Blog moved to Medium.com

I now write and publish my posts on medium.com and twitter.com

The links are here:

Medium: https://medium.com/@gaurav.sharma

Twitter: https://twitter.com/Gaurav1105

The History and Future of Everything -- Time

How The Economic Machine Works by Ray Dalio

Ray Dalio manages the world's largest hedge fund, Bridgewater Associates. Here is a brilliant presentation by him on how the economy works

Facebook by Numbers [July 13- Shared Infographics]

Source: Great Business Schools

Google on the future and evolution of Search

Email is dying and How...

Interesting graph that tells a story..  Ask anyone in age group 12-20 years...Email is so passe.

Web 2.0 Summit 2011: Mary Meeker, "Internet Trends"

Where Good Ideas come from?

Google wants to own your Wallet...

Or should it be –How will Google end up owning your wallet? 

Yesterday’s launch of Google Wallet was a watershed moment for the payments industry. Google announced an app that will turn shoppers’ phones into their wallets. Google Wallet enables consumers to securely store their credit cards, coupons, loyalty, and gift cards on their phones, so they can pay, redeem offers, and earn loyalty points - all with a single tap on their phone. It is in a field test now and will be available to all consumers this summer. 

But what makes this so unique? - it’s putting the wallet in a single app on your mobile phone. 

Google Wallet is designed for an open commerce ecosystem. Since Google Wallet is a mobile app, it can do more than a regular wallet ever could, like storing thousands of payment cards, loyalty cards, gift cards, receipts, boarding passes, tickets, and Google Offers. Every offer and loyalty point can be redeemed automatically with a single tap via NFC.  Google Offer is in direct competition with Groupon, and we will likely hear about the launch sometime next week.

Google Wallet is not a simple replacement for an ordinary wallet; it is an example of the ‘Wallet of the Future.’ Launched in partnership with MasterCard, First Data, Sprint, and Citi, Google wants to move your money wallet into your phone. Here is the product launch Video.

Stephanie Tilenius, vice president of commerce at Google, announced at the launch “We are about to embark on a new era of commerce. We believe that 2011 will be the year of mobile local commerce. Just TAP, PAY and SAVE”. She said “The world of commerce is ripe for a new wave, we are on the verge of major shift in payments and therefore commerce. Google is uniquely positioned to bring about this shift and accelerate.” 

To me, Google Wallet is the perfect Mobile and Local Commerce coming together. It brings together Merchants, Payments Networks, Carriers, banks, and other pieces of the ecosystem to make this possible. 

Think of it, there are over 3 billion mobile phones worldwide, and over 40% of the world’s population carries a mobile phone, far more than using a computer or accessing the internet. Mobile Phone is fast emerging as a ‘preferred’ transaction medium. Smartphone sales grew 72% in 2010, and 300 million smartphones were sold globally in 2010. Several forces are accelerating the pace of customer adoption. Read my earlier post on M-Commerce to understand this better. 

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How are various blocs coming together? 
Study the Google Model carefully, and you will understand the cleverly crafted master strategy. You will see how the different blocs (refer to image) are falling into place in a mutually reinforcing manner. The Offer and Wallet model allows Google to get precious customer information correlated directly to sales in the physical world and will enable it to place relevant offers and serendipitous advertisements when shoppers are in stores, ready to spend money and even more receptive to coupons and other discount offers. 

Currently, Google is not taking any 'cut' from the payments revenue; However, Google would make money by selling coupons and advertising that come along with the experience. This isn't Google's first attempt at electronic payments. Google "Checkout,” an online payment service launched in 2006, met with limited success.


Evolution of Payments: 

In the past few thousand years, the world of payments has not changed much—from coins to paper money to plastic cards. Now we’re on the brink of the following significant shift. The Initial phase of e-commerce was about leveraging HTML and web technologies to bring consumers online, very similar to how we shop today. In 1994, it started with Amazon and eBay, and even today, it continues similarly. But this is about to change now. 

With smartphones, mapped Geo-locations, and NFC, the online and offline worlds converge. The Payments industry is moving beyond plastic and is fast embracing digital currency. Smartphones have fundamentally changed how consumers interact with mobile technology. This new centricity is profoundly changing the customer experience. 

This shift and the increasing convergence of Banking, technology, and information create customer value and new business models. However, this is just an inflection point; the significance of this shift in Mobile Payments and Digital Money will be more apparent with rapid consumer adoption. 

Click to enlarge

Why should a customer be interested? 

