Understanding competition — the Bill Gates way

I thought that I had analyzed the levels and degrees of competition fairly comprehensively. In fact, I have used that as an organizing framework to understand competitive advantage.

Recently a friend of mine sent me an excerpts of an interview with Bill Gates when he was still the CEO of Microsoft which makes interesting reading.

Flying on the Delta Shuttle with Bill Gates 12 years ago, Richard Karlgaard– the Editor of Forbes asked Bill, “What Microsoft competitor worries you most?”

“Goldman Sachs.” Richard gave Gates a startled look. Was Microsoft about to try the investment banking business? “Software,” he said, “is an IQ business. Microsoft must win the IQ war, or we won’t have a future. I don’t worry about Lotus or IBM, because the smartest guys would rather come to work for Microsoft. Our competitors for IQ are investment banks such as Goldman Sachs and Morgan Stanley.”

Getting the brightest bulbs to work at Microsoft has always been his obsession. It’s paid off. But what about now?

The best and the brightest want to work for companies like Google and Facebook. Microsoft seems to be losing the talent war. And does that explain why Microsoft has not made any ground shifting move in recent years yielding that terrain to Google and others?

Microsoft is caught in a classic dilemma of its own making. Its major revenue and profit streams continue to be Windows and Office which needs to be defended at all costs against young new attackers. Now will the smartest guys want to work for a organization where they would have to defend legacy or want to take a crack at changing the world?

The answer is obvious.

Unless you are a Singapore government scholar who has no choice but to work in the Singapore civil service because of the scholarship bond that you sign when you are 18 years old.

Social network for Government 2.0

Government 2.0 is clearly gaining momentum. I just stumbled on a social network platform to discuss government 2.0 initatives. GovLoop is the Premier Social Network for Government 2.0 connecting over 12,500 Federal, State, Local, Academics, and Good Contractors.

This is what I call tapping the wisdom of the crowd something that I have been strongly advocating. Some prefer to call it crowdsourcing.

The U.S. Government’s dashboard — Elegant and simple

After Vivek Kundra launched the open access to U.S. government data he has now launched a new U.S. government dashboard that tracks the U.S. government spending.. This tracks government spending with charts and lists ranking the largest government contractors (Lockheed, Boeing, Northrop Grumman, etc.) and assistance recipients (Department of Healthcare Services, New York State Dept. of Health, Texas Health & Human Services Commission, etc.). Well, the site design is neat, user friendly but what took my breath away was the way the various trends that were displayed. Certainly they got inspired from gapminder.

This site has been built on Drupal– a open source content management software.

This clearly shows that the U.S. leads in transparency and even the Governments can innovate if they have the right leadership.

I strongly suggest all the Government CIOs visit the site.

Which other government will follow next?

Australia launches Gov 2.0. Will Singapore follow?

Another major country with pronounced democratic traditions and openness has set up a Government 2.0 task force. They rightly describe the opportunities that current technology provides, The current change in media behavior and habits is again seen as an opportunity not as a threat. The enthusiasm is clearly visible and the charter for the task force is clearly ambitious and could serve as an inspiration to other governments.

Many of the points made resonate strongly with me and I have written about it here and here. I only hope that Singapore also embraces this and does it soon.

I call it the inevitable path, because if people in government don’t wake up, the citizens will find some methods of forcing it to happen.

In Government spin zone

In the times we live, the quality of a first rate mind is to be able to identify spin. The only negative side effect is that in the process one gets labeled as cynical. What was once purely seen as creating an image to put a sheen on performance, has now degenerated into an orchestrated spin often to substitute performance.

The best way to do spin on a co-operating and conniving media is to use data. Since the art of spin was invented in the U.S. let’s start there:

The data dished out indicates that continuous claims for unemployment benefits dropped. The naive reader would be led to believe that job creation is happening and unemployment is declining. The reality however is that once continuous claims are made, the recipients drop out of the claims rolls. This is confirmed by my economist friend — Dr. Ananth in his column as well. So, the drop in unemployment claims has nothing to do with generating jobs. This disclaimer is not stated even in the fine print.

The US non-farm economy lost only 345,000 jobs in May though it was expected to lose 500,000. One just inflates the “expected” figures and when the real number comes it is seen as better than expected, notwithstanding the fact that even the real numbers are high.

