Strategos Volume III Issue II
Strategy and Consulting Club
Strategos Volume III Issue II Marketing April 2012 1. Managing Marketing Efforts In Dynamic Scenarios 2. Cause Marketing: The Worst A Brand Can Get
Finance 1. Innovation In Financial Services 2. Water As A Commodity
Operations 1. Best Practices In Supply Chain Management 2. Virtual Supply Chains Information Technology 1. Innovation In Information Technology Services Human Resource 1. Emerging Trends In Talent Acquisition 2. Developing Leaders Of Tomorrow Faculty Advisor Dr. R.K. Mitra Editorial Board Sachit Arora Swati Khurana
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Editorâ€™s Note Greetings from Socrates! Success in any endeavor today depends on the individualâ€™s ability to create new things, implement new ideas and challenge boundaries. Innovation is the buzzword today and any entity that does not change and adapt to the rapidly changing environment is bound to lag behind in the race. However, a lot of support in the form of effective leadership is needed for any innovation to reach the implementation stage. This issue, thus, focuses on the twin themes of leadership and innovation. To start with, we have articles from the domain of marketing about innovations in the field of advertising and cause marketing. In the light of the global financial crisis, innovation in financial services becomes an imperative and the articles from the finance domain illustrate the same. With the demands and awareness of the customer at an all time high, it is essential for organizations to constantly innovate their operations and supply chains to cater to the demands of the customer faster and in a more efficient manner. The article on Virtual Supply Chains elaborates on how organizations can work together and thrive in the volatile environment. Finally, any innovation is meaningless till it is backed up by sound implementation. This implementation can only be carried out by the right people. Retaining the right workforce is the need of the hour for any organization and the articles from the Human Resource domain try to analyze the emerging trends in talent acquisition and retention. Happy Reading!
Swati Khurana Sachit Arora
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Managing Marketing Efforts in Dynamic Scenarios Marketing budget, Marketing Mix, Marketing Channels, and Marketing efforts â€“ clichĂŠs that resound in the corridors of every office. As important as it is to know these concepts; also important is to know how to use them; and measure them.
Spoilt for Choices The scenario today is dynamic. Very often a marketer finds himself at crossroads, struggling to pick from the many marketing channels available. He has multiple options to cater to the multiple segments available. Following figure shows various marketing channels: Another trend is the outsourcing of mar-
keting efforts. Advertising agencies are increasingly coming up with models that allow an organization to fully decentralize marketing. Following diagram shows various marketing functions that are being outsourced Well, there are certainly a dozen points to sustain the benefits offered by modern day marketing options – but there is a downside that is often neglected; the increasing difficulty to keep control, measure and evaluate one’s own marketing efforts. With increased number of options and partners involved in one’s marketing activity; marketing clarity is hard to come by. Over 80% of today’s chief and senior marketing professionals lack deeper understanding in their own marketing measurement, customer relationship management (CRM), and customer data analytics.
In God we trust, all others must bring Data To do any indicative analysis about the marketing efforts, one needs the corresponding historic data. The brains that work upon conceiving a marketing model should also plan for the ways to collect critical data. The reliability of data capturing mechanism put in place would reflect as a confidence parameter in the downstream calculations. Pre-planning for data is the first step towards getting a hold on one’s marketing efforts. It is also important to collect data from all the channels employed for the marketing plan; and that these data be analysed simultaneously. Failing to do so, would result in a skewed analysis – which would further skew the future marketing efforts.
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Establishing Metrics It is always good to follow a structured approach to measuring marketing effectiveness. Every successful marketing manager would have clearly established metrics based on which he derives conclusions. It is never a good practice to develop metrics on the go, and base decisions upon these in-situ metrics. Given below is the famous marketing metrics continuum model, which establishes the various metrics that can be used, and how it varies from tactical to strategic.
Following is a representation of the various metrics marketers employ to measure marketing effectiveness. It is quite clear that businesses today employ both tactical as well as strategic metrics to gain insights about their marketing efforts. However, above all these it is imperative that all the members involved in the marketing process follow the same metrics, and have access to the same data. A best practice is to maintain
a marketing data dashboard. The dashboard would feature a consolidated view of the relevant marketing data, to those who should have access to it.
Crossing the Channels – Attribution based Measurement Return on Marketing Investment (ROMI) has always been a standard measure of marketing effectiveness. However, the disadvantage of ROMI is, in most cases it pertains to only a single channel. Consider the situation today – a user might be seeing TV, with his laptop open besides him. He might see television ad, and a pop-up ad for the same product. The levels that the modern channels intermix have blown out of proportions. Today, customer journey is no longer linear. It involves multiple interactions across diverse media and is influenced by multiple marketing channels. Attribution based measurements track the user behaviour for an action, allowing each channel that played a role in influencing the customer to get due credit. A proper implementation of a marketing attribution model, can give deep insights into conversion value, most influential path that led to conversion, and help prioritize the use of different marketing channels. Companies are investing in attribution. Marketers are seeking expert advice for the best ways to measure their channels with more precision. Attribution approach can provide a more concise way of measuring true channel and customer performance. And that’s something or-
ganizations are hungry for. To do this, they need help developing attribution models and making sense of all their data.” - Published in The Forrester Wave™: Cross-Channel Attribution Providers, Q2 2012
Dawn of Analytics and IT With the increasing complexity and scale of calculations to determine marketing effectiveness, a portal has opened up for Information Technology to pitch in. Today almost every main vendor in the IT domain has products that cater to measuring marketing efforts, and perform complex analytics on the data. There are a number of very stable CRM suites which are available in the market, which have analytics modules attached. The leading products in this space are Oracle Siebel CRM, SAP CRM, and SalesForce. All of these have the capability to track marketing data right from the launch of a campaign, and perform data analysis on the same. Very recently SAP announced their entry into the hot analytics space, with the launch of its new ‘BusinessObjects Predictive Analytics Application’. “We believe that predictive analytics is no longer just a technology for statisticians and professional data analysts. We think it’s the next extension of business intelligence in that it’s officially for everybody in the business,” maintains Jason Kuo, group product marketing manager at SAP.
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Many of the IT giants have seen this opportunity and have already started rolling out custom products for attribution based analytics. Given below is The Forrester Waveâ„˘: Cross-Channel Attribution Providers (Q2, 2012)
Controlling, which is one of the basic functions of management, will be possible only if measurement of efforts and performance is done. So adopting correct measuring metrics will enable keeping checks on the effort, implementing corrective measures, and will ultimately enable the marketing efforts to be more efficient and effective. Author(s)
Vartika Singh and Soumya Bhattacharya are MBA -IB first year students at IIFT
Closing Thoughts In order to thrive in the current dynamic scenario the marketers need to be proactive and should make the best use of the various available marketing practices. They should try to come up with innovative ideas and should evaluate them thoroughly before incorporating into the business.
