And the conversation continues…
(Photo: Adnan Abidi / Reuters)

So, the Chinese Premier, Li Keqiang, has come and gone. And the world is pretty much what it used to be.

But should we expect it to be otherwise? Perhaps not.

Li’s visit was accompanied by the usual headlines, with the expected tone: ‘Chinese premier bats for balanced trade with India’; ‘How Chinese Premier Li’s visit will boost TCS’s business in China’ (the copy of course said “may further boost”). A more realistic one was: ‘China’s Premier tries to make friends in India’.

There has been also, of course, the usual round of alarm bells from the usual bell towers: One asked for China’s latest incursion to be viewed within the context of their “long history of imperial arrogance”; another column called it ‘China’s Land Grab’.

The concerns that India has with China remain: A balance of trade heavily in favour of China ($1.83 billion), and, of course, our 57-year-old border dispute. What Li said to assuage India’s concerns also remains pretty much the same (like earlier premiers): That India and China can grow and develop together; that there is potential for the countries to cooperate; that they should, and can, have closer relations.

In concrete terms, what was achieved? A $1 billion debt-for-fuel deal between China and Essar Energy PLC Ltd, and smaller deals worth $500 million. And nothing on the border issue.

So what do we make of this visit really? Perhaps a PR exercise for the newly appointed Chinese Premier. Smile-and-wave-we-come-in-peace visits to the neighbours.

Bilateral trade between the countries has often been touted as growing to landmark levels—reaching the $100 billion mark by 2015 has been held as a glowing sign of prospering trade for the past few years. At present, bilateral trade is worth $75.6 billion. India largely exports ore, slag and ash, iron and steel, plastics, organic chemicals and cotton to China, while importing electrical machinery and equipment, nuclear reactors, machinery, boilers, cement, silk and mineral fuels.

If you compare India-China trade figures with the total volume of foreign trade of each country (India: $795 billion; China: $3.82 trillion) it comes a cropper. More so, if you compare China’s foreign trade with the EU ($546.04 billion), the US ($484.68 billion) and Japan ($345 billion).

Bilateral trade, and its apparent flourishing, has also been touted as the magic wand that will improve political relations between India and China. The argument being, if you are doing good business with someone, you are likely to make efforts to be on friendly terms. If that was the case, China and the US should be bum-chums, but last we knew they were hardly on speaking terms; Japan and China should be partying together, but, most likely, they have de-friended each other on Facebook; also, China and BFF Pakistan should be making fantastic amounts of money doing business, but in reality they’ve just made it past $12 billion.

And now for the border issue. Will China attack us? We seem to have lived in mortal fear of being “encircled” by China for the past 50 years. And seem to have done little apart from living in mortal fear.

But will they attack? Let’s see: Doesn’t China have enough problems of it own? Its economy is losing its pace; it has an ageing population that is slowing down their ‘demographic dividend’; wages are going up (they will have to if China has to keep labour happy and away from thoughts of unrest) and the likes of Apple will not blink before moving to cheaper countries; it is under increasing international scrutiny over human rights, factory working conditions, corruption and pollution.

Is this when a country attacks another? Perhaps yes, if the government has to distract the attention of its people from these very problems and focus on an external enemy, usually to win the next election. China does not have elections. It does not need to distract its population. It needs to keep them employed, well-paid, and calm.

So what was the whole Aksai Chin incursion about? Perhaps to signal this very point: That nothing really has changed. China still claims what it did all these years, and a friendly, neighbourly visit has little to with it. As does trade.

Ranbaxy has let down many but it’s the fellow generics makers that will bear the worst brunt (Image : Reuters)

There can be nothing more damning for a company, and more depressing for its customers, than the fact that the everyday medicines it sells could be fake, cause more harm than good, or are inert particles acting merely as placebos. The Ranbaxy saga of fraud and greed goes beyond that. In India, it shows how our regulators too have failed us.

As several news reports have showed, the Indian regulator too probed Ranbaxy after the US FDA’s charges came to the fore in 2008 but it was under-policed and half-baked to say the least. The investigation was dropped mid way when the Indian regulators saw that the UK and Australian regulators did not ban Ranbaxy drugs. The US media has already begun castigating the US government and the FDA for not being stringent enough. This story in Fortune details the sordid tale and questions how “Ranbaxy is in business in the United States”.

Why are we not questioning Indian regulators?

If the national regulator for Rs 65,000 crore industry wishes to piggyback on international regulators, approve or disapprove drugs, devices and reagents on the basis of how other regulators have evaluated them, then it’s nothing short of “reverse racism”. A California- based serial entrepreneur, who has since abandoned his novel, dry reagent programme, was blatantly told that he’d get approval in India if the US FDA approved the product, even though the reagent, which did not require cold chain, was more suited to India than the United States. This story is repeated several times over in medical technology and cellular/biological products.

Handcuffed or emboldened, depending on which you side you are coming from, by an inept and understaffed healthcare regulator, when Indian companies go global and face international scrutiny, they react in myriad ways.

