Sunday, October 30, 2011

Economic Behavior of Nations and Societies: A Strategic Role for Governments

The World has breathed a major sigh of relief that the Greece led Eurozone crisis is averted, yet another time, as a result of the high-level summit of Europe’s leaders at Brussels on October 27, 2011. The world’s most powerful leaders, ministers, investors and bankers had to undertake weeks of intense negotiations to arrive at the latest settlement. The size of the bailout fund, the European Financial Stability Facility (EFSF) has been increased from 440 million Euros to 1 trillion Euros, with a leverage of four to five times of its corpus. The lenders or the bondholders to Greece have agreed for a loss of 50 percent while converting the existing bonds into new loans. Greece itself would be handed over a new bailout fund. The European banks would be recapitalized to an extent of an additional 1 billion Euros while the countries in potential default like Greece and Italy have agreed to implement reforms. Stock markets, the world over, have greeted the Eurozone outcome with the ramping up of all the indices. That said, there is concern if the restructuring and rehabilitation would have a lasting impact or whether there would be a quick return to the specter of public debt crisis again.

At the heart of the crisis lie excessive and profligate public and private spending on the back of easy and unchecked loans, and in some cases asset bubbles supported by artificially high prices. The solution now proposed of stringent austerity measures including layoff of workers, reduction of salaries, pensions and benefits and cutbacks in public and private investments not only cause social strife but also run counter to demand stimulation that is required for economic revival. The way all the European leaders had to cooperate to resolve the crisis in just one country of the 17 country Eurozone points to the highly coupled nature of global economy and the threat of contagion effects of collapse of any one economy on the entire global economy. The Eurozone crisis, which followed the crisis in the US triggered by the lowering of sovereign rating, clearly demonstrates the fragile nature of global economy. It is of discomfort that the economic crises are being sought to be tackled by financial means rather than by sustainable structural reforms on the back of industrial competitiveness, and demand-supply balance. The root cause which is the economic behavior of nations and societies needs to be addressed.

Economic behavior

Like individuals, nations also display an economic behavior. A nation whose society, or sections of the society, prematurely considers that the peak of affluence has been achieved would give a goby to the core concepts of productivity and innovation as well as equity and equality that drive continuous development. A nation which tries to achieve growth through top down investments rather than grassroots development would face lopsided development. The competitive behavior of emerging nations, and the states or provinces within nations, unfortunately has been ignoring such requirements. Governments have sought the easy way to attract development and foster industrialization by offering fiscal sops or incentives and subsidies rather than by creating durable high quality infrastructure. This trend has been more so in respect of India where State governments typically vie with each other to create favored state for individual corporations.

Societies also tend to chase affluence sans productivity. As an economy begins to transform itself skews in demand and supply of talent take place, with enhanced job opportunities chasing limited skill sets. This, in turn, drives up wage structures in certain classes of employment while leaving a broad base of jobs relatively untouched. This, in turn, leads to a spurt in the consumption of luxury goods and premium products. For each luxury car imported into India, for example, seven to ten sedan cars based on locally made components can be produced, leading to much greater employment generation and more equitable wealth generation. In such skewed societies imports tend to be on unproductive lifestyle products rather than essential technological tools and equipments. Gross capital formation thus tends to be channeled into activities with poor capital-output ratios, sub-optimizing overall growth potential and maximizing inequities. Emerging nations need to strengthen their institutional mechanisms to ensure that economic behavior is appropriately shaped. Some of these are discussed below.

Islands in deserts?

World economy is certainly in the throes of major change. While everyone expects the centre of gravity to shift to emerging markets especially India and China, the transition is beset with substantial volatility and fluidity. Factors of market strength and supply competitiveness are dramatically influencing how the established and new economies shape themselves. Emerging markets cannot be smug under the assumption that they would be driving the future economic waves simply by demographic advantage or through investment flows. Nor can the emerging markets accept the premise any more that the Western style reforms and investment banking solutions are the panacea of globalization. Excessive public investments or private consumption are also not a long term solution for economic sustainability. By all accounts, the increasing speed with which global funds take flight is panning out to be inversely proportional to the decreasing pace with which the nations are able to grow their real economies.

Emerging markets have enormous scope for development but need also macroeconomic stability to sustain growth. The paradigm of growth in emerging countries is dependent substantially on such countries feeding their products and services to developed markets on one hand and expanding their respective domestic markets through new technologies, often based on imports from developed markets. Global economic coupling is, therefore, a fact of the current global order. A shrinking developed world, in economic terms, would eventually have a depressing influence on the growth of emerging markets as well. The concepts of global cooperation as evidenced by Eurozone and G 20 efforts are appropriate. That said, the emerging markets as well as the developed markets need to learn from the experiences of the last five years to get global growth back on track, with equity, stability and rapidity.

Central financial institutions

If there is one universal lesson that has emerged from the global liquidity crisis and its aftermath it is that central institutions such as the Federal Reserve in the US, Bank of England in UK, European Central Bank, Bank of Japan and Reserve Bank of India play a major role in stabilizing truant economies. Conversely, weak central institutions or central institutions constrained by bureaucratic and political influences would be incapable of protecting and growing the respective national economies. On the whole, it appears that except in respect of India, various central institutions, especially of developed economies, have been less than proactive and prudential in the oversight. The velocity of fund flow in the developed world is so high that any oversight or regulation was seen to be counter to the free market culture. The last few years have been teaching us through successive crises that proactive regulation by the central financial institutions would be better than retroactive intervention after the economies are battered by institutional collapse. The latest US rating resolution and Eurozone resolution point to the continued influence of political and governmental institutions on the empowerment and functioning of the central financial institutions.

The linkage between the policies of the central financial institutions and the response of the stock markets is another important consideration. While central institutions cannot, and should not, take policy decisions with an eye on the stock markets, undue unpredictability and suspense in key decisions seem to lead to stock market speculation and volatility. Given that there could be shades of right and wrong in any policy decision and given also that any policy decision has a strategic objective it would probably make better sense for the central institutions to lay down a rolling twelve month policy regime which also indicates potential, not necessarily mandatory, policy moves that could be taken should the economy behave in certain manners. India has benefitted in the past by reducing the mystique (in terms of incentives, subsidies, duties and taxes) from the annual budgeting process. Probably, the same approach would be appropriate for policy pronouncements from the central financial institutions. The latest forward guidance from the Reserve Bank of India on future rate revisions, for example, has had a positive effort on the Indian stock markets.

Too big to fail, too small to succeed

One of the striking takeaways of the global liquidity crisis is that the bigger the institution the greater is the adverse impact of its failure. This has been demonstrated in as diverse institutions as financial services industry (Bear Stearns and Lehman Brothers) and automobile sector (General Motors). The developed markets, despite the existence of strong anti-trust regulations, have enabled scale-intensive mergers and acquisitions. At the same time, studies of such mergers and acquisitions have also established that several of these have eroded rather than added value, even ignoring the undesirable trauma of factory closures and job eliminations that accompany such mega mergers and acquisitions. Emerging nations in their quest for global scale of their industries must be conscious of the need to insist on appropriate logic of such transactions. Fundamentally, the emphasis needs to be on achieving efficiency independent of scale as a first preference. Institutions such as National Competition Commission must play a positive and proactive role in enabling micro-economical growth of industries in alignment with macro-economic fundamentals. The concept of financially bailing out those who are too big to fail cannot be allowed to distort the fragile economic systems of the emerging nations.

The need to balance the big with the small is the essence of prudent macro-industrial management. While growth is an inevitable impulse of all companies, growth is not the only way to become profitable. Niche in products and services enables small and medium enterprises to contribute to the national economy. Central, shared services of technology and marketing, usually sponsored by the governments could help small and medium enterprises retain the agility, efficiency and nimbleness of their small and medium enterprises with the scope and scale of shared services. Some of the established principles of Indian economic management such as big corporations and government procurement organizations supporting the small and micro enterprises are relevant but have not delivered so far due to technological and marketing insufficiencies. Probably, a holding corporation to support micro enterprises of an industrial value chain could provide the needed resources for product development and marketing while enabling the individual enterprises focus only on cost-effective manufacturing.