Cause Marketing: The Worst A Brand Can Get Over the years companies have evolved their marketing campaigns ranging from plain old direct marketing to now ubiquitous social media marketing. Along the way there were many innovations which forced people and critics to sit up and take notice. One such tool which was a result of innovation is Cause marketing which engaged and empowered the customer and at the same time provided brand affinity to them. Cause marketing can be defined as strategic positioning and a marketing tool that links a company or a brand to a relevant social cause or issue, for mutual benefit. American Express first coined the phrase “Cause Related Marketing” in the 1980s while
raising money for the restoration of the Statue of Liberty in New York City. The prime example in this case for India had been a legend of sorts Tata tea “Jaago Re” campaign which raised the topic of total participation of an individual in our democratic process and also its various lacunae. The success of it can be gauged from the fact that even now it is known as a flag bearer of cause related marketing among Corporate India and Business school students. What enhanced its efficacy and reach was association with TATA brand which over the course of years is considered as institution which puts the society benefit at large.
Exhibit 1 : Global Cause Marketing Succeesses
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Picture 1: TataTea Jaago Re Campaign
Cause Marketing at P&G This goes on to show that Cause related marketing is a tool which if used sensibly can be effectively used to leverage public opinion for brand recognition. Now FMCG major P&Gâ€™s strategy regarding this cause related marketing is interesting. Around a year back they had a campaign P&G Shiksha in which of every P&G product a customer purchases, a contribution goes to education of under privileged children and there was an aim of opening 20+ schools across India. The move was sensible considering initiatives of others but somehow not very innovative as expected from a global leader. There was clash of ideas as another similar initiative was already in place by its rival ITC through its classmate range of notebooks and the brand communi-
cation was clear. The channel employed by ITC to communicate this initiative was product itself. So in a way the product brand itself became brand ambassador and communicated the message. So P&G did not bring anything new to the table in this competitive space. Now once again P&G is attempting to do same with its Gillette brand. With the launch of its new product Soldier Razor it tried to identify itself as a brand which cares for soldiers of India and tries to connect with soldier spirit of every Indian. Another step in this direction was the starting of a signature campaign to rededicate Gateway of India, which will then represent the imbibed courage shown by our soldiers and also every Indian in everyday life. Although on the face of it, this certainly looks a good step for product connecting everyone in
Picture 2: P&Gâ€™s Shiksha Campaign
a single thread , the fundamental deficit lies in its basic premise. A strategic perspective is that all the successful cause related marketing is designed around an existing social/national problem and all the brand communication is centered on that problem structure. This helps in brand connect with people as they feel empowered for that cause and at least psychologically they support the initiative taken by brand which helps in creating an instant top of the mind brand recall.
Gilletteâ€™s Initiatives In Cause Marketing In this case Gillette created a problem structure first (rededication of Gateway of India) which was nonexistent and then created all communication around it. In essence this rededication is not a social or national problem and hence can only
be remembered as one of many marketing gimmicks. Other flawed aspect from strategic point of view is that even if this initiative, which is designed to enhance communication with people, is a correct strategy then the celebrities or people roped in for this should be identifiable with this campaign. So instead of real war time heroes what we see is Arjun Rampal and Neha Dhupia stressing the brand value and soldier theme regarding this step. So coming from a company which was a pioneer of sort in advertising and marketing through its sports marketing steps with commercials featuring elite players of every sport, be it Rahul Dravid, Thierry Henry, Tiger Woods and Roger Federer, the roping in of these celebrities surely comes as a rude shock. And last but not the least the marketing communication which was different for print campaigns and TV ads .In TV ads
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the primary question asked is “Should the Gateway of India be dedicated to Indian Soldiers?” But in its print ads, the company urges a rededication to “the spirit of the soldier in every Indian.” This difference in targeted communication and goals which Gillette wants to reach are very ambiguous and clearly shows they somehow want to relate it in any way to their new offering. This creates a clutter in brand offering and subsequently in customer’s mind which does not help the brand in any way. The worst a brand can do is to be not clear about its value proposition and although this is a road less taken by leaders of any product category Gillette certainly chose to take it. We certainly believe that a company like P&G would had certainly done extensive market research and market analysis before launching such a unique marketing plan with so much cost involved, but it can be seen that it was way off in its objective of creating a brand association. The primary aim of directing people towards your brand page and requiring them to like your page to support your cause is too old and then the idea of flooding of your Facebook wall with messages from brand once the campaign is over certainly does not break any new grounds in innovativeness of the cause related initiatives. The aim of such marketing campaign is to set ideals and beliefs for mass people. This idea over the course of time will certainly draw attention for its focused petition signing spree but Gillette’s success for this campaign looks bleak.
Author(s) Suraj Batra is a 2nd year student at FMS, Delhi
Innovation In Financial Services In the current times of challenging economic scenarios, the sources of funding are getting scarce and cumbersome to avail. Different sectors of economies are losing their faith in the financial services sector amongst growing concerns of another downturn. In a bid to pacify these concerns and outdo their competitors, many of the leading financial services companies are integrating their strategic planning processes with innovation. They are coming up with offerings to entice the untouched sectors of the industries. Some of the innovations that not only can turn the tide in the financial services companiesâ€™ favor but can also address the growing concerns in the current economic crisis are as follows.
Financial Tools For Climatic Concerns Off late, the only thing that has been keeping up with the troubles of slowing economy is the stringent environmental regulations. Companies are facing a tough time in improving their bottom lines and reducing their carbon footprint. The paucity of funding sources has always been a challenge in addressing the huge funds required to battle enviro-
mental degradation. The lack of initiation by the developed countries to address such issues has always resulted in a roadblock for the developing nations. In 2008, the World Bank came up with a new financial innovation and offered two solutions to tackle the challenge at hand â€“ Green Bonds and Cool Bonds. The bonds are linked to carbon credits and by investing in these bonds; two things benefit the investors: first, the fight against global warming, which is aptly supported by the World Bank Second, the option to hedge their exposure to carbon credits
Green Bonds Green Bonds are six-year notes that were designed in partnership with the financial group Skandinaviska Enskilda Banken. The purpose of issuing these bonds was to raise funds for mitigation and adaptation projects financed by the World Bank. Some of the projects supported by these bonds are the solar and wind plant installations, reforestation and rehabilitation of power plants.
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Figure 1 : Green Bonds
Cool Bonds are five-year AAA notes issued by the International Bank for Reconstruction and Development (IBRD) and linked to Certified Emission Reductions (CERs) set up under the Kyoto Protocol.
