The Escalation Problem

A couple of months ago, Shachin Bharadwaj, founder of TastyKhana in Pune, sent me this Twitter message... 

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This was in response to...

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Just days later, I faced an almost similar situation. I was trying to buy some products urgently for my home and reached out to the relevant sales guys in Pune. For almost a week there was no response, in spite of several calls and messages. Finally, I called a friend who is a senior manager in that company. Although he was not responsible for this line of products, I called him on a Sunday morning, having run out of ideas. Within an hour, the sales guy called me asking for the details.

I receive several "escalations" from customers and friends, even though I am not in a "line" role... I am sure those who are in business sales / marketing or customer service leadership roles are inundated with escalations. Why does this happen? Why is it that large organizations - usually - are often unable to handle sales or customer service issues at the operating level? Surely they realize that "escalations" are not good for them, not only from a reputation perspective but also from a cost point of view.

Corporates would argue that such escalations are few, relative to the overall number of transactions that they manage, and therefore, statistically insignificant. If you have a 100 million subscribers with 10 "transactions" each, even a 99.9% quality level would still leave a million "failed" transactions. The best businesses would have (or aspire to) lower failure rates, however, it is impossible even for them to achieve 100% out of their operations. 

Earlier, they could have gotten away with it. An individual (customer) had limited ability to influence others or have her voice heard. An aggrieved customer could write to the company's senior management or to a publication and hope that something would come out of it. Perhaps some would go to a consumer court. Things have changed today. One aggrieved customer (even if accounting for the fourth decimal of all transactions) can ruin a company's carefully crafted (usually at huge expense) image.

The only way to get it always right is if every member of the organization focuses on solving customer issues or preventing the creation of any issues. How often does that happen? I can think of three main reasons why issues do not get addressed at the operating / first level and lead to dissatisfaction, frustration and inevitably, escalation.

1. Lack (or Mismatch) of Incentives

What are the most popular metrics for customer service organizations? Call centre staff are usually measured on number of calls, hold time, etc. A telecom service engineer is measured on network uptime, capacity utilization, etc. Very rarely are they tasked to enable happy customers. Customer satisfaction indices become part of larger corporate imperatives and company performance scores. I have not seen too many companies that directly measure (and consequently, incentivize) customer satisfaction - satisfaction that is tracked at an individual transaction level and not at the aggregate in an annual or quarterly survey. 

Similarly, a sales person is tasked to maximize new sales or revenues; most companies have complex commission structures that encourage sales of certain products (or to certain segments) over others. A sales person inevitably follows the money. If you are not a "priority" customer segment or seeking a low-value product, the sales guy has no interest in you, period. In my case where the sales folks showed no interest in my order, I suspect that there is no (or very little) incentive for sales to a "group" employee, so why would a sales guy waste time on my order when there are other deals to pursue in the market?

2. Lack of Empowerment

What are you willing to do to solve a customer issue? Ask any senior manager and you will always hear the answer, "Anything, customer is king." Unfortunately, that message rarely reaches the line staff -- not from a communication perspective, mind you, but in terms of policies and delegations. Does the organization recognize and celebrate moments when difficult customer issues were resolved speedily? Were employees who went out of their way to solve the problem rewarded immediately? Or was the first reaction of the management to conduct a cost-benefit analysis of the event?

Empowerment is also in terms of information. Customers are, mostly, not irrational. They understand that things/systems/machines do fail. What they'd like to know is why, and more importantly, how/when will the issue be resolved. I have never seen a customer service executive that has been empowered with such information. In the absence of facts, the CSE responds with vague promises and a generic assurance of resolving the issue within 24 hours or 48. 

A few years ago, my broadband connection was down and every time I called, I was told the issue would be resolved "soon". A week later, the connection was still down and my blood pressure was up. After a few rounds of escalation, I learnt that some equipment had been damaged due to a short-circuit and that the new equipment was waiting for the electricity department's go ahead for reconnection. This permission was awaited and could take a few more days; the telco could do nothing about it. Fine, but if only I had been informed earlier, I might have made other temporary arrangements for Internet connectivity without staring at the modem daily or shouting at the customer service staff. 

