The Great Leap...

Classroom beckoned after an excruciating wait of 91 months. What looked like a never-ending hiatus with studies was finally bridged last week when I found myself slouched uncomfortably among a heap of intimidating, high-sounding fat books, and a bunch of enthusiastic people drawn from all corners of the country.

Leaving behind the security of a decent paying job, cosy confines of home and care of family, I landed at IIM Lucknow Noida campus welcomed by a surprise shower. And yes I didn’t miss the evening pakoda-chai, which as I feared has become a regular feature at our mess.

Sustainability – A Business Imperative

Sustainable development is the kind of development which satisfies the current needs without endangering the future generations to satisfy their own. Sustainable development is a complex and multidimensional issue, which combines efficiency, equity, and intergenerational equity based on economic, social, and environmental aspects. These three aspects are fundamental to the concept of sustainability and are closely linked. Businesses operate in these spheres simultaneously and hence most affected by the sustainability as a strategic and competitive force.

Sustainability is no more just an issue or a point of differentiation for the businesses. Sustainability has become megatrend which is sweeping the business world off the very foundations they were thriving on. It is no more about launching a campaign or a plan or a vision, it has to be much more deep rooted, much bigger force to reckon with. World over winds of change have already started blowing. Over the past 10 years environmental issues have steadily affected the way businesses are seen or supposed to function. Earlier the only function a business was supposed to carry out was to make profits for the owners. But now it is expected from businesses to create sustainable value for all the stakeholders in the value chain including society.

In this globalized era, workforces and worldwide suppliers are creating environmental pressures. The rise of emerging economies has fuelled the competition for scarce resources emphasising prudent use of available resources. Carbon emissions, water, energy are no more local issues of a nation; these have become global issues as actions of one country affect other nations too. Investors have started looking environmental issues central to firm’s performance and they seek information on sustainable initiatives a firm is taking up. Customers have started valuing those companies more which are genuinely concerned about environment and society. More over government concerns is ever growing over the issues of climate change, food security, energy security, industrial pollution, natural resources depletion among others. This is bound to change the regulatory environment of a business if not presently then in near future. More and more companies are now moulding their strategy and taking up investment in energy efficiency, pollution control, carbon footprint reduction, renewable power which is going to change the competitive landscape once and for all. Venture investing in clean technology reached a nearly $9 billion annually in 2008 and it is picking up again after slowdown in 2009. The private-sector investment into the clean technology marketplace has been estimated at more than $200 billion a year—with fast growth not just in the United States and Europe but in China, India, and the developing world. G20 governments have earmarked some $400 billion of their $2.6 trillion in stimulus funds for clean technology and sustainability programs.

Even if in short term businesses ignore sustainability but in long term it will not be just competitive advantage but a business imperative.

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The need for Eco-Cities: Sustainable living

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More people today live in the cities than villages. Countries like USA and UK are more than 75% urbanised. Cities combined consume 75% of the world’s energy and produce 80% of its greenhouse gas emissions apart from being heavy users of water and producers of waste. However, the disadvantages that cities have created can be reversed by making them a key part of the solution. In fact cities are critical to addressing the issue of climate change and sustainable living because of their nature of having dense urban concentrations of people, shorter supply chains and shorter commuter travel. Research in sustainable development has explored this phenomenon and has proposed Ecocities as the answer to solving migration and urbanization problems.

Eco-cities are designed according to certain principles. Reducing the scale is an important principle. The so-called green codes focus on maximising the efficiency of individual buildings whereas the real gains come from the overall design of the city. Cities should be dense rather than sprawled, with more of apartment blocks and public transport. Similarly, public transport systems do not work efficiently when the city is spread out and commuters cannot easily walk to the bus/metro stop. We need to design our cities based on urban densities rather than size. But at whatever population, the scale of material consumption and waste should be much smaller than in today's cities and villages.