After the Parliamentary Standing Committee report last year that brought out irregularities in this industry, virtually everything under health ministry has come to a standstill. No decisions are being taken and no approvals given for testing of any new drug or medical technology. Biocon, which signed up a new big pharma partner in BMS for its oral insulin programme in November 2012, says it is way behind its clinical trial schedule in India. Other companies are either stalling their drug discovery programme or moving it elsewhere. “Try getting anything approved in Delhi these days,” says Kiran Mazumdar-Shaw, chairman and managing director of Biocon. “The whole India pharmaceutical story is over.”

It’s a culmination of many things: in the last few years, no health secretary has had a term of more than a year; the health minister holds many portfolios and perhaps health is the least controversial (read political) and hence gets least attention. One industry official commented in frustration, “The health minister’s hands are full with J&K issues”. The Central Drugs Standard Control Organization’s office itself is a case in point with temporary appointments.

“The industry is putting intense pressure on the government to upgrade the regulatory system but we are not happy with the outcome,” says DG Shah, secretary general of the Indian Pharmaceutical Alliance.

Historically speaking, there has always been a strong political opposition to implementing stringent quality norms. After all, quality comes with a price. Take for example the implementation of Schedule M, which is the minimum Good Manufacturing Practices under WHO. India took three years to implement it because it would have forced many small and medium manufacturers to close down. While Schedule M is implemented on paper, in practice, for garage manufacturers, it is business as usual.

Ranbaxy has let down many but it’s the fellow generics makers that will bear the worst brunt. It’s true the FDA has been tightening screws on GMP since 2002 when the US Senators pressured it for greater scrutiny. Several branded drug companies have since been in the firing line – Boehringer Ingelheim and Hospira in 2013; J&J in 2011; Baxter in 2006; GSK in 2005; Schering-Plough in 2002. Still, competitors of Indian generics companies will use the Ranbaxy example to raise hackles.

There will certainly be some collateral damage to Indian generics interest in Japan, says Shah. But since Japan, the last regulated market to have woken up to generics, is officially promoting generics through several ad campaigns, in the near term it will heighten the scrutiny levels for Indian companies. Each generics maker will have to pass the acid test.

Secondly, the handful of smaller companies India which are ready, even desperate some would say, for acquisition will face the heat of the Ranbaxy case. The valuations will fall significantly.

In such times, if the Indian regulator rose to the occasion, these travails would become bearable. But that’s not what the politicians want.

Bajaj RE60 (Photo: Amit Verma)

Like most battles in his life Rajiv Bajaj has fought this one in his own no-holds barred style. He has been vocal to the point of sounding arrogant, direct and has not hesitated a bit while attacking his opponents – in this case Tata Motors, Maruti Suzuki and TVS Motors. I mean, how many times in corporate India have you seen a media communication like the one reproduced below:

Rajiv Bajaj: “A 700 kg quadricycle’s exhaust emission & fuel efficiency will be no different than that of a small car…Who’s going to make a 450 kg quadri that can be exported to Europe & will ensure a sustainable world? Bajaj. Who’s going to make a 700 kg quadri that cannot be exported to Europe & will continue to choke India? Tata.”

Despite the opposition, it emerges that Bajaj has won the first round of the quadricycle battle. Earlier yesterday, the Government of India approved the quadricycle to ply on Indian roads. In a meeting chaired by Vijay Chhibber, the secretary of Ministry of Road Transport & Highways, it was decided to amend the Central Motor Vehicles Rules (CMVR) to include quadricycle as an additional category vehicle to be manufactured and registered in India. Only as a commercial vehicle though – which means taxi or fleet operations. Nope, it cannot be used as a personal vehicle.

It is no surprise that Bajaj is ecstatic at the decision. “It is a very profitable way to expand the 3 wheeler segment; the RE60 will soon be joined by many more similarly small, light, & low speed vehicles that will make for a cleaner, safer, quieter world. As an anti-car company we’re just delighted: 3 cheers for Indian engineering!” says Mr. Bajaj.

What does this mean for Bajaj Auto? Well, the RE60 is ready and Bajaj certainly will have a head start over every other manufacturer in the country. And the first mover advantage counts a lot. There are a few things though that Bajaj wouldn’t have liked in the decision – like a prominent ‘Q’ to be displayed on the quadricycle and its use only as a commercial vehicle. Everything else seems to have gone according to plan.

How big is the opportunity? Bajaj sold 2,26,131 three wheelers in the period April-March 2013.The total size of the passenger three-wheeler market in the country for the same period was 4,41,118 units. On the car side, the taxi segment is currently dominated by the likes of vehicles from Tata Motors, Maruti and Hyundai. That’s another opportunity. While Bajaj has said that it is going to sell both three wheelers and quadricycles, at this stage, there are no numbers to go by.

