Sunday, May 31, 2015

Hollywood’s Sequel Saga: Ten Dramatic Lessons for Firms

On June 12, 2015, Jurassic World would hit theatres worldwide, marking yet another potentially blockbuster sequel in Hollywood’s glorious history. There is a high level of expectation that Jurassic World would set new benchmarks in projecting an unseen dangerous reptile world. The number of sequels that Hollywood has been witness to are many. Some noted sequel sagas are: Terminator, Transformer, Star Wars, Die Hard, Bourne, Matrix, Planet of the Apes, Lord of the Rings, Harry Potter, Mission: Impossible, Aliens, Elm Street, Underworld, Wall Street, Hunger Games, X-Men, Men in Black, Mummy, Toy Story, Thor, Fast and Furious, Rocky, Lethal Weapon, Rambo, Batman, Superman, Pirates of the Caribbean, Shrek, Rush Hour, Mad Max, Godzilla – the list seems to be endless. And, of course, there is the unending spy series on James Bond which continues to weave its magic decades after the first Bond movie, and even twenty five Bond movies and seven Bonds (actors) later!

It is interesting that the Hollywood sequel saga endured even if some of the sequels failed to be of the same standing or as successful as the original. Such setbacks never deterred the Hollywood Moguls from embarking on sequels, each one bigger and better than the respective predecessor.     As the movie buffs would recount, whatever be the genre, the sequels always had a set of factors in common: unlimited scale, unstoppable action, unimaginable visuals, and more importantly, unceasing entertainment, all with increasing brand equity and increasing expectations. The creativity of Hollywood seems to have no limits or endpoints, given the number of sequels each central theme or central actor had given rise to. It is also interesting that the churn in the ownership of movie studios and production houses has not in any way dampened the spirit of sequels. Though not obvious, there is something to learn from the Hollywood sequel saga for the corporate firms and the professionals who shape the firms. 


Industrialization predates movie making by several decades. Actually, without products of industrialization such as cameras, lights, film and projectors, movie making would not have originated and developed as an industry in its own. That does not, however, mean that the core of what movie making seeks to provide, namely entertainment cannot be provided through non-industrial means. The stage dramas of yesteryears and the street plays of current years are proof enough that both entertainment and education can be provided through simple and direct human interaction and interplay. Industrialization, like it did for every other activity, has, however, dramatically transformed how movies can be made and viewed in theatres, and in addition spawned several auxiliary and substitutive industries such as viewing through televisions, compact discs and now through the Internet and computers/mobiles.

Industrialization, as is commonly experienced, seeks to constantly develop new products and services for newer functionalities. A new product tends to make the previous product obsolete eventually, if not immediately, even if the basic functionality does get only morphed but not rendered obsolete. Industrialization is nothing but the sum total of the persistence and progress of individual firms. The role of individual firms, and the professionals, in industrialization that constantly seeks to develop new products to supersede older ones is a practical expediency. Put in another way, the movie industry’s persistence and success with sequels is a fascinating contrast to how firms seek to survive and grow. While firms do launch successive generations of products, they do not have the magic of sequels that movies have. This is because several firms compete to launch multiple products with the same functionality while each movie has its unique emotional mix for the viewers. That is not the whole story, however.

Movie magic

Viewed philosophically, all movies, save some art and niche movies, are made to entertain. Thousands of movies are thus filmed to satisfy one single objective but manage to be different. Compared to that, firms become frustrated at the first sign of competition and crave for differentiation. There lies the magic of movies, and more so of movie sequels. If one is able to decode the magic of movies in general, and that of sequels in particular, there could be valuable lessons for conventional firms. This blog post tries to identify ten relevant factors through the discussion below; first on movies in general and later on sequels, in particular.

Singular purpose

Movies may differ widely, both in thematic content and in the movie formula; yet all movies have only one singular purpose of entertaining the viewers. Firms may take a leaf out of this. The fundamental purpose of any product is not fulfilling its functionality; rather, it is making users happy! Once firms have this clarity the entire value chain of such firms get defined and operated accordingly. 

Continuous stream

Movies are made with no particular sense of timing. Essentially a creative art, movie making is fired by the spark of spontaneity. Unlike products which are clustered around events (motor shows, equipment shows or electronics shows, for example) or seasons (summer and winter, for example), movies are made almost like an eternal stream. They are made with different timelines and get released when ready, and in no particular pre-designed competition with any other movie.  

Standard pricing

This is one aspect in which a movie makes a radical departure from any other product. Whatever be the movie, for a given theatre, the price of viewing or entertainment experience is just the same. Just because a movie is made with a mega budget it cannot have a higher ticket price. The revenue and profitability is purely dependent on achieving the maximum reach and repeat viewership. This is in marked contrast to firms deriving higher specifications and quality from higher investments and therefore demanding differential pricing for products. The egalitarian pricing requirement is not merely a great leveller for customer access but also a great motivator for product superiority.  

Many hues

The magic of movies is that the ‘common’ looks ‘uncommon’ in the hands of the movie makers. The same nature looks different in myriad hues depending on the film director and the cinematographer. The same ragas are mixed to develop new tunes by the music maker. In contrast, firms try desperately to juggle around a few factors (metal, glass, plastic and polycarbonate, for example) instead of achieving multiple hues on those factors. Bringing creativity for better use of available factors is a lesson firms that could be well learnt from movie making.

Unknown demand

Firms typically look for defined customer demand before developing a product. In respect of a movie, the requirement (except the generic requirement of entertainment) is never pre-defined by the viewer sample or universe. Professionals who look for all sorts of assurances before embarking on their product development may take a leaf out of movie making; the uncanny ability to fulfil a purpose which is not quantifiable but may only be intuitively imagined by the developer!

