Bring back my Mumbai to me

Last Saturday, over much (probably too much) wine and cheese, my good friend the shiny eyed Paul Fernandes quietly offered his understated genius to 21st century Mumbaikars.

Housed in an industrial gala, this beautiful little art gallery in Worli,  was Paul's gift to the Bombay of yore, as many of us want to remember it. This was best reflected in the song composed and performed at the opening by his four charming sisters entitled " Bring back my Bombay to me"

Mumbai needs Paul's art form at least as much as Paul needs Mumbai to recognize his genius. Indeed, this evening was really about two great characters talking of each other. Not unlike the  mighty Federer in conversation with the legendary Laver. It takes two great characters of equal genius to do justice to each other.

A number of people do refer to Paul as the Mario Miranda of Mumbai. Mario's focus was always on the situation he portrayed and the people in it. As all good cartoonists do, and do very well. Paul's passion is about the place and its essential character. The people are only the props. In fact, he reminds me of my favourite artist Herge (you heard right) more than anyone else. Undoubtedly there were many interesting characters in TINTIN, drawn mostly from Herge's childhood.  But Herge was very much about the setting. And he went to great pains to research and captured the essence of those locations. Whether it was the chaotic streets of New Delhi or the criminal majesty of Chicago's skyline, Herge (like Paul now) captured and caricatured the environment with élan and passion in equal measure. Which is why all his titles are built around places. TINTIN in Tibet, The Land of Black Gold, TINTIN and the Picaros, TINTIN in America and the now infamous TINTIN in Congo.

When I was ten, HERGE transported me deep into the soul of these great locations. When I was forty, Paul unlocked the heart of Bangalore and Goa for me. And now he interprets for all of us the spirit of one of the truly great cities of the world.

Paul's peculiar genre of art, which Girish Karnad so elegantly referred to in his inaugural address as "Cultural Caricaturing" is probably more relevant today than when he first started doodling about his beloved Bangalore some twenty years ago.

In a world that increasingly secures itself around its immediate surroundings and time frames, Paul's work is akin to the protection of heritage buildings. It reminds, it preserves and it provokes.

Taken for granted: Compliance is a cheaper substitute for Customer Concern

Last week saw the unseemly defence by SIAM (Society of Indian Automobile Manufacturers) of two of their member organizations against the adverse crash test results pronounced by the NCAP. They wasted no time retorting that both the vehicles in question did meet Indian safety standards.

I'm not the expert on automobile safety and therefore what an Indian Safety standard (as distinct from the standard applied for the NCAP crash tests) implies for the protection of the Indian passenger. But the alacrity of the defence by SIAM seemed to suggest that compliance is a cheaper substitute for concern.

But this isn't about motor cars or crash test standards. The central issue is the prevailing apathy towards customers in India. I find it ironical, because at some level all of us are interchangeably customers and sellers. Most of us (and very often) find ourselves at the receiving end of callous customer attitudes. The Director General of SIAM is reported to have said " Global NCAP can do what they want. We have our own safety standards road map which we are going to follow..."

Sample this: I have been trying for close to a year to get my airtime company ( the biggest we have) to install a booster in our office. Because all of us on this particular network have to literally to hang out of the balcony to get any signal. After several rounds of following up and pleading, their final stand was there weren't enough users of their network to justify a booster. I think they must know how difficult it is to shift to a new network.

But why is this important to anyone? Is there really a business case for much better customer empathy?

Sometime last year I had spoken about  Return On Customer Experience as the more relevant expansion of the term ROCE.

Return on Capital Employed was an accounting ratio conceived for the Industrial Age. Today with the ever increasing share of services in GDP, capital employed as a denominator hardly offers an insight into the health of a business. The IT business makes a mockery of that ratio. They need very little capital employed. Businesses like hospitality no longer needs to own real estate. There must be a new denominator.

If we consider the NPS ( net promoter score) logic or the new book Absolute Value ( Profs Simonson and Rosen of Stanford), there is mounting global evidence of customer experience as the underlying basis for the long term financial health of any business.

This not strange for two reasons. Firstly, in a wired world, customer experience is the new brand equity and therefore your demand driver. (read some of the online reactions that the SIAM defence generated). Secondly, we know that most of the intrinsic value ( over three fourths) of a 21st century business lies outside the balance sheet. And the significant chunk of that is in customer equity or what we call brand value.

Hiding Outside the Balance Sheet

Last week at a management retreat someone asked why acquisition after acquisition had failed to deliver to expectations in spite of all the auditing and assessment that goes into them.

All of us have read and heard about high profile acquisitions like that of Cadburys and Gillette. The astronomical prices that were paid and the arguments about the exuberance exhibited in these purchases. Many of us would have consumed the large amounts of print in HBR and similar sources of wisdom on why many of these were doomed for disaster.

My counter question to the participant was this:

Are we certain about what we are buying? The auditing firm and the lawyers will tell us with great certainty (at a great fee of course) about cash, receivables, inventory and facilities on the one hand and creditors, lenders, taxes and financial charges on the other hand.

But the average financial statement accounts for only about a fourth of the acquisition value. Hence we do not have a handle on three quarters of the price tag.

So what did P&G pay for? At the time of the acquisition, sometime in 2005, the Gillette brand alone was worth $18 bn, by itself representing almost a third of the $ 57 bn bill. In fact, the book value of the firm was just $ 4.5 bn accounting for under 7% of the sale value.

This is not a one off case. Data from a globally regarded M&A track suggests that over the last 600 odd acquisitions, only 19 % of the aggregate payout represented book value. So what did they pay the balance 81% for? More importantly, what specific shareholders expectations were attached to the unaccounted portion?

In 1998, when TATA Sons decided to structure an internal licensing of the Corporate brand, many eyebrows were raised both within and outside group. The primary motive for this exercise was not an additional earning from the license fee. It was done most of all to establish a financial recognition of the TATA reputation on the operating performance of group companies.

So the big question was whether the TATA brand was a nice feeling or a strategic business asset. If indeed it was more than nice feeling, then what was its value contribution to individual operations. In what specific ways was it contributing? How could these be protected, nurtured and aligned to their large global ambitions? A separate function was set up and funded only to manage what was something of a national treasure.

But what was exemplary was the role and responsibility of leadership in recognizing and implementing this thinking about the marquee as a strategic business asset. Last week, we heard from Jeff Immelt as to why he personally oversees the GE brand. Simply because at $50 bn, it is the largest and most powerful business asset at his command.

These assets are no longer nice to have. They have a discernible and often dominant impact on business forecasts and the resulting cash flows. Can we allow them to remain outside our financial radar?