Saturday, April 26, 2014

The Optimal Pain Signature: The Foil for a Pleasurable Life?

We are in a technology-driven world where nothing seems to be impossible.  If the decades of the 1950s to 2000s were focused on electro-mechanical and mechatronic developments to help human beings achieve the unthinkable, from intra-city bullet trains to inter-planetary spaceships, the technologies of the twenty first century are focused on understanding the human biology better and enabling superior diagnosis and therapeutics through molecular biology and genetic engineering. The merger of biomedical sciences and engineering are creating new vistas of healthcare. Today, there is hope, for example, that genetic markers could help forecast the probability of cancer or enable the right choice of oncology drugs. The same technological capability could extend in several related and unrelated disease areas, nay to life itself.
If the ultimate form of impossibility is creation of human life, even that could become possible one day. Only a few days ago, a laboratory has announced that it has been able to successfully grow certain human organs in a laboratory environment using stem cells. Possibly, a full human life may also be grown or cloned one day. In the meanwhile, several companies are racing to develop a new breed of health devices or a host of healthcare applications such as heart rate tracker, fitness tracker or blood pressure monitor. There is an expectation that sooner or later smart phones and a new breed of wearable computers would turn into techno-biological foils to human beings. Yet, technology may have its own limits. The reason is that technology can help only if any physiological parameters can be characterized or measured. Surely, more biological markers which are measurable and have predictive capability will be discovered but thoughts and experiences cannot be measured, at least as of now.

Physical pain, the first frontier

Temperature, pulse rate and heart rate are three of the fundamental physical measurements of human wellbeing or illness. There are several bio-chemical markers that can be cultured or isolated through blood tests. Imaging studies, for example X-rays, ultrasounds, scans and angiograms of different types, can help identify the irregularities in the body internals. However, no technology has emerged, nor will emerge, that can measure pain, which even prior to temperature is an indicator of something going wrong or gone wrong with the human body. If only there were to be an instrument that can measure pain as it emerge and calibrates different types of pain, potentially chronic diseases like migraines and acute diseases like heart attacks be diagnosed ahead, and patients relieved or saved as the case may be. Unfortunately, pain only can be experienced and expressed but cannot be measured real time (the so called pain scales are post-facto, self-reporting, and subjective).

If medical diagnostics has to conquer the ultimate frontier, the first frontier to conquer is pain. There is so much subjectivity in pain that people tend to either understate or overstate pain, and in some cases even be incapacitated in expression. Apart from pain as a precursor of the impending physiological problem, post-operative pain is also an important marker of the pace of recovery. Without knowledge of the true state of pain, doctors dispense pain killers on an empirical basis. Apart from causing their own infamous side effects, the pain killers also mask pain making the discovery of illness even more difficult. Neuroscientists from the University of Colorado Boulder, New York University, Johns Hopkins University and the University of Michigan have identified functional Magnetic Resonance Imaging (fMRI) of the brain as an imaging technique to understand a pain level or pain signature of a person (see “An fMRI-Based Neurologic Signature of Physical Pain, The New England Journal of Medicine, 2013, 368: 1388-1397, April 11, 2013). Yet, fMRI is too sophisticated a hospital procedure to be of any use or relevance to day to day pain diagnosis and management.

Physical sensitivity

The rigors of life teach us that pain is an inescapable concomitant of human living. People experience physical pain from the early days and over years become capable of enduring pain. Sportsmen, among others, constitute a special category of people who test limits of endurance; they rebound from pain amazingly fast even as others recoil from pain involuntarily felt. To be sensitive to pain is probably not a bad thing even as an ability to endure pain is certainly a good thing. The ordeal of pain that is undergone by pregnant women prior to and during delivery is a classic instance of nature’s biology steeling the feminine gender to be sensitive and robust. Chronic diabetics, on the other hand, experience forced insensitivity with sugar levels leading neurological insensitivity to pain, and therefore resulting in ignorance of several pain markers of impending difficulties.

