3 Things that are wrong with our engineering education

It is hardly a secret that India is staring at a mega crisis in engineering education. The problem is two fold:

1. The number of students graduating every year far outnumbers the industry requirements. Supply far exceeds the demand
2. Out of this huge supply, <1% is equipped to work in the industry.

By reliable estimates, India produces over 15 lakh engineers a year. Most students look for a break in IT sector since that has been the mother ship for all engineers for many many years. Bad news is that mother ship does not have enough space.

IT sector is creating roughly 3 lakh entry level jobs a year.

Putting two and two together 70%-80% students graduating in 2014 would be either unemployed or underemployed. And I have not yet considered students who graduated between 2010-2013 and are still competing for the same jobs.

Think about it, roughly 4 out of 5 engineering graduates will be unemployed.

To make matters worse, engineering education has not equipped them with skills that would enable them to earn on their own.

Technological advancements have made it feasible for an individual with programming skills to make a living by many ways other than a job - build apps, become a freelancer, become part of a virtual team such as gTeam. However, all of these roles require real world programming skills which our engineering education does not focus on.

So what is it that is wrong with the engineering education system? 3 things:

1. Curriculum - Very very abysmal focus on programming. Student graduates after copying like 500 lines of procedural code in 4 years. How will the student survive in 10 million+ lines of code and over 5000 classes. If you haven't done it, you don't know it.

2. Teachers - Absence of practitioners from education system. Most teachers are pure academicians who have never written code in professional capacity. It is unreasonable to expect that they would be able to give practical programming education. As I said, If you haven't done it, you don't know it.

3. Exposure - Student's world is limited to a batch of 100-200 for 4 years. That becomes his/her benchmark for being competitive. In reality, student is competing with 1,50,00,00 other students. He/she does not realize his/her true ranking until they have graduated but by then it is already too late - education is over and they are under pressure to find a job!

All of these factors together are working against the student and leave him/her stranded after 4 years of hard work and investment of several lakhs rupees. The big question is for students for whom the boat has already sailed, what should they do?

Good news is that there are still options to learn. You should learn programming. That is really the only thing that industry cares about - can you program? If you love it and are committed to it, you can learn and easily get 1 of those 30,00,00 jobs.

To help students truly learn programming, we at TRISECT offer a very hands on and very intensive 3 months training course that requires writing over 12,000 lines of code. Unique course structure, pedagogy, and guidance from professionals ensures rapid learning and awesome results. We even provide placements and charge fee only after student gets a job. You can explore program details on our website. [Disclaimer: TRISECT is my venture]

Should Flipkart be Worried About Amazon?

Amazon has announced its entry into Indian e-tailing market and has forayed with categories that are mainstay of Flipkart - books and electronics. So, should Flipkart be worried about Amazon?

Yes - a lot. Here's why.

1. Amazon understands online behavior better than anyone else

So far, no Indian e-tailer was big on analytics and understanding buying behavior. With Amazon, that has to change. Amazon has incredible depth in understanding buying behavior and decision cycle and consequently converting prospects.

Amazon - 1 : Flipkart  - 0

2. Amazon serves the information need much better

Before Amazon had launched, lot of buyers who buy books online used to make their buying decision after surfing Amazon. Why? Because Amazon serves the information need far better than any other player - in the world. Personally, I have never ever bought from Flipkart or Snapdeal or any other Indain e-tailer without having to read about the product on some other site.

Next time, when I am browsing Amazon for deciding whether to buy the book or not, guess who would be waiting to sell me one?

Amazon - 2 : Flipkart - 0

3. Amazon has a stronger hold on engagement

This is enabled by 1 and 2 but is vastly more significant. Being able to engage an online customer is non-trivial. It is confluence of great UI, great UX, having relevant SKUs, relevant information, credible social interaction, great technology (such as recommendation engine) and possibly more that I missed out. Given a company that understands the customer well, serves their other needs apart from just purchasing and is great at keeping them engaged - should a competitor worry about them - absolutely!

Amazon - 3 :  Flipkart - 0

There is however, one significant advantage that flipkart has
4. Amazon does not understand Indian business environment as well as Flipkart does

Flipkart has been in the market for several years now and understands the business environment and its nuances much better than Amazon does. This is not a trivial advantage to have. What I am not sure about is, is it sustainable advantage - may be not.
Amazon will have to go through its learning curve on logistics, delivery, CoD, procurement, high rentals etc. and they may take some time to establish their foot hold. They have the second mover advantage. They can learn from their competitors. It is much harder to experiment and figure out what works rather than learn from a competitor who has gone through the cycle and made those mistakes.

As an example, while flipkart has just started to launch marketplace, Amazon entered with marketplace. Amazon knew delivery and customer satisfaction is a challenge (see Rediff Shopping as an extreme example) and chose to pick up that battle.

