Design by default

The first step of personal development is the understanding of “Who am I” or “how our life is designed”? This is something like “if you want to reveal the secret you will have to go into that.

As quoted by Mr. James.J.Mapes in his book Quantum Leap Thinking, we always have options in our life and the choices that we make out of these option finally shapes our life. But the challenge become apparent when we have to make choices, because choices we make are result of the way we look at the life. Or in other words we see life through a filter of belief system. The composition of that filter determines the quality of our choices. And the clarity of the filter depends on many things- experience, education and environment.

Theoretical concept of this conditioning of life has been proposed by many others like Shiv Khera who says….in one of his book “You Can Win” that our life is conditioned (I think designed) by the situation or the persons (surrounding us) we encounter throughout our life. It may lead to a positive attitude or negative attitude (toward life or other things).He defines these surroundings as environment- family, society, friends, works etc – experience – with person and situation and education- formal or informal.

Carrying this philosophy forward I just want to say, everything in this world has its phases of development, being it a business, life or career it has to pass through formative, growth, maturity and finally end phases. The quality or the design of each phase is somewhat determined by the act of preceding phase (except formative). As discussed the choices taken in growth phase of life is the function of the filter system built during formative phase that finally decide the design of latter stage of growth phase. Same applies in career as well, initial quality of your experience at work station further shape the future of your career to an extent (not completely).

The point I want to make here is, no matter how our life or career is designed, we can alter it…..yes we can…..”Every moment is the seed for new life”. At any point of time if we think we can change our self we should take charge of our life and move ahead. This is what everybody says starting from Vivekananda to new generation motivational speaker Robin Sharma. But my thinking here is, so what if our conditioning or designing was done by default can we take charge to design the life of others as a parent to design the life of our next generation, as a boss to design the career of our subordinate? Can we create a positive environment around us, can we create a good experience for others or can we pass on the right education to others? If we can do this we can change the world.

Reverse Innovation: Future MNCs

A reverse innovation, very simply, is any innovation likely to be adopted first in the developing world. Increasingly we see companies developing products in countries like China and India and then distribute them globally. In contrary Glocalization (made up of two words Globalization and Localization) where in the innovation are done in the developed country and then distribute them worldwide, with some adaptations to local conditions has been the strategy for the MNCs for growth across the world. It allows multinationals to make the optimal trade-off between the global scale so crucial to minimizing costs and the local customization required to maximize market share. Glocalization worked fine in an era when rich countries accounted for the vast majority of the market and other countries didn’t offer much opportunity. But those days are over—thanks to the rapid development of populous countries like China and India and the slowing growth of wealthy nations.

VG (Vijay Govindrajan, Professor of International Business and Consultant of General Electric ) and Jeffery Immelt, CEO of GE who are the pioneers of this concept has explained the evolution of this concept in General Electric. Following this concept General Electric announced that over the next six years it would spend $3 billion to create at least 100 health-care innovations that would substantially lower costs, increase access, and improve quality. Two products it highlighted at the time—a $1,000 handheld electrocardiogram device and a portable, PC-based ultrasound machine that sells for as little as $15,000—are revolutionary, and not just because of their small size and low price. They’re also extraordinary because they originally were developed for markets in emerging economies (the ECG device for rural India and the ultrasound machine for rural China) and are now being sold in the United States, where they’re pioneering new uses for such machines. This is how the reverse innovation is working and believed to be the future for the growth of the MNCs.

The fundamental driver of reverse innovation is the income gap that exists between emerging markets and the developed countries. There is no way to design a product for the American mass market and then simply adapt it for the Chinese or Indian mass market. Buyers in poor countries demand solutions on an entirely different price-performance curve. They demand new, high-tech solutions that deliver ultra-low costs and “good enough” quality.

Reverse Innovation has evolved in following four phases:

Phase 1 — Globalization —Multinationals built unprecedented economies of scale by selling products and services to markets all around the world. Innovation happened at home, and then the new offerings were distributed everywhere. For instance, Xerox Corp. developed big, bulky, expensive copiers for U.S. consumers; it then sold them in Europe through its subsidiary Rank Xerox and sold them in Asia through its subsidiary Fuji Xerox.

