In business, a lot of things are folklore..

A couple of weeks ago, I watched Steve Jobs - The Lost Interview on NetFlix. Robert X. Cringely, a tech journalist interviewed Steve Jobs, when he had left Apple and was the CEO of NeXT.  This was 2 years away for Steve to get back to Apple as a CEO.  This was in 1995 when Steve Jobs was 40 years old.

Why is this relevant now in 2018?

1.     The key highlight of this interview is Steve Job’s comparison of “product” Vs. “sales and marketing” people.  I strongly believe, that given the background of “Digitization of Financial Services”, Steve Jobs perspective on product vs sales and marketing is extremely relevant. Let me clarify, in the context of this article - product means “digital product” not a “financial product”

Is building a superior “digital” product important or just focusing on driving customer adoption? Let me reiterate, Marketing and sales team play a paramount role in highlighting the existence of a digital product and helping customers to build awareness. The objective of this blog to draw parallel between Steve Job’s perspective and digitization. He says that at Pepsico the people in sales and marketing always would get promoted as they drive the firm’s business. However, for tech firms like IBM and Xerox which had a monopoly at that time, product was not given importance. Here too it was sales and marketing.

Now, pause for few seconds, what if IBM and Xerox gave importance to the Product team in 1990’s instead of Sales and Marketing?

Steve Jobs insight was so precise in 1995, now we all know about IBM and Xerox decline in tech innovation and its impact on their respective market share.

Steve also explains as to why good product vs. bad product impacts business.  

Why the debate about Product vs. Sales & Marketing relevant in 2018 for Financial services firms?  

Even though, the core of Financial Services is non-tech, however we have observed customers are choosing Digital as their preferred channel. I have observed that most of the financial services firms who have good market share don’t give importance to superior digital product. It’s akin to what Steve Jobs mentions that large firms don’t focus on product innovation. May be financial services firms think, their customers don’t have a substitute. Banks and Asset Management firms give importance to marketing the product than improving customer / user experience (UX).

Steve Jobs also says just having a process isn’t enough, its content (business content) not process. Following a process may not deliver a great product.  

Drawing parallel to Steve Job’s Process Vs. Content - how many customers are delighted by using financial service firms’ website or a mobile app? Does these websites / mobile apps designed to understand the user’s context? Does these firms give importance to user experience or spend huge marketing dollars to on-board customers?

2.       Steve’s answer to interviewer’s question – how did he learn to run a company without formal training?

His answer to this one was straight and blunt.  Nobody knows why they do? What they do? Nobody thinks about things very deeply in business. He goes on to say that most of the things in business are folklore.

I believe, these statements by Steve Jobs are so incisive. Drawing a parallel between folklore comment and Financial Services firm’s digital initiatives. Most of the mid and large firms in Financial Services are still using legacy IT systems. This retards the overall digital user experience. How many firms use flexible technological stack?

To summarize, the “lost interview” which was shot 23 years back, is exceedingly pertinent for digitization in Financial Services Industry. A huge business opportunity for Fintech Startups. 

Disclaimer: Predominant part of my career in Financial Services was in Sales and Business Development, however last 3 years I have been on the Digital Product side.

Hit Refresh

Its inspiring & rare to find a CEO who is willing to expose his vulnerabilities in the open and be comfortable to talk about his career mistakes. I am referring to Microsoft’s CEO Satya Nadella comments made about pay gaps between men and women. After this mix-up, he sends an email to all employees sharing this conference video and accepts that he answered the pay gap question incorrectly and that it helped him learn about his unconscious bias. Integrity personified… You can read many similar instances in Hit Refresh about Mr.Nadella’s empathetic leadership style.

I found lot of parallel traits that can be related to the industry i am employed for over 15 years. Asset Management Industry (Mutual Fund) can learn a lot of from Satya Nadella’s interplay insights between empathy and technology. IT Industry thrives on “innovation” and not on “tradition”. On the contrary, Asset Management industry shines on tradition / past performance, however is it prudent for an Industry for following “tradition” in all departments? Given the background of change in technology and customer experience. I am referring to the data exchange between investors, distributors, registrar and transfer agents and Asset Management companies. Unfortunately “tradition” seems to still thrive in this case. I am excluding Advisory and Fund Management but highlighting transaction acceptance, processing and record keeping.

Microsoft CEO urges policy reforms to create a regulatory environment that promotes innovative and confident adoption and use of tech. While data privacy and security are always key concern, they also need to be balanced against the demand for data to flow more freely between the various services. Now let's switch back to Asset Management Industry. It's frustrating to see Independent Financial Advisors struggle to get an “one view” of their business / assets. Software service providers have no choice but to use a crude method to reconcile the data as the data flow is not via APIs.  In other words, transaction feed / technology stack  is not consistent.