End as beginning

Professionals despairing at product failures and industrialists dejected at business failures need to get inspired at how sequels are made with both passion and gumption. Sequels demonstrate that any end is artificial and every end can be a new beginning with the right creativity. It is the same park and similar reptiles but Jurassic World promises to be excitingly different from Jurassic Park. Rather than belabour the hostile product-market waters, professionals and businessmen must look at better and bigger sequels to start with the end but undo the past of desperation and dejection, if any.

Thematic core

The success of the original as well as the sequels lies in a strong thematic core. All the sequels listed in the beginning of this post have a unique thematic core built in a pioneering way; some, truly exotic and esoteric like Star Wars and some, primal and thrilling like Jurassic Park. Successful products like BlackBerry, iPhones and Windows had strong thematic cores (communication security, mass media and business documentation, respectively, for example). The skill for these firms lies, as do sequels do, in keeping the thematic core vibrant and contemporary. Otherwise, there would be no scope for a product or service sequel, unfortunately!  

Emotional connect   

Every endeavour, be it a blockbuster movie or a successful product, would have a few factors that appeal to the experiencing people (not customers, per se). It could be the exciting opening and signature tune of a James Bond movie or the do-good action of a Batman franchise. The ability to build on those factors of emotional connect and enrich them further ensured the success of the sequels. Every product or service to be long lasting (not merely as a successful one-timer) needs an emotional connect. Once an emotional connect is developed and nurtured it would become an overarching hallmark.

Creative technology

Movie sequels are often seen as triumphs of technology rather than as providers of fresh new entertainment. That probably is not true. Higher technology (especially superior graphics and dazzling visual effects) are no doubt deployed to take the sequels to higher levels but it is the movie director’s creativity that calls upon such an exalted role for technology. High-tech movies are invariably products of highly creative film makers. In contrast, firms and professionals tend to be cautious in deployment of higher technology, often setting limits through investment caps and returns arithmetic. Here again, firms have a lesson to take from sequels.

Reliving demand

As we noted earlier, unlike physical products, movies have demand and yet have no demand. They are an addictive habit as an option for entertainment. To hypothesize, a priori, that sequels would have a natural assured demand is a doubly wrong hypothesis, therefore. Yet, sequels are successful in rejuvenating and reframing demand. There are not many products that last through a whole span of civilization. One may think of the Indian saree as one product that stayed conservative as well as contemporary; handcrafted as well as technology driven over the ages. Creatively thought and executed, more products may well last through ages.

Mission: Impossible?

‘Mission: Impossible’ is one of the success stories of Hollywood sequel sagas. Just as the movie makers and the actors as well as technicians of sequels make the ‘Mission Impossible’ of each sequel a ‘Mission Possible’, firms and professionals in the day to day businesses and product-market spaces ought to adopt certain principles that underlie successful movie and sequel making that can keep themselves and the products or services long lasting. To recall, the ten principles are as follows.
Firstly, there must be only one singular purpose of business: to make the users happy and contended.  Secondly, new developments should be a continuous process; neither timed to competition not timed to seasons. Thirdly, developments should be made with the rigour of a standard sticker price; efforts must be to recover higher investments through expanded reach and repeat purchases. Fourthly, firms must develop the available designs and materials in many capabilities and elegances, rather than look for unique ones each time. Fifthly, firms must have the conviction and passion for an intuitively felt demand.  

The next six principles which come on top of the five earlier principles are specifically derived from the sequels saga. Sixthly, a good product, like a good movie, need not have an end; each end can be a new beginning. Seventhly, there must be an enduring theme in each product or service that is rather ageless. Eighthly, emotional connect builds a long lasting relationship between the firms and their stakeholders, especially the users. Ninthly, the more creative a firm or a professional is the higher can be the level of technology that can be marshalled; lack of creativity at firm level would be an impediment to deployment of technology even if technology were to be available. And, tenthly, the ultimate challenge lies in rejuvenating a satisfied demand.

Just as time progresses and never ends, firms and professionalism must move on, and live on to perpetuity. Amidst the dramatic entertainment of Hollywood sequels there are many lessons for such an approach as discussed herein.

Posted by Dr CB Rao on May 31, 2015

Sunday, May 24, 2015

Rebalancing Management and Administration: Some Philosophical Conundrums

Management (including administration) is the process of doing things (including getting things done). Without management and administration, orderly and directed development of organizations and societies would be difficult. Over the last several decades, however, management has become more identified with organizational or business development while administration has become identified with economic or social development. Management has also become a major instrument of competitiveness while administration has become an instrument of governance. The issue that has emerged is whether management in its quest for growth and development has become a driver of profligate use of resources while administration in its twin focus on growth and equity has got stuck between the two.

As the same limited space is being exploited by different practitioners and theoreticians, increasingly greater separation is being sought to be made, like technical being different from management and administration, or technical operations being different from technology management, and so on. The proliferation of such segmented thought processes has led to relentless efforts to maximize parts without realizing that the whole is being sub-optimized. With challenges of federal structures in administration and global structures in management there is a need to recapture the fundamental purpose of all management and administration. The key purpose of all management and administration needs to be development (not necessarily growth) with equity (not necessarily with equality). This blog post falls back on one of the most fundamental branches of study - philosophy - to restore the perspectives.


Philosophy is the study of fundamental aspects of knowledge and practice, abstraction and reality, and perception and existence. The objective of philosophy as a branch of study is to vest one with wisdom. Enquiry and logic as well as hypothesis and validation form the bedrocks of the study of philosophy in any field. While the Western philosophical thought owes much to Plato, Aristotle and Socrates, many others added to subsequent philosophical streams. In contrast, Hindu, Buddhist, Jain and other oriental philosophical streams had an even more hoary past. The Hindu Vedic Upanishads are considered the earliest exponents of philosophy in the world. Indian philosophy in general brings significant analytical rigour to metaphysical issues and enquires about the existential reality through the nature and function of human psyche. The ultimate purpose of Hindu philosophy is the attainment of moksha or nirvana (salvation).