Banking on banks

Banking competitiveness is as important as industrial competitiveness is to economic stability and growth. India is fortunate that the banking sector does not deal in exotic products as the institutions in developed countries. Even singular products such as derivatives had affected several companies in India in 2008 and 2009. This had reflected poorly on the internal audit and compliance mechanisms of various banks as well as the timeliness of oversight by the Reserve bank of India. This has been reflected in a different manner by the collapse of microfinance institutions in India in wake of the exorbitant interest rates and exploitative arbitrage of concessional funding extended to such institutions and self help groups. Delays in the implementation of prudential capitalization norms of Basel III may render the Indian banks weak in terms of capital adequacy (the first policy statement by the Reserve Bank of India on Basel III is expected only by end December 2011). India has also not taken up stress testing of its banking sector as it ought to have done in the wake of global liquidity crisis.

While the Reserve Bank of India, and the overall Indian banking system, have come out better within the global banking community for their caution and conservatism, it would be inappropriate to rest on this relative success. As the State Bank of India episode has shown Indian banks are saddled with high levels of non-performing assets. Indian banking at one time took upon itself the task of consulting with its clients to develop their businesses on the right lines but has eschewed that path. In the interests of sustaining the asset quality it would be appropriate for the Indian banks to set up on a consortium basis a consulting cum rating organization that could provide asset rating and business improvement services concerning their clients to the banks. The Indian banking system has to move beyond the limited tool kit of repo rates, statutory liquidity ratios and cash reserve ratios to fundamental economic and industrial analysis to ensure that the funds are deployed productively.

Central economic planning

Central economic planning received much criticism from the 1950s for the tilt towards socialistic and command economic model it implied. It was seen as regressive attempting to throttle how human enterprise would like to plan its development. The developments of 2008 and beyond have, however, brought out the risks of a completely unplanned economy. Whether one likes it or not, mixed economy of public and private participation is a matter of fact. Whether the governments should participate in certain capital intensive domains such as power utilities and inherently non-profit driven activities such as education and healthcare is no longer a matter of debate, at least for the emerging markets. Rather than provide huge incentives and subsidies to attract overseas and private enterprises to capital intensive projects, probably it would be better for the governments to provide them through utility rates that the society can bear. That said, it is somewhat inappropriate that the central planning commissions should focus on tax and investment allocations than strategic direction of economies.

India is going through its Eleventh Five Year Plan 2007-12. The Indian planning commission ought to be initiating the Thirteenth Five Year Planning exercise covering 2013-18. The approach to date continues to focus on central and state allocations. Instead, the Indian Planning Commission should focus on major structural transformations that could take India to a different trajectory of development. Some of the strategic game changers for India could be high speed transportation (for example, bullet trains, expressways, freight corridors), optimal energy generation mix (for example, nuclear, non-nuclear), universal social infrastructure (surely, education, healthcare, housing), and focus sunrise sectors (for example, nanotechnology, genetic engineering, semiconductors). The central planning process should focus on identifying, generating and channeling mega investments for strategic game changers for the economy.

Growth with equity

It should be the dream of every economic planner to ensure growth with equity for his or her nation and society. In a global economy, strong domestic demand and equitable spread of life style are essential for growth to be sustainable. The governments cannot abdicate the responsibility for directing growth entirely to free enterprise and private sector. A combination of policy management framework that could govern economic behavior of nations and societies comprising diffusion of growth initiatives, strong central financial institutions, optimal scaling of enterprises, banking regulation and central economic planning would provide a platform for sustainable growth with equity.

Posted by Dr CB Rao on October 30, 2011

Wednesday, October 26, 2011

Government-Academy-Industry-Networking (GAIN): A Paradigm for Indian National Innovation

The foundations of India as a knowledge society lie in our colleges and universities. The society would not be intellectually what it is but for the educational institutions which transform human beings into human resources. Similarly, the foundations of an economic society lie in the industries and businesses. The society would not be economically what it is today but for the industries and businesses that not only utilize the human intellectual capital developed but also generate new knowledge to achieve commercial results. Despite this intrinsic synergy, it is of concern that industry (which for the purpose of this post includes business and administration) and academics (which for the purpose of this post covers all educational institutions) tend to be quite detached from each other.

Amongst all fields of knowledge generation in academia and knowledge application in industry, science and technology emerge as the primary drivers of development, requiring the highest levels of teaching, research, industrial development, investment and commercialization. These two fields are also the fields that require constant experimentation and research to develop new bodies of knowledge that can be commercially utilized anew. Science and technology are thus not only essential for social and economic development but also constitute the twin areas in which both the industry and academia have an enormous stake. Science, technology, industry and academy thus constitute the four essentials of national development and global competitiveness. Needless to say, the greater the collaboration amongst the industry and academics the greater would be the benefit for the nation in terms of the amazing results of science and technology.

Common and uncommon

Whenever two entities have goals that apparently converge but have strategies that diverge, there could be certain basic differences affecting the combined system. In the modern world, academics are considered to be the engine of economic development, in addition to the established role of community development through education. Similarly, industry is expected to be a responsible citizen in addition to the role of efficient wealth maximizer. However, the routes taken by the industry and academics are traditionally, and even now, seem to be different. Academics see their deliverables in terms of people and qualifications while industry sees its deliverables in terms of products and services. The factor of people, and more fundamentally of knowledge and talent, which constitutes the output of the academic system and the input of the industrial system is not utilized the best way.

Similarly, the disparities are also more apparent than real. Industry believes that its core requirement is speed of execution and that the academic environment is not exactly speed or delivery oriented. On the contrary, it is perhaps the educational system that has a very rigorous and time bound study calendar which it implements with predetermined accuracy. Academics believe that industrialists are content with application and repeatability for most part and that they are less concerned about knowledge and creativity as a work ethic. On the contrary, it is perhaps more incumbent than ever for the industries to be creative to retain or achieve competitiveness.

Drug discovery as a case study

While the concept of academic and industry collaboration is applicable for all industries, the pharmaceutical industry has all the promise to be a major domain for such collaboration. The Big Pharmaceutical Corporations traditionally dedicated to innovative drug discovery have moved away from a “high cost, long lead, low productivity” model of conducting all research in-house to a “low cost, low lead, smart development” model of industrial outsourcing and academic collaboration. Academic institutions abroad play a major role in triggering new scientific and technological development through academic research and converting them into industrial activity and business wealth. Genentech is a great example of this process. A large number of drugs that have been discovered or are in the development pipeline owe their origins to academic research. Some examples such as Pemetrexed (Alimta), Darunavir (Prezista), Astrasentan (Xinlay) and Emtricitabine (Emtriva) come to mind.

According to a research study (“National Origins of New Drugs”, Nature Publishing Group 2005), an analysis on drugs approved by the FDA between 1997 and 2008 suggests that 58 per cent were discovered by Big Pharma, 18 products by biotechs and 24 percent by universities. Of the 24 per cent discovered by the universities, interestingly, 8 per cent went to Big Pharma and 16 per cent to Biotechnology. On certain other criteria such as share in discovering drugs for unmet medical needs and drugs for orphan needs, biotechs and universities had a higher share. Willingness and creativity to experiment, which is a true benchmark of accomplished academia could be a driver for this. Quite apart from discovery of drugs, academic and industrial sponsors can collaborate on drug structure prospecting studies, receptor identification, biomarker development, mechanism of action studies, molecular pharmacology, molecular biology, target development, new dosage forms and novel drug delivery technologies.