Access by Proximity is another important principle of ecological city building. If enough diversity is close enough, one doesn’t need to travel a lot for life's basics like residence, job and school. The idea is to design maximum access right into the city structure aided by mixed use zoning. Proximity access policies could also include local hiring practices, renting apartments to people who don't own cars and who work nearby, making bank loans available in the neighborhoods from which the savings come and permitting increased residential construction in activity centers and prohibiting it in farther-out areas.

Diversity is healthy. This is perhaps the largest, broadest principle of all. It is no longer meaningful to design for separate “zones” for commercial and residential activity (except for hazardous industries).Our cities today are home to the ultra rich on one hand and the slum dwellers on the other. We need to have more inclusive growth. For example, slum re-development projects help to rehabilitate the poor in EWS housing while freeing up the land for other development. Singapore has created a successful network of hawker-centres across the city.

In the past, a common obstacle for ecocity advocates was the conventional wisdom that anything less than direct automobile access would be bad for business. The mere suggestion of replacing a parking space with a sidewalk cafe would be enough to draw the ire of merchants and chambers of commerce. Over the last decade or so this perception has been changing drastically. With more and more cities embarking on pilot projects to close streets for traffic, businesses are seeing the benefits of car-free commerce. Thus Instead of viewing integrated ecological design at odds with economic development, city planners worldwide are increasingly promoting urban density with a focus on community and people’s connection with nature as an automatic boost to small business and local commerce. This new urbanism combines the strengths of the market with the strengths of good planning and basic ecological and social principles.

Sab waqt ki hera pehri hai – Looming Currency War

“Currency war” (jargon made popular by Brazilian prime minister) has brought out three points very clearly:

1) Too much of everything is bad, even the money.

2) Hard hit every country has taken due to the recession and even the great USA, the most ardent proponent of free market now actually not interested in free market, ask President Obama.

3) With time everything changes including the needs and perception - earlier everybody was running behind capital but now no one wants it.

Third point is going to be the centre of attraction in the article.

The lines from the song “Sab waqt ki hera pheri hai” from the Bollywood movie Hera Pheri is becoming more and more apt with each passing day. These lines mean that with the time all needs and perception change. It were the emerging economies like Brazil, India etc which wanted to capital most in early 90s, and now they want none. Earlier emerging economies were running behind the capital. Now capital is running behind these economies. Who can forget the crisis India faced because of inadequate foreign exchange. It was blessing in disguise for sure because it caused India to open its market for the world and since then India has not looked back. The growth story is there for everybody to see. Clocking above 7% growth is no mean feat, ask USA but don’t ask China.

So suddenly what has happened that caused this war of currency. As usual whatever happens nowadays, it is because of recession root of this “war” is also in recession. Huge amount of money to the tune of 12 trillion dollars as per IMF estimates is pumped by the central governments in their respective economies to revive them. But as an old saying goes you can take horse up to lake to drink water, but you cannot make it drink. So even though money was pumped in the system, people and businesses were sceptical about the recovery and demand and hence demand for money didn’t increase in these economies. Returns nosedived in sync with dip in growth of the economy. The effect is two pronged. Manufactures have to search for market and hence exports become more and more important just not for China but also for every nation in the world as consumption in their economies is not reviving. Secondly investors (read speculators) started moving out of these economies looking for good returns and growth. Their search (Even Google was not required) landed them in developing economies market.

Problem arising out of excess capital inflow is also twofold. As money inflow increased, the country in which it started flowing in, its currency started appreciating making exports more and more uncompetitive. Cost of sterilization kept rising. Secondly markets started becoming more and more speculative and volatility increased as most the capital inflow is portfolio investment. Hence to tackle these problems governments started taking measures to stop appreciation of their currency. Like Brazil’s doubling of transaction tax on fixed income flows. These kinds of measures are being taken by China for years and it is able to keep its currency down artificially to keep up its export competitiveness. Problem now is that these kinds of measures are being taken by every other government. So if all government start taking steps to depreciate their currencies, it will trigger a downward spiral which may be detrimental for the growth revival in the world and everybody will be worse off. Question is in this game who will blink first.