“With an innovative product that creates a new category, quantitative predictions don’t work as there’s nothing to base them on. Qualitatively this development resets the rules of the game for the global automotive industry. It presents an opportunity for those who can adapt to change & a hurdle for those who can’t or won’t,” adds Bajaj.

I believe this is still the first round. Now that the quadricycle category is open, manufacturers like Maruti Suzuki will take a shot at it. Tata Motors would need to answer the tough question – can the Nano make a better quadricycle than a passenger car?

Update: I spoke with Puneet Gupta, principal analyst at IHS Automotive, an auto forecasting firm and Puneet isn’t very confident that Bajaj is looking at huge volumes to start with. It is not that three wheeler guys will be lining up to replace their vehicle with a quadricycle. “I think Bajaj is looking at policy changes at a state level, as and when new permits are made available, as the potential market. Once that happens then volumes could be quite big. I don’t expect Maruti to enter this segment considering their brand position in the market but it definitely makes sense for Tata Motors,” says Gupta.

My wife, Leela, and I were graduate students in the USA when we first met her in the university café one day. Over the next two years that Leela and I spent getting our Master’s degrees and over the years that followed, Kusum became a close friend–unknown to all of us, these were what would become the last few years of her life. She died in 1993, seventy-four years old. She called us “her children” and telephoned us even on the day she died—we were in Philadelphia and she in Kansas. Leela was perhaps the last person she called.

Kusum was sharp, acid-tongued, and even bordered on being ego-centric. But she was forthright, enormously generous and would fight with all her soul for the underprivileged. Her book titles are characteristic of her—In Defence of the Irrational Peasant (1979), or The Lonely Furrow (1969), for instance.We loved her despite all her eccentricities because she made us think—to see things in a different way, to courageously challenge orthodoxy when necessary, and she made us always look at things from the human perspective. During the Desert War of 1991, she insisted that the three of us should go and watch a re-run of “All Quiet on the Western Front”—one of the best anti-war movies ever made, I think—and she was equally firm about sitting between the two of us. Throughout the movie, we listened to her curse the folly of the war in Kuwait and Iraq. And to think that this woman had played a significant role in the 1946 “Indian Naval Mutiny” in Bombay—to use the British term for the movement. She was disgusted and angry that I was going to work with a Wall Street firm. “India needs people like to you to go back and join politics!” I did not have the guts to tell her that I did not have the guts to say no to the job offer. She was only mildly appeased when I left the Wall Street position to go back to graduate school for my Ph.D.

In any case, why would I begin a business and strategy blog post with Kusum Nair? In 1961, Kusum wrote a seminal book called Blossoms in the Dust: The Human Factor in Indian Development. It was primarily a journal that recorded her travel through the agricultural regions of India where she found that despite all the propaganda, the Indian government’s five-years plans were providing no benefits to the Indian farmer. As she recounted to us, “Sometimes the farmer did not even know we were independent of the British!” She began the book as follows:

On the stroke of midnight on 14th August, 1947, the Tricolour was hoisted to the strains of the national anthem. India became independent.

The monsoon night was starless but aglow with the brilliant illuminations below. Every man, woman and child was out to witness the supreme, historic moment and the air was filled with jubilant cries of “Jai Hind!”.

An elemental force had burst its confines and swept like a flood across the land. Would it also wash away the cobwebs, the inertia and deadness of centuries? Would it create overnight a brave new country in which everything would be perfect? Anything seemed possible.

Next morning, the sun rose in the eastern sky to reveal the same squalor, the staggering poverty and hunger, the deep inequalities as the day before. Myriads of flowers, yellow and orange marigolds and pink rose petals, lay scattered on the ground, stale, scentless, trampled.

The municipal sweepers came and swept the streets, and the blossoms mingled in the dust.

My post is about one such blossom that we have swept into the Indian dust. “Frugal innovation” is today being termed by some as a “new paradigm”—but there is a nearly 2000-year old blossom—an Indian engineering marvel—that holds lessons for frugal innovation. Here is the story.

An innovation blossom in the dust

The flow of the Kaveri, the great river of south India, is arrested at Tiruchirapalli by a stone dam built by the Chola kings in the 2nd century AD. Locally the dam is called Kallanai (Kallu=stone; anai=dam in Tamil) but it is more popularly known by the name the colonising British gave it—“Grand Anicut” (anicut is perhaps a corruption of anai=dam and kattu=build).

The Grand Anicut across the Kaveri

Our story begins much later than the Cholas, however. In 1827, a 24-year old British engineer, Maj. Arthur T. Cotton, was charged with the task of inspecting the Grand Anicut. The young engineer recommended some minor but urgent repairs to the structure, but the British Government of Madras dragged its feet. It was not until 1830 that Arthur Cotton and his younger brother and assistant, Frederick Cotton, also an engineer, were commissioned to cut sluices in the Grand Anicut so that the silt sediment would flow through.