Financial Tools For Handling Health Concerns Health has been one of the prime concerns that affects every country, but seldom has a country come up with an effective plan to minimize the risks associated with the health of its citizen. Every year many children in the low-income countries are deprived of the vaccination that is necessary to guard them against the fatal diseases. In 2006, to counter the challenges poised by the risks associated with health, Inter-
national Finance Facility for Immunization (IFFIm) came into existence. The facility, having assets worth billion of dollars, came up with an innovative plan called the Frontloading Aid. The assets owned by the facility were collected from sovereign donors that were legally binding. With passing time, they also introduced bonds, raising a substantial amount from the investors. The funds raised from the investors were used as a frontloading aid, to source the vaccines needed to fight the battle against the diseases. Till now, IIFIm has been able to raise USD 2.3 billion and has funded various immunization programs and has even supported many countries by providing them with new and essential vaccines. With funding made available sooner, not only can more people be vaccinated, but also they can receive the vaccines in an optimal time frame.
Figure 2: Investment in Rwanda by MIGA
Financial Tools For Investment Concerns The world has been battling with political uprisings and turn-arounds since last few centuries. Investors have always been wary of the political factors, its stability and instability in a country. The economic development of a country is at its ebb whenever it recovers from a war (Afghanistan, Iraq) or a political uprising (Libya, Egypt). The investors are always unwilling to expose their money in such volatile economies. Afganistan, a country tattered by militant groups and wars, is witnessing such political instability and is posing a risk to the investors associated with it. The country faces reconstruction needs, manufacturing and even mining activity needs,
which can be met only through huge investments made by foreign investors. There was an immediate need of a stable solution, which was provided by Multilateral Investment Guarantee Agency (MIGA). The agency started an insurance scheme under the head Temporary Business Interruption (TBI) insurance. MIGA insures the investors who invest in Afghanistan. All the Foreign direct investors were insured against risks of currency inconvertibility, expropriation, civil disturbance and terrorism. This scheme not only protects investors from all kinds of losses but also gives others the confidence required to pour in their investments in Afghanistan. Since 2006, MIGA has issued USD 78.2 million in guarantee coverage for investments in Afghanistan. Moreover, MIGA is the only global multilateral organization
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that insures against political risk, bringing otherwise wary investors into some of the environments where investment is most needed.
Financial Tools To Address Farmer Concerns As we know that there are two types of lending one is secured and the other is unsecured. In secured lending, underlying collateral is the source of repayment that needs to be mobilized when something goes wrong. As it is very difficult for the poor farmers to arrange for a security to cover their loans a new financial innovation was proposed known as the collateralized commodity transaction. In Collateralized Commodity Transaction, the money is not lent based on the economic strength but on performance risk. The underlying collateral is the soft commodities that are being produced such as grain, cotton, coffee or cocoa. In this technique the lender relies on the borrower’s ability to conduct profitably the commodity transaction. At the same time lender reduces his risk by exercising his right to sell off a very liquid asset i.e. commodities as soon as he gets a feeling that the loan will be defaulted. This whole process is called Warehouse Receipt Financing. Warehouse Receipt Financing not only helps the poor farmers by providing them with loan so that they can finance their needs but also provides a cover for the lenders. This is a brilliant technique that can serve as a counterpart to micro financing. This technique can also help in the overall development of the country
by providing funds to the primary sector thus running the economy appropriately.
Financial Tools Against Famine Concerns In Ethiopia 80 percent of the population is engaged in agriculture, making them highly vulnerable to the country’s chronic and severe droughts. The government’s Productive Safety Net Program provides aid to the chronic food disasters. Generally, the underdeveloped are overlooked. Emergency responses meant for help during extreme droughts are typically too slow to prevent them from having to sell crucial assets such as livestock and equipment; they then become part of the chronically food insecure cycle. This problem has transformed into a huge problem especially for Ethiopia. To protect against the above situation a solution called as index based risk financing was devised. It was first implemented in Ethiopia in 2006; it basically uses contracts with global firms or banks to hedge against specific hazards or events. Data on these hazards are tracked regularly and if there is an observation that there is a deviation from average levels, then payouts are triggered. For example: if in Ethiopia had a drought ensued, Axa Re would have paid USD 7.1 million, to be disbursed in cash to as many as 3,00,000 farmers. The Ethiopian index-based riskfinancing program makes the government’s Productive Safety Net Program sustainable. Moreover, this mechanism involves fewer transaction costs than many other interventions, and avoids false claims.
Weather risk is transferred from low-income households to global risk-takers.
Authors Karan Bedi and Rohit Shukla are MBA -IB first year students at IIFT
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Water as a Commodity Commodity A commodity is a good whose price is determined as a function of its demand & supply in a market. Well-established physical commodities have actively traded spot & derivative markets. Generally, these are basic resources & agricultural products such as iron ore, crude oil, coal, salt, sugar, coffee beans, soya beans, aluminium, gold, copper, rice, wheat, gold, silver, palladium & platinum. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining.
Water Water is the most fundamental constituent of life & will always remain a vital element for human survival. Like gold & oil, water is a commodity & it happens to be rather scarce. Recently, there has been an increase in public awareness of global water issues. Virtually every country in the world is faced with some combination of water quality & quantity issues that will require significant expenditures for their resolution. Not only human health but also, environmental protection & economic de-
velopment are critically dependent upon the efficient management of this increasingly scarce resource. The water industry is poised for considerable growth as convergent technologies & institutional changes combine to address the global demand for clean water. Long term drivers of water use -Population growth & urbanization -Degradation of water supplies -Resource sustainability -Climate changes -Geopolitical instability -Aging water infrastructure -Convergent Technologies
About 70% of the earthâ€™s surface is covered in water, but 97% of it is saltwater, which is unfit for human use. Of the remaining 3%, only about 1% is readily available for human consumption. Rapid industrialization & increasing agricultural use have contributed to worldwide water shortages. Pollution also highlights the need for clean water.
Many companies are seeking a piece of the water market. In addition to direct stock purchases, some of the larger firms offer dividend reinvestment plans. Firms seeking to profit from water-related businesses include beverage providers, utilities, water treatment/purification firms & equipment makers, such as those that provide pumps, valves & desalination units. When it comes to bottled water, the market is growing internationally. On the desalination front, some 100 countries currently rely on desalination for at least part of their freshwater consumption needs.
Urban Indian Water Scenario The rate of urbanization in India is amongst the lowest, but the nation has more than 250 million city dwellers. By 2020 it is predicted that the 50% of Indiaâ€™s population will live in cities that will put pressure on the already strained centralised water supply systems of urban areas. The urban water supply & sanitation sector in the country is suffering from inadequate levels of service, an increasing demand-supply gap, poor sanitary conditions & deteriorating financial & technical performance. According to Central Public Health Engineering Organisation (CPHEEO) estimates, 88% of urban population has access to a potable water supply. But this supply is highly erratic & unreliable. Transmission & distribution networks are old & poorly maintained, & generally of a poor quality. Consequently physical losses are typically high, ranging from 25-50%. Low pressures & intermittent supplies allow back siphoning, which results in contamination of water in the distribution network.
