Entries Tagged 'Entrepreneurship' ↓

I have been reading a number of articles on the present world financial crisis and the looming recession the countries are going through.

How deep into the recession shall we have to go before we are back to growth? How long will it last? What should be done during this period to experience minimum damage? What should be the behaviour of an enterprise or and individual during the recession?

Since the expansion is not prevailing, there is little use in trying to expand your market. Would it be proper to take the time to review your internal operation in seeking savings and improvement of your efficiency? Innovate and seek better ways of performing. More output with less input.

In every threat there is an opportunity. In time of recession, cash is King. The shake of the economy may probably bring down the fragile enterprises. There might be opportunities in taking over enterprises with future potential which have not resisted the wake.

I have extracted from the Quarter review of Mc Kinsey, the interesting and relevant article to the crisis:

What does the future hold?

Despite the shared features of the past century’s financial crises—usually, excess leverage somewhere in the financial system and then a breakdown in confidence—the recessions following them were quite different. What determined the length and severity of those recessions was how governments responded: in particular, whether they managed to restore confidence among consumers, companies, investors, and lenders.

An economic crisis becomes a catastrophic recession only if it blocks the provision of capital to businesses long enough to generate widespread corporate failures. This blockage is what made the Asian financial crisis so devastating. Net capital inflows to the region, $93 billion in 1996, turned into net outflows of $12 billion in 1997. Local banking systems just couldn’t provide the capital to plug this gap, foreign banks weren’t prepared to extend credit, and the International Monetary Fund (IMF) moved too slowly. As a result, businesses couldn’t finance working capital, let alone investment, and failed to obtain the export financing these countries needed given the high share of exports in their GDPs. Once the flow of credit had been restored, the economies affected by the crisis recovered quickly.

Similar dynamics were at work during the Great Depression, when a combination of bank runs and limited federal controls undermined the financial economy. From 1929 to 1933, almost half of the banks operating in the United States before 1929 either failed or needed government assistance, as a result of falling prices, the doubling of the country’s debt-service ratio, and the default of more than half of US farm debt.¹² Many of the companies with the strongest credit couldn’t obtain long-term debt capital in the years after the crisis. Moreover, capital had minimal cross-border mobility in the 1930s. With businesses starved of funding, corporate investment fell by more than 75 percent from 1929 to 1933, according to Bureau of Economic Analysis data.

Under less extreme conditions, with the right kind of government intervention, economies can weather even sizable credit crises. From 1981 to 1983, for example, Federal Deposit Insurance Corporation (FDIC) data show that 258 US banks failed or required assistance. Nonetheless, nonresidential US investment fell by less than 1 percent in all. During the entire 1980s, almost 750 banks failed and more than 1,500 required assistance, as opposed to 35 during the preceding decade. Yet corporate investment increased by an average of 4.5 percent a year in the ’80s.

Today, the real economy goes into the recession surprisingly well prepared: US industrial companies had lower leverage and higher interest coverage than they did going into the dot-com bust, the S&L crisis, or even the oil shocks of the 1970s. How the real economy fares will depend greatly on the way the current policy debate plays out over the next few quarters.

What should companies do?

We do not yet know how the current crisis will evolve. The confidence of consumers, corporations, and investors—a key factor—cannot be forecast. Nor can government policy. Yet research shows that in past recessions, companies pursuing a purely defensive strategy fared less well than their more active counterparts.¹³ As the economy enters what will probably be a difficult downturn, companies should prepare to seize their opportunities.

Examine the patterns

Although recessions differ, it’s worth understanding how different industries performed during past downturns and what factors determined the speed of recovery. In coming months, as the focus of government policy shifts from fire fighting to economic stimulus, this kind of research will help companies understand the implications for themselves and assess how the evolving macroenvironment will affect them in the next few years.

Overprepare

Most companies already have contingency plans, but few plan as aggressively as they should. It’s worth preparing for the worst—for example, major customers filing for bankruptcy, capital expenditures needing to be cut in half quickly, or a country sales operation losing access to local-currency working capital. What seems improbable now could become a reality sooner than you expect.

Scan for opportunities

Managing downside risk shouldn’t blind executives to potential upsides. Despite the current turbulence, in most industries it isn’t hard to identify either the companies that will find themselves under pressure or which consolidation and reshaping scenarios might emerge. Instead of reacting to situations on short notice as they arise, invest time now to understand how such forces might affect your industry and what role you want your company to play.

About the Authors

David Cogman is an associate principal in McKinsey’s Shanghai office, and Richard Dobbs is a director in the Seoul office.

The transport industry in general is a high user of fossil fuel and is causing the depletion of the world resource. The need to resort to renewable source is capital in the future. Sweden as a country has started using bio fuel for years and is quite advanced in use of ethanol. E10 and later E15 mixture with gasoline has become common. We expect a higher proportion of bio-fuel in the mixture in the future.

As an entrepreneur much can be learned from the swedish experience and possibly convert these knowledge in wealth.

I am surprised to learn today, that the first test of using a mixture of bio-fuel with Jet A1 extracted from fossil oil has been successful.

A Japanese airline has become the first Asian carrier to fly using bio-fuel. The Jumbo Jet took off on a 90-minute demonstration flight from Tokyo using a blend of 50 per cent standard aviation fuel mixed with oil derived from several forms of vegetation including algae. But analysts say that bio-fuel production must become cost-effective if it is to be a viable alternative to kerosene.

