Saturday, June 30, 2012

Strategic Adjacency: A New Model of Integrated Diversification

Microsoft has made a stunning strategic move in recent days with the announcement of its own tablet computer, named Surface. For a technology giant and software pioneer whose business model, ever since inception, focused only on developing and supplying software for computer manufacturers and computer users, this move signals the company's significant shift in strategy. It is, however, not the first time that Microsoft forayed into hardware. Its X Box and Kinect gaming devices have been runaway hits; however, they have been hardware forays into a new domain of entertainment and gaming for the company. The entry into tablet manufacture represents its first move to forward-integrate into an adjacent product-market segment.

Microsoft has not been the first or the only one to do so, however. Google, the developer and supplier of Android mobile operating system, launched its own Nexus mobile phone a few years ago and has followed up with the acquisition of Motorola Mobility for adding on robust mobile phone development and manufacturing capability. It has also ventured in earler years into development of its own software akin to Office suite (pioneeringly on cloud platform), development of Chrome computers (extending the search concept) and now into tablet computers (a personal connectivity move announced just a few days ago). Amazon and Barnes & Noble have forward-integrated into electronic reading business through their e-readers and media tablets (Kindle, Fire and Nook) over the last few years. In old-world language these would have been defined as integration or diversification moves. This blog post proposes that in today's world, we need to conceptualize these moves differently.

Strategic adjacency

The above moves by companies which have achieved iconic status in their core technologies and businesses are not classic integration models as such moves are also accompanied by significant outsourcing. They are also not classic diversification moves which seek new diversified market segments, related or unrelated. Rather, these represent a definite attempt to move into strategically adjacent areas. The example of Apple having its own integrated software and hardware platforms, and the likelihood of personal computers being phased out by tablets have, no doubt, prompted Microsoft to protect, if not expand, its business by moving into the tablet computer domain. Faced with the lost time in developing an appropriate chip for smartphones that allowed other chip makers to dominate the mobile space, Intel is now leveraging its own Atom mobile chip with a newly launched Intel branded smartphone combination. Simultaneous dvelopments of convergence and divergence in an industry or related industries are blurring the definition of industry. This represents both an opportunity and a challenge for firms. Strategic adjacency provides a model to handle these.

Strategic adjacency could be seen as a sequential, and sometimes simultaneous, move to expand the business canvas, keping the ultimate customer focus unchanged while providing enhanced user functionality. For Microsoft, computer manufacturers were intermediaries and operating systems were enablers to reach to the computer user. Through Surface tablet, the firm is attempting a paradigm shift to reach the end-user dirctly. When Apple moves into its proprietary televisions the focus would still be on the same consumer who uses its iPhones, iPads and iPods, and who is traditionally covered by Apple with its unique ecosystem. Theoretically, any domain that helps the human being, operating as a domestic person or as a business person, fulfill his needs could result in strategic adjacency. Apple one day could create global tele-presence solutions and Microsoft could help in remote management of offices and homes. Google can help one visualize and rlat to the whole world from one spot. Facebook could institutionalize its own way of global social networking throgh its own branded mobile and tablet devices and exclusive email addresses. The question, then, relates to the basic triggers for firms to achieve strategic adjacency.

Competence versus commoditization

Competence, or core competence has, in the past, been the primary driver of business focus. Multiple competencies enabled companies to become corporate groups or conglomerates dealing in integrated or divrsified businesses. Rarely competencies were seen as enablers to move up or down, or even sideways in strategic spaces within an evolving broader domain. Traditionally, a truck manufacturer never sought to become a transport service provider. Nor did component maker aspired to become a truck manufacturer. The concept of competence as a driver, and also as a limitation of business, was well recognized and respected. Companies typically used different filters (technology, product, channel, market for example) to identify competencies that could drive business expansion and diversification. All of these tended to be company specific and investment intensive and zealously protected by owners or innovators of such proprietary technologies.

Recent times have seen a fundamental shift in understanding competencies. A central core competncy is now considerd enough to integrate multiple competencies. Innovation that has been the driver of competencies has, by and large, become commoditized with early commercialization to multiple partners. Notwithstanding hundreds of patents, companies are unable to hold off industry-wide replication as well as outsourcing and inlicensing of products. No single company today needs to be the in-house innovator of bundles of all the tchnologies, components and systems. Many innovator firms are keen to outlicense their patented or proprietary components to as many end-products as possible. Even large firms which have proprietary internals are willing to provide their parts to competitors. As a result, any company with access to reasonable finances can develop a new end-product in a strategically adjacent space.

Competence within commoditization

Despite the lowered entry and exit barriers however, it is still left only to a few firms to make an optimum use of strategic adjacency. This is due to the capability of such firms to achieve competence within the aspects of commoditization. Samsung has achieved uniqueness in the already standardized (or commoditized) ultrabook computer market by becoming the only ultrabook with optical DVD drive. Microsoft is planning to achieve similar uniqueness in its Surface tablet by offering standard USB 3.0 port (to ensure compatibility with the established computing devices as well as easy portability of data) and by converting the front cover into a key board (to gain an innovative advantage over conventional tablets in space usage). Clearly, seamless portability and integration between established PC usage power and contemporary tablet usage profile is seen to be the unique selling proposition. In designing Windows 8, Microsoft has sought to overcome its delay handicap with an operating systm that straddles multiple mobile, media and computing applications seamlessly.

