Sanjay Negi's thoughts on Current Affairs and Information Technology Directions.


Monday, July 31, 2006

Mass Customization of Transportation Services

Mass manufacturing success was followed by ambitious attempts at mass customization. The holy grail here was that each customer could configure a product uniquely and this information would cascade backwords through the order, manufacturing and even the bill of materials and thence on to parts procurement. The mythical market segment of one would therefore be achieved by harnessing the power of IT at little incremental costs to the delivery infrastructure.

In practice it has been slow progress at best. Integrating the entire manufacturing supply chain remains a distant dream. There are too many decoupling points and therefore too many hand-offs. Also enormous capital and sunk investments at various stages in the value addition chain make the whole exercise akin to Don Quixote lilting at the windmills.

However this is increasingly an era of Service delivery rather than manufacturing and it is here that we can sense the contours of mass customization crystalising into reality. A few deft analysts is all that it takes to create a bewildering variety of banking or insurance products for smaller and niche markets segments. It is in the area of intra-city mass transportation services that mass customisation is perhaps waiting to happen. One hopes that it happens in India first.

All that we have today anywhere in the world is buses and suburban trains that deliver mass transport services from one alighting and disembarking station to another. This does not fully meet the actual need for transportation from home to office to markets to theatres to whatever.

Therefore we have mass personal transport to cater to the segment of one in the form of personal vehicles. It is important to remember that what is fundamentally required is customised transport service to transfer a person from point A to point B reliably and economically and a personal vehicle is merely a means of assuring the availability of that service.

If one could step out of the house and walk to a car in the parking lot, flash a card or register a biometric presence to unlock the door, drive it away to one's destination and leave it in this other parking lot without bothering about settling the bills and who uses the car next, society would benefit enormously in many ways.

Most cars would run 12 hours a day and not 1 hour a day. There would be far less cars on the roads, few traffic jams and much less fuel burnt and consequential pollution.

The technologies for making this mass customisation of transport services happen already exist. Sufficient number of people can be uniquely identfied with their PAN numbers along with their driving licences, credit cards and debit cards. Cars can be equipped with multi stage security access tied to unique identification of the service consumer. Cars can be physically tracked with GPS in case of emergencies and the service consumed can be metered automatically to directly collect the dues from the consumers plastic cards or even bank accounts. Going a step further, cars can be equipped with some minimum self diagnostic capabilities with automated update over wireless networks. This would help in preventive and predictive maintenance and help deliver reliability of service comparable to manual monitoring systems.

The costs of commercially installing such a model would be only incrementally higher than conventional self driven taxi services in terms of various security and transaction processing devices on the vehicles as well as the GPS tracking systems. However this would be negligible when compared to the gains in terms of vehicle utilization and manual transaction processing. As always, costs would fall with volumes which would in turn induce more usage in a virtuous cycle.

The present system of personal transport is hugely wasteful. Most cars run for half an hour and then sit idle for the rest of the day sometimes with the drivers too following the same routine. As the cars are associated with their owners, there is an additional image positioning compulsion which makes people own bigger cars. When cars are seen as primarily a utility, most people would make do with basic reliable and sturdy vehicles which take them to their destinations without fuss or fury.

What about the conventional mass transport systems like suburban trails and buses. These systems are best modelled as hub and spoke systems where the the smaller units like buses converge on a hub like a rail station in a feeder role and the architecture unravels itself at the other end. As the travel distances lengthen hub and spoke systems assert their economies of scale over personalised transport and would therefore continues to play their roles in our megapolises.

The mass customised transport systems as envisaged would also adapt to achieve economies of scale by co-opting a share taxi version where a good proportion of vehicles would have multiple concurrent consumers. The formulae for fare sharing would evolve in ways reminiscent of those used by the share taxis which start out as full vehicle renting for the first passenger and then give him or her progressive discounts with the addition of each passenger.

Vehicles participating in the mass customisation of transport services would have to be well dispersed across the city and within walking distances from residences, markets, theatres and places of work. Sufficient buffers would have to be designed into the model to take care of the skewed demand through the day and week. The city would have to provide ample parking spaces at short intervals. This should not be such a problem as a huge amount of road side space presently hogged by privately owned vehicles would inevitably get released.

However this parking would have to be managed closely and here again technology will come to the rescue. Agencies running the mass customised transport services would contract with parking lot owners for bulk space and ancillary services which would help keep their fleets running smoothly.

The information gathered during the delivery of this brave new service would have several other off shoot benefits. The pattern of service use would make it feasible to target other product and service promotions at each individual and parking lot owners and fleet operators could collaborate to deliver such targetted messages. The possibilities are only limited by one's imagination.

Saturday, July 22, 2006

Global Warming

It is estimated that the entire treasures fossil fuels stored in the oceans and the bowels of the earth in the form of coal, crude, tar, shale, natural gas, ocean bed methane, represent just a few weeks sunshine that the planet receives from its parent star. This energy has been painstakingly sequestered over the aeons by the life sustaining processes of photosynthesis and the consequent food chain. It is thought that coal represents fossilised plants and oil is the animal equivalent.

The delicate yet complex process of photosynthesis detached the carbon atom from the carbondioxide molecule and made it available for combining with organic compounds which recombined to form living matter. This process lowered the carbon dioxide in the atmosphere making the earth more hospitable for higher forms of life like mammals and eventually homo sapiens. Sometimes perhaps mother nature overdid it, ushering in the great glacial periods called the ice ages and it is surmised that the current epoch would have been just a brief interglacial before the heavy evaporation and precipitation cycles triggered the growth of amazonian rain forests across the globe and sucked up the entire supply of carbon dioxide to bring back another ice age.

Carbon in the gaseous form whether as carbon dioxide or methane is proven to be a potent greenhouse gas which help keep the planet warm. Reduce the amount and we have the ice ages, increase the amount and we have more rains and floods....till now that is.

In the first billion years of its life, the planet successfully captured and quaranteened carbon through the brilliant process of photosynthesis. This gave us 4 billion years of relatively stable temperature profiles with tolerable ice ages and reversible intergalacials. This gave nature sufficient time to playout the evolution sequences climaxing in the anthropological life form of today...the modern human who for some reasons not understood by anyone is threatening to disrupt the 4 billion year old thermostatic cycle.

Maybe there is some evolutionary purpose behind all this madness. We are development fixated. All mainstream media except the lunatic environmental fringe eulogises large development initiatives like new oil and gas finds under the ocean floors and in Antartica, more efficient conversion of shale and tar sands to oil, mega coal fired power stations, mega steel plants which use coke for reduction of ore and on and on.

It is perhaps safe to assume that the development momentum is too high and therefore we will not and cannot willingly stop till we have greedily used up all the fossil reserves unless because of global warming we become extinct before the fuels do. This hurtling downhill could however be interrupted if the cost of energy extraction from fossil fuels exceeds the cost of energy extraction from sunlight received by the earth and also fondly called renewable energy...whether directly through solar cells or indirectly from windmill farms, hydro energy or biomass.

The dice presently seems loaded in favour of the first happening sooner than the second...and then there may be no time for the second as the planet may rapidly become non-habitable with soaring temperatures and vanishing life forms disrupting the food chain for ever.

Small beginnings have been made in the form of carbon credit trading but it may be a case of too little too late. This is where real global scale intervention only would work. Carbon credits could be priced higher and higher every year with a built-in appreciation. Fossil fuels could be taxed higher and higher every year again with built-in escalation. The funds so collected would be used to create a global forest authority with a strictly defined mandate and sovereign territorial rights over all existing forest lands on the planet where humans and their development structures would not be allowed to encroach. This forest authority would be charged with the responsibility for extracting the right amount of carbon from the atmosphere and would advise on formulating tax policies for regulating use of fossil fuels to maintain an optimum atmospheric carbon balance.

We are of course far off from getting anywhere near to a softlanding on the global warming front. Even the USA refuses to come on board citing economic constraints and people welfare. The perception is that the present economic standards cannot be maintained if cheap energy is not made available or even worse energy consumption is cut. The first argument has already got rebutted in a way as doubling of oil prices has not so far negatively impacted US growth. As for the second, only a transition from fossil fuel energy to renewable energy is expected not a real cut in energy use. This change can be hastened by taxation and other monetary policies which nudge and incentivate a preferred behaviour.

