How do we stay profitable?

Published in WICMA's Industry Insight Apr - June 2015

 

Ensure Fire Protection and Preparedness to Avoid

This summer Mumbai saw some very bad cases of fire where lives were lost. Some of our city’s finest firemen sacrificed their lives in the line of duty. A fire broke out in an old building in Kalba Devi area. Mumbai’s Fire Brigade Chief Sunil Nesrikar died after leading the fire fighting operation and so did Deputy Chief Officer Sudhir Amin after battling with 90 percent burns. Two other firemen MM Desai and SW Rane also lost their lives. In another incident, 7 people died and many others injured in a high-rise residential building in Powai.

The thing about uncontrolled and unwanted fire is that lives are badly affected, lost and lot of stuff gets damaged beyond repair. Our extended family also saw a similar incident of fire in which there was a small blast in the split AC of the master bedroom and within minutes the system started billowing thick black smoke. They vacated the flat and raised the alarm for their neighbors too. The fire department also responded swiftly but by then a lot of material was gutted. Due to the water sprayed from the fire engines to douse the flames, the entire flat’s furniture was damaged. Papers got burnt so did lot of clothes, artifacts and there was soot everywhere. It is estimated that the entire work of salvaging and repairing the flat will easily take 6 – 8 months. I witnessed another fire few years ago in a building where the firemen got stuck in the lift trying to go up to the higher floors. It was a huge mistake. Add to that the fire engines could not reach the refuge area as the access path was completely “inaccessible.”

Point is hazards like fire is always lurking around us and can be often avoided (or not). It is for this, buildings have fire-fighting equipments and we have the fire-fighting department of the state. Materials also have material safety data sheets for handling. But human intervention or lack of intervention thereof can often lead to instances of fire and things going out of control. We will not discuss the quality of equipments and technology available to fight fire in India or the lack of proper consideration for fire protection while designing buildings, access areas or even town planning at a macro level. Quite often fire occurs due to human errors like lose wires or storage of inflammables. We will discuss about prevention of fire or preparedness to reduce the losses.

Prevention

Everyone must have basic knowledge of what are inflammables, why do they catch fire and how they should be stored to avoid fire hazard. There is a difference in electric fire and other type of fire. In one case, we need to use foam whereas others we can use water or sand to cut off the oxygen supply. We must know the inflammables around us too. There are a lot of fire-fighting equipments in modern buildings. Learn to operate them. Be aware that every system needs routine checks to ensure that the equipments are in working condition and will do the job when required. We should install first level defense system like simple fire extinguishers at strategic points in our home or place of business. It is crucial that the equipments are accessible and operable. Do not ignore odd sounds, smoke or any kind of weird smell emanating around you. Investigate and eliminate completely.

However, the bigger problem is when fire breaks out and we have to tackle the aftermath.

Preparedness

When fire breaks out the only concern for human beings is to preserve and save themselves and people around them. Unless it is sheer human arrogance, bravado or stupidity, lives can be saved but it is the loss of belongings like clothes, papers, jewelry and documents which are draining. Among these furniture, fixtures and clothes can be replaced fairly easily provided you have adequate funds. Often we can make do with fewer clothes or tables and chairs. What is vital are our important papers, documents, cash-in-hand, jewelry which when perish are difficult to replace. We should be prepared to protect them.

How do we prepare?

Insure your house and business. There are many companies offering general insurance and the premium is quite affordable considering the benefits in case of a disaster. There are options for fire, theft, burglary, earthquake etc. We all invest in term plans for life insurance but definitely not with the intention to die so that the surviving family gets financial support. But if the inevitable happens, a part of our financial worries are resolved.

Invest in a fire resistant locker or safe large enough to store your basic jewelry, cash and papers. It is better to use a bank locker for more secure storage.

Make a list of all important papers, files and documents (birth certificate, school & college certificates, passport, PAN card, Aadhaar card, bank documents are your ID proofs) and organize them. Scan them and store in electronic format in your hard disk as well as portable hard disk or pen drive. The physical copies should be stored in one place so that they can be retrieved fast enough if required and given the opportunity.   

Invest in a cloud – based solution like Dropbox and store a copy of these documents hence essentially keeping them away from your home or office.

One might argue that how do we prove the authenticity of the documents. A solution has been developed by Government of India, Department of Electronics and Information Technology (DeitY) called Digital Locker. (To know more, visit: http://deity.gov.in/ and https://digitallocker.gov.in/)

(The 2 images below are screenshots from the official website) 

I have been reading about fire on and off but hearing the practical complications and challenges from my relatives, I can comprehend the gravity of the crisis. Let us hope that such disasters don’t strike us but we do not know the future. So if a disaster does strike, let us be prepared to rebuild our lives and avoid all that we can.  