The flurry of visits to China by important officials in the Obama administration goes beyond the apparent significance. The US Treasury Secretary’s visit and before that the U.S. Foreign Secretary’s visit reiterating their U.S. was committed to a strong U.S. dollar is laughable. This is crude spin at best.

The U.S. is the biggest debtor and China has no choice but to accumulate U.S. dollar assets and suffer erosion of value as its currency is pegged to the U.S. dollar. As long as U.S. outsources its manufacturing to China, and as long as vested interests dictate that China’s economy has to be export driven, a weak U.S. dollar serves both sides. The U.S. keeps asking China to revalue its currency is nothing but a meaningless side show. Another case of spin.

The reality is that job creation in the U.S. since 2000 has been very low, and yet to keep the economy expanding the interest rates were kept low which created the asset bubble. We saw the repercussions of the asset bubble. Despite the bubble and the meltdown, China didn’t seize the opportunity to build a domestic economy. It simply increased the export rebates and boosted manufacturing capacity. Making the shift from export driven economy (which helped China taste success) to a domestic economy is akin to making the step from a state led economy to a market led economy. The present Chinese ruling elite has chosen to postpone the inevitable.

So, to keep up with the fact that Governments are doing something and that the economy is recovering we are entering the “spin zone”. Markets have rallied sharply since March 2009 and this is often cited as saying that all the stimulus spending is working. President Obama’s stimulus may become the cause of another bubble.

However if there’s more transparency and if the governments follow the principles of Government 2.0, by sharing all data and empowering citizens, it would be hard pressed to reveal the truth and curtail the spin.

Investors like bubbles. Media, to be relevant loves them. And Governments these days are too willing to generate one. And did I say that getting firmly entrenched in the “spin zone” and expanding the zone is often the first step.

I would certainly like to hear about the other spins that the Government puts across.

Will Singapore learn the lessons from the financial crisis?

Just finished reading Daniel Gross’s book, Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation. It is available as an e-book too. It is a book that I recommend to all executives and civil servants who are responsible for developing policy and strategy because it is important to place emphasis on perception tools as much as we do for analytical tools. There are similarities between the actors in the dumb money operation and in the Singapore civil service.

Dan writes:

“The Dumb Money creed rested on four pillars: perpetually low interest rates, perpetually rising asset prices (especially for housing), borrowers of all types remaining perpetually current, and perpetually strong markets for debt. The high priests of this cult were the nation’s central bankers.

In 2007 and 2008, each of the pillars of Dumb Money began to crumble. The rules of physics still applied to finance. Interest rates, it turned out, could rise. Asset prices could, indeed, fall. Borrowers, having seen no income growth in a decade, fell behind on their debts. All of which helped cause the markets for securitizing debt and derivatives to break down”

The people who blew up the system weren’t anarchists. They were members of the club: central bankers and private-equity honchos, hedge-fund geniuses and Ph.D. economists, CEOs and investment bankers. And the (overwhelmingly legal) con they perpetuated on themselves, their colleagues, their shareholders and creditors, and, ultimately, on us taxpayers makes Madoff’s sins look like child’s play.”

Looking back, the investors who believed the stories told by Madoff and Stanford—that they could deliver steady, positive, market-beating returns in any type of climate, despite the manifest failure of virtually every other money manager to do so—were obviously foolish. But our best financial minds also spun tales and theories with great assurance, making seemingly irrational and unprecedented activity seem completely sensible. And we bought them.”

So, Why do the best and brightest get it so wrong? One easy way to explain it is here.

The arrogance of power. Combine that with great wealth, quick progress, a group think syndrome, limited thinking style and big responsibility at a relatively immature age and you have a potent mix. It invariably leads to hubris. Hubris was typically responsible for the downfall of heroes in Greek tragedy.

In addition, people in positions of great power and/or wealth will often interact primarily with people like them, both at work and in their social life, most of whom share a similar world view. They start believing that they are the only ones who understand what is going on and what needs to be done. Everyone who disagrees with them is just plain wrong or worse downright stupid. When problems occur, they tend to circle the wagons and become even more isolated.

