Category: Business Environment

The Joys and Perils of Dancing on a Knife’s Edge

February 25th, 2011 — 11:09am

The tumultuous crowds that brought down a dictator in Egypt had an unintended impact far from their homeland: they drowned out – rightfully! – the announcement of a strategic partnership between Nokia and Microsoft. I admire the Nokia I researched; yet I acknowledge it is currently in deep trouble. I have long disdained Microsoft for its product quality and its reliance on monopolistic power instead of innovation (sole exceptions: Xbox and Kinect; and yes, I admit that Office 2011 for the Mac is far better than iWorks!). So, what do I think of this alliance?

A key “prerequisite” question is: Do I still believe the ideas in The Spider’s Strategy? Absolutely! Toyota’s “unexpected acceleration” fiasco and its resultant recalls of millions of cars didn’t discredit Lean Enterprise. Why then, should Nokia’s recent challenges discredit Networked Organizations? Indeed, Nokia got into trouble because in the key area of product innovation, it stopped applying the ideas that powered its 17% compounded annual organic growth rate (in revenues and operating profits) from 1995 to 2006.

Nokia violated a subtle rule embedded in my third Design Principle, “Value and nurture organizational learning.” It used to learn rapidly by setting seemingly impossible targets that demanded the periodic reinvention its business model. Simultanneouly, to keep control, it insisted its managers follow a “no surprises” policy. This brilliant rule is the proverbial knife’s edge. Balance well, and you can pull off miracles. Tilt toward “big risk” and you can lose your shirt. Tilt toward “no suprises” and you will bring innovation to a screeching halt. As it grew, Nokia made the mistake many other large companies have: it tilted toward “no surprises.” So, unlike Apple, it didn’t build a network of complementary product makers to buttress its proprietary Symbian software. Unlike Google, it didn’t attract a different type of sustaining network by making Symbian open source – until it was too late.

The alliance with Microsoft was in the cards from the day Nokia’s Board appointed Stephen Elop CEO. Nokia’s press release spoke of a strategy to “build a new global mobile ecosystem” with Windows Phone software at its core; “capture volume and value growth to connect ‘the next billion’ to the Internet in developing growth markets;” and make “focused investments in next-generation disruptive technologies.”

The second element – a continued focus on markets like India and China – is an key, though the notoriously developed-world-focused financial analysts may not care. Apple has ignored these markets and Windows still has a true monopoly among operating systems. These facts, plus Nokia’s still dominant marketshare there, give the alliance a strong base on which it can build; Nokia can instantly create volume for the Windows Phone and a seemless integration with Wintel computers may give it an edge over low cost Chinese phone makers. At the very least, this element will buy the alliance time; at best, the “next billion” is a huge market. That’s where the first element is also critical.

To bring the alliance value, the goal of building a mobile ecosystem must truly assimilate the lesson of a recent The New York Times story about a start-up company that hoped to build a business around enabling group dates. The founders noted that the site’s users were mostly South or East Asians, but filed that fact away as “Interesting, but Unimportant.” Success came only when they reluctantly acknowledged that group dating wouldn’t fly in the US and shifted their focus to India. The world, as Thomas Freidman said, is flat. But that doesn’t mean people’s needs are the same everywhere. That’s why the word “global” in the language of this strategic element is troubling. Its use may seduce financial analysts, but unless an ecosystem to specific markets, it won’t amount to a hill of beans. At one time Nokia knew this lesson; it had had anthropologists in Indian villages whose work strengthened its market position there. Does it still remember that lesson and can it convince a monopoly to learn it too?

The third element is critical for the long term and most troubling: Will two companies who haven’t created any disruptive technology recently be able to do so in the near future? Nokia’s Chairman Jorma Ollila had championed the Networked Organization philosophy and as CEO, had managed its phenomenal growth. I could make a cogent case that he and the Board had no choice but to create the alliance with Microsoft. (Which would explain why they pursued Mr. Elop in the first place.) Now, he must ensure that Mr. Elop realizes that his most critical tasks are (1) putting into leadership positions those within Nokia who are still capable of dancing gracefully on a knife’s edge and (2) using his deep knowledge of Microsoft to convince Mr. Ballmer to do the same. Then, and only then, will the alliance succeed. If so, I may one day become once again an enthusiastic customer of both companies.

Comment » | Business Environment, Company Performance, Corporate Culture, Leadership

“Oh, You Spoke the Culture and She Spoke the Language”

October 6th, 2010 — 11:07am

The quintessential Indian term, “License Raj” pejoratively describes environments where governmental approval – administered by imperious bureaucrats – is essential for day-to-day activities of people and businesses. I used the term at a recent meeting I attended to describe my sojourn (1992—1994) in France. (Incidentally, none of this is a commentary on today’s France and India.)