The unique competency paradigm clearly counters the limitations of commoditized innovation. When Audi designed its Q3 SUV it showed the competence to bring in the larger Q5 SUV architecture into a smaller space at a lower price point. Another classic case is that of Samsung Galaxy Note which brought back the stylus to provide drawing and writing capabilities onto a smart phone . However, competence in a commoditized world offers no permanent protection against other follow-on moves. It is necessary for such firms to achieve rapid success and huge scale to ensure that replication of the paradigm by others would be delayed, if not deterred. Typically, such firms project their uniqueness very strongly to the customers to be able to capitalize. Sony could bring Xperia series of camera phones into competitive reckoning by focusing on Bravia engine and better camera sensors. In contrast, the reluctance of Nokia to project its unique Pure View camera phone with an unprecedented 41 megapixel camera demonstrates how the potential benefits of competency could be frittered away by hesitant marketing.

Integrated diversification

The concept of stratgic adjacency is the building block of a new model of integrated diversification. A combination of central organic core comptence and multiple acquired, licensed or leveraged competencies enables the modern firm to define its marketplace as an ecosystem of adjunct products and services that redfine the marketplace in an ever enlarging manner. This would typically require a conflunce of technologies. All of these, do not change the central focus of the marketplace but could change how the marketplace could be served, either incrementally or in a breakthrough manner. As an example of technology kaizen (continuous improvement), we can think of enhanced driving experince. Today, GPS systems in automobiles are seen to be an accessory, with destinatioms to be keyed in. In future, SIRI type of voice recognition and response technology could enable the user or the driver just state the destination orally whereupon the driving assistant takes over and guides the user to the destination. This would involve bundled strategy with the satellite communication system providers. Other improvements could involve the automobile recognizing the driving concentration when the drivers speak on cellular speaker phones and alerting the drivers. Future cars could become driverless, or be capable of selective autopilot at least based on robotics and continuous distance measurement technologies.

As a breakthrough adjacency, one can consider the provision of power to home consumers by public sector electric utilities in India. Faced with shortages in power generation leading to daily power cuts and the consequent consumer distress, the utilities may diversify into solar power generation and undertake to establish solar power plants in every home they serve. The utilities thus can not only diversify their offering through strategic adjacency but also in the process serve the same consumer in a much better fashion. Another breakthrough adjacency could be in terms of hospitals opening mobile diagnostic and mobile home treatment clinics with fully equipped buses bringing healthcare to the home (socially too, one wishes the hospitals would show the same empathy in bringing healthcare to the patients' doorstep as well as they display in deploying ambulances to bring patients to hospitals for critical care). A leading business process outsourcing firm in India has found a new strategic adjacency in adding analytics to its core business of transaction processing.

Strategic adjacencies and ecosystems

This blog post has provided several examples of the concept of strategic adjacency. It has also showed variations in terms of incremental steps as well as breakthrough strides in serving the customers. Starbucks' phenomenal growth has been in terms of finding strategic adjacncies in an incremental fashion while Amazon's phenomenal growth has been through strategic adjacencies of a breakthrough nature. Both approaches work admirably given appropriate technological and business contexts. The beauty of the stratgic adjacency model is that the firm evolves and grows while creating a new ecosystem around the same marketplace. In that sense it provides a smart way for integrated diversification without the investment intensity that the classical models of integration and diversification entail. Ecosystems created by the model of strategic adjacencies provide enhanced customer fulfillment and sustainable growth for firms.

Posted by Dr CB Rao on June 30, 2012

Sunday, June 17, 2012

Father as Life Manager: A Father’s Day Tribute

It is impossible to hypothesize who is more important to a family; the father or mother. As with formation of human life, in its evolution as well both are essential. The roles are, however, different; neither being less important than the other. Times may have changed with mothers becoming career women and fathers becoming more involved in home making but the basic attributes of each role have not changed much. As with a mother, a father also represents a leadership role in bringing up of a family. This blog featured a post on the role of the mother in the post “The Quintessential Indian Mother: Subtle Principles of Management”, Strategy Musings, May 13, 2012. This Father’s Day, this blog post features a tribute to the Father. The role of a father, however, is best told by his sons or daughters as they travel through the time machine on the Father’s Day, or any day for that matter.

Life has relative permanence but unfortunately humans have no permanence. Yet, as long as one has the powers of remembrance, one can never forget the intents, acts and emotions that personified the father, fondly called “naanna”, “appa” or “bapa” in some Indian languages. Tragically, in most cases the children lack the maturity and ability to identify and analyze what the father meant to him or her. By the time the required level of competence is reached, in some cases it becomes too late pay back with gratitude what the father did for him or her. As one reflects, one sees his or her father as a co-builder of the family institution, endeavoring always to make the children better endowed and more successful in life than he himself has been. He plays a leadership role as the chief executive of the family even if he is just a humble worker, an emerging executive or an established manager, essentially one among many in an organization.