At a broader level it can be argued that civilizational development is not about digging more coal and oil, burning it and letting the smoke into the air. Development is about organizing, specialising, awareness improvement, education and health and last but not least having some control over our fates. This is precisely what would get strengthened by controlling global warming. Indeed by prescribing a slightly different mix of energy sourcing, we may be opening up an entirely new range of specialization possibilities with their own eco systems and may even be accelerating growth in the conventional meaning of the term. I really fail to see any conflict with development goals and aspirations....unless all this this is part of a greater design.

Maybe the almighty wants the Human race and its food chain to spread out from Planet earth. They have been restricted to this one rock for too long. May be they need to be shaken out from their comfort zone. So in the planned scheme of things humans may have been hard coded to destroy their present environment on this planet so that they have strong motivations to seek alternatives elsewhere. A few decades of hell on earth may prod them to migrate quicker.

Sunday, July 16, 2006

The Economic Model of Politics as a Career

Can Politics as a Career be a viable option?

How does a politician make money for his livelihood legitimately? The truth is that there is no way a career in politics can yield respectable legitimate returns. Even for those politicians that finally become Ministers, society does not reward them with commensurate remuneration which can make the profession attractive. The investment of resources that are mandatory to pursue a successful political career would just not achieve a financial breakeven in any transparent accounting projection.

Therefore professionals from any stream of learning would find it crazy to jump into the political fray where economic failure would look guaranteed.

Doing it as a hobby or social service is also difficult as public life sucks up enormous resources in cash, time and effort and is beyond the capacity of normal disciplined industry white collar office going species.

Therefore it is logical that only those who have learnt the ropes while serving apprenticeships during college days as Student Union activists actually graduate into full fledged career politicians. Only they seem to have cracked the code on generating a stupendously high ROI without any legitimate avenues of income streams in sight.

The model for making a living from politics is a closely guarded secret known only to the followers of the cult. The general public suspects that the model envisages unregulated brokering in one form or the other, but does not understand the intricacies of execution or implementation and how accountabilities are ensured in the shadowy verbal communications based environment in which the system works.

We see only the external manifestations of the success achieved by the practitioners of this art, the farm houses and swank properties, children getting educated abroad, lavish marriages, fancy cars and so on, all without any visible sources of income. However there is no educational institution that has a curriculum designed to deal with this interesting though mysterious subject and therefore the know how remains outside the public domain.

There is a lingering suspicion that members of the bureaucracy understand the mechanics of the model well, after all they would have to participate in the delivery and implementation mechanism at least if not in the conception and design itself. For some reason they also seem to opt not to share their secret knowledge with people outside the pale. Taking a closer look this also seems logical as many of that species too seems to enjoy the fruits of a system whose roots, trunk and branches are invisible to the lay observer.

Indeed the full intellectual might of the Bureaucrat is harnessed to ensure that the system continues to flourish. Look at the complexities of our tax laws. There are categories and categories and then there are exemptions and exemptions. As if that was not enough, there are discretionary powers to deal with doubts which are generously created by such complex sets of rules. This did not happen by default. It surely is designed that way.

The easiest way to improve the financial well being of a traffic cop is not by giving him a higher increment but by inserting a new clause in the traffic violations list which he can then happily exploit. Well meaning rules regarding helmets and cell phones are ostensibly for public safety and are difficult to quarrel with but it can be argued that the same rules are a source of rich pickings for the police establishments and there is no knowing how the collections are distributed up the adminstrative and political heirarchy.

Any average bureaucrat would easily foresee the potential and keep drafting rules to maximise returns which would be honestly shared with the political masters. For the politicians this would ensure handsome payback for all the investments that have been ploughed in earlier and the more brazen ones amongst them of the Haryana variety could even set collection targets for the administrative machinery garnularly broken to enforce accountability.

It is difficult in such a setting to motivate an intelligent honest hard working office going professional to sincerely participate in the maelstrom of our uniquely adapted democarcy.

Friday, July 14, 2006

Mumbai Bombings in a Cultural Perspective

The theory of gorrilla warefare is not new. It is a deliberate strategy of hit and run by the weaker side who cannot hope to win in a conventional battle where numbers, hardware and generalship decide the results. Our own Shivaji Maharaj was a leading exponent of this form of military strategy against the vastly superior Mughal armies so much so that the Marathas consolidated their gains and eventually grew to a conventional military power capable of challenging the various Sultanates and even the British for a brief while.

Modern day Terrorism is in some ways an off-shoot of Gorrilla tactics with the difference that the target objectives have been expanded to general populations with a view to gaining publicity and thereby more support amongst their constituencies. This then augments their resources and helps in staging more such strikes in a continuous upward spiral. Logically this would then lead to a situation where things become serious enough and the International community takes note and enforces a compromise. This would be the equivalent of the Gorrillas metamorphosing into a conventional force.

How did earlier civilizations deal with this model of attack designed to weaken their core through such one sided attrition. The most obvious one was to raise large forces capable of carrying the battle to the home ground of the Gorrillas. All great empires have attempted this with varying degrees of tenuous success but most of the evidence points in the other direction. Building strong walls and fortifications has been even less of a panacea agains a constantly moving enemy who is able to improvise ever more creative forms of attack.

What has worked in the past is quid pro quo. The Romans settled barbarian tribes on the periphery of their empire giving them minor citizenship rights in exchange for peace and even protection against invasions by other tribes. This arrangement worked for centuries to the nutual benefit of both sides.

In the modern context it is out of question to make a frontal assault on the home bases of terrorists as they are widely dispursed and are well shielded by the vast urban populations amongst whom they habitate and some of whom constitute their constituencies as well. An overwhelmingly militarily powerful state like Israel has made sporadic attempts at this to no avail. It is theoretically not feasible to reach the desired outcome with this option given the internationally guaranteed constraints of territorial sovereignity and other allied concepts.

Building modern day equivalent of walls and fortresses would definitely be counter productive as these would choke freedom to life and commerce and may inflict greater damages on the economy and psyche than direct terrorist acts could ever hope to accomplish.

The only choice it would seem would be to reach out to the terrorists and their constituencies and offer them civilisational dividends. If in some way the Arab middle east could have a stake in India acquiring political and financial muscle, it would set the tone for Pakistani expectations from India. Civilizationally Pakistan identifies itself with the middle east and in that sense is a front state for pan Islamic sentimentalities. The key to India's Kashmir probem lies further west of Pakistan where their soul lies. Once we accept this reality and even look to envigorate our moribund ethos with the more contemporary middle eastern value systems, we would have taken a giant step in taming the barbarians.

Thursday, July 13, 2006

The Hunt for Oil

The first Oil shock happened in 1973 at the time of the nth Arab Israel war when the middle east countries using their declared opposition to Israel as an excuse, seized the initiative by restricting oil supplies and that marked the beginning of formation of the oil producer's cartel OPEC which was later expanded to include countries like Venezuela, Nigeria and Iran.

Even before the 1973 war, it was known that oil would not last forever but then there was no urgency about the matter. When the prices rose dramatically, the Japanese auto makers capitalized on the crises by quickly grabbing market share with smaller fuel efficient cars. The trend since then has been rising prices, energy conciousness, environmental concerns, diminishing new finds, and search for alternative and sustainable energy which is expected to become increasingly viable with the rapidly approaching peak oil and widening of the corresponding demand supply gap.

All the fossil fuels including oil and coal were unobtrusively lying dormant in the bowels of the planet till some blokes invented the steam and internal combustion engines. Indeed the availability of abundant fuel energy triggered off the industrial revolution and subsequently the present attempts towards a post modern society.

The trend so far suggests that as civilisation progresses, continuously increasing division of labour takes place as people derive their existence and livelihood through the logic of value creation through specialisation. This necessarily means an exponential increase in the support infrastructure to put together the slices of infintesimally tiny roles and leads to per capita consumption explosion of which oil is but one ingredient.

It is just not conceivable that the civilisational thrust would get reversed just because one of the raw inputs is getting into short supply. In the immediate term market forces would make alternate energy sources far more viable and help sustain current life and work styles for some more time.