It is important, therefore, that a healthy human being is constantly aware of the pain frontiers one experiences. The simple tests that the earlier generation doctors employ in terms of scratch test or tongs test on parts which are served by peripheral nerves or distant blood vessels are some of the best indicators still. Barefoot walking on clean surfaces and being aware of the organic to organic and organic to inorganic touch are some of the ways in which a human being can continue to be in sensitivity to the subtle changes in body constitution. A spontaneous ability to feel and express pain is God’s gift and constitutes the body’s first defense against any harmful assault on the human body. The ability to distinguish between pain as a natural defense and pain as a route to endurance needs to be part of the pain DNA of an individual.

Emotional pain, the hidden frontier

While physical pain is easy to experience and express, emotional pain is much harder to understand and express. In today’s world where inequality is commonplace and where expectations race ahead of adequacies or endowments, it is easy to be vulnerable to emotional pain. Unseen and undiffused emotional pain leads to stress, which in turn leads to many psychosomatic and cardio-pulmonary diseases. Emotions such as anger, anxiety, worry, frustration, despondency, dejection, sorrow and sadness cause a person to experience emotional pain. While an ability to bear emotional pain is necessary, an inability to differentiate between natural emotional pain and impacted emotional pain is cause of much physical misery in individuals. High stress levels, for example, are known to cause severe migraine attacks in individuals.

Emotions are a function of attachment. Attachment is a function of biological (natural) or spontaneous (destined) chemistry. The more attached a person is (to something or someone) the more emotional he or she would tend to be. Anything that threatens or erodes the attachment would cause negative emotions and increase stress levels. Chronic stress levels cause a weakening of the immune system and cause a host of diseases. Attachments have a natural tendency of fading with time (like the attachment for schoolmates getting overshadowed by the attachment for college friends).  Attachments are a healthy part of human life but when the baggage of attachments constantly overflows (as it happens with highly social individuals) or if the baggage remains empty always bereft of attachments (as it happens with highly reclusive individuals) the emotional balance would be adversely impacted.

Sensible sensitivity

Emotional burden may seem to be lower in respect of individuals who think more through the head than through the heart, and who are impervious and insensitive. Apart from the fact that such non-emotional individuals tend to be in a minority, non-emotionalism tends to cause as grievous burden as emotionalism. The solution lies in individuals being sensitive sensibly. It is okay to cry in a movie theater watching a movie of pathos but it would not be sensible to bring the pathos into real life. It would but be natural and human to grieve over the loss of near and dear but it would not be sensible to stop enjoying anything and everything for years on in memory of the departed. The solution to coping with emotional burden lies in sensible sensitivity, which describes a holistic approach to understanding the root causes of emotional sensitivity and finding practical ways of coping with it, case by case. 

One important concept of sensible sensitivity relates to understanding the cause and response mechanism. Many times the anger that an individual has in response to criticism is not related to the criticism per se but more to the ego state of the individual. Understanding the self in terms of ego state and attachment profile is critical to minimization of adverse emotional burden. Another important concept is to apply oneself in areas where one has genuine interest. The level of interest in work facilitates a level of productivity and promotes a level of wellbeing. While it is not always possible to secure family and professional circumstances that are fully aligned with one’s interests, it is possible to choose a niche of interest that leads to a nucleus of satisfaction (like gardening in a family circumstance or mentoring in a professional circumstance). The third part of sensible sensitivity is an understanding and acceptance that, as with physical pain, a certain amount of emotional pain helps an individual operate within sensible limits of living. 

The pain signature

The foregoing leads us to consider a concept of individualized pain signature that expresses one’s threshold to pain, both physical and emotional. While at one level physical pain and emotional pain are correlated, particularly when they are chronic, they also can be viewed to occur independently. A person can have propensity to high and low levels of pain (recognition, absorption and tolerance), both physically and emotionally. A person who is low on both the counts could be insensitive to himself and his environment. A person who is high on both the counts could be a highly strung individual with significant and deleterious auto correlation between the two pains. A person who is low on physical and high on emotional could be execution-weak but intellect-secure. A person who is high on physical and low on emotional could be field-aggressive but people-insensitive. Unlike certain other grids, being stuck in the middle with an optimum balance could be the better option for a balanced life.

