I was speaking to a friend who got into building a hotel. This was his first construction-linked project. When he started, he had estimated the cost project to take about 2.5 years and cost Rs X. It took him 4 years and cost him 2X. At every stage, he had to pay off people. Every permission, every slab cast had a price. Sometimes, the permission givers were not upfront in their demands, and these caused delays. My friend found only one honest person in the entire system through this period.
Even now, he has to keep cash (black money) readily available because many of these ‘inspectors’ come for routine visits and demand money. Pay up or else…! Even the garbage that needs to be picked up (for which we all pay our taxes) has been added to the list of payoffs.
My friend told me corruption is a common occurrence in every business that deals with the government. He said I was lucky that I was in a software-driven business.
As I said earlier, this is not the India that we set out to create in 1947. The problem is that the rot starts at the top.
We all groan about the high prices of real estate in India’s cities. Rates in South Mumbai have reached Rs 75-80,000 per sq ft ($1,800 per sq ft). Have we ever thought about why that is the case?
In urban areas, real estate is one of the biggest money generators for politicians. About 25-30% of the money needs to be made to politicians and the corporators, starting from the land, the construction contracts and then the various permissions. This is because some of the chief ministers also have to work on targets – sending money to their political masters in the capital. (A few years ago, I had a story about how one CM candidate pipped the favourite by offering a higher minimum guarantee to Delhi.)
In resource-rich state, it is mining rights. In land-rich states, it is real estate cuts. And We, The People of India, pay the price everytime and everywhere.
This story is about how innovative our political parties are becoming when it comes to buying votes.
In the early days, voters would be paid an amount (say, Rs 500) to vote for a candidate./ The payment was made prior to voting.
Then, the payment was linked to outcome. 50% was paid prior to the vote, with the balance on success (i.e, if the candidate won).
All these payments were made in cash. Given the crores of voters who need to be paid, this entailed moving a lot of money. (Think: If you faced this problem as the boss of a political party in charge of payoffs, what would you do?)
The ingenious solution lay in eliminating cash payments entirely. Now, payments are made directly to a person’s mobile number — as a topup! All the party has to do is to send its bags of cash to the mobile company and provide it with a list of phone numbers to add the amount to.
This is how our ‘democracy’ is compromised.
A large company won a contract for a waste management project in a global tender. Everything clean so far. Then, it started. Party 1 called up for Rs 8 crore. Had to be paid. Party 2 called up for Rs 10 crore. Paid. Party 3 called up for Rs 7 crore. Paid.
Then, a senior leader from Party 3 called up for a central fund contribution of Rs 10 crore. Company refused to pay. Letter comes from a government ministry stalling the project. CEO of the company is verbally abused when he goes to meet the senior leader and told he has no other choice but to pay. After the payment is done, another letter comes clearing the project.
Even though one knows corruption is happening, when I heard this story first-hand from a friend, I was furious from the inside. But that fury is countered by frustration knowing we cannot do anything “the system.”
I was having a conversation late one night with a few friends and relatives, whom I was meeting after a long time. Inevitably, the topic shifted to politics. One topic that kept coming up was that of corruption – at the high levels and at the low levels. Its pervasiveness has now become so deep and wide that we accept it as part of the operating environment. We are no longer jolted out when we hear stories of corruption.
It was not like this once. It should not have been like this. It need not be like this for the future.
Before we get to that, I want to share some of the stories – big and small. For obvious reasons, I will not put the names – just how it operates. All political parties are guilty of this crime. And every person gets away with it. Over time, the system is such that the honest people are almost weeded out of the system.
From a post I wrote a year ago:
Every company, however small, must develop a “numbers discipline” when it comes to revenues and costs. For much of my business life, this is not something I bothered to do – and so am assuming that there are plenty others like me! Hence there is a need to reinforce this point.