Modern philosophy builds on the fundamentals of ancient philosophical wisdom with a contemporary tweak. Indian leaders and philosophers, Sarvepalli Radhakrishnan, Sri Aurobindo, Mahatma Gandhi, Madan Mohan Malaviya, Bala Gangadhar Tilak, Rabindranath Tagore, Ambedkar, and Jiddu Krishnamurti, to name a few, sought to superimpose contemporary social imperatives on fundamental philosophical premises to generate new developmental ethos. It is a matter of regret that business and economics have not had philosophers who brought to bear such contemporary tweaks in organizational systems. These disciplines have produced leaders driven for execution or academicians focussed on strategizing. Only Mahatma Gandhi brought in valuable social and economic philosophical underpinnings to business. The world would be a better place if professionals dedicated to management and administration begin to apply principles of philosophy to what these disciplines aim to achieve.  


Logic is the foundation of philosophy. The logic for business, or ‘business logic’ as is commonly phrased, is pursued by professionals. Some interpret it as improving quality of life and some as providing more value for money. Almost universally, businesses desire to be in perpetual growth mode; more products, more customers, more revenues, more profits, and more market capitalization. All things that are synthetic, that is all manmade goods, come from natural resources. Everyone knows that natural resources are not unlimited. Today’s oil, gas, mineral and metal resources are built up over several centuries but are being consumed to finish over just a few decades. Logic, therefore, says that industrial progress as we see today (newer and varied products in larger quantities) is going to stutter and stop one day. While the principles of conservation are invoked time to time, the fundamental drive to convert natural resources to synthetic products has not stopped.

The only living activity that is self-sufficient is organic agriculture that is rooted in the soil, nourished by rains and nurtured by seasons. Even if all the modern day products (from tractors to fertilizers and from processing to packaging) disappear, agriculture would survive as the sole economic activity that would help the human race survive. Management and administration are not adequately recognizing the very primal role of agriculture in human life and are not doing enough to ensure a virtuous agricultural ecosystem. Logic would require that there should be more institutes of rural management and there should be more aspirants for diplomas in agricultural management offered by the IIMs. Unfortunately, the contrary seems to be true. Logic requires that ‘ruralization’ should have greater priority over urbanization and agriculture must continue to be the dominant national culture.


Equally unfortunately, however, not all logic can be followed, especially when one has to contend with a legacy of what fruits of development, as commonly understood, bring to population. With development, what has not been necessary becomes absolutely commonplace and what has been an option becomes fundamentally necessary. Development surprises and intoxicates people with surprisingly newer and richer products. A television three decades ago cost no more than Rs 10,000 but today advertisements galore for televisions that cost more than Rs 500,000. Development is modern day economic marijuana; like the cannabis has its medical uses, development has its economic uses but the primary risk of intoxication and addiction will never cease. However logical it may be from a philosophical angle to moderate profligacy masquerading as development, the appeal of development can neither be wished away nor rebelled against.

Rationality offers a solution when logic is stymied by legacy. Rationality requires conserving as much as consuming. As a seemingly bizarre but actually rational example, rationality may require that all mineral water and soft beverage plants must be located only at river mouths which see loss of millions of cusecs of water every day, especially in rainy seasons. The mineral water park must have its own aqua reservoir filled in with water which would have otherwise gone waste to the sea. Another way to look at conservation could be that soft beverages must be made only with desalinated water; if people have an aversion to drink desalinated beverages, so be it - as the result would only be conservation of water. Another example of rationality could be that any large scale electronics firm should set up its own electronic waste recycling facility along with the main plant. There will no longer be any naturally aspirated engine but only turbocharged intercooled engine, as another example.


One bedrock of philosophy is hypothesis. Without hypothesis there can be no discussion, without discussion there can be no debate, without debate there can be no inclusivity and without inclusivity there can be no progress. It is important that managers and administrators proceed based on intelligent hypothesis. While there is a strong element of intuition in successful management and leadership, intuition is not impulse; intuition also works on hypothesis. For a rendering on intuition see the author’s earlier blog post, “Educated and Experienced versus Instinctive and Intuitive”, Strategy Musings, May 10, 2015 ( Philosophy as a branch of study focuses as much on gaining knowledge through prior art as on building knowledge through forward looking hypothesis.

Managers and administrators feel that they are rational if they are planners. Planning, however, is not hypothesising. Development of hypotheses is a more subtle form of thinking about and feeling for other persons (stakeholders, for example) and other events (competition, for example). Every route that is taken up as part of a planning process must have a solid hypothesis. If the government believes that fiscal incentives are necessary to innovate in India, there must be an underlying hypothesis on investor behaviour and expectations (and not on GDP growth rate, per se). Hypothesis is not the equivalent of assumption; the latter being another superficial component of the planning process. A view on ‘action-reaction’ (quantitative easing leading to reversal of recession, for example) is not hypothesis either. In this case, the hypothesis is probably one of restoring people’s faith in an economic future.


The fourth pillar of philosophy is validation. Science is built on experimental validation. Management and administration have a lower scope for validation because they deal with people and require rather irreversible commitments. Validation usually occurs in managerial and administrative spheres by past results or by pilot projects for future. If hypothesis construction is perceptively carried out based on past results validation has a lesser role to play. However, when major initiatives are undertaken validation of hypotheses through pilot projects is well merited. Validation is fundamental in all technical areas and equipment as well as process related aspects but is a challenge when people and culture related aspects are involved. Progressive validation is a useful way to ensure execution perfection and also improve the quality of hypothesis itself.

