Sunday, June 29, 2014

CATCH as a Career Development Acronym: Merging Conceptual, Analytical, Technical, Creative and Holistic Skills

Young people regardless of educational stream are restless to discover the elixir of professional growth. Each educational stream by virtue of the unique nature of its domain imbues in its students certain unique capabilities. Literature, for example, provides its students with an ability to appreciate the dynamics of humans and nature. Commerce makes its students aware of the worth of trade and business. Accounting makes students proficient in deployment and measurement of assets and liabilities. Science makes its students create the bridge between the natural and synthetic; the organic and inorganic. Engineering teaches its students the ability to convert ideas into gadgets; the abstract into real. In a similar manner, each professional course that has a technical characteristic of its own provides unique characteristics to the students.

Doubtless, these professional courses help individuals enter the organizations and functions of their choice and grow in their careers based on further professional specialization or diversification. It is not, however, so well established that educational excellence by itself provides the motive force for managerial and leadership development. A simplistic, and popular, view is that if technical capabilities as embedded through professional courses are reinforced with soft skills such as communication, inter-personal and other behavioral skills, it would help individuals achieve higher goals through superior performance. While a combination of such hard skills and soft skills is undoubtedly very much needed, there is a more fundamental skill-set that enables truly superior competitive performance. This blog post proposes a model, which is described through an acronym called CATCH, that represents a combination of Conceptual, Analytical, Technical, Creative and Holistic capabilities.
Simplistically, conceptual skills are ideation or imagination skills. In a managerial sense, they represent skills that help an individual crystallize complex and abstract problems in terms of core themes and ideas. One of the fascinating conceptual analyses was displayed by Air Asia. When asked why Air Asia was trying to enter India when there were already so many low cost airliners, mostly suffering losses, pat came reply from the CEO, Mittu Chandilya who questioned if they were low cost airliners or low fare airliners. The conceptual clarity teaches us that fundamentally the firm has to be a low cost operation whereupon it can automatically be a real low fare firm, if it chooses to. Another marvelous conceptualization was telling the IIT professors struggling to dissect the cultural pros and cons of having a management school within IIT that it would be like having a mini-IIM in IIT campus.
Conceptual thinking enables a leader or manager to understand core opportunities and challenges facing a business; it cuts out clutter. It helps managers and leaders avoid distractions. Conceptual thinking is particularly helpful when firms are either in startup or end-state phase of business or when they are faced with strategic crossroads. The uncertainty of future options and unpredictability of data points are managed by conceptual definition of the core problems. A firm which has a product lead time of five years and was paralyzed from investments for five years can be conceptually concluded to have lost a decade of life and several decades of competitive advantage, even without any data analysis. Equally, such a company can be conceptually held to be capable of reentering the competitive game with only a clever acquisition. Conceptual thinking simplifies the otherwise complex business life.  
Analytical skills are those that enable an individual use a logical method of thinking about anything in order to understand it, especially by looking at all the constituent parts separately. It typically deploys scientific and research based approaches. The link between conceptual and analytical is simple; the analytical part can take off optimally once the conceptual part is clear. Taking the AirAsia example, once  conceptual clarity is established that low-cost rather than low-fare is the right model, analytics would need  to focus on how the lowest cost of operation could be achieved. This would involve analyzing every component of cost for frugality and every component of customer service for value-optimality. The more comprehensive the analysis is the better would be the operating model. That said, analytics without conceptual crystallization would be a wild goose chase.
Analysis provides choices and generates data points that could help managements make appropriate decisions. Conceptual clarity would continue to help in making analysis better. For example, layering of additional fares on base fare cannot be good analytics; so is the case with the complex dynamic fare model. The model develops in an opaque manner a high average fare for the airliner, leveraging the seductive promotional advance fares and exploitative usurious last day fares but would not be in keeping with the concept of a true low cost airliner which is expected to provide maximal perceived service with minimal absorbed cost. Analytics requires sound business background; analysts should understand the vital-essential-desirable as well as the fundamental-core-peripheral concepts as appropriate to the industry or the business one is in. Analysts should also appreciate where what tools would be relevant; operations research, for example, would be applicable for route planning while game theory could be relevant for competitor analysis and simple arithmetic appropriate for standard costing.             

