Consulting in 2010 is not just limited to the regular strategizing and business restructuring domain; consultants of the world have much more to offer. Corporate layoffs have spawned a wave of professionals who are trying to repurpose their skills in the niche consulting realm. While the competition is fierce in this space, the barriers to entry are low, and the industry as a whole is seeing a shift as clients drop big corporate consultancies in favor of smaller, more specialized firms. Ever heard of space consulting?? Or for that matter, fire safety consulting? The people today need specific solutions and these consultants come up with those exactly tailored around your requirements. The September edition of Strategos focuses around these niche areas of consulting, which are now a non debatable part of the $350 billion global consulting industry. The two featured articles speak about Traffic Consulting, which might just bring an end to our woes from routine jams and bottlenecks while travelling, and Cross-cultural and Relocation Consulting which is probably every global organizations prime requirement in the flat world of today.

The guru gyaan section has Dr. Rohit Mehtani enlighten us with his take on Dynamics of Negotiation which discusses the negotiation in the global economy in much wider per-spective and how negotiations can be used by the firms in more effective manner. The winning entries of Sectornama take a look at the Bank-ing Industry while our column on Strategy out of the Board-

room talks about the strategy lessons learnt from Age of

Empire, which was incidentally the first history based real-time strategy game. We, at Team Strategos, sincerely hope that this edition will be an enjoyable and informative read for all of you and promise to you all the more such editions in the near future. Any bouquets and brickbats are most welcome.

Wishing you happy reading!

From the Editors Desk Traffic Consulting A Framework 3

Neeraj Rana

IIFT Delhi

Cross Cultural & Relocation Consulting 8

Rishi Gupta & Shanup Peer

GLIM, Chennai

The Dynamics of Negotiation 12

Prof. Rohit Mehtani IIFT, Delhi

Strategy out of the Boardroom: Lessons from Age of Empires II 15

Aatish Kumar

IIFT Delhi

Consulting Gyan: Decoding the Pareto Prin-ciple 20

Abhinav Varshney

IIFT Delhi

Sectornama - An overview of Indian Bank-ing Sector 22

Ashish Rathee & Mohit Bhatia

IIFT Delhi

Limelight: The Consultoont 25

Vasudha Narayanan

IIFT Delhi

Crossword Puzzle 26 Tease your Brain 28 Tackling Caselets 30 Thinking Cap 32 Club Buzz 33 Achievments @ IIFT 35 Volume 1, Issue 1 September 2010 Socrates, The Consulting & Strategy Club,

IIFT Delhi

Coordinators Mayur Toshniwal +91 9555588057 Subbarama Sarma +91 9971421299 Vibhu Mishra +91 9650536288

E-mail:

socrates@iift.ac.in or consultsocrates@gmail.com

Visit us at:

www.socrates-iift.co.cc www.iiftevents.com www.iift.edu

Manvi Bajpai

Lead Editor

Abhinav Varshney Vasudha Narayanan Oojwal Manglik

Editor Editor Design Editor

Team Strategos

A Framework for Traffic Consulting

Zooming in and out of the slow traffic mumble. Trying to make the lights get me

out of jungle...

This song, by Paul Weller, quite succinctly describes the state of an average commuter on roads of city like Delhi. The transportation system, in cities, is slowly reaching the maximum capacity that can be handled by the existing infrastructure. The push is mainly because of the economic growth leading to the increasing prosperity of the people and their changing lifestyle. People now prefer to use their own transport to travel instead of using public transport. This, on transportation front, not only leads to traffic congestion but also to increased air pollution. Traditionally, in urban areas, traffic lights are the most important traffic management system. They control and manage the traffic, with a focus on identi-fying a problem, and its solution, locally. In most of the cases the solution is found without considering its effect on the rest of the system. Also, in most cases, different roads in the same cities are maintained by different authorities. These authorities are responsible for their share of roads and, generally, dont

cooperate. The problem that is being faced by the traffic management system in India is increasing burden on the already constrained infrastructure, limited room for expanding transportation facilities in cities and to improve the quality of life of city dwellers, by making travelling safe and by reducing the air pollution in cities.

Framework

The framework that will be followed in this write up to analyze the case is

First, the existing system needs to be understood, to understand the requirements and constraints of the system. Next based on the review of the existing data about transportation, gaps will be identified. Subsequently they will be addressed and finally the implemented solutions will be monitored and measured. Analyzing status Quo

Better employment opportunity in big cities, like Delhi, is a major factor why a lot of people migrate there. The population of Delhi has increased from 9.4 million in 1990-1991 to 16.9 million in 2007-08 as shown in the figure 1 with a CAGR close to 3.85 %. The inorganic growth in the population outpaces the infrastructure growth put-ting lot of pressure on the existing infrastructure. With the increase in population the number of vehicles on roads also increases. Figure 2 shows how increase in the population is directly related to the number of vehicles on road in Delhi.

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Figure 1: Delhis estimated population from 1991 to 2007 Source: Economic survey of Delhi 2008-09

Figure 2: Number of vehicles vies-a-vis population of Delhi Source: Transport department, Government of NCT of Delhi and Economic survey of Delhi 2008-

09

In Delhi the annual growth rate of vehicles is 6.42% which outperform the population growth rate of 3.85%. The change in the length of roads over last few years has been shown in figure 3.

Figure 3: Length of roads in Delhi Source: Delhi Statistical Handbook-2007, Dept. Of Eco and Stat, Government of Delhi

Total length of roads in Delhi for the year 2007-08 was 30985 Km. The roads in Delhi are developed and maintained by PWD, MCD, NDMC and Delhi Cantonment Board (DCB). The share of different authorities is shown in figure 4.