French state run utilities regularly sent notices that said, “We will come on X day at Y time to read your meter. If you are not at home, we will levy a 50 Franc charge. If you need to change this appointment, you must also pay a 50 Franc charge.” My wife (India-born, but US-bred) spoke French well, but found such demands incomprehensible. I didn’t speak French, but having grown up in India, readily understood them. Ultimately, she found France more challenging than I did.

While several people laughed at my story, one observed, “Oh, you spoke the culture and she spoke the language!” The depth of this casual statement, spoken in jest, stayed with me.

Many scholars and adults believe that learning someone else’s language allows us to understand how he/she thinks. So, premier universities had – and still have – language requirements for undergraduates. Years ago, the European Union, against significant opposition, passed laws requiring children to learn languages that where not their own national languages. When the best of our companies open offices in countries far from home, they populate these offices with people who have more than a nodding acquaintance with the host country’s language.

Indeed, when the Disney company opened EuroDisney outside Paris (while I was living there), it hired bilingual – often fluently so – people. Yet, EuroDisney was an unmitigated disaster at its opening; I took my toddler there and swore I would never return. The Park turned around only when Disney acquiesced to a European – French – management takeover.

So, the knowledge of a language, however proficient, may not necessarily translate into an understanding of the associated culture. Conversely, the understanding of a culture, may not necessarily require fluency in the language. In the language of mathematicians, neither is necessary nor sufficient.

As we create ever more complex – networked – organizations that span the globe, we must understand this issue in greater depth than we do. How do you think businesses should deal with this culture-language issue?

Comment » | Business Environment

“Don’t be evil” meets “Do no harm”

March 1st, 2010 — 3:33pm

Last week, an Italian court gave three Google executives six months’ suspended sentences. Their case dealt with a video uploaded on YouTube in Italy, giving the court (and the prosecutors) jurisdiction. The video, which showed a group of teenage boys bullying another with autism, quickly became an Internet sensation. A couple of weeks later, Google received a complaint and removed the video within three hours. By then over half a million people had viewed it. The Google executives were deemed guilty of violating privacy laws.

In the real world, most issues worth reflecting on – like this one – have no simple answers. This one asks us to weigh the relative benefits of privacy and free speech. I don’t know all the possible arguments people made about this case, but I’ll address a few that I heard repeatedly.

The first ignores the specific details of the case and suggests it was a cynical ploy by the billionaire Italian Prime Minister Silvio Berlusconi to clip the power of the Internet since it was threatening his vast “old media” empire. I don’t know much about the Italian judicial system, but if one has a reasonable understanding of realpolitik and of Mr. Berlusconi’s repeated cavalier disregard of a variety of laws, this view is hard to dismiss as a ridiculous conspiracy theory. If true, the court’s decision could have a very negative impact around the world.

It isn’t unheard of for ruthless executives to take unethical, albeit legal, positions to further their ends. The big deal here is that this decision was handed down in a Western democracy on an issue with very high stakes. Undoubtedly, many ruthless people are currently assessing how they could win similar rulings in their bailliwicks. The Ahmadinejads and Mugabes of the world are preparing arguments along the lines of “But this is acceptable in the West.” So, the decision has made the world much more fraught with risk for decent people.

The second viewpoint has attracted most commentators. In essence, it compares the Internet to traditional communications – like telephones and the post office. Telephone companies aren’t subject to criminal charges when their equipment and services are used to plan crimes, no matter how nefarious. So, why should companies like Google?

I am not a lawyer, but for me, this argument doesn’t have legs. Progress in laws generally always lags progress in technology. In The Spider’s Strategy, I argued that our legal systems haven’t caught up with the fact that sense-and-respond capabilities are erasing the traditional boundaries of companies and taking us into uncharted territories. So, inadequate laws shouldn’t be a defense here.

Besides, Google’s defense was that it took down the video within 3 hours of being informed about it. The real question is: should it have acted proactively? After all, when I go to my local post office, I am routinely, proactively asked to confirm that the letter or package I am shipping has nothing dangerous in it. Legally, the post office doesn’t have to ask me (at least not that I know of!), but it is commonsensical for them to do so, if for no other reason than to protect its own people. I am sure that if I give them cause for concern, someone will take some proactive action and at least screen my package. Indeed, increasingly, the post office is trying to screen all packages.

But Google responds that every second, twenty hours of video are loaded on its systems around the world. They just don’t have the ability to screen everything. This argument also seems specious. Google doesn’t have to screen everything. However, can’t – doesn’t – it have filters to screen on an exceptional basis? If a tag or a comment says “school yard bully” couldn’t that particular video be checked out? Let’s assume that this filter would itself get swamped by volumes. How about using an additional decision point? “If a video hits 100,000 views or if a video is shooting up the popularity index very rapidly, check its appropriateness.” Saying “We want the right to search every book in the world and make money out of giving people access to these” seems incompatible with “We can’t possibly be expected to scan every video – or even a fraction of the videos – currently on our system.”