Creativity and serendipity

Creativity has no boundaries. It is interesting that many of the blockbuster drugs approved in Japan were discovered by non-pharmaceutical corporations. In fact, it is a uniquely Japanese phenomenon to have pharmaceutical operations within non-pharmaceutical companies in Japan. Evoxac (cervimiline hydrochloride, partly by Snow Brand), Starlix (nateglenide, Ajinomoto) and Spectracef (cefditorin pivoxil, Meiji Seika) are the three Japanese drugs discovered by food companies. Eloxatin (oxaliplatin) came from a precious metals company, Tanaka Kikinzoku Kogyo. Several agricultural and plant products have given rise to medicinal products and food supplements. The willingness to constantly search for new applications has helped scientists to be creative.

Serendipity is one of the many factors that contribute to drug discovery. It has played a role in the discovery of prototype psychotropic drugs that led to modern pharmacological treatment in psychiatry. It has also played a role in the discovery of several drugs that have had an impact on the development of cardiovascular drugs. Serendipity in drug discovery implies the finding of one thing while looking for something else. This was the case in six serendipitous discoveries (out of a basket of twelve drugs covered in a Vanderbilt University research; Dialogues Clinical Neurosciences, 2006 : 8 (3) : 335-44) namely, aniline purple, penicillin, lysergic acid diethylamide, meprobamate, chlorpromazine, and imipramine. In the case of three drugs, i.e., potassium bromide, chloral hydrate, and lithium, the discovery was serendipitous because an utterly false rationale led to correct empirical results; and in case of two others, i.e., iproniazid and sildenafil, because valuable indications were found for these drugs which were not initially those sought The discovery of one of the twelve drugs, chlordiazepoxide, was sheer luck.

The freedom of academics sparks the creativity of science and helps cross-functional and cross-domain discoveries. Breakthrough concepts of artificial intelligence and biological cloning have resulted from university professors and researchers. Most Nobel prizes in science and medicine are garnered by university academics. Great institutions like Karolinska University are not only in the forefront of not only education and research but also in the vanguard of an intellectual ecosystem for entrepreneurship and commercial development. Many of the Silicon Valley startups have university connections that enabled great new ideas of professors and researchers see commercialization as entrepreneurial ventures. There is no reason why the Indian Institutes of Technology (IITs), the Indian Institute of Science (IISc), National Institutes of Technology (NIT) and other premier universities cannot create knowledge ecosystems in India.

Competency building

In parallel to the product-focused research, academic institutions and industrial organizations can collaborate to develop students with skills and competencies that are required for cutting edge science and technology and convert the skills into commercial capabilities. The world is placing significant hope and trust on India delivering the unique advantages of frugal engineering, novel technologies, high quality, rapid commercialization and cost-competitiveness. This requires a talent pool which has not only an excellent knowledge base but also an ability to apply such knowledge to industrial scale development and global networking. The relative shortage of such talent, despite the high number of graduates, postgraduates and researchers has resulted in a skew in the employment market. Companies and educational institutions must collaborate to develop the requisite talent pool. Two way sabbaticals of industry professionals and academic professors, mutual lecture sessions, live projects in industries, symposia, and consulting assignments by universities would be great ways to strengthen the talent pool.

Institutions of higher learning not only provide the private sector with skilled human resources, but also support the sector in many other ways, including research and development . Collaboration between the academia and industry plays a crucial role in fostering public and private sector competitiveness, through both indirect and direct knowledge transfer. The indirect knowledge transfer is achieved through such activities as industrial training, using members of the academia as consultants in the private sector, holding joint workshops and conferences, and journal publications. On the other hand direct knowledge transfer is achieved through collaborative research and/or purchases of patents. It should be noted that in both types of knowledge transfer, knowledge flow is in both directions, between academia and industry. Knowledge from the academia to the industry is used to improve products and services, while the knowledge from industry to the academia is used to define disciplines, develop curricula, design short courses, and improve pedagogy.

Government, the vertex of knowledge triangle

Globally, governments have played a significant role in fostering industry academic collaboration either by policy or financial incentives. The progress made by several developed economies is directly attributable to the knowledge and talent ecosystems that governments, universities and industries built together. The United States has been the pioneer in funding academic research and institutional development of knowledge with commercialization of intellectual property. Europe has been also a major harbinger of scientific and technological innovation for commercialization. A study of select Asian countries by the World Intellectual Property Organization (WIPO) as reflected in its work “Technology Transfer, Intellectual Property and Effective University-Industry Partnerships: The Experience of China, India, Japan, Philippines, The Republic of Korea, Singapore and Thailand (2007)” has interesting insights.

In these countries, development and expansion of University-Industry (U-I) relationships during the study decade has been a result of goal-oriented and deliberate public policy efforts. The areas of focus have included: defining the legal status of universities and their professors, relaxing or removing regulations that prevented faculty members from working with companies, developing policies on intellectual property rights, establishing technology transfer offices, creating funding schemes, and ensuring adequate financial resources for research and development activities at universities. Asian countries, both developed and developing, demonstrated a consensus that universities and public laboratories should make greater contributions to countries’ overall economic growth and competitiveness. While universities, industries, and publicly-funded research institutions should be allowed to develop working relations with each other through their own initiative, governments also have a responsibility to establish laws and practices that would give proper incentives towards collaborative research activities. At the same time, WIPO cautions that we must be careful not to forget the importance of long-term scientific goals and educational responsibility. Universities should not cave in to the pressure to generate quick commercial outcomes.

In all of the Asian countries that participated in the WIPO project, some type of policy framework, underpinned by laws and government regulations, has been put in place over the last two decades. According to WIPO, ideally, the policy framework should serve three purposes: first, to state publicly the intention of the government with respect to the direction universities and industry should take; second, to lay down legal rules for the conduct of universities and industry, for example in relation to the management of IPRs; and third, to secure financial resources and incentives to facilitate collaboration. Not all countries have policy frameworks that serve all the three purposes. In certain countries, the legal status of universities needed to be redefined by new laws so that they could operate as independent and responsible entities. In others, there was no need for new legislation. In some countries, governments are taking pro-active measures to boost U-I collaboration, while in other countries they play more backseat roles, allowing universities and industries to determine their own courses of action. The legal frameworks are very different among the Asian countries that participated in this project. In addition to the legal framework, some countries draw up basic plans and goals for U-I collaboration with a view to setting forth future directions and accelerating the trend. Such basic plans are meant to be reviewed and if necessary, modified regularly to take into account the progress to date.

'GAIN' as a paradigm for India

In India, which has among the best university, industrial and legal systems of the world, Government has a major role to play in the academy-industry collaboration. For one, most high level scientific and technological institutions in India are sponsored, funded or regulated by the government. Secondly, government funding and tax policies have a major role to play in seeding the thoughts of collaboration and incentivizing. In the US as well, federal funding is a major trigger for academic research. In India, the Department of Scientific and Industrial Research (DSIR) of the Government plays a major catalytic role through programs such as Industrial R&D Promotion Program, Technology Development and Demonstration Program, Technopreneur Promotion Program and Technology Development and Utilization Program. Of these, TDDP has been playing a significant role in strengthening the interface between industry R&D establishments and academic institutions through a variety of schemes and projects. Yet, the impact in terms of intellectual property creation and commercialization is not as deep as it ought to be.

Eventually, for a national impact, India would need a model of Government-Academy-Industry-Networking that is win-win for all the stake holders and the nation at large. One of the concerns industry has in sponsored research is the protection of intellectual property while the academia similarly have their concern for creative freedom. There is a need to combine creativity and novelty of positive university thinking with the rigor and discipline of real proof-of-concept that is required by the industry and regulators to achieve win-win commercialization. In this joint endeavor there is no question of who is better; chemistry is as important as biology, and extending it further, discovery of a preliminary proof-of-concept drug and its advancement to commercialization are equally important. Government on its part would like the educational institutions to generate some royalties out of the intellectual property generated which would help the institutions reinvest for better infrastructure.

