Old Economy vs. New Economy – Indian family businesses adapt well to the digital world

This article was first published in Family Capital on October 5, 2021, Co-author: Ramachandran, Kavil; https://www.famcap.com/2021/10/old-economy-vs-new-economy-indian-family-businesses-adapt-well-to-the-digital-world/ 

Family businesses evoke the memories of a Bajaj scooter or a Godrej lock, in India. Though now they dominate even the sunshine industries like pharma, telecom, biotechnology and information technology with firms like TCS, Wipro, Sun Pharma, Biocon and Airtel being the largest players in their respective industries. Yet, when we talk of new age industries like e-commerce and analytics, we often think of the Flipkarts, the Swiggys, and the Microsofts, all of them either private equity backed startups or non-family firms. Family firms are not yet known in a big way in e-commerce and the next generation wave of technology viz. artificial intelligence, analytics and machine learning.

Belying anecdotal worries about the potential of family firms to withstand the rush of competitive forces in the economy post liberalization in 1991, family firms registered remarkable growth. Removal of restrictions and controls unleashed their entrepreneurial spirit. Taking advantage of the changing business landscape through the 1980s and the big bang reforms of 1991, family-firms built businesses in all industries including in areas otherwise reserved for public sector and the upcoming industries.

Family firms now face another set of challenges different from the ones they faced post-liberalization; that of disruptive technologies and digital economy. The traditional business models are being challenged and the speed of change is nerve wrecking. Some of the unique advantages that family firms possess, like long-term orientation, loyal employees and owners’ passion, may be deterrents to being agile and innovative to cater to the changing market demands. So far, the family firms have been laggards in the race. But will it be the story of the tortoise and the hare? With slow and steady winning the race?

Take the example of Tata CLiQ. In 2007, Flipkart pioneered the e-commerce market in India, with Amazon foraying in in 2013. There were many startups that tried to compete and then either shut shop, consolidated or gave up the dream to become as big as either of them. Five years back, in 2016, the Tata group made a silent entry into e-commerce with Tata CLiQ. It has neither sprinted ahead of Flipkart and Amazon, nor is it the most popular. Yet, it’s gaining ground slowly and steadily. They do not believe in offering deep discounts like the other portals do and have strategies that they know are sustainable. They have been adding more brands to their platforms, have steep revenue growths, and have acquired some well-known existing e-commerce platforms.

Would Tata CLiQ ever topple Flipkart and Amazon to become the number one e-commerce portal in India? We do not know. But what we do know is that Tata CLiQ is here to stay and will benefit from the experience, the philosophy and the resources at its disposal as a part of the Tata group. While Flipkart will have to rely on external funding, the Tata group acts as the venture capitalists for CLiQ, saving them from the pressures of finding funds. Even in the past, the Tatas started their information technology business as a division of the group holding company Tata Sons, in 1968. The company was listed only in the year 2004.

Similarly, many family firms have presence in the new age businesses, albeit in a small and no-frills fashion. Owing to the reputation of the family at stake, they may take them public only when the venture achieves a respectable size. Many of these businesses are championed by the next generation members of the family who are more exposed to the current trends due to their education or interest. The trend has made it easier for the next generation members of the family to do something of their own. It is easier for the family to invest in a member of their own family rather than trust their money with a 30 something youngster with a risky idea. Puneet Dalmia, a third-generation member of the Dalmia Bharat group started the online career portal, jobsahead.com, with funding from the family. It was later acquired by Monster worldwide. Puneet then joined the core family business but continues to act as a venture capitalist for other startups.

Like the Dalmia group, many family firms have become active investors in the startup eco system, either in their own capacity as a family or through the firm. Apart from investing in fields of online education, e-commerce, agri-solutions, investments in emerging technologies and digital space are also popular amongst the families who have been involved in traditional businesses only so far. For example, Premji Invest, the personal investment arm of Azim Premji family, has invested in wide ranging startups- from food (iD fresh foods) to data management and analytics (Data Stax) to e-commerce (Snapdeal). While the family firms may not have direct presence in many of the new age economy businesses, they do have significant stake in many of them through investments. These investments are typically in personal capacity or through the family office, without disrupting the core family business. Though being cautious about their reputation, family businesses monitor the progress closely and may impose certain strategic restrictions.