The pain signature is an important guidepost for any individual in the fast, technology-driven and stress-filled life of the times. While understanding one’s pain signature from biological and philosophical points of view is essential as discussed above, a day also may not be far off when there could be simpler and more accessible tools than fMRI to decode one’s pain signature. Wearable computers and services that track one’s thought and expression patterns as well as neurological electrical wave patterns could provide on-the-spot and on-the-dot guidance to individuals as well as their caretakers and mentors as the case may be.  Until then, and probably even after that, self-awareness on pain signature would be essential. The more aware and the more sensitive an individual is to his or her pain signature, the more he or she would be able to leverage it an aid to a well-balanced pleasurable life.

Posted by Dr CB Rao on April 26, 2014


Saturday, April 19, 2014

Strategy, Structure and Execution: The Essential Leadership Trilogy

Leadership is all about delivering results. It could be through capital assets and human resources; it could be through business for profit or service for non-profit. Leader may have qualities that fit exactly the requirements of an entity; he or she could possess generic leadership capabilities applicable for diverse entities. Much research has focused on what makes a leader deliver superior performance; there is an even greater level of research and hypotheses on generic and specific leadership qualities. There is thus a surfeit of pronouncements on what makes leaders performers and what makes leadership tick. As with everything else in management, leadership is about a process; a process that makes ideas take shape as plans and get executed to deliver results.

This blog post considers the trilogy of leadership in terms of strategy, structure and execution. These are probably sequential steps in startups but in most other cases, they are continuously iterative and mutually adaptive. There is research that establishes that structure follows strategy, and also that results are more about execution than about strategy or structure. While this may be true, a perfectly optimized leadership process requires that strategy, structure and execution are well aligned. This blog post addresses a few issues: (i) achieving alignment between strategy, structure and execution, (ii) adaptive adjustment amongst the three components and (iii) leader influencers on the leadership process trilogy, and vice versa. This theory is important because no leadership challenge or no leader is akin to each other, and it would be helpful to have a process that is both personality and context neutral.
Crafting a strategy
Strategy, simply put, is defined as a plan that is intended to achieve a specific purpose. In management jargon, strategy has assumed a larger connotation of a process or an outcome that involves an overall corporate plan, duly supported by functional plans, to achieve a long term goal over a period, usually of three to five year duration. Strategy formulation is considered as a process that brings all key personnel of an entity aligned on to certain objectives. Strategy is also considered to incorporate several methodologies such as integration, diversification, merger, acquisition, cost leadership, differentiation, niche, all at the corporate level, backed by functional level strategies such as market share building, product portfolio development, operational excellence and so on.
Strategy, whether seen as a plan or a comprehensive process, is the foundation of all developmental actions for a firm. A leader has the opportunity and responsibility to put his stamp on the strategy or strategy development process. The Tata Group under the previous chairman, Ratan Tata, had a strategy of development in industrial sectors such as automobiles, steel, telecommunications, beverages, power and airlines, backed by a strategy of globalization. The same group under the current chairman, Cyrus Mistry, has a new strategy of operating in several infrastructure sectors. Many times, strategy formulation has a context based on the growth or profit position of the company. Although the process itself is complex, strategy becomes referred to in simple phrases of turnaround, revival, expansion or diversification. The leader must continuously evaluate the best strategic options while ensuring change with continuity.
Establishing a structure
Structure is one of the fundamental means available for leaders to deliver the results. Structure means the organizational structure encompassing the processes of coordination and talent management as well. There are different organizational structures that are available for a leader but structure must follow the strategy. A focused mono-product startup would require a simple functional structure while a global multisite network would call for a complex organization structure. No single organization structure has the capability to provide complete solutions, particularly if business is constantly evolving. There exist many choices in designing an organizational structure, several of which also present paradoxes. Concepts such as centralization and decentralization, empowerment and accountability, formal and informal reporting on one hand and flat or multilayered, functional or product, project or matrix, and regional or global engage the attention of organization leaders. The main concern, however, should be on another important factor.
An organization structure is an important aid not only for execution of strategy but also for developing leaders. There tends to be an alignment between these two purposes on the face of it; good talent leads to good execution while good executors qualify themselves to be good leaders. The real alignment, however, comes only when a profit and loss (P&L) responsibility is integrated into the organization structure. For example, it is easy for a business leader to splurge resources on projects when he has no responsibility for the revenues and profits accruing out of the projects (in a functional organization these are largely driven by marketing and finance departments). Similarly, a business leader may not ever get to understand the total nuances of organizational management if he or she has no linkage with profit and loss management. The apex leader’s biggest challenge lies in designing an organizational structure and establishing management processes that ensure functional efficiency as well as business effectiveness.
Ensuring execution
The third part of the leadership trilogy relates to execution. Strategy can be spoken about, structure can be seen around but it is execution that institutionalizes a business. Execution is often seen as undertaking a set of activities within budgeted resources and timelines. Effective execution, however, is more than that; it involves continuous calibration against strategy, being aware of developments in the competitive landscape and developing leaders who have execution doggedness and environmental resilience. The leader has the primal responsibility to ensure end-to-end execution. A well executed factory, a well designed product and a well executed launch may not necessarily get translated into a well executed business. Tata Nano car is a striking example of the well executed functional parts failing to make for effective business execution.
The leader’s responsibility lies in calibrating functional execution against a backdrop of business execution. That is where a well developed strategic plan which is extended into functional strategic and execution plans counts. In most organizations, however, strategy is seen as an annual mechanism independent of execution while budgets (that flow out of strategy) and execution (that is authorized by budgets) are seen as more aligned. In some organizations, strategic investments are considered as sunk costs rather than as investments that can be repurposed. Viewing execution in a strategic perspective is a leadership skill larger than evaluating execution against budgets. Wise leaders ensure that execution provides for flexibility for strategic flexibility or course changes even while executing. Reliance Communications has, for example, ensured that its strategy and execution of CDMA based plans have not prevented them from moving on to GSM bandwagon at a later stage.
Effective trilogy

