DISTRIBUTION INDUSTRY CHANGE OVER TIME

The Mutual Fund distribution industry is changing at a rapid pace. The model of doing business in the last 15 years has changed dramatically. The rules of the game have changed and also the new players. Margins are falling where assets have doubled in the last few years. This change in the industry has affected many families and the IFA community also.  No one thinks how the family of an IFA will survive when margins of revenue are falling. Diverse product selling is not an easy cakewalk.  Clients may not be interested or they have already someone else to provide the same. Being an IFA and running the family has now become a nightmare.  PMS/AIF all have also gone through a reshuffle in minimum ticket size. It is easy to say that procure clients of higher ticket size. Many IFA is not up to the mark of that level of quality where they can get HNI and Ultra HNI. In many places direct channels have replaced the IFA kitty. Well, these changes will keep coming and transformation will happen in future.

When the revenues are falling the rules are bound to change. The marginal revenue of the business is narrowing down whereas cost is still the same. Resource allocation Resource utilization, and developing the Total Quality Management within the organization is the key survival strategy. The traditional business model is obsolete. AMC has already stopped expansion plans of Branches. Fixed cost is the burden.

What is the change and from where they came?

Well, Technology is the name of the mother who gave birth to the new players of the Industry. Over the time new revolution throws away traditional business rules and players unless they become new players.

Currently, in 2019 we are witnessing fall of revenue from Traditional Old assets due to the impact of TER and also new business revenues are no longer matching with traditional revenue pattern. When an industry grows, new customer size grows revenues grow but these are traditional rules of revenue. Technology is making the revenues to reduce and hence number play becomes more important. Even if I am not a part of the race sooner than later I have to become a member of the new club of revenue-generating process.

Society of Cost Cautiousness

Today SmartPhone has changed the rules of the business. Big-ticket size business partners are no longer loyal. Cost-saving has become a smell in the air for every customer. We have built up a society of cost cautiousness for the better utilization of resources. Yes, resources need to be utilized properly keeping the new rules of the game.

The Distribution Industry is now one of the most cost cautious industries flooded with Technology-driven baby boomers. Well, a merger of these baby boomers will happen but before that, the race of low-cost servicing and ease of doing investments will be modified. Reaching to masses or building a crowd of investor is no longer a tough task. Well, can anyone tell me where the office of ET Money? Well, I don’t need to know as the small app keeps working proficiently.   

Further Mutual Fund Industry has Direct Schemes which are the child of Low expense ratio. Now Free Business is the new Business for this world. It has now become a practice that core business is being converted into a free business model and ancillary industries or business grows to get the revenue from the free business model.

Did any person come for the marketing of ET money? The rules of marketing have changed. People prefer reference in technology and no longer human reference. Those who think old relationships have potential well the next generation is already in the customer bandwagon and they don’t need a human relationship but a CHATBOT or a technology-driven relationship.

What will happen in 2020 or 2025?

We need to know what is stored for 2020 to 2025 down the line. Revenues will fall. Now those who challenge me I have something ready for you to show.

In the year 2011 around 6 lakh agents used to sell Post OFFICE SMALL Savings schemes. Much larger form the current mutual fund agents number. They used to get a brokerage of 4% at that time. Data from the government show that all small savings schemes put together collected Rs 2.51 lakh crore on a gross basis in 2009-10. The post-office savings account was the biggest contributor bringing in Rs 68,000 crore on a gross basis, followed by the Monthly Income Account (Rs 54,300 crore) and the recurring deposit (Rs 30,353 crore). Distributors estimate that a typical agent selling post-office schemes earns about Rs 10,000 a month in the big cities, Rs 5,000 in towns and about Rs 2,000 a month in rural areas.

Today these agents earn 1% only.

 Do we think about these agents? Many of them have left the industry of Small savings. The same pattern of brokerage is coming down for the MF Industry. Revenues from MF will decline and particularly the major impact will be on those grey areas where one buys the business. Buying business model is going to be one of the biggest reasons for the collapse.

Cost management in Distribution Industry 2.0.

If you have fixed cost then better make it variable since the industry revenues are variable. The rules have changed. Affording fixed cost in this industry is no longer feasible. With diminishing revenues resource allocation and utilization to get the maximum benefit is the prime part of Total Quality Management (TQM). Applicability of TQM is now necessary. One cannot have fixed cost either large ticket size humans.

Remember large ticket size humans ruled the Mutual Fund Planet when the industry revenues were high and technology was nowhere and the whole of the game depended on the human-based relationship. In this industry, there is a word called Book Size. That Book size created the fat paycheques. Now technology has replaced human relationship, followed with a new generation, the customer is more cost cautious and the biggest reason LOW CUSTOMER LOYALTY. It just takes a fraction of time to change the loyalty of the customer in today’s era. For example, if I don’t get a TAXI through OLA CABS I get into Meru or Uber. This is loyalty and that is business model.

The Book size game is over.20, 25-year-old exp. The CV is redundant. These fat paycheque fellows cannot dream to make a new start. The days of ESOP, fat salary and bonuses are over. For them, business is still under the old rules. When the revenue of the industry is falling how they will get their fat pay cheques? These people are known affordable category segment under the new rules.