Indian School Education and Results - "My dear Smriti ji,"

Have a look at my latest blog post in LinkedIn.

Mediocre or Excellent. What will you be?

Mediocre or Excellent. What will you be?

Published in SME WORLD June 2015 Issue

There are probably many definitions of the word mediocre or mediocrity but my definition is “thinking and believing that I am doing the best I can.” Honestly, there is no harm in being mediocre but the world pays for excellence, brilliance. They pay for the diamond which has better clarity or cut, the footwear that is custom-made, the engineer who is more innovative; a doctor who is more skilled, pen which makes writing a pleasure, the car with the best engineering and aesthetics, the instrument which gives highest accuracy, the sound system with the superior quality sound. The list can simply continue. Bottom line is – there are too many contenders who are fighting to be mediocre. There is little value addition or differentiation for the better. The ones who have created excellence in their work or business have become established and developed a sustainable model for existence.

            Why do people or businesses in general tend to be mediocre? It is easy and does not require much effort. Why bother striving for perfection? Quite often it is the lack of internal motivation and misplaced cognition of what is it we really want. Everyone wants more money, better living standards and comfort but can we get it just by wishful thinking? We have to walk the extra mile and not only try to become above average but strive to improve – continuously, relentlessly. We have to take things to a particular state of conclusion. Till then the job is just not done and something that is half done is not worth much. 

Diana Waring said, "The difference between mediocrity and excellence is often a matter of effort."

            Whether it is our personal or professional lives or our business or even our commitment to the society, we must strive for excellence because this life is full of opportunities and nothing except our mind can stop us.    Obstacles in our life are mostly self-created through our perception and attitude. We can change them. We must change them. Yes, change is difficult and painful. It rocks our world and throws us into chaos but only from that can something new take birth, something that is well-defined and meaningful.

            Aiming for excellence in whatever we do (cooking, making the bed, writing letters or running a business) is within us. It is should become an intrinsic factor. This will immediately translate into a better quality of work. When we become conscious of quality as an individual the same percolates into our culture and the business we are in. This cascading effect reinforces how we conduct our business. We must develop a “need to achieve” within ourselves. Is there any harm in striving for perfection? One might contend that it can be a waste of time. But in the attempt for perfection we might end up delighting our customers and stakeholders which can suddenly give a geometric leap to our business. 

            Whether someone is watching or demanding or not; a job needs to be done with a commitment to accuracy with complete follow-through. My lawn tennis coach used to always stress on the need for follow-through in the strokes I played. He would say, “If your follow-through is good, you will achieve the results you desire. The job is not over when your racket connects with the ball, it has to be made to land in the required part of the opponents’ court to help you score a point or give you a tactical advantage.” Try throwing the ball in a bowling alley and restricting the follow-through. See where the ball lands up and how many pins fall. Once you offer a quotation, do you check back with the prospect if the rate is acceptable? Do you ask what else is required to secure the order? Once the order is secured do you keep the customer in loop about the delivery schedule, do you check back if the items were received as desired? Do you inquire if anything else can be done to improve the relation between you and your buyer or seller? Do you walk the extra mile? Do you make that effort? If not, try and do it. See the difference. Everything should be taken to its logical end and if it is a regular business transaction then the process has to be repeated every time without fail. That is how we can try to attain excellence and differentiate us from the herd.  

The easier way is to be inefficient, do poor quality work and resort to blame game or bribery, skimming, cheating to cover up for the slack. You can payoff people only so many times then you get stuck in the maze. The harder but more sustainable route is to set the systems right, create checks and balances, demonstrate compliance and demand the same from everyone else. Motivate yourself to do a job properly and with dedication every time without fail. Make the extra effort whether your job description calls for it or not. Many people get similar opportunities only few shine while the rest remain mediocre. Mediocrity is mundane, all pervasive and replicated at ease. Apple, Rolex, Rolls Royce, Victorinox, Faber are few examples of excellence. The world worships excellence, they aspire for those people, products or services and they are ready to pay the demanded price justified or not.

The only thing that stops you from rising above mediocrity and aiming for excellence is you.   

Make in India – Sounds good but are we ready?