3. Lack of Learning from Mistakes

Each escalation is a moment of learning. Why did it not get addressed at the level it should have been? What was lacking? Senior executives that receive escalations focus on the immediate solution (as they must) but often fail to deep dive into the real problem. Whether it is a change in incentives or a process, or a reprimand in case of negligence, something must change after each deviation from the norm of operations.

It is also important that even after an escalation, the issue be addressed by the operating teams. That sends a message to the operating staff as well as to the customer: the escalation was an exception, the point of contact for the issues does not change. Escalation should not become a habit.

Of the three, I believe that wrong measurement/incentives is the most serious. Organization structures by business units, functions, regions, etc. and their corresponding incentive systems worsen the situation. Most employees in any organization do not think they are responsible for customers or customer "service". In a telecom company, network, operations and finance staff would constitute over two-thirds of the organization; how many of them are measured directly on customer related parameters? I am sure similar situations exist in financial services, travel, retail, etc. Are there examples of companies where customer-related metrics drive business performance and incentives?  

The Leadership Dilemma

Continuing from my previous post about Prof. Ram Charan's seminar on Putting People Before Numbers, I wanted to share and discuss a hypothesis that most organizations fail to distinguish between Managers and Leaders.

Prof. Ram Charan had shared a concept of segmenting managers into categories like P&L Managers, Functional Managers, Experts, etc. That is a wonderful way of thinking about people, capabilities and careers. I had also shared about the popular perception that the P&L Manager role is the one that everyone aspires to (or is expected to aspire to). What this has led to is the confusion between a Manager's job and that of a Leader. It is popularly understood that a leader, whether that of a Business Unit or an Organization, is the ultimate P&L Manager. Therefore, by default, the best P&L Manager is expected to become the CEO or the best Function Manager is asked to lead a function or a division. 

This is the biggest mistake that many organizations make.

A leader need not be the best manager that an organization has. Leadership has been defined by many gurus, so I will only provide three things that I believe characterize leaders:

1. Vision: A leader has a clear picture of the future, aspirational state of the organization, and the confidence that we will get there.

2. Inspiring: Either through crystal-clear communication or pure induction, the leader inspires her team to believe in the vision and strategy.

3. Collaborating: The leader attracts the best people into his team and enables superior performance, jointly and individually, towards the shared vision.

The third quality includes, by extension, the ability to spot talented people and future leaders.

How often have we not seen that the crack sales person, crafty financial expert or creative marketing lead  possesses none of these qualities. However, the accepted career progression for a wonderful manager is to become a "leader". It is likely that a good leader was a good manager, but it is not at all necessary that every successful manager would be an effective leader. But who can argue against established career paths? Both are hurt in this process: many a great manager starts underperforming when thrust with a leadership role; many potential leaders languish in roles where their capabilities are under-utllized.

Most leaders know about the importance of talent management, yet they fail to do much about it. A reason I mentioned in the earlier post was that talent management has been mystified. Perhaps there is another reason. Maybe many of those who are in leadership roles are not leaders themselves and therefore, do not possess that innate quality of identifying and nurturing talent. Have we become victim to traditional norms of career progressions and promotions?

This is a controversial topic, and as I mentioned in the seminar, usually a "career limiting" one for those who raise it. All I have for my hypothesis is anecdotal evidence. This requires more research and discussion. I welcome your thoughts and feedback.   

Putting People Before Numbers: Prof Ram Charan

This week, I attended a seminar by Prof. Ram Charan (management guru, advisor and author of several best-selling management books) for senior leaders. The program was provocatively (I thought) titled, Why Smart Leaders Put People Before Numbers.

Later, I realised that this was also the sub-title of Ram Charan's new book, Talent Masters (co-authored with Bill Conaty, former Sr. VP at General Electric). The central premise of the book (and consequently, of the program) is that "word-class companies achieve their stellar performance... by finding and nurturing leadership talent." With increasing globalisation and competition and reducing opportunities to create product differentiation, the bet is that companies that can attract and develop talent better than others would create sustainable competitive advantage.

Most leaders and senior managers know it; yet they fail to do much about it because talent management has been (in the words of a participant) "mystified into a dark-art" with lots of jargon and mumbo-jumbo thrown at it. What is needed is to demystify it: recognise that a systematic approach can be put in place to manage talent and that with practice, leaders can get better at it.