Eventually the logic of division of labour will get threatened with limits placed on value creation by humans through specialization. Most of the current specializations today fall in the area of service creation and delivery and this is where the rapidly increasing power of computing machinery is creating the prospects of an end to this form of social development. As the atomicity of services created and delivered reaches its physical limits of consumption saturation, and in parallel the need for infrastructure falls as computing and artificial intelligence manage most coordination requirements, we may well have a situation where energy consumption starts falling and we may have surplus oil which no one wants.

As of now we seem to be on the steep part of the 'S' curve for per capita consumption of the planet's raw materials. With the logic of services specialisation and Moore's law, this curve should start flattening out in the next few decades and then humans can really start enjoying this paradise that God created for them.

Friday, July 07, 2006

Disinvestment of Neyveli Lignite and NALCO Derailed

The Indian Prime Minister has put on hold all Disinvestment proposal pending further review. The immediate cause it seems is to placate the constituents of the coalition and prevent any precipitate withdrawl of support and consequent destabilizing of the Government at the center. At least that is what the press is saying.

Everyone appears to be taking hard positions on the matter. The pro-disinvestors can't understand why the allies and even some sections of the ruling party are making such a fuss about a ten percentage points equity off loading by the Government. The anti disinvestment camp says it is a matter of principle and therefore the percentage of equity should not be considered relevant to the debate.

The Government apologetically explains that they are just attempting to raise some funds for noble causes without losing any control over the entities concerned and at the same time also send signals to the International Community that the reform process is in place and this would therefore help in attracting Foreign Direct Investments.

Well, well, well.... what are all these folks arguing about. The total amount that would get raised through the now aborted disinvestment would be a paltry couple of thousand crores which is neither here nor there. Definitely not worth the risks of having the coalition collapse. The ten percent off loading of stock would make no material change in the control of the organizations concerned and therefore this whole affair looks like a managed round of good old shadow boxing.

Why then is this whole show being enacted. As usual we have to go much beneath the surface to unravel the real motivations of all the protagonists here. Who are the real beneficiaries of the status quo? Who has genuine reasons to fear a distubance of the cosy arrangements obtaining at present? There usually can be no smoke without fire and the threatened constituencies need to be smoked out from this chaotic sequence of events. Only then there would be a real practical chance of devising ways to address those fears and hopefully arrive at a win all solution for the leftists, rightists, fence sitters, workers, managers, tax payers and the biggest constituency of all the mal nourished, poverty stricken, slum dwelling, God foresaken, by-standers.

Judging by the reactions of the various sections, the most violent has been those of the workers who have immediately struck work and forced the hand of the State politicos. They must be losing out in some ominous way not readily understood by arm chair theoreticians and idealogues. This much needs to be granted. Once we accept this thesis, rest of the issues just melt away.

If we agree that Governments across the planet do not in their very nature have a clue to running commercial organizations, and if the total cost to society is objectively calculated, it would financially be infinitely more prudent to give away the equity for free (better still give some money in addition to sweeten the deal). The Employees of these organizations for reasons not understood by outsiders would go to any length to preserve Government Ownership and Management, the simple solution now begins to stare us in the face. Do not try to disinvest. Just give the company away for free to the employees and run for your life before they get wiser.

To be safer this needs to be done in one shot for a large number of Government companies both central and state. It needs to be positioned as giving the workers their due in recognition of their sacrifices and hard work. It would take some time for the employees to realise how harsh the environment is outside their cocoons, but they nevertheless would buy into the dreams of getting quick riches without the benefit of previous experience.

The morality of this lies in the fact that an impoverished society would stop subsidizing these employees' oases and get on with life's struggles without the shackles and millstones of having to finance any commercial entity being run by the Government. We must not get fooded by the arguments of profit making public enterprises. Such an animal never existed and in theory too cannot be created. They look profitable because they are given preferntial treatment right from inception to adulthood and now on crutches, through subsidized funding, purchase preferences, marketing monopolies, cost plus pricing and what not.

Why do the political leaders allow this charade to continue. Simple again. They benefit in some small ways that owners benefit by controlling commercial organizations. Contracts to favoured suppliers, nepotism in employment opportunities, sinecure appointments to boards and senior executive positions, commandeering company facities and infrastructure for private use and so on.

By giving away equity to employees, in the long run, we would be able to create a constituency in favour of private ownership. This remains a debilitating roadblock as was seen during the privatization of BALCO. The whole town including subsistence small time traders like street hawkers and flea market shop keepers observed a bandh for several days to protest against the Government move. Unlike the employees of BALCO these poeple had nothing to lose, but still were apprehensive enough to support the workers' cause.

The Private sector also needs to come forward and behave more inclusively. A good example is the reservation issue. For some reason reservations in India are applicable only to the Government and Public sector. Why the differentiation? To make matters worse, Captains of Industry, some of them well kown and widely respected came out strongly against the idea of extending reservations to the Private sector with arguments like merit ought not to be sacrificed thereby insinuating that merit is somehow a monopoly of the higher stratas of society

This was a golden opportunity for the Private sector to strike at the image of the life blood sapping Government sector as a friend of the under priviledged. Nobody seems to think so far ahead.

Thursday, July 06, 2006

Some Facts to Make Everyone Ponder

Some facts and predictions to make all of us think

Total world cross-border trade as a percentage of global GDP1990: 18%2015 (estimated): 30%

Number of regional trade agreements1990: 502005: 250

Change in Germany's population over the age of 75 from 2005 to 2015: 33%

Increase in tax burden needed to maintain current benefit levels for Germany's future generation: 90%

Change in Japan's population over the age of 75 from 2005 to 2015: 36%

Change in Japan's population under the age of 5 from 2005 to 2015: -13%

Increase in tax burden needed to maintain current benefit levels for Japan's future generation: 175%

Computational capability of an Intel processor, as measured in instructions per second1971: 60,0002005: 10,800,000,000

Multiple by which e-mail traffic has grown from 1997 to 2005: 215

Number of US tax returns prepared in India2003: 25,0002005: 400,000

Combined market cap of top 150 mega-institutions1994: $4 trillion2004: $11 trillion

Total capital under management by private equity firms in 2003 in the United States and Europe: $1 trillion

Market cap of the NYSE in 2003: $11 trillion

Growth rate of the total wealth controlled by millionaires in China from 1986 to 2001: 600%

Estimated number of Chinese households to achieve European income levels by 2020 (assuming real income grows at 8 percent annually): 100 million

Total number of workers in China: 750 million

Number employed in China's state-owned companies: 375 million

Year when the income gap in the United States between the wealthiest 5% and the bottom 10% was the widest ever recorded: 2004

Part of national GDP spent on the public sector in the United Kingdom in 2004: 20%

UK public-sector spending as a ratio of GDP when transfer payments (for example, pensions) are included: 40%

Proportion of Latin Americans who would prefer a dictator to democracy if he improved their living conditions: 50%

Muslims as a percentage of the global population2000: 19%2025 (estimated): 30%

Number of major violent conflicts1991: 582005: 22

Number of coal-fired power plants China plans to build by 2012: 562

Estimated year China will overtake the United States as the number-one carbon emitter: 2025

Estimated year CO2 levels will hit 500 parts per million: 2050

Years since CO2 levels last hit 500 parts per million: 50 million

Average years it takes a CO2 molecule, once produced, to degrade: 100

Global CEOs who think overregulation is a threat to growth: 61%

Probability that a company in an industry's top revenue quartile will not be there in five years: 30 percent

The Adaptable Corporation

This has been extracted and abridged by Mckinsey from the book "The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics" by Eric Beinhocker.

Any business faces two basic demands: it must execute its current activities to survive today's challenges and adapt those activities to survive tomorrow's. Since both executing and adapting require resources, managers face an unending competition for money, people, and time to address the need to perform in the short run and the equally vital need to invest in the long run. This problem raises an important question—is it possible to do both well or is there an inevitable trade-off between executing and adapting?

