Geniuses at Google

The next few posts relate to IPL 2010. It might look a little dated now, but please remember that I had first written in on April 1 2010 when the IPL was actually taking place –

Google have a very good policy. Do not interfere with what user wants to do. In fact, it was the only site which relied on getting users OFF their site to become successful. All other websites are designed to make you stay at their page as long as possible.

 

Even with “get users OFF” policy google is successful because it managed to find a way to make money while getting people off their site using google adwords. Google Adwords are the ads you see on the right hand side of the page when you do a search like “Memory profile .NET”. When you click on one of the ads on the right hand side, google makes money.

 

All this was fine, but my respect for the people in google increased with the start of IPL 3 cricket tournament this year. Let me explain…

 

In 2006, google spent 1.65 billion dollars to buy YouTube. I was always wondering how they would make money out of such an offering. People are used to watching free videos, so converting to paid service would just kill the site. Keyword based search that they had would not work, because the kind of users who search on google are different from the ones who search for a video. ex: When I search for “.NET memory profiler ” its most likely that I want to download a trial version of the product and maybe buy it. Hence advertisers will queue up for such a keyword. However, when I search for “Yuvraj Singh’s 6 sixes” on you tube, I am not looking to buy anything. I just want to while away some time. Hence not many advertisers would want to advertise in you tube.Google needed a different way of earning money from their 1.65billion$ investment.

 

All that has changed with IPL 2010. Google struck a deal with BCCI to stream the match live on you tube.  Google was free to sign up their own advertisers for these matches. Currently Hero Honda and most other TV advertisers are also advertising on You tube. The revenues would be shared between Google and IPL(BCCI).

 

With this move, computer is suddenly challenging the reign of TVs over live events.I believe TV rights deal sizes would slowly start reducing and internet telecast rights would become costlier in the future.

 

If I owned sites like cricinfo.com, I would be very concerned about my company’s survival. These sites would give textual updates on what is happening in the match. The company does not have to pay anything to BCCI to do this. SO, their expenses was not much. However with the streaming of live content, these kinds of sites would lose eyeballs to YouTube.

 

Only way to compete is to bid for the rights next year, which would mean higher costs for the company. I believe this is a perfect example of disruptive technology invading and destroying an existing company.

 

Currently not many people have broadband capability to watch IPL on YouTube. So, the market is small…most of the people will still go to sites like cricinfo to get match details. But soon, with improvement in broadband’s penetration and speeds, most people would be shifting to YouTube like service.

 

If you were the owner of cricinfo kind of site, what would you do to counter YouTube?

 

10 faces of innovation

 The author of the book 10 faces of innovation is Tom Kelley. He is the co-founder of an innovation company called IDEO. These guys are hired as consultants to generate ideas at their client companies, so they know a trick or two about innovation. He says for innovation to occur in a company, the team formed should contain people who exhibit 10 different characteristics. It does not mean that there should be 10 people in the team.Each person in the team is expected to exhibit more than one characteristic. The 10 characteristics which he calls as faces are –

 1) Anthropologist – An anthropologist is a person who has a keen eye on the problems faced by people. These people are the ones who maintain bug lists and fix lists. They are extremely good at finding solutions to problems.So, basically, these guys are the ones who come up with new ideas.

2) Experimenter – He enjoys looking at possible scenarios of a problem and creates initial analysis of whether an idea is tangible. Usually this guy is immersed in creating some POCs.

3) Cross Pollinator – He has the ability to connect two seemingly unrelated items. Cross pollinator has an enormous appetite for learning new things. He is the person who connects a bubble gum with a leaky water pipe and comes up with an idea of M-seal product.

4) Hurdler – He is a quiet optimist who knows how to side-step organizational issues to keep moving the idea forward. A hurdler is a tireless problem(non-technical) solver whose key asset is perseverance

5) Collaborator – Helps in solving cross-functional problems. If an idea involves contributions from multiple teams, a collaborator is a must. A collaborator coaxes people from different disciplines to share the ideas and make things work. This role can be played most effectively by managers and bosses in general.

 6) Director – Has the big picture in mind and “directs” the team in a certain direction. A director is responsible for creating a team that works on any innovation. 

 7) Experience Architect – Is responsible for creating the product in such a way that it delights the user every time he uses it. A good example is how you felt when you operated iPod or iPhone for the first time. It is an experience no one will forget. Clearly,Apple have good experience architects.