One interesting idea (amongst many) that I picked up was that of segmenting managers. Prof. Ram Charan suggested that managers (or roles) should be categorised into different segments, e.g. P&L managers, Functional managers, Experts, Innovation managers, Country managers, etc. The methodology of segmentation ought to be customised to the context, however, such segments (not too few, not too many) should be identified. Every manager cannot perform each of these roles; each also requires different development and reward mechanisms. Future people requirements of a business would vary by segment, and therefore planning the pipeline of talent has to be done at a segment level. For instance, if your future strategy is driven by expansion into new markets, you may need a pipeline of country managers whereas a product innovation driven strategy would require availability of appropriate experts and subsequently, P&L managers.

This sounds intuitively correct to me and I do believe that each manager can perform one or two types of roles without a major overhaul of skills (usually difficult at middle to senior levels). However, business culture has glorified the role of the P&L manager, thus everyone aspires to become one. In fact, if somebody does not aspire to be CEO (or Business Head) in future, he/she is perceived to be not good enough, even for the current job. Therefore, a person who may be a great functional manager or an expert is almost forced into the path of a P&L manager, irrespective of the fit. Not only do we need to plan careers for each segment of people differently, we also need to change popular perceptions about what a successful career (path) is.

I have written in the past that the enterprise of the future is going be unlike what we know from past experiences. Leaders that can make the shift now have the opportunity to create (or remain as) world-class companies. Or be left behind.   

The Jugaad problem

Innovation in India has always been about overcoming constraints. And it has led to several success stories and accolades. Some have called this 'jugaad' - a word that is apt for the situation but has slightly negative connotations. Jugaad, generally, gives an impression of side-stepping the problem or finding additional resources - in a clever manner - to achieve one's goals. The problem with jugaad is that, often, it does not address the underlying issue (or constraint) that led to the problem in the first place. So, there's no guarantee that the problem will not recur. Or create new problems in its wake. But, in the short term, there's action and it appears all's well.

Two incidents prompted me to lament on Twitter today that India's becoming a jugaad nation, in a negative sense. The first one is my pet peeve of traffic in Mumbai.

Twice in three days, I experienced the same situation. We were driving on one of the 'highways' that connect various parts of Mumbai. For some unknown reason, we saw traffic jammed up ahead. Vehicles were turning around; some crossed over to the opposite side and were trying to move forward. Most others drove straight back towards the previous intersection - to find an alternative route. I told my driver to stay put and figure out what was happening but we were in a sea of vehicles wanting to go in the opposite direction. So, we joined them and after a lot of maneuvering and honking and scrapping, found a service road. This road was also jammed by now. Thirty minutes later we joined the highway, perhaps a hundred metres ahead of the original jam. The traffic appeared to be flowing smoothly. Whatever had caused the initial problem had sorted itself out. It was just impatience on the part of some drivers and the consequent jugaad of finding some short-cuts that created new traffic jams elsewhere. In a strange coincidence, almost the same incident played out twice this week.

The second 'incident' was really a few discussions that I've had recently, online and offline about the lack of capacity creation in India. Demand growth is dramatic; competitive intensity is increasing. The focus is on serving the demand but this is (often) not accompanied by investments in developing talent, creating systems and empowering people. Every time we hear a horror story of poor customer service - usually from the biggest brands, in telecom, banking, media or retail, we wonder what's causing this? And can this growth be sustained without investing for the long term (at the cost of short term profits / returns)?

Maybe I am low on confidence about the India story (not the opportunity, mind you) after all that's happening around. If I am unduly worried, let me know and boost my confidence. :-) If not, still, we must keep the faith as SamK reminded me and work at this problem resolutely.

You cannot treat a fracture with lots of Band-Aids, but you cannot become a doctor overnight either.

About Value Systems and Economic Power

Extract from Thomas Friedman's Op-Ed in New York Times: We're No. 1(1)!
Who will tell the people? China and India have been catching up to America not only via cheap labor and currencies. They are catching us because they now have free markets like we do, education like we do, access to capital and technology like we do, but, most importantly, values like our Greatest Generation had. That is, a willingness to postpone gratification, invest for the future, work harder than the next guy and hold their kids to the highest expectations.

 

In a flat world where everyone has access to everything, values matter more than ever. Right now the Hindus and Confucians have more Protestant ethics than we do, and as long as that is the case we’ll be No. 11!