Executing versus adapting

Tom Peters and Bob Waterman were among the first popular writers to draw attention to the managerial implications of this challenge, in 1982's In Search of Excellence, where they argued that organizations must simultaneously be "tight" in executing and "loose" in adapting. This dialectic has been a central theme in management literature ever since: James Collins and Jerry Porras, for example, note the importance of both control and creativity in Built to Last, Richard Foster and Sarah Kaplan examine the need to balance operating versus innovating in Creative Destruction, and Michael Tushman and Charles O'Reilly paint their vision of an "ambidextrous" organization that can operate as well as innovate in Winning through Innovation. One of the best-known and most-cited academic papers on the topic, written in 1991 by Stanford's James March, used the memorable terms "exploration" versus "exploitation."

Each writer's language and nuances may be different, but it is no coincidence that the yin-yang theme of opposing challenges keeps cropping up. The evidence suggests that most companies are far better at the executing half of the dialectic than at the adapting half. Very few do both well.

In two major studies, published in 2002 and 2005 respectively, Robert Wiggins, of the University of Memphis, and Tim Ruefli, of the University of Texas at Austin, show that while many companies can manage short-term bursts of high performance, only a few sustain it in the longer run. The authors stratified a sample of 6,772 companies over 23 years into superior, modal (middle), and inferior performers in their industries. Only 5 percent of these companies remained in the superior stratum for 10 years or more.

Wiggins and Ruefli concluded that the short-term performers were successful executers that lost their way when the environment shifted. All sources of competitive advantage are temporary, and very few companies can create new sources of advantage after their historic sources decline.

Taking another angle on the problem, Foster and Kaplan point out (in Creative Destruction) that only a very small population of companies has endured for a very long time: for example, of the original Forbes 100 companies, in 1917, only 13 have survived independently to the present day. These companies must in some sense be highly adaptable, having endured the Depression, World War II, globalization, and enormous changes in markets and technologies. Yet as the authors observe, the long-term survivors, with the exception of GE, have been mediocre to poor performers relative to their industries and the overall market.
We thus have, on the one side, high-performing executers that can't sustain their performance and, on the other, long-term adapters that don't perform well. Companies that can both execute and adapt are very rare indeed. Wiggins and Ruefli found that fewer than 0.5 percent of the companies in their sample stayed in the top stratum for more than 20 years. Only three companies—American Home Products, Eli Lilly, and 3M, or 0.04 percent of the whole—made it to the 50-year mark. (This sample didn't include multibusiness companies, such as GE.)

Why is adapting and performing well so hard?

The answer is that the demands of execution create deep barriers to adaptability, and these barriers afflict every organization. Overcoming them requires a fundamental rethinking of what GE's Jack Welch calls an organization's "social architecture"—the combination of individual behavior, structure, and culture—which shapes long-term performance.

Barriers to adaptability

Any organization faces many potential barriers to adaptability, some specific to itself. We will focus, however, on three that are deeply rooted in the nature of organizations and thus widely shared.

People: The price of experience

Much has been written about recent research in behavioral economics showing that managers and other decision makers are not as perfectly rational as traditional economic theory assumes. This research tends to focus on common biases and errors, which affect the quality of decision making. Such biases can undermine adaptability; the well-studied bias of overoptimism, for example, can make organizational-change efforts seem less urgent. What is less well known is that behavioral research also offers insights into why people become set in their ways and have difficulty adapting to change.

We've all had the experience of arguing with people and believing that the evidence for our position is crystal clear, though the other person "just doesn't get it." Why is it that people sometimes "just don't get it," even in the face of overwhelming evidence?

Mental models become more rigid, more locked in, and more averse to novelty as we gain experience

The answer may lie in the way we learn and categorize information in our mental models. Many cognitive scientists believe that one important way people learn involves condition-action (or if-then) rules. A child might, for example, learn that, "If the stove is hot, then don't touch." Through experience, we accumulate a storehouse of such rules. Our environment gives us feedback about which do and don't work. Over time we tend to give more weight to those that have worked in the past. Mental models also organize rules into complex hierarchies and webs of relationships. A child, for example, might have a hierarchy of rules related to hot things, with a general rule—"don't touch"—as well as subcategories of specific forms of behavior for ovens, radiators, food, bathwater, and the like.
This set-up of rules, weightings, and hierarchies has tremendous benefits. It enables us to learn from experience, to make decisions using ambiguous information, and to make inferences across experiences. (A child might, for example, categorize a radiator as like an oven; both are hot and not to be touched.) But the downside is that our mental models tend to become more rigid, more locked in, and more averse to novelty as we gain experience.

When we are young and inexperienced, our hierarchies of rules are fairly shallow, so our views of the world are relatively general. This way of thinking has advantages and disadvantages. The advantage is that such mental models are easy to change: new experiences are readily absorbed, and reorganizing the hierarchy of rules isn't very difficult, because there isn't much to reorganize. The disadvantage is that we are less likely to respond correctly in unfamiliar situations. Hence the stereotype that young people are more adaptable but also more likely to behave inappropriately.

As we gain experience, our rule hierarchies fill up and the situation reverses: we have a larger collection of specific experiences and more feedback on what has and hasn't worked. Our mental models grow into complex structures of categories, interlinked rules, and weightings. We become less likely to perceive experiences as totally new and instead try to relate them to previous ones, which we group into existing categories. Once in a while, we encounter something outside our experience and must then create a new category or rearrange an existing one. As mental models become more complex over time, major rearrangements become more difficult. Reorganizing an older, more experienced mental model resembles reorganizing General Motors, whereas reorganizing a younger, less experienced model is more like reorganizing a start-up. Mental models tend to settle over time, and bigger and bigger shocks are needed to shake them up.

This is not an ageist argument; certainly there are 20-year-old fuddy-duddies and adaptable people of 70. But in broad terms, the structures of mental models change over time, and each stage of development has its strengths and weaknesses.

The implications for organizational adaptability are critical. Companies tend to be organized as hierarchies, with the most experienced, successful people on top. This arrangement presents a trade-off: the mental models at the top are usually among the best for execution in a stable environment. These executives have extensive experience and a large storehouse of specific responses that are quite likely to be appropriate.

Yet when the environment changes significantly, such individuals may have difficulty recognizing the change and then, once they do, may draw too heavily on what has worked in the past. This kind of inertia helps to explain the hero-rogue syndrome: a CEO executes successfully in one environment, is lauded by the press and investors, and then falls off a cliff when the environment changes. It also helps to explain why many turnarounds involve wholesale changes in top management: it is often easier and faster to change which people occupy the executive suite than to change their mental models.

Structure: The risk of complexity catastrophes

Organizations can be viewed as a form of network in which webs of people interact. A very general phenomenon in networks, called a complexity catastrophe, helps explain why large organizations often find it harder than small ones to adapt.

The idea is simple. In any network with more than one connection per node, as the number of nodes grows, the number of connections or interdependencies grows even faster. (A three-node network where everything is connected to everything else has three connections, for instance, but a four-node network has six.) The more interdependencies, the more potential for conflicts that constrain the range of solutions. Getting three friends to agree on where to meet for dinner might be easy, for example, but getting six friends to agree is much more difficult because one, say, likes meat, another is a vegetarian, yet another has to stay near home, and so on. Conflicting constraints make change difficult because a positive change in one part of the network can ripple through and have a negative impact somewhere else. Highly interdependent systems, such as large software programs, jet engine designs, and international trade agreements, can sometimes become so complex that they go into gridlock and change becomes impossible. That is a complexity catastrophe.

Highly interdependent systems can sometimes become so complicated that they go into gridlock and change becomes impossible
An example of a complexity catastrophe in the business world was Dell's assault on the PC industry in the 1980s and '90s. In 1984 a 19-year-old Michael Dell, using $1,000 raised by selling his stamp collection, started a company that 13 years later eclipsed IBM, Compaq, HP, Fujitsu, and other corporate giants to become the world's leading seller of PCs. A natural question is, if Dell's low- cost, customer-friendly business model was so successful, why didn't any of these larger, better-resourced competitors imitate it? Companies can often succeed in changing one dimension of their business model, but simultaneously changing multiple dimensions inevitably leads to conflicting constraints. In order for the incumbents to move to a direct sales model for consumers they would have had to manage conflicts with their existing retail channels, for example, as well as simultaneously change their manufacturing and logistics systems and brand positioning. As a start-up, Dell had more degrees of freedom than the established players, making it easier for it to create a new business model than for the incumbents to adapt theirs.
As an organization's size and complexity grow, its degrees of freedom drop. Yet size and complexity are just what execution demands. Scott Page, of the University of Michigan, has studied why some organizations are complex and hierarchical while others are simple and flat. He concludes that organizations evolve in response to the problems they have to solve. Complex problems that must be divided into lots of chunks and then carefully sequenced and coordinated require deep hierarchical organizations with many managers and traffic cops. Simpler tasks can be solved by simpler, flatter organizations.