While the author has underscored the technology trends beyond cloud computing, but Asset Management industry is still hesitant to adopt Cloud. As a digital admirer, i wonder when will we adopt latest tech to benefit Mutual Fund distributors and in turn minimise the friction points. It's worth highlighting about evolution of “technology diffusion” by Economist Diego Comin. This economist has studied the evolution of tech diffusion over last two centuries in countries across the world. On an average, countries tend to adopt a new tech about 45 years after its invention, although this time lag has shortened.  If we were to apply this learning and track the birth of cloud computing.  Microsoft Azure came into existence in 2008 and Asset Management industry in India is yet to adopt this. My independent opinion, adopting Cloud computing will help in redefining the architecture and sharing data will be seamless within the ecosystem.

Friends or Frenemies - the examples mentioned in this section resembles similar to Asset Management Industry ecosystem. In India, there are over 42 Asset management companies and 4 major back office (RTA) service providers.  Data compiling from these 4 registrar and transfer agents for an Independent Financial Advisor is lengthy and time consuming task.  Switch back to smart phone and Platform. Microsoft software deployed on its competitor phone - an Apple iPhone is a good example. The author ensures no matter which phone or platform customer chooses, Microsoft products can be used. It's a great example of coexist and compete. Hope we learn from this and develop healthy and sharing ecosystem.

Hit Refresh is a must read for business leaders, as Satya writes it is impossible to be an empathetic leader sitting in an office behind a computer screen all day.  CEO needs to be out in the world.  I am optimistic that very soon Asset Management industry will "hit refresh" button to upgrade record keeping infrastructure to deliver better experience for distributors / partners.

Platforms and Robo-Advisory

Last couple of years i have spent disproportionate time on Digital initiatives and Platforms and guzzled on loads of content on Robo-Advisory. The objective of this blog is to bring out the true validated attributes of Digital Platforms and Robo-Advisory. The following notes are insights from two relevant authentic books coupled with my experience.

The first book is Platform Scale by Sangeet Paul Choudary, the founder of Platform Thinking Labs, Singapore. He is currently ranked as a leading management thinker by Thinkers50. He is also the co-chair of MIT's Platform Strategy Summit. He explains the inner workings of new business models and their ability to scale rapidly. The starting point is Platforms are not in the business of building software but in business of enabling interactions among all stakeholders. His sixteen points on Platform Manifesto unravels the scope of platforms and how it can function as plug-and-play. The quest for Platform Scale starts with architecture. This cannot be achieved through marketing initiatives but through a series of architectural considerations for high participation for producers and consumers. Successful platforms ensure they capture rich data through learning "filters". Filters are created based on data captured on an ongoing basis through a user's actions. One question that crossed my mind was, - Is there any personal finance platform which has all 16 elements embedded in it? Lets park this question for few minutes.

Switching to my next book Fintech Innovation by Paolo Sironi, a FinTech Thought leader - Spokesperson IBM Investment and Risk Analytics. Reading this book, one can gain insights about the transformation of wealth management industry. Paolo has given rich inputs on Robo-Advisors, Goal Based Investing and Gamification. The main essence of Robo-Advisors resides in their attempt to institutionalize the “personalization” of the investment experience. It's quite obvious to me now - If personalization is paramount then Roboadvisory portals ought to have "filters" to enhance user experience. In other words, tech has to be the core. I concur with Paolo that incumbent firms are not aligned with the strategic imperatives brought forward by disruptive technology and demo-graphical changes. Tipping point may arrive when digital firms are capable of having emotional dialogue with investors. enlarged data-set can strengthen the positioning of the wealth management offer and enable one to act on sentiment.

My independent view is that most of the existing Indian Fintech firms are yet to leverage these tech trends. Hybrid solutions made up of technology and human advice B2B2C may thrive. Time for Robo-Advisory firms to go beyond captivating user interfaces and graduate to Robo-Advisors 2.0. Is there any real personal finance platform ? My take Platforms seems to be ubiquitous in Personal Finance space, but the fact is that at this juncture it is an elusive one.

THE RISE and FALL of NATIONS by Ruchir Sharma is an insightful book on changing landscape of world economies. At the eve of India's 70th Independence day, I found these data points on India very incisive. The following are extracts from his book.

Growth:

In the AC era, there are precious few nations that would qualify as rising stars by the standards of the BC era. In 2007, the year before the global financial crisis hit, the number of economies growing faster than 7% reached postwar peak at more than 60%, including China and India, and Russia. Currently, there are only 9 economies growing that fast, and only one of them is reasonably large: India.

