Biz Musings

Business Development

2009-09-22T10:16:00.002+05:30

There is always a set of people in B-Schools who want to get into "Business Development". Seth Godin, in his usual style has written a blog on this which is reproduced here:

>>

Business Development is a mysterious title for a little discussed function or department in most larger companies. It's also a great way for an entrepreneur or small business to have fun, create value and make money.

Good business development allows businesses to profit by doing something that is tangential to their core mission. Sometimes the profit is so good, it becomes part of their core mission, other times it supports the brand and sometimes it just makes money. And often it's a little guy who can be flexible enough to make things happen.

Examples:

Starbucks licenses their name to a maker of ice cream and generates millions in royalties.
A rack jobber like Handleman does a deal with a mass marketer like K Mart. K Mart gives them room in the store to sell records and gets a cut, Handleman does all the work.
AOL buys AIM instant messaging software and integrates it into their service.
Years ago, I licensed the rights to Isaac Asimov's Robot novels from a business development person at his publisher and turned the books into a VCR murder mystery game which I licensed to a business development person at Kodak, a company that was experimenting with becoming a publisher. (Isaac made more from this project than he did from many of his books).
Best Buy offers extended warranties on appliances you buy. They don't provide the warranty, of course, a business development person did a deal with an insurance/service company to do it and they share the profit.
The Princeton Review built a huge test prep business, but only by licensing their brand to a series of books which did the lion's share of their marketing for them.

You don't see business development from the outside, particularly all the potential deals that fail along the way. Many companies, though, spend millions of dollars a year looking for deals and then discovering that they pay off many times over. Others, particularly smaller competitors, are so focused on their core business that it never occurs to them to consider partnerships, licensing, publishing, acquisition and other arrangements that might change everything. Harley Davidson probably makes more money on business development than they make on motorcycles.

The thing that makes business development fascinating is that the best deals have never been done before. There's no template, no cookie cutter grind it out approach to making it work. This is why most organizations are so astonishingly bad at it. They don't have the confidence to make decisions or believe they have the ability to make mistakes.

Think about the Apple Nike partnership on making a device that integrates your iPod with your sneakers. This took years and cost millions of dollars to develop. Most companies would just flee, giving up long before a deal was done and a product was shipped.

Here are some tactical tips on how to do business development better:

Process first, ideas second. If you're going to be bringing new partners and new ideas into your organization, you need a process to do it. Professionals don't, "know it when I see it." Instead, professionals think about the abilities of their company and strategies necessary to bring ideas in, refine them and launch them. Great business development people don't waste time in endless meetings with random vendors or hassle about tiny details up front. Instead, they have an agenda and a project manager's understanding of what it means to get things done. They don't keep the process a secret, either. They share it with anyone who wants to know. Someone needs to say, "here's how we do things around here," and then they have to tell the truth.
Who decides? Because every great business development project is different, it's incredibly easy to get stuck on who can say yes (of course, everyone can say no). Professional business development people intentionally limit the number of people who are allowed to weigh in and are clear to themselves and their potential partners about exactly who can (and must) give the go ahead. Don't bother starting a business development deal unless you know in advance who must say yes.
Courtship, negotiation and marriage. Every deal has three parts, and keeping them straight is essential. During the courtship phase, you win when you are respectful, diligent, enthusiastic, engaging, outgoing, and relentless in your search to make a connection. Do your homework, research people's backgrounds, learn about their kids, visit them--don't make them visit you. Look people in the eye, ask hard but engaging questions, you know the drill. Basically, treat people as you'd like to be treated, because the people you most want to work with have a choice, and they may just not pick you. Hint: if you skip the courtship part, the other two stages probably won't come up.
Buyer and seller. If you've ever pitched a product or service to a business, you know how soul-deadening it can be. The buyer works hard to make it clear that she's doing you a favor, and you need every dog and every pony available at all times (and you better be the cheapest). But business development doesn't have this dichotomy. Both sides are buying, both sides are selling, right? So talented business development people never act like jaded buyers, arms folded, demanding this and that. Instead, from the start, they seek out partners.
Enthusiasm is underrated. Business development people are exploring the unknown. That means that there's more than cash on the table, there's bravery and initiative and excitement. The best business development people I've ever worked with are able to capture the energy in the room and amplify it. They'll build on the ideas being presented, not make them smaller.
Close the open door. I regularly hear from readers who are frustrated because a big company wasn't willing to hear a great idea they mailed in. Here's the thing: there isn't a shortage of ideas. There's a shortage of execution. That means that successful business development teams look for proven partners and organizations with momentum. A key part of that is the decision to say no early and quickly and respectfully to people who don't meet that threshold.
Call the lawyers later. A business development deal that never happens is one that's sure to cause no problems. While the legal clarity you need is important, there's plenty of data that shows that ten page NDA agreements and onerous contracts early in the process don't protect you, they merely waste your time and energy.
Cast a wider net. The Allen and Co. annual gathering is a dumb place to choose a merger partner. Limiting the number of potential partners to people you've met at a trade show is also silly. Business development (when it works) creates huge value for both sides, so better to be proactive in searching out and soliciting the organizations that can make a difference. Here's a simple way to widen your net: start a blog and go to conferences to speak. Describe your successful business development projects to date and let the world know you're looking for more of them. How many amazing partnerships could the Apple store launch? How many great books could Starbucks highlight? Not only don't they do this, they hide. Don't hide.
Talk to the receptionist. This is huge, and so important. When a great partner shows up at your doorstep, do you know? Here's a test: call your organization (pretending to be from some respected organization), describe a business development opportunity and ask who can help. If you're not immediately transferred to your office, you've failed, right? Make it easy for the right people to know that you're the right guy.
Hire better. How do you decide who to put in this job? I'd argue that glibness and charisma aren't as important as strategic thinking, project management and humility.
Structure deals with the expectation of success. The only real reason to do business development deals is because when they work they're so powerful. Andrew Tobias put his name on a piece of software that ended up earning him millions of dollars. It's easy to get hung up on all the bad things that could happen, but keep your focus on how the world looks when you get it right.
End well. Most of the time, even good business development deals fall down before the end of the negotiation process. If a deal doesn't come together, say so. Acknowledge what went wrong, thank the other party and end well. If it does come together, track the integration and stay involved enough to learn from what works and what doesn't. I'm still waiting to hear from people who said they'd get back to me "tomorrow" fifteen years ago, but I'm losing hope... Ending well not only teaches you how to do better next time, but it keeps doors open for when you need to come back to someone who you should have done a deal with in the first place.

Exciting Innovation - Sixth Sense

2009-08-19T10:01:00.002+05:30

So if you get a kick out of tech innovations, watch this video.

I bet in 10 years, this will be common across the globe. A new era in user experience!

Bloglines ... .. .

2009-08-12T12:13:00.002+05:30

Am moving away from Bloglines after 5-6 years. I am not too sure how long they will survive and for some of us it appears as if people have already left forgetting to turn the servers off and at some point, when all payment reminders are sent and not responded, the ISPs might just decide to pull the plug.

Just worrying if such a state occurs to Facebook or LinkedIn!

Global Corruption Map

2009-08-09T09:26:00.000+05:30

A global corruption map by Forbes. Maps countries against Corruption Perception Index.

Bandwidth Sync Correlation & Media

2009-08-09T09:09:00.003+05:30

(reproduced from Seth Godin's blog, including the text)

So, what can you learn here?

There's a huge correlation between how much interaction there is and how powerful a medium is (at least among successful media). Telephones changed the world because the interaction is so real. As you get more interactive, though, you exchange less dense media. You can't have a real time conversation online that carries the digital impact of a movie or some other high bandwidth entertainment.
The bottom left corner is the scrap heap. It's hard to place a commercial value on this part of the grid and there's not a lot of commercially interesting work being done here. People just aren't interested in low bandwidth, non-interactive media. Graffiti, for example, rarely draws a paying crowd.
The top right of the corner is where huge value and difficult sales lie. Not everyone can pay for the scarce resources needed to deliver an in-person seminar or one on one coaching, but those that need and can afford it, love it.

If you had seen this chart three years ago, you obviously would have invented Twitter. Now that you see it today, what will you create?

(Thanks: Seth Godin).

Twittering

2009-05-13T11:36:00.003+05:30

Ah. The World does move fast. Less than 10 years of blogging making a first appearance, it is already becoming a big bore to blog or read them. It is the world of twitter. Make it short, make it precise..

As I continue to blog, I am also going to twitter more and am eagerly awaiting the day when tweetdeck or other plugins let me post in one shot to twitter, facebook and blogspot!..

Misgovernance at World Bank

2009-04-24T09:51:00.002+05:30

We all know how a pathetic institution World Bank is. While it claims to reduce poverty in the World, it has done little to reduce poverty of the beggars in front of its main posh offices at Washington, DC. This institution is a embodiment of incompetence, mis-governance, corruption, advancement of selfish & personal motives in the shroud of poverty reduction and what not?..

Harvard Business School has come out with its research on Mis-Governance at the World Bank. The draft of the paper can be found here and an interview with the authors here. While it is a very interesting paper, I also hope & believe that this is just the icing on the cake and one of the first to appear..

It is time that the World stops and rethinks & redefines the purpose, mission and operating procedure of this mammoth irrelevant institution. The least that we can do is to cut down the $1.5B in Op-Ex!!

Leadership Vacuum

2009-04-06T09:37:00.001+05:30

Steve Hamm of BusinessWeek wrote

It has been a remarkable couple of weeks in New York. First, the financial system meltdown. Now, Meltdown Part II. Meanwhile, many of the world’s political, business, academic, and civil society leaders are in the city this week attending the UN General Assembly meeting, the Clinton Global Initiative conference and a smattering of smaller big-think events. It seems to be the end of the world as we knew it. And being on the edge of big and painful changes has put people on edge. There’s a sense of urgency. Also, anger.

I talked to Craig Barrett of Intel and Pramod Bhasin of India’s Genpact on Monday and Tuesday, and it was remarkable how frustrated they are—and how willing to express it. Barrett lamented that the US government has not responded to industry’s calls for long term planning and investing in national competitiveness. Instead our leaders stumble from crisis to crisis and play to the popularity polls. “The government is thumbing their noses at us!” he says. Bhasin bemoaned India’s corruption and lawlessness: “Private industry is trying to pull us into the 21st Century, but government is trying to keep us in the 18th Century!”

What’s going on here is we’re in the middle of a global leadership crisis. The US was once the undisputed world leader, economically, politically, and, after 9/11, morally. But the Bush administration blew that big time. In the past eight years, we have been diminished tremendously. When Bush gave his lifeless speech at the UN yesterday, he seemed to have shrunk to half of his former size. There was barely a ripple of reaction from the audience. He is not only despised; he’s now irrelevant. Meanwhile, the overheated and untruthful rhetoric of the US presidential election has diminished the stature not just of the liars but those they are lying about.

But the world needs leaders—individuals and countries with the authority, recognized wisdom, and clout to bring stability to global affairs and economics. And, right now, it doesn’t have any. Putin’s a powerful despot who commands no respect beyond his borders; China’s leadership is a faceless, self-absorbed bureaucracy; Britain’s Brown is a faded star; and Merkel is merely a competent technocrat. The only global political leaders who inspire respect and excitement (at least, from me) are India’s Singh, Columbia’s Uribe, and Rwanda’s Kagame. Unfortunately, Columbia and Rwanda are too small to matter except symbolically, and Singh governs a nearly ungovernable India.

Survey the business horizon, and you come to a similar conclusion. Only Warren Buffett commands almost god-like respect. What he thinks and says matters. Leaders such as IBM’s Palmisano and Intel’s Barrett are competently leading their large companies through the storm, but their influence is fairly limited beyond the borders of their supply chains.

In civil society, people expect a lot from Bill Gates now that he’s spending most of his time on his foundation. He has a ton of money, between his fortune and Buffett’s, and a bold strategy for attacking poverty and disease. I have a lot of hope for what he can do, too. In fact, I suggested to a couple of Gates Foundation people earlier this week that he should use his UN speech to try to calm the world. Their answer: It’s impossible to do that in the six minutes that have been allotted for him.
I have hope, though, for the state of leadership in the world and for America’s role in it. Think of the US in the early 1930s. We were in disarray, yet a great leader came in with a vision, a plan, and a commanding confidence that turned the tide and set us on the course that made America a positive role model and shaper of the course of world history for more than half a century. That sort of thing could happen again.

Math, anyone?

2009-03-22T20:12:00.000+05:30

A favorite clip of mine.. Can you beat the logic? And btw, it isnt meant as a tirade against anyone;)!

Blame the B -Schools

2009-03-18T07:15:00.003+05:30

Peggy Cunningham, the Director of Dalhousie's (Halifax, Canada)) MBA program echoed the thoughts of millions of others in this interview when she said that B-schools are to be blamed for current crisis and B-schools have ended up creating greedy monsters.

I tend to agree with her in largely. (If you dont, loook into placement fair historically in last 7 years at IIM-A). However I would add one tag to that. It is basically Bankers (& Finance MBAs) who are to be blamed for this. Of course, it doesnt mean rest of the world is as innocent as it can be. The overall greed still is the root cause of all evil - however Bankers (and I include Financial services giants as the leaders of this group) had the great evil genius brains to innovate bad financial instruments, make the rest of the world poor while they continue to grow rich - thus not bothering about true creation of wealth.

Captialism & Socialism - Mini Lecture Series - Parts I thru V

2009-03-16T15:11:00.003+05:30

Re- posting notes from Capitalism & Socialism - Mini Lecture Series (I thru V).

Shareholder value is a myth - says who? Neutron Jack!

2009-03-14T12:41:00.002+05:30

Jack Welch, the idolized management guru, Neutron Jack who mercilessly shutdown businesses which didnt add shareholder value, the same Jack who possibly influenced several MBA classrooms with his 'investor/shareholder returns should be focus of the business' thought gave an interesting interview in FT.

Jack says:

"On the face of it, shareholder value is the dumbest idea in the world," he said. "Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products."

I still believe that there should be a minor tweak to the order of main constituencies - customers should come first, followed by employees and finally products. If every company strategizes "customer care" as a core competency and willing to risk short term gains, success is definitely on the cards. But then, getting to that decision and living by that commitment needs lot maturity.

The Satyam Marriage

2009-03-14T07:58:00.006+05:30

Per today's Economic Times, one of India's highly unreliable business gossip dailies, the current list of Satyam suitors include IBM, KKR, iGate and Fidelity in addition to Tech Mahindra, Spice and L&T. Let us forget that ET news is as unreliable as it can get and do a quick and dirty analysis of who will win over Satyam finally. Of course, all the MBAs from various financial markets will publish voluminous analysis - especially that they have nothing else better to do anyway.

