Prateek's Musings

My Perception Of Sales

In my pessimistic view, sales is the process of fooling someone into spending money to buy something that just barely meets their requirements. This happens for a number of reasons. A salesperson might not possess enough knowledge about the product/service offerings they have been hired to sell, which results in them selling something which either falls short or seems overkill for the customer's requirements. Another salesperson might not have the ability, time or willingness to understand the customer's requirements. And then there's another person who wants to earn maximum incentive with minimum effort, and just focuses on selling those products/services that serve this purpose.

Are All Products Differentiable?

My retention of marketing concepts is zero, but I believe product-market fit is at the top of the agenda for marketing managers and product managers. Some industries have limited scope for customisation and by extension feature-based differentiation. My limited experience in banking has led me to believe that banking products targeted towards retail customers are pretty much the same. E.g. most banks will offer a normal savings account with similar interest rates and add-ons like debit cards, redeemable reward points and so on; alongside special variants for kids, females, senior citizens etc.; followed by multiple tiers of membership-based premium offerings with wider range of add-ons and privileges. The reasons for that could include financial viability and regulations among others.

The Conundrum Of Human Capital

Irrespective of the increased use of telesales, adoption of digital marketplaces and evolving abilities of virtual assistants, sales will remain a personal process involving actual salespeople in flesh and blood. In banking and financial services, there are outbound sales personnel who reach out to customers to identify prospects, generate leads and close them successfully; and inbound sales personnel who largely engage in lead generation by getting referrals for new customers from existing ones, or pitching more products/services to existing customers.

Revenue is the product of number of customers, product holding per customer and revenue per product. Companies have to expand the footprint of their salesforce and boost their average productivity to maximise both customer and product sales count. Hiring more salespeople costs money and time which could go into other revenue generating activities, hence it is largely handled by people in non-revenue generator roles, i.e. HR personnel. Salaries in India are obviously lower than those in developed countries, but from an informal survey of the salaries of frontline sales personnel across leading private sector banks in India, I observed that salaries are even lower than those offered by the WITCH companies. This also lowers their switching costs and makes it easy to jump from one job to another, driving up attrition, resulting in more hiring and more costs.

Productivity is also linked to hiring. HR personnel cannot possess the same level of functional understanding as the experienced hiring manager. To paraphrase the words of Prof. Sunil Maheshwari, the current Alumni and External Relations Chairperson at IIM Ahmedabad, hiring has become more about certificates over competence. Competence is extremely difficult to evaluate, and competence evaluation cannot be scaled up for large batch sizes. As a result, most folks who end up getting hired are misfits who don't possess the ability and drive to learn and grow. A smart salesperson would understand their incentive structure in and out, and identify ways to maximise their incentives; but these misfits won't even be able to do that. All this puts an invisible ceiling on the optimum productivity level which could only be reached or breached if the hard-working folks overachieve by huge margins, creating that pareto effect of 20% of the salesforce bringing in 80% of the revenue.

Processes Exist, But Are They Effective?

One component of the hiring cost is the cost of organisational onboarding and functional training. Organisational onboarding aims to introduce a new employee to the organisational hierarchy and structure and provide information about standardised processes followed across the organisation. Functional training enables the employee to become a productive salesperson by providing them knowledge about the product/service suite and directions for utilising various technical and non-technical systems for sales and performance tracking. Unfortunately, it is common for a lot of new employees to either completely miss these programmes, or have only a physical/digital presence with no attention. This is either because of the employee themselves taking things lightly, or their managers expecting them to start working from the first day instead of wasting time attending these programmes. Those mandatory quizzes with minimum passing percentages also get easily tackled with freely circulated answer keys.

The outcome of all this is that a salesperson starts working with incomplete knowledge, encounter more obstacles and end up getting solutions from senior colleagues who themselves got them from someone else rather than a standard operating procedure or a policy document, ending with a lose-lose situation for all parties involved. The customer feels cheated because they are provided incomplete and inaccurate information by the salesperson. The salesperson underperforms because they wasted time seeking help on a straight forward non-issue. The company loses revenue due to lower sales productivity, lower spread of the mis-sold product/service and potential future revenue due to loss of goodwill.

