Author name: Shubranshu Singh

Amazon’s boxes are building our world. It is a behemoth in the network economy. But the networked economy is a part of the networked world. In every way, we are reliant on networks. Phone networks, web networks, social networks, alumni networks, capital networks, official networks, political networks, religious and spiritual networks. Networks have peculiar economic characteristics. This is easiest to see in products like the telephone, fax, a PC, the local courier operation or the internet. One phone or fax or email address is useless. Two units have some value. Thereafter, any increase in the network size has a more than proportionate increase in value to each user. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Bob Metcalfe, the inventor of Ethernet postulated the Metcalfe’s law in 1980 : the value of a network equals n squared (n X n), where n is the number of people in the network. Thus a 5-person network is worth 25, but a 10-person network is worth 100. A linear increase in membership means an exponential, geometric increase in value. Network economics therefore exhibits an extreme form of increasing returns, both for all members of a network and for leading suppliers to the network. An expanding network becomes a self-reinforcing virtuous circle. Each new member increases the network’s value, which in turn attracts new members. Generally, network members are unpaid but well rewarded evangelists of the network. Networks typically spend quite a while reaching their tipping point, and then there is no stopping them. Traditionally, value comes from having a closed, proprietary system and from scarcity. No more. With networks, value comes from openness and from proliferation. The more allied it is with other networks, the more valuable a network becomes. The gain in coverage and value creation far exceeds a loss in the exclusivity of value capture. The more you have, the more you want – the exact opposite of diminishing utility. The more we make, the easier and cheaper it becomes to make more. This is the beauty of network economies. It is both deflationary such that prices come down for ever and expansionary such that more and more useful things are created and used. The frothy excitement from investors in general and markets across the world to the possibilities that networks provide has led many observers to feel that leading players can come close to generating almost infinite returns. One reason is the share of low-cost of internet transactions. As the value of network increases with scale, so the average cost of enabling software declines. The marginal cost is almost zero. Non-network businesses may have high fixed cost, but the marginal cost of meeting customer demand never falls to zero – After all sales, marketing and customer service are all fairly extensive operations. By contrast, networks – and in particular- the internet may add customers and sales at negligible extra cost. The world was disrupted by Amazon. This was because the Internet allowed Amazon to separate information flows from physical flows. A store that sells books is a physical entity that has inventory as well as an area of exhibition where what’s on the shelves is available and consumers may interact with it in shop. But the internet separates the two – the storefront supplied the information without any involvement of physical flows and therefore it could have huge stocks with zero inventory, thus pole vaulting over the traditional trade-off between cost and choice. It also created the live reality that consumers of information also became unpaid producers of information. Being adaptive, the cost of cross selling different products decreased dramatically with the internet. When one is selling a flight ticket, one can very easily sell hotel rooms, travel insurance, car hire and umpteen other services. The value of a loyal customer base becomes multiplied by an engaged loyal following. Network effects are reaching across the business world. An array of traditional and new companies have put network thinking at the core of their business model. The results have been a mixed bag but it is clear that the pace of evolution of technology affords us no luxury of a U-turn. The birth of millions of new online companies and the transformation of existing businesses has been made possible thanks to the Internet. Networks have enabled existing organisations to adapt to the rapidly changing market conditions. The new internet world has given new meaning to ‘share’, ‘search’, ‘like’, ‘connect’ and ‘viral’. The durability of capitalism has been based on its inherent adaptability. So long as sanctity of contract, private property, profit and growth are intact and can align with privacy and democracy we shall find a better world via the internet. http://www.businessworld.in/article/The-Network-Economy-And-The-Boundless-World-Of-More-Is-Merrier-/09-11-2020-340714/