 8) Set designer – He is supposed to set up a work environment for the team to work on. I really do not think it is applicable in most companies. But the role of the set designer is to ensure that the team is sitting close to each other and that they have enough privacy yet is easy to collaborate with others.

9) Care giver – Every idea goes through highs and lows. The care giver has the rare ability to motivate people through the lows. The caregiver cares a lot about the idea and nurses the idea back to highs. Caregiver is similar to a nurse when the idea is hospitalised.

10) Story Teller – A story-teller is passionate about the idea.He has good communication skills and is able to convince people to invest in the idea. it is like a script writer trying to explain the story he has written to the director and producer. The script writer explains the story in such a way that the director will say, yes, I will make the movie!!

However, if you want to create a team that contains all the faces, how do you create it? How do you know which ones are story tellers and which ones are anthropologists? For this, one of my colleagues( Judith Mills for those of you in CDC Software) proposed a game. In this game everyone is given the 10 faces and each person is supposed to select the 3 faces they believe they exhibit. Then they need to write down these faces in 3 separate sheets of paper. The organiser of this game then collects all the sheets from all the people, mixes them up and returns 3 sheets of paper per person.

Now, the participants each have to look at the faces they received and try to find the person who they believe exhibits the innovation face. They then give this sheet to that person. The trick here is that the other person has to take the sheet that other person has offered. At the end of 5 or 10 minutes some people will end up with lots of anthropologist while some others end up with lots of script writer etc.

I found the game very interesting  to find out if others perceive you as you imagined yourself to be. i.e is your strength really your strength? Do others feel you are strong at something which you never thought?

How does your company create teams to do special projects? Please do comment.

Disruptive Innovation

One of the most interesting books I have read is Innovator’s dilemma written by Clayton Christensen. He starts out by asking few rather simple questions. Why do seemingly profitable companies collapse and die? Most people including me assumed that it is because of gross mismanagement of the company resources. But the author disproves this theory by giving examples of companies that were thought to be really well-managed but later on became bankrupt. One such example is Wang computers. They used to make mini-computers with annual revenues of 3 billion dollars!!

 

The author heightened my interest in the book by saying all the assumptions are wrong. He says the companies fail because they listen to their customers!!

 

According to the author, there are two kinds of innovations, sustaining innovations and disruptive innovation.

 

Sustaining innovations

 

These kinds of innovations usually have the following characteristics –

1) It will improve performance of existing products

2) usually more complex technology is used than existing product

3) Usually targets higher end of existing market.

4) Profit margins are better than existing product.(Moves up the company in value chain)

5) Usually adds on to an existing technology or product.

 

Examples of sustaining technology innovations are –

1) The CD- ROM drives – We had 16X, 32X, 48X and now finally 52 X speed readers.

2)The current hard disks – we started from 40MB ( during 286, 386 machines) to 500 GB or maybe even 1 TB size now.

 

For these kinds of innovations, listening to customers is a good thing.Also, being first company to introduce the “new & improved” product does not provide much advantage in these cases.

 

Disruptive Innovation

 

These innovations have the following characteristics

1)Usually will have lower performance than existing products

2)Usually these products will be simpler and have fewer features than existing products

3)Targets low-end of the existing market

4) Profit margins are lower than existing products in the market.

5) usually costlier initially, but cheaper to run in the long run.

6) Usually replaces an existing technology and product completely.

 

Examples of disruptive innovations given in the book are

1) Smaller hard disks

2) Digital camera vs. analog camera

3) Mini-computers to desktops

 

These kinds of innovations are so radical that customers cannot think of it and cannot provide a proper feedback. In these cases the “first mover” advantage is huge.

 

When desktop computers first came into the picture they were not very powerful and could not do the things that mini-computers could do. Hence, when Wang computers created a desktop and asked their customers if they would be interested, the customers refused to pay for a higher cost product with very low performance.  But the customers failed to appreciate the desktop’s main advantage – smaller size. Soon, IBM desktops hit the market and as their performance increased, it made mini-computers redundant. Wang, who relied on mini-computers went bankrupt.