Economic Good The above developments have called for a good management of water resulting in a sustainable use of water, making water an economic good. Economically it is a common-pool resource, i.e. there is a finite amount that must be shared in common over a variety of uses & geographic areas. The classical tragedy of commons arises since users are likely to ignore the effects of their actions on the pool when pursuing their self-interests. Renewal of water is both stochastic & seasonal implying uncertainty in its supply. This calls for investments in infrastructure that enable us to store & regulate water supply. Besides, water cannot be considered as a homogeneous good. There are all sorts of qualities, ranging from surface water to drinking water. This scarcity in water might lead in water being traded in the market as a normal good.
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Water: Private Good Water industryâ€™s activity would consist of gathering, treating, transporting, storing & distributing/collecting water, transporting & treating waste water. Water industry is extremely capital intensive & huge investments are required to build dams, develop & maintain networks & factories built to collect & treat water. So, itâ€™s kind of a natural monopoly. The required investments, especially in the distribution networks, are so large that it is unlikely that two firms each with their own network can profitably operate. A monopolist will hoard water & create a further artificial scarcity leading to further rise in water prices. Water being an essential commodity will not have its demand affected & thus will be sold at exorbitant prices. Profit is maximised at the point where Marginal Revenue is equal to the Marginal Cost. At this point we observe that the monopolist is producing quantity Q0 & charging a high price of P1. But the actual demand here is Q1; hence a certain section of buyers are neglected. Water being a necessary good people will be willing to pay any price. Hence water hoarding might happen in the informal market. Existence of informal market will give rise to a black market leading to water inflation.
Water traded in exchange It is required that water be traded in a market characterized by large number of buyers & sellers. Due to homogeneity, it can be traded at exchanges where there will be efficient price discovery of water.
Exchange will provide buyers with the opportunity of buying water at the lowest rate & sellers to sell at a higher rate. The exchange will also be able to avoid counter party risk. Once orders are matched the exchange is liable to ensure that the goods & cash exchange hands with no default from either side. Another advantage of trading water in an exchange would be the information available. Lack of asymmetric information will yield to efficient markets where buyers & sellers have full knowledge of the product & price. As we can observe from the diagram below equilibrium occurs at point where water supplied is W1 & price is P1. Any deviation from the equilibrium price & quantity will bring the market back to equilibrium point, thus making it a stable equilibrium. In case price is above P1, there will be excess supply & in order to sell their good, sellers will start lowering the price until it reaches the equilibrium point again. For price below P1, excess demand will push up the price till the market stabilizes again.
Indices where water is being traded Some of the popular indexes designed to track various water-related investment opportunities are: • Palisades Water Index • Dow Jones U.S. Water Index • ISE-B&S Water Index • S&P 1500 Water Utilities Index Government Intervention Given the huge investments required for technological improvements & the installation of networks, a role of the government seems justified. Theoretically government intervention can be in terms of: Subsidies: The government can provide subsidies to households & firms investing in water conservation techniques, e.g. a use of storage tank of 30l or above for households, a rain water reservoir for communities etc. Taxes: The government can tax industries & households on water usage, if the usage exceeds pre-specified volumes. But this might be considered unfair especially amongst low income households who may start experiencing budgetary problems. Regulation/Technical Intervention: Health considerations require the imposition of high quality standards & efforts aimed at checking whether the standards are met. Regulation of the dumping of waste water by industries is also needed. Water Credits: Similar to carbon credits, the government can also allocate credit points for low water consumption.
These credits can be redeemed for discounts/subsidies, or used as a reserve against high consumption in future. However, the problem of measurement crops up yet again. Distribution: Water is transported by informal players via vehicles to places which are located far away from water sources. The government can organize this service & carry it out more systematically.
Conclusion Recent years have seen an upswing in the demand for investments that seek to profit from the need for fresh, clean water. If the trend continues, & by all indications it will, investors can expect to see a host of new investments that provide exposure to this precious commodity & to the firms that deliver it to the marketplace. Just as with any other investment in commodities or sector funds, wise investors should limit their exposure to water. Generally speaking, highly concentrated investments, such as these, should not represent more than 10% of the assets in a well-diversified portfolio. Limiting exposure to concentrated positions provides some opportunity to capture positive returns while limiting overall portfolio volatility. Author: Rohit Jain is a Second Year student at FMS Delhi.
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Best Practices In Supply Chain Management
â€˜Good quality at a low priceâ€™ may seem a good tagline to put on the brochure of a company, but to actually implement that in the true sense requires a strong supply chain management. Ikea, for instance, has maintained its promise of delivering innovative, good quality products at low costs. Substantiating this claim, Ikea has reduced its retail prices by a total of 20 percent during the last four years. Here, the process of driving down costs gets initiated the moment a new product is conceived and it stays for the entire product lifetime. haking cue from one of its product, a 50 cents mug design of which IKEA reinvents iteratively to increase the number of mugs that can be stored in a pallet and to create more value for customers purchasing it. It has also optimized the speed at which cup can be passed through machines responsible for manufacturing so that maximum number can be fitted into kilns and hence, save the costs.
not only in products but also in processes involved for sustainability. Product differentiation is much more transient than process differentiation as products are easier to reverse engineer. But for process, one needs to work at the root level.
Recently, it has shifted from wooden pallets to cardboard ones for packaging which are much lighter and carry the same load as that of timber. Through continuously improving the supply chain, the essence of creating great value to the customer while reducing the cost of delivering the good is captured. In this world of competitive differential advantage, differentiation needs to be done
The operations & supply management play crucial role in sailing the company through the economic downturns and its aftermath. When the demand for the goods & services reach more or less a stagnant stage, effective supply chain management become indispensable to increase/sustain the company growth. Manufacturing and delivering of goods & services respectively involves many
During the time when economy is booming, customers are willing to spend for their increasing demands. In these times; growth, innovation & acquisitions are top most priority of most of the companies. Apart from that due to increased globalization and competitiveness, global markets force companies to maintain competitive prices. So, the need for the companies to have focus on their internal operations & supply management (OSM) as well arises.
Value Addition By Supply Chain Management
processes starting from delivery of raw materials, storage of raw materials &semi-finished goods, manufacturing, work-in-progress inventory, inventory control, ware houses, distribution, retailers and then consumers. Supply Chain management (SCM) is the management of a network of all business processes and activities involving procurement of raw materials, manufacturing and distribution management of finished Goods. All organizations have varying supply chains according to their process. SCM adds values to the business functioning by finding out efficient & effective ways to get goods & services to the customer better, faster & cheaper. SCM focuses at the flow of goods and services from one end of the chain to the other through different processes so as
to improve the productivity, efficiency and profitability of the entire process. Since, customers are vital for organization, hence now organizations are shifting its focus from demand driven to value-driven, customer-focused supply chain.