I invite you to watch the video produce on the subject.

Excessive use of chemicals and pesticide is certainly having adverse effects on nature. Of late I have been reading on vermin-composting and organic farming. I inquired with ‘AREU’ Agricultural research extension unit, to check if it was possible to compost with worms in Mauritius. I was told that AREU they are experimenting on this composting method and are having difficulties in finding enough worms to operate a composting system.

I am stunned to hear that in Mauritius the population of earth worms has gone so low. As a kid I recall that the back yard of my kindergarten school was infested with worms particularly area where the soil was moist.

Methods for Collecting Your Finished Worm Compost

After you have been feeding your worms for three to six months, you may notice the bedding has been eaten, and you can begin harvesting the brown, crumbly worm compost. Harvesting the compost and adding fresh bedding at least twice a year is necessary to keep your worms healthy.

Method 1:

Move the contents of your worm bin to one side, place fresh bedding in the empty space and bury your food wastes there for a month or so. Harvest the other side after the worms have migrated to the new food and bedding.

Method 2:

Remove one-third to one-half of the contents of your bin, worms and all, and add the worm compost to your garden soil. Add fresh bedding and food to your bin.

Method 3:

Spread a sheet of plastic out under a bright light or in the sun. Dump the contents of the worm box into a number of piles on the sheet. The worms will crawl away from the light into the center of each pile and you can brush away the worm compost on the outside by hand. Soon you will have wriggling piles of worms surrounded by donut-shaped piles of worm compost.

Using Your Worm Compost

Worm compost is more concentrated than most other composts because worms are excellent at digesting food wastes and breaking them down into simple plant nutrients. Use it sparingly for best results.

Mulching and Amending Soil

To mulch with worm compost, apply a one-inch layer to the soil around plants. Be sure the worm compost is not piled against plant stems. To amend soil, worm compost can be spread one-half to two inches thick over garden soil and mixed in before planting, or mixed into the bottom of seeding trenches or transplanting holes. You can also mulch your worm compost into:

1. Houseplants: Sprinkle worm compost around the base of plants to fertilize. Each time you water, plant nutrients will seep into the soil.
2. Potting Mixes: For healthy seedlings, mix one part worm compost with three parts potting mix or three parts sand and soil combined. Peat moss, pearlite and worm castings are also good ingredients to add.

Warning Signs

Some symptoms that your worm composting is not going as well as it could are:

• If your worms are dying
• If your bin smells rotten and/or attracts flies

Worms Dying

If your worms are dying there could be several causes:

1. It may be that they are not getting enough food, which means you should bury more food into the bedding.
2. They may be too dry, in which case you should moisten the box until it is slightly damp.
3. They may be too wet, in which case you should add bedding.
4. The worms may be too hot, in which case you should put the bin in the shade.
5. The bedding is eaten, and it is time to add fresh bedding.

Bin Smells

If your bin smells rotten and/or attracts flies, there may be three causes:

1. First, it may be that there is not enough air circulation. In this case, add dry bedding under and over the worms, and do not feed them for two weeks.
2. Second, there may be non-compostables present such as meat, pet feces or greasy food. These should be removed.
3. Third, there may be exposed food in the bin. In this case, secure the lid, cover food scraps with bedding, and cover worms and bedding with a sheet of plastic.

http://earth911.com/blog/2007/04/02/composting-with-worms/

All of us definitely are required to perfect our communications skills.  I continuously need to sharpen all my skills, of all the skills, the one of  persuasion would yield instantaneous and the largest pay back. I was lucky to have known this fact early in my life career and later joining the Toastmasters club was delightful.

Perfecting Your Powers of Persuasion

The Persuasion Process
Simply stated, persuasion is the ability to sway others toward a different perspective. It takes careful preparation and the ability to frame/reframe, offer concessions, communicate one’s position through evidence/logic, and to correctly match the other party’s emotional state.

The starting point is credibility. It is your expertise, your relationship, your reputation in the organization, and your ability to be proactive when dealing with others. Trust is the foundation of persuasion and is manifest in certain behaviors: honest communication, body language that displays interest, listening and questioning, and so on.

The content of one’s message and the way the content is delivered is also important. The content needs to focus on the goal that is common to both parties and on the need to reach that goal mutually. This makes the message attractive to the other party
and generates reciprocity on the other side. In other words, if your message is constructed correctly, the responding message from the other party will be something you can build on.

As with any message, yours must be supported with evidence and rationale. This may take the form of an analogy, statistics, or even a reference to a value the other party has. For example, when you are trying to persuade an employee to change performance behaviors, you may discover that he or she values working alone (the reason for the lack of proper performance behavior). Wanting to work alone is validated by reframing it as having a strong personal work ethic. This, in turn, establishes a discussion that takes this issue and reframes it as a value that would benefit others in the organization. This may persuade the employee not to work alone as often so that others can see his or her strong work ethic.

Finally, a skilled negotiator is quick to assess the emotional state of the other party and to respond to that state. This requires on the part of the negotiator a high self-esteem level and emotional balance when handling conflict. Having self-esteem allows the
negotiator to display passion for reaching agreement, while the emotional balance makes certain that the passion is not over- or underwhelming.