 

I feel digital camera is a good example to explain what happens in case of disruptive technology change. When digital cameras first came, they were very low-end  but extremely costly. The professionals stuck to analog cameras. But slowly, over the years the quality of photos of digital camera improved while the costs declined. Till a few years back, the quality was still not up to the mark for professionals, but became good enough for the masses and digital camera which was introduced as low-end became the main product for the masses.Now, the quality has become good enough for even professionals with digital SLR cameras coming into the market. The future of Kodak and Konica are bleak even though they have released their own versions of digital cameras, they have lost the first mover advantage.

 

 

Obviously, a disruptive innovation is very dangerous to existing companies. Hence, it is important to identify such innovations and take measures to tackle it. The author says it is very difficult for existing company which is fed on high margins of profitability to promote or find markets to a low-end product. Hence, the author says the most successful way to tackle a disruptive innovation is to start a new subsidiary and have different standards of profitability and market share.

 

Let me apply this knowledge to software industry. Currently, the buzz is around cloud computing. So, is it a disruptive technology? 

Lets take the characteristics of disruptive innovation and see if it passes the test

 

Usually Lower performance than existing products	Cloud software would be slower because of network. So YES.
Simpler than existing products	usually not. But I am sure there are complex systems that cannot yet be implemented on cloud platform. So, in a way YES.
Targets low-end of the market	YES. It is meant for companies who cannot set up their own infrastructure.
Profit margins are lower	I believe YES.
Cheaper to run in the long run	NO. Since it is subscription based, it will be costlier to run

 

The last point really makes me wonder if it is a disruptive technology. A disruptive technology will also improve the performance of its product faster than market demands so that one day it is acceptable to the mass market. In case of cloud, the internet must become faster which it will. But another drawback is security issues which cannot ever be made acceptable to mid or high-end market. I believe as long as a system is connected to the internet no high-security information can be present there. The number of brilliant hackers in the world are far too many in the world.

 

I will make a prediction that cloud computing will not be disruptive, but it will carve a niche for itself. SO, we do need to invest in it, but we need not create a subsidiary for it.

 

A more perfect example of disruptive innovation is an electric car. Clearly, car companies that rely on petrol and diesel will be extinct in the future as the world oil reserves come down. Let us put electric car through the “disruptive” identifier –

Lower performance than existing product	Yes, Reva car has a range of 60 KMS with a top speed of 50km/hr
Simpler than existing products	Electric motor is extremely reliable as there are very few moving parts. So YES.
Targets low-end of the market	Yes. currently there are no luxury or sports electric cars
Profit margins are lower	Maybe. Not sure
Cheaper to run in the long run	YES. Electricity is cheaper than petrol/diesel.

 

Electric cars will also completely replace petrol/diesel cars in the future.

 

So,my prediction is that in future all of us will be driving electric cars but all our software will not be on the cloud.

Personal MBA

My love for business books started when I was in my previous company Perot Systems( Now Dell). The library there was huge and I had absolutely no work to do :-). I took up one book by random and it turned out to be “Only the paranoid survive” by Andy Grove. I assumed that such books would be boring, but to my surprise I was reading this book well past midnight on several occasions.

 

This got me thinking… are all business books interesting? I started searching for books to read once I finished the first book.  When I searched on the net, I came across an interesting concept, a concept of a Personal MBA.

 

The creator of personal MBA Josh Kaufman has a theory. Instead of spending lots of money on a MBA course, it should be more profitable to read a select set of business book and get similar knowledge. He acknowledges that reading these books is not enough. That we need to try to apply any leaning in our daily work life. And a personal MBA will not get you a consulting job in a bank. He just says it provides enough information to have an intelligent conversation with a person who has done a formal MBA.

 

He had created an initial set of 42 books which I revered as THE books to read. However, when I got through about 4 of them, Josh changed the list and only 2 of the books I read were still in the list. This broke my heart, but also led me to believe that the list of books he is giving might be influenced by the amount of money he is making. (This guy sells the books in his recommended list through amazon)

 

So, now, I  just occasionally visit the site to see which new books are present. This however does not decide which books I buy. I just visit the nearest crossword or landmark and buy the books I like. Sure, some of the books I have read were terrible(ex: The HP way) but I still learned something about HP.

 

So, I have a list of books I have read in the “Books I have read” page. I have marked some of the books as “recommended”. I would consider these books as the books to read for your Personal MBA.

 

For people interested in the original personal MBA – the site is http://personalmba.com/ It’s really worth going through what he says at least once.

