Subba’s Serendipitous moments

April 30, 2008

A cricket question transposes to a Indian culture question

This post is not about cricket. There are too many things happening in Indian cricket on a daily basis and there are many experts out there who are more appropriate to comment.

The game of cricket apart from Bollywood is one thing that unifies India and to a large extent serves as a proxy for the changing Indian ethos. The recent slapping incident when Harbhajan Singh slapped a fellow Indian cricketer (his team mate in the national team) in the field in full view of the public raises several issues, not just related to cricket but how Indian ethos has been changing with our short lived patience, how the much prized aggression on the field is going overboard and how jingoistic we tend to become.

Questions arise and legitimately so, because the country considered Harbhajan not guilty in Australia even before the complete truth was known. As Kunal seems to imply, somehow a charge of racism against him was considered as questioning the country’s moral position on racism and hence the whole country brought it on itself to defend Harbhajan even going to the extent of unleashing vile threats when everyone knows how divided the country can be on race, religion, caste and class considerations.

Kunal also forces the “schizophrenic double standards” Indian style of thinking (that is increasingly getting manifested in many different walks of life) into the open. He cites the instance of Sreesanth being called brilliant on the morning he gets five for 40 and uncouth when he goes wicket-less for 40 from six overs.

While we were applauding the new found aggression in the Indian team and justifying them in all possible ways, we are now forced to condemn Harbhajan’s action which was nothing but just another manifestation of aggression. So, where do we draw a line? Why the double standards? I am sure that people will quote the rule books, but that would be inadequate.

Kunal Pradhan asks some very penetrating questions here.

At a time when India — the board and the media — has encouraged, embraced and celebrated these players as icons of a new, young, aggressive team, here is my question: How would they have reacted if Harbhajan had slapped a foreign player? Would the moral outrage have been replaced by justifications of extreme provocation? Would the player who now stands in shame have become a symbol of national pride who gives as good as he gets? Would there have been stories of how a peace-loving Indian who respects all other cultures can only react so viciously when pushed against the wall? Would the nation, instead of looking at his crime dispassionately, have rallied around him?

I feel that much of the event driven problem solving that goes on has one fundamental flaw– the essential question (the problem statement in this case: should aggression deserve praise and approval at all?) being considered is rarely given enough thought. Often, the larger, more profound question about whether direction (is display of aggression a sign of weakness or one of power) or desired long term effects of aggression is ignored while the temporary problem is dealt with. The neglect continues, as the same root cause recurs in different colors, until we take courage and honesty to examine the underlying cause.

While much of the post has dealt with cricket and aggression, hopefully someone will examine the changing Indian ethos caused by a sudden transient growth of Indian economy or surge in global standing.

My own view is confidence is good to have, power is potent when it is not exercised, aggression is effective when it is controlled and surge in relative positioning in the inter-connected hyper competitive world is sustained when it is done quietly and softly.

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April 29, 2008

Indian Education

Filed under: Education,India,Learning,Model — Subbaraman Iyer @ 12:12 am
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My friend and prolific blogger Atanu Dey has been shouting himself hoarse about the reforms that are needed in the Indian education system. He has written numerous posts on the subject and I only hope that he gets support.

A civilization which has Acharya devo bhava (The Teacher is GOD) as one of its basic tenets and which revered teachers and placed a high premium on education is clearly rotting.

Given my yearning for learning, I have attended several virtual learning programs including the one conducted out of Berkeley (HAAS school of business) over the video conferencing/ web. Even though I am not a student in the campus, I am amazed at the dedication of the faculty and the overall support the institution provides. When will we get even close?

The Times of India in a hard hitting piece brings the point home.

A few weeks back, one of my brightest students who, for some reason, resisted going abroad, asked me: “What is the difference between universities in the West and here?” A direct question on a subject like this can be difficult to answer.

There are visible differences determined by the funds at one’s disposal. But are there deeper ones? I tried to recall my experience as a student abroad and compared that to what my students in India go through. I zeroed in on two points.

The first concerns teaching, or rather with how teachers perceive their role and relationship with students. In our colleges and universities the proportion of teachers who prepare seriously for their classes is rather small.

Delivering a lecture is reduced to a routine, to the extent that one doesn’t think about individual classes, let alone individual students. The emphasis is on the number of lectures one delivers per week, not on their quality.

Even in cases where the quality is high because the teacher is an active scholar, interaction with students is minimal and concern for individual students and their progress is rare.

This is in sharp contrast to the treatment of students in the West. In most European and North American universities, each student is made to feel involved in the progress of the course. A lot of first-hand reading and writing is expected from everyone.

The teacher is expected to respond to each student’s writing as many times as the course calls for. Comments made on the student’s writing are not of a routine nature; rather, they convey the teacher’s incremental impression of the student’s work, including the reading done. As a student advances to higher levels, the teacher’s responsibility and involvement increases.

This is in sharp contrast to our universities where most doctoral students pine in vain for regular guidance. The teacher-student relationship here is a subset of the larger institutional ethos.

In universities, it is negative from day one when the student runs from one window to the next, completing admission chores. Regular teaching begins weeks after the academic session has officially started and remains sporadic.