When definite public good is involved through breakthrough concepts, it makes sense to ensure maximum coverage in a risk proof manner. A highly fuel efficient car deserves a universal hypothesis with little validation. A solar powered car may require progressive development of concept through progressive validation. Philosophical approach to business and administration requires that resources are conserved by not throwing them into arena without validation. Whether a Singapore type of capital is viable in Andhra Pradesh may have answers in how the Gachi Bowli development in Hyderabad has taken wings. The hypothesis that development skyrockets land prices, and escalating land prices benefit owners is a hypothesis, for example, that can be validated with the examples of New Raipur and such other developmental regions.


The life of a philosopher is lonely and controversial. In a world that seeks speed, a philosopher’s approach of logic, rationality, hypothesis and validation could be seen as time consuming. A philosopher has, many a time, few followers and many critics. Even a saint-philosopher as great as Sri Ramanuja had to face opposition.  Business and administration which seek conformity of thought are not the natural habitats for philosophy. Yet, these are the very domains which could benefit from application of philosophical principles. Corporations and public bodies which have departments and officers for compliance must also institutionalize cells and sentinels for philosophical enquiry and objectivity. A judicious amalgamation of philosophy in an organizational ecosystem leads to balanced economic and social development, rooted in wisdom. 

Posted by Dr CB Rao on May 24, 2015        

Sunday, May 17, 2015

The Global Smartphone Industry as a Case Study of National Competitive Advantage: Striking Lessons and Guidance from China for a Successful ‘Make in India’

Ten years after he proposed the theory of competitive advantage of firms, Professor Michael Porter proposed in 1990 a theory of national competitive advantage. Porter proposed that a nation’s competitive advantage would lie in the capacity of its industry to innovate and upgrade. He held that companies gain advantage against the world’s best competitors because of pressure and challenge. He pointed out the need for a virtuously competitive total industrial ecosystem in a country comprising not only the firms but also their strong domestic rivals, aggressive domestic suppliers and demanding local customers. Trending from the popular economic concept of national comparative advantage, he felt that nations would have sustainable competitive advantage in certain but not all industries. Looking at Japan, he argued that domestic rivalry arguably tends to be the most important determinant of national competitive advantage. He advocated collaboration between governments and industries to widen the ambit of national competitive advantage.

Porter proposed a diamond of national competitive advantage comprising four national attributes, namely, factor conditions, demand conditions, related and supporting industries and firm level strategy, structure and rivalry. According to Porter, these attributes determine the national environment in which companies are born and learn how to compete. He also observed that nations succeed in industries which are good at factor creation. Porter’s theory of national competitive advantage has relevance for India in the context of the NDA Government’s ‘Make in India’ drive. There has been a viewpoint from none other than the governor of Reserve Bank of India that Make for India is more important than Make in India (ie., relying on domestic market is more helpful than relying on overseas markets). Another viewpoint has been that there must be ‘Innovate in India’ as a precursor to ‘Make in India’. This blog post studies the global smartphone industry to establish and extend as well as customize the applicability of the concept of national competitive advantage to India.

Global pecking order

The global smartphone industry is expected to record a shipment level of 1 billion units in 2015 and is expected to grow at CAGR of 16 percent and touch a level of 3.4 billion units in 2020. The industry is dominated by five big players, namely, Apple, Samsung, Lenovo, Huawei and Xiaomi who together account for around 58 percent of the total market. Significantly, three of the top five makers are Chinese in origin, whose share increased from 9 percent in 2011 to 17 percent in 2014. Moreover, of the balance 42 percent of the market, additional Chinese manufacturers such as Gionee, Oppo, ZTE, Konka and Coolpad dominate. If Taiwanese brands such as HTC, Acer and Asus are also considered, the impact of the China region would be more pronounced. Clearly, the trends point to growing dominance of Chinese manufacturers in the global smartphone industry. They are also likely to make greater inroads into other emerging markets such as India and other Asia-Pacific countries. Interestingly, yesteryears’ Western makers like Nokia and Motorola as well as current oriental manufacturers such as Sony and Panasonic are no longer in any noticeable global pecking order.

Many analysts attribute the rise of Chinese manufacturers to their typically Chinese low cost structure and scale-oriented low price structure. In fact, Chinese manufacturers seem to have succeeded in bringing high end specifications to mid-tier budget price range. A Xiaomi phone may cost less than 50 percent of a comparable Apple or Samsung high end phone. In the strictest sense, a Xiaomi phone may not compare equally in elegance or finesse with an Apple phone but in terms of key hardware and form factor, the Chinese brands tend to be comparable or even a notch higher. The low cost cum price structure of Chinese manufacturer is clearly a driver but not the sole reason. If so, Indian low cost smartphone manufacturers such as Micromax, Karbonn, Lava and Zolo should have been in better pecking order. Also, despite its price premium, Apple is able to hold on its own globally, and even outsell the top Chinese brands in the Chinese home market. A more objective analysis would require a broader framework than a “price impact of market share” approach. Porter’s diamond of national competitive advantage provides a base theory but not the whole of explanation; this blog post deploys, extends and customizes the model of national competitive advantage in the smartphone setting.

Smart national attributes

Factor conditions and demand conditions of the national competitiveness diamond are rather self-evident in so far as China is considered. China has one of the lowest cost structures among technologically capable countries, covering not only labour costs but also energy and other infrastructure and overhead costs. Ample availability of high quality infrastructure is a clear win for China. In terms of demand, China with its population of 1.4 billion and per capita income of USD 10,000 is one of the most exciting and self-propelling markets globally, especially for stylistic and high technology products like smartphones (India, in comparison, has a population of 1.3 billion and per capita income of USD 4000).  The real competitive advantage to any nation as applicable to the smartphone industry lies in two factors: related and supporting industries as well as firm level strategy, structure and rivalry. The competitiveness of an industry in a global setting depends on the competitiveness of the total industrial value chain relating to that product, end to end. On the dimension of industrial value chain, China scores high in the smartphone industry.