Caretaker and Educator

The earliest memories of the father are always those of a caretaker; helping one as a baby make the first crawls and take the first steps in life, and later holding the hand to stroll, shop and enjoy in the seemingly vast and perpetually exciting places of parks, shops and movie halls. The father is always there to take the child to a doctor when the child turns sick and to take turns with the mother to follow the doctor’s instructions; measuring temperature, administering medicine, providing the prescribed diet, and maintaining all-night vigil. The greater the sickness the greater is the concern and the weaker the child the greater is the attention. The seemingly unending advices and the occasionally unnerving admonishments have always only one objective of seeing the child grow strong and healthy. Many advices of good health given by father unfortunately ring true only when one grows up!

Even as he is a caretaker par excellence, the father is a great educator too, regardless of his own level of education. Right from the selection of pre-school to the high school and college, he always tries to do the best within the means in terms of providing the best education in the best institutions possible. The care he takes to buy the school books, wrap them and pack them in the school bag leaves impressions on a child’s mind even when he or she becomes a parent. A time does come in the family’s development to leave the growing child in the hostel as he or she enters the portals of a college. The joy of the father knows no bounds when the graduation happens and the first job is taken. Many times, the father is more interested than the son or daughter to secure the best career opening. Unknown to the son or daughter, the father seeks the best advice from his peers and well-wishers on appropriate career options and job openings. He looks for the best competitive examinations, the best services and organizations and looks over, or even rough-fills, the application forms as they get prepared.

Toiler and Breadwinner

Probably, the more profound images of a father in a child are those of his being a toiler and breadwinner for the family. A mother may take on additional pressure to have a working life and supplement income but the father’s hard work remains the sheet anchor to create wealth for the family. Despite facing the pressures of working life, the ideal father always has time for the family, playing light games such as chess, caroms and cards with the children whenever. Work life is never easy for the aspiring father. Roving across the country, leaving the home state, and often even separating from family for years, or even going abroad alone, the father stakes the best part of his life for earning for the family.

Typically, the father earns to save, and saves to pass on wealth and security to the succeeding generations. While maximizing his earning potential, the good father, however, controls the spending power of his children. The value of money is known when the money at hand is less than the desires in the mind. That money comes from toil and toil comes from commitment is a fundamental principle that is passed on from generation to generation of successful families. The new clothes the father brings home on the eve of each festival, the crackers and fireworks he buys for the Festival of Lights ( Diwali), and the care he takes in spending money on vacations, the first child savings bank account he opens reinforce the smiles that money can bring to the family but more importantly how careful saving and investment habits can sustain the smiles.

Characterizer and Motivator

An ideal father builds the character of the child; values such as integrity, rectitude, helpfulness, friendliness, piety, sincerity, discipline, diligence, religiousness, dedication and service are imbibed in the child as one watches the father reflect those positive values in his professional and personal life. The kindness and caring with which one treats his parents, wife, children, relatives, and friends has a lasting bearing on the evolution of the child’s personality and potentially lays the foundation for the development of his interpersonal skills. While the genetic disposition on personality development cannot be predicted or controlled, the father, along with the mother does play an important and integral role in characterizing the right personal and professional traits in the child over years of childhood, adolescence and teenage.

Motivation is one factor that separates achievers from non-achievers. Whether one achieves certain material comforts and social status or not, one’s level of motivation must never ebb. In many ways, motivation by itself is the single most important factor for any human being to have faith and optimism in life. Motivation is that faculty of a human being to stay focused, fight against odds and seek higher goals even as earlier goals are achieved. A strong sense of self-worth and a keen sense of learning from experience help one stay motivated. The motivation the father displays in handling his work and family matters despite the enormous pressures of continuing education and career development, the stability he displays in handling the difficulties and pressures of family life, from sicknesses to celebrations, provide a motivating impact on the child.

Protector and Mentor

The father protects; he observes and analyzes what is good and beneficial for the family, from his own life to shaping the life of the other members of the family. He is always watchful of how the family is shaping up and how the children, especially the girl child, is able to cope with the hostile conditions of the world. From providing the fundamentals of day to day security of housing, food and clothing to the enablers of higher living such as education and lifestyle goods, protection is always felt by the children without the father ever being explicit about it. A father who protects his parents and wife provides a solid feeling of protection to the children.

As the child grows and matures, gets educated and employed, and becomes empowered and independent, and as the father himself becomes aged and progressively dependent, the role of the father changes from that of caretaker and protector to one of mentor. The ability of the father to transition from a relatively influential role to one of relatively guidance role, providing life's wisdom in a contemporaneously acceptable manner, calls for significant equanimity while the ability of the son or daughter to deal with the transition with respect and understanding, and with the wisdom to benefit from the wisdom of the elders, determines the mutual happiness all members of the family would derive. The dutiful child never considers himself or herself as someone who could forget the past in which the parents brought him or her up.

The child is the father…

The circle of life has neither a beginning nor an end, even as humans enter, age, accomplish and leave this world. Within the impermanence of life, the intents, thoughts, expressions, actions and memories of positive guidance, good living, emotional loving and fulfilled life are the relatively permanent ones. As the child grows into an adult, and becomes a father himself or mother herself, the love and affection showered by the father (not to mention the mother) need to be fondly remembered and repaid with gratitude through respectful caretaking in the twilight years by the younger ones.

