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Strategies for a discontinuous future.












Saturday, May 13, 2006
 
Management Innovation

Speaking of innovations from around the world that may help make better org cultures, here's something interesting out of India.

-- Mahashunyam // 5:37 PM //


 
Seth Godin goes to Google

Cool presentation.

-- Mahashunyam // 5:35 PM //


 
Connected Consumption

One of the most important things I've read this week - media pods in Tokyo.

-- umair // 3:10 PM //


 
Response to Comments

David G writes:

"Either you believe that a business' primary asset is its human capital, or you don't. If you do, it's irresponsible not to develop & invest in that asset - the at-will system absolves management of this responsibility - and laziness compounds the problem.People without leadership skills get promoted here because leadership is not important to a company's financial performance - thanks to at-will employment contracts."

and

"Do we understand you correcly that you disagree with Umair that the US workplace is dysfunctional? It appears that you are predicting the decay of all global worplaces that don't map to the US way of doing things.???"

Excellent points that I thought deserved a separate response because these issues are worth thinking about.

First of all, let's separate leadership from management. The reality is that what companies need most are just able and competent managers, not necessarily great leaders. If anything, a significant reason for terrible management in corporate America is this silly belief in the heroic powers of messianic leaders who will rescue dysfunctional org cultures. This is responsible for creating the cult of the mega-million bonused executives and the rat race to the bottom among middle managers who are obsessed with politicking and power grabbing rather than focusing on running their businesses well. So, I'd frame the problem in terms of bad management.

Secondly, let's examine if there is any causal relationship between bad management and at-will employment. First thing I'd point out is that there is no evidence that at the aggregate level, companies from different jurisdictions with similar level of economic development in their respective domestic markets are that far apart in terms of the quality of their management. Phone companies are pretty well equally evil around the world and few people are happy with their nickle-and-diming banks. Few airlines can get their act together. Te few French and German companies that I've had the misfortune to deal with are just as terrible as their Amercian counterparts. It then begets the question : why aren't stronger job security laws correlated with higher levels of motivation or more healthy and/or effective org cultures?

Secondly, at the micro level, there're vast differences in the quality of management among companies in the same markets that operate under identical employment laws. I'd suggest that the reason for that is that the winners have not only perfected their strategies but actually created high performance work cultures based on trust and common sense, regardless of the at-will employment relationship. Such cultures are fostered and shaped by the continual hard work of emplyees and managers at every level, not by the inspiration of towering visionaries.

Think about this : Southwest has continued to outperform any other US airline for over three decades, Westjet in Canada consistently provides outstanding service that delights their customers while United, US Air, Northwest and Air Canada continue to suck, even after getting bailed out by US or Canadian taxpayers and the bankruptcy courts. Why is it that Westjet and Southwest can do this but the others can't? Why is it that Westjet and Southwest employees are actually happy to work for them? This is true across industries and geographies : people just love banking with ING Direct or buying Apple's products, for example. Bank of America and Dell, on the other hand, can't even dream of having anywhere near that level of performance or bonding with their customers. Why is it that the case although these companies are based in the same legal jurisdictions as far as employee relations are concerned?

This leads me to conclude that it's not the at-will employment that is to blame. Clearly, many corporate environments around the world are dysfunctional but the reasons for that range from the short-term'ism, slavishness to stock analsysts, hidebound cultural norms and clueless management. Even then, sweeping generalizations are not quite accurate : for example, the quality of management and work cultures in the US ranges all the way from absolutely outstanding companies such as IDEO, the SAS Institute and Google to the abominably evil phone and cable companies.

The key determinant is the willingness of the management to build a solid, long-term business which can only be achieved by having an environment that attracts and nurtures top talent. If you are an entrepreneur, I hope that you are trying to create such great work environment. If you are a worker bee, I hope that you do your due diligence on the prospective employer, or fire your current employer if it's not meeting this requirement.

Of course, I am not suggesting that cultures that don't adopt US style business practices are doomed - far from it. All I am trying to do is figure out what works, irrespective of which culture it comes from. Clearly, there are many things wrong with the US businesses, and indeed the American culture itself. However, I don't think that at-will employment is one of them.

-- Mahashunyam // 3:30 AM //


Friday, May 12, 2006
 
On Risk

Higher Learning in France Clings to Its Old Ways - New York Times
I was doing some more thinking after commenting upon Umair's earlier post on the idea of at-will employment when I came across this article. While the article focuses on the ills of the French education system, it also illustrates one of my key theses on wealth creation.

Conventional wisdom holds that deployment of capital and labour create wealth. However, this misses the critical role of risk taking and management. It is the embrace of change against all fears and acting out of conviction in the face of active opposition - indeed, as a contrarian - that leads to creation of wealth.