Because Google has created a new kind of incentive for people to use -Google Wallet. The new system will be compatible with Google Offers, a Groupon-style deal program, credit cards, and store loyalty cards. If you are following the Local and Deal Commerce (aka Groupon, Living Social, etc.) space, you will understand the potential and customer interest.
Over time, consumers can save each of these offers directly to their Google Wallet. That means consumers will get the benefit of carrying their offers with them at all times. 

"Unique because combining Offers, Loyalty, and Payments in an Open Platform."

However, even with strong tailwinds to support the adoption, there are some challenges to overcome: 

• What about Non-Android phones? If Google Wallet is an open platform, it needs to be cross-platform. How does Google plan to integrate into the larger ecosystem? 
• Dependency on Mastercard PayPass terminals: Google Wallet only connects to MasterCard PayPass terminals. There are more than 135,000 of those in U.S. stores and restaurants, but that's only a small fraction of the total number. 
• What about Mobile Carriers other than SPRINT?; especially when other carriers plan their own Mobile Wallets. AT&T, Verizon Wireless, and T-Mobile USA have formed their consortium to create a wallet- ISIS, that will compete with Google's.
• Competition from other Payments and Card Companies: Visa has also launched a similar initiative, read the blog announcement. It plans to launch a digital wallet product in the U.S. and Canada later this year and already offers a mobile payment program at retailers around the world. Visa has agreements in place with Bank of America, Chase, U.S. Bank, and Wells Fargo for mobile payments. 

Benefits to Retailers: 

With the integration of coupons or offers into Google Wallet, Retailers can target customers by providing discounts directly within search ads to check-in offers to offers in Google Places  (Think Ad-sense, FourSquare, GrouponNow, and Facebook Places, etc.).

The integration of offers into Google Wallet will enable merchants to close the loop by directly connecting their online and mobile advertising with offline purchases. Also, Google Wallet provides merchants with targeted foot traffic and a way to engage with customers in-store, thus enhancing the customer experience. Check this video: 

So what else happened in the Payments space this week? 

Earlier this week, Square, the company founded by Twitter creator Jack Dorsey announced its mobile payment plans. On Monday, Dorsey showed Square’s way of replacing wallets and cash registers without using NFC. 

Using this Square App, instead of NFC, users order and pay with an iPhone application, which stores their credit card information. At checkout, buyers give their names to the cashier, who will need to use an iPad as a register to complete the transaction. This App just might render the cash register and POS terminal useless, but that calls for a separate post some other time.

Also, there are two other stories worth following:
Why is Paypal suing Google Executives?  And Who will win at Mobile Payments, Google, or Square?

Please leave your comments and share your views. I look forward to reading them.

Internet IMPACTS - Growth, Jobs and Prosperity

The Internet has transformed the way we live, work, socialize and meet, and the way our countries develop and grow. Two billion people are now connected to the Internet, and this number is growing by 200 million each year. But the magnitude of the economic impact of Internet-related activities is not obvious. 

There are many studies on the impact of IT or telecommunications but little analysis on the global impact of the Internet on growth, jobs, and wealth creation. Does the Internet really create wealth or just displace it? How large is the economic impact of the Internet in objective terms? etc. 

To this effect McKinsey Global Institute (MGI) has come out with an excellent research report “Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity with an aim to estimate the magnitude of the impact of the Internet on the world economy.

Google Advisor : Making financial products comparison easy

Financial decisions are some of the most difficult decisions we face. Be it, finding the right credit card and mortgage or finding the right insurance product for our family. Due to information asymmetries, it becomes increasingly difficult to find the right product or option. While consumers now have instant access to more details than ever before, this has also made it much harder to find exactly what they want. 

With this in mind, today, Google has rolled out a fantastic tool for consumers. Google Advisor is a comparison tool which allows users to get information on financial products. It enables you to compare offer options for your credit cards, checking and savings accounts, CDs or mortgage. With Google Advisor, the search company has entered the consumer finance comparison space. Currently, the service is only available in the United States and it is a matter of time before we see an international launch.

Re-inventing Management for the 21st Century.

Management 1.0 was invented by people long dead or long retired, but with rapid change happening at an exponential pace, the organizations are facing a fundamentally 'different and new reality'.  They face the world, where knowledge is fast becoming a commodity, and it is extremely difficult to have a sustainable differentiator.

The 'command and control' model of the industrial age is being challenged. A new management model more open, collaborative, flexible and adaptable to human beings is required. The 'Pyramid-Structure' of management is already giving way to 'amorphous' structure in this 'new knowledge world'.