New ventures by next generation family members and investment in startups by non-family members requires robust governance mechanisms to approve the funding by the family. The buy-in from the investment committee of the family or the family office is important. The venture must be approved keeping in mind the long-term goals of the family. Professional help from wealth managers and experts from financial institutions may be needed to evaluate the financial viability of the proposed venture and subsequently to monitor it. In many cases, the socio-political clout of the proposer within the family influences the decision making, apart from the economics of the proposal. Through sound governance systems and processes the subjectivity can be minimized.

Blockchain applications: Bringing in the next wave of new technology jobs

This article was first published in Business Today on November 6, 2019. Co-Author: Sanjay Fuloria; https://www.businesstoday.in/opinion/columns/blockchain-applications-next-wave-of-new-technology-jobs-forget-analytics/story/388743.html

Blockchain applications are suitable across industries due to their security, immutability and decentralised properties. This means the next wave of new technology jobs would come from blockchain.

Blockchain is hot news these days. There was a time, in the not so distant past, when working-age people were going after analytics courses. People's inboxes were flooded by emails from sundry institutes and organisations offering analytics courses, degrees and diplomas.

Everybody wanted to get into analytics. While the availability of data is huge and the requirement to analyse and make sense of it is still there, analytics doesn't seem to be so popular now. Blockchain seems to be the next analytics.

As per Yli-Huumo etal, the idea of Blockchain started in 2008 (Yli-Huumo, Ko, Choi etal, 2016). Blockchain is defined, as the name suggests, as a chain of blocks of information. This is stored in a database. Merriam Webster defines blockchain as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way."

Blockchain is also defined as "a digital ledger of economic transactions that is fully public, continually updated by countless users, and considered by many impossible to corrupt." (Carlozo, 2017). The use of cryptography makes the blockchain transactions trustworthy and secure (Holbl, Kompara etal). All cryptocurrencies including bitcoin have the blockchain technology at its base.

The above properties of blockchain make it applicable across industries. As usual, banking was the first industry to make use of blockchain technology. The banking industry has always been the first mover when it comes to the latest technology. Barclays and UBS are trying the blockchain technology to speed up settlement and their other back-office functions.

This could lead to an annual saving of $ 20 billion in costs. Middlemen could be eliminated just like that. Payment collection and automation of digital invoices are other applications in the banking industry. Crowdz is a B2B startup that is blockchain-based.

Barclays bank has invested in Crowdz in May 2019. JPM Coin is being launched by JP Morgan to enable transactions between one institute and the other. JPM Coin is based on blockchain technology.

Blockchain technology is slated to revolutionise messaging. It is going to be used to build an improved and secure communication infrastructure. The security expectations would be uniform across platforms. Currently, different platforms have different protocols which might compromise security.

SuchApp is working at creating a "5G ecosphere" using blockchain. Commercial transactions would also be possible on SuchApp. Then there is BlockMesh. This will work outside the range of cellular towers. It will work on the concept of peer to peer networking.

Telegram Open Network (TON) is being developed by the popular social networking app Telegram. They are planning to get into censor less browsing, payments and file storage. Other chat platforms like Kik are also raising money via Initial Coin Offering (ICO).

Kik is into in-app currency. There are other nuances which some companies utilise to make themselves unique. There's an app called Echo that uses a different protocol named Interplanetary File System (IPFS) which leads to quicker messaging. Echo is unique because other apps require the interacting parties to access the blockchain directly whereas Echo bypasses this by using the IPFS client.

Ride-sharing services have started using blockchain technology in a big way. Although we hear a lot about ride-sharing, according to a U.S. report, only 1% of the Vehicle Miles Travelled (VMT) (standard terminology in the ride-sharing industry) are accounted for by the ridesharing services.

There is a huge opportunity in rural markets. Blockchain technology can help by removing intermediaries between the driver and the rider. Driver vetting is another advantage of blockchain technology. Smart contracts make the rules and regulations transparent. These can be viewed by any stakeholder of the platform.

Any variations would be accomplished by enforcing smart contracts. The drivers' traffic record could be added to the blockchain to be used later for feedback and corrective measures. An Israeli company is working on a community-owned transportation platform that utilises any unused capacity for the benefit of the rider.

They are using the blockchain technology to device a ''fair share" reward system for all the stakeholders. There's another example of Arcade City that uses blockchain technology for all transactions. They permit drivers to set their own rates, build their own clientele of riders, and provide other services like delivery.