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COLLABORATIVE ANALYTICS...PATH TO STAY ABREAST IN FUTURE

How I should develop Strategy in my Organization? How I will be able to predict the future? How I do I connect internal and external customers?  How do I create disruption? These are the most difficult questions being faced by the CEO and MD of an organization. Identification of the pole star has become one of the critical aspects for the survival of this organization.

Data analytics are being used to identify the patterns for internal business growth. Well, the same data analytics can be used for creating Collaboration. I would rather term it as collaborative analytics. Yes, collaborative analytics helps an organization to solve the critical question raised within the minds of the top management. Collaborative analytics based on data analytics. Collaborative analytics can help to reduce cost and also improve efficiency in resource management within an organization. Data analytics are being deployed to create a solution. The same solution can be achieved through collaboration within every corner of an organization.

Collaboration is often and most commonly applied for selling of products or reaching out with the product to the people. Well, I am not discussing the same collaboration over here. Collaborative analytics can be deployed to redefine an organization. Product development done in isolation cannot help an organization to remain sustainable over the long term.  Collaborative analytics is connecting with social capital, creating a network internally and externally not for sale of products but for all.

Innovation can be created through collaboration. Collaborative analytics would help an organization to identify future trends. The same, when applied within an organization, increase the cross-department solutions. These cross department solutions improve the organization output from the internal perspective. Internal COLLOBORATION breaks silos within an organization. Collaboration helps to create innovative products and solutions.

Every organization has huge pool of talent but divided in terms of geography or divided in terms of P&L. Internal collaborative analytics helps to create synergy at a higher level.  This collaborative analytics leads to a huge pool of experience and solutions creating to exponential growth for the organization and makes the organization strong enough in terms of solution. This new redefined strength enables an organization to take up complex projects and drive solution.  Collaboration in innovation helps to come out of the fear of gaps of future.  General Electric took the collaboration analytics to bridge the gaps of internal part of the organization where they created collaborative talent pool to provide innovative solution to its process, products and consumer.

Collaborative networks leads to concept development which further leads to engagement and creating disruption for an industry.  The answerer to any disruption is through collaborative analytics. The biggest boon of collaboration is that it creates momentum of winning within an organization structure as well as the organization skills in every corner increases to new level.

When an organization does face the risk or threat of falling down? When an organization becomes silos it faces the nightmare of falling down and getting out of competition.  This is a hardcore fact which often is ignored. Collaborative analytics helps to stay abreast of future developments.

Collaborative analytics have a direct impact on the bottom line of an organization that too on a sustainable basis.

But what makes this collaborative analytics so powerful. Well, when we outsource a particular segment or work under JV we develop a connection with social capital. This social capital is of a mass weapon which helps an organization to scale into new heights.

General Motors developed collaborative analytics where is acquired many startups, hired resources and created product and solutions to business.   There are plenty of examples where collaborative analytics have helped organization to face tough situations.  Isolated approach kills the organizational growth.

Social capital based collaboration leads an organization to execution focused operational element to a network of connection that links the entrepreneurial part of product and service innovation. At the same time the organization internal and external collaborative efforts raise the scale of the organization.

Collaboration leads to economies scale and business growth. It’s no longer time to focus only on collaborate sales. The collaborative analytics is the only path to survive in the long term.

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Your Business Strategy Solution are in the 17 Goals

What should be the strategy for my company? What should be my product? Which segment of the consumer to focus?  Where should invest to grow my business? How I can grow mine exponentially? These questions are common but seem to be powerful enough to keep the management awake at night.  Fragile economic growth has changed the dynamics of doing business. Instability within the global economy is another factor which asks companies to reinvent and redefine its every corner to grow with the changing economic circumstances.

What does sustainable business model mean? It means uplifting the society into a productive society which feeds the process of growth over generations. Every day functioning at every level of an organisation makes things sustainable. It is not a one day or a time-bound activity. The sustainable organisation includes the place from where a company source raw material, to labour, to the person to whom the finished goods are sold. All these come under the sustainable business organisation.

United Nation came up with a list in 2016 of 17 Goals which are known as Sustainable Development Goals. These goals are one of the paths shown to the global corporates and economic to design, develop, invest and grow. It has been found that these goals have the potential of creating $12trllion of exponential revenue growth. Sustainable business growth leads to economic value creation.

The 17 sustainable development goals (SDGs) to transform our world:

GOAL 1: No Poverty

GOAL 2: Zero Hunger

GOAL 3: Good Health and Well-being

GOAL 4: Quality Education

GOAL 5: Gender Equality

GOAL 6: Clean Water and Sanitation

GOAL 7: Affordable and Clean Energy

GOAL 8: Decent Work and Economic Growth

GOAL 9: Industry, Innovation and Infrastructure

GOAL 10: Reduced Inequality

GOAL 11: Sustainable Cities and Communities

GOAL 12: Responsible Consumption and Production

GOAL 13: Climate Action

GOAL 14: Life Below Water

GOAL 15: Life on Land

GOAL 16: Peace and Justice Strong Institutions

GOAL 17: Partnerships to achieve the Goal

The above goals are sufficient  enough to create new industries, drop-down traditional practices, change in manpower and their abilities and the most important thing redefine the whole organisation.

