24 June, 2007

process to empathy ratio

Knowledge@Wharton: Would you explain the concept of the process to empathy ratio?

Bagchi: Yes. This is actually not a scientific explanation. I, like any MBA, would talk about P/E ratios [price-equity ratios]. You talk about one of the indicators of the financial health of an organization through P/E ratios. When I was raising MindTree, one day it occurred to me that we were putting too much of an emphasis on process and building of process and process as an enabler. I found that the Human Resources folks -- we actually call them People Function folks in MindTree -- were becoming more process-centric, and process does not solve all problems. Process works only when it is given life through empathy. I didn't know how to drive home the point, and then it occurred to me that we could have a different take on the P/E ratio concept. I called those folks and said that we need to balance every process with empathy. Think of it as a new way of looking at the P/E ratio. Deal with every situation partly by looking at process and partly by looking at empathy.

Subroto Bagchi
Physical infrastructure you can buy. Intellectual infrastructure you can create, borrow, or inter-network. But emotional infrastructure is the most nebulous and most difficult to build. It offers the most sustainable competitive advantage.

Subroto Bagchi

Seven consumer trends you need to know about

By Reinier Evers, trendwatching.com

In a traditional consumer society, he or she who consumes the most, the best, the coolest, the most expensive, the scarcest, or the most popular goods, will typically also ‘gain’ the most status. However, expect 2007 to be the year in which many brands realise (if not grudgingly accept) that the ‘old’, mass-era status symbols, from the Audi Q7 to the De Beers Radiance collection, are no longer every consumer’s wet dream. After all, as mature consumer societies are increasingly dominated by (physical) abundance, by saturation, by experiences, by virtual worlds, by individualism, by participation, by feelings of guilt and concern about the side-effects of unbridled consumption, status is to be had in many more ways than leading a somewhat dated lifestyle centred on hoarding as many branded, luxury goods as possible. In light of this and factors such as the proliferation of social networking, expect the following trends in 2007:

1. Transumers – An increasing number of consumers are driven by experiences instead of ‘the fixed’. They are driven by entertainment, by discovery, by fighting boredom; people who increasingly live a transient lifestyle, freeing themselves from the hassles of permanent ownership and possessions. These consumers have been around for some time but there will be many more of them in 2007. The implications? An obsession with the here and now, an ever-shorter satisfaction span, and a lust to collect as many experiences and stories as possible, are undermining the perceived value (and thus status) of fixed goods and services. How can firms react? Fashion brands are leading the way in tapping into ‘transumerism’. From the very transient (and affordable) collections at Zara and H&M, to innovative lease concepts that play to the temporary nature of the business, and to transumers’ desires. Elsewhere, exclusive car sharing clubs are popping up faster than you can trade in your old jalopy. Why spend all your money on a Bentley when you can experience a Ferrari, Lamborghini and Maybach, too? Check out the likes of Classic Car Club, P1 Club, LuxShare Auto Club and Ascari.

2. Participative lifestyles - Especially for younger consumers, participation is the new consumption. For these creatives, status comes from finding an appreciative audience (in much the same way as brands operate). No wonder that it's becoming increasingly important to hone one's creative skills. Status symbols, make way for status skills. In economies that increasingly depend on (and thus value) creative thinking and acting, well-known status symbols tied to owning and consuming goods and services will find worthy competition from status skills: those skills that consumers are mastering to make the most of those same goods and services, bringing them status by being good at something, and the story telling that comes with it. Once you get into spotting status skills, you’ll notice they are spreading everywhere. Travel is a case in point. As reported in the New York Times last year: “While many travellers are still happy to spend their vacations lollygagging on the beach, more and more of them want to learn something on their trips. [...] Adventure travel captured the American imagination years ago, but now more people are seeking skills, not just thrills.” Equitours, for instance, offers instruction-based horse-riding tours in the United States and across continental Europe, while Access Trips takes small groups off the beaten track for sports programs and a maximum instructor-to-client ratio of 1 to 5. In other sectors, Volkswagen AutoStadt Driving Courses provide customers with a personal trainer to teach them everything from reducing fuel consumption to keeping one’s car under control in extreme circumstances.

