In his classic best-seller ‘The Goal’, Eliyahu M. Goldratt discusses about the three fundamental ways of making money for a going concern namely,
Increase throughput (the rate at which the system generates money through sales)
Reduce Inventory (all the money that system has invested in purchasing things which it intends to sells)
Reduce Operational expenses (all the money the system spends in order to turn inventory into throughput)
With changes happening at such a fast pace, more so in the high tech industry where change is the hygiene factor, (remember Alvin Toffler’s ‘Future Shock’ where he talks about the shattering stress and disorientation that we induce in individuals by subjecting them to too much change in too short a time), companies are increasingly finding it tough to address Goldratt’s basic principles in remaining competitive. Given the current circumstances, the high tech industry is looking at increased collaboration with suppliers, customers, freight carriers to cater to the fast paced changing needs of the market. Think of a situation 100 years ago where players in this industry started right from procuring the raw material, building the product and then selling it to the customer. Slowly the trend started in the direction where companies started partnering with external partners to handle some part of the supply chain. And right now we are in a situation where the entire manufacturing is handled by contract manufacturers and the distribution is done by third party logistics providers.
Now comes the question of does it make sense to do so? Are we not exposing our skill set to external parties who can be potential competitors? The answer is you don’t have a choice. You have to change at a pace which you cannot do alone. Secondly with the economy in such turmoil, you have to find ways of reducing your inventory and operational expenses. Why not have somebody handle the entire manufacturing so that you don’t have inventory of components in your books. And of course you have the classic cost factor. It makes perfect business sense to produce at the least cost. So we see many of the contract manufacturers setting shop in the lower cost Asia-Pacific region.
But how do the OEMs ensure that they thwart potential competition from the contract manufacturers who can move up the value chain? Well, the contract manufacturers work on a technology which is prevalent in the industry. There is no trade secret as such. For example, while the Contract Manufacturer will print the labels which are affixed on the cartons but the Label Printing rules are controlled at the OEM’s premises. And another classic way is patent it. So let people copy it and you make money out of it.
And innovation is the key. While OEMs try to stay ahead of the market through their innovative technologies, the partners work on the more established technologies. It reminds us of the era before Taylorism when it was believed that managers do the thinking while workers carry out the routine job.
To put this in a different way, Gary Hamel and Prahalad wrote about the concept of Core Competency - Those things that define what is special about an organization, what sets it apart from other organizations. High tech companies are increasingly doing that where they focus on the innovation while the other processes in the value chain are being handled by their partners. The increased emergence of Web 2.0 technologies has brought about breakthrough changes in ways of collaboration. Coming back to the Game Theory principles, it is only strategic collaborative interactions among the stakeholders in the high tech industry, which can lead to Nash equilibrium. So the mantra is ‘Collaborate or Perish!’
Please post your comments. For more insights, please contact me at Sandeep_chatterjee@infosys.com
Thursday, August 14, 2008
India-2020
In his classic book ‘India 2020: A Vision for the New Millennium’, A P J Abdul Kalam, the former President of India, remarks, “A developed India by 2020, or even earlier, is not a dream. It need not be a mere vision in the minds of many Indians. It is a mission we can all take up - and succeed.”
Quite aptly said given the fact that India has the second highest manpower in the world, a staggering 1.13 billion. With the aging population in US, the shift has already started shifting towards India which is destined to be the next economic superpower. Having said that, let us look at some of the factors and the hindrances towards this vision.
First and foremost is the huge educated workforce provided by India. India produces roughly 500,000 technical graduates, much more than US. And most of them are an English speaking workforce which has the potential to be the supply for the global work engine. Time and again concerns have been raised over the quality but the success of the Indian citizen globally has proved that it is a mere aberration. Here China is a potential competitor and hence utmost care needs to be taken regarding the quality of the input which goes into shaping these minds.
Secondly, India has a cost advantage in terms of man and machine. Common sense says that it makes perfect business sense to be the least cost producer without compromising on quality. This cost advantage may not be sustainable in the long run but slowly the shift has been towards providing quality manpower rather than cheap manpower. The likes of Infosys, Tata Consultancy Services, Wipro, Tata Motors, Tata Steel all bear testimony to the fact that India is slowly tilting towards the economic superpower status.