The Madras, or the Cheap School of Engineering

Lady Hope, Arthur Cotton’s daughter recounts a memorable event in her biography of Arthur Cotton: Upon cutting the anicut, Frederick discovered a strange fact: to his amazement, he found that the Grand Anicut, “was hardly more than a mass of rubbish, mud, stones, and logs of wood, the safety of which depended solely on its then plastered surface.” As Bret Wallach sums up, “It was an important, perhaps even a revolutionary discovery: simple inertia had been great enough to withstand 1,600 annual floods.” What is important to us today is that for Arthur and Frederick Cotton, this discovery gave rise to what they termed, “The Madras, or the Cheap School of Engineering.”

In his next project, which was to build the Coleroon Anicut slightly downstream—Coleroon was the Anglicised name for Kolidam—Arthur Cotton applied what he had learned from the Grand Anicut: instead of a grand European style of dam, he chose a minimalist design inspired by the Grand Anicut. And we can say that he learned the lesson well for the Coleroon anicut stands even today irrigating a vast tract of about half a million acres. Some modern refurbishments had to be made over the years, and a subsequent similar dam further downstream had to be constructed when the river threatened to change course, but despite this, the Coleroon anicut is a shining example of the Madras Cheap School of Engineering.

Emboldened by his experience at replicating the design of the Grand Anicut in his work on the Coleroon anicut, Arthur Cotton used the same minimalist, resource-savvy design elsewhere. As Frederick Cotton writes, “it may be of interest to those who are following Sir Arthur in his work in Hydraulic Engineering that the most important step in his education was the lesson he learned from the builder of the so called grand anicut…it gave him, even with the slender means extended to engineers of that period, the power to control and master the greatest river of the country.”

And the greatest river Frederick Cotton is referring to here is the Godavari in Andhra Pradesh. The British estimated that the maximum discharge of the Godavari was more than 200 times the water of the Thames and 3 times that of the Nile. Arthur Cotton took the lessons from the Kaveri and applied them in the four anicuts he built across the Godavari. Indeed, Arthur Cotton is worshipped even today by the people in Andhra Pradesh for transforming through his irrigation engineering the once-famine struck delta regions of the Godavari into the rice-bowl of India that it is today. Frederick Cotton writes about his brother:

The fact was learned from an engineer of old times, but the courage with which Sir Arthur put the idea into practice in his great works was all his own….The four anicuts he built across the Godavari are not solid masses of masonry, but surface coatings of stone over the sand of the river bed, for which he substituted cut-stone for the plaster of the early engineers, but the principles are the same. …Indeed, the cheap School of engineering, which he did much to introduce is, it appears, set aside for the extravagant system of England. And after all, what is good engineering but economy! Any engineer can do anything with money; the question is how to do great things at little cost.”

If there is one lesson that Arthur Cotton’s life and work teaches us, it is that blossoms in the dust can teach us much. The 2000-year old Kallanai across the Kaveri in Tiruchirapalli is one such blossom.

Other blossoms

There are many other innovations across the world that we have forgotten. For instance, James O’Kon, an American engineer discovered recently that in the seventh century AD, the Mayans built with hemp and stone, a 600-ft suspension bridge with two piers and three spans—this bridge was the world’s longest suspension bridge for 700 years. O’Kon believes it can hold lessons for bridge technology today.

I’d love to hear if you know about other blossoms in the dust.

Chasing the perfect score?

“Did you get the Ten Year papers?”

I remember that question from decades ago, when I took the first board examination.
A collection of previous question papers, and even better, model answers. A perfect set of course would include answer sheets of the student who consistently scored, even if one could not get their board exam answer sheets.

Now the UPSC is opening up its – dare I say coffers… It is opening up access to its old answer sheets and has actually shared marking schemes. This is very good news for prospective candidates. They actually have a sense of what they are working towards. On the other hand, there is the niggling question – did the system just allow itself to be gamed a bit more?

This is what I remember of every examination I or my friends have taken and ‘cracked’. Yes, that was the term used – we used to crack it open. Demystify it and then beat it down with sheer hard work. Of course there were some geniuses who claim they never studied for any competitive examination.

(On a side note, shouldn’t examination boards be briefing their candidates better)

The process was simple. We’d gather as many question papers as we could. The past ten year papers for the class ten (age 16) board examination were easily available at any bookstore. Printed with black ink that leaked on to cheap paper with occasional but few errors, the booklets were a treasure. Armed with the knowledge that each ‘examiner’ set papers for three years, we knew what was required.

The three year term of the examiner was an urban legend, but the papers did follow a cyclical pattern. All we had to do was identify where we were in the 3 year cycle..if it was the third year of that particular examiner, it was incredibly easy to guess the question paper, because the same examiner was unlikely to ask the same question twice, and of course, they had to give adequate weightage to each area – the broader ten year trend showed us that clearly.

Did everyone do this? I don’t know. Everyone I knew did.

This was probably the most sensible use of the mathematics, statistics, logic and deduction that we had been taught over the years.