Identifying gaps As has already been mentioned, the increasing population in cities is putting a lot of pressure on the already existing infrastructure. Figure 3 shows that the length of roads has increased only marginally over the past few years but the number of on road vehicles (figure 2) is increasing consistently. With the increase in on road

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Figure 4: Distribution of road network to different authorities Source: Delhi Statistical Handbook-2007, Dept. Of Eco and Stat, Government of Delhi

vehicles in Delhi, the road length per 1000 vehicles has been reduced to 5.51 in 2007-08 from 8.45 in 2000-01. The increased number of vehicles on the road has not only reduced the mobility of a large section of people, but has also increased the pollution level, journey time and fuel consumption. The pedestrians are now the most marginalized commuters on the road. The gaps that has been identified are

1. The growth of vehicles on the roads is outpacing the growth of

infrastructure.

2. Limited room for expanding transportation facility in metros.

3. The absence of multimodal public transport facilities in cities.

4. The lack of coordination between various authorities handling roads

network.

5. Absence of central traffic management controlling authority in cities.

Addressing gaps Traffic congestion, normally, occurs when more number of people use the existing transportation facility than it can handle. This causes delay and inconvenience beyond the specified limit. Establishing a traffic management centre, to centralize the control of traffic flow, is the most important and most basic way to handle the problem. It will make use of the already existing Intelligent Transportation System (ITS), which includes traffic signal control and other traffic management system. The development of the centrally controlled ITS will at once address two of the gaps (4 and 5) identified in the previous section. As has been pointed out in figure 4, major part of the roads in Delhi are being developed and maintained by MCD but there are other stakeholders as well. The coordination between them is important in order to avoid having any bottle necks (due to repair work being done by one authority) on the roads. The flow of traffic will be diverted accordingly if the information of roads being closed is available before hand to a central control room. The implementation of the advanced ITS like cameras (CCTV), changeable message signs and traffic detectors will make the real time information available, which improves safety on the roads by reducing the reaction time in case of any eventuality. Advanced adaptable intersection management system helps in managing arterial network of roads which are very common in cities like Delhi reduces the travel time. With ITS all traffic related information will be available at one place, all centres can be implemented from one point and all the data once entered will be available to all the subsystems. Moreover, with all the data collected at one place, an opportunity to do analysis for traffic planning with a solid basis is provided to us. ITS again helps in a BIG way to fill in gap 4 and 5 identified.

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But it should also be realized that investment in more advanced techniques is not the fundamental solution to the increasing traffic problems. The traffic management should not only be technique oriented but also result oriented, so as to make sure that the ultimate quality of the trip experienced by the end users should be good. Implementing multimodal public transport system is another way to target three gaps (1, 2 and 3) with one solution at the same time making the trip experience good for the user. Multimodal transportation means using different modes of transport to reach ones destination. Having a transportation

system in place which will not only be reliable but also safe and easily accessible will prompt people to opt for it rather than using their own personal vehicles. This will reduce number of vehicles on the road. The implementation of Metro rail in Delhi is a perfect example. It has not only taken burden away from the road transport system (approx figure is 12 lakh commuters) but its implementation with underground and elevated lines uses much less of already constrained at-grade resources.

Measure and monitor Any system is prone to fallacies and lacunae. So its important for a system to

accept this and collect data to adapt to ever changing and challenging circumstances. Data, in relation to traffic, needs to be collected and analyzed. The roads in the cities should be monitored with systems like traffic detectors, infrared sensors, CCTV cameras to facilitate quick reaction time in case of accident or divert traffic in case of congestion reported on specific roads. The roads in a city should be prioritized in order of their busyness so as to know where the traffic should be diverted in case of congestion. The gaps found and analyzed are specific to Delhi. A study to assess the cost and benefits of the recommendations is required to extend them beyond the city of

walls. Design once, deploy many times should be the philosophy for achieving

the cost efficiency. The design of traffic management should specify the use of standard objects and interfaces to help ensure system-to-system interoperability between project partners.

Conclusion The effort of the entire traffic management system works at two level. The first level is technical where the traffic management system is a structured description of complex system of traffic and traffic management measures. These descriptions and measures are used to develop and implement technical infrastructure for efficient traffic management system. Another level is a more end user oriented. It is aimed at providing the right information to the right peo-ple so that they can take right decisions. The decisions can be taken within a small span of time once the information is available to the centrally controlled traffic management centre. This reduces the reaction time for the authorities (ambulance, fire brigade or Police). The basic approach towards the implementation of recommendations provided above should be to integrate traffic management plans. It should develop a cooperative regional traffic management enabling different road authorities (national and local) to work together effectively. It should always be kept in mind that the efforts should always be directed towards making the travelling experience good, both in terms of safety and quality, for the end user like you and me. Author

Neeraj Rana

Batch of 2012

IIFT, Delhi

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Cross Cultural &

Relocation Consulting

Genesis

Imagine John who is coming to India for the first time on a long term project. He lands at the Netaji Subhash Chandra Bose International Airport in Kolkata along with his family. After the initial few days at the company guest house he starts looking for a rented flat but is perplexed by the problems he faces. The fact that Salt Lake, where his office is located, is 20 kms away from the nearest establishment which his wife prefers makes his job tougher. Thereafter he also needs to get his children admitted to an international school and, if possible, buy a second hand SUV to make his travelling easier. Add to this the increased rates of the middle-men on seeing a firangi and the growing concerns of his wife of catch-ing malaria! What does John do now? Thus, enter our cross-cultural and relocation consultants. Technology today has not only shrunk the world but also rendered international boundaries invisible for conducting business. Today, a global manager routinely communicates across continents, countries and cultures, without having to leave the office. And the numbers keep growing. As someone aptly remarks- "What distinguishes India from other nations is its extensive knowledge of both U.S. and India business practices. With growing

businesses the need for effective leadership arises and this further depends upon three things-

Individual Perspective- focus on personal communication

National Culture- articulate differences and similarities between cultures

Corporate Culture- gain knowledge and exposure from a cross cultural

viewpoint.