Strongman British Prime Minister Harold Macmillan – who was admiringly called ‘SuperMac’ – was once asked what he feared. “Events, dear boy, events”, he said. Throughout history, even the most confident and successful empires, corporations and power structures have been dragged down by events. The COVID-19 pandemic is an event of global, shape shifting impact. Perhaps the biggest crisis we have faced. Because of the enormity of the challenge, confidence isn’t what it used to be. Egotism and bluster are not endearing in this context. Everything around us has changed – relationships, relevance of economic goods, route to market, ways of working, use of technology, means of learning and much more. But when it comes to hierarchy, not much has changed at all. Our environment has changed but we have not. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] From the Stone Age to the present day, man has been a sucker for hierarchy. The desire to follow confident leaders and to find security in a subordinate status relationship seems to be a lingering and pronounced trait of our primitive origins. As hunter gatherers ,chances of livelihood and security increased with attachment and deference to a leader. Being meek and docile was a good strategy for survival. History also bears out this human predilection. After every revolutionary attempt that was meant to end hierarchy – be it the French or the Russian revolution – there emerged an even more damaging hierarchy. Even the emergence of the modern, flat, informal, knowledge based organisation has changed more of the form than substance. You may call a boss by their first name but that doesn’t change the power a boss wields over your life. In fact, the more popular, appealing and acclaimed a revolutionary change was, the more suffocating the hierarchy it produced. The 20th century was both the century of democracy and the common man and the century of the psychopathic dictatorial leader. Just three sociopaths – Stalin, Hitler and Mao, put together – killed more than a hundred million people. In every form of organisation and society – liberal, democratic, humanistic, profit seeking – wherever official hierarchy is abolished, unofficial hierarchies spring up and flourish. It is human nature that status is both sought and acknowledged. Our enduring taste for hierarchy is an anachronism in the era of the individual knowledge worker but still near impossible to extirpate. It is destroying value and imposing a dictatorship of both the ends and means. To understand it better, we have to firstly understand conformism and herding. There is an inherent tendency for humans to conform internally to known groups and be suspicious of outsiders. Within the group, higher status individuals are imitated and there is a natural tendency to respond most alertly towards those higher up in the hierarchy. Any sense of individualism is knocked out early. The individuals who survive and thrive are docile followers and confident leaders. Groups that thrived were those with the greatest cohesion. Therefore mindless conformism became the norm. Even today from being fans of the football club to following absurd fashion and worshipping rock stars following the herd is as popular as ever. It is not merely a matter of taste. Even in rational domains such as electoral choices, responses during bull and bear stock markets and balancing social or religious diktats versus evidence from science, we tend to follow the herd. Many authoritative pieces of work have shed light on this phenomenon. William Whyte wrote a business bestseller in 1956 called ‘The Organisation Man’ and in 1970, Robert Townsend penned a popular satire called up ‘Up The Organisation’. Townsend concluded that mediocrity was preferred and perpetuated so that the leadership could have lasting dominion over man. Trapped in the cubicle farm and into boxes of an organisation chart, they remain in place due to need, ambition or mindless habit. Richard Pascale in his book ‘Managing on the Edge – How the Smartest Companies Use Conflict to Stay Ahead’ – estimated that half the time that any contention arises, its potential value is totally lost because eventual conflict is avoided. The key weakness of most organisations is their inability to tolerate conflict, foster debate and harness the outcomes for improvement and growth. Even within organisations, cohesion is seen only within functions, subdivisions or smaller teams. You rarely find it between functions or geographies. From a business perspective, the most heartening fact is that human beings have neuroplasticity. It means we can rewire ourselves and learn, relearn and unlearn. Moreover we can learn and transmit learning. Therefore, our genetic predisposition is important in determining our behaviour but not necessarily decisive. What is important is self realisation. If we realise we have biases, we are capable of correcting them. My educated guess is that on the other side of this crisis, more than washing our hands and wearing masks, the bigger legacy will be that business executives need to take change as a given. The speed of cultural evolution and our need to rely on neuroplasticity will increase. We are in a post-industrial world beyond mechanical, cause-and-effect models and we must move to fluid, network based biological models. Complexity, heterogeneity and size are compounding forces. The larger, more complex and heterogeneous the organisation, the more it sees internal conflict. We must know why it is difficult to change and still do so in our own best interest. Our natural inclination may not be our best friend but it need not be our cruel master. That much self-interested willpower is desperately needed. http://www.businessworld.in/article/The-Unbroken-Hold-Of-Hierarchy/03-11-2020-338674