Non-adherence to standard operating procedure by some professionals like doctors and law enforcement professionals could be labelled anything from unethical and immoral to criminal, but the same gets an almost free pass and is even occasionally encouraged for salespeople. It might be foolish to except a salesperson to be as selfless as a soldier serving on the border, but the least that can be expected from them is upholding ethics. But if we want to ensure that a salesperson doesn't give the excuse of committing a mistake inadvertently, robust fail-safes need to be built into the processes themselves and the systems they utilise.

Moving On From Legacy Systems

A few years ago, I worked with a small software company which made web-based trading information exchange platforms for private banks (buy-side firms engaged in investing HNI money) and investment banks. These platforms were built on almost end-of-life versions of software building blocks, and hosted on oldest stable versions of server operating systems, and that really puzzled me. A conversation about this with a friend made me realise the principle behind this - Don't fix something if it ain't broken.

There is no point inconveniencing an end user for something that will change the current UX for the worse. But looking inwards, upgrading and modernising the backend systems will only make platforms more scalable and easy to maintain, and also eliminate the dependence on legacy stuff that could go beyond maintenance and debugging any minute. This doesn't mean that companies should adopt cutting edge beta tech either, but finding a middle ground between cutting edge and end-of-life software building blocks and infrastructure.

Conclusion

Passing the responsibility from people to standardised processes and scalable systems will free up the time of salespeople and boost their productivity. This productivity boost might lead to less employees feeling burnt out or misfit, enable them to earn more incentives and scale up business performance as a result. Organisations could become leaner and employees could expect better career progression. Standardised processes will improve customer experience and encourage referral, meaning more customers will buy and use more products from the company. Lower employee costs and predictable revenue streams will culminate into sustained long-term profitability both at the macro level and even in terms of unit economics.

My Connection With Films

As a fat kid with very few friends, watching TV was my only pastime. While I watched cartoons alone on most school afternoons, watching the World Television Premiere of some successful films on a Sunday evening with my parents is a core film-viewing memory. It was only after I stepped into adulthood that I started visiting theatres more often to watch a few films, and for the rest I relied on my hostel room's Wi-Fi connection and my experience of using torrents.

Sizing India's film business

With more than 10,000 theatres across the country, revenue from theatrical film exhibition in India are projected to reach INR 384 billion in 2024 and cross INR 512 billion in 2029 (Source). This number is miniscule compared to USA and China, but makes sense in the context of India's connectivity, technological penetration, disposable income and entertainment preferences.

Anecdotally, Indian film industries churn out scores of film every year, however their budgets and scales have been fairly modest. This trend has drastically changed in the last decade due to global critical acclaim and financial success attained by films like the Baahubali duology and Dangal. The stupendous success of the magnum opus RRR at the Oscars and Golden Globes have definitely put Indian films on the map of world cinema.

Business Model Of Films By Dummies

There are three key aspects of the business of filmmaking - production, distribution and exhibition. Production encompasses selection of the base story or concept of the film, hiring or selecting writers to expand it into a screenplay with dialogues, hiring or selecting the director and other technicians, casting actors, readying the inputs required for filming, shooting the content and then enhancing the content with dubbing, re-recording, background score, DI, VFX+CGI and other activities.

Distribution involves the sale of audio and movie streaming rights to respective platforms, television rights to a TV network and sometimes dubbing rights to a specialist company. Production companies aim to recover the production costs and earn some profits through these sales. As the production company sells various rights, they decide upon a date for the theatrical release of the film in consultation with the industry's producer and distributor governing bodies, and streaming release dates with their partner platform. The extent of preferential treatment given to a film in setting a release date is directly proportional to the value of its theatrical and streaming rights, which is linked to the film's budget.

Distributors prepare for theatrical exhibition of the film by signing agreements with theatre owners and multiplex chain management. These agreements outline the number of shows, ticket prices and revenue share between the distributors and theatre owners. Andhra Pradesh, Telangana and Tamil Nadu have a cap on ticket prices; although the former two states allow this cap to be raised for some films with prior permissions from the Government.