The third viewpoint focuses on biases rooted in the divergent histories of people around the world. Americans favor the freedom of information over all else because its national birth was in part driven by the oppression of a government using information inappropriately. That’s why it is the First Amendement to the US Constitution (part of the Bill of Rights which enshrines the first ten amendments); the Consitution was adopted on September 17, 1787 and the Bill of Rights was adopted on December 15, 1791. In contrast, there is no explicit “right to privacy” in the US Constitution or its amendments; this right was imputed to exist (on the basis of several of the other Bill of Rights amendments) as late as 1965 by a much disputed ruling of the US Supreme Court.

In contrast, Europe has suffered severely as a result of a lack of a fundamental right to privacy. Throughout history, dictators and totalitarian regimes have terrorized their people by collecting huge amounts of secret information and using these to justify punishments, torture and killings. And so, it is no surprise that Article 8 of the European Convention on Human Rights says, “Everyone has the right to respect for his private and family life, his home and his correspondence.”

Supporters of the “information first” logic point out that today’s totalitarian states block access to information, particularly that acquired through the Internet. So, Google rightfully stood by its corporate motto and “did no evil:” It shouldn’t have – and didn’t – act preemptively to block the video, but took action when it was appropriate. Supporters of the “privacy first” logic, (which, incidentally, the Italian court adopted) argue that Google had a fiduciary responsibility to protect the autistic child’s right to privacy. Above all, Google should have “done no harm.”

In the years to come, we will face the two facets of this third viewpoint over and again. Sense-and-respond capabilities will not only benefit businesses and society, but will also raise this issue in ways that we can’t even imagine. (For example, listen to “Different Strokes.” This “On the Media” program from National Public Radio discusses technology that tracks where someone goes on the Internet on the basis of his/her typing pattern.)

My own bias is towards privacy; I think it will increasingly become hard to live as an individual unless privacy safeguards are strengthened. And the day when this becomes a real issue for everyone is not far off; it will happen, as I’d indicated to a pharmaceuticals industry audience in May 2002, because of genetic-profile based medicine. Even “open information” stalwarts in the US will have to think about whether they want companies and governments to have unfettered access to their own specific genetic structures. That is why I did not howl in protest when I read about the Italian court’s decision – but as I indicated in my discussion of the first viewpoint, I am not one hundred percent convinced that it was the right decision.

1 comment » | Business Environment, Corporate Culture, Online Business Models, Politics

A very happy new year?

January 6th, 2010 — 6:11pm

I spent a chunk of December in the UK, traveling from London to Edinburgh to Cambridge to Cardiff (It’s a Dr. Who/Captain Jack Harkness thing; if you know these names, you won’t ask, “Why Cardiff?” and if you don’t, don’t worry since the answer’s too long to give here!). There, as here, on the surface the economy seemed fine. Oxford Street, London’s equivalent of New York’s 5th avenue, was beautifully lit up and packed with people. The department stores were hard to walk through; Harrod’s had its security staff directing and controlling traffic inside. Our effort to get seating for a traditional afternoon tea – relatively easy, even near Christmas, on past trips – met polite refusals at multiple locations; we ultimately went to the British Museum, not to see the exhibits, but for tea!

I also saw a very different side of UK. In all the cities, many stores were boarded up or had “To Let” signs. Other than Harrod’s, department stores were discounting prices even though there were no posters and banners announcing sales; we paid less than sticker price for several items. The news was gloomy – Iceland was bankrupt, Greece almost so and Spain and Portugal were not far behind; failure to resolve these would undoubtedly hurt the Euro Zone. Perhaps most tellingly, endless pubs and small restaurants were inviting customers to party with them on Christmas, using price – “Only £16.95 a person” – as their primary solicitation tool. In contrast, a few years ago, we few restaurants were open and we had to pay £150 for 3 people (one a child) at one of the few open establishments.

Almost metaphorically, the elegant, comfortable and super-fast Eurostar trains that run through the tunnels beneath the English Channel broke down. On a bitterly cold day, not one or two, but five of these trains simply came to a halt within the tunnels. Why? No one knew. The trains had operated flawlessly for 17 years – and on occasion, in comparably cold weather. Chaos reigned for days: Thousands of people were stranded, unable to go on their planned ‘holidays.’ As the trains stopped, so did truck traffic between the UK and France. Thousands of truck drivers stood around on British highways, turning them into parking lots. And for good measure, the British Airways cabin crew union decided to go on an indefinite strike to protest a work rule change. The strike was ultimately avoided when a British court voided the strike vote on the basis of a technicality, but before the court ruled, more panic gripped the public. Uncharacteristically, huge amounts of snow and bitter cold stopped other trains and blocked roads all over the country. And a financial institution made news by announcing its plan to transfer its professionals abroad to help them avoid the newly announced taxes on bonuses – even though it was unclear whether the law applied to them.