Early in life, I had many opportunities to visit many wildlife reserves in India such as Ranthambore, Corbett and Sariska. Looking for the elusive tiger made me understand the concept of territory. I came to appreciate its need for large contiguous areas of habitat which supported its requirements for prey. I realised two tigers don’t share turf. Survival in the jungle is about conflict and competition. It has a parallel in the world of business which is often overlooked. This idea has a metaphorical and conceptual value. There is an inverse correlation between sharing territorial space with the largest competitor and return on capital. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] The appearance of competition displaces a brand or business off its natural trajectory. To then survive, protect turf and continue to grow, it needs to act. Pricing power is eroded and margin is shaved off. The impact is proportional to the proximity and power of competitors. Weak conflict indicates a distant or non-interacting competitor. Strong conflict implies a competitor who is eyeball to eyeball. The most obvious case of imminent conflict is if the competitor is in exactly the same quadrant in terms of size, offering, customer type and geography. Conversely, if the customers, products, geographies and strategic intent are different then such competitors are distant and dissimilar and may fundamentally not be interested in conflict. As in the wild, in the world of business too there are places that are free of jungle style Darwinism. These white spaces can be defined as entire sectors, geographical markets, segments or portfolios where competition does not operate. Here, margins are limited not by competition but by what customers can afford. Such a non-competitive space is as idyllic a place as can be imagined in a world of commerce and capital. It is rare to find but it must be considered and hoped for in every business or market opportunity plan. Since competition creates an existential crisis, it follows that we must always know how near and large our biggest competitor is. An eruption of conflict between two prime competitors will throw both off course but the question to ask is who has more to lose? A small but well-resourced competitor that is very adjacent may give more trouble than a much bigger, richer and more successful corporation that may have shallow interest in one’s market. Conflict is closely linked to turf and territoriality. Is conflict always bad? Not really. Looked at from the perspective of the resulting market efficiency and creation of customer value, competition is usually beneficial. But because it depresses margins, it is bloodletting where the dominant incumbent is concerned. It is from this profit impact perspective that competitors – both big and small – must the mapped. One has to see their competence, resources, target markets and modality of serving their customers. If one cannot defend, one has to move away. Impact of the relative market share on competitive intensity is a logarithmic rather than a linear relationship. Managing it calls for excellent manoeuvring. If one can increase the distance away from a big or small competitor, one can protect pricing power and margins. The potential for conflict decreases more than proportionately to the distance or the diminishing relative size of the competitor. There is a well-known correlation between high market share and profitability. However this relationship is also not linear. The greatest benefit in profit terms usually comes from increasing market share in markets where one is already very strong. A 10% improvement in relative market share produces a much greater than 10% increase in profitability. A competitive white space has to be secured by increasing relative market share. Plainly put, sales have to increase faster than of competition. One way of doing this is to find new customers. The easier way is to sell more to existing ones or at least at a rate faster than the competitor. Further one has to increase the retention of customers one already has. This needs empathy and an ability to serve customers well. It calls for brand esteem and good reputation. To make a white space possible one has to commit financial resources and demonstrate staying power in the market. Through a superior understanding of market and consumers one has to land better products with fast delivery, superior marketing and lower prices. In principle it sounds simple. One avoids conflict or wins by differentiating oneself and accelerating the stages of value add. But it is easier said than done. It requires a corporate general of genius to execute and bring it to reality. I can hear the old forest guard in Ranthambore saying “Listen to the call of the deer, the Tiger is on the move” … http://www.businessworld.in/article/Competition-And-conflict-The-Market-As-A-Jungle/29-10-2020-337236

