Search

ekoshapu

Notes to Myself

Category

Management

Critical Thinking and Analysis Case Study: Mumbai-Ahmedabad Bullet Train Project

shinzo-abe-narendra-modi_1d5b3072-990d-11e7-baba-4acd69b87684Bullet Train

I have had the privilege (or curse?) of pursuing full-time MBA two times. And if I had enough wealth, I would pursue it again, or maybe some other higher studies such as Ph D or Masters in Economics, Masters in Policy Making etc. I enjoyed the process of learning about Critical Thinking and Analysis and honing ability to study various subjects, evaluate opinions, data, facts and form a view.

And MBA is all about “application” – through Case studies. So, let’s pick the most recent and most interesting case study – that of Mumbai-Ahmedabad Bullet Train.

As I write this post, the Indian Prime Minister Modi and Japanese Prime Minister Abe laid the foundation stone of the 508 Km long Mumbai-Ahmedabad High Speed Bullet Train project, a few minutes ago.

Here are key details of the project (Case facts):

  • India’s first Bullet train is being built in partnership with Japan
  • The government has set an ambitious deadline of starting the bullet train on August 15, 2022 – the day that India marks its 75th year of India’s Independence.
  • The gigantic infrastructure project that is going to cost India approximately Rs 1,10,000 crore (~17 Billion USD)
  • he Japanese government is providing a loan of Rs 88,000 crore at a “miniscule” interest rate of 0.1%.
  • The loan can be repaid over a time span of 50 years, with the repayment beginning 15 years after disbursement. The loan interest ranges between Rs 7-8 crore a month and the government claims it will not put any strain on existing financial resources.
  • The bullet train will run at an operating speed of 320 Km/hour and a maximum speed of 350 Km/hour! The 508-Km journey will be completed in 2 hours and 7 minutes and cover 12 stations
  • Japan’s Shinkansen E5 series of bullet trains have been identified for the project.
  • The bullet train – with executive and economy-class seats – will have 10 coaches that will be able to seat as many as 750 passengers.
  • Later, Indian Railways proposes to add 6 more coaches to take the seating capacity to 1,250 passengers. Initially, 35 bullet trains will be operated.
  • By 2053 this number is likely to go up to 105. The bullet trains are expected to do 70 Ahmedabad-Mumbai sorties in a day. While 24 bullet trains will be imported from Japan, the rest will be manufactured in India
  • According to the government, the project is likely to generate employment for about 20,000 workers during the construction phase.
  • Safety: The train delay record of Shinkansen is less than a minute with zero fatality, says Japan. Not only that, the technology for disaster predictions and preventions will also be acquired.
  • This would make sure safety is maintained in case of any natural calamity such as an earthquake etc. Modi government hopes that with this technology, India will leapfrog to the cutting edge of latest train developments.
  • One of the biggest benefits of the bullet train project will come from the fact that Indian engineers and labour will gain knowledge and skills to ‘Make in India’ the parts and rolling stock. This, in turn, would be beneficial for future high-speed rail projects that are being planned for other routes in the country – and as Railways Minister Piyush Goyal said – we may even start exporting!
  • The Maharashtra government is still undecided on where the bullet train will end in Mumbai. The state government this week agreed to spare 9,000 sq metres plot for the station at the Bandra-Kurla Complex on the condition that the railways assess suitability of an alternative site.
  • At their summit talks today PM Modi and Mr Abe are expected to focus on bolstering defence and security ties. They are also expected to discuss cooperation in the nuclear energy sector. The recent nuclear test by North Korea will come up during the talks, officials said.
  • Benefit for Gujarat: An agreement between the Japan International Cooperation Agency and the Gujarat Maritime Board for developing the Alang shipbuilding yard, besides the establishment of two industrial parks, will be on the table during Abe’s visit. According to Gujarat Chief Secretary, JN Singh, 15 Japanese companies are keen to invest in Gujarat and will be signing agreements with the state government. Some of these companies include Moresco, Toyoda Gosei, Topre and Murakami.