This is as true of individuals as it is of societies and corporations. Quite frequently, people arguing against capitalism and free markets pose me this hypothetical : would you call it a fair system if two equally intelligent people born into similar backgrounds with similar qualifications and work ethic end up being vastly different in terms of their financial well-being? In other words, shouldn't a fair society be the one where equally qualified people end up more or less equally wealthy?

On the face of it, this is a seductive line of logic, but my answer is always the same: how do their attitudes to risk compare? Do they embrace change equally and pursue the same opportunities? If not, then the answer is no. A fair society is one where only equality of access and opportunities are guaranteed, not the equality of outcome because at the end of the day, how far you go in life depends upon what you make of the opportunities that come your way and, even more importantly, how many opportunities you create yourself. Consider two equally talented and qualified people John and Jane Doe. If John Doe works for the government all his life and retires after working for 30 years with a pension while Jane Doe lives on four different continents, changes three industries and seven companies, tries to create a business of her own a few times, fails and goes bankrupt but still keeps trying until she succeeds spectacularly then clearly John and Jane will differ significantly in how rich they are when they turn 60.

What are the societal implications? First of all, on aggregate, the entrepreneurial population will be richer on average but within that group, there will be vast differences in wealth. There will be a few that succeed spectacularly, many who are moderately successful and a few who would have failed. Compared to this, the non-entrepreneurial group trades off stability and security for less wealth so on aggregate they will be poorer but the income levels will be more uniform, i.e., the standard deviation will be less. Therefore, the degree of inequality of wealth distribution would be significantly correlated with the overall change embracement and entrepreneurial attitude of the population. This is the familiar boogeyman created by socialists who see the gap between the rich and poor as, ipso facto, the evidence of the unfairness of the capitalist system. Of course, this is retarded : it's much better to live in a society with a few Bill Gates's and Larry Elison's who themselves may be multibillionares, but who create thousands of millionaires among their employees, allow hundreds of thousands of risk averse non-entrepreneurial people to trade off instability for steady income and middle-class lifestyle, and generate billions of dollars of wealth for the society at large which gets further redistributed through taxes and pension funds.

It is obvious that a society needs successful entrepreneurs for the economic well-being of its people. Successful entrepreneurs make it possible for the majority of risk-averse population to trade off labour for steady income and, more importantly, risk reduction. This is a critical point : entrepreneurs are not only income creators for the society but also risk-reducers fore the masses. I don't think this is fully appreciated by most economists. Entrepreneurs not only create wealth but they also mitigate economic risks for the non-entrepreneurial segment of the population.

In effect, the society gets not only a share of the wealth created by the entrepreneur, but it also gets a free subsidy in the form of risk reduction and mitigation from the creation of a successful enterprise. Furthermore, successful enterprises create a portfolio effect at te societal level as risk is distributed across many segments of the economy. I don't think we value or appreciate this portfolio effect, but it is critical to the resilience of an economy. One result of this portfolio effect is that it allows re-deployment of capital and labour to the most productive segments of the economy. For example, a lot of the redundant personnel from forestry and manufacturing industry in Canada are moving to Alberta and finding jobs in the oilfields. Similarly, a lot of dot-commers and telecommers are now working in non-tech industries.

Therefore, it is critical for a society to develop deep pools of risk absorption capacity, and nurture its entrepreneurs. How can this be done? At the aggregate level, one way to look at this is the risk-taking capacity of the society as a whole as manifested by its enablement of individuals to survive the conequences of risk taking. Are there policies and mechanisms in place that make it easier for people to take risks? Some of this are: easy availability of risk capital, venture-friendly tax regimes, availability of deep skills pool, large domestic markets, mechanisms to transfer learnings from successful entrepreneurs to newbies, social safety net and so on. Mechanisms such as universal healthcare and unemployment insurance in Canada should be evaluated not only for their compassion value but also how much they help in increasing te risk-taking capacity of individuals : social safety net goes far in increasing the risk-taking capability of the society as individuals are assured that two of their fundamental needs - basic survival and healthcare - will be taken care of even if they fail.

Similarly, at-will employment laws should also be seen as contributors to business risk mitigation as I argued in the other thread. Imagine what would happen in the absence of at-will employment : not only would businesses not hire as much, the workers themselves would not have as much incentive to seek active change. They would continue working for dying industries and/or companies for far longer than would be economically efficient. However, ease of layoff ensures that they quickly figure out what to do next, which usually leads to them finding a job that is economically more robust and/or to re-education and re-training for new skills that are in demand which usually comes from new and growing segments of the economy.