Soon it will be Rime of an Investor – Money money everywhere not a penny to invest.

Dushyant Chaturvedi

Sustainability: Investing in a better future

“Nothing in excess” goes the maxim often heard and taught. But in practice, we have exploited Earth’s resources like there’s no tomorrow. As a result, we are facing the consequences of our excesses manifested in Global warming, water scarcity and ruined ecosystems. Our cities have grown inorganically with huge asymmetries in their development. Just to put a figure to that; 30% of India’s 1.1 billion population lives in urban areas. Of that more than 70% resides in just 10% of the cities. Not only have the resources depleted at alarming rates, they have been grossly polluted.

‘Sustainability’ is the need of the hour. Sustainability is defined as “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” It’s all about using living in a way that resources serve us in perpetuity. So what do we need to do to live in a sustainable manner? We must reduce our ‘Ecological Footprint’. Ecological footprint a measure of humanity’s demand on nature and measures amount of land and water a given population needs to produce the resources it consumes and to absorb the wastes, using prevailing technology. A lot of green standards abound that tell us how to design our buildings in an environment friendly way. But what we actually need is better planning of our cities.

I refer to an article on building new cities in the 21^st century that compared two cities viz. Barcelona and Atlanta. Both are former Olympic hosts with populations of around 2.8 million and with roughly the same standard of living. Yet, the per capita ecological footprint of Atlanta is four times that of Barcelona! Indeed, Barcelona’s per capita environmental impact is lower than even that of many rural areas of Europe. In India the large cities are already bursting at the seams and every day newspapers are full of problems faced due to rampant in-migration. We cannot stop people from choosing where they want to live and work. The answer lies in creating sensible templates for urban planning.

So what should be our strategy for a sustainable future? We need to design compact cities and stop creating flat urban sprawls. Our Cities should have an optimized circulation plan alongwith an efficient Public transport built into the urban design. Studies suggest that reducing the sprawl and better public transport alone can bring in a 30% reduction in energy usage. Building sustainable cities would involve significant costs in modifications to existing city structures and building new cities. However, sustainable development must be treated as investment and not consumption. Only in this way will capital including our natural capital be available for future re-investment.

Neerad Swaroop

Dr. Kiran Bedi at IIM Lucknow

Dr. Kiran Bedi

Last month, we had the privilege to listen to Dr Kiran Bedi, as part of our Leadership talk series. Being the first woman IPS officer, Dr Bedi has been a role model and an icon to many of us and we all were waiting for her lecture with much anticipation. And boy, did she deliver!!

For my part I was really curious to know how a career Police woman would talk to us about the finer nuances of management. To say that it was a real enlightening experience would not be an exaggeration.


She shared her experiences on her tenure as IG Prisons of Tihar Jail - how she brought about reforms in the management of the prison, and initiated number of measures such as detoxification programs, yoga, redressing of complaints by prisoners and even literacy programs. In just about two years she took up a sick organization (if a jail can be so called) and turned it around into a self sustaining and humane organization.

When she took over as IG prisons the prison was a stinking place, literally, as MCD had stopped its cleaning operations in lieu of unpaid bills. An ingenious idea to treat this waste to make manure not only solved the problem of waste disposal but also helped in growing fresh vegetables for the prison Kitchen. This was one of the many measures which she brought about to transform an apathetic government enterprise to a well run professional organization. Leading by example, she started taking rounds of the prison facilities regularly, pointing out the deficiencies and problems in notices pasted on information boards. Her active interest forced her subordinates to emulate her and to take up corrective actions so that on the next round the highlighted issues were taken care of. She started complaint redressing programs, literacy and counselling programs for the prisoners. This was aimed at gaining the prisoners confidence and to make them shun the path of crime once free. Because according to Dr Bedi, the purpose of the prison is not just to house and punish the criminals but to reform them and make them better citizens. Though she admitted the process was not that easy or simple but it had really started showing results and a number of criminals on leaving prison were reformed, law abiding citizens.