The purpose of cross-cultural and relocation consultants is focused on the need to

provide end-to-end relocation, cross- cultural training and destination services for

people moving to and from India- especially the former. For example- Americans

don't understand indirect communication, if you can't do something you simply

have to say 'no'- something which most Indians are not very good at. This in turn

creates a communication gap which may affect the business at some point. And

with more and more teams comprising individuals from multiple cultures, the

need to connect effectively grows even greater.

Model Framework Today, companies spend between $250,000 and $1 million to relocate an

executive overseas. And, on average, it takes 3 years to recoup that

investment. Most failures in international assignments are due to personal and

family issues, rather than poor job performance. Cross-cultural training equips

business professionals with this very knowledge, and trains them to effectively

interpret and act appropriately in a given cultural setup. Most importantly, it

encourages the expatriates to develop sensitivity to the host nations culture and

adapt to situations accordingly

Special Entry

Cross-Cultural Training overview The training methodology is designed to provide the expatriates with the opportunity to learn how cultural adaptation can enhance job and team performance. Participants are also taught about the various communication styles and expectations that supervisors and colleagues from the host nation expect of them. Finally, the spouse or family's adjustment is one of the key elements in making an international assignment a successful one. All these aspects are thus considered and therefore incorporated into the training program. From an Indian cultural point of view, the expatriate training covers various as-pects such as

Overview of Indian culture

Social customs.

Verbal and Non-verbal communication styles

Building and nurturing bonds with colleagues

Business etiquettes

Manner of interaction with female colleagues

Health and safety concerns

Sensitive issues Caste system

In addition to our experience in intercultural training and organizational consulting, we are skilled clinicians providing individual and family assessment and ongoing psychological support through either on-site or distance delivery of services.

The Way Ahead Today with the economy continuing to grow, more and more cultures are mixing and the opportunity is even larger. It is estimated that the number of expatriates coming into the country will grow exponentially over the next three years. The number was around 50,000 in 2008 and now about 70,000 expatriates are expected to be added in 2010 alone. This proves that the market for cross-cultural training and relocation guidance is only becoming larger.

Special Entry

And to prepare to deal with this volume, consultants will need to strengthen their infrastructure and train their resources effectively. Take for example Global

Adjustments- cross-cultural consultants based in Chennai. The CEO, Mrs Ranjini Manian plans to enter into strategic alliances with organizations that have something to contribute to this - For instance, a particular group of builders who create apartments replicating foreign ambience at affordable costs. This indeed sets up the very business and helps affirming our faith that this is one sector that is yet to reach its true potential. References:

http://www.globaladjustments.com/?q=node/29

http://www.suryaconsulting.net/cross-cultural-training.html

Author

Rishi Kumar Gupta

GLIM

Shanup Peer

GLIM

Special Entry

The

Dynamics

of

Negotiation

We are often required to negotiate and most of the time it is an unavoidable exercise. It is unavoidable because we frequently face situations, in our day-to-day personal or professional life, when we are confronted with others with whom we have a conflict of interest. We have to negotiate to resolve this conflict and we cannot simply walk away because we are entrenched in an interdependent situation. If it was not interdependence, one could look the other way round and could manage without having to negotiate. But since we are in an interdependent relation, we dont have a choice but to negotiate and resolve the conflict. The

choice here has two aspects, the alternative either does not exist at all or, if it

does, it may not be as good as the outcome likely to be obtained from the negotiation. Not having an alternative implies complete dependence on the negotiation outcomes or, for that matter, not having a good alternative still means substantial dependence on the negotiation. It is ironic in some way as more interdependent the situation the more dependence it creates, for those who are in that relationship, on the success in negotiation. There exists a conflict of interest and that it co-exists with interdependence in the relationship and not so good alternatives, therefore, becomes an important condition for negotiation intended to resolve this conflict. Having arrived at this assumption, the next question that comes to fore is that since the parties to the negotiation see a conflict in their interests and respective positions, can they do something to make the negotiation a meaningful exercise for them. Some always see negotiations as distributive in nature, as in a zero-sum game, if one party gets more the other gets less. If the resources to be distributed in the conflict are assumed to be of fixed nature in this sense, then the negotiations can only be value claiming and distributive in nature. Success or fail-ure in negotiation will be determined by the fact who got more and who got less. Such an outcome will, therefore, create a win-lose situation for the parties engaged in negotiation and this is bound to create satisfied and dissatisfied parties emerging out of a negotiation situation. Can such a rivalry like situation be avoided? Realizing this, efforts are often made to transform a negotiation situation and process into a value creating exercise rather than just a value claiming competitive behavior. Value creating exercise, as in a positive sum game, enhances the value for all the parties involved, creates a win-win situation and leaves everybody happy with the outcomes of the negotiation. The subject of negotiation, looked at in this manner, is strongly built around the premise of interdependence. This interdependence has a much wider connotation in the context of international negotiations. We perceive globalization as a phenomenon built on the notion of shift from dependence to interdependence in our relationships. Not only individuals, firms and nations also see themselves as a part of this interdependent system. Countries participate in multilateral

negotiations and frameworks because being left out of such a framework is seen as an undesirable situation. Firms are interdependent and this comes across very clearly the way they see themselves as a part of the integrated supply chain rather than as an independent or isolated unit in the market place. Interdependence is the key in multilateralism and in the networks in the market place. If we see global supply chains as built on the concept of global sourcing, global manufacturing and global marketing spanning across nations, where the national borders become meaningless, then negotiation in this context acquires a new and complex meaning. One, negotiation has to be seen in the multicultural context and, second, negotiation has to be seen as a tool of relationship management rather than a simple market place transaction.