Under the GAIN paradigm, the government would develop, through a joint expert committee, a standardized and transparent model of academy-industry collaborative agreements which will enable open collaboration and cross fertilization. In certain sunrise sectors, the government would need to take specific initiatives. For example, the Taiwanese government launched a Project called “Two Trillions & Two Stars” to promote industry development, in which the two stars referred to were the semiconductor and display industries. In order to convert the traditional production-strength business model into advanced technology, the need of qualified talents was identified by Taiwan as a crucial factor to keep up with the future plan. Therefore, Government, Industry, Academy and Research Institutes cooperated to provide technology training programs in Taiwan. One action initiated by Industrial Development Bureau, Minister of Economic Affairs (MOEA) was to establish “Semiconductor Institute” in 2003 to meet the challenge of professional and technical talents shortage issue. In addition, different kinds of organizations worked together to synergize programs for international investment and local industries.

India, with its several thousand colleges and universities as well as hundreds of public and private research laboratories could be catalyzed into a knowledge network by government policies. Transfer of academic research to entrepreneurial ventures on zero fee but commercialization linked royalties could be a great way to develop faith in the accomplishments of Indian research that are dormant. Larger firms and universities can play a more proactive role by setting up cutting edge centers of excellence in sunrise fields. Government can extend its effective role by providing the seed capital for such ventures which usually require mega capital. Active participation by the institutions and industries for such centers would be enabled if the sponsoring units are provided dedicated access to facilities and research. Centers for biotechnology, nanotechnology, artificial intelligence, genetics, and alternate energy are best supported by such collaborative endeavors.

Knowledge cities for GAIN

The Government of India has just announced a National Manufacturing Policy which envisages the creation of 12 mega National Investment and Manufacturing Zones (NIMZs) in the country to spur massive industrialization and make Manufacturing contribute to 25 percent of the GDP. For achieving global competitiveness and self-sufficiency through manufacturing, knowledge that can stimulate product and process competitiveness is even more necessary. GoI should consider the IITs, the IISc, the NITs and CSIR laboratories as well as the GoI recognized industrial R&D centers (totaling say 100 to start with) to take the lead for creating the knowledge cities around them. Networking would be as important as physical assets to translate GAIN into a successful operating paradigm. As with National Manufacturing Policy, GoI should soon come up with a National Knowledge Policy, with National Knowledge Cities and Government-Academy-Industry-Networking as its principal platforms, and national innovation and global competitiveness as the principal objectives.

Posted by Dr CB Rao on October 26, 2011.

Monday, October 24, 2011

Insights from Maruti-Suzuki Saga : Japanese Management as Indian Ecosystem

When a pioneering institution founded on seemingly impeccable foundations encounters periodic upheavals, the causes could be systemic and often beyond the obvious. The periodic workers' unrest at Maruti Suzuki India Limited (Maruti-Suzuki), India's premiere automobile company draws attention to this. Maruti Suzuki India Limited (initially Maruti Udyog Limited, established in 1981) became a 50:50 Joint Venture (JV) between the Government of India (GoI) and Suzuki Motor Corporation of Japan (Suzuki) in 1983. Establishing a state-of-the-world automobile plant in 1983-84 with Suzuki technology, long before India's economic liberalization of 1992, Maruti-Suzuki had a phenomenal impact on India's industrialization and economic development. It revolutionized India's primitive automobile industry, led the influx of state-of-the-art Japanese automotive and component technologies through scores of follow-on ventures, enabled the Indian industry adopt the famed Japanese management concepts and demonstrated that with aligned vision and goals, public-private partnerships and 50:50 joint ventures can succeed. With the sale of the GoI stake to Suzuki and the public offering, Maruti-Suzuki became a subsidiary of Suzuki, Japan by 2007.

Despite the presence of virtually every international automotive company in India, and despite Suzuki having bought up the GoI share, and the attendant structural changes, Maruti-Suzuki continued to be the market leader in the Indian passenger car market, especially the small car segment. In 2009-10, the company achieved a peak sale of over one million vehicles and a peak turnover of USD 8.4 billion. Against this virtuous performance, the series of strikes affecting the production and climate at Maruti-Suzuki, some dating back to 2000, is indeed distressing. While the current strife is variously attributed to trade union matters, public-private partnership issues, work culture and management methods, and will be resolved sooner than later hopefully, the loss of sheen in the original jewel of India's manufacturing crown has some lessons that are relevant to sustain India's growth as a global manufacturing hub.

Troubling hypothesis

In the words of Mr R C Bhargava, Chairman of Maruti-Suzuki (Interview inThe Hindu Business Line, October 23, 2011), since June 2011 when the dispute started, the Company has lost USD 350 Million. He also said, "Unfortunately, at Manesar, the Gurgaon plant's harmonious work culture has not taken roots. Partly because it's a young facility, the workforce is younger and political influence is much stronger. Also, in 1983-84, when the Gurgaon plant was set up, Maruti was a low-key company, still outside the radar of politicians. But when the Manesar plant came up, it was a part of a very successful industrial establishment. Trade unions like to work in areas where workers are prosperous. How come they are not as active among the unorganised sector? The Gurgaon-Manesar belt is known for industrial unrest, particularly in automobiles, as it is one of the most prosperous sectors".

The above observations of the Chairman of Maruti-Suzuki, who had been with the Company as its Managing Director since 1981 and steered its affairs, including transition from a JV to a Japanese entity from 1983, are troubling. The hypothesis of higher prosperity and greater work force youthfulness leading to greater unionism and higher unrest is both enigmatic and disturbing. The essence of superior management, and everyone agrees that the Japanese Management is top class, is that it should result in greater prosperity for the company and its stakeholders. Clearly, it is regressive to accept a situation where prosperity breeds unrest. We need to understand the efficacy of management system in a national perspective. As India seeks to become a global economic superpower, India needs more than technology and management, probably an entire national ecosystem to achieve its potential and aspiration. The following narration in this blog post is independent of Maruti-Suzuki and does not purport to be of any judgment on the company. Rather it postulates certain essential ingredients of a national strategy to achieve true integration of Japanese Management as a national ecosystem.

Japan, a phenomenon

So much has been written about Japanese management that there is hardly any topic or facet that remains to be identified. A few essentials are, however, spoken about more than the others. These are workplace efficiency (5 S), visual management (kanban), inventory minimization (just-in-time, lean management (Toyota Production System) and continuous improvement (kaizen). The management practices are sharpened by an educational and research system that enables conceptual analysis, scientific advancements and technological inventions. These are well supported by a national work ethic of sacrifice, discipline, fortitude, and orderliness which condition the Japanese to place the society's interest before self. Clearly Japanese management is not merely a set of practices but a total national eco system. This has been tellingly demonstrated in the manner in which the nation responded to the Fukushima nuclear tragedy.

As India moves to become a global manufacturing hub, the country has to reinvent itself completely to inject a degree of sustainability in the global competitiveness. India's intelligentsia, politicians and bureaucrats must recognize that sustainable excellence cannot be achieved in anyone sector in isolation of similar excellence in other sectors. Any outsourcing that occurs to India only on cost arbitrage is unlikely to be sustainable (when a strategic time horizon of two decades or more is considered) unless it is reinforced by value differentiation. If cost competitiveness itself is affected by industrial strife or by hurdles to productivity prognosis could be suspect. That said, it would be insufficient even if R&D outsourcing gets added to manufacturing outsourcing, unless massive systemic upgrades take place in social, educational and economic infrastructure. It would be incorrect, for the same reason, to assume that economic liberalization can by itself be a sustainable engine of transformation.

