IoT Asset Management Solution: Trucking & Fleet Management

A high level architectural view of an IoT Asset Management Solution built from ground up to address the needs of different market segments.

The end use for Trucking and Fleet management tries to address the following key requirements:

  1. Low Cost Solution.
  2. Real-Time tracking even when faced with intermittent connectivity.
  3. Reliability to handle the most demanding terrain and environment.
  4. Scalable and Adaptable to accommodate various use cases.
  5. Security to prevent tampering and unauthorized access.


Posted in IoT

Asset Tracking & Management: An IoT Strategic Imperative

One of the most compelling use cases in IoT is in the area of Asset Tracking and Management. Asset classes can range from living, nonliving, transitory, stationary, remote to the accessible. An Asset Tracking system designed for one asset class can rarely be redeployed for another asset class as is. Each of the use cases and application scenarios are different and unique.

A further challenge to the emergence of a single dominant platform for managing assets is the heterogenous nature of assets that firms typically employ, even within the same industry. Therein lies the challenge of developing an Asset Tracking system; necessitating a multifaceted approach across various disciplines.

Wastage in Businesses – Inefficiency or Cost of Doing Business?

Every year businesses across all sectors of the economy lose billions of dollars on account of the following:

  1. Excess Inventory on hand.
  2. Low Asset Utilization and/or Asset Loss.
  3. Non-identifiable, Non-trackable and Perishable supplies.
  4. Labor costs associated with idling and/or unnecessary hauling of equipment.
  5. Line stoppages and business interruptions due to missing supplies and/or equipment breakdown.
  6. Cost of expediated transportation.

The above challenges need a systemic approach to tackle the inefficiencies, but you can’t fix what you don’t know.

Asset Tracking System: A Strategic Imperative

Activist investors are pressuring mismanaged firms to undertake a strategic review of how their businesses are run. During the 2017 proxy season, activists launched 327 public campaigns against U.S. companies, with $121 Billion1 under their management. Firms needs to proactively identify areas of weakness in their sphere of activities and call for a course correction.

Here are a few examples where the use of Asset tracking can unleash hidden value, eliminate waste and increase overall efficiency:

  1. In Los Angeles and Long Beach, California home to the busiest container ports in the USA, average truck turn time is around 82 minutes.2
  2. According to a 2017 study by National Retail Federation U.S. businesses lose around $50 billion annually to retail shrinkage.3
  3. Transportation delays in-transit and on customer premises will cost US chemical manufacturers an additional $22 billion in working capital on account of additional inventory held.4
  4. Annually hospitals lose 20% of their equipment. Historically asset utilization in US Hospitals has stayed around 40 percent, which means valuable assets such as IV pumps sit idle 60 percent of the time.5
  5. In the USA, an average city water utility loses 30 percent of the water supplied through leaks or un-billed usage.6

Asset Tracking System: A Competitive Advantage

The Internet has played an important role in the creation of new products-ideas, their diffusion and in levelling the playing field across firms and industries. Gone are the days where quality management systems such as TQM and Six Sigma enabled firms to leap frog competition.

The basis for competition in the hyperconverged world relies on achieving better quality with greater agility, easier provisioning and lower administrative costs. It’s imperative for firms to adopt a system wide view of their activities from procurement, design, manufacturing, operations, delivery, installation to use.

A firm that can leverage enterprise knowledge, integrate best practices and leverage asset tracking data can acquire a competitive advantage over its rival. To get there, firms need to invest on a platform that can leverage multiple data points and in-house knowledge to unlock hidden value.

Asset Tracking: Passive, Active or Intelligent?

At the basic level passive asset tracking involves nothing more than an electronic label and reader (e.g. RFID, NFC). One level higher is Active Tacking which entails connectivity, LBS (Location Based Services) and some form of a sensor coupled to a power source.

An intelligent asset tracking solution adds an extra layer of complexity with On-Board Monitoring, of one or more parameters of interest. Applications that require Real-Time resolution can now handle extreme events and undertake preventative actions.

Asset Tracking and Management – The Six Critical Elements

A compelling Asset Tracking solution requires the delicate act of balancing six critical elements – Sensors, Location Based Services (LBS), Connectivity, Power Consumption, On-Board Monitoring and Analytics.

  1. Sensors: The one analogy that I can think of when it comes to sensors is blood. Like blood, sensors serve three main functions: convey, protect and regulate the asset under observation. Sensors comes in all shapes, forms and functions the choice depends on what one intends to monitor, control and prevent.
  2. Location Based Services (LBS): For assets confined within a certain geographic radius (e.g. hospitals, warehouses, factory floor) one can assign fixed location identifiers or use triangulation (aided by beacons) to pinpoint location. If the asset under consideration involves a moving target (e.g. trucks, drones, mining equipment, shipping containers) that requires real-time monitoring one can select GPS or A-GPS (lower battery drain).
  3. Connectivity: The choice of connectivity often boils down to the tracker location (local vs. remote) and mobility (stationary vs. transitory) constraints. Additional requirements stem from network reach and coverage – PAN, LAN, MAN or WAN. The choice for a reliable connection range from NFC, Bluetooth Low Energy (BLE), ZigBee, ZigBee-IP, IEEE 802.11ah, WLAN to LPWAN (SigFox, LoRa, RPMA, Symphony Link, Weightless, NB-IoT, LTE-M). To offset some of the limitations arising out of cost, security and low power consumption gateway devices are often deployed for last-mile connectivity.
  4. Power Consumption: One of the key design metric in deploying trackers is whether to be battery or grid powered. For remote or unreachable applications, the choice is often forced. Additional constraints that dictate power usage include -Always ON, Alive When Spoken To and Periodic Awake.
  5. OnBoard Monitoring: Applications that demand real-time monitoring have an additional constraint: take preventative or corrective actions before it’s too late. In battery powered devices there is a critical requirement to eliminate redundant data transfers or aggregate sensor readings. Both these scenarios call for an On-Board monitoring system.
  6. Analytics: What good is any data if you can’t act on it. The real value in any asset tracking system is knowing how to develop real-world solutions based on the insights gathered. The applications are numerous but just to list a few – Overall Equipment Efficiency, Defect Monitoring & Classification, Predictive & Preventative Maintenance, Trend Analysis and the holy grail using Machine Learning and AI to uncover hidden value.