Now Singapore’s civil servants are intelligent people, but they have become ensconced in their ivory towers. There is too much group think and there is rarely a marketplace where ideas compete. Most Ministers and civil servants come from the same elitist institutions and often have a tendency to very much function like a club. I do not know how much debate happens during the cabinet meetings, but after observing Parliament proceedings closely I have rarely seen a good debate or alternate viewpoints being pursued.

More importantly, having seen civil servants and executives in Ministries and statutory boards interact, the “group think” syndrome just continues to strengthen because they don’t want to be left out of the club. Worse, any alternate view is interpreted as a challenge to the authority, not just to a point of view. Has kowtowing the superior become the SOP (standard operating procedure) or is it a “survive and grow” strategy or worse the natural default behavior? With so many Minsters and civil servants coming from the military side, I would not be surprised if compliance fetches a better premium than creativity.

The Singapore media has never had a track record of triggering new ideas or debating current ideas. It has always served to propagate official thinking and giving it a spin.

Now, can the top honcho always get it correct? And what’s the risk of his reading the situation wrong or coming up with the sub-optimal solution? I shudder to think.

If the financial crisis has one thing to teach the Singapore government and civil service, it is that systemic failures of massive proportions are possible. And the best and the brightest (in Singapore they are judged when they are 18 years old based predominantly by their school leaving scores) with their group think cannot be the fountainhead of wisdom.

Wisdom and government dominance have been strange bedfellows. And incompatible too.

What ails Singapore entrepreneurs?

I am not talking about the entrepreneur who sells red bun and starts yet another coffee shop. I am talking about technology entrepreneurs who create products, services, generate jobs and stimulate growth.

Singapore is probably the only country in the planet which has a Ministry of Entrepreneurship staffed by eminent and scholar Ministers. The first to head the Ministry in 2003 was Raymond Lim a Rhodes and a Colombo Plan scholar. Subsequently it was headed by Dr. Vivian Balakrishnan for a very short time before Lee Yi Shyan took over.

Despite such scholar Ministers, Singapore has had limited success as entrepreneurs and very less of technology and new media entrepreneurs. The Government has put in all kinds of incentives and generous funding.

My own assessment after having done some serious thinking is as follows:

• Few angel investors or Series A investors

• Start ups don’t collaborate and create partnership networks themselves

• Start ups don’t think global – they depend too much on the local market

• Big Singapore companies are not encouraging about start ups

• Start ups build business the traditional way – Not disrupting anyone

• They try to copy other successes blindly

• Clearly no game changing ambition

• Less idealistic, hence do not get the new business models.

• Excessive focus on making money quickly – No big picture or long term picture in mind

• Focus on sales, not on a compelling value proposition

• Start ups don’t even do simple, free marketing – blogs, viral marketing etc.

James Chan has some interesting observations and I would agree with all of them.

Does anyone have anything to add to this?

Isn’t is a paradox that we were once a nation of entrepreneurs? Our forefathers from China and India arrived here without any support with barely to survive and set up businesses. Even today the Chinese and Indians have successfully set up businesses not just in their own countries, but all over the world.

Where and how have we lost the spirit?

Why do smart people do stupid things?

This has always been intriguing. I always thought that it was perhaps the smart people do things on the spur of the moment. Courtesy my friend Shekhar Gupta, I understood that intelligence and rationality are different. Once one understand this concept, it is easy to understand why smart people can do stupid things.

Think of the mind as having 3 parts:

Autonomous mind that engages in problematic cognitive shortcuts or “Type-1″ processing. The mind jumps to the first available solution automatically and without any conscious control.

Algorithmic mind that engages in Type -2 processing — the slow laborious thinking, often leading to analysis paralysis.

Reflective mind that decides when to make do with the judgments of the autonomous mind and when to call the algorithmic mind.

The reflective mind determines how rational a person is. When and how one’s reflective mind springs into action is determined by a number of behavioral attributes including whether one is dogmatic, flexible, open minded and so so. Most importantly it also depends on whether one has fixed mindset or a growth mindset.

An inflexible mindset or a fixed mindset person has trouble assimilating new information and hence invariably ends up force fitting the problem to the solution that he has in his head. And then even though he is smart, he is lazy to find a better solution.