Thirdly is the infrastructure. It is true that we have improved in terms of roads, railways, airport, power sector reforms but a lot needs to be done here. The backbone of any superpower is its infrastructure. Taking the example of US where there is hardly any power cut and the road system is perhaps the best in the world. The building of the golden quadrangle, the potential signing of the nuclear deal will go a long way in removing the infrastructure bottlenecks.
Next is the political will. The breakthrough decision of liberalizing the Indian economy is responsible for putting India in the global map. Take the case of Infosys which had to face the initial red-tapism in selling its services to the western world. But once the bottleneck was removed, there was no stopping. And the environment should be conducive to propel the growth rate. We have moved far ahead from the 2% Hindu rate of growth but the challenge is making this growth sustainable.
So where do we see India in 2020? India will be the superpower of the world attracting foreign investment and manpower. With a huge growth potential, companies have shifted focus to India in terms of emerging markets and also making India a global hub for their markets. There will be a reverse brain drain and India will be the preferred destination for foreign workers. We have already seen such trends where in the placements in IITs and IIMs people preferred to stay back rather than work abroad. They feel that India gives them a better opportunity to hone their skill sets.
India, being the world’s largest democracy, is prone to coalition politics. But the recent vote of confidence victory of the UPA government sent strong signals that people want reforms to be continued and not derailed. According to a recent report in McKinsey Quarterly, the challenge now facing the new ruling coalition is to extend the success of their information technology (IT) and outsourcing industries into the broader economy. To that end, foreign investment and global competition must be allowed to reach more sectors, including some in which the government now plays a significant role. Although India has broadly cut import duties and increased foreign-ownership limits over the past ten years, large sections of the economy remain sheltered by high tariffs and restrictions on foreign direct investment, which amounts to just 0.7 percent of India's GDP, compared with 4.2 percent in China and 3.2 percent in Brazil. Imports total less than $70 billion--a small amount compared with China's $413 billion.
There has been a strong argument that liberalization has widened the gap between the rich and the poor. But, according to a McKinsey Quarterly report, since 1991 when liberalization began, annual gross domestic profit (GDP) growth has been twice as high as it had previously been. As a result, poverty rates have fallen by nearly a third in both rural and urban areas. The celebrated software and outsourcing industries are only the latest evidence of the effectiveness of the reforms, which have created hundreds of thousands of high-paying jobs and generated billions in export revenues.
India in 2020 will be the hot seat of all major companies. Everything will be e-enabled right from paying the water bill to ordering a cab. There will be wider roads. There will be no power cuts. There will be abundant availability of food, water and shelter for all. Foreigners will be craving for an onsite stint in India. And finally it will be a win-win for the ‘Flat World’. “We no longer discuss the future of India. We say the future is India", said quite aptly, the Indian Commerce and Industry Minister at the conference organized by the US-India Business Council in 2004.
Jai Hind!!!
Quite aptly said given the fact that India has the second highest manpower in the world, a staggering 1.13 billion. With the aging population in US, the shift has already started shifting towards India which is destined to be the next economic superpower. Having said that, let us look at some of the factors and the hindrances towards this vision.
First and foremost is the huge educated workforce provided by India. India produces roughly 500,000 technical graduates, much more than US. And most of them are an English speaking workforce which has the potential to be the supply for the global work engine. Time and again concerns have been raised over the quality but the success of the Indian citizen globally has proved that it is a mere aberration. Here China is a potential competitor and hence utmost care needs to be taken regarding the quality of the input which goes into shaping these minds.
Secondly, India has a cost advantage in terms of man and machine. Common sense says that it makes perfect business sense to be the least cost producer without compromising on quality. This cost advantage may not be sustainable in the long run but slowly the shift has been towards providing quality manpower rather than cheap manpower. The likes of Infosys, Tata Consultancy Services, Wipro, Tata Motors, Tata Steel all bear testimony to the fact that India is slowly tilting towards the economic superpower status.