Whenever there’s panic and chaos, humans almost cannot resist pointing fingers at others. And that’s exactly what was happening all around. The people and the press wanted black and white answers – somebody’s head should roll, shouldn’t it? Someone has to pay for my inconvenience, right? And far from black and white, no one nominally in charge even seemed to know whether the problems were on the grey scale – or were a garish shade of red and orange.

This situation is a microcosm of today’s US economy (and most likely, for many others). The old rules no longer work because of network effects. Experts disagree about what the new rules should be and “My model is better than your model, you imbecile!” types of arguments abound. Politics drains what little realism there is in these models and ideology is spewed, dressed up as science. Piecemeal solutions are offered as panaceas for all evils. People who don’t know the difference between “budget deficit” and “national debt” routinely pass judgment on what should or should not be done. And seeing them in this state, many of those who can distinguish such terms – but don’t understand terms like “empathy” and “conspicuous consumption” – tell themselves that this is the best time to pay themselves their biggest bonuses ever.

I couldn’t help wondering whether the US definitely – and Western Europe perhaps – are on glide paths to a two-tier economy. Certainly Warren Bennett, who could single-handedly finance some small countries for years without breaking a sweat, has expressed similar concerns about the US; he has flatly said that this trend does not bode well for a democracy.

So, here’s my hope for 2010: That of us who are brilliant or are among the top echelons of the society (in our minds anyway) and those of us who make major decisions on behalf of our companies, resolve to do whatever we can to help turn this gloomy picture around. We don’t need specialized training to do this; all we need is (1) to consider for our own, everyday choices, not just “What’s in it for me?” but also, “How will it affect the network within which I live?” and (2) to help others do the same. If our networked economies thrive, we’ll do even better than we are doing now; if they fail, sooner or later they will drag us down.

Governments alone can’t solve a problem that companies, consumers and governments jointly created. They will need the active help of companies and consumers. And if, as corporate executives and consumers, we do think of our networks, 2010 can truly be a happy new year.

Comment » | Business Environment

A Tale of Two Indias

October 21st, 2009 — 2:03pm

Earlier this month, I finished a fifteen day trip to India. I formally met executives at two of the country’s largest business groups, and several others in social settings. A journalist posed a question that set me thinking about how business had changed since I lived and worked there.

In 1984, I returned to India after finishing my MBA and spending 13 months in the US as a management trainee at American Express Bank. In other posts, I’ve mentioned my experiences as a trainee creating policy papers for the AEB Board. My return quickly cut me down to size.

My 13 months in New York hadn’t taught me the basics of banking. For example, the lesson I was taught about “Letters of Credit,” the grease of the wheels of international trade, was: reject any “Bill of Lading” that differed from its LC, no matter how small the discrepancy. This categorical rule was meant to protect the Bank if contract disputes emerged between the buyer and seller of the goods covered by the LC and BL. But in India, 100% of the BLs had multiple differences from their LCs. Rejecting them all would shut down the Bank. My India-trained colleagues handled these decisions effortlessly, whereas I, supposedly a “high potential” junior manager, couldn’t without help. (Incidentally, the (rare) managers from the Sub-Continent who got posted abroad, often received multiple, quick promotions to the levels they would have normally achieved had their careers unfolded in the West.)

I also learnt there were many things we could not do, even if they made good business sense. Often, my colleagues (and even my boss) signed off on some transactions with indecipherable squiggles. Moreover, when they had to approve certain types of transactions (e.g., giving a valued client a better deal on its foreign exchange transaction than was allowed by India’s central bank), they almost always had to make client calls; in those cases I signed for them. Ultimately, I realized that these transactions violated arcane Indian laws; when these were minor, the officers squiggled; when they were non-trivial, I became a convenient fall guy.

Today, the situation is very different. Many arcane rules have been repealed; one does not need to break the law every day in order to do one’s job. A palpable degree of confidence radiates from business executives about the prospects of their own firms in particular, and the economy in general. In the 1980s, virtually nothing I had studied in my MBA was applicable in India. Today, many companies are brilliantly run – and could teach a lot to the rest of the world.

The country’s liberalization and rapid growth has, however, produced one downside: A top executive I met bemoaned the fact that the country was teeming with MBAs who wanted to be Managing Directors immediately, without putting in sufficient time to learn their profession. (And I could sympathize with this viewpoint. I watched an interview of a newly appointed, very young, CEO on a TV business channel. The interviewer fawned over him in a manner typically reserved for film stars and cricket players. Which young person wouldn’t want such treatment?) The fact that virtually none of the many business schools that have sprung up all over the country require work experience for admission exacerbates this problem; selections are done mostly based on the Indian equivalent of the GMAT and/or the candidate’s academic record. The desire of the young MBAs clashes with the realities of corporate life and is producing a serious problem: Indian executives estimate that 20% – 40% of their professional staff change employers each year.