A follow-on post will look at how various technologies can be leveraged and integrated to build a solution from ground up, specifically for the trucking industry.


  1. The 2017 Proxy Season, Published by J.P. Morgan’s M&A Team, July 2017
  2. Average Monthly Truck Turn Time, Harbor Trucking Association, 2015-2017
  3. National Retail Security Survey 2017, NRF
  4. Transporting growth: Delivering a Chemical Manufacturing Renaissance, American Chemistry Council, March 2017
  5. Industry Survey: Transformative Technology Adoption and Attitudes—Location Technologies, ABI Research, 2Q 2017
  6. Smart Water Network, Navigant Research, 2016
  7. Prince, Jeffrey and Simon, Daniel H., Has the Internet Accelerated the Diffusion of New Products? (April 1, 2009).


In fond memory of Rev Fr. Agnelo Pinto and Rev Fr. Pat D’Lima whose guidance during my adolescent years at St Paul’s High was instrumental in shaping who I am today.

Product Management: It’s more than just MRDs and PRDs

Every successful product should have a Marketing Requirements Document (MRD)and a Product Requirements Document (PRD) that together define the overall purpose, scope and goals for the product and its stakeholders – the firm, its end customers and its shareholders.

Product Management: Achilles’ heel  

Very few companies, champion internal processes or a work culture where product management is given the importance it deserves. Product Management often gains prominence when the product has been commoditized or when the industry is maturing (decline). The exception to the rule are medical device and biotechnology firms where regulatory requirements demand thorough book keeping.

In some firms a member of the marketing or engineering team helms the role of Product Management; such a role is replete with managerial hubris.

A good Product Management practice necessitates that the function of Marketing, Product Management, Engineering, Finance and Operations be distinct and separate, to avoid conflicts of interest and managerial bias (Group-Think, Self-Selection, Sunk-Costs, Representativeness, Availability, Risk-averse, Risk-seeking).

Marketing Requirements Document (MRD)

In my view the marketing team, in cohorts with strategic planning, defines the overall skeleton for the MRD (Marketing Requirements Document). In some firms this role is delegated to the office of New Product Planning and Innovation.

A good MRD is one that encompasses a well-defined market (market segments), outlines the revenue and profitability goals and defines the Go-To market strategy to make the product successful.

Product Managers should never own or be tasked with defining the MRD for two reasons.

  1. First, an inherent conflict of interest and self-selection bias will drive most PM’s into solidifying their role in the company.
  2. Second, the sole purpose of a MRD is to enact a system of checks and balances to review the overall performance, profitability and viability for the product or business.

Product Requirements Document (PRD)

A Product Manager uses the MRD as a blueprint to conceive the mind, body and soul for the Product.

PRD: Where do I start?

It is my firm belief that a PRD should be customer centric and not engineering driven.

If the product in question is backed by a revolutionary new idea, then ethnographic studies and focus groups are vital in shaping the PRD.

If the nature of the innovation is incremental then a treasure pile of correspondence between and among market participants (internal and external) is where you should start. If possible, immerse yourself into learning about the customer by joining the sales and marketing team on field visits.

A new product must justify its place in the marketplace. A comprehensive market review and competitive analysis that includes features, price, channels and promotion must be undertaken. In fact, I recommend every Product Manager to do this when he or she assumes a new position.

The use of multidimensional scaling and conjoint analysis are indispensable tools both when conceiving new offerings or streamlining existing products.

Functional Performance, Acquisition Cost, Ease-of-Use, Operating Cost, Reliability, Serviceability and Compatibility should dictate technology choices and the overall scope, form and shape of the product.

Recognizing your Stakeholders

Any successful product requires teamwork and the ability to bring together people towards a common goal. Inherent in any organization are power dynamics that come into play that need to be handled with tact and diplomacy.

A Product Manager will face various stakeholders, with conflicting goals, as the product moves from conception to commercialization.

  1. The finance team which green lights the project, approves development costs, allocates resources and evaluates profitability goals (upon release).
  2. The R&D, engineering and supply chain teams that work diligently to bring the product to life.
  3. The legal department in drafting-reviewing contracts and licensing terms with partners, vendors and suppliers.
  4. The regulatory and certification bodies who confer product safety and grant market approval prior to launch.
  5. The marketing, sales and support team who will promote, deliver and support the product as it gets adopted by customers.
  6. The corporate and strategic planning team who evaluate business performance and manage shareholder value.

Product Manager: A Lone Ranger

A PM is akin to a lone ranger fighting for the glory of his (her) product.

The ultimate responsibility for ensuring that the PRD and MRD converge; deliver value to the firm and its investors falls on the Product Manager.

The traits that I personally advocate a great Product Manager to possess are empathy, curiosity, humility, attention to detail, entrepreneurial, embrace uncertainty, foresighted and data driven.

Keep the Innovation Running, it’s the lifeblood that fuels humanity.

Vision for IoT Smart Personal Assistant

The current generation of Smart Wearables Devices (SWD) were primarily introduced as a companion device to the smartphone. As such, SWD’s offer nothing more than the added convenience of “usability of the go” and “small form factor“.

Most buyers, including me, question the wisdom of owning a muted version of a smartphone on their wrist; a key reason stalling wider adoption of SWD.

To find their rightful niche in the marketplace, SWD need to evolve from a smartphone centric device to a stand-alone IoT Personal Assistant (IPA).

Vision for IoT Smart Personal Assistant

In a follow-on post, I will outline my vision for a device coined “IoT Smart Personal Assistant (IPA)”; one that can enhance quality of life for its users and unlock hidden value for market participants.

The Future of Semiconductor Business & Innovation

Abstract: The Life Cycle theory on industry evolution suggests that the rate of knowledge obsolescence tends to diminish over time. In effect it deters new entrants from entering the industry; the ensuing shakeout forces industry consolidation and concentration. The fallout; operational efficiency, product proliferation and price discipline take center stage.