How to Be More Persuasive
Most people use only facts to persuade. This is unfortunate, because facts only justify a position if you tend to agree with that position. Persuasion is a complex art. It involves a careful blend of feelings, logic, WIIFTs (what’s in it for them), and values. Because people feel differently about different material needs and situations and because WIIFTs vary from person to person, persuasive techniques must be adapted to each person in each situation.

To successfully persuade someone, you must appeal to them on three levels:

1. Emotion (opens the mind)
The use of emotion in persuasion must be planned carefully. You need to be enthusiastic and confident about your plan, idea, or settlement (emotion really does open the mind). However, like garlic in stew, too much of an emotional appeal will fail as surely as no emotional appeal at all. You need to find ways to keep the other party emotionally involved in the discussion. You will notice a distinct lack of energy at the table if you or the other party is emotionally uninvolved.

2. Logic (justifies the recommendation)
Logic is the rational, factual, reasoned discourse about the merits of an idea or settlement. Logic is a core part of persuasion. Emotion opens the mind and logic justifies the position you are taking.

3. Values (seals the deal)
The final part of persuasion is the appeal to values. Values are beliefs that guide behavior. Each of us has values that are unique to us and values that we share in common. You should make your persuasive appeal within the context of the other party’s “dominant receptivity mode.”

“Dominant receptivity mode” refers to predominant values that the other party holds dear. Perhaps the person you are dealing with is a conservative traditionalist favoring the status quo. You would not persuade such a person to buy your product by pointing out that your item represents state-of-the-art technology used by entrepreneurs. Instead, you might position the product as one that will help him/her preserve assets that increase the efficiency of the workforce. You market your product or idea to match the other person’s dominant receptivity mode (i.e., value system).

How, then, do you use this persuasion model in everyday negotiations? You can use the model in this way:

• Appeal to emotion—State a claim
  A claim is an opinion unsubstantiated by fact. The claim is generally the vehicle by which an emotional appeal is made. An effective claim stimulates the interest of the listener—it opens the listener’s mind. For example: “I could show you a way to increase your sales by 18 percent. Would you be interested?”
• Appeal to logi—State facts to support the claim
  A fact is information that can be verified by independent sources or proven through empirical investigation. Facts must back up claims and be verifiable by independent sources. Facts are the logical part of persuasion. For example: “In a carefully designed and controlled study in two organizations similar to yours, those who took this course in negotiation settled on average 18% higher in their sales efforts than those who did not take the course.”
• Appeal to values—Assign a meaning/WIIFT
  A meaning is the personal benefit that someone can make of the claim or fact.
  For example: “What all this means is that you’ll have increased profits in your
  division.” You can demonstrate a personal WIIFT meaning at this point, speaking to the issue in
  terms of the party’s dominant receptivity mode. For example: “John, with increased profits you will be in a position to negotiate increased commissions for you and your staff.”

Listening
In any negotiation, it’s important to remember to listen to the other party. This involves:

• Responding to the person rather than to the concepts
• Following the other party’s claim, facts, and meaning rather than trying to go to areas you think should be explored
• Clarifying what the other party is saying
• Acknowledging the feelings being expressed by the other party

Text printed from AMA web site to whom I am indebted.

Recycling of PET bottles

I saw on Euro news yesterday, that in Portugal, a new factory has been set up to produce quality blankets from used water bottles (PET). PET stands for polyethylene terephthalate.

The situation in Mauritius:

PET post consumer bottle recovery and recycling: The Mauritius Soft Drink Bottlers’ Association , regrouping the four big producers of soft drinks has contracted a private company (POLYPET RECYCLERS LTD) to sort and export PET bottle waste, in response to a producer responsibility regulation from the Ministry of Environment. Special dustbins in strategic spots have been placed and a collection rate of 30% of the 3000 MT of PET used on the island (or about 80 million bottles) has been reached. In addition the Association promotes community initiatives with NGOs to create an opportunity for locals to find some additional revenue obtained from the reselling of PET waste. Workers directly engaged by Polypet are more than 30 and indirect job creation is around 100 on the collection side.

For the time being the collected PET bottles are crushed for export. The quantity collected may not justify the setting up of a factory to recycle and convert the resins.

What tonnage could be collected in the region? How much can be collected in Reunion island, Comoros and Madagascar? Will the volume then justify the setting up of a plant to transform the resin? Has anyone studied the issue?

In these days and testing times, what need to be done? I have read an interesting article from Mc Kinsey which would be of us to entrepreneurs. Do put in your comments.

Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business. Through our work and research, we have identified eight technology-enabled trends that will help shape businesses and the economy in coming years. These trends fall within three broad areas of business activity: managing relationships, managing capital and assets, and leveraging information in new ways.

Managing relationships

1. Distributing cocreation

The Internet and related technologies give companies radical new ways to harvest the talents of innovators working outside corporate boundaries. Today, in the high-technology, consumer product, and automotive sectors, among others, companies routinely involve customers, suppliers, small specialist businesses, and independent contractors in the creation of new products. Outsiders offer insights that help shape product development, but companies typically control the innovation process. Technology now allows companies to delegate substantial control to outsiders—cocreation—in essence by outsourcing innovation to business partners that work together in networks. By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

Information goods such as software and editorial content are ripe for this kind of decentralized innovation; the Linux operating system, for example, was developed over the Internet by a network of specialists. But companies can also create physical goods in this way. Loncin, a leading Chinese motorcycle manufacturer, sets broad specifications for products and then lets its suppliers work with one another to design the components, make sure everything fits together, and reduce costs. In the past, Loncin didn’t make extensive use of information technology to manage the supplier community—an approach reflecting business realities in China and in this specific industrial market. But recent advances in open-standards-based computing (for example, computer-aided-design programs that work well with other kinds of software) are making it easier to cocreate physical goods for more complex value chains in competitive markets.