Research students wait for months to receive their advisor’s comment which often turns out to be perfunctory.

Most teachers don’t care for their students’ intellectual progress or emotional well-being. The absence of kindness and concern in teachers’ behaviour is not confined to universities, as the recent spate of reports on severe corporal punishment shows.

The second major difference between universities overseas and ours concerns the condition of libraries. Why our libraries are so bad is a puzzle which cannot be explained by citing the paucity of funds alone.

I knew a librarian who was well-trained and cared for reading, but apparently did little to save his library from rapid decline. He said: “Most of our students study for marks and they can get marks without using the library”. What about teachers?

The frustrated man showed me records of books that teachers had borrowed over 10 years ago. Reminders and fines were of no avail.

The joy of browsing in a library remains alien to most of our students. Neither the syllabus nor the pedagogic relationship with teachers impels students to self-exploration.

As philosopher Mrinal Miri has pointed out, one can get through our system and do well, without coming across a single uplifting idea which can be sustained for a while. To get their entrance ticket for the examination hall, students are required to surrender their library tickets and obtain a ‘no objection certificate’.

This procedure shows how little we trust our students. We assume them to be cheats who run away with books. This attitude reflects the colonial character of our universities.

They have done little to overcome this legacy. They exist like relics of a bygone era, serving essentially as expensive babysitters for teenagers. It is a rare youngster who survives our higher education with self-esteem and a dream. Is it a surprise that such students normally want to proceed abroad to realise their dream?

Even while going abroad they face obstacles. American universities do not trust our mark sheets. They ask for a transcript freshly typed out and signed by the head of the relevant department. For this service, departments and colleges charge a bewildering variety of fees, ranging from Rs 25 to Rs 400 per copy.

The money is not all; the student must wait for days and run the stressful risk of losing the chance to go. In a recent case where the student had lost all hope of getting the transcript signed by the head of her alma mater, an authority no less than the vice-chancellor had to intervene. Mercy was finally shown but not without a farewell insult for using a short cut.

An alumnus who now resides in the US was less lucky. Her application for admission to a new course could not meet the
deadline because her old university in India failed to send a fresh transcript of the degree she had earned 15 years ago.

Should we be surprised that India did poorly in a recent ranking of the world’s 200 best universities?

I just saw another piece here which was equally heart rending. I am sure we all know someone at least remotely similar to these characters, but that doesn’t make it less tragic

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April 28, 2008

Indians are privately smart and publicly dumb

It takes courage and honesty to write a self critical book titled Games Indians Play: Why We Are the Way We Are.

Prof V Raghunathan ex faculty at IIM(A) and now with GMR Group minces no words as he brings us face to face with the typical Indian mind set. I just finished reading the book and most of his arguments resonated very well with me. In fact it addressed some of the deep questions that I have often asked about the Indian psyche.Now, having lived outside India for over 15 years though I make frequent trips to India, I have never been able to understand the “split personality” in Indian behavior. Prof Raghunathan fills that knowledge gap in a very deep penetrating way.

For people who would like a synopsis here’s his interview with India Knowledge@Wharton:

In his book Games Indians Play: Why We Are the Way We Are, V. Raghunathan writes about a farmer whose corn won top awards year after year. When a reporter asked about the secret of his success, the farmer attributed it to the fact that he shared his corn with his neighbors. Why, the reporter wondered, would the farmer want to share his seed when those neighbors also competed with him for the prize? The farmer’s reply was, “The wind picks up pollen from the ripening corn and swirls it from field to field. If my neighbors grew inferior corn, cross-pollination would steadily degrade the quality of my corn. If I am to grow good corn, I must help my neighbors do the same.”

That Indians often fail to act like this farmer is the principal theme of Raghunathan’s book. Using examples as varied as their tendency to drive through red lights to their failure to protect the environment, Raghunathan argues that Indians often act in ways that focus on winning immediate gains at the expense of long-term benefits. What makes Raghunathan’s approach unusual is that his argument isn’t a moral diatribe: He employs game theory — a branch of mathematics — and related concepts, such as the prisoner’s dilemma, to present his case.

A former professor at the Indian Institute of Management in Ahmedabad, Raghunathan in 2001 was named president of the ING Vysya Bank. He now works for the GMR Group as managing director of GMR Industries, the group’s agri-business division, and CEO of the GMR Varalakshmi Foundation. Raghunathan also teaches game theory and behavioral economics at the University of Bocconi in Italy. To relax, he repairs mechanical clocks.

India Knowledge@Wharton: Your book is titled, Games Indians Play: Why We Are the Way We Are. What are Indians like?

Raghunathan: In the first chapter of my book, I describe what I believe Indians are like by offering 12 canons of “Indian-ness.” For example, one of our traits is “low trustworthiness.” By that I mean we are most likely not to cooperate in a prisoner’s dilemma kind of situation. Privately, Indians are reasonably smart — in fact, we are as smart as anybody else — but publicly we are dumb. Our ability to understand the need for cooperation is very low. We believe that cooperation and selfishness cannot go together — which is not true. We also tend to be very fatalistic in our outlook. We give excuses such as, “What can I do alone? Everybody else is looking out for himself, so why shouldn’t I?”

