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Tuesday, July 24, 2007

The Slowly Changing Global Economic Order

Throughout Asia, on the eve of the completion of ten years since the east asian currency cris, a number of people are reflecting what happened and are assessing the future posibilities . As things stand today, many developing countries have undergone an amazing economic development. Through carefully pursued policies some of them are reaping the benefits of having established a good, liberal economic order and becoming integrated in the world and the global division of labour. The endeavours of some governments and the willingness of their entrepreneurs to take risks ensured that they reap economic success.

On the long flight from Singapore to SFO over the weekend, began to chat with the co-passenger, a distinguished economist. He shared his views on what’s happening in the global economic scene – essentially encapsulating views from his institution’s recent research on patterns. We chatted on a number of things and coverged on a few themes:

A. The dominance of the west as economic super powers are clearly things of the past.
B. The truth is that many developing nations have squared off massive external debts that they hadaccumulated.
C. The foreign-exchange reserves of several emerging nations are far higher than they need to meet any contingencies. For some asian countries, the forex reserves account for over40% of GDP.
D. There was a time when hese funds used to be held as
US Dollars. Those days are simply gone. The investment strategies of nations are mostly beginning to get driven by two things: better yield and meeting strategic objectives. For example, the energy deficient nations like China and India use these in far better directed ways.
E. As can only be expected the response to the new emerging world order by the rich western nations leave things to be desired. More energy goes there towards creating protection barriers and unfriendly laws.
F. The west coupled with myriad issues ranging from demogrpahics to meeting energy needs to maintaining lifestyle of their citizens need to focus on boosting competitiveness and focus on innovation and entrepreneurship – their traditional qualities are still their best bet for maintaning and enhancing prosperity.



Saturday, July 14, 2007

The Amazing Toyota

Last week had been very hectic with little time to update the blog. On the flight to Singapore from SFO yesterday night read the current issue of HBR focussing on managing business for the long term, It’s definitely a collector’s issue. More of it later. Of all that I read there, I find this
amazing interview of Katusaki Watanabe, the President & CEO of Toyota to be amongst the best – very detailed and quite insightful. Toyota is one of my favorite business success story. It is , arguably, already the best carmaker on the planet.

HBR notes that Toyota’s penchant for measuring everything—even the noise that car doors make when they open and close as workers perform their final inspections on newly manufactured automobiles is a phenomenon known as the Toyota Way. In its 70th year since founded and in 50 years since it started exporting cars to the United States, and a decade since it launched the world’s first commercial hybrid, the Prius, it is all set to sell 9.34 million vehicles in 2007, to overtake America’s General Motors and become the world’s biggest automobile manufacturer. Toyota is also the most profitable car manufacturer: In the financial year that ended in March 2007, it made a profit of $13.7 billion, whereas GM and Ford reported losses of $1.97 billion and $12.61 billion, respectively, in 2006. In fact, Toyota’s market capitalization on May 2007 of $186.71 billion—was more than one and a half times of the combined value of GM, Ford & Dailmler Chrysler. Look at how long Toyota has come. Jagdish Seth recently pointed to how the US automobile manufacturers lended their distribution arms to the Japanese decades back thinking that these low cost automobile manufactures manufacturing small cars can never make a dent in their traditional business. Toyota’s philosophy of jojo: “slowly, gradually, and steadily” has indeed helped it win the battle.
Toyota does not embrace the principles taught in business schools globally as it believes that mindset matters more than the tools. Today their hyper growth is creating issues internally – on quality, talent to keep pace with the company’s rapid expansion and with technological change. I have pointed to Toyota’s growth pains earlier.
Toyota’s innovation & growth is phenomenal. Look at this : Toyota has added the capacity to produce 3 million automobiles over the past six years. Perhaps the only other automaker to boost production that fast, according to industry experts, was the Ford Motor Company, under Henry Ford in the early 1900s. Watanabe San talks about Toyota’s new plant in Takaoka – the fastest production line where lead times, logistics and assembly time shall be cut in half. Through process innovations and automation involving robots, the line will move 1.7 times faster than seen in any other Toyota shop around the world. Painting times stand reduced by 40%. The two lines shall throw out 16 models as against 4 or 5 models from three lines earlier..
Incremental improvements or radical reforms – what’ best for Toyota to sustain growth ? - both says Toyota. Watanabe San says that Toyota’s future will depend on its ability to strike the right balance - between the short term and the long term; between being a Japanese company and being a global company; between the manufacturing culture of Toyota City and the design culture of Los Angeles, where some of Toyota’s cars take shape; between the cautiousness of Toyota’s veterans, who are worried about growing too fast, and the confidence of its youngsters, who have seen only success.
Environment, energy, safety and evoking emotion & comfort are the key factor in Toyota’s future scheme of things. Where all this would end? Of course, in Toyota’s dream car. In Watanabe San’s dream it would be a vehicle that can make the air cleaner than it is, a vehicle that cannot injure people, a vehicle that can make people healthier the longer they drive it, a vehicle that can excite, entertain and evoke the emotions of its occupants, a vehicle that can drive around the world on just one tank of gas!!
Watanabe San’s philosophy and by extension of that of Toyota in managing for the medium and long term is indeed very interesting – some components of the strategy has clearly helped Toyota establish global leadership

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Monday, July 09, 2007

The Changing Technology Adoption Paradigm

I wrote a brief note for sandhill.com on the The Changing Enterprise Technology & Business Paradigm. When more and more focus is put on innovation, its evolution, growth and in managing innovation while looking through what conventional collaborative mechanism in fusion with powerful mechanisms like internet enabled collaboration could help achieve –all these point to a world of immense possibilities. With a dominant number of internet users poised to take a dip in the virtual world, the virtual world could become more and more real!!