In the semiconductor industry the very presence of technological knowledge obsolescence has prevented industry shakeout and consolidation up until now. However, with escalating costs and the fundamental limits on device physics reaching a climax are the curtains descending on the semiconductor industry. If so, what are the ramifications for the industry and its ecosystem?


  1. Future of Semiconductor Business & Innovation
  2. Fabless Semiconductor Chip Startup Business Plan
  3. Semiconductor SOC Design Cost Model

First a brief look at the semiconductor industry dynamics:

1. Semiconductor fabrication plants exhibit exponential cost dynamics. Rock’s Law, named after the visionary venture capitalist Arthur Rock, predicts that the cost of a semiconductor fab will double every four years.

2. Semiconductor Industry is characterized as having very high fixed cost, and low variable costs.

3. A cutting edge semiconductor fab has an active life cycle that lasts anywhere between three and five years. The cyclical nature of the industry results in periods of high capital expenditure interspersed with bursts of revenue streams.

4. Moore’s Law, named after the visionary cofounder Gordon More of Intel, predicts that the size of a semiconductor chip will shrink by half every two years (everything else remaining the same).

5. Semiconductor chips although very design intensive benefit heavily from division of labor.

6. Semiconductor design exhibits compelling scope economies due to cumulative experience and design knowledge.

7. Semiconductor design is susceptible to significant knowledge obsolescence within domains.

8. Process and Product Innovation both happen at the same time. Firms either acting alone or together orchestrate process innovations that the entire industry draws upon. Product innovations on the other hand are firm specific.

9. The industry is highly competitive with low barriers to entry. However tacit knowledge and market reputation favor both scope and scale economies.

Semiconductor Value Chain and State of the Industry

As of 2011, worldwide semiconductor sales attributed to IC’s and components reached $299.5 Billion. The market is fragmented across all sectors except in the area of microprocessors were a duopoly exists. The worldwide pure play semiconductor foundry market totaled $29.8 billion in 2011. The top five foundry players accounted for almost 80 percent of the foundry market share.


Electronic Design Automation (EDA) vendors accounted for revenues of $4.19 Billion in 2011. Semiconductor chip design, verification and implementation tools accounted for almost 90% of this market, with the rest owned by PCB design tools.

The market for semiconductor IP registered sales of $1.58 Billion. Design Services made up another $350 Million in revenue for 2011. IC Packaging and Assembly generated revenues of $13.9 Billion and the embedded software market registered sales of $1.2 Billion. Semiconductor FAB’s demonstrated revenues of $29.8 Billion in 2011.

Across the value chain semiconductor chip companies and semiconductor FABs account for the lion share of the revenue. The former exploits economies of scope and the latter economies of scale.

Revenue Drivers


Cost & Value Migration

An amalgamation of processor cores, feature rich IP and fab for hire have pushed the value frontier to a new normal. Aided by quantum jumps in feature size and design productivity, SOCs redefined products and markets.

The first generation of SOC’s saw processor, peripherals, interfaces and memory integrated. The second generation of SOC’s built on the previous by harnessing multiple cores, RF and power management functions. The third generation of SOC’s will bring together photonics, high density memory and MEMS into the main stream.

CostPerformanceRatioCost Performance Ratio, SOC’s – The New Normal

On the value frontier, a leading edge System-on-Chip (SOC) offers cost-performance ratio that rivals the elite microprocessors of today. The new players with vastly different business models are increasingly threatening the old guard. However both have seen semiconductor design costs reach epic proportions.

With increasing levels of integration and multicore processors becoming the norm, hardware and software costs have exploded. Verification engineers and software developers now covet over half of the development team. As geometries shrink, tooling efforts to account for increasing variability of parameters and DFM (Design for Manufacturing) requirements have further exacerbated the problem.

The Economics of Chip Design

A typical semiconductor company spends anywhere from 20% to 25% of its revenue on R&D with COGS accounting for another 40%-45% and SG&A in the region of 10% – 15%. With these assumptions and using the Semiconductor Chip Design Cost Model the numbers that emerge tend to favor products that can be milked over relatively large periods of time or in markets with large demand side economics of scale.


To put things in perspective, the annual shipments of microprocessors (all segments) in 2011 stood at 350 Million units. High-end smartphone shipments reached 60 million units in 2011. The returns necessary to justify investment on a new chip requires double digit market share.

Fabless Semiconductor Startup:

The picture is no different for emerging startups wanting to unleash the next biggest idea or invention. Although startups rely on VC money to fuel R&D in the initial stages the return necessary to justify venture investment are increasingly out of reach for many.

A semiconductor startup pursuing an opportunity in a fast growing market needs to capture more than 10% market share and demonstrate higher probability of success. To deliver both, the odds are as good as winning the lottery. (See: Fabless Chip Startup Business Plan)


Startup Exit Valuation:


Note: Startup is funded, based and operates solely out of USA

Implications for Product Innovation

It is imperative for designers to leverage legacy designs, in die form, surround them with abundant memory and unleash rich software to create value. New alternatives in 2.5D packaging (side-by-side die on an interposer) or 3D packaging (Through-silicon-Vias) will aid this effort. Many low to medium volume applications will make this transition. OEM’s in commodity markets will increasingly adopt COTS and rely on ODMs/EMS to bring solutions. Software will be the basis for differentiation.

For high volume applications the next wave of innovation will require products that can integrate wider range of heterogeneous functions (mobility, sensing, intelligence, adaptability and connectivity).


The market will essentially evolve to provide one or all of the following functions- Intelligence, Connectivity, Stimuli and Gratification in varying degrees. A chip that can integrate all of the above functions and satisfy the needs (price/performance) of the market will unleash major realignment and shakeout within the industry.

Imagine a TV in the not so distant future that morphs into a Gaming Console, a PC, a Web-TV or an entertainment hub based on the need. Embedded Hardware Virtualization will make this happen and enter mainstream market in a big way.

Intelligent Devices constitutes another market area with a potential volume larger than PCs, Mobile Phones, Servers, and Tablets combined. With a 2020 vision of 25 Billion devices the market requires Sensing, LBS, Augmented Reality, Analytics, Security and Self-Monitoring to be prevalent in most nodes. A platform centric vision for intelligent nodes can unleash innovation and propel existing players to new heights.