Compare the first Fortune 500 companies list of 1955 with the Fortune 500 list 2019. There are only 52 companies that appear in both the lists and have remained since inception. That’s a remarkable attrition rate. Only 10.4 percent of the Fortune 500 companies in 1955 have remained on the list. The rest have degraded, gone bankrupt, merged with or acquired by others. ‘In Search of Excellence’ – by Tom Peters and Bob Waterman was published in 1982. It listed 75 corporations as exemplars. Just 2 years later in 1985, Business Week ran a cover story titled ‘Oops!’ that recounted the fall from stardom of many of these 75 companies. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Through the years, the troubles at revered companies such as IBM, Polaroid, Motorola, Maytag, HP, Delta Airlines, Kodak, Raychem, Amdahl, Kmart, DEC and others have been the stuff of case studies on topics ranging from strategic mastery to scandal. The modern Corporation is an institution which is most exposed to failure. According to a famous study by Arie de Greus, the then planning director at Shell, the average life expectancy of a multinational company is around 40 years. This research was conducted in the late 1990s but the first 20 years of the 21st century have only proven that the mortality of corporations is an even bigger reality now than ever before. My entire career has been working with global brands and companies. I have worked in great multinationals such as Unilever, Visa and Diageo. I have had the privilege of managing global brands in highly competitive categories. I sincerely believe that corporations should be exposed to natural competition and the risk of failure. Otherwise they will not be efficient and the fruits of their sustained success will not accrue to society at large. Capital is the accumulated saving of society. It must fetch return. As a brand builder, I see brands potentially outliving parent corporations. To me, the important question is what makes ‘successful longevity’ possible? I search for the answer with a brand based view of the business reality. Companies can live, die, mutate, merge but brands can remain forever. Poor Corporations may kill great brands. Great Brands can never kill good corporations. When markets are very profitable, new entrants are attracted. From having too few firms in the market before long there will be too many. Profits tend to zero. This is theoretical, classical economics and does not correspond to reality. Brands ensure different trajectories for businesses. Financial adventurism, short-term profit mindedness and management myopia can tank companies with great brands. As a general rule, brands help amplify the benefit of the virtuous cycle and mitigate the damage of the vicious cycle in the market. Commodity pricing is a case of a non-branded reality. Margins suffer when there are few barriers to entry and exit. Differentiation is at the core of brand building. This is as much true for cheap motels, unskilled labour, poor farmers selling horticultural produce by the roadside as it is for very rich corporations selling packaged goods, boxed hardware or financial packages. If you don’t have the edge, you are losing control. A virtuous cycle happens when a brand differentiates its product and service so that it can enjoy higher margin than competitors and gain a large market share. The brand with the higher margin can make further investments in scale, technology, innovation to consolidate and increase its lead. It can pay more to get better talent and build more productive systems and alliances. It can afford to advertise and provide better value. This is the secret for successful, profitable companies. This is the reality of increasing returns. The brands which build such virtuous cycles account for the majority of profits in a developed economy. On the other hand, the neglect of the brand leads to a negative or a vicious spiral. Those who are behind fall further behind. Returns get diminished. The squeeze leads to a declining pace of innovation and this in turn erodes differentiation even further. Successful companies and brands can fail because they are unable to retain the edge on learning, adaptation and innovation/renovation. Therefore, the moment the cycle turns to the declining side they are unable to change. Success makes brand management arrogant, complacent or plainly greedy. They ignore new technologies, customer service and innovation. They stop listening to customers and lose empathy. They stop hiring new talent or rewarding productive talent. Basically, they don’t want change. “Nothing fails like success” wrote Richard Pascale in his wonderful book ‘Managing on the edge’ published in 1990. If you have laurels, try not to rest on them. Remember your greatest strengths are also weaknesses. Don’t be so enamoured with what you do best, that you fail to realise that the world around you is changing. http://www.businessworld.in/article/Failure-Is-A-Commodity-Success-Is-A-Brand/19-10-2020-333001  