India Knowledge@Wharton: What exactly is the prisoner’s dilemma, which you just mentioned? How do you use it to explain the behavior of Indian business people?

Raghunathan: The prisoner’s dilemma, which was first developed by researchers at the Rand Corporation during the 1950s, is a concept that has come to occupy a prominent place in game theory. The problem statement goes like this: Assume that you and I are co-conspirators in a crime. Each of us is selfish and coldly rational. We are being interrogated in two separate cells, and we are unable to communicate with each other. The interrogator tells you that he has enough evidence to put each of us away in the slammer for two years each. However, if you squeal on me and help him prosecute me, he will set you free immediately and imprison me for five years. He also tells you that he will make an identical offer to me (though you and I cannot communicate). If each of us betrays the other, he will put us both away for four years. Being selfish and rational, we have to respond to the offer in terms of what is in our best self-interest.

Now, here is our dilemma: Should we defect and squeal against each other, or should we cooperate and hold out against the interrogator? You may reason that if I defect, it would be in your interest to defect as well — otherwise you will be stuck in prison for five years while I go free. And if I do not defect, it is still in your interest to defect, since you will walk free immediately. So you decide to defect. I follow the same reasoning, and I defect as well. As a result, each of us ends up with four years in prison. If we were to cooperate, though, each of us would be better off because the interrogator has evidence to put each of us away for just two years. But for us to end up with that outcome, we need to recognize that the two-year punishment we will have to accept for cooperating is better for each of us than the four-year punishment we would get for defecting and ratting out each other.

Our situation is such that we believe that if we do not cooperate, we benefit more. We put ourselves in the other person’s situation: We ask, if he does not cooperate, why should I? If he cooperates, it may still be in my interest not to cooperate, because I benefit by not cooperating.

Although this may sound abstract and theoretical, this is often how Indian business people tend to think. Very often our exporters show samples that are of a high quality, but when the time comes to ship the goods, they send something inferior. This is very much like a prisoner’s dilemma situation. You may initially make money because you have gotten something for nothing, but going forward — in an iterative kind of a context — you will most probably fail. You will stop getting export orders when your customers figure out that they cannot depend on your quality. They will stop trusting you and start suspecting you. In my book, I cite the example of some Indian companies that had won orders to export powdered red peppers (or chillies) to Korea. Apparently, when the goods arrived, the Koreans discovered that the very first consignment was adulterated with red brick powder. The Koreans emptied the whole consignment in the high seas, vowing never to import this product from India. I read a similar report as recently as last year.

The prisoner’s dilemma also explains why Indian companies often fail in joint ventures. We tend to be over-argumentative and often look out for our own narrow advantage rather than trying to make the venture succeed. If you look at the way we behave in all kinds of situations — whether it involves jumping a red light or dumping our garbage in the streets — that kind of behavior can be explained by the prisoner’s dilemma. I will keep my own house clean, but the streets are not my business. Since everybody thinks the same way, the public interest suffers.

India Knowledge@Wharton: Is that what you meant when you said that Indians are “privately smart and publicly dumb?” Why is that so, and what are the consequences of this behavior?

Raghunathan: Another way of expressing this idea is that we are good lightning chess players but terrible long-term chess players. If I have to see two moves ahead, I may do just fine, but if I have to see 10 moves ahead, I may not. Public interest is like seeing 10 moves ahead, while seeking out private advantage is like seeing two moves ahead. In the prisoner’s dilemma, it is clear that in the short run, it pays you to defect. It takes you a longer period of reflection to realize that even given your selfish motive, you are likely to benefit more if you cooperate — and if each player does the same thing, both come out winners. I came to this conclusion through many other concepts of game theory that I have written about in the book. Having seen how people think in other countries and in India, I [realized] that Indians would tend to conclude in a jiffy that it is in their interest to defect and squeal against their partner. It takes longer to think through that if the partner also defects, both would be worse off. Unfortunately, Indians often don’t think that far. That is why I say we are privately smart but publicly dumb.

India Knowledge@Wharton: In taking the long-term view, what is the “tit-for-tat” strategy, and how does that apply to business situations?

Raghunathan: We tend to deal with the same people over and over again, even though we may interact with hundreds or thousands of parties over our lifetimes. If I tell myself that I will never be the first person to defect, but after that, I will do whatever the other person does, that is the “tit-for-tat” strategy.

In my book, I cite examples from the experiments that the mathematician Robert Axelrod conducted on this concept. Life is a series of interactions of the PD (prisoner’s dilemma) kind, and you deal with the same people several times. I may cooperate with you in an interaction, and you may cooperate as well. Then I go off and interact with other people, and then come back again to you. Remembering that you had cooperated in the past, I cooperate again. Essentially, I keep cooperating in every interaction until you defect. In the following interaction, I too defect, remembering our last interaction. Now it is up to you to decide whether to cooperate or not. If you cooperate, I go back to cooperating as well.