IT Systems in Supply Chain Management One of the practices in supply chain management improvement involves upgrading the systems in terms of technology in order to increase the efficiency. On the similar lines, Dell supply chain management system replaced previously used UNIX-based servers with Oracle clusters of Dell PowerEdge serv-
Figure 1: Drivers of Supply Chain Management
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ers. The production database on Oracle Database was managed by primary and secondary servers. This new system allowed easy addition of servers to the clusters to handle increased workloads. It had positive effect on the efficiency, and the data extraction for all material movements’ transactions dropped from almost 5 hours to just 35 minutes for an 88 percent Improvement, while the time for the entire end-of-quarter jobs processing decreased from 31 hours to 23 hours. Dell computers also brought changes to the distribution channel by skipping distribution through retail channels and customizing its products as per the customer orders on internet, making the whole process customer centric. This in turn benefited the company and also value was passed on to the customer in terms of choice.
Inventory Management Inventory level supply chain management is challenging as it affects both cost and service. Uncertainty revolving around demand and supply makes it necessary to hold inventories for some time so as to better respond to the dynamism in the market. One of the pioneers in inventory level supply chain management is Wal Mart, though its phenomenal growth cannot be just attributed to inventory supply chain management. Wal Mart’s has continuously focused on customer’s needs and put efforts on reducing costs through efficient supply chain management practices involving implementation of efficient procurement, distribution, logistics, inventory management. Owning to this, company is able to offer a variety
of products at the lowest possible costs and in shortest time. Wal Mart has highly automated distribution centers, which in turn help in reducing the shipping costs and time by significant amount. It also works on the principle of procurement of goods directly from manufactures eliminating the intermediaries and passing on the cost benefits to the consumers. Use of barcodes and RFID tags has made the handling of inventory much hassle free.
Reduction in Wastage One of the main considerations in the supply chain management is the focus on reducing the wastage of resources. Based on it, many companies are now following the age old lean production practice. Evolved from the ‘Just in time’ and a step forward from six sigma practice, now there is focus on extreme lean manufacturing. Bajaj Auto has used this to re-organize and redesign its core business processes. The new plant was opened at Chakan leading to few major suppliers to shift in vicinity giving good advantage. It implemented SAP-ERP and supplies were streamlined based on replenishment of line consumption. Lean manufacturing has now been extended to Lean IT which focuses on elimination of wastes in IT products and services. Here the wastage is in terms of work which has added no value to product or services like defects or slow application response time. As the world economy is in flux, every company wants to find more ways to exploit and get maximum efficiencies out of their systems, be it product related or services related. Financial supply chain management is one of those areas which is still in nascent stage and evolving. It
Figure 2 : Components of Supply Chain Management
consists of services that combine data and transactions from trade and payment activities. It provides all information that is needed to complete the business transactions to the parties in supply chain. In this supply chain , the main focus is on the ability of banks’ clients to access a gamut of services offered by the financial institutions. Excessive focus on supply chain management (SCM) towards achieving maximum benefits and exploiting each resource does not always guarantee success. Interestingly, none of the “man-made” SCM major disasters (i.e. excluding those which are caused by Mother Nature & factories burning down) happened in the industry after 2000. There can be two reasons; more industry attention towards supply chain issues & other it can be due to the lessons from failures
in the past that led companies to avoid the catastrophic impacts of SCM failures. One of the major disasters of SCM is of Apple in mid1990s.In mid 1990s Apple was among the leaders in market share of deeply fragmented PC market. That position suffered a hit in the last half of 1995 because of supply chain failures. In 1993, the company launched Power Book laptops with excess inventories and production capacity .But Power Book did not performed as expected by Apple & suffered due to high inventory & production cost. So in 1995, it played very conservatively and launched new line of Power MAC PCs with low inventory & production capacity. That proved very expensive for apple. When the demand for Power MAC PCs exploded, Apple got itself short in production as compared to demand, with customers reporting wait of up to two months. At one point, Apple
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had an order backlog of $1 billion. Apple’s market position in PCs took a permanent hit.
Supply Chain Management in India Still there are fields which need attention to be focused on in India for supply chain management plan and its implementation. India has the capability of becoming a food exporting country. India’s food processing industry wastes around 20 per cent of all foods because of ineffective supply chain management of perishable goods. Indian food industry is in dire need of effective operations & supply channel through which farmers can sell their grains etc to the consumers in India & in the international market too. There is a need to implement best practices in supply chain in developing infrastructure like cold chains, ample storage facilities and transportation. Many developed countries along with strong developing economies in the world are going through economic downturn. USA is still struggling to bounce back from the sub-prime crisis. European countries are also unable to overcome the Euro-Zone crisis and UK economy has contracted by 0.4% in Q2,2012. India‘s GDP in 2011-12 also moderated to 6.5% from 8.4% in the 2010-11. GDP grow at 5.3% for Q4, 2012, slowest in 9 year. Similarly China’s GDP grew at 8.1 percent during 2011-12, below 9% after long time. These times would be challenging for the companies as consumers have resorted to austerity measures, investing &saving instead of spending. To survive through these times, effective application of supply chain management will play a key role in most of the industries. It can improve competition
in the marketplace by controlling prices and shortening product delivery cycles. But this tool to success needs to be maneuvered with tact, and this is what will differentiate the companies from being successful or from failing. Authors Akanksha Garg and Mayank Gulati are pursuing their MBA from IIFT
Virtual Supply Chains: Thriving together in Volatile markets In the present scenario of enterprises capitalizing on their core competencies, the concept of virtual organisations has become to reality. A virtual organisation can be defined as “highly flexible, temporary organization formed by a group of companies that join forces to exploit a specific opportunity”. Organizations have become more focussed on doing “what they are good at” and forming strategic alliance for doing “what they are not good at” with those “who can do it better”. Thus, in an attempt to adapt to the conditions of growing dynamization and globalization of business, the contemporary enterprises have evolved from independent to economically interdependent entities.
Success of the modern enterprises depends a lot on their capacity to manage all important supply chains in which they are involved. For an enterprise, apart from the vertical integration, it has become important to decide how much of supply chain they want to own. For example Dell has been operating on the concept of virtual organizations; most of the components in a Dell computer are made by other companies while Dell focuses on its strengths--marketing, customer support and integration of these components into the final computer products.
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The Dynamics ? Under the concept of virtualisation, a manufacturing organization transforms its operations from a single production site to a networked manufacturing method. Being dispersed, there is considerable complexity associated with the method of management of the supply chain and its integration. The SCM scenario becomes more complex as along with internal supply chain of member organizations, there exists another layer of supply chain between the virtual organization and other virtual organizations. When buying a computer from Dell, the virtual organization includes suppliers of various components, the Dell customer service representative, assembly line and assembly crew, the logistic distribution network which delivers the computer and end customer.