Here is a good 2015 article about Economics of Bullet Train written in connect of Mumbai-A’bad Bullet Train proposal then.

https://capitalmind.in/2015/12/the-economics-of-the-bullet-train-and-whether-it-makes-financial-sense-to-take-a-0-1-loan

Now you must keep in mind “What’s In It For Me” (Link: http://www.urbandictionary.com/define.php?term=WIIFM ) question and apply it for different stakeholder groups.

For example, WIIFM from Japan’s perspective. Why would they provide loan at such low interest rates of 0.1% and provide technology? What do they get?

Think about WIIFM from different stakeholder perspectives – some of the key ones are: PM Narendra Modi (the individual), BJP Government at the Center, BJP Government in the state of Gujarat (remember, Gujarat state elections are due in few months), BJP-Siv Sena state government in Maharashtra, the commuters (who can take slow and cheap train or a fast and expensive flight, as of now, to travel Mumbai-Ahmedabad), business communities in Gujarat (Surat, Ahmedabad etc) and business communities in Mumbai (again Gujaratis?), the Indian Railways (getting technology know-how, developing skills in operating High-speed trains), the social and environmental groups (massive displacement due to land acquisition and some part of the route is submarine), the new commercial opportunities along the train route/stations (malls at and around the train stations), the public at large (tax burden, cess, toll?).

The more you start thinking, the more you can identify stakeholder groups. And different aspects how they are linked such as – Economic, political, sociological, environmental, international relations (Japan as an investor and ally – to counter China threat).

For now, I leave it up to you to think about this case study from various angles. Will write a follow-up post on this in due course. Maybe my analysis, or just updates about the project.

 

Advertisements

भयानक दरोडा – A lesson in management

भयानक दरोडा

हॉंगकॉंगमध्ये एका बँकेवर दारोडा पडला.

‘सगळ्यांनी मुकाट्याने जमिनीवर आडवे पडून रहा.

लक्षात ठेवा पैसा सरकारचा आहे पण जीव तुमचा आहे.’

दरोडेखारांनी ओरडून सांगताच

सर्वजण मुकाट्याने जमिनीवर आडवे झाले.

*याला म्हणतात ‘माईंड चेन्जिंग कन्सेप्ट’*

( *Mind Changing Concept* ) म्हणजेच माणसांच्या

सर्वसाधारण विचारांमधे बदल घडवण्याची

किमया.

त्यातील एक महिला कर्मचारी ‘अश्लील’ पद्धतीने आडवी

पडली होती. एक दरोडेखोर तिला ओरडून

म्हणाला,

‘मॅडम! जरा सभ्यपणे वागा. हा

दरोडा आहे, बलात्कार नाही.’

*याला म्हणतात व्यावसायिक रहाणे*

( *Being professional* ). आपल्या कामावर लक्ष केंद्रीत करा.

दरोडा टाकल्यावर दरोडेखोर लूट घेऊन घरी आले.

त्यातला ज्युनिअर दरोडेखोर, *जो एम.बी.ए. होता*

तो 6 वी पर्यंत शिकलेल्या

सिनियर दरोडेखोराला म्हणाला., ‘चला

आता आपण पैसे मोजायला लागूया!’ त्यावर

सिनिअर दरोडेखोर म्हणाला, ‘वेडा आहेस की

काय? हे पैसे मोजायला कित्येक तास लागतील.

जरा धीर धर. रात्री टी. व्ही.

वरच्या बातम्या बघ. तुला आपोआपच कळेल की

आपण किती लाखांचा दरोडा घातला आहे ते.’

*याला अनुभव म्हणजेच*

*‘एक्सपिरिअन्स’*

( *Experience* ) असे म्हणतात.

हल्ली कागदी पदव्यांपेक्षा अनुभव जास्त

महत्वाचा झाला आहे.

दरोडेखोर बँकेतून निघून गेल्यावर बँक मॅनेजर

सुपरवायझरला म्हणाला, ‘ताबडतोब

पोलिसांना फोन कर!’

