Has 21st Century’s Intense Competition lead to the Abolition of Business Ethics?

“In a time of universal deceit, telling the truth is a revolutionary act”

– George Orwell

On September 18^th, 2015, United States Environmental protection agency issued a notice of violation of Clean Air Act against Volkswagen for tweaking its diesel engine in order to bypass the emission test. 11 million Cars, worldwide, between the model year 2009 and 2015 were identified to have faulty systems. This proves how contemplating an unethical decision with its apparent short term benefits is eventually a recipe for disaster.

For a business entity, ethics can be categorized as its responsibilities towards, (i) its customers, (ii) its employees, (iii) the government and (iv) the ecological balance of our planet. We need ethics as they are vital for the proper functioning of the economic, political and social network which will eventually lead to the overall development of the human race.

So, how and why does unethical behaviour creep into a system and make highly intellectual business leaders lose track of their ethical responsibilities? The answer lies in the fact that any deviation from ethical practices is mostly the result of the current competitive corporate culture or pressure from the higher managerial food chain, which can emerge when a company is unable to live up to its financial expectations. To overcome these bottlenecks, leaders eventually end up bending the rules and this is when ethics and policies collide.

Let us take an example of child labour. If a firm hires children as its major work force, it can drive down its prices. Now to remain competitive, the rival firm has to relook into its cost structure and come up with an optimized price point. Should the firm also look to hire children in its work force? Is it ethical? Will this help in achieving cost cut? The instinctive answers to these questions may be yes but in the long run, it will not serve the purpose of growth. History is full of references of organisations which have linked good ethical practices with their performance and have eventually outperformed their competitors financially.

Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices has listed Tata Steel as one of the World’s Most Ethical Company for the year 2017. Points are awarded to an organization based on: ethics and compliance program (35%), culture of ethics (20%), corporate citizenship and responsibility (20%), governance (15%) and leadership, innovation and reputation (10%). Prior to 2017, the Indian Steel giant had bagged this award in years 2012, 2013, 2015 and 2016. Over decades, ethics has been a major driver for Tata Group. One of the core business ethic principles the company follows is to fully support the development and operation of competitive open markets. It may be pointed out that this policy hampers the organizations’ revenue, but In the long run, these policies promote a strong public image based on trust and relationship.

The challenge for those in business is to identify ways to do what is ethically correct while maximizing a shareholder’s wealth. Before taking any decision, the leadership of an organization must introspect what impact will their decision have on the organization and society as a whole in both the short and long run. The importance of ethics has been reinforced into business organisations and business individuals time and again.

As Henry Ford once said, “A business that makes nothing but money is a poor kind of business”. Ethics in business is present; the difficult question is how to make it more prevalent.

 

Authors: Saurav Dhar & Rishi Raj

PGPM, Class of 2018, Great Lakes, Gurgaon

Alumni Speak: Mohit Kakkar – Winner of SAP Global IoT Prototype Competition

Mohit Kakkar, student of PGPM Energy (Batch 2014-16), is currently working with Deloitte Consulting India Pvt. Ltd. and has recently won the SAP Global IoT Prototype competition.

We got in touch with him to know more about his achievement.

What was the SAP Global IoT prototyping competition about?

The Prototype competition was meant to give you an end-to-end experience of designing and prototyping an Internet of Things app for people’s needs. The top 5 submissions each won a brand-new Intel NUC Mini PC and $25 gift card which can be used to fund an entrepreneur on Kiva. The top 200 runner ups were displayed on the SAP “best of” gallery with their outstanding prototypes.

What is your line of work? Why did you take part in SAP Global IoT Prototyping competition?

After completing my masters from Great Lakes, I started working as a SAP consultant at Deloitte Consulting Pvt. Ltd. I participated in this competition because I am an IoT enthusiast from my post-graduation days where I learnt the fundamentals of IoT like Sensors, Cloud and various other business technologies. Since the digital transformation roadmap strategy of SAP got changed and they announced SAP Leonardo which was put forward as an innovation portfolio focused on innovative solutions running seamlessly on the cloud, there was no better way to get myself acquainted with the platform other than by participating in this competition and working on it in real time.

