Think Flat

I am not sure whether some of the regular visitors to this site recall my posts on innovations in consumer lending, back in March of this year. I had discussed the emerging model of peer-to-peer lending, pioneered by firms like Prosper.com.

In the final post of the series above, I had painted a potential scenario wherein peer-to-peer lending sites find a way to securitize and sell the loans transacted; I was happy to read a recent report in the American Banker (read here – subscription may be required) which mentioned that Prosper has filed a registration with the Securities and Exchange Commission in the US to develop a system  enabling people to resell the loans originated through its website.

While I am personally happy that a trend I had predicted has been vindicated by actions in the market, this piece of news is probably very timely, given the credit-market crisis that is unraveling around us. It reinforces the fact that the Internet is constantly driving more innovative and efficient ways for markets to exploit newer transaction opportunities. It also signals the fact that Internet based business models can build resilience in traditional markets.

Prosper’s strategic move may have a limited impact in the short term, given that it currently caters to niche, high cost, individual loans; however, larger financial institutions focused on retail lending need to watch developments in this area very carefully!

Posted by Balaji Yellavalli at 05:41 PM | Permalink | Comments (0) | TrackBacks (0)

Subsequent to my earlier posts, there have been further developments in the areas of consumer payments and consumer lending that I thought I could share with you.

Amazon.com has announced its intentions to jump onto the ‘consumer payments’ bandwagon by offering payment services, like Google and Paypal, to its customers. Many online sources report that  Jeff Barr, Amazon’s executive who heads their Web Services Group apparently wrote in a company blog last week, ‘Since we've been processing payments for over 10 years, we have a really good understanding of the cost and fee structures which are associated with each type of payment method.’

On a related note, there have been a few comments to my earlier posts, decrying the excessive focus on innovation in service delivery as opposed to service creation. While I agree in some part to that point of view, I also believe that in a Flat World, execution excellence is what will differentiate the winners from the also-rans; and execution excellence is about delivering not-so-innovative concepts in a rapidly scalable and cost effective manner to the market. Paying for purchases is not necessarily an innovative area; but bringing in efficiencies to offer superior ‘one-click’ experience at better cost structures is something that has changed the way the world shops! And the capabilities to execute on such initiatives are not necessarily born out of 'legacy' retailing or banking experience, but from a better understanding of how customers behave and the ability to model their adoption of newer technologies.

The other update on innovations in consumer lending (Read my older posts here): Prosper.com announced last week that it will take its peer-to-peer lending model to Japan through a joint venture with a local financial services firm (I could not find the original press release on Prosper’s website, but here is a related report). This follows Zopa.com, another UK based peer-to-peer site, announcing its US foray and UK’s Virgin Group investing in an emerging US peer-to-peer lending site. In the context of the ongoing happenings in the global credit market, it is interesting to see that on the one hand, while Central Banks across countries are challenged to walk the delicate path of restoring order to the financial system, peer-to-peer lending sites are quietly expanding their reach! I am not attempting to strike a comparison, given the magnitude of the larger global crisis, yet, I strongly feel that peer-to-peer sites offer a lesson to those clamoring for safety-nets to irresponsible lending (and borrowing) behavior!

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By Badri Devalla, Sr. Principal, High-Tech and Discrete Manufacturing

Supply chains are lengthening as everyone knows - we are connecting far removed markets and suppliers, moving far more information (buying a car at a dealer in your zip code vs viewing models and building a personalized car online), and moving a lot more inventory over larger distances (So much so that there’s a Think Local movement gaining root in the left coast of the U.S.)

Continue reading "Shrinking the expanding supply chain" »

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Badri Devalla, from our high-tech business unit, was recently discussing how the use of information in supply chains is changing. So I've asked him to share his thoughts on this blog.  

Badri is a Senior Principal for Infosys solutions for the High-Tech and Discrete Manufacturing industries.  He holds a Ph.D. in Computer Science from Texas A&M.  He is particularly interested in how companies use consumer information for better product, supply chain and customer operations.

Posted by Richa Govil at 09:20 AM | Permalink | Comments (0) | TrackBacks (0)

Sandeep Dadlani's previous blog generated quite a bit of discussion (some on the blog and some 'offline') about relying on inuition vs. analytics to make decisions. In business, as in life, you never have perfect information (by that I mean complete and accurate information about everything you need to know to make a particular decision).