If this approach to innovation becomes broadly accepted, the impact on companies and industries could be substantial. We estimate, for instance, that in the US economy alone roughly 12 percent of all labor activity could be transformed by more distributed and networked forms of innovation—from reducing the amount of legal and administrative activity that intellectual property involves to restructuring or eliminating some traditional R&D work.

Companies pursuing this trend will have less control over innovation and the intellectual property that goes with it, however. They will also have to compete for the attention and time of the best and most capable contributors.

Further reading:
Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom, Cambridge, MA: Yale University Press, 2006.
Henry Chesbrough, Open Innovation: The New Imperative for Creating and Profiting from Technology, Boston: Harvard Business School Press, 2003.
James Surowiecki, The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, New York: Doubleday, 2004.
Eric von Hippel, Democratizing Innovation, Cambridge, MA: MIT Press, 2005.

2. Using consumers as innovators

Consumers also cocreate with companies; the online encyclopedia Wikipedia, for instance, could be viewed as a service or product created by its distributed customers. But the differences between the way companies cocreate with partners, on the one hand, and with customers, on the other, are so marked that the consumer side is really a separate trend. These differences include the nature and range of the interactions, the economics of making them work, and the management challenges associated with them.

As the Internet has evolved—an evolution prompted in part by new Web 2.0 technologies—it has become a more widespread platform for interaction, communication, and activism. Consumers increasingly want to engage online with one another and with organizations of all kinds. Companies can tap this new mood of customer engagement for their economic benefit.

OhmyNews, for instance, is a popular South Korean online newspaper written by upwards of 60,000 contributing “citizen reporters.” It has quickly become one of South Korea’s most influential media outlets, with around 700,000 site visits a day. Another company that goes out of its way to engage customers, the online clothing store Threadless, asks people to submit new designs for T-shirts. Each week, hundreds of participants propose ideas and the community at large votes for its favorites. The top four to six designs are printed on shirts and sold in the store; the winners receive a combination of cash prizes and store credit. In September 2007 Threadless opened its first physical retail operation, in Chicago.

Companies that involve customers in design, testing, marketing (such as viral marketing), and the after-sales process get better insights into customer needs and behavior and may be able to cut the cost of acquiring customers, engender greater loyalty, and speed up development cycles. But a company open to allowing customers to help it innovate must ensure that it isn’t unduly influenced by information gleaned from a vocal minority. It must also be wary of focusing on the immediate rather than longer-range needs of customers and be careful to avoid raising and then failing to meet their expectations.

Further reading:
C. K. Prahalad and Venkat Ramaswamy, The Future of Competition: Co-Creating Unique Value with Customers, Boston: Harvard Business School Press, 2004.
Don Tapscott and Anthony D. Williams, Wikinomics: How Mass Collaboration Changes Everything, New York: Portfolio Hardcover, 2006.

3. Tapping into a world of talent

As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Much as technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks.

Top talent for a range of activities—from finance to marketing and IT to operations—can be found anywhere. The best person for a task may be a free agent in India or an employee of a small company in Italy rather than someone who works for a global business services provider. Software and Internet technologies are making it easier and less costly for companies to integrate and manage the work of an expanding number of outsiders, and this development opens up many contracting options for managers of corporate functions.

The implications of shifting more work to freelancers are interesting. For one thing, new talent-deployment models could emerge. TopCoder, a company that has created a network of software developers, may represent one such model. TopCoder gives organizations that want to have software developed for them access to its talent pool. Customers explain the kind of software they want and offer prizes to the developers who do the best job creating it—an approach that costs less than employing experienced engineers. Furthermore, changes in the nature of labor relationships could lead to new pricing models that would shift payment schemes from time and materials to compensation for results.

This trend should gather steam in sectors such as software, health care delivery, professional services, and real estate, where companies can easily segment work into discrete tasks for independent contractors and then reaggregate it. As companies move in this direction, they will need to understand the value of their human capital more fully and manage different classes of contributors accordingly. They will also have to build capabilities to engage talent globally or contract with talent aggregators that specialize in providing such services. Competitive advantage will shift to companies that can master the art of breaking down and recomposing tasks.

Further reading:
Richard Florida, The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community, and Everyday Life, New York: Basic Books, 2004.
Daniel H. Pink, Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live, New York: Warner Books, 2001.

4. Extracting more value from interactions

Companies have been automating or offshoring an increasing proportion of their production and manufacturing (transformational) activities and their clerical or simple rule-based (transactional) activities. As a result, a growing proportion of the labor force in developed economies engages primarily in work that involves negotiations and conversations, knowledge, judgment, and ad hoc collaboration—tacit interactions, as we call them. By 2015 we expect employment in jobs primarily involving such interactions to account for about 44 percent of total US employment, up from 40 percent today. Europe and Japan will experience similar changes in the composition of their workforces.