In this supply chain, Dell Computers is at high level; the company forges strategic alliances with suppliers and other members of supply chain, fulfilling the orders from customers and providing the services after the business transactions are over. The virtualization of supply-chain has helped firms to enhance supply-chain performance by reduction on the expenses to build and operate the infrastructure of a real supply chain. Many products have a short life span and to utilize this window of opportunity, various organizations commit there resources to use their core competencies to achieve common benefit. For example , the UKâ€™s Virgin Group briefly held 5% of the British cola market with just five employees by focusing on the companyâ€™s core competence: its marketing.
How it Works? The objective of SCM for an organisation is to reduce or minimize the costs and achieve sustainable competitive advantage in the market. The integration involves movement of materials, storage, and control of products across the supply chain. The supply chains can be very complex due to a three layered structure involving high level virtual organisations, under layer virtual organizations and the internal supply chain of virtual organization. The integration has moved from traditional arms length approach to the new â€œvirtual supply chain,â€? which enables corporates to focus on their core competencies and outsource other capabilities to lower-cost suppliers, no matter where they are located.
A comparison of traditional approach followed in computer industry with a virtually integrated supply chain is explained below: Under the virtual supply chain, the organizations with different core competencies are collaborating to share the real time information to make more accurate forecasts, reduce inventory build-ups and streamline their supply chains to compete in todayâ€™s recession hit global market without bearing the burden of maintaining the expensive infrastructure. The virtual concept thus reduces the technology and resource barriers and provides a collaborative environment to compete globally at reduced costs.
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Virtual Integration & Cloud In past, the organizations functioning as individual enterprises under a single enterprise authority domain had to rely on more traditional technologies like an e-mail, phone and fax to exchange information with their suppliers and end users. However the concept of virtualisation has transformed the relations to diffused authority domain and has increased the complexity of information sharing between the geographically distributed collaborators. Maintaining a virtual configuration requires considerable financial investment for software tools for sharing and processing the information about shipments with suppliers, transportation providers and end users. This problem can be solved by cloud concept where virtually collaborating organizations use cloud-based collaborative platform for logistics, trade and transportation. It provides a robust platform for closer collaboration with supply chain partners which even companies on a humble budget can pay for. The virtual concept with cloud has brought the benefit of efficient supply chain management to end customers, as cloud based applications for mobiles are being developed. The distributors and retailers can track the productâ€™s real time movement on their mobiles and can plan the activities accordingly. Real time sales data from the retailers can be collected by collaborators to schedule their supply chain functions. This leads to considerable cost reduction which at end is beneficial to
the virtual collaborators and customers.
Is it all roses and cherries? In todayâ€™s rapidly changing economic environment and increased competition, the firms are forced to maintain low costs through the adoption of focused supply chain strategy. Here, the virtual supply chains may hold the key by providing flexibility and speed. Virtual supply chains allow efficient communication, collaboration and coordination among different organizations working towards a common goal. The collaborative structure of suppy chain in virtual organizations has contributed to reduce the costs and increase the profitability by decreasing the time to market and deliver a product. Nonetheless, the other side the virtualization isnâ€™t free from downside risks and flaws. After the strategic alliances are formed a reorganization of business process is needed to streamline and optimize the flow of goods which may require substantial capital. Since the orga-
nizations are geographically spread out, the success of virtual supply chain hinges upon the real time information sharing and improved communication between organizations. Though virtualization breaks the limits of time and space, but the success of virtual concept is highly dependent on the transparency and trust between the participating firms. Establishing the parameters for risk sharing, profit sharing, resource contribution is of paramount importance for the success of virtual supply chain structure. In spite of the roadblocks, there exists a need for combining the latest in technology to provide a competitive advantage in the difficult times for global economy. It provides a platform to the organisations to compete without deviating the resources to the areas other than their core competence areas, thus acting as a key to create a unique and sustainable competitive position. Author(s)
Rahul Balwada is a First Year student at IIM Indore
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Innovation in Information Technology Services Oxford Dictionary defines the word ‘Innovation’ rather innocuously as “a new method, idea, product, etc”. The word, however, makes some kind of profound sense in the words of Steve Jobs when he says “It is what distinguishes the leader from the followers”. In this era of ruthless competition, Innovation or the lack of it is what makes or breaks organizations. The buzz word in the business world, it has become particularly favoured with the IT organizations. This can predominantly be attributed to the rapid technological developments in the IT industry. As predicted by Gordon Moore, the co-founder of Intel, the pace of development in the IT industry has been exponential. Besides the growth rate, there has also been a significant reduction in the cost of innovation. In the words of David Verrill, Executive Director of the Centre for Digital Business at MIT’s Sloan School of Management and Co-Chair of the Innovation Showcase, part of the annual MIT Sloan CIO Symposium, “It costs so little to innovate now. It used to be that you needed to raise tens of millions of dollars and spend a couple of years building a company. Now you can outsource development, host it in the cloud, and be up and running in a few months for a few hundred thousand dollars.” Even as you are browsing through this article, thousands of teenagers are programming their 32
creative ideas into android apps. Thanks to technology, innovation is no longer restricted to the geeky programmers in air conditioned cubicles. The challenge is open for anyone and everyone and that has forced organizations to give it a serious thought.
Understanding Innovation To begin with we first need to understand what exactly can be termed as an Innovation. Experts define three varied degrees of innovations. Organizations generally choose to play safe and focus on incremental innovations in existing products and services within existing business models and processes with little or no risk. Again, organizations may choose to take substantial risk and pursue breakthrough innovations while developing new products within existing models or new models for existing products. Very few organizations choose to venture into the uncertain domain of disruptive innovation. Needless to say, the rewards here are as high as the risks.
Innovation Icons - Google In the pantheon of IT companies, Google would forever be the God of Innovation. In the HBR article on “Reverse Engineering Google’s Innovation Machine”, the authors
have aptly noted that “It excels at IT and business architecture, experimentation, improvisation, analytical decision making, participative product development, and other relatively unusual forms of innovation. It balances an admittedly chaotic ideation process with a set of rigorous, data-driven methods for evaluating ideas and has emerged as the creator of new approaches to business and management innovation. ” Eric Schmidt, Google’s executive Chairman, in a recent interview talked about the systematizing of innovation at Google and creating a culture “where we ask why things are the way they are, and wonder if they can be done in a different way”.
There has been a strategic alignment in their organizational goals in order to improve their innovation capacity. They have prudently invested in infrastructure that enables them to support innovation by giving them efficiencies and economies of scale and at the same time giving them the ability to leverage third party innovators in rapidly adding products and services. They believe in the acidtesting of their decisions against the objectivity of data. Besides, they ensure that their obsession for innovation is reflected in their job descriptions. New ideas at Google are often generated by employees in a prescribed system of time allocation. Employees have 80-20 breakup of time where 80% of the time is spent on the core business and 20% is spent on projects of their own choosing. Their
Figure 1: Google over the years 33
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R&D spend is also amongst the highest in the category, and reiterates their seriousness with regards to Innovation.