The SDG is also being focussed by the government and hence one needs to keep a close eye on the government policies which are framed towards these goals. The country which adopts these goals within its government policies that economy and those companies who realign their strategies are poised to grow exponentially.

Upcoming all-new business strategies will depend on social business and growth. Exponentially growth will be achieved by that product or service which is linked with the social segment.

Now after the product has been identified it is the people who play a critical role in designing and adapting the redefined company. But on which people or what type of people an organisation needs to achieve this redefined growth. Well those people who have CSR aspect mindset is the best army of people who can really adapt and take forward the redefined organisational growth.

All the Vision and Mission statement of the companies will be redefined where social development based and impact creating objectives will be adopted. I this journey of redefining many people will leave and many new people will come but the ones who have CSR aspect mindset can create a change and impact the growth of an organisation.

The one who understands the shortcomings of the current period, process, strategy are the ideal person for building the team. These are the people who identify the gaps between organisations and as they are linked with CSR activities or mind-set are the key people to be part of the turnaround. Remember one thing very clearly that redefine of an organisation cannot happen without the same set of the mindset of people.

Sustainable business impacts customer, communities, process and society. For example, the Indian government is taking many steps like clean water, save water, smart cities, gender equality, bridging gap of income inequality etc. All these are nothing but opportunities of redefining the companies and industries. The ban on use of plastic is an indication for the manufacturer to look for recycles product to be manufactured. If water saving is promoted then industrial manufacturing needs to re-design the products which saves water or uses minimum water.

In Indian Financial market SEBI has come with the RIA model and scrapping the Regular model. This change is designed to bridge the income inequality gaps. RIA helps to promote savings and investments with proper advice. Distribution industry rule has been changed and hence the plan for redefining of the organisation is already laid off. Income inequality gap can be reduced when the RIA model grows and reaches to the poorest person and advise them to invest.

Cashless mode of business has growing stupendously.  The prime objective is that Parallel economic growth needs to be closed. Sweden is the country which has taken a total cashless objective. If you visit Sweden, be sure to take your credit card or mobile phone with you. Only 15% of payments involve cash transactions, and it’s rare that a person will be limited to paying with cash. A popular mobile payment app, Swish, used by half of the country’s 10 million population enables payment transfers to people and businesses.

For example, Grameen Bank achieved viability through several operating innovations, such as using peer groups to manage the loan process. Group members had to approve of each other and could not take additional loans unless all members had repaid. Group lending reduced the need for credit assessment (since the groups did the screening); for collections departments (the groups encouraged its members to pay); and, for loan loss reserves (since peer pressure and repayment of group members’ loans assured low losses). These attributes changed the cost structure of lending and made microcredit economically viable.

Aravind Eye Care System3 created a self-sustaining business model that allows it to serve the poorest people in need for eye care, for free. Key operating model innovations include a highly efficient production process (performing high-quality cataract surgeries much faster than traditional models); its own manufacturing facility for producing intraocular lenses at a much lower cost; and, a dual hospital set-up (a somewhat higher quality facility for paying patients and a lower cost facility for the poor). These operating decisions allow for a pricing structure in which revenues from the full paying patients create profits which subsidize those who cannot pay.

 The birth of payment banks came up from these government policies of cashless economy. Sustainable business growth comes when people within an organisation have the mind-set to bring and adapt changes.  

In simple terms, all your questions are answered by the goals mentioned by the UN. When you connect your product or services with the goals you redefine your company. But it’s the product and the people who had the mindset to take forward the re-definition of the organisation into a new level. Grameen Bank could not succeed if people were having traditional mind-set of operating Bank, same with Aravind Eye Care System3 or with the payments banks.

Sustainable business growth aligned with population and mass usage is the key to growth of an redefined organisation. All your business strategy questions are within the society which one needs to identify and work upon.

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THIS FOR THOSE WHO ARE AGAINST OF BANK MERGER ....BENEFIT FOR ALL ...

The whole economy is focusing on credit growth and many well-renowned rating agencies,  consultants, advisors and few  MNC have painted this picture that credit growth will not happen through consolidation of the banking industry. Well everything is not linked with easy money flows into the pocket of the corporate. It is about building the economy into a lean structure, cutting out the extra fat.

Today we have to comply with Basel III and after few years Basel 4, Basel 5 etc will pop up in the next decade and the government has to keep injecting liquidity into the system. What nightmare it will be to keep the norms intact for so many Banks in India. My 2^nd point is that despite having so many banks did the same reduce the gap of penetration of banks in rural India. Why did the NBFC business scaled up in the last decade where banks struggled with NPA created by political influenced banking people. Why every year the Indian government has to inject millions to billions into the Banking system. This money belongs to the taxpayer’s money. The same liquidity can be offered as tax incentive by reducing the tax slabs to the individual taxpayers. The same can be given as an enhancement under section 80C to the individual people.