The interesting part is that the consumerization of IT is creating a whole new world, all managed by a new set of rules. The impact of consumerization on enterprise and opportunities to leverage such advances are all groomed in the consumer space itself. The transition of such things into enterprise IT thereby happens automatically – in a way, advances in consumer space dictates the corresponding fallout in the enterprise space. True, but difficult to believe – right? An analysis of the past shows that in a significant number of cases the technologies that were originally focused on consumer space have made deep impact over time on the enterprise space – Personal computers, search, IM all are shining examples of this powerful trend. Native web companies keep coming out with a lot of full blown but trial offerings that entices lot many more consumers and many a times a revenue and utilization value evolves out of more and more usage of such offerings. In the process, the consumer space gets more and richer forcing successful offering(s) to be pushed into the enterprise –in larger numbers and faster pace. Corporates like Nissan, IBM, Reuters and some retailers are beginning to adopt such technologies aggressively. With an impending explosive growth of communication and broadband capabilities, the medium of virtual reality/world is sure to take a central seat. Clearly the virtual reality movement does not appear to be a fad per se but can help business create and define new frontiers in its growth path. What should the CXO’s do in such contexts: Embrace such technologies faster and in innovative ways align them to their business growth plans. Consumer technologies are not a taboo to be shunned - these need to be constantly assessed for their potential for innovative leverage in growing business. Read the full note here.

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Sunday, July 08, 2007

The Contrarian View On The US Dollar

Every country that I get into and every casual conversation invariably leads to real estate price racing ahead and a sense of a potential USD fall down further. While it is evident that a shift to other currencies is taking place so the days of the all-dominant U.S. dollar could be numbered. There are some within the US establishment who think that by bullying some nations could be forced to keep the dollar peg. I was once speaking to a central bank head – who gave this view on currency peg. Make the investments of reserves proportionate to the trading share. Singapore now reports that the proportion of trace with china has increased vis-à-vis the US. When I read this piece by Marc Faber, it makes interesting reading:

I only find one depressed and universally despised asset class: the dollar. But a dollar recovery should not be ruled out. Monetary conditions and international liquidity have tightened relatively, not because of Fed policies but because of market-induced illiquidity in the US household sector. In the past, these conditions of relative tightening have been US dollar supportive, but negative for asset markets.
What should you do? Reduce your risk exposure. Sell emerging economies' stock markets and their currencies. For the next three to six months, shift money into short-term US Treasuries.

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The New Seven Wonders Of The World

Just landed in San Francisco to see that the results are in and the New 7 Wonders of the World have been announced.

Technology played a big role in the selection of these seven wonders. Roughly 100 million votes were cast by internet and cellphone SMS. The new seven wonders of the world were announced by New7Wonders a non-profit organization. The campaign to name the new wonders of the world began in 1999 by Swiss adventurer Bernard Weber. The new seven wonders of the world were announced in Portugal by such celebrities as Bipasha Basu, Ben Kingsley,Bertrand Piccard & Hillary Swank. So which wonders made it onto the new list? Below are the new Seven Wonders of the World:

Chichén Itzá, Mexico
Christ Redeemer, Brazil
The Great Wall, China
Machu Picchu, Peru
Petra, Jordan
The Roman Colloseum, Italy
The Taj Mahal, India

It is interesting to note that some of the the candidates that were nominated but didn’t make it to the top seven included the Eiffel Tower, Syndey Opera House, Pyramids of Giza, and Statue of Liberty. For more information click here. Its interesting that 6 out of the 7 in the list happen to be in developing countries. The only exception is the Roman Colloseum in Italy. Yours truly has visited all the new 7 wonders of the world.



Thursday, July 05, 2007

Outsourcing & Offshoring: The Smart & Mature Way

With outsourcing as a given way of life, we are seeing that the offshoring phenomenon for tech work is seeing an unprecedented growth and shows propensity for more aggressive volume growth. Writing on IBM's progress on this path, the NYTimes article highlights that

the idea is to build networks for producing and delivering technology services much like the global manufacturing networks that have evolved over the last couple of decades. Look inside a computer or automobile and the parts come from all over the world. High-end technology services projects increasingly will follow that formula, combining skills from across the globe and delivered on-site or remotely over the Internet.