There is, however, a major shortcoming in the research work that has exists in the field of negotiations. Most of the work is based on observations made in the laboratory settings where the subjects engage in transactions akin to market place transaction, where no prior relationships are assumed between them nor are they expected to negotiate later on after the experiment ceases. The relationship and the social context is, therefore, missing in this research output. This is partly also due to the fact that the research work, in terms of managing controllable and non-controllable variables, is difficult in real life negotiation situations because such negotiations are not visible to the outsiders and also because the parties to the negotiation are engaged in real and not artificial problem situations. So looking at this lacuna in the existing body of knowledge in negotiations, it is increasingly felt that the long term relationships and social contexts need to be factored into the negotiation related studies and training. That is, the fact that negotiators have prior relationship or experiences with each other and that they are likely to have relationship in future, unlike the situation where there is no past and no future of the relationship, adds altogether a different dimension to the negotiation process.

About the author Prof. Rohit Mehtani holds the distinction of being the alumnus of prestigious institutions and universities like BITS Pilani, Deakin University (Australia), University of Hull (England), Delhi University, Punjab University, Indian Institute of Foreign Trade, New Delhi and Indian Institute of Management, Calcutta. He has also been a recipient of the prestigious British Chevening Scholarship for higher studies in England and for re-search with European Institutions in Brussels. Prior to coming to Indian Institute of Foreign Trade (IIFT), where he is a Professor & Consultant of International Business Strategy and International Political Economy, he was Director (Marketing) with the Federation of Indian Export Organizations (FIEO). Prof. Rohit Mehtani has also been on the Governing Board of the Consultancy Development Centre (CDC), a body set up by the Department of Science and Industrial Research to promote technical and management consultancy in India. Prof. Mehtani is a visiting faculty to number of prestigious business schools, offers consultancy services, handles training programs for the corporate sector and senior government officials, conducts special workshops, researches and writes on global political economy and international business related issues.

STRATEGY OUT OF THE BOARDROOM

Age of Empires II: The Conquerors, also known as Age of Conquerors (AOC), was released on October 26, 1997 from Ensemble Studios. It was one of the first history-based real-time strategy game made. The game focuses on historical events throughout time. Age of Empire covers the events between the Stone Age and the Classical period, in Europe and Asia. The Academy of Interactive Arts & Sciences named Age of Conquerors the 1998 "Computer Strategy Game of the Year." The basic theme of the game is to manage the scarce resource (food, wood and gold) to grow your economy and use the economy in creating military. Using this military one is supposed to annihilate the opponents army and economy

which compels the enemy to accept defeat. Todays corporate culture can be very well linked with the game. Strategies used

in the game have an analogy with the one used in the corporate world. And the skill to be able to perform it in a limited amount of time is the factor which stands them out of the crowd.

Salient features of the Game

Civilizations Age of Conquerors is set in the Middle Ages, from the Dark Ages to the Imperial Age. It allows players to choose one of 15 civilizations, from Europe (Byzantine, Spanish, Franks), Asia (Chinese, Japanese, Mongol), South America (Aztecs, Mayans) and the Middle East (Persian, Saracen). Every civilization has its unique features. Each of them has different special units and different technology that gives them specific tactical advantage over one another. Units There are units in the game with different characteristics like Foot-archer, Cavalry Knight, Foot swordsmen, Cavalry Archers, Spearman, and Pike-man etc. Each unit has its own strength and weakness.

Military Buildings Different types of military buildings are used to create differ-ent type of army. Like infantry, cavalry, archers, siege units and Siege units are created from Barracks, Stables, Archery and Siege workshop respectively.

Similar is the case in the corporate world. Every competitor has its own unique selling point (USP), his specialty. One can use this USP with proper strategy and tactics to achieve success over his competitor. One has to use available resources and strengths to overpower the competitor.

Strategies used in the game

More the merrier

The winner almost always out produces the loser in every respect- more villagers, resources, buildings, military units, etc. Oddly enough most game winners usually have more military losses as well. The ample resource income means they can af-ford it. Most victorious players simply out produce and overwhelm their oppo-nents. Analogous to the real world, big corporations overshadow small ones by scaling up their production. This allows them to flood markets with lower priced items and squeeze out any opportunity for the smaller players.

Thou shall put a Production unit for every few number of Villag-

ers One should restrict the number of woodcutters or gold miners per lumber-camp and mining-camp respectively for maximum production of resources per villagers. This is very well explained by the key concepts of Theory of production in Micro-economics. Law of Diminishing Returns states that As units of a variable input

are added (with all other inputs held constant), a point is reached where addi-tional units will add successively decreasing increments to total outputthat is, marginal product will begin to decline.

Thou shall do all the technological researches before battling As soon as one moves to a next age, one should do all the economical researches. Before battling with any army the units must be equipped with all the technical

researches (attack and armor) in that age. To survive in market a company should undergo technological advances to rise

against the competitors product. Honda unlike Bajaj scooters underwent constant

technological advances to stay in the market.