The application of technology has reduced differences among the productivity of transformational and transactional employees, but huge inconsistencies persist in the productivity of high-value tacit ones. Improving it is more about increasing their effectiveness—for instance, by focusing them on interactions that create value and ensuring that they have the right information and context—than about efficiency. Technology tools that promote tacit interactions, such as wikis, virtual team environments, and videoconferencing, may become no less ubiquitous than computers are now. As companies learn to use these tools, they will develop managerial innovations—smarter and faster ways for individuals and teams to create value through interactions—that will be difficult for their rivals to replicate. Companies in sectors such as health care and banking are already moving down this road.

As companies improve the productivity of these workers, it will be necessary to couple investments in technologies with the right combination of incentives and organizational values to drive their adoption and use by employees. There is still substantial room for automating transactional activities, and the payoff can typically be realized much more quickly and measured much more clearly than the payoff from investments to make tacit work more effective. Creating the business case for investing in interactions will be challenging—but critical—for managers.

Further reading:
Bradford C. Johnson, James M. Manyika, and Lareina A. Yee, “The next revolution in interactions,” mckinseyquarterly.com, November 2005.
Scott C. Beardsley, Bradford C. Johnson, and James M. Manyika, “Competitive advantage from better interactions,” mckinseyquarterly.com, May 2006.
Thomas W. Malone, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life, Boston: Harvard Business School Press, 2004.

Managing capital and assets

5. Expanding the frontiers of automation

Companies, governments, and other organizations have put in place systems to automate tasks and processes: forecasting and supply chain technologies; systems for enterprise resource planning, customer relationship management, and HR; product and customer databases; and Web sites. Now these systems are becoming interconnected through common standards for exchanging data and representing business processes in bits and bytes. What’s more, this information can be combined in new ways to automate an increasing array of broader activities, from inventory management to customer service.

During the late 1990s FedEx and UPS linked data flowing through their internal tracking systems to the Internet—no trivial task at the time—to let customers track packages from their Web sites, with no human intervention required on the part of either company. By leveraging and linking systems to automate processes for answering inquiries from customers, both dramatically reduced the cost of serving them while increasing their satisfaction and loyalty. More recently, Carrefour, Metro, Wal-Mart Stores, and other large retailers have adopted (and asked suppliers to adopt) digital-tagging technologies, such as radio frequency identification (RFID), and integrated them with other supply chain systems in order to automate the supply chain and inventory management further. The rate of adoption to date disappoints the advocates of these technologies, but as the price of digital tags falls they could very well reduce the costs of managing distribution and increase revenues by helping companies to manage supply more effectively.

Companies still have substantial headroom to automate many repetitive tasks that aren’t yet mediated by computers—particularly in sectors and regions where IT marches at a slower pace—and to interlink “islands of automation” and so give managers and customers the ability to do new things. Automation is a good investment if it not only lowers costs but also helps users to get what they want more quickly and easily, though it may not be a good idea if it gives them unpleasant experiences. The trick is to strike the right balance between raising margins and making customers happy.

Further reading:
John Hagel III, Out of the Box: Strategies for Achieving Profits Today and Growth Tomorrow through Web Services, Boston: Harvard Business School Press, 2002.
Claus Heinrich, RFID and Beyond: Growing Your Business with Real World Awareness, Indianapolis, IN: Wiley Publishing, 2005.
Jeanne W. Ross, Peter Weill, and David C. Robertson, Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, Boston: Harvard Business School Press, 2006.

6. Unbundling production from delivery

Technology helps companies to utilize fixed assets more efficiently by disaggregating monolithic systems into reusable components, measuring and metering the use of each, and billing for that use in ever-smaller increments cost effectively. Information and communications technologies handle the tracking and metering critical to the new models and make it possible to have effective allocation and capacity-planning systems.

Amazon.com, for example, has expanded its business model to let other retailers use its logistics and distribution services. It also gives independent software developers opportunities to buy processing power on its IT infrastructure so that they don’t have to buy their own. Mobile virtual-network operators, another example of this trend, provide wireless services without investing in a network infrastructure. At the most basic level of unbundled production, 80 percent of all companies responding to a recent survey on Web trends say they are investing in Web services and related technologies. Although the applications vary, many are using these technologies to offer other companies—suppliers, customers, and other ecosystem participants—access to parts of their IT architectures through standard protocols.¹

Unbundling works in the physical world too. Today you can buy fractional time on a jet, in a high-end sports car, or even for designer handbags. Unbundling is attractive from the supply side because it lets asset-intensive businesses—factories, warehouses, truck fleets, office buildings, data centers, networks, and so on—raise their utilization rates and therefore their returns on invested capital. On the demand side, unbundling offers access to resources and assets that might otherwise require a large fixed investment or significant scale to achieve competitive marginal costs. For companies and entrepreneurs seeking capacity (or variable additional capacity), unbundling makes it possible to gain access to assets quickly, to scale up businesses yet keep their balance sheets asset light, and to use attractive consumption and contracting models that are easier on their income statements.

Companies that make their assets available for internal and external use will need to manage conflicts if demand exceeds supply. A competitive advantage through scale may be hard to maintain when many players, large and small, have equal access to resources at low marginal costs.

Further reading:
“Jeff Bezos’ risky bet,” BusinessWeek, November 13, 2006.