As I see it, clearly distributed model of development/support is working well. Ranging from lower complexity, shorter duration, utility-type projects to more strategic ones, outsourcing to countries like India (as long as internal company controls are in place) has proven to be a cost saver and in many ways a performance accelerator. It takes some time for companies to get the rhythm right and once a critical mass is reached things are in general zipping ahead. The issues of improved productivity and enhanced quality wrapped around more robust tools to manage and administer these distributed development efforts. In this evolution, it may also make sense to keep some residual work addressed closer home and this is an integral part of the sourcing framework. A customer-imposed changing of the vendor guard forcing some old school Big 6 leaders to be replaced by a newly ruling set of global industry influencers means that the industry is in the cusp of a major change and with offshoring bringing some cases, the order of fifty percent saving, through well thought out mechanisms, this space will see lot more action for sometime to come. Over a period of time the volumes of residual work onshore may also come under constant review for being offshored. The dynamism and competitiveness in this industry would mean that all stakeholders benefit uniformly.

As I wrote recently, the key thing would be to see the level of innovation and differentiable IP’s that service firms can showcase – this needs to be tied to increased productivity and reduced cost for customers. Ultimately, service players that have invested in emerging areas well ahead and in right measures, stayed close to customers, and focused on efficient execution are well positioned to capitalize on the market as it improves. Companies that will succeed in the services market going forward will be those that embrace the evolution of the software environment, collaborate closely with partners and customers, possess a strong understanding of industry-specific business processes, and have a mature and seamless global delivery capability – all these are achievable only by making right quantum of focused investments in the right direction at the right time.

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Wednesday, July 04, 2007

The World of Happiness

Different people around the world have different notions of happiness. Traditionally, religion(s) characterize happiness in different ways. Daniel Gilbert writes about the science Of happiness.Just came across an interesting report by Stefan Bergheim based on the world database of happiness.

Sorting 22 rich countries by variety
1. The happy variety: Australia, Switzerland, Canada, the UK, the US,
Denmark, Sweden, Norway and the Netherlands (Finland and New Zealand
seem to be intermediate cases)
2. The less happy variety: Germany, Spain, France, Belgium and Austria
3. The unhappy variety: Portugal, Italy and Greece
4. The Far Eastern variety: Japan and Korea

Surprises (?):
– Spain is not in the same group with Italy
– Cannot differentiate between Anglo-Saxon and Scandinavian economies
What constitutes happiness :The happy variety of capitalism -the package:
1. High degree of trust in fellow citizens
2. Low amount of corruption
3. Low unemployment
4. High level of education
5. High income
6. High employment rate of older people
7. Small shadow economy
8. Extensive economic freedom
9. Low employment protection
10.High birth rate
…and probably many more
=> All require a broad-based policy approach

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Tuesday, July 03, 2007

Oracle, SAP & Cybercrime

Just landed in Singapore and noticed that the Oracle –SAP imbroglio has taken a decisive turn. SAP admits that TN made some inappropriate downloads but claims that SAP never benefited from that. By clearly delinking TomorrowNow from that of SAP, it has created speculations about the future role of TommorowNow. The original complaint by Oracle went on to say,” SAP employees used the log-in IDs of multiple customers, combined with phony user log-in information, to gain access to Oracle’s system under false pretexts. Employing these techniques, SAP users effectively swept much of the contents of Oracle’s system onto SAP’s servers”. The charges appear pretty serious indeed. SAP’s response makes interesting reading. Oracle now
says that with SAP’s admission of inappropriateness, proved its case. Eric Goldman points to potential ramifications of this. I am not too sure of the nature of downloads and the possible usage of those. While I do not justify any illegal or unethical activity, somehow I feel that no materially significant advantage could have been accrued on account of TN’s downloads. Hopefully this does not get any more ugly.

Update : Read Larry Dignan's interesting perspective on this.

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Monday, July 02, 2007

NetSuite Files For IPO

The much awaited IPO of NetSuite is about to happen. NetSuite just filed with the SEC for an IPO. It makes an interesting reading to look at the advantages seen by customers and risk factors that could affect company performance. The company claims to have 5,300 active customers as on date.

From the SEC filings, which make interesting reading. The company sees the key advantages for it as :

- One Integrated System for Running a Business.
- Role-Based Application Functionality and Real-Time Business Intelligence.
- On-Demand Delivery Model..
- Low Total Cost of Ownership.
- Rapid Implementation..
- Ease of Customization and Configuration..

The Larry Ellison majority owned company sees the risk as under:
- we have a history of losses, and we may not achieve profitability in the near future. We experienced a net loss of $23.4 million for 2006 and $3.7 million for the three months ended March 31, 2007. As of March 31, 2007, our accumulated deficit was $193.0 million;

- because we provide a suite of on-demand applications that many of our SMB customers use to manage their critical business processes, the market for our service may develop more slowly than we expect;

- our customers are small and medium-sized businesses, which can be challenging to cost-effectively reach, acquire and retain;

- our quarterly operating results may fluctuate, and we have a limited operating history;

- we use a single data center to deliver our services. Any disruption of service at this facility could harm our business; and

- we may become liable to our customers and lose customers if we have defects or disruptions in our service or if we provide poor service.

- ou r customers are small and medium-sized businesses, which can be challenging to cost-effectively reach, acquire and retain.

- We believe that our quarterly revenue and operating results may vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful.

Its indeed interesting that Netsuite has filed for an IPO now.

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