Deepak Pelluru's Forbes.com Articles

My “trilogy” encompassing articles on Innovation, Leadership and Globalization has been published on Forbes.com CEO Network. It will really encourage me if you take a moment to check out these blogs and possibly leave a comment or two on the Forbes web site. The links are as follows:

1.       Leadership: Why every manager should think and act like a CEO?

http://www.forbes.com/sites/infosys/2011/12/16/business-leadership-bte/

2.       Innovation: A new avatar of innovation for emerging economies!

http://www.forbes.com/sites/infosys/2011/12/14/innovation-for-emerging-economies/

3.       Globalization: The future of globalization…

http://www.forbes.com/sites/infosys/2011/12/13/emerging-economies-bte/

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SmartGrid 2.0 – Will Smart Apps and Devices, 4G networks and Intelligent Software transform Utility Industry?

SmartGrid is the buzzword in the utility firms across the world which purportedly yields magical results such as ability to predict energy consumption patterns for effective load balancing of power supply based on the demand, bi-directional communication between consumers and utilities for optimizing the peak time demands, demand response from the consumer side, providing visibility and analytics to the end consumers about the power consumption by their devices etc. All the above result in preventing black outs, creating energy efficiencies, cutting down carbon emissions etc

Even as SmartGrid is being acknowledged as the ‘way to go’ for most traditional utilities, there is already the next generation i.e. SmartGrid 2.0 in the reckoning which is an intelligent software driven, smart device, smart equipment and topology ‘aware’ grid system spanning across the generation, transmission and distribution pieces of the energy supply chain.

SmartGrid 2.0 is also being touted as the ‘SoftGrid’ with intelligent software at the heart of the whole system. I think it will be to the utilities industry what the digital ‘soft’ switches and routers were to the communications and internet industry. This will transform the utility ecosystem from a collection of electro-mechanical devices to a system that is similar to the communications ecosystem with all the devices such as grids, substations, transformers, transmission towers and meters being controlled by software. I believe that just as we have the telephone exchanges and routers or mobile network equipment controlled by a real time Operating system software (e.g CISCO, Nortel, Ericcsson etc), we will also have the transmission and distribution equipment of the power grid run by customized Operating system software. All the devices on the power grid will be linked either by a communication network such as a WAN which is made possible thru’ the power lines themselves or via a 3G or 4G mobile network. Each device will have an IP address and can be tracked as well as send and receive messages/commands.

The devices on the power grid starting from generation and going all the way thru’ the transmission and distribution equipment will be ‘aware’ of each other’s presence on the network thus spanning a network of topology aware devices. The Smart devices in the customer premises like the Smart A/Cs, Smart Washing Machines, Smart Toasters etc will also be IP based networked devices running on embedded software and connected over a 3G/4G network which can send and receive bi-directional communication to and from the Grid as well to and from the end consumers.

I will now take a trip into the future on my time machine and see how the life of a common man will change with these contraptions. Some illustrations that come to my mind are as follows:

1.   The smart devices on the customer premises such as the Smart washing machines and their ilk will have an UI akin to today’s smart phones, which are connected to the Internet as well as to the Utilities Grid. They have Smart Apps which can be downloaded and installed. These Smart Apps will pass on the device status such as the power consumption stats to the Social Apps like Twitter or Facebook or via SMS to the users Smart Phone. The end consumer can control the power settings and schedule runs using Smart Apps based on the information that these devices pass on from the grid about the power supply situation. This is taking today’s “demand response” system couple of steps forward. This will be very useful in load balancing during the emergency situations when there are risks of blackouts.

2.   Much like the algorithmic trading that happens on the world’s leading stock markets, the smart devices of tomorrow will have Smart Apps that make possible the trading of energy within and across the grid depending on the power load and the offering price. Consumers can buy and store energy when it trades at a price point as well as sell the energy produced by them (using renewable sources such as solar, wind and geothermal energy) at a price point. We might have the global energy trading stock market existing in the near future for all we know!