Amazon - 3 :  Flipkart -1

Some people might argue that Flipkart has acquired a huge customer base but I think that advantage is temporary. Primarily because Amazon has better engagement with strong social angle and hence will have higher retention and lower acquisition cost. Moreover, Indians do have an implicit mindset that foreign vendor is better.

To an extent it seems that best hope for Flipkart is that Amazon fails to adapt to Indian environment.
But, if Amazon is able to learn nuances of operating in India, there is very little that Flipkart has today that will help it maintain a competitive edge.

Value of Good Education

More than an year ago, I and Pankaj Garg - my batchmate from Sunstone Business School, had worked on a strategy project to answer if RIL should enter e-tailing and if yes, what is the right way to enter e-tailing.

An year later, Amazon has entered the Indian e-tailing business and is starting with same categories that we had recommended.

Not bad for a couple of people from IT background to be able to analyze an entirely different business and understand its dynamics.

What made it possible?

I think this is where problem based pedagogy used by Sunstone proved really helpful. Solving problems like this one ingrained real business skills in me. This was not a trivial problem and neither was it answered in a day or a week or a month. We worked for several weeks - running it through various frameworks, seeking help from faculty, meeting industry people, collecting thoughts from anyone who wanted to share. All these activities added some real value in our real life. They set us up to take on problems like these - something that reading a book or two would have never achieved.

It is hard to overemphasize value of good education. :)

Infosys is in Big Trouble

Narayana Murthy's return and Rohan Murthy's appointment to the company are clear indicators that Infy is in much bigger trouble than they would let us believe.

Biggest question to ask is:
Why does Infy need Murthy to return?
Because current leadership has failed them. In last 2 years since Murthy left, a company of 1.5 lac people could not find single leader among themselves that could run the company at even the industry average rate.

It would be naive to assume that current leadership did not have access to Murthy's wisdom or guidance. They could not deliver despite Murty being available for consultation.

Would Murthy be able to put Infy back on track?
Who knows? May be, may be not. But that's not the point. The point is, what happens after Murthy's exit in not so distant future? Even if Murthy is able to reverse some damage, who will take it further on the right path?

Would it be Rohan? Would current leadership be able to step up to the plate next time? Would they be able to groom another leader while Murthy is at helm? Would they bring in someone from the outside?

All of these options are fraught with grave risks. Their safest bet of proper succession planning, by their own admission, has failed.

Get the Vision Right - Why Amazon Made it Big?

Studying strategy of a company does not make sense in isolation

In my current context, it is not possible to understand what Amazon did right without understanding what its competitors did wrong.  So I spent the last few days studying Amazon’s IPO filing, early annual reports, Barnes and Noble’s annual reports, financial statements, early customer reviews, press articles from that era and so on.

While I found tons and tons of interesting things (some of which I will share over next few posts), all of these stem from very basic things that form the foundation of strategy – mission, vision, conviction. I had my own epiphany in the process – It came rushing to me why it is important to have a crystal clear vision, mission, and goals. We all say that we know that there needs to be a clear vision and mission but I don’t think a whole lot of us really realize what it means.

When you are competing, you are faced with choices and decisions. Your clarity of vision and mission would guide you through those decisions. If your vision is clear and you are committed to it from your heart, you will be able to relate to the winning side of the story. [I do not know the whole story yet, but I know that there is no other way this can be].

On a side note, I think I was lucky that Rajul and Bennett made us spend 3 whole weeks on mission and vision. Without that background, I’d have never had this epiphany.

Jumping back to the topic at hand, Mr. Bezos had started in very early days of internet. Broadband had not even made its debut and internet penetration was below 10%. Online retail was a nascent phenomenon and a very tiny fraction of retail.

Two important things happened at this stage:

1. Jeff Bezos formed a strong conviction in growth of internet and value of online retail
2. He developed a clear long term vision and mission for Amazon

Put these two things together and you get a powerful result – even if Bezos did not know when e-tailing will take off, he believed it would eventually and he had the conviction to be patient and focussed without compromising his path. He was firm on vision and flexible on details – all the choices that Amazon made – affiliate programs, online marketing spend, website feature, selling at a loss for several years – stand the test of being vision guided.

Selling at a loss for several years appeared as a bottomless pit to analysts and even till date that strategy is received with suspicion (as comments on the SBR Reliance e-tailing post testify). Bezos on the other hand was convinced enough to go all in.

Moreover, Bezos was clear in his communication of the same. Here are few excerpts from his letter to shareholders in 1997:

It's All About the Long Term
We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position.

…

Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies. Accordingly, we want to share with you our fundamental management and decision-making approach so that you, our shareholders, may confirm that it is consistent with your investment philosophy

…

We aren't so bold as to claim that the above is the "right" investment philosophy, but it's ours, and we would be remiss if we weren't clear in the approach we have taken and will continue to take.

