Good things come in threes

Ah, so the time has flown. It just seemed like yesterday that she was born. Or was it just yesterday that she turned one?

Three. It is hard to believe how fast time flies.

It has been a delight to see her grow, lost as we are in her smile. Started as it did, with a grin we caught in the X-rays. Then, a sly smile from within her covers. The shrill cry that turned the next moment into a wide smile of happiness. Now, a toothy gregarious laughter that keeps us enthralled. It has been a delight.

Last year, the worries were of her getting to a play school. Thankfully, she loved the one she joined. So much, that she missed it over the weekends. Did I ever miss any of my schools as much?

This year, the worries were of her joining a bigger one. Lucky as she is, a school that she likes has come by. Now we worry how she would take to this. I guess, this too shall pass.

A born traveler she is. Loves the planes. Loves the seas. Loves the cold. Loves the gardens. Loves the zoos.

Ah, the zoos. Bangalore's Bannerghatta. Mysore's impressive spread. Trivandrum's humid trail. Tirupati's drive in wonder. Chennai's Vandalur. Singapore's Zoos, Safaris and Bird parks. Berlin's Zoolischer Garten. Munich's Hellabrun. Innsbruck's Alpenzoo. Here is a zoo-logist in the making.

A non-stop chatterbox. With a vocabulary that has us impressed. Courtesy of Peppa Pig and Mickey.

Born digital. It is hard not to wonder when a small hand deftly scrolls touch screens. "YouTube!" she says, asking for her favorite videos. Wondering why TVs don't have touch screens yet.

Why? O' Why? It is the season of why's. Why do we see through our eyes? Why do we breath only through our nose? Why are leaves green? Time it is, to dust off our books to answer her.

A wonder it is, to see her grow. Time flies, but it is a wonder indeed, to see her grow.

The era of the Chief Digital Officer

The new buzz word in the techno-business landscape is the role called the Chief Digital Officer (ominously enough, the CDO). Gartner believes that one-quarter of firms will have someone with that responsibility by 2015. Starbucks and Harvard have one, and apparently so do city governments like New York.

Here are my two cents on this topic.

The move to digital, while varying across industries, is a strong trend.

One would have to be blind to not recognize the magnitude of digital presence that is seeping across industries. As they say these days, every business is a digital business today.  In some, such as retail trade, entire channels are now digitally driven. In more physically constrained industries such as discrete manufacturing, digital control systems and sensor-enabled monitoring are pervasive (tomorrow, with the emergence of the 'Internet of things' digital will penetrate deeper). Finally, in knowledge-intensive areas of R&D and product design (for example, Pharma R&D, energy exploration or even financial product design), the use of large-scale Big data and analytics is now commonplace enough.

As a large number of operating  processes become digital, there is the need for new capabilities and  mental models in structuring businesses

The rules of the game in the digital enterprise are often substantially different from the traditional world.

Consider the operating blocks of the digital enterprise: that require utilizing new technologies such as mobility, social, cloud and big-data - so different from traditional approaches that utilized more constrained, capital intensive, and less flexible models.

Re-architecting entire value chains using these new building blocks lays an emphasis on:

• Rapid innovation and experimentation (for example, leveraging the cloud to quickly build test capacity for new solutions)
• Decision-making that is more  data and analysis driven vs. based on qualitative hypothesis (for example, utilizing big-data technologies to process real-time information)
• Propositions  are more responsive in real-time to consumer needs (for example, customized offerings that reflect preferences communicated through social media)
• Solutions that provide a greater range of customer access (for example, mobile-based offerings that are geo-location sensitive)

Consider also the cost structure of digital offerings: which is often a fraction of the traditional, fueled by cost-effective access to computing power, with minimal investments in capital-intensive assets, and with minimal IT personal oversight. At the time of Instagram's billion dollar valuation by Facebook, when it served 10 million+ users, it had about 20 engineers managing its infrastructure. Such cost effective capacity at scale was unimaginable traditionally.

Successfully leveraging these requires more than just an expertise with managing technology - one also needs an expansive grasp of business and operating models, and a creative bent in harnessing new technologies in creating innovative business models.

Will traditional CIOs be comfortable at stepping into the shoes of a CDO?

Traditionally, CIOs have remained comfortable managing cost-centers and leading delivery units. Stepping up to becoming P&L owners will be a different experience.

This will require them to externalize their focus and direct their understanding deeper towards business customers and markets . This will be a different from the traditional focus on the internal customer - and the change will require a whole new range of capabilities. It is, of course, quite another question as to how easy would be the 'permission-to-play' from their business brethren as they cross new boundaries.