Thirdly is the infrastructure. It is true that we have improved in terms of roads, railways, airport, power sector reforms but a lot needs to be done here. The backbone of any superpower is its infrastructure. Taking the example of US where there is hardly any power cut and the road system is perhaps the best in the world. The building of the golden quadrangle, the potential signing of the nuclear deal will go a long way in removing the infrastructure bottlenecks.
Next is the political will. The breakthrough decision of liberalizing the Indian economy is responsible for putting India in the global map. Take the case of Infosys which had to face the initial red-tapism in selling its services to the western world. But once the bottleneck was removed, there was no stopping. And the environment should be conducive to propel the growth rate. We have moved far ahead from the 2% Hindu rate of growth but the challenge is making this growth sustainable.
So where do we see India in 2020? India will be the superpower of the world attracting foreign investment and manpower. With a huge growth potential, companies have shifted focus to India in terms of emerging markets and also making India a global hub for their markets. There will be a reverse brain drain and India will be the preferred destination for foreign workers. We have already seen such trends where in the placements in IITs and IIMs people preferred to stay back rather than work abroad. They feel that India gives them a better opportunity to hone their skill sets.
India, being the world’s largest democracy, is prone to coalition politics. But the recent vote of confidence victory of the UPA government sent strong signals that people want reforms to be continued and not derailed. According to a recent report in McKinsey Quarterly, the challenge now facing the new ruling coalition is to extend the success of their information technology (IT) and outsourcing industries into the broader economy. To that end, foreign investment and global competition must be allowed to reach more sectors, including some in which the government now plays a significant role. Although India has broadly cut import duties and increased foreign-ownership limits over the past ten years, large sections of the economy remain sheltered by high tariffs and restrictions on foreign direct investment, which amounts to just 0.7 percent of India's GDP, compared with 4.2 percent in China and 3.2 percent in Brazil. Imports total less than $70 billion--a small amount compared with China's $413 billion.
There has been a strong argument that liberalization has widened the gap between the rich and the poor. But, according to a McKinsey Quarterly report, since 1991 when liberalization began, annual gross domestic profit (GDP) growth has been twice as high as it had previously been. As a result, poverty rates have fallen by nearly a third in both rural and urban areas. The celebrated software and outsourcing industries are only the latest evidence of the effectiveness of the reforms, which have created hundreds of thousands of high-paying jobs and generated billions in export revenues.
India in 2020 will be the hot seat of all major companies. Everything will be e-enabled right from paying the water bill to ordering a cab. There will be wider roads. There will be no power cuts. There will be abundant availability of food, water and shelter for all. Foreigners will be craving for an onsite stint in India. And finally it will be a win-win for the ‘Flat World’. “We no longer discuss the future of India. We say the future is India", said quite aptly, the Indian Commerce and Industry Minister at the conference organized by the US-India Business Council in 2004.
Jai Hind!!!
Saturday, May 17, 2008
Glass Ceiling: Does it Really Exist?
Shobha and Kamalesh, both batchmates at a reputed engineering college, were thrilled that both were selected for a multinational company. Five years down the line, Kamalesh’s growth has been faster than Shobha’s. Ask Kamalesh and the reply comes that he deserved it. Shobha blames it on glass ceiling.
As per Wikipedia, the term glass ceiling refers to situations where the advancement of a qualified person within the hierarchy of an organization is stopped at a lower level because of some form of discrimination, most commonly sexism or racism, but since the term was coined, "glass ceiling" has also come to describe the limited advancement of the deaf, blind, disabled, aged and sexual minorities. But mostly it is used as some form of gender-based workplace limitations towards the fairer sex.
Statistics say that the world is ever changing and so are the roles; however all is not same in the upper echelons of the corporate world. Globally less then 1% of women are board members, and this figures falls drastically in case of India.
