The Importance of Service Transition

“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

Why RACI Fails

“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.

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

“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.

Difference between Sales and Operations Approach to Transactions

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.

Overselling a Product's Capability

"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

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.

In Charge Vs In Control

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".

“Lessons For a Manager from a Politician”

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.

The Entrepreneur Manager

“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.

Corporate Visions Part 2

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

“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

Idealism Vs. Pragmatism

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.

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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?

Management vs. Leadership

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”.

Compounding Money

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

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

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

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.

Paradigm Shift

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.

Re-Strategizing - Change is the Only Constant

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

"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.