Yet, if they do succeed in making this transition, it could see them becoming true business partners - an objective that has dominated business-IT alignment discussions for some time now.

Finally, do CDOs need a board level presence?

This is an interesting question, and aligned to whether digital efforts are significant enough to warrant a board-level focus. While the answer will vary by industry, here are few perspectives to consider:

• Traditionally, there have been cases of CIOs reporting to the COO, CSO or another CxO, and therefore being a level removed from the Board. However, as digital initiatives span business and technology boundaries and in some cases business units, there may be the case for an elevated office of the CDO with greater sponsorship.
• Organizationally, the question is also whether digital efforts are substantially strategic.  Consider the case of Walmart, which utilized a few acquisitions to create the digitally-focused Walmart Labs. In cases where digital is as strategic as causing a transformation in the core business, one would believe that a board representative is justified.

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In sum: As every business out there transforms to becoming digitally-enabled and eventually digitally-led, the office of the Chief Digital Officer is likely to become an important one. The operating requirements and capabilities of this new role are beyond a mere evolution of the CIOs role, and may need a deeper rethink of organizational setups.

Do you teach the bright, or the slow?

One of the things I have been doing recently, now that I am supposedly the master of my own time, is teaching. Besides keeping me on my toes, the sense of personal fulfillment with teaching is quite distinctive. It is another matter that teaching has made me realize how little we actually use all the stuff that we were taught in school and college life, but that's another post.

Every class has a range of students. Some who learn fast and outdo everyone in their comprehension of a subject, some who are slow and take time to understand a subject, and a vast majority who fall around the means.

As a teacher, a big challenge is to figure which set of students should one focus on during class.

It is often easy to address the fast and the brightest, since they are the easiest to teach to. They get what you say and often tend to challenge you to push yourself. Often they are also the most participate and vocal.

However if you do so, it is pretty easy to leave behind the vast majority who would have understood very little of what you would have taught in class. Particularly the slow learners.

When I started teaching a long time back as a teaching assistant in college, this was a mistake I did - focusing on the fast. The classes would be exhilarating personally since I would focus on solving tough problems and debating with the fast learners in class. Yet after a couple of classes, I would realize that a majority of the class still did not grasp the concepts taught a few classes back. Worse still is the phenomenon that most students hesitate to ask questions when not understanding a topic, and after a couple of classes with incomprehension tend to lose interest in the subject. As a result one has created a whole class of slow learners by not getting the class along early. It took me a while to realize the folly of this approach.

Take the contrary approach of focusing on the slow learners. The challenge here is that by slowing down and working with the slow learners, it is possible to get a large part of class bored. Or so one would think.

Interestingly, even the brightest students often have weak spots. There are classes where even the brightest tend to be slow in comprehension, and even parts of a certain class could register slow. Therefore, slowing down tends to take along the whole class much better.

Add to this the reality that the fastest invariably know how to self learn a subject with minimal tutorial help. As teachers, we add greater value to the class by getting the slow learners and the vast majority to get alongside the fast in their grasp of the subject.

This is my experience. What do you think? Do you teach the bright, or the slow?

One reason digital trumps print

Last week, I bought my mom a book. Something she had been asking about, for quite some time.

Yet, when she got it, she put it down saying the print is too small. Reading too small a print gives her a headache, and she would rather skip it than chance pain.

Now this is one problem with reading books the print way. You cannot resize text, you cannot zoom in and out. The medium is just too static.

In contrast, digital media is way more flexible. Zooming and out is a breeze.

Recently, reading books online has become an addition. With Amazon's Whispersync, I keep track of read pages on multiple devices - my laptop and my phone. In addition, its made my reading non-linear. Now I book-mark pages and jump back and forth, something I found painful to do with books in print. For an avid reader like me, the digital media has been a quick hook-on.

What's interesting is that even the earlier generation may have reason to switch.

A case of two disruptive Ms

As consultants, we tend to be heavy users of travel services. Therefore, disruptive business models in the industry are particularly interesting.

Makemytrip, the travel portal, is an interesting case. For a frequent traveler, the ability to quickly evaluate flight options and comparison shop is of phenomenal value. Often travel schedules do become unpredictable and need change during odd hours. No conventional offline travel agent seems to come close to providing the level of experience and flexibility that a portal like Makemytrip does. In addition, what is particularly interesting is that prices online hardly ever differ from those booked through agents. Maybe its because both are hooked onto the same GDS systems for flight bookings and offline travel agent commissions are increasingly on the downward route.

This is making me and a number of my consultant colleagues, increasingly shift online to make bookings despite having dedicated corporate travel agents at our call. Soon offline travel houses will find it hard to justify their value and premium pricing against flexibility offered by these online setups.