Posted by Dr CB Rao on June 17, 2012

Saturday, June 16, 2012

Entrepreneurial Professionalism: Convergence of Leadership Duality

The theories of entrepreneurship and professionalism in management border on extremes at times, equating entrepreneurship to compulsive adventurism and professionalism to ossified bureaucracy. As with most positions, the true mean lies in the middle. Industrial and national development requires entrepreneurship as much as professionalism. This blog post explores the duality and proposes principles of convergence based on a well-known Indian industrial conglomerate group.

The duality

An entrepreneur takes risks to establish something of substantial business value from almost nothing essentially through his vision and passion. A professional optimizes, expands and diversifies an existing business to drive greater value. Almost all new businesses are established through entrepreneurial energy and are developed further through professional panache. Both the classes, entrepreneurs and professionals, thus seek to generate more wealth (revenues and profits) and facilitate better quality of life through products and services that serve the consumers. Yet, both the classes also unwittingly destroy value while performing their roles. This occurs mostly due to the different drivers that trigger the leadership and managerial activity in each class and the different routes taken by both the classes. By and large, one may say that an entrepreneurial way of work and a professional way of work tend to significantly differ, even if both the sets of leaders may have gone through similar streams of education and experience. The fundamental difference relates probably to how the two classes of leaders perceive risk and safety in business.

In an effort to derive synergies, if not wish away the differences, management experts suggest that entrepreneurs should have with them a set of professionals who counter and manage the entrepreneurs’ runaway growth instincts. Similarly, professionals are expected to have entrepreneurial drive to be able to drive businesses with less bureaucracy. While this appears to a great hybrid model, very often the model does not work the way it ought to. The reasons are essentially twofold. Firstly, the organizational ecosystem tends to develop a particular ethos, which is immutable, depending on whether the firm is founder-led or professional-led, in all senses of the power play. Secondly, the incentives or rewards, and the perceptions of risks and penalties work entirely differently for the entrepreneurs and professionals. The way opportunities and challenges are viewed in the decision making approaches tend to be accordingly different. The challenge for both the entrepreneurs and professionals is to explore how the duality can converge to deliver superior value building for all classes of organizations, whether entrepreneurial or professional.

Entry deterrent bets

Business grows on risky bets; bets that the market opportunity that is perceived is real and realizable, the investments will be productive and profitable, and the organization has strengths that are clear and competitive. Entrepreneurs take such bets based on their education, experience and more importantly intuition, with intuition clearly dominating the mix. No research, for example, has ever established the need for iPod, iPhone or iPad. Steve Jobs, who developed these products out of ingenuity and passion, was therefore an entrepreneur par excellence. Professionals do also take bets out of the same three factors of education, experience and intuition but tend to deliberately substitute intuition with analytics. An entrepreneur, almost by definition, never takes a bet which has no risk. That is the typical entrepreneurial way of being ahead of the pack and monopolizing the emerging or latent market. In several ways, a really passionate entrepreneur takes a bet that has a level of entry deterrent risk. This is an interesting concept that gets actualized time and again in entrepreneurial chapters, even in an emerging country such as India.

When J N Tata ventured to set up a luxury hotel in Bombay, now Mumbai (1902), a steel plant in Bihar (1907) and an electric utility in Bombay (1910) under the British regime, clearly each of them was a move with entry deterrent risk; but it laid the foundations of the largest, most diversified entrepreneurial group in India. What Nirma did in terms of affordable detergent powder (1980) challenging the hegemony of established multinational it was a risk even larger companies were not prepared to take; today it is a FMCG giant in its own right. When Reliance decided to enter the privatized oil exploration (2000), not many followed as it was a move with considerable risk. It, however, represented a genetic corporate trend that was uniquely that of Reliance of daring to go early into capital intensive areas (from textiles to oil and telecom as well as retail). When Dr Pratap Reddy established Apollo Hospitals (1983) as the first corporate hospital he was taking as much risk as a skilled surgeon would take in carrying out a complex surgery and the outcome has been equally successful; Apollo is the largest corporate hospital chain in India. Examples abound of entry deterrent risk taking providing significant early mover advantage to entrepreneurs.

Fall protecting nets

As opposed to the entrepreneurial trend of taking entry deterrent risks, professionals tend to have the practice of establishing fall protecting safety nets. The safety nets established by professionals range from scenario development to staged execution. Many times, professionals by virtue of their knowledge and experience, have the ability to ideate far more profoundly than entrepreneurs would. However, the time taken to convert ideas from concepts to constructs traversing collaboratively as well as contentiously through a whole series of analytical and consensual exercises dilutes leading ideas into trailing projects. Also, even when taken up for execution the projects tend to be sequentially stage-gated with options to make “go or no-go” decisions after detailed reviews at the end of each stage gate. The time lost in that sequential stage-gated process leads to significant delays in go-to-market. Interestingly, quick-thinking and rapid-acting entrepreneurial organizations turn into deep-thinking and slow-acting professional organizations all too soon as a result of which the lag between right ideation and smart execution increases over time. For example, Microsoft ideated the tablet computer in 2000 but Apple walked away with smart execution in 2010!