Leveraging information in new ways

7. Putting more science into management

Just as the Internet and productivity tools extend the reach of and provide leverage to desk-based workers, technology is helping managers exploit ever-greater amounts of data to make smarter decisions and develop the insights that create competitive advantages and new business models. From “ideagoras” (eBay-like marketplaces for ideas) to predictive markets to performance-management approaches, ubiquitous standards-based technologies promote aggregation, processing, and decision making based on the use of growing pools of rich data.

Leading players are exploiting this information explosion with a diverse set of management techniques. Google fosters innovation through an internal market: employees submit ideas, and other employees decide if an idea is worth pursuing or if they would be willing to work on it full-time. Intel integrates a “prediction market” with regular short-term forecasting processes to build more accurate and less volatile estimates of demand. The cement manufacturer Cemex optimizes loads and routes by combining complex analytics with a wireless tracking and communications network for its trucks.

The amount of information and a manager’s ability to use it have increased explosively not only for internal processes but also for the engagement of customers. The more a company knows about them, the better able it is to create offerings they want, to target them with messages that get a response, and to extract the value that an offering gives them. The holy grail of deep customer insight—more granular segmentation, low-cost experimentation, and mass customization—becomes increasingly accessible through technological innovations in data collection and processing and in manufacturing.

Examples are emerging across a wide range of industries. Amazon.com stands at the forefront of advanced customer segmentation. Its recommendation engine correlates the purchase histories of each individual customer with those of others who made similar purchases to come up with suggestions for things that he or she might buy. Although the jury is still out on the true value of recommendation engines, the techniques seem to be paying off: CleverSet, a pure-play recommendation-engine provider, claims that the 75 online retailers using the engine are averaging a 22 percent increase in revenue per visitor.² Meanwhile, toll road operators are beginning to segment drivers and charge them differential prices based on static conditions (such as time of day) and dynamic ones (traffic). Technology is also dramatically bringing down the costs of experimentation and giving creative leaders opportunities to think like scientists by constructing and analyzing alternatives. The financial-services concern Capital One conducts hundreds of experiments daily to determine the appropriate mix of products it should direct to specific customer profiles. Similarly, Harrah’s casinos mine customer data to target promotions and drive exemplary customer service.

Given the vast resources going into storing and processing information today, it’s hard to believe that we are only at an early stage in this trend. Yet we are. The quality and quantity of information available to any business will continue to grow explosively as the costs of monitoring and managing processes fall.

Leaders should get out ahead of this trend to ensure that information makes organizations more rather than less effective. Information is often power; broadening access and increasing transparency will inevitably influence organizational politics and power structures. Environments that celebrate making choices on a factual basis must beware of analysis paralysis.

Further reading:
Thomas H. Davenport and Jeanne G. Harris, Competing on Analytics: The New Science of Winning, Boston: Harvard Business School Press, 2007.
John Riedl and Joseph Konstan with Eric Vrooman, Word of Mouse: The Marketing Power of Collaborative Filtering, New York: Warner Books, 2002.
Stefan H. Thomke, Experimentation Matters: Unlocking the Potential of New Technologies for Innovation, Boston: Harvard Business School Press, 2003.
David Weinberger, Everything Is Miscellaneous: The Power of the New Digital Disorder, New York: Times Books, 2007.

8. Making businesses from information

Accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities.

Frequent contributors to what economists call market imperfections include information asymmetries and the frequent inability of decision makers to get all the relevant data about new market opportunities, potential acquisitions, pricing differences among suppliers, and other business situations. These imperfections often allow middlemen and players with more and better information to extract higher rents by aggregating and creating businesses around it. The Internet has brought greater transparency to many markets, from airline tickets to stocks, but many other sectors need similar illumination. Real estate is one of them. In a sector where agencies have thrived by keeping buyers and sellers partly in the dark, new sites have popped up to shine “a light up into the dark reaches of the supply curve,” as Rich Barton, the founder of Zillow (a portal for real-estate information), puts it. Barton, the former leader of the e-travel site Expedia, has been down this road before.

Moreover, the aggregation of data through the digitization of processes and activities may create by-products, or “exhaust data,” that companies can exploit for profit. A retailer with digital cameras to prevent shoplifting, for example, could also analyze the shopping patterns and traffic flows of customers through its stores and use these insights to improve its layout or the placement of promotional displays. It might also sell the data to its vendors so that they could use real observations of consumer behavior to reshape their merchandising approaches.

Another kind of information business plays a pure aggregation and visualization role, scouring the Web to assemble data on particular topics. Many business-to-consumer shopping sites and business-to-business product directories operate in this fashion. But that sword can cut both ways; today’s aggregators, for instance, may themselves be aggregated tomorrow. Companies relying on information-based market imperfections need to assess the impact of the new transparency levels that are continually opening up in today’s information economy.

Further reading:
Hal R. Varian, Joseph Farrell, and Carl Shapiro, The Economics of Information Technology: An Introduction (Raffaele Mattioli Lectures), New York: Cambridge University Press, 2004.
Carl Shapiro and Hal R. Varian, Information Rules: A Strategic Guide to the Network Economy, Boston: Harvard Business School Press, 1999.

Conclusion

Creative leaders can use a broad spectrum of new, technology-enabled options to craft their strategies. These trends are best seen as emerging patterns that can be applied in a wide variety of businesses. Executives should reflect on which patterns may start to reshape their markets and industries next—and on whether they have opportunities to catalyze change and shape the outcome rather than merely react to it.