 

I liked this article that seeks to distinguish the USA of the early 20th century and now, and how India and China, demonstrating the same great values that the earlier USA had, are emerging as major threats to US economic dominance. Thomas Friedman has always been brutally honest with his opinions. Some may disagree with his conclusions (or the approach with which he arrives at them), but there is no denying that Mr. Friedman has admirably managed to simplify and put in context complex macro-economic shifts that we are all part of.

 

The India that he briefly describes in the above op-ed is the India that I have generally known; the India in which most of us grew up in; the India that thankfully still exists in many small towns and villages.

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A common scene in most towns of India - amidst the chaos, institutes of English and Computer education stand out. 

My fear is that India is changing fast. Instant wealth / success and gratification are now more sought after than the rigour of education and hard-work. What was earlier perhaps limited to the glitz capital, Mumbai is now spreading wide across the country, thanks to televised shows and new media.

Will a Times of India op-ed in 2050 lament the loss of Indian values? Maybe these are the cycles of life, the ups and downs in the fortunes of various nations. Or can a nation's leaders and thinkers steer a different course? Governance in India, in the current times, does not give such confidence. We have many strategists; we are missing the leaders. 

India Spectrum Auctions 101

All you wanted to know about the India 3G & BWA Spectrum Auction process.

What is being auctioned

3G: Three slots of 5MHz spectrum in most circles; 4 slots in a few. That means, in addition to BSNL or MTNL, you will have at least 3 private operators offering 3G services in each circle.

BWA: This is Broadband Wireless Access spectrum... this is spectrum in a different frequency band where a few technologies like WiMax and LTE are available/being developed to offer very high speed data connectivity. 2 slots of 20MHz each are being auctioned. Again, BSNL and MTNL have already been allocated one slot of this spectrum.

Circles and Eligibility Points

India is divided into 22 telecom circles:. 

2 Metros
Mumbai and Delhi (NCR) 
5 Category A Circles
Rest of Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and Gujarat 
9 Category B Circles
Kolkata, Punjab, Kerala, UP (East), UP (West), Haryana, Rajasthan, MP and Rest of West Bengal 
6 Category C Circles
HP, Bihar, Orissa, Assam, North East and J&K

In order to bid in the auction, bidders needed to obtain Eligibility Points. Each Metro and Cat A circle needs 32 points, Cat B 12 points and Cat C 4 points totaling 350 EPs. The EPs were obtained by paying earnest money in proportion to the number of EPs sought; most bidders obtained 350 EPs. The points are fungible across circles, i.e. if you had only 100 points, you could use them to bid for any combination of circles within that limit. Eligibility Points determine how many & which circles a bidder can bid on, at any time.

Bidding

Bidding for all 22 circles happens simultaneously in each "clock round" of bidding. The first round starts at the Reserve Price (Cat A: 320 cr; Cat B: 120 cr; Cat C: 30 cr for 3G..... half of this for BWA). About 4 to 6 rounds of bidding happen daily (based on the last 30 days of bidding.)

In each round, a bidder has to only say Yes or No for each circle at the current round price. 

The price for the next round is determined based on the level of demand (i.e. # of Yes bids) for each circle in the previous round. Excess Demand is calculated as Demand (# of Yes Bids) - Supply (# of Spectrum Slots). If ED is 0 or 1, the price increase is 1%; if ED = 2, 5% and ED>=3, it is 10%. If ED<0, i.e. demand is less than supply, then price does not increase. (Price increments are also capped at Rs 40 cr (20 cr for BWA) in each round.)

The interesting thing is that even if there is no excess demand for a circle in a round, the auction for that circle does not end... it goes on till all the circles have reached a point of no excess demand. So you could have a situation that demand = supply in a circle, but its price increases in the next round because some other circles still have excess demand. This is probably the only "flaw" in the auction design -- of course, it benefits the Seller (the Government in this case).

Activity Ratio

A bidder can bid for only those circles that are within the Eligibility Points that it has at that time. Thus, the EPs associated with all the "Yes" bids of a bidder determine how many bids it can place in the subsequent round. In the initial rounds, however, this is relaxed and a bidder can retain its EPs, if it bids at or above the specified Activity Level. So, the auction starts at 80% level, i.e. a bid equivalent to 280 points (80% of 350) retains the bidders 350 points in the next round. The Activity Ratio is increased by the Auctioneer to 90% at a later stage and then to 100%. At 100%, bidders have to bid (i.e. choose Yes) in order to retain the associated EPs. Unless they are a Provisional Winner in that circle. 