But are we missing the point here? There are professions like nursing, information technology, banking where women have a big presence while in some professions like mining, forging, it is predominantly a male bastion. Psychologist Warren Farrell, Ph.D., the San Francisco-based author of such books as Why Men Earn More and The Liberated Man, has a specific take on the equation. "Women enter into those areas because they are the most fulfilling," he says. "Men don't because they feel they need to take on the responsibility of providing for the family, and the way they earn love is to earn money." That's not to say that some careers can't be lucrative, but more often than not, they are far surpassed by salaries in some fields such as finance and technology. This also does not conclude that men are good at certain professions or women are good in some others. In fact, I have seen women handling assembly lines in automobile companies and equally adept at the forging shop. In fact people also talk about reverse glass ceiling where men find it tough to succeed in women dominated professions.
Based on my personal experience, it is not lack of skill set or capability or any sort of discrimination which prevents a woman from rising to the top. Women in India, a country that prides itself on being a traditional society, still face enormous pressure to conform to social mores. More often than not, the hurdle of conforming to traditional roles within families poses as a barrier to businesswomen in India. This is one reason why men are more flexible in matters like relocation, working odd hours which do count when it comes to climbing up the social ladder. Though women have made great strides in the corporate world in the last three decades, women from all income classes are still too often discouraged by family members from having careers that infringe too much on family life.
However, in the last 30 years, things have changed drastically in India. Women of the likes of Lalita Gupte, Kalpana Morparia, Indra Nooyi, Anu Aga, Kiran Mazumdar-Shaw, Simone Tata, have quietly broken through the barriers of social conformity--both at home and in the workplace--to become successful entrepreneurs and professionals.
If we look at other professions, we now see women conductors in buses, women auto drivers, women police officers and the numbers have been increasing day by day.
To conclude, the glass ceiling is more of a result of the rules of the society rather than any kind of discrimination.
As per Wikipedia, the term glass ceiling refers to situations where the advancement of a qualified person within the hierarchy of an organization is stopped at a lower level because of some form of discrimination, most commonly sexism or racism, but since the term was coined, "glass ceiling" has also come to describe the limited advancement of the deaf, blind, disabled, aged and sexual minorities. But mostly it is used as some form of gender-based workplace limitations towards the fairer sex.
Statistics say that the world is ever changing and so are the roles; however all is not same in the upper echelons of the corporate world. Globally less then 1% of women are board members, and this figures falls drastically in case of India.
But are we missing the point here? There are professions like nursing, information technology, banking where women have a big presence while in some professions like mining, forging, it is predominantly a male bastion. Psychologist Warren Farrell, Ph.D., the San Francisco-based author of such books as Why Men Earn More and The Liberated Man, has a specific take on the equation. "Women enter into those areas because they are the most fulfilling," he says. "Men don't because they feel they need to take on the responsibility of providing for the family, and the way they earn love is to earn money." That's not to say that some careers can't be lucrative, but more often than not, they are far surpassed by salaries in some fields such as finance and technology. This also does not conclude that men are good at certain professions or women are good in some others. In fact, I have seen women handling assembly lines in automobile companies and equally adept at the forging shop. In fact people also talk about reverse glass ceiling where men find it tough to succeed in women dominated professions.
Based on my personal experience, it is not lack of skill set or capability or any sort of discrimination which prevents a woman from rising to the top. Women in India, a country that prides itself on being a traditional society, still face enormous pressure to conform to social mores. More often than not, the hurdle of conforming to traditional roles within families poses as a barrier to businesswomen in India. This is one reason why men are more flexible in matters like relocation, working odd hours which do count when it comes to climbing up the social ladder. Though women have made great strides in the corporate world in the last three decades, women from all income classes are still too often discouraged by family members from having careers that infringe too much on family life.
However, in the last 30 years, things have changed drastically in India. Women of the likes of Lalita Gupte, Kalpana Morparia, Indra Nooyi, Anu Aga, Kiran Mazumdar-Shaw, Simone Tata, have quietly broken through the barriers of social conformity--both at home and in the workplace--to become successful entrepreneurs and professionals.
If we look at other professions, we now see women conductors in buses, women auto drivers, women police officers and the numbers have been increasing day by day.
To conclude, the glass ceiling is more of a result of the rules of the society rather than any kind of discrimination.
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