The merger will release a lot of obligations for the future. The Indian economy does not need so any banks.  Future NPAs will come down, existing NPA will come down, the business will become easier for ARC and the biggest boon will be that the corporate Indian will not be able to take advantage of splitting up of loans and loan reconstruction by the corporate India. The post banking merger benefits cannot be measured overnight and the same cannot be derived in terms of valuations.  The Banking industry lacked in reaching to people. They even did not pass the benefits of the RBI rate cuts despite a repeated effort by the RBI.

PSU Banks got Rs 1.95 lakh crore capital infusion in 18 months. Every year the Govt have to inject the tax payer’s money into several banks just to keep them afloat. This same money can be utilized and invested in economic growth-related matters rather writing of loan created by manipulated bankers and credit risk analyst in a joint effort with corporate or under political influence. In future, this type of liquidity injection will not be required and the same inflow can be utilised in some other place.

In a recent report where an a joint study by Assocham-Crisil  states that Indian banks' gross non-performing assets (NPAs) stood at ₹9.4 lakh crore as on March 31, 2019. Much of this will come down and the government will be able to control the NPA issues.

Competition within banks will improvise and better control will come up. The new round of consolidation will bring down the number of public sector banks to 12 from 27 just a few years ago. These lenders will have no choice but to become more competitive because they’ll have to price consumer loans by linking them to the central bank’s policy rate. Banks are not for making a profit at the cost of Govt, but to bridge the gap for the consumers. This is a very strong and brave effort for the betterment of the economy.

The way NBFC have grown their business and their unsustainable business model raises lost of risk for the Indian economy in the long term.  The merger of Punjab National Bank, Oriental Bank of Commerce and United Bank with business worth ₹7.95 lakh crore to make India’s second-largest bank. The other merger will be between Canara Bank and Syndicate Bank, which will make the country's fourth-largest bank, with ₹15.2 lakh crore in business. 

Also, Union Bank of India will be merged with Andhra Bank and Corporation Bank to build India’s fifth-largest public sector bank with ₹14.59 lakh crore in business. Indian Bank will be merged with Allahabad Bank to make India’s seventh-largest PSB with a business of ₹8.08 lakh crore. These economies of scale of business will make a huge impact on the long term benefit of the economy. As I said earlier every benefit cannot be measured right now.

Banking audit system has collapsed long back and no point of discussing internal control and concurrent audit etc. the Rising NPA and mismanagement and fraud cases have broken the faith of the audit. Consolidation will at least reduce the nightmare of the collapse and management of the banking industry will improvise.

Well, Post Merger India might soon get tax cut for individual citizens. Well balance of revenue and expenditure is art and the current government knows it well. How we can expect cut down in tax when the same money is being injected into liquidity management for the banks.

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DIGITAL PRODUCT LIFE CYCLE ...THE NEW STRATEGIC COST MANAGEMENT SERIES 1

Digital transformation has become essential for every organization. But the biggest problem is that we all are focusing on Digital Distribution but in terms of revenue, we are laggards. Companies spend millions on the product and of IT infrastructure to develop the distribution of the products. But the real truth is that Digital Transformation itself is the product for long term sustainable business model.  The Traditional strategic management theory of Product Life cycle is over. It is now the time for treating Digital Transformation as the product life cycle. Did we ever measure the life cycle costing of Digital Transformation?

Few Examples of Digital Transformation before moving ahead.

At Hasbro, digital transformation is child’s play. The toy and game company made big investments in its digital and data strategies that paid off in a big way. In late 2012, Hasbro realized that instead of focusing on children, it really should be marketing to their parents, who are the people who actually make the purchases.

Home Depot, once just a hardware store, The Home Depot today has a robust data and IT department to fuel its ongoing digital transformation. Home Depot has also improved its use of data to better understand customers.

Honeywell also made major changes in itself. Honeywell uses data to determine the best spinoffs and movements for its company.  Along with its own digital transformation, Honeywell uses data to help its customers. In 2016 Honeywell started its own internal digital transformation group. It introduced new technologies, including more IoT-connected and data-centric devices and offerings. As it reinvents industrial process control and offers more technology solutions for its customers, Honeywell also shows off its renewed focus on customer data and internal solutions.

Disney has acquired other companies to advance their digital transformation. Disney recently spent $52.4 billion to acquire the assets of 21st Century Fox to be able to connect directly with consumers rather than through distributors and advertisers. 

It is not the product consumed by the consumer but the Digital Transformation is the product which is consumed by people. Trivago, RedBus,Ola, Uber, Digital Banking any industry has Digital Transformation as the product. It is not the product mix which gives growth to an organization. It is the Digital Transformation which gives growth to an organization.

 The new strategic management speaks that Digital Transformation is the product and one has to measure the Life cycle Costing of the Digital Transformation. This means there is a shift from A traditional product-based life cycle costing to Digital Transformation based life cycle costing analysis.

In most cases it has been found that Digital transformation of an organization means copy paste the model from other companies.  The problem begins from here only. It is true that the Digital Transformation needs a basic level to match the industry where copy paste can be implemented but the same level cannot transform revenue growth.

