of firms leave a long-term imprint on them and constrain their future degrees of freedom? This question has importance in India as many family-dominated business groups face the new ,dynamic environment. Indrajit Mukherjee, a doctoral student studied this issue and his paper was nominated  for the Best Conference Paper Award in the Strategic Management Society Annual Conference last year at Cologne in Germany.

     These three  papers are from our Strategy Group which is growing into a formidable research team.  During the past three years, five of their doctoral students namely, Raveendra Chittoor, Indrajit Mukharjee, Sathyajit Gubi, Anubha Sinha and Somnath Datta presented or will be presenting more than 20 conference papers in top tier conferences such as Academy of Management Annual Meetings and Academy of International Business Annual Meetings. Additionally, half a dozen of papers have been published by them in high quality international journals such as JIBS and Organization Science

     Let me move next to that issue that is centre-stage during the current financial crisis that grips the world- the issue of governance. Governance, particularly good governance is like love, something that everyone aspires to and wants but seems so hard to get in today’s world. What better time to publish original insights into governance. “The Intelligent Person’s Guide to Good Governance” is a very timely book by Prof Munshi,  Retired Professor of Sociology here, Biju Paul Abraham  one of our young professors and, Soma Chaudhuri  of Vanderbilt University..The central argument of the book is that any serious engagement with good governance must go beyond an exclusive reliance on the state or the market and must explore different modes of partnerships, including public participation.

     Another perspective on governance was contributed by Prof Sushil Khanna- he reviewed 30 years of Indian experience in corporate governance and contributed a paper to the European Conference on Corporate Governance in Brussels.

     One of the features of today’s uncertain world is that a firm’s external environment can suddenly and irretrievably change. This shock can be brought about by technological evolution or government policy change or, as we recently experienced, a crisis in housing markets in far-off places.  Suddenly a firm finds that human assets created arduously over many years are mismatched to the new challenges. How does the Human Resource policy of a firm respond in such an event?  Sumita Kelkar, a doctoral student, guided by Prof Prodip Sett explored the dimensions of HR flexibility and postulated a new one which they call “flexibility inducing HR practices”. Their paper, “Environmental Dynamism, HR Flexibility, and Firm Performance: Analysis of a Multi-Level Causal Model”  has been accepted for publication in the International Journal of Human Resource Management which is  one of the top two Human Resources Management – journals in the world.

     This is Sumita’s second publication in this journal.. Her first article was accepted for publication by IJHRM early this year. Both these articles are out of her thesis work at IIM Calcutta.
Contributions from our Finance and Control Group include a novel NPV-based method of pricing telecom infrastructure by Prof Ashok Bannerjee and Debasis Saha and presented at the Hawaii International Conference on Business.

     Contributions of our Operations Group include a paper on supply Chain issues by Prof Subroto Mitra presented at a conference in Hawaii; another paper from him on the Logistics Industry at a conference in Lugano, Switzerland; a design of a game management software for the Oil industry by Prof Balram Avittathur presented at the International Service Systems conference in Melbourne , Australia; on modeling regional electricity load by Sahadeb Sarkar at a Honolulu Conference; a strategic planning model for freight movement by Prof MN Pal, Sourav Basu, and Prof Nag presented at a conference in Cartegena de Indias, Colombia; another paper at the same conference by Prof Ashish Chatterjee and Dipankar Bose on Capacity Planning under Demand Uncertainty; one on ordering strategies for short-lifecycle products by Prof Balram Avittathur  presented at the International Symposium of Logistics, Bangkok, Thailand; a paper on probability matching by Prof Rahul Mukherjee at the Yokohma, Japan conference on Stastical Computing and another paper at the same conference by Prof Saibal Chattopadhay on designing pilot samples under certain specific conditions; one on aspects of data envelopment analysis by Prof Sanjeet Singh at a Washington DC conference.

     Every state Chief Minister sees the setting up of an IT services industry as the route to providing high-paying jobs in his state. You see these well constructed apparitions’ spring up on the outskirts of our major cities. You can see many for example on the road from Calcutta Airport into town. What is the implication of this kind of frantic building or land use and land markets? MK Satish guided by Prof Annapurna Shaw, took a close look at this in their paper, “Information Technology, and Information Technology Enabled Services Cluster Growth: Impact on Metropolitan Land Use and Land Markets.”