It is only now I wonder whether this was right. The Ethical line is always drawn faintly in grey, and often seems to move gently, almost sway. It might not be a bad idea to question ourselves, past and future, once in a while. This was and is, certainly on the safe side of the line. This is still right, and not wrong.

(Photo: Amit Verma)

We never cheated, though we knew plenty who did. Entire examination centres, sometimes invigilators were reported to be compromised. Dark rumours of the papers ‘leaking’ flew fast and hard before the big paper. It is not very different now. In a certain Eastern state, it was reported, heads of educational establishments advised their employees to allow candidates to cheat in an examination for fear of personal reprisals. Cheating is an examination taking skill for a significant proportion of students. This dishonesty certainly skews the results and futures of many a candidate, but that is not the worst of it. What is worse is that those who have cheated do not know what they claim to know. When it comes to performing on the basis of that set of skills and knowledge, they are lost. Cheating can only get one so far. The only person one has cheated on is oneself.

And sadly, what is lost is trust in the system.

Which has implications for the future.

Connectivity has brought to us a range of distance education resources, and will bring us more. Technology is seen as a part of the solution to the issues of access, standards (not necessarily quality), faculty shortage, cost management among other things. Massive Online Open Courses (MOOCs) have seen a huge response from India, it being the largest international group to participate in these courses. While there are assignments, assessments, tests, peer learning groups and peer marking – none of these lead to actual credits at any Universities.

While it is early days yet, and credit systems are being worked out (which of course means a revenue model is being put in place), one of the biggest hurdles in countries such as India is ethical. India has a reputation for being untrustworthy in assessment systems. Our students cheat, our invigilators collude. Not all, but enough to undermine the future. Enough to hold back the MOOCs from certifying even those who worked honestly. Sure, technology can allow for iris recognition and keystroke pattern matching type solutions. But as a savvy friend said – ‘what stops people from having some one sitting under the table holding answer materials reading out to the candidate?’

This is the big question. What stops people from being dishonest?

Many have grown up believing that cheating is not such a large crime. Sorry, a wrong is a wrong. And must not be allowed. Many think, it is fine to cheat because everyone does it. Sorry again. Not everyone does it. And even if they do, it is still wrong. Then, comes the argument – if others get ahead by cheating, why should I be the only dumb one left behind? I admit, I still think it is wrong, but in such a situation, do you have a good answer? The examination is a hurdle, a high stakes hurdle to be crossed. They will think of competence another day, about meeting the task when it comes to them. First they have to survive this day, this examination. So examinations become about beating the system in any way possible. The effort is directed away from expanding learning (don’t mock) and goes towards gaming compliance standards.

This starts at school, corrupting more than just that moment. It is not surprising that the Rajat Gupta case and the Ranbaxy story have been in the news this week with damaging implications for investments to India. Both these, and many others, tell the story of lax ethical standards in doing business with India. And often, these are seen as the pragmatic option, the norm. Gaming the system was never wrong in a regime where rules were myriad, complex and often contradicted each other – this changed in a globalised world. Gaming the system was seen as morally separate from cheating the system e.g. tax avoidance is not the same as tax evasion. The world has changed. In this post-crisis regime even contracted business leader compensation has been returned to shareholders – having been labeled as ‘fat-cat-salaries’. The Bangladesh garment factory disaster is an avoidable tragedy that started with compromised ethics. The new social and work contract extends far beyond the standards expected in the past.

(Photo: Nicholas Prior/ Getty Images)

Strong ethical standards create environments of trust where it is easy to do business. Business is done in teams, where resources, milestones and conclusions are shared. Our education systems need to be geared towards fostering trust and co-operation, not silos of individual regurgitation. Standardised testing is under fire for various compelling reasons, but the ethical reasons outweigh the rest. These tests may be efficient, but they foster the wrong sets of values for a society that aims for sustainable growth. So, what if our major senior exams were, say, open book. What if there were no incentives to cheat? What if there were fewer rules to break? What if, students could talk to each other, as they do in the real world? After all, examinations are supposed to test and verify if a candidate can operate in the real world. Would such tests still be gamed? Would the ethical filters be different? Would candidates still be working with – ‘I’m sure we can get away with it, who cares if it is wrong’ – attitudes?

For the India of tomorrow, the ethics of yesterday are not going to work. These values and ethics start at school, in the classrooms and in the examination halls. For long have many argued for low stakes testing to replace the make or break examination system that incentivizes people to cheat. It may not be fair to blame examinations for all ethical issues, but the sensitivity to right and wrong begins at school.

The Indian system now seeks to introduce some value testing in their examinations. What sounds like a good idea, in principle, may not, in practice, be the best design to serve the purpose at hand. While there is a place for discussion of values within a school environment, testing directly, in exchange for marks is a daring move. Can one ever, for five marks, honestly and completely write out what the ‘right’ pathways are, or is it merely about providing the right prescribed answer? What would you do? Game the system and get the marks?