Whether you're trying to figure out your way through unfamiliar streets or trying to trade-off new product features, you are forced to make do with imperfect information. It could be that the needed information simply does not exist (or more accurately, it is not captured anywhere), or you don't have the resources to collect/analyze the information or you don't have the time to do it.

What if I were to restate Sandeep point: when does it make sense to seek (and invest in) better information and when does it not? IT professionals are adept at putting together 'business cases' for IT investments. What about business cases for information analytics? And how do those business cases change if the cost and management attention required for analytics becomes a fraction of the original estimate through the use of global resources and advanced technology?

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Many of us have read the Malcolm Gladwell best-seller “Blink” recently and loved it. The book describes several situations in business and life where we take important decisions intuitively and instinctively rather than by deep analysis. It also then goes onto argue that intuitive gut-based decisions are more effective than decisions based on deep analysis. Gladwell is also the author of other best-sellers like “The Tipping Point”, “Wisdom of Crowds”, “Undercover Economist”.

Continue reading "Do Not Blink!" »

Posted by Sandeep Dadlani at 02:19 PM | Permalink | Comments (5) | TrackBacks (0)

My previous blog on Customer Relationship (CRM) and Customer Data Integration (CDI) generated some interesting comments. While many industry insiders did agree on the importance of CDI and “putting the cart before the (CRM) horse”, there was healthy skepticism around the effort and investments involved in a potential CDI implementation – is it again one of those big, hairy, audacious monsters which puts organizations at risk during implementation?

Well, to answer that question simply, no, it is not. But let me not get into a spiel on CDI implementation; instead, let us take a detour and touch upon technological developments in the flattening world around us, which if leveraged in an organizational context, can significantly bring down the implementation efforts, costs and risks for complex technology programs.

My long time friend and colleague, Sandeep Dadlani wrote a blog recently, right on these pages, extolling the virtues of 'Linked In' and how it can jump start networking and collaboration even within a large and rapidly growing organization. Think about it, networking and collaboration tools on the Internet have figured out the art and science of connecting and integrating public data across a mass of individuals. These tools seamlessly and silently update, in real time, any changes in people's professional or personal lives, based on individual preferences. And here, we struggle to link silos of customer, employee or any other business critical information, when everything is right under our noses, within the firewalls of the organization!

Continue reading "Web 2.0 and The Network Based Organization" »

Posted by Balaji Yellavalli at 04:35 AM | Permalink | Comments (1) | TrackBacks (0)

by Balaji Yellavalli, AVP, Banking and Capital Markets

The other day, the CIO of a leading consumer automobile finance company (which also offers other diversified financial services such as credit cards, banking, mortgage loans, etc.) told me that they cannot pull the data on an existing customer, say, a credit card holder, when she approaches the firm with a new transaction, say, a home mortgage or an auto loan. Something we would assume as the most simple or obvious thing that one can do in a post internet, hyper-connected, Flat World! These issues may not manifest as tangible or substantial cost escalations in the short run, but ultimately they are bound to add up and bring down customer profitability.

Why is this concept so difficult to implement, if its benefits are so patently obvious to me as a customer?

I see two main reasons. One, we all know very well: Financial services firms have grown through mergers and acquisitions over the past decade, which have brought "legacy baggage" with them.  Business processes, technology infrastructure, organizational politics, turf battles and sometimes even genuine customer privacy concerns have come in the way of sharing data across lines of business.

The other reason is not so apparent: Ironically, it is the evolution of a discipline and function called Customer Relationship Management (CRM) over the past decade or so.

CRM was purveyed as a panacea for integrating all customer touch-points and provide insights into customer behavior. For sure, CRM streamlined customer interactions. The call center or customer contact center, became a ubiquitous part of our daily lives, whether we wanted to add on a new service or to find out why we have been billed erroneously. CRM provided the glue to unify the front-end experience across both these channels and of course any other physical channel, like a bank branch or an ATM.

However, in doing all that, CRM has created for the organization, two new challenges.

Continue reading "CRM: Putting the Cart before the Horse" »

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Two meetings last month remain etched in my memory for different reasons. Both with CIOs of  retailers who are facing a particularly challenging environment.

