Wednesday, July 21, 2010

I roamed the countryside searching for answers to things I did not understand.

Long ago I had read a quote from Leonardo da Vinci "I Roamed the countryside searching for answers to things I did not understand" Leonardo's quote has been at the back of my mind for the last many years. I can't be sure of what he meant but this is how I interpret it in today's context.

Successful organizations and leaders get caught up in their own success and often attempt to make templates or standardize on a few "success models". The end result of a successful endeavour becomes the focal point and the steps along the way get forgotten, rewritten or trivialized to meet the needs of the standardization. In the attempt to standardize "success models" we short-circuit the learning process, hence often depriving organizations and it's leaders the lessons of old fashioned experience.

The French developer Ferdinand de Lesseps comes to mind. He successfully developed the Suez Canal but clearly underestimated the challenges in designing and building the Panama Canal. He underestimated the requirements in design, topography and finally the power of Malaria ridden insects which ended the first attempt at building the Panama Canal in utter failure because he assumed that the success at Suez would automatically translate to success in Panama.

In today's context of a global economy with companies expanding past national boundaries, it is tempting to bucket successful processes or initiatives. We tend to bucket emerging economies together, developed economies together and so on, mostly because it is elegant to do it this way, but the danger is that the important differences are lost and assumptions of things that work in say Brazil would work in India could well be wrong.

To understand the international nature of business it is important to have an international executive team, and an international board. Many companies have figured out the former, but the latter of having international boards is still uncommon. Commonly used management catch phrases like "be close to your customer", "design globally for local needs" sound great in a presentation but often translate into driving agendas that do not add to the core competency of the organization.

Government initiatives also at times fall into the same category. In 2006 I was in a meeting with the development agency in one of the countries in south East Asia as an industry observer. The discussion was about transforming the region into a sustainable innovation and technology centre. The discussions were good and predictable. The actions however were far from good. An example was that the local government decided to give tremendous tax subsidies to multi national companies to set up manufacturing plants and insisted on some percentage of people employed should be of certain educational background (the hope was to increase technological capability in the region). The problem is that this particular region has a surplus of under utilized manufacturing plants and a shortage of factory operators. Instead of giving incentives to start technology centres and incentives to use the existing under utilized capacity in the region they went about creating further capacity and fuelled further importation of labour. The companies got their tax incentives that lasted 5 years and now are looking for more to stay. The region did not develop any core technology capability, and they have even more factories running below capacity!

Roaming the country side is about understanding local competencies and needs genuinely and not necessarily looking for buckets to place them in. You can start by understanding the core competencies of your organization, identify what additional competencies need to be developed and invest in furthering these capabilities. The answers should be directed at developing your business competencies in areas that add maximum value to your customer, employees, and investors.

In 2007, during a conversation with a young CEO of a Technology Company in Singapore with an annual revenue of about 35M:- he talked about the factors that were limiting his growth and about his expansion plans that would help him grow. Almost all the factors centred on engineering talent, time to market issues and the limitations in his sales and marketing channels. However his expansion plans were primarily about increasing his manufacturing capabilities. The end result of his plan would in effect increase his employee strength from 100 to 225 employees. At the time in 2007 they had a 5 member executive management team, 60 product development engineers, 12 operations and finance employees, 8 Sales and Marketing, and 15 people in manufacturing responsible for outsourcing and quality control. His expansion plan would entail a new manufacturing set up that would increase his employee count to 225, and revenue of about 100M. Of the 225 people; 105 would be responsible for manufacturing, 20 for operations and finance, and he would have 75 engineers and 20 people in Sales and Marketing. I told him that to me it sounded like his main inhibitors to growth, and his expansion plan did not match up. Because in his initial problem statement he did not see any issues with the production capability or capacity of his external contract manufacturers, but he had issues with timely product development, product strategy, and the channel. Three years later and after implementation of his plan, the company has a revenue of 35M, a manufacturing plant that is under utilized and is about to be closed down!

Roaming the vistas of technology and business we have to assimilate knowledge and understand human nature and local culture. The current trend of capturing complex systems in finance, and business into mathematical models while ignoring essential elements of human nature including self preservation, greed, and jealousy lead to solutions that do not address the problems.

The second decade of the 21st century will be at the very least interesting. The dynamics in the economy and politics of the world are fairly volatile so as we roam the country side lets hope we get answers for things we do not understand.

Monday, February 15, 2010

Have you bought your peace today?

The US debates universal health care, China tackles official corruption, Singapore discusses affordable housing, India the Maoist insurgence; the one common thread in all these issues is that society and social contracts are changing rapidly.
All societies are class based, in some societies movement between classes is much easier, and in some it is more difficult. In some countries social classes are defined along the lines of wealth, in others based on political influence, education, race, sex, and in many cases it is a mixture of many of the above.
Most social issues are wrapped in ideological discussions, but the movement for or against change is catalysed when existing social contracts that worked for a long time, start to change rapidly. Social turmoil results when the establishment does not recognize or worse still does not acknowledge the collapse of existing social contracts that preserved the status quo all these years.
In many of the developed nations, one of the primary social contract for decades involved having a strong growing middle class that was offered relatively unfettered access to decent jobs and the ability to generate wealth for those with the ability, skills and inclination to do so. In some of these nations, that social contract between the wealthier segments (job creators like business leaders, industrialists, etc) and the rest is changing dramatically leading to increased unemployment and a diminishing middle class.
In fast developing economies, the social contract of providing opportunity for wealth creation and improvement in quality of life is threatened, by official corruption and land grab. Many societies are seeing dramatic changes in the expectations of their populations. The changes in expectations come from education, desire for wealth, exposure to a wider world and often changing social contracts between the classes.
The cynical part in me wonders if the ideological battles are real or just mechanisms to come to a "favourable" resolution. Of course "favourable "it self can be a hotly debated issue; as-in favourable for whom?
Would it just be easier to "buy peace "; i.e. in order to maintain peace, stability, and the ability to thrive, each of us will have to "buy peace" from the different classes that are at the receiving end of the changes in society. If social stability was based on a premise of a growing middle class; then maybe the cost of self preservation is to pay for some kind of health care for the masses in a stagnating economy with greater than 10% employment. The cost of preservation in a fast developing economy with tremendously polarized wealth distribution and difficulty in movement between social classes may be public subsidy for essential services/goods and strong measures against corruption. Instead of spending precious time and resources on debates, demonstrations, and the like, it may just be more pragmatic and "buy peace".