सुपरवायझर म्हणाला ,

‘थोडे थांबा साहेब! *आपण आधीच बँकेच्या 70 लाख* *डॉलर्सवर डल्ला मारला आहे. त्यात अजून 10 लाख डॉलर्सची भर घालूया व मग पोलिसांना बोलवूया!’*

*याला म्हणतात ‘लाटेबरोबर पोहणे’*

( *Swim with the tide* ). म्हणजेच संकटाचे रुपांतर संधीत करून

स्वतःचा स्वार्थ साधून घेणे.

सुपरवायझर म्हणाला, ‘जर दर महिन्यात असा

दरोडा पडला तर काय मजा येईल!’

*याला म्हणतात ‘प्रॉयॉरिटी बदलणे’*

( *Changing priority*).

कारण ‘पर्सनल

हॅपिनेस’ हा तुमच्या ‘जॉब’ पेक्षा जास्त महत्वाचा असतो.

दुस-या दिवशी टी. व्ही. वर बातमी झळकली

की *बँकेवर 100 लाख डॉलर्सचा दरोडा पडला*.

पण ही बातमी ऐकून दरोडेखोर मात्र हैराण झाले.

कारण त्यांनी आणलेली कॅश परत परत मोजली. पण ती फक्त 20 लाख डॉलर्सच निघाली.

*मग 80 लाख डॉलर्स कुठे गेले?*

*खरी मेख काय आहे ते सिनियर दरोडेखोराच्या बरोबर लक्षात आहे.*

तो वैतागून म्हणाला, ‘आपण

जीवावर उदार होऊन दरोडा टाकला पण.

आपल्याला फक्त 20 लाख डॉलर्सच मिळाले.

पण

त्या बँक मॅनेजरने मात्र काहीही न करता 80

लाख डॉलर्स लाटले.

*खरे आहे माणसाने शिकले पाहिजे.नुसतेच दरोडेखोर न* *होता ‘सुशिक्षित दरोडेखोर’ व्हायला पाहिजे,’*

*याला म्हणतात ‘ज्ञान’ म्हणजेच* *‘नॉलेज’*

( *Knowledge*) ज्याची किंमत

सोन्यापेक्षाही जास्त असते.

तुमचे सोने नाणे

लोक पळवून नेऊ शकतात पण तुमचे ‘नॉलेज’ कुणीच

पळवून नेऊ शकत नाही.

🔴

#WhatsApp #Forward

Peter Drucker said…

Peter Drucker said:

“Culture eats strategy for breakfast”

culture-eats-strategy-for-breakfast

Corporate-culture-vs-strategy

Culture eats strategy for breakfast everyday – decoding Murthy-Sikka battle

If you were operating at or connected to the senior levels in the technology industry, the news of Sikka’s exit from Infosys would neither be shocking nor unexpected. It was a question of when – not whether – Sikka would be out of Infosys. So what went wrong ?

The History

When Sikka took charge, Infosys was in doldrums. Once an industry bellwether, Infosys stood still as industry peers like HCL and TCS grew quicker and delivered better returns. Its efforts at moving up the value chain through Infosys 3.0 came a cropper. Murthy’s second stint as CEO under those tumultuous conditions was a largely forgettable one The only positive event were Murthy’s efforts to bring in a new CEO.

The CEO search

The Infosys board envisaged what it needed in a new CEO: a successful technology executive with a global perspective and proven track record. Sikka’s academic success and credentials at SAP looked impressive: additionally, he seemed to have the depth of strategic skills and the right vision for an organization Infosys’ size. He took charge as the first non-founder CEO in 2014. All good? Not quite. Two areas simmered in the background right from beginning:

1. The very first clue comes from Infosys’s tagline: “Powered by Intellect, Driven by Values”. While Sikka’s Stanford PhD and SAP HANA success ensured his intellect stood out, his values’ fitment is unlikely to have ticked all boxes. Sikka was a global executive schooled in liberal values – diametrically opposite to te values of a traditional Infosys. Sikka’s masterful strategic skills and intelligence were an unlikely replacement for his mismatch of cultural values, especially for the top job at an organization that prided itself precisely on these very values,.

