Spirits in the Material World – The Editor

I was out for a night cap the other day with a bunch of friends and guess what; these guys who have worked under the tutelage of Narayana Murthy suggested that I read the Mahabharata. Then I asked them, “Why should I do that?” The reply was, “it will tell you how different characters behave and how each individual around you is a type set of the character in the great epic.”  I found it very amusing at first and then the lack of a smile on their faces made me realize, there was more to it than what meets the eye when it comes to books and dealing with ups and downs in business. Rumour has it that Mr Murthy too has recently devoured the great epic and is passing on his knowledge of right action, purpose and liberation to his employees by recommending the book. Of the fourth principle, which is “pleasure”- I have no idea how it will be disseminated, but I presume it is in telling ourselves that victory lies in trying to figure out how one builds a great business.

In the early nineties I read a lot of books about the Japanese Art of War and the Warrior. My friends and I said to ourselves, “this is what will discipline us.” Yes we did cut a lot of strategies to precision and in the end it was about cutting in to others to survive when the dot com bubble burst. I was just recovering from being a “ronin” samurai and had returned after a few years in the western world, only this time I was armed with social theories, propaganda and knowledge of political campaigns. So I reentered the world of business to convince myself and everyone around me about a new and changing India. One must remember that when the going was high in 2005, the Bhagvad Geeta was being introduced in most B-Schools and many businessmen were latching on to its teachings. The call of the day was “do your duty, and move away from all the dullness of the mind.” Come 2008 I saw all philosophies disappear and I was rejoicing with the fact that there are no more books to be read to justify business cycles and their aftermath. Instead, I saw a lot of my friends find faith in a church or a temple. I settled for finding myself and accepting losses with a glee and greeting profits with my own hard work and providence. But all my experience did not stop me from being furious when someone stole a deal; then came the suggestion to read the Mahabharata, confirming to me that even books move with business cycles. Very soon I feel movies like StarWars and its legendary dialogue “May the force (money) be with you” will be the object of discussion with future business executives and entrepreneurs. But I still don’t know if all this helps us from not being spirits in the material world. Do let me know about your episode with books and business cycles. Let me go Viedea now.

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Gucci and Me – Namit Goel

I have asked myself this question lately, how did premium fashion brands use online private sales to make this concept the latest shopping trend in India? Brands have struck the right chord with bargain-hunting fashion aficionados who wish to own prêt-a-porter at a very low price and also sell off their excess inventory by tapping the aspiring market. What more, since it does not have a negative impact on the brands’ image from a consumer standpoint, a variety of luxury brands ranging from apparels, home furnishings, bags and shoes can be bundled and sold quickly. It is however a private club and you need to be invited.

It works like this; private shopping sites buy excess merchandise directly from premium brands and designers; then they mark up the price for a profit and offer them at a heavy discount only to approved members. This membership is available by invitation from current members who have registered online or by applying online and then being subjected to a wait list. The product catalogue is then exclusively mailed to the approved members according to the buyers’ interest and buying behavior. This is gauged through social networks such as Facebook and Twitter. Since the merchandise is available for a limited time period during a sales event, I found the shopping experience to be fun, exciting and fast-paced. I saw deals on products disappear fast. It sounds like a very good business model, but sheer shopping popped another question in my head. If the idea is to make it available only to a limited range of members, how does this business scale and make money?

To find answers to my question I called up one of these websites and they told me that the number of members is not important; it’s all about having the right members who are passionate about the product offerings and are willing to buy them. I feel the answer to my question can be found in value added features that private shopping sites offer. These sites have started monetizing and increasing the business through viral invitations where each member will earn reward points per new member brought in. There are special clubs for premium members who have a propensity to buy lots online and they will receive extra discounts. A well thought of technical representation of the shoppers, their demographics and economics will be streamlined at the beginning of the event to stimulate impulse purchases. Special social recommendation systems will be set in place to up-sell and cross-sell based on purchases and browsing pattern of the customers.

Of course, all these features will soon fade away as more competitors arrive; but it all depends who will aggregate a large spectrum of luxury brands and designers on to their side. I believe this space will be red hot soon and will see a series of fund raising transactions at a mind-boggling valuation, followed by a period of consolidation in 3 to 5 years time. Sounds like its deal time, doesn’t it. But it will be great to hear your thoughts about the same and I would suggest talk to your chic friends, they will probably know what websites I am talking about.