In 1980, when there were only 124 countries on the Human Development Index (HDI), India ranked one hundredth. Over the subsequent decades, India's economy expanded by 650%, while the global economy by less than 200%, and as a result India climbed in the HDI rankings. It now stands at 89th among the original 124 countries, up 11 spots. 

Between 1989 and 2010 India generated about 10 million new jobs in manufacturing, but according to the World Bank economist Ejaz Ghani, nearly all the jobs were created in enterprises that are small and informal. Informal shops, many of them one-man operations, now account for 39% of India's manufacturing workforce, up from 19% in 1989.  

Crony Capitalism:

In 2010 billionaire list, the top 10 Indian tycoons controlled wealth equal to 12% of India's GDP. Between 2010 to 2015 India saw one of the world's sharpest gains in the clout of good billionaires. India's 2015 billionaire list is filled with new faces, and most of them are in productive industries like pharmaceuticals, education, and consumer goods.  

India has a bewildering array of publications, most too small to be economically viable. Of more than 13,000 dailies and 86,000 magazines, fewer than 40 have more than 100,000 readers. They set the tone of a business culture in which it is seen as quite routine to own a newspaper for the purpose of peddling influence. 

Consumerism

The state monopolies like MTNL and BSNL have been allowed to slowly wither in the face of more nimble private telecom companies, and together they now account for less than 30 million of India's 900 million telecom subscribers. For the government to protect these state behemoths is hard, given the consumer demand for better services.  

After completing this book, i felt if India reduces the protectionist measures and becomes more open economy it looks more promising.  As per the book, The most closed economies, with trade less than 50% of GDP, fall into 2 groups. One is a cluster of very populous countries like China, India and Indonesia that rely less on trade simply because their domestic markets are so large. The other group includes oil and commodity driven economies. The more closed they remain, the smaller their share of newly limited global trade flows. 

The number of agreements cut by India went from 0 to 18, including agreements with major economies all over the world.  

Author concludes it very aptly - India's prospects are holding steady and it continues with its long tradition of confounding both optimists and pessimists.

ELON MUSK by Ashlee Vance

Elon Musk’s tweet about Tesla Model 3 launch made headlines in India. The Guardian states 400,000 people worldwide have pre-ordered this car and Musk said it is the biggest consumer product launch ever. To my mind - It’s an incredible product campaign - as deliveries of this car will start only at the end of 2017.  I was naïve to think like this… What if Elon Musk owned an Asset Management company? How he may have looked at designing Mutual Fund Products? I started reading Elon Musk by Ashlee Vance to know more about Tesla.

In 1990s, Elon was keen on building a full-service financial institution online. Navigating through regulator was not an easy one, but he still started X.com, a finance start-up. The company had in fact secured a Mutual Fund license but later moved into to Internet payment solutions. My question was answered when I read about his views on Financial Services. He says, all the bankers did was copy what everyone else did. Looking at Elon's track record – he would have created a mutual fund scheme which is highly compelling to invest. 

Ashlee Vance narration about Elon Musk's life is extremely engaging. After reading about Telsa and SpaceX, one can presume that people working in Detroit and Boeing would have never imagined like Musk. In other words, a start-up can catch large corporates unaware.

Mr.Vance story telling on as to how SpaceX was built and team’s experience at early stage is captivating. SpaceX venture demonstrates many insights – about creativity and execution skills. The office was made more like living, because of the number of hours team put it. SpaceX took 6 years and 500 people to make first privately developed liquid fuel vehicle to go into the orbit around the Earth. An inspirational one. Why do large corporates doesn’t create an environment to nurture creativity and get the execution right?

Couple of days ago, I saw a tweet from one of the celebrated fund manager from India that Elon Musk got Tesla and SpaceX right due to sheer luck. I vehemently disagree to his statement. One of the board of directors of Tesla puts it aptly – that ability to stay focussed in the midst of a crisis stands as one of Musk’s main advantages over other executives and competitors. Ashlee Vance has skilfully elucidated the leadership skills of Musk. He has mastered the art of getting the most out of his employees and hence maximized the power of the individual. 

I suggest that this book is a must read for parents. The first few sections of the book tells the story about his grandparents and parents in Africa and his life in Canada. This teaches us how insane set of experiences can alter the way we look at risk. Do parents strive to give powerful learning experiences to their children? Musk attributes his success to his suffering that helped to make him who he is and gave him extra reserves of strength and will. 

The Golden Tap - Kashyap Deorah

I started reading "The Golden Tap" during the Initial Public offer of Infibeam-the first e-commerce company in India. They were aggressively marketing, but I was very skeptical as their proposition was not compelling. Its a coincidence, that this book refers to the story of Internet IPOs in India during 2005-2008. Only three companies were well funded during that period, later none of them got significant funds. May be the Infibeam promoters understood the timing well and investors didn't. 