2. Sikka’s due diligence about the role of Infosys’ powerful and domineering founders presented an important potential fault line. There is a likelihood that Sikka mistook his experience in the West – where executive freedom is nearly guaranteed – as a benchmark for what to expect at Infosys. Little did he understand the true meaning of Murthy’s line “Infosys is my middle child”: Sikka, like others, might have laughed it off as parting words from a genius – not as literal words from a very possessive strong personality.

In the battle of nature vs nurture, Infosys founders expected Sikka to get nurtured by existing values whereas Sikka expected his nature to turn Infosys around. That dichotomy – as time would tell – made all the difference.

However, difference in such subtle yet vital areas rarely manifest themselves overnight: they build up overtime and blow over soon.

Enter Sikka

Sikka scored some early successes:

1. Sikka loosened the office dress code, promoted 500 employees, gave away iphones, strengthened grassroot communication and did everything to engage employees.

2. Sikka next wooed the investor fraternity and the stock markets by presenting a grand and aggressive vision of a $20 billion organization by 2020. For an organization known to under-promise and over-deliver, this was a cultural shock. The tall talk raised expectations drastically and while that enthused the stock markets in the short run, the expectations – as we now know – made it difficult for Sikka to live upto them.

3. Last, for a conservative organization known to harp on its brand but never known to pay top-of-the-line salaries, Sikka raised the salaries of his top reports to unheard-of levels.

Seen from the perspective of Infosys’ founders, these initial “successes” were not success at all: they were cultural failures, disturbing enough to lead to uneasy relationship with Sikka, but yet not alarming enough to cause a blast.

Meanwhile, Sikka brought an army of top people from SAP to change the culture and help him transition Infosys from a lumbering elephant to nimble cheetah. Unfortunately, Sikka misjudged what it would take to bring about a cultural change: if a culture of a 30 year old, hundred-thousand employee traditional organization could be changed with a handful of imported top-managers, Drucker’s powerful line “Culture eats strategy for breakfast everyday” would not have stood the test of line.

The challenges

All of the above would still have sustained but for a few areas where Sikka and the board crossed Murthy’s red line.

1. Awarding CFO Ravi Bansal a huge severance pay package raised question marks on corporate governance. Infosys prided itself on its disclosure standards. The board’s decision of not disclosing the contents of reports from an external law firm – especially when all was deemed “fine” – gave an already disenchanted founders’ team a stick to beat Sikka and the board with.

2. Within months of the Bansal episode, the board raised Sikka’s already high salary by 55%. The stick in the disturbed founders’ hands now got a poison tipping and became a lot more potent with Murthy incessantly and publicly lynching the board.

3. After some initial success, Sikka’s turnaround strategy missed its target by an embarrassing $5 billion: finally in June 2017, the board scrapped the $20 billion target.

For an organization that consistently beat investor expectations for years, this was a strategic Freudian slip and the Infosys stock – and Sikka – lost support of some of the vital institutional investors.

And for Sikka – long dismissed as a cultural misfit – who had strategic results as the last armory in his toolkit, a slipup in strategy, positioned his rhetoric as “all bark, no bite”. This was the last straw on the camel’s back.

The Exit

With a frustrated founding team led by combative Murthy, allegations of corporate governance, a failed turnaround strategy questioning the very competence of Sikka and missing investor support, Sikka had nothing to fall back on and nothing to look forward to – except a good nights sleep and the much needed peace of mind. Exiting Infosys provided him precisely those benefits – and Sikka cut his losses.

There are some really valuable lessons:

1. With the infamous Tata episode still fresh in memory, Indian founders and family business heads would do well to rethink if they really want to let go in the true sense when they hang up their boots. If all they want is to remote-control a strategically minded executive – who is tasked with the responsibilities of a CEO without the requisite authority, they should stop searching the market and instead stick to the comforts of loyal insider.