What! More complexity! 

During each round, the Auctioneer declares (based on pre-set rules) a number of Provisional Winners (equal to the number of slots). Being a Provisional Winner does not automatically guarantee the circle to a bidder; the primary benefit is that a Provisional Winner is deemed to have bid for the next round and can therefore retain Eligibility Points even when it chooses "No" for that circle. The Provisional Winner concept can be used by the bidders to "reduce" the demand level and consequently, the price increment in that round.

The End

The auction comes to an end when two conditions are met:
1. Activity Ratio is 100%
2. Excess Demand is 0 or less in all circles simultaneously

The Government has said that winners in the 3G auction will be allocated spectrum in September 2010. Based on that schedule, we can expect that services should be available in a few major markets in early 2011. The BWA spectrum is likely to be allocated immediately to the two winners; depending on their technology choices, wireless broadband services could be available towards the end of 2010.

(Note: I have tried to keep this quite simple and have not gone into all the details/complexities of the auction design. For those interested in the painful details, I am happy to answer your questions.)

Cracked the Scene. So?

My friend from school and I met for dinner after a very long time and got chatting about our other friends. He said, you know nobody from our 1993 batch at high-school has really cracked the scene. Is that really true, I countered, somebody had become a Partner at McKinsey, one co-founded a hedge fund at New York, some others were hot-shot investment bankers in India, Singapore and elsewhere and there were others moving up the corporate ladder. Seemed to me that everybody was doing reasonably well. But nothing spectacular, he said. 

Most of us have been working for about 10-11years, assuming that we spent 5-6 years studying further (BE+MBA, in most cases!), and are nearing our mid-thirties. Not bad, I'd say, if I compared this to what our parents' generation might have achieved. But nobody is a CEO of a big company yet. Or a well-known scientist or a management guru. 

You know, I have no idea what the hedge fund founder's kids' names were or what the Singapore I-banker did beyond I-banking... the occasional Facebook update tells me that most of us have put on weight, added new faces to the family photos and took an annual vacation somewhere. Everybody is happy. So it appears. 

If any of us had become the youngest CEO in the history of our companies, would it have made us happier than what we were now? We would have surely cracked the scene, but would it make our 3 or 5-year old kids happier? As CEOs, we might even install Telepresence at home, and meet the family face to face when on the road, more often now. Did we need the additional responsibility of being a CEO just when the responsibility as a parent was beginning to peak? 

Is it really progress (or cracking the scene?) if the envelope of a professional career is shrunk rapidly? Earlier CEOs were typically 50-year olds, now its passe to reach the top in the 40's and the target is to get there before the 40th birthday. So during the most productive years, all attention is focused on professional excellence and "success", with the hope that one can retire early and then enjoy life. But it is difficult to go trekking at the age of 45 when you are under medication for diabetes and hypertension. It is difficult to lift your fifteen year old child and fling her in the air while playing in the garden. So we cracked the scene at work but what about life, in general?

Anaggh Desai tweeted today, "Isn't it surprising that only Head Honchos talk and manage to practice Work - Life Balance?" I believe that though Head Honchos talk a lot about Work-Life Balance (WLB), most don't really practise it. There are very few who have the aptitude as well as an environment conducive to WLB. Balance is usually a euphemism for compromise; and when Head Honchos compromise between Work and Life, it is not difficult to guess which direction the scale typically tilts. 

I read somewhere, very long ago that the best way to plan one's life's goals was to write your own obituary. What would you like your near and dear, at home and at work, to think of you when you are no longer around? What are the first things that you want others to say about you? 

Are our actions today helping us achieve that "end-goal"?

Entrepreneur or Entrepreneurial?

Had an interesting discussion on entrepreneurship with my friend Janani who has recently started out on her own. In fact, she and her hubby (& my classmate) Marlee gave up fundoo MBA careers (bank/consult) to start an interesting concept in the education space. We were chatting about start-ups, and what helps/impedes their growth.