The second disruptive case is that of Meru. Meru provides cab services in multiple cities of India with a dedicated phone-based booking facility. What is interesting is that Meru has been able to provide uniformly high quality cab services using a relatively low-cost model. Their cabs might not be the best of cars (and that's changing too), but are certainly clean enough, consistently in every city. Again where Meru beats "traditional" professional cab firms is the flexibilty of booking a car upto 30 minutes in advance in almost any location in cities where they operate - an invaluable service when schedules change rapidly; and at prices that are one-third of a corporate travel firm, they are a hands-down win proposition.

What both these models are doing really well is using technology to provide low-cost services with reasonable levels of quality and focusing on an important value point for frequent travelers - flexibility.

Shouldn't governments have service level obligations?

Governments, particularly in India, have an abysmal record of providing uniform high-quality services to citizens. At no place is this more apparent than in the capital Delhi, where in a drive of less than 15 minutes, from the beginning of the Grand Trunk Road to the Rashtrapathi Bhavan, one can see the entire range from stinking dirty garbage covered pot-holed roads with overflowing severs to sparkling-clean well-tarred multi-laned roads bordered with well-trimmed hedges and expansive manicured lawns.

In a democracy, the Government exists to 'serve' the people. Aside from its greater role as a policy maker, every government spends an inordinate amount of time and money providing services to citizens. It is therefore quite sad to observe that they do such an inconsistent and poor job of it.

In the private sector, mature service organizations are increasingly adopting formal service level obligations (that are clearly defined and measured). For example, airports such as Changi in Singapore, or recently those at Hyderabad/Bangalore, have formal service metrics that guarantee that an arriving passenger would receive his bags, finish check-out procedures and be on his way to the cab in so-and-so minutes; as another, most banks have well defined turn-around service timelines for check/statement processing. The formal definition and measurement helps align incentives across the organization for consistent service delivery.

To expect Governments today to adopt a similar professional service mindset is probably a tall order.

Yet changes may be in the offing - if one is to go by the recent US Court ruling on the Army Corps of Engineers, blaming them for "monumental negligence" for some of the flooding during Katrina: Katrina ruling could bring new deluge of lawsuits.

While this could still be called a one-off incident in the advanced democratic setup of the US, if a Government entity could be held responsible for failing on its service obligation, that's quite a harbinger of things to come. Imagine what would happen if some day, the citizens of North Delhi took our government to task for the neglect of their area!

Why do teachers focus on the best students?

If anything, it would make better sense to focus on those who struggle through lessons - the best students either are smart enough to understand their lessons and/or put sufficient effort to learn; its the strugglers who require attention. But invariably, most teachers direct their attention at the brightest. Why? I muse.

For one, it has to do with the skewed student-teacher ratios that most schools (at least in India) have. The skew causes undue effort on the teacher's attention span, so that they tend to focus their limited energies on those who are easiest to teach; it therefore, takes no leap of imagination to understand why the brightest rule - they are in sync with what is being taught most of the time, unlike the poor strugglers who gasp at the whizzing bouncers (ah! I still remember the feeling).

Another related reason, is that the best (perceived) students are invariably also the more competitive and aggressive of the lot. So in the babble of the class, the teacher's attention is more taken up by these, who end up asking the most questions and answering a bulk.

A third potential reason, is linked to how teachers get incentivized. Not every teacher is fundamentally motivated by an intent to change the world through pedagogy. For most, its a profession. A profession in which incentives are often linked to the output of the smartest student. Remember how teachers revel in pride when their student tops a school, a major examination or some day wins a Nobel! On the other hand, which teacher is ever felicitated for the poor struggler who barely managed to make it through?

To side with the teachers, one must admit the fact that teaching is a demanding occupation, requiring intense emotional (and physical) involvement and leadership skills that are no less than any other occupation. It is also amongst the most thankless. From the limited teaching I have done, I will attest as much.

So there is limited point in criticism of the teachers. But one must recognize that these behaviors do emerge, and as such might not result in the best of outcomes.

As a concluding afterthought - a personal recollection. I tend to have a quiet disposition and in most of my high-school classes, was often amongst the quietest in class. As a result, at the start of class sessions, I was hardly ever given attention by teachers, and used to struggle to catch their eye if I had a question.

Luckily for me, math and science were my strong points. After the first test or examination in these subjects, I could almost always sense a visible change in the amount of attention I received. The teacher's roving eye would sweep the class and rest on a bunch of us who had scored well.(There were even days, I thought I had perfected the art of predicting test scores in advance based on how the 'eye' swept the class!). Those days, it was often gratifying and embarassing - for along with it came the undue directional focus of questions from the teacher.