Phase 2 — Glocalization — In this phase, multinationals recognized that while Phases 1 had minimized costs, they weren’t as competitive in local markets as they needed to be. Therefore, they focused on winning market share by adapting global offerings to meet local needs. Innovation still originated with home-country needs, but products and services were later modified to win in each market. To meet the budgets of customers in poor countries, they sometimes de-featured existing products. For instance, McDonalds changed its menu in India to include a lamb burger while still maintaining its core global product platform.

Phase 3 —Local Innovation — In this phase, the first half of the reverse innovation process, multinationals are focusing on developing products “in-country, for country.” They are taking a “market-back” perspective. That is, they are starting with a zero-based assessment of customer’s needs, rather than assuming that they will only make alterations to the products they already have. As teams develop products for the local market, the company enables them to remain connected to, and to benefit from, global resource base. For instance GE is using this concept for development of the low cost ECG machine.

Phase 4 — Reverse Innovation — If Phase 3 is “in country, for country,” Phase 4 is “in country, for the world.” Multinationals complete the reverse innovation process by taking the innovations originally chartered for poor countries, adapting them, and scaling them up for worldwide use.

Now after understanding the concept of this reverse innovation I would like to apply this on micro level in our country. Take an example of TATA NANO which was developed for the two wheeler rider who can not afford to have four wheeler. But now this is planed to launch TATA NANO in European market with the name of TATA EUROPA.

I want to through one question to my audiences that is there any way where in we can use the innovation to cater the demand of low income group and then escalates them for the upper segment market too.

Geographical Indication

The news of Geographical Indication to Tirupati Balajee Laddu has inspired me to write this post.

A geographical indication (GI) is a name or sign used on certain products which corresponds to a specific geographical location or origin (eg. a town, region, or country). The use of a GI may act as a certification that the product possesses certain qualities, or enjoys a certain reputation, due to its geographical origin.

In this the product produced in certain geographies and is popular for that, but other produces the similar things outside these geographies and gets the leverage of this brand. To protect this unethical brand leverage government has proposed the GI Act.

In December 1999, the Parliament has passed the Geographical Indications of Goods (Registration and Protection) Act, 1999. This Act seeks to provide for the registration and better protection of geographical indications relating to goods in India. The Act would be administered by the Controller General of Patents, Design and Trade Marks who is the Registrar of Geographical Indications. The Geographical Indications Registry is located at Chennai. The details can be accessed at (http://www.patentoffice.nic.in/ipr/gi/geo_ind.htm).

Various products nationally or internationally have received the GI for certain products. E.g. are the Champaign, Darjeeling tea (http://www.wipo.int/sme/en/case_studies/darjeeling_tea.htm) etc.

Limited Liability Partnership - A new method of Incorporation

Limited Liability Partnership, a legal form available world-wide is now introduced in India and is governed by the Limited Liability Partnership Act 2008, with effect from April 1, 2009. ( http://www.mca.gov.in/MinistryWebsite/dca/actsbills/pdf/LLP_Act_2008_15jan2009.pdf)

A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liability. It therefore exhibits elements of partnerships and corporations.

LLP combines the advantages of ease of running a Partnership and separate legal entity status and limited liability aspect of a Company.

Key features of LLP are:

• LLP is a separate legal entity separate from its partners, can own assets in its name.
• It can sue and be sued by others.
• Unlike corporate shareholders, the partners have the right to manage the business directly
• One partner is not responsible or liable for another partner’s misconduct or negligence.
• Minimum of 2 partners are required and there is no upper limit on number of partner.
• Firm registered should be ‘for profit’ business.
• It has perpetual succession.
• The rights and duties of partners in LLP, will be governed by the agreement between partners and the partners have the flexibility to devise the agreement as per their choice. The duties and obligations of Designated Partners shall be as provided in the law.
• Liability of the partners is limited to the extent of his contribution in the LLP. No exposure of personal assets of the partner, except in cases of fraud.
• LLP shall maintain annual accounts. However, audit of the accounts is required only if the contribution exceeds Rs. 25 lakhs or annual turnover exceeds Rs.40 lakhs.