Built to Last

 Till now I was explaining one term or concept which I learnt from reading a particular book. Now that I have run out of terms or concepts to explain, I will turn to summarizing the books I have read. When I read these books, I knew I was learning something new and after all these years I still remember that I enjoyed reading the book and that it was very interesting. What I have forgotten is what exactly I learnt from the book!!! I had to check  one or two sites and see what was in the book and things came rushing back. So, here is my summary of Built to Last book by Jim Collins.

 

This book describes the research done by Jim on various companies. He observed that some companies managed to stay at the or near the top for more than 50 years while other companies seem to rise to the top for a few years and then fall into oblivion. He then analysed what was common in the companies that remained at the top. Some of the companies he selected are – 3M, Johnson&Johnson, Merck, Wal-Mart,IBM, Philip Morris etc.

The common characteristics he found are –

 

Clock Building Vs. Time Telling

 

The Built to last companies seemed to do well irrespective of who is CEO. Some of the companies like 3M and Merck have histories of over 100 years and yet are at top. He says this is because of process of clock building. “Built to Last” companies have leaders who teach the management how to build clocks so that they can tell the time on their own, while leaders in other companies want to be stars. Hence they tell the time but do not teach others how to tell the time. So, once the star CEO steps down, the company no longer does well.

An example of time teller in my opinion is Steve Jobs of Apple. I truly belive the company is doomed once he exits. Why do I say that? The management threw him out in 1990s and the company declined. They brought him back and he has produced hits like ipod and iphone. He was on medical leave for a few months the company releases a product like iPad. Yes,I am predicting it to be a failure… I think Steve jobs hasn’t taught the management how to “tell the time”.

 

Do not look for profits in everything

 

The author gives the example of Merck which distributed medicine for some disease in Africa free of cost in 1920s because people of africa could not afford the cost. Similarly, they provided medicine to Japanese after the world war II at cost price since the country was devastated by nukes.

 

These actions caused a lot of loss to the company in the short run, but it built up enormous amount of good will amongst japanese and Africans. The result is that they are the number 1 company in the very rich and profitable market of Japan now.

 

BHAG

 

Big Hairy Audacious Goals. Every company should have one to drive the people, make them passionate about the work they do.  Ratan Tata had one – A car for every indian family.

 

The BHAG clearly galvanised the tata engineers to excel in every aspect of car design to result in a beautiful creation called Nano.  I am sure that if Ratan had just said I want a car that costs less than 2lakhs, we would have got a far worser product. 

 

Does your company have a BHAG?

 

The author says BHAGs should be something the company has never done before, but it should not be such that the company can never achieve it. It’s something like the stretch goals, but which ignites the passion in the employees.

The author says, once the BHAG is achieved, the leadership should look for a new one.

 

Strong Cultures 

 

Every Built to Last company had very strong sense of company culture. He also explains a culture is built on stories( it might have been a different book…not sure). Once, Packard of HP found the room where lab equipment are kept locked. The story says that he was so furious that he got a hammer and broke open the lock. He wanted to convey that any engineer in HP should have all the equipment available to him even if he comes up with an idea in the middle of the night.

 

Innovation

 

No company can survive for 100 years without innovating. 3M is an excellent example of a company that surprises people with their new products every year. In fact our office would have been a far worser place had it not been for their post-it notes and cellophane tape. How is it that the company manages to innovate so well?

 

It is because the management has innovation in their performance criteria. They have a rule that 20% of their revenues must come from products that was invented in the last 5 years. This might not sound like much for us, but remember that it is a 100 years company and their revenues are in billions because of hits like cellophane tape. In fact I read in an article in business today last week that they have upped the target to 30% recently since most of the management was hitting their target of 20% easily… 

3M products that I have noticed –

• cellophane tape
• post-it notes
• The new fangled reflectors on the concrete dividers on Bangalore roads!!
•  My car’s sun film
• The mat in UB city’s 2nd floor. i.e the ones near the doorway to go to fountain and food court.
• Scotch Brite!!
• Used to see their 3.5 inch floppy disks…

They are everywhere… Do let me know if you find any 3M product that is not mentioned above.

There were other points as well like home-grown management which I don’t remember too clearly.

Do you think your company is built to last?