This strategy is different than that of a so-called “massive retaliator,” whose response to one act of defection is to never, ever cooperate again. The tit-for-tat strategy does not have a long memory. It is forgiving. It is a good strategy in the sense that it is never the first one to defect, but at the same time it retaliates against defectors. It makes it clear that it will not respond to defection with continued cooperation. It responds to defection with defection, and will not resume cooperation unless the other party cooperates first.

I show in the book that the tit-for-tat strategy never wins against any one individual. But in the long run, people get to know that you are a gentleman; you are never the first to defect. They know that you are forgiving, but also that they cannot take you for granted. All these are, broadly, the hallmarks of a gentleman, and so I call this the “gentleman’s strategy.”

This strategy can easily be applied to a large number of business situations. For example, consider a businessman who normally supplies materials of high quality but once in a while — one out of 10 times — he supplies sub-standard materials. In other words, he defects one time out of 10, and cooperates nine times out of 10, hoping that you will not retaliate. He is trying to gain some extra points over his interactions. Such a businessman is not using the tit-for-tat strategy; he is using a random-defect strategy. What happens with this strategy is that if one of the players he runs into is a massive retaliator, that player will stop dealing with him completely. His ability to collect any further revenues from that party will end.

However, a tit-for-tat strategist will never defect first. As a result, it becomes clear to all the players over the long run that the tit-for-tat player will never retaliate unless they did something wrong to him first. Unfortunately, in India such business people are few and far between.

India Knowledge@Wharton: In one chapter you cite the example of the TVS Group, a company in Southern India, which recognized that foregoing short-term benefits sometimes helps you gain long-term advantages.

Raghunathan: Yes — Suresh Krishna, chairman of Sundaram Fasteners, which is part of the TVS Group, told me this story about his father, T.S. Krishna. His father had told him this anecdote during the 1960s but he still remembers it.

The TVS Group, like other traders in Southern India, imported diesel engines during the 1940s. The engines were imported from London for about Rs. 1,100 ($220 at the prevailing exchange rate) and were sold in the local market at a 25% to 30% markup for about Rs. 1,400 ($280). But during the mid-1940s, supply was disrupted because of World War II, and this led to an extreme shortage of engines. Anyone who had an import license could easily sell the engines for Rs. 5,000 ($1,000) — many customers were willing to pay such prices. At one level, you could call this market pricing since the demand-supply situation was so skewed. It was a seller’s market. But, at another level, you could also view this as a defection of sorts because the sellers were exploiting the wartime shortage to force buyers to pay a higher price.

Krishna decided that the TVS Group would not follow that approach. Despite the shortage and the prevailing high prices, he insisted on charging the normal markup of 25% and kept selling engines for Rs. 1,400 throughout the war. At that time, the local business community thought he was either naïve or downright daft for missing out on the opportunity to make as much money as possible. When the war ended, however, the traders who had profiteered from the shortage went out of business one after another; today no one remembers those companies. But the TVS Group survived, and it continues to be recognized as a valuable company.

In today’s terms, we might say that TVS had better corporate governance, and its strategy paid off because it delivered long-term shareholder value. Back in 1945, though, it was just one decent man trying to do the right thing for his customers. Krishna refused to defect just because the timing was against his customers. The consequence is that even today, TVS is regarded as a name to be trusted. If the company lists its shares for sale, people subscribe to them. If products carry the TVS brand, people buy them. Krishna probably did not stop to think about the “brand value” of his behavior; still, his actions helped build the TVS brand.

India Knowledge@Wharton: Why do you think Indians are bad at regulation and self-regulation?

Raghunathan: I think self-regulation is molded by regulation. Even in the U.S., when you are driving along a highway, if you did not know that a police patrol car might unexpectedly appear behind you with lights flashing, you might be tempted to drive faster than the speed limit. If the U.S. government had not come down hard on emissions, maybe the auto industry would have not revised its production standards. I believe that self regulation is indeed affected by regulation.

In India, part of our problem is that the regulatory environment is weak. Combined with our fundamental lack of self regulation, matters tend to spin out of control very soon. As I said above, we are like lightning chess players and a little too quick to see where our immediate self-interest lies. When we think we can get away with something and the probability of getting caught is low, we tend to do whatever we want to do.

For example, consider the Companies Act, which governs disclosure of financial information by publicly listed firms. Today, if a public company does not disclose its financial statements on time, the penalty is Rs. 1,000 ($25) a day. This implies that if a company is willing to spend $9,125 on fines, it can go a whole year without making financial information available in the public domain. To me, that almost sounds like an incentive for companies not to file their annual financial statements. How can we have self-regulation when the regulations themselves are so weak? The reality is that back when these regulations were formulated, a thousand bucks a day was a lot of money. Today, you would need to charge corporations a penalty of Rs. 10 million ($250,000) a day for it to be a deterrent.

The trouble in India is that the chances or being caught are low, and the consequences of being caught are weak. As a result, we have forgotten what self regulation means. Democracy has been misinterpreted to mean the right to do whatever you want.

India Knowledge@Wharton: Why is it so hard for Indians to work in teams? Even in a team sport like cricket, one-upmanship often undermines collective performance. Does game theory offer any explanations?

Raghunathan: That is a good question, but I don’t know to what extent game theory can answer it. The only thing I would say is that it depends on how the team players resolve their own prisoner’s dilemma-type situations.