I used to think that (a) small companies could not estimate accurately about what numbers they do each month or quarter since business is generally unpredictable, and (b) it didn’t really matter whether we met whatever targets we set or not. I was wrong on both counts. And habits once formed become hard to change. Over time, missing numbers becomes an acceptable thing, and that culture then sets in – both on the sales front and on the expenses side.
How can the Uns of India become United? And what can this unity do?
For this, I recommend reading these two posts by Atanu Dey:
As Atanu puts it: “It is possible that the 150 urban parliamentary constituencies of India have an aggregate of 20 million or so people who are sensible, educated, middle-class, urban voters. If they can be consolidated into a “vote bank” and persuaded to vote en bloc, it is possible that they can swing elections and be a force to contend with. The idea is to create a constituency which we call the “United Voters of India.””
Creating a better country is, quite literally, in our hands.
We are the People of Middle India. We are the Uns. Unregistered voters, Unconcerned citizens. Undecideds. On election day, we take a day off. So, why should our elected leaders care about us?
Imagine if it could be different. Imagine the Uns coming together to create a Votebank. Just like some of the communities do in India. (Take a look at what is happening in Bihar and who holds the balance of power.) Imagine taking up a mission to get 50 good people into the Lok Sabha next elections. If the DMK and TMC can wield so much power that their 15-20 MPs, imagine what power can be exercised with 50!
Simplistic, Yes. Doable, Yes. For that, the Uns have to become the Uniteds.
Now that we have finally executed well during the Commonwealth Games, it is time to hold those responsible for the mess and loot prior to the games accountable. And on paper, we have various inquiries that have been instituted. The Organising Committee has already been indicted. The reports will be submitted, a few will be held guilty, asked to resign, sent into hibernation for a few years, and then made Governors.
What no one will then question is how such loot could have happened without involvement from the highest authorities in the land. Middle India would have moved on – because corruption has now become an acceptable part of our culture (just like jugaad). We paint all politicians with the same brush, and so we don’t really care. The looters have enough money to buy out and muzzle all voices for many generations to come.
We are so naive, so gullible. Like we were in the 1950s.
As I was reading one of the books written in the 1960s about India, I couldn’t help thinking about the challenges and the opportunities that people must have felt at India’s Independence. True, we started off Freedom with plenty of challenges — Partition, Gandhi’s assassination, Kashmir and the Princely States integration into India. It took a few years to sort them out.It wasn’t even clear at that time that India could stay together as a single country.
So, when the 1950s started and most of the problems were behind us, there must have been a sense that finally our destiny was in our hands. Looking at India now, I cannot help feeling that we made more than a few wrong turns as a country during that decade. None have hurt us more than the lack of investment in primary education. As my friend, Atanu Dey, once put it, “All we needed to do was to educate one generation of Indians.” And we failed them. That blunder continues to haunt us even today – and we still haven’t got it right. And we still don’t hold those who made the blunder accountable.
It happened quite literally to me. I had gone to Metro and was walking down one of the side roads near St. Xavier’s High School and College. And I saw Raj Mahal, the restaurant. Long forgotten, it was a place I used to frequent while at school every once in a while. And so for old time’s sake, I went in, sat in the seemingly unchanged restaurant, and ordered a Bread Pakoda. It was almost going back in time three decades!
As I walked on that lane, I came across the Second Hand Bookshop. That lane was full of bookshops, from what I remembered – old and new books. (The other good place for buying used books was on the street at Fountain.) And as I went inside and browsed some of the books, I came across the Indian History section, and picked up two books on India written in the 1960s for about Rs 60 apiece.
Memories have a funny way of coming back!
