"Fable"ous Management Theories

Transaction Costs and Competency Development

2012-01-01T01:38:00.000-08:00

In 1937, Ronald Coase, wrote an essay “The Nature of the Firm”, through which he introduced the concept of “transaction costs”. Ronald Coase was to later on receive the Nobel Prize for Economics. In economics a transaction cost is a cost incurred in making an economic exchange. Transactions costs are the costs which directly hamper the competitiveness of companies and where all things being equal, would determine the rise or fall of these companies.

So how does one relate the concept of transaction costs to long term viability of organizations? One answer as given by Jeffrey K Liker, in “The Toyota Way” is:

“Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals”

This is an important aspect to be considered by the service industry. The service industry has been growing globally and in many countries represents in excess of 50% of those countries GDP. The Indian IT industry is primarily composed of the services sector. So what is a service and how do we reduce transaction costs here?

A Service has been defined in many ways. One definition has been given in the ITIL Service Design Book; “A means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific costs and risks.”

This is like a caterer providing cooked food to an organization for lunch where the company does not want to set up its own kitchen and hire its own workers to produce lunch, or an Insurance company engaging the services of a BPO to process its claims, or a Telco using the services of a provider to process the paperwork of the millions of clients signed up each year. There are so many other services, like remotely managing infrastructure, or software maintenance work, or even development work.

Efficiencies in all are achieved by better “quality”. Better the quality, lower are the transaction costs. For service providers the quality comes from better equipped people. If the service provider has systems in place to ensure less wastage, or reduced effort in providing services, it is more competitive. To have better quality one needs to understand Peter Drucker’s statement “Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for”. So reading Drucker’s statement, we can take it that quality is developed by creating internal competencies or capabilities which help in reducing the transaction costs and hence improve competitiveness over time.

Further in organizations, one of the supplier’s is the L&D or competency development department. Developing internal competencies is not a one shot affair, but a process of continual effort of time and money in building people. Developing capability happens when you enable people to get a sense of real life exposure through scenario based training. As Confucius said:
“I hear and I forget, I see and I remember, I do and I understand.”

For any company to grow, its people are its strength’s. This is a Maxim, we have heard for a very long time. However the true strength is not in the people alone, but in the “talented and productive people”. To develop people, one needs to see the long term perspective and build in the systems and their associated costs and not take the short cut by having a transactional approach to competency development.

Strategizing Business Continuity

2011-08-09T06:32:00.000-07:00

"In Strategy it is important to see distant things as if they were close and to take a distanced view of close things", Miyamoto Musashi

9/11 changed the way we looked at the world, at ourselves and the way we do business. Organizations suddenly realized what vulnerability was and the impact of various factors on business continuity. Over-night BCM or Business Continuity Management became the new buzz-word.

As I read the very recently released edition of Service Strategy, ITIL 2011, I came across some interesting factors related to Service Strategy and business continuity. The first was the identification of strategic industry factors and the second was the management of risk. Some of the quotes were so relevant that they reminded me of a case of a major telecom service provider. It was known for the quality of its voice services.

The ability to provide voice services to its customers were managed by a series of NOC (Network Operating Centres) across the country. Consequently to ensure seamless services for its customers in a very competitive market, a series of contingency plans were drawn up to ensure business continuity.

One of the plans involved the continued operations of specific servers at these NOC’s. It was factored in by the BCM people that some redundancy had to be built into the system in the event of damage or malfunction of key servers. Accordingly a set of servers were setup at an alternate location which would take over in the eventuality that the primary servers failed.

However one particular step to restore functionality needed manual intervention. Accordingly as part of the plan a quick reaction team was designated and this team would take the required action in the event of an emergency. The team members were provided specific mobile numbers by the telecom player to be called when the event occurred. It was thought the team members would be able to respond and have the back-up running in less than 30 minutes, an acceptable risk.

“Everything in strategy is very simple, but that does not mean that everything is easy,” Carl von Clausewitz

Unfortunately tragedy did strike and there was a fire at a NOC in one major hub. Voice Services went down. As per the business continuity plan steps were initiated to get systems up. Unfortunately it took more than 3 hours to get the systems on track.

When the post mortem was done, a fundamental error was seen. The quick reaction team was to respond when the voice services went down. However the means to contact them was through the same voice services they had to restore.

At times strategizing needs a common sense approach and understanding what to do and what not to do.

The Importance of Service Transition

2011-07-04T10:27:00.000-07:00

“With the right pricing, a business will lead its field, brand loyalty, have the cash to expand and be highly profitable” - Peter Drucker

In these highly competitive times when businesses are under constant pressure to get the right pricing and reduce Capex (Capital Expenditure) and Opex (Operational Expenses), there is a constant change in service and product lines. To ensure the smooth flow from one service to another, “Change Management” and “Service Transition” play an important role.

While many managers understand the meaning of Service Transition as the addition or modification of planned or supported service or service components and its associated documentation some fail to realize the importance of Service Transition.

One interesting example of Service Transition which provides an insight on how things can go wrong is given below:

On 23 July 1983, an Air Canada Boeing 767-200, flight 143 from Montreal to Edmonton ran out of fuel at 26,000 feet midway into the flight. The Captain with extensive experience as a Glider Pilot was able to land the plane at an unused airport, Gimli, Canada, using techniques normally applied by Glider Pilots with no fatalities. This flight made aviation history and gave the plane its name “The Gimli Glider”.

On investigation by the “Transport Safety Board of Canada” the following was noted:

• The Boeing 767-200 was a new addition in the fleet. The planes had been in service for 4 months prior to flight 143, and the “Minimum Equipment List” or set of procedures had been updated more than 50 times
• Earlier planes had 3 crew members flying the plane, including the flight engineer who was responsible for fuel loads.
• The 767-200 had two crew members, and the duties of the flight engineer had not been adequately distributed amongst the pilot and co-pilot.
• Air Canada had just converted to the metric system of calculations for determining the fuel load, which were done in a complex calculation between volume or the holding capacity of the fuel in the fuel tanks and the weight of the fuel, so that instead of 22,300 Kg of Fuel, the flight had 22,300 pounds of fuel, or about 10,000 Kg.

All these errors got compounded to such an extent that the lives of more than 150 people were put at risk. The conclusion of the review board was this was a result of poorly managed transition caused by a series of corporate failures and minor human errors.

These errors happen so often in many things we do. While for a lot of managers the consequences may not be that dangerous, from a business perspective they could be. Thus an important learning from this is the importance of Service Transition in today’s business where minor faults can be catastrophic.

‘The art of progress is to preserve order amid change and to preserve change amid order.’— Alfred North Whitehead

Lessons from the EC2 Crash

2011-05-06T22:00:00.000-07:00

The advantages of utilities is that they are available when you need them and are cheap, as in less costly. They can be turned off by the user at his desire which helps regulate the cost. The reverse is that it can also happen that the utility can get shut off and then you are left in the lurch. It’s like using electricity from a grid, available on demand, metered to your consumption, perfect for business, till it shuts off and leaves you in the dark.

The Cloud has often been compared to a utility service only much safer and robust, available to match your budget and needs so that your business is cost effective and can expand with capital constraints. The fact is that cloud services have been available for quite some time and have been relatively reliable. This perception however, took a bit of a jolt last week, on around the 21st of April when Amazon Web Services’ Elastic Compute Cloud or EC2 had a disruption in services for clients, in some cases for more than 36 hours. There were around 75 sites which crashed because of this outage. Needless to say the clients were not happy with some being at the risk of being put out of business, an event which has happened in previous cloud outages from other vendors.

The EC2 service has been available for more than five years, and has grown over time. The outage happened not because of any internet issues or security issues, which many would have thought to be the key culprits. The fault lay somewhere else, in one of their data centres and an ongoing upgrade there.
For those clients dependent on EC2 or any other outsourced service this again highlights the danger of choosing to outsource services without having a clear assessment of needs and business impacts of failure. It highlights the importance of contingency plans for business continuity.

Outsourcing is a reality and makes business sense. However the question of outsourcing is not just about saving money on a transactional cost calculation basis but a wider overall cost benefit analysis. With passing time organizations need to be cost effective while continuing to provide excellence in their services. No organization will have a monopoly forever, allowing it to charge a premium. It would need to constantly innovate, and reduce its costs of operations.
For this, organizations need to constantly train and imbibe in its people the value of excellence. In the words of Aristotle

“Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.”

The lessons learnt from the EC2 crash are that outsourcing and its implications need to be learnt and that there is no substitute for constant training to provide excellence in service.

“Data Centres-Another Growth Story”

2011-03-20T02:35:00.000-07:00

The great communicator, US President Ronald Reagan once famously said that “Information is the oxygen of the modern age. It seeps through the walls topped by barbed wire; it wafts across the electrified borders.” This huge quantum of information available through different means is at the heart of the expansion of data banks available to organizations, governments and the general public. So where does all this information or data get stored?

Data or information is stored in interlinked servers across the world, some in isolated locations and some in server farms or data centres. A data centre is thus used to house servers, computer systems and connected peripheral parts like telecommunications and storage systems. To support its working it is dependent on continuously available power supplies and data communication services.

With the ever increasing quantum of data and consequently data centres there has been an evolution of the data centre industry from a guideline perspective for housing data centres and the business perspective. From the guideline perspective the first major integrated standard guideline for the infrastructure of data centres was the “Telecommunications Industry Association’s” TIA / EIA 606-A “Administration Standard for Commercial Telecommunications Infrastructure” of May 2002. It was followed up by the TIA - 942 Telecommunications standards for Data Centres in April 2005. This was meant for use by Data centre designers in the building development process and covered the following:

• Site Space and Layout
• Cabling Infrastructure
• Tiered reliability
• Environmental Consideration

The tiered reliability mentioned above ranges from Tier 1, which allows upto 28.8 hours downtime annually to the most stringent Tier 4 allowing a downtime of only 15 Minutes annually.

From a business perspective the growth story in India has been quite bright. As per various studies made by the Gartner, IDC and Springboard research the growth till 2014-2015 seems set to be at a rate of upto 39% CAGR (Compounded Annual Growth Rate). Gartner has predicted that the total market capacity would see an increase from about 1.3 Million square feet of data centre space to about 5.1 million square feet in 2012. This figure did not include data centres in less than 1000 square feet area which were numerous as well.

IDC meanwhile predicted the size of the market as 10,000 crores by end of 2011 against a market valued at 6000 crores in 2009. It is further predicted that India has the potential to be the hub for markets in the Middle East, East Africa and Southeast Asia.

One driver for the growth of the third part data centre industry has been the deficiency of skilled manpower and technical skills within most organizations to manage captive data centres and the associated budget constraints. While there are drivers, there are challenges too.

The growth story is just beginning and evolving. It presents enormous opportunities in the IT / ITES space.

Can the Cloud (IAAS) Replace RIM?

2011-01-08T06:07:00.000-08:00

“No one would dispute that information technology has become the backbone of commerce. The point is however, that the technology's potential for differentiating one company from the pack - its strategic potential - inexorably diminishes as it becomes accessible and affordable to all”

- Nicholas G Carr, in an article titled “Does IT Matter?” in the Harvard Business Review, May 2003.

Cloud Computing has turned that vision to reality by providing awesome computing power, much as a Utility service like power or water, to be consumed in the quantity and time of ones choosing, avoiding the setting up of substantial captive IT infrastructure.

Thus a question which arises is that would Cloud Services replace the booming RIM business? This is a fear in the minds of many companies pursuing or in the process of pursuing the RIM business. This fear stems from the mistaken belief that the cloud and RIM are interchangeable services.

The cloud is a public access environment albeit with many flavors, typically with multiple customers accessing the same infrastructure. It’s a great service for many small and medium sized businesses which could otherwise never have had the wherewithal to setup sophisticated IT infrastructure. However “Cloud” services can hope to replace captive IT Infrastructure only to a limited extent. This arises due to the following reasons:

a) Legal and compliance issues especially regulatory requirements such as accounting and auditing standards, banking regulation and information provision requirements such as SOX.

b) Data Export limitations. Certain rules like the Data Protection act in the UK and the Data Protection Directive (Directive 95/46/EC) of the European Union prohibit the transfer of personal information of customers outside certain jurisdictions.

Risk Mitigation. While using the cloud is a great way of achieving cost benefits, the downside is the risk associated with having only a single source of service. One of the most famous examples of cloud services, “Saleforce.com” has had its customers locked out of their data during server outages. In 2009 bookmarking site Ma.gnolia crashed and ultimately went out of business.

d) Security Issues: Cloud services face a challenge between making their services user friendly and having a robust security. Since there will be multiple customers using a cloud service, weak password setting at one client could leave the door open for hacking for other customers.

Unlike the cloud environment which provides Infrastructure as a service (“IAAS”) RIM actually allows an outside organization to take care of a company’s own infrastructure. So IAAS is outsourcing the complete IT department while RIM is typically outsourcing just the manpower while keeping physical control of the infrastructure.

Therefore depending on many factors some of them listed above, each of these services (RIM and Cloud) would have their own markets and would not be competing for business. One needs to differentiate the hype from the need.

Opportunities in UID for the Banking and IT Industry

2010-11-20T01:14:00.000-08:00

There has been a lot of discussion regarding the UID project and the scope of opportunities which exist for the IT industry in general. I would like to present some opportunities in the IT sector resulting from certain financial and banking growth activities which would be occurring. It is important to look at a number of policies and acts of parliament and the convergence thereof to see the potential for large business applications in the very near future. However to understand this opportunities one needs to see the following:

The Unique Identification Authority of India (UIDAI), was established in February 2009 to own and operate the Unique Identification Card (UID). It is an agency of the Government of India. This authority will aim at providing a unique number to all Indians based on simple biometrics.

The Mahatma Gandhi National Rural Employment Guarantee Act or NREGA is an act passed by Parliament aimed at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage-employment in a financial year to a rural households. The outlay for this program is about Rs. 40,000 Crore (About $ 9 Billion) for the year 2010-2011.

One of the aims of the UID project is to enable payments to beneficiaries of NREGA and to avoid embezzlement of funds. Now of course the immediate potential application is to merge telecom applications to provide a means of transferring those monies to beneficiaries. A greater attraction could be to offer complete banking solutions to an untapped population of close to a quarter of a billion living in the rural areas, without access to these facilities..

This is made possible by seeing an RBI directive in 2010. The RBI (Reserve Bank of India) has been stressing on banks to increase their reach in rural areas by a policy of “Inclusive Growth”. By its letter dated 28th September 2010, RBI/2010-11/217, DBOD No. BL.BC.43/22.01.009/2010-11, the RBI has specifically extended the scope of Extension of Banking Services through the use of Business Correspondents or agents to act as banking counters. The RBI is offering incentives in the form of reimbursements for each account opened. By using these BC’s there is huge growth opportunity for banks through the following:

a) They get a cheap source of funds for their banking operations.
b) They get partly reimbursed for the administrative cost they incur while the verification is already ensured by UID.
c) They get to fulfil their corporate social responsibility by reaching out to the rural masses.

The benefit for the IT industry lies in the following:

a) Immediate application development for payment gateways, verification systems and other systems.
b) IT Infrastructure development for these BC (Banking Correspondents). India has about 638,000 villages as per the census of 2001. So even if 10% of Indian villages were to have a BC, we are talking of installing close to 63000 such Banking Counters.
c) It costs more than 1 lakh rupees per month to maintain an ATM. Even if it costs one lakh per year to maintain a BC, we are talking of a huge market in maintenance and support.

The vision is there, what we need to do is ensure the successful implementation of all these directives, which has huge business potential and at the same time could help make a huge difference to society.

Currency Wars on the Horizon

2010-10-24T21:54:00.000-07:00

German Economy Minister Rainer Bruederle, is said to have quoted two weeks ago, “"The danger of a trade war has appeared on the horizon," and "The danger is that complaints about currency undervaluing lead to retaliatory measures, which could eventually turn into a trade war".

The appreciating Indian Rupee vis a vis the US dollar has been sending alarm bells ringing in companies in the export dependent IT-ITES sector in the last few weeks. One primary factor has been India’s stock market. The recent spurt in the stock market has been greatly fuelled by influx of FDI. This has been having an appreciating impact on the Indian rupee and the depreciation of the dollar has seen the bottom line of Indian IT companies being hit.

To understand this better, one can see that the rupee has fluctuated from a high of 51.9 to the dollar to a low of 43.9 in the last two years and is currently at 44 to the dollar. Associated with higher cost of operations is the fact that there have been stringent requests by clients to decrease billing rates. Another impact of the heavy inflow of FDI has been that the RBI has been forced to purchase dollars to try to keep the Rupee on track. It is believed that this would have an inflationary impact on the Indian economy making cost of operations even higher.

While this in itself is not good news, there is much more happening. In the background of the currency fluctuation, it should be noted is a trade war going on which has not got the attention it deserves. This is a semi-official trade war in currencies being fought by the Americans and the Chinese, whose effects could be even more costly for companies in the coming months and years.

Global Chinese exports in the year 2009 are estimated to be about $ 1.2 Trillion, of which $ 300 billion were to the US. There has been a raging controversy in the US that unfair currency practises by the Chinese has been hurting American Competitiveness. It is felt in the US that the Chinese keep the value of the Yuan artificially low to boost their exports. It is felt that even if the Yuan appreciated by some %age, Chinese exports would be less competitive, making life easier for American companies. Also the depreciation of the US Dollar is being felt as a tool to become competitive in Trade and thus help to get the US out of the quagmire of economic recession it’s in.

With that background, to indirectly nudge its trading partners, a bill was passed in the US House of Representatives, on 29th September, 2010 titled “H.R. 2378: Currency Reform for Fair Trade Act”, to basically allow “countervailing duties to be imposed to address subsidies relating to a fundamentally undervalued currency of any foreign country.” Another bill which has been introduced is “S. 3134: Currency Exchange Rate Oversight Reform Act of 2010”.

For many of us, this may seem like a trade war to be viewed on CNN. However the implications could be quite substantial to the Export dependent companies. The specific threats from these bills are that:

They propose measures, like charging rebated Value-Added Taxes as an import duty. This implies that if a company gets a rebate on exports in its home country, which most do, then a countervailing duty could be imposed by the US to ensure fair competition in the American Market, as it is perceived that this rebate allows companies to unfairly lower their prices. Another threat is that Congress and the US President could levy taxes “to obtain compensatory tariffs against currency-subsidized imports.”

Such is the concern that Guido Mantega, Brazil's Finance Minister, declared last month that the world is already involved in "a trade war and an exchange rate war," and that Brazil would take action to defend its economic interests.

“To open a shop is easy, to keep it open is an art” – Chinese quote

Why RACI Fails

2010-08-25T20:55:00.000-07:00

“RACI” is a responsibility assignment matrix, especially used in management where participation of various roles exists for the completion of an assigned task. This enables managers to participate and discuss a common task and maintain absolute clarity to obtain a desired outcome. Suppose you have a project which needs completion, and which would have participation from different functional teams, it would be apparent that you would have various roles within the task.

Defining the roles and responsibilities is critical for its success. This is important for the following reasons:

1. Focusing on the key objective; away from non essential distractions
2. Decision making concerns need to be addressed
3. Blame Games where things may stray from desired path need to be avoided
4. Workload Imbalances have to be managed
5. Lack of action because of incomplete or ineffective communications to be prevented
6. You-we-they attitude to be avoided

Take a scenario where a small application would need to be developed. This project in its various phases would need to have a members with various skills, such as functional and designing skills, development skills, testing skills, transition skills etc. While there would be only one project manager, across the development phase, people with different skill sets would have responsibilities for various aspects of the project. So you have the project manager who is accountable and different team members responsible for various components for the project.

At the same time the project may need expert advice from a functional or special skills who would fall under the category of people who are the “Consulted”, while there would be people who may need to be kept informed of the activities of the team Take for example, a QA tester has been assigned the role of testing the program. His manager may need to be kept informed of the duration for which he would be part of the project so that, any planning which he may require to do is done.

Thus we see while you may have multiple people assigned various roles, the roles could be easily defined. So the RACI matrix is as follows:

Responsible: Many
Accountable: One
Consulted: Many
Informed: Many

The basic concept is to ensure that there is no dilution accountability while ensuring that scenarios listed above do not derail projects.

That’s the theory. The problem in many situations is that the RACI matrix does not give clear guidelines for devolution of authority. To be able to carry out any role, there are certain powers of decision making which need to be provided. You cannot have any responsibility without some corresponding authority. It’s like having duties without rights.

So you have situations where people with responsibility are left wondering as in the words of George Carlin “I have as much authority as the Pope, I just don't have as many people who believe it.” The RACI concept is great but the human element which it aims to address, sometimes becomes the greatest stumbling block.

Chop Shop Statement in perspective

2010-08-16T10:23:00.000-07:00

Democrat Senator Schumer from New York during a discussion on a border security bill recently stated:

“The emergency border funds will be paid for by assessing fees on foreign companies known as chop shops that outsource good, high-paying American technology jobs to lower wage, temporary immigrant workers from other countries. These are companies such as Infosys”.

This has created a lot of indignation in India with criticism coming from across the corporate and political spectrum. While the statement itself is in poor light, our reaction should be seen in perspective. President Obama, a democrat won the US elections in November 2008, on the back of a rejection of the economic policies of George Bush. One very important issue in that election was unemployment. Unemployment stood at 5% in April 2008 but had risen dramatically touching 7.5% in October 2008 just at the time of the elections. It further reached 9.5% in April 2009.

Since April 2009 the unemployment rate has remained in a narrow band of 9.5-10% and it is forecast to be around 9.9% in Feb 2011. With elections around the corner in November 2010 there may be many more statements addressed to the American public by its politicians. Politicians will be politicians no matter which country they reside in, and they need to get re-elected, so we should not really get too worked up. This reminds me of some lines from Kahlil Gibran

“The reality of the other person lies not in what he reveals to you, but what he cannot reveal to you. Therefore, if you would understand him, listen not to what he says, but rather to what he does not say.”

In fact we should highlight the positive effects commerce with India has brought to the US, something we are really not doing effectively. One prime example is investment by Indian companies in America.

A report released by Congressman Jim McDermott “How America Benefits from Economic Engagement with India” stresses on theses investment in the US. It is a very interesting study as it highlights that between the years 2004-2009, 90 Indian companies made more than 100 Greenfield investments valued at $ 5.5 Billion creating 16,576 jobs. Further the report highlights that the total investment by Indian companies to the US in that same period was to the tune of $ 26.5 Billion which resulted in job creation to the tune of 60,000.

Indian companies and especially the IT companies employ tens of thousands of people in the US and probably pay taxes in the billions. These very same companies have been busy at campus recruitments where thousands of people have been hired. So the statements that high paying American jobs are lost are not entirely correct.

Further while there is indeed a huge unemployed labour pool there is also a shortage of skills within organizations especially in IT, Communications and healthcare. So the need for skilled people will always be there. In that light we should also not look at the raising of H1B fees very narrowly as if it will sink the Indian IT / ITES Industry. NASSCOM estimates that the value of India IT/ITES exports would be around $ 60-62 Billion in FY 2010-2011. If we assume that 60% exports go to the US, we are talking of approximately $ 36 Billion. Now at the other end look at the H1B regime. The total number of H1B’s issued in a year is 65,000 of which traditionally 60% go to Indians. That’s about 39,000. So with increase of visa fees by $ 2000 the net increase in payouts for the whole industry would at best be $ 78 million. Against an export of $ 36 Billion, well......

Is Character innate or is it situational?

2010-07-17T00:42:00.000-07:00

Albert Einstein is said to have stated that:

“Most people say that is it is the intellect which makes a great scientist. They are wrong: it is character.”

If character is such a necessary component for our personality, what exactly is it? The dictionary meaning of character is as follows:

“The combination of qualities or features that distinguishes one person, group, or thing from another; A distinguishing feature or attribute, as of an individual, group, or category; A structure, function, or attribute determined by a gene or group of genes; Moral or ethical strength.”