People at the core

Amongst all countries of the world, India would have the largest proportion of people aged 35 years and below over several decades going forward. This generation, unlike the Japanese society, has two extremes to look at: one, a hugely transformed consumerist affluent HNI (high net worth individual) model and the other, an utterly unchanged impoverished BPL (below the poverty line) model. The largest sections of India's youth will be positioned in between the two models, in quest of an appropriate model to avoid the poverty vortex and attain the affluence peak. While industrial and economic development could provide quick fix, as already demonstrated in China and to some extent in India, sustainable and equitable prosperity requires a distinctive model designed for Indian demographics. The appropriate model would have culture and competency serving as the twin foundations, and aspiration and achievement constituting the twin pillars of socio-economic transformation.

Each of the four factors comprises in turn several impactful dimensions. A positive social culture emerges from equality, equity, integrity and empathy. A positive competency set comprises knowledge, application, improvement and innovation. Aspiration is more than a dream; it has awareness, competitiveness, mission and passion. Achievement has, in addition to result, reward, recognition, and growth. An intellectual and egalitarian society with a strong work ethic, more often than not, has all the above elements. The Japanese society comes closest to the above model, which probably explains why Japanese management has become so successful in that particular society. While Individual enterprises that embraced Japanese technology and management have been shining examples of individual success with some collective positive impact on the local industry and economy, in countries as different as India and America, they have not been nationally transformative. That is because the people factor still needed to be addressed in totality.

Education and experience

Japanese management has arisen out of the traumatic experiences of a war ravaged nation seeking survival, reconstruction and competitiveness. As the aftermath of World War II posed stark pressures the Japanese society complemented its work ethic with innovative edge to become globally competitive in just two decades. This suggests that people missions forced by experience often succeed in the face of adversity. Sustainability, however, accrues only through right education and research. During the very same period, Japan overhauled all of its educational and research systems to focus on science and technology, and research and innovation. As a result, a competitive and profitable industry got the right base of human resources to invent new products and efficient processes to place Japan in the top spot. Decades of economic stagnation may have raised questions about Japanese economy but the continuance of Japanese competitiveness despite the very same economic adversities reflects the sustainability of its ecosystem.

India needs teachings of both experience and education to ensure sustainable global competitiveness. Experience teaches that outsourcing services based on insourcing of factor inputs is not a hugely sustainable paradigm. For example, India is far more competitive in trucks where it has achieved high indigenization than in cars where it has high import dependence. Wherever people advantage is supplemented by domestic equipment and material supplies and indigenous process technologies, India could achieve the highest levels of competitiveness globally; bulk drugs and formulations are examples. The implication is clear; India needs a revitalization of its capital goods, raw materials and component industries to achieve sustainable competitiveness. Similarly, the advanced Japanese, Korean, American and European educational teaching and research systems teach us that cutting edge research is the basis of new start-up technologies. While the Indian Institutes of Technology (IITs) are famed globally, it is the student stock than the intellectual property base that has received global recognition. IITs have had centers of excellence in certain disciplines such as microwave engineering, ocean engineering, biotechnology, mainframe computing, artificial engineering, and more recently, nanotechnology. The emergence of new sciences and technologies is tied to exploitation of such infrastructure.

Creating a new ecosystem

Creating a new ecosystem that achieves an optimal combination of culture, competency, aspiration and achievement is not the sole responsibility of the Indian educational system; nor is it within its means. It is a combined responsibility of all the institutions, educational, industrial and governmental institutions and the social, economic and political systems. At one level, the task would appear too massive to even think of attempting it. On the other hand, the mammoth task can be broken up into several manageable sub-tasks such as driving an Indian cultural renaissance through the educational system, enhancing the institutes of higher learning for cutting edge research, campaigning socio-politically for high national achievements and providing multiple avenues for recognizing performance.

A novel way to address this fundamental and overarching requirement could be through institutionalization of power and responsibility to drive such a transformation. Expert agencies could be created for drawing up of curriculums of Indian culture with all the wisdom of centuries updated with requisite modernity. Educational institutions could modernize the syllabi each year to incorporate modern developments on a real time basis. Industries can aim at developing new capabilities in import substitution. Individuals can be encouraged by family elders and institutional leaders to inculcate positive aspirations from the beginning. And finally, growth and development need to be expressed in more tangible metrics in shorter time frames to motivate the society that India can transform itself.

From management to ecosystem

If Maruti-Suzuki and other new car and component companies, with their Japanese technologies and management practices, could transform a dilapidated automotive industrial structure of India into a globally scaled and technologically vibrant industry, there is no reason why a larger adoption of a total national ecosystem concept cannot have a more impactful and more expansive transformation on the Indian industry and economy. Fundamental changes have to be engineered at the social and educational levels in parallel to industrial and economic initiatives to achieve a total transformation towards a Japanese style ecosystem with Indian ethos.

Posted by Dr CB Rao on October 24, 2011

Sunday, October 9, 2011

Steve Jobs (1955 – 2011): Life and Soul of Technology

In the demise of Steve Jobs on October 5, 2011, following his decade long steely battle with a rare form of pancreatic cancer, the world has undoubtedly lost one of the greatest technology visionaries and business leaders of all time. The world, not merely the domain of technology or the field of consumer electronics, would be poorer by his absence. Over the last two decades, Steve has pioneered a computing and connectivity revolution which has irrevocably changed how the world networks and experiences itself. Through his several product and process contributions, Steve Jobs defined what words like creativity, innovation and connectivity actually mean. He clearly belongs to the rare class of leaders who give depth and substance to the concepts that are abstractly talked about but are never fully and truly experienced by the users.

Given the enormous contributions Jobs has made, his demise has triggered an overwhelming outpouring of tributes from leaders and commoners from all walks of life, and from all nations. Collaborators and competitors have been one in praising the enormous transformation he brought about in the deployment of digital technology to improve and enhance everyday living. Several of the adjectives and superlatives showered on him by the media such as digital diviner, technology visionary, iconic leader, technology titan, gadget genius, master showman, the modern day Thomas Edison, apple of technology, technology talisman, and several others sit easily on Steve Jobs. Even more remarkable is the fact that even as a technologist and businessman, Steve Jobs is compared with some of the greatest artists of all times like Mozart, Picasso and Leonardo da Vinci!

In very simple words, Steve Jobs was an artist and genius extraordinaire who integrated technology and art, hardware and software, materialism and emotion, and business and life as no one else has done so far. He was not only an amazing inventor of product concepts but an astounding integrator of ecosystems. It would be impossible and even superfluous to attempt any more than what is already said, or would doubtless continue to be said, about his unique achievements. This blog post attempts to draw lessons and insights from his leadership as to how “thinking differently” can make highly positive and significantly transformative changes to individuals, societies and nations.

From digital divide to digital connectivity

The greatest contribution of Steve Jobs was in making computers a part of daily living, at work and off work. Ever since Steve Jobs invented the world’s first truly personal computer in 1977, in association with Steve Wozniak (with whom he co-founded Apple in 1976), he kept on transforming the computing and connectivity world with stunning new products. Until the 1980s, computers were for offices and businesses while entertainment devices were for homes and families. By making computers truly and sensitively personal devices, and integrating media in all forms with handheld portable Apple devices such as iPods, iPhones and iPads, Steve has transformed digital divide into digital connectivity. Productivity that comes out of efficient organization of activities, and motivation that results from sensory satisfaction are achieved through Steve’s Apple products, making life both productive and pleasurable.