Sustainable Scaling Of Film Production

More and more films with bigger budgets are being produced every year, as production companies and directors look to bring together ensemble casts, utilise modern technology and creating multi-verses of characters, akin to the Marvel and DC Cinematic Universe from Hollywood. However, reports suggest that the lead actor's salary is the biggest cost incurred during the production of a star-led film. These salaries are market-driven, and both producers and distributors know that stars can single-handedly bring in massive footfalls and theatrical revenues in the release weekend itself, thereby ensuring that the distributors break-even on their investment at the earliest.

However, a film's financial success is hard to predict because it depends on the its reception and the performance of other films released during the same period. In situations where films severely underperform, actors have ended up part of their salary to compensate the producers and the distributors. Therefore, it makes more business sense for the sought after stars to adapt the profit-sharing model and divide their salary into a fixed component proportional to the number of days they allot for a film, along with a variable component linked to the theatrical revenue and the value of the streaming rights sales.

The Inevitable Intervention Of Streaming Platforms

When the COVID-19 pandemic brought the world to a standstill, people sat up and took notice of streaming platforms. The massive influx of viewership emboldened them to sign exclusive deals with production companies to release films directly on their platform instead of theatres, giving them a lifeline and a way out of the accumulating interest.

While initial deals were pretty much always a win for the production companies, platforms have grown enough to enforce their terms and even revise the terms depending on a film's theatrical success and initial viewership garnered on their platform. I am not aware of the depth of their analysis of a film before signing or revising a deal, but it is a lesson that production companies could imbibe to choose whether to produce a film and decide the resource allotment and the scale of the publicity campaign and theatrical release.

The Not-so-Slow Death Of Cinema Theatres

If you are at least a 90s kid, you might remember the theatre where you watched a film for the first time. For most people, it is a single screen theatre that might have become defunct or even destroyed and replaced by a multiplex or a commercial complex. Apart from selected areas in some South Indian states, single screen theatres have fallen out of grace. Sudarshan 70 MM, a notable single screen theatre in the RTC X Roads area in Hyderabad and a big contributor to the financial success of some landmark Telugu films, was demolished in 2010 due to being unviable.

PVR INOX - the biggest multiplex chain in India has grown multifold in the last few years, both organically and through acquisitions, but their latest financial report clearly signal a top-line and bottom-line downturn along with poor unit economics. They have also managed to restrict footfalls from South Indian films by choosing not to screen films with a theatrical window of less than 8 weeks, and have resorted to signing exclusive deals for re-releases of older films which did not garner enough theatrical revenue during their original runs. Things are probably worse for some of the smaller chains.

Consolidation is the natural course in an asset-heavy industry like this, but distributors and theatre owners need to come together and find a way to make theatrical releases profitable for both parties without distributors having to press for higher revenue shares and theatres having to push food and beverage spends for top-line growth.

What's The Way Forward?

Streamlined processes, robust contracts, focus on the fundamental revenue stream needs to support creativity and innovation to make films a sustainable and more lucrative business to attract investors and audiences.

I stopped following F1 after the 2022 season due to a couple of reasons - moving to another city for a new job and not being willing to buy the expensive F1 TV subscription when Disney+ Hotstar gave up the broadcasting rights. The 2023 season was pretty much dominated by two-time defending world champion Max Verstappen and Red Bull Racing, so I believe there isn't much I missed. But the 2024 season has been springing up a lot of surprises both on and off the track. I am just going to rely on the highlights of the qualifying sessions and races, but there's enough exciting news to be covered.

It's Not So Bullish Anymore

After securing his maiden title in the last laps of the 2021 Abu Dhabi Grand Prix in a controversial manner, Max Verstappen dominated the 2022 and 2023 seasons securing 15 and 19 victories in 22 and 23 full-length feature races respectively. This season began in a similar fashion as Super Max secured seven feature race wins in the first ten races. However, other teams' car upgrades seem to be doing much better than Red Bull, and that has led to Max not even getting on to the podium in the last four race weekends. His radio messages during the Hungarian Grand Prix made his frustration pretty evident.

