Over the time again and again philosophers have dwelt into the question , what’s the purpose of business and answers have varied to cover almost every dimension from economic growth to value creation for its stakeholder and beyond. The greatest management guru of current time Peter Drucker mentions
“Business exists to supply goods and services to customers, rather than to supply jobs to workers and managers, or even dividends to stockholders. Profit is not the explanation, cause, or rationale of business behavior and business decisions, but rather the test of their validity” – Peter Drucker
As per Drucker business identifies the need of the value creation for a particular segment of people and creates that value, if your business is making profit that just validates your creation of value for your customer. So there is something larger which is purpose of business , profit creation may not just be validity test ( as Drucker mentions ) but definitely be an integral part of it however there are other people like John Renesch who have put a very strong support for greater purpose of business
"Corporations are human-made organisms, associations of human beings. To see this association as having one solitary purpose and responsibility, to grow only in economic terms, is such an extreme view that implosions like what happened to Enron, WorldCom and other corporate collapses will become more and more commonplace." -- John Renesch
John has hit the profit creation part of business too hard, taking specific examples like Enron and Worldcom. Same sentiments are shared by James C Collins in his book “Built to last” mentioning that maximizing profit has not been the dominating force or primary objective of visionary companies, yes they seek profit but they are equally guided by core ideology – core values and sense of purpose beyond just making money. Even though we can never undermine the bottom lines for any business yet we have sufficient reason to believe that this can never be an ultimate goal of business. If we go back and find out reasons of starting of several organization we would come across passion for technology, innovation, identification of improvement and value creation, making things better and faster as some of the key reasons which may include something as personal as working for self of being once own master.
Anu Agha of Thermax sums it well "We survive by breathing but we can't say we live to breathe. Likewise, making money is very important for a business to survive, but money alone cannot be the reason for business to exist".
Whatever is the objective of business, profits can not be negated but why do we need profit? If a firm wants to sell some product why can not it provide just by covering its operational and capital expense without taking any extra profit, this much should be enough for sustaining any organization but will that be enough for growth as well? Can it enable value creation and innovation?
Showing posts with label business. Show all posts
Showing posts with label business. Show all posts
Monday, February 22, 2010
Wednesday, December 9, 2009
Business of Businss Education
The factories of innovation ..some of the greatest B schools of India seems to be on path to new kind of innovation , developing the most expensive post graduation programs on the earth. ISB, SP Jain Institute of Management and research are leading the pack with introduction of new program which can cost you more than 2.5 Million INR to get an MBA degree ( well to be specific some of these may be only diplomas or certificates if not approved by AICTE) . At one side ISB is starting PGPMAX which will be more of a part time MBA course for executives and will be taught at Hyderabaad campus with some sessions in Kellogs and Wharton on the other side SP Jain has already launched a course in collaboration with Schulich university Canada which will be divided between Mumbai and Toranto campus.
There is no doubt that some of the included expenses are stay in foreign campuses , food etc but the point to ponder is whether these courses will be wble to provide you the relevant return on investment. If we include other living expenses for around 2 years , it will come across 3 Million INR, It is enough amount to secure a middle class common man's pension for lifetime so what is the kind of ROI one is looking from this kind of investment , well I do understand intellectual development and ability to apply structured methods for solving strategic , operational issues etc would be some of the great take away from this course but at the end it all boils down to what can you do with such skills i.e How much you can earn or what is the kind of job you are offered.
If we even consider some of the normal not so expensive courses , they have failed to provide a good ROI to more than 50% of the participants . All the media hype about million dollar salary in pink news paper is focused on some top 5- 10% of the class participants , rest go back with a decent increment in their salaries and mostly almost in the similar area of work ( as even in campus placements organizations give due weight to the background of candidate). even though top 20 institutes take fees in the range of 4 to 10 lacs , and the salary of students coming out of program varies between 4 to 11 lac with average being somewhere 6.5 to 7.
two of the Three generic strategies which even watchman of these B school knows is cost leadership and differentiation
Cost Leadership : Salary , roles depend on various factors from business condition to industry need so why can't B school implement a more innovative model which they have been teaching for long time , They can take a fixed component of fees which covers cost of course material , infrastructure etc and a variable component of the fees which depends on what kind of benefit is materialized to the student after course , to be specific let it be a percentage of annual pay package received by student , isn't something similar today's IT organizations doing by charging a variable component depending on how much money IT saved / earned for their clients .
