Wednesday, August 27, 2014

Less and More as Combinations: Intriguing Contextual Connotations

An interesting life mantra is that we should achieve more with less. The entire productivity paradigm is based on achieving higher output with lower input. The ratio of output to input is defined as the efficiency index. A criticism of this simple approach has been that it does not integrate other tangible parameters as quality and other intangible dimensions such as esteem. The simple model can therefore be expanded to integrate such tangible and intangible factors both on the input and output sides. Despite doing all that, the ratio tends to be one of output to input, with a higher index meaning higher efficiency or productivity. Another alternative critique has been that efficiency by whatever way measured is not the whole thing but effectiveness is!

If efficiency is the way of doing something well with no waste of time or resources, including money, effectiveness is producing a result that is wanted or intended. Efficiency and effectiveness may exist independent of each other but together they ensure competitiveness. Effectiveness is achieved when one is clear on the intended or desired result, understands the inputs required to achieve the outcome and deploys them in the right manner. If ‘less is more’ exemplifies the efficiency mantra, ‘right is right’ probably reflects the effectiveness credo. That said, life is more than efficiency and effectiveness. ‘Less’ and ‘more’, the defining blocks of any effort or result, have contextual combinations with interesting and intriguing connotations. This blog post considers some of these, as useful pointers for life journey.   
It is not necessarily true that less would need to be more. We know that only a small percentage of human brain is typically used for human faculties and actions. If only the humans are able to use more of their brains (no pun intended!) the human race as a whole would be more accomplished. There are operations, occasions and transactions when more tends to be more. For example, a higher load factor means higher profitability to an airliner. An event of celebration generates more happiness with greater attendance. A higher investment transaction, judiciously made, should generate higher returns. These truisms do not necessarily mean that the less is more efficiency paradigm is inappropriate; on the contrary, it is still appropriate and both approaches are synergistic. Any airliner would be more competitive if it is able to carry more passengers (more load factor) with less number of aircraft. Such proportionality may not work out in other two examples, however.
Rather than consider that less is more and more is more are intuitive or counterintuitive, one may hypothesize, therefore, that there is a contextual dimension in all these relationships. The context depends on the entities involved in any interaction. The nature of entities and the nature of relationship often determines how less and more interact in terms of accomplishment. As a general principle, one must have the ability to use more of one’s faculties. There is, however, little point in deploying excessive intellect of repetitive minor or mundane matters. To understand the contextual nature, we may appreciate that for any activity there would be a trigger and a receptor or a provider or receiver. A 2X2 matrix of less and more would provide contextually meaningful frameworks to conceptualize and analyze internal and external interactions for optimal outcomes.
Value arbitrage
In every interaction, there is a possibility for the giver to give less or more; equally for the receiver to receive less or more. There is thus a 2X2 matrix possibility in every transaction. We can see the power of this concept by way of a few illustrations. A Guru just needs a short profound verse to convey its deeper meaning to a group of accomplished sishyas. The same guru would need to annotate and explain in detail if the sishyas are first time learners. There are therefore situations when the giver needs to modulate between less and more depending on the receiver. Whether the giver gives more or less, or the receiver receives more or less depends on the nature of the entities. While ideally less should lead to more there would be occasions when more would lead to less or more would need to be provided to achieve the maximum, or even the very minimum.
In every interaction, there would be a perceptional, and at times real, arbitrage. An intelligent student may think that an hour of study is less important to him or her than it is to a less intelligent student, and may therefore while away time. But as a unit, time has equal importance to both types of students, albeit at different levels. A rich man may think the a hundred rupee note is less valuable to him than a thousand rupee note and may feel inclined to donate the former than latter. However, for the charity that receives the donation while the hundred rupee note is more valuable in its hands than in the rich man’s hands, the thousand rupee note helps the charity more than proportionately in its objectives. While there is a perceived value arbitrage, more fundamentally there is only a value exchange in the transactions. Dysfunctional economies are characterized by huge gaps between perceived value arbitrage and real value exchange.
True value
Every transaction or activity involves value exchange. When an unknown person asks and pushes the right lift button for another person in the lift and the other person thanks him, there is a value exchange. A lecturer teaching the students may seem to reflect a transaction of knowledge transfer for a salary. However, the lecturer derives value from the record of teaching students over time, getting challenged with new questions that prod him to gain new knowledge. A student may seem to reflect a transaction of getting taught for a fee to the institution. However, the student derives value from the experience of learning with other students (ie., in an ecosystem) and the learning of a behavior pattern besides the subject. The point is that in addition to any product/service or money exchange that occurs in any transaction there is inevitably an embedded value exchange.
In a competitive world, the monetary levels of a product or service are set by the level of competition. Products and services are offered discounts. When a product or service is offered at a lower price, it is considered a value for money for transaction. However, the true value that is embedded is neither the discount nor the money saved; rather, it is the value accrual that takes place for the buyer through the saving of money. For the company that offers a ‘value for money’ product, the true value that is embedded is neither the additional sale or additional market share achieved; rather, it is the value accrual that takes place for the company through better sustainability of business.  The true value for the economy lies in the improved domestic savings and enhanced business sustainability. The need, therefore, is not a blind perception that less is more but that multiple combinations of less and more are value accruing.
Less and more
In transactions, the giver can provide low or high effort. The receiver may receive low or high value.  There exist four quadrants: Low Effort – Low Value (LELV), Low Effort – High Value (LEHV), More Effort – Low Value (MELV) and More Effort – More Value (MEMV). Of these, LELV and MEMV represent the rule of proportionality intuitively. MELV quadrant is clearly an unacceptable quadrant while LEHV is the most desirable quadrant. The entities (givers and receivers) could be businesses and societies, businesses and customers, businesses and businesses, businesses and governments, governments and societies, and so on. They can even be the internal self and external person, even within an individual. There are contexts in which the true value moves across the quadrants. The typical journey is from LELV in the startup phase, to MEMV in the growth phase, to LEMV in the maturity phase to MELV or LELV in the decline phase.
The conceptualization, analysis and management of product life cycle or business life cycle that governs business development must be based on true value analysis. Driving numbers, either of investments or of revenues without regard to inherent value that is generated and accrued would lead to sub-optimization. Business strategies and/or functional strategies such as marketing strategies, talent or manufacturing strategies must look beyond value arbitrage and focus on exchange of true value between entities. Perception of true value increases stakeholder loyalty and makes the wait for successive generations of development exciting and rewarding. The relationship between successful alumni and prestigious alma maters is an excellent example of how embedded value exchange continues to provide lifetime value alignment.  
The ability to calibrate effort and value is an important characteristic of development psyche, individual or institutional. Typically, the life of a product in use is a multiple of the time span put in the development and manufacture and delivery of the product. The life multiple is a function of the true value embedded in a product. The higher the true value, the faster a product moves into the LEMV quadrant and the longer it manages to stay in the quadrant. True value would be a better metric to judge the worth of a product strategy than the compression of time to develop. The principle holds good for individuals as well as institutions operating in the respective ecosystems, or the products and services they generate and offer to the ecosystems.     
Posted by Dr CB Rao on August 28, 2014          



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