Invention, Innovation and Entrepreneurship

Recently, I saw Pranav Mistry's talk and demo on the Sixth Sense technology on TED Talks. Absolutely mind blowing stuff! It set a lot of mental gears in motion, especially with what he has done so far and his intent to make his knowhow available to others to further develop products for the masses at large. Those 10 minutes triggered a small thought process on who would be an Inventor, Innovator and an Entrepreneur with respect to the technology he has developed. Using a working outline of each role, a highly probable scenario would be as follows.

Inventor: An inventor typically uses available technlogy components and creates a new technology that can be further adopted in creating technologically advanced products and services. Pranav Mistry, no doubt, is a genius inventor. What he has done is so simply beautiful! I am sure many would have thought "Why did I not think of it before?". But does Pranav Mistry go beyond being an Inventor?

Innovator: An innovator would use available technology and inventions and create a product or service that does not exist before and those that can be used by regular people in their day to day lives. The technoogy outlined by Pranav Mistry would now need to be accessible to products and services designers to incorporate into usable products and services. E.g. Mobile phone or laptop designers may be one such group that may use the technology in designing innovative products. In all probability, the role of the innovator could very well be taken up by the product development teams in product designing companies. A person like Pranav Mistri could very well be a part of such innovating teams. The key factor in Innovation would be to apply the invented technology to usable products.

The Entrepreneur: But just designing an innovative product or service is not the end of the story. The entrepreneur would be the next entity in line to carry the story ahead. The entrepreneur would need to look at making appropriate business decisions regarding the business of making and selling the innovative products. These business decisions need to be made in the face of uncertainty and rewards for risks taken. These decisions need to be in areas like:

• Markets to enter
• Target customers
• Production capacity and volume
• Input factors
• Product costing
• And other business management areas.

The flag of entrepreneurship in this case could very well be taken ahead by the operations teams of the companies selling such products. So, the entrrepreneur entity would be the one who can take up the innovative products and build a successfull business out of it by undertaking the risk in making business decisions in the face of uncertainty.

To summarize, I believe the story started by Pranav Mistry has an exciting life ahead and should be full of twists and turns as the innovators and entrepreneurs adopt it and add their bits to it to cater to the masses at large, the dream shared by Pranav Mistry.

Recession, Cost Cutting and Employee Motivation

, mThe recession prevalent for the last almost two years has reportedly been the prime reason where companies across all sectors have resorted to a slew of cost-cutting measures which include sales of assets, travel freeze, employee layoffs, freeze on salary increments, and many others.

No doubt most of these measures are crucial to the well being and indeed the survival of some companies. Companies have gone ahead and updated their corporate policies and implemented the same to safeguard the interests of the shareholders. Unfortunately, the employee as a principal stakeholder is sometimes ignored. There are some peculiar instances where employee related austerity measures fail to withstand the the test of common sense and logic.

As a suitable backdrop for this discussion, let's look at an imaginary representative software services company that has say a annual revenue base of around Rs. 1000 cr with an employee strength of 6500 persons. Lets assume, the salary expense come to about Rs. 550 cr and the PBDIT is about Rs. 250 cr. Lets further assume that this company does not reduce some of its manpower (500 persons) due to performance issues and a reduction in business opportunities. It also announces a freeze on any increments for the two years and a sizable cut in the variable pay of the employees as well.

Now that the economy is looking up, and the stock markets have risen consistently for about 7-8 months, the company is upbeat about the future. The company also maintains and thanks the employees for standing by it in trying times. It also announces employee oriented qualitative measures. But, at the same time, the company maintains the need for continual of the austerity measures in view of a possible economic downturn. The employees are, however, not so upbeat due to rising inflation, the continued freeze in salary increments and cuts in the variable pay. And obviously the employee motivation levels turn dangerously negative due to a seeming lack of congruence in the words spoken and the deeds performed.

