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Reliance Industries: The disruptor-in-chief

Reliance is busy putting every thing in place to become a place for everything

May 30, 2019 by Ebin K Gheevarghese
Reliance Industries: The disruptor-in-chief

He on the side of technology wins, said Napoleon. And truly, Reliance Industries is going all Bonaparte to remain in the thick of things. RIL chairman Mukesh Ambani couldn’t have made it clearer at the 41st annual general meeting in Mumbai July last year.

“Reliance has reached an inflection point. As the golden decade rolls on, our consumer businesses will contribute nearly as much to the overall earnings of the company as our energy and petrochemical businesses,” said Mukesh Ambani, chairman and managing director, Reliance Industries Limited.

RIL is known for taking the long view and a succession plan is part of the process. Mukesh seems to have set the ball rolling by making his son and daughter, Akash and Isha Ambani, directors of Reliance Jio Infocomm and Reliance Retail Ventures, respectively.

With the young scions at helm, Reliance Industries is now putting the framework in place to blitzscale its consumer-facing business.

“Reliance has massively invested in the telecom arm and offline stores. It will bring together telecom and retail arms, and provide an omni-channel experience to the customers,” said Satish Meena, analyst at Forrester.

In more ways than one, Reliance Industries is embracing a paradigm shift.

Mergers and acquisitions

Reliance is putting together a full stack offering through key mergers and acquisitions. Last year, the India conglomerate acquired the US-based telecom solutions provider Radisys for around USD 75 million to power Jio’s 5G and internet of things (IoT) capabilities.

“Radisys’ top-class management and engineering team offer Reliance rapid innovation and solution development expertise globally. This complements our work towards software-centric disaggregated networks and platforms, enhancing the value to customers across consumer and enterprise segments,” Akash Ambani said at the time of the acquisition.

Reliance has also acquired end-to-end voice technology firm Reverie Language Technologies, pharma software solutions provider C-Square Info Solutions, logistics startup Grab A Grub Services, AI chatbot startup Haptik and picked up a majority stake in Bengaluru-based online education platform Embibe.

“They know they cannot build these capabilities in-house. So they are trying to build these small companies, and use them. That is why you see the acquisition in content, technology, etc,” said Meena.

Jio is building on their mobile subscribers by investing in related services to create an ecosystem that gives customers access to content like music streaming app Saavn, Balaji Telefilms and Eros, as well as payment options like Jio Money, Jio Payments Bank and point-of-sale (PoS) terminals for small stores, said a Forrester report.

“Reliance is looking at Jio as a connectivity pipe for many more services. And the first set of services are going to be in media space and retail,” Jayanth Kolla, founder, Convergence Catalyst, said.

Ecommerce play

According to a Forrester report, Reliance Retail’s entry into the online retail sector is the biggest challenge for Amazon and Flipkart — as Reliance is well positioned to create massive disruption in the market. Due to the recent changes in the ecommerce policy and the restrictions on an inventory-led model for marketplaces with foreign direct investment (FDI), Reliance Retail is finding a favourable policy environment to launch operations where it can use its existing retail infrastructure to deliver goods to customers.

Reliance’s strategy is multi-pronged. “Reliance is investing in services like media, fintech, etc. Media is a consumption service, fintech, mobile payments and wallets are enabler services. By having access to mobile payments, Reliance has the consumption patterns of people which they can further use in ecommerce space. So they have made bets in three to four different categories and each one will feed into another. Their acquisitions are in line with this particular strategy,” said Kolla.

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Technology platform

Cloud services and Artificial Intelligence (AI) are set to become the bedrocks of communications infrastructure, with both having the potential to grow manifold in the coming years, Akash Ambani said at the India Digital Open Summit in Mumbai.

“AI is going to be the electricity of the digital world — a deep tech that would power everything. They are picking up companies which have good IP, good technologies, and have proven themselves and will aid their core business,” Kolla said.

AI technologies focus on engagement through conversation and content. Chatbots, voice assistants and conversational computing platforms leverage the user interface with natural language.

According to Kolla, AI is the next big theme for Reliance and that is why they are investing in such companies with good technology in machine learning, AI, Neuro Linguistic Programming (NLP) and Computer Vision.

“Reliance wants to get deeper and wider into India. There are only 150 million English-speaking people, so it cannot capture entire India without the Indic language capabilities. Reverie is their NLP for machine translation, Haptik is their NLP for chatbots and voice agents, and Netradyne is their computer vision investment,” he said.

“For instance, Reverie's Indic language machine translation engine and voice engine will help Reliance Jio's core services and media services expand into various Indian languages to cater to masses,” Kolla added.