First let me point out the similarities. Both retailers are probably number two or number three in their sub-sector and have recently declared dismal results while the number one retailers in their category continue to buck industry trends and declare fantastic revenue and earnings growth. Both these retailers are under pressure to cut costs and at the same time transform the company. Both these retailers have relatively new CEOs whose mandate is to turnaround these companies. Both CIOs have been with their companies for over a decade.
 

So what does this mean for the CIOs? The two CIOs had absolutely different ways of dealing with what seemed to me fairly adverse circumstances.
 

The first CIO, lets call him CIO A…. figured out a way to consolidate his infrastructure spending and strike a pretty neat outsourcing deal with a global major reducing his net operating costs, resulting in lower SG&A. Lets ignore the specifics of the outsourcing deal for now but prima facie, the outsourcing deal has helped him free up headcount for either selected layoffs or to focus on strategic initiatives or both. The net financial impact is positive and he looks like a hero for his CEO. His CEO has gone on record stating that they will not look for further cost reductions in IT since it is so pivotal to the future growth of the company. Masterstroke, some would say….but some further digging may reveal that the CIO A has barely started to focus on how IT can really help turnaround the company. The company faces plaguing issues in areas such as customer service and customer loyalty. The speed at which he moves to mine the already available customer data to bring a customer-focused revolution in the company will be a direct measure of his success going forward…. From what I know of this CIO, my bet is that he will move forward aggressively using the same confidence and personal commitment as he showed in the outsourcing initiative. He knows that the biggest difference he can make is initiatives that directly affect customer service and customer loyalty.
 

The second CIO, lets call him CIO B…is struggling. Faced with similar circumstances, he is dabbling with initiatives around outsourcing, multi-channel management, master data management, etc. but is not truly committing to either. He is waiting for the new CEO to provide direction and will move as per his priority. Politically Smart? I don’t know…. I assume his new CEO will be looking towards his next rung of leaders (who have been around longer than him in the company) to make bold suggestions and take bold steps to take the company forward and make him look good. This retailer for example has no way of controlling how they deal with customers across multiple channels – store, services, website, etc. Any quick initiatives around this area are bound to be received well in the market and will boost the company’s topline. But the wait-and-watch approach so far deployed by CIO B will not serve this company well. I will refrain from betting on this one till we see how the company moves forward.
 

The two stories above highlight a couple of strong trends
1.       CIOs can be as powerful and as self-initiated as they want to be….particularly in difficult times to help reduce costs and improve sales/margins. It’s up to the individual CIO to take the proverbial bull by the horns to make something happen
2.       Outsourcing (as a quick fix to cut costs) and customer-service /loyalty type initiatives are being used to show quick results to Wall-Street. Other structural issues particularly supply chain issues are being addressed by more long-term transformational initiatives. Those are important and should be addressed in parallel but more on that in another blog….
 

by Balaji Yellavalli

I got many interesting responses to my previous blog stressing the role of technology “engines” in meeting emerging regulations related to Anti-Money Laundering (AML) and illustrating the collateral benefits of such moves on customer experience.

I envision two critical “calls to action” especially in the context of regulations such as AML, Know Your Customer (KYC) and others that keep popping up every time a new and perverse way to engage in criminal activity is uncovered.

One, financial institutions need a strong “Unified Compliance Solution” (UCS) approach to integrate seemingly disparate compliance-monitoring activities across global lines of business. A UCS approach not only helps in linking apparently unconnected transactions to establish a potentially suspicious pattern and file a “Suspicious Activity Report “(SAR) with the regulators. It reduces time for investigation and focuses staff energies in going after the “bad guys” as opposed to disrupting genuine day-to-day transactions. A UCS also helps in integrating customer data which could help in gaining better insights into customer behavior, for improving customer experience and ultimately, customer satisfaction.

Infosys’ experience with leading financial institutions has borne out the fact that while Regulatory Compliance may be the impetus for a UCS, it is not the end game. A well-designed UCS can be leveraged for competitive advantage and ultimately, for winning in the turns, based on superior customer insight!

I know a top Wall Street Firm that consistently outperforms the competition by combining regulatory compliance initiatives with customer data integration. It is in an enviable position today because of investing ahead of time in aligning and unifying disparate silos of organizational information across their global operations. 

The second call to action: it is assumed, when we discuss such topics, that the quality of transaction data generated by a firm’s systems is clean and reusable for further analysis. Unfortunately, it is not always the case.