In your own words, what specific problem does this prototype seeks to solve? How does IoT provide an ideal solution?

We are living in 2017 and power utility companies today do know where a power outage has occurred, but they do not know what triggered that outage. Additionally, utility companies still can’t predict an outage and hence, they can’t take any preventive measures to stop it. On the other hand, by the time a crew member gets to know that a power outage has occurred at some place, the impacted customers suffer approximately 20 minutes of power outage on an average. Lastly, today customers have no visibility of their electricity consumption pattern and neither the electricity tariff that power utility companies charge them on a particular hour of the day.

Hence, the problems were many and I came up with a solution i.e. an innovative app which connects assets, control room operations team, crew members and customers/people.

Leonardo IoT Bridge provides us with capabilities to cut across various aspects of a power utility business model. We can monitor the real time health of the transformers using IoT sensors, using cloud platform edge computing we can store and analyse huge volumes of data of all the real time parameters; and we can also predict the future outages using machine learning algorithms. Moreover, we can also help the customers stay aware of their electricity consumption behaviour patterns by using smart meter data. Hence, we achieve increased transformer utilization, lesser power outages, and maximized revenue generation by monitoring the operational status and customer satisfaction.

What inspired you in creating your prototype?

My passion for IoT and excitement to learn SAP Leonardo framework inspired me to create this prototype. But to think through the complete end-to-end solution my 3.5 years of experience in Power utility industry and my subject knowledge which I gained at Great Lakes Institute of Management gave a head start to start this idea. Once the first draft was ready, the feedback and motivation I received from my mentor were a huge inspiration for me to build this prototype in an agile model, wherein I did multiple iterations to touch up the inconsistencies.

Do you plan to do further work in developing your prototype?

We have actually started building this solution in Deloitte. But I am eagerly waiting for the SAP connected goods portal, wherein we can configure and use the pre build APIs.

What are your thoughts on being able to fund an entrepreneur via the Kiva crowd funding platform? How did you go about identifying an entrepreneur to fund? Were there certain criteria that you used?

It felt really great that our hard work helped someone start their business. We talk about connecting people in the SAP Leonardo framework, but for all the winners to be able to fund an entrepreneur has truly connected people together.

Initially, I tried to fund an entrepreneur in my country, but then I found a lady in Cambodia who needed a loan of $625 to purchase a motorbike for her daughter to run her goods delivery business. She had received $600 already and I thought I should give my $25 gift prize to her and close down her request. It truly felt like bliss to be able to help someone so far away.

Read more about the Competition, winners and their prototypes here!

Will Strategic Acquisition of Free charge revive Axis Bank from Declining Profits?

Strategic Acquisitions have become the order of the day in the recent corporate world. Corporate Players who estimate their future survival in the market through current earnings, investor’s confidence and changing customer base are becoming prudent enough to strategize their investments in highly probable winning deals.

Axis Bank which is reputed as India’s third largest private lender is no exception to this. The bank has been choking to sustain its profit margins with increasing bad loan provisions which had resulted in a steep decline of its asset value. As a cascading impact, the bank had ended up reporting 16.06% decline in net earnings in the first quarter of the year despite a marginal increase in the top line revenue by 1.45% during the same quarter of last year. The lender’s asset quality has also worsened by a steep increase in Gross Non Performing Assets (NPA) to 5.03% during FY17 Q1 compared to 2.54% for the same quarter of previous year. The market has instantly reacted to this discouraging trend of financial performance by 3% fall in stock prices on the same day which reflects the loss of investor’s trust.

However, the Board has now come with a new strategy of venturing and broadening their presence into the digital space by acquiring Snapdeal’s ‘Free Charge’. The Bank was desperate to close this deal as they have offered an attractive price compared to ‘PayTm’ which was also competing to acquire this asset. This deal also gives a big sigh of relief to Free Charge’s parent, ‘Snapdeal’, which is already in talks for selling itself to its rival ‘Flipkart’ due to its declining fortune since the beginning of this year and struggling for independent survival. Free Charge was acquired by Snapdeal in early 2015 for $ 400 million. However, it has now been sold to Axis Bank at a massively discounted valuation of 85% at $ 59 million (384 Crores INR).