Assuming the company's reading about the uncertain future is valid, is there anything that can be done at all to boost employee motivation and confidence? Let's evaluate one possible measure and its impacts, both financial and motivational.

Let's assume the company announces a one time cash reward of say an average Rs 15000 per employee. What is the impact?

1. Financial Impact:
Increase in salary cost = Rs. 15000 x 6000 employees = Rs. 9 cr
Therefore, percentage increase in salary cost = (Rs. 9 cr / Rs. 550 cr) x 100 = 1.6%
Percentage decrease in PBDIT = (Rs. 9 cr / Rs 250 cr) x 100 = 3.6 %
Considering the hardships faced by the employees in terms of rising inflation and other factors, this one time extra cost is quite manageable and even negligible to some extent.

2. Motivational Impact:
The motivational impact obviously is difficult to gauge in numbers, but such a step would build up a substantial positivity in the employee. First and foremost, it bridges the credibility gap between what is said and done. It also sends a correct message regarding the future uncertainty, business austerity and the concern it has for its employees. A cash reward of Rs. 15000 though not comparable to the expected salary increment, is substantial enough to gain the lost employee confidence and morale. With the potential increase in employee positivity and motivation, the corresponding impact on overall business operations and objectives would definitely be far reaching.

To put it concisely, it is well upto the company management to think of such bold innovative steps that augur well both for the organization and for the employees as well.

Providing Business Solutions - Learning From A Doctor

Providing customer centric solutions is a tricky business requiring the solution provider to juggle multiple factors in a unique fashion. Though there are many such factors, a few of the important ones are discussed here, using a a doctor as a very good analogy to explain the good practices of solution providing business.

1. Customer Uniqueness: Each customer is unique, has a unique set or combination of problems, and expects a unique solution from the solution provider. Say, a patient with an ailment of Diabetes fractures his limb and needs to be operated upon. A second patient may walk in with Diabetes and a viral infection. All the three individual ailments and their cures are known. However, in each patient's case, the treatment has to be a combination of the individual treatments in such a way that the patient's ailment is cured. It is difficult to imagine the treatment being meted out for the fracture and the infection without considering the prevalent Diabetes. Hence it is necessary for the business solutions providers to provide a solution not limited to one or a few problems and but consider the overall health status of the customer organization and provide a holistic solution.

2. Expertise: It comes in essentially as two sides of the same coin viz. what has been learnt till now based on past work and what is the capability to apply that knowledge to unique customer problems and solve them. We go to a doctor because we have heard that he or she has been able to cure similar ailments in other patients. But we choose to stay and get treated by that doctor because the doctor treats our ailment in unique fashion.

3. Diagnosis - Separating the Cause from the Effect: A good doctor always listens to the patient's ailment, asks the right questions and conducts the required medical examination to arrive at the root cause of the ailment The good doctor does not treat every patient with a headache the same way. Since the headache could be due to deprivation of sleep, work related stress, unaccustomed exposure to afternoon sun, and so on, each merits a different treatment. In business too, there would be a common symptom like demand - supply mismatch with varying causes like lack of proper IT tools, friction between the sales and production teams, employee morale, high capacity with low demand or low capacity with high demand and so on. Each requires a different treatment.

4. Follow Through: During and after the treatment is provided, the good doctor follows through and checks the health of the patient to confirm the success of the treatment. He or she does not hesitate to change the treatment if necessary.Similarly, a good solution provider should ideally follow through and seek regular feedback regarding the success of the solution provided, and change course if required.

These points do tell us what the good solution provider would do. But it comes with a caveat. The customer needs to be a good patient as well. As a good patient selects the good doctor and entrusts his or her health to the doctor, the customer organization would perhaps do well to do its groudwork in selecting the right solution provider and then trust it to deliver the solution agreed upon!

ERP Implementation and Business Processes

There was a company where we were implementing an ERP solution. Streamlining of business processes across the organization was one of the primary objectives of the ERP implementation. During the initial business analysis, the typical sales versus production problem came up.