3.   The power grid which will be a network of interconnected IP devices will be ‘self healing’ as it is self aware and can manage the power routing via different routes when there is congestion in a particular line. This will be similar to the way internet routers send traffic along path with least traffic. This will help prevent overloads in the power lines

4.   The diagnostics that are sent from the various ‘topology aware’ devices can be analyzed centrally and give visibility into the functioning and health of the devices at any point of time. Either the problems can be fixed remotely via the IP network or help can be sent to the physical location of the device which can be determined in conjunction with a GIS system such as Google Maps. This will go a long way in preventing distribution efficiencies and enhancing reliability of power availability. The power losses can be tracked and traced and preventive action can be taken to fix these power losses and thefts at any point in the power grid.

5.   Like we have the mobile apps on today’s smart phones and tablets, we will have a plethora of Smart Apps for the different types of Smart Devices which can be used for bi-directional communication between the end user and utility firms which will help usher a green and carbon free world.

In summary, the utility industry is all set to see a revolution from an electro-mechanical based devices to a world of Smart IP Devices with freely downloadable Smart Apps which will improve the energy savings, balance energy demand and supply as well as bring the renewable sources of energy such as solar, wind, geothermal, oceanic current based etc into the main stream power grid and integrate all these seemingly disparate elements!

The common thread running across CSPs and Energy/Utility companies..

One of the reputed IT firms in India created an industry focused vertical encompassing CSPs, Energy and Utilities. This led me to think as to how the firm can leverage competencies across these seemingly disparate industries and how these different entities fit into the game plan and create synergies for the firm.

In simple terms both CSPs and Utilities are in the business of providing ‘essential’ services for their customers and in the absence of which modern life will come to a grinding halt. If we look at the infrastructure needs of Utilities and CSPs, both the industries have a hub and spoke model of distribution with central grids/mobile switching stations/telephone exchanges forming the hub and the network of sub-stations/transmitters/transformers/transceivers connected thru’ copper or Optic cable acting as spokes.

There are tonnes of copper criss-crossing the world as the customers need the ‘last mile’ wired connectivity to be able access these services. Though this commonality might appear to have ceased to exist somewhat with the advent of wireless communication, it is to be noted that even wireless/mobile communications would need setting up of towers/transmitters for last mile wireless access and the connectivity between the towers and the switching stations/exchanges is still via optic-fiber cables.

Even coming to the landscape and challenges being faced by the CSPs and Utilities there is a common thread running through industries:

1.   The service offerings by both Utilities and CSP have now fallen in the realm of ‘commodity services’ and it is getting more and more difficult to offer differentiation in these businesses.

2.   There used to be a monopoly in both the CSP and Utilities sector till recently. However the monopoly has started to gradually even out in the CSP sector in the recent past

3.   The coverage of the world’s population is almost 100% in case of Utility industry and it is going to get there very soon for CSPs as an industry

4.   Regulations and government policies have a big impact on both these industries

5.   The investment needed in infrastructure and equipment is very large for these industries thus creating higher entry barriers

6.   When it comes to overall technology/IT adoption however the CSP are far ahead when compared to the Utilities. This is however changing with the advent of the Smart Grid.

Let me now discuss what lies in store in future for these industries. The CSPs as an industry has evolved rapidly and is facing extreme competition especially in the mobile communications space. There is a preponderance of triple play and quad play options where in the service provider gives broadband internet, landline, cable TV, mobile, 3G internet all as a single bundled service offering. There is an emergence of Apps and Mobile Internet which has led to the prevalence of devices like smart phones and tablets which has given us access to information in ‘anything anywhere’ format.

New modes of communication like social networking has changed the way we communicate and even as we digest the revolution brought about by entities like Facebook and Twitter we are seeing the evolution of hybrids like the integrated versions of Skype with Facebook which allows voice chat on a social networking platform.

Differentiation by creating attractive value propositions/value added platforms/products for the customers are the key to success in the CSP world. The CSPs will need to look for ways and means to make the customer increase the usage of their service so that it results in higher ARPUs. Intensive customer profiling needs to be done so as to prevent defections of customers as bandwidth becomes a commodity and innovations like Multi Number Portability reduces the exit barriers for customers.

While CSPs tries to increase usage, the problem is exactly the opposite in the Utility industry where there are energy shortages and inability to balance the equilibrium in the power grid. The utilities must try to encourage users to conserve power and ensure there are no blackouts in peak times due to grid overload. Smart Grid is a great initiative that addresses this issue well and it leverages the technology especially IT very well for solving the problems.