Be Unpredictable Most players are rather stubborn as they will focus on one strategy and will not stop, you must use this to your advantage. Usually the opponent will be this stub-born when he realizes that you are a civilization that specializes in a certain line of units (Viking: Infantry, Persians: Cavalry, etc.) He will mainly only use the counter to the unit that he expects you to employ in battles (Persian: Pikemen, Viking: Archers), so you already know what he will build. What you need to do is build a complete opposite to the units that your opponent expects you to use (Viking: Heavy Cavalry, Mongol: Heavy Infantry). Usually the opposite of the stereotypical unit is a counter to the counter of the stereotypical unit, so you will easily destroy your enemy's army. This is a good example of game theory wherein Minimax Theorem is applied to get an edge over the opponent .According to this strategy, the player then makes the move that maximizes the minimum value of the position resulting from the opponent's possible following moves. The player tries to maximize his Minimum profit by choosing a strategy which will minimize an opponents Maximum loss.

Thou shall be aggressive Being aggressive means initiating the battle. Monitor the enemys next moves

closely by secretly scouting his map. This helps one formulate his winning strat-egy accordingly by creating counter army. Dont let the opponent boom in

peace i.e. keep distracting the opponent while he is concentrating on economy by sending few cavalry knights at his villagers or gatherers. Likewise in corporate culture one has to closely monitor his competitor. For ex-ample, Coca-Cola closely monitors each and every tactical move of Pepsi. Lot of similar examples can be cited from the history. One who comes with the prod-uct first has the advantage of wooing the customers over his competitor. For ex-ample Apple came with PC first which gave him the advantage over IBM which took time catch up in Computer manufacturing market.

Thou shall not store the resources As the economy booms the resources start accumulating. When we create more villages, buildings and military units these resources are used. A winner never stores resources more than that is required to run each and every production units. All production units should be operational. Similar strategies like Just In Time, Economic Order Quantity and efficient meth-ods are used to maximize the returns.

Thou shall not freak when attacked Great players never lose their cool, even when under attack by a considerable force. So you have forward built and your opponent moves his forces around your weak flank and infiltrates your base, hacking at your town or villagers. Great play-ers never ring the town bell as it really disrupts their economies. Instead they sim-ply move their villagers to a new site and if the attack is serious enough, they withdraw their forward-based military units to repel the invaders. In the time of distress or crisis one should not freak out and quit, rather keep calm and take measures to analyze and solve the problem one by one.

Winning isn't about annihilating your opponent

Rarely does winning a game require totally destroying an opponent's army or town. Many games are won simply by conquering strategic territory, destroying enough units, denying a resource or by winning a contested town centre. For example In the case of Boeings 787, the new Dream liner and Airbuss A350,

following the Boeings speculation Airbus announced that it would develop the

A350 to compete with Boeings 787. By announcing its A350, Airbus had suc-

ceeded in its goal of disrupting the business case for the 787.

Thou shall not have battle fixation The rule is to never remain focused on the battles while neglecting your economy. Get into a routine of spot-checking your army's progress while maintaining your main focus on your economy. Once the focus on economy looses your resources starts getting unbalanced and the military production stops. Similarly, a company has to take extra care of the egg laying hens so that constant cash inflow is maintained throughout in the firm. One cannot fixate on competi-tors strategies too much loosing his sight of the basic profit generating units.

Author

Aatish Kumar

Batch of 2012

IIFT, Delhi

Decoding the Pareto Principle

In 1906 an Italian economist by the name Vilfredo Pareto deduced a mathematical formula explaining the unequal distribution of wealth he observed in his country. After the analysis Pareto came to the conclusion that roughly twenty percent of the people controlled or owned eighty percent of the riches. He developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas .It was later in 1940s that a Business Management

Thinker and quality management pioneer Joseph M Juran attributed the 80/20 rule to Pareto calling it Paretos Principle. Broadly speaking the Pareto principle (also known as the 80-20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes. One can apply the 80/20 Rule to almost anything, from the science of manage-ment to the sciences of the physical world around us. The 80/20 Rule means that in any set of things (workers, customers, etc.) a few (20 percent) are imperative and many (80 percent) are considered trivial. In Pareto's case, he found that roughly 20 percent of the people in his country dominated with 80 percent of the wealth. In Juran's initial work, he identified 20 percent of product defects causing 80 percent of product problems. Its well known by Project Managers that 20 percent of work (usually the first 10 percent and the last 10 percent) consume 80 percent of the time and resources. We know that 20 percent of our inventory on hand occupies 80 percent of warehouse space. Similarly, 80 percent of our inventory line items (Stock Keeping Units or SKUs) come from 20 percent of vendors. At the same time, its likely that 80 percent of revenues will be the result of sales made by 20 percent

of sales staff. And 20 percent of workers will cause 80 percent of your problems, while another 20 percent of personnel will deliver 80 percent of your entire production. The formula appears to work in both directions. The value of the Pareto Principle in management is in reminding us to stay focused on the 20 percent that matters.

Managers or project leaders can apply Pareto analysis when they have limited time or resources. A project may take many tasks to complete in its entirety, but a small portion of those tasks may meet the main goals sufficiently. Pareto analysis is also useful when working under a deadline; it helps prioritize tasks in order to deliver a superior product than would result from attempting to complete every detail. Application in the field of Computer Science

Mozilla Firefox, a popular web browser known for it huge range of custom ser-

The

Con

sult

ing

& S

trat

egy

Clu

b

vices and add-ons uses Pareto analysis to assess the usage of their menu items and add-ons on their Firefox browser. According to Pareto's law, about 80 percent of users should use only 20 percent of the items. Therefore, folks at Mozilla would do best to focus on increasing accessibility and fixing errors related to those items. Any Statically analysis based on Web Analytics would give a clear picture of which features are accessed more on the site. However, when they actually surveyed usage they found that 80 percent of users only use five menu items, or 7 percent of the total. This though may not seem to be in total conformity with the Pareto principle (which say 20 percent) but this nevertheless doesnt refute it. In fact this reinforces the idea that certain aspects

of a design are more important than others. Even if the situation did not exactly follow Pareto's law, it demonstrated that working on some details can produce diminishing returns.