Here in this short 15 minutes video of Prof Gary Hamel, celebrated management thinker and one of my favorite management 'gurus', makes a highly strong and passionate case for 'tearing down the old management structures and re-inventing the management practices relevant to the new-new world'.

MicroFinance in India: Theatre of the Absurd

What has played out in the Micro-finance Industry over the last few months is increasingly looking like a ‘Theatre of the Absurd’- being enacted on the financial services landscape of India. What one is witnessing is a disjointed, repetitive, emotional, and intellectually dishonest discourse with a plot that lacks a realistic or logical assessment.

Here’s why?

•  A sector, which was the darling of investors till 2010 (remember the excitement/frenzy with the SKS IPO and others including I-bankers and starry-eyed investors wanting to jump in!) has overnight turned into a pariah. MFI’s are struggling with a severe liquidity crisis as banks have turned shy of lending and investors are rushing for the exits. The much-flaunted credit loss rates of 1% have exploded to double digits and more, all in a span of less than 6 months!
•   A sector that hired more than 10000 employees in 2010 fired over 2000 employees in 2011. 
• Lending has dipped sharply and Top Micro-Finance companies, commanding exorbitant valuations some over 25-30 X are having their bank loans restructured under CDR. 
•  A motley tribe of “experts”, politicians, associations, and bankers with a myopic outlook and ivory tower viewpoint are making an already bad situation worse with their actions and pronouncements. The present crisis in fact reminds me of ‘the elephant and the seven blind men’.

So let’s take a look at the reasons being cited for the current crisis -Exponential growth without the right systems to support the growth, over-indebtedness of borrowers, lack of credit bureaus, over-reliance on costly debt, and commercially oriented Private Equity investors with high-value expectations. All this added together with a lack of trained human resources and proper governance for a rapidly growing industry. Critics say the industry grew too quickly for its own good, with little regulation. That fostered a breakdown in lending discipline, with multiple loans to overextended borrowers, and allowed some unscrupulous players to thrive. Some say that remarkable growth prompted a backlash from vested political interests. Whilst the post mortem is partially correct it’s time we dig deeper and went beyond the obvious. Two broad issues to be addressed at the outset are:

(A) Incorrect Positioning of the sector: In the Indian context most have been led to believe that Micro Finance is a ‘Not-for-profit business and is in the realm of “Social entrepreneurship” and meant purely for the upliftment of the poor, however for the most part that has not been the case, albeit for, a small percentage of MFI’s/SHGs and NGOs. The Lion’s share of this “Business” has been dominated by a few large MFIs which were commercial in their orientation but did don a fig leaf of having noble agendas with respect to these customers. Having said that frankly, the reality is that scale and sustainability in this area cannot be achieved unless there is a commercial drive behind these enterprises. 

Given the number of underserved in India, if you can’t bring scale in this industry, you are doing a huge disservice to the mass of humanity that is not financially included. The industry leaders, however, have done a terrible job communicating this simple fact while obfuscating the business paradigm by masquerading as social entrepreneurs with a cloak of social mumbo jumbo.

Microfinance literally started off as a ‘cottage industry’ in the ’90s, and then some of the enterprising players were able to scale up. Keep in mind there was already a huge customer base, not serviced by large public and private sector banks as the cost structure of the banks did not support servicing this segment, and that’s where some of the Micro Finance players stepped into service a largely underserved segment of the Indian Populace.

The larger MFI’s were able to scale up their operations because of the availability of capital and Private Equity investments, driven by commercial considerations. These investors brought in a semblance of Modern systems and scientific management practices. There was quite definitely a profit motive, and then some promoters and management teams cashed out when the going was good, this needless to say caused heartburn and dissonance with some in the industry, politicians, and others have given this sector was perceived to be altruistic and primarily driven by financial inclusion objectives.

My take is that all stakeholders would be well advised to ignore the theatrics and accompanying distractions and focus on the core issues. Keep in mind Poor people do make choices every day and are willing to pay for services and more importantly competitive forces over a period of time drives down the prices in any case. For example are the same borrowers not paying telecom players commercial rates for prepaid calling cards or private health care services for that matter? M0re importantly why are some, largely urban intelligentsia being judgmental about the subject  -Who is defining the ‘poor’ and are MFIs only servicing the poorest? In reality, a lot of these loans have also been extended to small retailers, farmers, small enterprise owners, and people with an entrepreneurial bent of mind, wanting to do something productive with the money lent to them. The only venture capital accessible to them!! Besides full-service MFIs have also been selling Micro Insurance and other financial products and services that are in great demand by this segment.