The analysis will have to be done typically 5 angles - investors of original Satyam, buyers/current investors, the employees of Satyam, clients of Satyam and the Govt. (appointed board)...

Investors of 'original' Satyam - this is a easy set of people to be ignored. In the current scenario, any type of purchase is not going to recover the lost money, especially all the goodwill asset value. However the undoubted optimist will still hope that it will be a large public company (read IBM) that will buyout Satyam with a share-exchange plan in place. Institutional investors will oppose any PE buyout because they know all they will get is few peanuts if that was the case.

Buyers/Current investors - Given Satyam clientele, the large workforce, processes of Satyam, IBM might see lot of value in the acquisition. Particularly after HP has lapped up EDS/MPhasis and Obama creating issues for offshoring jobs, IBM might want to solidify its commanding presence in low cost labor. For Tech Mahindra, it is a great time to scale huge right away. iGate's story is still vague - am not sure they have done a due diligence of what they will do if they acquire Satyam - more or less they would get eaten away by the magnitude of Satyam's operations. L&T, Spice are not right suitors according to me. They neither have a good vision nor the capacity to manage a large ITeS organization for now. However, the most important suitor is KKR. No matter what KKR says, the end result is that it will break Satyam into smaller pieces and sell them off one at a time within 5 years or less.

Employees of Satyam - Currently the employees are the strength of the company. However, it is also to be noted that the employees dont have much bargaining power, given the economy. In this kind of situation, the employees would prefer taken over only by an IT Services organization - IBM, Tech Mahindra, iGate - in that order. For them moving to IBM is the safest option - they get a better branded tag and also move into a safe, comfortable and familiar territory. The employees' big fear would be to be taken over by KKR. For a KKR buyout will clearly result in quick layoffs of the excess fat right away and KKR would never hesitate to take tough decisions in tough times.

Clients of Satyam - This is a tough set to deal with. I am sure that the clients would not prefer a L&T/Spice takeover. The clients might be ok with an IBM takeover, with IBM's established reputation. From their point of view KKR may not be a bad choice either - however, the clients know that if KKR steps in, their bargaining power will go down for sure.

Govt/Board - Now what would the board declare as a victory? Am sure that the board would definitely not accept a PE takeover as a victory. For one, the PE pricing will be the most conservative and PE buyout will create lot of uneasiness for various stakeholders. For the board, a sale to Spice might be a full victory -an Indian company transitioned to a Indian company. IBM may be a close choice as well - safe zone.. and IBM has a history of mess-up in a lot of things and will live up to that reputation - a mess in Satyam acquisition will be soon forgotten.

Considering all above, as one can sense, IBM comes to close enough to satisfying lot of factors and a suited suitor for Satyam, though in my opinion, KKR would possibly be the right buyer at the moment. Satyam, in spite of having a strong workforce, is definitely struggling with a immature senior management and a bloated labor force to some extent. KKR would be the right choice to put the company back in shape.

IBM is popular. KKR is a fit. But we should not forget a lot of other players in this game - institutional shareholders, LIC, NASSCOM, other Indian IT Services majors, media and finally Raju (!).

Lets see who wins the Swayamwaram.

Project Management Quotes

2009-03-12T07:20:00.002+05:30

Stephen Seay compiled this wonderful list of quotes on Project Management. I thought this is a interesting read and must be passed along. So here you go:

Good estimators aren't modest: if it's huge they say so.

The sooner you begin coding the later you finish.

A verbal contract isn't worth the paper it's written on.

What is not on paper has not been said.

If you don’t know where you’re going, any road will take you there.

If you fail to plan you are planning to fail.

If you don't attack the risks, the risks will attack you.

A little risk management saves a lot of fan cleaning.

The sooner you get behind schedule, the more time you have to make it up.

A badly planned project will take three times longer than expected - a well-planned project only twice as long as expected.

If you can keep your head while all about you are losing theirs, you haven't understood the plan.

When all's said and done a lot more is said than done.

If at first you don't succeed, remove all evidence you ever tried.

Feather and down are padding - changes and contingencies will be real events.

There are no good project managers - only lucky ones.

The more you plan the luckier you get.

A project is one small step for the project sponsor, one giant leap for the project manager.

Good project management is not so much knowing what to do and when, as knowing what excuses to give and when.

If everything is going exactly to plan, something somewhere is going massively wrong.

Everyone asks for a strong project manager - when they get him they don't want him.

Overtime is a figment of the naïve project manager's imagination.

Quantitative project management is for predicting cost and schedule overruns well in advance.

Good project managers know when not to manage a project.

Metrics are learned men's excuses.

For a project manager overruns are as certain as death and taxes.

If there were no problem people there'd be no need for people who solve problems.

Some projects finish on time in spite of project management best practices.

Good project managers admit mistakes: that's why you so rarely meet a good project manager.

Fast - cheap - good: you can have any two.

There is such a thing as an unrealistic timescale.

The more ridiculous the deadline the more money will be wasted trying to meet it.

The first 90% of a project takes 90% of the time the last 10% takes the other 90%.

The project would not have been started if the truth had been told about the cost and timescale.

To estimate a project, work out how long it would take one person to do it then multiply that by the number of people on the project.

Never underestimate the ability of senior management to buy a bad idea and fail to buy a good idea.

The most successful project managers have perfected the skill of being comfortable being uncomfortable.

When the weight of the project paperwork equals the weight of the project itself, the project can be considered complete.

If it wasn't for the 'last minute', nothing would get done.

Nothing gets done till nothing gets done.

Warning: dates in the calendar are closer than you think.

There is no such thing as scope creep, only scope gallop.

Anything that can be changed will be changed until there is no time left to change anything.

If project content is allowed to change freely the rate of change will exceed the rate of progress.

If you can interpret project status data in several different ways, only the most painful interpretation will be correct.

A project gets a year late one day at a time.

A project isn’t over until the fat check is cashed.

Powerful project managers don't solve problems, they get rid of them.

Global Savings Glut

2009-03-10T21:18:00.002+05:30

Would like to post a couple of interesting links for those who would like to explore more information on how the global debt crisis began.

The first link is that of my favorite Nobel Prize winning columnist Paul Krugman's NYT Op-ed. He discusses Ben Bernanke's famous 2005 speech on Global Savings glut and explains it in layman's terms.

Revenge of the Glut

The second link is that of the original speech by current Chairman of Fed Reserve Ben Bernanke, who explains his view on how the emerging Asian markets, especially China exported Capital amongst other things to western world, thereby causing a savings glut.

Global savings glut and US Current Account deficit

Those of you interested in exploring more (similar) articles, ping me.

Stockbrokers :)

2009-03-02T17:18:00.002+05:30

An old but relevant joke:

Stockbrokers are called so because they advise/help us in investing in stocks that make us go broke!

B School & Placements

2009-03-01T20:11:00.004+05:30

One thing that many of us haven't yet got right is the fact that going to B -School is NOT going to a placement/career fair. But that is the way the B-School advertisers, media and even alumni have projected it. And it will stay no matter what anyone says.

One crore + salaries are abundant in B-school placements in India. Every IIM boasts for at least 1 if not more 1CR+ salaries. The media goes ga-ga about it. And IIMs, the institution that is responsible for generating talent that will help India move forward, has just become a placement factory like any other private B-school, only with better results. Doesn't it look queer when a MBA grad from IIM, with 1 or 0 years of experience gets a 1 CR salary? Either something is wrong with the company/industry that is hiring him/her, or he/she is so exceptionally talented - in which case we can use that person to help us get out of such economic crisis as the one we are facing.

The pressure of students in IIMs about placements, and the reports that they drink their sorrow just shows what wrong set of candidates the institutes have admitted in the first place. Aren't these students just trained to cope with crisis and provide leadership to situations? Instead of fighting for placements, losing hope and drinking in sorrow, aren't these top notch exceptionally talented MBA grads supposed to provide leadership to themselves, their institutes and be creative to steer out of crisis?

What is the point in hiring those with great 1CR salaries, when they are fighting like cocks for jobs? Even amongst the IIMs, there is a bitter cold war across the A,B,C,L institutes to "claim" companies for placements. They have also been playing by moving their placement dates up and down to get the companies "first". And worse, they have gone to connect with thousands of companies, who have been ignored and ashamed by the same institute all these years.

What is worse, one can blame this "placement focused" attitude and curriculum of IIMs as the base for killing enterpreneurship and arming students with skills to survive and compete.

The management boards of IIMs should come together to declare that they would stop babysitting their students for placements. Going to a B-School is to arm onself with skills that will help him/her to be successful as a leader and create a vision. It is not a placement fair. And of all places, institutes like IIM should start setting right examples.

Recruiters can wake up and stop being irrational in recruitment. And for Godssake, the usually stupid media can stop evaluating B-schools in terms of top salaries and placement statistics.

Leadership is not a popularity contest, Mr. Obama

2009-02-10T16:36:00.004+05:30

I have so far restrained myself from making any posts relating to politics in this blog. However, as I had said in an earlier post, it will be stupid to form theories and predict outcomes ignoring effect of powerful externalities like politics. It is like a Physicist proving something under vacuum conditions and proposing that the same would happen when normal atmosphere is present.

The last few days have been anything but depressing. What Obama intends to do is extremely unclear. Does he, as the historic President of United States, really wants to support the falling economy and get it back on track? Or is he just content to be the first Black President who got bi-partisan support for every bill he introduced on the floor?

Time and again, renowned economists like Prof Krugman and Thomas Friedman have been arguing the necessity of a huge stimulus to try & fix the large black hole. In spite of having some well known names in his Economic Team, Obama has introduced a bill, which in all likelihood would have lost its meaning by the time it passes the floor. And what is worse, he didn't even manage to get bi-partisan support for it!

Mr. Obama, it is time to wake up and realize that leadership is not a popularity contest. You were in a popularity contest till Nov 20, 2008. You have already won it. It is not enough to give powerful speeches anymore. It is the time of action. And every day that we lose is precious.. It is not time to experiment with getting bipartisan support. It is not time to just talk about greediness of Wall Street or anything. It is time to frame strigent policies and jump to rescue. It is not enough to be called the popular first black president. It is better to be called as a true leader who led the renaissance of the US economy.

It is a time to show leadership.

Financial Mess and the Reforms

2009-01-29T14:12:00.004+05:30

I was worried.

I was worried very deeply when this financial crisis hit. Not just because lot of us lost truckloads of money in stocks or real estate investments; not just because lot of us may find ourselves deprived of comforts that we otherwise would have enjoyed; certainly not just because lot may go unemployed..

But I was worried because this financial mess might just be one another passing phase where the so called dark side and socialists shout for reforms and the rest of free market capitalists waiting for their time to go back to bad old ways. I was worried that we might never actually work and implement some of the financial reforms that will keep more checks and balances in the systems. I was worried that we might never get to action-ize what Paul Krugman, Joseph Stiglitz and Prof. Jeff Sachs have been talking about for a very long time.

But now I am not that worried. If the latest IMF report released today were to be believed, looks like the financial mess will stay for quite some time in spite of coordinated actions by bankers and governments. And that the world will witness just 0.5% growth - the lowest since Second World War. Don't mistake me as a sadist - I am very depressed about all this just the way you are. But I see this as an opportunity to learn tough lessons; to put into reality some of the measures that the Keynesians have been cribbing for quite some time; to put checks against financial institutions that go on a spree unchecked; to persuade development institutions who blackmail cutting of loans/funds unless there is free & open market without thinking through the consequences.; to work towards reducing growth gaps.

This is the best opportunity we have to work on financial reforms. If we dont use it, we have only all of us to blame in less than a decade again for similar situations.

ISB is World #15 - FT MBA 2009 rankings

2009-01-26T11:52:00.005+05:30

ISB did it again!

After catapulting itself to FT #20 for MBA 2008 rankings, ISB has bettered its act. FT announced ISB as the World's 15th best MBA school in its 2009 rankings.

Last year, after the rankings were released, there was a major downplay of this record by non-sportive people. But ISB has proved itself and made sure that it is here to stay and is not just a one time (w)oneder. One of the comments in my previous blog when ISB was declared a FT #20 school said I was being profound. I stand by what I said that day and am proud of this school and this moment again.

Congrats to ex-dean MR, Dean Ajit, Chairman Rajat, the Governing board, all resident and visiting Professors, all the staff and all the alumni and students of this great school.

This is really an awesome time for Indian higher education. Go ISB!

Obama and he future of offshoring/Indian IT/ITeS

2009-01-23T11:22:00.007+05:30

So Obama is in the coveted seat finally.

And after all the celebration of the black man moving into the White house, now the who's who of India Inc. is sitting up to see what this revolution means to them. In particular sweat are the IT/ITeS guys who worry that Obama's anti-offshore stand would affect their glorious run for a long time.

Their concerns are filled with reason. The new President has promised to punish those companies who send American jobs offshore. After all, the democrats are a labor party. And how can their President not listen to the socialistic calls? I have seen lot of Op-Ed columns in recent days blaming Obama for not taking a leadership stand when it comes to offshoring issues, but just succumbing to partisan politics and short term benefits.

A couple of days back at a social gathering, one of my acquaintances, who is a Senior VP with India's largest tech services company, said that the IT future of India looks bleak and maybe we will go back to pre-2000 days. Though the companies would remain profitable, he added that the margins will shrink, hiring will slow down and growth will not be at amazing numbers like before. A few people asked me what my take was.

Yes. We don't have a rosy picture for India now. Economic meltdown, Mumbai attacks, Satyam fiasco, Obama in the White house - infact it looks like when it rains, it pours!. So many anti-effects for India-IT.Com.. Yeah, the picture isn't good and analysts sentiments are real bad. Infact even after good results, a few IT companies stocks have been downgraded by analysts because the future is uncertain and current performances are largely because of currency fluctuations.

But lets put analysts away for a while. Business and world do not run by what media or analysts "think". Evaluating future of IT companies of India by analyst sentiments is lequivalent to saying that the Fed should form its operating principles based on what gamblers in Atlantic City or Las Vegas "think".

As much as we talk about problems of globalization, the inequalities created because of such moves (and I am a very strong subscriber to that faith), the (unfortunate) truth is that nobody is in control of globalization. It is not a phenomenon that you can stop by pushing a button. Obama may sit in the Oval office and proclaim himself as the World's most powerful man, but neither he nor anyone has the power to stop globalization. The world is shrinking at such a rapid pace that competitve advantages will overcome absolute advantages over a very short period of time.

If Obama thinks that he can "control" offshoring, by offering tax breaks to those who dont offshore and "punishing" those who do, he is simply trying to cover his eyes and claim that the Sun is gone. US has been doing this kind of manipulation in several sectors (like Textiles, or Fisheries for example); but in a matter of time, companies will stop buying this. You cannot control offshoring by these kind of laws. If he is serious about improving jobs in America, Obama would rather focus on building education platforms, control cost of living and make labor freely available with necessary talent.