About the Authors

James Manyika is a director and Kara Sprague is a consultant in McKinsey’s San Francisco office; Roger Roberts is a principal in the Silicon Valley office.

The authors wish to thank their McKinsey colleagues Jacques Bughin, Michael Chui, Tony Huie, Brad Johnson, Markus Löffler, and Suman Prasad for their substantial contributions to this article.

I invite you to visit a St Mary’s school mate’s site. I would have loved to see more Watercolors from Mauritius!

Are we in Mauritius creating enough opportunity for our artists to prove themselves and reaping income from their art whilst creating the notoriety of the country?

I am inspired by an article written by Dick Mc Cann, an australian business coach, who like the President Obama proclaims “Yes We can”. Yes, we need the optimism to move out of today’s zone of turbulence, where and every day the media keeps reminding us of the gloom. I see this very morning a very bright sunshine through my window and breathe the fresh air and look forward to a wonderful day. I rather listen to my inner voice that peps me than the news on the Radio. Yes I am making my day. I wish that the optimism with the firm belief that I have the capacity and  the will to move ahead is more spread in the Mauritian population.

Where does “Yes We can” come from?

Mc Cann writes:

The Linking Leader Model identifies six People Linking Skills, five Task Linking Skills and two Leadership Linking Skills. Successful managers need to be good at the People Linking Skills and Task Linking Skills but it’s the two Leadership Linking Skills that make the difference between a manager and a leader. Let’s look at one of them – Motivation.

For most people, individual jobs need to be connected to a larger purpose or achievement to be genuinely motivating. Motivation is all about engaging people in an endeavor that will inspire their commitment and energy consistently over a longer period and cause them to put extra effort into the challenges that lie before them. We can break down the skill of Motivation into six measurable elements:

1. Articulates a compelling vision of the team’s future

2. Focuses unwaveringly on clear goals

3. Is someone team members want to follow

4. Can make others feel optimistic about the future

5. Inspires team members to perform

6. Takes a stand on controversial issues affecting the team

Effective leaders articulate a compelling vision of the team’s future (item 1). If people are to give of their best they need to have a clear picture of what lies ahead. In addition they need to be persuaded that this vision is worth pursuing and it’s here that the linking leader has a real chance to motivate the team. Along with the vision there needs to be a set of clear goals that act as beacons to follow (item 2). A leader who focuses unwaveringly on these goals will inspire team members to give of their best. Nothing demotivates people more than when the goals are constantly changing.

To articulate a compelling vision for the team a leader must believe in the value of their aims and are willing to explain and defend them, even in the face of a challenge. A vision of this kind can’t be contrived. It is rooted in a person’s sincerely held belief about the intrinsic value of their end goal and is fired by a genuine desire to achieve it. It is this that brings the vision to life for them and others. Most commentators on the USA Presidential Elections would give Barack Obama a good rating on how he presented a compelling vision of America’s future and the voters have certainly indicated that he is someone they want to follow (item 3).

The importance of optimism (item 4) to the human race is shown by Martin Seligman’s work (Seligman, 1991) in analyzing USA political speeches using his CAVE technique – Content Analysis of Verbatim Explanations – where he analyzed the nomination acceptance speeches of candidates for the American Presidential Elections. In the 22 Presidential Elections from 1900 to 1984, Americans chose the more optimistic-sounding candidate 18 times. In all elections in which an underdog pulled off an upset, he was the more optimistic candidate. The exceptions were three elections contested by Franklin D. Roosevelt and the Humphrey-Nixon election of 1968. Roosevelt’s proven ability in a crisis and the impact of the Chicago riots at the time of Humphrey’s speech seemed to have more than negated the opposition candidate’s more optimistic speech. It seems that people want to hear about rosy futures and will support someone who helps create a sense of hope, optimism and wellbeing within an individual.

In the classic book, Pollyanna, by Eleanor Porter, we can see how someone with a focus on opportunities can affect those with a negative view of life. Pollyanna’s positive attitude helps Aunt Polly, Mrs Snow and Mr Pendleton see the world in a new light and the book is a tonic for anyone who feels at all depressed.

Pollyanna’s behavior is often described as a naïve form of optimism. She believes that things will always turn out for the best and that no matter what happens, there is always something to be glad about. There are never any obstacles, only opportunities!

Pollyanna would cope with any misfortune by playing the ‘Glad’ game. She teaches her game to several characters in the book who have a decided tendency towards seeing the obstacles. It lifts their spirits enormously and has a major effect on their lives. Pollyanna’s attitude to life has led to the coining of the psychological term known as ‘Pollyanna-ism’. Pollyanna accepts anything that happens to her by reflecting that things could always have been worse.

This noble view of the world is not always an asset in managing a business or running a country. The reality of the business and political world is often summarized, tongue-in-cheek, by Murphy’s Law, ‘If anything can go wrong, it will‘. Therefore it’s important not to sit back, accept what happens and continue to paint a rosy picture of the future. It’s essential to identify all the obstacles that might occur and have an alternative plan of action to implement, should things go wrong.

So it’s easy to say, ‘Yes we can.’ This is the compelling vision that people want to hear. But in a few years will we be able to say, ‘Yes we have,’ or will the President-Elect of the United States of America follow the path of the overwhelming majority of nation leaders whose political career ends in failure?

I have been reading Ian I Mirtroff and Gus Anagos on managing crisis which is a worthwhile reading in this current Economic crisis. I have captured some salient points which I am storing for memory.