You can have loyalty or results – rarely both.

2. For prospective CEO choosing a top job at any organization – specially with powerful founders or families, it is well worth developing a thorough understanding of the cultural factors and sensitivities involved. Raw Intelligence is a necessary but not a sufficient condition to succeed – emotional intelligence provides the much-needed sufficiency. And that involves recognizing stakeholders interest before picking up the top job.

There is no point in diving in deep oceans and complaining about sharks.

The forces of nature are so strong that in the battle of nature vs nurture, nature often wins hands down. As Sikka learns that lesson and walks into the sunset, he would do well to recall Peter Drucker’s golden lines that Cyrus Mistry at TATA group learnt equally painfully:

“Culture eats strategy for breakfast everyday”.

Source: WhatsApp Forwards and long-time Infoscions

Dahi Handi – Corporate Leasons

Dahi-Handi festival teaches us few Corporate lessons:

1. All Cannot be at the top

2. As you rise so does the risk

3. Ground Level bears the maximum load

4. And the guy at the top eats 'माखन'

😆😝😉😁😀😛😜

Stock and Flow – in Economics and other areas

Stock and Flow variables are one of the basic concepts of Economics. Unfortunately, they are not covered in current MBA curriculum (at least based on the courses I attended). But I feel that the concepts are also important beyond the subject of economics and helps in analyzing various commonplace notions/ comparisons people (wrongly) make.

Stock refers to a quantity of a commodity accumulated at a point of time. The quantity of the current production of a commodity which moves from a factory to the market is called flow.

The basis of distinction is measurability at a point of time (which is stock) or over a period of time (which is flow). Note that both stocks and flows are variables. A variable is a measurable quantity which varies (changes).

Consider analogy of a flow of water into a tank, and a small hole at the bottom causing the leak. The following depiction helps in understanding stock and flow concepts.

The water flowing into a tank is a flow variable. The water stored in tank “over a period of time” is a stock variable. And the leak at the bottom of tank can be considered as “depreciation of capital” – the decay!

Stocks_and_Flows.svg

So, we must remember following points:

  • Any flow must have a time component. i.e. per hour, per day, per year etc.
  • Stock is NOT defined in terms of time. It is rather a snapshot at a given point in time (cumulative effect till then)
  • Flow adds up to a stock, and decay or depletion or depreciation reduces the stock

StockFlow

Let’s apply the concepts of stock and flow to various terms:

  • Is GDP a flow variable or a stock variable?
  • Is debt a stock or flow variable? How about Capital?
  • Is Depreciation a stock variable?
  • How about Budget deficit (flow), and Outstanding national debt (stock)
  • How about Salary (flow), and savings/ wealth (stock)
  • How about Income statement (flow), and Balance sheet (stock)?

In the context of a nation, GDP is a measure of activity per year – and hence a flow variable. So is a company’s Income Statement – economic activity during the year – and hence flow variable. And so is your monthly Salary – a flow variable.

Consequently, Balance sheet of a company (which is a snapshot on a given day) indicates stock variable. The assets and liabilities and retained earnings the company has accumulated over time. Understand how flow (Income statement) and stock (Balance sheet) are related in this case. Some of the earnings from Income statement are retained – and flow to Balance sheet in form of Retained Earnings.

Similarly, you earn some salary and you save some part of the salary – which contributes to your wealth (stock variable). You may or may not be able to save from current salary, in each period – but then you can draw upon your wealth and sustain.

GDP of a nation is a stock variable. The amount of output it produces in each year. What would be the equivalent of Stock then? There is no single answer. One approach is to consider Gross Domestic Debt or Gross National Debt. The idea is to consider ratio of Debt to GDP ratio and interpret it as “number of years to pay off all debt, if all of GDP were to be devoted for debt repayment”. Budget deficit is the “leak” – the shortfall in paying off the debt.