Corporate leaders must address this challenge, even if these numbers are a wild exaggeration. I suspect that they will have to take a good hard look at their human resource policies to craft a uniquely “modern Indian” solution. A key part aspect must be the strengthening of company-specific management training; such an investment will convince seasoned managers that the company is truly interested in their professional wellbeing. Until Enron went down in flames, Tom Peters and others were preaching that every manager should adopt a “Me Incorporated” mindset; this doctrine is still prevalent on today’s Wall Street. In India, the most visible example of this mindset is the bitter fued between the two Ambani brothers, each a billionaire many times over. In a networked world, the rest of Indian industry simply cannot afford to fall into the same trap.

A model of what is needed already exists in India and I was privileged to visit it: The Tata Management Training Center in Pune is one of the oldest corporate universities in the world. It is using everything from in-class programs for senior executives to eLearning tools to meet the needs of managers at all levels. Some courses last for a few days, while others are delivered “Executive MBA” style over several months. Chetan Tolia, its Managing Director, told me that some 5,000 managers walk through TMTC’s gates each year. If other major business houses emulated the Tatas in this regard, India could develop a truly formidable competitive advantage.

The million dollar question is: Will they? The ten million dollar question is: What impact will this have on developed economies?

1 comment » | Business Environment, Corporate Culture, executive education, MBA education

There’s Always a Price Tag

September 13th, 2009 — 3:46am

In recent weeks, media mogul Barry Diller made a news splash when he proclaimed that hundreds of millions of people are in for a rude shock: They who expect virtually everything on the Internet to be free, but within 5 years, they will actually have to pay for content.

Virtually simultaneously, Chris Anderson, the editor-in-chief of Wired magazine (and author of The Long Tail), set forth a dramatically different viewpoint. In his book, Free: The Future of a Radical Price, he argued that businesses must learn to compete with “free.” Anderson doesn’t really believe the provocative title of his book; he argues that in an Internet-focused world, every business must be willing to give away something valuable for free in order to gain paying customers for other – presumably more expensive – products and services. Anderson himself is reportedly giving away copies of his book for free (at least to some people); his payoff will be invitations by companies and associations to give paid talks, which can be a very lucrative business.

Anderson’s viewpoint is not novel, though it is being treated as such. A decade ago, I read a book entitled Information Rules: A Strategic Guide to the Network Economy. The authors, two well known economists (Carl Shapiro and Hal Varian) argued that the “new rules of business,” a very common phrase during the early days of the commercialized Internet, were not new at all. Indeed, classical economic theory had within its doctrine all of the rules needed to run Internet-based businesses successfully. One, which is relevant here, was that buyers could not assess the true value of an “experience good” without consuming it at least once.

The experience good idea suggests that Anderson overstates his case, while Dillard will have to pay at least some attention to the idea of “free.” For example, business people can assume that the online Wall Street Journal – perhaps the best example of the Barry Dillard argument – will be worth paying for since they have consumed the paper version and know that there are at best, only a handful of media outlets which can provide comparable information. In contrast, the online version of the average daily newspaper has to give away all its content for free simply because experience has taught potential consumers that most newspapers carry pretty much the same news – at least regarding most of the important issues of the day. So, if a particular newspaper charges for its online edition, the average consumer can find similar coverage by some other which does not.

Media companies will not succeed unless they pay much greater attention to the first of nine questions I ask when formulating strategy: Who needs us? Why? If no one “needs us” we can’t charge for the value we think we deliver. If people do need us, we can.

Of course, one might present a counter-argument by pointing to the relationship young people have with music: They “need” it but they want it free. Here I’ll say that we must differentiate between theft and fair use. I have yet to meet a young person who considers ripping off music as his or her right; they are almost always apologetic and defensive, pointing out they have little money and “everyone is doing it.” If it weren’t for this attitude, I doubt if iTunes would have been the money maker it is: why buy it on iTunes if you can get it for free? Yet Apple is making money … perhaps even minting it.

The Internet is as close as we can come to the economists’ assumption of a perfect market – one in which no one makes “supernormal profits” because there are too many buyers and too many sellers of the same (or very similar) stuff. The only way a company can make money is by making this perfect market “imperfect,” and draw a greater number of buyers than any competitor. And there are only three ways of doing this: building a great brand, creating defensible intellectual property or creating a hard to replicate delivery system. The WSJ is in the catbird seat because it has done the first two very well; the typical newspaper lacks “defensible intellectual property” and is distributed in exactly the same way as every other. Moreover, only a handful have true “brand name” status. Hence, they cannot get out of the perfect market.

I will be interested in learning how Mr. Dillard will deal with this issue. If he can, he will be able to turn the Internet into paid media. If he cannot, he won’t – unless of course, all of the content providers collude and in Ayn Rand’s John Galt style, go on strike (or equivalently, coordinate the raising of barriers).

