Monday, October 29, 2007

No Smoking

Why am I writing anything on No Smoking? The other day I was watching a news channel(English) and one analyst was putting her views and rating the just released movie No Smoking . She was searching for a number to rate between 0 to -10 and that made me curious so, on Saturday evening I saw much talked about movie (although with a horrible review) of well known director Anurag Kashyap and I couldn't resist myself writing about it. I would say the movie was excellent and it was a sincere attempt by the director to achieve what nobody has tried yet in Bollywood. It has less to do with smoking and more with John's arrogant and self centric character. One can replace habit of smoking with anyother obsession and make this movie. What went wrong? I think it was difficult for Indian public to digest the concept that a gate to Pataal lok can be through Dharavi(Asia's biggest slum area) but easier for hollywood viewer to accept that Angles and Demons wearing black corporate suits in Constantine. One need to take similar level of pains in understanding No Smoking as for Fight Club. The movie is far before its time with respect to the kind of public that provide hit status to a movie and hence it lacks business sense. But sometimes we have to put that business sense aside to pursue what we want to do. I like the bit when John chose life(jumping in bath tub) over a pack of cigarette but still din't get through because one need to pay for what he has already done.

I know this post is as difficult to understand as the movie itself but it is all about mind games.

Monday, October 22, 2007

Risky Business

Risk is a fact of business life. A big chunk of Companies' major responsibility of creating profits and shareholder value is occupied by taking and managing Risk. But current situation suggests that many companies neither manage risk well nor understand the risk they are taking.

The unfamiliarity of top management with Risk management is depicted by their handed down habit of focusing on simple performance metrics such as earning per share, net income or growth expectation on stock indices. Hence top management oversighting risk management and not integrating risk management into day to day decision making creates the greatest problems like unexpected and severe financial losses which results in volatile cash flows and stock prices and ultimately a bad reputation with customers, investors and employees.

"Risk" when undertaken creates shareholder value.Therefore, right strategy is to strike a balance that protects the company from financial distress and allowing space for entrepreneurship. Decisions consciously weighed against the risk, results in high returns. High returns here means the level of risk-adjusted returns with respect to risk undertaken.
And moreover companies can not only be safe but enjoys a competitive advantage that comes from taking on more risk more safely.

To understand risk and knowing what type of risk the company is facing is an important step of risk management. For a company risk can be put into four main catagories. first one is the Market risk that is adverse market price movements. second is the Credit risk where there is a possibility that borrower or counterparty might fail to honor its contractual obligations. Third type of risk is operational risk. It is an exposure to losses due to inadequate internal
processes and systems and to external events. And finally, Business-volume risk that is generated from changes in demand or supply or from competition and results in revenue volatility.

Thursday, October 18, 2007

Brand Recall

Tiger Woods swings his club to be at Par and here appears the name “Accenture” or the red cloth goes off without revealing the object inside and appears a tagline “What makes you special?” for IBM Global Services, another is HSBC Gobal Solutions for that matter. Difficult to understand for a normal person sitting in front of TV what does these companies do? And so is for us.

They sell neither car nor mobiles and they are connected to the general public only in indirect ways. Their single deal goes in millions of dollars. Here I am talking about companies who provide consulting services or others into outsourcing and off-shoring. Why their advertisements appears on television as most of the viewers have nothing to do with their businesses.

The answer lies in the term BRAND RECALL. Brand Recall is the extent, to which a brand name is recalled as a member of a brand, product or service class. Common market research usage is that pure brand recall requires "unaided recall". For example a respondent may be asked to recall the names of any cars he may know, or any whisky brands he may know.

Some researchers divide recall into both "unaided" and "aided" recall. "Aided recall" measures the extent to which a brand name is remembered when the actual brand name is prompted. An example of such a question is "Do you know of the "Honda" brand?"

In terms of brand exposure, companies want to look for high levels of unaided recall in relation to their competitors. The first recalled brand name (often called "top of mind") has a distinct competitive advantage in brand space, as it has the first chance of evaluation for purchase.

TCS is looking forward to project its image of biggest Indian IT Company to overtake Infosys whose brand recall tops the list among Indian players. And what about HCL whose ad has beautifully left its mark on our mind?

Structure Or Flexibility?

Here I am writing my first blog and wonder whether I will sustain it or it will be forgotten in few months?
But the incident that trigger me to blog was a discussion I had with my friend, standing in an overcrowded bus of
Mumbai. The bumper to bumper traffic of Mumbai roads provide enough opportunity for a guy who is not that empty above, to ponder on certain issues and discuss them off the record. Anyway, our discussion on organizational issues of a small company(start up company) triggered a question in my mind. "For a small company which is a better option Structure or Flexibility?"

As more and more companies consider flexibility in organizational structure and responsibilities as their strength I have a slightly different view out of my own experience. In the initial stages a company should follow a rigid structure that guarantees minimum standard output and creates a culture for the company.

It provides an opportunity to orient strategy around organizational design that in turn helps company thrive no matter how market and competitive conditions change. Building an organizational design is hard and time consuming but it pays in terms of profit, costs and risks. However that doesn't mean that we need to have vertical hierarchical structure, gone are the days when capital was the scarce resource and such an structure was very much needed for efficient performance. The key factor for the progress of a small company is an organizational design that intends to maximize the collaboration among talented workers who are today's wealth generators.