There are several examples of how fall protecting nets delay market development and penetration. Several Japanese companies have been ahead of Hyundai in India, including Toyota which did its feasibility studies for entry into India at the same time as Hyundai (around 1995). Yet, Hyundai entered earlier and became a much bigger volume player in India much faster than Toyota. The difference has primarily been due to the stage gates that Toyota set for itself, from market research to market entry. On the other hand, Hyundai has been less concerned about error-proofing its corporate strategy than achieving diversified and accelerated market entry. While this may be seen as a company specific observation it may also be seen as a national culture too, given the repetition of similar pattern between Korean and Japanese firms in a wide range of industries. The question, therefore, is whether entrepreneurial skill which is considered an individual skill could be extended into a corporate competence. The example of Tata group of India illustrates that it is indeed possible to converge the duality of entrepreneurial and professional approaches to achieve superior competitive advantage.

Convergence of duality

Tata Group is one of India's largest and most respected business groups. Tata Group's name is synonymous with India's industrialization. The Group gave India her first luxury hotel, first steel plant, hydro-electric plant, inorganic chemistry plant, first global software services company, first integrated automobile company and created a reservoir of scientific and technological manpower for the country. Its Trusts have instituted the first integrated engineering and biology educational infrastructure, Indian Institute of Science in 1909, the Tata Institute of Social Sciences in 1936; India's first cancer hospital, the Tata Memorial in 1941, and in 1945, the Tata Institute of Fundamental Research, which became the cradle of India's Atomic energy program. Today, Tata Group comprises 100 operating companies in seven business sectors: information systems and communications; engineering; materials; services; energy; consumer products; and chemicals. The Group has operations in more than 54 countries across six continents, and its companies export products and services to 120 nations. It has been also in the forefront of India’s largest and most effective global acquisitions including, Tetley Tea, Corus Steel, Jaguar-Land Rover, and Daewoo Heavy Vehicles. In terms of specific product innovations too, the Group has been ahead of the rest in the Indian industry, more so in the automobile industry, with a slew of continuous product innovations.

There are a few principles of entrepreneurial professionalism, which though could be commonly espoused in various other firms, are practiced rather uniquely in the Tata Group. Some of these are: a national fervor (from the very inception of the group in 1868), continuing iconic group leadership, across generations (JN Tata, JRD Tata, Ratan Tata), visionary leadership at the top (a 14 member group level board of directors), world-class leadership talent at firm levels (organic succession in each firm), defined group, firm and business structures, impeccable value system (5 core values of Integrity, Understanding, Excellence, Unity and Responsibility), heightened social responsibility (from hospitals to educational institutions in factory communities and other cities), robust corporate governance (mix of talented independent directors at firm level), commitment to technology, quality and safety (continuous knowledge audits), top-class cadre build-up from the bottom (massive graduate and post graduate recruitment programs and Tata Administrative System), responsible competition and competitiveness (fair industry practices), and globalized outlook (internationalization through physical overseas expansion and global acquisitions).

Typically, the Tata model comprised balanced and bright leadership at all levels and in all firms, including a good and healthy combination of technical leadership and business leadership. The model also comprised a vision that combined technological modernity and business competitiveness with social sensitivity. The sum of the parts proved better than the parts and the wisdom at the top helped to provide the right balance of entrepreneurship (as demonstrated by an endless stream of business firsts) and professionalism (as demonstrated by an endless saga of expansion and diversification). The Group could take risks that were entry deterrent for its competitors despite having fall preventing safety nets that did not slow down progress. The Tata group validates the hypothesis of this blog post that it is indeed possible to achieve the best of entrepreneurial and professional leadership based on the right principles, effectively practiced.

Posted by Dr CB Rao on June 16, 2012

Saturday, June 9, 2012

The Making (and Unmaking) of Future Leaders: The Natural Leadership Development (NLD) Model

Leaders have a great role in the making and unmaking of future leaders. Leaders, almost by definition, are those who look for a future of the organization they lead that is far beyond their own tenure, or even their own professional lifespan. Availability and development of a capable pool of future leaders has to be an essential objective of a leader. It is, therefore, paradoxical that several organizational contexts and leadership settings involve unmaking as much as making of future leaders. While great organizations have several structured programs of leadership development, synthetic leadership development (by sporadic programs by internal or external faculty, however capable they may be) is hardly comparable to natural leadership development (through continuous experience and observation of masterly leaders). This blog post seeks to propose a model of natural leadership development which is decidedly preferable and executable. It also offers clear insights into the factors that reinforce or impede natural leadership development.

Natural leadership development

Leadership development occurs naturally, spontaneously and continuously when potential leaders are associated with proven leaders from the inception of their career. There are several interesting pathways by which natural leadership development (NLD) occurs. The fundamental prerequisite, of course, is the presence of capable leaders as the heads of functions, locations or businesses and an iconic leader at the helm of the organization as the chief executive officer (CEO). Under such a virtuous scenario, leadership development occurs on a two track basis. Even as functional or unit leaders get developed by their CEO, they in turn develop the young executives into future leaders. While this process is largely hierarchical, at times potential exists for young leaders to directly interact with the CEO and for young entrants to directly work with unit or business leaders. This leadership development process occurs as a continuous process all through the careers of leaders as well as aspirants.