If you approach the resolution of the dilemma externally, you will never resolve the issue. By approaching it externally, I mean asking yourself, ‘If the other party defects, what should I do?’ or ‘If the other party does not defect, what should I do?’ If you ask yourself such questions, the answer at which you will arrive is that you should defect. If both parties ask themselves the same questions, they both end up defecting — and losing.

The only correct way to resolve the prisoner’s dilemma is to ask yourself, ‘What is the correct thing, deep down, for me to do?’ In other words, what is the action that if everyone were to follow it, would lead to the collective good? If you were to approach the prisoner’s dilemma that way, both accomplices would arrive at the same answer — not to squeal against the other. You need to approach the issue internally. The problem arises when you expect others to defect, so you try and pre-empt the harmful consequences by defecting yourself.

India Knowledge@Wharton: To what extent are such tendencies uniquely Indian? For example, if you have been following the horror stories about the recall of millions of toys manufactured in China, wouldn’t you think these are human traits rather than Indian ones?

Raghunathan: Absolutely. I agree completely that these are human traits. You will find them everywhere in the world. The theories I discuss in my book were not developed in India but outside, and people have been writing about and talking about them long before my book came along. But one major difference is that in other parts of the world, the tendency to defect is much lower when you play the prisoner’s dilemma type of games. In India, the tendency to defect is much higher.

Consider the example about the toys being recalled in China. It is of course true that in this one dimension Chinese manufacturers — or their subcontractors — did not pay attention to quality. But I can think of 10 other dimensions in which the Chinese have chosen cooperation with one another over defection. For example, Chinese people show enormous discipline when they work in a team. I have seen Chinese cab drivers stopping before a red light at 2:00 a.m. — no Indian taxi driver would ever do that. The number of medals they win during the Olympics shows that they have systems that work very well.

In Shanghai, in four years they built out the magnetic levitation train that connects the airport to the city. Or consider a simpler example. When I was in Shanghai, I saw a newspaper ad that addressed the citizens and said, “If you want to be residents of a world-class city, you must behave accordingly and not hang your laundry out to dry on your balcony.” When I drove around the city, I did not see a single Chinese home with washed clothes hanging on the balcony. In India, it is unthinkable that you could even make such an appeal.

So it is true that nowhere in the world are people immune to the prisoner’s dilemma. But the incidence of defection in almost every walk of life seems to be unique to India. This may seem to be a caricature, but if I am exaggerating certain features, it is because I want to draw attention to them.

India Knowledge@Wharton: Do you have any reason to hope that the way Indians are will some day become the way Indians were?

Raghunathan: I am not a spiritual person. But in doing research for this book, for the first time I read the Bhagavad-Gita [the Sanskrit text that is regarded as sacred by Hindus]. I realized that the Gita has a lot of things which help resolve the prisoner’s dilemma readily. For example, if you do your dharma [duty] towards humanity, the level of cooperation could be much higher. That is what having a good character is all about.

This gives me hope for the future. As India’s economy improves and education spreads, I hope defection will be replaced by cooperation. My question about why Indians are the way they are is a rhetorical one — it is an expression of my frustration. But my attitude towards India is like that of a parent towards a beloved child who needs correction. You don’t love that child any less; it is because of your love that you want to bring about change. I hope these ideas will encourage some introspection about how to make things better.
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April 27, 2008

State of the Business intelligence industry

Dave Hatch writes a good report on the expansion and contraction of the “BI” here.

He mentions three factors that inhibit expansion within the enterprise:

  • A lack of BI skill sets among non-technical business users

  • The inability to integrate data from all sources necessary to meet business needs

  • Poor data quality – end users do not trust the information.

I would add a few more based on my experience in Asia Pacific:

  1. Vendors tend to pitch solutions to buyers than to end users.

  2. There is often a big disconnect between IT and end users in terms of what BI applications to target. In most organizations BI tools often end up as mere reporting applications.

  3. End users often have little understanding of the analysis that they need that would enable them to do strategic planning. Barring the CFO community where the budgeting and consolidation process is often well defined, other functional areas rarely have a well considered view of the role of analytics as applicable to their functions.

  4. Many BI projects have failed to produce the necessary business outcomes and hence there is some kind of skepticism. This explains why despite BI being high on the priority list of CIOs, the actual usage has stagnated, something that you confirm.

I have long held the view that for BI to succeed, the vendor community has to invest in more awareness, education and process know how with users. Given that the BI industry has consolidated with Oracle’s acquisition of Hyperion, SAP’s acquisition of Business Objects and IBM’s acquisition of Cognos, (3 of the largest pure play BI vendors), this is unlikely to happen. These large software vendors are likely to bundle BI as part of their overall applications strategy, which could give users a standard template driven packages, but enterprises are unlikely to gain significant benefits or competitive advantage, as they have not been part of of the evolution of the analytics mind set within the organization.

David also talks of BI being delivered as a SaaS service. We evaluated its appeal, and found that a lot of standard reporting applications lend themselves to the SaaS model. The moment the analytics applications has to seek data from diverse data sources, organizations have no choice but to go for the on-premise model.