“Character” in most common usage is referred to as our moral fibre, or the moral qualities we possess. This would imply a variety of attributes like honesty, loyalty, integrity, courage, and fortitude.

Is Character inborn and would it be consistent throughout a person’s life or is it situational, subject to change due to situations?

Both these divergent views have strong basis of support.

Johann Wolfgang von Goethe has said that “Character develops itself in the stream of life.” This is in line with Aristotle's view that character is based on naturally occurring psychological responses. This would imply that everyone is capable of becoming better than they are. In specific circumstances the moral fibre or character of a person could be improved. Thus if we keep good company we would develop a positive character. The reverse then could also be true that in given circumstances a person could do things out of character. An example could be a situation where a normally honest person could be tempted into doing a wrong act.

The other end of the philosophical divide states that character is consistent and not open to variance. Psychologist Lawrence Pervin defines moral character as "a disposition to express behaviour in consistent patterns of functions across a range of situations"

Ralph Waldo Emerson is said to have quoted “No change of circumstances can repair a defect of character.”

Would this always be true? If it were then would not any attempt to improve the spirit of a person be a wasted effort? Religion which professes to improve the moral character of a person would be meaningless.

We are shaped by the circumstances of our existence and get moulded with the flow of our lives. We are affected by our society, traditions, culture, and economic situations. Our outlook on right and wrong changes with time, hence the values we associate with them do so to. In such a scenario moral character could be situational. In the words of Albert Einstein “Weakness of attitude becomes weakness of character.”

Will the Double Dip actually be a V+U recession?

2010-07-01T08:01:00.000-07:00

Since the collapse of Bear Stearns on March 16 2008, the world has been in a financial crisis, with the terms recession and depression freely doing the rounds. The only debate has been to its shape, whether this is a V, U, or W shaped (double dip). Whatever the prognosis, the situation is still volatile and would likely to remain so for some time to come.

Of a world GDP of approximately $ 57 Trillion, the US with 1$ 4.5 and the EU with $ 16.44 are the two most important players. The situation in the US is not very rosy where the unemployment figure is at 9.7% as per the Bureau of Labour Statistics. Added to that is the fact that GDP growth has been lower than expected for the 1st Quarter of 2010, while the fiscal deficient is in excess of 10% and US national debt is reaching 75%. To add to the woes the recent drop in the stock market reflects poor investor sentiment on account of lower than expected growth for the 2nd quarter.

The EU is also facing similar pressures and as per the European Economic Forecast - Spring 2010, the EU GDP growth will be depressed for the 1st three quarters of 2010. The employment rate is expected to fall by 1% this year, putting greater pressure in the unemployment rate. The fiscal deficient would be as high as 6.8% throughout the EU, and a debt to GDP ratio of 78.7%. The recent crisis in the EU over Greece may just be a play on future crisis yet to come from the UK, France, Spain and Italy.

Further hampering a climb out from the recession with deficit’s and debts reaching record levels; Governments do not have the stomach for more stimulus packages. The lack of political will for more stimulus packages is more due to the alarming rise of Dept to GDP. Greece with a debt of 115%, unemployment at 9.2% and deficit at 12% caused a global crisis. If seen in the light of the fact that Greece’s economy represents just 2% of the EU, economy, what are the dangers posed from a nation like Italy which has a debt of 115%, unemployment at 8% and an accepted fiscal deficit of 6% (some say a lot higher), and represents 12% of the EU GDP?

Consumer spending in the US shows very weak sentiment. Retail figures for May 2010 in the US show a 1.2% drop. New home sales for May 2010 have plunged 33%. Along with a drop in Auto Sales this represents a continued scenario of return to recessionary economics.

Another factor likely to affect the world economy in 2010-2011 is a potential crash in World Agricultural prices. As per the FAO the Food Price Index has consistently been falling from 174 in Jan 2010 to around 164 in May 2010. Although highly tentative the forecast of rice production alone is estimated to see an increase of more than 4% in 2010-2011.

The BRIC economies of Brazil, Russia, India and China represent about 8.6 Trillion GDP, or close to 16 % of the world GDP. An expected drop in agricultural prices may greatly impact the BRIC economies where close to 39% of the labour force and 10% of GDP is based on agriculture, unlike the developed economies where only about 0.7 % (US), 4% (EU) labour force is agriculture dependent. Drop in agricultural prices would affect the Chinese and Indian economies substantially though for different reasons.

So when the first stage of the recession started in 2008, we saw the developed economies of the US and EU hit badly while the BRIC economies (barring Russia) less severely hit.

George W Bush famously said “In an economic recession, I'd rather that in order to get out of this recession, that the people be spending their money, not the government trying to figure out how to spend the people's money.”

The problem is there is very little money either with Governments or the people to spend. With less funds available and return to recessionary pressures the second coming dip may not be a V curve but actually a U curve.

Convergence in the Cloud, RIM, SAAS, ITSM and ITIL

2010-06-15T07:34:00.000-07:00

The evolution of the internet from a medium of connectivity to a medium of business has brought about a paradigm shift in IT behavior and usage. Cloud computing is representative of that shift. It presents a dynamic change whereby resources such as application software, information, and data center usage are available to organizations in an “on-demand” with “pay as you go” basis; akin to utilities like electricity and water.

While to many it may seem like a revolution, in its roots lie certain basic principles of evolution. The first stage in the evolution evolved from better and faster connectivity, which allowed outsourcing as a separate industry to grow. Outsourcing achieved two things, it helped organizations to have cost advantages, and it gave them the ability to focus on their core competencies. A third very important point not often realized is that it broke the taboo of using specialized outsourced services and the fear associated with having critical data stored and utilized by third parties.

With time; evolution of both hardware and services has seen a slow convergence on the web. As services became specialized new models of businesses for software; allowing customers cost advantages in their Capital Expenditure like ASP or “Application Service Provider” models have grown. Further from the ASP model has grown the SAAS or “Software As A Service”.

Similarly from a situation of owning and maintaining huge IT infrastructure has grown the practice of using outsourced models via data centers and RIM “Remote Infrastructure Management”. The growth of RIM has been so rapid that Gartner predicts that by 2012, 20% of businesses will own no major IT Assets.

“As organizations make plans to navigate the economic recovery and prepare for the return to growth, our predictions for 2010 focus on the impact of critical changes in the balance of control and power in IT," Brian Gammage, VP and Research fellow at Gartner.

Cementing the relationship between Software on the web and Infrastructure on the web has been the practice of Service Management, or IT Service Management, a discipline used to provide continual IT Infrastructure and Services seamlessly. IT service management is representative of an emerging scenario where the focus of any organization is the service it provides to its clients and not the technology.

These emerging scenarios’s are in line with the changes in the best practises area where there has been a shift from “process” to “business”. ITIL, the most established best practise in ITSM has also seen a focus on the life-cycle approach. As we see the current phase out of ITIL Version 2 to the ITIL version 3, we also need to look at the need for re-tooling and re-training professionals.

After all, what worked well in yesterday’s environment has been clouded over.

What leads to Progress, Necessity or Vision?

2010-05-25T23:27:00.000-07:00

"No single idea has been more important than...the Idea of Progress in Western civilization for three thousand years”
Robert Nisbet

It is said that when there is improvement in the human condition, there is progress. Over many millennia, man has progressed from being a “cave man” to a “civilized man”. Technological, scientific and political advancement has greatly improved man’s living condition.

There is a saying “Necessity is the mother of invention”. This implies that all inventions and discoveries have been due to a crying need of man, whether it was the wheel, metals, agriculture and so on and so forth. However has all progress been a result due to necessity only? And is that still true or has mankind moved beyond necessity being a motivator, to his vision being a motivator?

In the early part of the twentieth century Albert Einstein said “Everything has changed except our way of thinking”. One could not blame him. After all while there were always visions of creativity, the funding and effort always came about because of necessity. Take aviation. The Wright Brothers could prove the possibility of powered flight as early as 1903. However it was only World War 1 which could move governments to fund it rapid advancement.
Similarly in a special Message to Congress, in May 25, 1961, when President John F Kennedy unveiled a vision to place a man on the moon by this statement “ I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.” This would have been a bold vision had it not been due the advancements made by the Soviets especially of sending Yuri Gagarin to Space.

If we had not seen the marvel of the communication revolution brought about by the internet and other IT related advancement one may have agreed with Albert Einstein.

However since the advent of the computer revolution, visions of a better future have become more common. In fact Bill Gates in his book “The Road Ahead” prophesized the importance of the internet as an information superhighway. Has the computer and the power of information technology been able to provide a means other than necessity to help “Progress?” If one were to see the headlines of a couple of days ago wherein scientists announced a breakthrough about the creation of artificial life, without any specific life threatening necessity one would be tempted to agree.

One would be tempted to think that man has really changed his way of thinking so that Progress is now possible without any specific necessity.

Are the Marketing Mix and 4P’s of Marketing Irrelevant?

2010-03-14T00:22:00.000-08:00

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”
George Soros

The basic function of marketing professionals is to add value to an organization by increasing the sales of its products. The present generation of marketing professionals have been brought up on the concept of the “Marketing Mix”, which addresses the issues of creating a marketing plan. The term itself was created in 1953 by Neil Borden and within it the 4P’s classification was added by E Jerome McCarthy in 1960.

The 4 P’s classification has in it the four elements of Product, Price, Place and Promotion. In its traditional copy book sense, this classification was sufficient to position products, however with the explosive growth in “knowledge” and its use in adding value to products, the classification of the 4P’s is losing its relevance.

Take for instance, a hypothetical situation where executives from a music company are defining their marketing strategies on Price and Place vis a vis their traditional competitors. This would have been fine a couple of years ago, but today they will realize that their competition is not from other music companies but from mobile service providers, who can make caller tunes available. In India the largest music company from revenue is not your traditional HMV or EMI but Airtel, a mobile service provider selling ring tunes.

Similarly the largest camera company is not a Canon or Kodak, but Nokia, whose camera phones outsells all other cameras from traditional camera companies.

The knowledge revolution brought about by large scale computerization, global connectivity through the internet and convergence of various media have all helped to render traditional thinking to the realms of history.

The ability to video conference and tele-presence have made the need for intercontinental business travel so less necessary, so that airlines face competition not from one another, but from a company like Cisco.

The signs of these fundamentals shifts have been there for more than a century. Western Union was the biggest communication company in the 19th century but it missed out on the telephone and its pre-eminence in communication by virtue of its telegraph business was lost. Kodak was late in its entry into the digital medium and the results are there for all to see.

Marketing professionals today need to realize that there is only so much value they can derive from their products and there is a limited shelf life. The focus on data can be dangerous as data is based on the past, it cannot really give a pointer to the future, as the future is constantly changing. In the words of John Sculley

“No great marketing decisions have ever been made on quantitative data”

Today’s marketing professional has to be an out-of the box thinker, and have the courage of his convictions, because his decisions will probably not be based on precedent, he would be creating the precedence.

A First Job is like a First love, Unforgettable

2010-03-07T03:27:00.000-08:00

Some time ago I spoke to a former colleague after a gap of almost 20 years. While reminiscing our times together he remarked, “A first job is like a first love”.

That remark has stuck with me the last few months. It was chance that I also happened to meet a couple of colleagues of mine from my first company just yesterday, some after a gap of 20 years. Yesterday’s meeting helped me to focus on those lines and I have attempted to understand the similarities between the two, the first job and the first love.

It finally came down to these lines from Tim McGraw:

“Like an old photograph
Time can make a feeling fade
But the memory of a first love
Never fades away.”

When we join our first jobs we are young and idealistic and money has not blinkered our approach. The sense of right and wrong and fairness are still embedded from a life spent in school and college getting an education at times far removed from reality. It’s something like being in love for the first time, no right, no wrong, just love, just affection?

With time we become more cynical, and begin to realize, that on the scales weighing right and wrong, the scales will always tilt towards the side of benefit. The victories and failures which will come later, maybe in different jobs, will ground us out of an idealistic approach.

I noticed that when we got together, it was so much easy to relax and talk, of days when we did crazy things, crazy gossips. There was virtually no malice or anger, just fond memories.

It may be that time smoothens some of the roughness of past engagements and incidents, but what we all would agree is that the mystique and pleasure of getting the first pay check, is unforgettable. The memories and people associated with that first pay check will always linger on.

Difference between Sales and Operations Approach to Transactions

2010-02-21T03:23:00.000-08:00

The difference between an operational approach and a sales approach to transactions has much to do with the difference between Transaction costing and strategic costing.

Transaction costing is the costing associated with carrying out an economic exchange. Look at it this way. A company wants to buy a computer from a computer vendor. The buyer has a direct cost in the purchase, along with creation of a bay to house the computer. These are direct costs for it along with an indirect cost associated from its purchase department. The sum of the first and second form the transaction cost.

On the computer vendor’s side, there is a cost of product, delivery and service. These are direct costs. However there is another aspect related to the acquisition of the customer and its retention which probably may not be in the purview of the operations team.

This is where strategic costing comes in. Strategic costing looks at an incremental performance improvement including the customer dimension. Every transaction which is carried out with a customer has in it the root for another transaction. When a customer perceives a product or a service, his perception is based not only on its utility and cost but the overall experience including the acquisition of the product or service.

So second, third and other consecutive sales are a product of the overall experience of the first sale. This is where incremental performance comes in. In the case of the computer vendor and the buyer the operational approach would be to look at the cost of carrying out the transaction only on the basis of the present balance sheet approach. The approach of the sales would be to view each sale as a precursor to another sale. The advantage in such a sale is that it would come at a much lower acquisition cost and impact future balance sheets also.

Of course there are risks associated with transaction costs running out of control for an indeterminate future and this lies at the root of the eternal conflict between operations and sales. At what point do you cease to incur costs in carrying out transactions? How do you reconcile between the two approaches?

Do you look at transferring some notional costs towards marketing costs, to maintain a balance in transactions? Whatever needs to be done, a balance is needed between toady’s balance sheet and tomorrow’s. You cannot have cost effective operations coming at the cost of customer satisfaction which will effect your future.

At the end what needs to be remembered is that we should not just visualize a future but enable it.

ITIL V3, Enhancing Business Value

2010-02-04T22:24:00.000-08:00

Last November the 20th anniversary of ITIL was celebrated. For the uninitiated, ITIL or “Information Technology Infrastructure Library” is a Best Practice Framework for IT Service Management. It has evolved over the years from version 1 released in 1989, with a version 2 being released around the year 2001 and in 2007, a new version, V3 being introduced. When Version 3 or V3 was introduced, Version 2, or V2 was not withdrawn. This happened only recently in December 2009. This simultaneous existence of two versions between 2007 and 2009 created a huge churn over the respective merits of ITIL V2 and ITIL V3.

To many; V3’s emphasis on creating business value over simply improving execution of processes is its biggest achievement, while for others the core focus of ITIL should be on improving processes. In this churn of things I recollected my own experiences with Infrastructure Management, and this brought into focus why I believe that Business Value is enhanced by ITIL V3 and hence it merits greater attention.

About 20 years ago I was working in a company which pioneered Computer Education in the School Segment in India. At that time we had a presence in about 90 cities and towns spanning the length and breadth of the country with an installed base of upwards of 2000 systems. Towards the end of 1989, when the need for enhancing customer support was felt, I was given that task. The brief I had on being given the responsibility was very simple “We need to ensure that our clients are happy and that we can re-sign our contracts. To ensure re-signing, the computer systems must work”.

Though we already had a team doing maintenance work, there was a need to have a systematic approach in “Infrastructure Management”. Thus the existing department, the FE (Field Engineering) Department was greatly enhanced in size, scope and approach. However imagine India in the 80’s and 90’s, without its present communications link. There were no mobiles, the PCO system was not up, and calling a place like Kurseong, or Pathanamthitta or Dibrugarh, could take days. Telegrams were a way out, but they were difficult to convey messages. The internet was not even imagined. Thus slow mail was the only way out.

When we set out to expand the FE Dept. we had all these challenges and more. As I went along in the job, I learnt by experience the essence of creating business value over just improving existing processes. To many, the term Business Value may seem like an esoteric term as it talks of intangibles beyond monetary terms, like customer, societal, and supplier values. However if the Balanced Scorecard perspective of the Financial; Customer; Internal Business, and Innovation and Learning, were applied, the concept was not too difficult to understand.

I would try to relate those perspectives from my learning as I went about defining Services. The first factor relating to finance was the most easily understood! It was a given that by re-signing the contracts we would be adding to the top-line and bottom line.

The second factor was the customer. We needed to be near the customer and provide a better experience for him so that he would keep coming back to us. That helped to define the customer in our “Service Strategy”. Our Strategy was to work on a hub and spoke model, the Hubs being the major metros Delhi, Mumbai, Chennai, Kolkata and Gauwhati. The whole purpose of working on a Hub and Spoke model was based on the fact that the current infrastructure for communication and reach was a handicap and to be nearer the customer, we needed a decentralized process.

We then looked at our employees in the field as our internal customers, and approached our working from the aspect of “A Happy Employee creates a Happy Customer”. We knew that if we enabled our employees to have better infrastructure, there would be lesser complaints from customers giving our employees more peace at work.

The fourth important aspect, Learning and Innovation was something we really took to heart. From an ITIL V3 perspective I could compare this to the emphasis on “Continual Service Improvement” or CSI.

Since we could not plan out everything in advance we were constantly trying to incorporate new learning’s from the field. We created a Field Engineers Handbook to be distributed to all employees so that they could do first level repairs themselves, reporting formats were created and then modified and re-modified, the aim was to improve; always. We went by the adage, “Change is the only constant”. In that sense CSI is all about change and adaptability, incorporating all good things.

CSI is not just an important component in Infrastructure Management; it is an important component in management philosophy as a whole. Thus in the debate of the improvements of ITIL V3, the extra emphasis on Service Strategy and CSI, help businesses by enhancing Business Value.

Is the Economic Recovery a Mirage and have we missed an opportunity for Reforms?

2010-01-10T01:29:00.000-08:00

“What is more mortifying than to feel that you have missed the plum for want of courage to shake the tree?” - Logan Pearsall Smith

There have been a lot of noises that the worst recession since the great depression is over. This comes on news such as that from the Bureau of Economic Affairs, which states that the US GDP grew by 2.2% for the 3rd quarter of 2009.(http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm) while the estimates for the 4th quarter are as much as 4%. Of course to many this might be a great indicator that the economy is recovering.

However along with this apparent growth is the fact that there has been no let up in job losses, albeit at a much lower rate. Even assuming the fact that the official records do not reflect complete figures of unemployed, such as those who have stopped looking for jobs, etc, the current unemployment situation at 10% (http://www.bls.gov/news.release/empsit.nr0.htm ) is still quite high. “Traditional” sentiments state that unemployment figures start to trend down a couple of months after the recovery process begins. However the so called recovery has been on now for 9 months, with 6 straight months totally in the black. We have yet to see unemployment figures going south.

Perhaps one reason for all the positive noises coming out is because some of the big banks are miraculously repaying the loans given to them by the government. The markets were bad for the last couple of quarters, till the middle of 2009, yet Investment banks could repay government loans to the tune of billions of dollars. So just, think; housing, automobiles, manufacturing, trade, and employment all head south, but the financial institutions are making money. It’s kind of funny.

If you go more deeply you may see some of the reasons. These banks could repay the TARP loans because of TARP itself. Look at it this way, the US government has pumped in excess of a trillion dollars in stimulus funds. The US Government paid AIG money, which paid Goldman Sachs money who repaid the loan given to it by the US Government. In all the exchange of money, what productivity has actually happened? Now also look at the fact that four institutions AIG, Freddie Mac, Fannie Mae and GMAC have received in excess of 600 billion from the US government and they may not be in a position to repay anytime soon.

However since banks like Goldman Sachs and Citi are now moving towards being free of the TARP induced controls, there are chances that we could see a return to the speculative scenario we had earlier. Over leveraging is still widespread, and has not been controlled. On the 27th of November just an announcement by the Dubai government on the potential delay in debt repayment was enough to cause global markets to crash. So if the economy is improving, why no confidence? Is it because the banks know a thing or two more about their actual health?

The whole approach of all governments have been one of containment, of effects and not associated with removal of causes for the economic recession. So we could probably see a recap of this crisis soon. I feel that we have actually patched up and postponed the full implications.

We have seen two successive governments, one republican and the other democrat throw hundreds of billions of dollars at the crisis, but no one has keenly looked at the regulatory precautions such as the “Glass Steagall Act” act enacted in 1933 to control wild speculation.

There are no efforts at bringing about systematic safety valves into the money system. We may therefore yet hear with regret the words of H. Jackson Brown, Jr, “Nothing is more expensive than a missed opportunity.”

In the Battle of "isms" have we lost sight of Right and Wrong?

2010-01-02T03:04:00.000-08:00

“I am not bound to win, but I am bound to be true. I am not bound to succeed, but I am bound to live by the light that I have. I must stand with anybody that stands right, and stand with him while he is right, and part with him when he goes wrong.”

Abraham Lincoln

In my last two articles I had written about Idealism in the light of the Copenhagen Summit on Climate Change. I received a number of comments and views. A trend seemed to be prevalent that if you were for climate protection you were an idealist and if were on the other side you were a realist.

I felt that at Copenhagen and outside, amongst the cacophony of noise, between opposing camps, the voice of reason has been lost. There was a debate between two opposing camps. There was no debate between right and wrong. Global warming was discussed purely from an economic point of view.

Take the threat of global warming towards the melting of the ice caps and retreat of fresh water glaciers. While this is greatly debated by all, the common man who needs the natural river flow for his very survival is just ignored in the big picture. The BRIC countries might have reached some vague compromise with the US, however what China and India need to realize is that the reduction in fresh water from the Himalayas effects most of Asia, South Asia and South East Asia which is home to almost 50% of the worlds population. If they do not save their fresh water source they have a huge challenge in front of them.

This is not the first type of argument between opposing camps. The end of the Second World War saw the competition between socialism/communism and capitalism. The end of the cold war saw the quiet demise of communism. Even China has forsaken communism for some quasi capitalism, and Russia has embraced capitalism whole-heartedly.

So while capitalism may rejoice in its seeming victory, the recent global depression highlighted the fragile nature of capitalist structures. The unchecked greed would have been very damaging were it not for the common taxpayer who ended up bearing the burden of the follies of a few. So while a vast majority suffered, a few thrived.

All this just highlights one point that most of us are trapped in an enclosed thought process without the ability or the desire to differentiate between right and wrong. What we need to do is look inward and transform ourselves. As the Buddha said:

“All wrong-doing arises because of mind. If mind is transformed can wrong-doing remain?”

If mankind could be compared to Icarus, the similarity would be striking. Just as Icarus made wings of wax to flee Crete and gain Independence, mankind is polluting the world to escape poverty. Unfortunately Icarus had a grim ending, as he rose higher, the sun melted his wings which were made of wax and he plunged to his doom. Will the same befall humanity?

Will he have the sense to differentiate Right from Wrong?

Is Idealism a good sounding word for Reality

2009-12-20T06:23:00.000-08:00

Last week I had written an article questioning the strength of ideas. At its roots was the citation for awarding of the Nobel Peace Prize to President Obama.

“For 108 years, the Norwegian Nobel Committee has sought to stimulate precisely that international policy and those attitudes for which Obama is now the world's leading spokesman. The Committee endorses Obama's appeal that "Now is the time for all of us to take our share of responsibility for a global response to global challenges."

“His diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world's population.”

http://nobelprize.org/nobel_prizes/peace/laureates/2009/press.html

The background was the Copenhagen summit. This was the great opportunity to preserve the idea of protecting Mother Nature. President Obama had his chance to promote “values and attitudes” shared by the majority of the world, the reason for which he was awarded the Nobel Prize. The world expected him to take the lead.