As we all know e-commerce business is a red hot sector for Venture Capital (VC) industry. I always had this question -what makes VCs to veer towards a startup and lavishly fund them? Hence, I was very keen to read this book. The book captivated me, when i read a section on This-of-That investing. This=established market spaces. That=emerging market countries. Ideas that are successful in the US, pick the ones that will apply in the Indian Market and then infuse funds. My view this investment strategy is very naive one. Its similar to using copy & paste function in an MS Excel sheet to copy a formulae. A razor-sharp section explaining the VC investment process. 

Mr.Deorah's journey from IIT-Bombay to Silicon Valley and then back to Mumbai is a breezy read but with lots of substance. I liked the way he started his new business venture- Chaupaati Bazaar and sold his venture to Mr.Kishore Biyani. It was inspiring the way he set up the firm, and the way the deal was closed with FutureBazaar.com. 

Mr.Deorah has shared an interesting observation about early days of Flipkart.com, they were fanatical about customer experience (CX) at any cost. Mr.Bansal, co-founder owned up the entire brand experience for his customer. I felt, Flipkart implemented CX culture in early days (2009) where in most of large corporates may have realized it only post 2013. No wonder, they have a great brand loyalty. 

The kernel of this book is about perspectives on valuation of Flipkart, Housing.com and the way the speculative funds are flowing into the start-up ecosystem. His view on Unicorns made me realise about valuation game. I agree with Mr.Deorah's view on Housing.com episode. Getting excess funds alone cannot drive success, leadership skill at the top is key success. Now, I started respecting Zomato as a firm - they had not raised money from global funds in its journey to becoming a unicorn. The section on Unit Economics is a very prized one. In a funding driven e-commerce companies the operating losses (loss per transaction excluding fixed costs) ranged from -15% to -30%. 

Lots to insights from Mr.Deorah's venture - Chalo app - customers could use this in restaurants for a seamless experience. The way he went about striking a deal with OpenTable was brilliant. My take away from both Chalo App & Chaupaati Bazaar was Mr.Deorah knew the significance of product which most Indian tech entrepreneurs don't attach importance. After completing the book its tacit now what drives the VCs to gaze at start-ups. A must-read for all start-ups. 

It appears to me that the story has not ended as the Golden Tap has not gone dry yet. The question is - After the tap goes dry - who will pay for the "convenience" e-commerce companies or Indian consumers?

Zero to One -Peter Thiel

Why do large companies fail? This question always bothered me as these firms have access to abundant resources and tech knowhow, but why does  "consistent growth" elude them?

Only 12% of the 1955 Fortune 500 companies were on the list in 2015, and nearly 88% of the companies from 1955 have either gone bankrupt, merged with (or were acquired by) another firm, or they still exist but have fallen from the top Fortune 500 companies. Source: American Enterprise Institute.  

In India too, over a ten year period, the Sensex churns by around 50% i.e. of the 30 stocks in the Sensex at the beginning of a decade, only 15 are left by the end of it. Source: Ambit Capital.

After reading Peter Thiel’s book, I have got many answers to my question on consistent business growth. In times to come, this book will recognised as a great "classic”. I was told this book is relevant for start-ups and but I believe it’s highly relevant to large firms too. His notes on "how to build a future" may salvage many large firms.

His 7 questions that every business has to answer, unravels the perception of every business model. They are proprietary  technology, the timing of business, market share, people , distribution , durability and the last is the "secret" question. I wish, all the promoters & CEOs read this as this may save lots of dollars. It’s so relevant in the current context of global economy.  

If we were to start analysing companies based on these 7 qualitative parameters – I am certain many companies may fail in these parameters hence may not be around after few years. For Instance regarding distribution - I spent more than 15 years in Mutual Fund Distribution , I completely related to his perspective on “distribution” and its significance for the success of a firm. I found his approach very pragmatic - superior sales and distribution team can create a monopoly without a product differentiation. 

His viewpoint on business success is attributed to luck or skill is sharp.  His  stance on of how firms operate in "Indefinite Optimistic" mode is shrewd. If one analyses this philosophy, here the business simply believes the future will be better, but it doesn’t know how exactly to get to this mode , so no specific plans. 

Now if we were to look around the companies which operate in this mode - there are plenty without a specific plan and eventually may disappear. To my mind, some of the new firms entering into manufacturing of smartphones are in indefinite optimism mode. They may be believing that surge in demand of smartphones in future will invariably rev up their product sales.

"Secrets" section of this book is worth reading many times as it is profound. Generally most of us operate in a mode of "I know all". He says most people think only in terms what they have been taught. There may be place to look for business opportunities where no one is looking. Companies may be seeking & working within their experience boundary akin to a personal computer - seeks & reads file from existing files & folders.