Comment » | Business Environment, Online Business Models

Time to Re-read “What is Strategy?”

July 22nd, 2009 — 4:45pm

For the uninitiated, “What is Strategy?” is the name of a best-selling Harvard Business Review article that Michael Porter, a “University Professor” (i.e., the highest of the high) at the Harvard Business School and the Grand Poobah of Strategy, wrote in 1996. I will address only one of its many ideas in this post. I thought of it because of a recent visit to an upscale mall – and an announcement by a major company.

The visit was to an Apple retail store. I needed to connect my Mac to our Sony plasma TV, but could not remember the exact pin-configuration of the TV’s socket. The Apple employee helping me suggested that I ask at the Sony Style retail store located nearby and so, there I went.

You may recall that Sony began opening these stores when Apple started eating its lunch. The stores would make the vast array of great Sony products accessible to consumers. The moment I told a salesperson – who looked like a supervisor – that I was there for information, not to buy, he visibly lost interest in me. Not that the store was busy; you might have been able to hear a pin drop if you cupped your ear. Undeterred, I asked my question. The salesperson responded, “Do you have internet access at home?” “Yes,” I said, “But how does that help me now?” “Well,” he replied, “When you go home, look up the answer on our website.” “You can’t do that here?” I asked. “No,” he said, walking away. The ludicrousness of the idea that I would search their website instead of looking at the back of my TV did not even occur to him. And he is supposed to convince affluent consumers how to spend their money? In the time he spent losing a once and future customer – perhaps for ever – my teenager used my iPhone to get the information.

At the Apple store, the same salesperson greeted me again. He apologized for not thinking of going online and gave me the cable I needed. My wife asked for his help in selecting a graduation gift for my niece, who was finishing her high school. He showed us several fun software, but my wife picked up an expensive productivity program. “Oh gee,” he said sarcastically, “I just finished school and in the Fall, will start college. And my aunt gets me a productivity software! How nice!” We laughed, saw his point and decided to defer the purchase. He lost an immediate sale, but he reinforced the link between Apple and me.

Porter’s article says that strategy is about “fit.” Multiple small, individually inconsequential items must work together seamlessly for a strategy to be successful. The reason why Apple’s retail stores work – one in two purchaser of a Mac in an Apple store is new Apple customer – is that they are a seamless part of Apple’s corporate strategy. From the Genius Bar to the highly knowledgeable, non-pushy employees, everything fits together perfectly, just like the components of any Apple product. (Even the employees’ clothes match those of the Steve Job-like pitchman on its highly effective advertisements, “Hello, I’m a Mac” “And I’m a PC.”)

Sony once knew this lesson, but has forgotten it. Retailers speak of “location, location, location.” Sony’s location did not help it seal a relationship with me.

It is in this context I have been waiting to see how Microsoft’s newly announced retail stores will turn out. So far, this venture has been defined by location: the stores will be near Apple stores to give consumers non-Apple options. This is strategy?

For the sake of Microsoft’s shareholders (of which, regretfully, I’m one), I hope that the people in Redmond have thought this out a bit more. And if they haven’t, they should take this opportunity to first read Chan Kim and Reneé Mauborgne’s book, “Blue Ocean Strategy.” The essential thesis of this book is that too often, companies compete head to head with each other, leaving blood in the waters (“Red Ocean”) instead of seeking “Blue Oceans” where there are no established competitors. The Redmond strategists should also remember Porter’s message about fit: business history is full of examples of companies which tried to copy an effective strategy of a competitor, but failed miserably. The copying was typically superficial and small, seemingly inconsequential elements did not fit together. The Sony Style stores are a great example. Oh wait, Wintel machines and Windows Vista are even better ones.

1 comment » | Business Environment, Business Tools, Company Performance, Corporate Culture

The Roadblock to India’s “Tryst with Destiny,” Part 2 of 2

May 18th, 2009 — 5:36pm

I held off on completing this post – a direct follow-on to my last one – until the Indian elections ended. The 700 million strong electorate returned to power the current Prime Minister, Dr. Manmohan Singh, with a stronger plurality of votes than anyone has obtained in a long time. This means India should have a stable, reformist government for the next few years, led by a technocrat with integrity.

One reform that won’t be on Dr. Singh’s radar is the dismantling of the “Iron Triangle.” It won’t be because it is important, but in the face of many, many other issues, not urgent. Yet, it is this Iron Triangle which keeps more people like Dr. Singh from wielding power and driving change that will benefit the country at large.

The “pervasive mindset effect” of the Iron Triangle initiates this problem. I had just completed my eight standard (grade) when my father called me back from the playground. Did I want to be an engineer or a doctor? I chose the former to avoid dissecting cockroaches (an 8th grade requirement). My friends, all good students, had similar conversations. Only one smart kid among the 220 boys in my class opted out of the sciences; today he is a well known Indian author and journalist. Years later, at the premier Birla Institute of Technology and Science, a computer took on my father’s role: it directed students with high Grade Point Averages to engineering or science, those with moderate GPAs into management; and those with low GPAs into English or economics.