Quick Guns – How smartphones are becoming the champions of new gaming – Alap Bharadwaj

If I was playing a video game fifteen years ago, I would have not expected the gaming industry to have overtaken the movie business. In fact as of today it has become the biggest generator of revenue across the entertainment sector. In April, the Guinness World Records announced that the game Call of Duty: Modern Warfare II had broken the world record for the best launch day in terms of dollar revenues in the history of the entertainment industry. The US $ 50 billion gaming industry is growing, highly profitable and has been historically dominated by two major platforms – gaming consoles (that are solely video game focused pieces of hardware) and the more general all purpose personal computer. Just to give you some market information, today along with the PC the three console OEM’s – Microsoft (makers of the Xbox), Sony (makers of the PlayStation & Playstation Portable) and Nintendo (makers of the Wii and Nintendo DS) dominate the industry with a combined total of 95 percent (Console + Portable) of the market. While this stat might look like plain vanilla at the outset, the interesting point to note is that just a year ago gaming’s bellwethers held 99 percent of the market. Boasting a growth of 400 percent, but there’s a new kid in town and its name is – the “Smartphone”.

There are several reasons for the smartphone’s ascent up the ladder of choice as far as the gaming population is concerned. It is the ease of use and universal reach that makes Smartphones an obvious answer to the next generation’s gaming platform. I feel there are other reasons that are more significant pointers to the growth of this space. Smartphone gaming largely focuses on Social games. These games appeal to many non gamers as they are simple and intuitive and don’t alienate newbies like their much more complex console counterparts. Looking forward I feel this will result in a dramatic shift in the demographic of gamers in the years to come. Further the hardware strength of today’s iOS and Android Smartphones also plays a big role in the increased popularity of these devices as gaming platforms. Today’s top 2 smartphones in terms of processor power – the iPhone 4 and the Samsung Galaxy S boast the following specs:

iPhone4 Samsung Galaxy S

CPU

ARM Cortex A-8 (2.0 DMIPS/

MHz in speed from 600

MHz to greater than 1 GHz)

Samsung Hummingbird

S5PC110, 1 Ghz

GPU

PowerVR SGX 535

PowerVR SGX 540

Memory

512 MB eDRAM

512MB RAM

These are incredibly powerful pocket sized devices capable of running extremely graphic intensive applications. This was demonstrated recently by id software running its new game called ‘Rage’ on the iPhone at a steady 60 frames per second, faster than the Xbox or Playstation 2 (pre cursors to the current Xbox 360 and Playstation 3). Ultimately, the convergence taking place coupled with the unique opportunity to access over tens of thousands of games on various App stores will inevitably push Smartphones into the public eye as the most cost effective and accessible platform to play games on. I personally reckon Smartphones will eventually overtake Consoles in terms of market share, giving the current incumbents of gaming leadership more than a few things to worry about.

The dark side of Investment Banking – Deepak Srinath

The deal that falls through at the last moment – an investment bankers worst nightmare! Be it Reliance-GTL, Bharti-MTN or smaller deals, every investment banker on the planet has had to go through this scenario – You’ve worked hard on an M&A or PE deal for over a year. Finally you have an offer on the table that your client has accepted and the diligence is going well. The chemistry between the two parties is good and they’re already discussing nuances of post merger integration. You’re fantasizing about your killer bonus and the BMW….and suddenly the earth caves in. For reasons completely out of your control, the deal falls through. You’ve made zero returns on your investment of months or years of work on the deal.

Catch hold of any seasoned investment banker sipping his highball at the Harbour Bar and he will tell you that it’s all a part of the game and this profession is only for the big game hunters who have the balls for the high risk-high return model. But this is exactly what gets my goat – why have we bankers reduced ourselves to bounty hunters who either hit that pot of gold or get killed by the alligators in the swamp. Do we not value ourselves as professionals, who deliver specific professional services at every stage of the transaction? Why then are all our contracts loaded on to that ‘success fee’? Look at lawyers for example – they may get a bonus for winning a case, but win or lose they get compensated for their professional effort. Same with every other professional service I can think of except maybe real estate brokerage. Even sportspersons get compensated based on milestones they achieve. Unfortunately, the success fee model has become such a norm that it is difficult to get a client to agree to a different structure, especially in a highly competitive and dare I say, commoditized market for i-banking services.

I have a very simple proposition for my clients – pay me for the work I do. Attach milestones to every step of the transaction process and compensate me for delivering it. Of course, there will be a component of the fee contingent upon ‘success’ of the deal. And what clients benefit by doing this- a) Accountability at every stage of the transaction b) Overall cost of the transaction reduced by 25-30 % c) Unbiased advisory because I have enough incentives to tell you what is best for you rather than just pushing you to close the deal.

Any takers or do we keep our hunting boots on?

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