By enacting laws to prevent offshoring, Obama will enable only weaking of companies who struggle to survive without quality labor or who struggle to live with high cost labor and finally end up offshoring anyway or worse, close shop or lose to competition from rest of the world.

So my take on this matter is that, Obama can do what he wants to do - the Indian IT will not face any crunch as long as we are backed my good educational institutions, great talent and of course, comparitively cheap labor. If we are worried with stock downgrades, I think we should conveniently stop worrying - as the analysts who do these funny acts really are playing without getting the big picture. After all, the analysts are gamblers - Do you still listen to them?

Satyam - a Poison Pill?

2009-01-18T07:46:00.004+05:30

It has been bothering me for some time if Satyam had eventually decided to swallow the poison-pill? When the Maytas news broke out on Dec 16, there has been a bunch of conspiracy theories going around.

One big possibility which I tended to incline slightly at that time was:
- the promoters stake was getting diluted because sale of mortgaged Satyam stock by lenders (which were mortgaged in the first place to invest in Real estate)
- the only way the promoters could keep management control was to do a MBO(management buyout) of the company (with help of PEs)
- and the best way to do it was to reduce the buyout rate

While the above seems a nice little corporate theatrical act, there are lot of obvious gaps in the story.

With news being surfaced about the controversial Dec 16 board meet, there are questions if Satyam really decide to take the poison pill to avoid takeover by IBM or HP? That Satyam may get acquired is not a new story. As early as 2003, there have been strong rumors of a EDS takeover. From 2005, it was a IBM takeover story - the rumors got only stronger.
- What if they werent rumors? What if one of the IT biggies was ready to swallow the Indian IT major?
- By taking a poison pill to invest in real estate and infrastructure, it was a smart way to keep the interested parties away as they would have no interest in these kind of ventures
- Or was the poison pill an act too? - to cover up siphoning of funds and/or lack of real cash?

Some time back I watched Barbarians at the Gate - the fall of RJR Nabisco. Maybe we will have our own movie soon once we figure out the screenplay.

(For the record, I HATE conspiracy theories of any sort).

Trusting Economists - an oxymoron?

2009-01-18T07:37:00.002+05:30

Uwe Reinhardt, an economics professor at Princeton says

Matters are worse when, wittingly or unwittingly, economists infuse their analysis with their own (or a political client’s) preferred ideology.

Consider, for example, President Bill Clinton’s 1993-94 health-reform plan. In this plan, President Clinton proposed a mandate on employers to provide their employees with health insurance.

Politically conservative economists predicted that the mandate on employers to provide employees with health insurance would lead to vast unemployment. Economists supporting the Clinton health plan predicted that the negative employment effect of the mandate would be small, and that the effect might even be to increase employment.

It can be shown with a simple mathematical model that an economist’s prediction in this regard is powerfully driven by two assumptions about the behavioral responses to mandated employer-paid health insurance.

The first is the responsiveness of the supply of labor — that is, how many workers are willing to work — to changes in take-home pay. Economists generally believe that employers reduce take-home pay to recoup their contributions to any sort of fringe benefit, including employer-paid health insurance. If workers are very sensitive to changes in take-home pay, one would predict a highly negative employment effect in response to government-mandated, employer-paid health insurance, other things being equal — i.e., the number of people with jobs should go down.

On the other hand, if the supply of labor is relatively unresponsive to declines in take-home pay, one would predict only a small decline in overall employment in response to the mandate. Unfortunately, the empirical literature on this responsiveness offers economists a wide range of estimates from which they can choose judiciously to make their (or their political client’s) preferred case.

The second effect bearing on this issue is the value workers place on having health insurance on the job. If that value is high, then the employment effect of the mandate might even be positive, other things being equal, as people choose to enter the work force just to get health insurance. Some economists in the Clinton era who supported the Clinton health plan appear to have used this hypothesized effect to predict a net increase in employment in response to the employer mandate.

This example starkly illustrates how easy it is for economists to infuse their own ideology – or that of their clients – into what may appear to outsiders as objective, scientific analysis.

………
So there you have the flexibility, shall we say, that economists enjoy when they apply their professional skills to affairs of state in what may seem, to outsiders, like purely scientific analyses.

In the first lecture of my freshman economics course at Princeton titled “The Art of Siffing Among Seasoned Adults,” I demonstrate how seasoned adults routinely structure information felicitously (i.e., “sif”) to further their own agenda, and I point out that economists can be among the most skillful practitioners of this art.

“If at the end of this course you still trust me,” I warn them, “I have failed in my mission. When economists advise on public policy, the operative mantra is Caveat Emptor!”
(source: The New York Times)

Blacklisting (and) World Bank

2009-01-12T14:20:00.003+05:30

I am not sure what is this big obsession with World Bank blacklisting companies. After the Satyam fiasco, now IBN and ET are reporting in big titles that Indian IT companies Wipro, Megasoft have also been barred by this lending institution. The World Bank is also acting as a moral king by saying that they are publicly disclosing these names (and it is on the first home page of the worldbank.org website) for transparency reasons.

Now lets come to the point - so what?

The World Bank does not carry morals of any sort to command such a important headline in this area. If they have banned Satyam, Wipro or anyone, it is something internal to them. Why does the developing world need to care so much? The World Bank has not set any standards on ethics or corruption free practices. The World Bank has not set or upped any bar on moral codes of conduct. The World Bank has not even tried to keep its house in clean order before banning others for polluting it.

If only the World Bank was a publicly listed entity, no one would be purchasing its shares in any market- developing or otherwise. The organization would have folded for corporate governance (or the lack of it), (mis)management, double standards and corrupt practices. Ideally many organizations like Wipro would have banned doing any business with World Bank.

Maybe, the first thing the World Bank can do to ensure its integrity is to publish a list of (total, if not of individual staff) share holdings with institutions and and real estate holdings of areas/countries they do business with.

Back to my other rhetoric. The emerging popular media of India, IBN, CNBC, NDTV & TOI should stop sleeping with anyone who can be called as "flash news". The top respected journalists of India should be setting standards now, instead of running a TRP ratings war against each other. The media should ask relevant questions and also understand sensitivities. But when who cares?

Lot of good (wo)men..

2009-01-09T07:06:00.007+05:30

It hurts.

After being celebrated as a czar of India software, today Ramalinga Raju is the most shamed corporate king in India Inc. Incident of this sort is unprecedented in India. It is not to say that there have been no frauds of this magnitude, but they have all been dealt with either secretly or somehow. And today, the media has a field day with reporters from CNBC, NDTV Profit shouting a the top of their voices 24x7 on the Satyam fiasco.

How is it possible that a company survived a lie of this sort so long? How is it possible that of all people, Ramalinga Raju - a supposedly perfect gentleman, a top philanthropist of India could have done this? How could any of them involved sleep peacefully for years trying to stuff this cash vacuum into their pillowcases? All invetigations, media rumors will fetch the truth slowly. The role of auditors, bankers, government will come out along with erstwhile management of the company.

But it is not about the company and its financials. An IT company is about people. It is about talent that is accumulated. And Satyam undoubtedly has some of the best talents of this country. What is to become to all of them? It is important for the Satyam staff to stay united. All the leadership principles that have been fed in the past years have to swing into action now. This is the time of real crisis - something which no one has imagined would happen, leave alone experiencing it in the past. All the emotional guns have to be fired now. For at the middle of it, there is a strong company, supported by strong people and servicing strong clients. 80% of the company's revenues come from 20% of the customers. It is important for the current leadership to connect with that 20% and retain business.

What Satyam needs to provide now is a swift, dramatic response. It is important for the company to prove that "Not everyone in Satyam is like Raju and Raju alone does not make Satyam".

The employees have to stop panicking. Trying to jump ship blindly is useless at this time. It is recession and no one is hiring. Jumping ship now is like jumping into the ocean leaving a current ship, which can still be made workable and move ahead. It is important for all employees to stay united, reassure clients, and try to salvage what is left. This is easier said than done - but definitely is the better course. Any mass resignations will only start a downward spiral.

Finally the media. All I have to write is a rhetoric. As it is, the big financial institutional investors are just gamblers who do nothing worthwhile on their own, but bet money on horses and try to make massive profits out of the winning horse. And financial analysts are even worse - all they do it just give some random running commentary of the horse race and make money of it. The media analysts are the most horrible - With no real talent to make a product or sale or run a business and generate money on their own, they just try to make profits by advising people on who runs better business. These are a bunch of jokers who have no idea of what is smoking under their pants until there is fire in entire building. I havent seen anything predictive out of the so called smart analysts. All they have done is more damage by pressurising people who do real work to manipulate financial records like backdating stock options or cooking books or bloating profits.

But who wants to hear? If the media can mess up something sensitive as Mumbai terror attack with utmost disregard for human lives and national security, will they ever find out that they are the ones who are putting unnecessary pressures on people who run real businesses? Will media ever understand that 50000 employees of Satyam are wondering about their livelihood and will need support at this point of time? Well, for those who copy titles like India's 9/11 and India's Enron and India's Obama, am sure they will not have any brains to think along these lines.

Until the next fraud happens, life will go on for media/analysts/investors. This episode will become a reference case for media and B-school case in Strategy (mis)mangement. But for current Satyamites, this is a struggle, a challenge and a war - one which they never wanted or imagined to be part of.

However the IT folks are much much better than analysts, investors and media. The IT engineers to do real operational work and make real money out of their work - than by betting and commenting and advising. That is why I still feel all the associates of Satyam will ensure that they can bounce back.

There are not just few good (wo)men in Satyam, there are lots of them.

Poverty and World Bank

2008-12-29T17:12:00.006+05:30

Every morning we are greeted with grim news. Economic meltdown, stock slump, housing slump, bear hugs, climate concerns, terrorist attacks, inhibited growth etc. While the rich has lost billions collectively and the poor have nothing to lose as they had nothing in the first place, middle class is bearing most of the brunt. Some of them on the left of the balance have been pushed back to being poor once again.

As the World talks about stimulus packages and rescue efforts and investor confidences, the actually affected parties are really not being cared about. The developing and poor countries are still sufffering with health hazards, poverty, hunger and what not. While all capital banks have done bad innovations to screw middle class, the so-called responsible institutions like IMF, World Bank have done NO innovation whatsoever in all these years for poverty eradication.

Well, how can they? After all, people who sit in cosy Washington offices, sipping Starbucks and watching the Snow Christmas with double coats can hardly relate to hunger driven, water starved, naked children suffering extreme weathers and succumbing to death.

The World Bank is not a sacred organization of any sort. It has been ridden with corruption, scandals, bad leadership, heavy op-burden, excessive employee perks, aimless units amongst others. The institution seeks to serve its interests more than anyone else's. It boasts of over a $1b op-expense every year. It's employees have every benefit/perk - first class travels, tax free salaries, seven-star accomodations, retirement benefits, home-country-travel/education/parking and several other allowances, lifetime employment guarantees, periodic vacations, work from home options for years and what not! And all this under the cover of working towards elimination of poverty!!!

The only reason this institution is even surviving in spite of becoming irrelevant and incompetent is because it is protected by top capitalist nations to push their agenda into developing and poor nations.

The past Presidents of World Bank have spent all their time to fight internal corruption. A proper audit of World Bank would definitely throw people off their seats. Given all this arrogant & complacent behavior, the World Bank cannot even drive poverty out of the beggars in front of their offices, leave alone the countless billions in Africa and poor nations.

As 2009 dawns, Zoellick must make one promise - the bottom of his heart. If he can stop all the useless internal expenses his organization generates, if he can prevent internal corruption, if he can downsize his organization to ensure only the right people remain staffed - that would be the most sincere effort anyone can take to help people live, fight the hunger and wake up everyday with some hope. After all, if profit making companies are forced to downsize, cut costs and make efficient operations, this international burden called World Bank should do something on its part.

(The above is an excerpt from my paper. All the views here are personal.)

World Bank & Satyam

2008-12-24T19:42:00.003+05:30

I had a post here on this subject. However after a friend / former colleague and some well wishers at work advised me to take the post out, I have respected their advise and taken it out. Sorry for the disappointment.

Scam + Shame => Satyam!!!

2008-12-17T11:27:00.005+05:30

Eight years after Sify (the Internet company of Satyam Computers- sold off a few years back) bought the Indiaworld.Com channels in a whopping Rs. 499 crore cash deal, the promoters and management of Satyam Computers have indulged in their next tomfoolery again. By agreeing to take stakes in Maytas properties and Maytas Infra, both of which are controlled by the same family, the Raju's, Satyam Management & more importantly the board have engaged in the action that makes investors feel stupid.

It is even inconceivable that Raju's and their henchmen thought this deal would go along. How is it possible that a publicly listed company, buys the shares of another, without discussing with the investors and where there is a direct conflict of interest? A look at the valuation for Maytas and any novice would find the ridiculous numbers. The deal would make Satyam a net debt company!! The synergies are not very compelling either. What is the value proposition? "We will build offices, provide infrastructure and software"? The promoters and the management should be kicked for their actions and the board must be summarily fired and legal action needs to be taken for such a impudent move to approve this acquisition.

The bigger problem is that companies like Satyam do lot of hedging, sit on a pile of cash citing risk management during turbulent times. Now all they have done is to engage in most unethical, shameful activities that just makes their pockets bigger, short-changes the investors and puts India Inc. to shame. Satyam is sitting on a Rs. 8000 crore pile. A few days back it was reported by 'analysts' that Satyam would be the safest company to tide over the meltdown storm. But Captain Raju and his crew have ensured that they dont mind sinking the ship if it will mean profits to the family.

This is not expected of a person like Raju, who is hailed as a visionary and has got a number of awards like Businessman of the year and Entrepreneur of the year from E&Y, Dataquest etc. Satyam has now reversed the bid, but investors, clients and associates will start to wonder seriously about the vision of the management and if they have the skills and ethics to lead them forward.

It is time that we form a United Shareholders of India, similar to the one created by Carl Icahn in US and fight for minority shareholder rights.

Disclosure: The author is an investor in Satyam Computers and also was a long term associate of the company in a middle level leadership position.

Nationalized Banks - this is your time

2008-12-03T13:41:00.006+05:30

It is a bank for the retired people who have nothing else to do but go wait there all day.

It is a lousy, government organization. It takes hours to get anything done there.

People come, eat lunch, chat, watch TV(!), take breaks & naps and go home. They are least bother about customer service.

While the above applies to any government controlled company in India, I am specifically talking about nationalized banks - like State Bank of India or Canara Bank. You can find the staff highly irritating, very bureaucratic, zero level of customer service, dont-care attitudes and everything that you can complain of. If this were any private company in any sector, the shutters would have been down, the management and staff would have been stoned. But being a nationalized bank, armed with very powerful unions the staff could care less about what management plans or customers think.