A LLP is indeed advantageous because of comparatively lower cost of formation, lesser compliance requirements, easy to manage and run and also easy to wind-up and dissolve, no requirement of minimum capital contributions, partners are not liable for the acts of the other partners and importantly no minimum alternate tax (as of date). But, LLP cannot raise money from the public.

The process for incorporating a LLP is pretty simple. The flow chart (http://www.llp.gov.in/) depicts it clearly.

The Registrar of Companies (ROC) is the authority having jurisdiction over the incorporation. The steps required are:

• Decide on the Partners and the Designated Partners
• Obtain Designated Partner Identification Number (DPIN) and a digital signature certificate.
• Decide on the name of the LLP and check whether it is available.
• Draft the LLP agreement
• File the LLP Agreement, incorporation documents and obtain the Certificate of Incorporation.

In order to help you decide on which legal form to choose, here’s a feature comparison between the LLP, Partnership firm and a Company:

Features	Company	Partnership firm	LLP
Registration	Compulsory registration required with the ROC. Certificate of Incorporation is conclusive evidence.	Not compulsory. Unregistered Partnership Firm will not have the ability to sue.	Compulsory registration required with the ROC
Name	Name of a public company to end with the word “limited” and a private company with the words “private limited”	No guidelines.	Name to end with “LLP”” Limited Liability Partnership”
Capital contribution	Private company should have a minimum paid up capital of Rs. 1 lakh and Rs.5 lakhs for a public company	Not specified	Not specified
Legal entity status	Is a separate legal entity	Not a separate legal entity	Is a separate legal entity
Liability	Limited to the extent of unpaid capital.	Unlimited, can extend to the personal assets of the partners	Limited to the extent of the contribution to the LLP.
No. of shareholders / Partners	Minimum of 2. In a private company, maximum of 50 shareholders	2- 20 partners	Minimum of 2. No maximum.
Foreign Nationals as shareholder / Partner	Foreign nationals can be shareholders.	Foreign nationals cannot form partnership firm.	Foreign nationals can be partners.
Taxability	The income is taxed at 30% + surcharge+cess	The income is taxed at 30% + surcharge+cess	Not yet notified.
Meetings	Quarterly Board of Directors meeting, annual shareholding meeting is mandatory	Not required	Not required.
Annual Return	Annual Accounts and Annual Return to be filed with ROC	No returns to be filed with the Registrar of Firms	Annual statement of accounts and solvency & Annual Return has to be filed with ROC
Audit	Compulsory, irrespective of share capital and turnover	Compulsory	Required, if the contribution is above Rs.25 lakhs or if annual turnover is above Rs. 40 lakhs.
How do the bankers view	High creditworthiness, due to stringent compliances and disclosures required	Creditworthiness depends on goodwill and credit worthiness of the partners	Perception is higher compared to that of a partnership but lesser than a company.
Dissolution	Very procedural. Voluntary or by Order of National Company Law Tribunal	By agreement of the partners, insolvency or by Court Order	Less procedural compared to company. Voluntary or by Order of National Company Law Tribunal
Whistle blowing	No such provision	No such provision	Protection provided to employees and partners who provide useful information during the investigation process.

But, LLP might not be a choice due to certain extraneous reasons, for example, DOT would approve the application for a leased line only for a company; Angels / VCs would be comfortable investing in a company.

The framework for incorporating a LLP is in place and currently registrations are centralized at Delhi.

Power of Mind

“When you are inspired by some great purpose, some extraordinary project, all of your thoughts breaks their bonds: Your mind transcends limitation, your consciousness expands in every direction and you find your self in a new, great and wonderful world. Dormant forces, faculties and talents become alive and you discover yourself to be a greater person than you ever dreamed yourself to be.”

Patanjali

When I thought to write this blog then many question came into my mind like: what should be its first posting? Which area should I hit first? I had few stories in my mind but nothing could be finalized. By chance I happened to read one book “The Monk who sold his Ferrari”. The above mentioned quote from book (p-50) caught my attention- Because I have realized this few months back in my life as similar message was passed on to me by my mentor. I personally have realized the truth and power of this quote. Hence I decided to make this quote as my first posting of blog.

Through this posting I would like to convey one message- If you think big without any limitation and full of determination all the forces existing in this world conspire with you to work magic in your life. This is power of your mind which ultimately transcends into action.