However this was not to be. The idealism of environmental protection came with a price tag. The thought of the economic consequences has given cold feet to all, bringing into play the hard reality of money.

The concept of Idealism is based on values and attitudes which spring from the mind and are focused on sense of fair play and justice. Realism on the other hand is based on the concepts of what exists, or which has an absolute value, like money.

The first Noble Peace Prize was awarded to Henry Dunant, founder of the Red Cross, who shared it with Frédéric Passy. Over the years we have seen that the concept of the Red Cross though very great, is always within the boundaries of its budgets. Only so much can be done for the victims of war and conflict and famine and hunger.

The debacle at Copenhagen just clarifies that Idealism, is perhaps just an image of realism, or as the two meet, in the words of William F. Buckley, Jr.:

“Idealism is fine, but as it approaches reality, the costs become prohibitive.”

Can Ideas truly defeat armies of selfish interest?

2009-12-13T00:30:00.000-08:00

"The star possesses no anger; the dawn bears no malice … An invasion of armies can be resisted; an invasion of ideas cannot be resisted. …. the glory of darkness is to be conquered by the torch”

-Victor Hugo, The History of a Crime

These words have inspired many a famous line including, “More Powerful than a thousand Armies is an idea whose time has come”. As we see the streets of Copenhagen erupt in passion over “Global Warming”, can we truthfully answer the question “Ideas are more powerful than armies of selfish interest?”

The harshness of the economic order due to the industrial revolution saw the birth of communism. It was such a potent force that it wiped away czarist forces in Russia. In China too the might of Chiang Kai Shek's army backed by modern weapons could not resist Mao’s peasant armies, and was swept away. The idea was that of equality of an economic nature, a great leveler of wealth bringing about equal opportunity and growth. However the reality was quite different and today this great idea has all but been condemned to die a natural death.

The Indian subcontinent was born to the idea of "Non Violence", if there was Mohandas Karamchand Gandhi in India, there was the frontier Gandhi, or Khan Abdul Ghaffar Khan in the North West Frontier Province. Today the North West Frontier is the heart of the most dangerous place on Earth, and India too erupts in violence every now and then.

The end of the First World War saw the birth of “The league of Nations”. It was a cry of peace, an idea of oneness in humanity to unite against future wars. The timing was perfect, but could it stop the Second World War? The Second World War’s end saw the birth of the “United Nations”. If one were to do a checklist today, what would you sense?

The latest battlefield in the human mindscape of "Ideas" is that of Global warming and Environmental Protection. Global Warming is a reality, seen in the disappearing icecaps, in the melting of glaciers and the rising temperatures worldwide. We should sense that floods in Jeddah and snow and Ice in the UAE, are occurring due to vast changes in the environment. The changing monsoon patterns and drought in the breadbaskets of the world is a sign of danger.

So we see that Global Warming is a clear and present danger, and the idea of Environmental protection is so strong that it produces extreme passion. However the world is divided between two warring halves to preserve the environment, and to preserve economic interests. So is the idea strong enough to defeat the armies of economic interest? Will the selfish armies of self interest decide the fate of humanity for eternity?

Is it possible that “the glory of darkness is to be conquered by the torch?” We do not need enduring ideas, we need enduring action, else like so many great ideas, which should have been all conquering, this idea too may be defeated.

“An idea that is developed and put into action is more important than an idea that exists only as an idea.” - Buddha

Fighting Food Inflation with Tight Monetary Policy is Counter-Productive

2009-12-03T23:43:00.000-08:00

“Clearly now going forward, the accommodative monetary stance will have to be reassessed” Usha Thorat, RBI Deputy Governor, Dec 2, 2009

The above emphasis was also shared by R Rangarajan, Chairman, Prime Ministers Economic Advisory Council. This is in response to shooting up of food prices in recent times. This has clearly worried the Government of India as food inflation has been up 17.4% in the third week of November 2009, and the Government is under pressure in the Parliament. To fight this menace, a tighter monetary policy is being considered.

What Does Tight Monetary Policy Mean?

It is a course action undertaken by a Central Bank (RBI in India) to constrict spending in an economy that is seen to be growing too quickly, or to curb inflation when it is rising too fast. The usual policy is to "make money availability scarcer" by raising short-term interest rates. This raises the cost of borrowing and effectively reduces its attractiveness.

However one question is how many people use borrowed money to buy food? In cases of tightening economic situations most families will first stop on luxuries, then some basic household necessities and the last would be food expenditure. So you will see the Construction Industry (housing), Auto Sector, textiles, tourism being hit first, causing acute financial pressure on the economy.

So by the time the scarcity of money causes families to restrict a demand for food, the whole economy would have gone for a spin (downward). The fact that the food prices have been shooting up has been know for many months. Earlier the Government was highlighting low Inflation, showcasing only 0.7% in April while the commodity price for food was shooting up. Long term solutions are needed, not knee jerk reactions.

As I had written in my previous article in May, India’s economy is dependent on the Monsoon, and correspondingly to the Agriculture sector.

http://sunilmohal.blogspot.com/2009/05/indian-economy-set-to-buck-negative.html

The Government has limited options:

1. Being Politically correct, Tighten Monetary Policy, and tank the economy. However the food prices would remain high till the next crops come in, and the purpose is defeated.

2. Being politically incorrect, but economically correct, do nothing, wait for the next harvest to come in, and hope the economy does not tank.

3. Focusing on long term solutions, like

a) Creating Food Storage facilities. Currently India looses Rs. 58,000 Crore (About $ 13 Billion) annually on food wastage, as per MrSubodh Kant Sahai in speech in Parliament in March 2008.
b) Better Pesticide usage. "It is estimated that India loses approximately 18% of the crop yield valued at Rs 90,000-crore ($ 20 Billion) due to pest attacks each year," as per a CARE Ratings report.

c) Better irrigation to increase crop yields.

"Leadership is, among other things, the ability to inflict pain and get away with it - short-term pain for long-term gain."- George Will

The Need for ITIL Compliance and Training

2009-11-28T04:34:00.000-08:00

“Information technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without the talking about the other.”

Bill Gates

To say that businesses are increasingly dependent on the performance and integrity of their Information Technology (IT) Systems, processes and Infrastructure, is a major understatement. Be it banking and finance, retail or manufacture, IT forms the backbone for efficient services. To better manage IT services, the guidelines laid under the ITIL® scheme are a standard to enable efficient cost effective performance. Today ITIL is the accepted framework for IT Service Management. Compliance to ITIL processes and methodologies does give an edge to organizations specifically focused on Infrastructure Management.

“The Infrastructure Management Services (IMS) industry currently accounts for US $524 Billion, nearly 25% of the US $ 2.3 Trillion IT Spend, and this is moving towards a remote delivery model where services are increasingly delivered by vendors from low-cost locations.”

http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/RIM_Exec_Summ.pdf

In 2004, Bharti set a precedent for “Equipment and Network Management Services” when it signed a $ 750 Million outsourcing deal with IBM. This was a global first in the telecom space and since then other organizations have followed in similar patterns. In March 2007, Idea Cellular did a deal valued at that time of about $ 600 million plus for a 10 year period.

Outsourcing of Infrastructure Management, as an Industry is probably the next big opportunity. RIM or Remote Infrastructure Management as an Industry may be valued in the region of $ 26-28 Billion by 2013, as per a study conducted by Nasscom and McKinsey, titled: "The Rising Remote Infrastructure Management Opportunity: Establishing India’s Leadership". It states that the global RIM industry has grown at more than 80 percent CAGR, from $2 billion in 2006 to $6 billion in 2007 to $7 billion in 2008.

http://www.nasscom.org/Nasscom/templates/NormalPage.aspx?id=53579

As an industry the opportunities are great, therefore for any Organization benchmarking its processes against internationally recognized and accepted standards is of the utmost importance to catch a piece of the potential $ 26 Billion pie. That explains the necessity for the organizations to be “ITIL Compliant”.

The next step to understand is that your processes and systems are only as good as the people who work and manage them. I quote Aristotle, to explain it for me.

“Excellence is an art won by training and habituation. We do not act rightly because we have virtue or excellence, but we rather have those because we have acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.”

Training individual employees to ensure excellence in service is thus one of the single most important aspects of benchmarking yourself. Training makes you a champion, as Muhammad Ali famously said “I hated every minute of training, but I said, ''Don't quit. Suffer now and live the rest of your life as a champion.''”

Is Freedom all about Politics?

2009-11-14T03:05:00.000-08:00

November 9th, marked the 20th year of the fall of the Berlin Wall, a date symbolizing freedom. Many a world leader have thumped their chest and equated that to its political sense, the ability of people to choose their leaders in a democratic form.

Democracy = Freedom

It is borne out of a thought which sees billions of people, having different forms of governance as being “un-free”. That is a modern day version of the cry of Jean-Jacques Rousseau,

“Man is born free, but everywhere he is in chains”

That statement can be expanded to mean that Freedom is inherent to humanity, but what is Freedom? Philosophically it can be defined as the ability to make your own choices, political, economic and social, without constraint or being held up by others. The emphasis on the political aspect of freedom “freedom to” often overlooks the economic aspect of freedom, or the “freedom from” (hunger, poverty).

It is often accepted that two of the great revolutions of the 18th century, “The American War of Independence” and the “French Revolution” were about political freedom, the unshackling of political bonds. However what is not associated is that “freedom” in the economic sense was at the root of the big picture of political freedom.

Would the American Declaration of Independence with the profound words of “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness” have been possible without the war cry of “No Taxation without Representation”? That famously meant “"taxation without representation is tyranny." Similarly would “The Declaration of the Rights of Man and of the Citizen", at the end of the French Revolution been possible, if it were not for “Let them eat Cake”.

Would the “Magna Carta” or the great charter of Freedoms, been possible if it were not for the desire of the Barons to preserve their privileges and limit the power of the King? Even the “Bill of Rights 1689” enacted by the English Parliament, had a basic principle which was “Freedom from taxation by Royal Prerogative”.

Would the fall of the Berlin Wall, in 1989, have been possible without the weakening of the Communist states due to economic malaise? Would Solidarity have been possible in Poland, without the desire from the “Freedom From”? If Poland had not been weakened by the Solidarity movement in the early 1980’s, the Berlin Wall may never have fallen.

From the signing of the Magna Carta on June 15th, 1215, to the fall of the Berlin Wall on the 9th of November 1989, the breast thumping cry of Freedom, equated to the political sense wrongly colors the basic Economic Reality, freedom from hunger and poverty. Many a big political leader today would be better served by the following words of Abraham Lincoln:

“Freedom is not the right to do what we want, but what we ought. Let us have faith that right makes might and in that faith let us to the end, dare to do our duty as we understand it”

Why ITIL has so little emphasis on Infrastructure

2009-11-02T00:15:00.000-08:00

For the practitioners of ITIL and its champions a question which often comes up is why is it that in a best practice labeled “Infrastructure Library”, the actual emphasis on Infrastructure is minimal.

We need to understand what ITIL is and where it comes from to answer this basic but important question.

What is ITIL?

“ITIL® is the only consistent and comprehensive documentation of best practice for IT Service Management. Used by thousands of organizations around the world, a whole ITIL philosophy has grown up around the guidance contained within the ITIL books and the supporting professional qualification scheme.

The ethos behind the development of ITIL is the recognition that organizations are becoming increasingly dependent on IT in order to satisfy their corporate aims and meet their business needs. This leads to an increased requirement for high quality IT services.”

http://www.itil-officialsite.com/AboutITIL/WhatisITIL.asp

“If GM had kept up with technology like the computer Industry has, we would all be driving $ 25 cars that got 1000 MPG (miles per gallon)” – Bill Gates

Bill Gates could not have said it better to describe the explosive growth of the Computer or IT industry. However what needs to be understood is that the IT industry is just not the hardware component, but the software as well. In the 70’s and early 80’s decisions affecting the use of IT were based on the hardware aspect. It slowly progressed to a focus on the software aspect. Now decisions on IT are based on “the need”.

The requirement and the consequent design of solutions of comes first with both hardware and software based on the need. Thus the IT industry has progressed considerably from the focus on hardware to the “solution”, from a product to a “service”.

ITIL or “Information Technology Information Library” follows a similar history. This concept emerged in the 1980’s when the British Government decided it needed to have a framework to efficiently manage the use of IT resources. As was the scenario in the 70’s and early 80’s, IT resources meant “Hardware”. The British Government tasked the Central Computer and Telecommunications Agency (CCTA), now called the Office of Government Commerce (OGC) to devise a framework for efficiently managing these resources.

The earliest version of ITIL was called GITIM, “Government Information Technology Infrastructure Management”. It focussed heavily on service support and delivery of IT infrastructure. By the 1990’s the framework for managing IT Infrastructure had gained widespread use in Europe and the name ITIL stuck.

However like all of Information technologies’ explosive growth as explained with the analogy of the development of the car, the scope of IT Service Management has grown, the only thing not having grown is the name, which is still rooted in the IT infrastructure of yore. ITIL underwent an overhaul in 2001 with Version 2. The latest version change “V3” in 2007; or ITIL V3 has laid emphasis on aligning with business needs.

To explain further the explosive growth of computing power, try to recollect the Y2K problem. In the 1960’s when computers began to be used in general applications, computer programmers used to use only 2 digits to represent the year to save on computer memory costs. As the year 2000 was approaching there was a sudden fear that all those programs with their roots in the 1960’s would not work. Hence there was a frenzy to upgrade software code. Hardware scarcity is not a fear any longer.

In the scheme of things today, the hardware or infrastructure portion plays just one part in the provisioning of IT services. It’s like having a lot of information. Information by itself is of no use unless it is structured in a usable format, what we would say knowledge. Similarly to ensure optimal usage of services “ITIL” now mandates a comprehensive all encompassing approach to service management, and not looking at Infrastructure in isolation.

The philosophy behind ITIL V3 today as per the OGC is one of “patterns of collaborative exchanges, rather than an assembly line”.

ITIL today is all about aligning the four P’s i.e. People, Process, Products and Partners. In such a scenario Products or hardware or infrastructure thus forms just one important pillar.

Overselling a Product's Capability

2009-09-27T01:09:00.000-07:00

"The question should be, is it worth trying to do, not can it be done.”
Allard Lowenstein

I recently bought a mobile phone from a retailer with a national presence in India. As a business phone I needed to use voice, sms and email. The sales man sold me a particular phone model with which Blackberry services worked. So I bought it. When I tried to activate Blackberry services, I could not. I discovered that Blackberry did not work on the phone and when I complained to the product company they sent me the following mail.

"This e-mail is in reference to the blackberry support of (XYZ) and (ABC). We appreciate your interest in ALPHA products and services. Please be informed that these phones are technically designed to support the Blackberry application. However, the Blackberry application is currently not available for this model. Also, the network operator does not provide Blackberry services for this phone model. We request you to check the availability of Blackberry application on the following web link….."

Who is at fault, the retail organization, the product company, or me?

The product manufacturer is clearly giving an elusive answer, hiding behind the fact “Yes it will work sometime, but not now”.

The retail company at first said that, it was not their product so they could do very little, about making Blackberry work. When I pressed them that their sales man should have been explicit, the head of telecom products, in this retail company told me that it was my fault for buying such a phone, and that I should have bought a Blackberry if I needed Blackberry services.

The Product Company which makes the phone has a turnover in Excess of $ 25 Billion a year worldwide, and the retail company I bought it from has a group turnover in Excess of $1 Billion in India.

I have mentally debated the question whether it was the Product Company which over hyped its product capability intentionally to its dealers / retailers, or was it the retailer overselling a product. The end result for me as a user is mistrust in both the brands. I feel that there really was no need to hype the product by anyone.

Its not that the phone instrument was bad, but it had been over hyped. Had I been told that mail facilities would work, not blackberry, I may still have bought it, but in the process of overselling; this company is now on my “no no list”.

So was it all about earning more money, increased sales? I am reminded of a quote by Voltaire:

“When it’s a question of money, everybody is of the same religion.”

The Cost Efficient Way vs Cost Management

2009-09-12T00:44:00.000-07:00

In these tough economic times reducing costs has become an integral part of survival strategies. In the cacophony of cost reduction what is often missed is that this could lead to lower quality or deficiency in services. Take the example of cost cutting in manpower. While this might save immediate recurring costs, losses of human assets are not easily replaceable. Similarly in the production of manufactured goods, the temptation to reduce input materials saves money but can give a feeling of a cheap quality good. The potential of long term loss is so well stated by Aldo Gucci:

“The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory.”

A cost is an expense incurred in the form of money, time or resources to procure an item or a service. Since cost plays an important role in any enterprise; in the calculation and determination of profits, Cost Management plays an important role in business.

We use this term “cost management” very widely today, even though there is no uniformity in its definition. Usually we refer to cost management as a collection of management decisions and control functions which influence costs in terms of money or capital. Within it the continuous process of revenue enhancement and expenditure in a timely fashion is also clubbed. Many Organizations believe that by having strong cost management policies and procedures make them cost efficient.

This is because they equate cost efficiency with cost management. While a lot of companies can have great cost management, it may not follow that they are cost efficient companies. What does one mean by that?

I would like to explain the difference between the two by asking this question; “what is the difference between leadership and management?”

Though there is many an answer, one good way of differentiating the two is that management is linked with tasks or transactions while leadership has a lot to do with a vision. Cost efficiency similarly is a mindset, a desire for more with a lesser cost, while cost management is a wish to continue the same with less.

Take the case of Toyota and the Lean Manufacturing concept. Is Lean management a transactional way of manufacturing or is it a philosophy? While many corporate have tried to emulate the philosophies espoused by Toyota, how many have succeeded?

"Many good American companies have respect for individuals, and practise kaizen and other TPS tools. But what is important is having all these elements together as a system. It must be practised every day in a very consistent manner-not in spurts-in a concrete way on the shop floor."

Fujio Cho, President, Toyota Motor Corporation.

One may wonder is this not the same as “frugal engineering”?

http://sunilmohal.blogspot.com/2008/07/frugality-at-work.html

Frugal Engineering as explained by Carlos Ghosn is the ability to engineer products at lower costs. However this concept is not really focussed on the complete ecosystem, but is a subset. When we talk of cost efficiency we are now talking of “Cost Efficient Leadership”, a vision for the complete organization. USA Today said it best

“Toyota is as much a state of mind as it is a car company”

The cost efficient way is a state of mind, not a management procedure.

With the Recession near ending, wither employment?

2009-08-22T01:03:00.000-07:00

“Fed Views Recession Near End”.

These headlines have been appearing in the media for the last couple of days. Alongside this almost celebratory tone most economists are seeing green shoots in the economy amidst a general impression that the recession is on the ebb.

Yes the economy, that is businesses and large organizations are stabilizing and are returning to the black. Key indicators all point to that (refer my previous article of July 30th). While there were job losses in July, the job losses have almost halved from the figure of 650,000 jobs lost per month before May 2009. This seems to be another indicator that recovery is around the corner.

So with the recession “near at end”; a question does arise as to when the unemployment figures will drop?

Before proceeding to this question one needs to understand the current scenario. I would like to briefly touch upon the unemployment figures for July in the US which was 14.5 million or 9.4% of the work force. This has been almost unchanged for the second consecutive month. This is paradoxical as it would mean that there no job losses, while the job losses were to the tune of about 330,000 in July.

http://www.bls.gov/news.release/empsit.nr0.htm (*)

We have 330,000 jobs lost in July 2009, but the unemployment rate remains static at 9.4%. So what is the story? About 2.3 million persons were marginally attached to the labor force in July. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (*) So if we add that figure to the unemployment figure which is 14.5 million, the actual unemployed total stands at around 16.8 million or 10.8% of the workforce.

This is an indicator the unemployment situation is graver then reflected.

“The world, indeed, is like a dream and the treasures of the world are an alluring mirage! Like the apparent distances in a picture, things have no reality in themselves, but they are like heat haze.” - Buddha

There is a feeling amongst many; that companies are not hiring because they want to be on firmer footing and consolidate themselves before they revert to hiring. Is that the whole truth, or is there another scenario(s) at hand?

A point which has been overlooked is the impact of the whole sale merger of companies in such areas as the BFSI (Banks, Financial Services and Insurance) Sector, the Pharma sector etc. These mergers have shut down many jobs, most of them permanently. So while companies are stabilizing on their balance sheets, the benefit to the labor force in terms of enhanced employment is a question mark.

The road to higher employment is going to be a very long and rocky one and to revert to 4-5 % unemployment levels will take years. Since many of the old job opportunities are less likely to emerge, skill up gradation and skill enhancement is of the utmost importance.

“When you are asked if you can do a job, tell 'em, 'Certainly I can!' Then get busy and find out how to do it.” Theodore Roosevelt, 26th US President

This November, Black Friday to signal a new dawn

2009-07-30T04:15:00.000-07:00

The Legend of the Phoenix, from the ancient Greeks has it that the mystical bird when it completes a life-cycle, burns to ashes and then from these ashes arises a new young bird resplendent in all its glory of gold and color.

Last year between Aug 19 and Aug 22, 2008 I had written about the impending retail crash, which would cause a crash in retail sales leading to what would be a “Red Friday”.

http://sunilmohal.blogspot.com/2008/08/ides-of-march.html
http://sunilmohal.blogspot.com/2008/08/no-man-is-island.html

I further opined in February 2009 that we would see some signs of recovery by October 2009. Taken in the context of the situation at the beginning of the year I would like to quote a few words from Anne Lamott; “Hope begins in the dark, the stubborn hope that if you just show up and try to do the right thing, the dawn will come.”

Much has happened in the last one year. There has been widespread pessimism and predictions of an “Apocalypse” in the economy. In the next couple of articles I would like to share my opinion of the way things are headed, with the thought that the dawn is almost upon us.

1. New home sales have surged 11% in June 2009, over the previous month. Of course one should be careful in what one reads from this, as the median price range has fallen. However the flip side is that builders had 281,000 houses on the market last month, down 4.1 % from May. This is the lowest since February 1998. This should see a surge in construction activity. In fact as per the US Dept. of Commerce US steel production showed an increase of13.5% from 3.8 million metric tons in April to 4.2 million in May.

2. Car sales continue to drop, but it appears that the bottom has been reached. Ford plans to increase production by 16% in Q3.

3. The U.S. Census Bureau announced on July 14th advance estimates of U.S. retail and food services sales for June, were $342.1 billion, an increase of 0.6 percent (±0.5%) from the previous month. Though we see that there is a month on month increase, there is a difference of 9% from June 2008.

4. Most Banks have shown improved performance for almost 2 quarters now showing that the worst in the banking sector seems to be over. Here again, we need to read this with caution as some of the implied profits is due to one off sales or accounting changes.

5. The Job market has continued to show a decline but the numbers of people being laid off are showing signs of declining. http://www.bls.gov/news.release/empsit.nr0.htm

While a lot of people may think “When things are bad, we take comfort in the thought that they could always be worse. And when they are, we find hope in the thought that things are so bad they have to get better.”, I am of the belief that this year “Black Friday” will definitely bring some cheer in retail figures.

The Phoenix will rise…

The Economic Imperatives of Education

2009-07-16T23:00:00.000-07:00

“We can't afford our kids to be mediocre at a time when they're competing against kids in China and kids in India who are actually in school about a month longer than our kids”; Barak Obama.

There has been a great deal of discussion about the decline of education in the US and its possible impact on the US Economy. In fact Alan Greenspan in his book “The Age of Turbulence” writes about the economic consequences of a weak education system:

“A dysfunctional U. S. elementary and secondary education system has failed to prepare our students sufficiently rapidly to prevent a shortage of skilled workers and a surfeit of lesser-skilled ones, expanding the pay gap between the two groups. Unless America’s education system can raise skill levels as quickly as technology requires, skilled workers will continue to earn greater wage increases, leading to ever more disturbing extremes of income concentration.”