This article provides a succinct analysis. For a thought provoking analysis I strongly recommend reading Carol Dweck’s book. It is bound to influence any thinker. For a very entertaining yet thought provoking book that can significantly change your perspective, I recommend reading Dan Ariely’s book — Predictably irrational.

Have you known of any smart thinkers doing stupid things?

Government 2.0 — Empowering the people at the Malaysia NICT

I was an invited speaker at the Malaysia National ICT conference at Putrajaya, organized by MDEC between 9-11 June 2009. I was pretty impressed with the scale, size and involvement of everyone concerned.

My presentation slides can be viewed/downloaded here. My special thanks to Zern Liew, who really helped me with some of the visuals. He is a fantastic visual thinker and we tuned in well with each other.

I was also on the panel discussion moderated by Roslan Bakri Zarkaria of MDEC. He was energetic and mingled with the audience and thus kept the tempo high. I was equally impressed with the fellow panelists James Smith of futuregov who talked about teh research project on the perceptions, initiaties of Gov 2.0 in different parts of Asia. The other speaker Ashran spoke about Open Innovation which is increasingly gaining currency and it was wrapped up by Ashraf of Consoci talking about specific Malaysian initiatives.

I was equally impressed by Devan’s attempt of explaining the mash-ups where he talked about possible applications integrating the data on parks and incidence of dengue fever. He brought about the possibility so well that I hope the Government CIOs were listening. Just reinforced my point about data.gov which I mentioned in my talk. I was equally impressed with Joel Neoh of Youth Asia where he shared research data about the Malaysian youth expectations from the Government. Clearly it seems to me that the Malaysian youth is not apathetic to the workings of the Government. I wonder what would be the results if the survey was done in Singapore.

I got the impression that the MDEC is doing its best to seed initiatives and support efforts to usher in Web 2.0 models into the government. It is tough ushering in change; more so in a government set up. Malaysia has always taken a cautious approach towards deploying new technology or even making social interventions due to the nature of businesses there and the kind of social structure. It would be interesting to see how they are able to bring in openness, a culture of sharing and a more transparent pubic-private partnership.

One thing about Malaysians that has always impressed me is the quality of talent amongst the entrepreneurs and their strong commitment to Malaysia. Surprisingly most of them do not have a global vision and are content to stay within Malaysia. Given the opportunities that Malaysia itself provides, it is easy to understand.

But in this hyper-competitive and inter-connected world, is it a smart thing to be a walled garden?

While I was at the airport I bumped into a friend and he asked me a profound question: His question was: Isn’t an empowered people a threat to the government itself in Asia ? The perfect answer still eludes me.

Can Singapore do the makeover?

Many people have realized that the Singapore model of attracting MNCs to locate their operations here and use that as the base for expansion has run its course. The markets in China and India are big, complex and growing and cannot be run out of Singapore. Every MNC that I have known has a China strategy, a India strategy and most of the operations (factories, R&D centers, support centers) are all located there.

If that is reality why does sections in the civil services in Singapore and even politicians sing the old tune of attracting MNCs to Singapore? And in desperate attempt to get MNCs to start operations here and create jobs, they offer lots of incentives. Once the incentives have run their course, the MNCs pack their bags and go elsewhere.

Rob McDonald the incumbent CEO of Proctor and Gamble who is also on the IAC of the EDB has some clear homilies to offer. One, he is absolutely right when he says that the single minded pursuit of foreign investment (sometimes at the cost of local industry development) has ceased to be a winning proposition for growth. Labour costs have gone up and so has the cos tof doing business. Moreover other countries have become equally attractive.

Singapore’s R&D sector despite Government pumping in billions of dollars have not borne fruit. Though it is early to make conclusive judgment, trends seems to indicate that we have a long way to go. It is as easy to set up a R&D centre in Shanghai or Bangalore and may be more effective, given the availability of talent and cost. Mr. Ngiam’s article here also reinforces the view.

Singapore needs an urgent makeover. One key aspect is to reduce its dependence on MNCs, support more local companies, reduce the role of the GLCs and reduce business costs. It is not that Singapore doesn’t pursue initiatives here, but it has a strong preference for MNC courting.

What is interesting is that for the first time, the Straits Times actually carried the candid views of the International Advisory Committee of the EDB. Normally you see PR speak, but this time some truths and homilies have also come about.

Guess, things are changing.