I think We all have something to learn from TATA's here , a 2000$ car and a 20$ water purifier , that is what Indian market demands value for every penny spent , specially in education which is very crucial for indian middle class .
Differentiation : There are very few institutes in India which have created a differentiation , I would consider NITIE (SCM), ICFAI(FIN), FMS(Service), IRMA(Rural), IIFT (IB), XLRI, SCMHRD (HR) , MICA (MarCom) as some of the leaders , rest all are more of "Me too" kind . They should start differentiating in a way which adds value to students and also makes sure that it is filling a wide gap in the industry
There is no doubt that some of the included expenses are stay in foreign campuses , food etc but the point to ponder is whether these courses will be wble to provide you the relevant return on investment. If we include other living expenses for around 2 years , it will come across 3 Million INR, It is enough amount to secure a middle class common man's pension for lifetime so what is the kind of ROI one is looking from this kind of investment , well I do understand intellectual development and ability to apply structured methods for solving strategic , operational issues etc would be some of the great take away from this course but at the end it all boils down to what can you do with such skills i.e How much you can earn or what is the kind of job you are offered.
If we even consider some of the normal not so expensive courses , they have failed to provide a good ROI to more than 50% of the participants . All the media hype about million dollar salary in pink news paper is focused on some top 5- 10% of the class participants , rest go back with a decent increment in their salaries and mostly almost in the similar area of work ( as even in campus placements organizations give due weight to the background of candidate). even though top 20 institutes take fees in the range of 4 to 10 lacs , and the salary of students coming out of program varies between 4 to 11 lac with average being somewhere 6.5 to 7.
two of the Three generic strategies which even watchman of these B school knows is cost leadership and differentiation
Cost Leadership : Salary , roles depend on various factors from business condition to industry need so why can't B school implement a more innovative model which they have been teaching for long time , They can take a fixed component of fees which covers cost of course material , infrastructure etc and a variable component of the fees which depends on what kind of benefit is materialized to the student after course , to be specific let it be a percentage of annual pay package received by student , isn't something similar today's IT organizations doing by charging a variable component depending on how much money IT saved / earned for their clients .
I think We all have something to learn from TATA's here , a 2000$ car and a 20$ water purifier , that is what Indian market demands value for every penny spent , specially in education which is very crucial for indian middle class .
Differentiation : There are very few institutes in India which have created a differentiation , I would consider NITIE (SCM), ICFAI(FIN), FMS(Service), IRMA(Rural), IIFT (IB), XLRI, SCMHRD (HR) , MICA (MarCom) as some of the leaders , rest all are more of "Me too" kind . They should start differentiating in a way which adds value to students and also makes sure that it is filling a wide gap in the industry
Tuesday, February 19, 2008
Realizing the power of Small ( and medium enterprises)
In most economies, smaller enterprises greater in number then the large corporations . some of the facts related to SMEs in the world are:
1) In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people.
2)China’s more than 8 million SMEs, account for 99 percent of China's total enterprise and 60 percent of the nation's industrial output and exports.
3) In India 4.5 million SMEs contribute 40% of industrial production but create 70% of industrial pollution.
4) As per the latest Microsoft-AMI Partners report, "the India SMEs are on a firm growth trajectory, with 60 per cent of PC-using businesses expecting 20 per cent growth and 16 per cent planning to add branch offices to expand operations" .
Not only are SME's seen to be the engine of employment growth but they are also responsible for driving innovation and competition. These are the businesses which later on become some of the largest empires in the world , recall the days when Infosys started with 5 man and a two BHK aprtament in Pune and went on to be the second largest software services provider in Asia. SMEs also play a major role in developing entrepreneurship and ways of diversifications.
Given the rosy picture , SMEs are the one hit hard even by minutest change in the macroeconomic conditions. They have great difficulty in obtaining captal for scaling thier operations , crossing boundaries of nation , going with technical upgradation and attracting the best talent. This all keeps these indegeneous industries shackled with thier potential locked.
1) In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people.
2)China’s more than 8 million SMEs, account for 99 percent of China's total enterprise and 60 percent of the nation's industrial output and exports.
3) In India 4.5 million SMEs contribute 40% of industrial production but create 70% of industrial pollution.
4) As per the latest Microsoft-AMI Partners report, "the India SMEs are on a firm growth trajectory, with 60 per cent of PC-using businesses expecting 20 per cent growth and 16 per cent planning to add branch offices to expand operations" .