I think there're economies of scope and learning in this as well : the more a society learns how to do this, the larger the fraction of its population that gets better at it.

Other factors are socio-cultural: attitude of consumers to new products and services, social stigma attached to failures, the prevailing mythos in the society, social network & capital and so on. For example, note the quote from the NYTImes article:

"We are caught in a world of limits where there's no such thing as the self-made man," said Claire de la Vigne, a graduate of Nanterre who is now doing graduate work at the much more prestigious Institut d'�tudes Politiques de Paris. "We are never taught the idea of the American dream, where everything is possible. Our guide is fear."

Compare this mythos with the US where pursuit of wealth is a passion and where instituions from Babson College to incubators in Silicon Valley have deeply ingrained mythos of optimism and chasing the American dream.

As I argued in my previous posts, this is a key competitive advantage that the US has. It occurred to me that another evidence of this is the formation of new industry clusters as studied by Micheal Porter. I think Porter understood the role of economic factors such as economies of scope and learning in the formation of clusters, but I don't think he's accounted for the cultural factors. To me, the fact that outside the US the biggest clusters have taken root in Israel, India and China are the evidence that these socio-cultural factors matter just as much as the economic factors, if not more. In fact, the rise of clusters in India and China is concomitant with the dramatic change in their national mythos where suddenly the entrepreneur has gone from being a blood-sucking buccaneer to the world-conquering hero.

Contrast this with EuropeFrance where free enterprise is now a dirty word and suddenly it becomes obvious why Europe France will experience secular decline in its economic fortunes for the foreseeable future. It is sad to see that the national mythos appears to be one of fear, change-aversion and risk-avoidance. There's something terribly wrong with a country whose best and brightest can only aspire to become government bureaucrats. Is it any wonder that they are so far behind in terms of embracing people from other cultures within their midst or globalization in general?

-- Mahashunyam // 6:54 AM //


Wednesday, May 10, 2006
 
Microsofted

So lately, I have been writing a lot.

I rely pretty heavily on a thesaurus when I'm writing seriously, to help me back off from sounding purely technical.

All of which leads me to ask: why, for the love of god, does the thesaurus in Microsoft Word absolutely, totally, suck?

Why does it blow to an almost incomprehensible degree?

It's like someone who's illiterate wrote this thesaurus. It doesn't speak the same english I do. Most of the recommendations it spits out are awful - they're irrelevant, based on bizarre idioms no one can actually use to write seriously, or just nonsensical.

I remember using a better thesaurus in WordPerfect - when I was like 8 years old!

The problems with complementarity - gawd.

-- umair // 7:06 PM //


 
Simulation Wars

You know, I haven't talked at all about Wii vs XBox Live/360/etc.

But I will.

For now, here's a killer quote:

"..."We did a controller like that eight years ago," said Scott Henson, Microsoft's director of platform strategy for games for Windows and Xbox. "It worked extremely well for a few games. But it's hard to see how it really applies to a lot of game experiences."

Nice one. Hubris lets us dismiss tomorrow's radical innovations - but it doesn't make them disappear. It is a key source of strategy decay.

And what's most interesting is that Henson - in typical Microsoftian fashion - thinks the controller is just an isolated piece of technology.

Of course, the whole point is that Nintendo focuses on crafting incredibly rich and lush experiences-as-games - while it's Microsoft that focuses on, well, being just another platform owner.

If Microsoft understood experience, they would be deeply afraid, because experiences are about emotional and sensory utility - and Nintendo, I suspect, is about to deliver that in spades (while Microsoft delivers another 5000 sequels to yesterday's stale, tired blockbusters and fading genres).

-- umair // 6:40 PM //


 
Edge Competencies - Breaking Advertising

Google's success at revolutionizing advertising from the edge, not the core, is inviting competition.

The next bit of the old dominant design to fall is TV upfront ad sales - an archaic, totally obsolete mechanism which is, at heart, responsible for the mind-numbingly tedious corn-fed drivel that is broadcast on network TV.

"...The upfront is on the tip of everybody�s tongue,� Roehm said. �By breaking it into smaller chunks, [starting with] something less overwhelming than the upfront, we can do it."

We talked about this before. But here's the really interesting bit. It looks like these guys have been reading Bubblegen - because they're talking squarely about microchunking.

The end game here is clear, as it is across consumer industries: radical innovators are beginning to understand the power of edge competencies. Increasingly, they will use market, networks, and communities to rescale and restructure the ancient, obsolete mechanisms that are repsonsible for so much of the homogeneity and blandness that characterize today's consumptionscape.