     In our attempt to correct various wrongs in our society, we have been experimenting with various kinds of reservations and the jury is still out on which of these deliver the results we hope to get from them. One such experiment is the ongoing reservation of some Gram Panchayat Head positions for women. In a co-authored study, Prof Ragabh Chattopadhyay found that there was a significantly higher investment in drinking water facilities in those Gram Panchayats that were headed for women. The study, “Women as Policy Makers”, merited publication in Econometrica, the prestigious quarterly journal of economics. This certainly is a finding that reflects the new era: women make better bosses!

     It is only appropriate that in these troubling times that we look deeply not merely at the technocratic areas of management but also at cultural and value issues.  We have a slew of research papers from IIM Calcutta on these topics. Rohit Varman of our Marketing Group  takes a long , hard look at the phenomena of  Consumer culture  where people  portion pursue, acquire and display goods and services that are valued for non-utilitarian reasons, such as status seeking, envy provocation, and novelty seeking. In one paper, “Weaving a web: subaltern consumers, rising consumer culture, and television”, published in the international journal, Marketing Theory, he points out, among other things the troubling connection marketers make between a consumer culture and other “western values” such as ‘democracy’ and ‘modernization’, as if consuming more is essential to being modern. In another article, due for publication in the prestigious international Journal of Consumer Research, Rohit looks at the emerging anti-consumption movement. There was a time such work might have been viewed as in the provenance of socialists, but many of you must have noticed President Obama’s remark at the G20 Summit a few days ago that he was not in favor of the “voracious consumer market” that has been the United States for so long.

     Other contributions from our Marketing Group: a methodology for assessing the quality of Education as a service, presented  by Prof Koushiki Choudhury at a conference on Education in Paris; a similar study on service quality in  retail banking presented at a conference in Kuala Lumpur, Malaysia; an empirical classification of the global auto industry by Prof Profulla Agnihotri presented at a conference in Paris.

     Contributions from our MIS Group include the following: Prof Debasis Saha on methods to audit LAN-networks at a Hawaii Conference; a method of accurately computing fidelity in routing trees presented by Prof Parthsarathi Dasgupta at an international workshop at Newcastle-on-Tyne, UK; another paper by him on placement of standard cells and gate arrays at a conference at Montpellier, France;  a paper on using wireless-sensors in agriculture by Prof Somprakash Bandopadhay at a conference in Geneva, Switzerland; a paper on a pernicious form of online behavior, “shilling” ny Prof Ambuj Mahanti and his graduate student, Sanjog Ray at a conference in Patras, Greece; a framework for understanding technology use by virtual teams by Prof Priya Sethuraman and Prof Snjiv Vaidya at a conference at Christ Church, New Zealand; one on the dynamics of growth of Wikipedia presented by Priya, Rahul Roy and Amitava Dutta at a conference in Paris, France; a paper on valuation of combinatorial auctions by Prof Anup Sen, Prof Amitava Bagchi and their doctoral student, Spumyakanthi Chakraborty presented at a conference in Hawaii; Prof Subir Bhattacharya presented a paper on agent-based model for portfolio selection at the same conference; a paper on achieveing fault-tolerance in wireless networks by our doctoral student D Anuragh at a conference in San Francisco.

     Another slant of thinking on values here at IIM Calcutta has been led by Prof Panduranga Bhatta of the Business Ethics and Communication Group- looking for answers for today’s challenges in traditional Indian values. His paper, “Using Indigenous Knowledge in Management Education: Indian Experiments” is being slated for publication in the US-based Journal of Management Education.

     So, as you can see, the research pickings at IIM Calcutta have been pretty good this year. Encouraged by this we are stepping up the budget for research funded from the Institute’s own resources. The results I have described so far came out of a regime which had a budget of Rs 10 lacs a year; this year onwards we have budgeted Rs 2 crores per year.

     In addition to this,  we have budgeted for each faculty member to go to 3 international conferences in a block of 3 years as compared to just once every three years previously.  This is because we understand that world class research operates as part of a world-wide network of ideas and people. It is important that our faculty interact frequently with their international intellectual peers.  

     I, for one, can’t wait to see all the wonderful and original ideas that will flow during this year and which will be my privilege to report at next year’s Convocation.