(B) Incomplete understanding of the ‘credit cycle’ and faulty ‘Valuations’:  At the heart of the problem are various stakeholders of the industry who have not witnessed a full-blown credit cycle. To understand this better, we need to connect the dots in terms of the vested interests of various stakeholders.

Let’s start with the people who run MF companies- enterprising people with social and equally commercial motives wanting to find a fortune at the bottom of the pyramid. Let’s make no bones about the fact, that there has been a commercial angle to this business that in good measure led to its exponential growth in recent years. Most stakeholders never understood the full impact of a credit cycle and in fact one of the issues with the MFIs is that most of them are woefully underprovided in terms of their credit loss provisions in their balance sheets. The talk about high-interest rates is not fully accurate as this is indeed a risky business and you have to price to risk given the unsecured nature of the loans.

The story sold to investors was that microfinance investments make phenomenally great returns. Actually, microfinance business over a full credit cycle does not make supernormal returns, for the simple reason, the revenues are ‘front-ended’ and credit costs come with a ‘lag’. If you take the average over the full credit cycle, the returns are relatively optimal; ROEs should be in the range of 18-20%, and since the full costs have not hit the book, a large part of the investor community started believing that this is a 40%plus ROE business.

Somehow the perception of employees, investors, and the regulators, together with the valuations commanded and cashouts by few promoters, have misled the public at large. However, over a period, you will discover that, not only because of the AP ordinance, when costs normalize and are higher than historical levels, even with the current so-called high pricing, this is a business with not more than 1-2% ROA, which in itself is not a supernormal return, in fact, reasonable from a sector, which is inherently ‘risky’. If it were not risky, the public sector and other banks would have rushed in.

Therefore most  MFI promoters have leveraged the ‘first full-blown credit cycle, ‘riding only the crest’; with valuations and profit projections made basis of past performance ignoring hidden and potential losses that would surface in the future. To quote Naseem Taleb, the Andhra imbroglio is but a small ‘black swan’ event, which has pricked the bubble and what you have now is a train wreck in slow motion.  

Banks are yet to begin fresh lending to MFIs due to the high risk of defaults in Andhra Pradesh, where the biggest MFIs are based. The RBI-constituted panel under Y H Malegam has come out with recommendations such as capping the MFI lending rate at 26 percent and margin caps of 12% among others.

As much as the regulators are trying to salvage the situation however literally mandating the terms and conditions of the loan program for the entire industry is throwing the baby out with the bathwater. This is bound to lead to asymmetries that will be difficult to resolve in the future and it must be said that perhaps inadvertently the new guidelines favor the larger MFIs over the smaller ones and equally large numbers of marginal borrowers will be cut out of the institutional programs pushing them back into the clutches of the local money lenders. So, now in a country with 1/4th^r of the geography affected by Maoists, the promise provided by MFIs to provide  ‘capital’ for the poor people is getting lost. The investors don’t want to invest in MFIs; banks are shy of lending and thanks to self-inflicted wounds around valuations, the entire industry is contracting.

So where do we go from here?

A lot of issues have been mixed up in the last few months. So here are three suggestions for the rebuild of this industry (in response to Malegam Committee recommendations):

(1)Avoid Interest rate capping - The heart of the issue is that most have not fully understood the ‘profitability model’ of the Microfinance Industry. Based on experiences in other countries both developing and developed, it would reasonable to assume that this sector would give loss rates in the range of 4-6 %in the long term. This along with the real expenses of running an MFI I suspect has not been fully factored in the recommendations. The debates around usury in the last few months seem more like “Value judgments” rather than backed by real numbers. Keep in mind a lot of banks charge interest of over 35% on their unsecured card loans and justify this on grounds of making only minuscule returns even at that rate. One must take note that financial services must always work on the paradigm of ‘risk-based’ pricing. The moment we talk of rate caps there will always be a segment that gets marginalized defeating the very objective of financial inclusion and in turn, these borrowers end up going to the ‘local moneylender’. Rate caps create asymmetries in the market and give an unfair advantage to the players who have already scaled up. The higher barriers to entry created by regulations may also mean that commercially orientated MFIs will be less likely to target smaller or more geographically remote market segments - due to the capped margins and higher operating costs required to serve these segments. So the ‘rate cap’ will actually reduce competition, which is not really good for the consumer. 