What Is a Major Crisis?

It’s not possible to give a precise and general definition

of a crisis, just as it’s not possible to predict

with exact certainty when a crisis will occur, how it

will occur and why.

We can, however, propose a guiding definition of a

major crisis. First, a major crisis affects, or has the

potential to affect the whole of an organization. If it is

an event that will affect only a small, isolated part of

the organization, it may not be a major crisis.

A major crisis will also exact a major toll on human

lives, property, financial earnings and the reputation

and/or general health and well-being of the organization.

Often these effects occur simultaneously. As a

result, a major crisis cannot be completely contained

within the organization’s boundaries.

And some major crises, such as the one suffered

by Barron’s Bank several years ago, will actually

destroy the organization.

The Systemic Nature

of Crisis Management

A complex system involves a number of intertwined

parts working together. The separate parts of the system

cannot exist nor function in isolation from one

another. For instance, you can’t remove the heart or

lungs from a human body and have the human body

survive. Also, because systems are so tightly interconnected,

one event in one part of the system can

have system-wide effects.

These characteristics of complex systems are

reflected in modern society. We are much more interconnected

than before. The impact of one event in our

society will have much wider implications than in the

past.

For example, 60 years ago, the impact of humancaused

crises, such as a mine disaster or an explosion,

would have been limited to one particular community

or region. Today, crises can impact vast areas

of the globe in little time. A rogue trader in the Far

East, as was recently shown, can bring down one of

the oldest blue-chip banks in the world. Or a nuclear

disaster such as Chernobyl can threaten the health of

people on two continents.

As a result, crisis management must always include

the big picture. For example, ask yourself: “How can I

temper how a crisis in one area of the company will

impact the entire company?” “How can I prevent one

crisis from causing another crisis or a chain of

crises?”

The systemic nature of crisis management also

means that it must be integrated with other important

organizational programs in your company, such as

quality assurance, strategic planning, environmentalism

or issues management. Crisis management

should never be viewed as another separate, standalone

program.

Risk Analysis vs.

Crisis Management

Author Ian Mitroff strongly counsels against traditional

risk analysis for companies. The reason: Risk

analysis mainly selects crises with which the company

or the company’s industry is familiar. One of the

fundamental steps for traditional risk analysis is to

construct models of the probability of occurrence of

past crises. These models will give a higher ranking

to certain types of crises based on how likely they are

to occur. Conversely, the models give low rankings to

crises that are least likely to occur.

However, it is precisely those crises that have never

occurred before that must be anticipated. Yet, using

traditional risk analyses, companies will not prepare

for a crisis until it happens — at which point, of

course, the unprepared company can be significantly

damaged

. Four Types of Signals

Signals can be differentiated along two dimensions.

The first dimension relates to the source of the signal.

In this dimension, signals can either originate from

inside or outside the organization.

The second relates to the kind of signal. Signals

can be either technical (recorded by remote sensing

devices), or noticed by people.

If you put these two dimensions together, you have

four types of signals that apply to every company:

1. Internal technical signals, such as monitoring

devices for hazardous operations.

2. Internal people signals, for example, people

working in a plant.

3. External technical signals, such as monitoring

of plant emissions carried out by environmental

activist groups.

4. External people signals, including members of

surrounding communities who may literally “smell”

that something is wrong.

Needed: One Champion

For an organization to successfully instill a crisis

management program, it must find an organizational

champion to lead the way. This champion should be

a leader who has championed other system-wide

programs. He or she must be able to see the big picture

and make the connections between the various

parts of the organization. The champion also needs

to understand and be able to explain to top executives

how a major crisis will derail the major business

objectives of the company.

Crisis Management: An

Exercise in Creative Thinking

Crisis management requires individuals and companies

to think about the unthinkable. It is, in other words,

an exercise in creative thinking. Creative thinking is

especially important in preventing a crisis from escalating

into a worse situation..

My NLP training refers me to the ‘what if” frame….

What would you say to some entity which has been faithfully serving to you for 86 years?

Since 1924 grandfather YIPTONG gave up his activity of manufacturer of cigarettes to join in to be a distributor of British American Tobacco ( BAT). All through the years up to the present the family business is still the distributor of BAT cigarettes.

At the early start, YIPTONG distributorship was more about being a wholesales depot in the main city of Port Louis where retailers came to obtain their suppliers. Later in the early sixties with the transformation of retailing in Mauritius, BAT selected a restricted number of distributors who were assigned geographical regions to promote market and supervise the sales of their products.

Unlike many other products, cigarettes are sensitive products and cannot be handled like most other commodities. The distributors had to ensure that the storing of the stocks at the point of sales where optimum to guarantee of their conservation to freshness and contamination from damp and strong smells. The shell life of the locally produced cigarettes was limited to weeks. The role of the distributor was to ensure that stale products were tendered to the consumers and that a proper stock rotation was maintained. Systems were put in place to control the stock of each retailer and to run a just in time rotation. Credit was extended to the retailers to maximise sales.

It was a great opportunity for the family to acquire the knowledge and practice of retail distributorship. As cigarettes sales involved heavy financing and exchange of large amount of cash, the distributors also learnt the task of handling large amount of money. Most distributors, enriched with this BAT distribution experience ventured into distribution of other products.

All in all the association with BAT has been a win-win to both BAT and the distributors.