How about Population? Is it a stock variable or flow variable? Well, I hope by now it is clear in your head.

Birth rate is a flow variable. And population is a stock variable.

The Systems Thinker  V10N4

Just a thought. Can we consider Voltage, Current and Resistance in terms of Stock and Flow?

The relationship between voltage, current, and resistance is described by Ohm’s law. This equation, I = V/R, tells us that the current, I, flowing through a circuit is directly proportional to the voltage, V, and inversely proportional to the resistance, R.

So Voltage is analogous to Stock. The difference in Voltage levels – max at one end and zero at the other – causes current to flow. Thus Current is analogous to Flow. And the resistance, R, causes current to slow down. Not exactly equivalent to a depreciation or depletion, but somewhat similar.

Current Voltage - Ohm.gif

Well, maybe I am pushing the analogy too far, but there are parallels. And they help in understanding concepts.

Now let me comment on the wrong kind of comparisons and how the concepts of stock and flow can help point out the flaws in the comparisons.

We often hear sentences such as “XYZ person in Forbes Richest List is so rich that his wealth is more than GDP or ABC country”. Or, “Mr. X is so rich that he can use his fortune and single-handedly wipe out the country’s Budget Deficit.

Can you see the flaw? Person’s wealth is a stock variable. And GDP or Budget Deficit are flow variables.

Is it appropriate to compare the two? Maybe yes, maybe not. Depending on what the context is. However, it is important to understand the distinction between the category of things we are comparing.

Let me end this post by extending Stock and Flow concepts to philosophy and religion.

Hindu religion has concepts of पाप (sin), पुण्य (good deed), and पूर्व-संचित. I am sure the other religions would also have something similar. The activities you do and actions you take result in earning पाप or पुण्य in this life. So they are Flow variables 🙂

And your पूर्व-संचित is the things you have accumulated in your past life (or lives). So that is the Stock variable 🙂

Your destiny is shaped by पूर्व-संचित (Stock) as well as by पाप or पुण्य in this life (Flow). You cannot do much about the Stock. However, you can certainly do a lot about the Flow!

I hope you’ll understand the concepts of Stock and Flow much better if you take this perspective! 🙂

Happy learning…

Corporate restructuring, mumbo jumbo and Metrics

My organization is undergoing “yet another” corporate restructuring.

It happens so frequently that I think it is one of the deliverable or KPIs of the top management – every year they would announce some “significant corporate restructuring” to make the organization “lean, agile and responsive”.

CEO announced organizational changes in a long email and said that his direct reports would send further communication detailing out respective org structure.

So far 3 BU heads have announced their re-org. And it all sounds mumbo-jumbo to me. I cannot figure out how the Metrics would change, or be defined and how the effectiveness of re-org would be measured.

Here are some citations from various communications related to re-org (and all of it is REAL verbatim communication, not made-up!)