We are entering a realm of devices capable of features analogous to what we humans are born with. Ironically most humans share the same feature set. It is the DNA that confers uniqueness and character. For chips, with similar features, software will emerge as the key differentiator and enabler that can morph into something unique depending on the context.

The Road Ahead

Globally the aging population (65+) will grow to 2 Billion by 2050. The world’s emerging middle class will reach 4.9 Billion by 2030. Developed and emerging economies share of the middle class will reverse from the current 50% to 22%. A slow-cycle market characterizes one and a fast-cycle market exemplifies the other. The challenge lies in managing both at the same time and within the same organization.

1. Industry Concentration: The minimum efficient scale (MES) for a semiconductor fab is nearing $10 Billion. For a fabless chip company the ratio of minimum sales volume (MSV) to market size has reached double digits (~15%). As platform products and services, with winner-take-all dynamics, become more prevalent, the industry will consolidate. Firms either need to pursue broad line differentiation or risk being caught in the middle where the future is anything but certain. Each market vertical will converge to the “Rule of Three” with an uptick in M&A based on horizontal product line reach.

2. New Business Models: The new winners will be those who can enrich customer captivity (combination of switching and search costs) and combine it with supply side economies of scope. The industry will favor fast-followers and late adopters over innovators. An asset lite model supplemented by just-in-time design methodology and standardized hardware platform with software differentiation will redefine competition.

3. Vertical Integration: OEM’s will be forced to ensure that their semiconductor suppliers remain viable and continue to create value. Some form of vertical integration either in the form of minority stake, multi-year supplier partnership or outright purchase will become a necessity. Pure play foundries and EDA specialists will integrate forward to offer one stop R&D solutions by assembling a portfolio of IP’s and engineering resources. At the technology level high density Memory (3D), MEMS, Interconnects, Photonics and Embedded Software are prime targets for M&A.

4. Operational Efficiency: Ultimately all firms needs to generate returns that cover the cost of capital. The less efficient companies will struggle merely to remain afloat. Efficiency governs all activities from engineering, production, marketing, sales, to operations. The organizational power structure, long the bastion of engineering, will cede control to marketing and finance.  ROIC the new mantra.

5. R&D: Escalating costs, will force many chip companies to offshore R&D. In the next five years leading edge designs, the stronghold of Silicon Valley will move overseas as markets there become large. Many companies will transform their model to one of an IP provider. Foundries, the current gateway for all semiconductor chips will move up the value chain to offer one stop solutions as will EDA companies. Development of process technology for new nodes will require pooling of industry resources together.

6. Value Migration: For firms to generate economic profit it is imperative to adopt a software centric vision for the products as value migrates from hardware to software. Firms that can package and deliver hardware-software together will remain immune to commoditization and reap the benefits of lock-in and network effects. If you are somehow not plugged into one of the platforms, competition will force you out.

Closing Remarks:

As the economics of semiconductor business undergoes fundamental shift, changes in the value chain and ecosystem is inevitable. To sustain economic profits exploiting economies of scope in R&D resources will become critical and challenging. One business model that could disrupt the industry is “Just in Time Design” harnessing elements from Dell’s supply chain model and Toyota’s production management system. When transaction and search costs associated with semiconductor Intellectual Property and Engineering Talent intersect on an EBay like trading platform the vision will become a reality.


  1. Semiconductor Annual Revenue Data sourced from WSTS, April 2012
  2. EDA Annual Revenue Data sourced from EDA Consortium MSS Newsletter, Q1-Q4 2011
  3. Semiconductor Foundry Market Data sourced from Gartner, March 2012
  4. Processor Market Shipments by Industry and Architecture, IDC, February 2012
  5. Semiconductor Industry Profitability Analysis based on financials from 2007 – 2011 of Top 10 players in each category excluding outliers. Data compiled from Annual reports, Morningstar, Bloomberg and SEC filings.
  6. 2011 PC Shipment Data, Gartner, January 2012
  7. 2011 High End Smartphone Shipment Data, Berg Insight, February 2012
  8. Intelligent Systems, The Next Big Opportunity, IDC, August 2011
  9. World Population Aging, United Nations
  10. World’s Emerging Middle Class, sourced from Dr. Homi Kharas, The Brookings Institution,
  11. Global Semiconductor Alliance, March 2012
  12. EDA Consortium, Quarterly Marketing Statistics (2011). Market Research Reports
  13. ChipSTAT Annual Review, April 2011
  14. NASSCOM, Opportunities in Embedded Software (2010)


To my colleagues and peers in the semiconductor industry with whom I have shared and enjoyed an incredible journey. Your inputs on the Survey are highly appreciated. Thank You for taking the time to answer it.



The Lure of Emerging Markets– India

With growth looking more and more anemic in the developed world and the fundamentals (expenses outpacing revenue) clearly pointing to a lackluster demand going forward. Can products and services from the developed world find a market elsewhere? Can the Indian consumer market offer a road ahead.

Adopted from Economist, Daily Chart March 7th, 2011

A burgeoning and transitioning Indian economy with buyers on the move bodes well for businesses local and global. Do the numbers justify India’s rise or are we once again succumbing to temptations of finding growth where the fundamentals just don’t add up. Is now the time to step in and serve unmet, latent and unaddressed needs ?

In a two part analysis lets investigate what it means to do business with consumers in India analyzing fundamental drivers of demand, the market potential and the challenges of meeting those demands.

Part-I: Demystifying the Indian Consumer – Market potential, the real numbers

  1. Demystifying the Indian Consumer (Download)
  2. India Consumer Durables Market Forecast: 2011 – 2015 (Download

Part-II:  Go-To Market Challenges – Leveraging networks, Igniting demand.

  1. O Buyer Where Art Thou
  2. Channels – Leverage, Make or Buy

Demand – The Holy Grail

Fundamentally there are only two ways to generate demand for any product or service:

  1. New Sales: Attract new buyers who have never experienced the product category or service.
  2. Replacement Sales: Entice existing buyers to replenish, replace or upgrade their existing product or service.