Innovation at Apple Apple has been the rebel innovator of the industry who has rejected the status quo in the technology bandwagon. It has leveraged on its visionary innovations to position its products at the top of the Maslow’s pyramid. The brand in itself has achieved an iconic status. Quite unlike other companies who rely on acquiring third party innovations, Apple has mastered the art of innovation. Its products have disrupted the entire music industry. It has come with entirely new product categories. Its iPhone is reinventing the cell phone business. Apple leverages its diverse ecosystem of employees, customers, suppliers, partners & global networks, proven innovation process and a winning culture to build an innovation factory in its organization that generate ideas that simply click. The tremendous growth in its revenues in the past 5 years stand testimonial to the phenomenal success that can be attributed to their “Think Different” approach. Apple has not restricted itself to product or process innovation. It has gone a step ahead by introducing innovation into every stage of its value chain, right from supply chain, research and development, manufacturing to distribution and retail. Besides, its vertical integration has empowered it to develop products which are equipped with its own hardware, software and services. This enables Apple to have a better control over its value chain unlike other vendors, who just develop the hardware and get the software and services from third parties.
Innovation in Strategy - Balanced Score Card The Balanced score card is a strategic performance management tool that can keep track of execution of activities and monitoring the consequences arising out of it. Faced with the “Transform or Die” notice, today IT organizations are trying to plan and manage innovation as a core business process. Attempts are being made to integrate it into the business at both the strategic as well as the operational levels. Using the BSC, a synergy can be created between the strategic and tactical goals of the organization. BSC is a framework for translating the innovation quotient in the organization’s vision into strategy. It uses four strategic perspectives (refer Framework) to allow the organization to create an innovative, sustainable organization that can adapt resiliently to change. BSC ensures that innovation is not just for the sake of sheer compliance but is more of a core capability that enables the organization to redefine their customer value proposition. The BSC framework keeps a check on the 4 basic perspectives of an organization and reflects the effect of the innovation culture on each of them. This is a powerful approach for companies which choose to address innovation as a strategic theme.
Figure 1 : Triple-A Supply Chain
Figure 2: Balanced Score Card
Sustainability The management guru C.K.Prahalad in his HBR article on “Why Sustainability Is Now the Key Driver of Innovation” had pointed out that the smart companies treat sustainability as innovation’s new frontier. He further went on to state that “Traditional approaches to business will collapse and companies will have to develop innovative solutions. This will happen only when executives recognize a simple truth: Sustainability=Innovation”. Innovation is of benefit only if it creates value that is viable. In a successful organization, innovation is sustainable and on-going, rather than an ad hoc process characterized by boom and bust.
Innovation should be applied across the business model to develop a holistically sustainable enterprise. IT companies understand the criticality of sustainability. Infosys is one company which focuses on sustainability by adopting Green Innovation. It focuses on green computing to improve the quality of life and transform business. From an enterprise cloud to smart grids at campuses, they have piloted several green applications locally. Author(s) Swayam Prava Mohanty is pursuing her MBA from Xavier Institute of Management, Bhubhawaneshwar
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Emerging Trends In Talent Acquisition Just think of ‘Sachin Tendulkar’, ‘Lata Mangeshkar’ and all other successful people in their respective domains. What make them stand apart from the crowd? Are their skills which make them rare, or is it their knowledge of their respective field which makes them so venerated. We can simply say it’s their ‘Talent’ which makes them so special. So now the question arises - What is Talent? According to Mckinsey and Company consultants Michaels, Handfield Jones and Axelrod, talent is defined as “the sum of a person’s abilities- his or her intrinsic gifts, skills, knowledge, experience, intelligence, judgment, attitude, character and drive”.
Talent Management Talent management can be viewed as having a system in place in an organization where ‘right people are there with the right job’. It means in order to have ‘talented’ people working for an organization, there should be a proper system of getting right people from efficient sources (talent acquisition). Proper learning, training and well laid career plan should be there (talent development) . There should be proper workforce planning and if required, movement of work-
force from one department to another For success of an organization in meeting its objectives, goals, mission and the overall strategy, it’s important that all the realms of Talent Management – Talent Acquisition, Talent Development and Talent Assessment & Alignment are properly looked on.
Talent Acquisition This article will explore the different aspects of ‘Talent Acquisition’ and how the trends are emerging for the future which is going to shape the way HR Managers look into ‘Talent Acquisition’. Before we move forward, let’s have a clear understanding of the difference between ‘Recruitment and Talent Acquisition’. Recruitment can be defined as the process of finding and attracting people for a given job. Alternatively, we can say it’s the process of attracting candidates from available sources to fill a given post. On the other hand, ‘Talent Acquisition’ is getting right people on board from the most efficient sources. In contemporary times, organizations are following different methods of attracting talent – job advertisements, newspaper
advertisements, job portals, employee referrals etc. But times are changing and hence an HR Manager has to accept that the need of the hour is to look into the future of Talent Acquisition. Consider this, according to the Global Talent Risk Report 2011, to sustain economic growth, United States and Europe will need a more than 25 million and 24 million workers respectively. The shortage of talent can be well understood by this report which mentions that multinationals consider only 25% Indians and 20% Russian professionals as employable. Hence, it’s imperative for HR managers to know the future trend of ‘Talent Acquisition’ and ways to implement them.
Emerging Trends For The Future Now we have reached a stage where we can safely admit that how ‘Talented Employees’ are going to be crucial for an organization. It leads us to a point where there will be ways searched by HR Managers to attract right talent and reach out to them before their competitor’s do.
Aligning Strategy And Tactics ‘Tactics’ is the term used to refer to a short term plan whereas ‘Strategy’ means having a long term plan . The future of Talent Acquisition will see an alignment of Tactics with Strategy of an organization. For example, an organization can’t afford to hire a ‘Passive’ candidate now, i.e. a potential candidate who is not interested in a given job in an organization. Also, in same lines an Organization can also not afford to lose an ‘Active’ candidate, i.e. candidate who is right fit for the job
and will be willing to work for the organization in future. Hence, an alignment of Tactics with Strategy will mean that an HR Manager will look out for ways to engage an active employee now (tactics) so that he is prepared and ready to work for organization in future, whenever opportunity arises (Strategy).
Focus On Talent In future, organization seem to favour ‘Talent’. It means, in future, there will be relaxation in criterion (e.g. Work experience of 8 years required) for a given job. This also makes business sense, as organizations who have already identified a ‘Talent’ may want to get them onboard even if they are not satisfying selection criteria. So, the future will see an entire shift of focus on ‘Talented Candidates’ and a relaxation in their certain job criteria.