China has an established base in a whole range of smartphone components such as semiconductors, audio components, transmission modules, radio frequency switches, touchscreen controls, camera chips, baseband processors, RF transceivers, IC power management systems, fingerprint sensor components, chassis components and various other electronics. In addition, Foxconn has been the world’s largest electronics contract manufacturer and assembler located in China, whose scale and working efficiencies are simply unmatched by any other manufacturer or assembler in the world. The ability to scale up subcontract operations to meet millions of units of production on a quarterly basis with robust supply chain assurance is a critical differentiator for China over any other country. It is, therefore, no wonder that the leading smartphone of the world designed in California is exclusively assembled in China, largely with components from China, Japan, Taiwan, and Korea.

The strength of related and supporting industries is not a new discrete foundation only for smartphones in China; China’s dominance in subcontracted component and product assembly operations for a host of Japanese, European and US companies in a whole gamut of electronic goods has been a very relevant precursor for smartphone industrial base in China. The firm level strategy, structure and rivalry, the fourth point of the national competitiveness diamond, also constitute a significant factor. The Chinese companies, with active support from the Government of China, have honed the abilities to become electronics and telecommunication conglomerates. Their technological conglomerate strategy is much like that of Korean Chaebols such as Samsung, LG and Hyundai but with added sharpness of scale ramp-up and cost lever. The Chinese firms have also not fought shy of keen inter firm fight for technological superiority and high-end specifications, reflecting high industry rivalry. Advancements such as bezel-less form factor, superior sensor imaging, and proprietary skin over standard Android skin have become commonplace in China.    

Innovation connect

The smart national attributes have clearly enabled the Chinese smartphone industry to jostle its way into the global smartphone industry. As of now, the Chinese (together with Taiwan) far outnumber smartphone makers from any other country. The market share in terms of units is also bound to go up. That said, industrial competitiveness does not necessarily mean market competitiveness. If the above smart national attributes were to represent the whole of the competitiveness paradigm, Apple iPhone would not have become the bestselling smartphone in Q1 of 2015 in China. On a related analogy, Korean automotive and electronic manufacturers still trail the Japanese counterparts both in scale and innovation on the supply side, and esteem and equity on the customer side. There is, therefore, a fifth element of the national competitiveness diamond (beyond Porter’s model) that relates to customer connect that happens largely through a bridge laid over several years through sustained product innovation and performance.

It is the quest for absorption and re-innovation that has made Korea a formidable competitor to Japan. Similar quest has enabled China to become a part of the global bullet train club (along with Japan and France) or the telecommunications gear club (along with Europe and USA). The Chinese smartphone saga promises to be the same. By continuously manufacturing innovative products for others, it is possible for the industry to transit a nation to its own orbit of innovation. A bit of help from the government in terms of a tweaked intellectually property regime and legal support also helps the Chinese industries. Despite that, an opaque governance system, and an inadequate judicial system, innovators of other nations, despite getting concerned on these counts, continue to depend on China for outsourced manufacture of innovative products. The Chinese smartphone industry is a striking example of innovating through manufacturing for others, and moving towards global dominance through continuous innovative manufacturing for itself.

‘Make in India’

The case study of Chinese national competitiveness in global smartphone industry has many lessons and guidance for India. In fact, fundamentally, the striking contrast needs to be appreciated before the teachings are absorbed! Viewed from one angle, India does not trail behind China in any respect in providing the market wherewithal for a vibrant Indian smartphone industry. India is the second largest telecommunications market with close to one billion subscribers. The telecom sector has been witnessing a blazing growth rate of 35 percent each year.  While the wifi connectivity is low, the Internet connectivity through a combination of wifi and cellular services is expected to touch 700 million by 2025 (currently nearly 250 million Internet subscribers). In terms of new mobile connections, India has been adding a staggering 18 million net additions each quarter, more recently outpacing China by a massive 6 million connections. All this has been in spite of high price of mobile handsets, and lack of communication contract subsidization! If this level of mobile and smartphone growth of a total population of 1.3 billion cannot support a global smartphone industry in India, nothing else would! Another factor of related and supporting factors was also taken care of when Nokia set up a huge park to manufacture handsets and also support the components and accessories industry. In glaring contrast to the immense potential, Nokia had to shut down production and the park itself is now a pale self of itself.

The lesson for India is that the mere presence of certain demand side factors or attributes of the national competitiveness diamond cannot, by itself, lead to blossoming of the domestic manufacture to the full potential. The national ecosystem must be driven by a focus on innovative manufacture and a passion for global scale businesses that can create India’s own Alibabas and Xiaomis. It is somewhat a strange commentary that certain leaders of India’s largest global scale firms and conglomerates could do none of what or Xiaomi did while they were at the helm of the respective firms and conglomerates and are now left to investing in such ventures of others! For India’s development, ‘Make in India’, the mantra of Prime Minister Modiji, is not only an essential and urgent mission but also requires a missionary and binding zeal of all stakeholders, political establishments, governments, banks and financial institutions, policy making and development institutions, businesses, policy makers, regulators, administrators, industrialists, academicians, employees, students, and the Indian people as well as the Indian society at large, whatever be the other differences! Similarly, it need not be a mission for only new ventures or private sector. India has already established a huge industrial base in public sector as well as private sector, and in Indian ownership as well as foreign participation, and every entity should take upon itself to leverage its capabilities to expand and diversify in India. The potential is so huge and the stakes are so high that India as a nation, and all the stakeholders - individually and collectively - can no longer be languid and casual about the ‘Make in India’ Mission.