3. Connecting lifestyles - In a post-material world, all that’s left to covet is… other people? From networking sites to buddy lists to meetup.org to a boom in members-only clubs, social status 2.0 is all about who you connect to and who wants to connect to you, tribal-style. This lifestyle is a subset of a larger trend, ‘online lifestyles’, which encompasses everything from status gained from the number of views for one’s photos on Flickr, the real estate one owns in Second Life, to the good looks (and outfit) of one’s avatar.

4. Eco-lifestyles - With the environment finally on the agenda of most powers that be, and millions of consumers now actively trying to ‘greenify’ their lives, status from leading an eco-responsible lifestyle is both more readily available, and increasing in value. A substantial subset of consumers is already bestowing recognition and praise on Prius drivers while scorning SUV owners, and this will only accelerate as design-minded and branding-savvy eco-firms push to the forefront in 2007. Make it green, make it chic, make it effortless, make it visible, and don't hesitate to point out your competitor's polluting alternatives!

5. Trysumers – Trysumers are transient, experienced consumers who are becoming more daring in how and what they consume, thanks to a wide range of societal and technological changes. As saturated, experienced consumers can draw on plenty of past experiences, and know that many more experiences will follow, it's easier to cope with possible disappointment stemming from trying out the unknown. Freed from the shackles of convention and scarcity, immune to most advertising, and enjoying full access to information, reviews and navigation, experienced consumers are trying out new appliances, new services, new flavours, new authors, new destinations, new artists, new outfits, new relationships, new anything with post mass-market gusto. Companies that are latching on to the trend are enabling such experimentation through ‘rent instead of buy’ deals – from handbag subscriptions to super car sharing.

6. Transparency tyranny - Remember the promises of flawless matching of supply and demand, and limitless consumer power, when the web burst onto the scene a dozen years ago? While the last few years didn’t disappoint(consumers are already enjoying near-full transparency of prices and, in categories like travel and music, near-full transparency of opinions as well), 2007 could be the year in which transparency tyranny really starts scaring the shit out of non-performing brands. Why? For one, 1+ billion consumers are now online, and the majority of them have been online for years. They're skilled bargain seekers and ‘best of the best’ hunters, they're avid online networkers and they're opinionated reviewers and advisors (tripadvisor.com now boasts 5+ million travel reviews). Now, for 2007, add camera and video phones becoming both ubiquitous and more powerful - reviews of anything and everything will go multimedia. The impact? Well, a picture says more than a thousand words, and a video says more than a thousand pictures. Everything brands do or don’t do will end up on YouTube.com, or on an undoubtedly soon to be launched YouTube-clone dedicated to product reviews.

7. Generation C(ASH) – Three and a half years ago, Generation C(ontent) emerged as "an avalanche of consumer generated content that is building on the web, adding tera-peta bytes of new text, images, audio and video on an ongoing basis." Fast forward to 2007, and it's hard to find anyone still in awe about the fact that content-creating consumers are behind some of the biggest Web 2.0 success stories, from the tens of millions of blogs to the Flickrs and YouTubes. However, this trend still has a lots of room to grow, as younger, participation-minded consumers will eventually dominate all of the online space, meaning the stakes will continue to be raised as well. And now Generation C(ontent) is joining Generation C(ash). If consumers produce the content, if they are the content, and that content brings in money for aggregating brands, then revenue and profit-sharing is going to be one of 2007’s main themes in the online space. It’s not like brands will have a choice: talented consumers are going to be too sought after to remain satisfied with thank you notes. Get ready for an avalanche of revenue sharing deals, reward schemes and sumptuous gifts aimed at luring creative consumers.