How else can you explain the fact that they didnt bother to bring in ATMs and Credit cards into Indian soil for decades until private banks and foriegn banks pushed for it. As much as people blame ICICI for what it has done, but for ICICI, none of the Indian nationalized banks would have even thought about improving customer service. Today a regular savings account in SBI comes with debit card, ATM accesses, Internet Banking and what not !!..

And I think there will be a no better oppurtune moment than now for the nationalized banks to win the faith & love of public. Customers who moved away from these nationalized banks, corporate youth who hate to stand in tellers queues for hours together and NRIs who want to be in control of their money have all now started to pull out their money from private banks like ICICI and are putting them into SBI & Canara & Indian banks. Never before has such a surge of new account openings taken place.

If SBI & others think that this is because of the great customer service that they have or attractive deposits that they offer, they are highly mistaken and awfully arrogant. People move the money into SBI because they think their deposits are insured by the Government of India. And that SBI wont fold and/or run away with their money. If & when the economy stabilizes and there is growth path again, it will be a matter of time the customers find out that making investment decisions with money stuck in a SBI safe is like waiting for a judgement in a Indian court. Customers will take the money and run. And SBI will find itself running to Finance ministry to issue a depositor confidence boosting statement.

So this is the right time for the nationalized banks to improve their service & image. Use all the incoming money to ensure that your operations are made better; hiring is better; services are good; you are more responsive to customer. Ensure that your customer will stay with you because he/she loves your service. Not because they are stuck with you. If SBI & other nationalized banks choose to sleep now and act as if they are kings of Indian banking system, it is a matter of time before mergers happen within them or they get divested and eventually bought out or closed. I know that the socialist circles of India will never let any of this happens, no matter how bad these banks perform, but there is something called as competitive sustainability and without efficiency improvements and innovations, no institution can survive- not even the government itself.

(As a side note, I walked into the newly opened SBI Kondapur @ Hyderabad the other day. It was 11:00 AM. An young chap in his mid twenties sat in one of the teller windows, reading a local newspaper, not bothering to answer the queries customers were asking him. I wonder whether they do a culture fit and actually try and hire the laziest irriating bums to work in these places!)

The IMF's usual dance

2008-11-27T13:16:00.002+05:30

The IMF has done it yet again. Pakistan, not being able to gain support from former friends like US, China and not even from their brethren Saudi Arabia, has finally & reluctantly approached the IMF and got a $7+b bailout.

And the IMF as usual has attached its strings to the bailout and imposed all standard conditions to bring inflation down, even at the cost of development faltering. This is not the first or last time IMF has undermined the democracy of the nation it tries to support.

And yet, after all the recession, sub prime, economic meltdown, G-20, developed economies faltering and all that, there is ONE institution which will never mend its ways - the IMF. Isnt it just about time they wake up?

Rescuing Big Three of Detroit

2008-11-26T07:26:00.003+05:30

Off late, the MoTown three have been spending money in pursuit of more money. If we to follow the Op-Eds of NYT or other leading dailies, we can see everyone from Michigan senators to right wing Nobel prize winning economist talk about why Detroit need to be rescued. And why this has to be done in spite of the fact that there has been no innovation, careless spending, wrong investments and arrogant/extravagant attitudes of the auto companies. We have been threatened that closure of even one of the auto companies, will start a downward spiral, bring all three down, bring their suppliers down followed by dumping of all their existing unsold cars - causing a further $400b loss. So bankrutcy is not an anwer because it will ultimately lead to liquidaiton unlike in airline sector.

This is all true. And yes. I am dead against rescuing the Detroit guys. After all, their irresponsibility, lack of care for climate change, arrogance in spending - even after Honda & Toyota started dominating - is simply mind boggling. But let me keep my prejudice aside for a moment. After all, these car companies were just serving American dream. It is not that they didnt innovate, but there werent that smart. And I believe that the bailout package given to them is not to just continue with their status quo, but to reorganize and re-energize their operations. If the Fed is willing to rescue Bankers with hundreds of billions of dollars, a $25b bailout for GM/Ford/Chrysler is not that bad at all, if it could save employment.

The bailout could come with very strict terms and in phases. Chrysler need to be sold to GM. And GM has to stop producing all the various models which the company itself is probably not aware of. Ford needs to given an ultimatum to return to profitability within a year or massive restructuring and downsizing by 50%.

Yes, socializing losses is harmful. But the car companies are more of victims right now as their death has been hastened, though it was imminent. It is not the time to treat them different from the bad Bankers, who have brought about this meltdown with unnecessary innovation.

Will the IIMs please stand up

2008-11-20T16:15:00.002+05:30

If one were to look abroad, most of the macroeconomic think tank is populated by Professors from various Universities. This is more true in the case of US. Harvard, Columbia (where Prof. Sachs sits), Princeton (home of Prof. Krugman), Michigan (Prof. Prahalad), Chicago (Prof. Rajan) and several top notch Universities house these think tanks, draw from the wealth of their experience and are ready to provide advise to various institutions including Fed and Treasury and even to the Office of the President on economic affairs. While the MBAs from these schools do make millions and at some point contribute to the meltdown directly or otherwise, the teachers do stand up to provide advise and support or at least make their voices heard.

In India, we have the IIMs - quasi-government controlled age old institutions. The IIMs, particularly A, B & C are guilty of identifying some of the smartest brains in India, arm them with business skills and help fast track their careers by providing opportunities via placement cells and excellent pay packets running to crores of rupees. All this for a paltry fee. Obviously the immediate RoI for someone who walks into IIMs is a gazillion times more than doing a similar course in US Universities. And yeah, these smart IIM grads have grown to greater heights and as said before contributed one way or other to meltdown.

But contrary to US, where are the IIM professors advising the nation at the time of the need? These are guys who educate the smart brains of the country. Where are their opinions? Why is it that they make a rare apperance in Economic Times or any other leading public daily advising or giving opinions to Indian government and Indian citizens. Is the government controlling their views too? Are they not being allowed to express opinions through blogs & columns? Does the IIM institution prevent its staff from talking about real world problems? IIMs continue to make news only regarding CAT, placements/internships, director appointments or OBC quotas.

While I do understand that this comparison comes with its own bunch of flaws, the core question of why are the IIM Professors absent in a Indian think tank still remains. Come on IIMs, you have a duty to this nation. We have serious problems and we need smarter and serious people to solve them.

Savings wont save us!

2008-11-19T12:53:00.007+05:30

Given today's grim scenario, one thing that definitely wont save us is savings!. When economy is on a downward spiral, companies stop producing, stop making profits, start firing people.. Now people stop spending, that leads to lower demand and companies stop producing ... this is the vicious circle. We have been through this in an earlier post.

Now what governments need to do, as advocated by the reinstated master Keynes is to put money in people's pockets. This is to ensure that people spend more. No matter how the government does it - by slashing interest rates, by creating new projects (read jobs), by cutting sales taxes - success will come only when that money is being spent by public. Spending will create demand that will boost supply, increase profits, create jobs and go on..

So if we start tightening our purse strings to spend on a rainy day, well.. this IS the rainy day. As governments start doing their job to support the falling economy, public has to do its part by spending enough. This is not a time to listen to old middle-class tales of how savings will save us eventually - it is in fact the right opposite. It is time to break piggy banks and buy that stuff you have always wanted. Buy a house, dress, stocks, chocolates, gift items, jewelery. Tour the nation. Stay/Eat in hotels. USE THE MONEY. Our recovery is dependent on our spending no matter what the government does or intends to do.

Maybe the FM should tax people who save more and boost spending. Lets spend and save the economy!

Bullish Market!

2008-11-18T15:34:00.004+05:30

And so why should I talk about Bullish market when we pass Life in the time of Bears.

I am referring to the Indian IT Service companies. Almost all of them - TCS, Wipro, Infosys, Satyam, CTS, HCL and even smaller players like MindTree, Patni are all sitting on excess reserves of cash. A quick glance would tell you that the range is between $250m - $2b!! This is the time to strategize, target and buy over troubled companies in Europe or US so that the toplines can be impacted positively as the meltdown melts down.

Almost all companies are now gung-ho for M&As. However the aggressive purchases could well determine who will be in the forefront for next 5 to 7 years. This is an opportunity in a platter.

I have been against the Indian IT Service companies sitting on cash pile, neither utilizing it on investments nor returning it to shareholders. But now these companies are offered with a golden opportunity to make hay with this cash pile. And those companies which keep sitting on the pile without realising value for it, might as well be clear that they would be left behind.

Buy, buy, buy!! It is bullish market to buy IT Service companies in EU/US!

Predictions and Investment Analysts

2008-11-17T14:39:00.003+05:30

Economists are much better. They don't claim to predict future. They study different scenarios, conjure interesting theories and see if they can help the world grow.

Investment analysts on the other hand - no one knows what they do. They have complicated formulas, jazzy excel spreadsheets, floating tickers and they issue some advise. Most often arbitrarily is my guess.

Look at this Merrill Lynch statement. We all know that the markets are down and future is uncertain. So what is so great about ML making a comment about a gloomy future?

Why is that these overpaid highly greedy super egoistic investment analysts not able to predict the bubble bursting? Or the fact that their loans and their own instruments will go under?

Why is that Merill, which is predicting grave market scenario for next 12 months, not able to predict that it itself was en route to its grave?

Stop it Merill. You got Lynched.

What should Microsoft/Yahoo! do?

2008-11-06T11:25:00.006+05:30

Now that Yahoo's irrelevance in the internet industry is more or less certain, Jerry Yang has come back asking Microsoft to buy his company out. Yahoo!'s shares are at $13 range currently. Microsoft's original bid was $33/share and Jerry didn't want to take it. After Google has walked away from the advertising deal, Yahoo!'s board is now currently left with no option but to seek Microsoft's help by buying them out.

What should Microsoft do? Microsoft itself is on the verge of irrelevance in Internet industry. Except for the infamous browser called Internet Explorer, anything that Microsoft has done (copied from someone) hasn't been even a moderate success. Acquisitions like Hotmail and borrowed ideas on cloud computing and other developments have kept Microsoft afloat in the web world. If Microsoft were to acquire Yahoo! eying Search consolidation, it might not be such a bad decision after all. However, considering that Google is well over 65% of the market today, an acquisition on its own will not help Microsoft in any way. First the merged company will need to trim itself and leverage the power of each of the products it owns. And knowing Microsoft, the big bully might find it tough to change its bad habits of acquiring something, making changes to that successful system so that it becomes unusable and buggy.

What should Yahoo! do? The best course of action is to add Icahn to its board so that a decent negotiation can take place with Microsoft. Next, remove ineffective board members without any severance pay. Third, really focus on getting the maximum value for Yahoo! shareholders instead of just focusing on packages for top management and board.

Too sad to see you go Yahoo!. The end could have been better.

The WEMF - Worldwide Emerging Markets Fund

2008-11-05T13:46:00.010+05:30

2008 is making history of all sorts, the most radical one being that America, where racism is still in living memory, has chosen Afro-American Barack Obama to lead her for the next 4 years. 2008 is probably when the US will start standing to the left of even former USSR. And 2008 is probably when, US should officially shed its status as the leading economic superpower and dollar stops from being the lone international currency.

Maybe 2008 is when we hold another Bretton Woods conference, only that it wouldn't happen at Bretton Woods, but this time it will be within the borders of East Asia excluding Japan. Maybe 2008 is where we will get to replace the Washington consensus with a New Delhi consensus. And for all the cynical folks, we are not talking about a typical socialistic or communist package out there.

The reality is that the American dream, has ended; Informally founded at Regan era, continuing its spree under Clinton, going to peak during the Bush years , the dream has run its course and has shaken people awake as Obama prepares to enter office. It is as if all of us have slept for last 20 years and we are getting back to where we originally were. During this sleep, many have become wealthier, spent quite a lot and finally are back to being poor.

And hence maybe we need to reinvent the international institutions at stake here, primarily the International Monetary Fund. It is about time that we hold a Chindia conference somewhere between Beijing and New Delhi, declare that the IMF in its current shape and form is highly irrelevant and propose formation of a WEMF - the worldwide emerging markets fund.

This fund is where real emerging markets will have more voting shares than the so-called leading economic superpowers.
This fund will respect democracies of nations to which it lends/advises.
This fund will not force liberalization down the throats of countries that simply dont lack the capacity to withstand such a open economy.
This fund will not stress creditor interest alone.
This fund will have a genuine interest to pull people out of poverty and not act on the interests of giant free market capitalist countries.

Professor Jeffrey Sachs rightly says "Low taxes and deregulation produced a consumer binge that felt good while it lasted, but also produced vast income inequality, large underclass, heavy foreign borrowing, neglect of environment and infrastructure and now a huge financial mess. The time has come for a new economic strategy- in essence a New Deal".

And so let us work towards this New Deal.

Capitalism & Socialism - Lecture Series - Part V - Notes

2008-11-01T21:49:00.005+05:30

Today's post is about the infamous liquidity-trap. When I gave the lecture, this part was very well discussed with lots of interesting questions around this subject. If you are a fan of Prof. Krugman, you dont have to necessarily continue reading this post, as he has been too vocal about this for the past many months.

But before stepping into the trap, let us look at one important factor - savings. Generally savings is a virtue and people are encouraged to save more. If there were no government intervention in the world (a free market capitalist dream), then this is what would happen - consumers will save more, which means they will spend less. This will automatically result in lower production of goods which reduces efficiency as well as workforce numbers and profits for companies. As a result, salaries will get lower for consumers and in turn, because of this, consumers will start saving even more. This will only detoriorate the situation further, giving rise to a vicious circle.

However in reality, there are governments. And when there is lot of savings trying to pull down the economy, governments lower interest rates thereby boosting investments. These investments ensure that there is sufficient liquidity in the markets. Thus even though consumers save, the situation is not all that bad, as government tries to balance the act from supporting the investment angle.

Now let us come to the crux of the topic. What if consumers are continuing to save, there is little liquidity in the market and the interest rates are too low that they cannot be cut any more (or cutting them down wouldn't make much of a difference)? Such a situation is called the liquidity-trap. This is what Japan has found itself in; this is what the US is probably heading towards. The interest rates in Japan are already hovering around 1%. The US interest rates are also similarly at 1%. Even if Ben Bernanke of the Fed decides to cut the interest rates, how much can he? If he makes it to 0%, will that be sufficient to boost the economy?

This is a trap as we can see, which gives no clear traditional routes to help the economy bounce back. In such situations, bailout packages become clearly necessary and that is when socialization of losses occurs. (The free market capitalists do believe in these kinds of socialistic principles as it suits them!). Remember that we are not talking about a third world impoverished country here. We are talking about America, the world's superpower. And this is a nation that will not hesitate to initiate a World War III if it only means that it will boost their economy.