Although considered allied to, or reflective of, engineering and technology, technical skills have a broader connotation as well. Any skill required to efficiently and effectively perform a job is a technical skill. Technical skill typically grows out of the knowledge of a subject and is the fundamental core to be in a domain or lead it. Every business requires a number of technical skills; what is core technical for one industry could be enabler for another industry. For example, for an automobile firm, manufacturing technology could be core while finance and IT could be supportive technical ones. For a banking firm, finance and IT could be core while civil engineering could be supportive. Regardless of such differentiation, technically one must be a master of expertise in one’s domain. Companies such as GE and Unilever focus on multi-functional expertise to build themselves into firms with sustainable competitive advantage.
Technical skills are acquired through serious curricular efforts, proactive extracurricular reading and intense on-the-job deployment and learning. Technical skills are reinforced by continuous learning; it is more than a simple learning curve effect. A doctor or surgeon continuously adds to his or her medical skills through each case he or she handles. A maintenance engineer continuously adds to his preventive maintenance capability with every breakdown maintenance case he or she handles. A product designer continuously improves his or her products by observation of customer usage and integration of material and other technologies. An accountant understands the power of numbers and their implications by continuously monitoring global accounting regulations and trends for generally accepted accounting practices of different countries, and related case laws. Being constantly studious is the only way to acquire and enhance technical skills.    
Creative skill involves the use of skill and the imagination to produce a new work in any domain, be it work of art, science or engineering. Many experts consider that creativity and originality are even more important than technical skill. If an airliner can creatively transport its employees seamlessly across the nation through a hub and spoke strategy it would provide competitive differentiation. If a full fare airliner can provide a mobile online air ticket reservation and purchase facility with anytime access without dynamic fares it could nurture for itself a creative niche. If an airliner can replace its in-flight print magazine by a digital version displayed on individual screens it could not only reduce costs but can also provide a whole archive of magazines to information lovers. If ground handling is improved to reduce vehicle turnaround by 50 percent, an airline could add one additional flight to its daily schedule. By opening its own dedicated takeaway food kiosk in the departure terminal, an airliner can save on crimped up and inadequate service on its flights, more particularly the short haul ones. Creativity differentiates the winners from the losers, more so the sustainable growth firms from the also-rans.
Creativity requires an independent and questioning mind that constantly seeks improvements at one level and out-of-the-box thinking at another level. Creative skill comes with constant observation but each time with a fresh enquiring eye. Creativity also comes with finding new ways of solving difficult problems or fulfilling customer needs in better manner. The process of technological development is based on creativity. Creativity can come from knowledge or from practice. The former should lead one to find better ways from knowledge. The latter should lead to a quest for knowledge that can improve practice. Many times, small but focused experiments become scalable for global impact. A creative payment gateway, for example, can revolutionize global online commerce. A creative patient record management system can revolutionize national healthcare registry, as another example. Successful startups develop from creative operational or business solutions.    

Holistic skill is the ability to consider a whole thing or being to be more than a collection of parts.  Holistic life and holistic medicine are examples of common phraseologies of holism. Holism is the philosophical approach that the whole, of anything, must be considered in order to understand its different parts. Holism is one of the most complex capability to possess because it is a multidimensional attribute; covering all direct and indirect influencers and current and future evolutions. Reverting to the AirAsia example, the business plan of AirAsia involving important parameters such as fleet mix, route network, schedule density and several other factors are dependent on the nature of airport infrastructure in various cities and towns. It would be segmented thinking to buy a large capacity aircraft and also hope to connect all the tier 2 and tier 3 cities; it would not work as a holistic strategy because the short runways would not accept such larger aircraft. It would be somewhat like an international airliner like Lufthansa planning to convert its entire fleet to A 380 (the largest plane) even though only few global cities can accommodate such wide-bodied plane.
Holism requires thinking and imagining beyond the obvious, connecting the visible and invisible dots of industry boundary, industry value map and inflection points in regulatory evolution. This is not necessarily the forte of the wise elderly or apex leaders; all individuals who can process multiple sets of data and information and form patterns can develop a holistic approach to what they seek to accomplish. Holism is a temporally integrative capability as well; involving an ability to connect the certain past, volatile present and uncertain future to achieve a holistic solution. It merges emotion with objectivity as well as experience with anticipation to create a new paradigm that others less endowed would find it difficult to mimic. Holism requires that the four skills discussed earlier, namely conceptual, analytical, technical and creative are well developed in an individual. Holism in such individuals acts as a capstan capability.
The catch
If these constitute the five virtuous capabilities for personality, knowledge and leadership development,  it must be intriguing that such programs emphasize only some of the capabilities; analytical and technical ones are the most emphasized. The reason lies in the belief that while analytical and technical skills can be “taught and acquired”, the other three skills are dependent on how the brain is hardwired with respect to conceptualization, creativity and holism. This could be a catch in adopting the CATCH development model on a wider scale; but the catch is more imaginary than real! As with many developmental activities, introspection, on the part of the developer and the developing (the mentor and the mentee, the guru and sishya, the boss and the subordinate, the teacher and the student, the leader and the follower, as the case may be). Fundamentally, the developer should be a CATCH personality to develop the individuals, and needless to add, even the developers would need to develop themselves to make the CATCH development template work.
Posted by Dr CB Rao on June 29 2014.         

Saturday, June 28, 2014

Structural and Process Impedance: A Key Factor for Organization Design and Strategic Acceleration

Organization structures are essential mechanisms for delivering strategic objectives. They are like the equipment shell or the chassis in (or on) which the rest of the hardware and software is integrated to develop a product that meets design objectives. That structure is an enabler for strategy is well researched and well validated. Alfred Chandler in his path-breaking work established that structure followed strategy. Yet, not much research is focused on the enabling and disabling capabilities of an organization structure, relative to its strategic objectives. Organization structure is an enabler to “house” qualified and experienced individuals to meet both strategic and governance requirements. It is also an enabler to fix accountability and responsibility. Rightly designed, therefore, it must provide competitive advantage to a firm.