Equally important has been the socialistic philosophy of Steve Jobs, which probably has not been understood at all. In total contrast to the practice of every other industry or business corporation that offered products at a lower level (so called utilitarian) to one stratum of the society and products at a higher level (so called luxury) to another stratum, Steve offered one standardized high value product to all sections of the society. He also did not believe in the practice of either skimming the market with hyped up value and usurious pricing or fragmenting it with broken technologies and flexible pricing. In fact, his products are the same, whether for billionaires or for commoners. The user experience from his products is so classy, yet so natural and personalized that neither the rich nor the not-so-rich found themselves alienated from his universal designs. He never had to make his iPhone with titanium or platinum or bedeck it with crystals or diamonds for the rich to differentiate it from the standard iPhone for the masses. In a sense, Steve has achieved an immense measure of social equalization with his technological virtuosity, an achievement which political and social campaigns could not ever achieve.
Steve Jobs' digital connectivity is more than a technological feat; it is a transformational phenomenon of social equalization and universal harmonization.

If only more corporate leaders become attuned to this philosophy of providing high value at reasonable cost, industries would be more scale-efficient, waste-resistant and cost-competitive.

Minimalist design for maximal impact

The contributions of Steve Jobs in the field of design are phenomenal. Minimalist design has had successive definitions through his products, each topping the other. His products have always been objects of art, merging seamlessly with the varied human forms and blending harmoniously with myriad environmental ambiences even while retaining an outstanding differentiation. Steve's designs have no vintage related obsolescence. Apple products, especially the “i” Series, demonstrate that a well designed and elegantly crafted form factor can be as durable and as compelling as a corporate logo. Here again, his design philosophy defines the term ‘trade mark’ in terms of emotional ownership by his users, which no amount of legal ownership that trade mark rights can fetch to a company. Apple's fight with Samsung on iPad has to be seen more in terms of the threat, the first time ever, to Apple's emotional connectivity with its users.

The other aspects of Apple's design philosophy are equally compelling. His product technology has been intuitive, universal and user-friendly. His products align perfectly with natural human behavior of ‘explore and experience’. From the ‘scroll and click’ mouse he pioneered for his personal computers initially to the ‘touch and feel’ he developed for his iDevices more recently, Jobs has transformed computers into a great sensory and audio-visual experience. One does not need to read complex manuals or go through multi-step tutorials to start using Apple products. Highly intuitive, feelingly natural and helpfully self-corrective features distinguish the user experience provided by Apple products. Steve Jobs has done what was for long impossible; he has infused life into technology, rendered its functioning soulful, and made technology intelligible to even the uninitiated. Various product innovations from Mac graphics and computer mouse to touch, slide, pinch and move sensory technologies, and the most recent iPhone4S voice technologies, are lively examples of Steve's humanized technologies.

Steve Jobs' design philosophy has been commercially as successful as aesthetically it has been elegant. This is very much evident from the fact that not even several hundreds of diverse smart phone models or portable music players from leading technology companies, in the aggregate, could make any dent on the leadership position of Apple products in terms of either design strengths or market allure. If more scientific and technology leaders pursue simplicity and focus for optimal performance the ’design to delivery’, value chain would be that much more impactful for the corporations as well as all of their stakeholders.

Digital ecosystem

There was a time when “make or buy” was a procurement decision. The concept of integration came up later to define the strategic choice of a corporation to have the full value chain within itself or focus only on a few core competencies internally. More recently, the wave of outsourcing has overwhelmed the world as a powerful instrument of cost competitiveness and time effectiveness. No leader, however, has encompassed all of these concepts under one umbrella of creating a virtual ecosystem by which all the current stakeholders and future value drivers would be sufficiently independent to be specialized, and yet strongly connected to an Apple ecosystem. Sony may have realized the importance of media and entertainment to development of electronics much earlier than Apple but it was Steve Jobs who pioneered the integration of music and movies into the Apple ecosystem through his iPod (2001) and iTunes(2003), providing a seamless media connectivity to the user. While some viewed this as an attempt to regulate consumer freedom through proprietary digital platform, eventually his contribution to making unlimited choice available to the consumer and curbing media piracy to support the media corporations is well acknowledged.

Equally impactful has been his unprecedented contribution to application development for his devices. In fact, the true era of application development has arrived with only the iDevices, more particularly iPhone and iPad. Application development is the model of virtual integration at its best, providing unlimited computing, connecting, reading, gaming, and entertainment capability to the Apple devices through third party applications. The fact that Apple has several thousand applications for its devices, for example over 500,000 applications for its iPhone, speaks off the success of the Apple digital ecosystem wherein any creative and capable software developer could come up with front ranking applications. Some of these application developers could themselves evolve into medium and mega enterprises in due course (Angry Birds, for example). Also, at a time when manufacturers consider retailing to be a different expertise, Steve Jobs propounded the concept of Apple Stores to enable and enhance integrated user experience. Today, with 320 retail stores, 237 of which are in USA, Apple retail network has extended the integration of the ecosystem further. Moving from the ground to the cloud decisively, Steve Jobs took one more giant leap when he announced in 2011, Apple iCloud service which seamlessly stores all of the music, photos, movies, documents, applications, mails, calendars and many others, and wirelessly pushes them to all of the Apple device users.

The strategies of integration, outsourcing and collaboration have thus become one under a vision of digital ecosystem for Apple products, services and consumers. For all the participants, it was as if it is one’s own world to live in as a home. From a corporate leadership point of view, creation of an expansive umbrella ecosystem which supports the core organization and all of the stakeholders is the way to grow a sustainable business.

Global value chain

Until Jobs came on the scene, the automobile industry and consumer electronics industries were two industries that seemingly had a global value chain. Yet, each of the industries was characterized by generational, performance and styling differentials in the models offered for different countries, constraining the operation of a true global value chain. More surprisingly, the industries exerted to retain critical components within the developed country supply chains and within collaborating groups, tied together by ownership or loyal supply history. Steve Jobs had a different concept of a unified product design for the globe from America, sourcing components from even potential competitors (for example, Samsung), basing the final assembly in China and generating huge value for Apple and USA through global sales.

Job's contributions in bringing Asia on its own as the global production hub of smart phones and tablets is acknowledged by not only the leaders of the component firms but also the leaders of the governments. Taiwan, China, Korea, Singapore and Japan drive the availability of critical components for Apple devices. Despite huge scale of procurement and critical scope, Apple has followed single vendor, and concentrated country, supply chain policy to great success. Part of the answer could lie in Apple’s penchant for integration under one ecosystem and the consequent assurance stakeholders perceive in terms of sustainable co-existence and growth. That said, Apple’s supply chain strategy is perhaps one of the more guarded aspects of the even otherwise secretive company. Flawless launch of products in millions of units the world over is possible only through a finely coordinated supply chain system as Apple’s.

The lesson for leaders is that global value chain can only be optimal on the basis of two primary factors; design superiority that provides the strength to source even from competitors as much as from dependent vendors, and an overall ecosystem that provides assurance to all stakeholders through collaborative forecasting and planning.

Simplicity as strategy

The achievements of Steve Jobs are built on just two core foundations of simplicity and elegance. These have supported a superstructure of seven principles that drove every aspect of his technology and management.

Style is Substance

From the very initial days Jobs and Apple believed in style: in neat, clean and clear fonts, in attractive, explanatory and friendly graphics, in elegant form factor with pleasant touch and feel experience, and in marketing in style and in dramatic detail. Jobs merged the left brain which is logical and linear and the right brain which is creative and emotional in his design philosophy, operational strategy and customer connectivity. Jobs’ knowledge and appreciation of calligraphy (which he learnt as a dropout at Reed College) came back to him years later to add detail, distinction and differentiation to his products.

Time is of essence

The concept of time as he executed was not one of go-to-market with the least time lapse from the first ideation. Rather, it was one of providing speed and efficiency in the hands of the users. From the response time to the navigation speeds, his devices deliver the time advantage to the users. At the same time, Steve Jobs was also willing to wait for the appropriate time to unleash some of his brightest ideas (for example, he was willing to wait to launch the devices, ready in the late 1990s, only after the broadband revolution in 2000s). At the same time, whether at Apple or the intervening Next Computer Services or Pixar Studios, he utilized every moment to develop or ideate on novel products.