The foregoing establishes that strategy, structure and execution are equally and simultaneously important for effective leadership. An effective leader is one who, for each objective he or she chooses, visualizes an end-to-end picture of strategy, structure and execution. The Malaysian low cost airliner AirAsia’s decision to enter Indian domestic airline sector reflects such leadership trilogy approach. Way back in October 2012, the firm decided to enter the Indian domestic airspace with a truly low cost (not promotional fare) model, stimulating traffic in virgin routes on the planks of both cost and quality. The strategy was followed up with a new hub in Chennai, and a scaling-up business model, including hedging of fuel costs for three years. The strategy involved tying up a joint venture with the reputed Tata Group which had an interest in civil aviation historically.
Even as AirAsia awaited various government approvals from February 2013 onwards, the  parent company started establishing a structure in India. An Indian subsidiary was set up, and a board was constituted. A chief executive officer and a chief commercial officer were promptly recruited who in turn started setting up the operating organization. The firm took on board Ratan Tata, who has a passion for flying and civil aviation, as the Chief Advisor and S Ramadorai, former Chief of TCS as the Chairman. Tony Fernandes, the founder-CEO of AirAsia himself joined the Indian board as the Chairman reflecting the importance attached to the Indian operation. The firm also started executing by signing up travel agents and booking agents for the network, and ordering the aircraft, having applied for and received in-principle approval to import 10 A320-200 aircraft. AirAsia, as a brand, has also started becoming visible in India by extending and advertising its international routes to India.  
Coping with surprises
If the crux of leadership is the strategy-structure-execution trilogy, the essence of success lies in how well aligned and integrated these three components are. The above brief account of AirAsia India, a case study in the making, demonstrates how these three are to be aligned and integrated from a forward thinking. It involves proactive risk-taking, and also a belief in the model to overcome all competitive opposition. Despite the well laid plans, there could always be surprises; for example, AirAsia did not imagine that the Tata Group would form its own joint venture with Singapore Airlines for the Indian civil aviation market. Only when strategy, structure and execution are aligned with due flexibility and continuous calibration, firms can cope successfully with surprises. 
The ability to cope with surprises comes with flexibility in trilogy components rather than making them risk-proof. There will always be internal and external variables that cannot be forecast which could impact the starting assumptions of any venture, organic or inorganic. Depending on the nature of the surprise, one or more of the three elements of strategy, structure and execution would need to be differentially emphasized to manage the surprises. Rather than an elaborate organizational bureaucracy, a small leadership group often provides the drive for a successful trilogy. Tata Motors’ success in achieving a successful bid and an even more successful turnaround of the JLR infrastructure is a case study in itself of strategy-structure-execution operating in impactful alignment.
Posted by Dr CB Rao on April 19, 2014

Sunday, April 13, 2014

From Computers to Humans: Can the Creators Learn From Their Creations?