Posted by Dr CB Rao on May 17, 2015  

Sunday, May 10, 2015

Educated and Experienced versus Instinctive and Intuitive: From Conflict to Synthesis of the Four Leadership Essentials

The author of this blog, in an earlier blog post titled “Thought, Expression and Action (TEA) Positive: Triggers and Filters in One’s Mind”, discussed the thought-expression-action linkage in human or organizational behaviour and brought out the importance of staying positive in the three essential aspects by understanding the triggers and filters - Reference: Strategy Musings, March 15, 2015 ( The emphasis of the blog post was on reaching and positioning oneself in a positive state in terms of one’s thoughts, expressions and actions. Every head of institution, be it the head of a family, the teacher of a class or the chief of an organization has a responsibility to be TEA Positive and make others TEA Positive.

A feedback on the blog post has been that all humans are conditioned, over time, to think, express and act in a particular manner and that being naturally TEA Positive, as proposed in the said blog post is next to impossible. The feedback also referred to specific personality types (for example, assertive and stressed), leadership styles (for example, task oriented or authoritarian) and competitive growth pressures (for example, earnings and profit growth) that make the TEA Positive a difficult state of equanimity to accomplish. While granting the difficulties, the author would propose that the solution would eventually lie in understanding oneself and what drives one’s competitive behaviour. This blog post proposes yet another supplemental framework for understanding one’s TEA profile, with more particular reference to leadership.  

Four essentials

There can be no two opinions that education and experience shape a leader. There are, however, no set principles of the levels that are required of each in the leadership journey. While education and experience are not tradable, there are instances of college dropouts making it big in the leadership arena. On the other hand, high levels of education make for stature in certain entities like universities and domains such as research. As a guidance, higher education helps individuals gain more from experience. While formal university education ends at one point (early twenties or late twenties) and experience commences thereafter, experience also teaches an individual a lot. Education provides theoretical knowledge and experimental perspectives, and instils logic and rationality in a leader. Experience adapts and reinforces knowledge and overwrites experimental perspectives with experiential learnings. An educated and experienced personality, without doubt, constitutes a twinned leadership essential.

Leadership, however, is not simply following pre-set procedures, although certain aspects of leadership such as safety, quality, ethics and values require evangelical advocacy and unremitting compliance. Leadership is largely made up of aspiration and anticipation as well as shaping a future with inadequate resources and uncertain execution. Leadership is also one of agility and timeliness in choices and decisions, all the time. Textbook knowledge of what it takes for an individual to lead needs to be supplemented by two very fundamental factors that vary from individual to individual – instinct and intuition. Instinct is a natural tendency for people to behave in a particular way using the knowledge and abilities they were borne with rather than thought or training. Intuition is the ability to know something by one’s feelings rather than on facts or evidence. An instinctive or intuitive way of thinking, expressing and acting is one based on one’s instinct or intuition, respectively. As contrasted with education and experience, instinct and intuition tend to be fundamentally personal attributes.


Individuals are governed by multiple instincts, of which the need for survival, security and growth are paramount from a leadership point of view. These are inborn instincts but are conditioned as one develops in life, especially through the early years with the family. This does not mean that the instincts of the parents are automatically imbibed by the children. In many cases, the contrarian instinct gets rooted. A child, who sees his parents fighting for survival may develop an instinct for growth rather than security. Similarly, a child who is witness to unbridled drive of the parents for growth may develop an instinct for security. Siblings in the same family may develop and display different instincts. The instinct for security, for several individuals, is a golden mean of the basic instincts of survival and growth. At a basic level, fear triggers the instinct for survival while greed triggers the instinct for growth.

The human mind constantly weighs the options, instinctively so to say (!), by trading off the perceived (or experienced) result of one instinctive behaviour over the other. An individual who is driven by survival instinct may not fear jumping across a chasm of two metres if that is the only way he or she can survive from another imminent danger.  An individual who is passionate for growth may not wager his riches on a new project if extraordinary volatility emerges in the external environment. The instinctive response is often moderated or amplified by the conflict and collaboration of instincts in one’s self. The conditioning influence on the intrinsic instincts of an individual comes through the bars one sets on each of the instincts. As one pursues a leadership journey, the instinct for survival tends to get overshadowed or overridden by the instinct for growth. The challenge between the two instincts probably goes on a roller-coaster until one attains the age and maturity to settle for the golden mean of security.


In contrast to instinct which is a natural human characteristic, intuition is a blessing one receives in a differentiated manner from the Creator. The processes of instinctive behaviour have been rather thoroughly researched in recent years, including through brain mapping using sophisticated imaging techniques. The processes of intuition have so far remained beyond clinical analysis. It is hypothesized also that despite some empirical or scientific basis of disciplines like astrology and numerology, the relatively successful leaders in these domains make successful predictions, powered by their intuition. While all individuals may possess intuition only a few are blessed to have an intuition that helps them see the future. Ordinary individuals may, often, mistake their bias as their intuition. In case of several individuals intuition is weak enough to be overridden by data and logic. In some leaders, however, intuition is powerful enough to override data and logic. When data, logic and intuition are aligned, a winning combination emerges.

Intuition often acts as the overlay once the conditioned instinct comes to the fore. Intuition is willing to be subject to review against data and logic but unlike instinct would refuse to be conditioned by these. Highly intuitive individuals may be persuaded to consider various factors but their intuition would simply refuse to go away. While many may assume that the leaders’ assiduous work towards a challenging goal is driven by their willpower what actually drives such leaders is their intuition that the different future they see is what would actually materialize. Intuition, like instinct, would propel individuals to accelerate or delay their purposeful actions. Intuition needs to be viewed differently from premonition that individuals experience on a selective basis as to some bizarre or surprising event that could take place in their lives.  To sum up, individuals are differently blessed by the Creator in terms of their intuitive faculties, and intuition serves its purpose best when it is free of bias, premonition and works independent of data and logic.