There are some important points which need to be noted by policy makers worldwide, about the economic impact of education.

It is very strongly believed that the rise of the US economy to its present state of pre-eminence is due to the fact that its workforce is one of the most educated with at least 85% of adult Americans having at least a high school degree.

In fact it is strongly argued that investment in education can have long term benefits like increase in GDP. Two leading researchers in the economics of education, Claudia Goldin and Lawrence Katz, have published a paper which covers this view “The Legacy of U.S. Educational Leadership: Notes on Distribution and Economic Growth in the Twentieth Century.”

http://www.economics.harvard.edu/faculty/goldin/files/legacyaea.pdf

Not only has education impacted the GDP, US data shows that at the personal level, the longer a person stays in school the more he earns. Persons with less than a school diploma are likely to earn about $ 426 weekly while those with a bachelor’s degree are likely to earn upwards of $ 978 weekly.

http://www.bls.gov/emp/emptab7.htm

The Bureau of Labor Statistics also projects that through 2014 over half of all new jobs in the US will require at least some college. Of the 30 fastest growing jobs through 2014, four out of five will require some postsecondary education or training. It is estimated that by 2020, the US may face a shortage of more than 14 million workers with these skills

For countries aspiring to raise the living standards of its people, focus on education is a key.

The foundation of every state is the education of its youth.
Diogenes Laertius

In Charge Vs In Control

2009-07-06T00:39:00.000-07:00

Control is an important management function just like planning and direction. Earlier control was reactive, i.e. when errors were detected, control helped to resolve issues. Today control is pro-active; meaning it is a foreseeing function. Control has been defined by management gurus in various ways:

According to Henry Fayol,

Control of an undertaking consists of seeing that everything is being carried out in accordance with the plan which has been adopted, the orders which have been given, and the principles which have been laid down. Its object is to point out mistakes in order that they may be rectified and prevented from recurring.

According to Harold Koontz,

Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished.

To ensure control, managements usually designate or put in-charge managers, supervisors or leaders etc to ensure that management objectives are adhered to in accordance to plans, i.e. there is control over the organization.

The issue arises when management wrongly assumes that putting a person “in Charge” will automatically ensure that there is control. In Organizations, whether commercial, political, social or any other, it is important to understand that all people who are “In Charge” or designated as leaders need not necessarily be “In Control”.

Take the last years of the Presidency of President Bush when he was considered a “Lame Duck President” as was Tony Blair a “Lame Duck Prime Minister”, or Manmohan Singh before the elections of 2009.

The term “Lame Duck” refers to a person who is not able to function properly. So while both were “In Charge” they were definitely not “In Control”.

We see that the term being “in control” carries similar meaning to be “In Charge”, but is accompanied by the fact that a person in control has the ability to influence action or result, which may not be true in the case of the person simply designated “in Charge” or the “Leader”.

This assumes significance from many perspectives. Internally in an organization when specified functions have to be carried out or plans have to be implemented the people responsible for those actions, the “Leaders/ Managers” may not be in a position to implement them.

Externally this issue is usually seen when trying to open new accounts or trying to carry out any transactions with an organization. You may be talking to the people with the right designations, but often they may not be the people to influence decisions.

Thus it is important to ensure that one does not get sidetracked by people who may be in charge but not in control. Appreciate the subtle difference between "In Charge" vs "In Control".

Create Heroes for Motivation

2009-06-22T01:03:00.000-07:00

Many companies today are faced with existential issues. Productivity and sales are down. Companies are being forced to defer expansion plans and lay off staff. In a grim scenario like this motivation of staff has become a big challenge.

Organizations have the option to wallow in their circumstances or motivate themselves to bravely face the downturn and work towards a better future. So what can they do? To understand that, we need to understand what motivation is.

What is motivation?

It is a stimulus or a force that influences behavior and gives direction. We all need a motivation in life. The motivation to succeed could be internal (Intrinsic) or external (Extrinsic). I will relate an example of one method of external motivation, when a whole country was facing existential problems.

It was the dead of winter in November 1942. The German Armies were at the point of over-running the Russian army at Stalingrad. With Stalingrad gone to the Nazi’s; Hitler’s dream of World Domination could have come true. Nikita Khrushchev (later to become the Premier of the USSR), was the Political Commissar for Stalingrad and responsible for its defense. He needed to motivate his troops to stand fast against all odds. He asked for suggestions from his advisors.

“We need heroes”, a suggestion given by one advisor was picked up and thus the legend of “Vasily Grigorevich Zaytsev” was born. The film “Enemy at the Gates” is loosely based on this episode from the 2nd World War. Whether actions like this actually saved Stalingrad, may be debatable, however there is no doubt in the efficacy of the use of “positivity” in motivation.

A hero is a term which comes from the ancient Greeks. According to them a hero was person who did something beyond what a normal human would do and thus left an immortal memory of greatness.

Organizations need to look at their operations and find the areas where they have positive results, their success stories, in getting new deals, or in cost reduction, or in new inventions or processes. Organizations need to create heroes. Employees need communication in the form of hope and of people, their own colleagues who are doing well, and who are successful.

In the words of Mark Twain, “Really great people make you feel that you, too, can become great.”

Believe in the power of “Good Begets Good”. Create heroes and you will be successful.

Say No to Detroit, Say yes to Dimaro?

2009-06-12T00:27:00.000-07:00

“Our country is not the only thing to which we owe our allegiance. It is also owed to justice and to humanity. Patriotism consists not in waving the flag, but in striving that our country shall be righteous as well as strong.” - James Bryce

On Wednesday Fiat Chief Executive Sergio Marchionne became CEO of the new Chrysler Group LLC, which will take over Chrysler LLC. This is another landmark event in the financial crisis facing the world.

With unemployment hitting 7.1% at the end of Q4, 2008 in Italy, (http://www.italica.sm/shownews.php?newsid=0000000455) and an Italian now being the CEO of Chrysler, would it be fair if Mr. Silvio Berlusconi, the Prime Minister of Italy were to exhort Mr. Marchionne to “Say No to Detroit, and yes to Dimaro?”

Some time ago President Barak Obama said 'Say No to Bangalore and yes to Buffalo'. This was an attempt to ask US corporations to create jobs in the US and not overseas. In this whole contention of job creation one question needs to be addressed, “What of the Status of MNC’s”?

This is a question posed to those organizations, or business entities which are global in nature, normally called Multi-National Corporations (MNC) seeking the lowest cost of operations, to maximize profits.

What is their identity?

Who do they owe allegiance to?
Do they have a nationalistic identity as to a reference of the physical location of their headquarters?
Or is their identity derived from the nationality of the top management?
Or is it derived from majority stock holders and allegiance is towards them?

If an MNC shows outward allegiance to one nation, does it risk its credibility somewhere else, and if so who suffers, employees, owners, or the government’s collecting taxes?

Take the example of Sony Pictures Entertainment (SPE). SPE is a subsidiary of Sony Corporation of America (SCA), a subsidiary of Tokyo-based Sony Corporation. Michael Lynton is its Chairman and CEO. Now is SPE an American company because it’s Chairman is American, or is it a Japanese company by virtue of being a subsidiary of a Japanese company?

Can Prime Minister Aso of Japan say “Say no to Hollywood, say Yes to Hokkaido?”

Chrysler Group LLC still has a majority stake held by American Entities (Government, UAW etc) so it is still an American company, but with an Italian CEO now does it become an Italian Company? Or will it become an Italian Company if Fiat gets majority stake in it?

We are living in a global village, as it has been said “No Man is an Island”. In such a scenario MNC’s can ill afford allegiance to anyone but “Profits”.

Is Fate a Welcome Guest?

2009-06-05T02:00:00.000-07:00

A number of years ago I saw an all time classic “Lawrence of Arabia”. One very memorable line of the film was “It is written”.

Destiny, fate, kismet all refers to a perception that there is a predetermined course of events and that our future is predetermined. What I understood from that line from Lawrence of Arabia was that certain things are inevitable. Like the rising of the Sun, producing light and removing darkness. The pessimistic view would be that at the end of the day the sun sets and there is darkness everywhere.

Literature has frequent reference to fate. In "The Appointment in Samara" by W. Somerset Maugham, fate’s inevitability is given:

(The speaker is Death)

There was a merchant in Baghdad who sent his servant to market to buy provisions and in a little while the servant came back, white and trembling, and said, Master, just now when I was in the marketplace I was jostled by a woman in the crowd and when I turned I saw it was Death that jostled me. She looked at me and made a threatening gesture, now, lend me your horse, and I will ride away from this city and avoid my fate. I will go to Samara and there Death will not find me. The merchant lent him his horse, and the servant mounted it, and he dug his spurs in its flanks and as fast as the horse could gallop he went. Then the merchant went down to the marketplace and he saw me standing in the crowd and he came to me and said, Why did you make a threatening gesture to my servant when you saw him this morning? That was not a threatening gesture, I said, it was only a start of surprise. I was astonished to see him in Baghdad, for I had an appointment with him tonight in Samara.

(http://www.k-state.edu/english/baker/english320/Maugham-AS.htm)

In another context, the soldiers of the light brigade in their famous charge in the Crimean War knew their fate, which was death, and yet they welcomed it leaving a permanent mark on history.

(http://poetry.eserver.org/light-brigade.html “Charge of the light Brigade, by Lord Alfred Tennyson )

So do we run from fate, as in the first case or welcome it as in the second? In welcoming fate, do we avoid the tension and fear of negativity and manage to live our lives in greater harmony?

In the words of William Shakespeare:

“What fates impose, that men must needs abide; it boots not to resist both wind and tide”

The Indian Economy set to Buck the Negative Trend

2009-05-29T00:51:00.000-07:00

For the last couple of months there has been conjecture, discussions debates and what have you, about the state and direction of the Indian Economy. Most parts of the world are undoubtedly in the throes of a major recession, but what of India?

Is the worst behind us? While thinking of this I am reminded of the lines by Alex Tan “Perhaps our eyes need to be washed by our tears once in a while, so that we can see Life with a clearer view again.”

So does it mean that we are on the path of recovery? Consider the following:

1. Car & Motorcycles sales are up by 2% in March 2009, compared to March 2008, whereas in most parts they have fallen from 10-30%.
2. The largest housing lender, HDFC has shown loan approvals during the year 2008 -2009 at INR. 49,166 crores (About $ 10.39 Billion at currency rate of 1$ = 47.3 INR) as compared to INR 42,520 crores ($8.98 Billion) in the financial year 2007-2008 representing a growth of 16%. Actual Loan disbursements during the year were up 21%.
3. While the inflation rate has more or less remained stagnant at 0.7% for week ending April 25 2009, the Commodity price for food items has gone up from a level of 125 in March 2009 to about 130.2 in April 2009 (http://indexmundi.com/commodities/?commodity=food-price-index)
4. The export / import balance in March 09 of $-4.9 Billion is the lowest differential in the last 2 years. (http://www.rbi.org.in/scripts/BS_ViewBulletin.aspx).
5. Foreign Exchange Reserves saw a huge decline between April 2008 (314 Billion) to 252 Billion in October 08, but since then these figures have been seeing a remarkable steadiness so much so that these reserves stood at 251.9 as of Feb 2009 (http://rbidocs.rbi.org.in/rdocs/Bulletin/DOCs/MAYBULCS44.xls).
6. Retail sales seem to be picking up.

Besides the above facts and figures there are some other key indicators. India’s Export earning at about $ 165 Billion as a %age of GDP is low. Of the export earning IT/ITES is about $ 60 Billion, which has not headed south, so even if one would see a negative change for the remaining the worst case scenario is not more than a couple of Billion. Similarly with remittances which had been about $ 27 billion as per the World Bank in 2008, likely to drop, we can see another negative growth of a couple of a Billion Dollars. In a trillion Dollar economy a few Billion dollars less is not going to have a major impact.

We also have the following positives:

The formation of a stable government in India in May 09 has already seen a fantastic rally in the stock markets, so much so that an upward change of 17% in the first few minutes on opening of the stock markets after the election results were declared forced the markets to shut down. While there might be minor corrections in the days to come, it would still show a very healthy position vis a vis other stock markets. This has brought in huge foreign investment back in the stock markets.

Finally we have to realize that 60% of the Indian economy is still dependent on Agriculture and it is ultimately the rain gods and not Wall St. which is the biggest driver. If the Monsoon is good or even average, then there is no looking back.

I think this festive season on Oct-Nov should see a visible rebound with the turbulence of the last couple of months behind us, so in the words of Ramsay Clark “Turbulence is life force. It is opportunity. Let's love turbulence and use it for change.”

“Lessons For a Manager from a Politician”

2009-05-13T23:44:00.000-07:00

NASSCOM, is the premier trade body and the chamber of commerce of the IT-BPO industries in India. It recently held a conclave for the SME segment and I was privileged to be a part of it. It was a great learning experience. One speaker gave a very interesting comment that most business leaders give a thumbs down to our politicians, but could if they tried to, learn a couple of lessons which could be applied in their everyday work life.

The Five Mantras, a Manager could learn and my interpretations of them are:

Play to the gallery

This is one of the strongest abilities of a politician. This is an ability to get the approval of the majority of elements in a group or team. Good PR and man management skills and an ability to bring about consensus is a sure way to get work done. This is very important in a world of conflicting demands and interests.

Most Attractive Position

The politician has the innate ability to place himself in a position to derive maximum value at the lowest cost. This is a very useful lesson for the marketing man, where the whole essence of marketing is to gain a decisive advantage over business rivals. The ability to understand and place oneself and his organization in advantageous position is the key to success.

No Ego

The Ego is the “I Factor”. They say in politics “there are no friends or enemies only permanent interests”. Most politicians will carry out their strategies focused only on objectives and do not let their ego come in between. One has to only read the papers these days to understand this.

Maximize Value

In the business sense you can relate it to ROI. ROI or Return On Investment; is a performance measure often used to evaluate the efficiency of an investment. In business while calculating ROI the return of an investment is divided by the cost of the investment.

Realize their weakness

Most managers would be challenged to recognize their weakness, for a variety of reasons, ego being one of the biggest. If you can not recognize your weakness how will you take corrective actions to improve? Today the world is littered by companies which are teetering on collapse because they could not recognize their weakness.

Banking Results Hide a Grim Truth

2009-04-25T23:59:00.000-07:00

“When a thing is funny, search it for a hidden truth.” George Bernard Shaw

The recent quarterly results given out by the banks has brought great cheer worldwide, with stock markets rallying and suddenly there is a talk that the depression (not recession as claimed by politicians) is about to see its imminent end.

When I see the good cheer all around on these positive notes I find it difficult to reconcile with some facts regarding the US economy. Why should we take that as the bell weather of the world economy? Well there is no escaping the fact that the US GDP is actually 25% of world GDP. Any positive there would rub on everywhere else and the reverse holds true as well. Therefore there are certain facts which are difficult to overlook:

1. Unemployment figures have risen to 8.5% in March 09 and are expected to reach 10.3% in Oct 09 as per the http://forecasts.org/unemploy.htm.

2. Retail sales per the US Census http://www.census.gov/marts/www/marts_current.html) are heading south month on month, year on year.

3. Car sales are heading south as well and are in fact down by about 36% from march 08 (http://www.motorintelligence.com/m_frameset.html).

4. New House sales in the US have shown a slight pick up in February 09 as opposed to Jan 09, but are still at 41% lower than Feb. 08 as per the website http://www.census.gov/

(http://72.14.235.132/search?q=cache:TV7nXG0Tz88J:www.census.gov/const/newressales.pdf+new+home+sales&cd=2&hl=en&ct=clnk&gl=in)

The fear on rising credit card defaults is adding to a sense of concern. So where is the profit coming from? Is it that existing mortgages are being refinanced to take advantage of the low mortgage rates?

Another important aspect not commented upon is that the “American Recovery and Reinvestment Act of 2009” which seemingly had a $ 787 Billion for the stimulus, actually has a 37% component or $ 288 Billion tax rebate. Now this is a one time rebate which will put a couple of hundred dollars per person on the table which may help in some minor family expenses, but what effect will it have on the economy? Will this sum help to pay an installement or two on a mortgage, thus postponing the inevitable, which is more default?

It seems as if we are postponing current challenges for a future date when we could see another round of great losses.

“Three things cannot be long hidden: the sun, the moon, and the truth.” Buddha

The $ 37 Billion LPO Opportunity

2009-04-22T21:49:00.000-07:00

“While we stop to think, we often miss our opportunity” Publilius Syrus

Globalization and outsourcing between them have created a huge pool of opportunities for India. From the simple all-encompassing BPO model we have arrived in the era of specialization. We have the KPO, RPO, LPO, and we have online Tutors and what have you. In this period of economic recession another opportunity for the LPO industry valued at around $ 30 Billion would emerge spread over the next 5-7 years?

The LPO is a well known concept and has been much written about. I would like to point out a specialized area for the LPO business revolving around services related to the CDS or Credit Default Swap.

The total value of CDS outstanding, world wide issued by banks, companies, hedge funds, HNI etc is to the tune of $ 62.2 Trillion, as per the Bank for International Settlement. The composition of the United States outstanding CDS contracts is about $ 15.5 trillion as of Q2, 2008. The Maturity value is as follows:

http://www.occ.treas.gov/ftp/release/2008-115a.pdf

Maturity Value of CDS by Aug 2009 is $ Trillion 0.93
Maturity Value of CDS by Aug 20014 is $ Trillion 10.075
Maturuty Value of CDS after Aug 2114 is $Trillion 4.495

Estimated Market size for KPO

Assuming that if 5% of that entire amount ends up in litigation (because of the nature of these financial instruments) we are talking of potential litigation of more than $ 750 Billion dollars spread over the next 5-7 years. All those law firms would need back end services to fight out their claims. Assuming nominal fees of 5% towards back-end research work etc, the market for this specialized research in the next 7 years would be in excess of $ 37.5 Billion.

What is a Credit Default Swap?

A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument goes into default or on the occurrence of a specified credit event occurs. The salient features of a CDS are:

It is a new financial instrument developed in 1997,

You need not own the credit instrument like the mortgage or loan, so in a way it is like a gamble for getting benefit on some event happening like a third company going into default or bankruptcy,

There is no centralized exchange or clearing house for CDS transactions; they are all done over the counter (OTC) and a CDS can be bought by anyone, including an individual Investor.

Why there could be extensive litigation over the CDS is because off the unregulated sales, and numerous failures and bankruptcies which have occurred. In the words of General Douglas McArthur “There is no security on this earth, there is only opportunity”

The Entrepreneur Manager

2009-04-11T11:34:00.000-07:00

“Management is doing things right; leadership is doing the right things.” These are the words of the Guru of Management, Peter F Drucker.

In an earlier time when the industrial revolution started and till the dawn of the Knowledge economy, companies and organizations had a certain flexibility to carry out their activities. Evolving companies needed to have a Division of Work, Unity of command, Scalar Chain, Centralization, and Stability of Work Tenure amongst others as their Principles of Management.

In those times an organization was required to have a great leader and a strong management, which could do things right.

Globalization and the Knowledge economy have changed the playing field. Globalization ensures that product rationalization is not possible. Local issues need local solutions taking out centralization and bringing in de-centralization. The concept of multi-tasking has eroded the practice of Division of Work. We no longer talk of just vertical growth but lateral growth. Equity (Just Workplace) and Order (Social Order) have given way to ROI and the quarterly balance sheet.

Today’s world is a fast paced one where your product or service could be replicated and provided at a cheaper cost, in a time span which does not allow you to get full value for your intellectual property.

With such challenges do companies need stringent processes which muffle innovation? In such a scenario do companies need managers with the same thought processes? Or do they need a radically new approach with the manager having the ability of an Entrepreneur?

Typically an entrepreneur is understood to be a businessman, a person with the ability to take up an enterprise. He is a leader who can create and market new services or goods. We need today Managers who combine these skills in addition to classical abilities to do right things. The manager with a combination of these skills is the Entrepreneur Manager.

In the current economic scenario managers and management is not enough, we need the entrepreneur manager and entrepreneurship in management.

In the words of Lyndon B Johnson “Doing what's right isn't the problem. It is knowing what's right”

The Entrepreneur Manager not only needs to do things right but also needs to know what’s right.

Illusionary GDP Growth for 2009

2009-03-28T00:27:00.000-07:00

“After two years in Washington, I often long for the realism and sincerity of Hollywood.” - Fred Thompson

In these times of economic downturn there is a discussion of negative GDP for the developed world while some countries like China are expected to have a positive growth of 8% and India is slated to have a growth of 6.6% as per their respective governments. Assuming that we will apply the same yardsticks to both sets of countries, it is quite difficult to imagine such a contrast. I would like to explain why.

GDP has been described as the Gross Domestic Product of a country and is calculated on a year on year basis. The most common method is the expenditure method. I would like to quote 2 sources for this:

“The expenditure method is the more common approach and is calculated by adding total consumption, investment, government spending and net exports” - http://www.investopedia.com/ask/answers/199.asp

“GDP = consumption + gross investment + government spending + (exports − imports), or, GDP = C + I + G + (X − M)” http://en.wikipedia.org/wiki/Gross_domestic_product

We should look at each parameter of Consumption, Investment, Government Spending and Net Exports to undertsand the actual picture.

Consumption

With collapsing economies, huge job loses, and tendency to save rather then spend, consumption levels are falling drastically. The unemployment figure in the US has risen to 12.5 million in Feb 09, In China more than 20 million migrant workers have lost jobs, and in India about half a million have lost jobs, but that figure is probably distorted as only 1 in 10 workers in India are in the organized sector. We also see Inflation rates coming down drastically reaching near zero in India, China and the US bolstering the fears of negative consumption.

Investment

Global FDI inflows declined 21 percent last year to 1.4 trillion U.S. dollars because of the negative impacts of the global financial crisis and its economic aftermath, which was likely to further contract in 2009, according to the United Nations Conference on Trade and Development. China in fact saw a decrease of about 21% in the 1st 2 months of 2009. Internal Investments have also fallen with projects shelved, expansions halted.

Government Spending

This is the only bright spot on the GDP parameters, but whatever figures for stimulus packages are being thrown around have too many ifs and busts. Chin has talked of $ 585 Billion plan, but it is suggested that this may be spent over the next 5 years, India’s government spending would remain clouded till the end of the elections in May, and then the actual figures may come out.

Net Exports

Exports have nosedived to such an extent that figures of 30-40% reduction is the norm. While China is dependent on Net Exports (Exports – Imports) at 7% of GDP, India has a negative Net Exports. (http://sunilmohal.blogspot.com/2009/01/effects-of-bric-on-world-economy.html)

There is a steep trend down on all parameters of GDP, so the figures of GDP of 8% for China and 6.6% for India seem to be based on hope rather then reality.

Sympathy and Support

2009-03-15T10:12:00.000-07:00

“Friends are the pillars on your porch. Sometimes they hold you up, sometimes they lean on you, and sometimes it's just enough to know that they are standing by.”

Sympathy is a word derived from Greek, meaning “together” and “suffer”. Thus when people share in others grief, they are being sympathetic. We could also say that sympathy displays the notion of understanding another’s grief and denotes that you are with him in this hour of need. The word empathizing is used interchangeably and can mean responding to another’s emotional distress

Sympathy is also closely linked with compassion. We often equate sympathizing with giving in times of need. Excessive sympathy can be fraught with dangers.

I feel that too much sympathy can become a disabling emotion when a person’s attitude becomes one of receiving emotional understanding for difficult situations. So the focus shifts away from the positive or taking corrective action to one of making people understand situations in a favorable way to extricate assistance. Thus the focus is away from setting things right yourself to expecting help and getting someone else to do your job. One saying which has always borne this point out is:

Give me a fish, I eat for a day
Teach me how to fish, I eat for a lifetime.