 Innovation in the digital transformation which bridges the gaps and improves the society is going to the winner. Your product or digital transformation should make the consumer feel that it is part of building the future. It should not turn out that you are imposing the change on them forcefully. Once the consumer gets a feel of forced imposition then they will never accept the product.

The digital Transformation when reaches a maturity level then it is obvious that the organization or the industry revenues will come down as the product reaches the maturity level. Now if a company which does constant innovation and creates new segments of digital Transformation treating it as a product, then that organization creates new frontiers and new growth paths for the industry as well as for itself.

The digital transformation should add value to the existing market, create new market or give value to the consumer. Most of the companies spend million on how to reach to a consumer but they don’t measure the maturity of the Digital initiatives taken by the company.

In many instances it has been found that how tweaking in Digital Transformation a company has revived or has got a significant exponential jump in its growth.

ROA is nothing but the efficient utilization of the data using various analytics and integrating the same into the Digital Transformation platform. The life cycle of an organization also depends upon the from anticipating a need, to design, to manufacture and test, to install, use and maintain. This can only be done by measuring the life cycle of the Digital Transformation.

Companies are focusing on data analytics to explore new opportunities but are we focusing on integrating the same in Digital Transformation or focusing on product mix. Yes, this theory of product Mix has changed now. It is now the Digital Mix. The insights about the same will be shared in the next article.

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NOTHING IS WRONG WITH INDIAN GDP... ITS WRONG WITH CONSULTANTS AND ADVISORS

Indian economy has plummeted to 5% and that has become a matter of concern for the neoclassical economist. Well, every market player is an economist and every management consultant becomes an expert adviser in these times. Well, Indian economic growth of 5% was sufficient enough. The GDP number seems to be low since the same so-called management consultants and economist have made robust growth projection based on which they corporate took the decision making.

Now why I said that 5% GDP growth is enough since the period between April to June 2019 was an election month and all investments and consumption decision was under hold. Then how one can expect growth in this period. 2ndly when the investments and consumption were getting slower post the NBFC crisis then how one can expect to make decisions about spending. Unless a fully-fledged government comes into place corporate decision making always remains a slow strategy framework.

Hence all those economists and management consultants’ calculations were based on baseless factors. Growth revival of an economy cannot happen unless the people on the street have faith in the consumption and his monthly salary intake. One should be thankful for the Indian economy that a 5% growth was achievable when the Trade war has turned the table of Global growth into a recession phase.  

Now let’s comes to these people who made the prediction of GDP to 6% and 6.5%. Well, Post-recession of 2008 and technological advancement have simply made the neoclassical economic theories redundant. Same story rather worst situation is of all those management consultants who have not kept par with the evolving academic theories and still living in the traditional management theories.

Indian GDP will suffer more if the Indian corporate house don’t change their ears and mouth about the strategic cost management and resource utilization.  The myopic vision of management consultants and lack of understanding about technological advancement  followed with identification of change of pattern is the key supporter for the Indian corporate houses.

Corporate defaults or bankruptcy is happening? Why day by day business is becoming unsustainable? What makes the business fragile and weak? Why diversification of business verticals is not generating profits? Why I have sale a business which did not turn out to be cash cow after a few years. Where all these did go wrong? Well above all these did 2008 recession happens and business just collapsed. Well, advised by these traditional management consultants who could imagine or predict the changes. Identification of the revolution of changes and acting upon the same is critical survive.

The decline of Indian GDP is also linked to these above points. Did Indian corporate is making a sustainable business model with efficient identification of changes. 

Just as technological advancement has happened the same story is applicable for economics and management. Strategic cost management based on technology has changed dramatically. Traditional cost management strategies are redundant in the times of Exponential disruption based growth.

We are witnessing many corporate failures in India and more are about to come. What is the recipe which went wrong for these corporations in their decision-making process? Well, the management advisors went wrong in guiding the top management. Short cuts in business development followed with myopic thought process on profits and most importantly they lacked sustainable business model designs.

Sustainable business is the only way to save from any shortcomings. Every 10 years the global economy will face recession trends if business and strategy are based on short term myopic vision. Most of the senior management people don’t have a sustainable business model. ROI is the least focus whereas profit remains the main target. Why don't we discuss ROI and not profit? This is the place where we lack.

Cutting down cost and expanding business is one of the greatest recipes of the short term based business models and revenue models. Resource allocation has been left behind and cost-cutting is the oxygen we breathe. We love those management consultants who share insights or avenues of cutting down cost but what about resource utilization and optimization. Cutting down cost cannot expand the business. It is just a chapter of a book of cost management.

When we speak about sustainable business model we mean resource allocation, replacement and adoption of technology, aligning with long term industry dynamics and the identification of the patterns of change to take forward the sustainable business model.

Lack of decision making and not acting promptly will cost the Indian corporate in the long term.  Any Industry which does not make a change in its management consultants theories then there is no doubt they will suffer.

But what is wrong with these management consultants and neoclassical economist? They are simply lacking the education of the new management theories which are evolving either from college research labs or from the global failures. Yes, failures teach us where we went wrong. 2008 recession and still the slow growth is a big lesson. Sustainable business model within verticals will be key success mantra.