The advocates of free market capitalism fail to address clearly such complex situations. While in theory, everything is a resource and can be scaled up and down as the situation demands, it is just theory. In reality, such corrections do not occur so easy and so fast. An example is wages. While wage increase is a demanded norm (in any market), wage decreases to support the economy are not and they tend to be sticky. And I think this may be a good time to start thinking about what Keynes said.

Capitalism & Socialism - Lecture Series - Part IV - Notes

2008-10-19T11:44:00.006+05:30

In this note, we will talk about the third major reason that triggers a downward spiral of capitalism and socialism - manipulated and immaturely introduced policies. It will be anyone's guess that this post will be an unabashed criticism of the policies advocated by World Bank and IMF. No other organization or institution across the globe other than World Bank/IMF possibly can lead to such devastation in established structures so easily.

In letter and spirit these institutions strive to propagate wealth creation and upliftment of the poor, improvement of Global economy etc. However in reality, many of the policies pushed by the IMF in particular has resulted in deep devastation and increased the rich-poor divide in countries. So why do then these institutions claim credibility? It is because of 2 reasons. One, is that the policies pushed by IMF do result in short term success - increased GDP growth. Two, is that these institutions are front face of developed nations and are promoted heavily and control the cash flow to support developing and poor countries.

What the IMF and World Bank fail to understand is that by loaning money with lot of conditionality to open up at a feverish pace, they are not just undermining the democracy in the nation that is struggling to survive, they are also creating unhealthy growth. This is like giving the highest dose of anti-biotic to someone with regular fever. He/She will immediately respond, only to fail in the longer term. These countries suddenly see enhanced GDP growth for a maximum of 10 years, after which they fail dramatically, because of the rapid privatization and opening up of economy, which has failed to create real wealth inside the country. Adding to this, the rich poor divide increases as well... Russia is a beautiful example of such a disaster. Policies should always be tied to comparative advantage of the nation, the willingness of developed countries with absolute advantage to truly support the developing/poor nation which is under brink of collapse, history, labor power, democratic structure, geographic advantages, social structures, primary expertise and other important factors.

And of course, IMF and World Bank need to realize that helping a developing/poor nation doesn't mean just ensuring that the creditors for the country are protected. The goal should be truly to ensure elimination of poverty and prevention of collapse of social structures in the nation.

Capitalism & Socialism - Lecture Series - Part 3 - Notes

2008-10-14T17:57:00.001+05:30

This is continuing the lecture on Capitalism & Socialism and today we will see the second reason I had listed as a cause for failure of these systems - greed & impatience. If you were to hear the campaigns of Obama and McCain, then you cannot miss the phrase "greed of wall street eating the main street" from both of them. They are not far from the truth. It is greed and a dose of impatience mixed together that actually leads to failure of any good system.

Where does this all start? It is tough to point out. But we can safely say that it possibly starts with investors who take equity stakes with the idea of making a quick buck. Make no mistake - it is NOT just retail investors like you and me who want to double and triple our holdings in few months by investing in stock market. It is even the seasoned investors, big financial institutions who want to do this. Not everyone is Warren Buffet, after all!

So when these investors want to make this urgent profit, they push corporations to show successes in their business every single quarter. Not just that, they want every corporation to better itself every single quarter. This pushes the corporations to try and do whatever it takes to be a leader in the market. They hire some of the best brains with exhorbitant salaries hoping that their innovative & leadership skills will be useful in this never ending competition.

When smart MBAs join with skyrocketing salaries and corner offices with few or no previous experience in corporations, they are under pressure to show results. And then they start innovating "bad" things - In financial institutions, this leads to innovation of bad instruments like sub-prime lending, reverse mortgages etc. which take advantage of unsuspecting human behavior (which is coupled with little greed anyway). Thus a vicious circle is formed where investors are investing in nothing continiously. And when is it found that there has been no foundation and no pillars of support, the entire building collapses, taking everyone with it.

As you can see the impatience of investors and greed of investors, coroporate management play key role in the downfall of a capitalist economy.

While greed plays a major factor in downturn of capitalist markets, impatience plays a key role in destroying socialistic structures. For wealth to be divided and a propotionate share to go to every participant, it is important that wealth be created and economy becomes rich. Any attempt to bring fairness in the system by excessive controls will result only in a temporary mirage of success. In the longer run, this arrangement will not work out as it will push the nation into backwardness and will not help poor to rise out of poverty. In addition, this will also lead to lot of unrest as control structures inherently lead to corruption, pesudo dictatorship and inefficiencies.

Thus a combination of greed and impatience has the power to ruin both capitalist as well as socialist set-ups. It is not a joke when they say "Good things come to those who wait!"

Lessons from Collapse of Golden age of 1920s

2008-10-03T08:30:00.001+05:30

Ilian Mihov, Professor of Economics at INSEAD, on the lessons of the collapse of the ‘golden age’ of the late 1920s.

What is the biggest lesson from the Great Depression? In my view, it is that monetary policy and the financial sector play a crucial role in economic development. Let me put it more precisely: good monetary policy is unlikely to accelerate the speed of economic growth – after all we have more income year after year because mankind comes up with new ideas, with new products, with more efficient ways of producing output. However, bad monetary policy can easily derail economic development. It is true for rich and poor countries alike.
Why are financial markets and the banking sector so important? Banks fulfill a very important role in the economy by matching borrowers and lenders. When we deposit $100 in a bank, the bank keeps, at most, two to three dollars in its vaults (in fact the money is often in the central bank), the remaining $98 or so is lent to a borrower.
Most businesses require loans for their normal operations. When the banking sector does not work properly, businesses cannot get loans and they have to curtail their production and lay off workers. As they curtail production, they demand fewer products from their suppliers and therefore their suppliers have to reduce their output and fire workers. If manufacturers cannot sell their goods because the firm downstream does not need as many products as before, they cannot generate enough revenue to repay their earlier loans. Businesses go bankrupt and banks experience further problems as their balance sheet deteriorates due to non-performing loans. At this point, banks want to lend even less because of the uncertainty generated from bankruptcies. As they lend less, the vicious circle continues – with producers cutting production and firing workers. On the top of this, depositors start worrying about their deposits because the non-performing loans have made some banks go belly up – your bank has lent out your money to borrowers who cannot return it. Depositors start withdrawing their cash and banks have even fewer possibilities for lending as they have to hoard cash in case there is a run on the bank. If the financial sector does not work, the real economy can go into a deadly spiral and shrink by 30 per cent as during the Great Depression.

Capitalism & Socialism - Lecture Series - Part TWO - Notes

2008-10-01T13:27:00.009+05:30

Before we start, on a side note, there were at least 4 mails in my inbox after the posting of the previous part which said that I have missed out one of the most important reasons for failure of economic systems - Sudden Economic or Geographic variations - If there is a wide set of people who think that this is an independent reason enough, then I guess I would still humbly excuse myself with the opinion that while it is of course a significant risk to the economy, it still wouldn't classify as a strong enough reason for failure of the overall system.

Let us have a quick look at reason - 1 - do not complement each other sufficiently. There is a very popular phrase that is doing rounds these days that sums it all - Privatization of profits and Socialization of losses. While profit making companies strive to make more money and increase their net personal gains, sometimes by hook or crook, the burden of failure unfortunately seem to exist with taxpayer money. There have been discussions and blogs and talks on the "correctness" of such actions - I have myself talked against such rescue plans for the fear of encouraging blinded risk taking by institutions who have the comfort of a couch-catch during a free fall.

However such a support is imperative. No matter what we crib about the protection being extended to foolhardy greedy behavior it is an absolute must. What is missing however is the kind of regulation that will keep blind risks in decent check in this case. Every time when excessive greed and immature policies bring about a halt in the flow of wealth creation, leading to losses and slowdown, collective responsibility steps in to smooth the fall. This has happened time and again, thanks to the voice of West in protecting the capitalist system.

The reverse support however is not happening that common. When socialistic structures crumble, the World watches reporting this downfall in full steam. The West hails this as a failure of communism and the so called World saving financial institutions like IMF and World Bank watch this as an opportunity to impose their "liberalization" policies as soon as possible into the falling nation, not worrying about the fact that the country may not just be ready to face that.

But why does this situation occur in the first place? To put it simply, everyone in the world (nation) needs to get a fair share of everything. While capitalism creates wealth and makes the human race rich, one of the many downfalls of the system is that, by itself, it doesn't do anything to the rich-poor divide other than increasing the gap. Hence a definite structure like socialism has to set in to ensure that everyone gets a fair share of wealth created. There is nothing wrong with that. But the problem comes, when people begin to question - WHEN?

How long does one wait to get a fair share before it can be distributed? Europe suffered centuries of dark ages and so does Africa today. If people today need to work tirelessly now so that wealth can be created over a period of time and then distributed, every worker will feel left out of enjoying the wealth that he/she helped create. This feeling worsens when they see some set of people (burgeoise - upper class) enjoy the wealth already. The unrest created leads to communist principles set in and socialism introduced prematurely. So now the nation tries to bridge the gap between rich and poor without proper means to do so. While initially this looks to work because of the iron hand with which this gets implemented, slowly and surely this model is bound to fail as it doesnt stand on a stable platform where wealth has been really created.

(This principle is something many of us tend to follow even though we laugh at socialism/communism. Will any of our IT Services friends reading this blog will agree to an arrangement if their company said that they will have to work for the next 20 years so that their company can create wealth and become profitable and if profits are created, they will be shared with their children later. We will crib at the top management for drawing handsome salaries while we slog around to help them make money. We will demand equal share of profits, equal salay across employees etc.)

And that is why precisely both models must work together. When capitalism is going about churning money, socialism has to step in to ensure that the rich-poor divide does not go out of control. And if prematurely induced socialism starts to crumble, there must be way to infuse wealth into the system so that the socialistic structure can hold ground.

So when the statement gets repeated that Socialism failed, one needs to understand that it is only the shortcut and premature inducing that has failed. On the other hand, capitalism will also crumble in the same account if losses were not socialized or if the rich-poor divide goes unchecked.

Capitalism and Socialism - Lecture Series Part -1 Notes

2008-09-28T17:05:00.001+05:30

(Considering several questions around some of my thought process around liberalization, wealth creation and growth for all, I am going to present a condensed form of my lecture on this subject in "2 minute digest" series. This is the first part. Comments are welcome here or in any other forum as appropriate).

Capitalism and Socialism are 2 essential pillars of human eco-system. There is no one one model fits all in the Universe and both models back each other up. The obvious definition explains it all - Socialism ensures that everyone gets a fair share and Capitalism ensures that wealth is created so that it can be distributed. If it all that simple, then why do systems fail?

Systems fail because:
1. They do not complement each other sufficiently
2. Greed and impatience that is inbuilt in human instinct
3. Manipulated and immaturely introduced macro-economic policies

In the longer term, all three reasons play a equal role in failures; just that at some touchpoints one of them is highlighted more. In subsequent passages I will explain each one of them in detail.

Before we examine the structures of socialism and capitalism, it is imperative to understand that these social structures did not necessarily come out in the seventeenth century. While they have existed in preliminary forms (Robinhood was an early socialist!), both these structures came out as a fallout of the industrial revolution. As the industrial revolution laid the foundation to capitalism, it also led the way to a severe rich and poor divide, thus leading to a strong belief in socialism.

The second important fact is to realize that there has to be constant balance of one over the other. If either of the system progress on its own is unchecked, it will ultimately lead to a collapse because of a bunch of factors - most of which can be directly correlated to the three reasons stated above.

And the third important fact is to understand that International politics and diplomacy are not considered clearly in the underlying theories of these systems.

In the next part let us discuss the reason-1 in detail.

EBITDAT?

2008-09-26T08:26:00.007+05:30

We all know that the billionaire investor Carl Icahn is a very shrewd investor. Of late, he has been sharing some of his views in his personal blog. And the latest one has a very interesting term that Icahn has coined - EBITDAT. Now for those of you who wonder what the last T stands for, it stands for THEFT. He jokingly says that the value of the company is not evaluated jusy by looking at EBITDA(which stands for Earnings Before Interest, Taxation, Depreciation, Amortization btw), but by also looking out at the corporate theft of the company.

Icahn is not necessarily joking. The upper management of troubled corporations, particularly financial institutions are very smart in innovating techniques to protect and expand their persoanl financial assets immaterial of the fact that there is a financial 9/11 going on and their company contributed to this downfall and is falling as well. While it is perfectly fair that executives of great-performing companies get paid handsomely, when failures are also rewarded in hidden forms, that is when the second T kicks in and plays the most significant role in EBITDAT.

WB loses.. only this time not because of the Commies

2008-09-24T15:09:00.003+05:30

West Bengal finally lost its golden chance boost employment and investment opportunities in the state. Only this time, one cannot completely fault the commies. For a change, the communists, with their more liberal leader Buddhadeb wanted to get the Tata Nano plant in Singur. As luck would have it, Mamta wanted to prove her might and she eventually did, by forcing Tatas to abandon the site and move off to a different place.

It is just ironic that such a problem happens to the Nano project which has the world watching with such an awe. It is also ironic that it didnt happen because of the communists.

Bengal is back into blackwoods, thanks to Tata saying goodbye to Singur. Now the hard fought land, whose value was estimated to grow in leaps and bounds that actually triggered of this issue, will once again be a wasteland, with no claims and drowned value; and several such areas of Bengal will go down in value as there will clearly be no more Indian investments (leave FIIs alone!) in the near future and some of the already made ones may just be urging to leave.

Politics at play against wealth creation. Surprisingly the commies watch it stunned.

The ICT Convergence

2008-09-24T10:55:00.003+05:30

So after several years of talking, the industry is now walking the talk. The ICT convergence is set on full swing and a formal competition is also launched. Apple iPhone set a trend bringing in an instrument that exhibits potential to be the device of the future. And with Google & Amazon joining hands for the next one, threatening Apple's leadership in music industry along with, this competition is bound to become an interesting one.

When the most creative and risk-taking minds of the globe compete with each other, lets hope that our quest for the holy grail will become a reality soon. At some point we will have a device that can do/be: lock/open doors of homes/cars, toll/metro pass, camera/music/photos/games, internet/email/IM/video-conf, ration cards/passport/voter ID/driver license, remote control for TVs, TV/digi-movie screen, debit/credit cards..... I dont think I am dreaming too much. Most of this is already available in instruments today.. the SIM will be the alternate-blood of our life.

May we live in interesting times.

Stop it Merrill. You got Lynched

2008-09-18T13:53:00.002+05:30

I couldn't control my laughter when I read this - Buy ICICI, Target 1010, advises ML .

Come on Merill. Stop advising people now. You have been bought. You have been shamed in public. And all smart egoistic investment bankers of Merill - THANKS for the comments, but we know better.