The essence in both is assistance, however in the first; the person receiving help becomes dependent on someone else while in the second case he becomes dependent on himself. In the first case he receives sympathy. You need to be sympathetic with people but you must ensure that sympathy does not act like a crutch where they loose the ability for action on their own. In the second case also a person is getting sympathy, but with a path to progress, helping the sufferer stand up by himself.

In today’s world where there is so much hardship and financial crisis, we need understanding and support, but we need to understand that sympathy will not get us out of problems. It could help us to unload burdens; the final results however would be due to our actions.

Remember the words of Oscar Wilde

“I can sympathize with everything, except suffering.”

The $141 Billion eLearning Opportunity

2009-03-07T23:48:00.000-08:00

“The foundation of every state is the education of its youth.” - Diogenes Laertius

President Obama certainly believes it, that is why he has budgeted $ 141 Billion for Education as part of the American Recovery and Reinvestment Act (ARRA) of 2009. Everyone will wonder where the $141 Billion eLearning opportunity came from!!! That was to get the eyeballs. The actual figure would be much lower, but considering that the total market for eLearning in the US was about $5 Billion in 2007, the opportunities are enormous.

The US economy is seeing radical change in employment opportunities or the lack of them. The stimulus package has been created with the avowed aim creating or preventing the loss of 3 million jobs. Since the availability of manpower would be lopsided in different verticals, retraining would be in great demand.

Why do I think that Learning and eLearning specifically could benefit greatly from this stimulus package? The above were the figures, the other details are below:

The Reasoning:

Training Need in Education : The school sector is in dire need for modernization and spend on capital purchases makes sense. Elearning would enable greater coverage, more consistently then manpower as enhanced manpower can not be consistently budgeted for. Rep. Harry Brooks, Chairman of the House Education Committee, has opined “school systems should not use the federal stimulus funding for personnel ….If you were to use the money for a staff person, that staff person goes away in two years or you have to find the money to continue it, which may not be possible.” Coupled with this is a Graying Teacher Population fuelling shortage of Manpower. As of Aug 2002, more than 60% teachers were above the age of 40, and it was projected that in about a decade more than 2 million teachers would need to be hired. There is already a shortage of teachers. ELearning would bridge the gap as a force multiplier. There would be potentially
Language Issues : As per the US Census, at http://www.census.gov/ there are more than 31 million US residents age 5 or older who speak Spanish, which is almost 1in 10 Americans, of whom only about half speak English well. Content available in 2 languages would enable greater coverage and cover a shortage of bilingual teachers.
Healthcare Training Needs: There is a shortage of trained manpower in the healthcare field and with more than $153 Billion in stimulus funding specifically targeted at Healthcare, the emphasis would be to retrain Unemployed American citizens to fill those opportunities
Information Technology : This saw the least job loss in 2008. With growing emphasis on modernization, including an additional $ 20 Billion in Healthcare IT, Internet and Broadband Infrastructure generally, and raft of new legislation in the Offing, coupled with resistance to programs such as the H1B, there would be a huge shortfall of skilled manpower.

Who Could Benefit:

1. Content Providers in the K-12 segment, IT, Healthcare and OSHA.
2. Content Providers with capability for multi-lingual support and / or Section 508 compliance capabilities.
3. Providers of small to mid level learning systems or LMS.

The Challenges:

For Schools the funds would be given to state and local bodies, so the marketing efforts would be greater. About half the funds would be distributed in the next forty days and the remaining would be given in six months, therefore the marketing burst would have to be really fast.

My desire to share this is to help organizations focus on the positives, and try to go beyond the negativity in the current economic situation. There will always be opportunities, as has been said by Brian Koslow,

“The freedom to move forward to new opportunities and to produce results comes from living in the present not the past”

Tax Break for outsourcing AJCA 2004

2009-02-28T09:17:00.000-08:00

President Barak Obama has just signed the stimulus Package. One point discussed in the recent legislation has caused extreme concern. This is the removal in Tax breaks for “outsourcing”.

Before going to details I would like to quote Russell Baker.

“An educated person is one who has learned that information almost always turns out to be at best incomplete and very often false, misleading, fictitious, mendacious - just dead wrong.”

There is a fear around the repeal of the tax break for companies outsourcing their work. The first question is was there ever any specific tax break for companies outsourcing their work? And how affected will companies be when the tax bar is raised from 5.25% to 35%.

To answer the first question, no there was never actually any specific law related to outsourcing. What had come about in 2004, many years after outsourcing actually began was a tax holiday to encourage American Companies to repatriate their funds from Overseas, back to the US, under the bill, the "American Jobs Creation Act (AJCA) of 2004. Under US Tax law, overseas subsidiaries have no specific time limit on the repatriation of funds. So they can keep the profits made outside the US indefinitely. In 2004, to encourage companies to bring back their profits, Congress gave a tax holiday and reduced the corporate tax from 35% to 5.25%.

This enabled companies to bring back $360 billion stashed outside. Interestingly about 75% came from low tax areas like the Netherlands and other European countries and Tax havens like Cayman Islands and Bermuda. Also a lot of the profits were from the pharma companies.

It is a misnomer that companies make profits solely by outsourcing. A lot of them are engaged in legitimate business activities like Coke and Pepsi are in the soft drinks business or HP and Dell selling computer products and services. This step might actually hurt legitimate operations of US multinationals making them less efficient.

To answer the second question, repealing the tax break will not necessarily affect outsourcing or increase its cost. This is apparent as these companies are currently not bound to repatriate their profits in a specific time frame. Even if they were, one advantage parent companies have with their subsidiaries is that they can decide how much profits are to be booked under transfer pricing.

In another scenario, if a US multinational outsourced its work to a third party, the profits it made by cost savings was being taxed at the same amount of 35% in any case, so how can we say that a tax break has been removed and outsourcing will become costlier?

Is The European Union on the Verge of Collapse?

2009-02-18T22:32:00.000-08:00

Economics is the external force which changes the momentum for society.

The world order has consistently seen change quite often due to social disturbances caused by a depressing economic scenario. We are now witnessing the beginning of another fundamental change.

“We must ensure that federal funds are used to buy American products and to help promote manufacturing in our country” - Sen. Sherrod Brown

The deepening economic crisis is changing the contours of International trade and attitudes. When the crisis was appearing initially, there was a world view that we have to take concerted action globally. It was being said that it was neither a US problem nor a European problem alone but a global problem. Stimulus Plans were made and bail out money given to save countries from collapse, Iceland, Pakistan, Ukraine etc.

The barrel has almost been scrapped clean, and in the next couple of months sovereign debt of more than $ 400 Billion is due from Central and Eastern European Countries. Who will play Santa now that countries are so badly affected that they may not have the funds or inclination to help?

As the above statement shows, there is a hardening of public opinion in favor of “me first”. With no support are we staring at the dismemberment of the European Union between the Haves and Have Not?

A Brief Look through Time

Magna Carta – Signing of the “Charter for Rights of People”

King John, of England due to his misrule and conflict with France, and the pope needed huge sums of money to maintain his armies. In the seventeen years of his rule he raised feudal payments eleven times. Finally he imposed income tax for the first time. His misrule and deep economic deprivations caused the people to revolt, forcing King John to sign the charter of "Magna Carta" in 1215, which proclaimed certain rights to people.

“No taxation without representation”

America was a British Colony ruled by England till the last half of the 18th Century. All taxes and issues related to the colonies were decided in London. The cry for representation and right to resources lay the groundwork for self governing and Independent States. We got “"Life, liberty, and the pursuit of happiness "

Let them eat cake

The leaders in Europe in the latter part of the 18th century were almost oblivious to the aspirations of the ruled and the economic hardships faced. Queen Antoinette’s remark was a grim example of how out of touch the monarchy in France was, and hunger and economic collapse led to the French revolution. From the French revolution we got “Liberté, Egalité, Fraternité”

No amount of political freedom will satisfy the hungry masses.

Vladimir Lenin who famously quoted these words led the Russian revolution and established the USSR. Communist Russia gave us the strong roots for a welfare state, which is what most of Western Europe is today.

Glasnost, Uskoreniye and Perestroika

The economic collapse of the erstwhile Soviet Union led to the breakup of the USSR, and freedom for the Central Asian Republics and the disappearance of the Warsaw Pact.

Is Hope a denial of Reality?

2009-02-07T22:16:00.000-08:00

Is reality a physical state? Or is it a mental state? Is there any reality at all?

“What is reality?”

Reality is a defined as the state of things as they actually exist. There are different levels of reality in western philosophy, such as:

Truth : Truth is supposed to be an agreement of facts
Fact : Something that can be verifiable as per some existing standards

Reality is linked to perception, or how we view things.

Suppose a person has 3 bowls of water at 3 different temperature levels, hot temperature, room temperature and cold water. If he puts his hands in the bowl which has hot water and then puts it in the bowl with water at room temperature, then he will feel the water at room temperature is cold. However if he puts his hands into the cold water, and then the bowl with water at room temperature he will feel that the water at room temperature is warm.

Till some years ago it was a fact that there were 9 planets, Mercury, Venus, Earth, Mars, Jupiter, Saturn, Uranus, Neptune and Pluto. Today, however astronomers have voted Pluto as a dwarf planet. So what was a fact a few years ago is no longer a fact today.

Before the Beijing Olympics, the reality was that Mark Spitz had won the maximum number of Gold medals in a single Olympics. That reality changed when Michael Phelps won at 8 gold medals.

So we see that that both truth and fact are relative as is reality to a certain time frame.

So there is no permanence in reality. This is similar to the Hindu belief in Maya, which is derived from the words “Not” and “that”. As per this belief, the world is unreal because it is unstable, unreliable and impermanent. It is constantly changing and not permanent and hence an illusion.

Since reality is rooted only in the present and hope is an expression of positive outcome in the future, Hope can not be a denial of reality.

Therefore if we are stressed out today because of the economic crisis, we would should remember that this is impermanent, and hope and work for a better future.

Effects of BRIC on World Economy

2009-01-31T07:04:00.000-08:00

The BRIC grouping refers to Brazil Russia India China. This term was first coined by Goldman Sachs in about 2001. In the year 2008 the economies of the G7 stood at about $32.96 Trillion vs $ 8.87 Trillion of the BRIC, which is about 26% size of the G7. However, economists often talk of the economies of the BRIC countries in terms of PPP, or Purchasing Power Parity to demonstrate the relative strengths of these economies. Thus for the same period 2008 in PPP terms the G7 stood at about $29.1 Trillion vs $ 15.37 Trillion for the BRIC , which is about 52% size of the G7. A table highlighting the figures along with export import figures is given below:

What is the PPP theory? This is a theory which equalizes purchasing power of currencies in the home currency for a given basket of goods or services. This is used to calculate relative living standards. For example the average doctor’s fee paid for a single consultation in India would be lower then for a similar consultation in the US. Similarly the rent of an apartment in India would be lesser then that in the US. So the PPP will factor in the lower cost of services and adjust to show the relative strength as per the local currency. So if the factor of conversion is 3, then it would mean that a person earning $1000 in India is as well off as a person earning $ 3000 in the US.

The problem with this theory is to decide which basket of services to select. Should it be food, medical costs, transportation, or entertainment etc? This is because the proportion of relative cost would be different in different countries for different services or products. So the consultation fees for a doctor in the US might be 3 times costlier then that in India. However if one was to buy say, a Sony 42inch LCD screen, the cost would probably be the same, in fact it may even be more in India as the local taxes would be higher in India.

Now look at the ratio of exports of the BRIC vs G7 in dollar terms and PPP terms. The effects of lower exports in PPP terms would be perceived to be lower. However in trade you need to pay in actual dollar terms and not some relative terms. In the present economic crisis the slow down of exports would in effect probably hit the BRIC countries more especially China and Russia. So their ability to have a positive impact on the world economy instead of being more may actually be less. Russia would be hard hit by drop in Oil prices while the Chinese economy is already facing huge factory closures due to drop in exports to the US and European markets. Negative exports would have implications for imports as well further dampening global trade.

So I believe the BRIC groupings effects on international trade been exaggerated and the resultant effects on powering the world economy in this economic downturn is misleading. Part of this is due to the illusion of PPP calculations.

Why L&T should have stake in Satyam

2009-01-29T21:01:00.000-08:00

Presidents Obama’s federal stimulus package of $ 815 Billion was cleared by the House of Representatives yesterday. It is expected that the Senate should clear it sometime next week. Of this amount about $ 500 billion plus would be spent by the US government on four key areas, all of which would have huge components of IT expenditure.

So why does it makes sense for L&T to have a stake in Satyam?

The single largest new investment in national infrastructure since the creation of the federal highway system in the 1950s is planned in the US from Government spending from the stimulus package.

In the coming months, by Q3 2009, the US would see development of Infrastructure to create jobs and revive the economy. The sudden upsurge in development of infrastructure would need skilled engineers and companies with the necessary tools to provide those services. There would be a shortage of people in the US and companies would be hard pressed to provide services.

L&T is a global company with extensive experience in infrastructure like roads and bridges. In today’s economy Information Technology is a tool to enhance efficiency in areas like designing, project management, GIS. Satyam would help strengthen areas in the L&T fold to form a strong product mix.

It has been commented upon by none other than Carlos Ghosn that the “frugal engineering skills” of Indian companies can affect cost savings of upto 15% in development costs.

If L&T can show effective cost savings for potential clients through the combination of L&T skills in Infrastructure and Satyam skills in IT, it would be ideally placed to reap business opportunities.

Thus despite all the negatives of Satyam at the present moment, the potential rewards are huge. If L&T does not acquire Satyam outright, it would atleast be able to leverage synergy by being the largest stockholder.

Opportunities in Education

2009-01-25T09:50:00.000-08:00

Only the educated are free. - Epictetus

In todays’s context, where the economic crisis looms large before us, job security provides freedom. So “Will certifications help in my job search or maintenance of the existing one”, is a question which is very relevant.

The main focus of this topic, opportunities in education relates to the Information technology field, mainly because of the rapid obsolesce of technology and need to constantly upgrade skills. Certifications help to prove to potential employers that you are equipped to face technical situations. This is much in the manner as quoted by the Reverend Edward A. Malloy

“A college degree is not a sign that one is a finished product but an indication a person is prepared for life.”

Certifications also help in depressed job markets as the pool of potential employees is much greater for employers and certifications help in getting you before the employer. They give an edge in that the chances of your resume being looked at is much more. Ultimately performance is the key but certifications helps you prepare theoretically.

Currently the focus of the Obama administration is to boost the economy by increasing new jobs by the tune of two million. Certifications relevant for these new jobs would greatly enhance employability.

Some of the new areas likely to see rapid growth of opportunities would be:

1. Construction and Infrastructure where Construction Project Management skills and PMI certifications would be in great demand.

2. Internet Infrastructure related certifications would be in great demand as money is pumped into the school systems to upgrade their connectivity. So persons with networking and security certifications like the CCNA, CCIE, CISSP or background in ISO standards would be in greater demand. ITIL certifications would be essential for IT Infrastructure designing and development in hospitals where greater use of technology would emerge.

3. HIPPA certifications would also prove beneficial for opportunities for the health workers.

eLearning provides an easy, cost effective way of enhancing skills without too much disruptions to a daily routine to enable a person to aim for those jobs. eLearning should get a boost with so many potential applicants.

Economic Outlook - Opportunities in the Crisis

2009-01-11T02:05:00.000-08:00

When written in Chinese the word crisis is composed of two characters. One represents danger, and the other represents opportunity.

A lot of people would have been happy to see the end of 2008 and would have heralded the advent of 2009 with a bit of trepidation. It’s only human due to the bleak economic situation staring at everyone. I would like you to remember the words of Charles R. Swindoll

“We are all faced with a series of great opportunities brilliantly disguised as impossible situations.”

First the background for the US market. The IT industry employment was at 3,876,200 which were up 2.1 percent over the past year (Nov.2007 – Nov. 2008) as per the National Association of Computer Consultant Business.

http://www.naccb.org/employment-index/december2008_it_release.pdf

Of the 30 fastest growing employment opportunities in the US, 6 were in the IT related space such as Network and system admin, Systems analysts etc as per US Dept. of Labor. The complete list is available at

http://www.bls.gov/news.release/ooh.t01.htm

In a survey carried out for hiring prospects for 2009 , more than 60% felt it would be flat, while the remaining were equally divided amongst those who thought there would be gains and the others who felt that there would be losses.

President Elect Obama is scheduled to take over as President on the 20th of January 2009. To meet the vast economic challenges currently faced, he has plans to provide stimulus to the US economy to create employment to the tune of two million plus jobs. The initial figures being discussed are in the region of $ 700 Billion in federal spending. Information technology applications should stand to benefit immensely from this.

1. Engineering

The single largest new investment in national infrastructure since the creation of the federal highway system in the 1950s is planned in the US. For such development specialized engineering solutions would be desperately needed. These would be in areas of Computer Aided Design and GIS (Geographic Information Systems) to support infrastructure development. Visualization applications would greatly help in reducing costs.

2. Energy Consumption

This is a top priority of President Elect Obama, to reduce energy consumption in Federal establishments. Companies with experience in designing green buildings, renewable energy, can partner US companies.

3. School Education

“We will repair broken schools, make them energy-efficient, and put new computers in our classrooms. Because to help our children compete in a 21st century economy, we need to send them to 21st century schools”.

Those computers will require networking solutions, content for CAI, Content Management Solutions as education departments at the local level would use federal funds, but would have decision making abilities.

“It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the internet, every child should have the chance to get online, and they’ll get that chance when I’m President – because that’s how we’ll strengthen America’s competitiveness in the world”

There would be increased usage of online learning solutions. Since there is a shortage of trained teaching staff “Distance Tutoring”, Learning Management Solutions should find enhanced demand.

4. Library and Medical Services

“In addition to connecting our libraries and schools to the internet, we must also ensure that our hospitals are connected to each other through the internet.”

These functions would require increased digitization of content and other outsourced services.

Over and above President Elect Obama’s stated vision for the stimulus, would be enhanced development to fulfill new legislation which is bound to be introduced.

New Legislation in the BFSI segment would force companies to upgrade technology and redo programming, much as the Sarbanes Oxley act after financial Irregularities in 2002. Some of these changes would be on the lines of the Glass-Steagall Act (GSA) of 1933. This act demarcated the functioning of commercial banking and Investment banking. The GSA had been repealed by legislation called the Gramm-Leach-Bliley Act (GLBA) in 1999. The large number of mergers would necessitate seamless integration of technology platforms which would create newer job opportunities.

The above are just some of the opportunities which will be arising in the near future. I would like you to remember the following words of Orison Swett Marden

“Don't wait for extraordinary opportunities. Seize common occasions and make them great. Weak men wait for opportunities; strong men make them.”

Corporate Visions Part 2

2009-01-08T01:30:00.000-08:00

Do Companies need to re-look their mission and vision statements?

The Stock market like fate; is a fickle mistress.

Yesterday the corporate world was shocked by the disclosure about Satyam’s one billion dollar loss, or fudged accounts, depending on which way you look at things.

The consequences are of course shattering and the stock market has rewarded the former IT giant by drubbing its stock price by 80% in just one day. One of the interesting points made by Mr. Ramalinga Raju in his resignation letter and acceptance of guilt letter was that “we were riding a tiger and it was difficult to get off”.

Of course the tiger was the stock market and its expectation of high result.

This is not a new situation. The collapse of so many financial giants in the US has been partly due to the ever greater threat of dismal performance and management allowing greater risks to placate a fickle stock market. Over leveraging, risky financial instruments etc were pursued, to prevent loss on the Wall Street.

Does this again raise the question of the vision of an organization and a company’s belief in it, and the three questions associated with it:

1. "What do we do?"
2. "For whom do we do it?"
3. "How do we beat the competition?"

Should a fourth question now be asked, how do we placate a fickle stock market?

How many managements have the ability to sustain their vision like Gillette when it was faced by a hostile take over bid by Coniston Partners in 1988. At the price offered by the Coniston, the shareholders would have had an instant 40% gain. However Gillette under its CEO Coleman Mockler, did not bow to pressure and urged the shareholders to desist. Ultimately in the next 10 years the shareholders were rewarded by a performance almost 3 times better then that of the stock market.

How can one agree with Pablo Picasso when he said “It is your work in life that is the ultimate seduction”, in the light of the market reality?

Short term risk vs long term benefit. One should remember the following words of George Merck IInd:

“We try to remember that medicine is for the patient… It is not for the profits. The profits follow, and if we have remembered that, they have never failed.”

http://www.merck.com/newsroom/executive_speeches/120150.html

Mission and Vision Statement

2009-01-03T05:20:00.000-08:00

“The Art of War is of vital importance to the state. Of the Five constant factors, the first is the Political Direction”

Sun Tzu

In a world of no hold’s barred competition, a right series of decisions and actions could mean the difference between survival and destruction. The current economic meltdown has shown that there is no immunity from financial tsunamis.

Strategic planning (or political direction) is a key ingredient in defining the direction of an organization and the allocation of resources. Strategies are of internal origin and pro-active in nature. The outcome is used to define the roadmap for the present and future. It generally comprises of the following questions:

1. "What do we do?"
2. "For whom do we do it?"
3. "How do we beat the competition?"

Therefore an evaluation of the current situation, defining targets and a roadmap are a key. Organizations often outline goals and objectives into a mission statement and a vision statement. The mission statement and vision statement can be detailed as below:

A Mission statement informs you of the fundamental purpose of the organization while the vision statement outlines what the organizations wants to be.

Mission statements are rooted in the present while the vision statement is about the future identity.

The mission statement creates current processes while the vision helps in decision making.

The mission statement defines the internal SLA’s (Service Level Agreements) or parameters while the Vision is a source of motivation or inspiration.

With the current economic situation what does one make of a mission and a vision statement? Do companies need to rewrite their Mission and vision statements in line with new realities?

Take the situation of Investment Banks. Their raison d’etre has been wiped clean by their transformation into commercial banks. If the fundamental purpose of existence (Mission statement) no longer exists, whither thou vision statement?

Similarly with the huge layoffs being announced by organization, stoppage of work and strategic retreat, what of a vision of the future for the employees? Has the vision lost its relevance?

The Vision Statement can change, as detailed by this portion of a Speech by Steve Ballmer, CEO Microsoft on Sept 5, 2008

A New Microsoft Vision Statement

You know, for many years we had kind of what I would call the all encompassing mission, vision and scorecard statement: a computer on every desk and in every home. That was kind of a mantra, and really worked for our employees because it had a sense of purpose, it talked about what we were really trying to get done, and by the way it was a measurement system, which is counting desks and homes and how were we doing.

Well, our footprint and portfolio is broader than that, and we talk now with our folks about enabling people and businesses to realize their full potential.

I think that actually motivates not just our folks but a lot of people in the technology industry: The sense of really making a positive difference in society is important.

http://www.microsoft.com/presspass/exec/steve/2008/09-25vcsummit.mspx

Honda’s Vision is unique, because it has the flexibility inherent in it for change.

Honda Vision Statement

We see the world not as it is, but as it could be.

We see the world through the eyes of dreamers. Because we are a company founded by a dreamer. And we are a company built on dreams.

We see the pursuit of impossible dreams as an empowering force, capable of producing revolutionary ideas. Dreams inspire us to create innovative products that enhance human mobility and benefit society. Honda encourages all of its associates to pursue their dreams. And it's our mission to share these dreams with others and to make them a reality.

We see "The Power of Dreams" as a way of thinking that guides us and pushes us forward. The strength of our company comes from this philosophy

Happiness

2008-12-22T22:32:00.000-08:00

What is Happiness? Is it a way of life, is it an emotion or is it a state of mind? Or is happiness an illusion, a mirage chased by people for its own sake? Or is it the opposite of sadness?

Happiness is an emotion associated with multiple feelings such as contentment and satisfaction. Bliss and intense joy are other emotions associated with happiness. In trying to understand happiness there could be a variety of biological, philosophical or religious approaches.