The lateral entry of leaders from other organizations occasionally is indicative of deficiencies in the NLD process of an organization but does not necessarily constitute the derailment of the NLD process. In many cases, entry of such leadership talent provides new opportunities for reinforcing the NLD process in the organization. A reality check as to whether the current leadership is adequate in the face of competitive environment often provides an answer as to whether or not lateral leadership entry is appropriate or not. That said, however, each organization must always be aware of the potential factors of reinforcement and derailment (reinforcers and derailers respectively). The two important reinforcers are the competitive drive and leadership harmony of an organization. The two important derailers are the environmental unpredictability and leadership trivia of an organization. Clearly, leveraging the reinforcers and eliminating the derailers provides the best assurance of NLD in an organization.

Competitive drive

The fundamental prerequisite for successful NLD is the alignment of leadership not only to the current competitive imperatives but also to the future corporate development perspectives. A holistic organizational development blueprint provides the basis for developing natural leaders from within, and also as a pool of leaders which is constantly recharged with fresh leadership assignments across the hierarchy. The competitive drive of an organization and its leadership has the most significant influence on the NLD processes in an organization. Though there is a debate whether the leadership talent in an organization is a trigger or an outcome of the strategic vision and roadmap of an organization, for the purposes of NLD it is the competitive ecosystem of the firm that influences the NLD processes. Regardless of whether the firm is in a growth mode or turnaround mode, if the leadership challenges are harnessed and percolated down in the organization, the NLD processes will bloom well.

The competitive drive for leadership in a growth mode largely requires leaders to seek new opportunities, design new products, explore new markets, pioneer new technologies and sometimes become adventurous and risk-prone to enter sunrise sectors. This gives tremendous opportunity for the CEO to script a new strategic vision, for his deputies (the other CXOs) to pilot and lead new businesses, and for several young leaders to participate in the growth processes in various product-market segments and leverage their fresh ideas and youthful enthusiasm. The competitive drive for leadership in a turnaround mode largely requires leaders to seek operational excellence and cost efficiencies, improve capacity utilization, enhance market penetration, extend product life cycles and optimize risks. This requires the CEO, the CXOS and other leaders to benchmark the firm in term of the best practices and restore the competitive edge. Typically, the competitive drive in an organization entails both growth and turnaround providing ample opportunities for NLD.

Leadership harmony

Leadership harmony at the CXO level is a key determinant of the NLD processes in an organization. Leadership harmony occurs when the vision and strategy are developed and executed with shared ownership between the CXOs and the CEO. Leadership harmony requires that the organizational ecosystem treats all the business verticals or units equitably in terms of budgets and metrics. It also requires that line and staff leaders work collaboratively without perceptions of superiority. Though there is a debate if organizational structures and processes enable leadership harmony or if leadership harmony optimizes structures and processes, for the purposes of NLD it is the maturity level of the leaders that determines the positivity of the NLD processes. Whether or not the top management meetings are visible and transparent (to the organization) in terms of structures and processes, leadership harmony has a way of breathing life and energy into the organization.

Young leaders, and the CXOs themselves, are greatly benefitted in an environment of collaborative leadership. In such an internal environment, the leaders tend to engage amongst themselves openly and synergistically providing the needed impetus for collaborative cascades horizontally and vertically at all levels of the organization. For organizations in growth mode, leadership harmony provides mutual reinforcement and risk optimization. Multiple skills become available to debate and diagnose the unknowns of growth. For organizations in turnaround mode, leadership harmony eases the pain of restructuring, enables harmonious redeployments and leads the company to successful turnaround faster. Leadership harmony provides higher levels of empowerment across the organization enabling speedier and focused decision making and execution. Needless to add, the factors of reinforcement, competitive drive and leadership harmony need to coexist for each to be successful. Without leadership harmony, competitive drive gets blunted while without competitive drive, leadership harmony leads to corporate smugness, both situations leading to eventual stagnation.

Environmental unpredictability

Economic cycles have long been a fascinating aspect of economic analysis with leaders of the governments and businesses always trying to bring some predictability of economic environment to decision making. The task, however, has become increasingly challenging as economic environment has become more unpredictable and volatile with several countries staying in deep recession for years on. The price movements in oil, commodities, industrial metals, and precious metals have become unpredictable while currency exchange rates have become major distorters of orderly globalization. Global investment flows have become equally unpredictable while the global banking institutions have become fragile. Massive investments in infrastructure and sector-specific stimulus programs have supported global recovery but have not resulted in global growth. Economic and financial instability in the Euro Zone has been threatening the fragile global recovery. Even economies such as India and China that were expected to sustain world leading economic growth rates based on strong domestic demand have begun to falter.

The industry and business are dependent on a positive investment environment for funding the growth or turnaround plans as the case may be. The funding environment being uncertain, neither the growth plans nor the turnaround plans can be implemented decisively. Various companies, from Apple and Microsoft in the US to Infosys and Reliance in India, have been sitting on cash piles rather than aggressively investing for growth. Even if reinforcers such as competitive drive and leadership harmony exist, economic unpredictability tends to derail even the best laid plans, growth or turnaround, and most harmonious organizational structures and processes. In addition, forces of environmental and social activism as well as governmental and legal review processes tend to block or reopen the apparently settled projects. Organizations are often forced to tailor leadership aspirations and expectations to what geo-economic and geo-political considerations allow.