Why business needs lessons? The vanguard of a battle is an exclusive classroom. Many enduring lessons are learned. Learning is, literally, a matter of life and death. Today, more than ever, business is a battlefield. The pace of change is unprecedented. Information and capital are available to all. The ecommerce disruption has changed all equations. Survival demands a warlike urgency in developing new products, procuring superior intelligence and being on the offensive. But, management structures, information systems and personnel development programs are antiquated. Legacy mindedness, insularity and inertia are taking businesses to defeat. They need to unlearn and learn again. [siteorigin_widget class=”SiteOrigin_Widget_Image_Widget”][/siteorigin_widget] Why learn from the military Strategy has military origins. The ancient Greek word Stratēgia refers to the art of generalship. The world’s top militaries are management powerhouses. They are unique institutions that have survived over centuries, changed continuously and improved effectiveness. They are home to technical and organizational innovation. The internet owes its origins to a Pentagon sponsored program. The progress of life sciences, aviation, space exploration, engineering, communications technology and system theory owes much to the military. Besides strategy, we must learn from military operations. Consider the Ladakh standoff currently on between India and China. It teaches us lessons.  It is imperative to watch a competitor’s moves in every square mile. Any winning action on part of the adversary means a loss of share. Mass markets must be seen in terms of smaller sub segments. Every hilltop and valley matters. The enemy tests your ability to hold a position, in battle and in market. A cool headed appreciation of aims “No plan survives first contact with the enemy” is an axiomatic truth. Both strategy and operations need a real-time orientation. Everyone must contribute. Decisions ultimately get taken on the ground nearest to the action. A decision architecture must provide for high quality analysis at that level. In the British Army, during military exercises -with shells bursting on all sides- officers were expected to sit down and write an ‘appreciation’ on a sheet of paper spelling out the details of their aim, the factors which affect its attainment, the inflexible and unchanging constraints, the course of action open to them and the conclusion they had drawn. They began by outlining their position amidst a crisis they faced. It could be a sudden enemy advancement, a broken bridge, a destroyed ammunition depot or a full interruption of communication lines between them and their main formation. The real stumbling block was always the ‘Aim’ paragraph. For most officers, it is far more difficult to decide what they were trying to do than to propose how to go about it. As for the factors affecting the situation, they were only relevant in so far as they related to the aim. If the aim itself was wrong, nothing else in the appreciation would be right. Businesses must understand the value of this exercise, conducted in real life situations. The commonest mistake of inexperience is a misjudging the aim and misinterpreting the facts. Men win wars Human resource matters above all. Businesses must attract, train and retain the best. We can learn from the armed forces. Men in uniform are on boarded very young and trained for high stakes roles. They are assessed for teamwork, resilience and mental agility. The Battle of Britain was a military campaign of the Second World War, in which the Royal Air Force defended the United Kingdom against attacks of the Luftwaffe. It is the story of a few intrepid pilots. Winston Churchill said “Never in the field of human conflict was so much owed by so many to so few.”  Corporations hungry to win must develop managers like these fighter pilots. Backed by ground support, alert to active monitoring systems, even a few well trained gritty fighters with a bias for action can turn things around. Even though character outranks ability everywhere, the orientations to command in the various branches of the military have developed somewhat differently. The Navy and the Air Force take a more process-driven approach whereas the Army emphasises individual leadership initiative, collective action, flexibility and quick manoeuvring. An ordnance officer, navigation expert, fighter pilot, intelligence officer or Special Forces commando will each have a very different set of skills. A captain of a $15 billion aircraft carrier will rely on a technology enabled process whereas the leader of a covert action commando platoon may need to change his plan every minute. Above all, a code of honour, pride of service and respect for uniform motivates military men. For this, they are willing to die. Ultimately, it’s a test of apex command Like war, business is a test of the apex command. The larger the action, the more time must go into planning; the longer it will take to move combatants into position, to reconnoitre, to link up supplies and do coordination with other battle formations. To a conscientious commander, time is the most vital factor of his planning. Proper foresight and correct preliminary action must be aimed to conserve the most precious element under his control – the lives of his men. Therefore, he must keep his tactical plan simple and eliminate as many variable factors as possible. He has to look at as much of the ground as circumstances render accessible to him, first hand. The French have a term  – coup d’œil – for a glance that takes in a comprehensive view. Only then can the command to commence battle be responsibly issued. If the business world can imbibe these lessons, we will have a richer, happier and more productive world. http://www.businessworld.in/article/The-Battle-For-Business-Military-Methods-That-Matter/27-09-2020-325195/