Wall Street Crisis and Why Financial Institutions Deserve this

2008-09-15T12:52:00.002+05:30

Let me first start by assuring you that I am not a sadist. It is not good to see age old institutions crumble. It is definitely not good to see investors lose out millions of $$$ when such a crisis hits the street. But it is important to realize that it is the same set of greedy investors and limited-vision top-management that have caused downfalls of esteemed financial institutions.

The success of capitalism lies in the concept of wealth-creation. Remember that wealth creation refers to society in general. And this leads to betterment of lives of people. However financial institutions and greedy investors have read the text completely wrong. All they have managed to do is to just recycle wealth smartly.

And while taking someone else's wealth at the pretext of expanding it, the financial institutions have managed to keep a larger cut for themselves. As they ran out of ideas on this and the greedy investors pushed these companies to show increased growth every quarter, the companies hired brains from top schools, made them think like Shylocks and finally ended up innovating on stuff like sub-prime lending and reverse mortagages. In India, we have had similar innovations on sub-prime credit cards, unasked personal loans and improperly checked home loans.

The middle class, which is cursed to be a loser in every game, fell for this trap as usual. All these financial institutions have done is to suck blood of these unsuspecting middle class. When the loose foundation begins to crumble, these companies have no option but to cave in. Lehman, Merril Lynch, Bear Sterns, AIG - all are nothing but a failure in their own greed.. And with this downfall, they will take their greedy investors and unfortunately dependent industries and whole economy with them.

In India, good institutions like ICICI are also moving towards innovating on this sector. What everyone has to remember that success of institutions and economy & capitalism come by wealth-creation, not by robbing middle class and the like. I really hope that ICICI, HDFC etc.,
take good lessons from these fallen US giants. And IIMs and other institutions should stop teaching their students to be money bloodsuckers and instead show them the right way to make good growth.

And yeah, the rhetoric. The middle class should learn. After depression, sub prime, recessions, chit-funds, Harshad Mehta scandals, credit card payment issues etc., it is time to realize that only hard earned money and smart investments will sustain.

Hype Cycle for Emerging Technologies

2008-09-11T13:28:00.004+05:30

(Source: Gartner's review-July 2008)

Behind the scenes at Biz schools

2008-08-22T10:06:00.008+05:30

Here is an article that, I am sure, most in top global business schools will definitely relate to, at least to some parts of it if not the whole. I know my ISB batchmates will!

(Reproduced verbatim from Business Week: Original article is here)

In Ahead of the Curve: Two Years at Harvard Business School, Broughton provides an insightful and entertaining, behind-the-scenes glimpse at a powerful institution that he sees as generally succeeding in its mission of transforming students into business leaders. But he views HBS as failing them in almost every other way. It is, in his persuasive account, a "factory for unhappy people."

Why this should be, despite the obvious successes and accomplishments of graduates, is a complex subject that Broughton dissects with a reporter's eye for detail. In his retelling, the 895 members of his class were men and women of modest talents but outsize ambition. Boastful, insecure, and occasionally charming, they were destined for careers that required them to sacrifice family and friends for the success they felt they so richly deserved.

As one of the handful of students who came to HBS in 2004 with few ambitions of his own—he had no idea what he wanted to do—Broughton was well qualified to describe how Harvard in particular, and B-school in general, does such people a disservice. With a second child on the way, he struggled to find a career path that would allow him to spend time with his family—a requirement that kept him from joining the droves in pursuit of consulting and investment-banking careers. The pressure to follow conventional paths is a recurring theme, with classmate after classmate either battling the forces of conformity or succumbing to the siren song. In the end, Broughton spent the summer after his first year in Cambridge working on a novel instead of an internship and graduated without a job after interviews at Google and McKinsey. Today, he retains one foot in journalism while pursuing a few "entrepreneurial ventures."

Broughton found little to criticize and much to praise about the HBS case study method, which gets students to find fixes for company problems. It's a testament to the method of the Harvard faculty that Broughton managed to become conversant in the language of business with so little prior exposure to it.

But ethics is another matter. Many of Broughton's classmates came to HBS ethically challenged, he says; some qualified for financial aid by depleting their savings with the purchase of expensive cars. But HBS didn't much alter their attitudes. In 2005, for example, 119 HBS applicants were caught attempting to hack into a Web site that stored admissions information. For those who had been accepted, Harvard retracted its offers, and its dean called the behavior "a serious breach of trust." But in Broughton's "corporate accountability" class, it was Harvard that was faulted—75% of the class sided with the hackers.

The author gives insight into daily life at Harvard and the "fear of missing out" that leads many students to attend every event, no matter how trivial. But in the end he didn't seem to find it "transformational," at least not in the way HBS hopes it will be. If anything, exposure to business in all its forms deepened his cultural bias against it. He came away appalled by the power that business wields in our society and by the ability of an institution like Harvard to perpetuate that state of affairs. "Has society allotted too much authority to a single, narcissistic class of spreadsheet makers and PowerPoint presenters?" he asks. Broughton leaves no doubt about what he thinks.

11.2 million percent Inflation - you must be joking

2008-08-19T14:56:00.002+05:30

Let me use few articles as a precursor to my one of my major article on "Why World Bank is a Irrelevant and Irresponsible Institution".

Zimbabwe is skyrocketing in its inflation. Currently the official figure stands at 11.2 million percent, while some of the private reports state that real inflation is close to 20 million percent. Billion $$$ notes are being printed in Zimbabwe and rates get higher by thousands for one SINGLE bread if you delay buying it even by a second. All this for a country which was not long ago called the Bread-Basket of Africa!!

True - it is yet another African country with irresponsible government, hopelessly uneducated mass, topping in corruption and scams blah, blah and blah. And yeah the West has denied every kind of support to the nation. Absence of donors means that the inflation is heading to even roaring heights. All pointing to mass killings & murders, refugees, countless starvation deaths and total collapse of yet another African nation.

And the United Nations and World Bank and IMF stand by and watch. It is not enough to have Millennium Development Goals... it is more important to save millions who are dying without food & water right in front of our eyes. Professor Jeffrey Sachs single handedly has done MUCH more in the past 20 years than what all of World Bank and IMF have done to prevent these kind of economic disasters.

It is easy to blame political parties and government in Zimbabwe for all this. What did the poor people who have no clue about any of this do? The only superpower of the World - United States - will fight in Iraq and other places for democracy. But it will stand by the egoistic economists in World Bank and watch the millions of poor African men & women and children die. After all, Zimbabwe doesn't have oil.

World Bank - be ashamed for what you do... and what you don't!.

Why is the World Bank an Irrelevant & Irresponsible Institution

2008-08-18T08:22:00.001+05:30

Need Help with Biz plan in Social Sector

2008-07-15T05:20:00.004+05:30

I am currently working on a Business Plan to create a self-sustainable platform that will enable socially underprivileged achievers (for example, Rank holders in High School/Higher Secondary coming from very poor sections of the society) to continue their education.

I need help in completing the Business plan. Help can come in the following areas

Coordinating the various sections of the plan
Putting the plan together in suggested formats
Presenting plans to appropriate audience
Research required to make the plan
Ideas for the business plan
Any other area...

If you would like to be a part of this socially relevant business plan effort, please comment in this post and I will get in touch with you.

Talent Myth

2008-07-09T13:45:00.001+05:30

(Reproduced from Gladwell dot com and New Yorker)

Are smart people overrated?

1. Five years ago, several executives at McKinsey & Company, America's largest and most prestigious management-consulting firm, launched what they called the War for Talent. Thousands of questionnaires were sent to managers across the country. Eighteen companies were singled out for special attention, and the consultants spent up to three days at each firm, interviewing everyone from the C.E.O. down to the human-resources staff. McKinsey wanted to document how the top-performing companies in America differed from other firms in the way they handle matters like hiring and promotion. But, as the consultants sifted through the piles of reports and questionnaires and interview transcripts, they grew convinced that the difference between winners and losers was more profound than they had realized. "We looked at one another and suddenly the light bulb blinked on," the three consultants who headed the project--Ed Michaels, Helen Handfield-Jones, and Beth Axelrod--write in their new book, also called "The War for Talent." The very best companies, they concluded, had leaders who were obsessed with the talent issue. They recruited ceaselessly, finding and hiring as many top performers as possible. They singled out and segregated their stars, rewarding them disproportionately, and pushing them into ever more senior positions. "Bet on the natural athletes, the ones with the strongest intrinsic skills," the authors approvingly quote one senior General Electric executive as saying. "Don't be afraid to promote stars without specifically relevant experience, seemingly over their heads." Success in the modern economy, according to Michaels, Handfield-Jones, and Axelrod, requires "the talent mind-set": the "deep-seated belief that having better talent at all levels is how you outperform your competitors."

This "talent mind-set" is the new orthodoxy of American management. It is the intellectual justification for why such a high premium is placed on degrees from first-tier business schools, and why the compensation packages for top executives have become so lavish. In the modern corporation, the system is considered only as strong as its stars, and, in the past few years, this message has been preached by consultants and management gurus all over the world. None, however, have spread the word quite so ardently as McKinsey, and, of all its clients, one firm took the talent mind-set closest to heart. It was a company where McKinsey conducted twenty separate projects, where McKinsey's billings topped ten million dollars a year, where a McKinsey director regularly attended board meetings, and where the C.E.O. himself was a former McKinsey partner. The company, of course, was Enron.

The Enron scandal is now almost a year old. The reputations of Jeffrey Skilling and Kenneth Lay, the company's two top executives, have been destroyed. Arthur Andersen, Enron's auditor, has been driven out of business, and now investigators have turned their attention to Enron's investment bankers. The one Enron partner that has escaped largely unscathed is McKinsey, which is odd, given that it essentially created the blueprint for the Enron culture. Enron was the ultimate "talent" company. When Skilling started the corporate division known as Enron Capital and Trade, in 1990, he "decided to bring in a steady stream of the very best college and M.B.A. graduates he could find to stock the company with talent," Michaels, Handfield-Jones, and Axelrod tell us. During the nineties, Enron was bringing in two hundred and fifty newly minted M.B.A.s a year. "We had these things called Super Saturdays," one former Enron manager recalls. "I'd interview some of these guys who were fresh out of Harvard, and these kids could blow me out of the water. They knew things I'd never heard of." Once at Enron, the top performers were rewarded inordinately, and promoted without regard for seniority or experience. Enron was a star system. "The only thing that differentiates Enron from our competitors is our people, our talent," Lay, Enron's former chairman and C.E.O., told the McKinsey consultants when they came to the company's headquarters, in Houston. Or, as another senior Enron executive put it to Richard Foster, a McKinsey partner who celebrated Enron in his 2001 book, "Creative Destruction," "We hire very smart people and we pay them more than they think they are worth."

The management of Enron, in other words, did exactly what the consultants at McKinsey said that companies ought to do in order to succeed in the modern economy. It hired and rewarded the very best and the very brightest--and it is now in bankruptcy. The reasons for its collapse are complex, needless to say. But what if Enron failed not in spite of its talent mind-set but because of it? What if smart people are overrated?

2. At the heart of the McKinsey vision is a process that the War for Talent advocates refer to as "differentiation and affirmation." Employers, they argue, need to sit down once or twice a year and hold a "candid, probing, no-holds-barred debate about each individual," sorting employees into A, B, and C groups. The A's must be challenged and disproportionately rewarded. The B's need to be encouraged and affirmed. The C's need to shape up or be shipped out. Enron followed this advice almost to the letter, setting up internal Performance Review Committees. The members got together twice a year, and graded each person in their section on ten separate criteria, using a scale of one to five. The process was called "rank and yank." Those graded at the top of their unit received bonuses two-thirds higher than those in the next thirty per cent; those who ranked at the bottom received no bonuses and no extra stock options--and in some cases were pushed out.

How should that ranking be done? Unfortunately, the McKinsey consultants spend very little time discussing the matter. One possibility is simply to hire and reward the smartest people. But the link between, say, I.Q. and job performance is distinctly underwhelming. On a scale where 0.1 or below means virtually no correlation and 0.7 or above implies a strong correlation (your height, for example, has a 0.7 correlation with your parents' height), the correlation between I.Q. and occupational success is between 0.2 and 0.3. "What I.Q. doesn't pick up is effectiveness at common-sense sorts of things, especially working with people," Richard Wagner, a psychologist at Florida State University, says. "In terms of how we evaluate schooling, everything is about working by yourself. If you work with someone else, it's called cheating. Once you get out in the real world, everything you do involves working with other people."

Wagner and Robert Sternberg, a psychologist at Yale University, have developed tests of this practical component, which they call "tacit knowledge." Tacit knowledge involves things like knowing how to manage yourself and others, and how to navigate complicated social situations. Here is a question from one of their tests:

You have just been promoted to head of an important department in your organization. The previous head has been transferred to an equivalent position in a less important department. Your understanding of the reason for the move is that the performance of the department as a whole has been mediocre. There have not been any glaring deficiencies, just a perception of the department as so-so rather than very good. Your charge is to shape up the department. Results are expected quickly. Rate the quality of the following strategies for succeeding at your new position.

a) Always delegate to the most junior person who can be trusted with the task.
b) Give your superiors frequent progress reports.
c) Announce a major reorganization of the department that includes getting rid of whomever you believe to be "dead wood."
d) Concentrate more on your people than on the tasks to be done.
e) Make people feel completely responsible for their work.

Wagner finds that how well people do on a test like this predicts how well they will do in the workplace: good managers pick (b) and (e); bad managers tend to pick (c). Yet there's no clear connection between such tacit knowledge and other forms of knowledge and experience. The process of assessing ability in the workplace is a lot messier than it appears.

An employer really wants to assess not potential but performance. Yet that's just as tricky. In "The War for Talent," the authors talk about how the Royal Air Force used the A, B, and C ranking system for its pilots during the Battle of Britain. But ranking fighter pilots--for whom there are a limited and relatively objective set of performance criteria (enemy kills, for example, and the ability to get their formations safely home)--is a lot easier than assessing how the manager of a new unit is doing at, say, marketing or business development. And whom do you ask to rate the manager's performance? Studies show that there is very little correlation between how someone's peers rate him and how his boss rates him. The only rigorous way to assess performance, according to human-resources specialists, is to use criteria that are as specific as possible. Managers are supposed to take detailed notes on their employees throughout the year, in order to remove subjective personal reactions from the process of assessment. You can grade someone's performance only if you know their performance. And, in the freewheeling culture of Enron, this was all but impossible. People deemed "talented" were constantly being pushed into new jobs and given new challenges. Annual turnover from promotions was close to twenty per cent. Lynda Clemmons, the so-called "weather babe" who started Enron's weather derivatives business, jumped, in seven quick years, from trader to associate to manager to director and, finally, to head of her own business unit. How do you evaluate someone's performance in a system where no one is in a job long enough to allow such evaluation?