But now I look back and wonder - why, oh why, do most teachers focus their efforts on the their best students in class?

What is this funny thing called value?

The central tenet in a lot a economics and strategy is this concept called 'value'. These days, I seem to be ploughing through one engagement after another building all sorts of valuation models and therefore I present my (rather muddled) musings on this notion that has vexed me through many a sleepless night.

In its most basic sense, 'value' is said to be 'created' in an activity if the benefits exceed its costs (note that this could be economic, social, metaphysical, whatever). That is to say, if the outcomes exceed the effort you put into an activity, you have created value.

This notion is of course extendable to a group of individuals who come together to form, say a firm, and thus if they create something together thats worth more than their effort, the firm's created value.

The question is, who determines the worth of the outcome?

This is clearly relative. If the output is being consumed by the creators (say, if I wrote a piece of code to search my own data), then I determine the value (say, the amount of time it saved me from going through the data manually).

But in most situations, we are concerned about the worth of the outcome to the market. Value, in a market context, is set by the consumers who would benefit from the outcome. (In the same example, if I started giving out the piece of code to all, value is set by the benefit to all who utilize it).

Of course, this is a bit simplistic. What if there is a big group of similar producers (like a lot of people writing the same code) and consumers could ideally choose between any producer? Value created is then bounded by the how much of it can be consumed. In economic terms, this point is where the market 'clears' and a price is set.

The interesting question of course is, how much of this 'value created' will each of the creators and consumers capture? The answer, is clearly not easy to determine and (it seems) is dependent upon market structure and the bargaining power of each in the market.

If you would recognize, in a firm's context, this question is what a lot of strategy literature tries to answer. The whole notion of 'competitive advantage' or 'strategic moats' (and all those Porter 5-force models) is largely linked to identifying those elements that enable a firm to gather as much of value as is possible from its market interactions. In a micro-sense, this is the realm of pricing theory.

(These days, there is also this interesting field of research in coalitional game theory, thats trying to answer the question from a GT point of view. See this and this).

'Shareholder value' creation by a firm is therefore largely linked to its ability to participate in a marketplace that values its output and then its ability to appropriate as much as possible from its interactions.

Value creation is an oft bandied term. Whoever knew so much lay beneath.

Can firms grow too fast?

Notwithstanding our volatile and depressed equity markets...

One of the good things about working in growing economies like India is the sort of interesting things you get to hear about managing growth - things unspoken in mature markets. Instead of grappling with growth challenges, here one gets to ask questions such as in the title line.

But this is an interesting question: Can a firm grow 'too' fast for its own good? Over the past few months, I've been fortunate to be exposed to industries and firms which are witnessing explosive growth; and I've heard people talk terms such as 'sustainable growth' and 'manageable growth'- terms which you'd typically hear only in the context of national economics.

But after all, firms resemble nation states, in a sense. Just as countries can overheat if fiscal and monetary economics are not managed to suit growth (these days, they can overheat otherwise as well, as we've learnt to our chagrin) firms too can overheat their operating models when faced with huge unprecedented growth.

Ultimately, a firm's operating and financial structures are designed for a certain range of volumes. And if these structures are not modified in time to support a much higher range, it is likely that they'll strain; just as short-term mismatches can drive up national inflation, such strains can drive up internal cost to serve, destroying firm value.

Another issue with growth is the change in the nature of the firm in relation to its size. A small firm is quite different from a medium-sized firm, which is quite different from a large sized firm: in its operating structures, in its human capital and policies, in its customer relationships, in its ambitions. As firms rapidly make the transition from one-stage to another, the sheer nature of the firm changes. People used to the informality and flexibility of the startup suddenly get saddled with policies and formal mechanisms. Internal divisions suddenly grow into the size of small firms ...

Of course, nobody wants to give up on growth (I doubt if any nation state would either) - after all, who knows how long it would last. But is it sometimes detrimental to grow too fast? Economies like China and India have been caught at the raw end these days from unmanageable growth. Statements have been made on sacrificing growth to rein in overheating. Should growing firms also 'manage' their pace of growth? Of course, firms dread being left behind in the marketplace, but would slowing down sometimes make you a 'better' firm?

The below is from the Ram Charan chronicles :

"We were driving to the airport in Charleston, W.Va., and he said to me, 'Why are you trying to grow this thing so fast?' I was sort of shocked by the question. Three weeks later my financial guy came to me and said, 'We don't have money to meet payroll.' Charan realized we were growing too fast, that's why he asked me that question."