Parenthood and seeing your child for the first time is an example of the biological state of happiness. It’s a feeling which can not be described, only experienced. Marriage could be considered happiness in a psychological state.

Mohandas K. Gandhi:

Happiness is when what you think, what you say, and what you do are in harmony.

According to Aristotle, “happiness is the only emotion that humans desire for its own sake”. This would lend one to believe that for Aristotle, happiness was something pure, bereft of any adulteration. He further clarified that men sought riches, honor not for their own sake but to achieve happiness and lead a good life.

If that is so, did achieving riches bring joy or happiness? Are they one and the same?

Many Philosophers have defined happiness as living a good or virtuous life.

According to Buddhist teachings, Happiness focuses on obtaining freedom from suffering by following the Eightfold Path. In the Buddhist view, ultimate happiness is only achieved by overcoming craving in all forms.

Is overcoming craving a form of contentment?

Thomas Aquinas has described happiness as a “Beatific Vision of God's essence in the next life”. Happiness is the eternal reward for those who lead a virtuous life, as dictated by the scriptures in most religions.

Buddha:

Happiness comes when your work and words are of benefit to yourself and others.

I personally feel that the words of Anne Frank, a child of thirteen probably understood happiness in its most simplistic and pure forms. This is what she had to say:

The best remedy for those who are afraid, lonely or unhappy is to go outside, somewhere where they can be quiet, alone with the heavens, nature and God. Because only then does one feel that all is as it should be and that God wishes to see people happy, amidst the simple beauty of nature.

Leadership - The Failed State

2008-12-14T19:38:00.000-08:00

A state is a political association of people with effective sovereignty over a geographic area. A state succeeds when it maintains a monopoly on the legitimate use of Physical force within its borders. When the state has been rendered ineffective, the state becomes a failed state. The Crisis States Research Centre, gives a more broader view and includes the term inability to provide “development functions”.

A US based think Tank, the Fund for Peace and the magazine Foreign Policy, from the Washington Post, publish an annual index called the Failed States Index. This list is arrived on various parameters like:

a) Social Indicators
b) Economic Indicators
c) Political Indicators

The worst 20 states, in 2008 are:

1. Somalia--- 6. D R of Congo --11. Guinea-----16. Ethiopia
2. Sudan----- 7. Afghanistan---12. Bangladesh-17. Uganda
3. Zimbabwe- 8. Côte d'Ivoire- 13. Burma------18. Lebanon
4. Chad------ 9. Pakistan------14. Haiti--------19. Nigeria
5. Iraq------ 10. C A Republic-15. N Korea-----20. Sri Lanka

The complete list can be had at the following:

http://www.fundforpeace.org/web/index.php?option=com_content&task=view&id=292&Itemid=452

A prominent issue which comes out from the list in my view is the absence of leadership, or more appropriately failed leadership. This would be one of the reasons why a country like North Korea, in spite of having a strongman in the form of Kim Jong Il or Zimbabwe with Robert Mugabe are a failed state. Zimbabwe became a free nation in 1980. In its earlier version as Rhodesia, in 1979 the GDP per person was $ 1879 which today reads at $ 200 (two hundred) and the life expectancy has been reduced from 51 years to 44 years.

“To be a leader, you have to make people want to follow you, and nobody wants to follow someone who doesn't know where he is going.”

Joe Namath

A strong leadership is essential for the growth and development of nations. It is when the leadership abdicates their responsibility for their people and put their personal benefits before that of their citizens that we see a deterioration of the state. Such a situation is amply evident in North Korea, Zimbabwe, Burma, Sudan, Pakistan and even Bangladesh.

India and Pakistan both got Independence in Aug 1947 from the British. India has consistently improved on GDP, education and health parameters despite starting from a lower base, and Pakistan is fast heading towards being a failed state. The following are the details.

Paramteres -------Pak - 47--- India - 47----Pak -07---India - 07
Per Capita GDP--- $470--------$350-----------$2,600-------$2,600
GDP growth-------------------------------------5.30%--------9%
Literacy-----------17.90%------14%-----------49.90%--------61%
Life expectency---33 yrs-------28 yrs---------64 yr----------66.8 yr

One of the main reasons for the current situation is that Pakistan has been either ruled by a feudal oligarchy or the military. Both these players have not established institutions like an independent judiciary, or an election commission. Further expense has been disproportionate on the Defense services at the cost of health and education.

“A leader has the vision and conviction that a dream can be achieved. He inspires the power and energy to get it done.”

Ralph Nader

Wrath

2008-11-29T22:53:00.000-08:00

As I come to the last of the articles on the “Seven Sins”, the economic situation has been overshadowed by the events in Mumbai, at least in India. Not that; people across the world, are not affected. These terrorist actions just reflect the fact that we are in a very interlinked world.

As per the dictionary meaning of wrath we come across the following:

1. Strong, stern, or fierce anger; deeply resentful indignation; ire.
2. Vengeance or punishment as the consequence of anger.

No matter how angry the emotions of the people, there are times when one should sit back and reflect as Confucius said:

“When anger rises, think of the consequences.”

There are two terrorist actions which come to mind, which have had far reaching consequences.

The first, and the most major till date is of course, 9/11. The response of the US in pursuing the enemy to Afghanistan was very justified. However the war on Iraq, also a consequence of 9/11 was probably not. It could be debated till eternity, as to the actual reasons for the Iraq war, however, what can not be debated, is that 9/11 clouded a lot of reasoning. The second major terrorist activity which comes to mind is the killings of Israeli athletes in the Munich Olympics of 1972. The wrath of the Israeli people was so great that the then Prime Minister of Israel, Mrs. Golda Meir initiated “Operation Wrath of God” to eliminate all the terrorists involved. The consequences on the focus of the Mossad towards revenge perhaps diverted their attention on all the signals of the impending Yom Kippur or 6th Oct 1973 War with the Egyptians and Syrians.

“Holding on to anger is like grasping a hot coal with the intent of throwing it at someone else; you are the one who gets burned.”

Gautam Buddha

While the above are extreme examples for wrath, we experience unreasonable anger sometimes on petty issues. A non appreciation by the boss; a late arrival for an appointment; a sarcastic comment by a colleague are just some examples of petty issues.

We need to control anger as its uncontrolled form could be all consuming.

“Anger is never without a reason, but seldom with a good one”

Benjamin Franklin

Lust

2008-11-28T22:10:00.000-08:00

Lust is usually associated with excessive thoughts or desires of a sexual nature. However it could also be associated with any excessive addiction; whether for money or materialistic comfort.

“The lust for comfort, that stealthy thing that enters the house a guest and then becomes a host, and then a master”

Kahlil Gibran

Lust clouds reasoning, forcing a person to behave in a manner very different from its actual nature.

The current situation in the auto industry can be equated with the lust for short term profits alone clouding all reasoning for long term progress. The big 3 in the car industry focused exclusively on SUV’s and the Light truck market giving virtually complete market share in the car segment.

Here is an Aesop fable on the dangers of lust.

The Lion in Love

A lion once fell in love with a beautiful girl and proposed marriage to her parents. The parents did not want this to happen but were afraid of the consequence of refusal. In an effort to dissuade the Lion, the parents said “We would be honored, but feared that the Lions claws and teeth would hurt our daughter”. So blinded was the lion by his love, that he agreed and came back the next day after removing his teeth and claws.

At this site the parents turned him away from as they longer feared the Lion and refused the marriage proposal.

In Greek mythology we have heard of the fall and destruction of Troy, because of the abduction Helen by Paris.

William Shakespeare’s Play “Macbeth” is also a play of Macbeth’s lust for power, which blinds him in his burning ambition to become King. In the process he betrays his friends and all the values he earlier held dear.

“Of all the worldly passions, lust is the most intense. All other worldly passions seem to follow in its train.”

Gautam Buddha

Sloth / Laziness

2008-11-25T23:39:00.000-08:00

“Laziness travels so slowly that poverty soon overtakes him.”

Benjamin Franklin

This is one of the sins which has changed in scope and meaning over the centuries. It has been described as apathy of the individual towards his religious duties and in the modern context also has come to mean a failure to utilize ones talents.

The Auto Industry in the US has been a victim of laziness and indifference. While Auto Industries the world over were innovating and moving with the times, the Big 3 in America were focused on maximizing returns on segments like light trucks and SUV’s. The sudden volatility in petrol prices and the downturn in the markets have left these companies with few products to offer. The following table shows the sales figures for Oct 08

Source: http://www.motorintelligence.com/

The only segment of growth has been the small car segment, while the SUV and large car segment has shown the maximum fall in sales.

The story of the Big 3 is like the tale of the Ant and the Grasshopper. The Ant and the Grasshopper In the summers the ant is very busy creature collecting food for the winter months. Once a grasshopper came across a colony of ants and asked them “Why are you so hard at work? Enjoy the warm weather”. The Ants replied that they we stocking up for the winter and recommended that the Grasshopper do the same. The Grasshopper replied, “Why bother when there is so much lying around” and continued on its pursuit of enjoyment. When the winter came and there was no food, the Grasshopper realized the value of the advice, “It is best to prepare for the days of necessity”.

"Failure is not the only punishment for laziness; there is also the success of others"

Jules Renard

Pride

2008-11-20T01:19:00.000-08:00

Pride sullies the noblest character.

Claudianus

Pride is considered to be one of the major sins. We are all subject to bouts of pride in our actions, but in Pride; also lays the seeds of destruction.

Consider the following Aesop’s fable,

The fighting Cocks and the Eagle

There were two Cocks fighting to be the master of the farmyard. At last; one won. The loser hid in a corner, while the winner in its inflated sense of the self, flapped its wings and flew to top of the chicken coop. An Eagle sailing through the air pounced upon him and carried him off.

The moral of the story “Pride goes before destruction”

Parmalat, one of the biggest diary corporations was set up in 1961 when its first plant was opened by Calisto Tanzi. By 1990 it was listed on the Milan Stock Exchange. By 2003 it became a symbol of one of the largest corporate scandals when a €4 billion gap was discovered in its accounting records. Part of the reason for the gap was diversion of funds to cover huge losses in new divisions. Pride played a role in that instead of facing reality, a cover up was attempted.

While this may be very simplistic story, Pride, “loss of face” prevents people from acknowledging failure.

As per the Bureau of Economic Analysis, Industry Economic Accounts, on a 2006 GDP of 24735.6 Billion Dollars, “Motor vehicles, bodies and trailers, and parts represented 493.2 Billion Dollars or close to 2%. Taken together with associated industries and support infrastructure, the Auto industry represents 4% of US GDP.

The Auto Industry and consequently the US economy needs support, but the focus has been on “the use of Private jets by the CEO’s to attend the meeting” while the politicians are talking of “what do we tell our voters”. Pride on all sides is confusing the issue and people are missing the woods for the trees.

The Banking sector has collapsed. The housing and construction sector is in shambles. The retail figure which will be coming out in the Thanksgiving – Christmas – New Year sales season would best be forgotten. Therefore saving the auto sector is very important. Else we could perhaps see the Dow Jones going below the 7500 mark by the 1st week of January 2009.

As Dante described Pride:

"Love of self perverted to hatred and contempt for one's neighbor."

The questions is :

Is Pride going to decimate the auto Industry? Nero fiddled while Rome Burnt? The Banking sector has been hit hard, the housing industry is in shambles, retail figures are worrying, and now the auto industry?

Gluttony

2008-11-18T02:08:00.000-08:00

"Gluttony denotes, not any desire of eating and drinking, but an inordinate desire... leaving the order of reason, wherein the good of moral virtue consists."

Thomas Aquinas

Gluttony is “Greedy or excessive indulgence” as per the Merriam-Webster Online Dictionary

Gluttony has been described as one of the seven deadly sins. Gluttony can be equated to over consumption to the point of waste.

The big investment banks like Goldman Sachs, Bear Sterns, Morgan Stanley, Merrill Lynch and Lehman Bros. awarded their employees in excess of $130 billion in bonuses between 2003 till 2007.

“Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.”

http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking

Bill Coleman, chief compensation officer at Salary.com states the following:

``Wall Street has created this mindset that most people find obscene, which is that it's hard to live on just half a million dollars a year.''

By replacing Pluto, the Greek God of wealth, with ADEPHAGIA, the Greek goddess of gluttony, we see a sea change in attitude.

Does this mark a dangerous trend in business philosophies, in that executive’s lifestyles are paramount, irrespective of fate of their organizations, shareholders and executives?

Does this mean that on Wall Street, gluttony has been a way of life?

Greed

2008-11-13T03:03:00.000-08:00

“There is a sufficiency in the world for man's need but not for man's greed.”

Mahatma Gandhi

The Goose with the Golden Eggs

Once upon a time there was a poultry farmer who had a goose which laid golden eggs. This provided a comfortable existence for the farmer. However one day the farmer decided to take out all the golden eggs and so cut the goose. Alas, the farmer lost his steady earning.

The Global world order is dominated by Capitalism. Capitalism has in its root, greed, or the desire for accumulation of wealth. An excess of greed can be catastrophic.

The SEC or the Securities and Exchange Commission was created by the Securities Exchange Act of 1934 as an independent agency of the US Government for enforcing the federal securities laws and regulating the securities, stock and options exchanges, and other electronic securities markets.

The Net Capital Rule, of the SEC mandated the maintenance of a ratio of indebtedness and liquid assets. The objective was to ensure that in the event of a large bad debt brokers/dealers would be able to maintain operations.

The Net Capital Rule was done away with for large investment banks in April 2004

http://www.sec.gov/news/press/2004-58.htm

In their desire to expand all prudence was lost. Over-leveraging no longer regulated by the SEC; saw caution being thrown to the winds. In the period of four years from april 2004 to October 2008, all the large Investment Banks have either collapsed, or converted their operations from Investment banking to commercial Banking.

“Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.”

Erich Fromm

So the question arises: Is greed a bottomless pit? How much is enough? When does greed become narcotic?

Hope

2008-11-02T22:08:00.000-08:00

In 1762, Sir Francis Baring, founded the Barings Bank. Originally called the “John and Francis Baring Company”, it was later to become Baring Brothers in 1806. After a very long and sometimes checkered history, including participation in the Louisiana Purchase and overexposure to Argentinean and Uruguay debt in 1890, it embarked on a path of fiscal prudence and caution so much so that it became the Bank of the British Monarchy.

Nick Leeson was a derivatives trader in Singapore for the Barrings Banks. While working at the Bank, Nick made a large number of unauthorized speculative trades which made some decent profits. However his luck turned and he soon started making errors and losses which he hid. Between 1992 and 1994 the losses had ballooned from 2 million to pounds 208 million.

In the hope that he would be able to recover these losses he placed huge bets on the 16th of January 1995 on the Tokyo exchange. However the Kobe earthquake of 17th January 1995 sent everything in a tailspin and the losses mounted to pounds 807 million, causing the bank to collapse.

Falsely relying on hope as a means to salvation was the end of Nick Leeson and the Barrings Bank.

"Hope is the most evil of evils, because it prolongs man's torment."

Friedrich Nietzsche

This sense of living on hope is not an isolated and rare event as it may seem. We are all prey to this phenomenon at various stages. When things are not working out or going wrong, we fall back on “Hope”. We hope that things will turn out right. We “Hope” that we will meet our targets. We “Hope” that the economy will be all right. We “Hope” that the boss will give a raise.

He that lives upon hope will die fasting.

Benjamin Franklin

The problem with “Hope” is that it lulls us into a sense of complacency. When a sales person sees a “Sales pipeline” he is prone to feel “Hope” that he will meet his target, little realizing that he has to be on guard, and that a sale is a sale only when the money is in the bank, not when he has got a letter of intent, nor when he has got a purchase order.

Hope can be a very disabling emotion. It “disables” action and weakens the effort. For success in any action we have to overcome “Hope” and rely on action.

“Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.”

Dale Carnegie
=====================================

Does “Hope” act as a disabling emotion? Does it lull people in a sense of Complacency?

Is Globalization a Myth? Part II

2008-10-30T03:40:00.000-07:00

In response to my first article I got a lot of interesting comments. Most emphasis was on trade and economics. It was best summed up by the following by Michael Manos, PE, PMP,

“Are companies going to continue to push the global boundaries to find talent and economic advantages....yes!” “Are we looking at a world with no boundaries and a common set of laws; No!” ”The world is complicated with different cultures, geography and political history. The interests of agricultural countries are far different from the wishes of fully industrialized areas. Much of that difference has to do with the geographical and cultural differences of those particular areas. Those differences are not going to change.”

In the current context, Globalization is about economics and economic upliftment of the dispossessed by cross border investment. It is not about cultural assimilation. Even the pace of the current pace of globalization finds people equally divided in their opinions.

Going further, in a BBC World Service Poll in February 2008, the following was highlighted:

In 22 out of 34 countries around the world, the weight of opinion is that "economic globalization, including trade and investment," is growing too quickly. On average one out of two (50%) hold this view, while 35 percent say globalization is growing too slowly.

For most people world wide Globalization is all about trade, economics and investment and its effect on their day to day life. While there is a lot of understanding of global trade, perceptions vary from peoples on economic standpoint and its effects on them. For people hit by the loss of manufacturing jobs in the US, its not a great thing. For people whose lifestyles are threatened and traditional ways of life endangered, it’s also not a great thing. For those seeing prosperity touching their lifes, it’s a great thing.

In the economic sense “Globalization” has been in existence since mankind started living in fixed communities. We have seen trade between the early civilizations of the Nile (Egypt), Tigris-Euphrates (Babylon) or Indus (India). Other civilizations have also been engaged in trade like China, Greece and the Roman empires. The Arabs in fact were instrumental in the spread of a lot of scientific and literary content through their trading activities. The spread of European empires in the 18th and 19th century boosted globalization due to their reach and importance for extraction of raw materials from the colonies. In fact the 19th century was sometimes called “the first era of globalization”. However the First World War brought about a brief halt in Globalization.

After the First World War, and the collapse of; and redistribution of colonies, we saw the world economies in a system of flux. The period between the First and Second World wars saw the Great Depression and hyper inflation in Germany. Economic discontentment and the unfair conditions prompted by the Versailles Agreement for War reparation were some of the reasons for the rise of Fascists Forces.

The end of the Second World War saw the signing of the Bretton Woods agreement, to establish rules for economic and financial relations. This was partially due to the push of Cordell Hull the US Secretary of State between 1933 and 1944 who propounded that a liberal international economic system would help in maintaining a durable peace. The Bretton Woods agreement helped establish the IMF and the World Bank.

Globalization has seen its highs and lows as per economic and political realities of the times. The current economic tsunami has proved one thing, Globalization is not a myth, in the sense we are all very much interconnected.

That globalization will find fewer cheerleaders today is self evident, as countries scramble to erect firewalls to protect their economies. However part of the solutions is also going to be coming from a concerted effort by all the major economies of the world and not just by the G8, but by the participation of the G20 as well.

Globalization is definitely not a myth; however it is not a reality either.

Answers on Linkedin:

http://www.linkedin.com/answers/international/internationalization-localization/INT_INZ/345792-564729

Is Globalization a Myth? Part 1

2008-10-17T23:31:00.000-07:00

“Globalization is the process by which the experience of everyday life marked by the diffusion of commodities and ideas is becoming standardized around the world.”

The Encyclopedia Britannica

“Globalization is to make global or worldwide in scope or application.”

The American Heritage Dictionary

Globalization is a process by which the people of the world are bound. The factors leading to Globalization are economic, cultural and political. Common global challenges like Climate Change, Food security and economic challenges have seen concerted Global Action.

Economic Factors

From the Economic sense and International trade perspective “The Silk Route” and “The Spice Trade” has been there for centuries. In fact the 19th century was sometimes called “the first era of globalization”. The end of the Second World War saw the signing of the Bretton Woods agreement, to establish rules for economic and financial relations. The Bretton Woods agreement helped establish the IMF and the World Bank. The ITO was a result of this agreement. From the ITO evolved GATT. The functions of GATT were taken over by the WTO which came into existence in 1995.

The most recent rounds of discussion under the WTO, the Doha Development Round are currently stalled due to mutual fears between the developed and the developing countries.

Socio Cultural Factors

Alan Rugman, at the Indiana University’s Kelly School of Business, writes in his book “The End of Globalization”. "Globalization is a myth; it never really occurred anyway". "The vast majority of manufacturing and service activity is organized regionally, not globally. Multinational enterprises are the engines of international business--and they think regionally and act locally."

Rugman claims that there are virtually no truly global businesses, for even giants such as McDonald's and Coca-Cola tailor their products to the local market. From a personal perspective I could not agree more. I was once the implementation head of a group required to “Globalize” the training content for a very large Fast Food Chain, with thousands of outlets world wide. At the start we thought all we had to do was to translate the content on SOPs (Standard Operating Procedures) into the local languages. Simple issues started coming up, different signs and colors in different regions took on different meanings. Red was the color of danger in America or the color to stop, while the same was an auspicious color in China, a signal of good fortune.

This led us to the term “Localization”, which is modifying Global products to suite the local market. So our efforts of Globalization of SOP’s actually became Localization of SOPs. So from a socio cultural perspective we were way off from Globalization. It reminds me of the words of Rudyard Kipling:

“East is East and West is West, and never the twin shall meet”

Political Factors

Another force contrary to the concept of globalization is the nation-state. In terms of concerted global action the domestic opinion over-rides global considerations.

The Kyoto Protocol on Global Warming has still not been ratified. The year 2008 has seen massive protests in countries throughout the world by the massive jump in food prices. Approaches to the use of biofuel in the industrialized nations has been claimed to be the recent cause of surge in food prices. In a report published in the Guardian paper in July 2008 it has been reported “Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank”.

So on major issues of Economics, Global Warming and Food security while there is a lot of collective debate the work on the ground is still way off from Global Consensus. Culturally we have a long way to go.

----------------------------------------------------------------------------
Therefore is it correct to say “Globalization is a Myth?”

The Demise of Laissez Faire, Birth of Social Intervention?

2008-10-13T22:26:00.000-07:00

“The market is not an invention of capitalism. It has existed for centuries. It is an invention of civilization.”

Mikhail Gorbachev

Capitalism is an economic system where means of production are privately held. This allows individuals to operate for profit in a “free market scenario”. Though Capitalism in its current form owes its existence from the thinking of Economists since the 17th century, it can pre-date its existence by centuries.

Capitalism in its various forms has been in existence since very early ages. The barter system, the ancient Silk Route from China to the Roman Empire, the Arab trade in spices from India to the West is examples of Capitalism. This trade was characterized by Merchants and hence came to be called Merchant Capitalism. Merchant Capitalism slowly evolved from individual “Merchant” to the partnership form. Mention of this is found in text from the 9th century to the 15th. Partnership or Mufawada, in Arabic, compagnia in Europe and the Vaishya or trading communities in India have been around for centuries. The concepts of Credit, Profit, capital, credit notes etc have all revolved around the early trading systems of barter and gold.

The Industrial revolution replaced the “Merchant Capitalism” by the market Economies of the present Western world. Capitalism in its present form has been characterized by the principal of Laissez Faire. The Principle of Laissez Faire has been around for more than 300 years. It has been derived from a slogan “Laissez faire et laissez passer" meaning 'Let do and let pass'. Another slogan “Laissez faire et laissez passer, le monde va de lui même!" added the words “the world goes by itself”.

Laissez Faire at its core advocated non state intervention and profit as its core. Eminent leaders have all advocated this in present times from Churchill to Thatcher, Reagan to Bush.

“The substance of the eminent Socialist gentleman's speech is that making a profit is a sin, but it is my belief that the real sin is taking a loss”.

Winston Churchill

The issue with unregulated Capitalism is that it discounts certain basic human elements such as blind greed. It also assumes that markets would be able to be self regulating.