Computers are some of the most fascinating and epoch making creations of the mankind. Computers have enabled human beings undertake activities that were previously beyond human imagination. From robotic controls to satellite navigation, computers enable the previously unthinkable to be routinely practical. The computer, in its configuration, though has not changed much in concept; an input system, an output system, an operating system, a Random Access Memory (RAM), and a hard disc memory continue to be the core of a typical computer, be it the mainframe, desktop, laptop, notebook, netbook, ultrabook,  tablet, phablet,  smart phone, smart watch or smart glass. External memory and a few other accessories have enhanced what the computer can do. The developments of the last few years, however, have been pushing computer more as a social device rather than a computing device. A question, therefore, is whether the mankind is sub-optimizing the power of its own creation.

A few pointers in development of the computers and the extended devices listed above reinforce the concern. There is more emphasis on miniaturization of the form factor with empowerment of the hardware, say from a computer to a tablet, than on maximization of the processing power, per se. There is more emphasis on display quality than on processing capability. There is more emphasis on connectivity than on computing. There is more emphasis on photography than on archiving. There is more dependence on distant Cloud than the intrinsic device. These trends, by no means, are negative; they are certainly positive and represent a powerful way of making computers an integral part of everyday life. The concern arises not from these pointers per se but with what they represent collectively. Millions of technology resources and billions of dollars are focused on miniaturizing what is available on large scale than on boosting the power of the large scale further.
Rebooting the design
The computer designs need to be up-scaled to newer horizons as the world looks at greater networking, shared processing and infinite storing. The need for new mainframe technologies cannot be limited to certain specialized areas. The futurism of global networking and cloud computing requires that mainframe computers are brought back into the mainstream of global electronics development. Along with that, newer input technologies need to be developed; for example, intelligent tabletops serving as input slates, processors and display screens. The conventional office desk should be replaced by a smart table top which enables communication, computing, conferencing and a host of other professional services. The same concept would extend to personal tabletops serving as the total computer solution to the home needs. The smart phone or tablet would then be a dovetailed extension of the tabletop. When this tabletop technology becomes universal, no one would ever need to carry a laptop or tablet. One would simply enter any other office and work from either conference room or guest room table tops.
Extending the logic further, walls can be made into display and input walls, especially in conference rooms. While real time, realistic video conferencing is already in vogue, computer walls can transport individuals across geographies.  People can deliver talks to large groups and groups can animatedly converse with each other; the key, of course, would be a step-jump in communication technologies. Devices should have the ability to simultaneously transmit and receive across a wide range of communication devices, from fiber optic to satellite networks. Finger scanning and visual biometric technologies would be an integral part of the new rebooted designs. Similar concepts can be extended to shop floor machines with walls and machine displays serving as real time communication, collaboration and monitoring devices. In a nutshell, the question is whether the flow of technology should be only to bring the power of a desktop into a small smart device for an individual or to simultaneously make the desktops exponentially powerful and interactive for teams and groups collectively.    
Relearning the basics

Computers have certain basic characteristics of operation that enable them accept, process, store, retrieve and transmit huge amounts of data and information; all of this has been a result of painstaking development of several brilliant scientists, engineers and technicians. It is believed that a human being is, likewise, blessed with a capability to process trillions of data. Yet, it appears that a typical human being is fast losing the capability to utilize his or her own inherent, intrinsic natural powers. The solution could be in terms of learning a few basics from the way a computer operates.