The answer is that you end up doing performance evaluations that aren't based on performance. Among the many glowing books about Enron written before its fall was the best-seller "Leading the Revolution," by the management consultant Gary Hamel, which tells the story of Lou Pai, who launched Enron's power-trading business. Pai's group began with a disaster: it lost tens of millions of dollars trying to sell electricity to residential consumers in newly deregulated markets. The problem, Hamel explains, is that the markets weren't truly deregulated: "The states that were opening their markets to competition were still setting rules designed to give their traditional utilities big advantages." It doesn't seem to have occurred to anyone that Pai ought to have looked into those rules more carefully before risking millions of dollars. He was promptly given the chance to build the commercial electricity-outsourcing business, where he ran up several more years of heavy losses before cashing out of Enron last year with two hundred and seventy million dollars. Because Pai had "talent," he was given new opportunities, and when he failed at those new opportunities he was given still more opportunities . . . because he had "talent." "At Enron, failure--even of the type that ends up on the front page of the Wall Street Journal--doesn't necessarily sink a career," Hamel writes, as if that were a good thing. Presumably, companies that want to encourage risk-taking must be willing to tolerate mistakes. Yet if talent is defined as something separate from an employee's actual performance, what use is it, exactly?

3. What the War for Talent amounts to is an argument for indulging A employees, for fawning over them. "You need to do everything you can to keep them engaged and satisfied--even delighted," Michaels, Handfield-Jones, and Axelrod write. "Find out what they would most like to be doing, and shape their career and responsibilities in that direction. Solve any issues that might be pushing them out the door, such as a boss that frustrates them or travel demands that burden them." No company was better at this than Enron. In one oft-told story, Louise Kitchin, a twenty-nine-year-old gas trader in Europe, became convinced that the company ought to develop an online-trading business. She told her boss, and she began working in her spare time on the project, until she had two hundred and fifty people throughout Enron helping her. After six months, Skilling was finally informed. "I was never asked for any capital," Skilling said later. "I was never asked for any people. They had already purchased the servers. They had already started ripping apart the building. They had started legal reviews in twenty-two countries by the time I heard about it." It was, Skilling went on approvingly, "exactly the kind of behavior that will continue to drive this company forward."

Kitchin's qualification for running EnronOnline, it should be pointed out, was not that she was good at it. It was that she wanted to do it, and Enron was a place where stars did whatever they wanted. "Fluid movement is absolutely necessary in our company. And the type of people we hire enforces that," Skilling told the team from McKinsey. "Not only does this system help the excitement level for each manager, it shapes Enron's business in the direction that its managers find most exciting." Here is Skilling again: "If lots of [employees] are flocking to a new business unit, that's a good sign that the opportunity is a good one. . . . If a business unit can't attract people very easily, that's a good sign that it's a business Enron shouldn't be in." You might expect a C.E.O. to say that if a business unit can't attract customers very easily that's a good sign it's a business the company shouldn't be in. A company's business is supposed to be shaped in the direction that its managers find most profitable. But at Enron the needs of the customers and the shareholders were secondary to the needs of its stars.

A dozen years ago, the psychologists Robert Hogan, Robert Raskin, and Dan Fazzini wrote a brilliant essay called "The Dark Side of Charisma." It argued that flawed managers fall into three types. One is the High Likability Floater, who rises effortlessly in an organization because he never takes any difficult decisions or makes any enemies. Another is the Homme de Ressentiment, who seethes below the surface and plots against his enemies. The most interesting of the three is the Narcissist, whose energy and self-confidence and charm lead him inexorably up the corporate ladder. Narcissists are terrible managers. They resist accepting suggestions, thinking it will make them appear weak, and they don't believe that others have anything useful to tell them. "Narcissists are biased to take more credit for success than is legitimate," Hogan and his co-authors write, and "biased to avoid acknowledging responsibility for their failures and shortcomings for the same reasons that they claim more success than is their due." Moreover:

Narcissists typically make judgments with greater confidence than other people . . . and, because their judgments are rendered with such conviction, other people tend to believe them and the narcissists become disproportionately more influential in group situations. Finally, because of their self-confidence and strong need for recognition, narcissists tend to "self-nominate"; consequently, when a leadership gap appears in a group or organization, the narcissists rush to fill it.

Tyco Corporation and WorldCom were the Greedy Corporations: they were purely interested in short-term financial gain. Enron was the Narcissistic Corporation--a company that took more credit for success than was legitimate, that did not acknowledge responsibility for its failures, that shrewdly sold the rest of us on its genius, and that substituted self-nomination for disciplined management. At one point in "Leading the Revolution," Hamel tracks down a senior Enron executive, and what he breathlessly recounts--the braggadocio, the self-satisfaction--could be an epitaph for the talent mind-set:

"You cannot control the atoms within a nuclear fusion reaction," said Ken Rice when he was head of Enron Capital and Trade Resources (ECT), America's largest marketer of natural gas and largest buyer and seller of electricity. Adorned in a black T-shirt, blue jeans, and cowboy boots, Rice drew a box on an office whiteboard that pictured his business unit as a nuclear reactor. Little circles in the box represented its "contract originators," the gunslingers charged with doing deals and creating new businesses. Attached to each circle was an arrow. In Rice's diagram the arrows were pointing in all different directions. "We allow people to go in whichever direction that they want to go."

The distinction between the Greedy Corporation and the Narcissistic Corporation matters, because the way we conceive our attainments helps determine how we behave. Carol Dweck, a psychologist at Columbia University, has found that people generally hold one of two fairly firm beliefs about their intelligence: they consider it either a fixed trait or something that is malleable and can be developed over time. Five years ago, Dweck did a study at the University of Hong Kong, where all classes are conducted in English. She and her colleagues approached a large group of social-sciences students, told them their English-proficiency scores, and asked them if they wanted to take a course to improve their language skills. One would expect all those who scored poorly to sign up for the remedial course. The University of Hong Kong is a demanding institution, and it is hard to do well in the social sciences without strong English skills. Curiously, however, only the ones who believed in malleable intelligence expressed interest in the class. The students who believed that their intelligence was a fixed trait were so concerned about appearing to be deficient that they preferred to stay home. "Students who hold a fixed view of their intelligence care so much about looking smart that they act dumb," Dweck writes, "for what could be dumber than giving up a chance to learn something that is essential for your own success?"

In a similar experiment, Dweck gave a class of preadolescent students a test filled with challenging problems. After they were finished, one group was praised for its effort and another group was praised for its intelligence. Those praised for their intelligence were reluctant to tackle difficult tasks, and their performance on subsequent tests soon began to suffer. Then Dweck asked the children to write a letter to students at another school, describing their experience in the study. She discovered something remarkable: forty per cent of those students who were praised for their intelligence lied about how they had scored on the test, adjusting their grade upward. They weren't naturally deceptive people, and they weren't any less intelligent or self-confident than anyone else. They simply did what people do when they are immersed in an environment that celebrates them solely for their innate "talent." They begin to define themselves by that description, and when times get tough and that self-image is threatened they have difficulty with the consequences. They will not take the remedial course. They will not stand up to investors and the public and admit that they were wrong. They'd sooner lie.

4. The broader failing of McKinsey and its acolytes at Enron is their assumption that an organization's intelligence is simply a function of the intelligence of its employees. They believe in stars, because they don't believe in systems. In a way, that's understandable, because our lives are so obviously enriched by individual brilliance. Groups don't write great novels, and a committee didn't come up with the theory of relativity. But companies work by different rules. They don't just create; they execute and compete and coördinate the efforts of many different people, and the organizations that are most successful at that task are the ones where the system is the star.

There is a wonderful example of this in the story of the so-called Eastern Pearl Harbor, of the Second World War. During the first nine months of 1942, the United States Navy suffered a catastrophe. German U-boats, operating just off the Atlantic coast and in the Caribbean, were sinking our merchant ships almost at will. U-boat captains marvelled at their good fortune. "Before this sea of light, against this footlight glare of a carefree new world were passing the silhouettes of ships recognizable in every detail and sharp as the outlines in a sales catalogue," one U-boat commander wrote. "All we had to do was press the button."

What made this such a puzzle is that, on the other side of the Atlantic, the British had much less trouble defending their ships against U-boat attacks. The British, furthermore, eagerly passed on to the Americans everything they knew about sonar and depth-charge throwers and the construction of destroyers. And still the Germans managed to paralyze America's coastal zones.

You can imagine what the consultants at McKinsey would have concluded: they would have said that the Navy did not have a talent mind-set, that President Roosevelt needed to recruit and promote top performers into key positions in the Atlantic command. In fact, he had already done that. At the beginning of the war, he had pushed out the solid and unspectacular Admiral Harold R. Stark as Chief of Naval Operations and replaced him with the legendary Ernest Joseph King. "He was a supreme realist with the arrogance of genius," Ladislas Farago writes in "The Tenth Fleet," a history of the Navy's U-boat battles in the Second World War. "He had unbounded faith in himself, in his vast knowledge of naval matters and in the soundness of his ideas. Unlike Stark, who tolerated incompetence all around him, King had no patience with fools."

The Navy had plenty of talent at the top, in other words. What it didn't have was the right kind of organization. As Eliot A. Cohen, a scholar of military strategy at Johns Hopkins, writes in his brilliant book "Military Misfortunes in the Atlantic":

To wage the antisubmarine war well, analysts had to bring together fragments of information, direction-finding fixes, visual sightings, decrypts, and the "flaming datum" of a U-boat attack--for use by a commander to coordinate the efforts of warships, aircraft, and convoy commanders. Such synthesis had to occur in near "real time"--within hours, even minutes in some cases.

The British excelled at the task because they had a centralized operational system. The controllers moved the British ships around the Atlantic like chess pieces, in order to outsmart U-boat "wolf packs." By contrast, Admiral King believed strongly in a decentralized management structure: he held that managers should never tell their subordinates " 'how' as well as what to 'do.' " In today's jargon, we would say he was a believer in "loose-tight" management, of the kind celebrated by the McKinsey consultants Thomas J. Peters and Robert H. Waterman in their 1982 best-seller, "In Search of Excellence." But "loose-tight" doesn't help you find U-boats. Throughout most of 1942, the Navy kept trying to act smart by relying on technical know-how, and stubbornly refused to take operational lessons from the British. The Navy also lacked the organizational structure necessary to apply the technical knowledge it did have to the field. Only when the Navy set up the Tenth Fleet--a single unit to coördinate all anti-submarine warfare in the Atlantic--did the situation change. In the year and a half before the Tenth Fleet was formed, in May of 1943, the Navy sank thirty-six U-boats. In the six months afterward, it sank seventy-five. "The creation of the Tenth Fleet did not bring more talented individuals into the field of ASW"--anti-submarine warfare--"than had previous organizations," Cohen writes. "What Tenth Fleet did allow, by virtue of its organization and mandate, was for these individuals to become far more effective than previously." The talent myth assumes that people make organizations smart. More often than not, it's the other way around.

5. There is ample evidence of this principle among America's most successful companies. Southwest Airlines hires very few M.B.A.s, pays its managers modestly, and gives raises according to seniority, not "rank and yank." Yet it is by far the most successful of all United States airlines, because it has created a vastly more efficient organization than its competitors have. At Southwest, the time it takes to get a plane that has just landed ready for takeoff--a key index of productivity--is, on average, twenty minutes, and requires a ground crew of four, and two people at the gate. (At United Airlines, by contrast, turnaround time is closer to thirty-five minutes, and requires a ground crew of twelve and three agents at the gate.)

In the case of the giant retailer Wal-Mart, one of the most critical periods in its history came in 1976, when Sam Walton "unretired," pushing out his handpicked successor, Ron Mayer. Mayer was just over forty. He was ambitious. He was charismatic. He was, in the words of one Walton biographer, "the boy-genius financial officer." But Walton was convinced that Mayer was, as people at McKinsey would say, "differentiating and affirming" in the corporate suite, in defiance of Wal-Mart's inclusive culture. Mayer left, and Wal-Mart survived. After all, Wal-Mart is an organization, not an all-star team. Walton brought in David Glass, late of the Army and Southern Missouri State University, as C.E.O.; the company is now ranked No. 1 on the Fortune 500 list.

Procter & Gamble doesn't have a star system, either. How could it? Would the top M.B.A. graduates of Harvard and Stanford move to Cincinnati to work on detergent when they could make three times as much reinventing the world in Houston? Procter & Gamble isn't glamorous. Its C.E.O. is a lifer--a former Navy officer who began his corporate career as an assistant brand manager for Joy dishwashing liquid--and, if Procter & Gamble's best played Enron's best at Trivial Pursuit, no doubt the team from Houston would win handily. But Procter & Gamble has dominated the consumer-products field for close to a century, because it has a carefully conceived managerial system, and a rigorous marketing methodology that has allowed it to win battles for brands like Crest and Tide decade after decade. In Procter & Gamble's Navy, Admiral Stark would have stayed. But a cross-divisional management committee would have set the Tenth Fleet in place before the war ever started.

6. Among the most damning facts about Enron, in the end, was something its managers were proudest of. They had what, in McKinsey terminology, is called an "open market" for hiring. In the open-market system--McKinsey's assault on the very idea of a fixed organization--anyone could apply for any job that he or she wanted, and no manager was allowed to hold anyone back. Poaching was encouraged. When an Enron executive named Kevin Hannon started the company's global broadband unit, he launched what he called Project Quick Hire. A hundred top performers from around the company were invited to the Houston Hyatt to hear Hannon give his pitch. Recruiting booths were set up outside the meeting room. "Hannon had his fifty top performers for the broadband unit by the end of the week," Michaels, Handfield-Jones, and Axelrod write, "and his peers had fifty holes to fill." Nobody, not even the consultants who were paid to think about the Enron culture, seemed worried that those fifty holes might disrupt the functioning of the affected departments, that stability in a firm's existing businesses might be a good thing, that the self-fulfillment of Enron's star employees might possibly be in conflict with the best interests of the firm as a whole.

These are the sort of concerns that management consultants ought to raise. But Enron's management consultant was McKinsey, and McKinsey was as much a prisoner of the talent myth as its clients were. In 1998, Enron hired ten Wharton M.B.A.s; that same year, McKinsey hired forty. In 1999, Enron hired twelve from Wharton; McKinsey hired sixty-one. The consultants at McKinsey were preaching at Enron what they believed about themselves. "When we would hire them, it wouldn't just be for a week," one former Enron manager recalls, of the brilliant young men and women from McKinsey who wandered the hallways at the company's headquarters. "It would be for two to four months. They were always around." They were there looking for people who had the talent to think outside the box. It never occurred to them that, if everyone had to think outside the box, maybe it was the box that needed fixing.