I don’t think that vendors have managed to integrate unstructured information into their BI solutions. Clearly there’s a need and there’s a market opportunity.

I just want to emphasize the fact that it is not often the problem with the BI tool set, it is the inability of end users to devise their analytics frameworks relevant to their organization that is blocking the growth of the BI industry. The vendors haven’t addressed this. They would have to establish a baseline literacy of BI tools and applications, and ensure more effective implementation, rather than merely focusing on selling standard applications.

The promise of BI is yet to be translated into actual performance. BI technology has no value unless one gains agreement from the users on how it is to be deployed, more so when unstructured data powered by people whose roles and interests vary has to be incorporated. Clearly a major rethink is required.

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Does God exist?

Filed under: Inspiration,Perspective,Stories — Subbaraman Iyer @ 9:11 pm
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A man went to a barbershop to have his hair cut and his beard trimmed.

As the barber began to work, they began to have a good conversation.

They talked about so many things and various subjects. When they
eventually touched on the subject of God, the barber said: “I don’t believe
that God exists.”

“Why do you say that?” asked the customer.

“Well, you just have to go out in the street to realize that God doesn’t exist.
Tell me, if God exists, would there be so many sick people? Would there be
abandoned children? If God existed, there would be neither suffering nor pain.
I can’t imagine loving a God who would allow all of these things.”

The customer thought for a moment, but didn’t respond because he didn’t
want to start an argument.

The barber finished his job and the customer left the shop. Just after he left
the barbershop, he saw a man in the street with long, stringy, dirty hair and
an untrimmed beard. He looked dirty and un-kept.

The customer turned back and entered the barber shop again and he said to
the barber: “You know what? Barbers do not exist.”

“How can you say that?” asked the surprised barber. “I am here, and I am a
barber. And I just worked on you!”

“No!” the customer exclaimed. “Barbers don’t exist because if they did, there
would be no people with dirty long hair and untrimmed beards, like that man
outside.”

“Ah, but barbers DO exist! What happens is, people do not come to me.”

“Exactly!”- affirmed the customer. “That’s the point! God, too, DOES exist!
What happens, is, people don’t go to Him and do not look for Him. That’s
why there’s so much pain and suffering in the world.”

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Forgiveness the sweetest form of revenge

Filed under: India,Motivation,Perspective — Subbaraman Iyer @ 6:28 pm
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The Times of India one of India’s leading dailies carries a beautiful piece on Priyanka’s meeting with Nalini which was covered here.

It logically lays out why forgiveness is perhaps the only means out to forget deep hurt and injury. It also brings out the distinction between forgiving and forgetting.

“Forgiving someone is the best way of stepping neatly out of that time zone and ensuring that they, rather than you, suffer the fall-out of the episode. When Priyanka Vadra decided to meet Nalini, co-accused in her father, Rajiv Gandhi’s murder, she didn’t go for Nalini’s sake; she went for her own peace of mind — to attempt a closure on the grief that has haunted her for years. She went not so much to forgive, but to be released of the pain that had her in its grip. With this act she released herself of the burden of the past. If her tears also released the guilt Nalini had held onto for years, then that was incidental.”

Summed up the motivation and the collateral benefit very well.

Viewed in this way, some detractors may even call the forgiveness comes from a purely selfish motive, but even if it does, it comes out from a maturity that’s really rare and a courage of conviction that’s still more rarer.

Forgiving releases one from pain. “It is far easier to forgive someone when you believe that we are all responsible for our actions and pay for the same. We can let go of feelings of vengeance when we understand that God has His own way of balancing out everything. The Law of Karma dictates that we benefit with our good actions and suffer for our bad acts.”.

On the contrary, the Indian Express columnist continues his tirade against the Gandhi-Nehru family. I have no problems if his engagement has been purely around political policy or their public life, but despite Priyanka clearly stating that it was a private visit, Mr. Sudheendra Kulkarni continues to harangue her with his innuendoes. Unlike the Congress which he accuses of playing politics with Rajiv Gandhi’s assassination, it is indeed Mr. Kulkarni who’s attempting to do so, by mixing a purely private and personal exploration with political significance.

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April 25, 2008

Management lessons from Jeff Bezos

Of the many CEOs that I hold in awe and respect Jeff Bezos is very high on the list. It is not that he has become successful and continues to remain the poster child of the Internet economy when other stars from the dot com era have either faded away or have been just one trick pony. The few things that amazes me are:

How Jeff continuously proved all the skeptics in the Wall Street and outside observers continuously wrong by being true to his vision, values and strategies.

How he managed to scale the company from selling books to groceries and everything in between and become the world’s largest E-tailer.

How he turned conventional wisdom on its head by combining and integrating 3 widely different customer value disciplines: operational excellence, customer intimacy and product leadership constantly when it is generally believed and recommended by Michael Tracy and Fred Wiersema in their book: The Discipline of Market Leaders.

How he has managed to not just radically alter business models and paradigms around retailing, but also transformed his company from a retailing firm to a high technology firm through continuous innovation.

Finally how he has turned conventional thinking on advertising, innovation and customer service on its head and created new approaches.