As the complexity of transactions, coupled with their global spread increases, so does the scope for errors in collating and reporting. Independent studies by leading analysts have estimated that the business losses due to poor transaction data quality are in the order of US$1 billion to US$ 1.5 billion on an annual basis. It is ironical that financial institutions are actually losing money due to poor maintenance of data and information within their organization, far from making money from information! Hence, it is important to install strong data quality systems as an intermediate step before building the UCS engine.

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by Balaji Yellavalli

Recently, I attended a conference on “Money Laundering” in New York. I was surprised to meet more than 500 people representing banks, financial institutions and government agencies on a cold Monday morning to discuss a topic that one would normally associate with the underworld! Well, to be fair, the conference was to discuss the emerging regulations to curb Money Laundering or “Anti-Money Laundering” (AML) as they are collectively known.

How is AML relevant in a Flat World? Well, just as there are benefits of the flattening world, there are unscrupulous elements in society that take advantage of business and technology advances to perpetrate financial crimes. Money laundering is potentially the tip of the iceberg – it may be a conduit that feeds into international corruption, drugs and in the post 9/11 world, terrorist financing. In other words, fraud can be an unanticipated outcome of the Flat World, if regulators and the private sector do not work together in a timely fashion to detect and weed out the bad elements of society.

Interestingly, this conference was the sixth or seventh in an annual series and elicited active participation from well-known top tier global banks and investment firms as well as US regulators from Washington DC. A leading Swiss Bank executive said on a panel that they use “Artificial Intelligence” based algorithms to sift through terabytes of customer transaction information to detect suspicious patterns and uncover potential wrongdoing. At the same time, the bank maintains the classic “Swiss” tenet of privacy and customer anonymity. Well, I can imagine how difficult and complex it can get!

I may be wiring some money from the US (where I live) to India (where I was born) to invest in a holiday home for the family. I may have done that after juggling my savings, e.g., selling a portfolio out of my retirement accounts or liquidating my time deposits held with US banks. So how do the regulators and banks ensure that this is a genuine transaction? Do they know that I am just an innocuous consultant working for a large global professional services firm or a front for some other suspicious person or transaction? Not to scare you, but it illustrates the challenge government agencies and financial institutions face in linking the myriad, seemingly ordinary transactions that people conduct in the course of their daily lives, to suspicious and potentially dangerous activities.

The challenges can be a minefield, fraught with financial risks for banks and financial institutions.

Now, going back to the Swiss bank illustration, it is about mining existing customer transaction data globally and across the enterprise to uncover patterns; how does one go about doing that?

Continue reading "Anti-Money Laundering in a Flat World" »

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by "Radha" Anantha Radhakrishnan, AVP, Infosys Retail and CPG Business Unit

I have always been fascinated by the power, largeness and might of an elephant and wondered many a time how this power could be unleashed many folds, if it can be more agile and made to dance, while retaining its might and majesty.

Having worked in the Retail and CPG industry on the business side as well as consulting side over the last many years, I have had the opportunity to see the sheer magnitude of effort, energy and time which goes into collecting and investing in information across the many different players in the whole value chain.

There are so many types of data  – sales, inventory, consumer, shopper, price, promotion, deals, orders, forecasts, service levels etc – adding up to billions of terabytes of data.

These billions of terabytes and the investments made to continuously collect them form the retail industry "information elephant”.

In the increasingly flat world marked by palpable emergence of new types of consumers (Prosumers, Transumers, Millennials et al), multiple new channels, new store formats, increased competition along with emerging new geo markets (China, India, eastern Europe etc.), each player in the retail value chain needs to figure out the best possible way to make money from the information elephant.

For the information elephant to dance and for the players in the retail value chain to make money from it, there are many opportunities and challenges.  Surprisingly, none of the big ones have to do with technology. They have to do with changing mindsets to think “flat world”:  Think enterprise, think actionable insights, POR (Point Of Relevance) instead of POS (Point of Sale). 
 
They have to do with thinking about “information turns” just as retailers are used to thinking about inventory turns.

• How well is the data collected been used meaningfully across functional silos within the enterprise and leveraged across the value chain?
• Is this data converted to information, knowledge and actionable insights?
• Is the actionable insight made available to the appropriate people at the “Point of Relevance” (POR) to be able to decide?
• Is the company’s focus on information storage rather then “information turns”?