Limitations and Pitfalls

A more recent application or implementation of management theory thats been

making the rounds for a few years suggests is that one should interpret Pareto's Principle in ways that would create a new approach, sometimes termed Superstar Management. Its supporters claim that since 20 percent of employees likely produce 80 percent of results one should focus limited time in management of only that 20 percent the so-called superstars. However, this proposed implementation of Paretos Principle to management is flawed, because it over-

looks the fact that 80 percent of time should be spent doing what is really impor-tant, or most likely to deliver the greatest return. By helping good salespeople become better, we are more likely to reap greater results than by dedicating the same management effort to helping the fewer great salespeople become terrific.

In this case, the sheer numbers work against us spending time only helping manage and improve the few great workers. Thus, its wise to evaluate various management situations and apply the Pareto Principle appropriately and wisely.

Author

Abhinav Varshney Batch of 2012 IIFT, Delhi

Banking Industry Overview

Socrates, the consulting club at IIFT held a sectoral analysis competition

SectorNama, which was adjudged by Mr. Som Kapoor from Accenture Business

Consulting. The following is the best entry adjudged for the Banking Sector.

Commercial Banks in India are categorised into Regional rural banks, Local banks and scheduled commercial banks (SCBs). Scheduled commercial banks are then divided into Public sector, private sector and foreign banks. Private sector includes old private sector banks which were in existence pre-liberalisation and new private banks post liberalization. The Public Sector Banks (PSBs), which are the base of the Banking sector in India account for more than 78% of the total banking industry assets. If a global comparison is made, Indian banks lag behind both in terms of assets and services. Market capitalisation of SBI and ICICI together is just around 1/12 of that of the Industrial and Commercial bank of china.

Analysis if SCBs on Key Performance Indicators of Banking System

Deposits

In bank deposits, Public sector banks increased their share in 2008-09 as deposits growth decelerated in private and foreign banks. The share of Current account and savings account (CASA) deposits which are the cheapest source of funds has been consistently declining over 2006-09 in SCBs, which poses a challenge. Only private banks managed to increase their CASA %(See Figure 1)

Figure 1

Credits and Advances

In credit advances, foreign banks lowered credit lending to priority sectors in 2008-09. Public sector banks maintained credit growth to the sector, owing to their responsibility of supporting growth in the economy. In private banks, retail loans as a proportion of loan portfolio decreased owing to higher risk associated, especially the unsecured loans. In bank investments, a very crucial trend was seen with banks over the years investing in mutual funds at exponential growth rates with investments in government bonds sharply decreasing each year. Thus, banks are no more conservative and want to capitalize on the higher returns on offer in secondary markets. (See Figure 2)

Figure 3

Spread as % of Assets

Foreign Banks with their low cost of funds enjoy high interest spreads as compared to public sector banks.(Figure 3)

Figure 3

Asset Quality and Capital Adequacy Ratio

Indian banking system is quite sound with consistently decreasing net NPAs to advances over the years. Even in period of financial turmoil, Net NPAs to advances marginally increased. Capital Adequacy Ratio comfortably meets Basel II norms. In 2008-09, SCBs were able to raise CAR from 13 to 13.2%, bucking the global trend.

Operating Expenses

Public sector banks with their high wage bills and inefficiencies are far behind Private Banks which through their operational efficiency have been consistently reducing operating costs and hence maintain return on equity in spite of falling advances. As shown in Figure 3, SBIS operating expenses are on the rise.

Policy Initiatives

There have been recent policy initiatives which will have a profound impact on the banking system: NBFCs like Aditya Birla Group, Tata Capital, Reliance Capital, Bajaj Group and RABO Bank, Goldman Sachs etc are in fray.

Introduction of Base Rate

The base rate system has replaced the BPLR system with effect from 1st July 2010 Base rate is the minimum rate below which banks cannot lend. Rationale for bringing in this regime was the Lack of transparency in the BPLR system which hindered transmission of monetary policy signals. Also, BPLR system led to under- pricing of credit for corporate and over-pricing of credit to agriculture as well as small and medium enterprises under BPLR. This will give better bargaining power to SMEs and retail customers with healthy credit profiles while negotiating lending rates. Short term loans for highly rated corporates will get costlier in this regime. For now, BPLR and base rate will coexist for few years as existing customers are unwilling to move to higher rate regime.

Growth Prospects

Retail, rural, wholesale and SME banking will see fast paced growth with CAGR in 15-25% range For public sector banks to tap this growth its important they are given more

autonomy as 51% govt. holding in Public sector banks does not allow further capital raising to finance growth. Wholesale banking has a huge potential as financing of infrastructure growth

pegged at excess of US$600 billions required in the next 5 years. Banks can do

this through variety of instruments. SME Banking is another avenue for

aggressive growth. Banks should move beyond credit and offer private equity

advisory services and relationship management services.

Authors

Ashish Rathee,

Batch of 2011

IIFT, Delhi

Mohit Bhatia,

Batch of 2011

IIFT, Delhi

Jack Enyart would love to sketch the quizzical look you are giving this title, and turn you into a comic book character if the fancy took him. Hes the person you

want to meet if you spent Sunday mornings watching Looney Tunes or Duck Tales. The self-made consultoont has twenty five years of experience in the comic book

and animation industry. His long stint boasts of associations with Warner Brothers, Disney, Marvel, Fox and Hanna Barbara. He is the most prolific author of the Looney Tunes comic book and also developed TVs first

original cartoon show Duck Tales. Now he has taken

consulting beyond the norms (quite literally, he even changed the name!) and provides consultoonting for

media houses and individuals alike. He offers expert development, scriptwriting, strategic planning and assistance at pitch meetings for studios.