Ethical Reasoning may be learnt with reflection and practice, and we must actively invest in it as part of our education inside and outside schools. It is time to rebuild the credibility that has been lost.

Does iGate have a future without Phaneesh Murthy? (Photo: Reuters)

Late last year, when iGate placed a series of aggressive ads in leading American newspapers such as New York Times and Wall Street Journal (with captions such as “Conspiracy Uncovered”; “Mega Corporations’ No 1 enemy exposed”) to promote its own outcomes based pricing model many IT executives here were amused because the outcome based pricing came with limitations.

The traditional pricing model was simple, less complicated and easier to scale. Several customers preferred the simplicity of the traditional pricing model. Outcomes based pricing – where a client is charged based on business outcome rather than on the number of hours software engineers put in to write the code – would be a tough sell. But to stand out in the clutter of a scores of Indian IT companies, each indistinguishable from the other, iGate needed a bold new approach. This bold and slightly risky approach was classic Phaneesh Murthy, the then CEO, who was sacked by the board recently.

Invariably described by people who know him as a supremely confident person, Phaneesh himself both understood the enormity of the challenge and his own ability to deal with it. He told Mint last year:  ”Today, everybody tells me you are not going to succeed, you don’t have the scale, we have hundreds of thousands of employees, you are in a cost-plus model… But I (want to) shift the model to one where technology does more of the work, rather than people doing more of the work. If I can achieve that objective, that will be hugely satisfactory of twice over transforming the industry.” Without Phaneesh, iGate will have to seriously reconsider its strategy.

Business historians and management gurus don’t look kindly on charisma. Those endowed with it are often impractical (which means their vision is more likely to fail than succeed), they lead their team members into a reality distortion field (there’s no feedback) and often destroy shareholder value than create it (the rare exceptions are given a lot of publicity. (The title of Rakesh Khurana’s much cited essay on charisma reads: The curse of superstar CEO).

But, charismatic CEOs are often useful for specific purpopse – to transform an organisation or an industry. (Think Steve Jobs) iGate, and in someways even Indian IT sector, was dependent on the charisma of Phaneesh Murthy.

Scale up is difficult in any business but it is even more so in IT services. With every $100 million dollar change in revenue close you have the added complexity of managing approximately 3000-4000 more people. With more people come more processes and complicated workflows. Also, clients prefer to do business with more cash rich and stable firms. In the last 15 years only Cognizant has bucked this trend to become the second largest IT services firm from India.

The bottomline is that if you fall behind on the IT services revenue treadmill you don’t get a second look.

It was expected that iGate, under Murthy, would buck the trend and go on to bigger things. That’s why Apax Partners sunk in $380 million to fund the deal with Patni. There is also a billion dollar of debt on the firm. All this was done with Phaneesh’s reputation as rainmaker.

The consolidation in many ways is still a work in progress. While industry observers tend to look at the transformation of iGate by comparing pre and post-Phaneesh Murthy days (when margins swung from negative to positive, and its revenues grew at a pace that worried competitors) a more useful timeframe is post-Patni acquisition. There the record is mixed. Its margins wavered (in the most recent quarter its gross margins dropped), it has missed its guidance, lost accounts and market share. Its share price movement (even before Phaneesh’s removal) in the last three months resembled the hump of a camel. It needed Phaneesh to take the company forward.

With him gone, all those hopes may well be history now! In the end, the business historians and management gurus are probably right about charisma.

iGate was betting too much on it.

Jiju Vidyadharan, Director Funds & Fixed Income Research at CRISIL

The last five years have been very painful for the markets with annual returns hovering around 3 percent. Most funds have managed to only marginally beat this benchmark return while others simply languished.

UTI mutual fund is one of the few fund houses that has managed to give good returns in a lacklustre market. The fund has topped Crisil’s quarterly ranking for mutual funds with seven of the schemes in the top cluster for the quarter ended March 2013.

The UTI dividend yield fund, MNC fund and opportunities fund have clocked a return of more than 10% for the last five years. We spoke to Jiju Vidyadharan, Director Funds & Fixed Income Research at Crisil about why UTI has been such a consistent performer.

FI: Is it really difficult to achieve lower risks and higher returns in the Indian markets?

JV: Some of UTI AMC’s funds have lower volatility in returns. UTI MNC Fund, for instance, has the least volatility of 12.61 percent across all equity funds managed by UTI, over the past three years. The key reason for this trend has been their investments in defensive sectors, which have a lower volatility as compared to the broad market.

FI: When the market has been flat at around 3 percent for the last five years, both dividend yield growth fund and UTI opportunities have managed to return around 10 percent. What has really worked for them?

JV: Over the past three years, UTI Lifestyle fund generated returns of 9.57 percent over the last 3 years ended March 2013. The fund had 21 percent exposure to defensives and 11 percent to finance, which helped it outperform the category. The fund is ranked Crisil Fund Rank 1 as per the Crisil Mutual Fund Ranking for March 2013.