Mahatma Gandhi decision to involve college students in India’s freedom struggle reinforces the problem. Unlike the “Young Republicans” or “Young Democrats” chapters on US campuses, Indian National Congress-affiliated students took to the streets, demonstrated, and went to prison. After independence, every political party set up student chapters and extended their battles into campuses. Students who aspired to be scientists, doctors and engineers typically did not join; they had too much work. But those who cared little for an education did so. They organized strikes that shut down the universities regularly. Because strikes showed a person’s ability to organize people, these people were welcomed by the political parties.

The rigidity of the educational system exacerbates the problem. For example, the famed Indian Institutes of Technology do not admit anyone older than 25 for their bachelor’s programs. The premier Indian Institutes of Management do not (they used to in my youth), but their heavy focus on academic qualifications assures that most entrants lack significant real world experience. Few mid-career Indian professionals can emulate US General David Patraeus, who took a leave of absence to do a Ph.D. at Harvard’s Kennedy School of Government; his thesis on successful fighting of insurgencies (seemingly!) helped turn the tide in Iraq. Multitudes of such ridiculous restrictions create a system which pigeon-holes people in professions which do not interest them and for which they have little aptitude or passion.

The consequences of this Iron Triangle are the range of problems other observers blame for holding India back. The best of the best in my generation left the country; the best of the best in today’s generation by and large, eschew the difficult and essential task of nation-building. In the US, some successful executives move – at least for a few years – into senior government positions; though this practice is not without its problems, these pale into insignificance when compared opportunities lost because of the lack of such movements in India. Sure, half a dozen people have made such jumps and have helped the country, but they are exceptions, not the rule.

A reformist government would reform higher education in order to demolish the Iron Triangle. Reducing rigidity will be simplest, though it will require vision. For example, the curriculum at IIT Madras trains students more rigorously in engineering than MIT or CalTech do, but gives them little chance to learn about life – or ironically, how society affects technology. Will someone replace a few science and engineering courses with music, art and poetry?

Changing the science-focused mindset will be harder and require even greater vision. In the 1970s, it made sense for my father to limit my choices. Today India needs to make the Liberal Arts an area of study that will attract the best and the brightest. (Good news: IIT-M has recently begun an Arts program.) It must create Schools of Law on the model of the IITs, IIMs and the premier private universities (like BITS).

De-politicizing the universities will be hardest, but essential. The government might have to figure out how to ban political activity (as opposed to studying political science) on campuses. This recommendation is greatly at odds with my liberal view of life, but how else can India stop the least deserving from becoming the most powerful?

The good news is that Indians are stepping up to the plate. Infosys Co-Chairman Nadan Nilekani recently publicly asked the new government to reform education. Two successful business people – ABN AMRO Bank CEO Meera Sanyal and an IIM-Ahmedabad graduate and entrepreneur Sarath Babu – were candidates in the recent election. All three’s views of what needs changing may differ sharply from mine, but that’s immaterial. What is material is that people to whom education mattered are turning their attention to the body politic. If you don’t think their efforts are important, simply consider this: how long would India’s recent rapid growth as a business powerhouse last if an ill-educated politician successfully managed to eliminate English from its premier universities?

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The Roadblock to India’s “Tryst with Destiny,” Part 1 of 2

May 8th, 2009 — 2:02pm

Last week, I was at the Judge Business School of Cambridge University. This year, Cambridge is celebrating its 800th anniversary. It is astounding that an institution not tightly bound by religion has thrived this long, much of that time as a leading center of human thought. There is hope for humanity yet!

I took the time to chat with Navi Radjou, a former colleague at Forrester, and the first Executive Director of the Center for India and Global Business. Recently created in part with a grant from the Indian Government, the Center pays homage to Jawahar Lal Nehru, an architect of Indian freedom and its first Prime Minister; Nehru had studied at Cambridge in his youth. On a recent trip to India on behalf of the Center, Navi met business people, politicians, film makers and ordinary people. He described fascinating examples of business and social innovation, some of which truly have the power to change the flow of life even in other parts of the world. I will not steal the Center’s thunder and describe any of these here; suffice it to say that this Fall, PBS will be airing a series of documentaries on some of these innovations (created by filmmaker Khursheed Khurody) and the Center will do some supporting work on the series.

With all the good happening there, it might seem churlish to some for me to keep the promise I made in my last post and bring up India’s Achilles Heel. But the country must address this and soon. So, I will go on.