We have heard that many corporate sells no core business. Well, nothing is noncore if you have enough technical knowhow to run the show. It’s the management and the consultants who run the show and their lack of education kills the business.

Without expansion one cannot grow. Focusing on one business should have given birth to Jio mobile connection. It’s the management of the diversification which leads to success. One business might go down but others will save. It is just like product mix where you do business mix. Now this theory was not given in any book. Business mix efficiently carried out can create a sustainable business model.

Today the one business which you run may not be sustainable in the long term. Then, in

that case, you think what should be doing?

Well about the management consultants –if they were so smart they should have become billionaires.  We need those economist and management consultant who can predict the change and develop theories of management of a business. We don’t want traditional knowledge since they are not written POST recession of 2008.

Indian GDP will grow in the coming months based on the faith of the people of the street. Faith is very important to run an economy and business.

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4D MANUFACTURING ...LEADS TO LOWEST CURVE OF MANUFACTURING COST

Technology always creates new industries and opportunities. It brings down the cost of production and brings new disruption. In the coming days manufacturing base across the globe will shift from high end of capital consumption to low-end capital consumption with a focused approach towards the optimization of resources. Many new SME will open up and will transform the global manufacturing landscape. Technology will shift the gears of Strategic Cost management. 

The global industry of manufacturing is heading towards another low-cost model of production. This will further shift production cost to lower levels and also many job locations will be changed in the coming few years. 3D manufacturing is an old ball game where there are certain limitations regarding tweaking of cost and quality where it becomes expensive. The prime objective of the strategic cost management is to create innovation and to get affordability of the products. The rising population and weak economic growth reduce the affordability of higher-cost services. Among the services healthcare industry is one of the biggest industry which hardly face any recession at any point in time.

Medical treatment is a nightmare for any economy and particularly where the aging population is growing up. According to the most recent population report from the United Nations, the global populations aged 60 and over numbered 962 million in 2017, more than double the number of 382 million in 1980. It will take fewer years to double the number again. The report projects that by 2050, the population aged 60 and above will reach 2.1 billion. Globally, the population aged 80 years or over is projected to increase more than threefold between 2017 and 2050, rising from 137 million to 425 million.

This rising old age will have a huge burden of medical cost and non-affordability of the same would be another nightmare where jobs and social security benefits are becoming a burden for the government.

Low cost production of health services and disability treatment is only possible through low-cost production of medical equipment. 3D manufacturing has no doubt reduced the cost burden but it has its own limitations.

Under 3D printing various factors related to production have limitations. But when it comes to 4D-printed object can change its shape in response to certain triggers, such as (body) heat, light, electricity, magnetic fields or moisture. The biggest benefit of the same currency is the healthcare industry.

Healthcare cost management is one of the most important aspects of the modern economy as pollution and complicated health care cost have created more complication in treatment and cost management related to the same. Programming the production process and material consumption will reduce the cost for various types of products for the healthcare industry.

The adaptability of 4D printing can be used on materials like hydrogels and polymers. 4D-printed organs, medical implants, and other critical instruments and lead to affordable healthcare treatment and disability treatment.   The biggest boon of 4D printing technology is that it is programmable material, in which after the manufacturing process, the printed product reacts with parameters within the environment and changes its shape accordingly. This gives a wider spectrum of production and tweaking within the manufacturing space.  The cost of raw material and the quality will change post-adoption of 4D technology.

 The ability to do this comes from the almost infinite configurations at a micrometric resolution, creating solids with engineered molecular spatial distributions and thus allowing unprecedented multi-functional performance.  This is the new revolution in manufacturing space.

 4D printing is a relatively new advance in bio-fabrication technology, which is rapidly emerging as a new paradigm in disciplines such as bioengineering, materials science and chemistry and computer science. In practical terms, this means 4D-printed objects can theoretically react much more dynamically, rather than remaining as rigid, solid structures. In the future, it may be possible to envision a time when products created with 4D printing can adapt and adjust to their surroundings, in addition to being customized to fulfill user needs.

The next evolution for manufacturing through the adoption of 4D will be railways, oil and gas followed with footwear to industrial manufacturing. You design the car and we manufacture concept is soon going to be a revolution for the Automobile industry. At the same time, production of the same will shift to a lower end of the cost curve. Cost-effective construction and production of industrial products will soon rule and change the dynamics of the game of manufacturing. The cost of production in many cases comes to 90% which itself increases the demand for the 4D revolution to grow.

On another hand, the material being used for manufacturing will also witness a revolution where different type of raw material will be used replacing the traditional raw materials which will bring another set of revolution towards the cost curve.

Production time lines will improvise radically in the coming days as 4D will change the dynamics of the production time frame. A significant low-cost model of production, where the speed of production will increase but without a corresponding significant impact on production cost.

 In 4D the final product will change its dynamics based on the external factors without incurring any cost for the change on course.  The dimensions of productions will witness a paradigm shift under 4D technology.

Replacement cost of ancillary units will be low as the cost of production comes down.  For example, in Airbus 4D technology in managing its cooling components.