UTI Opportunities fund had 17 percent average exposure to defensives and also had 9 percent exposure to cement during the same period, which helped it generate 7.74 percent returns during the three year period. The fund is also ranked Crisil Fund Rank 1.

UTI Dividend Yield Fund, on the other hand, has yielded returns of 4.68 percent during the same period. This is similar to the category average. Exposure to Oil and gas and Auto sectors lowered the return for the fund. The fund is ranked Crisil Fund 3 as per the Crisil Mutual Fund Ranking for March 2013.

FI: The fund managers in UTI have not taken concentrated risks. How does CRISIL look at concentration of risks in general and how does UTI fit in?

JV: For Equity funds, CRISIL uses diversity score/ Herfindahl’s index as the parameter to measure industry concentration and company concentration. Crisil’s scoring on each parameter is relative among the peer set. Only a few UTI funds are ranked 1 and 2 on both company and industry concentration. This indicates that they are relatively less diversified as compared to peers.

FI: In terms of liquidity parameters how does UTI opportunities and lifestyle fund fare in your ranking?

JV: Crisil evaluates liquidity based on the trading volume over the past six months for stocks in the portfolio. Crisil’s scoring on each parameter is relative among the peer set.

UTI Opportunities fund and UTI India Lifestyle fund have parametric ranks of 5 and 3 respectively on Equity liquidity as per the Crisil Mutual Fund Ranking for March 2013. This indicates that the liquidity of the stocks.

James Anderson is jubliant. Photo credit: David Gray / Reuters

On Sunday, England’s Jimmy Anderson became the fourth English bowler to take 300 test wickets when he helped skittle out New Zealand.

Anderson’s bowling coach, David Saker, made a big statement: he called Anderson the most skilful bowler around. Note: not the best, but the most skilful. He meant that Anderson’s control of outswing, inswing and reverse swing across conditions is second to none.

Many would dispute that. The many who believe that Dale Steyn is the one way ahead of the pack.

One thing is undisputed though: these two pacers are head and shoulders above the rest. Here’s why:
• Their ability to get wickets across all conditions. Anderson and Steyn have both succeeded in India, no paradise for fast bowlers.
• They have the cleanest bowling actions I’ve seen in a long time. Dale Steyn is a rhythm bowler and once he’s found his groove, he doesn’t look to be exerting himself at all. Look at how his opening partner Morne Morkel strains himself to get pace and bounce. James Anderson cocks the ball by his cheek just as you’re taught in school; none of Andrew Flintoff’s flailing arms.
• They’ve managed to steer clear of injuries. One needs only look at India and Australia in recent times for cases where injuries to strike bowlers have killed the team’s chances.

It’s an intriguing exercise to look at their stats side by side.

They’re around the same age (Anderson is 30 and Steyn 29), and made their test débuts within a year of each other (Anderson, 2003, Steyn 2004). Steyn took just 61 tests to reach the 300 wicket mark, whereas Anderson took 81.

Anderson’s ability to swing the ball both ways is extremely useful and the fact that he developed it recently is commendable. His 5-52 at Galle in 2012 showed his range of skills: the first two wicket-taking balls moved away from left-handers, the third reversed into a right hander’s pads, the fourth was an off-cutter that bowled a right-hander and the fifth left the right hander. Anderson’s seam position is perhaps the best in the world and he is able to generate ferocious outswing to left-handers. In my opinion, fast bowlers like Anderson and Steyn are strike bowlers—especially in test matches—and my main interest is them getting top order wickets. Even though Anderson has bowled 700 more test overs, Steyn still has more wickets and a far better average. In fact, at 22.65, his test average is inferior only to McGrath, Ambrose, Marshall and Hadlee in the all-time highest wicket takers list.

Click here to view the embedded video.

Dale Steyn’s 7-51 at Nagpur was a master class in fast bowling in hot, dry conditions. He caused the Indian batsmen all sorts of trouble by bowling good length balls at searing pace. While Anderson is all about a controlled seam, Steyn’s main asset is much more primal: sheer speed. He is quick enough to blast through batting attacks on the subcontinent. Anderson is a thinking bowler, but when you can bowl 140kph reverse swingers, perhaps you don’t need to think too much. Steyn also has a higher percentage of wickets taken away from home. There’s no question he’s the better test bowler.

Click here to view the embedded video.

The two are much more evenly matched when it comes to ODI cricket. Interestingly though, Anderson has bowled more than twice as many balls as Steyn has.

Anderson has a marginally higher percentage of wickets taken away from home in ODIs. Though they are neck-and-neck in the 50-over game, Steyn is ahead in the shortest format. Because of the IPL, Steyn has played a lot more T20 cricket than Anderson and it shows.

It is clear that Dale Steyn is the better T20 bowler. His average in T20 Internationals is a staggering 16.64.