Like structure, process is a key component of delivering strategic performance. In several ways, process is like the operating system of a computer. However, unlike the operating system of a computer, the processes are as varied as firms are. Even within a firm, processes can vary across businesses, functions, sites and geographies. Process follows structure because process prescribes how different parts of a structure “talk” to each other. The more efficient a process is the more effective a structure would be. In practice, however, organization structures, like equipment or houses, provide a base for talent but do not automatically enable complete deployment of talent while processes, like operating systems, require increasing complexity to achieve even minor differentiation in delivery.  This blog post proposes that rather than the structure or process it is the level of structural and process impedance that determines a firm’s efficiency and effectiveness.
Impedance, conductance
Impedance is the total resistance of electric equipment (a wire, for example, at the simplest level) to the flow of power. The lower the impedance the better would be the equipment efficiency. Electrical impedance depends on the geometry and material. A thin copper wire would be more resistant than a thick copper wire while an iron wire would be more resistant than a copper wire of the same thickness. The same principle applies to structural impedance too. If an organization structure is geometrically complex and if the individual parts are resistant to organization-wide change, structural impedance would be strong. Processes tend to get established to manage structural impedance.  However, processes which are essentially aimed at information flow also suffer from process impedance. The flow of information also tends to be like flow of current in the electric wire. The mindsets of people determine the resistance level to information flow.
Conductance is the inverse of resistance. The greater the conductance of a material the lower will be the resistance.  Interestingly, the flow of electrons in a material determines the levels of resistance and conductance. The principles of impedance are similar to principles of mechanical friction as well as hydraulics. The information flow, in particular, bears a similarity to pressure differential in flow of water from source to a destination, the pressure at later stage being lower than at source. The choice of materials and the geometry are important in design; so is the importance of additional accessories to achieve efficiency.  For example, resistors and boosters are added in equipment and pipeline designs to overcome issues of resistance.  The important point to note is that natural human elements as well as synthetic material elements display widely varying characteristics. It is necessary to choose options that meet design objectives.
Design language
Products, as we know, have design language. Organization structures and business processes also have their own design language. While a product’s design language is to appeal to customers in a differentiated manner, an organization’s design language is aimed at promoting internal efficiencies. The deployment of the right geometry in an organization design can lower the otherwise inevitable structural and process impedance in an organization. One of the best geometrical patterns in organization design is Rensis Likert’s Linking Pin Organization (LPO), which offers an elegant balance between vertical hierarchy and horizontal span, while ensuring absolute clarity on how chain of command and cross-functional links could work across an organization. There are several other organization design constructs and principles but few are as clear as the LPO is.
Clarity in organization design came to be affected over time as concepts of line and staff functions began to take root. The emergence of multi-business and multi-site global organization has led to several organization structures that sought to impose diversity on line-staff differentiation. Structural complexity has resulted in further efforts to impose additional structures to manage complexity. Firms adopting this route tend to be impacted, rather unknowingly, by the increased structural and process impedance caused by the complex organizational geometry. The increased fragmentation caused by such structures also has been inhibiting the ability of firms to develop leadership pipeline. The Strategic Business Unit (SBU) concept provides an ideal design solution to bring the simplicity of LPO structure to highly diversified businesses; the success of a diversified construction major such as L&T in India to find homegrown internal leadership succession is related to a combination of SBU and LPO structures.
Structural planning
While it is widely accepted that structure follows strategy in a generic sense, not many give attention to the need to let organization structure to follow business structure in a specific context. Strategic planning happens, in most organizations, every year to look at a five year perspective on a rolling basis. Many emerging businesses become mature businesses and mature businesses become declining businesses while green shoots of new businesses emerge in the strategic plan horizon. Mostly however, firms try to make do with only minor adjustments to organization structures that could hopefully accommodate strategic changes as much as possible rather than proactively reinvent organizational structures along with strategic shifts. The positive way is to make organization design an integral and concomitant part of the annual strategic planning process and make development of a new organization structure mandatory before any strategic investments are planned.
Structural planning should focus on creating independent but accountable organization structures for new strategies. Typically, today’s organizations should be created for tomorrow’s results. The costs of not being organizationally proactive could be immense. Tata Motors’ inability to make a sustainable growth path in the car market is attributed to its unwillingness to create an end to end discrete sales, marketing and dealership organization for passenger cars, distinct from that of its traditional commercial vehicles.  Leading hospitality chains, from Hyatt and Hilton to Taj and ITC, are able to achieve complete market coverage by developing discrete hotel infrastructures and marketing organizations appropriate to each segment. These business strategy driven organization structures reduce structural and process impedance by design.
Design behaviors
Managements, somewhat strangely, tend to prefer complexity rather than simplicity. Some managers find creation of new organization structures ahead of business development to be an avoidable expense. Some managers find it difficult to let go of career opportunities that could come along with additional responsibilities when an existing structure is burdened with additional scope. Some managers, of course, fail to appreciate the nexus between strategy and structure. The combined effect of these embedded behaviors is the creation of monolith firms that become unwieldy and complex. Enlightened managements, however, recognize that the costs of discrete organization structures are more than compensated by increased business efficiencies within each structure. The success of conglomerate business model is based on such realization.
The fear that individualization of organizational units promotes non-standardization or non-harmonization of enterprise processes is ill-founded. A linking pin organization that connects the leaders of individual organization structures into a conglomerate leadership group addresses most such concerns. Proactive organization design approach requires the choice of right heads for right structures and trust in their ability to lead accountably at SBU level and integrate responsibly at conglomerate level. Envisioning an organization of the future needs to be an integral component of leadership vision for new businesses, whether mono-product standalone businesses or multi-product conglomerate businesses. Understanding the physics and mechanics of organization structures and the role of structural and process impedances is a key component of successful organization design and development.   
Posted by Dr CB Rao on June 28, 2014