At the macro level demand is driven by population growth, income growth, productivity gains, monetary policy, trade policy, innovation that renders products accessible and affordable or changes in the regulatory environment.

At the micro level demand is stimulated by awareness, cultural norms, cheap credit, accessibility, education levels, income levels, price, technology, product quality and lifecycle.

Demystifying the Indian Consumer

The Indian market is squarely divided between the urban and the rural. A projected consumer model1 of the Indian market resembles a direction post reflecting the many possible roads businesses can take to reach the various segments.

imageSource: NCAER; MGI Consumer Demand Model.  (Using 2010 $PPP)

The Globals and Strivers are where most MNC’s focus today. But it is the Aspirers and Seekers together making up about 160 million households by 2015 where the mass market will converge.  The Deprived numbering 70 million will continue to march along, relegated to the sidelines and will find it increasingly difficult to break through without government support.

Note: For a detailed discussion on the consumer segments refer to the McKinsey / NCAER report: The ‘bird of gold’: The rise of India’s consumer market. 

Rural and Urban Divide:

Employment Status: The most striking observation one can glean from the employment status of Rural and Urban India is that over half the workforce is categorized as being self-employed. Cash flows within this segment remains volatile something marketers need to keep in mind when projecting numbers.

Another significant proportion falls into the category of casual laborers. This base of the population survives one day at a time. Lastly, the vast majority of salaried professionals are public sector employees with a few participating in the private sector.

An average graduate earns $ 9,474 per year in leading cities, the comparable rural figure is just $ 4,789. The difference, in fact, is higher for illiterates as well –average of $ 3,684 in the elite towns versus just $ 1,184 in the villages2.

Note: The purchasing power of the Indian rupee is much higher than its exchange rate value in USD

image Source: RBI Monthly Bulletin, April 2011

Expenditures: Rural and Urban India spend almost equally on all fronts although the share of the wallet dedicated to food is marginally higher in the rural area. This can be attributed to differences in the average household size which stands at 4.7 for rural and 4.2 for urban3.


On an average, the urban Indian earns 85 percent higher than his or her rural counterpart, spends 71 percent more and saves nearly double.

How Indian Consumers Pay:

The retail industry, with transactions valued at USD 410 billion per year4 is predominantly cash based. India’s consumer durables market was valued at around USD 33 billion5 in 2010, with electronic products (computing devices, mobile handsets and audiovisual products) accounting for almost 76%.

India has 173 million debit cards users (13%) and 23 million credit cards users (2%). However cash continues to be the only mode of transactions for the 40% unbanked population in the country. Overall, 67% of transactions are carried out in cash, while only 33% are done through electronic means6 (60% of these are P2P transactions).

The penetration of PoS terminals in India remains low at 419 terminals per million inhabitants7 (2009). On an average, the debit and credit cards together account for only two card transactions per day per PoS terminal. The economics clearly point to a need for alternate payment mechanism.

Consumers in a Transitioning Economy:  A Moving Target

As a new middle class emerges across India, people will seek greater quality in what they pay for (food, housing and clothing). As incomes rise further, the same will look for convenience and pay for it. Finally once the Indian economy leaps into the league of developed nations buyers will seek customized offerings and services. This scenario has played out numerous times and each time the pattern has repeated itself in every country that made the leap from underdeveloped to the developed.

MovingConsumerShortBreadFactorIndia will be no different although the needs, composition  and behavior of the different segments may deviate.

Note: For an in-depth look at the lifecycle in an emerging market refer to the pioneering work by Alonso Martinez and Ronald Haddock, The Flatbread Factor,  the finest work to emerge from the strategy landscape over the last decade.

Moving Segments, Changing Needs 

Over the years a gradual shift from a joint family system to nuclear family has taken hold across India. The trend will only accelerate further as incomes rise and people demand more freedom, expression and personal space.

India is already witnessing the arrival of new consumers expressing themselves boldly by trying and adopting new offerings triggered by: 

  1. INCOME Effect: As the 2nd fastest growing economy, with 8% plus growth people have more to spend.
  2. MINDSET Change: The post liberalization population numbering 35% is just coming of age.  
  3. AWARENESS: Access to information brought on by increased media proliferation, technology reach and 15 million foreign travellers annually.
  4. ASPIRATION Effect: Desire to experience new things as a consequence of moving up the value chain and the need to fit in by emulating others.  

By 2015 the various consumer segments in India will demand and pay for goods and services differently. Some of the opportunities that will open up:


The Numbers Game:

When all said and done, it ultimately boils down what level of sales can the economy sustain given the consumer makeup and country specific environment they live in. The best way to gauge the health of an emerging economy is to project Consumer Durable (CD) Sales.

Consumer Durable (CD) sales are a bellwether of broader trends and underlying fundamentals in the economy. CD Sales are primarily driven by discretionary spending which correlate strongly with per capita growth in GDP earnings. CD penetration rates are a good indicator of shortcomings in the economy on account of infrastructure, credit availability and stability in household earnings.

Here is what one projection on achievable CD sales looks like and the assumptions made.


CAGR for Consumer Durable Sales (2011-2015E)CAGROne should pay close attention to the adoption rates for the basket of consumer durables under consideration. The adoption rates are a way to cross check sales projections and ensure that sales mirror the size of the consumer segments.


Sizing up Demand:

To develop the same sales estimate from bottoms up one has to look at potential market size among all the available segments and put together a detailed plan to capture individual buyers. One such framework that maybe employed is depicted below.


GBL: Globals (High Income), MMI: Middle Middle Income, UMI: Upper Middle Income

I will leave it those interested to arrive at individual targets for CD sales at each of the segments under consideration.

In Part-II of this discussion we will investigate how having established a sales target one can go about selecting a Go-To Market Strategy to realize the set objectives.

Note: It may appear to the reader that I am biased towards the Indian Market. It just so happens that I can relate to the Indian market better on account of my origin and roots. The worst thing any marketer can bring to his profession is an inherent bias in selecting target markets.

A lack of in depth knowledge and expertise on China and Brazil has hampered my ability to conduct a similar analysis on their market potential.