“Capitalism is the astounding belief that the wickedest of men will do the wickedest of things for the greatest good of everyone.”

John Maynard Keynes

Laissez Faire has enabled the concentration of wealth which has created the emergence of “Financial Capitalism”. The US economy had been increasingly marked by non intervention of the state in the financial sector as evinced in Milton Friedman’s Economics. Friedman in his book “Capitalism and Freedom” favored reducing the role of government as a means to create political and social freedom. His philosophies greatly influenced the policies of Ronald Reagan and Margaret Thatcher.

Ben Bernanke, the current chairman of the Federal Reserve, is an ardent believer of Friedman’s Economics. He paid tribute to Milton Friedman on his ninetieth birthday “I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again”.

The current crisis caused by the financial meltdown has brought onto centre stage “Social interventionism” as an ideology. This involves the intervention of a government in the affairs of the market. Practically all the major leaders of the industrialized nations are falling over themselves to provide Government funds to tackle essentially “Private Problems”.

Laissez Faire’s demise would have at its root the unbridled quest for maximum profit without any oversight whatsoever, as characterized by Wall street in its actions from the passing of the GLB act in 1999 and the removal of the “Net Capital Rule” in 2004.

To contain the damage from the economic crisis, the EESA has been passed by the US Congress. The Emergency Economic Stabilization Act of 2008 (EESA) is $700 billion package devised to rescue financial institutions by purchasing devalued mortgage-linked assets. A fundamental shift in this package is a proposal to place limits on executive's compensation, another blow to Laissez Faire.

However the questions arise:

Will these funds help save some limited people at the expense of a vast many? Would it by like Fannie Mae and Freddie Mac, Profits are ours, the losses are somebody else’s?

Or is it the end of Laissez Faire and the beginning of a socialist society?

Answers on Linkedin:

http://www.linkedin.com/answers/financial-markets/equity-markets/MKT_EQU/342428-564729

Idealism Vs. Pragmatism

2008-10-02T12:24:00.000-07:00

Idealism is what precedes experience; cynicism is what follows.

David T. Wolf

Idealism is a philosophy which approaches the states of nature on the basis of ideas and values. Idealism as explained in the American Heritage Dictionary:

Philosophy: The theory that the object of external perception, in itself or as perceived, consists of ideas. The act or practice of envisioning things in an ideal form or the pursuit of one's ideals.

Pragmatism is a philosophy which approaches the state of nature in practical terms. Pragmatism, as explained in the American Heritage Dictionary:

Philosophy : A movement consisting of varying but associated theories, originally developed by Charles S. Pierce and William James and distinguished by the doctrine that the meaning of an idea or a proposition lies in its observable practical consequences. A practical, matter-of-fact way of approaching or assessing situations or of solving problems

I have been an avid reader of various forms of educational tales which are a part of our heritage like the Aesop’s fables, stories from the Panchtantra and the Jataka tales.

I am relating below the tale of the “Wolf and the Crane” from the Aesop’s Fables to highlight the points of Idealism and Pragmatism. There is a slight deviation which I would I would attribute to “poetic license”.

The Wolf and the Crane

A Wolf had been feasting on an animal he had killed, when a small bone stuck in his throat. He could not swallow the bone and feeling terrible pain he started howling and jumping up and down. With tears in his eyes he beseeched all to help him, promising all sorts of rewards. At last a crane agreed to try. He told the wolf to lie on his side and open his jaw as wide as he could. The crane then put its long neck inside the Wolf’s neck and removed the bone.

This version shows the crane in an ideal state willing to help out from a sense of morality and human values, unmindful of the danger to its neck.

The next version, goes as follows. A crane approaches the wolf and agrees to help. Before putting its long neck inside the Wolf’s jaw it places a stick between the jaw, to prevent the jaw from shutting down and biting its neck off, and then proceeds to remove the bone. This version shows the caution with which the crane proceeds, helpful, but aware of the risk, the wolf might bite its neck off.

To face this world and get solutions one needs to be Idealistic, however you have to be worldly wise like the crane, in the second version and ensure that your concerns are addressed. An Idealist who is not pragmatic would become a cynic.

------------------------------------------------------------------------------------------------

In today’s context, is the debate of the 700 billion dollar bailout, a fight between Idealism and Pragmatism? The issue of letting market forces working things out in a capitalist society, or letting Wall St. pay for its sins, in an idealistic manner vs. the pragmatic view that the economy needs to be revived and credit has to come in?

It was the hour before the Gods Awake

2008-09-30T03:27:00.000-07:00

It was the hour before the Gods awake.
Across the path of the divine Event
The huge foreboding mind of Night,
alone In her unlit temple of eternity,
Lay stretched immobile upon Silence' marge.
Almost one felt, opaque, impenetrable,
In the sombre symbol of her eyeless muse
The abysm of the unbodied Infinite;
A fathomless zero occupied the world.
A power of fallen boundless self awake
Between the first and the last Nothingness,
Recalling the tenebrous womb from which it came,
Turned from the insoluble mystery of birth
And the tardy process of mortality
And longed to reach its end in vacant Nought.
As in a dark beginning of all things,
Repeating for ever the unconscious act,
Prolonging for ever the unseeing will,
Cradled the cosmic drowse of ignorant Force
Whose moved creative slumber kindles the suns
And carries our lives in its somnambulist whirl.
Athwart the vain enormous trance of Space,
Its formless stupor without mind or life,
A shadow spinning through a soulless Void
Thrown back once more into unthinking dreams,
Earth wheeled abandoned in the hollow gulfs
Forgetful of her spirit and her fate.
The impassive skies were neutral, empty, still.
Then something in the inscrutable darkness stirred;
A nameless movement, an unthought Idea

“Savitri” by Sri Aurobindo

These words from Savitri, written by Sri Aurobindo and given out in a sermon by Dr. Karan Singh, have always been a part of my sub- conscious since childhood. After spending a couple of years in the spiritual environment of the Aurobindo Ashram in New Delhi, it was natural for this to happen.

These words resonate now due to the total uncertainty of the present times. While the financial markets are in total turmoil, the question is where we are headed. I have listened to countless experts in the last 48 hours giving their opinions and ideas, and the only certainty is the lack of one. There is a sense of some fundamental change about to happen; but that change is so unpredictable that it is almost an “unthought idea”.

Human Capital

2008-09-28T03:17:00.000-07:00

"The strength of the United States is not the gold at Fort Knox or the weapons of mass destruction that we have, but the sum total of the education and the character of our people".

Claiborne Pell, US Senator from 1961 to 1997

The notion of Human Capital has been around for a very long time. In fact Adam Smith, in the “Wealth of Nations” has defined four types of fixed capital, or items which afford revenue or profit. The four types were: 1) Machines 2) Buildings 3) land and 4) human capital.

This has been commented on by a number of notables since. Karl Marx in his Das Kapital has stated:

"By labor-power or capacity for labor is to be understood the aggregate of those mental and physical capabilities existing in a human being”.

Human Capital has become an important economic concept since the 1950’s and 60’s. The basic reasoning is that people invest in education and training to build up skills and abilities which can bring about a long term return.

Theodore William Schultz was the 1979 winner of the Nobel Prize for economics. Amongst his varied research included a study into why post World War II Germany and Japan recovered much faster then the UK. He concluded that this was due to a healthy and highly educated population.

The first level of “labor capital” boosted the “Industrial Revolution”. Education and greater human skills was an enabler in the increase in the “services sector”.

Peter Drucker in his book, “The Age of Discontinuity” has talked of the “Knowledge Economy”. Today it is understood that in the “knowledge economy” or information economy, expertise and skills are an important asset.

With the current market conditions the conservation and enhancement of this important “Capital” is all the more important. The competition between companies, and economies would be won by those investing in and reaping the advantages of “Human Capital”.

The effects of the current economic crises would have wide scale implications in the nature of economic activity. Employees would need to have multiple skills and do multitasking as with time and improvement in technology, specialized roles would tend to be fewer.

In today’s scenario therefore Human Resources and specifically the training departments would need to refocus their attentions for the survival and growth of their companies

"So the question is Do Organizations realize the importance of Human Capital?

Linkedin Debate:

http://www.linkedin.com/answers/management/organizational-development/MGM_ODV/331106-564729

Economic Meltdown - A Statician’s Dream / Everyones Nightmare

2008-09-24T22:09:00.000-07:00

"A Single death is a tragedy; a million is just a statistic”

Joseph Stalin

In these times of crises, only the dark side would appear in our minds.

The demise of Lehman Brothers last week was projected as a great tragedy and rang alarm bells all across so much so that that AIG was bailed out by an 85 Billion package. However what may be less known is that since late 2006 more than 286 Mortgage companies have gone bust while since mid 2007 about 81 hedge funds have been liquidated.

Now the US government is in with a 700 Billion bailout package which will essentially convert private debt into public debt, or about 2,200 dollars for every person in the US. This would have been probably allright and considered a necessary evil, if the maths added up and we actually knew what the debt was. The problem is we really do not know with all types of fancy financial instruments being used to show profits in boardrooms.

I have been provided some very insightful information by Mr. Louis F Hill, Chairman of Rockwood Capital Management, Inc. He has shared the following:

In October 2007, Bill Gross, of Pimco, estimated $ 250 Billion losses in US sub-prime mortgages. Then in January 2008, the G-7 Finance Ministers estimated there would be $ 400 Billion Losses in US mortgages. This increase was caused by the realization that the mortgage mess had spread beyond just the sub-prime class. By April 8th 2008, The IMF estimated there would be $ 564 Billion losses in US residential mortgages. Please note, that the headlines for the IMF numbers were reported higher ($ 945 Billion) because of their inclusion of $ 380 Billion in commercial real estate losses. So what is the scale of the SIV’s (Structured Investment Vehicle) involved with residential mortgages? If mortgages were the only holding in these vehicles, we could estimate that the SIV’s debt exposure would be 10 times the latest estimate or $ 5.64 Trillion.

The Bank of International Settlements reports there are more than $ 500 Trillion dollars of derivatives in 2007 and $ 600 Trillion in 2008. Credit default swaps were estimated at $ 58 Trillion in 2007 and $ 64 Trillion in 2008. So the mortgages in the SIV’s, at the $ 5.64 Trillion level, are a small part of the total numbers derivative instruments in existence.

In the past six years, Stephanie Pomboy of Macromavens estimates 500% more credit has been created outside of the banking system than within it. This means that those financial products are essentially unregulated.

To understand one of the issues one needs to get an idea of what a CDS or Credit Default Swap is.

“A credit default swap is like an insurance policy. It can be used by a debt holder to insure against a default under the debt instrument. There is no requirement to actually hold any asset and is not generally considered insurance for regulatory purposes”

Now if we have created enormous amounts of credit outside the banking system, which are unregulated then, I guess all the numbers will become just that; Statistics, which would cause enormous hardships to people who will also become statistics in government records.

Back to the housing fiasco, some idea of statistics is below:

Bank seizures in the first half of the year increased by 154 percent to 370,179 from the same period in 2007. while a record 1.2 million homes were in foreclosure during the second quarter of 2008. That represents 2.8% of all outstanding loans, up from 1.4% of all loans during the same period a year ago, according to a report released Friday by the Mortgage Bankers Association (MBA).

During the three months ended June 30, 2.9 million homeowners, or 6.4%, were behind on their payments, up more than 25% from last year.

This brings us to the question:

Is the 700 billion bailout like putting a band-aid on a bullet wound, would it be enough?

Linkedin Debate:

http://www.linkedin.com/answers/financial-markets/equity-markets/MKT_EQU/329558-564729

Economic Meltdown - Kangaroo Banks

2008-09-18T03:10:00.000-07:00

There is no calamity greater than lavish desires.
There is no greater guilt than discontentment.
And there is no greater disaster than greed.

Lao-tzu (604 BC - 531 BC)

The current economic meltdown is due to our inability to differentiate between our needs and greed and the various interest groups getting acts passed in congress.

The Glass-Steagall Act (GSA) was enacted in 1933 after the collapse of the stock markets in 1929 leading to the Great Depression. This was done to ensure that a clear distinction was made between commercial banking and Investment banking. Regulatory barriers were created and banks were given a limited period of time to choose their lines of business to prevent all sorts of conflict of interest. This also ensured that Banks would be limited in their ability use depositor’s money for underwriting issues.

One of the main reasons the GSA was passed was that it was felt that commercial banks had become too-speculative. In the period leading to 1929 the banks had become very greedy. They issued doubtful or unsound loans to companies in which the banks had invested and then encouraged clients to invest in that stock. (Does this ring a bell in the form of sub-prime mortgages?)

The GSA was further strengthened by the Federal Reserve Board in 1956. A new act stated that underwriting insurance was not a good banking practice and needed to be delinked from banking operations.

The GSA was a strong barrier to fiscal irresponsibility and excessive speculation. Somehow this important legislation was overturned by the Gramm-Leach-Bliley Act (GLBA). The full name was the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999). This is an act of the United States Congress which repealed the Glass-Steagall Act.

The ostensible reason was to open competition among banks insurance companies and financial services companies. The distinction between commercial banks and brokerage firms has since thinned.

If in a country we have the executive wing acting as the judiciary and dispensing justice, we call it having “Kangaroo Courts”. The reason these are separate functions is to ensure proper checks and balances. The passing of the Gramm-Leach-Bliley Act blurred the distinction between commercial banks and Investment banks in a manner similar to the executive and judiciary in Kangaroo courts.

I would like to give a short story taken from the Panchtantra, a series of stories in the manner of Aesops Fables taught in India to drive home some wisdom. This particular story explains how excessive desire can be ruinous.

The Brahmin and the Pot of Flour

Long long ago there was a Brahmin, Rama Raju known for his miserliness. Every day he would save the flour earned from his begging in an earthen bowl. This he tied above his bed.

One day he returned home very tired and went to sleep and began dreaming. He dreamt that there was a famine in the country and that he had fetched a huge some of money from the sale of his flour. He used it to buy goats whose milk he sold at huge margins eventually having a large herd. From this he bought cows etc to become a very rich man. He then dreamt that he got a beautiful bride with whom he had kids. These kids who were very naughty would not listen to him. One day he to discipline them he picks up a cane and starts waving in the air.

In his now disturbed sleep the Brahmin actually picks up a cane and waves it and by chance hits the pot of flour which crashes onto the ground. The Brahmin wakes up to see his dreams shattered.

“Moral of the story, Castles built in air will come crashing down”.

Management vs. Leadership

2008-09-16T22:27:00.000-07:00

I came across a question in a forum the other day “Mastering the ART of Change, What is the difference between management and leadership”.

The answers I noticed were different but in a way very similar, management was about activity while leadership was about direction. When I spoke to my friends and colleagues a lot of them also thought that the two words were inter-changeable. I would tend to differ, by the following examples:

We use the term management in a wide variety of ways, “managing your life”, “managing your time”, “managing your affairs” and even “managing your work/personal life”, however we rarely have the word “lead” replace manage in any of these situations.

Peter F Drucker has stated:

"What is the first duty – and the continuing responsibility – of the business manager? To strive for the best possible economic results from the resources currently employed or available."

So my first observation was that management was more about transactions, activity and balancing various issues.

In most organizations “Managers” are expected to manage the state of affairs in their domain, whether it is related to people, processes, inventories or sales. We never really equate “Managers” with “Leaders” except in the context of “People issues”.

Leadership according to many respondents in the forum was more to do with direction, new ideas and leading people in a particular direction. A leader was a person with a vision, having ideas for the future. A leader is a person who is always guiding for a future.

Peter F Drucker on Leadership:

"Leadership is the lifting of a man’s vision to higher sights, the raising of a man’s performance to a higher standard, the building of a man’s personality beyond its normal limitations."

Throughout history, we have come across leaders as persons who have provided a vision, like:

Bill Gates ambitious vision “to place a computer on every desk and in every home”.

Speech by President John F. Kennedy, Delivered in person before a joint session of Congress on May 25, 1961, challenging America to land a man on the moon:

“I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth. No single space project in this period will be more impressive to mankind or more important for the long-range exploration of space; and none will be so difficult or expensive to accomplish”

Or leadership provided by Winston Churchill during Britain’s darkest hour in World War II by this inspiring speech “we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender”.

I believe

“Management is about consolidation, Leadership is about vision and growth”.

Education Series

2008-08-31T22:14:00.000-07:00

Being a member of linkedin has enabled me to interact on thought provoking issues and points. I am going to be sharing the issues which have been discussed and where I have taken part through this column.

I would be giving the topic and its link to enable viewers to see the trail and views from a wide audience.

For a middle-level manager, which of these is most Important? "Employees / Organization / Clients "

http://www.linkedin.com/answers/management/organizational-development/MGM_ODV/304089-14006763

Is The BPO Boom Over

http://www.linkedin.com/answers/startups-small-businesses/business-plans/STR_BPL/303104-19423967

What is excellence

http://www.linkedin.com/answers/career-education/mentoring/CAR_MEN/308978-11565626

Why Employees Fail

http://www.linkedin.com/answers/management/planning/MGM_PLN/298393-10472407

The Coming Retail Crash - No Man is an Island

2008-08-22T22:53:00.000-07:00

No man is an island, entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less...any man's death diminishes me, because I am involved in mankind...

John Donne

My last article on the Ides of March has elicited some offline queries. One of the themes was that the collapse of the housing industry should not cause such a catastrophe that the US economy on the whole should be hit hard enough to cause a Red Friday.

Not being an economist provides me the liberty of looking at things from a simpler viewpoint. My retort to the gentleman was as follows.

Could you imagine all the primary and secondary industries connected with the housing industry? Do you know that the construction industry shed about 557,000 jobs from the period Sept 2006 to July 2008. My view is that if there is slump in construction it would lead to reduced demand for the following:

1. Cement Consumption reduced by 2.2% in 2007 and is expected to reduce by 10% in 2008.
2. Steel consumption domestically is seeing reduction in demand as 30% consumption is for the construction industry and 20% for the auto industry.
3. Similarly requirements for fittings, fixtures, electrical items, plumbing, are some of the other areas to be hit causing job losses for plumbers, electricians, transporters etc.

Some of the statistics as per Bureau of Labor Statistics, US dept. of labor give the following details:

1. Employment in retail trade lost 211,000 jobs since March 2007
2. Motor vehicle and parts dealers saw a decline of 35,000 jobs since January 2008.
3. Temporary help services has seen a decline by 185,000 jobs since Jan 2008.

The one industry which has seen huge increase in demand for manpower is the mining industry which includes oil and gas.

Overall there has been a loss of 463,000 jobs in calendar year 2008 as of July 2008.

Therefore the decline in basic industries like Housing and the auto sector would not be causing limited damage but damage across the economy. Not only is there less money to spend, there is a negative belief as well which would lead people to put of purchases. Therefore John Donne’s statement is apt, that things do not happen in isolation, we are all interconnected. While the Friday after Thanksgiving may not be such a catastrophe, it would definitely bring no cheer.

The Coming Retail Crash -Ides of March

2008-08-19T04:51:00.000-07:00

In Shakespeare’s Julius Caesar, the soothsayers warning "Beware the Ides of March," displayed a sense of foreboding. The ides of March in Julius Caesar was the 15th of March, a day of bad luck and evil.

Is November 28th going to be a newer version of the Ides of March? A new Ides of November?

Why do I state a specific date as the new of Ides of March? Well this is going to be the date of this years Black Friday, ie the Friday following Thanksgiving. The Friday following Thanksgiving (the 4th Thursday of November) is traditionally the start of the Christmas shopping season. Stores throughout the US see a sudden boom in sales and the period of loses (red on the account books) are wiped out. This is the period in which retailers are back in the black.

All the signs of a slow down are there but, is it a tip of the iceberg?

1. Unemployment is up to 5.7% as of July 2008 and expected to rise to 6.5%
2. Mortgage defaults are up almost 100% over the same period in 2007.
3. Housing prices are down by up to 20% causing greater fear and recession.
4. Fuel consumption is down 2%. Americans are driving 4% less then they were last year (one of the highest drops since 1942). This not just due to high oil prices but the sheer inability to pay.
5. The auto industry is in a tailspin with plans to close down assembly lines for gas guzzlers and companies reporting losses of tens of Billions.
6. Freddie Mac and Fannie Mae which between them refinance 5 Trillion dollars, of housing loans are between them in a not so good shape.

The latest worry is that the average American is using his credit card to shore up the weekly spending on basic necessities like groceries; sums in a tight market which would be difficult to repay leading to more defaults. In fact this trend seems to be happening. There just seems to be not enough money in the home front.

So with such a dire situation what will happen to Black Friday? Will it be a Red Friday?

Make Customers in Prosperity

2008-08-15T23:29:00.000-07:00

One day, a sick Kite, who was on his death-bed due to illness implored his mother “Do not mourn, O Mother, pray and invoke the blessings of the gods and my illness will be cured”. His mother replied in grief, “Son, which God will pity you? You have outraged all by pecking at the very altars on which offerings were made to them”.

The original translation was “we must make friends in prosperity if we are to take their help in adversity”.

My take on the moral of the story is “Do not take your customers for a ride because when the competition really hots and up and the economy is tight, they will desert you”.

In today’s competitive world, where the acquisition cost of a new customer is so very high, it makes more sense to retain existing customers. A company alienates its customers mostly on small issues, like small charges hidden in the very fine print. When a customer figures it out, there is usually a sense of outrage.

While it is a given that costs have to be recovered from customers, the effort has to be on providing correct and relevant information on why it is so. This can only happen when the front line people are adequately trained.

A well trained workforce is a key to company’s growth and prosperity.

Customer Satisfaction

2008-08-15T06:11:00.000-07:00

"(I Can't Get No) Satisfaction", a 1965 song by the Rolling Stones, is credited by Mick Jagger for having popularized the Rolling Stones and giving them their first number one. The song is as controversial as the concept of Satisfaction.

Changing Customer Behavior

Customers are always 'reaching out' for a seamless customer experience'. Internet access is growing faster, and most products and devices are coming with an online service component, expanding the customer experience. Customers now have more information about competitive products and service offerings, and feature sets are becoming quickly commoditized. Add to that the low cost of 'switching' for many products such as (Credit Cards), and customers feel little pain in changing providers.

Changing Business Issues

On the 'receiving end', the new consumer is probably “more accessible”, because of the proliferation and dominance of the “mobile” access channel. Enterprises thus have a greater chance of reaching the actual consumer. However with increased access comes a greater chance of “irritability”, as consumers get pounded by sales agents and service representatives.

The Business leaders are fast learning that what lie at stake for their business to grow is MORE Satisfaction, Loyalty and Retention. Businesses (especially in segments such as Banking, Insurance and Telecom) whose very existence depends on the number of customers they own, are realizing that the cost of acquiring customers makes the first year in the life of the customer the lowest in terms of profitability. Today the story is NOT just about acquisition but RETENTION.

What leads to retention? It is the satisfaction of the customer towards the products or services he has received.

What is Customer satisfaction? To many, it is a business term which is used to capture the idea of measuring how satisfied an organization’s customers are with it. Any organization or enterprise has customers who use its services or products. In return for their patronage, customers expect to get their money’s worth. This is extremely important as in this age of intense competition there would be multiple choices available for the customer for any given product or service.

Though customer satisfaction is an abstract idea, varying from an individual to individual, quite often it can be related to the cost of a product or service against its cost as opposed to competitive products or services for similar services. Organizations are interested in customer satisfaction because they need to retain existing customers and expand their customer base. Customer Consumer behavior and changing business issues are directly linked to customer satisfaction.

Every satisfied customer adds to the stability of a company. Companies can ignore unsatisfied customers at their own expense.

Fear Factor

2008-08-09T22:50:00.000-07:00

“It's fear of the unknown. The unknown is what it is. And to be frightened of it is what sends everybody scurrying around chasing dreams, illusions, wars, peace, love, hate, all that--it's all illusion. Unknown is what it is. Accept that it's unknown and it's plain sailing. Everything is unknown--then you're ahead of the game. That's what it is. Right?”