The execution tasks of most large companies tend to be quite complicated, whether the challenge is getting oil from remote parts of the world into the cars of millions of consumers or coordinating risks in a global bank. This complexity of execution inevitably leads to interdependencies and organizational complexity, which in turn create the potential for gridlock: a complexity catastrophe.

Resources: The path to dependence

In 1959, long before the idea of a tension between exploration and exploitation became popular in management circles, Edith Penrose, an economist at the London School of Economics, published a slim but influential volume: The Theory of the Growth of the Firm. Penrose viewed this growth as a process of search and exploration. Management teams seek out new opportunities in the environment and then use corporate resources to exploit them.

By resources, Penrose primarily meant physical assets and talent, but modern theorists have extended her definition to include less tangible but equally important resources, such as knowledge, brands, reputations, and relationships. In short, resources are whatever management uses to exploit opportunities.

This theory has two implications. First, the particular opportunities that management wants to exploit determine a company's resources. A team that sees opportunities in nanotechnology, for example, will find the relevant researchers and machines and then attempt to build a brand and a reputation for expertise in that field.

The flip side is that a company's resources define and limit its ability to explore. Say that a management team is running a fish-processing plant and the CEO wakes up one day enamored of nanotechnology. The opportunity may exist, but the company's resources (canning machines, its workers' skill at filleting fish, and a brand such as Taste o' the Sea) confine its real opportunities to fish processing.

According to Penrose, management's job is to search for profitable business plans. Naturally, the search is limited to plans the managers believe they can execute. The organization's resources determine what those plans will be. But in executing a plan, management changes a company's configuration of resources. As the company hires people, invests in assets, and so on to execute its current plan, those actions define its future opportunities. A coevolutionary loop thus links the resources a company employs to execute today with the business plans of tomorrow.

Another important barrier to innovation is the coevolution of plans and resources, which creates what researchers call "path dependence" in the structure of organizations. In other words, history matters because decisions that helped companies execute in the past constrain their ability to adapt in the future. A company therefore might be stuck with the wrong resources to go in a given direction because reconfiguring them would take too much time and money.

Creating an adaptive social architecture

Thus three critical and widespread barriers to adaptability are a lack of flexibility in individual mental models, complexity catastrophes, and path dependence in resources. Overcoming these barriers isn't easy—if it were, far more than 0.5 percent of all companies would perform well over many decades. But by understanding the nature of the barriers, we can begin to address them.

Companies have two ways of overcoming these barriers. One is what Jack Welch called the "hardware" of an organization (its structure and processes), the other the "software" (norms and culture). The two sides must be consistent and mutually reinforcing to create a coherent social architecture.

Organizational hardware

The hardware fixes for the adaptability problem, though challenging, are in many ways the easier ones. Companies can use three key approaches:

Reduce hierarchy.
Increase autonomy.
Encourage diversity.

Reducing the level of hierarchy can help to prevent a small number of mental models from dominating the organization, while increasing the level of autonomy helps to reduce interdependencies and to lower the risk of complexity catastrophes. Encouraging a diversity of mental models,resources, and business plans increases the odds that if the environment shifts, a company will have, somewhere inside it, the ability to respond.

Achieving this kind of shift requires changes not only in the organizational chart but also in important processes. Human resources (HR), for example, must support diverse mental models through hiring, training, and career paths. Likewise, strategic planning must support experimentation, and budgeting must promote appropriate trade-offs between efficiency and flexibility.

In the 1990s, many organizations went down this path, chopping out layers of hierarchy and giving business units more autonomy. For some companies, these moves brought greater adaptability, but for many they created execution and control problems that forced the corporate center to reassert itself and often negated gains in adaptability. Why? Because hardware is only half of the story; an adaptable social architecture also requires critical changes to organizational software.

Organizational software

Flatness, autonomy, and diversity are diametrically opposed to the control, coordination, and consistency that successful execution requires. But the software of norms and culture can help organizations have their adaptive cake and execute it too.

An organization's norms are "should" or "ought" statements about what it regards as the right, appropriate, or expected thing to do in a given situation. Taken together, norms create an organizational culture. Just as Tolstoy famously said, "All happy families resemble one another, but each unhappy family is unhappy in its own way," the norms of companies that are both high performing and adaptive have a family resemblance.

These norms fall into three categories:

Cooperating norms. One of the key roles of a hierarchy is to enforce cooperation among individuals—in particular, to ensure that people coordinate tasks and share information. Norms that encourage trust, reciprocity, and shared purpose can achieve the same effect, but in a more flexible way.

Performing norms. One of the arguments against increased autonomy is the diminution of senior management's centralized control over performance. Companies can counter this problem by instilling norms that create strong expectations for individual performance, so that employees will go the extra mile, take the initiative, be honest and transparent, and believe that success will be rewarded.

Innovating norms. Structures and processes that support experimentation and diversity must have norms to back them up. Vital innovating norms include the belief that facts matter more than hierarchy, that good ideas can come from anywhere, and (to borrow a phrase from Jim Collins and Jerry Porras) that "good enough never is."

Explore & Exploit Incorporated

An example will help to illustrate how the hardware and software sides of a business can work together to overcome the barriers to adaptability. Imagine a company called Explore & Exploit (E&E) Incorporated, which has a flat organizational structure of highly autonomous business units and minimal hierarchy within them. In addition, the organization has an innovating norm—"speak truth to power"—that encourages younger, more junior people to challenge senior colleagues by pointing to facts. This combination of structure and norms counters mental-model lock-in. In addition, E&E's HR policies encourage practices such as hiring people from a variety of backgrounds and rotating employees through businesses and experiences, thereby creating a natural diversity of mental models.

The autonomy of the units means that the organization has relatively few interdependencies. Changes and innovative ideas don't require approval from many parts of the organization, so there is less potential for complexity catastrophes. At other companies, the result might be fiefs and a lack of cooperation, but at E&E a deeply embedded "one-company" norm and a shared sense of purpose counteract this tendency. Furthermore, high expectations for individual performance, a competitive spirit among units, and a culture of accountability (backed by appropriate HR and budgeting systems) enable senior executives to manage near-term performance without centralizing control.
Finally, E&E's strategy process encourages the creation of "portfolios of initiatives": experiments in medium- and long-term growth opportunities. The processes that support experimentation are backed by an innovating norm to "fail small and succeed big." One important benefit is that not all of E&E's resources address the near-term demands of the business; the company can array a diverse base of talent, assets, partnerships, and other resources to exploit growth opportunities and hedge against shifts in the environment. E&E manages the cost implications of this approach by requiring its units not only to maintain vibrant portfolios of initiatives but also to be cost competitive with their industry peers. This pressure drives innovation in near-term execution as well as long-term adaptation.

Of course, E&E's management still faces difficult trade-offs between the near-term benefits of scale, greater coordination, and more centralized control, on the one hand, and the long-term risks of mental-model lock-in, complexity catastrophes, and resource stagnation, on the other. The company's intense performance culture tends to drive the organization to execute well in the near term, so senior managers see their job as tilting the bias back toward long-term adaptability, without sacrificing performance. They also realize that the deeply embedded cultural norms of E&E explain its ability to perform this double act—if the norms were just slogans on the wall, both adaptability and execution would suffer. The CEO and top team thus invest substantial time in propagating and reinforcing the norms.

Executing and adapting appear to be irreconcilable opposites, and the empirical data suggest that most companies are destined to favor the former over the latter. But understanding the sources of this schism can help us to see the outlines of a potential solution. By creating a social architecture that marries a flexible structure to a cooperative, performance-driven, and innovative culture, companies can begin to overcome the problems that keep organizations from adapting to an ever-changing environment.