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The State of the Indian Online Advertising Industry- Is the Glass Half Full or Half Empty?

Speech I gave at the International Advertising Conference meeting in Bombay 26th March ’09

     It was in August 1995 that VSNL, then a state enterprise, started an ISP service in Bombay. By the end of that year India had 25,000 users…I started around the same time, so its been an interesting journey.
     Today, India has 35-40 million users, defined as unique individuals who visit any internet site at least once in the last 30 days…a glass-half-full-or- half empty depending on how you look at things, as I will describe shortly
     This user base grew 20% or so and looks set to grow about the same this year…that makes us the fastest growing market in the world
     We also have 300+ million mobile phone users; estimates of how many of these access the internet in any given 30 day period vary but 10m looks right
     By comparison, satellite TV reaches 250m and all of Print gets to 220m. So, internet reaches an audience just 20% of TV or Print…but delivers a disproportionate reach among SEC A&B groups
The Internet and Mobile Association of India estimates that Online ad revenue in 2008 was around Rs 500 crores or $ 100m. That makes it just 3% of total advertising in India. So, things are at a very early stage.
     The online ad ecosystem is by now reasonable well developed: all major ad agencies now have digital divisions and have started recommending online media routinely in their media plans; besides these, there are at least a dozen, well staffed Interactive Ad Agencies in each of the major metros. During the last year dedicated ad sales networks have sprung up: at least 6 in the general online space, 3 or 4 in mobile ad sales and at least 2 in selling video ads.
     I started by saying that the Indian Online scene is capable of being viewed as either half full or half empty. 40 m users puts India among the top 5 internet markets in the world, and the 20% y/y growth rates makes us the fastest growing. But 40m is small compared to the size of country we are. And this low number means that a generation of young people is coming of age digitally challenged.
     What could make us achieve the true potential of this market which many of us believe can be as much as 300m+ users?
     Universal availability of reasonably priced broadband is probably the topmost driver. This has lagged in the last few years because our telecom companies have , in the immediate past, seen it much more worthwhile to invest in mobile phone growth. Capital markets reward higher mobile subscriber numbers much more than broadband numbers; solving the last mile access problem requires capex and getting right of way permissions requires both money and time. However the last few months have seen a flurry of activity in broadband launches both in ADSL wired as well as wireless broadband.
     Availability of Indian language content is probably the next driver. The absence of standardized unicode based fonts across our 22 languages, lack of Indian language keyboards, absence of unicode language rendering engines in mobile phones sold in India are all contributory factors.
     The  third driver is higher credit card penetration. There is a strong link between higher credit card penetration, a flourishing ecommerce system and a vibrant online advertising industry. Online ecommerce players are the ones who get immediate and direct value from online advertising and anything other than the most basic ecommerce requires a user based equipped with credit cards. India has just 10 m unique credit card users- rightfully that number ought to have been 100m + by now. What is holding things up is the absence of a common credit rating system that all credit card issuers have access to. Incumbents drag their feet in joining such shared systems- only firm government mandated action can help here.
     There are good things happening as well.
     After a four year effort,  a new version of the Information Technology Act got passed in December 09 in which online players are granted the status of “intermediaries”  along the same lines as the Digital Millennium Act in the US and EC Directives on eCommerce. This brings a modern regulatory framework allocating the right balance of liability among all the players in the digital chain.
     Venture capital activity has reached a new high level with companies like Sequioa, Matrix, Draper Fisher and others setting up strong Indian offices. These firms not only bring capital but also insight into what business designs work or not work as well as patience in working with our young entrepreneurs. I only wish we’d have more, many more angel investors who would provide the first Rs 20- 50 lacs to get young enterprises started.
     There is frantic government activity on the eGovernance front. Major government initiatives are under way in digital geo maps, online filing of income tax returns, and the bringing of digital era efficiencies to government departments such as Sales Tax and Land Records. Our massive public sector banks are pushing hard now with ATMs, Credit and Debit cards and online banking. Each of these efforts is important because they demonstrate to the lay public the efficiencies of a digital system and make them familiar with the digital world.
     3G mobile phone licensing activity is under way, and we should see launches by the end of this year. With the arrival of smart phones and 3G there is a possibility that India may leapfrog the PC era as we leapfrogged the mainframe era and went directly to PCs.
     In the balance, maybe the glass is after all half-full!

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