Well, a lot could be said of him, but I would just limit myself to some of the management nuggets that’s worth considering:

The right way to build a brand is by delivering great service.

We (Amazon.com) take those funds that might otherwise be used to shout about our service and put that into customer service.

We work hard being customer-obsessed and expressing it through innovation

Our two very strong cultural attributes are innovation and customer obsession.

Frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.

Companies get skills-focused, instead of customer-needs focused. When [companies] think about extending their business into some new area, the first question is “why should we do that—we don’t have any skills in that area.

I’ll tell people that if the stock is up 30% this month, please don’t feel you are 30% smarter. Because when the stock is down 30% a month from now, it’s not going to feel that good to feel 30% dumber.

I’ve taken plenty of criticism, but it’s always been about our stock price and never about our customer experience. After the bubble burst, I would sit down with our harshest critics, and at the end of the meeting they would say, “I’m a huge customer.” You know that when your harshest critics are among your best customers, you can’t be doing that badly.

For the full interview where he discusses his views on branding and his approach to branding see here and here.

Not many people know that amazon.com’s Web services is considered the industry benchmark. Jeff virtually invented cloud computing with his Elastic compute cloud EC2 and storage services S3 services offering giving thousands of developers a scalable infrastructure at perhaps the cheapest price on the planet. To see how he explains the offerings and the candid way he handles all the Q&A, see his lecture that he gave at MIT recently.

His latest innovation — the Kindle a e-book reader priced at $400. The sweetener is that it comes with free wireless broadband which is unprecedented in the industry so as to facilitate instant download. His vision — to have every printed book on earth available for instant download and at a price that cost less than half of what printed books would cost. Compelling and daring — the typical Amazon way. Guess, the Kindle is out to revolutionize our reading habit as much as the ipod did to listening music.

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April 24, 2008

Enterprise software –Is there a misalignment?

Filed under: Business,Perspective,Strategy — Subbaraman Iyer @ 11:53 pm
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Vinnie Mirchandani — ex Gartner and a respected blogger dislikes the fact that the tech industry spends so little in R&D and asks a rather pointed question: “If your favorite charity only contributed 10% towards needy causes, you would not spend them much the next year”

I did some analysis last year of the R&D spend and the SG&A spend of the 40 top Enterprise software companies (excluding IBM and Microsoft). This is what I found:

The industry average for SG&A: R&D spend is about 2.5:1. Here’s how it breaks up segment wise:

Annual revenues > $ 1 Billion : SG&A: R&D = 2.4: 1

Annual revenues $500 M- $ 1 Billion : SG&A: R&D = 3.2: 1

Annual revenues $250M- $ $500 million : SG&A: R&D = 3.2: 1

Annual revenues < 250 Million : SG&A: R&D = 2.7: 1

If one recognizes that even in the R&D spend, there is more development spend than research. I would suspect that the development spend is almost 60% of the R&D spend, which means that the last place one has to look for innovation is the software companies.

Vinnie makes a valid point that the start ups probably spend more on research. True, but even these start ups once they begin to scale up, have to spend more on SG&A.

Is the industry structure, with their practices inherently broken and cannot be fixed? I wonder!

My advice to CIOs would be to build their own innovation teams and do things that are relevant for their challenges rather than live in the hope that the Enterprise software world has the complete perfect solution for them.

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April 23, 2008

Why is the shift to Wave 3 going to be difficult?

I wish I could share Mr. Sudhakar’s optimism about Indian companies just operating a switch to change their mind set to becoming a thought leader from an order taker. As I responded to him (to his remarks that I have a low opinion of Indian companies) the mind set change is not easy.

I was talking to a couple of friends in the industry, when suddenly the brainwave stuck. My thesis is that there seems to be a particular “Indian mind set” just content with supplying raw material and not getting higher in the value chain. Let me elaborate with a few historical perspectives.

For centuries, India has been selling spices to the world. But do we dominate the food market? Someone packages the spices, gives it brand power and occupies the consumer’s mind share. And the market leader in that area is McCormick that has nothing to do with growing spices.

So has it been in several areas — be it textiles, silk, pharmaceuticals and now software. The pharmaceutical industry for one, have been preoccupied with supplying bulk drugs for decades and it is now that they are slowly venturing into branded drugs albeit reluctantly.Even now most pharma companies are happy to do clinical trials for MNC drug companies, or do contract research.

It is not that the spice traders, or the textile manufacturer or the pharma industry did not intuitively understand the Wave model. They did, they saw margins under pressure, they were hungry for more profits, but they were deeply stuck in their raw material or supplier mind set. I would opine that the same is being replayed in the software services space. One can argue that globalization and the newly discovered passion for success amongst Indian entrepreneurs have changed the equation, but that’s only to a point.

Here’s what I posit: Just because one does exceedingly well in a particular position in the value chain, doesn’t guarantee that one can transition to a higher level in the value chain.

Prof Yves Doz of INSEAD has an interesting framework that explains this. He defines 3 layers of business thinking — the adaptive layer, the experiential layer and the existential layer.

The adaptive layer is the layer, where it is purely supply of commodity goods, with very little value addition, and working on a cost arbitrage or sheer availability. The availability of spices and the availability of cheaper manpower for software services fall in this category.