(2)Bring the entire industry under the supervision of the RBI: It is suggested that an MFI regulatory desk be created. I agree that regulations, relatively speaking have been weak, although views pronouncing, that they are non-existent is not true. In fact, most of the large microfinance players are registered as NBFC’s with all the right kinds of regulations relating to the Code of Conduct for collections, financial reporting, transparency in loan agreements, etc. The same set of rules with tweaks and amendments must be applied to all players. Priority sector status for bank loans extended to MFIs is a welcome step and other similar initiatives good breathe life back into the industry.

(3) No state should have the authority to supervise or enact regulations related to MFI, if every state starts enacting laws; we will have an infructuous set of rules and regulations, which will be dysfunctional for the industry at large. Some rules already exist within the RBI guidelines for the NBFC sectors and other new ones have been proposed. The key is implementation and strict monitoring of the existing rules and not having multiple sets of rules and supervising bodies that can potentially choke the sector.

In the end, we should let the market forces take care of the inefficiencies, allow the industry to self-heal as the players are likely to do their own  ‘Manthan’ ~ weeding out the poison, till they find the ‘nectar of life.' The entire industry should not be made to suffer for the actions of some players or misguided politicians; lest we end up creating ‘PEEPLI Live’, in real life.

The Rise of Social and P2P Lending Platforms: Transforming the Banking Landscape

Have you ever visited Zopa, Prosper, and Lending Club? For the uninitiated, these are some of the front-runners in the ‘rapidly’ evolving world of P2P (aka Social) Lending.

Peer to Peer lending goes by many names. It is also called social lending, person-to-person lending, or p2plending. However, It can be defined in a straightforward way: individuals lending money to other individuals through a platform without a banking intermediary.

P2p lending sites hope to disintermediate banks and get credit flowing to individuals and small businesses.

EBay + Facebook = Social Banking  

These sites can be considered a combination of eBay and Facebook.com- a place where consumers come together to loan and borrow money from each other. The success of these web-based P2P lending communities can be assessed by the high growth in their numbers and loan volume.

The Rise of M-Commerce: How Mobile Devices Are Changing the Way We Shop

Some Statistics and trends:

• EBay generated $ 2 billion in global mobile sales in 2010 across 190 countries. 
• PayPal’s worldwide mobile transactions have skyrocketed from $ 25 million in 2008 to $500 million in 2010. 
• Smartphone sales grew 72% in 2010; 300 million smartphones were sold globally in 2010. 
• There are over 3 billion mobile phones worldwide. Over 40% of the world’s population carries a mobile phone, far more than using a computer or having internet access. 
• Mobile Phone is fast emerging as a ‘preferred’ transaction medium. 
• Online Commerce is gaining share vs. Offline Commerce as consumers change their behavior and expectations with rapid development in technology.

The Mobile Commerce Opportunity

Any discussion of the potential opportunity must first start with a basic understanding of what we mean by “Mobile Commerce.” Mobile commerce comprises two categories: (1) Mobile banking and (2)Mobile payments; Money transfers. Mobile banking refers to situations where the mobile phone is an access channel for financial services. Mobile payments and money transfers apply to cases where the mobile phone is used as a payment device to affect the transfer of value from one party to another.

The Future of Education - Khan Academy

If you want to see the future of education...it is here...The Global One world Classroom...Watch this video by Sal Khan (Bill Gates Favorite teacher) and now imagine the possibilities.

Innovation Blues!!

Facebook Deals- Shifting business Models

Facebook Deals, when launched in Nov 2010, allowed users, who "check-in" at a location using Facebook Places (on their mobile phones) to receive rewards and offers via their mobile device.

But now, Facebook is extending this to include offers from local businesses. Soon Local businesses will be able to sign up to use this feature, and people will be able to find Deals.

So how does it work?, And how will it be different from daily-deal market leaders Groupon and LivingSocial?
Well to begin with–All deals offered on the Facebook platform will be around “social experiences,” i.e. “things you can do with your friends”; how will users pay for these deals? … this is where Facebook Credits become useful!

To know more about How Facebook deals work? Check the following video

Facebook Credits has so far been used mainly for virtual goods, and occasionally for digital products, where Facebook currently takes a significant cut (30 percent) for the virtual currency, though Groupon and LivingSocial both take roughly 50 percent of the revenue for a given deal.

Deals also put Facebook on a collision path with Groupon and Living Social, in social commerce space, and with Google in advertisement space and income. Although it will be very hard for Facebook to compete with market leader Groupon, when it comes to social network, it has one huge advantage: 600 million+ users.