The fundamental hypothesis on genuine and authentic leadership is that it is committed to enhancing the value of the organization. This requires that the leadership faculties are put to the most efficient and effective use. Clearly, education and experience teaches many leadership lessons and genuine leaders tend to be in a state of continuous learning. The challenge lies in understanding and leveraging the natural instinctive behaviours and the differential intuitive capabilities. Some of the most valuable companies, Apple included, have been built on positive leadership instincts and intuitive powers of their leaders. Instincts work under pressures of internal and external environmental systems while intuition works under the vacuum of the empty space of the future. When an automobile leader recalls millions of cars, the instinct is one of safeguarding the reputation. When the same automobile leader persists with a hybrid car in an apparently indifferent market, the decision is powered by intuition.

Instinctive faculties come into play each day, and the conditioning and collaborating mechanisms need to be ever present in a leader. Intuitive faculties are called upon to play only when certain critical decisions of a future state are made; it could be selection of a future leader (or leaders) as part of leadership succession (or expansion) or development and commercialization of a new innovative product ahead of anyone else, and sometimes even when unaware of the requisite details of the product or the market. The author, in his long experience, has not only experienced the powers of instinct and intuition but also seen highly educated and experienced leaders becoming more effective or less effective based on how their instincts are leveraged and conditioned and even more importantly by drawing on the power of intuition. For leadership that seeks to create a sustainable future, the four essentials are: (i) education that inculcates a learning approach, (ii) experience that enhances wisdom, (iii) instincts that are contextually collaborative, and most importantly (iv) intuition that inspires a unique feel for a creative niche in an uncertain (or simply unknown) future.

Posted by Dr CB Rao on May 10, 2015

Saturday, May 2, 2015

Innovator Competitive Strategies: The APPEXP Framework for Competitive Advantage

Michael Porter postulated, in 1980, three generic competitive strategies that are appropriate for most industries and their several phases of evolution. These are cost leadership, differentiation and niche (or focus). These are both intuitively and practically elegant. Any firm that has cost leadership can ensure price competitiveness or earnings superiority, or a combination thereof with certain inter se trade-offs. A firm that follows differentiation can achieve a superior market and price position based on a set of differentiated features. A firm that follows a niche strategy seeks to adopt narrow product-market strategies that are unique to the firm. Some firms are successful in adopting a mix of the three strategies to eventually emerge as industry leaders. The three generic competitive strategies are yet to be dwarfed by any other superior set although over thirty five years have elapsed from the time the framework was first postulated by Porter.

A question may arise if the three generic strategies are relevant for companies engaged totally in innovative products or services. By innovative products or services we may mean products or services that fulfil a new use (or application) and/or fulfil an existing use (or application) in a novel manner. From Sony Walkman to Apple iPad and from diagnostic imaging to new molecular entities, innovator companies fulfil the above two criteria through their products and/or services. That said, firms that deliver an existing product or service through an innovative way of delivery may not be considered innovator firms; for example, firms engaged in transportation of a product utilizing trucks tracked by RFID devices may not qualify as innovator firms although they have struck upon a somewhat inventive component in their service value chain. Regardless of innovation levels, innovator firms also require the three fundamental generic competitive strategies.

Basic purpose

Many times innovation gives a strong entry into, and a significant time-reprieve in, the marketplace, and even provide a monopoly, but only so long as a strong follower product or service does not get introduced. The three generic competitive strategies help the firms develop brand equity at product or service level and secure staying power at firm level. Without cost leadership, innovators could get priced out when new competitors enter the market with lower cost of products. Even if such competition takes time, cost leadership builds a reservoir of accumulated profits to invest aggressively in new product innovation. With differentiation on certain specific attributes, innovators are able to build brand equity which provides a strong defence against market erosion. The association of Toyota with quality or Mercedes Benz with safety, for example, is reflective of how brand equity accumulates over time.  
Niche or focus strategy is particularly relevant for small firms. This strategy is well deployed by small firms in drug discovery area (focusing on just one target or at most on one therapeutic area) and in component area (focusing on just one component or at most on one system). Clearly, individually or together the generic competitive strategies are a vital adjunct to innovator firms even though innovation provides them with the first mover and monopoly advantages. That said, innovator firms would do well to have certain strategies that are unique to innovator firms, and which could work in a synergistic manner with the three generic competitive strategies. This blog post proposes three innovator competitive strategies that would be foundation strategies on which generic competitive strategies can be superimposed or worked as adjuncts. Prior to that we may review why R&D itself is not being seen as the sole innovator strategy.

Revisiting R&D

Clearly, Research & Development (R&D) is recognized universally as the foundation for new product development. A clear R&D roadmap and a robust R&D budget have always been seen as the drivers of innovation in a firm. It is, in fact, expected that the level of R&D budget both in absolute numbers and as percentage of sales determines the difference between an innovation-led industry segment and a generic industry segment. In each category as well, the R&D focus determines the relative inter-firm scaling in innovation. There are firms that still stand by R&D as the engine of organic growth while increasing number of firms are opportunistic about inorganically acquired R&D. It may, therefore, be questioned as to why anything other than R&D leadership is required as an innovator competitive strategy.

The answer lies in the fact that over a period of time, R&D has also become a “mechanical” or routine function rather than the kind of dynamic innovation hotbed that the domain is expected to be. It is seen as a product renewal domain rather than product redefinition domain. From time to time, product re-definitions do occur but the overall theme of R&D in a great majority of companies is to find a new product for the same application or to make the existing product better. In a recent McKinsey Quarterly (April 2015), it was postulated that innovation is indeed difficult for established companies and suggested eight essentials for innovation: Aspire, Choose, Discover, Evolve, Accelerate, Scale, Extend, and Mobilize. The first four attributes are considered to be strategic and creative elements and the balance four organizational and delivery components of an innovation operating system of a firm. The author of this blogpost feels that these eight essentials are enablers or practices but not innovator competitive strategies like the Porter’s generic competitive strategies.