On the other side of the garage, Mexican driver Sergio "Checo" Perez has seen a downturn in his fortunes especially after Miami. He has been out-qualified multiple times by Williams driver Logan Sergeant, who will be leaving the team at the end of the season after failing to make an impression in his season and a half with the team. He is currently seventh in the drivers' standings behind the McLaren and Ferrari and Lewis Hamilton, and could have even been surpassed by George Russell if not for his disqualification in the Belgian Grand Prix. While his contract extension until the end of 2025 season was announced earlier, there were wild speculations of him being replaced by veteran Daniel Ricciardo or Red Bull junior Liam Lawson.

Max is still 78 points clear at the top of the table, and he might still be able to win his fourth straight title in a less comfortable manner even without winning all races. But Sergio needs to reinforce the trust placed in him by the Red Bull team management who announced that he will stay with the team, and step up his performance to ensure that the team secures their third successive Constructors' title ahead of the rising McLaren team.

Papayas With A Purpose

F1 fans would remember Fernando Alonso's famous radio message "GP2 engine!" as a McLaren driver. Under the leadership of Zak Brown, the British team has seen a change of fortunes with their initial resurgence led by Carlos Sainz and Lando Norris. Their bet on Daniel Ricciardo didn't pay off, but the "Honey Badger" was replaced by a young compatriot - F2 and F3 champion Oscar Piastri in the 2023 season. In his debut season, Oscar secured consecutive podiums in Japan and Qatar and ended up at the 9th position in the drivers' standings. His experienced teammate Lando Norris had a rocky start to the 2023 season, but bounced back with seven podium finishes out of which only one was at the third place. However, a race win still remained a dream for the British driver in his fifth season in Formula 1.

This season has been at least half a meteoric rise for the papaya team as both drivers secured their first feature race wins, with Lando climbing up the top step at the Miami Grand Prix and Oscar tasting victory at the Hungaroring thanks to a better race start than his teammate who started the race at the front of the grid. Lando has had mixed luck with a combination of some poor race starts, racing incidents like the crash with Max at the Red Bull Ring and some team mistakes like the slow pit stop at Silverstone which cost him the lead. Oscar has stepped up and worked on his tyre management woes from past season, and already secured four podium place finishes including his race victory, half as much as Lando's eight podiums in 14 race weekends.

Lando would really wish to give his best friend Max a good run for his money in the race for the drivers' title, while Oscar could be the dark horse in the Constructors' championship if Sergio Perez doesn't effect a major turnaround of his fortunes.

The Appalling Alpines

The F1 outfit of the French automobile manufacturer has been through a lot of flux in the recent season with changes in driver lineup and management, but their success has almost completely faded away this season. Despite having two race-winning French drivers at the wheel in the form of Pierre Gasly and Esteban Ocon, this has been a season to forget with the car lacking any form of competitiveness. In fourteen race weekends including a few sprint races sprinkled in between, both drivers combined have managed to secure only ten points and the eighth position in the constructors' standings ahead of Williams who has scored four points and Kick Sauber on zero.

Last year, Bruno Famin replaced Otmar Szafnauer as the Alpine team principal mid-season; and this year the 36 year-old F2 team Hitech GP owner Oliver Oakes has been handed the mantle mid-season. On the driver front, Esteban Ocon has announced his departure from the team at the end of the season as he joins Haas which will have a completely new driver line-up with both their drivers departing. I wonder if Pierre will also seek to abandon this currently sinking ship and move to another team like his teammate. On the other hand, there has been talk that Alpine is contemplating replacing the Renault engine with a Mercedes engine. Will these changes happem? Considering their recent track record, even more changes might be afoot!

Not-So-Smooth Operation

The word "underrated" has become extremely overused, but I believe it best describes one driver currently on the Formula 1 grid - Carlos Sainz. Sainz has driven for four teams so far - Toro Rosso (now called Visa Cash App RB), Renault (now called Alpine), McLaren and now Ferrari; and almost everywhere he has surpassed his teammate and helped his teammates and teams become more competitive.

After Lewis Hamilton announced that he had decided to leave Mercedes to join Ferrari, Carlos had to look for another seat on the grid. The push for relaxation of age regulations seems to indicate that Mercedes are eager to bring F2 rookie and academy driver Kimi Antonelli alongside George Russell for next year, hence that door was closed. Mattia Binotto replacing former McLaren team principal Andreas Seidl as the leader of the Audi Formula 1 project probably made the team a less viable option. Sainz finally ended up signing up with Williams, which many fans including me see as a massive downgrade compared to a competitive team like Ferrari. But Sainz's history in F1 shows that he has mostly been at teams who have struggled and helped them past those struggles, and James Vowles would hope for nothing different from the "Smooth Operator".