Wednesday, July 05, 2006

The Annual Deluge in Mumbai

Flooding of Mumbai roads and submerging of rail tracks under several feet of water seems to have become an annual feature. Life comes to a standstill for a city reputed to be always on the move. Ground floor residences in low lying areas have water entering the living rooms and furniture and household belongings can be seen to float in these indoor pools.

Is it that Mumbai has started having more precipitation in recent years? It seems that as the city has grown, open areas like parks which used to provide buffer holding capacity for storm water have shrunk and as the drainage system carrying capacity remains constant, water overflows onto the streets and railway tracks paralysing the city traffic.

Clearly the capacity of the drainage system must grow as the open areas shrink. There can be no argument about this execept that open areas can be prevented from shrinking by going vertical which is another story by itself. For the moment a self sustaining economic model which would improve drainage capacity with time could be explored. This would be pertinent to any urban settlement not only a megapolis like Mumbai.

Let us imagine a commercial organization which runs a network of storm water drains in any city through a concession agreement. All houses, societies, institutions would subscribe to connect to the drainage network with tarrifs probably based on plot areas. In case of flats on a plot, the tarrif could be equitably divided as the plot is considered an undivided asset.

Municipalities which own the roads would also be required to subscribe and connect to the drainage network through roadside drains which would would receive surface rain water runoff from properly cambered roads. This would ensure zero water logging and much longer life for road surfaces and therefore significantly lower maintenance.

The drainage company's tarrifs would be regulated like all utilities based on cost plus formulae as is customary for services where free market competition is technically not feasible. The service level agreement guaranteed by the drainage utility would promise instant evacuation whatever the level of precipitation including cloudbursts and hurricanes.

As a commercial organization, the drainage company would soon realize that its network could be hired out for many other applications. All Power, Water, Telecom, Cooking Gas, TV Cabling and other Piping could use the very large caliber drainage network for riding their networks onto and would make the constant modifications, alterations and augmentations very simple indeed. No roads would have to be constantly dug up, no cables would get snapped and the repairs and maintenance of utilities piping, cabling, connectors etc. would be very convenient if and when required.

Since storm water drainage is a universal feature, it can be exploited as a critical piece of urban infrastructure. Indeed it would provide the foundation on which most of the other utilities would ride. Municipalities could then even ban overhead pole based wiring and cabling and the question of invoking the right of way for roads crossing etc. itself would go away. With everything out of sight and necessarily underground, the cities would give a much neater look too as there would be no poles to clandestinely hang small hoarding on.

It would be important to keep the drainage network strictly separate from the sewage system network as the design constraints are totally different. Sewage system carries a lot of biological and chemical load but the peak volumes (for which the capacities are designed) would be a tiny fraction of the Drainage network. There is really no practical need served in polluting an extremely large infrastructure by injecting a small steady amount of sewage into it.

As a matter of convenience, if the sewage system is kept separate, small and confined, it would surely be possible to treat it much more economically and effectively. May be the storm water drainage company could float a subsidiary to manage sewage.

A small flood in Mumbai can trigger a lot of productive thought...

Monday, July 03, 2006

Kamal Nath and the WTO Talks

Kamal Nath says that he had no option but to withdraw from the Talks as there was no negotiation space. The bone of contention is the huge subsidies that the US gives to its Farmers which lowers the prices of agricultural commodities and therefore gives an unfair advantage to the exporters of these goods from that country.

We have seen this genre of arguments before. The most common is the anti dumping scenario where the importing country imposes punitive duties to discourage below cost trade by predatory monopolistic transnational behemoths. Sometimes it could even be working at country level itself as in the case of China where the costing is not very transparent and it is difficult to clearly distinguish between cost saving components attributable to State subsidies and natural competitiveness of a developing economy.

What are the real issues here? As a customer is someone wants to sell to me at below cost, I would indeed be quite glad as it would represent transfer of wealth from the seller to the buyer. However the seller would soon go broke as this could not be sustained over a long period of time. The only reason that the seller with deep enough pockets would resort to below cost pricing would be to drive out other suppliers of those goods out of the market and then much more than recoup the earlier losses through the control gained through domination.

This is obviously not in the interests of fair play as it clearly amounts to resticting competition and therefore anti dumping duties are justifiable for trans-national trade. In case of supply demand equations within national boundaries, anti-trust and with anti-predatory pricing laws are supposed to take sufficient care of the matter so that fair competition is not impaired.

Coming to agriculture, most of India's farmers are subsistence farmers who have no surplus to sell and in fact are either net buyers or are badly under nourished. What comes to Mandis or is mopped up by government agencies is from medium to large and rich farmers who get subsidized farming inputs like fertilizers, water and electricity. Their surplus is then procured by FCI at higher than market prices giving them a double benefit for cost and price.

If India were to allow US to sell Agricultural produce to India at below cost, the marginal and subsistence farmers and other rural folks who are net buyers would get access to food at lower prices and would to that extent be less mal-nourished courtesy the US tax payer. Even the Government procurement agencies would find it cheaper to import from the US than buy from local medium and large farmers which they may still refrain from as they would continue to support the rich farming lobby.

Driven to its logical conclusion, the open market prices could possibly even settle lower than the PDS prices thus relieving pressure on Government procurement and forcing rich farmers to offload directly into the open market at the now much lower prices.

Those who get immediately hit would be the medium farmers with marginal surplus who would would see a proportionately large drop in their earnings and be forced to acclerate divesification of their sources of income. This may even lead to some badly needed consolidation in agricultural production activity to off set lower prices by greater economies of scale.

India needs to quickly move its working population from rural self sufficient agricultural communities to urban specialisation through division of labour. It is wrong to say that we do not have enough capital to follow that path. Capital is nothing but a representation of wealth in a country and wealth is tradeable human value add by another name. Value addition becomes tradeable through specialization as products or services and therefore urbanization is the fundamental secret to wealth creation. If for the moment we ignore the environmental impact of specialisation based civilizations, this is a proven model for economic success.

Kamal Nath can be given some benefit of doubt. He cannot even with uncle Sam's subsidies unleash the energies of a shackled nation all by himself, so he may be only softening the impact of transition for a few medium and rich farmers and in the process prolonging the agony for the masses. It is true that a lot of other events need to happen for this to work, but if people like Kamal Nath keep blocking all opportunites, they are only perpetuating the status quo. After all if the urban one third of the population is able to grow the GDP at 8%, the balance rural two thirds is becoming relatively marginalized.

The logic of wealth creation is remorseless and the only salvation lies in urbanising this remaining two thirds of India. If in the process we are able to use some unwitting help from the US tax payers, we should count our blessings.

Sunday, July 02, 2006

New Role for the CIO

As the capability of IT hardware multipies in deference to Moore's Law, Applications quickly grow to take advantage of this inexpensive manna from Intel Labs. What does not keep pace is the Human element including Knowledge, Attitudes and Skills.

The only proven way to surmount this Human bottleneck is to seek fresh blood at an accelerated pace. Newly minted graduates from Engineering Schools are found to be far more productive and adaptable than wizened old battle hardened wizards of yore.

It is simply not mentally possible for people to keep upgrading at the same frenzied speed as revisions in applications, platforms,technologies and the resulting mutations in business processes. It is inevitable that old will have to make way for the new and the CIO's main role should be to prepare organizations for these eventualities so that everyone can get the benefit of softlanding in an otherwise bewildering environment.

Organizations which choose to ignore these realities and let their CIO's continue to be glorified Purchase Managers will sooner or later have to pay the price for staying too long in their comfort zones.

Solving Traffic Problems

Using the power of IT to solve Traffic Problems is theoretically possible. Current Technologies based on GPS, Wireless, GIS and even Cellular Networks can be harnessed to bring much needed relief to harrassed commuters. Issues as usual go beyond Technology. Who would be the customers for such solutions which would be expensive to begin with. The beneficiaries would certainly be ordinary citizens behind their wheels, but there are no easy or attractive business models through which they can be made to subscribe to such services.

Municipalities and their Traffic Departments would in all probability not bite as they are always cash strapped and have other burning issues on their priority lists. In any case it is difficult to spot any sense of urgency there.