For individuals he helps with organizing projects, finding the right collaborators, making connections with studios and networks and also in drafting simple legal agreements. Project analysis and guidance is offered under various categories such as Your Career, Your Project, Your Obstacles and

Your Strategy. His own strategy to attract clients is catchy: You may wonder: can you afford CONSULTOONTING?

My answer is: you cannot afford not to get the inside knowledge

and custom help you need, to be competitive in this most challeng-

ing and fast-changing business!

A distilled version of this inside knowledge and experience is offered as the most basic, vital consultoonting advice in form of a reasonably priced CD. Enyart also reaches out to young audiences through lectures and seminars in schools, librar-ies and museums, modeling his presentations on the needs of the institutions. To complete his range of services, Enyart has launched a range of referral services to other top professionals in the animation industry through the service ANIMATION ADVISORS featuring Jean Ann Wright, a specialist in preproduction,

art direction and storyboarding; MJ Lallo, voice artist and recording specialist for animation and others.

From being the Man about Toon to explor-

ing uncharted territories as Consultoont to

turning mentor and broadening the horizons

for aspiring consultoonts through services

such as Animation Advisors, Jack Enyart has

donned many caps successfully and has also given the consulting industry a new,

animated dimension.

Author

Vasudha Narayanan

Batch of 2012

IIFT, Delhi

Across

5 Founder of strategic consulting (one

space),14 6 A saturated market where there is f ierce

compet i t ion, a l ready crowded with people (companies) provid ing the same type of services or producing the same kind of goods (one space),8

9 The phase of a project where you do what you promised the client you would do. Comes after the 'def in i t ion ' phase, and before 'Follow up',14

11 An information technology research and advisory firm headquartered in Stamford, Connecticut in 1979, 7

12 A brief description of the ideal state "Where" a company wants to be,6

13 A performance management system popularized by Peter Drucker,3

Down

1 Avoid confrontation by bypassing enemy ,8 2 T h e p r o c e s s o f g a t h e r i n g

information about other companies in your industry to compare your performance against and to use to set goals,12

3 Founder of a Consulting Firm who is also known an MIT Chemist who discovered acetate, 13(two space)

4 A visionary with 5 forces ,6 5 Deloitte, Ernst & Young, KPMG,

PriceWaterhouseCoopers (one space), 4

7 The Art of War (one space),6 8 Type of bar chart that illustrates a project

schedule with start and finish dates, deliverables, etc( one space),10

10 In business it is a framework of behaviors or set of rules action governing people's actions and assumptions,8

TEASE YOUR BRAINS

How to go about the guesstimates questions!

What is the size of the market for disposable diapers in India? Here's a good example of a market sizing. How many people live in India? A billion. Because the population of India is young, a full 600 million of those inhabitants might be of child-bearing age. Half are women, so there are about 300 million Indian women of childbearing age. Now, the average family size in India is restricted, so it might be 1.5 children, on average, per family. Let's say two-thirds of Indian women have children. That means that there are about 300 million chil-dren in India. How many of those kids are under the age of two? About a tenth, or 30 million. So there are at least 30 million possible consumers of disposable dia-pers. To summarize:

1 billion people x 60% childbearing age = 600,000,000 people x 1/2 are women = 300,000,00 women of childbearing age x 2/3 have children = 200,000,000 women with children x 1.5 children each = 300,000,000 children x 1/10 under age 2 = 30 million children How many tennis balls fit in a swimming pool?

You can break the question down into smaller pieces by asking the interviewer questions. And if the interviewer doesnt have an answer, you can make a series of

narrowing assumptions. a) What is the volume of a tennis ball? Assume 140 cubic centimeters

b) Are we talking about a standard Olympic sized swimming pooling? Yes c) What is the volume of an Olympic swimming pooling? What do you think? You will need to make a series of narrowing assumptions and might reason as follows: I know that an Olympic swimming pool is 50 meters long. An Olympic swimming pool has 8 lanes and, based on my experience, each lane is about 2.5 meters wide. So, I will assume that an Olympic swimming pool is 25 metres wide.

Based on my experience, an Olympic swimming pool is about 2 meters deep at the shallow end and 3 meters deep at the deep end. I will assume that the pool starts getting deeper at the 30 meter mark and hits maximum depth 10 meters from the end of the pool.

d) What is the volume of a tennis ball in cubic metres?

e) How many tennis balls fit in a swimming pool?

Since tennis balls are spherical, there will be small gaps between the tennis balls. This means that the actual number of tennis balls that fit in an Olympic swimming pool will be less than our initial estimate. Lets assume that 5% of the pool is filled

by the empty space between tennis balls.

Now try solving this,

Q. What is the size of the market for mobile phones in America?

Approach to tackle caselets

Issue

You are the newest member on the management committee of a well-known top-tier

strategy-consulting firm. Eager to be accepted by your more senior peers, you

volunteer to study the industry and propose a firm strategy for next millenium, which

you will present to the committee at its next meeting. As you leave the meeting, you

begin to realize the enormous task to which you have committed yourself.

How do you evaluate the consulting environment and determine likely future

scenarios?

What information do you use in this process? How will this information be

obtained?

What (to you believe is most likely to happen in the consulting industry given your

present knowledge?

How did you arrive at this conclusion?

What strategy do you propose to the management committee?

Possible Solutions

What matters here is the thinking process, not necessarily the answer.