Published in WICMA's Industry Insight Jan - Mar 2015 Issue

Our incumbent government’s “Make in India” initiative sounds particularly promising and points in the right direction to strengthen the contribution of manufacturing sector to our GDP. Ideally, this would mean that businesses would go all out to expand and ride this wave but on the ground that is not the case. Everyone seems to be in a wait and watch mode as the government is nearing its “1^st year in office” mark. Frankly, just by announcing “Make in India” will not mean that companies from the developed world will rain on our country with their manufacturing outsourcing plans.

The initiative is tremendously positive indeed. Foreign companies would love to make in India and take benefit of the price difference and talent pool. However they have stricter standards and norms. They are exceedingly precise about quality, delivery schedules and of course specification. The “Chalta Hai” attitude does not work for them. Business deals are never done over a few phone calls and a callously written email ordering say 500 pieces of shaft. The smallest of the businesses in the developed world believe in clear contracts, strong written communication with little space for misinterpretation, rewards and penalties for delivery schedule. Though payment is followed quite honestly, the clauses are extremely sharp and tight. Under these circumstances are we truly ready for “Make in India?”

Typically, when someone mentions that he or she is a business person, people immediately think of them to be loaded with cash and living a king’s life putting in least amount of efforts. Factually it is a business owner who takes the risk, invests in a venture, puts his house on mortgage to raise capital borrows from friends and family. Most often Indian businesses are proprietorship firms where the liability lies entirely on the owner. If a firm is not doing well, the employees and workers have all the freedom to seek a better opportunity and quit but does the owner have same options under our existing laws? This business person generates jobs, pays taxes, and helps the economy. And in return the government binds him with such laws, policies and conditions which create a strait jacket structure for the person to operate in. The picture is however not really gloomy and I do not mean to deride this wonderful move but there are at least 3 pain points which must be addressed before we go all out.  

Labor

Most of the MSMEs in India are still semi – automated and largely depend on the labor force. Labor has a lot of elements which needs attention. It is used as a major political tool which generates lot of vested interest. Availability of skilled work force is a common concern. Rampant absenteeism and festivals round the year affect production.

At present, the government issues the minimum wage figures zone-wise with no regard for the other business factors, they tinker with the provident fund norms and the union leaders at the other end are continuously negotiating for the workers. Union issues are badly affecting businesses and trade. Sadly, the actual worker is not really gaining much if we investigate deeply. Let me cite a true example. A well-established business in an interior part of the country with a large workforce was suddenly issued with a notice that a union has been formed by their workforce. The company shut shop the very next moment. No discussion, no questions asked. We all know how long the litigation will take in this country. Till date the fate of the workers is unclear, the owners are facing short term hiccups but they have another production location which is fulfilling their orders. Not all business owners have this choice but such cases are growing.

A business owner is not like the cruel and greedy “Sethji” from the movies of 70s and 80s trying to extract the maximum from the toiling workers’ while paying them peanuts. Business owners are usually fair and reasonable enough in their dealing though some bad apples do exist but that is human nature. Hiring, retaining, removing labor force should be within the purview of the business owner. I do not advocate straight hire and fire rule but there has to be some equanimity. There should be some link between the location of the unit, business performance, salary and wage structure, bonus and other benefits extended to the work force.

 Our government is initiating processes to streamline and subsume the existing laws to make them more efficient which is a good move but what is the actual outcome till date. Industry experts have to analyze in details whether the move is really going to be helpful or some section of another archaic act might cause conflict and still hurt businesses. Who will speak up for the business owners; the only people who will actually help realize the vision of Make in India!

Capital/ Funds

I don’t need to ask the readers their experience while trying to apply for a term loan/ working capital loan/ enhancement of overdraft limit or simply to buy some machinery for business improvement. Most readers will have more than one painful story to narrate.

Just by announcing “Make in India” is not going produce a Midas touch for the economy. Banks are still not easing lending system, too many bureaucratic hurdles, only large companies manage to get funded, and the smaller ones are still self funded or remain stunted. Financial bodies are the last source of raising capital for small businesses much of which play and will play a major role in the great Indian manufacturing story. Till these businesses gain critical mass, no one wants to touch them. If they do, it is at the cost of serious collateral and steep interest rate which often renders cost of production uncompetitive.

We would like to see some serious data on the vast number of schemes floated year after year; and their outcome. The actual case studies of businesses benefiting from bank finance and how. How have businesses actually gained through them? How can others take advantage of the schemes? What does the fine print say?