Sunday, June 15, 2014

Saturated Launch versus Silent Launch: Quality and Innovation as the Tilts to the Right Choice

Product launch is one of the most important milestones in the lifecycle of a product. Next to product development expenditure, product launch expenditure is the single largest expenditure component. While the scale and scope of launch determines the scale of revenues, the splurge on product launch also has an adverse price impact, influencing revenues in turn. Several options are available to the new age marketers in media to achieve saturation marketing. The loudness of some of the recent product launches including multi-full page advertisements raises the question if the maximal deployment of the promotional resources is required in today’s competitive marketing scenario or, on the contrary, promotional resources are being well spent. In fact, some of the promotional characteristics of even high technology products like consumer electronic products are focused more on visual aspects than on technical points. Even in respect of iPhone there is nothing more than a strong product visual and a price buyback offer in a full page advertisement!

While this excessiveness is an offshoot of free market competitiveness, the trend of saturation and intense advertisement of product launches is also related to the shortening product lifecycles. It has probably become important for firms to aim at the fastest possible recovery of investments, sometimes in periods as short as 3 to 6 months. The movie launches of recent times which aim at not only maximum number of screens in the home state or home country but also at simultaneous multilingual and multi-country launches is a striking example of saturation launches. While the automobile industry in sellers market conditions was accustomed to pre-launch booking of cars, other businesses especially cell phone and tablet firms are vying with each other in taking pre-orders although such industries are not exactly in sellers market conditions. Saturation marketing for the benefits listed above carries with it the possibility of making the customers insensitive to the messaging. It is time to consider if silent marketing could be an alternative to the current trend of vocal marketing; however, prior to that, an examination of what could constitute saturation launch could be appropriate.
Saturation launch
Saturation launch involves launching a new product through a well conceived and well coordinated advertisement campaign on the new product involving all the media (almost like a  blitzkrieg!). Typically, it starts with teaser advertisements in the pre-launch phase and full blown advertisements in print (newspaper and journal), radio, television, cinema, and social media immediately prior to and after product launch. In respect of certain products (such as automobiles and electronic gadgets) exposure in exhibitions of products at prototype stage itself is a given phenomenon. The benefit of saturation launch is that it captures the attention and imagination of the widest possible potential buyer and influencer base. It caters for diverse attention spans and mood scenarios, from early morning to late night exposure and flexibility of weekdays or weekend coverage. Given that each medium has its dedicated following as well as transient and random following, an exposure strategy can be designed based on product features and target customers. Saturation marketing is expressive in multiple ways; in fact, it attempts to capture the imagination of the customers through multiple human senses.
Pictorial, reading, listening, touching and simulation are the ways in which saturation marketing works. Saturation marketing can attract a potential customer to a product through pictures, can educate through written explanation, convince through sound bites, motivate through feel, and integrate through experiential simulation. Movie trailers, product displays, model homes, architectural walkthroughs, self-selection options and automobile test drives are examples of how pilot experience options can be deployed by firms to propagate the features of products as launch cum marketing experience. Next to such holistic experience, pictorial launch and marketing has been the most effective, and popular, medium of launch communication in India, even in this digital age. Sky hoardings, wall posters and wall paintings, rain and sun canopies and painted displays on transport equipment continue to be the most expressive launch media in India. Packaging and carry bags as well as flyers and leave behinds or product leaflets enable communication of the messages in a more ambulatory fashion. It is estimated that a saturation launch campaign on all of these lines together with maintenance marketing would cost anywhere between 10 to 20 percent of sales revenue for a product that achieves a viable scale.
Silent launch
Silent launch, on the other hand, could save the firm a considerable amount of such expenditure which can be passed on to the customers in terms of lower prices for the products. However, what exactly could be a silent launch has no formal definition. That said, it may be defined as a launch of a product without advertisement or publicity of the contemporary kind. One of the recent silent launches in India has been the re-launch of Tata Aria crossover SUV a few weeks ago. Compared to the first launch a few years ago, the re-launch has been absolutely quiet. In practical terms, silent launch tends to be the only option for products launched by small and micro enterprises (SMEs) and self help groups (SHGs) which cannot afford launch resources. That said, a silent launch need not be, and cannot be, a nondescript launch. Silent launch could involve quiet but effective product display at points of sale with efficient sales executives explaining the product features, and wherever feasible, touch and feel. Display of new automobiles in luxurious shopping malls is an example of silent launch. Even in the FMCG sector, consumers are often surprised by new products which quietly take shelf life alongside established products. Some of the SMES and SHGs tie up innovatively with leading hotels and retail chains to gain display and marketability as a component of the corporate social responsibility of such large enterprises.
Silent launch is particularly appropriate under five conditions. The first is when the product is such a runaway hit that it needs no special publicity. An iPhone, whose attributes of use and symbolism of possession are well known, qualifies for such a silent launch position. The second is when the product is likely to be a low volume niche product whose sales would not bear a proportionately elastic relationship with the advertisement and other launch expenditure. Tata Aria, which though a good product could not capture the imagination of the market, falls in such a category. The third is when a product is launched under marginal costing principles leaving no scope for launch extravaganza. The fourth is when, as discussed earlier, the firm by its very ownership or operational structure has no resources to support launch activities. The fifth is when the product is of a neighborhood variety; for example, local produce or local eatery. Word of mouth, including product reviews by independent reviewers, plays a strong role in the success of silent launches. Silent launches can occur in any industry though! The movie industry is prone to successful silent launches made possible by positive word of mouth. Products which are highly visible in use (like automobiles) or in display (like televisions) and products which are a common part of daily use (like fountain pens) gain by word of mouth or ease of use. Some industries like pharmaceutical industry or insurance industry may find themselves appropriate for (relatively) silent launches given the regulatory restrictions.
Quality, innovation
Saturation marketing, by definition, is cost-intensive. In contemporary marketing in India it has become cost-excessive due to several high voltage attempts to grab attention. The practice of having a celebrity brand ambassador (a successful movie actor or an accomplished sports person, for example) has been the biggest cost driver of saturation marketing, on a rather universal basis. Sponsorship of major sporting events such as Cricket IPL and Football World Cup are the significant seasonal cost drivers.   Taking full front page advertisement space in newspapers and multifold front page advertisement space in journals and magazines has been another extravagant cost driver. Sponsorship advertisements in popular television serials or sporting event telecasts are also major cost drivers.  In terms of sunk costs with recurrent expenditure, exclusive company sales plazas have emerged as the trend to capture consumer imagination. Big firms tend to utilize all of these elements to ensure, in their view, strong enterprise and product line recall. However, does this recall automatically translate into consumer preferences for specific products? The answer is probably in the negative.
If Samsung, LG or Sony would launch a curved super high definition television, the consumers would be interested in evaluating purchase of such a new product based on novelty of features and the prestige value associated with such purchase rather than on whether any of the companies was associated with any great event or celebrity. While it may be argued that when the market is crowded with many competitors such high voltage and saturation marketing enables some differentiation and recall, it is a moot point if there exists a direct correlation between such saturation investments and actual product purchase decisions. Many of the concepts underlying saturation launch and marketing need to be validated by research on the revenue effectiveness vis-à-vis cost extravagance. In the earliest stages of mechanical revolution, in the middle years of electronics revolution and in the contemporary digital age, only quality, as evidenced by predictable and reliable performance, remains as the robust consumer draw while only innovation, as evidenced by premium, futuristic product design, remains as the unique product differentiation. As competition gets tougher, firms would do well to seriously reconsider marketing extravagance and reevaluate relative allocation of expenditures between sustainable quality and innovation on one hand and saturation launch and marketing on the other; from the author’s view the balance has to tilt strongly tilt in favor of the former! In such a quality and innovation driven scenario, silent launch could provide more value for the consumer than saturation launch would provide.
Posted by Dr CB Rao on June 15, 2014