Important: Facebook/Social commerce has the potential to disrupt several business models. For example, Retail banking with augmented reality- How about a bank branch inside FACEBOOK? 
Not a remote possibility, especially when we already have bank branches inside Wal-Mart’s and TESCO's. Any Peer2Peer or Mobile Service provider can offer all these banking services at the place and time of customers preference. It is important to understand that the business of banking is changing. In an interesting way, you do not need a bank license to participate in the banking industry ( e.g., M-Pesa, ZOPA, PayPAL). Will talk more about this in my later posts.

Update: 25 April 2011: Facebook launches Deals against Groupon and LivingSocial in five major cities. The Deals launch will also be the first major push for Facebook’s virtual currency, Facebook Credits. Users will use credits to purchase offers from its Deals service.

Mobile Payment Services

Some interesting Mobile Payment Services



NFC Payments by Oberthur

Book Review : The Facebook Effect - David Kirkpatrick

Mark Zuckerberg celebrates his 27th birthday on May 14th; and what an achievement for this 27-year-old!, founding (and holding 24% stake)  one of the most remarkable companies in our times, valued anywhere between $50-65 billion. 

Perhaps the most significant event in modern history has been the birth of social media networks. David Kirkpatrick’s The Facebook Effect is an excellent description of Zuck’s genius, an inside story of how Facebook came about and the events and ideas that have shaped its development.

I found the early days of Facebook very inspirational. As it turns out, the story is fascinating and somewhat complicated. 

First impression: Wow!, I would love to work at Facebook. After reading this book, I am more impressed with its CEO Mark Zuckerberg. 

Many of us use Facebook nearly every day, some of us multiple times a day, without giving much thought to how the world's most popular social network came to be. This book takes us right inside Mark Zuckerberg's head to understand the ‘potential of Facebook. 

The book is divided into two parts, the first part is a fascinating corporate history revolving around reticent founder and Harvard dropout Mark Zuckerberg; the second is a thoughtful, analysis of the ‘Future of Facebook’.

Idea Diffusion : Ideas that spread Win

Great Talk by Seth Godin

The Benefits to Government of Connecting Low-Income Households to an E-Payment System

A good article on the opportunity in Indian Payments Market

The Benefits to Government of Connecting Low-Income Households to an E-Payment System: An Analysis in India - pymnts.com

200 Countries, 200 Years, 4 Minutes -Hans Rosling

Web 2.0 Summit 2010: Vinod Khosla, "Innovation vs. Punditry"

Rethinking the Mobile Web

Check this very interesting presentation.

Rethinking the Mobile Web by Yiibu

View more presentations from Bryan Rieger.

Innovation and Collaboration

Delivered a talk at IMRB(Indian Marketing Research Bureau), Delhi on 10 Sept 2010. Here is the presentation..

Innovation and collaboration

View more presentations from Gaurav Sharma.

Also here are few quotes on Creativity:

• "The things we fear most in organizations - fluctuations, disturbances, imbalances - are the primary sources of creativity." - Alfred North Whitehead
• "The chief enemy of creativity is 'good" sense.'" - Pablo Picasso
• "As competition intensifies, the need for creative thinking increases. It is no longer enough to do the same thing better, no longer enough to be efficient and solve problems." - Edward de Bono
• "Creativity is thinking up new things. Innovation is doing new things." - Theodore Levitt

After The Storm-Global Financial Crisis

Delivered a talk recently at Fore School (Photographs)..here you go

After the storm- Global Financial Crisis 27 aug 2010

View more presentations from Gaurav Sharma.

Fault Lines- Raghuram G Rajan

Yesterday, I attended a Global Leadership Series Lecture by Professor Raghuram G Rajan, where he discussed in detail some of the factors outside the financial sector that led to the financial crisis. 
While most of the news stories and public discussions over last two years have focussed on the 'greed of banking community', his observations on how the hidden fractures still threaten the world economy were quite insightful. He also shares these insights in his latest book 'Fault Lines'.

Well, the immediate suspects for this crisis seem to be – bankers, rating agencies, the Fed, Fannie, and Freddie, etc.; but if we dig deeper and analyze, What went wrong? It becomes abundantly clear that it was a crisis where not only the private sector was to blame, but also the government. It was a crisis caused by the faulty interface between the two.

Fault lines such as~Growing 'inequality' and Thin( or entirely absent) Social Security net create tremendous pressure on the political community to find the easy route. i.e., make cheaper credit available if they can't create that many jobs(as witnessed in the push for universal home ownership in the United States extensive lending by Fannie Mae, Freddie Mac, and others,  low-interest rates, targeted and relaxed lending to the sub-prime borrower, etc.).