Rising From The Ashes

After dominating the sport for close to a decade and winning several drivers' and constructors' titles along the way, the last couple of seasons haven't been exactly rosy for Toto Wolff's team. Fortunately, unlike smaller teams they have had two less problems - the drivers. Sir Lewis Hamilton is a modern-day legend in the world of motorsport and has taken the car across the chequered flag on three wheels at Silverstone in 2020. Young driver George Russell also cut his teeth at Williams as he managed to get a pole and score points with a car which on occasions felt under-engineered to even be fielded in a race. But Lewis Hamilton couldn't win a single race in the entire 2022 and 2023 seasons, and George secured his first and only win in the two seasons at Interlagos in 2022.

Both drivers secured points in the first two races, but the Saudi Arabian Grand Prix was one to forget for the team. Both drivers DNFed, but so did Max Verstappen as Carlos Sainz became a race winner. They got back to scoring points, but really got into the groove in Montreal where Russell secured the team's first podium finish of the season right ahead of Hamilton. The order got reversed in Spain, and George Russell finally secured his first win of the season at the Red Bull Ring, partly thanks to Max and Lando's crash which damaged the former's car and sent the latter out of the race.

George followed up the race win with a pole position at Silverstone ahead of Lewis, and both drivers valiantly fought off a formidable attack from McLaren drivers Norris and Piastri until a slow pit stop from Norris put him out of contention and eased the way for Lewis Hamilton to secure his 104th race win almost a thousand days after his 103th. The papaya drivers did fight back with a 1-2 in Hungary including a maiden victory for Piastri, but Merc came right back with an on track 1-2 for George and Lewis, only for George getting disqualified due to his car being underweight and losing the victory to Lewis. This surge in performance has really set up a good farewell for Lewis before he dons the red Ferrari overalls next season, and a great opportunity for Russell to step into the #1 driver role for next (and even this) season.

Predictions For The Remaining Season and Post-Season

Max Verstappen will successfully secure his fourth straight Drivers' title with Red Bull Racing, and might even get the team across the line in the race for the Constructors' championship irrespective of how his teammate does in the remaining races. The contest for the next five positions in the standings is going to be tastier, but Lando Norris might emerge ahead of teammate Oscar Piastri. Lewis Hamilton could also potentially pip the guy he replaces at Ferrari as Mercedes' return to form continues.

In the drivers' market, Kimi Antonelli joining Mercedes alongside George Russell is all but confirmed. At Alpine, the only viable option to replace Ocon seems to be academy recruit Jack Doohan. Could Sauber sign another German driver alongside Nico Hulkenberg in the form of Mick Schumacher to prepare for their transition to Audi in 2026? The Red Bull sisters team situation also has a lot of scenarios - Perez doing well and keeping his seat for 2025, Perez failing and losing his seat to Ricciardo while Liam Lawson joins Yuki Tsunoda at VCARB, Yuki getting promoted to Red Bull and Ricciardo deciding to move on from F1 to pave the way for a brand new line up at VCARB - anything seems possible at this point. So expect the unexpected until Formula 1 returns!

The biggest ever season of the sport yet concluded last month at Yas Marina Circuit in Abu Dhabi. Red Bull's Max Verstappen who had already confirmed his second consecutive title in Japan saw the chequered flag first, notching up a record fifteenth win of the season. Ferrari's Charles Leclerc finished second in the race and the championship ahead of Red Bull driver Sergio Perez.

A major technical regulation change promised a lot of action on track, but drivers and teams provided even more action off track. Everything has been discussed extensively in the media, so I will stick to talking about the things that made me take notice.

Champions and Challengers

The earlier stages of the season seemed to indicate that Max Verstappen and Charles Leclerc will have a close fight for the Drivers' Championship, and their respective teams will lock horns in the Constructors' Championship. However, a mix of strategy mistakes, reliability issues and damage control to prevent a budget cap breach led to this title challenge ending a lot sooner than expected.