Sunday, June 8, 2014

Competency-Ownership Grid: Towards Reinforced Accomplishment

Positive living requires sustained accomplishment. Accomplishment is rarely individualistic; it requires at least two parties, in many cases several. Accomplishment need not necessarily be only material; it could be philosophical or spiritual too. Most, if not all, of material accomplishments are bilateral or multilateral. From a conceptual viewpoint, even multilateral accomplishments can be reduced to bilateral ones; for example, an interactive accomplishment between agencies of government and several firms can be seen as a broad government-industry interaction or accomplishment. Even an apparently individualistic accomplishment of attaining spiritual nirvana is an interactive accomplishment between the mind and soul of an individual. The key question is how any interaction between entities can be translated into mutual accomplishment. The answer to this question determines how people and societies can achieve positive living.

Typically, activities precede achievement even as thoughts or intents precede activities. When firms and governments desire to promote industrial growth, several actions such as formulation of industrial policies, establishment of industries and commencement of commercial operations must take place. When someone desire to achieve nirvana, he or she must have a meditative conversation with his or her soul to achieve a state of tranquil mindfulness. All these myriad forms of activities with others and self can be seen as forms of engagement. How well these activities are accomplished is not a function of intent; rather it is a function of how genuine and effective the engagement is. The robustness of engagement depends on two principal factors; competency in engagement and ownership in engagement. Together, these form a competency-ownership interlock.
Competency is the ability to do a job well. Competency, in a more focused sense, is the skill needed to do a particular job or meet a particular task well. Competency has a specific need as well as a broader need. Every job brings in its stride certain unexpected occurrences. For example, in spite of measurement of all parameters a raw material may behave in an unexpected fashion while being machined. In spite of understanding human anatomy well, both academically and practically, a surgeon may experience an unexpected internal organ structure. One therefore needs to have specific competency to do a particular job but also a generic competency to build on the specific competencies by adaptation of specific competencies or integration of additional skills. The artisan who builds a superstructure, for example, must be able to address how a construction must be managed in turns and crevices to avoid water seepage. In other words a construction worker must have enough knowledge of waterproofing, and a waterproofing worker enough knowledge of construction.
Competency gets built through a continuous learning process, first through education and next through experience.  Competency building is a behavioral process as much as it is an intellectual process. It is a combination of educating oneself through formal or informal processes. It requires opening up of oneself without ego to what is required for the current state at one level and be prepared for future state at another level. Not respecting the teaching and learning processes in the school and college phase and not respecting the observing and learning processes in the employment phase impede competency building. Competitive learning which dominates the contemporary learning processes takes people ahead on examination or selection criteria but not in terms of true learning. Competency building requires a combination of focus on the core and diversity for the future. Each learning experience gives an opportunity to discover what one is really good at life, and what makes one truly actualized.
The ability to build optimal levels of competency at different stages of life and in the context of various tasks is dependent on an individual maximizing one’s performance through a complex balance of competition and collaboration. Competition is an intrinsic feature of human psychology stemming from recognition that resources are limited and wants are unlimited. Collaboration is a contractual feature of social psychology stemming from a realization that by pooling resources and skills one can be more competitive than others.
Ownership means that something belongs to someone. Ownership had been the central thesis and the vortex of myriad debates of economic policy. Private versus State ownership had been at the center of debate over private versus public capitalism. Over the last centuries, practical economics has seen the relative success of private ownership and enterprise over state ownership and enterprise. Major private enterprises, even in advanced countries wedded to free capitalism, have seen failures of private ownership and management while some public enterprises, even in developing economies, have seen successes of state ownership and management. Yet, on a broader and relative plane private ownership has emerged as a better driver of greater success. In this context, it is somewhat enigmatic that the word ownership gets well used but also misused in individual or business performance context.