Many SME will witness a significant jump in business and new opportunities under the 4D technology of production. The global manufacturing industry is witnessing massive change over in production and manufacturing segment.

 The world is under a revolution of 4D manufacturing.

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Lack of Leaders for the Upcoming Recession if ANY

After a decade from the 2008 recession, the only difference in the global economy is lack of leadership within the political parties across the globe and this keeps me awake in the night. From the US to the UK every country has a political risk and mass protest has become a routine affair.  

 Leadership is at risk in every country now. Instability has become a nightmare. The piling up of debt seems to be never-ending the story now and it has already become a balloon. Emerging economies are going to be the worst hit but more than that I fear about the lack of leadership to manage and handle the same. The 2008 recession was faced and managed by a hard group of leaders from all segments across the globe. Do we really have them now?

The global debt has swelled up and the way trade war is going ahead if a recession comes in no government or political party will have the ammunition save the global economy.

The trade war is reducing interest rates and taxes to support growth. In simple words, growth is being pushed by lower income for the Government across the globe. Corporate debts are swelling up to face the heat of trade war and this is the place of intense risk for the global economy.

A country like china who is the prime target of Trade war has got a swollen up Debt pile. Chinese firms accounted for 42% of all corporate bonds issued in EMs this year The combined debts of 30 large Developing Economies rose to 216.4% of GDP in March, from 212.4% a year earlier, sending it to $69.1 trillion in dollar terms.  Chinese firms accounted for 42% of all corporate bonds issued in EMs this year.

Margins are falling and revenues have already plummeted. Corporate debt obligations are becoming a nightmare currently. Global Debt Hits $246 Trillion, 320% Of GDP, As Developing Debt Hits All-Time High.

1.      Debt by sector, Q1 2019 (as % of GDP):

2.      Households: 59.8%

3.      Non-financial corporates: 91.4%

4.      Gov't: 87.2%

5.      Financial corporates: 80.8%

Collateralised Debt game has been played extensively by all the banks. The list as follows:

Key Players in this Collateralized Debt Obligation market are:–

• Citigroup                                                                           
• Credit Suisse
• Morgan Stanley
• J.P. Morgan
• Wells Fargo
• Bank of America
• BNP Paribas
• Natixis
• Goldman Sachs
• GreensLedge
• Deutsche Bank
• Barclays
• Jefferies
• MUFG
• RBC Capital
• UBS

US economy is entering into an election phase and without any election, it is well clear that Mr Donald Trump will be the President.  So the trade war and debt pile up story and lower interest rates will keep playing its game since Mr. Trump is backed by the US capitalist to create a bubble of the explosion.

He is strongly supported by capitalist and business-centric minds. Those who will propose taxing the super-rich and going for tax cuts for the middle class and lower-earning group of people there will be a significant risk for those politicians to ruin their political life. The vote will go to the ones who will support in making the super-rich to become richer and making wealth transfer tax free and further making consumer suffer from more consumption cost.

The economic numbers will be cooked to portray a robust economic growth but in real terms, it has weakened the fundamental of the US economy post-recession. If a recession comes I find the biggest threat which the global economy faces is the lack of leadership to control and manage the US  has filled up the pockets of the corporate US by lowering taxes and negligible investments in the economy. Buyback of shares stood at $800 billion. Corporations were spending too much of their free cash flow. 

This means that the benefits of the Tax cut and low-interest rates benefit are not passing into investing assets to create long term economic growth. 

The growing debt and falling revenues and growth are going to end at one point and that point is going to be the beginning of Recession.

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INDIA ROAD TOWARDS 5 TRILLION ECONOMY SERIES 1...Climate Change

Climate Change based economic growth is an opportunity for the GDP growth of many economies. Closing down the traditional models and building new energy-efficient models help to create economic demand for goods and services. The further improves employment and improves per capita income of an economy. Efficient cost management and utilization of resources under climate change help an economy to grow in a paradigm in the long run. In these articles, we will present in phased manner various segments which will draw the attention towards the road of achieving India’s dream of Rs .5 trillion economies.

The battle for climate change is between the economies which are focusing to become a developed economy and developing the economy. The responsibility weight is more on the developing economies to move faster towards green energy.

Coal the based economy is highly inefficient cost burden on an economy. When traditional economic modes are replaced with energy-efficient one's employment and GDP growth through ancillary industries growth justifies the long term growth of an economy.

The world the fastest-growing economy is aggressively moving in term of green energy based GDP. According to the Energy Information Administration, natural gas is displacing coal and comprises about 62% of all-new generation. Wind and solar made up 21% and 16%, respectively, all in 2018. And coal is falling to its lowest use in decades, expected to be 24% of electricity production in 2019.

But a country like India is focusing on coal-based consumption model and is expanding the coalfields is a sudden shock for the global economy. India and all those countries where GDP growth is going to pick up the demand for clean energy is going to be highly in demand. Coal-based power supply will only create more pollution for the country.

The dream of Rs. 5 trillion economies of India cannot be achieved without clean energy. Green energy is going to be one of the key contributors to this 5 trillion economy. The traditional model of energy supply will not create faster growth.