An important element of entrepreneurship, in my opinion, is the ability of the visionaries/owners to attract professional managers into what might seem like a 'family' concern. A successful start-up has to eventually morph into a large business/organization - that requires building a good management team. Can the entrepreneur attract, encourage and retain high quality managers who can help scale up the business? Can you share control with other qualified professionals and let them handle key elements of growing the business? 

This can become a critical issue if the business requires external funding to scale. Venture capitalists back entrepreneurs and concepts; private equity investors, on the other hand, back business models and management teams. The most successful Indian start-up (in my view), Infosys, made the transition from being an entrepreneurs-led start-up to a professional organization early in its journey. The founders behaved, through the company's history, as "managers" and not "owners". In fact, two of them have even "retired" from the company and let others take on leadership roles. At the same time, they created a company where many of the employees work in an entrepreneurial manner.

How can that happen in large organizations? How can thousands of employees/managers develop the same passion and innovation that entrepreneurs bring to a business? We need leaders/entrepreneurs/investors to create an environment where every manager believes he/she has an equal stake in the success of the venture. And this goes beyond stock options/profit sharing. It is to do with trust, delegation and respect. You have to make each employee feel that they have a say, the right to determine the future of the business as well as a duty to.

I have often been asked by friends, why don't you do something on your own? Perhaps it is a risk thing, but also, maybe because I feel that my "job" lets me do my own thing. Lets me dream big and go after it. How many entrepreneurs let their "employees" determine the direction and pace?

What do you think?

Note: I have no experience of being an "entrepreneur" though I have watched / heard from others. I have advised entrepreneurs and (through my company) invested in entrepreneurial ventures. I would like to hear other perspectives / alternative views. 

How many dissatisfied customers can you afford to have?

"You cannot satisfy every customer" the marketing manager said.

In a spirited discussion about the role of Web 2.0 in marketing, the conversation turned towards the large number of negative comments posted on websites and Twitter and such like. How do we know they are even for real? There are so many people out there saying what they want about our brand; we can't take everyone seriously. It could be competitors trying to malign us. Why couldn't the customer provide his mobile number in the complaint? Valid questions.

But are we trying to use these as excuses to delude ourselves that our customers are all happy and have no reason to vent their anger online? Are we using the (relatively) low penetration of the Internet (now) to treat it as a trivial medium? Most customers, when they have a problem, approach the traditional customer service channels. And most of them are willing to accept that a product or service could have a deficiency - nobody's perfect. What they do want are clear responses about what we propose to do about the situation and action to back that promise. It's only when they get automated responses ("thank you; noted; will get back; do not reply to this mail") or a stalling customer service agent ("our servers are slow/down; here's a trouble ticket #; pray") that some customers pour their sorrows in mails to the President of India or messages at mouthshut.com and Twitter.

In some cases, messages on Twitter / FB could cover issues / concerns that traditional customer service channels do not typically address ("xyz airline was late again #fail").

Marketers would do well to heed both types of messages. The first reflect angst or frustration that could lead to the customer not just complaning her case but becoming a brand un-ambassador (e.g. United Breaks Guitars!). The latter type are still not angry but gradually getting there. Registering the feedback and even involving the customer in designing a solution should be the proactive approach to managing the situation.

Every dissatisfied customer we leave out there is potentially raising an army of other similar people and can cause irrepable harm to our business. The Web provides them the platforms. Do we want to provide them a reason?

Business of Education

Why isn't there a national chain of K12 schools in India? In fact, why aren't there many?

I understand that education in India is for non-profit only but is there even a debate on the topic? And I can't believe that all the politicians who have set up schools in their names have been done out of only good intentions!!

When a manufacturing major decides to set up a mega-plant, it asks the Government for mines and power and other essential raw materials. They look for vertical integration to protect their long term interests. Then why are IT and BPO majors depending purely on Government action to provide them their essential 'raw material'? Every year they are hiring tens of thousands each, yet they have no control over the quality or mindset of the people they employ. No wonder they have to invest in almost recreating their education. The Knowledge Economy is predicated on India churning out sufficient numbers of well qualified youngsters. Note we are not just talking of call center execs or software code writers; the opportunity is in design, animation, law, financial analysis, research, education, management.... almost endless, if only we had the right talent. After years of suffering whimsical and incompetent people, the HRD ministry seems to now have a leader who appears to have his heart and mind in the right place. But can we let India's future: Vision 2020 and beyond, be left to the luck of the political draw?