The urge to own is inherent in human evolution, transiting from total dependence to semi-dependence, independence and interdependence in different shades.  A child who for the first time tries to crawl or walk by himself or herself, or tries to play with articles is unknowingly but spontaneously is, in fact, taking ownership of his or her life. Yet, as the child grows up and as competitive learning and employment processes divide people into different categories, the concept of ownership gets distorted. From ownership based on natural curiosity and quest for independence, people migrate to ownership based on focus and specialization, rules and regulations, and rewards and risks. The trend shifts from doing what one beckons one intrinsically to what one must do, or must appear to do. The context and drivers shift to expectations of others, be it family members, teachers, friends or employers. As a result, individuals may own qualifications but not the intrinsic learning or knowledge, and may own jobs but not the inherent processes or outcomes.
Ownership is both transactional and philosophical. A teacher needs to own his or her subject but more importantly must also own his or her pupils. The teacher must also own in a broader sense the school itself, even though he or she is just one stakeholder. Effective ownership comes from genuine identification with a cause. Real ownership comes with one’s genuine sense of belonging to a cause or with a role rather than from a view that a role belongs to oneself.
Competency-ownership grid
Obviously, if one is competent for a task and has ownership of the task, one would be able to deliver an optimal performance for the benefit of all stakeholders including the performer. However, life being not so simple, we have opposing polarities of incompetence and escapism to competence and ownership respectively. To be objective, both competence and incompetence are relative terms which need to be understood with reference to a task (and a natural or acquired ability to meet the performance requirements of the task) while ownership and escapism are also relative terms which need to be understood with reference to the task (and a natural or conditioned aptitude to stay committed to the task). Competency-ownership matrix therefore needs to be assessed on a case by case basis by individuals as well as organizations. As with a 2X2 matrix, there could be four combinations of Competent Ownership, Incompetent Ownership, Escapist Competence and Escapist Incompetence, all of which tends to be individual and organizational realities.
Competent Ownership drives long term sustainable performance in all bilateral and multilateral relationships. It should be the goal of all team members and leaders to find periodically the right match of abilities and tasks on one hand and instill and continuously encourage a sense of belongingness on the other hand. Competent Ownership does not stay fixed throughout entire career spans and organizational journeys.  Individuals and leaders need to continuously review the effectiveness of competent ownership. Incompetent Ownership is a correctable feature of team dynamics but needs careful solution. Just because an individual is not suited in terms of skills to a domain placing the individual in another domain may not guarantee success unless the individual has a sense of belongingness to the new domain as well. Moving one from Incompetent Ownership to Competent Ownership needs to be a calibrated exercise.
It is relatively easy to evaluate one’s competence but is difficult to assess one’s sense of belongingness. It is not unusual, therefore, to find Escapist Competence in organizations, which is unfortunate. Individuals who do not have a true sense of belongingness and leaders who are unable to assess the pockets of escapist competence leave the individuals and organizations in a state of false complacency. And, of course Escapist Incompetence is an organizational nightmare. Individuals who are neither matched to the tasks in terms of their skills and have no belongingness to the tasks constitute a category that needs to be addressed with urgency and understanding both by individuals and the leaders. Whether a drastic restructuring of talent and tasks helps in minimizing the occurrence of Escapist Incompetence needs to be evaluated prior to drastic actions.
A virtuous grid
Clearly, it would be ideal for all individual, organizational and social endeavors to have only Competent Ownership as the underlying human factor of performance. It is, however, unlikely that in an organizational continuum, it would be a natural occurrence. Even structured processes of self-selection by individuals and multi-layered assessments by others may not result in a virtuous grid where all, or almost all, space is occupied by the Competent Ownership segment. It is, therefore, an individual responsibility as well as a leadership responsibility to constantly retool oneself as the tasks evolve, and recommit to tasks on one hand with a continued sense of belongingness. That said, mismatch of task-competency and task-belongingness equations need not necessarily mean end of the road. Such awareness may simply open up new vistas of opportunity.
The basic thesis is not as much as about the grid, per se but the need to be on a mode of continuous learning and developing a sense of belonging to the tasks on hand. In a dynamic world, knowledge keeps increasing and the tasks keep transforming in scale and scope. When one stops learning, one starts becoming less successful. When one starts losing the sense of belonging, one stops enjoying what one does. The good news is that self-awareness as well as team awareness can help individuals stay in the zone of Competent Ownership. Virtuous organizations excel not only in the much emphasized aspects of strategy and execution but also in the matching of abilities, tasks and ownership at individual, team and organizational levels. In all forms of bilateral and multilateral engagement, individual to individual, individual to entity, entity to entity or government to society, Competent Ownership is the only solution to sustainable and equitable development.
Posted by Dr CB Rao on June 8, 2014 