The first relates to the discipline of memory. A computer can operate only within its memory limits; so can the human being. The only difference is that the computer’s design limits are known while the individual’s are unknown. The whole purpose of education is to let the individual understand his or her own memory capabilities. Many times, the human being fails to understand or utilize his own brain power, and feels that new knowledge has to overwrite the old knowledge. Partitioning of human memory helps an individual cope with data deluge just as partitioning of disc memory helps a computer store and process data efficiently. It is important that an individual practices in his own natural way of partitioning his memory into multiple storage areas. Equally important is the need to develop one’s own equivalent of RAM, that part of the memory bank with which his programs can communicate instantly. The individual must also make his brain more efficient by utilizing the intrinsic memory rather than relying on external props.
The second relates to the discipline of input. A computer can accept each and every input as long as it is provided by designed input mechanisms; it cannot differentiate data in terms of logic or correctness, and will process all data that is provided. As a result, the GIGO (garbage in-garbage out) phrase which came into parlance in the 1960s continues to be in vogue. That said, the computer can differentiate data and information based on pre-set rules. The human being likewise has both natural and acquired abilities to differentiate and discriminate between data based on education and experience gained over time. It behoves the individual to develop rules based on such lifelong education and experience, and apply them whenever he is faced with huge amount of data. A great case in point is an individual’s ability to process the huge amount of campaign data and information hurled at him from multiple sources during the election time, and take a rule based voting decision.
The third relates to the discipline of operating system.  The operating system is the core of the computer. It has all the programs built into it. The computer operates as per the operating system, no more and no less. Does the human being have an operating system, or the core programming that is standardized? The challenge and the opportunity is that each individual has his or her own unique operating system, based on multiple factors of genetics, family, education, experience, and intuition. Unlike the computer operating system, the human operating system is prone to creativity as well as rigidity at two extremes. The key for each individual’s superior performance lies in self-awareness that he or she operates as per an individualized operating system, and it lies entirely within him or her as to how he or she can reinforce and sharpen it.
The fourth relates to the discipline against malware. The greatest threat to orderly, safe and efficient operation of a computer is the malware. The major operating systems provide for security certification and inbuilt filters against malware. In addition, anti-virus providers provide anti-virus programs. The human mind is similarly susceptible to social and other malware. It is important that individuals recognize the need to develop core professional and personal principles to protect the human mind against the malware of irrational or non-integral behavior patterns that impinge on one every day. The sayings of philosophers, seers and spiritual gurus and the embedded knowledge of religious works provide strong filters against the invasions of malware on human mind.
The fifth relates to the benefit of applications. The phenomenon of applications getting developed for various devices reflects the need to customize the power of a computer to individual needs, making both access and analysis of information simple and effective. Likewise, every individual has the benefit of the knowledge and experience of his friends, peers and associates to provide additional pre-experiences and guidance to individuals’ own capabilities. The ability to leverage the stakeholders enables every individual to optimize his experience on one hand, and avoid the pitfalls of others on the other; at the minimum it avoids the time and cost of rediscovering what is already known to others. Applying others’ knowledge, experience and insights to one’s own approach enhances performance while making it error-proof.


The sixth, possibly the most important, is the power of the processor. The processor speed is the most important determinant of a computer’s overall performance. The ability and speed of the human brain to process information is similarly an important determinant of how one performs in the competitive world. Unfortunately, unlike the computer chip, the human cell deteriorates after a certain age. Medical research teaches that it pays for one to keep the body and mind fit, sharp and agile through a variety of exercises for the body and the mind. While a computer becomes obsolete with new technologies, the human mind has the ability to compensate any loss of performance that happens with age with gain of wisdom. As one ages, one can mellow with more grace and wisdom. Unlike a computer, a human being can be regenerative, and value-accretive with age.
The seventh is the power of the output. The result of the efficiency of a computer is seen in the output. So much emphasis is placed on display of output to assure customization and elegance. The human communication, especially the response and feedback mechanisms determine the effectiveness of the human personality as an individual and as a leader. Output efficacy varies widely with circumstances. It can be succinct or elaborate; at times a harangue is required while at other times silence is golden. Just as a computer’s display is enhanced by the right choice of fonts, pixels, screen and background, a person’s processed communication output is embellished by a person’s right choice of thoughts, words, format and backdrop. 

The eighth is the significance of modularity. The computer is a core device. Its core power can be extended by a variety of read/write devices, flash and external memories and other devices including smart devices. Each helps add capacity, enhance portability and provide flexibility. Some of these help remove the clutter in the computer. Likewise, the human being is the centre and core of everything. To let one’s life get governed by the plethora devices is somewhat like missing the woods for the trees. The devices, including the computer, must be used to enhance and improve one’s life than allow it to be tied in eternal knots and tangles.     