Auto Networking & Matching With the rise of social networking, the facets of Talent Acquisition is going to change drastically. The future seems to be built on ‘Networking’ and ‘Connections’. Presently, recruiters are looking for prospects in popular social networking sites like LinkedIn and Facebook. According to Jobvite Social Recruiting Survey 2012, 93% of recruiters use LinkedIn, whereas 66 % use Facebook and 54% use Twitter to search employees. It shows that in future, ‘Talent’ will be searched by recruiters via connections where the information available will be Just in Time, i.e. the information about a candidate will be available at a click. So, having a strong network of connections will enable a recruiter to get the right candidate
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for the right job.
Employee Engagement Recruiters are now conducting competitions at various levels to attract talent and the successful candidates are offered PPI’s (Pre Placement Interviews) or a chance to work in the company as interns.For example,. HUL (Hindustan Unilever Limited) conducting its yearly event ‘LIME’, a case-study based event where the winners get a certain amount of cash prize along with a chance of PPI. Also, companies are looking at new innovativeways to engage prospective employees. Reckitt Benckiser, a consumer goods manufacturer, is using Facebook to share company’s news, latest happenings and career opportunities.
of getting candidates involved with an organization and it will act like a ‘winwin’ strategy for both the company as well as for the potential candidate.
Emerging Technology The rise of technologies like video conferencing, teleconferencing etc. has now enabled team to work virtually i.e. from different locations. Also, now the recruiters have various technologies at their disposal which can facilitate Talent Acquisition in future. ‘Video CV’s’ (a candidate is supposed to make a video describing his skills and achievements). Recently, ISB Hyderabad, a premier B-School, added video resume in their admission process. Mobile applications can also be used by the recruiters, in future, in this regard.
Such strategies will set the future trend
Figure 1: Emerging Trends in Talent Acquisition 38
Employer Branding Seeing a drastic gap between demand (Requirement of candidates by Organizations) and Supply (Talented candidates), employer branding seems the emerging trend for the future. This means that in future, we will see organizations using ‘blogs’, ‘testimonials of other employees’, ‘advertising videos’ etc. in order to project themselves as the place to work in. Hence, unlike the past where the candidates only seem to enhance their resumes, the future will see efforts being put in by organizations to improve their brand image and lure ‘Talented Candidates’ to work for them.
and all other means at their disposal to get closer to a prospective candidate, who will be the right fit for the company and the job per se. Although, there are plenty of trends that might influence the way Talent Acquisition is carried out, the methods which will be finally implemented will largely depend on the overall strategy of an organization and how the emerging trends will help the organizations to efficiently and effectively carry out the process of Talent Acquisition. Authors Divyanshu Aggarwal and Priyang Aggarwal are MBA students at TAPMI Institute of Management
Amidst the overall spurt in acquiring talent, the future seems to be skewed in the favour of talented candidates. Organization will use innovative technologies
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Talent Management and Developing leaders of tomorrow What is talent? Can it be defined? Talent became synonymous with singing, dancing and acting due to the advent of reality television-â€œAmericaâ€™s got talentâ€? and so has the corporate world. The recent upsurge in turnover rates and the unstable economic conditions have made the need for talent more imperative. Unlike their reality TV counterparts, they may not be able to break into a jive, but they are what keep the organization alive!
Wish Upon a Star In the present scenario where competition for the star performers is heating up, organizations must think of new and innovative ways of talent management. They must know the art and science of how to Attract , Retain and Motivate their high performers. This is critical as the 80/20 rule applies in the case of human capital as well. 20% of the human capital attributes to 80% of organizational success. These 20% are the star performers or more aptly called HIPO- High Potential. First and foremost, organisations must identify the segments of the workforce that drive current and future growth.
Once the talent pool has been identified, the talent needs to be developed and groomed. The emphasis should be on matters that employees care about most: developing them in a way that stretches individual capabilities, deploying into work that engages their heads and hearts, and connecting with the people who will help them achieve their objectives. Creating the leadership bench strength then becomes critical. This is possible through development of a talent mindset, developing deep pockets and pools of talent, and differentiating between star performers in terms of performance and potential. The motivating aspect comes into play by creating lynchpin positions and rewarding them and providing continuous learning stretch targets.
How to identify and select HIPO ? This is the most crucial step of the talent management process. Organizations must take an active role in identifying and cultivating their employees who have the capability and potential to become effective leaders.
An organization must develop or set a framework that helps in identifying, developing and deploying HIPO. Then, they must align this framework/ talent management system with HR systems and processes such as rewards & recognition, promotions, career pathing and career development etc. At last, communicating the entire process to not only HIPO employees but also other employees must be done to ensure transparency and objectivity. Also, commitment and involvement of the top management is important. In fact, communication and support of top management are two set of activities which run throughout the process. Various frameworks exist for identification of talent. Some of the most commonly used ones are: 1. 9 grid potential vs. performancematrix: The employees are assessed on these two parameters: their potential and how they performed. They are then classified into 9 grids. This matrix not only helps in classifying employees, but also gives insights on their key characteristics and areas of development. Accordingly, development initiatives are made for each grid.
2. The BCG matrix: This is an adaptation of the BCG matrix that again classifies employees into four categories. Here, the parameters are capacity to learn and willingness to perform.
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These frameworks are just a few which help an organization in identification of HIPO. Organizations can even design their own frameworks for identifying and selecting star performers. They must ensure that the identification of talent happens as objectively as possible. Once the talent pool is identified, the next steps are to develop, retain and motivate the HIPO to set up a leadership pipeline.
a player might be injured, so is the development of the leadership pipeline, replacement at the crucial positions without delay. Various development initiatives ranging from job rotation, management development programs, cross-functional assignments, international assignments, coaching, and training exist and are being used. Some of the strategic initiatives that might help are:
Catching the falling stars
Once high performing talent has been recognized, various initiatives need to be in place to help in realization of their potential to create a leadership pipeline. Just as bench strength is important in football because we can never tell when
The HIPOâ€™s are the critical resource of an organization and cannot be jeopardized. There must be substantial systems in place to motivate and retain them as they are more visible in the internal and external market. So, HR needs to align and redesign the policies and processes
such as rewards and recognition, promotions etc. with the talent management system. Also, the talent management system should be an evolving one and change with the dynamic markets and industry practices. One of the biggest challenges is building & sustaining a strong talent pipeline. Organizations must build a robust HR system that pays attention to recruiting, employee development, performance management, compensation and reward systems, and retention. From adopting frameworks and best practices to implementing them, communication and top managementâ€™s support are critical for the success of the talent management process. Authors Sakshi Kharbanda and Charu Puri are MBA Students at IMI , New Delhi