  1. NCAER; MGI India Consumer Demand Model
  2. NCAER- Inclusive Urbanization Needed, Oct-2010. The numbers are adjusted based of the 2010 $PPP.
  3. National Sample Survey Office (NSSO), Report No. 531
  4. A.T. Kearny Global Retail study, 2010
  5. Confederation of Indian Industries Data, Dec-2010
  6. Mobile Payments in India – Deloitte/ASSOCHAM, April-2011
  7. Bank for International Settlements
  8. McKinsey – Comparing urbanization in China and India, July-2010 (Pg-2)
  9. Energy in India for the Coming Decades, Anil Kakodkar, Chairman, Atomic Energy Commission, India
  10. India- Energy Efficiency report, ABB, Jan-2011 (Pg-2)
  11. World Bank, GDP Forecasts.
  12. International Energy Agency (IEA)
  13. International Monetary Fund (IMF)
  14. Planning Commission of India
  15. India Census – 2010
  16. Modeling Diffusion of Electrical Appliances in the Residential Sector, Michael A. McNeil and Virginie E. Letschert, August 2010
  17. Bass Diffusion Model

Update, Oct 28th 2011: The Implications of the Global Web for US Startups, Point Judith Capital (some interesting data)

Update Oct, 22nd 2011: Economist Special Report : Business in India, rightly captures the challenges of doing business in India and impediments to its growth.

Update Oct, 17th 2011: India could become one of the top 10 e-commerce hubs in the world by 2015

Update Oct, 16th-2011: Top US based corporate giants like Wal-Mart, Starbucks, Morgan Stanley, New York Life Insurance, Prudential Financial, Intel, Dow Chemical, Pfizer, AT&T, Boeing, and others lobbying hard to enter India

The Future of Advertisements

Half Of All Advertising Doesn’t Work, The Trouble Is We Don’t Know Which Half ” still reigns supreme in the world of advertising.

Emerging new technology, shifting consumer behavior, always on consumer touch points and evolving new media are converging to create a new paradigm in advertising.

Advertising – Traditional, SEM, Social Media or Mobile ?

Universally almost all purchase decisions can be categorized into either a High-Involvement Purchase (ex: Home Appliance) or a Low Involvement Purchase (ex: Grocery). The former entails significant risks, is driven by situational needs and involves complex decision making. The latter seeks to minimize time, as Low-Involvement products engulf eighty percent of all purchases, is predisposed to impulse buying and familiarity/awareness plays a  key role.

It is no surprise than that most of the advertising (traditional) we see and hear around us encompasses Low-Involvement products.

Then the internet came along and SEM captured the attention of marketers. As a platform Internet offered conversations with and between buyers to be captured and acted on.

The one notable difference – Internet Search is preceded in most cases by a situational need (i.e. most buyers are either looking for something specific or researching a product category). In certain cases an enduring need also finds expression on the internet in the form of Blogs, Chat-Boards, User Forums or Special Interest Groups to name a few.

One could argue that SEM is ideally suited for High-Involvement products, but this does not seem to be the case. There is a reason behind this….. Legacy for one and….Risk Aversion for another.

With Social Networks people share rich information about their lifestyle, habits, interests and needs on an ongoing basis. A new dimension – Individual Behavioral Data is now available to marketers. What we get with Social Network Advertising is a hybrid between traditional and internet advertising.

With Mobile web we are on the cusp of something phenomenal. An ability to bring together all elements from Traditional, SEM and Social Network Advertising in a way unimaginable until now.

The Elusive Target:

According to The 2011 Digital Marketer, Benchmark and Trend ReportThe most influential element driving purchase decisions today is still  Word of Mouth (54 percent), followed by information from a Website (47 percent).” Advertising in video games and on mobile phones seems to influence far fewer consumers in purchase decisions.

That for you is the dichotomy facing advertisers: How to target advertisements effectively, in what media, to whom, where and when. 

Consider the decisions confronting a marketer when trying to influence a new car buyer. Depending on the buyer’s needs and life-stage a simplified decision matrix could yield 16 different options resulting in a specific choice of vehicle make and model.


Traditional means of serving an AD to such a prospective car buyer is a “Hit-or-Miss” game of chance. While Internet Advertising (SEM) added a new level of dimension by tying AD’s to the “search keyword” it is still blind to the prevailing need driving the search.

Critical information on Individual Buyer’s behavior and his or her preferences at various stages in the decision cycle eluded advertisers and advertising platforms. Today this data can be a near certainty.

Out with the Old in with the New:

The Old: The old world of Advertising relied on eyeballs, media concentration, economies of scale, POS data and consumer surveys to create awareness, cultivate brand attitudes and induce purchase intentions.

It did so using a careful selection and allocation of advertising spending across fifteen different media with the aim of maximizing reach and effectiveness.


The New: Platforms today are flush with rich behavioral data on shoppers, their life-style, geo-demographics, touch points and interactions as they happen in real-time.

In addition the incremental cost of delivering an AD impression today in ‘”Real-Time” is nearing “ZERO”. The ramifications are clear, an era of 1-ON-1 advertising is on the cusp.

The new age of advertising is all about capturing rich information flows in real-time within and across media platforms. Economies of scale or leveraging the networks with the largest reach become secondary as fragmentation is the norm.

New Rules of Advertising:

  1. Multi-homing – New age consumers will move seamlessly between platforms and media– with platform service providers incurring most of the multi-homing costs.
  2. Spatial vs. Temporal Relevance – The new advertising paradigm is all about harnessing relationships-interactions and developing models that morph information. The frantic bidding to secure the most coveted time slot will lose prominence.
  3. Real-Time / 1-ON-1 – The era of real-time, personalized on the fly AD delivery is here to stay.
  4. Ubiquitous Network – AD impression and delivery must traverse the intended target’s choice of platform across the behavioral sequence model.
  5. AD Markers – Just as DNA holds key genetic information governing humans, so too will AD Markers come to define buyers.