Leadership trivia

Not all derailers for the NLD processes come from external environment. Some emerge from certain leadership trivia, which often erode leadership effectiveness and impact. Two of the important trivia are bipolar leadership and anchored leadership. Bipolar leadership connotes a leadership behavior that swings rapidly and unpredictably between two extremes in either environmental sensitivity or interpersonal relationship. The extremes of bipolar leadership behavior covers the extremes of optimism and pessimism (in assessing business situations), collaboration and confrontation (in people management), decisiveness and procrastination (in decision making), sparkling intuition and paralytic analysis (in strategic management), extroversion and introversion (in communication), permissiveness and authoritarianism (in empowerment), forgiveness and vindictiveness (in performance management), transparency and opaqueness (in visibility) and so on. Such widely contrasting behavior patterns are occasionally adopted by certain maverick leaders to remain inscrutable but ultimately result in only unmaking of current and future leaders rather than in natural leadership development.

The other leadership aberration is one of anchored leadership. True leadership is equidistant from, and equipotent with, all functions, units, locations and businesses of the corporation, and its specific leaders. At times, leaders tend to be anchored around one platform or one leader to the detriment of other equally important platforms and prospective leaders because such platforms provide immediate growth or essential turnaround possibilities, or for the sheer comfort of dependence on known platforms and leaders. Such excessive dependence induces real or perceived bias in leadership behavior, transcending into bias in decision making, execution, and performance management. Factors of reinforcement, namely corporate drive and leadership harmony, are maximized when leadership is not only actually and but also perceptually, seen to be accessible, unbiased and objective towards all of its businesses and entities. Leadership trivia point out how important it is for leadership to be personable in relationships but impersonal in terms of reflecting the relationships in execution.

Life’s experience

Natural leadership development is akin to gaining life’s experience, molded by caring and disciplined parents, and diligent and committed teachers. In the challenging world of competitive career development leaders constitute the beacon and inspiration for young executives and leaders. Learning experientially with leaders committed to leadership development is fruitful and long lasting for aspirants. Competitive drive and leadership harmony in an appropriate organizational ecosystem enable and reinforce natural leadership development in organizations. The making of leadership thus happens by design and organizations that facilitate natural leadership development are bound to be successful in creating a vast pool of leadership talent for sustainable competitive advantage.

Posted by Dr CB Rao on June 9, 2012

Sunday, June 3, 2012

Foreign Educational Institutions in India: Right Priorities and Relevant Pathways

For a country which has its share of debates, a new item has been added for diligent debate in India. The move by the Government of India to allow foreign educational institutions to set up bases in India is considered an unnecessary cost-push move by some educational experts given that the Indian educational system has reached a state of maturity. On the other hand, the proponents feel that the move is a logical extension of globalization with Indian universities being allowed to set up shops in foreign shores and vice versa. It is also hoped that foreign universities bring in the required investments for world-class educational experience in India. Some experiments of liberalization in India have had unwelcome fallouts of mass entry; some caution, therefore, is probably well merited.

Foreign educational institutions in India

Over the last ten years there has been a significant proliferation of the so called foreign educational institutions in India without commensurate qualitative change in the educational scene. According to the Association of Indian Universities, the foreign education institutions in India have increased from 144 (in 2000) to 631 (in 2010). The maximum number were from the UK (158), followed by Canada (80) and the US (44). Of the 60 foreign education providers, who have programmes of collaboration with local institutions, only 25 local institutions were affiliated to Indian universities or approved by regulatory bodies. Only 32 of the 49 foreign institutions operating under twinning arrangements have had approval or affiliation. A review of the institutions or the institutional collaborative arrangements indicates that the arrangements are usually aimed at awarding a degree with a “foreign tag” rather than achieving any institutional transformation.

The Foreign Educational Institutions (Regulation of Entry and Operations Bill) 2010 has been pending before the Indian Parliament for the past two years. There has been growing concern in recent years that fake foreign varsities were duping students from India. Now, over 600 foreign education institutions operate in the country. The UGC put its plan to allow foreign universities to set up campuses on hold after a large number of members felt that there was need for greater deliberations from different areas of study, including technical, medical, law and architecture. There are also questions raised on the need to allow foreign varsities to function as "deemed universities''. Overall, it is clear that the existing framework has not enabled the real Ivy League institutions enter India; nor has it stopped the pursuit of higher education abroad by India’s talented students.

Enter UGC

The Universities Grants Commission has oversight and approval authority on the Indian university system. In an attempt to rein in fly-by-night operators who could money making educational shops in India, the UGC has made its approval mandatory for all collaborations between foreign and Indian educational institutions. The new regulations approved by the UGC on June 2, 2012 give existing institutions six months to get approval. The UGC has also laid down dual criteria to ensure that quality academic institutions are allowed to run joint degree or twinning courses. Only those foreign institutions will be allowed to collaborate who figure in the top 500 of the Times Higher Education World University Ranking or the Shanghai Jiaotong Ranking. The Indian varsities should have received the highest accreditation grade from the National Assessment and Accreditation Council (NAAC) and the National Board of Accreditation (NBA) to be eligible for a tie-up with a foreign institution.