-- umair // 4:38 PM //


 
Google Health as Edge Strategy

A few days ago, KH asked what the deal was with Google Health.

Let me try and shed some light on it for a sec - it's important to observe because I think it will be a textbook example of using edge competencies to reconstruct a deeply inefficient market.

With that in mind, why Google Health?

1) Large market size.

2) A market with low competitive intensity.

3) A market with enormous density and value of information (viz, just waiting for some Google-fu).

4) A market ripe for business model and value chain disruption and reinvention through hyperefficient interaction. Many of the most valuable keywords on AdWords are health related; it's not surprising that Goog smells the potential to leverage it's edge competencies into an already valuable domain.

Here, the game won't be about simple ads. Rather, high keyword prices point to enormous search costs for both parties in healthcare transactions. Google, then, will benefit more by using, for example, pay-per-lead gen, to make this market hyperefficient, and rebalance market power along the value chain by atomizing it.

-- umair // 2:50 PM //


 
Escape from Cubicle Nation: Open letter to CEOs, COOs, CIOs and CFOs across the corporate world

Escape from Cubicle Nation: Open letter to CEOs, COOs, CIOs and CFOs across the corporate world

Apropos Umair's post on corporate evil.

-- Mahashunyam // 2:39 AM //


Tuesday, May 09, 2006
 
The Problems with Business

"...f the U.S. and General Motors have similar flaws and indeed symbiotic fates, they appear to be conjoined primarily by the uncompetitiveness of their existing labor cost structures and the onerous burden of their future healthcare and pension liabilities.

That is not to say that other automobile manufacturers or countries don�t share similar characteristics: they do � but GM and the U.S. are compared here because of their historical dominance and therefore the influence that they will have on investment markets as they struggle to adjust. If GM is a canary, let�s hope for the canary�s long life, but be mindful of its chirping deep in the mineshaft of future events that speak to broader implications for the U.S. economy."


Now that my edge competencies work is coming to a close (don't worry, all will be published soon), I've been thinking about something related lately.

In the quote above, Bill Gross - the guru of the fixed income world, if you don't know - argues that the flaw of American business is labor cost structure (you know, healthcare costs, etc).

I think it's very interesting that Bill Gross recognizes that there is a huge flaw in American business.

But I think it's much deeper than cost structures.

I think it has to do with a few seemingly inevitable outcomes of the interplay of microeconomics, macoreconomics, and psychology:

- Boringness (Wal Mart effect)
- Stupidity (Dilbert effect)
- Amorality (Enron effect)
- ??

I'm trying to flesh all this stuff out. I would like to hear what you guys think - what are the different categories of business evil? What is it that's sending American business into a bit of a tailspin?

-- umair // 2:17 PM //


 
2.0

IndieKarma may be the best idea in the Web 2.0 space I've seen in a long time.

So good, in fact, it's deceptive.

IndieKarma is solving a very big problem: the fact that there's an enormous nonlinearity in the payoffs of ad networks right now. It's only after you scale to a fairly large minimum audience that you can achieve a reasonable CPM.

Of course, this is a huge economic gap.

IndieKarma's the first play to target it with a scalable idea.

Now, if IndieKarma's smart, they will think about way to scale much faster than they are right now.

For example, consider how cool it would be if your dollar wasn't just exchanged, but passed around virally....

-- umair // 12:48 PM //


Monday, May 08, 2006
 
Warp Drive...Coming Soon!

So a spaceship can't actually travel faster than the speed of light. However it is theoretically possible to form a bubble of space fabric around it, and make that move > speed of light. Would lead to such cool things as arriving before you leave. (Would that mean Bush would become El Presidente before he got elected? Oh! That already happened!). Here's a quick list of requirements to enable warp travel (for those you with some spare time):

  • Discover Negative Energy
  • Devise a Way To Manipulate It
  • Harness Dark Energy
  • Build Bubble Brakes

While you're out pick up some dilithium crystals.


-- Kashif Hasan // 2:12 PM //


 
Military Policy = Foreign Policy

It sure seems like 1984.

"If he were to get the nomination, military officers would run all the major spy agencies, from the ultra-secret National Security Agency to the Defense Intelligence Agency."

The ACLU's response should be interesting.

-- Kashif Hasan // 1:51 PM //


 
The Stupidest Person in the Universe (Ever)

I know, I know, you saw it already - but, really, omfg.

-- umair // 2:13 AM //


Sunday, May 07, 2006
 
Buy Nothing Day : Adbusters

Buy Nothing Day

Backlash against soulless consumerism = opportunity for innovation in creating next generation of social capital intensive businesses.

-- Mahashunyam // 6:03 AM //


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