Thrill Enthralls

As he devised his devices and as he launched them, Steve Jobs created a rare thrill which transported his entire ecosystem of the Apple organization, component suppliers and vendors, application developers and more importantly the users into a world of future possibilities. By eschewing market research and instead relying on his own perception of futuristic consumer needs, Jobs converted launch events into much anticipated dramatic rides into future. All Apple semi-annual launch events were inevitably thrilling and enthralling, representing an epitome of masterly showmanship and universal marketing.

Errors lead to Successes

It is not that either Steve Jobs or Apple was always successful. Apple struggled initially with Mac computers while Steve erred to antagonize his Board and lost the job despite several innovations between 1976 and 1985. Losing control of Apple in May 1985 was, of course, his greatest mistake. He lost much money in his subsequent entrepreneurial attempt, Next Computers. To add to that he had his own share of personal tribulations and unsatisfying spiritual quests. One may even doubt his wisdom in having the chief executive of Google, who would turn out to be a major competitor in smart phones and mobile operating systems, on the Board of Apple. All of these, however, did not deter Steve Jobs from discovering his spark of creativity to shape technology into breakthrough products and services (from digitally animated movies through Pixar to iDevice ideations through Next and Apple) . Neither did he slur over the failings; he moved to improve processes (for example, supplier scrutiny) and products (for example, antenna grip).

Technology is for all

In the fast changing technology world, established companies are often overtaken by younger startups with more creative and disruptive technologies. Steve Jobs demonstrated that Apple, even at 25, and he himself at 56, could be more creative than anyone else. Apple products were cool not merely to the adolescents and young professionals but equally appealing to the elderly and home making wives. That Jobs continued to brim with creativity in his 50s as he had been in his 20s, and despite undergoing a decade long traumatic fight with cancer, is something which most corporations and leaderships would need to take note of.

Team delivered perfection

While there is no denying Steve Jobs’ singular leadership, he has also built an outstanding team of ten outstanding leaders who delivered perfection in their domains. To quote a few, Jonathan Ive who heads design is credited with Apple’s minimalist snow white design while Scott Forstall drove successive IOS developments. Tim Cook’s exemplary supply chain prowess and Ron Johnson’s retail strategy provided end-to-end competencies. In addition, Steve Jobs’s relentless focus on getting the best of each employee has led to a uniformly high performing organization. The smooth succession of Tim Cook to the CEO role also signifies the development of internal leadership talent at Apple.

Wealth is Business Health

Steve Jobs is not known to have contributed or part-transited to charity as Bill Gates and Warren Buffet have done. However, the national wealth he has generated through Apple’s revenues, profits and market capitalization, and the sheer scale of his product development and manufacturing and the global marketing of his products have possibly created more jobs and career opportunities than any industrial or charitable activity could hope to achieve. Apple’s success, under Jobs, demonstrates that wealth earned innovatively though humanization of technology is the best way to ensure sustainable health of businesses.

Model for America, and the World

Apple has seen dramatic growth in revenues, profits and market capitalization with the reentry of Steve Jobs as Apple’s CEO from 1997 onwards. Looking forward into the immediate term, Apple could claim an estimated annualized revenue level of approximately USD 110 billion, net profit of USD 25 billion and a market capitalization of USD 350 billion. It has created new historic highs in estimated annualized sales if iPhones, iPads, iPods and Macs of 80, 40, 30 and 16 million units respectively. Apple employs nearly 50,000, over 12,000 of them in the US. The stock price touched a high of USD 413.45 in September 2011.

In an America which seems to have lost the confidence in its creative and innovative capabilities over the recent decades, Steve Jobs has demonstrated in the very same period an amazing model of aggressive and accelerating business growth based on products which touched and shaped human life and social connectivity as never before. By focusing on simplicity, elegance, perfection and friendliness he created an ecosystem of products and services that had sustainability and economic development. Hopefully, Steve’s life which provided the much needed life and soul to technology would inspire corporate leaders as well as bright men and women to focus on the hard but highly rewarding aspect of driving sustainability through simplicity.

The magic and the message

Unlike Jack Welsh and other leaders, Steve Jobs never made an attempt to discuss or describe his managerial or leadership thoughts. His commencement address at Stanford University in 2005, however, went on to become one of the most quoted speeches. It has been described as ‘life-changing’ and ‘career -transforming’. The three personal stories he narrated in the speech would inspire generations for the power of their simplicity just as his Apple products would continue to thrill generations with the elegance of technology. The legend that Steve Jobs has been would live on through generations of human enterprise and endeavor.

Posted by Dr CB Rao on October 9, 2011

Sunday, October 2, 2011

The Clocks Within: For us They Tick

In an uncertain life, time is the only certainty. Every tick of the clock represents an opportunity fulfilled or lost; or a risk faced or overcome. In an ideal lifespan, the heart ideally beats marginally faster than the seconds through which a clock ticks. There thus seems to be a correlation of destiny between the beat of life and the tick of a clock; if at all, the higher beat of the heart signifies the opportunity for the human being to accelerate development over time. Yet, we do not seem to realize the existence of the clocks within us that shape us into what we are. If we understand the nature of the clocks that tick in us probably we would be nearer to what we could be. As we grow in life, we desire everything to happen in a predictable clockwork precision to our advantage and are often perplexed and anguished as to why things happen in an unpredictable volatile manner to our disadvantage. The outcome of life is a function of several factors that are within us and several other external factors that impact us. We should obviously seek to manage the internal factors rather than worry about factors beyond our control. Understanding the clocks that tick within us is necessary to have our lives chime to peace and harmony; rather than to advantage or disadvantage.

There exist five clocks in a human being that attain a level of development, maturity and even atrophy as one grows in age. These are: biological clock, intellectual clock, emotional clock, economic clock and philosophical clock. Each of the clocks guides the human body, mind, heart, ego and the self. The first three are clearly physiological, and part genetic and part cultivated while the balance two are cultivated with a major diversity of purpose. The first three clocks enable our performance in the world while the economic clock determines the ego state and the philosophical clock influences the spiritual state. Reflecting on the teachings of the great Hindu sage Adi Shankaracharya (born 788 CE), the body, the mind or even the heart do not singly or collectively define the self, and much less the ego or spiritual state. Brahman or the self, according to Adi Shankara or the various great Hindu scriptures represents the ultimate, universal, non-divisible and non-quantifiable soul. The author of this blog post makes no pretence whatsoever that he has any explanation or learning he could offer beyond what is in the scriptures, and their various scholastic interpretations. On the other hand, the author through this blog post seeks to develop a simple paradigm that relates the march of time to the clocks that lie within us, and often tick so weakly that we do not notice them or so strongly that we are overwhelmed by them.

Multiple operating systems

The human body that drives the mechanics, the mind or the brain that together with the heart drives all its workings — memory, perception, reason, the stew of hormones that results in our emotions — constitutes our human system . It is, in other words, the “hardware” of human existence. The human ego is what governs the human hardware — the “software” of human existence, our very own “operating system,” unique to each of us. The human spirit is the “electricity” or the “energy” that animates us. Together, these form infinite personalities of physiological and psychological combinations that set apart each of the billions of human beings that exist in the universe. Mercifully, however, there exist broad bands of personality types that are shaped by centuries of human evolution into acceptable yet differentiated personalities. For each, however, the evolution into a personality type that both shapes the aspirations and drives the achievements as well as the overages and shortfalls is both a happenstance determined at the birth or a quest that continues all through the life.