Human technology

Technology helps better human development. Computer is one of the most brilliant and ubiquitous products of human technology. Its power and applicability is so vast that it also makes the human mind to lose its independence and self-reliance. Yet, the way a computer’s power is organized and managed with design, the computer’s creators, the human beings, can take a lesson or two from the computer for designing themselves better to live more effectively.
Posted by Dr CB Rao on April 13, 2014  


Sunday, April 6, 2014

Differentiation versus De-commoditization: Strategies for Haves and Have-nots

Differentiation is seen as a value building, remunerative strategy in product and business development. Differentiation as a strategy evolves along with industry structure. When an industry is built around a first time pioneering monopoly product, differentiation is of academic interest as the product constitutes the entire industry. As new players with identical or similar products enter the industry, differentiation emerges as the differentiator amongst different firms. However, when competition reaches a saturation point, the feasibility of differentiation declines even as the importance for cost leadership climbs up. Popularly, when competition becomes intense and differentiation becomes difficult, a product is seen as a commodity product. As an axiom, differentiation tends to be inversely correlated with commoditization, and vice versa. Yet, firms with investible resources tend to pursue differentiation as a premium strategy even in commoditized industries.

Differentiation tends to be primarily on product technology. In certain cases, it can be in terms of branding, channel marketing and point of sale strategies. Technology-driven differentiation tends to be more robust and sustainable relative to other forms of differentiation. Firms can seek to be differentiated not only by offering highly unique products but also offering a diverse range of products. In many cases, single product differentiation becomes vulnerable and firms are forced to field a broad range of products to meet multiple consumer needs. There was a time when Maruti-Suzuki held almost 100 percent of the Indian car market with only one product, the 800cc car. Yet, its dependence on small cars coupled with entry of other global car manufacturers in India led Maruti-Suzuki cede 50 percent of its share to competition. Diversity for a firm leads to differentiation of sorts. Diversity does not, however, stop commoditization. Many analysts equate with commoditization with genericization, and vice versa. This, however, is not necessarily true.
In strategic discourse, commoditization is a concept that is used rather extensively as a driver or outcome of competition. Compared to innovation, commoditization figures more prominently as an inevitable concomitant of a developing industry structure. Many analysts suggest that commoditization is a direct consequence of lack of competition on one hand and excess of competition on the other hand. It is now hypothesized that no industry, however technologically advanced it is, can escape commoditization. For example, unbridled competition in smart phones is making the high-technology products look like commodity products, freely available off-shelf; a proof that no product group can escape the specter of commoditization. However, commoditization is not just related to competition.  Understanding the theorem of commoditization in strategic parlance requires the understanding of the word itself. Common words often get layered with folklore especially in strategic discourse!
Simply put, commodity is a raw material or a product that can be bought and sold. Some analysts believe that materials that do not have differentiating characteristics are free commodities. Some others believe that even when no differentiation exists, the demand-supply equation determines if certain products are precious commodities. Some commodities like oil, gold and water, which are non-renewable natural resources in varying degrees, tend to be precious while some like grains and metals whose production can be stimulated tend to be more freely available commodities. Some believe that products and materials that are nature’s gift are commodities while products and materials that are worked by human design and manufacture are considered non-commodities. Even this approach does not work because a product of great human effort like steel is often considered a commodity. In a sense, there is no straight correlation, in any combination, between natural occurrence, human development, preciousness, differentiation that can define commoditization.   
Commoditized shakeout
Commoditization is a resultant of a number of factors: abundant natural availability, ready usability, shared characteristics, surfeit of capacity, basal need fulfillment and so on. Any product, even if reflecting the highest level of human ingenuity, can become commoditized with time. Any commodity could also turn precious and differentiated if it ceases to be naturally available, gold for example. A commodity could become differentiated if it can be worked on to imbue special characteristics, diamonds that are cut uniquely for example. If a commodity like oil can be developed to reduce friction and reduce pollutants it becomes differentiated. When first introduced, a mutual fund instrument could have been very special but today it is completely undifferentiated and commoditized. The same with a special lending instrument like housing finance. It was made differentiated with a specially established institution, Housing Development Finance Corporation but with all the banks treating housing finance as a key component of their lending portfolio the instrument has become commoditized.