We must focus on the possibilities of creating business models for these services, be they fee or advertisement based. The FM traffic advisories are free and the channels' revenues are advertisement driven. May be this is the route which needs to be explored further.

As the technology costs keep falling, may be Google like organizations can create individualized services which can be delivered to appropriate devices like cell phones. Subscribers would register for these alerts much like they do for web content and the providers would slip in targetted advertisements to fund the infrastructure.

FM travel advisories may just be a small start and perhaps all this is really going to happen and is waiting for costs and potential revenues to balance out.

I would not bet much on civic agencies to break new ground on this. They have their hands full and pockets empty.

Lean Organization and Outsourcing

The "leanness bug" has caught up with the IT function as well. By definition, "lean" implies minimum fat with just muscle and bone. I dare say that people are people and not fat or muscle or bone. Given a chance an average person would like to contribute positively like a muscle and not doze around like fat. However with the frenzied advancement of technology driven processes, people do become obsolete and therein lies the challenge.

On a macro scale, organizations which do not keep updated with best practices will get pushed to the corner in the marketplace and may have to either live on the fringes of the economy or entirely cease to exist, in either case employees welfare will relentlessly head south. On the other hand, organizations which keep pace with technology advancements will discover that large sections of their workforce turn underemployed and eventually surplus with attendant painful and traumatic consequences.

There is no free lunch and no steady state for ever. Leanness as a goal can quickly become a fad which we tend to follow for fashion sake. What is important is to appreciate the underlying logic. It is true that advancements in technology and processes will create fat and it is true that people with best of intentions and capabilities will not be able to keep pace and will be rendered obsolete. May be organizations need to be be redesigned keeping in mind these inescapable realities. May be that is the underlying logic which is driving the outsourcing craze. Why build permanent manpower structures it these have to fade out in the near future anyway. May be the concept of use and throw (disposable)is finally catching up with human resources as well.

It is good to remember that organizations not facing free competition do not have to go by the rules outlined above. Thus a large section of the economy is immune to market forces, be it the Government, Public Sector, Commodity Cartels or even dominent monopolists in any market segment. In these organizations, employees can thrive while their knowledge and skill fossilizes, but the rents keep coming in, sometimes funded by the tax payers, sometimes by choiceless consumers.

Collaboration Management as a Competitiveness Tool

Management of professional interactions that happen around all day to day work life has so far been an enduring challenge. The structured work processes are broadly serviced by ever more flexible systems like ERPs and CRMs.

The approach to unstructured work like problem solving, policy formulation, development projects, corrective action decisioning, event planning etc. has been so far left to mail management systems which mostly serve as store and forward communication environments and hence suffice only for skeletal record keeping.

Most of these activities progress through several one on one impromptu phone conversations puctuated by consensus seeking meetings or conferences where in depth examination in a problem solving mode is normally impractical as all relevant inputs are not easily accessible.

Several market players have tried to address this space as document management, content management, interactive portals, or just souped up e-mail infrstructure but would be weak in some respect or the other whether it is communication, file, or context services.

Even if a framework claims to cover all aspects, implementation will remain a challenge. It is doubtful if a one shot deployment as in a structurted transaction processing system can be at all attempted. The underlying processes are too nebulous and everchanging. It may just be a good idea to approach this organically by first providing the base infrastructure and then adding applications as the needs crystallize and successful experiences accumulate.

The cultural angle also cannot be ignored. The written word enforces accountability and therefore there is a comfort zone with verbal interactions. Sophisticated collaboration environments need to be adopted whole heatedly for them to succeed. If the professional environment does not foster mutual trust and respect, it will take more time for people to adopt sytems where all interactions are being recorded for posterity.

IT Strategy, The Current Paradigm

Business Cycles have become notoriously short and so have the Technology cycles which inexorably follow Moore's Law. As a matter for conjecture, Business change may be getting prompted by Technology change which is inevitable. In this fast changing scenario what is the value of an IT Strategy?

Traditionally IT Plans have been made to look as if they are driven by business imperatives. So we have all the high decibel jing bang of Business Strategy, Competitive Analysis, Value Chain Study, Technology Opportunities, Data Modelling and so on. The Outcome usually is a Matrix of Applications and Functions which are then prioritized into an Implementation Plan running into a few years.

Does this straightjacket the organizational ability and need to remain flexible and responsive to unforeseen developments in the business and technology environments?

Not necessarily so! If we remember that technology will change and keep becoming evermore affordable, it is possible to draw the contours of the shape of things to come in the next five to 10 years. Direction papers from various technology leaders give a good sense of what is coming.

The real issue may be that the CIO's and CTO's do not take enough pain to keep themeselves abreast of what is likely to happen in the near to medium term future.

Most CIO's and CTO's have are content to play a glorified Paurchase Manager's role where they enjoy negotiating with Technology Vendors and like ordinary purchase managers derive some sense of esteem and self worth out of being in the decision maker's chair for huge orders.

It is indeed rare to find CIO's who are engrossed by their preoccupation about the vison for future and even if there are some such endangered species around their views are quickly muffled by the CEO's who do not have the mental stamina to ideate about disruptive changes brewing over the horizon.

The fact that the product and business cycles are short and are largely driven by rapid Technology developments directly or indirectly is not reason enough to stop thing about the future and inded is an opportunity for those who have the talent and capacity to accurately foresee the shape of things to come. Let us not give up just yet.

Applications Trends for the Medium Term

ERPs or inetgrated suits of transaction processing applications are now standard infrastructure. It is the exploitation of the vast oceans of data captured by these systems that remains a challenge.

Business Intelligence solutions have been around for quite some time but have not become accepted as a "must have" largely because implementations have not always delivered what was promised at the outset.

One approach to BI is to experiment with standard platforms like Analysis Services within Microsoft SQL Servers and try to pilot some solutions with high visibility. Relatively small efforts can easily turbo charge standard MIS in most organizations.

All it requires is a bunch of bright people who are equally conversant with business issues and the technicalities of data staging, cube generation and multi dimensional querying.

Another approach is that being toyed with by Google itself. This would most probably supplement BI efforts where wide availability of simple data is required at the finger tips. The delivery machinery is likely to be based on standard Google search technology which interfaces with transaction processing system databases and other sources of corporate information.

The extension of integration of applications to subsume other domains continues to include the extended enterprise like suppliers, partners, customers, service providers and so on. The ubiquitous web enabled applications are making all this very achievable and gives a comeptitive edge to whoever gets there first.

Technologies like SOA are hastening the integration of isolated automation efforts and also providing standardization and reuse of functionality.

Further augmentation of applications capability is happening with cell phones becoming a channel for dissemination of information in both SMS and browser modes.

Knowledege and Collaboration Management is another exciting area and has a huge payoff potential, but like BI applications, this area needs careful handling as successful models are not readily replicatable.

Understanding IT Costs and Benefits

In the early nineties, a reverred Japanese Management Guru commented that most IT benefits were dubious and it was difficult to find an Information System which when removed would not benefit the organization financially as the cost associated with it would go away.

The Japanese company that he represented was not averse to all computing technology, in fact they were a manufacturing shop and had state of the art automation including robotics in their plant and continue to be a successful enterprise to this day. Their aversion was only to the hype surrounding the puported benefits of the Management Information Systems and the complex analysis that was possible with these expensive applications where the real requirements the Japanese believed was only for back of the enevelope estimations for taking any real life decisions.

Times have changed since then and Services industries have overtaken manufacturing in the global economy value add sweepstakes...and unlike manufacturing, service industry is information intensive where the difference between success and failure is often directly related to the quality and timeliness of information availability.

Even within Manufacturing setups, the bloated middle management layers are a testimony to the fact that support functions play an increasingly important role in the operational success of the company and the support functions' effectiveness is surely dependent the raw material called information.

To be able to accurately calculate the benefits of any application, it is important to first lay down the service levels expectations from the support functions taht would be the primary users of that system. This is easier said than done.