In order to develop a paradigm with which we the humans can understand, reflect on and manage this complex process, this blog post proposes the Paradigm of the Five Clocks that all of us need to be aware of. Each of the clocks which reflects each facet of the holistic human system comprising the body, mind, heart, ego and spirit is also hypothesized to have three levels of development. For example, biological ability could be driven by genesis, wellness and regeneration. Intellectual competence could be characterized by awareness, mastery and creativity. Emotional sensitivity could be reflected in three varying levels of neutrality, mutuality, and empathy. Economic drive could be individualistic, organizational or social. Philosophical approach could be fatalistic, introspective or spiritualistic. The chimes of the five clocks could dominate each personality in different proportions while each of the clocks could have varying capabilities or profiles. We can consider our clocks to interact in potentially infinite combinations to determine how unique and influential or how common and influenced each of us is in the universe. But, for human development such a complex network is not a relevant model, either for theoretical appreciation or practical application.

Do clocks have their time?

If the paradigm is interpreted in terms of ancient theology one may say that each of the clocks has its time and also its professional relevance. It is considered that a strong emphasis on the biology in the baby and growth years automatically leads to the development of a healthy body, mind and heart while there is time and need in the later years for a better awareness of one’s ego and a transition to philosophical maturity. It is also considered that persons engaged in different professions must be encouraged to focus on that aspect of the five developmental forces that is relevant for the profession in an overwhelming manner. Possibly, this paradigm was relevant in ages when life had been community-centric and taken as if ordained by birth. In today’s globalized world which knows no borders and in the competitive arena where multiple faculties are required to sustain and grow, an ability to think and develop in a holistic manner becomes relevant. This need is enhanced all the more by the inverted food pyramid, sedentary life style, and materialistic living that characterize contemporary times.

The well-evolved and well-placed human being of the day needs each of the clocks in an equal measure to develop into a holistic being who can enjoy the uncertainty of life with a reasonable amount of certainty. The only variation would be the level that characterizes each of the clocks. The ideal prescription is to have each of the five clocks work in us, and for us, in equal measure even as we try to attain the highest level of evolution in each of the facets. As one parents one’s children or as the family members influence each other, the overriding emphasis must be on the equal influence of the five clocks. The way a traditional Hindu family brought up its children and shaped itself over the centuries in India in a meta-physical mix of a healthy and happy joint family system did indeed support such an equal and balanced development. The components of this living comprised balanced natural diet, its richness compensated by hard work, providing the requisite biological strength, community living which enabled mental strength and emotional sensitivity, joint family system which provided economic strength and continuous religious activities including elderly counsels, celebrations and festivities which brought about philosophical maturity.

Listening and learning

The fundamental foundation of the paradigm is the recognition of the importance of the five clocks, each of which signifies the body, mind, heart, ego and self or spirit. That each is important, equally and equitably, is a lesson that can be learnt with benefit at any stage of life. However, it would require probably more than a professional mentor or guide; it would require a holistic Guru, again not merely a philosopher or religious teacher. The new age Gurus, be it Sri Sri Sri Ravi Shankar or Jaggi Vasudev, are probably contributing a lot to redirect and re-stabilize the society and help individuals discover the balance in life. The concept of clocks, as we all know, is that not only they draw attention but over time make people be ready to accept their chimes and alarms. The concept of clocks is also relevant in that the focus on seconds and minutes makes us all realize the importance of time. Smaller unitization of our life minimizes the risk of waste and maximizes the opportunity of learning.
Life offers us the opportunity to constantly learn new things.

This is one of the most ignored aspects of life in today’s world of focused learning and quick returns. The foundations of good learning are openness, observation, absorption, adaptation and application. Learning is thus a living process and not merely a school or college based transaction, where effort is rewarded first by marks and later by a job. Learning is also a stretch process. As each of the levels for each of the five clocks demonstrates there is an increasingly challenging task involved in upgrading oneself to the next higher level of capability, and competence. At the very basic level one can take life as is given or as it comes. One may attribute wellbeing to genetics, peg intellect at awareness level, be neutral on emotion, follow the dominant ethic of the society and in the overall be fatalistic on life and living. By stretch, however, most people can move to the next stage of wellness in biology, mastery in intellect, mutuality in emotion, sufficiency in economics and philosophical introspection. Being at this mid-tier itself makes a human being highly successful and reasonably iconic to guide and lead himself or herself, and others, on the right path.

The complete and perfect person

In Sanskrit, the mother language of India, and in many Indian languages there is a concept of ‘paripoornatha’. The concept of perfection in English somewhat comes close to that, although to describe a person who has attained paripoornatha, we would need to describe him or her as a complete and perfect person, and still fall short. Semantics apart, a person who listens to all the five clocks respectfully and follows their tic diligently and, in addition, super-stretches himself or herself to operate in the third highest level in each case would qualify to be the complete and perfect person. This means that the person should be yogic in life capable of regenerating the body components (except, of course, to the extent that one can humanly, as no one is immortal), creating new bodies of knowledge (except to the extent that not all knowledge can only be innovative), having high emotional sensitivity (except to the extent that one cannot be solely unilateral in empathy), achieving economic surplus (except to the extent that no one can aggrandize all wealth to oneself) and almost in a state of spiritualistic nirvana, of doing selfless duty (except to the extent that the familial needs also require to be fulfilled first, even going by the scriptures).

Super-stretch is easily possible if it is taken up as a way of life from the childhood. Not to despair, it should be feasible to target super-stretch at any stage of life. It requires, as mentioned earlier, the right guru to guide and effective time management. Focus on stress-free lifestyle and balanced diet would place the person on the right wellness path while choice of appropriate executive education programs would sharpen the intellect. Regeneration is entirely possible; else how does the body regain its earlier form even after a surgery? Similarly, brain can wire itself progressively to higher levels of complexity and intellectual attainment. Listening to the heart could provide the needed emotional quotient. Far more things are achieved through collaboration and empathy than with control and command. Resolving to be economically self-sufficient on an ethical basis, despite the hurdles and temptations, would reinforce the ego state while earning to share would enhance the stature as a responsible social citizen. Understanding the unavoidable nature of highs and lows in life would provide the requisite equanimity to appreciate the larger purpose in life. There could be several paths to re-clock oneself in this manner but doubtless, an enabling ecosystem and a partnering guru would make the journey of super-stretch truly fulfilling in a holistic sense.

Complete perfection and competitive/comparative advantage

Authoring this as a post in the blog dedicated to strategy and management, the author would like to position the paradigm of five clocks as a concept that goes beyond human or social development and contributing directly to firm level competitive advantage and nation level comparative advantage. Improved health levels boost productivity at firm level and reduce healthcare costs at national level. Enhanced competencies lead to sharper development and manufacturing edge at firm level and position India as an inventive country. Greater empathetic management would lead to greater harmony and synergy both at entity and nation levels. Economic capabilities enhance gross savings, gross domestic capital formation and gross national product. Spiritual strength helps the corporate, political and administrative leaders overcome crises in a resolute manner, be the leaders of destiny and enhance the image of the country in a world-leading manner.

The above, in turn, would require the Indian central and state governments to expand public and private healthcare services and upgrade educational infrastructure substantially. Administrators, human resource experts and corporate leaders would need to demonstrate the power of empathy through social responsibility initiatives. Leaders need to focus on generation of wealth for public good. Sage leaders and senior citizens need to bring out their wisdom from closed family circles into larger social forums. In essence, India, while integrating the strengths and benefits of modern development, must also travel back in time to its hoary past when it was in the forefront of ayurveda , astrology and mathematics,” sadbhavana” (noble thoughts), selfless service, wealth creation and sublime philosophy for the right clocks to tick and be heard by the current generation again. The congruence of a great past, a promising present and an exciting future is possible. For example, on this day of October 2, 2011, the 143rd birth anniversary of the great son of India, Mahatma Gandhi, his teachings, highly relevant even the vastly changed times, signify the fusion of the past, present and future for greater societal good.

Posted by Dr CB Rao on October 2, 2011