Sunday, June 1, 2014

Indian Aviation Industry: Red or Redux for Strategic Competitive Analysis?

Jet Airways, India’s favorite private airliner, posted its largest quarterly loss (of USD 360 million) recently casting doubts on its ability to turnaround despite the sale of a sizeable equity stake to Etihad. Jet’s difficulties compound the loss making operations of India’s full fare national carrier, Air India on one hand, and the low cost private airliner SpiceJet on the other. Air India (together with Indian Airlines) has been operational from 1932 with 4000 daily flights to over 90 national and international destinations while Jet has been operational from 1993 with 3000 daily flights to nearly 80 destinations and SpiceJet has been operational from 1993 with 350 daily flights to 58 destinations. While there are other marginal players like GoAir and Air Costa, their position is not considered any better. The sad story of Kingfisher Airlines which once had a 20 percent market share and has since ceased operations last year , and is in serious debt repayment woes, continues to trouble investors and bankers. The net loss of the major loss making airliners of India has exceeded USD 1.2 billion in fiscal 2013. Cumulatively, the Indian aviation industry is reported to have lost over USD 8 billion over the last seven years and the industry debt has exceeded USD 13 billion. The only successful airliner in India seems to be IndiGo, a privately held operation (from 2006 with nearly 500 daily flights to 36 destinations). 

Green is red?
In this scenario of airliner industry being in scorching red, AirAsia India, with its striking red livery, has made its entry into the Indian aviation as a low cost airliner (as an Indian subsidiary of the highly successful Malaysian AirAsia). It has made a splash with the announcement of its inaugural flight from Bengaluru to Goa on June 12, 2014 at a tantalizing fare of Rs 999. It is believed that AirAsia would launch its additional flights also with such nano fares. In the Indian aviation industry, approximately, Air India has a market share of 20 percent, Jet at 22 percent, IndiGo at  29 percent and SpiceJet at 19 percent. Together these four airliners garner 90 percent of the Indian aviation market. Given the more or less equal division with three unprofitable and one profitable airliner, new entry is a risky proposition on the face of it. The existing airline players together are up in the arms against the green light to AirAsia; clearly they are apprehensive of the adverse competitive impact of a disruptive entry into the Indian skies.
Mittu Chandilya, the young and aggressive CEO of AirAsia India has said that theirs would be the only true low cost airliner in India while all others may try to gain shares on low fares. He implied in several forums that the existing airliners have their faulty or inefficient operational models rather than low fares to blame. He has also committed himself to enter the market with disruptive pricing but expressed confidence that the airline would breakeven in a few months due to intrinsically superior operating model. In a characteristic response Indigo offered the classic Indian formula of Re 1 fare even as SpiceJet has been on low promotional fares for quite some time. It is unclear, at this rate, as to where the operational and business models of the Indian airliners would lead to, and if the Indian aviation industry would be in a perpetual red zone. There are doubtless some differences, with established airliners like Air India,  Jet, SpiceJet and Indigo being both national and international  (in varying mixes of course) and AirAsia being a pure domestic play. The Indian aviation industry makes an excellent case for analyzing structure, strategy and competitive advantage of firms, in particular the relevance or otherwise of Porter’s theory of competitive strategy in multiple facets and the need for an alternative theory.
Industry analysis
Transportation industry is a consumer facing but highly infrastructure controlled, technology driven and investment intensive industry. The industry has to perforce operate through public (government owned) assets, be it roads, rail tracks, sea ports or airports. The Indian aviation industry reflects these characteristics in a distinctive manner; it is an oligopoly with a mix of public, private and overseas ownership. Airports are tending to get privatized, but not entirely and the skies are regulated. Aircraft makers are just two or three, and investment costs are huge. Aircraft turbine fuel bears huge import costs and duty elements and taxes dominate the fare structure. Air transportation is a highly technology intensive operation with compelling needs of rapid turnaround and uncompromising safety. It requires highly skilled workforce, be it pilots, maintenance engineers, flight crew or ground handlers. In most cases, the service an airliner can offer tends to be accentuated or attenuated by the quality of airports while even the lowest of fare is ballooned by tax components.
In terms of strategic framework, at one level the competitive forces seem stable. With only two aircraft builders with long delivery lead times but fiercely competitive between themselves, the bargaining power of suppliers is high but not prone to escalation. With capacity ahead of seats and occupancy factor being elastic with fare competitiveness the bargaining power of buyers is low but not compelling. With air transport being a favored requirement for business travelers and time-sensitive travels, the threat of substitutes is low but distance distorts the competitive force; the shorter the distance the greater the threat of alternate transport modes such as rail and road. Given the loss-making nature of the industry and the exits and consolidations that happened in the industry from time to time (East West, Sahara, ModiLuft, and Air Deccan) the threat of new entrants ought to be low but entry now and then (example, Kingfisher, GoAir, Air Costa and AirAsia) with disruptive operating models reflects that the threat of new entrants is real and the Indian aviation industry defies the Porter’s norm of industry attractiveness.
Industry rivalry, the fifth competitive force, is judged by the scale and scope of competitive responses of the players. In general fast moving consumer goods, electronic goods and white goods industries are known for high competitive intensity. Road transport in spite of the fragmented competition and rail transport by virtue of being a State monopoly do not engage themselves in intense competition. Air transport in India continuously fluctuates between cartelized high fares and disruptive promotional fares. Apart from boosting occupancy factor and market share, individual airliners do not have any other apparent reason for competitive behavior. Given that market share is gained at the expense of profitability in the Indian aviation industry, industry rivalry is intense. That being the case, the air traveler ought to have been the winner but apparently it is not so; poor connectivity, minimal options, high dynamic fares, long waits and bland service are the common refrains of domestic frequent fliers. International flights may offer better service but options tend to be few and expensive. Considering the five competitive forces, the Indian aviation industry refuses to be described adequately by the theory of competitive strategy.       
Need for a new model