Update Sep-21, 2011: WSJ Article: “TV Lures Ads but Viewers Drop out”


  1. Consumer Behavior – A Strategic Approach, Henry Assael
  2. IAB Internet Advertising Revenue Report, April 2011
  3. The 2011 Digital Marketer: Benchmark and Trend Report
  4. Radio & Television Business Report

Mobile Banking – An Acute Emerging Market Need

India’s Mobile Banking Potential:

A precursor for any open market economy to flourish is the free flow of capital and goods between buyers and sellers. 

Myth and Reality:

Out of 1.2 Billion Indians only 240 million citizens have access to banking services; Whereas 764.76 million people have mobile phones. McKinsey estimates that 180 million1 new job seekers will enter India’s workforce over the next two decades—a potential demographic dividend. 30% of India’s population lives in urban areas. The 4.5 million wealthy households that consume luxury products and services are concentrated mainly in the top 10 cities.The Labor force participation by occupation is Agriculture (52%), Industry (14%) and Services (34%). A vast majority of the population living in Tier-2 / Tier-3 cities are either small business owners, entrepreneurs or self-employed laborers.

The Indian economy depends far less on exports compared to its other brethren’s in Asia. Most of the growth is fueled by domestic consumption.

Bigger Pie / Bigger Slice:

An emerging middle class estimated to be increasing by 20 million a year, with a median age of 26 when weighed against the backdrop of 400 million people in India that do not have a bank account, severely dampens the market potential. One look at how MNC’s have fared over the past decade is ample proof of what went wrong with the rosy projections.

An estimated 37.2 %2 of India’s population falls below the poverty line (BPL). Microfinance was supposed to serve the needs of the poor but went wary with its focus more on credit delivery rather than help people escape poverty.

The banking system can evolve as a key gatekeeper that can bring together missing parties, unleash spending, enhance trade and in the process create new opportunities for livelihood.  

India’s Banking Reach

The number of bank branches in India is 85,3003 of which 32,000 branches are in the rural hinterland where almost 70 per cent of Indians live. Almost 38 per cent of banks have branches in rural India and 40 per cent of the country’s population has bank accounts. The average population per bank branch with above statistics is 13,900.

Last Mile Challenges – High Cost of ATM’s

If current statistics are to be believed India’s ATM density is around 35 ATM’s per million people which is abysmally low compared to the US’s ATM density of 1300. At last count the number of installed ATMs stood at 69,324 (January, 2011).

Setting up an ATM currently costs around Rs.8 lakhs ($18,000), including the VSAT, interiors, signage’s, etc. Rental costs would differ from area to area and would range from Rs.5,000 ($120) a month in small towns to Rs.50,000 ($1200) a month in upmarket areas in metros. The total expenditure per ATM would be around Rs.25 lakh ($56,000) over a 5-7 year period. The cost for a bank to set up say around 1,000 ATMs will be at Rs.100 crore ($22 Million).

In India the ATM network is mainly operated by FSS called FSSNET used to connect ATMs of 32 Nationalized banks. A cost of Rs.20 is incurred per transaction on these platforms deeming them unsuitable for micro-transactions, the lifeblood of rural India.

The economics can deter anyone from reaching out to segments that are deemed unprofitable to serve.

Opportunities – Abound

All is not lost yet, extreme rural poverty has declined from 94 percent in 1985 to 61 percent in 2005, and projections are that it will drop to 26 percent by 2025.

The challenges of serving India’s rural hinterland, where 70% of the population resides, are enormous – poverty, weak infrastructure, illiteracy coupled with the high costs of serving customers in the last mile.

A solution for these challenges is Technology coupled with Innovative Business Models that can bring about both change and create opportunities for businesses. Serving customers at the Bottom of the Pyramid is not going to be easy or promising.

Technology to the Rescue – Mobile Penetration

India has achieved a tele-density of about 65 per cent, thanks to the major contribution from mobile phone services. According to TRAI the total number of Telephone subscribers in India reached 806.13 million5 at the end of January 2011. Tele-density in Urban stood at 150.67% and that in rural at 32.11%.

McKinsey research forecasts that the total number of Internet users will increase more than fivefold, to 450 million, by 2015. Total digital-content consumption will double, to as much as $9.5 billion. Including access charges, revenues from total digital consumption could rise fourfold, to $20 billion—twice the expected growth rate of China


With falling handset prices, strong government support (UID, National Rural Employment Guarantee, Inclusive Banking Policy) and aggressive rollout by mobile service operators the projections will soon be a reality.

However a “cookie-cut” approach to taming this large market will not work. What is needed is a localized offering developed from ground up that can cater to the diverse and heterogeneous Indian market.

Payment Networks:

International Payment Networks like VISA and MasterCard are both present and doing well in India. However both these networks carry with them the legacy of originating in the western world, catering to the needs of well developed markets with an organized retail sector and serving a largely homogenous customer base. India, with its diverse languages, heterogeneous markets, rampant illiteracy, poverty and underserved infrastructure offers insurmountable challenges in achieving higher penetration rates.

According to the data released by Reserve Bank of India (RBI) for 2009-2010 there were 18.3 million credit card users and 181.4 million debit card users in India.

Mobile Payment Networks:

Private mobile payment gateways have come up to meet the demand of micro payments like OxiCash, mChek. However, both cater to the urban pre-paid segment, utilize debit / credit-card networks and are primarily positioned to serve as an E-Wallet for the end-user.

National Payments Corporation of India (NPCI)

The future of India’s Banking and Commerce lies in a Mobile Payment Network like the one proposed and being deployed under the National Payments Corporation of India (NPCI), a government backed initiative. The envisioned architecture (Figure 1) proposed under the NPCI looks very comprehensive.


Figure 1: National Payments Corporation Network Architecture.

What’s unique about this network among other things is the ability to authenticate users using both conventional PIN and biometric technology, a must for serving rural customers, low transaction fees (Rs. 0.10 per transaction) and seamless integration with financial institutions. In addition technology has been leveraged and deployed to circumvent infrastructure and regional barriers in reaching the last mile.