It is also apparent that the real reasons for the crisis are still not addressed; the fiscal stimulus is only a temporary 'band-aid' solution. The world today needs to make hard choices to ensure greater stability and lasting prosperity.

The fundamental idea of this book (and his talk) is to focus on slow-moving tectonic plates in the global economy: Consumption by borrowing in countries with fiscal deficits, Excess savings in exporting countries that are fiscally in surplus, and growing sophistication of the financial sector. 


None of these movements might seem dangerous in itself, but when these plates come together and collide, the global economy can get badly shaken. To most players focused narrowly on their positions, leave alone the movements of the plate they stand on, the earthquake - like this crisis - may seem an unfortunate happenstance.

In the analytical framework of Fault Lines, it is apparent, that the current crisis was not a pure accident and that more severe crises could arise in future unless the root causes are addressed sufficiently soon.

Please also check Paul Krugman and Robin Wells review of Rajan's book, and Rajan's response to it.

3E's - Energy, Environment & Economics

A remarkable video about the forces shaping our Future.

People, Passion, Perseverance: You've Got Entrepreneurship- Steve Case

Open Innovation

In a world where strategy life cycles are shrinking, innovation is the only way a company can renew its lease on success. It’s also the only way it can survive in a world of bare-knuckle competition.

Not every management innovation creates a competitive advantage. Some are incremental. Some are wrongheaded. And many never pay off. But’s that no excuse not to innovate.

There are different flavors of innovation and can be stacked in the increasing order of importance as follows : Operational Innovation, Product and Service Innovation, Strategic Innovation, and Management Innovation.

With rapid transformation of businesses , the nature of relationship between consumers and the firm has changed radically.

Let’s take an example here of Open & Collaborative Innovation.


Who can forget the Ford Model-T? - large assembly lines , massive production units in Detroit, you could have any car as long as the color was black ( assumption here was that the end consumer is an undifferentiated lot).

Cell Phones- Transforming Rural Life

Just saw this wonderful presentation by Iqbal Quadir: The power of the mobile phone to end poverty. Iqbal is the founder of hugely successful Grameen Phone.

I am convinced about the power of Mobile telephony as an effective poverty reduction tool. Experiences like the Grameen Phone have shown that provision of phone connectivity to a village serves several purpose- it leads to the economic development by helping individuals and business gain economic efficiency through communications; it promotes social and economic development for individuals who own and operate the telephone enterprises.

One of the basic principles of the Information Age is that information can be a source of power, efficiency and cost savings.

Find your 'ELEMENT' : Sir Ken Robinson

Michelangelo once said “I did not create David, I merely discovered him. He was there within the stone, all I did was to chip-off parts which were not David”. So true, this statement clearly defines the role of parents, teachers and business leaders. Our job is to help discover the true talent by providing the right environment.

Sir Ken Robinson, a world renowned educationist and creative thinker, outlines the same in his excellent book: The Element: How Finding your Passion Changes Everything.
Here in this video-talk, Sir Ken, in his trademark humor, talks about the book and the need to find one's passion.
Don’t miss it.

Profit vs Market Share

And the debate continues...

I have friends who work across various industries-FMCG, including Retail, Telecom, Technology, Financial Services, etc. We meet up regularly, and I often ask them a naive' question: So, how is the company doing?

And invariably, their answer is: "Great! We have the largest market share in this product category";" My territory market share has gone up by x% "; " Oh! We are feeling some pressure; our market share is falling".

Does this sound familiar? , almost everyone seems to be talking about 'Market-Share,' but very few talk about 'profitability.' So let me share my perspective on the same…

Delivering Happiness -Zappos.com

Here is an excellent presentation by Tony Hsieh -CEO Zappos.com

Please note the vision statement:

"One day, 30% of all retail transactions in the US will be online. People will buy from the company with the best service and the best selection. Zappos will be that company" Important point to note..'they call themselves 'service company' not 'shoe or clothing company'.

Most important - their product is 'happiness'

Zappos - SXSW - 3-14-09

View more presentations from zappos

Vision shared-vs- Shared vision

"The empires of the future are empires of the mind." — Winston Churchill

I promise to keep this post really short.

First a small exercise, if you are a senior manager in your company, go out and meet few frontline employees, and ask them this simple question: What is our company’s Vision?

Are you surprised with what they have to say? I bet you are…

So, is it important to have a vision for the organization? More importantly having a ‘shared vision’ rather than 'sharing a vision'.