Note: – I am going to edit this post if iPad becomes a hit.There will be no trace of my wrong prediction…However if I am right, I will become a management “guru” and TV channels will approach me for interviews whenever a new product is launched….Muhahahaha

Demographic Dividend

Remember the title. You are going to hear this term a lot in the future. Especially when people are talking about India and its economic growth.

 

Demographic dividend is the rise in the rate of economic growth of a country because of rising number of working people. That is,the economic growth that occurs when there are more people in the working age ( 20 to 60) than non-working (i.e dependants).

 

I came across this term in Nandan Nilekani’s Imagining India. I recommend this book even though it does not fit into business books category.You would be amazed at his level of knowledge about India and wonder how he managed to run infosys as well as do research for this book.

 

Every country has a limited window of time in which the possibility of reaping demographic dividend occurs. US and other developed countries of Europe had this opportunity right after world-war II. Many couples had put-off starting the family because of the war. As soon as the war ended lots of families were started at the same time. When these babies grew up and started working the countries grew at phenomenal rates to become “developed” countries. This generation was called “Baby Boomer” generation.

 

The main ingredient is that the large number of people in working age should actually get some work. If unemployment rises during this critical time, the country will fail to reap the dividend and remain a “developing” nation.

 

In earlier times, a country with a large population was considered to be destined to be poor. This was because there were not many knowledge industries and over population was thought to be a burden on the natural resources of a country.However, this view has changed considerably in recent years with development of lot of knowledge based industries and population is now considered an asset. 

 

China started “One Child” policy when people still considered population as a burden. This policy artificially accentuated the demographic dividend. i.e suddenly all the working people had less number of dependants. Hence their growth rates are in double digits. But when this single child reaches the working age, suddenly they have more dependants( 2 parents and one child). This is becoming serious problem for China and are actively thinking of abolishing the rule. One side-effect of the rule is that the kids there are very very pampered. The people there are facing something called 4-2-1 problem. i.e 4 grandparents, 2 parents and one child. Can you imagine? Forget brother or sisters, the kids in China do not have cousins, uncles or aunts. They are the sole focus of attention of 4 grandparents!! But I still think growing up would be less fun without cousins, aunts and uncles.Anyway, I digress… Because of this policy China will stop having the dividend in about 5 to 10 years time.

 

However, in India, we don’t have any such problems thanks mainly to Sanjay Gandhi. Nandan says because he tried to control population through forced sterilization and faced the wrath of people no politician in his right mind wanted to do anything for population control. The result? we expect to have demographic dividend well past 2050 🙂

 

India is also unique in the sense that we are not behaving like one country. He says, different parts of the country are earning demographic dividend at different years. When green revolution happened, farmers in North India suddenly became rich, started having fewer kids and reaped the dividends. Then IT revolution brought money into the hands of educated people of South India the fertility rates have dropped dramatically.

However, some North Indian states like Bihar and UP continue to have high population growth which would help India grow for another 40 years.

 

I like the term “dividend”. Its like when I invest in stock market, I don’t look for dividend. I invest thinking the stock price will go up. Any dividend I get is like a bonus. Similarly, people don’t look for getting any economic benefit of having kids, but the fact that country as a whole gets benefits makes it a “demographic dividend”

 

I have a plan to extend this benefit infinitely.I am sure most people plan to have less number of kids than their parents had. Right? That is what is giving us the high economic growth. Now, to sustain this, we all need to ask our kids to have lot of kids.  That is it!! We just need to increase our population every alternate generation!! Nothing could be simpler 🙂

 

NOTE: –  Anyone who follows the plan described above is doing it at his/her own risk. I should not be held responsible for the consequences. 

  

Why Agile is a step in the right direction

This post was written after CDC introduced Agile development methodology to do software development. After more than a year, I can confirm that the methodology works. We released two releses on time. CDC(Pivotal) had a dismal record of delaying releases before agile.

Before I start, I have to make a confession… I love Agile. I like the fact that the team can decide how much work to take up. I like the fact that the communication between various disciplines are very open. I love the fact that we all sit together and I can shout out to someone “Hey, you know I thought of a scenario…Can you try out and see if it works?”. He would try it out and tell me if the things work as expected or not. In fact,it makes me think “Why were we not following this before? It’s such a simple idea” . Anything that sounds like a simple idea in retrospect is a hallmark of a brilliant idea.