 Deforestation and coal-based models of energy supply will create the only devastation for the economy. In recent data, it has been found that Captive coal mines produced 25.1 million tonnes of the fuel in FY19. This is 55% higher than FY-18 numbers. Further Auction of new coal mines is going to happen soon. If a climate reacts opposite to the normal mode then framing and other segments of the economy will be impacted. Coal Mines and deforestation are already played the damage game on climate. Agri outputs will be impacted severely in the coming years if brakes are not placed on coal mines and deforestation.  Unless the government comes up with rules for a reduction in mining, focus towards green energy will not build rapidly.

We are not investing properly in green energy-based models. The TAXATION benefits need to be introduced in several layers of the economy so that renewable and green energy-based models are adopted and consumed.

The adoption of 5G in the country will spook the demand for energy significantly. The power consumption will take a new direction as faster internet will open up many technological business models replacing traditional models. At the same time without green-based energy models, climate change will spook inflation in the long term.

Many countries particularly Islamic countries are investing in Green Energy segment. In Malaysia, the world’s very first corporate green sukuk worth 250mn ringgit ($61mn) was issued by Tadau Energy in early 2017 to co-finance large-scale solar construction. Indonesia became the first country in the world to issue $1.25bn of sovereign green Sukuk in 2018 and another one in two tranches at a total value of $2bn in February 2019. Islamic finance will be considered as one of the primary financing strategies for green energy projects, in particular in the GCC, Jordan, Egypt, Malaysia, Indonesia and Pakistan. 

 Green energy-based audit practices need to be formed where taxation benefits will be properly passed out to the corporate. Taxation benefit for corporate will shift the focus from traditional power consumption mode to power-saving mode. Taxation benefit will be given after a successful audit have been done. Once the auditing standards for taxation benefit are framed for green energy the focus towards power saving and energy efficiency models will grow.

The auditing standards need to be designed and upgraded so that proper measurement of the implementation of GREEN ENERGY is accessible and the same benefit is passed to the company.

The benefit should be for a decade so as to change the society completely into green energy.  Green energy is going to be a huge contributor to the GDP.

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Mutual Fund Distributors on the Verge of Death Series 2

How many times one IFA have to face rough words of his client? It was not a mistake being IFA, it sold the product and then the client suffered loss.  When IFA started the business he was told look into the Offer document to check the objective of investments. Now does IFA need to become a portfolio analyst before recommending any product? An IFA cannot get back to school to study now. Falling revenues and loosing clients have now become now inevitable.

The revenues have fallen and IFA’s are already in problem with the current mess created by the AMC. To whom I shall write or address to get a solution to my matter. The client wanted returns and we gave them products. But managing the products and generating a return from them is the work of the AMC and their professionals. Then why I should lose the client. What explanation should I give being an IFA for the fiasco in debt products? The current scenario will push these clients towards Bank FD  and will never attract Mutual Funds to them. 

If an IFA  go to AMFI then indirectly he will file the complaint to those who about AMC and the irony is that he will submit the complaint to the AMC Heads about themselves only. AMFI is run by the AMC people and by the IFA community.  Why does the AMFI need AMC people to represent to the government why can’t the AMFI be headed by the IFA community?

The financial market is under a critical phase.  Mutual funds are no longer Sahi hai. Last 1 year we all faced the burn of IL&FS, ZEE and then few NBFC stock problems. Long back we faced Amtek Auto problem and few more which I don’t remember.

The performance of FMP has also been impacted.  Credit Risk-based papers are best suited for well-defined products under the category. The strangest part is that Liquid Funds which should have a maturity of 90 days to 180 days in terms of papers being invested how they get into negative return phase. This is because those risk-based papers were held in those Liquid Fund product portfolios. The most surprising part is that same risk-based paper has been included in every category of Debt Mutual fund.  How can this be allowed? Why did not SEBI interfere into the portfolio being managed by the Debt Mutual fund category?

The debt fund is collapsing due to the inbuilt structure of products where the papers itself are no longer plain vanilla products.  When the unlisted firms in the Zee group which borrowed money, pledged the shares in listed group companies as collateral. When these companies defaulted happened, and some creditors sold the pledged shares, the share price crashed. So creditors could not recover the full value of their outstanding loans.

We all know that DSP, ICICI, Reliance and few more AMC brings a huge number of FMPs. Now in order to generate a return from these FMP ones needs debt papers and lack of papers brings the Fund management team to look for poorly rated papers under the Name of Risk-Based Debt paper.

The ZEE group story will occur with many more companies as on when their times come.  Debt Mutual Funds are on the tip of Iceberg. The Fund managers and AMC greed of beating the players within the circle and generating superior returns have created this mess.  

The biggest problem as on date is that the NBFC sector is reeling and hence many ancillary industries will suffer. This will impact the debt instruments floated by them as they have commitments to payback and this is where Debt Mutual Funds faces problems.

Well, we currently don’t know how much-leveraged debt holdings are there in the debt mutual fund space. But if any IFA loses any clients who will take the blame and who will compensate?

Coming back to the question where an IFA will complain.

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