In the flat world with dispersed and diversified value chains on the one side, leading to decreasing economies of scope and scale, and on the other side a consumer base which is increasingly stating that One Size, Color, Shape, Taste will not Fit All –- the players who can make their information elephant dance are going to be the winners.

Everyone who matters in the value chain has built its own information elephant, painstakingly at that. The time has come to make that elephant dance and increase the information turns –- It is the only way to succeed in a flattening world.

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Recently, I came across an article in "Grocery Headquarters", a grocery retailer publication, quoting Anantha Radhakrishnan of Infosys.

In the article, he says that retailers and suppliers should focus on using information to understand the "point of relevance", the moment at which the consumer is making a purchase decision, which might not necessarily be at the point of sale.

To quote the article:

"'You have a whole set of good technologies like business intelligence and portal technologies, which are the enveloping layers, and you have three crucial technologies -- wireless, RFID and VoIP -- that can all be leveraged in a beautiful way to orchestrate delivering this information and making money from it by reaching it down to the point of relevance for the consumer,' he says.

"Obviously, incorporating these technologies comes at a cost, but experts say making an investment in analytics should not be seen as a barrier to leveraging consumer data. Instead, they say, grocers need to use these technologies in order to see a substantial return on investment by boosting shopper loyalty.  

"'The important thing is that the ROI exists, because you've already made a large investment in information with consumer data,' says Radhakrishnan. 'The analytic technology is not the killer in terms of investment. You already bought an elephant, which is a data warehouse. You now need to feed the elephant in order to keep it alive and get better results from having invested in it.'"

Intrigued, I have asked him to share more of his thoughts on this blog.  But let me introduce him first. 

Anantha Radhakrishnan, “Radha” for short, is an Associate Vice President and key member of the management team for Infosys' Retail, Distribution and Consumer Products business unit. He is an industry veteran with two decades of experience in the global consumer products and US retail industry.  Radha has held various responsibilities across multiple business functions such as category management, supply chain, marketing and customer service. At Infosys, Radha works with retail and consumer products clients, helping them design, implement and realize benefits from large scale transformations.  He holds an MBA from Indian Institute of Management (IIM) at Lucknow, and a BE (Honours) in Engineering from National Institute of Technology (NIT), Tiruchirapalli.

Posted by Richa Govil at 04:09 AM | Permalink | Comments (0) | TrackBacks (0)

Recently I met Sharad Elhence who leads the Product Operations practice at Infosys Consulting.  He shared some interesting thoughts on information usage (or lack of it) by corporations.

He says:

"Malcolm Gladwell’s article “Open Secrets” in the January 8, 2007 issue of The New Yorker made an interesting read on my long flight from Frankfurt to Bangalore last week.  It provided a different perspective on the Enron scandal and Jeff Skilling’s prosecution.  Did Jeff Skilling and other Enron executives withhold critical information from investors?  Or did they share as much information as they could but nobody fully analyzed and interpreted that information?  In other words, was the core of the Enron scandal a puzzle or a mystery?  Malcolm cites the distinction between a puzzle (situation where we don’t have enough information available to us) and a mystery (where we have all the information available but the interpretation of the information requires analysis and judgment) from the work done by Gregory Treverton, a national security expert.

"What does this have to do with the Flat World ideas?  I believe that the fundamental shift of making money from information is all about understanding the difference between a puzzle and a mystery.  In the business world, there are a many more mysteries than puzzles.  Collecting more information may help solve a puzzle or two but monetizing information will come from having the mindset of solving a mystery.  Analyzing the data that companies already have collected to gain insights about their markets, competitors, customers, channels, products and operations is essential to delivering ROI (return on information).  So let’s unravel the big mysteries in ours and our customers’ businesses and if we find a puzzle along the way, let’s gather the missing information to solve that puzzle and then get back to the bigger mysteries and the associated big payoffs."

Sharad Elhence leads the Product Operations Practice at Infosys Consulting, helping clients in strategy, process and technology issues related to improving end-to-end supply chain performance.  He has more than 18 years of consulting and leadership experience.  Most recently, he was the Chief Operating Officer for an early stage provider of enterprise performance and knowledge management solutions.  Prior to that he was Vice President of Strategy at i2 Technologies and a management consultant with McKinsey & Company.

Posted by Richa Govil at 02:21 PM | Permalink | Comments (3) | TrackBacks (0)