To conclude this post, I think one of the biggest things that Amazon did get right was their vision and leadership’s conviction in that vision.

Why Amazon Started With Selling Books?

As I started working on “why Amazon could make it big?” I thought it would be most useful to understand their strategy right from the beginning. That brought me to some very basic questions about how Amazon began. Why did they start with selling books? What was the market size and potential that they saw? Was expansion to other categories planned or did it just happen?

I found some of the answers while going through their IPO prospectus and other articles and interviews. Let us begin by answering why Amazon started with selling books.

As it turns out, it was no coincidence. Selling books was a well thought out decision and Amazon had a lot of compelling reasons to start with selling books.

1. Amazon had figured out early that those products that were dependent primarily on information for making a purchase decision were easier to sell online. Come to think of it, all the bean bags and sofas in physical book stores are nothing but a means of letting the buyers discover that information in a comfortable environment by reading excerpts and sampling books.

Amazon provided synopses, excerpts, reviews, author interviews, and personalized recommendations – online. That is all you would need to make up your mind whether you want to purchase a book and this information is far more than what you will ever find in a physical bookstore.

2. Breadth of titles that an online retailer can offer is endless. In 1997, less than 2 years after website was launched, Amazon was offering 2.5 million titles, including most of the estimated 1.5 million English books that were in print and about 1 million that were out of print but in circulation.

Compare this with maximum of about 350,000 titles that a distributor would carry and 175,000 titles that largest bookstore could carry.

Amazon had a strong value proposition in offering wide range of books and making it possible for users to discover and find titles of their choice. It had opportunity to capture the long tail in the books industry.

3. Economic advantages of selling online – Amazon saved on real estate costs, personnel costs, and inventory costs. It had publisher tie ups and most of its orders were communicated to publishers who shipped the books directly.

4. Publishers liked Amazon because Amazon had significantly lower returns. Traditionally, publishers were generous in offering returns to their customers. This meant that if their customers erred in forecasting the demand, the inventory would end up at publisher’s door. This also encouraged over-ordering by bookstores.

Amazon on the other hand, would mostly ship books already sold and hence had much lower return rates. Combined with high volume, it helped them create solid supplier relationships.

5. Low procurement and operational costs enabled them to pass on economic benefit to the buyer which further strengthened their value proposition.

6. Convenience of shopping from home and having it delivered at your door step was additional advantage to the buyer that enhanced value proposition of selling books online.

7. Potential for direct marketing and personalized services – traditional bookstores did not have demographic information of their customers or an understanding of their individual needs. Amazon could easily collect and mine this data to create direct marketing offers and build personalized services both of which were of value to the buyer.

8. Market commonality between online users and book buyers. Those were the early days of internet and, as it seems intuitively correct and, as Amazon had figured out then, there was significant overlap in the population that was online and the population that bought books.

9. Global reach – Being an internet retailer gave Amazon access to customers around the world. In 1995, (the website debuted in 1995), international sales accounted for 39% of their sales. In less than 2 years they had customer accounts in over 100 countries. Amazon had started with an eye on international market.

10. Worldwide book industry was large, growing, and relatively fragmented.

U.S. book sales were estimated to be approximately $26 billion in 1996 and were expected to grow to approximately $30 billion in 2000, while worldwide book sales were estimated at approximately $82 billion in 1996 and were expected to grow to approximately $90 billion in 2000.

Seems like Amazon made a smart choice by starting with books. What do you think?

Why Amazon Could Make it Big?

While I was working on “Would Reliance enter e-tailing”series on SBR, I did some research on internet retailers in US and in the process, stumbled upon some interesting facts.

•          Top 10 online retailers list is dominated by offline retailers – only Amazon and Netflix are pure play internet companies.
•          Top most internet retailer, Amazon, is a pure play which is greater in volume than combined online revenues of other 9.

Why no other pure play online retailer could make it big? 

What did Amazon do right that made it attain e-tailing volume greater than next 9 combined – and this list of 9 includes formidable retailers such as Walmart, Staples, Sears etc.? These giants had money, supplier relationships, retail experience far beyond what Amazon had in its early days and they too had entered online retailing early.

And yet Amazon somehow managed to beat them all at selling online – How? And why no other online retailer could do the same?

These are some very interesting business questions that caught my fancy and I shall try and answer – Why Amazon could make it big?

As we did for answering the Reliance e-tailing question, I began with looking up on Google for any ready answers (shortest possible way is always worth a try), and surprisingly, even though the question had been asked and there were several opinions and thoughts, there was no concerted effort to figure out why Amazon clicked and everyone else flopped.

What do you think, “Why Amazon could make it big?”