The degrees will be awarded by the Indian universities for their acceptability in India. Institutes failing to abide by the guidelines would be penalized. The UGC is empowered to stop grants in case of public institutions while it can recommend to the Centre withdrawal of recognition in case of deemed universities. As stated by the UGC, the regulations aim to set a quality bar to the entry of foreign educational institutions into India, as well as for collaboration between the foreign and Indian educational institutions. The regulations, however, do not, and probably were not intended to, provide a canvas for structural changes in the Indian educational system, even in the higher education band where such foreign educational institutions operate. A more fundamental appraisal is needed.

Indian education, more with less

The Indian educational system has certainly its world-class achievements. The numbers of Indian students who gain admission in the top rung US educational institutions annually and the numbers of the Indian scientists and engineers employed in the US constitute a clear testimony to the Indian talent and Indian universities. In addition, the strong base of science and mathematics from the school level in India contrasts with the diffidence to engage in those studies in the US. However, these achievements are more in keeping with India’s ability to “do more with less”, rather than with a natural potential to “do even more with more”. The gaps in the educational system can be seen at different levels from primary school education to higher university education.

The need for a massive transformation in the primary and secondary school educational systems together with strict enforcement of the right of every child for education is keenly felt in India. This is, however, a domain which is, and has to remain as, the core competence of India. Foreign institutions would have little incentive or capability to play a role in this area. The fact that the pre-school and school years are also the years of solid foundational grounding in the Indian culture and Indian ethos, there is a case for the Indian institutions to display their moorings. Given this situation, this blog post focuses only on the higher education component of foreign institutional entry. The higher educational system has serious shortfalls in terms of infrastructure, faculty and research direction.

Higher education, lower resources

The largest of the entities in the Indian educational system, the Indian Institutes of Technology (IITs) have an annual budget in the range of Rs 2500 million (USD 50 million). They have typical faculty strength of 500 and student strength of 6000. In contrast, the top rung US universities have budgets of USD 1 billion to 4 billion (20 to 80 times over). The faculty strength tends to be the order of 2000 to 4000 and student strength of the order of 20000 to 40000. It is not uncommon for the top US universities to receive USD 500 to 1000 million each in research grants or alumni gifts. It is also not uncommon for the US universities have research budgets of the order of USD 750 million. While clearly there are differences of scale and scope, these are particularly pronounced in funding channels and their scale as well as research budgets and their scope.

The Indian higher educational system has done particularly well to equip each of its students to higher education or higher research abroad. What the Indian system failed to do is to create a base of fundamental research and development in its institutions in India that could serve as the further developmental grounds for the Indian talent. Even today, the breakthrough research continues to get done in the university laboratories of US, Japan and Europe. The Nobel prizes continue to get won by professors of US and European laboratories (despite several Indian researchers working in those laboratories). The entry of foreign educational institutions should address this fundamental infrastructure, research and resource gap rather than aim at providing run of the mill degree award and executive development programs.

Building a new research ecosystem

Foreign educational institutions can make a significant contribution in building a new research ecosystem in the Indian educational institutions. The work in the foreign laboratories is continuously focused on the fundamentals of matter and biology, oftentimes exploring the linkages. For example, at a time India is looking at genetics, epigenetics has been taken up in a big way in US laboratories. Interdisciplinary research is an institutional approach to provide new solutions. Microrobotics for less invasive surgery, nano-structured meta-materials, development of new materials such as graphine, ultra-sensitive diagnostics, human protein sequencing, personality genetics, amino acid studies, solar energy development, and so on. While not all research makes it to commercialization and while some is hyperbole in advance, the fact remains that many new problem solving directions are emerging from the US academic research.

The dilemma or disconnect for the Indian educational system lies in having a valuable stock of academically trained scientists and technologists in India who necessarily have to find a research base in the advanced laboratories of the US, Japan or Europe. Clearly, the value proposition for the foreign educational institutions must lie in accessing Indian talent without barriers and for the purpose creating the requisite laboratory infrastructure, research processes and information exchanges in India. This would certainly be a more complex process than sourcing products or processes from India because of the sensitive nature of intellectual property generation and patenting issues. By acting innovatively and responsibly with enhanced capabilities of scientific and technical communication the Indian talent can actually accelerate the publication and intellectual property record of the foreign universities. On the whole, a new ecosystem needs to be the sine qua non for getting the foreign educational institutions in to India.

What the governments can do

The governments, state and central, should treat setting up of state-of-the-art laboratories under the Indian-foreign educational system on par with attracting global commercial manufacturing and research proposals. Liberal provisioning of land and supportive infrastructure such as roads, power and telecommunications would go a long way in creating world class educational and research infrastructure in India. The Government of India and the Indian universities can also address the intellectual property constraint or barrier through a vibrant intellectual property office (IPO) system in India. Proposals of collaboration between the Indian and foreign universities must specify clear domains of research and goals of development. Commercial viability could be attempted for the initiatives through sponsored research projects.

Posted by Dr CB Rao on June 3, 2012