Using smart grids it is possible to predict the patterns of energy usage in different areas at different times and hence move energy from one grid to another based on the load in different areas. The equivalent of smart phones and tablets in the utility space are the smart devices which ‘know’ the peak time of power usage and can switch on automatically when there is less load on the grid and thus creating equilibrium and preventing  grid overloads. There will be a plethora of devices like smart washing machines, smart ACs and the like which are smart grid enabled and communicate in both directions with the grid to ensure power usage is optimized and prevent spikes in power usage.

In summary both CSPs and Utilities will adopt technology in a big way to achieve their objectives and IT systems like Business Analytics/Integration/BPM/Complex Event Processing will be the key enablers in the success story of these industries!

3D Printing – The Next Inflection Point in Manufacturing

It is late Friday night and you happen to see a note in your blackberry from the CEO of a Fortune 500 organization (with whom you are negotiating a large deal) asking you to join him for a round of Golf on Saturday Morning at 8 AM. You sadly realize that your golf kit is not in shape and there is no one around who can lend you a golf club. So what would you do? You will simply “print” yourself a flashing new Golf Club of a reputed brand with your ‘personal 3D home printer’.

Welcome to the world of 3 D printing! 3 D printing enables you to download CAD designs from the standard CAD/CAM software packages and build products using additive manufacturing technology.

Let’s take a step backward to the beginning of 2D printing when John Gutenberg invented the printing press in 1400s. The invention of the printing press created a huge increase in the knowledge levels of people around the globe due to wide dissemination of knowledge made possible by mass production of books and newspapers. However this method of printing had its own disadvantages. It was a very complex process to typeset and set up the printing press to print a book and it was unviable to print books and newspapers unless there was scale. Printing only a single copy of a book was simply unthinkable. With the outset of DTP and PC based Home Printers in late 20’th century, this once un-surmountable barrier was overcome and it was possible to customize the printing process and the element of the ‘scale’ became no longer relevant.

Same is the case with manufacturing industry. So far most of the manufacturing is assembly line based and the machinery has to be set up/configured for the manufacture of a specific product or a specific model. It is a time consuming process to set up the assembly line and not easy to change the set up for making changes to the product design or features. Once again the ‘scale’ factor comes into picture here and unless there is a minimum scale the set up process is too expensive making the process of building POCs and prototypes needed for certain complex products very cumbersome.

What the DTP and PC based Home Printer did for 2 D printing the 3 D printer will do the same for manufacturing. It is no understatement to say that 3 D printing technology will unleash the new wave in the manufacturing industry and will radically change the way we look at manufacturing. ‘The Economist’ in its Feb 2011 edition calls the ‘3 D Printing’ a new industrial revolution which does exactly the opposite of what the 18’th century industrial revolution did. The game will now change from mass production which was heralded by the earlier industrial revolution to customized production which the current revolution will herald.

I will now briefly touch upon some of the ways in which the 3D Printing will change the face of manufacturing and how the IT industry can take advantage of this next inflection point. This certainly will create disruptions in the way we think and work currently

1.   There was an article in ‘Scientific American’ last year which talks about formulating a customized medicine for each person and for a disease based on the DNA sequencing and the genetic conditions. This will be the most effective cure for a person based on his genetic profile unlike the ‘one medicine cures all’ format of today. Similarly using 3 D printing each person can create his or her own customized version of the products on the web and can either have them manufactured by the company or get the manufacturing done at using the home printer by simply downloading the CAD model of the custom product to his or her PC and paying the firm online for the ‘design’. This creates a world where one would have every product delivered in digital format like we do today with music and books.

2.   Individual users can actually participate in the product development online either individually or in teams. There will be actual co-creation right from the product conception to the product manufacturing stage. The firms have a role to play in terms of making it easier for the users to enter the product specifications and features and convert them to actual design or CAD models in the backend. This is important as the end users will not be able to deal with the intricacies of the complex CAD/CAM modeling software which is the realm of mechanical engineers. The software needed for visualizing the end products from an end user perspective needs to be built as the wire frame models used in today’s CAD packages will not be understood by the end users

3.   Firms will own the IP for the products as well as the brands and will only give the right to the end user to download and print X copies of the product only. This will be very much like the licensing models in use for software products today. There is also a possibility of a number of commodity products being available on the Internet in the ‘Open Source’ mode and open to improvisation and further development by the community very much like the current ‘Open Source’ models in vogue today