In 2018, Reliance invested USD 7 million in San Diego-based KaiOS Technologies for a 16% stake in 2018. KaiOS’ operating system powers Jio phones. As opposed to Android, KaiOS are cut out for low-memory feature phones like Jio.

Reliance’s JioGenNext, an accelerator for tech startups, launched Basecamp—a mentoring programme for pre-seed-stage startups in fintech space—in March 2019.

“While Reliance Jio has been a facilitator and enabler of startups, when they partner with startups, entrepreneurs need to be cognizant of the fact that they could become a Reliance company in the future,” Kolla said.

To wit, JioGenNext is the potential farm team for Reliance.

In a lot of ways, Reliance has the power to preside over Digital India’s narrative. “Reliance looks at the country and the market in holistic manner. Their aim is to be in every third household of India,” Kolla said.

Reliance’s FTTH (fiber to the home) broadband services — Jio GigaFiber — will be rolled out in 1,100 cities soon. RIL-owned Network18 has a host of TV channels.

In 2018, Reliance invested in internet service providers Den and Hathway.

“Den and Hathway are the core businesses of wireline optic fibre cable-based operations. In one shot they got both network and existing subscriber base. If you look at Reliance Jio investment scheme, it is to strengthen its core business and adjacent businesses that will come on top of this core business, like media and content,” Kolla said.

With a nationalist government in power, Reliance has the Goldilock condition to push its India First idea and ride on the technological wave sweeping the globe. Sooner than later, Reliance is going to be India’s neural network for all practical purposes.

Speed bumps

Reliance moved the goalpost for the rest of the telecom players with Jio launch. The company do have a reputation for blowing away the competition. But Reliance Jio was truly game changing, at many levels. Jio hooked up the bottom of the pyramid. And immediately, a cavalcade of tech platforms flooded the country.

“Chinese companies are cracking in, penetrating tier 2, tier 3, tier 4 cities. They are capturing the imagination of the people in smaller towns with apps like Bigo Live and TikTok. That's exactly the mass media market that Reliance is going after,” Kolla said.

The massive data disruption ushered in a new tech age in India. Data became the new oil and set the stage for a new power struggle.

“Data colonisation is as bad as the previous forms of colonisation. India’s data must be controlled and owned by Indian people and not by corporates, especially global corporations,” Mukesh Ambani had said at an event in Mumbai.

Ambani senior was obviously hinting at global behemoths like Walmart, Amazon and Facebook eating into the ripe Indian market.

“Upcoming regulations can be favourable to Reliance Jio. Between data privacy, data localisation and OTT regulations, India's regulatory aspect could help in keeping these guys at bay. Thus regulatory support, marketing and sales aggression for driving adoption in tier 2, tier 3 markets and extensive product portfolio will benefit Reliance,” Kolla said.

Customer loyalty is another pain point for Reliance. Forrester’s Customer Experience Index showed that multi-channel retailers had the lowest industry average score in India in 2018. To compete with Amazon and Flipkart, Reliance will have to significantly improve the customer experience, both in stores and on its online channel, because discounts and cashbacks will not generate loyalty for online customers.

However, the more immediate problem that could throw a spanner in the works is data sharing. According to the rules, Reliance Jio Infocomm Ltd and Reliance Retail can’t share data. “They are different companies. So there are data privacy rules," Ashwin Khasgiwala, Reliance Retail Ltd’s chief financial officer, said at a conference in Mumbai.

It means Reliance can’t use Jio’s database to leverage Reliance Retail. In all likelihood, Reliance will find a legal loophole to end-run the regulations. Another possible workaround is to merge both entities.

It goes without saying, Reliance Industries has committed to a new direction. Reliance Jio’s introduction was a good case in point. Throw in Jio Phone to the equation, and a clearer picture emerges. The underpricing strategy ensured a deeper smartphone penetration – bedrock Reliance hopes to build on to push its products.

The conglomerate’s leverage with the corridors of power could also mean the company can even skirt competition laws (In February 2018, the Indian government voided data traffic as a metric to define market monopolisation). The omnipotence of Reliance would create an atmosphere of dependence, and new startups would be forced to get on board with the Reliance juggernaut to keep their boats floating or risk being the jetsam and flotsam.

In future, Reliance would be the tide that lifts all boats. Whether you like it or not, the staying power of Reliance would makes sure the company trickles down to the molecular level of Indian demographics. Reliance wants to be the many-splendoured thing at any cost. To that end, the company is putting every thing in place to become a place for everything.

(Moulishree Srivastava contributed to this story.)

Ebin K Gheevarghese

Ebin Gheevarghese is a Bangalore-based tech journalist. He focuses on emerging Indian startups. He can be reached at ebin@thepassage.cc.

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