Education Industry has a lot of potential for the use of blockchain technology. Academic credentials could be added to the blockchain. This would make the verification process easy. Any fraudulent claims could be nipped in the bud.

There is a U.S. based startup, Learning Machine, that has created a toolset called Blockcerts that can be used to prepare, provide, view, and verify blockchain-based certificates. Student records can be shared and secured using blockchain. There are a lot of education apps and services available nowadays. Identity management for these services is a major problem. There are blockchain-based platforms available that help users carry their identity around the internet.

Internet of Things (IoT) could use blockchain technology for its advantage. A new concept christened as Autonomous Decentralised Peer-to-Peer Telemetry (ADEPT) uses a technology similar to blockchain to let devices (things) to communicate with each other directly without the presence of any mediator.

Data security is a major challenge with IoT as multiple devices get connected in real-time. If the data gets leaked or it is in some way not secure, it could be detrimental for all the concerned parties. The security aspect of blockchain could be utilised to its full potential when dealing with IoT.

Real Estate industry is another where blockchain technology could play a pivotal role. There are software as a service (SaaS) platforms where property information could be put in and documents could be recorded.

Blockchain applications are suitable across industries due to their security, immutability and decentralised properties. This means the next wave of new technology jobs would come from blockchain. Get ready to be swarmed by promotions from organisations/institutions offering blockchain courses. Working knowledge of blockchain could be the next great differentiator.

The Power of Democratized Data

This article was first published by Global Association of Risk Professionals, Risk Intelligence, on September 21, 2018. Coauthor: Sanjay Fuloria

https://www.garp.org/#!/risk-intelligence/technology/data/a1Z1W000004B9QmUAK

How readily available data sets and crowdsourcing can promote problem-solving and policy solutions

While reading a post on the Reddit social news aggregation site, we were amazed by a link to download government data. The data pertained to parking tickets issued by the Chicago Police Department over a decade. The data was anonymized but had all the details regarding the reasons for the tickets and demographic details of the violators.

The local government put this data up in a comma separated value (csv) format to invite inputs from researchers and intellectuals for help in policy formulation. This would improve the performance of the police department. They could answer questions, for example, about gender or racial bias in issuing parking tickets.

This approach should be used by the Indian government at the Center, and by state governments and local civic bodies. Anonymity is important to maintain, but other than that, there is no reason why this data should not be made available to the public at large for analysis. While the government has started data.gov.in, the amount of data available there is pretty limited.

Apart from that there is this need for accuracy. We compared the actual seasonal rainfall data for the state of Telangana on two government websites, www.imd.gov.in and http://www.tsdps.telangana.gov.in/. 

They were not the same. As per IMD, the actual rainfall to date was 665.8 millimeters as of September 5, 2018, which is 6% in excess of the 50-year Long Period Average (LPA). The other website showed rainfall of 584.8 millimeters as of September 7, 2018, which is a 7% deficit. 

IMD publishes data weekly, whereas the Telangana data is daily. Which to believe? It looks like the two agencies don’t talk to each other. No wonder the forecasting models used by these government agencies are far from accurate.

The data availability would enhance the scope for better inputs to shape public policy. The areas could be as diverse as traffic management, crime control, queuing in hospitals, school admissions, etc. The government could in fact have contests, with prizes given for best policy recommendation or for the best machine learning algorithm to solve a particular problem.

Downloadability

The government could take a cue from the likes of Kaggle, where such contests are the norm. On Kaggle, a lot of companies provide their data free of charge to solve their problems. The only requirement is the availability of data in an easy to download format.

The census data available through www.censusindia.gov.in is very difficult to download. The navigation of the website is itself a bit challenging. The data sets are distributed into different files. The best alternative would be to make it available in one file and at the village level. Such granularity is needed for analysis and to make sense of data.

Census data, if easily downloadable, could lead to a lot of analysis. Much of it would be superficial, but some would definitely be meaningful and could be used by the government to inform its policy choices. 

As James Surowiecki says in The Wisdom of Crowds, “A diverse collection of independently deciding individuals make better predictions than individuals or even experts.” The wisdom of crowds can be leveraged.

While financial data is made available by the government, data on other socially relevant fields can be hard to come by. With so many open source tools available for handling the data, it has become relatively easier to make sense of data. Moreover, there are many MOOCs (Massive Open Online Courses) available to whoever is interested in learning data handling.