A good place to begin is to evaluate the industry from a competitive analysis

perspective. such as Porters five forces.

The following is an abbreviated analysis.

Rivalry (low to moderate): The management consulting industry is fragmented, with

many players each holding relatively small concentration of total market. Firms act as

competitive monopolists and differentiate themselves by specialty, type of customer

(Fortune 100 versus Fortune 1000 companies), reputation (McKinsey versus

accounting firms), and the resources they employ (no MBAs versus all MBAs). Many

companies are relationship-driven with their customers, which limits competition and

keeps prices high. Top tier firms in particular are able to have high price points.

Potential Entry (moderate): There are no great barriers to entry into the consulting

industry; however, it is primarily the established firms that compete in the top tier of

the industry. Its possible new firms would enter if the industry were earning positive

economic profits. Substitutes (moderate): Companies can move the consulting

process in-house by hiring ex-consultants and bright MBAs.

Buyer Bargaining (moderate-high): In the last decade, the consulting market supply

generally following demand, which lowers buyer power. However, it is appropriate to

question the effect a recession might have on industry. Its possible demand may

decrease as companies quit expanding, which would reduce demand, give buyers

more bargaining power, and push prices lower.

Supplier Bargaining (low-moderate): Major suppliers are the intellectual capital

employed by firm (e.g., experienced consultants who bring in sales and new

consultants who provide analytic). Firms must pay market price or risk losing

suppliers.

Other interesting points might explore the critical success factors in the consulting

industry. What sets top tier firms apart from middle ones? Do any firms have specific

sustainable competitive advantages? How does the marketing mix differ among

firms? Does your firm have any specific core competencies or advantages that set it

apart from other companies?

Determining likely future scenarios is more ambiguous. There are several important

points to consider:

What affect will a recession have on consulting firms?

Will top tier firms suffer differently from others?

How will the mix of products demanded change over time? (e.g. cost-cutting

studies rather than market expansion studies.)

Will the consulting market continue to expand or suffer a cutback?

Will certain geographical areas expand faster than others will?

What are the key success factors to succeeding in the industry?

Is there any way to achieve a sustainable advantage that cannot be duplicated by

your competitors?

Can you use non-traditional methods to achieve competitive advantage, such as

leveraging through technology?

Given your firm's competitive strengths and core competencies, what is the best

strategic route?

Using this approach and answering the questions brought forth would help address

the issue.

THINKING CAPS

DESIGN CONCEPT

This cap has been designed to showcase the spirit of a consultant, IIFT and Socrates alike. On the left side of the cap, we have an impression of cogs and wheels. This

symbolises the spirit of Socrates. The cogs and wheels are the most important

parts of any machine. This design draws parallels to the human brain and

creativity which are essential requisites for a successful consultant.

Salient features of the Design:-

We have the logo of IIFT imprinted on the front portion of the cap. On the rear

end, flowing lines towards the side lend continuity and add to the visual aesthet-

ics of the design.

Team name- Team Captivate

Vasudha Narayanan Amandeep Singh

Rathin Rawal Sriram R

MBA(IB) 2010-12 Batch

CLUB BUZZ Club Activities 2009-10

Kinduz Consulting comes a visiting

Accenture Business Consulting in IIFT

Demand Forecasting

Business Consulting is like the Chakravyuha or

Padmavyuha in Mahabharata. The clients or-

ganization knows what is inside, while you do

not know anything inside. You have to go in,

fight the inefficiencies within the clients organi-

zation, and then come out successful.

The session conducted on covered:

Challenges faced in Business Con-

sulting

Analyzing case studies, identifying

causes from problem statements

Six Sigma approach to problem solv-

ing

Mr. Pavan Kota has extensive

experience in the field of Busi-

ness Consulting, working in the

past with the TATA Group, Lion-

bridge and Capgemini and con-

sulting with clients in the U.S.,

India, U.K. and Singapore.

A session on demand forecasting

was conducted by Yash Saxena of

Emergent Ventures India, who

also happens to be an IIFT alum-

nus.

Salient Features of the session:

Necessity of studying demand forecast

was analysed. The reasons were Stock

effects and Market Response Effects.

Different methods of forecasting covered:

Prediction Market, Delphi Technique,

Game Theory.

Session conducted by Rahul Misra, an engineer from

IIT-B with 5 years of work-ex and an MBA from ISB.

Session on How to approach the interviews of con-

sulting companies

Stressed on need for a strong CV through an account

of his experiences of consulting interviews at ISB.

Advised developing a diverse skill set to be eligible

for multiple domains while applying to consulting

companies.

CLUB BUZZ Club Activities 2009-10

Sectornama

Thinking Cap

Live Project: ButterflyFields

Winners!!

2009-11: Superchargers

2010-12: Arthashastra

Sectornama- The sectoral analysis competition

was judged by Mr. Som Kapoor, an IIFT alum-

nus employed with Accenture Business Consult-

ing.

Emphasis was laid on how to make an im-

pactful deck. Salient features of all teams

decks were picked up to illustrate the point.

Knowledge of simple tools and techniques

such as Excel, Powerpoint was stressed on,

common sense was identified as extremely

crucial.

Socrates organized a competition to dress up that

part of the body that matters the most: The Head.

Teams were to design a cap that showcased the

qualities of a consultant and an IIFTian. The win-

ning entry from Team Captivate is displayed

Butterfly Fields is a unique initiative

of IIT/IIM Alumni to make learning

enriching and enjoyable for students.

The scope of the live project at IIFT

included looking at export/import

prospects of educational aid; need gap

analysis and identifying potential joint

venture partners.

IIFTian success stories

Crossword Puzzle Answers