We were in the midst of deciding what the planning cycle should be for the company, based on which the Master Production Schedule (MPS) and Material Requirements Planning (MRP) engines were to be set up. The production department explained its operations for various product lines and and upon asking, mentioned that the ideal lead time for planning and scheduling production batches was about a week. The sales team, subsequently explained their processes and mentioned that there were many high volume customers who gave them orders with a lead time of only about a day or two. In case the orders were not fulfilled, they usually were lost. The imminent loss of sales prompted frequent changes in production schedules resulting in production inefficiency.

The management of the company asked us "How does your ERP solution take care of this unique business situation where both the departments stand justified?"

Though the question was targetted to us primarily as ERP consultants. It was evident that within the ERP system, it would be foolish to try and play with the parameters where both the departments' objectives would be fulfilled. Hence, we decided to take a holistic general management view to the problem.

We had detailed discussions with the Sales and Production teams to understand the dynamics of their operations and try identify room for business process improvement in line with the ERP solution implementation. We analyzed the production processes and concluded that a week's fixed time fence was indeed jsutified, considering the economics of the production processes. We next turned to the sales processes. Knowing the 80:20 rule, we asked the sales team to do a preliminary ABC analysis of their customers and the volume of business they gave as against the short order fulfillment lead times expected. This analysis gave interesting results.

There were essentially 3 categories of customers. The A class which constituted the bulk of regluar orders to the tune of 70-80 %; the B class which gave one off orders giving about 15 % volume and the C class which was made of opportunistic buyers giving 5 %. We decided to probe further. We asked the sales team to focus on the A class customers. We asked the team to approach the A class customers and explain to them the ERP implementation that was underway at the company and the need to have streamlined operations between sales and production. the customers were further requested "Will it be possible for your procurement team to place majority of the orders at least a week before expected delivery?" This approach worked wonders. Most of the A class customers agreed as a week's notice was fair to all concerned in return of good production efficiency and product quality. The company went ahead to report higher sales volumes and better production costs.

Thus, a simple change in the assumptions made in existing business processes resulted into highly streamlined operations between sales and production. ERP really had no role in it; apart from perhaps being a change catalyst, something which prompted that a change in the business process was warranted.

This incident taught me that a holistic approach always helps and many times the answer lies not in technology, but the way in which we communicate and execute things.

Disorganization...fine...but how to implement it?

As a consultant for about a decade and a half, I have been an avid reader of business management and have seen numerous references to how companies have restructured their businesses successfully. Its always a big question for me as to how did they actually go about implementing the change.

Take this example:

In his book ‘Crazy Times Call for Crazy Organizations’, Tom Peters talks “Beyond Decentralization … Disorganizing to Unleash Imagination”. He introduces us to the case of Oticon, a company manufacturing hearing aids. To regain its sagging market share, its president, Lars Kolind, dramatically did away with the existing organization structure (and everything related to it) and created a 100% project directed entity where the employees were expected to decide the tasks that needed to be done and physically organize themselves as they think fit to get those tasks done.

Interestingly, this radical move helped Oticon make record profits, regain lost market share and shorten its new product introduction lead-time by half. Kolind attributed this astounding turnaround to the new configuration of his organization.

As a consultant, this particular case raised several practical questions from an implementation perspective, the most important one being: "How would one manage such a disorganization and explain the source of its success?"

As major components to a possible comprehensive answer, I would like to evaluate these:
• People expertise remains irrespective of the organization structure
• Project driven matrix structure draws upon the necessary expertise from the profit centers (ensuring customer needs are met) and competency centers (ensuring delivery of expected customer needs) for achieving business results.
• Use of projects as the organizational building block.
• Realignment of HR framework to motivate people, enhance ownership, promote innovation and suitably reward the performers
• And most importantly, redefining the business process framework using a black box approach: move back from workflows to guiding principles

To summarize, I must say there is more to it than meets the eye!