This clearly indicates a strategic acquisition with great anticipated outcomes. Axis Bank would get a popular digital payment brand backed up by a high-quality technology platform, which can be leveraged towards tapping into current market opportunities that are booming in the digital space. The benefits of this acquisition will begin to bear fruit in the next couple of years. Another big competitive advantage which the bank would gain on this acquisition is access to small value transactions and Utility Bill Payments which are the key customer service segments of Free Charge.

It is also quite rational to think that the Bank already has a significant presence in the Digital Space through ‘Axis Pay’ and there was no need for the acquisition. However, the digital market of India is in its boom days buoyanced by the ‘Demonetization’ Move of the Government last year. Telecom Giants like ‘Reliance Jio’ have further intensified this growth by their rapid penetration into the Digital markets by making Internet Connectivity as the common man’s amenity in India. A recent survey published in ‘The Economic Times’ on 27^th May’17 says that the Debit Card transactions have surged to 1 billion at Point of Sales of merchant locations in January 2017 compared to 817 million during the same time last year against the ATM transactions which was almost static at 700 million. This clearly substantiates the fact that the Indian Economy is rapidly shifting towards ‘Digital Cashless Mode’ and people prefer to make more cashless payments compared to cash transactions. It has also been evidenced by the annual report (2016-17) of Axis bank that the bank had reported 66% share of digital transactions in India in FY17 Q4 compared to 51% during last year. Also, the spends on Credit/Debit Cards of Axis Bank have increased to 47% in 2016-17.

Image Source – Annual Report of 2016-17 (Axis Bank)

The above facts and figures substantiate that this acquisition is a focused strategy of Axis Bank towards an inorganic expansion into the Digital Payment Space without duplicity of efforts on the customer acquisition and emerging as a ‘Key Contributor’ to the ‘Digital India’ drive amongst the BFSI Sector. The appetite of the market is so large that the bank cannot afford to spend time and resources on building a new platform from scratch, rather it is wise to leverage the market opportunities as a forerunner amidst other competitive market players. The integration of Free charge with Axis Pay would further increase the ease of the payment by the customers as Axis Bank already has a mobile wallet ‘LIME’ which has been interfaced for UPI Payments with Axis Pay.

The bank also needs to focus on retaining the acquired customers by offering them loyalty programs and cross selling products by understanding their needs. As per one of the updates that was given by Free charge late last year, the number of registered users on its platform has peaked at 30 million and 20% of them for utility bill payments. Also, the market leader ‘PayTm’ claims to have 122 million active users and hosts 90 million transactions per month on its platform. The other rival ‘Mobikwik’ has reported 35 million users and 45 million monthly transactions during the same period last year. Also, a market research throws light on the fact that India’s Digital Payment Segment has handled almost 600 million transactions in the year 2015-16 whose mean economic value rising to 400-450 INR.

Another ray of hope is that the digital payments industry in India is expected to grow by 10 times to $500 billion by the year 2020 as per the recent study by Google and Boston Consulting Group. It also predicts that more than 50% of India’s Internet users are likely to use digital payments by 2020, and the top 100 million users are likely to drive 70% of digital payments by value. If the above mentioned promising predictions turn into reality, Axis Bank can significantly tap this humungous market opportunity with its unique ‘FinTech’ flavor and competencies.  This would eventually pour in into its revenue bucket and would help the bank with some breathing air to compensate for its massive bad debt provisions eating into their bottom line, while RBI figures out a sustaining solution for increasing menace of NPAs. Though this was primarily aimed at market penetration, the bank can think of stepping into other niche products in digital space apart from payment service based on the customers’ expectations and demands. This acquisition would be the first step for building a better brand equity for the bank and an opportunity to explore and serve more customers as a ‘Digital Player’.

 

Author: Yogesh Sundararajan

PGDM, Class of 2018, Great Lakes, Gurgaon