Source: NPCI

Mobile Value Added Services & NPCI Network

Now it is up to businesses and entrepreneurs to harness this network at the backbone to deploy Mobile Value Added Services (MVAS) that can both develop trade and foster inclusive growth. The opportunities are boundless:

  1. Real-time Commerce.
  2. E-Business
  3. E-Billing
  4. E-Health
  5. E-Education
  6. E-Banking
  7. E-Logistics
  8. E-Entertainment 
  9. E-Travel


Source: ASSOCHAM Financial Pulse Study – Emerging Landscape in Mobile VAS Industry

It is a win-win situation for all stakeholders involved – Higher ARPU (Mobile Service Providers), Transaction Fees (Financial Institutions), Enhanced Trade and Commerce (Market Participants), Wider Tax Base (Government), Financial Security (End Users)

Closing Remarks:

I have spent the last six months travelling extensively across India, studying the ground reality, gathering first hand data, understanding the pitfalls, challenges and opportunities with doing business in one of the fastest growing emerging markets. While I am ecstatic of its potential one must tread this important market very carefully for the political, legal, cultural and infrastructure challenges are daunting and not for the faint at heart.

However with extensive market research, immaculate planning, localized offerings and innovative business models I am convinced one can succeed in what is shaping up to be the most important market of our generation. 

Recommended Reading:

Myths and Realities of Being an Entrepreneur in India (Knowledge @ Wharton)


I am thankful to officials (Government, Banks, Businesses), friends and eager citizens of India for their support and warm hospitality.


  1. India’s urban awakening: Building inclusive cities, sustaining economic growth – McKinsey Global Institute
  2. Planning Commission of India.
  3. Reserve Bank of India (RBI)
  4. Retail Banker International (RBI)
  5. Telecom Regulatory Authority of India (TRAI).
  6. McKinsey Digital Consumer Survey, 2010
  7. National Payments Corporation of India (NPCI).
  8. Learn Telecom

Coupons–Is the time right for going Mobile ? ( Part-I)

The primary use of Coupons, delivered through various mediums, for the CPG manufacturers is to facilitates sales (purchase behavior)through one of the following means:

  1. Trials.
  2. Repeat Purchases.

It is an established fact that Advertising Communications and Promotions (AC&P) play an integral role in stimulating sales across the consumer packaged goods industry. Depending on the product / industry lifecycle a brand manager can employ different tactics (Appendix) that are geared towards one of the following:

  1. Increase Sales on account of Trials by New Users
  2. Increase Sales on account of Trials / Repurchases by Other Brand Loyal’s
  3. Increase Sales on account of Trials / Repurchases by Favorable Brand Switchers
  4. Increase Sales on account of Trials by Other Brand Switchers
  5. Increase or Maintain Sales on account of Repurchases / Stock-Up by Brand-Loyal’s

For the end buyer, Coupons help realize one of the following objectives:

  1. An economic motivation – where the main goal is to save money
  2. A hedonistic motivation – where the aim is to derive pleasure associated with striking a great bargain.
  3. A routine-loyal, or risk-avoiding motivation – where the goal is to reduce the risk associated with trying a new brand or product.
  4. A functional one – where the aim is to reduce search costs.


Strategy Tactics
Brand Loyal’s High Low Increase
Advertising suggesting additional or alternate applications of product
Brand Switchers
Medium High Build Loyalty Advertising to enhance
Price Discounts
Routine Brand
Low Highest Attract buyers keep
search costs high.
Price Discounts
Other Brand
High Low Entice Brand Switching
Minimize Risk
Comparative Advertising
Price Discounts
New Category
Lowest Lowest Initiate
Advertising – Create Awareness, Link Brand with Category need.
Price Discounts

Table-1 : Promotion Strategies and Tactics based on Buyer Groups

Challenges facing Brand Managers:

  1. As newspaper circulation continues to drop across America, Marketers need to adopt new vehicles to push Coupons onto consumers. The available options include Direct-Marketing, Internet based Coupons or Mobile Coupons.
  2. The current means of distributing coupons are not driving incremental sales. They are more likely to offer discounts to those already planning to buy, thereby cutting at the margins for manufacturers and retailers.
  3. Coupon usage history cannot be traced down to the individual level. The best available data is geo-demographic level. This lack of transparency hampers price discrimination and identifying well qualified prospects.

Coupon Usage – An Emerging Market perspective

My observations from studying how Advertising Communications and Promotion work in emerging markets (India) highlight two important deviations:

  1. Coupon distribution is still very much unheard of. Coupon fraud and absence of an organized retail infrastructure have prevented Coupon based marketing promotion from taking off.
  2. A second reason, an important one, arises from the industry lifecycle. A high growth market such as India offers, CPG manufacturers, brands and market segments that are yet to be established and defined. Consequently the use of Advertising to both position a brand and stimulate sales works very well at this stage in the market.
  3. The closest thing to using Coupons is the BOGO offers or Bundling that offer manufacturers an option in attracting buyers.

State of the US Coupon Industry – 2010


Through the first nine months of 2010, coupon redemption is up another 5.3% to 2.5 billion vs. the year-ago period, with the value of coupons redeemed up 7.7% to $2.8 billion according to NCH Marketing Services, a unit of Valassis Communications.


Internet coupons still account for only 1% of distribution. The majority of overall growth
in redemptions still come from Free-Standing Print Inserts (FSI), which accounted
for more than 2.1 billion redemptions overall last year, according to NCH data.



According to a recent survey by mBlox almost 70% of coupon users chose Mail/Post and Email as the preferred vehicle for receiving coupons. 


Source: mBlox survey conducted by OnePoll, Oct 5-2010

A follow on post will explore who technology can be utilized to alleviate and successfully administer coupon usage to build brand loyalty. How can social networking sites and local deal site come to add value. What do both consumers, retailers, CPG manufacturers and interested stakeholders wish for. 

  1. NCH Marketing Services, a unit of Valassis Communications i
  2. Advertising Age
  3. eMarketer


Impact of Advertising Communications and Promotions in affecting Sales based on product / industry lifecycle.

  Impact on Sales
Stage in Product / Industry
Advertisements Promotions
# Introductory Phase High High
# Growth Phase

1. Differentiated Product / Leader

2. Me-Too Product





# Maturity Phase

1. High Brand Loyalty

2. Low Brand Loyalty





# Decline Phase None Low