India’s Achilles Heel is not the limits to the numbers of engineering students it can train; while the world focuses on the Indian Institutes of Technology, most engineers trained by its many of the regional engineering colleges (e.g., Delhi College of Engineering) are highly skilled. It is not lack of basic essential infrastructure, which, without doubt, is way behind world class. It is not grinding poverty, accentuated by the still pervasive effects of caste, though that is terrible to behold. (Incidentally, caste is not just a Hindu problem; sadly, Catholics, Protestants, and Muslims – as well as adherents of several other religions – also espouse their caste status in issues of importance, like marriage.) It is not religious or caste battles; these, though ugly when they happen, are not as common as the Western press makes them out to be. It is not even the fact that some 20% of the current Members of Parliament have criminal records or outstanding criminal charges against them; this fact has received widespread coverage in the West now that 700+ million Indians are voting.

I could go on with this list of issues, which have all been raised by various observers of India, some friendly to the country, and some not. In reality, all these issues – and others like them – are derivatives of the core problem, which no one I know of has described. It is a self-reinforcing Iron Triangle made up of (1) a pervasive mindset that believes that smart people should – and must – study engineering or medicine; (2) a still rigid academic system that does not give most people second chances; and (3) Mahatma Gandhi’s greatest error: the politicizing of universities.

Demolishing this Iron Triangle is India’s biggest challenge; if it does so successfully, it will flourish and achieve what Prime Minister Nehru called its “tryst with destiny.” If does not, it will probably still be successful, but is likely to plateau at a level far below its potential.

In my next post, I will describe each of the legs of the Iron Triangle and how they interact. I will also offer some thoughts about what India could do.

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Lingua Franca of the Universe?

April 17th, 2009 — 9:30am

Greetings from Hong Kong (where I started writing this post) and Barcelona (where I am currently)! In Hong Kong, I was teaching in an executive program for a very well thought-off global company. The participants, mid-level executives of the company, are from multiple countries across the Eastern half of Australasia, though the bulk were of Chinese heritage and indeed, from China.

The hotel was grand and overlooked Hong Kong Island and harbor; the views were breathtakingly beautiful. The program I teach for this company is always held here and so, the staff that host us know me well. On a prior trip, I had asked how the handover of Hong Kong to China had affected the area’s residents. One of the staff had volunteered that young people were no longer learning English as avidly as they used to.

This time, a letter to the editor in a local English newspaper caught my eye. The writer was arguing that since Hong Kong’s kids would have to deal with Mandarin in everything from official communiqués to advertisements, schools should teach Chinese, not English. Interestingly, the writer’s name indicated that she was of Indian heritage.

Subsequently, I had dinner with a young woman, a manager at my host company. She confirmed with evident dismay that both schools and parents of students were deemphasizing English education. Moreover, the new focus was not even on the more widely spoken Mandarin, but – reflecting the cultural heritage of the region – Cantonese dialect.

The attitude towards English was affecting even her company. Managers in mainland China were increasingly asking that training programs be translated and delivered in Mandarin, despite the company’s success in improving its staff’s mastery of English. They argued that junior managers and staff did not need English to sell to the vast Chinese market. The argument that lack of English would keep the local staff from achieving senior regional and corporate positions and sooner or later, the mere recognition of this inviolable ceiling would cause the best and the brightest to quit, did not change any minds.

Ever since I first encountered this self-imposed linguistic ghetto building, I have wondered about the medium and long term impact on Hong Kong’s economy. Where would fresh English speaking people come from to run its vast financial markets? What impact would the almost inevitable shortage do to Hong Kong’s position as a center of global trade? My dinner companion said that people who aspired to such jobs usually did all they could to get some education abroad, but this is far from an ideal solution.

Hong Kong is not alone. Barcelona is in the Catalan region of Spain and many Catalans do not consider themselves Spanish. Their language, I’m told, can be loosely described as midway between Spanish and French. Catalan is required of every school student and Spanish is viewed with some disdain. Moreover, I’ve heard stories of foreign students coming to study in Barcelona’s universities, and leaving when they realize that their fluency in Spanish won’t count for much in their education. And this is despite the fact that this beautiful city is trying to establish itself as a commercial destination!

Long ago, I used to tell clients that India’s ultimate advantage on the world stage was not its technically educated people, but the fact that that educated Indians learn to speak English virtually as a first language. We may speak it with funny accents, I’d say, but make no mistake, we do speak it well and many Indians even “think in English.” This fact, I used to say, will give India at least a generation’s worth of advantage over countries where English is learnt reluctantly and used only when the local language just will not do. My recent experiences suggest that the advantage may be even greater. (In a future post, I will discuss India’s Achilles Heel — and no, it is not its still weak infrastructure or the poverty in the villages and slums.)

I have nothing against anyone who is proud, genuinely proud, of his or her own language. In addition to English, I speak two other languages, and in fact, use one of these fairly extensively at home. But like it or not, if we ever make contact with aliens from some other part of the universe, in addition to using math and music, we will be communicating with them in English (and their dominant language). In a global world, it would be nice if our politicians, our academics and even ordinary citizens, recognized this fact.

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