The state of the Indian aviation industry, as discussed above, is reflective of an industry that has few degrees of freedom to control its destinies even though individual firms aspire to succeed. The industry’s logjam which cannot be removed by the entry of one or two overseas airliners as wholly owned subsidiaries or joint venture partners. The industry needs to work on a multilateral collaboration model to bring itself out of the logjam. The industry needs a model of collaborative advantage. The author in his blog post titled, “A New Theory of Generic Collaborative Strategy: Adding Value to Porter’s Generic Competitive Strategies, Strategy Musings, March 24, 2013 propounded an alternative but supplemental approach to industry analysis (
The blog post proposed in the generic collaborative strategy five collaborative value drivers. These are the values of co-integration, co-development, co-fulfillment, co-expansion, co-diversification and co-saturation. These value drivers are achieved collaboratively with suppliers, innovators, customers, new entrants and also all the players within the industry. By leveraging the collaborative value drivers, a firm can ensure competitive operations, optimized investments, innovative products and processes, enhanced consumer choice and larger market. As opposed to competitive strategy which seeks to increase the value of the firm on a relative basis at the cost of related as well as competing stakeholders, collaborative strategy drives up the value of the firm and its stakeholders simultaneously.  
The collaborative model is essential for the Indian aviation industry to come out of the woods. Co-integration would require development of a total air transportation value chain involving ground handlers, caterers, airport authorities, maintenance hangars, air travel booking agencies much as automobile industry works with its component suppliers and logistics providers. Co-development requires that current plans leverage current enablers and future enablers are developed to meet future plans.  Currently, the infrastructure at the Indian airports dictates the airliners’ fleet mix and route planning (apart from regulatory licenses); for example, the small runway length of certain airports rules out bigger aircraft such as Airbus A 320 while air traffic instrumentation dictates the landing hours. While airliners must advocate with government agencies to upgrade airports in all their facets, the airliners must also perforce work with a fleet mix that harmonizes with the available infrastructure.
Co-fulfillment requires that air transport must transform itself from the most economical alternative to the most preferred experience. That cannot come from mere hot food or cumulative mileage points. It comes from a belief that if one makes a booking with an airliner he or she would be provided with a total travel experience. In multi-sector travels, notably international or multi-city national, the originating airliner, for example, can offer the best option without insisting on total routing with only its aircraft or code-shared aircraft. The customer experience and loyalty that develop with sacrificing airline’s short term profits would be significant in the long term. Co-diversification would require acquiring potential technologies that could add competitive advantage to the operations. It could mean co-branding of debit and credit cards at one level or diversification into pre- and post-air travel logistics and travel portals on the other. Co-saturation would mean the ultimate collaborative strategy of networking with all agencies, public and private and central and state governments to completely saturate the Indian skies with network that covers all the cities and towns.  
Beyond the firm
It is understandable that every firm in the Indian aviation industry, be it the hallowed but loss making national carrier Air India, the favored Jet Airways, the avowed low cost airliner SpiceJet,  the profitable IndiGo or the disruptive startup AirAsia, is focused on advancing the respective airliner level occupancy factors and revenue parameters. However, the industry scenario offers few real degrees of freedom to any individual airliner. AirAsia would probably do well to play for the long term consolidation rather than short term disruptive entry while others would do well to look at collaborative revival than competitive blockage of AirAsia.  A massive collaborative transformation of the entire aviation value map is called for. The industry needs to be reinforced and pulled out of the collective dire straits through multilateral development before the individual firms can be on a sustainable growth path. The Governments and the private firms need to work together to find a lasting solution through the collaborative format discussed herein.
Posted by Dr CB Rao on June 1, 2014