: John Lenon

I started this blog on the suggestion of a friend that I should perhaps give her sales people some tips on negotiating sales. Though I have been writing for more than a year, it is now that I am touching on one aspect of negotiating.

A friend of mine, based out of Los Angeles is providing services in the Supply Chain Field with special emphasis on RFID, and its usage in Logistics and Inventory Management. I have a fairly broad understanding of the topic, as I had set up an Enterprise Wide Maintenance Department facing complex issues of part replenishments. So when my friend discussed some potential target areas, in India, I strongly suggested the retail sector.

To cut a long story short a pitch was made and discussions were held resulting in my friends company, lets call it RFID Ltd., being short listed. After that things came to a stand still. Weeks led into months, and nothing moved, till my friend read in a paper that the Client Company was going to a huge Multi National company to provide the basic infrastructure for a pilot case.

Again we had the usual round of talks as to what could have gone wrong. A number of causes were discussed including the reliability of technology, its provenance, pricing etc. Finally I asked my friend if he had taken care of the Clients “Fear Factor”.

I briefly explained my version of the “Fear Factor”.

What exactly is the “Fear Factor”? I have often seen in organizations which are going in for products or services from SME’s (Small and Medium Sized Enterprises); Decision Makers hesitate in taking the final decision. This is especially true for technology upgrades. This fear factor is due to a perception within the decision makers of the potential for failure and then being forced to take responsibility for a situation which could have been due to reasons not of the suppliers making. In such situations decision makers tend to take the easy and safe way out of going for solutions from the most well known brand and not necessarily the most appropriate one.

If the product / service is successful then the decision maker basks in the glory, and if it fails than there is always the fall back option that the product / service was from the most well known brand, if it failed then they could not be totally responsible.

Decision Makers taking decisions on such factors, also tend to take it easy with the assumption that the implementing company will somehow take care of things. They forget that technology like fire is a good servant, but a bad master. No amount of technology can undo damages caused by bad processes.

We then proceeded with the assumption that perhaps the target company came down with a bad case of the “Fear factor”. The next step was what could be done?

Knowing that this problem has its roots in ignorance, the one major initiative is to fight ignorance with knowledge. We realized that extensive training would need to be imparted in the pre-sales period, with lots of provisioning and collaterals to champion the product / service in the implementation and post implementation phase. I also strongly suggested that my friend be ready to make suggestions in the processes itself to ensure that for want of clear cut processes, their product failed.

My suggestion was that in such cases the only solution lies in the ability of the SME to have successful implementations to showcase its reliability and a clear cut implementation policy to reassure a potential client. All of it backed by extensive documents and training material. The SME has to act in a consulting mode as well and not just a product / service centric mode.

Though the case has not been won by my friend as yet, he has resorted to use the knowledge factor to fight the darkness of ignorance, and it seems as if he is gaining momentum.

Compounding Money

2008-08-05T20:23:00.000-07:00

A couple of days ago one of my colleagues was discussing a deal we were contemplating. In the course of the discussion, he remarked, that we would be making a small margin in per Man-hour terms.

It being a Friday evening, and since we had some time on hand, I requested the colleague that over coffee I would like to tell him a small story. My colleague readily agreed and I narrated the following story.

Long, long ago there lived a very wealthy Maharaja from a long line of rulers. This fine dynasty had accumulated a vast amount of wealth. However towards the end of his reign the Maharaja was a worried man, as the crown prince was a wastrel. At his wits end the Maharaja asked his chief courtier for advice. The courtier, ever the loyal servant promised to show the prince the errors of his ways.

The Maharaja one day suggested to the Prince that he organize a contest and give the winner, whatever prize he wanted and be responsible for the event with his own resources. The Prince ever eager to be a center of attraction readily agreed. The contest started and finally, the winner was the Chief Courtier. The winner was asked to name his award. The Courtier asked the prince that a gold coin and a giant size chess board be brought. Once this was brought, the courtier asked the Prince that one gold coin be given on the first day and placed on the first square of the chess board. He then asked the Prince that the next day the number of Gold coins be doubled from the previous day’s number and placed on the next empty square so that in sixty four days all the squares were covered.

The prince laughed and made jokes about the courtier that he was not smart enough to ask for a bigger prize, and readily agreed. Thus on the first day one gold coin was placed on the chess board. The next day there were two coins placed on the chess board. The third day four coins were placed on the board. By the end of the eighth day when the first row was completed, there were 128 coins on the eighth square and a total of 255 coins had been placed.

This continued and after the second row was completed, there were 32, 678 coins placed on the sixteenth square with a total of 65,535 on the board. By this time the Prince began to realize his folly, however he allowed it to continue and on the seventeenth day when 65,000 plus coins had to be placed he expressed his fear of not being able to fulfill the award to the Maharaja. The Maharaja refused to intercede. By the twentieth day the Prince had run out of money and had to tell the Courtier that he could not fulfill his award and bowed to the courtier’s wisdom for teaching him the importance of money and how it could grow or be lost.

After completing the story, I requested my colleague to do the calculation by 8000 Man-hours effort. The sum which came up was enough to make him realize the potential and to look at the bigger picture.

Financial decisions should not be taken lightly and suffer summary dismissal. After all “From small acorns do big trees grow”.

Out Sourcing

2008-07-28T03:51:00.000-07:00

Outsourcing is a management solution to utilize the services of external organizations to bring about internal efficiencies at lower costs. Today most organizations realize that they have certain core competencies which enable them to grow in the market. At the same time they realize that within the organization they have functions which can be more efficiently handled by outsourcing to specialists.

Some of the most well known solutions in the outsourcing space are client interaction or client facing functions which are better known as the BPO or Business Process Outsourcing. Outsourcing has been utilized by organizations in the US since the early 1980’s. With the advent of better, cheaper and reliable communication solutions, the location of the service providers became less important, hence the location of the organization providing outsourcing solutions became less important. The determining factors in choosing outsourced suppliers became quality, cost effectiveness and scalability.

The outsourcing of services got a greater boost in the nineties with the advent of better, cheaper and more reliable communication and networking solutions. Location no longer was the key criteria in determining the outsourced vendor. Hence large American corporations started utilizing the services of companies in places like India for their outsourced work. India became a favored destination on account of its huge skilled manpower base, well educated in English and working at lower wages. All these factors combined to give a cost reduction of up to 50% for similar services in the US. Thus off shoring (sending your outsourced work to different shores; “off-shored”) became a reality.

For many, off-shored and outsourced, is an interchangeable term which is not quite true. Any work outsourced to a company in the same country is not off-shored.

As outsourcing has acquired its own legitimacy, various types of outsourcing assignments and fields have opened up such as KPO and RPO.

The RPO or Recruitment Process Outsourcing is a form of outsourcing where an organization out sources its recruitment activities to an external service provider. The aim being to have an external company manage the entire recruiting process, from job profiling to on boarding. The objective of utilizing an RPO is to lower a company's time to hire, increase the quality of the candidate pool and reduce cost.

One may wonder “so what’s new in an RPO? Temporary staffing has been around for decades”. In the RPO model the complete process is managed by an external organization while in temporary staffing, the recruitment model is owned and managed by the hiring company. Thus the biggest difference is in “Ownership”.

The RPO industry owes its origin to the phenomenal growth of the IT industry, which required ever greater skilled technical manpower to fuel their growth. The ever greater difficulty in sourcing technical talent was causing a rise in huge payouts to executive search firms. This led companies to examine various steps required to be initiated in reducing hiring and HR costs.

With time as companies embraced the concept of outsourcing more and more, RPOs also gained favor among Human Resource Departments. Originally companies began outsourcing processes associated with benefits, taxes, and payroll. Then the recruitment process itself was considered for outsourcing.

Another important factor in the growth of the RPOs in the US has been the de-regulation of the labor market. There has been a shift towards contract and part-time labor and shorter work tenures. This trend has had an effect of increasing the RPO activity.

The pros and cons of an RPO:

1. A company must provide initial direction and continued monitoring to assure the desired results. Improper implementation and monitoring could result in failure.
2. RPOs may fail to provide the quality or volume of staff required.
3. RPOs may not be able to effectively meet the challenges of hiring for a company which has a negative impression in the work place.

As in any situation where a company opts for outsourcing, the company should be very clear in its objectives, processes and implementation.

Cost Cutting - The Solitary Soldier

2008-07-19T10:28:00.000-07:00

Cost cutting is a favorite theme in times of economic crisis. If you save money it’s very good, but if you save on manpower requirements its even better, as manpower is a recurring cost.

After a great and costly victory in World War II, the process of downsizing began in the British Army. One area seeing a reduction was the Royal Artillery. After judging the manpower requirement in field trials it was seen that there was an extra man, being used with each existing gun crew. Nobody could understand why the there was an extra man, whose sole purpose seemed to be do nothing but stand at attention.

It was obvious that there would have been some sound reason as the British Army always had sound processes, created after elaborate research and testing. So the generals decided to figure out why an extra man was doing nothing with each gun. For that they had to go back in time by almost half a century. The 60-pounder artillery gun was in use by the Royal Garrison Artillery in World War I. Weighing 4.4 tons, the 60-pounder required a team of 8 horses to tow it. Towards the end of the war in 1918 the horses were replaced by tractors and Lorries. It remained in use by the British Army till almost the end of World War II in 1944 when it was replaced by heavier artillery pieces.

Guess what, the person standing at attention; originally was required to hold the horse teams in World War I. The horses were phased out in 1917 but the horse keeper remained.

The modern day corporate world is littered with such examples of extra manpower built into personal “fiefdom’s”. A constant evaluation of personnel requirement would keep organizations leaner and more competitive reducing the pain of sudden knee jerk terminations.

Frugality At Work

2008-07-06T22:46:00.000-07:00

Carlos Ghosn is the chief executive of the Franco-Japanese alliance of Renault SA and Nissan Motor Co. On a visit to India in early 2007 to do a deal with Mahindra and Mahindra Ltd (M&M), he coined the term "frugal engineering".

“Frugal engineering is achieving more with fewer resources. The cost of developing a product in the West is high since engineers there use more expensive tools. In India, they achieve a lot more with fewer resources”.

Recently Daiichi of Japan has acquired Ranbaxy, one of India’s most successful Pharmaceutical Companies, to leverage on its low cost base.

The concept of frugality has been misunderstood by a lot of companies as being miserly. Consider this news story seen in a prominent newspaper, “techies would need to carry tissue paper, toilet paper and bottles of Hand wash to office”.

Cost cutting and having a systemized approach to saving costs are two different things. A systemized approach to cost saving is actually understanding the very work which is needed to be carried out and then after a careful analysis of all options choosing the most appropriate manner of going about doing it. The “Best” need not be the most appropriate. That can be ascertained only by a correct need analysis.

Similarly miserliness can be counterproductive. Take the case of the IT Company stopping the issue of toilet paper. While it may save a small percentage of direct cost, the indirect cost could be huge. Such examples tend to frighten employees into beginning job searches in the thought process that their company is sinking. This reduces their effectiveness and lowers productivity. For each employee lost it costs up to 50% of the gross annual salary of that employee in replacement costs, training, reduced productivity etc.

Frugality needs to be an idea which needs to be part of the ethos of a company with a complete buy-in from the stakeholders, not an idea which can be enforced. It should not be a knee jerk reaction but a carefully induced concept.

Frugality needs to be a way of life.

Leadership

2008-06-29T23:25:00.000-07:00

The passing away of Field Marshal Sam Manekshaw marks the end of a Chapter in the glorious history of the Indian Army. He was the Chief of Army Staff during the 1971 India-Pakistan war which resulted in the creation of Bangladesh. Though he was the chief of staff, you do not find his image in the picture which is the most potent image of that faithful event. That picture contains the image of Lt. General Arora accepting the surrender of Pakistani Troops from General AK Niazi at a famous signing of the instrument of Surrender.

I have read a huge number of articles on the Field Marshal’s qualities, but I find this one of the most important. A great leader is a person who has the ability to identify great talent, nurture that talent and allow the talent to grow and most importantly receive just rewards for success instead of trying to usurp it. The Field Marshall had great subordinates because he encouraged them and stood by them in their good times and bad.

I once had a boss who would say “when in the field think like me, and I will back you up”. He could identify great people and enthuse in them a sense of commitment and ambition. He would support them when they needed it. He managed to really grow the team and the company, but he faltered in the final steps. The ability to allow his subordinates getting their just rewards.

In today’s corporate world the biggest challenge is identifying “doers” and “achievers”. More often than not managers tend to hire people not for the benefits that they may bring to an organization, but for their ability to be molded. Managers would rather keep subordinates who are pliable and would not outshine them. Where this happens, it is an organizational failure from the top. An organizational failure, because the leadership at the top has not created an environment which encourages excellence. Where making a mistake is frowned upon and to be discouraged with punishment.

Any employee is bound to make mistakes. When it happens, most management tends to go on fault finding and identifying defaulters. A second chance is rarely given. That is where the difference between a good organization and a “great” organization lies. That is where leadership tends to fail.

Leadership is about identifying, nurturing, sustaining, supporting and rewarding. So Lt. Gen J S Arora got the greatest reward of all, a permanent place in History.

Paradigm Shift

2007-07-07T23:59:00.000-07:00

Paradigm Shift

It was a lazy Sunday afternoon last year, and I was going through my routine of browsing for books at my favorite bookstore. I came across a phrase, “Paradigm Shift, a term loved by management, but rarely understood by most managers”. An interesting statement, probably true to some extent. This nugget would have been forgotten, if it had not been for two news bulletins that I came across that day.

Sunday, the 6th of August marked the 15th anniversary of the publication of computer files credited as the start of the World Wide Web. Tim Berners-Lee who published these files, began the spread of computer interaction that has lead to the Web, as we know it.

There are now countless hundreds of million of people around the world using the Web for all sorts of reasons — commerce, communication, entertainment, education, info gathering. A friend of mine who came across this news bulletin remarked very candidly, “The Web represented a paradigm shift in exchange of information”.

Sunday, the 6th of August marked the 61st anniversary of another event, a tragic event that also resulted in a Paradigm Shift. Sixty one years earlier, the United States Air force, dropped the Atom bomb Little Boy on Hiroshima. That along with the next detonation in Nagasaki changed forever world power equations. Nuclear power changed the world and it was understood that “War between nuclear powers” would no longer have the victors and the vanquished, but in most probably total destruction on both sides.

So what is a Paradigm Shift?

Paradigm Shift is a term first used by Thomas Kuhn in his 1962 book The Structure of Scientific Revolutions. It describes a change in the basic assumptions within the ruling theory of science.

Linguistically, the word paradigm comes from the Greek word παράδειγμα (paradeigma) which means "pattern" or "example". The word “paradigm” has also been used to refer to a class of elements with similarities. Therefore when there is a shift from the “pattern” or “routine” it becomes a “paradigm shift”.

Kuhn’s argument in his book: The structure of Scientific Revolution” is that scientific advancement is not evolutionary, but rather a "series of peaceful interludes punctuated by intellectually violent revolutions", and in those revolutions "one conceptual world view is replaced by another”.

As we move forward we notice that the term “Paradigm Shift” is a concept or a theory to reflect change. The two events noted above are just that, events in time. However they mark a very clear change from one position of thought to another. That is what the Paradigm Shift is all about.

e-Learning

2007-06-19T22:41:00.000-07:00

"Blended Learning-The Human Touch”

“If we don’t fly that helicopter, we are going to die”. Urgency, need, and desperation are some of the emotions that came about when Keanu Reaves and his companion had to learn how to fly a helicopter in the film “The Matrix”. What happens next, instant pilot awareness from a computer program.

The solution is instant education transmitted through computers. The spectacular image has opened the concept of eLearning to many a corporate.

Why not Instant Knowledge?

Technology has brought with it, greater speed, greater reach, and the ability to do everything “out of a box”. Instant food packets only need to be opened for you to have food that is ready to eat. In fact there are packets of food that heat up when opened! So why not have Instant Knowledge available in small doses, for use when absolutely required.

eLearning Is to learning what Kanban was to Manufacturing. eLearning has changed the outlook of people to training in the same vein as the “Just in Time” management philosophy has changed the outlook of people in manufacturing. eLearning has highlighted focused and timely teaching. .

From Competition to Unity

Prior to the widespread acceptability of eLearning as an accepted medium of instruction, there was an accepted view that learning was a group activity. One learned as much as from the “instructor” as much as one learned from the participating students. eLearning brought about an individualistic approach to learning and hence was considered “competition” to the traditional form of classroom learning.

In the last couple of years eLearning has gained widespread acceptance and there is a greater level of comfort to eLearning. The focus has now been to take the best of both in the form of a mixed platform of “blended learning”. In essence, a mix of the self paced learning philosophy of “E-Learning” and the interactive approach of a classroom session.

The blended learning model typically approaches learning by focusing on the use of eLearning content prior to the classroom session. .

How many people can use the Help features in a Software tool?

However, as in all great concepts the problems lie in the implementation. The problem in this blended approach is that most users do not adequately utilize e-Learning material before attending rapid fire training classes. Their awareness level is the same even after using eLearning material. To understand this, one must realize most people cannot use the power of electronic gadgets. After all how many users of “Windows” actually know anything beyond the basic commands, or how many users of mobile phones, PDA’s , can really use the power available at their finger tips? The solution lies in the understanding that the use of e-Learning itself is best when there is prior human interaction, bringing about awareness of goals, and instructions on the use of the medium. The full power of e-learning devices has to be explained.

Bring about e-Learning with the right “human” touch.

So if you do not explain the power of e-Learning and its use, you would be doomed to failure. My strong suggestion, use e-Learning rightly in the right manner with the right instructions.

Re-Strategizing - Change is the Only Constant

2007-05-26T23:25:00.000-07:00

Heraclitus made this statement about 2500 years ago in Greece. He perhaps could not have realized how true it would be even today.

“The Western Union Telegraph Company” or “The New York and Mississippi Valley Printing Telegraph Company” as it was originally called, began operations in 1851 to provide telegraphic communications services in the United States. Western Union built the first transcontinental telegraph line in 1861.

Alexander Graham Bell, the father of the first functional telephone, demonstrated a working model sometime in 1865. Not having enough funds to begin commercial operation, he offered the rights to Western Union for a paltry 100,000 US Dollars in 1876. “Guess What?” Western Union could not envision the change the telephone would bring about and refused to part with the money. Alexander Graham Bell went ahead and formed “The Bell Telephone Company” the next year in 1877. The rest is history. As a telegraph service provider, Western Union is no longer there.

As we see, change is happening constantly in the workplace, in society, in relationships, just about everywhere. Just because it is constantly happening does not mean it is comfortable. Just look at Western Union and imagine looking at a situation where they knew that the telegraph business was dying due to changes in the means of communication. Such change could have catastrophic effects.

Such changes are taking place constantly. Companies dealing in fixed line telephony had to adapt to the wireless or mobile telephony in a much shorter span. Such changes have the greatest effect on the manpower in these organizations. To ensure that organizations can effectively deal with Change, a planned approach, Change Management, is evolved to deal with the human aspect.

Organisational change management is the process of developing a planned approach to change in an organization. The objective is to maximize the collective benefits for all stakeholders involved in the change. Another objective is to minimize the risk of failure of implementing the change. The discipline of change management deals primarily with the human aspect of change.

Change management is important from the perspective that new technologies, new opportunities are constantly being thrown up. There is no consistency in the marketplace and the smart worker needs to constantly acquire new skills. There is no life long job. Today the situation requires constant adjustment.

Coming back to Western Union, we see that the story did not end in the late 1800’s. Western Union did learn about change and they constantly evolved their services using their strengths in the telegraph space to start financial services using money transfers. Today Western Union is one of the largest Financial service providers with about 250,000 agents throughout the world. The last point in the Western Union telegraph saga happened in around February 2006 when the last telegraph was officially delivered and it transformed itself from a telegraph company to a purely financial services company.

Even though change is inevitable, does not mean that it will be comfortable. If you approach change proactively, you can control how you reinvent yourself. To deal with change, just ensure that you follow new trends, keep learning and stay flexible.

Six Sigma

2007-05-23T02:10:00.000-07:00

"Victory will go to those who make fewer mistakes”

Sun Tzu, Clausewitz, Napoleon, take your pick. Each one says the same thing in one form or the other. Victory is not necessarily yours for having the perfect strategy or approach, but it surely helps if you make fewer mistakes than your opponents.

Napoleon began the invasion of Russia on June 22, 1812. The invasion was doomed to failure due to ill planning, stretched supply lines, the harsh winter. The French suffered huge losses, from which they really never recovered.

Exactly 129 years later, on June 22, 1941, Hitler launched an invasion on the Soviet Union. The invasion was doomed to failure for virtually the same reasons as Napoleon's — ill planning, stretched supply lines and the harsh winter. In fact The Battle of Stalingrad was a turning point in World War II and is considered the bloodiest battle in human history, with more than 2 million casualties. We would perhaps remember it more by the film “Enemy at the Gates” based on the Russian Sniper Vassiliy Grigoryevich Zaitsev and his battle with Major König (played by Ed Harris) in the film. This single battle (according to some) was the start of the downfall of Hitler, confirming again the theory that while you may win by sheer brilliance, you most definitely will loose by making mistakes.

For a lot of managers, business is like war. Well, to prepare for it there are strategies, blueprints, usage of intelligence etc. The emphasis on winning by reducing your mistakes is one major focus area for most corporates. You can relate it to models of management, like Six Sigma, a buzzword for many in the corporate world. What’s the bottom line? Fewer mistakes mean more productivity. More productivity means more profits.

Six Sigma is basically a measure of quality that strives for near perfection, eliminating mistakes. Six Sigma is a data-driven approach and methodology for eliminating defects in any process — from manufacturing to transactional and from product to service. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities.

Over the years, practitioners in many organizations have championed these theories. However, there are equally large corporations that have not been able to implement procedures like six sigma in entirety. This then raises a question. Is a process in itself enough? Is it a means to an end or is it an end in itself?

Maybe we could look at one major success story in India to highlight success through the elimination of errors, and what little extra is associated with policies and procedures.

The famous Tiffin Carriers of Mumbai are a centuries old. Their roots lie in the British Tradition of “Tiffin” or hot lunch. Some say that the vocation arose from a need of the British and Parsi communities for hot lunches, while others say it arose from a requirement of British Officers getting their lunches piping hot in various outposts in Bombay. Whatever the actual story, probably a mix of both, the tradition has survived for over a 100 years.

The Tiffin Carriers association has a network of some 5,000 carriers who deliver hot lunches to more than 200,000 people every working day, returning the Tiffin-boxes to suburban spouses before the evening rush hour. This labor-intensive business has an astonishing history and an error rate of one in six million transactions. The success rate is better than six sigma standards and their Six Sigma business has no high-tech technology. It employs people with little or no education.

What it has going for it is a process, a belief in the process and adherence to the process that is almost mind-boggling. You do not need a sophisticated process to make things work. However, what you do need are the human elements of “diligence, hard-work, relationships and loyalty, amongst others”.

Repeated mistakes are a costly proposition. That is understood. Means and processes have to be evolved to eliminate errors. That however is not enough, what is required is the human touch, a belief in a system, hard work and sincerity.

Introduction.

2007-05-22T20:45:00.000-07:00

Aesop's Fables and the Panchtantra and other such works have often been a source of getting easy to understand explanations to various issues. Stories such as the turtle and the hare, are representative of the fact that "Slow and and steady wins the race". For every new generation with changing view points and references, the need to put across points contextually arises often.

Being a voracious reader, of virtually any genre, fiction, non fiction, autobiographies, the daily news etc, I have started writing articles from the personal perspective and to explain certain issues to friends.

Hence the title "Fable"ous Management Theories, drawn from "Aesop's Fables".