Commoditization is a concomitant of two principal factors: easy availability of materials and easy availability of technologies. Together, they determine the height of entry barriers to an industry. When faced with this, the first response of the firms and industry is to drive down the entry barriers even more, almost to a level of a shakeout in the industry. Emerging markets such as India are particularly prone to the phenomenon of commoditized shakeouts. Several industries, as diverse as motor pumps, lubricating oils, airlines, television channels, home foods and bulk drugs, to quote a few are witness to the commoditized shakeout phenomenon. The strategy adopted by most firms, when faced with commoditization, is to seek cost leadership to avoid being the victims of shakeout. This strategy has clear a floor level of cost-price below which it cannot be pursued, except at the risk of self-annihilation. The ideal strategy to address this is to have differentiated products all across the firms but it is easier said than done. As mentioned earlier, only a few firms which possess high technology and resources can hope to pursue differentiation in the face of commoditization (the “Haves”). If differentiation is for the Haves, the Have-nots need a relevant strategy; this blog post proposes de-commoditization as a novel strategy for the Have-nots.   
Differentiation for the Haves
Differentiation is not a mere function of financial resources. It requires visionary ideation and smart strategizing. Technology that continually fulfills higher levels of needs helps in differentiation. Basic human needs of communication and socialization are continuously expressed through different levels of technology, from the early telegraphy to modern day satellite communication. Socialization has kept pace with communication technologies but have essentially utilized the communication portals and cloud infrastructure. Future technologies could be extensions of human intellectual and physical activities. Socialization can take the reverse route to induct robots as part of everyday life. These kinds of differentiation requires two types of Haves, having technological innovation as the first core competency and customer outreach as the second core competency.
The possession of these core competencies enables firms to continuously innovate new products that fulfill the human needs in completely different manners. Those who utilize the core competencies to undertake only incremental innovations cannot achieve true differentiation; on the other hand, they deliver small incremental improvements through high levels of technology, leading to adverse cost-value relationships. Those firms which have true technological and market competencies are truly firms of destiny for industry evolution. While the pioneers qualify almost naturally for the differentiator role (for example, Cadbury’s in milk chocolates, Danone in dairy products, Kellogg’s in breakfast cereals), time to time new differentiators emerge (for example, Nestle with KitKat). The Haves should rightfully concentrate utilizing their core competencies to setting newer product trajectories. Given that this requires huge investments, the Have-nots would need a different approach.
De-commoditization for the Have-nots
De-commoditization at one level is responsible business management. It avoids trivializing a product through self-destructing strategies. Launch of a new product at a huge price premium but immediately offering buybacks and cash-back discounts trivializes technologies and products. The first step towards commoditization is an almost unintended consequence of volume-driven marketing or cost reductions. The right strategy of de-commoditization is to hold, and if possible even reinforce, product specifications all through introduction and growth phases of the product life cycle, even in the face of new competition. The second step in de-commoditization is to avoid frivolous market segmentation. While offering products at different value points is inescapable, mindless jumbling up of specifications for driving up product proliferation adds to commoditization. The right strategy of de-commoditization is to keep the product lineup simple and meaningful.
The next challenge of de-commoditization arises when the inevitability of commoditization happens. De-commoditization can happen in one of three ways. The first is by building value adding features in a commoditized product (for example, extending a yogurt product in two directions of low-fat range and high-energy range). The second is modifying a product to deliver two principal functions in place of one principal function (for example, making a gaming device like Kinetic that helps gaming as well as exercising). The third is retro-designing a product to rediscover the roots (for example, bringing smart watch technologies to conventional Swiss watches). De-commoditization requires a disciplined Kaizen mindset that upholds a product’s value in the eyes and heart of the consumer always. It will not require the mega investments that the Haves splurge on differentiation drivers but will certainly need a keen eye for detail and a penchant for simplicity and functionality in a mindset of quality.
Posted by Dr CB Rao on April 6, 2014