  1. Given the strategic nature of XXX business unit to our growth and success, we are moving XXX within Corporate Strategy
  2. I (the Chief Strategy Officer) will work closely with Mr. A (BU head), who will lead the XXX Group, to craft the right Go-To-Market strategies, and create a compelling and differentiated leadership position for us in the market as XXX experts.
  3. YYY channel business will also roll up within the Corporate Strategy. We believe there is strong growth potential within this business and keeping it under the CS Organization will allow us to invest the right effort in leveraging this opportunity.
  4. Mr J will join the Corporate Strategy team, with a global focus on select Strategic Partnerships and Channel Relations
  5. Mr. P will lead Corporate Marketing; Mr. Z will support me (Mr CSO) on Strategic initiatives and will have a dotted-line reporting to Mr. P
  6. In FY17,  we executed towards our strategic intent to enable business transformation for our clients through digital innovation and driving operational efficiencies through automation, by leveraging our tools and with shift left initiatives
  7. Solution leaders will focus on enabling sales support, solutions & domain skills development & partnerships
  8. In FY17, we enabled large business transformation for our clients through consulting, innovation, and domain-led solutions.
  9. Over the years, we have built a solid foundation for growth with a strong leadership team, differentiated solutions, and robust delivery capabilities. We are realigning the ZZZ organization for FY18 with changes that will help us build on this foundation and accelerate business growth, sharpen our go-to-market, improve our prospect-to-win ratio and continue our heritage of delivery excellence.
  10. ZZZ Solutions leader will be responsible for tying together all horizontal solution and industry domain expertise to address multi-skill proposal requirement and enhance our win ratio
  11. The Operations leader will support the SBUs in ensuring the right talent is available to staff engagements, maintain utilization and talent acquisition as well as improve profitability through operational efficiency
  12. Our go-forward structure has been designed to simplify and accelerate decision making, empower leaders with end-to-end responsibility and improve our ability to realize our FY18 business goals of resuming industry leading growth, expanding profitability, enhancing operational excellence and strengthening our position as a leading Transformation expert.
  13. In summary, the changes we are making will enable us to function more effectively as an organization, improve our operating efficiencies, create new growth opportunities for our team members, support our clients more effectively, and capture a larger share of the market opportunity available to us.
  14. I am confident that with our realigned organization we are better positioned to make FY18 the best year in our history!

How does that sound in terms of meaningful, actionable and measurable strategic plan? Read it two or three times again if you “really really” want to understand the purpose of this re-org; or want to have a healthy laugh! The write-up can hold true for any re-org in any year!

There are many web pages that help you generate corporate jargon – some precisely call it as “bullshit buzzword generator” tools. Just Google this term to see examples.

Here is a Dilbert cartoon and a link to Corporate Bullshit Buzzword Generator that helps you build a catch phrase which could be thrown into any Strategic discussion.

corporate-bs

I found another website which has taken the buzzword generator idea to a new level!

This website generates not just jargon but entire conversation! Isn’t that amazing?!

Anyways…what’s your bullshit buzzword for the day?

 

P.S: This reminded me of a conversation with a customer who jokingly said: You guys said you have set up a “Center of Excellence” for some of your clients. I want something extra. How about a “Center of Perfection” for me?

Well, why not? As Mark Twain once said “What’s in a name? A rose by any other name would smell as sweet”.

What? Was it William Shakespeare and not Mark Twain who said that? Even better…that just proves the point. What’s in a name?

A “Center of Perfection” would sound as sweet as a “Center of Excellence”…maybe, a bit sweeter. And the best part is: both would do nothing!

I am waiting for my day when I would announce a corporate restructuring “to create 5 “Centers of Excellence” which would roll up into a new strategic “Center of Perfection” in order to enhance our market leadership through focused differentiation using CoE/CoP as vehicles for accelerated growth!

I knew I was made up for this B***S***!!!

 

Metrics, KPIs and CSFs – in Business and in Life

What is a Metric?

metrics_definition

Here I am referring to the first definition i.e. a system or standard of measurement, and not the Metric system.

Metrics are for measurement. Business Metrics are for measuring Business parameters. Key Performance Indicators (KPIs) are for measuring performance. Critical Success Factors (CSFs) are for measuring the outcome (of an initiative or a project or a decision). Different names – but ultimately they all are Metrics – a system of measurement.

And why do you measure? You want to manage, and improve things. As Peter Drucker put it: If you can’t measure it, you can’t improve it” and “What gets measured gets managed”

Drucker-1.pngpeter-drucker

Metrics should not be confused with Data or Information.

You can’t pick your data, but you must pick your metrics.

Slightly deviating from Metrics, do read about DIKW Pyramid. I’ll write a separate article on DIKW (borrowing from my MBA dissertation). But for now, keep in mind that Data is NOT Information. Information is NOT Knowledge. And Knowledge is NOT Wisdom. So don’t use these terms loosely, and interchangeably.