As a good leader she also developed second rung leaders, giving them autonomy, appreciation and due credit, so that 15 years after her leaving her position, the good work is continuing and Tihar prison is still citied as a case-study for prison reforms.

Apart from her stint as IG, Tihar she shared other experiences as well and stressed a lot on “sharpening ones axe” continuously and to always be in touch with lowest level of execution as mantras for success. She also impressed on the importance of keeping a balance between ones professional and personal life.

Her experiences brought forth a number of things to us. She proved that innovative thinking can help to overcome seemingly insurmountable barriers. Also it is possible to have a humane side to management and still be immensely successful and profitable. If one has the will and the determination then the so called “chalta hai” attitude prevailing in lots of walks of our lives can also be tackled. By the time Dr Bedi finished her talk, I am sure there was not a single one of us who was not motivated and inspired by her incredible zeal and positivity to become not only inspirational mangers but above that better human beings.

Posted on behalf of Neha Saxena

Infrastructure in India - An opportunity

It takes just few minutes on a railway station in India to understand what it means when somebody says India lacks Infrastructure. No doubt India has to go a long way as far as achieving infrastructure revolution. The path will be very difficult and will require commitment not only from government but from every citizen of India. What citizens have to do with it? Isn’t building infrastructure government’s job? I think we the people of India now have to come out of this mould of leaving our issues to be resolved by some unknown hand of God. It has to be the society and people of India to come out and build the nation. It will be a painful process and the worst part of it is that those who are going to build it will not be able to enjoy its fruits. Every generation builds for the future generations and that is how nations are built.

Now after philosophy it is time for business. Economics sense says any rational investor will not take up that venture, which cannot provide economic returns. So is there profit in this market? Actually how big is the market? Is there really an opportunity? Well to answer these question just consider this fact that Indian’s eleventh five year plan envisaged Rs 20,00,000 crore requirement for infrastructure development in 5 years completing in 2012. So we are talking about a market which requires investment of tune to 9% of India’s GDP in five years. So at modest 10% return we are talking about Rs 2,00,000 crore profits over the five years i.e. 40,000 crore per year. There are not many industries who can boast of such returns. But are these returns sustainable? Definitely so if we consider the fact that above requirement is expected to remain so in the years to come with growing urban areas, development of rural areas and increasing population.

A back of the envelope analysis of the sector tells us that there are very favourable government policies to encourage investment. There is demand, which is heading north. Competition is yet not fierce. Users are too many and need the services. Suppliers are too eager to cater. So it seems that it is one of the most profitable sectors in India. But then the big question why investments are not coming up. Why it is still lagging?

Infrastructure projects generally require huge investment and generally affect large no. of people while implementation. Risk increases more so when we consider that generally these are long duration projects and for getting the returns investor may have to wait for years. The very nature and structure of this sector makes it a difficult sector to enter.

There are 2 major challenges in infrastructure projects at the moment:

1. Long term sustainable financing for these mega projects

           - It is easier to get the initial funding, but getting a sustained funding in long term is a challenge,

             which causes stoppage or delays in projects.
           - Sources of funds should be increased within the Indian economy. Currently, Banks are a major 

             source of funding. They themselves face liquidity issues in long term. Apart from Banks, other 

             financial institutions such as insurance companies should also come forward for financing.
           - Government issues infrastructure bonds for raising funds. Banks and other FIs can also look for 

             this option, though ICICI already follows this practice.
           - It is important to start generating some cash flows after some time, so as to keep the interest of 

             debtors in long term

       2. Execution Challenges

           - Land acquisition
           - Environment policies very confusing for the companies right now
           - Delays in approvals from government side

It is critical for the success of ventures to take care of above issues and create better models for implementation, models that achieve participation and support from public also. That will be most critical factor above all.

Otherwise years after years we will be standing on the same railways stations wondering why trains get late. And while waiting for the train we will be wondering why India lacks Infrastructure.

- Dushyant Chaturvedi and Rishi Khanna