Not only are SME's seen to be the engine of employment growth but they are also responsible for driving innovation and competition. These are the businesses which later on become some of the largest empires in the world , recall the days when Infosys started with 5 man and a two BHK aprtament in Pune and went on to be the second largest software services provider in Asia. SMEs also play a major role in developing entrepreneurship and ways of diversifications.
Given the rosy picture , SMEs are the one hit hard even by minutest change in the macroeconomic conditions. They have great difficulty in obtaining captal for scaling thier operations , crossing boundaries of nation , going with technical upgradation and attracting the best talent. This all keeps these indegeneous industries shackled with thier potential locked.
Sunday, February 3, 2008
Entrepreneurship : Do you have it in you
Few day back we were listening to Captain G.R. Gopinath of airdeccan ,his tell of building an empire was mesmerizeing and from that speech and our readings we have drawn some basic characteristics of an entrepreneur
1) Risk Taking abilities : So taking risk is the first step of entrepreneurship . An entrepreneur must have risk taking ability , one who can not take risk can not become entrepreneur. When one tries to enter into any venture he never knows whether it is going to be successful or a failure and that makes it very difficult for a normal person to come out of his comfort zone . The decision of taking a risk is very important , one who passes this examination of taking risk has surely one of the very basic characteristics of being entrepreneur. If we track back the starting point of some of the today’s successful entrepreneurs like G.R. Gopinath, Mr Narayan Murthy and many of their likes have left their jobs and took a risk of loosing the financial security of their life.
2) Entrepreneurs believe in humble start : Many of today successful entrepreneurship ventures have started in a garage , almost all of them have had very humble beginning be it HP , Amazon , Dell , Infosys , Linksys or Google. The reason was obviously not that they liked the idea of working from garage but because of obvious resource crunch in the beginning phase of entrepreneurship most of these people have to work with minimum available facilities and resources in early days. Just before starting google , larry page and Sergey bin have concerted their own hostel room into a research laboratory , In early days of Infosys it used to function from a small 2 BHK in Pune , there was no servant to clean the flat and founder members themselves used to clean it .
3) Entrepreneurship demands Vision : It is not a mandatory criteria that entrepreneurs must have some clear vision about what they are about to do but if this vision exist then the organization is bound to sustain for long term. When Gopinath Munde started a no frill cheap airline , he had a vision that his fellow countryman should be able to travel by air without paying a fortune for it , It was this vision that kept his motivation high and made air deccan an instant hit among people from middle society. Consider example of Harper-Arrington Publishing and Media which was started by Harper and Arrington with a vision to educate kids and adults.
4) Entrepreneurship demands persistence : There are very few entrepreneurs who get it all right in the very first shot. It need lots of persistence to carry on the quest for success and to not give up the hope. Entrepreneurs don’t let it go , they would exercise all available options and make sure that they get the outcome . One of the example of persistence is
5) Entrepreneurs learn from mistakes : Infosys was not the first venture started by Mr Narayan Murthy , First of all he started a company named softronix but within a span of 1.5 years he had to close it , after doing a job for few years he again started a new venture named Infosys but this time he had already learnt the lesson , Softronix was targeting indian software market which did not have much scope at that time so later on with Infosys Mr Murthy targeted US markets where software industry was booming at that time .
These are not the only characterstics for entrepreneurship but these are definitely few important onces and if you have them all then I guess you should start now
1) Risk Taking abilities : So taking risk is the first step of entrepreneurship . An entrepreneur must have risk taking ability , one who can not take risk can not become entrepreneur. When one tries to enter into any venture he never knows whether it is going to be successful or a failure and that makes it very difficult for a normal person to come out of his comfort zone . The decision of taking a risk is very important , one who passes this examination of taking risk has surely one of the very basic characteristics of being entrepreneur. If we track back the starting point of some of the today’s successful entrepreneurs like G.R. Gopinath, Mr Narayan Murthy and many of their likes have left their jobs and took a risk of loosing the financial security of their life.
2) Entrepreneurs believe in humble start : Many of today successful entrepreneurship ventures have started in a garage , almost all of them have had very humble beginning be it HP , Amazon , Dell , Infosys , Linksys or Google. The reason was obviously not that they liked the idea of working from garage but because of obvious resource crunch in the beginning phase of entrepreneurship most of these people have to work with minimum available facilities and resources in early days. Just before starting google , larry page and Sergey bin have concerted their own hostel room into a research laboratory , In early days of Infosys it used to function from a small 2 BHK in Pune , there was no servant to clean the flat and founder members themselves used to clean it .