In the experiential layer, the challenge is to step into the shoes of the customer and create valuable products and services. The classic example is of how Nissan creates a new car for the European market. I would also consider TATA’s introduction of the Nano in this category.

The existential layer is going one level deeper — stepping into the minds of the customer. An Apple or a Nike fully understands the consumer mind — and works backwards to create products or services.

Now, if all these layers can be seen as value chains, one can understand how difficult it is to make the transitions from one layer to another. I would reckon that the ability to go from one layer to another is like crossing the chasm, and simple evolutionary mechanisms would be inadequate.

I am not in any way making a value judgment of the superiority of one layer over the other; it is just that the organizational DNA that one needs to be playing in each of the layers are vastly different and people tend to underestimate the kind of effort, energy and risk as they move from one layer to another.

Prof Yves Doz’s theory is appealing, because it captures the locus of capabilities and limitations very well.

Just as an aside: Faced with a possible slowdown in the West, Infosys’ response has been a traditional Wave 2.1 approach than the Wave 3 approach which Mr. Sudhakar passionately advocates. So has TCS with its Latin America operations.

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April 22, 2008

Wave 3 companies business models for Indian companies

Mr. Sudhakar Ram in a new post has explored different business models for Wave 3 companies. While he has elaborated different options, he has fallen short of making a compelling case for each of the business models. I would also add that some of Indian IT services firms have played in these sand boxes for quite some time, though they haven’t made it their core business.

Secondly, if the Indian IT service firms have to make this transition, it is going to call for a transformational change in approach. It is not that the new business models are flawed, it is the transition that is going to be risky as it would be a roller coaster ride. Since Mr. Sudhakar has opened the dialog here are my comments:

IT Budget owners:

I don’t think the Indian IT service providers have the aspiration to occupy this space, and neither do they have the required ability and bandwidth to do so. Occupying this position needs a lot of lot of domain expertise, breadth and depth of functional knowledge and more importantly the propensity to take risks. Essentially, one has to assume the role of a trusted advisor to the CXO world and may be even to the Board. Even amongst global providers, barring a IBM, Accenture, EDS, CSC and a couple more, few would have the capabilities to stake a claim to become budget owners and take the responsibility to ensure alignment and business impact.

If outsourcing initiatives indeed fail, because of lack of ability of providing alignment and business impact (as Mr. Sudhakar seems to imply), despite the experience and abilities of an IBM or an EDS, I am wondering how would Indian IT service providers fix the problem. Let’s accept the fact that most outsourcing engagements fail, because of a culture clash, the promised cost savings not getting realized and various other conflicts that such a relationship often entails.

Software product providers:

Mr. Sudhakar is right on this one and a number of Indian companies — the likes of Wipro and HCL have been doing it for sometime. Wipro perhaps has a better track record in terms of doing 3rd party software product development right from the 1980s with their InstaPlan product ( a very successful project planning software of the 1980s). They would have easily done this for over 100 companies. This is no different from a typical “IT body shop” (only that it provides higher end engineering services). Yes, Indian companies do enjoy a cost advantage, but these days it is very easy for the overseas company to set up a development outfit in India. So essentially even in this case, it is just labor cost arbitrage, (maybe applied to a different sector), not defining a new line of business.

Software Solution Integrators:

Well, if the track record in the SAP or Oracle or for that matter any package implementation service is any indication to go by, most Indian IT service providers are just routinely satisfied just being SAP certified consultants and “loaning” out people for the major integrators or doing routine SAP implementation. I guess most large multinationals would still trust a IBM, Accenture, Bearing Point to do the higher end work in terms of consulting, process mapping, change management and leave the integration work to Indian companies. In fact, I had the opportunity to analyze the revenue and margin mix at a leading Indian IT service provider and found that over 70% of the revenues and 40% of the profits of the SAP practice team came from maintenance, support service and on-site placement. It is difficult to walk away from such a lucrative, low risk business and ask them to embrace a higher value added, potentially risky segment. In another instance, this Indian IT service provider has a large pool of SAP consultants in a particular area, have done over 50 projects, but still lack the higher end business process knowledge, expertise in change management, maturity in client engagement and related project management capabilities to take on a big consulting firm, despite its track record. They just can’t inspire the necessary confidence and are more more comfortable playing the secondary fiddle.

Platform services:

I agreee with Sudhakar here that it indeed is a very exciting area for Indian service companies. Some like WNS and IBM Daksh have been successful as they developed a complete platform for their respective verticals (travel and insurance respectively), but their ability to expand the platform or build alliances with other players and make it an industry standard has been found wanting. This has deterred other companies from going this route. In fact I would believe this (platform services) would eventually become the natural step in the growth plans for companies which has deep IT skills, domain expertise and BPO capabilities.

As I said in one of my earlier posts, moving beyond Wave 2 to Wave 3 or Wave 2.1 is a business imperative. I know a number of Indian IT services firms are grappling with this issue. Given that they have grown in a reasonable risk averse environment, I do not think they want to adopt something too radical and big, as they are aware they do not have the necessary leadership skills or management expertise to pull this through.

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