As an illustration let us take an Human Resourse Management System. The process owner is the HR Department. The service they provide is to all the employees including the Management. If we look at only the Management side of the service, it can logically be argued as perhaps the learned Japanese Guru would have done, that all HR departments more or less meet the needs of the Management albiet with a little stress at times with or without an HR application. All that an HRMS would do is to give the HR Department some relief and that too only if they streamline their working and follow a systematic approach to keep the system updated as required. It is difficult to justify the cost of an HRMS just on the basis of the services provided by the HR Department to the Management, though most vendors are able to still sell their HR Systems by stressing this exact logic.

If on the other hand we examine the service the the HR Department ought to provide to the employee but is not able to without a proper system, it immediately becomes clear that if the company were to atke the employee as a stakeholder seriously, it would have to employ a small army of HR personnel to provide reasonable service levels to all employees. It is here that the real value of the HR system starts getting understood.

The only difficulty with this approach is that the CIO cannot drive this alone and more often than not, does not get the support of the HR or other functional heads who are happy in their current comfort zones and are not too anxious to step out and explore uncharted territory.

Of course since no other organization is experimenting, the employee expectations being in line with the market practices are also not high enough to stimulate the thought process and so staus quo reigns till someone from overseas comes and sets up new benchmarks.

Till then everyone is content to quibble about IT costs, and most discussions are over current costs compared to last year's costs and if any savings can be effected.

The Next Value Horison

Before the Industrial revolution, most economic value add pretty much got created in the agriculture and related sectors. With industrialization, much of the farm activity started getting mechanized, farm produce got commoditized and most value creation role got transferred to industrial goods.

In the last quarter of the previous century, Services started becoming the dominant engine for value creation as manufacturing got commoditized and started retreating to the back lanes of economic activity.

Services of course are amenable to automation and improved delivery through the use of Information Technology and it is not surprizing that the Tech companies are increasingly looking like the new winners in the ongoing transformation of the economic value addition landscape. What next?

It is difficult to say for sure, as no one has a crystal ball to gaze into. However we can expect that Moore's law will for some time to come continue to deliver exponentially greater value for the same buck and therefore the applications and associated infrastructure of today will inexorably and continually get commoditized geeting replaced by ever more powerful and richer technology. The services that the technology helps to deliver will also therefore meet the same fate.

What will remain relatively constant will be the human capability to absorb and assimilate the furiously changing working and living environments. People will need dedicated help to overcome their rapid obsolesence and most value add may actually take place in the cracks opened up by technological disruptions.

Organizations which architect themselves to service these voids may well turn out to be the winners in the next round which is not that far off in the future. Locking in the capability to evolve quickly may well be the competitive weapon of the future, much as securing critical supplies and investing in economies of scale creates high entry barriers to today's corporations. But how is this grid lock over over the capability to evolve built?

Here we are on familiar grounds. By controlling the factors of technological evolution using financial muscle could be a convenient way. Corporations with deep pockets could explore the possibilities of contractually locking out their potential competition from getting serviced thereby hastening their obsolescense.

On the other hand, just keeping current is going to be expensive business, and this gives huge advantages to those having the capacity to spend and thereby opening up the gap with the rest.

The Quality Movement and Information Technology

In the 1070's after the first oil shock, the West suddenly realised that Japanese cars were grabbing an ever increasing share of the market as they were not only more economical to acquire, run and maintain but were also more durable and almost hassle free. As one American friend put it the US cars used to suck in comparison.

This prompted a close scrutiny of the Japanese management methods and soon Kanban, 5S, JIT, Quality Circles, Kaizen, Kakushan, and TQM became part of Management jargon and folklore in the west. It was also discovered that the Japanese had indeed learnt the theory of Quality from an American called Deming who had found the Japanese a much more receptive audience than his fellow countrymen.

The conceptual foundations of the Quality movement can be traced back to several enlightened thinkers including Joseph Juran (whose father Jacob Juran was an emigre from eastern Europe) who had summarized his years of experience in various inspection departments of several US Industries (including Western Electric of Hawthorne Experiments fame) in the various books that he wrote including the seminal Quality Handbook.

The Theory of Quality was propounded when there were no computers in sight, but the symbiotic relationship of process maturity and improvements in a continuous upward spiral was established beyond all reasonable doubt. The centrality of motivational aspects or the desire for improvement was dealt with clearly and hence the critical role played by the support infrastructure in stitching together an improvement deliverable was thought to be the key to a project's degree of success.

Desire for improvement also has the inextricateably linked ownership imperative. There has to be someone in flesh and bone who has to champion any improvement initiative without which the concept of desire cannot really get grounded. Most IT projects exhibit serious weaknesses in this respect as the functional heads who should be leading the charge (as it is their processes which are being improved) are often seen as unenthusiastic co-passengers who are getting dragged along on an unfamiliar trip.

Even in those rare occassions where the ownership element has been structured into the project, the battle is far from over. Desire of improvement can be quickly stoked or doused by the quality of soft and hard infrastructure support available to the evangelists.

Recent developments like Knowledge Management, Collaboration environments, Search Tools, Business Intelligence Applications, Employee Portals and the ubiquitous E-Mail and Messaging utilities go a long way in filling the gaps in the hard infrastructure.

What would definitely take a much longer time if at all, are the softer infrastructural factors like respect for people, giving space for cultural dissimilarities, discouraging oneupmanship and shooting from the hip, working with facts and data not opinions, fostering creativity, tolerance for failures while honestly trying and alignment from the heart.

Technological progress would of course keep rolling on and even if an organization manages to put in place the hard infrastructure it would perhaps be sufficient to bull doze competition and get ahead of the race as it is difficult to spot any shining examples of successful soft infrastructure implementations in the modern services industry sectors, though we have all seen the impact of this model practiced in the far east in manufacturing earlier.

Technology companies as usual are vying with each other to to provide significantly improved offerings in the collaboration and knowledge management space. This is also closely linked to the open software movement where it would be possible to provide access to existing proprietary applications and platforms by installing middlewares on the desktops. These middlewares would in addition also provide development interfaces for new generation applications with inbuilt portability which would considerably enhance the collaboration experience.

Hopefully with these developments getting into production, the improvement cycles would get further compacted and the early adopters would open up the competitive gap even further. The whole lanscape is in for some very exciting times indeed.

The Onset of Technopia

As Technological developments and innovations follow Moore's Law, the implications for Business and social life can only be imagined. More Communications and Ubiquitious Computing would perhaps be the hallmark of the coming times.

Bandwidth will get much, much cheaper and more available. More people will have more decision-making powers in organizations and videoconferencing will get as good as being there while Wireless connectivity will free everyone from being geographically tethered to home or office.

Human interfaces will improve at a rapid clip to encompass Speech, Written natural language, Tangible touch, smell and taste interfaces, Electronic paper and even Neural interfaces.

Computers will be more capable of acting in the physical world and will be be endowed with Vision, Robotics Motion and action to include Desktop fabs augmented by RFID.

Computers will be much, much faster and cheaper overcoming the limits of current technologies with the harnessing of Quantum computing, Nanotechnology,DNA or biological computing. Artificial Intelligence will become a reality.

Computers will be everywhere as Ubiquitous computing takes hold through Information appliances and Wearables

Professor Kurzweil summarizes these projections as follows:

$1K computer does 1 trillion calculations / secondComputers embedded in clothes and jewelry.
Most routine business transactions involve a human and a virtual personality.
Translating telephones are common.
Human musicians routinely jam with cybernetic musicians.


$1K computer has approximately the computational capacity of a human brain.
Computers are invisible and embedded everywhere.
3D virtual reality displays in glasses are primary way of communicating with people and accessing computer-generated information.
All-encompassing virtual environments allow virtually any kind of interaction over any distance.
Virtual personalities (e.g., teachers, lovers) are common.


$1K computer has approximately the computational capacity of 1000 human brains.
Neural interfaces to computers have been perfected, and computational augmentation of human brains is available.
Computers have read all available human literature.
There is growing discussion about the legal rights of computers.


The number of software-based humans vastly exceeds the number of those using carbon-based neurons.
Humans who do not use the enormous computational augmentations available cannot meaningfully participate in dialog with those who do.
Life expectancy is no longer a viable term in relation to intelligent beings.

It is going to be a brave new world out there. Only the most mechanically inclined will prosper. Emotions and sentiments will be perhaps be debilitating weaknesses and the offending genes deactivated in custom ordered synthetically concieved babies.