3) Entrepreneurship demands Vision : It is not a mandatory criteria that entrepreneurs must have some clear vision about what they are about to do but if this vision exist then the organization is bound to sustain for long term. When Gopinath Munde started a no frill cheap airline , he had a vision that his fellow countryman should be able to travel by air without paying a fortune for it , It was this vision that kept his motivation high and made air deccan an instant hit among people from middle society. Consider example of Harper-Arrington Publishing and Media which was started by Harper and Arrington with a vision to educate kids and adults.
4) Entrepreneurship demands persistence : There are very few entrepreneurs who get it all right in the very first shot. It need lots of persistence to carry on the quest for success and to not give up the hope. Entrepreneurs don’t let it go , they would exercise all available options and make sure that they get the outcome . One of the example of persistence is
5) Entrepreneurs learn from mistakes : Infosys was not the first venture started by Mr Narayan Murthy , First of all he started a company named softronix but within a span of 1.5 years he had to close it , after doing a job for few years he again started a new venture named Infosys but this time he had already learnt the lesson , Softronix was targeting indian software market which did not have much scope at that time so later on with Infosys Mr Murthy targeted US markets where software industry was booming at that time .
These are not the only characterstics for entrepreneurship but these are definitely few important onces and if you have them all then I guess you should start now
Tuesday, January 29, 2008
USe customer to innovate
If we talk about innovations , researching on cutting edge technologies , working on new systems and frameworks , the immediate thing which comes to mind is the huge cost associated with it which does not always provide a good return . Imagine how many innovations and research never make it to the production environment . What could be the way in which companies can still get innovative ideas without having to spend too much on thier own workforce , that is surely learning from customer and involving him in your system to innovate.
Who would know customer better then himself , Customers are the biggest source of innovation . They can come up with any weird idea because it is not going to cost them any thing , they won't be afraid of failure (It hardly matters to them ) and they don't have any pressure from thier management to drive innovation in a certain direction only . One such idea is innvated by customer in Punjab , Dhaba owners of Punjab also purchase Washing Machines but not for washing clothes , guess what they make lassi in those washing machines. Just imagine if one of the negineer in Videcon would have come up with this idea that lets project our washing machine as Lassi maker also , what would have been reaction from his management ?
Now when customers have shown the way , they must be seeing a business proposition here , may be in future they can simply do some changes in design of washing machine and make it more suitable for lassi making .
Going forward it will be very important to involve your customers into your business , just imagine you end having a workforce of millions of people by using this methods and guess what you even don't have to pay these people . All you have to do is to listen to them carefully , understand them and thir needs and encourage them to provide feedbacks on any aspect of product and services . One other industru where I see this practice prevalent is media and entertainment , Many news channels have started making thier cutomers their reporters . They ask viewers to send any latest happening around them , You see now they are literally coveringentire nation without sending any one physically anywhere. What adds to this is tehonology which has made it all very simple.
So remember when next time you meet your customer , don't think that he is just customer , give him a new role that is of critique and Engineer for your product and he may change the way you do business.
Who would know customer better then himself , Customers are the biggest source of innovation . They can come up with any weird idea because it is not going to cost them any thing , they won't be afraid of failure (It hardly matters to them ) and they don't have any pressure from thier management to drive innovation in a certain direction only . One such idea is innvated by customer in Punjab , Dhaba owners of Punjab also purchase Washing Machines but not for washing clothes , guess what they make lassi in those washing machines. Just imagine if one of the negineer in Videcon would have come up with this idea that lets project our washing machine as Lassi maker also , what would have been reaction from his management ?
Now when customers have shown the way , they must be seeing a business proposition here , may be in future they can simply do some changes in design of washing machine and make it more suitable for lassi making .
Going forward it will be very important to involve your customers into your business , just imagine you end having a workforce of millions of people by using this methods and guess what you even don't have to pay these people . All you have to do is to listen to them carefully , understand them and thir needs and encourage them to provide feedbacks on any aspect of product and services . One other industru where I see this practice prevalent is media and entertainment , Many news channels have started making thier cutomers their reporters . They ask viewers to send any latest happening around them , You see now they are literally coveringentire nation without sending any one physically anywhere. What adds to this is tehonology which has made it all very simple.
So remember when next time you meet your customer , don't think that he is just customer , give him a new role that is of critique and Engineer for your product and he may change the way you do business.
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