The issue of capital is quite intriguing. The banks won’t lend without collateral and if they do then we are expected to pay back on time by signing up a concrete fenced agreement failing which we will be penalized severely. (We do not understand half of the clauses we agree and sign, atleast I don’t). On the other hand customers won’t pay on time which has hardly any legal solution. Even a case of cheque bouncing drags on for years. The delayed payment clause of MSMED Act is yet to show its teeth. How many people have flouted this clause and what has been their punishment? There is no clear roadmap or intent shown by the government on how the issue can be resolved.

Market Development and Sustenance

In the west, people spend quite a bit of money in educating themselves, upgrading skills, learning new technology or marketing solutions to reach out to a wider audience. But mainly they focus on creating a product of excellence while identifying a niche.

Indian small manufacturing companies are either setup by first time entrepreneurs who have an idea and some amount of capital but not much experience or ex-employees of large companies who go out and create their own small business and become component suppliers. Over a period of time they increase their customer base using the tag of these large companies. Very few companies are involved in systematic market development, spend on branding or communication. Much of it is word of mouth publicity or through acquaintances and business network. There is a lack of structure or form.

Most small businesses here typically depend on few well paying ethical customers who are disciplined. There is no conscious attempt to explore and develop their market or reach out to a larger customer base. One reason is lack of a strong legal framework to operate at a larger scale and protect the receivables. Lack of a swift and strong judicial system for recoveries of outstanding is a common hindrance which forces these businesses to operate within a limited geographic area. Naturally the demand is limited and won’t grow beyond a certain point. This finally hits the ability to sustain. The few larger buyers also use their position to coerce cheaper rates which actually hit the balance sheet and owners realize much later when the path to recover is steep and unsure.

We need good business support and enhancement networks under the aegis of the government to train existing business persons about law, markets, technology, branding and communication. Strengthening the business environment with strong judicial foundation is another requisite from the government.

Much of the pain points will be alleviated if the three above factors are constructively dealt with. We, as business people also have to contribute our bit towards “Make in India” by becoming ready for the global players. We have to change our attitude (all of us) and become more professional, understand and respect commitments, create a formal system of written communication, appreciate the importance of quality and imbibe it into the DNA of our businesses, absorb the dynamics of global trade and continuously upgrade our knowledge and skill base to stay ahead of the curve.

Cost or Investment? – A Perspective

Ignorance may be bliss, but it certainly is not freedom, except in the minds of those who prefer darkness to light and chains to liberty. The more true information we acquire, the better for our enfranchisement. ~ Robert Hugh Benson, Intellectual Slavery

While setting up a small business, the cost burden is huge for an individual. Owners try hard to reduce costs through various means including (frequently) trying to do multiple things on their own. Thus, they often miss out on important data or information which can prove costly after a certain period of time. We have to accept that we cannot do everything on our own but at the same time we cannot depend on others completely. 

A series of events in the recent past has given me some wonderful lessons in understanding operating business more efficiently and cost-effective way. The reason I am writing this article is because I have been told many people make such mistakes and end of up paying a lot as a consequence.
 
Lesson 1 – We often remain dependent on one person (usually the accountant or sometimes the dispatch person) who knows what is happening and seldom is the information available on paper for retrieval. Accountants in small businesses are good at book keeping and only understand certain amount of the tax laws which are in repeated daily use. Owners should not depend on one person especially when it comes to Accounts or Production. Get two people to do the job. You might argue that does it make sense? Yes, it does. What happens if one person quits or falls sick? Can you imagine the chaos?
 
Owners are too engrossed in running the business and managing day to day operations thus remaining ignorant of the general gist of business laws. One cannot claim ignorance as an excuse and knowledge would never hurt. Business continuity and compliance should never depend on the activities of one person.
 
Lesson 2 – Business in India (or elsewhere too) is surrounded with many laws and regulations. It is practically impossible for one person to know everything. To navigate these complex compliance factors, if the business owner does not have good consultants or domain experts then there could be pricey pitfalls. Retaining the services of a consultant (Excise/ Sales Tax/ PF-ESIC) is an investment and not a cost. Do not try to cut corners. But do not depend on them blindly. Join an association. Be a part of an umbrella body. This will help enrich knowledge and gain frequent insight on changes in the business world especially the law and regulations aspect. Sit and discuss, ask the right questions, and understand the information, process it, analyze and store it for future reference. These associations are also genuine source of references of good consultants. Getting stuck with an undesirable consultant can also be a sad burden.
 
Lesson 3 – Try and walk through each and every activity of your business and make notes. As cumbersome it may seem; the benefits are manifold. How is a sales invoice made? How do you take the backup of your data? What is the procurement process? Do this frequently and compare your notes. At face value, it might seem absurd but take a moment and deliberate internally. We may not be able to do everything all the time but we must have the knowledge of how an activity is being done and why it is being done. As an entrepreneur, we must be able to chip in wherever there is a need for additional resource or to share the load.
 