Peter F Drucker is considered to be father of management. I read one of his books “Essential Drucker”. This is not a book in the traditional sense, but a collection of essays Peter had written during his career on various subjects. This book is not for anyone looking for an easy read.I recommend this book only to the “seriously interested in doing MBA” category of people.I am hesitant to buy his other books as I fear I will not understand most of it.

 Anyway,one of the chapters in this book is about challenge of managing a knowledge worker. By the way, Peter coined the word “knowledge worker” in 1959 when there were almost no scope for a knowledge worker. He says, the primary contribution of management is to increase the productivity of workers.

The main issue is measurement.It’s a human tendency…If humans can measure, humans will improve in those aspects.

 How do you measure manual work? By the out put generated. ex:How many cars were produced in this shift? How many days does it take to build a house? All these factors are easily measurable.

Result – 

In the 20th century, management did very well, there was a 50 fold increase in productivity in manual labour. That is 5000 % increase in productivity in 100 years.They brought in a lot of innovations like assembly line, just-in-time parts delivery etc.

However, the main challenge of 21st century is to increase the productivity of knowledge worker.

How do we measure knowledge worker’s contribution?Can you measure a teacher’s productivity by the marks her students get? Can you measure a scientist’s productivity by the number of inventions he makes?

 Lets take software industry

Can you measure the productivity of a coder by number of lines of code he writes? I can write same logic in 2 lines or 10 or if I use some creativity in 100 lines. Can you measure quality assurance by number of defects he finds?All the QA people would want to test a fresher’s code since he is more likely to find bugs.

This has been the problem. Since it is not easily measurable, productivity levels have not increased the way it increased for manual workers.

 Peter says solving it would be the biggest contribution a manager can make in this century.

 I believe agile is the first step in measuring this productivity.

 Agile the first step

 I believe agile provides a way to measure productivity = in terms of velocity or story points. The points are associated with a user story by the team beforehand. So a team may commit to do work corresponding to 100 points this week. Now, managers can track this velocity and provide inputs to increase this to say 110 points by next release. That is a 10% increase in productivity. Now, manager can concentrate on a number… it is measurable, hence it is improvable!!

Managers should provide an incentive for the team to  increase its productivity. Maybe a nice bonus to the team that has consistently increased its productivity? This incentive would push  everyone in the team to develop more as a team. An individual cannot get this bonus by improving his own productivity. He would have to suggest changes to the way others work aswell for the team’s productivity to increase.

 I can think of a few flaws –

1)The team might increase the points associated with a user-story just to meet the increased point target.
2)One cannot measure productivity of a single member. The productivity can be measured only as a team.
3) The team can not change. If the size changes, it would be impossible to measure productivity till a baseline is set again.

I think the first flaw will sort itself out. The team members might be able to boost their velocity to 110 by bumping up their estimate. But, if they do, their target for the next release would be 120. I am sure at some point it would be impossible for the members to meet the target without improving their actual productivity.

 As for the other two flaws, I am not sure how they can be fixed. I am sure someone will think up another process which solves them. Maybe someone from India?   I am still not sure how we can measure productivity of a school teacher though… We cannot divide up her work into small chunks. Or can we?

I was wrong on the first flaw. I believe the teams are increasing velocity without actually delivering more to the customer. Hence, velocity cannot actually be used to measure productivity. We need to think up of some other way to measure productivity. However, I still love agile :-). Is there any move to measure productivity in your company? Is it Dilbertian or does it make sense?

Alphabet Soup!!

I wrote the following article after our company’s CTO gave us a speech in which he described how US might get into double-dip recession. I realised that most people would not know what our CTO was talking about.

 

Recessions are classified as U,V,W or L shaped based on the way the graph of growth rates look during this time. These are not formal terminologies but are used by all in an informal way.

 

V- shaped Recession

  

In this kind of recession, the economy experiences sharp, but brief periods of low economic growth before returning to its high-growth path. This kind of recession usually occurs in strong economies where growth rates may not be negative even when the economy is in “recession”. India would be prime example of this where the economy continued to grow at about 6% during 2009 recession. A typical graph of a V-shaped recession is given below –

 

U-Shaped recession

U-Shaped recessions lasts longer and the bottom of the recession is less clearly defined. Usually, the economy stays in the low growth mode for several quarters( usually about 2 years or 8-10 quarters) before returning to high-growth paths.

