Tuesday, December 27, 2005

What are leadership lessons from BITSConnect?
BITSConnect (http://www.bitsaa.org/giving/bitsconnect.html) was an incredible journey for me personally. I drove the project from inception to completion, and everything in between. At the end, BITS Pilani students across the world (not an exaggeration) had bounded together to fund and build $1.5M worth of state-of-the-art communication infrastructure at the alma mater. As a leader, here is what I learnt - a template I hope to refine and use in my career.
(1) Communicate vision and incentives: This is perhaps obvious and self-explanatory. To the inexperienced leader, it may not be immediately evident how hard this truly is. To the end, I don't believe 100% of the participants really understood the vision for BITSConnect. Incentives need to be tuned for individuals - some people joined BITSConnect to contribute to the alma mater, others did to get introduced to highly successful alums who could help them elsewhere, yet others participated because they were coerced and couldn't say "no". You need to recognize these differences in individual motivation, and speak to each one of them.
(2) Assemble teams with complementary skills: "Doers" - people who can be relied on to get things done without specific instructions and follow-up within the assigned time - get things done, they're execution artists. "Thinkers" are people who can see the bigger picture and come up with ideas, solutions ... like most other team efforts, BITSConnect needed a healthy mix of both. Many of the senior folk were thinkers who addressed questions us doers brought to weekly meetings, besides which they focused on fund-raising. Primarily a doer, I would turn thinker in our weekend meetings - an example of a need to play both roles depending on the occasion.
(3) Set and track short-term goals: Execution is essentially an excercise in discipline, and BITSConnect was no different. We met each weekend, assigned goals to each sub-team, and tested progress the following weekend. Breaking a large task like BITSConnect into 18 months of evenly spread weekly goals was probably the smartest execution move we made.
(4) Lead by example: You can both inspire and shame people into doing things by setting an example. The good part is that you dont need to do anything more than doing your own job exceedingly well ! In BITSConnect, I believe I set a really high bar by doing my very best at my specific assignments - and I was often inspired by the examples of others who pushed hard when I started to slacken.
(5) Use the carrot and stick selectively: I have seen people who excessively use one method than the other, and it's more often the stick that gets used. I recall two occasions when I needed to pull the vendor team up by threatening (once actually following up on the threat) by bringing in senior management from the vendor firm. But I used positive motivation a lot more often.
(6) Reward better than expected: We ended BITSConnect on a high note, and most everyone felt rewarded (I am painfully aware of exceptions). Well aware of differing individual motivations, the team overdelivered on rewarding people on criteria that the individual valued. An example is how I was rewarded on the one thing I valued - recognition - and how far the senior members of the team went to give me a place in their midst as a reward.
As I discovered from my classmates' varied responses to readings in our core leadership class at Wharton, unless you have been through a significant leadership event yourself, this sounds like a bunch of BS. I wish for you, reader, experiences that force you to think as hard about such experiences as some of us have.

Tuesday, December 13, 2005

Why startups are needed for big firms to survive?

This is just a corollary to my previous post, last paragraph. If the equilibrium described there must exist, then we have a compelling argument for why we will always need startups - because big firms, by the very nature of their incentive structures [stock price = wall street's pleasure] cannot risk innovating beyond a certain limit. Startups fill that gap.

Apple is a firm more in the startup mode - product focussed and a risk-taker, therefore with a very volatile wall street record. Microsoft is the opposite - a big company mindset from the start, which is why they wait for someone else to show them a big potential market, then they go after it like their life depends on it [Google?].

These two previous posts dont just apply to technology companies. Consider P&G and GE. Both underwent a radical change under their current CEOs - AG Lafley and Jeff Immelt [both non-engineers with Harvard MBAs] - who broke with years of tradition by acknowledging the need to buy innovative new firms as well as hire outsiders into senior management positions. P&G's acquisition of SpinBrush [small startup] and Gillette are results of that choice. GE's acquisition of Amersham Healthcare Plc., and the appointment of Amersham's CEO as the head of GE healthcare again reflect the same reality. Thoughts?
When is product innovation too quick for the market?
A few years ago, I realized there is an maximum ability in a market per unit time to absorb products - this is not the market size, but is the ability to buy replacement products. Consider a curve representing sales of all products that are dependent (in a probabilistic sense) on the product in question, then the maximum absorption ability is the slope of this curve.
This is a very real limitation. In the last couple of years, you hear VCs investing in telecommunications equipment tell you buyers were suffering from 'box fatigue' - buyers were tired of the number of telecom devices they had bought, and were less willing to consider a new network element. Indeed, this gave modular switches and routers in the network market a distinct advantage, and is one of the reasons such products enjoy enormous success. I see (anecdotally) a similar limit getting hit in the consumer communication device space, though interestingly, this limit seems to be different in different geographies - an interesting function of consumer psychology and disposable income.
The closest notion I have seen are replacement or adoption curves. Im sure these have been quantified well someplace, I just haven't seen them - I would like to do more than apply generic 'crossing the chasm' or 'S' curves to the problem - but actually draw a curve based on market data that is collectible in advance. Further, I would like to overlay this on a curve representing innovation - x-axis represents time and y-axis represents some measure of expected profitable return on R&D investment - so I can see where I will likely outrun the market's ability to absorb new products.
The upshot of all this? To the academic, this might be an interesting problem to quantify, and see what models might help both gauge and predict this maximum ability to absorb products. To the practicing manager, as technological innovation continues to outrun the market's ability to absorb new products, this could be a very useful tool in making R&D decisions.
In my experience as a product manager and engineer and studying technology companies at business school, large companies [often beholden to wall street] tend to wait for some proof of market adoption before investing [via acquisition?] in new technology whereas startups tend to introduce new products [often] in the hope that markets will prove themselves. Would a more predictive tool as described above destabilize this happy equilibrium?
How responsible are accounting boards for current pension problems?
Pension accounting rules in the US appear contrary to the FASB's usual conservatism in accounting. Consequently, accounting rules lead firms to understate pension obligations, and it requires fairly sophisticated financial statement analysis to get to the bottom of the actual pension obligations.
In addition to the current work at FASB on improving pension accounting, there appears to be a need for firms to state pension assets and liabilities on their balance sheets minus smoothing effects (this is often already in the notes) - which is really two changes - one, that pensions should not be treated off-balance sheet financing and two, pensions must be marked-to-market on balance sheets. The latter will be more aligned with the conservatism usually applied to accounting, and might allow investment management experts to continuously adapt to actual returns on pension funds.

Sunday, December 11, 2005

Is the MBA worth it?
As mentioned before, Im trying to get a general management education devoid of a major. In continuation of that theme, here are my courses for spring 2006 - 1 finance (finance of buyouts and acquisitions), 1 legal studies (negotiations), 1 strategy (strategic implementation) , 1 marketing (marketing strategy) and 1 leadership (leadership seminar). These will mark the completion of my formal business education, and Im happy with the material I have chosen.
In addition, I continue to be involved in the Knowledge@Wharton strategy group, am helping some friends from the valley with marketing and finance for their venture, and getting back on a health and fitness program that I had successfully executed through Fall 2004, but which has fallen by the wayside since. The last is important not just for immediate health, but is an exercise in work-life balance, and will perhaps help develop tools for the times ahead.
I have often been asked if the MBA is worth it, and what I have learned. Three things - (a) general business sense and judgment, (b) greatly increased self-awareness, and the realization that teams built with complementary skills are much more than the sum of parts, (c) softer, human skills; especially the ability to effectively interact with a very wide variety of people, which is more important (and a specific developmental need) than many realize. If these didn't make sense to you, you probably need an MBA.