As a business owner, you are the person in charge. You cannot claim to be unaware or dodge from the details of laws impacting your business. Since you cannot evade it, the judicious thing is to embrace it with open arms and remain truly “in charge”. Be aware, read, ask questions and educate yourself. Spending time in learning subtleties of business is not cost but a life-long investment.
 
Peter Drucker said “Today knowledge is power. It controls access to opportunity and advancement.” 

Education System and Business Sustainability

Published in SME WORLD Apr 2015 Issue

What is the ultimate goal of acquiring education? To sustain oneself and propagate. That is why in the medieval texts we have a sequence of Brahmacharya, Grihastha, Vanprastha and Sanyasa. Brahmacharya ashrama is all about acquiring skills and education followed by Grihastha when on marries and has family. This is also the stage when one works for livelihood either for someone else (working in a company) or for the self by creating an enterprise. The skills that one acquires help them sustain at their workplace, helps them support their family and helps create an enterprise.

The underlying theme is the vibrancy, innovation, newness and depth of an education system greatly impacts the type of business which grows and flourishes in that environment.

Why our education system needs complete overhauling?

If we observe the developed countries; it is clear that they have progressed mainly on the strength of their education system and teaching methodology. Elizabeth Holmes has created Theranos – a path-breaking diagnostic solution company while dropping out of her graduate program at Stanford. Steve Jobs is the brain behind Apple whose products have become “must have” possessions. Google and Zuckerberg’s Facebook do not require any introduction.

Why India has been unable to come up with any such solutions? The American education system and process definitely plays a pivotal role in nurturing the thought and analytical process, the confidence to take risks among their students which has helped create such enterprises. The German system is another case in point. How do they manage to build such fantastic automobiles, chemical companies and green energy solutions? I am sure it is definitely not the case of being God-gifted. Audi, BMW, Mercedes are still strong aspiration possessions around the world. Other Europeans including the Nordic nations are equally strong in their educational system. Finland whose education system is much studied and often emulated is again overhauling it. They are now going to teach skill-wise instead of subject-wise which makes more practical sense.     

It is still not too late. We need a system where the students are not pursuing higher marks through rote learning rather gathering skills which can help them become valuable for enterprises or being able to create one.

What should be changed?

We have one of the largest populations in the world but if we compare it to per capita income or contribution to GDP, the numbers are appalling against those countries having lesser population and better economy. Our system of education creates lot of good coders for IT companies but how many Indian engineers are in demand for design or original equipment design or manufacturing firms. How many Indians lead large scale projects in the world?

One Preet Bharara in the American Justice System or an Indian financial brain close to Warren Buffet is not enough. It is quite shallow as Indians go gaga whenever a person of Indian origin achieves something on the global platform. Are they there because of being Indian (or Indian blood from either of the parent’s side) or due to their upbringing in an advanced education system? Why do the Chinese immigrants excel in America? The American system amplifies their ability of doing hard work with a process that is value driven. Dignity of labor is one of their basic tenets of learning and the children work to earn from a young age.

Our entire curriculum should change starting from entry level to of course higher education; the testing and evaluation system needs to be made more scientific, a need to identify actual learning potential and outcome and as per the the new Education Policy stress on ethics and life skills.

Unless there is a deeper relation, exchange of ideas and actual joint working teams from education and industry; both will remain disjointed. Teachers play an important role in this backdrop. We mostly see people sticking to a fixed curriculum and racing to finish the course within a stipulated time. We need teachers who are aware of demands of the business world and train students to not only become employable but skillful. The entire approach should be outcome oriented rather than GPAs and marks. Both industry personnel and teachers need deeper interaction on a regular and coordinated basis to understand each other.

We need a 360 degree change. It is about time we put in a serious team in place to study what is working in other countries of the world, why and how are they implementing the system then create an indigenous one.

Many countries have dignity of labor as one of their basic tenets of learning and the children work to earn from a young age. This builds their ability to analyze, decide and choose and become independent. Vital skills for everyday life in any business, any profile.

How educated people can help? They are the people who drive your vehicle, read road signs, unload and load material, answer phone calls, get orders, process them and bill, and at each moment they are making many micro decisions which actually affect the outcome of your business. The ability to open up to new ideas, adopt them, implement and innovate comes from education. Is our education system helping create such individuals?