Three strategies

As with the generic competitive strategies, the innovator strategies must prescribe end-goals which are not project-specific, project-dependent and also are not firm-specific or firm-dependent; rather the goals should be somewhat universal strategies of innovation that provide a sustainable competitive position for an innovator firm. These are Application Leadership, Experience Leadership and Application-Experience Hybrid. These are discussed below.

Application leadership

Every product is designed to meet an application. Password, for example, is a product to ensure security for the user of either a computer or a safe. Depending on the product, passwords have been taking more user-friendly but more secure forms. Patterns and colours have been the first step. Fingerprint scanner has been the next step. Iris scanner and face reader are the more recent ones. These developments are done more easily on a smartphone because the smartphone has a processor as well as a camera. If, for example, the same functionalities (of processor, camera and communicator) are brought to the password mechanism of a safe, an entirely new safety system of not only multiple password possibilities but also recording all those who attempt to open the safe and communicating the photo identity of those who break the safe would be possible. It would be a game changer, at least for the domestic or office safe industry.

Application leadership requires a disruptive approach (in a positive sense of making things better, of course) to how user functions or product functions are to be performed. These usually require aspirations that are far beyond the obvious (like a flying city car, for example). Such ideas require breakthrough or disruptive technologies. In the example of flying car aspiration, this requires a breakthrough combination of automotive and aeronautic as well as electronic and communication  technologies like mini-rocket engine for vertical thrust, mini-jet engine for flying and an on-board computer which controls these two engines alongside the traditional gasoline or diesel engine and the navigation systems thereof. Reverting to the home or office safe example, similar disruptive engineering is required. Firms committed to application leadership would be having many laboratories dedicated to discovering and developing fundamentally new technologies, and fundamentally new ways of integrating them.

Experience Leadership

In contrast to application leadership which reengineers the usage-product mix completely, experience leadership focuses more on a product meeting higher levels of sensory satisfaction. The touch keyboard is an example of transitioning from mechanical to electro-mechanical and electronic, resistive and capacitive. Capacitive touchscreens have brought in a new level of touch-feel to screens in smartphones and tablets. The next experience change would be when 3D touchscreen keyboards are commercialized. The virtually silent automotive engine, the passenger seats that reconfigure optimally to a driver body profile, voice communicators (such as Siri of iPhone or Cortana of Windows phone), the visual graphics of a high technology movie are all examples of experience leadership. The movie blockbusters, in fact, are an excellent example of experience leadership, bringing superlative experiences onto conventional tales.

Experience leadership requires a combination of product and process approaches to take user experiences to a different level. Often, novel material and precision manufacturing technologies have to be used together to conceptualize and provide an elevated level of user experience. Certain firms (like Apple) focus on experience leadership to achieve market dominance (for example, iPad was not the first tablet to be made but became the leader with the experience leadership approach of Apple). Experience leadership typically focuses on the worst case situation or the most demanding situation and develops the products to meet such extreme needs. Low floor buses which are designed to let even the old and disabled commuters enter the buses most comfortably is an example of design perfection for the most delicate need. At the other extreme, a rugged all-terrain sports utility vehicle caters to the most punishing terrains while insulating the passengers from excessive trauma.

Application-experience hybrid

The application-experience hybrid innovation is a niche model relevant for situations where markets are segmented or resources are varied. It could vary from a resource optimized situation to a resource rich situation. Unlike the earlier two models, a resource optimized application-experience model would not be securing reputation dominance but could enable higher market coverage, albeit with lower margins. Cadbury’s chocolate range to meet diverse needs is an attempt to develop a hybrid of different applications and different experience levels. To be really effective, however, there must be distinctive and differentiated technologies to calibrate the application and experience dimensions. Full-line firms are usually better positioned to achieve this hybrid while niche firms would need to choose their competencies carefully.

One of the most interesting examples of application-experience hybrid can be found in the watch industry where the technologies of dial and movement and the design elements of form factors and display factors enable a grid of application-experience hybrids. It is interesting, for example, how Citizen focuses on ‘wear and forget’ super-light perpetual movement watches while any typical Swiss watch focuses on bold designs that need as well as seek attention. The success of Apple watch, in this context, would depend on bringing to the user a high level of novelty in both application (communication and healthcare) and experience (real-time and selective), packaged in high standards to which the watches are typically made. The hybrid model requires a much greater perfecting and fusion of new technologies than the application leadership or experience leadership would individually suggest.

Innovation mind-set  

Innovator competitive strategies require a leadership mind-set, both at firm level and functional level, to understand and implement innovation enablers. The organizational DNA must encourage aspirations to make transformational changes in product-market configurations, expressing of the aspirations through multiple ideas, analysis, evaluation and prioritisation of ideas, and development of implementation plans. It must also have the resource framework to work on such action plans over long periods of time, retaining the ability to be nimble and flexible in the face of changes in technology and markets. Innovation requires creativity and steadfastness but openness for review and integration of new pathways. 

Innovator competitive strategies require collaboration between agencies. Low floor buses would be useless if civic authorities do not construct bus shelters and pathways that are friendly to the differently abled. Luxurious aircraft would provide little overall convenience in airports that do not have aerobridges and have chaotic inter-aircraft transfer paths. The best of ultra-high definition televisions would not provide the viewing pleasure without commensurate transmission services. Oftentimes, the dilemma would be who should be the driver of innovation – the product manufacturer or the service provider? While there is no clear cut answer, as long as leaders in vantage positions think and act by and for innovation, eventually, the total consumer value chain would benefit. Innovation works best in an innovation-driving organizational operating system nurtured by an innovation-inspired leadership mind-set.  

Posted by Dr CB Rao on May 2, 2015