Coming back to Metrics – Metrics is not same as Data or Information (or even Knowledge/Wisdom). I’ll  talk about this common habit of mistaking a Metric for an Insight later. Let’s look at some reasons to measure:

slide_3

Metrics are a special form of Statistics. Statistical study is the practice or science of collecting and analysing numerical data in large quantities, especially for the purpose of inferring proportions in a whole from those in a representative sample. While the purpose of statistics is “to infer”, the purpose of Metrics is more specific – “to infer in order to manage”. Anything that gets measured is easier to manage – simply because you can understand it better.

KelvinLord-Measure500x250px.jpg

Focus on Metrics has been the backbone of statistical analysis, process improvement, Quality initiatives and Six Sigma methodology of DMAIC [ Define –> Measure –> Analyze –> Improve –> Control]

DMAIC methodology tells us something important in the journey of transformation. D comes ahead of M. You have to “define” what you want to achieve and hence what you want to “measure”. This is the foundation of Performance Management or philosophy of Management by Objectives (MBOs).

By setting right performance metrics AND right incentives, benefit/reward system you can INDUCE favorable behavior and manage performance.

You will realize how crucial this thought is once you look around and see its application. “Carrot and Stick Approach” is the crudest form of this principle. You incentisize by showing a carrot or bring in discipline by using a stick. However, understand that carror or sticks are NOT Metrics. They are rewards or penalties. Not the metrics.

Metrics are not outcomes. However, good metrics should “influence” outcome.

Let’s build on this thought. You want a child old teenager to “behave”. You use carrot and stick approach. You reward the boy with a candy if he behaves well. You punish him with stick if he misbehaves. Neither candy nor stick are metrics. Also, the “good behavior” is not a metric. But the measure by which you’ll determine whether the behavior is “good” is a metric.

Why is this understanding important? Suppose you tell the child that he should “behave well” to get a candy, otherwise he would be beaten up. The child would ask “What do you mean by “behave well”? In other words, the child is saying “Define the metrics that would determine if he behaved well or not”.

Now if the metric is set as the following:

  1. If the child studies for 4 hours a day, completes home-work, doesn’t watch TV, sleeps before 9 PM and gets up at 6 AM – without fail for 1 year – that’s good behavior and would get reward
  2. If the child fails at any of these even for a SINGLE DAY – that’s bad behavior and would get punishment

bad-metric

You can see that the metric is “designed to fail”. The success criteria is so difficult that the child would think that no matter how hard he tries he is not going to achieve. You are bound to miss those targets some time during one long year. So by setting such steep metric you cannot bring any behavior change in the child.

Right?

Well, almost yes, but not entirely…

What we are not considering here is Metrics and Reward/Punishment relation.

Let’s say for the same Metric the reward is not a candy but a brand new Xbox or Playstation console! Now the target is worth giving a try. Or let’s take the other extreme scenario (and this is really really extreme, meant only as an example). For the same Metric the punishment is that the boy would be beaten up to death. Now the target looks really achievable.

So the key point is – setting a right metric AND setting right reward/penalty system will likely lead to change in behavior and improvement.

Following picture summarizes the “Metrics –> Behavior –> Outcomes” link.

metrics-2

I will continue this in next blog posts and talk about why Metrics fail.

 

On Vijay Shekhar Sharma, Founder of Paytm

Not sure if you follow Vijay Shekhar Sharma, the founder of Paytm. He is a very interesting and inspiring person and he is just 37

Sharing few interesting links.

Vijay Shekhar Sharma, founder of Paytm sold 40% of company for 8 Lakh when he was in crisis, coz he had borrowed money at 24% per year interest. And he recently sold 1% of parent company for Rs 300-400 Cr.

 

I liked when he quoted D.L. Moody who said: “Character is what you are in the dark.”

————————————————————————–

This was published in Jan 2016, long before #demonetisation was announced.

Swag of Paytm CEO | Vijay Shekhar Sharma | Startupreneur Series

 

Vijay explains Paytm business model

 

 

Create a free website or blog at WordPress.com.

Up ↑