In his first season for Mercedes, George Russell finished in top five in eighteen races and even secured his maiden win at Brazil; a race Sergio Perez would like to forget. Checo did build up a substantial enough gap, but would have hoped for more success to avoid being treated as a support for Max.

Middling Midfield

Alpine and McLaren engaged in a close midfield fight as expected, but both teams were plagued with different issues and therefore ended up quite far from the top three teams. 42 year old "rookie" Fernando Alonso was at the top of his game in a performant Alpine, but ended up with six DNFs thanks to its reliability issues. McLaren's marketing team did a better job than their engineering team, but Lando Norris outdrove the car while overcoming multiple bouts of illness to get the team's only podium finish.

Esteban Ocon's performances didn't stand out much, but somewhat better luck helped him finish ahead of his teammate. On the other hand, Daniel Ricciardo had his worst ever season since replacing Mark Webber at Red Bull in 2014; culminating in him returning to his original team with a fat payout from McLaren for a premature contract termination.

Surprise Switcheroos

Sebastian Vettel's retirement announcement triggered a series of driver transfers for the next season. Fernando Alonso took up Vettel's seat at Aston Martin, and Alpine immediately announced Oscar Piastri as their new driver. However, Oscar publicly denied this move in one of the most famous tweets associated with F1 and decided to replace fellow Australian Daniel Ricciardo.

I understand that, without my agreement, Alpine F1 have put out a press release late this afternoon that I am driving for them next year. This is wrong and I have not signed a contract with Alpine for 2023. I will not be driving for Alpine next year.

— Oscar Piastri (@OscarPiastri) August 2, 2022

Alpine finally signed French driver Pierre Gasly from AlphaTauri ending a long-term association with the Red Bull Academy, and AlphaTauri signed Mercedes reserve driver Nyck de Vries who scored points in his first F1 race filling in for Red Bull Academy graduate Alexander Albon, who decided to stay with Williams for the next season.

While Nicholas Latifi losing his Williams seat to American driver Logan Sergeant after three seasons came as no surprise, Haas shocked some people with their decision to replace Mick Schumacher with Nico Hulkenberg, whose last full season in Formula 1 was in the Renault car in 2019.

Management Mishaps

F1's sporting regulations were already under the scanner due to the sequence of events that happened towards the end of the 2021 Abu Dhabi Grand Prix. Despite this there were noticeable slip-ups in stewarding across the season. It seemed that track limits were not tracked uniformly across circuits, and stewards also ended up giving judgements on a few racing incidents after the race ended, thus preventing drivers and teams from reacting to these incidents.

However, nothing could beat the deployment of a tractor for recovering Carlos Sainz's crashed Ferrari on track, as Pierre Gasly approached at a fast pace unaware of its presence. The memories of the accident in the 2014 Japanese Grand Prix which ended the life of Jules Bianchi are still fresh, and the sport can do a lot better at enforcing protocols which ensure the safety of both the drivers and the marshals.

Cash Crunch

The budget cap became a point of contention for all teams, and the news of Red Bull and Aston Martin breaching it in different ways led to strong reactions throughout the grid. Ferrari apparently had to turn down the engine in the later stages of the season and compromise performance to preserve engines and prevent a potential breach.

I believe budget caps are also being thought of in a similar fashion as restrictions on number of engines, powertrains and other components; which might lead to more teams allowing small breaches instead of trading off performance. Whether imposing budget caps really brings all the teams on a level-playing field is a tough question to answer, but hopefully the structure of these restrictions will become more robust with passing time.

Looking Ahead

The numbers for 2023 represent a bigger follow-up to an already massive season. Next year, the sport will travel to 23 venues across the world including the debut of Las Vegas as the third Grand Prix in USA. The number of sprint races has been increased from three to six. Six teams will field a new driver alongside an existing driver, including two debutants and one veteran. Four teams will undergo leadership change, and teams will learn from the positives and negatives of 2022 to improve their cars with FIA providing some relief for the porpoising issues. The increasing scope of logistics seems to go against the net zero goals of the sport, at least on the surface; but the growing popularity of the sport especially outside Europe is encouraging for a stronger top line and bottom line.