With the democratization of education, it is high time the government thinks of democratizing data. We are not saying data privacy is not important, but as long as the details don’t identify an individual, it should not be an issue. Let a hundred flowers blossom.

How India Grapples with Cyber Threats

This article was first published by the Global Association for Risk Professionals on December 01, 2016;

http://www.garp.org/#!/risk-intelligence/technology/cyber-security/a1Z40000003N3VTEA0/how-india-grapples-cyber-threats

On October 21, the National Payments Council of India confirmed one of the country’s biggest data breaches: a compromise of 3.2 million debit cards issued by leading banks including the State Bank of India, ICICI Bank, HDFC Bank and Axis Bank. It was a reminder that even as the Narendra Modi government has embarked on the Digital India campaign, cyber vulnerabilities and their costs to both the private and public sectors are significant and increasing.

Various studies show that the number of cybercrimes has been increasing substantially. As per data from the National Crime Records Bureau, it grew by 23 times over the 2005-2015 period. 

ASSOCHAM-Mahindra SSG put the compound annual growth rate at 107% from 2011 to 2015.

An Ernst & Young report said that 40% of respondents from India highlighted an increasing level of concern around cyber breaches or insider threats over the last two years. In March 2016, Ravi Shankar Prasad, then Communications and IT minister of India, reported to the upper house of parliament that in the year 2014, cybercrime cases in India went up by 69%.

Countermeasures in Progress

The government has stepped up efforts to combat cybercrime. Programs include public education to spread awareness, and there is a proposal to set up a cybersecurity and e-surveillance agency. In addition, the Reserve Bank of India, Securities Exchange Board of India and other regulators have issue cybersecurity guidelines and are expected to beef them up.

Microsoft Corp. has launched a Cyber Security Engagement Center (CSEC) in the National Capital Region. Microsoft India Chairman Bhaskar Pramanik said that “CSEC’s mission is to help build a trusted and secure computing environment, a critical enabler for India’s digital transformation. It will work towards fostering deeper cybersecurity collaborations with public- and private-sector organizations.”

In announcing the commitment, Pramanik said, “Cybersecurity is crucial for Digital India. A data driven economy can flourish only when governments, businesses and individuals have access to hyper scale and hyper flexible cloud computing with the confidence that their data is secure.”

Even as such initiatives become more critical, the National Cyber Security Policy of 2013 has not yet been implemented. Coordination is essential to tackle the menace of cybercrime. During the recently concluded CyFy 2016, the India conference on Internet Governance and Cyber Security, organized by the Observer Research Foundation, in Delhi, Carl Bildt, former Prime Minister of Sweden and head of the Global Commission on Internet Governance (GCIG), told the Times of India that “as an emerging cyber power, India needs to engage seriously on issues of Internet governance.”

Liability Insurance

While it is taking time to devise and implement policies at the national level, there is a solution that businesses can consider immediately: cyber liability insurance. The product has been available in the Indian market for some time, and companies in the IT, IT-enabled services and health care industries are showing interest. Most banks, however, have not gone beyond buying the mandatory bankers’ indemnity coverage.

“Cyber liability insurance is becoming very important nowadays, especially in the backdrop of the rising number of instances of cybercrime and data breaches,” says Sushant Sarin, senior vice president–commercial lines, Tata AIG General Insurance Co. Ltd.

“We see that more and more companies are buying them,” he says. “Those companies which were the first movers are buying more cover, and those that have not bought it yet are starting to explore it.”

The “limit of liability” for which companies need to buy insurance depends upon various factors, such as the type and volume of data, origin of data, location where the data resides, sensitivity of the data, data security protocols, peer group benchmarking, etc.

“If the data originates from Europe or the U.S., the data privacy laws are stricter there, so more Insurance will be required,” Sarin explains. “Similarly, if the data is personally sensitive or creates financial vulnerabilities, the amount of Insurance required will be much more.”

Possible Payouts

Sarin says that the amount payable by an insurance company when a cybercrime or data breach occurs would depend upon such factors as how the data got out; costs of notifying customers about the breach; fines or penalties imposed by regulatory bodies; damages awarded by courts to affected customers; reputational damage, etc.

One reason why some companies have not yet bought cyber liability coverage could be lack of awareness about the products, or a misguided belief that their organizations are secure. Given the current level of cyber risks and the likelihood that they will only get worse, the ready availability of insurance provides a practical option.