4.   Prototypes of products that are in R&D phase can be manufactured multiple times and quickly with this technology thus enabling the design team to quickly see the design come alive and fix defects early on in the game

In summary, 3 D printing will herald a new revolution in the way we look at manufacturing and will create disruptions in the manufacturing ecosystem (such as the manufacturing plant, supply chain, suppliers, ancillaries, partners, retail outlets and the like)

For more information on how this technology works please see the Wikipedia link below:

http://en.wikipedia.org/wiki/3D_printing

Supply Chains, Food Shortages and Inflation in the Emerging Markets

‘Inflation’ is the buzzword in economies around the world and more so in the emerging markets which have been witnessing unprecedented growth in the last decade or so. This leads to the central banks like Fed and RBI raising the interest rates in a bid to take inflationary tendencies head on which in-turn becomes an impediment to growth. The point to note is that the inflation in emerging markets is driven much more by the rising food and oil prices and not so much by the growing demand for goods and services. So raising interest rates may not have much of an impact in controlling inflationary tendencies.

Between the two key determinants of inflation viz: Oil and Food price increases, the former is based on extraneous factors and there is little that can be done an economy level to control it but the latter is within the ambit of the nations internal control systems and can be tackled to a large extent.

In nations like India there is a huge differential in the retail prices which consumers pay in retail stores and the farm gate prices. The differential is accounted for the middle men commissions, transportation costs, storage costs and other elements which form an integral part of the ‘Food Supply Chain’. It is  a shame that 40% of the food produced in the farms gets wasted / rotted by the time it traverses the food supply chain. A recent study by the India’s economic advisor to the Prime Minister says that a lot can be achieved by way of optimizing and enhancing the supply chain efficiencies and if done well this could have a substantial impact in bringing down the food inflation by several percentage points. The report went on further to say that the permitting FDI in multi brand retail (which means allowing the retail giants like the Wal-Marts and the TESCOs of the world to set up shop in India) will have a significant impact on reducing the food inflation.

The fears that the mom and pop stores (the Kirana stores in Indian context) will perish if the Global retail giants enter Indian shores seem unfounded if we go by the data from other emerging economies which opened up their retail markets to FDI much earlier in the game. In Mexico which opened up in 1991, 40% of all the retail stores are still mom and pop stores. In China which opened up in 2001, even today a global giant like Walmart has only 6% of the market share and is the third largest player. A local Chinese player called WuMart on the other hand is the biggest player and has 12% of the market share. The second biggest player is also a local Chinese retailer called Kangcheng with 9% market share.

The kirana stores can very well live alongside the global biggies by the introduction of ‘cash and carry’ in India. This means the Walmarts of the world will need to set up whole sale stores which will in-turn sell to the kirana stores and other smaller stores thus enabling the smaller kirana store to leverage the supply chain efficiencies of the global retailers. In addition the global players can also set up the retail stores which will sell directly to end consumers. India badly needs the investments in the areas of cold storage (both warehouses and vehicles), bringing the economies of scale in the transportation across the length and breadth of the country and leveraging the global best practices in sourcing, inventory management and just in time replenishment of the goods on the shelf. If these practices bring down the food wastages across the supply chain from 40% to 20% this will have a substantial impact on reducing the food prices as the food availability will go up by 33% at one stroke.

It is not just emerging markets which are showing resistance to the entry of the Walmarts and TESCOs. The recent edition of ‘The Economist’ talks about the travails of TESCO in the UK market where there is resistance from locals to prevent expansion of TESCO in some of the neighborhoods as they feel the pavement vendors and small shop keepers who have been there for ages will lose their livelihood. Such fears are unfounded as these expansions provide employment to many people and will boost the local economies.

In economies like India if we need to grow and leverage the progress and developments made in all sectors since the liberalization in 1991 and if we are serious about becoming the world’s third largest economy by 2030, we have no choice but to tackle inflation head on. We need to aid and abet growth in both exports and consumption in the domestic market. We need to prevent inflation from often rearing its ugly head. Encouraging FDI in multi brand retail and leveraging the globally acclaimed best practices in the area of supply chain management to bring down food prices is a sure shot way of helping this become a reality.