From a post a couple years ago:
The 5 Phases in the life of a Customer Relationship:
- Non-Customer and Competitor’s Customer: This is the universe of customers that need to be targeted. They can either be first-time customers in a category, or they could be competition’s existing customers. Need: Branding and Lead Generation
- Future Customer: This is where a subset of the non-customers have become interested and could be prospected to become a customer soon. Think of this as ‘dating’ or scouting. Need: Engagement
- New Customer: This is where the customer has just begun a relationship (‘marriage’). The first month or so can be thought of as a ‘honeymoon’ period with the customer. Need: Onboarding
- Existing Customer: This is where the customer needs to be retained, delighted and harvested. Else….think ‘seven-year-itch’! Need: Servicing and Engagement
- Ex-Customer: This is where an existing customer leaves to become someone else’s customer (‘divorce’). Need: Branding and Lead Generation
The opportunity in India lies in thinking how the mobile can be leveraged at each stage of the customer relationship.
What is needed is the equivalent of an i-mode for India. While i-mode’s 91% payouts made Japan the pioneer in mobile data, my belief is that a model wherein content and service providers could get 70% of the end-user payment can help drive data services in India. While AppStores do offer that, the “app market” in India is still quite limited. The challenge for AppStores is collecting money.
Here, then are the parameters of the problem that need to be solved:
- Collect money in small tranches (say, Rs 150, or $3) independent of the mobile operator for a collection cost of no more than 10%. This problem is not as simple as it sounds – most Indians do not have credit cards, don’t use their debit cards, and some many not even have a bank account. The lowest common denominator they all have is cash. What is needed is akin to a “cash conveyor belt.”
- Pay out 70% of the end-user price to the publishers (content and software)
- Run a profitable business with a gross margin of 18% (20% less 2% service tax)
The opportunity in India is to target 100 million users who are willing to pay Rs 50-100 ($1-2) per month for mobile data services. No one other than the mobile operator has solved the problem of collecting and billing for small amounts of money. India needs an alternative micropayments and publishing platform to help drive the mobile data ecosystem. Therein lies the biggest set of opportunities for intermediaries, content providers and software developers.
One clear opportunity in India is in the eCommerce space. As the Internet user base grows, the convenience of shopping from one’s home (or office) combined with attractive deals will grow the market. The key determinant for success for hard goods will be the efficiency of the value chain (logistics of speedy delivery). Winners are already starting to emerge in the space, but these are still early days.
The second opportunity will emerge in the mobile data space. With the combination of high speed networks (3G), smartphones with high-resolution displays in the $100-$200 space (watch for Android to make a big impact in the coming months) and nearly-flat-priced data plans (Rs 100 per month for almost unlimited usage), the mobile data space is going to see rapid growth in the coming years.
One obvious monetisation approach is advertising. But, the bigger opportunity will come from consumer micropayments. What is needed is a revenue share model akin to the AppStores – where 70% of what end users pay goes to the application developer. In India, the figure for VAS is much less than half of this, on average. This is what needs to change to create an innovation cycle that can drive a new billion-dollar market.
To make money via advertising, the Internet opportunity is about 10X the mobile opportunity today in India. But the challenge is that the bulk of the money in this space goes to Google and Yahoo (with Facebook likely to be a strong contender in the future). That leaves a much smaller quantum for the local Indian companies.
In addition, the cost of selling Internet advertising is also high – should one choose not to rely on the ad networks (Google AdSense, for example). Ad Networks provide the lowest monetisation for a portal, so over time, there is little option but to build one’s own sales team. And that is an expensive proposition.
In the mobile space, the operator is the enabler for almost all of the MVAS revenue, and as much keeps the lion’s share of what end users pay. Again, this leaves much less money on the table for the content and service providers than what they would like – and what they need to build large businesses.
Is there a way out?
There is a market that is a magnitude larger than Internet advertising in India – and even that barely existed a decade ago. Mobile VAS (value-added services) accounts for consumer spend of about $2 billion (Rs 9,000 cr) in India. With a user base that is also about 10X the Internet base in India, India is one of the few “mobile first, PC second” markets in the world.
These are the two big digital opportunities – advertising and transactions. In the first case, businesses pay to reach audiences. In the second case, consumers spend money. Margins vary – based on whether it a ticket that is being paid for, or a mobile game is being downloaded.
Both these markets have challenges going ahead. And therein lies the new set of opportunities.