 

W – Shaped recession

A W-shaped recession is also called double dip recession. This occurs when the economy has a recession, comes out of the recession and has brief periods of growth before slipping back into recession. This kind of recession is very dangerous as over-optimistic companies tend to overspend during the brief period of growth expecting it to continue and land in a debt-trap when the economy slips back.

L-shaped recession

  

L shaped recession occurs when an economy experiences a sharp drop in growth followed by many years of low or non-existent growth. Due to the long and painful nature of the recession it is also called “Bloody L”. Japan is a good example of this. The country’s economy has not been growing consistently since 1990s

 

8 months after writing this post, people are still wondering and worrying that  US of A might go into a W-shaped or double dip recession.

Inflection Point

This was my first post in my company to attract people to my blog. It worked then…hopefully it will work again! 🙂

Mathematics defines inflection point as a point on a curve at which the curvature changes sign. I am an engineer and I did study mathematics, but must have bunked the classes where the teacher explained this point.But, it did not affect my results in any way :-). So, why am I talking about this now? How is it related to “MBA classes” blog category? Read on…

One of the first business books I read was “Only the paranoid survive” by Andy Grove. Andy Grove was the 4th employee to join intel corp and became its CEO in 1987.I highly recommend this book to everyone.

In one of the chapters, Andy explains the concept of inflection point. According to him it is a point in time in a company’s life where a critical decision has to be made. If the right decision is made at this point, then the company will move on to a higher plane of profits. If the wrong decision is made, the company’s profits and growth slows down and turn negative.

InflectionPoint

It is very critical for the management to first recognise that it is at an inflection point. Most comapnies fail to recognise this. Andy Grove explains some of the inflection points faced by intel and secrets of intel that allowed them to make the right decision. I will explain just one point here –

Memory Chips to Processors

Till mid 1980s, intel was known as a memory chip maker. Their products were extremely popular and most of the electronic devices during that time like digital watches contained intel memory chips. During mid-1980s, cheaper Japanese made memory chips started flooding the market. Andy says this was an inflection point for intel as they could have either decided to fight the Japanese by lowering their own prices or decide to get out of the market. Before the Japanese invasion, the advantage intel possessed was mainly because intel was the first company to bring out bigger capacity memory chips. i.e they had the advanatage of being the first to introduce a superior product to the market. Its competitors were usually one or two years behind intel. But, the Japanes were able to copy the intel product within months, hence removing the one advantage intel had.Intel started burning through their cash and made heavy losses in 985,86 & 87.At this point, intel had a small lab and a fabrication unit which was designing processors for calculators and other stuff. This was a very small operation, but highly profitable. Intel management took the correct decision at this point to close down the memory chip making business and turn to processor for its survival. Till this point intel was known for memory chips, now it is known for processors.

What helped the management make the right decision?

In 1985, the intel management had choices –

• Invest heavily in R&D for memory chips so that their products are way superior than Japanese competition.
•  Get out of memory chips to conserve cash. Put the conserved cash in new technologies like microprocessors.

Andy says the management team had a discussion which went something like this -“if we got kicked out and the board brought in a new CEO, what do you think he would do?” “He would get us out of memories” was Moore’s response. And from that day, Moore and Grove began the long and difficult journey of persuading Intel to cast aside its accumulated identity and shift its attention solely to microprocessors.

So, the secret is to think like an outsider.

Do you think your company is facing an inflection point? If not, do you forsee any development that could develop into an inflection point ?

Why I started this blog

I started blogging in my company’s intranet for the first time 4 years after I joined the company. Most of the blogs in the intranet were highly technical stuff which,frankly, was really boring for me. I decided to do something about it and  decided to write about non-technical stuff.

I was always interested in management books and started writing about the books I had read. Due to some expert handholding and encouragement from my colleagues, the blog quickly grew and has about 50 posts  with about 100 comments in 8 months.

Some of my colleagues have told me that their friends who are not part of CDC would love to read my blogs too. WordPress seems tobe the best blogging site with stats like page views to keep me motivated. It will contain mostly management related concepts, book summaries,some thoughts on Agile in CDC and some CDC Software related stuff.

The initial posts would be copies of existing posts already present in our company intranet.

Keep coming back to this site if you enjoy it. I will make sure you have new material to read every week.