Wi-Fi in cars - the Chrysler way

2008-06-26T20:14:00.002+05:30

Innovation has no boundaries and these days anything that lacks innovation doesnt seem to sell. Value added services is another keyword that companies rely upon - to make a sale. Chrysler, following the footsteps of Ford is now bringing in cool-classy value added services. Their latest proposition is to provide Wi-Fi hotspots in their Chrysler cars.

This is like following cellphone way. Tired of bringing in clarity, easy UI, slimmer handsets and the like, manufacturers tuned in their innovation antennas started adding every value added stuff like camera, speakers, MP3 players, photo albums and what not. Now US Auto-kings picked a cue from this and started adding stuff like DVD players, handsfree cellphone receivers, speed-radar detector and now latest is the Wi-Fi hotspots.

But looks like the Detroit dullheads would never get it. The value for value added stuff comes ONLY when the base product is strong. Would you consider buying a cellphone just because it has camera and maybe even a mini-printer(!!) fully knowing that it has a very poor reception or poor mics or bad battery life? People dont buy Chrysler or Chevy or Ford not because it doesnt come with Wi-Fi, but because it drinks fuel so much. Innovation is not to be done just because it needs to be done. The Detroit cars are BAD - bad for fuel-conservation, bad for purses, bad for environment as a whole. Toyota sells because they give fuel efficient cars - not because they give OnStar or a camera in the hood to take pictures while driving.

Maybe Motown three should stop innovating and go back to working on basics.

Influence lazy government agencies

2008-06-19T16:25:00.002+05:30

Last 2 days have been buzzing with the news of how Amazon has stopped shipping to South Africa using their postal service citing rising thefts. Amazon is now offering only priority shipping though reputed courier services as opposed to using the Government postal agencies.

As with any government response, the postal agency has retorted that the thefts were down by 69% from last year and their success rate currently was at 99%!. In spite of such interesting numbers, Amazon, which has a mission to be Earth's most customer centric company, has decided to cut off its shipping through the SA post offices.

Angry customers are now forcing SA post office to look inward to resolve the problem. Few hours after the first announcement, SA post office declared that they were trying to contact Amazon to resolve the root cause of the problem. The post office said that Amazon is a important customer for them.

This signals many things - first being that the government agencies feel the pinch to change their attitude and work culture; second that even private agencies can induce change into such never-changing government institutions.

Will such a thing happen in India?

Camel is a Horse designed by a committee

2008-06-17T14:08:00.004+05:30

I hate meetings - long ones; no defined agenda; with few participants who come into work just for chairing or attending meetings. So any research essay that demerits meetings is a cup of lassi for me!

Slow Leadership came out with a strong post that can summarized that more meetings mean less trust.

In the list of activities that waste time and cause worthless frustration at work, meetings rank very near the top. Not only do many meetings fail to result in any clear decision, leaving you wondering why people came together in the first place, others have no discernible purpose at all. Worst of all, holding too many meetings passes a strong message: the boss doesn’t trust the team to function without his or her constant interference; and colleagues don’t trust one another not to undermine them in some way.

I would vote with the article more than one hundred percent. Most meetings dont result in any decision making - all people do is pass the buck. If one takes a bold decision, then he/she shows a dominating attitude; decision by consensus happens in meeting post lunch sessions. Most of the time the only decision taken is when to meet next to discuss the issue.

The status meetings are by far the worst - they are like reading all your spam mails, junk folder mails, bulk mails and forcing others to read them too. In addition to pervasive distrust that the author talks about, I believe that CYA plays a key factor in meetings.

The other funny thing is to keep saying "Lets take this offline". If you were to take it offline,
then why call a meeting in the first place?

As techies say, No-Laptop meetings makes sense. No meetings make more sense!

A Tale of 2 CEOs - Wipro

2008-06-13T10:32:00.003+05:30

Well, the tale is just beginning and it will take some time to see how it turns out. Wipro, which has always been showcasing different management stories and strategies has embarked on a 2-CEO model now. After Vivek Paul was summarily fired (though he is supposed to have left on his own), Wipro is experimenting with the new model. The 2 CEOs are from Wipro's school and have spent decades there. Premji continues to be the Chairman of this organization. Wharton calls this arrangement collegiate - where Premji is the Principal. The 2 CEOs - Vaswani & Pranjpe - themselves are gung-ho about this.

Says Vaswani: "Given the size of our business and the ambitions that we have for our business, two is certainly better than one. We do believe that the power of two will help us so far as we are concerned, given our environment." Adds Paranjpe: "Given the enormity of the opportunity and the task at hand, we felt it was worthwhile to have two of us trying to drive this rather than leave it to one individual to try and do [everything]. And from a personal perspective, it can get very lonely at the top. So, having two people helps."

The twin arrangement didnt work out well for several companies - like Unilever for example. But then one cant take them blindly to compare. The business models, cultural climates etc., are totally different here and Premji might just be able to pull it off.

Immaterial of what happens, it will be an interesting management lesson. Am wondering, by the way, is the CEO salary split between these two? Or each of them draws a CEO salary?? Well, it is Wirpo stockholder money and Premji owns 70%+ of it - so he will be careful is my guess..

For the record, Sidney Carton did die at the end of The Tale.

Chrysler catches up with Toyota ! - (of course there is a catch)

2008-06-10T13:33:00.005+05:30

Anyone who reads the following article in Detroit News would be laughing; surprised to the very least. By matching Toyota in one metric (Labor hours/car), Chrysler has the nerve to call itself matching Toyota in efficiency. This is a beautiful example of taking one metric, skewing it up, matching with a competitor and say that they are equals. Chrysler would possibly never run into discussions on vehicle quality, fuel efficiencies or overall financial performance in comparison with Toyota.

And this is the problem with single metric comparison. It would have been very easy for Chrysler to add some automation systems and claim that their efficiency has bettered; worse, they could have outsourced labor and claimed that their labor hours/vehicle has actually reduced!. I am not suggesting that they did that, but all this is certainly possible. Skewing one single metric is not a tough mandate at all!!

This is the same issue with metrics captured in IT Services companies. Things like man-hours, lines of code, bugs per 100 lines of code/bug density - these are metrics that are still being religiously followed even in top tier IT companies. There is hardly any realization that these metrics have died their death and any further use will only leave us with useless information. When a metric is defined, it is important to understand the purpose of capture of that information. Just because a BPO calculated number of toilet trips by men and women employees so as to set ideal number of toilets at optimal distance for each gender, it doesn't mean that once the numbers are reached, the BPO can claim a 100% efficiency!

However most of these metrics rest on the smartness of managers who question the need, the data gathering process, the inferences and the side-effects. If not, all we can expect is Chrysler to outperform Toyota!

Why ICICI could eventually fail

2008-06-08T10:26:00.003+05:30

I may be laughed at for my title and dismissed summarily as a novice's blabber, but nevertheless I will take the risk of going through with my thoughts on this.

ICICI is a hero in the eyes of Indian industry. In a land where government rank banks through proxies, where modern banking system was virtually unknown, where private banks could never muster enough support to break into mainline, ICICI stepped in boldly. It has gone places where no private Indian bank has dreamt of going before. KV Kamath is now an icon for what he has done. ICICI is a case study in vritually every book that deals with innovation, both in India and abroad.

Then why did I choose such a title? I not just a skeptic who finds fault with a new development. Neither am I to change. It is no secret that success of a corporation is dependent directly on the support it receives from its customers. True, employees, investors do have a good say on the survival, but the key itself is held by customers.

ICICI, while growing fast and bold and monumental, has somehow stopped taking its customers along with it. Somewhere in its journey, ICICI has dropped off customers in the middle of the sky, sometimes without parachutes, while it has sped along. It has become more like a federal company with middlemen dictating terms for end customers. Agents, who have no clue about ICICI's mission or vision, have become customer touch-points - or pain-points. Half baked mergers (with Bank of Madura etc.,) with poor system integration even after several years, have left common customers annoyed.

While corporate customers manage to arm twist and get things done in the bank, common customers are left to fend for themselves. Many of them stick with ICICI because they are either tired to move, or stuck with some transaction that doesn't allow them to move. While ICICI lures customers using all strategic marketing techniques, once they customers are in, they are made to go through all sorts of pain and trouble and poor processes. Customer familiar with latest technologies or with greater disposable income either don't care about hidden charges or just don't realize that there have been deductions without their knowledge.

But the middle class masses do realize. Walk into a ICICI teller counter and you can see customers yelling everyday on some deductions, wrong transactions, ATM charges, irresponsible middle agents, clerks with no clue about abbreviations, managers waiting for approval from "Mumbai". Add to this the irritating phone calls that thrust personal loans and credit cards - ICICI has a truckload of angry customers.

While flying high in quest for growth, ICICI has forgotten to take care of pilots who actually drive the company to success. Unless corrective actions are rapidly introduced and ICICI brings focus back on customer, chances are certain that the Bank will fail, possibly sooner.

Customer Delight and India

2008-06-05T11:11:00.002+05:30

These days Customer Delight is the keyword that each company hangs upon. One can hardly see any company that doesn't talk about keeping customer at the front. Amazon.Com proclaims loudly that its goal is to be Earth's most customer centric company. Similar tag-lines for several companies. Even the small Zappos.Com which started virtually with nothing in early 2000 and has grown to a $1B company by 2008, claims that its growth is because of its customer focus.

How these Web 2.0 companies build good relationships to build their brands. Forging strong communities is a key for marketers looking to build brands online. For Tony Hsieh, CEO at Zappos, meeting up with a customer at a bar in midtown Manhattan was perfectly natural. Most execs with 1,600 employees and doing over $1 billion in annual sales would probably pass on having drinks with an individual customer, but Hsieh is not your typical CEO. In the past week alone he had given away shoes on Twitter, sent out an open invitation to a company barbecue and solved a service problem a customer left in a blog comment. If this seems exhausting, Hsieh sees it as part of a larger strategy to build Zappos into a brand on par with Virgin. “We think our brand is going to be different because we want people to feel there’s a real person they’re connecting with, whether it’s when they call us or through Twitter or any way they come in contact with us,” he said. The path Zappos is taking has been forged by some of the Internet’s top brands, like Craigslist. It’s part of a newer crop of companies, including T-shirt phenomenon Threadless, handmade-craft site Etsy and review destination Yelp, quietly building powerful brands online on the strength of communities. For these companies, community is not a tactic or marketing plan line item, but core to what they do. It means being hyper-responsive to customers, laser focused on usability, unapologetically human and OK with customers determining the course their businesses should take. The bonus: When they take off, these brands don’t need to do much in the way of advertising, instead letting their customers spread the word.

(You can read the full article here)

This begs the question - where are the Indian companies in this regard? Is customer delight something that the Indian companies are serious about? True, there has been lot of improvements compared to early nineties, but are the improvements universal? Can one walk into Reliance Fresh or Spencers Daily and claim that they had a wonderful shopping experience? Or are such words restricted to stores in expensive mall-locations - Lifestyle, Crossword, Shoppers Stop and the like? Or are we satisfied that there is at least something now compared to nothing in the past? Do we, Indian consumers have enough power to demand the customer delight experience when we shop?

Customer Service and Outsourcing

2008-06-03T07:26:00.003+05:30

All businesses are gravitating towards Customer is the King mantra, well away from the Ford one size fits all model. Customers have also realized their commanding position and have started demanding excellent quality-low cost service from providers. In such scenarios, is it wise to outsource customer service to offshore BPOs?

The traditional Marketing Services teaches you that the customer touch-points should always remain with the corporate entity. The customer service is probably the only channel that helps a company evaluate customer needs and sentiments and plan for future. If this is outsourced to a BPO, how effective will the feedback flow?

On the other hand, no company wants to run a department that doesn't form a part of its core competency. Why bother dealing with the pain of recruitment, training, retention etc., when there are other service providers who have perfected this art and can deliver it for a fraction of the cost? And they do supply back metrics, customer complaints etc., in more concise and analyzable form.

Further, customers these days have started to terribly show their dislike for customer service as they know that they are taking to someone who would possibly act as a postman with no real interest to solve the customer issue. Throw in the offshoring, low-cost into this mix and the whole outsourcing-offshoring creates such a negative feeling in the mindset of most customers. However, on the other hand, investors want companies to perform - slash out unnecessary expenditures and focus solely on value creation; and customers want low cost for everything with the highest quality.

Just imagine the plight of the manager who has to deal with all this contradicting equations trying to solve each one of them. Bharti Airtel which had originally outsourced its customer service has now started to insource them back. ICICI on the other hand is outsourcing more and more of its services to middlemen and agents - to the point where it is facing issues starting from heavy ridicule in movies to court cases on repayment harassment.

Just as any other issue in the corporate world, this has no magic bullet. One thing I feel certain is the fact that if BPOs do not further up their commitment to the companies that they serve as well as the end customers they deal with, it may just be a narrow lane for service providing entities and the road will widen for all captive outsourcing units.

HP marries EDS

2008-06-02T12:09:00.006+05:30

HP has now officially joined hands with EDS in holy matrimony. The previous marriage went on a roller-coaster initially; the priest who solemnized it was fired; the family was dead against it. And yet, years later, HP has made the marriage work and has now proceeded for the next. Acquiring Compaq was probably one of the good decisions that HP took at that time, though unfortunate for Carly Fiorina, the "good decision" verdict came a little too late.

With EDS, HP hopes to repeat the story and take on a mammoth IBM. But is EDS a right choice at the moment? I have my own doubts. Questions to ponder:
(1) Does HP really need to get into Services and compete with IBM?
(2) Is EDS a worth choice?
(3) Is the price worth it?

With no proper strategy of its own, EDS has been laying its hands wherever it could to survive thus far. The synergies as explained by HP's executive management are vague and it might well take a long time before anything becomes realistic. My take is that HP has made a well calculated move to expand their services portfolio by mergers/acquisitions, but the EDS purchase is not all that brilliant. I may be proved wrong, but until then I would stand by what I say. One thing is sure though - what good will come to HP after this merger is debatable, but it will sure wake the sleeping giant IBM and make the elephant dance - or shake. IBM is bound to make stern changes to its organizational structures, hiring & firing policies and focus more on customer delight.

Mark Hurd is supposed to be extremely thoughtful and smart, as opposed to blunt Ms. Fiorina and one can only hope that he and his team will put in considerable energies to make sure that they get the necessary synergies. Meanwhile, the BFL investors can laugh all the way to the Bank - their sale to MPhasis and then to EDS and now to HP has definitely made them richer.

Ignition

2008-06-02T11:54:00.002+05:30

Welcome to My Biz Musings, another random blog by me because the Internet just lets me do what I want to. I hope to be a regular here with short posts, not wasting too much of anyone's time; posts will be mostly on business topics - ones that affect us in everyday lives. A quick disclaimer is that all views published here by me are of my own and do not pertain any of my past present or future employers.

So lets start the cruise.