Dale Steyn shows off his five-wicket haul. Photo credit: Rogan Ward / Reuters

I can see where David Saker is coming from when he said James Anderson is the most skilful bowler in the world. He has worked hard to strengthen his wrists and release. And Anderson has more variation and seam control than Steyn. But is bowling quick not a skill too? Steyn is a good five miles an hour faster than Anderson and tends to swing it later. Anderson, however, is improving very fast: his test average has come down about 2 runs per year since 2007.

Overall, I would have to say that Steyn is the better bowler but Anderson is on an upward trajectory. What constitutes skill? I’ll leave to you to decide.

Many of these investors have been holding the IDRs for more than a year, when the arbitrage opportunity was much bigger than the present 14 percent. The IDR is trading at a discount to its London price in the Indian markets. Several Indian investors have been waiting to cash in on the arbitrage opportunity ((buying in one market and simultaneously selling in another, profiting from a temporary difference) which could yield around 14.4% on exercise of the IDRs.

Ten IDRs represent one share of Standard Chartered. This is how the math works:

Indian IDR price = Rs 118.55

Standard Chartered stock price in London: 16.10 pounds

Standard Chartered stock price in Indian rupee: 16.10 x 83.88 (pound value in rupees) = Rs 1,350.46

10 IDRs will be equal to 1 share which works out to Rs 1185.5

Even if investors buy the IDR at Rs 1,185 and sell it at around Rs 1,350 they can get a return of 14.4%.

Many Indian mutual funds already have Standard Chartered as the largest holding in their portfolio. They are waiting for the window to open where they can quickly profit from the opportunity. Many of these investors have been holding the IDRs for more than a year, when the arbitrage opportunity was much bigger than the present 14%.

The British bank will open up this window for conversion at least once in a year, so investors in India can convert their IDRs into shares. Standard Chartered plc listed IDRs on Indian market in June 2010.

There are three reasons why this coming of the “data wave” was actually not very good news for the industry.

Firstly, operators were offering “all you can eat” data packages to subscribers which meant that as usage grew faster than revenues.

Secondly, moving data packets over mobile networks was threatening to become costlier than the revenue itself.

Finally, lesser and lesser of what users were spending on web-enabled services were resulting in new revenue streams for the operator.

With data usage shooting up, but costs threatening to spiral and revenue growth getting limited, you can probably see why the industry got into a huddle about data profitability and growth.  Let’s go back to our US example to make sense of these three reasons:

1. The trap of “All-you-can-eat” unlimited data plans -  In the mid-2000s operators were eager to offer pricing plans which did not set any real limits (there were some, technically) to how much data you could use. Because of these unlimited data bundles, in the initial days of the mobile data surge users used more and more of data but operators didn’t get paid any more money.  This is why revenue growth lagged usage growth.
2. The threat of data spiraling transmission costs - In the mid 2000s many operators were fast-tracking the development of radio networks but neglecting fixed access solutions or near-field technologies such as Wi-Fi.  By the late 2000s, it was evident that a mainly radio-enabled strategy for connecting customers would never work in data as well as it had for voice.  Overwhelming traffic growth was going to result in huge capital costs (e.g. network) and operating costs (e.g. energy).  Operators suddenly remembered that Wi-Fi offered 10x the speeds of 3G at 70 percent lesser costs, and started thinking about how to give users a richer mobile data experience by seamlessly managing multiple devices across 3G, 4G, Wi-Fi and fixed networks. But that wouldn’t come easy, or fast.
3. The curse of becoming a “dumb pipe” – As if cost escalation wasn’t bad enough, operators were also wondering about how they could capture a reasonable share of the new revenue growth.  Data revenue was increasingly for “mobile internet” access, ie people paying a monthly or per megabyte fee for accessing the web.  But when users spent on web-enabled services (e.g. travel booking, buying books or music, etc), the operator was usually bypassed completely in such transactions. So while operators were building the networks that would enable growth, they feared the threat of being edged out of any share of that growth!  One indication of how they were being bypassed is that between 2006 and 2009, US operators’ share of all page views onto their own sites plummeted from 57% to 27%, and from a ranking of number 1 all the way down to number 10.

My prediction is that India will see a surge in smart phone uptake from around the end of 2015 onwards. Why?

Device price points, form factors and replacement cycles are all converging.  Mass uptake of services might follow a year or two after that (by the time applications providers and operators offer services which appeal to the mid-tier user).

So I’d say the industry has anywhere from two to four years in which to start the journey to a network transformation that enables Indian mobile data users to have a good data experience using handsets, laptops or tablets, whether at home, office or on the move.  To be successful, this strategy needs to manage costs and enhance customer experience.

One thing that AT&T and others did to stem the tide of cost growth as mobile data exploded was to introduce “tiered pricing”, linking customers’ per month tariffs to “slabs” of data usage rather than leaving it completely unlimited.  That’s a great way to prevent cost from spiraling at the outset, but a long term network strategy is needed to enable us to be free to do what we want, at the right price, and have a great experience.