We generally find so-called elaborate ‘vision statements’ adorning the wall in corporate headquarters or maybe briefly mentioned in ‘annual shareholders’ report.

But, is that enough?

A vision is like ‘soul’ of the company; its aspirations, and like north-star, guides it into the future. A vision can only be effective if it is espoused by each and every member of the organization.

It is okay to fail...

Let me begin by asking few questions?

-How important do people in your organization see innovation to be in their day-to-day jobs?
-How well is your organization recognizing and exploiting the diversity of its people's talent?
-To what degree does senior management encourage innovation by demonstrating that- 'it is okay to fail'?

We see organizations struggling to create a sustainable culture of innovation. We know that mistakes and failures are a critical part of the innovation process, but what is required is an attitude towards acceptance of failure.

Consumer Finance - The Way Forward.

A colleague who follows my blog suggested that I share my views on Consumer Finance (CF) industry. Consumer finance companies across the globe today hold the second-largest share of consumer installment credit (after commercial banks).

Having keenly followed- the consumer credit processes and trends in the Indian market, key forces shaping the region's consumer credit business, and understanding the functional capabilities of a successful business model, I decided to take a 'helicopter view' in terms of what went wrong with Consumer Credit Industry (India story in particular)? But more importantly, the way forward?

So let me do a quick brain-dump of questions/challenges (I instead see them as opportunities) for the Consumer credit industry…… (Not in any order of importance)

• Reality check: What is the current state of the industry? What are the challenges to expect, and where are the growth opportunities? Defining the strategy for profitability, surviving, and thriving amid market volatility and a slowing global economy. How will the industry shape up in the future?
• Problem Identification- It is critical to understand correctly the factors currently impeding growth and operational capabilities required to become a first-class consumer credit player.
• Managing risk: Understanding the chances that the CF industry is potentially exposed to in today's economy -The rising default rates, How much trouble is worth taking?;  Especially in the absence/presence of 'developing' credit bureau(s). Also, regulatory risks should be factored in.
• Addressing atrophy –reluctance to change. Question the past practices and reinvent the business strategies. This requires finding people who believe in re-inventing the business. Re-evaluate the entire business model.
• Revisiting the company's cost structure (if big business has no cost advantage, there will be more firms of various sizes unless the entry is artificially restricted). 
• Cost management: Where do you slash costs? How do you determine what is unnecessary?
• Erosion of Market segmentation in consumer financial services in recent years inevitably raises the issue of future industry structures( Commercial Banks and Microfinance players)
• Creating winning strategies/Positioning- move from Product to solutions. (The customer wants 'why' not 'what,' different solutions for different people). Niche markets and customized product offerings. Fee-based vs. interest income. Maintaining profitability in difficult times, Re-positioning portfolio, and maximizing revenues. Other strategies for different businesses- cards, mortgages, auto finance, sales finance, Cash loans, etc.
• Focus on the customer's lifecycle- (not loan tenor). What are different ways to acquire customers,  more importantly, to retain the client? Revenue contribution? X-sell process and cost structures. Engaging the customer: Increasing the share of wallet and constructing a stronger relationship with their clients.
• Leveraging technology: How speed, convenience, and technology translate to higher revenues and greater customer loyalty. The world is moving online: How changing demographics and advances in technology turn potential into reality.

It is time to study the current scenario and develop a solution plan. As President Obama said during his inauguration speech on January 21, 2009: "It's time to pick ourselves up, dust ourselves off, and begin the work of remaking ..."

I will write some more posts related to this very shortly and will also try to share my research paper on the same .... Next post will be on Banking 2.0

Do send emails and leave your comments.

Facebook retracts?...but why?

Something very interesting happened yesterday….

In a late-night blog post responding to the recent outcry over a recent change to Facebook's terms of service, CEO Mark Zuckerberg said the social network's TOS will revert to a previous version.

So what really happened? If you dig deep, you will notice the real reason behind this retraction. Facebook found itself in an unenviable position in the face of strong public activism. Now this public/consumer activism is not something new, but of late this silent force has gathered quite a momentum with advent of technology. So here we had 80,000 + facebook users signing up for People against the new Terms of Service’. Facebook certainly was not prepared for this backlash from its own user base.

Most organizations today are grappling with a force that they don’t understand, one that is growing all the time. This force is broad, ever shifting, ever growing, and it is global. It encompasses blogs, discussion groups, Wiki’s, You tube... Consumers whom we have never met are rating the company’s products in public forums that we have no experience with or no way to influence.