Shyam's Slide Share Presentations


This article/post is from a third party website. The views expressed are that of the author. We at Capacity Building & Development may not necessarily subscribe to it completely. The relevance & applicability of the content is limited to certain geographic zones.It is not universal.


Friday, March 29, 2013

The Promise and Peril of India’s Youth Bulge 03-29

By Danielle Rajendram

" order to accommodate the 300 million people that will join India's workforce between 2010 and 2040, India needs to create roughly 10 million jobs a year."
population is under the age of 25, with 65 percent of the population under 35. By 2020, India’s average age will be just 29 years, in comparison with 37 in China and the United States, 45 in Western Europe and 48 in Japan.This demographic trend will confer a significant competitive advantage upon India. About a quarter of the global increase in the working age population (ages 15-64) between 2010 and 2040 is projected to occur in India, during which time this segment is set to rise by 5 percent to 69 percent of its total population. Roughly a million people are expected to enter the labor market every month, peaking at 653 million people in 2031. As a result the IMF projects that India’s demographic dividend has the potential to produce an additional 2 percent per capita GDP growth each year for the next twenty years.
However, India’s ability to reap the rewards of its huge demographic advantage is far from guaranteed.The failure of a number of Latin American countries with the same demographic profile as Southeast Asia to achieve similarly impressive economic outcomes is a cautionary tale for India. The key to transforming the demographic dividend into economic growth lies not just in having more people, but having greater numbers of better trained, healthier and more productive people. The relationship here is mutually reinforcing; India must harness the advantage of its youth to fulfill its economic potential, and in turn must generate growth in order to continue to support its growing population. As noted by India's former Minister of Human Resource Development, Kapil Sibal, “it will be a dividend if we empower our young. It will be a disaster if we fail to put in place a policy and framework where they can be empowered.”
At the most basic level, India must focus on improving the overall health and well-being of its children in order to make the most of their immense potential. The Asian Development Bank estimated that 32.7 percent of India's population lives below the poverty line of $1.25 a day (PPP), and India is home to one-third of the world's poor. At 44 deaths per 1,000 live births, India's mortality rate is high. The World Bank notes a direct link between undernourishment and impaired cognitive development, so should India fail to ensure the health and well-being of its children, its future productivity and development will be severely curtailed. With a Human Development Indicators ranking of 134 out of 187 countries, India has a long way to go, and must swiftly invest in developing the potential of its enormous human capital.
Perhaps the most crucial task India faces is equipping its burgeoning youth with education and skills training. According to India’s 2011 Census, India’s literacy rate sits around 74%, with significant variation according to state and gender. In this regard, India’s 2009 Right of Children to Free and Compulsory Education Act is a big step towards guaranteeing a basic education for every child. Since its launch in 2010 India has witnessed some positive results, with 94 percent of children between the ages of 6 and 14 enrolled in school, and steady improvements in terms of facilities such as toilets and drinking water.
Nevertheless, concerns regarding the implementation of the Act persist, with teacher absenteeism and large class sizes in many government schools fuelling the popularity of private institutions. Basic educational indicators across the country have actually deteriorated since the implementation of the Act in 2001, with the proportion of children in Standard V reading at a Standard II level and unable to complete basic arithmetic rising.

How to Beat Your Competition by Innovating in Ways They Can't Copy 03-29

How to Beat Your Competition by Innovating in Ways They Can't Copy

by Kaihan Krippendorff

Urban Outfitters on Powell Street in San Francisco
Urban Outfitters on Powell Street in San Francisco (Photo credit: Wikipedia)
The national retailer Urban Outfitters has increased its revenues by 500% in the last 10 years, expanding to nearly $3 billion today from less than $500 million a decade ago. Not only does the company grow faster than its peers, it is also more profitable, averaging 21% profit margins[1] for the past five years, versus an industry average of 14%. It is tempting to credit the standard retailing virtues of good execution and a deeper understanding of the customer for this success, but the truth is far more enlightening.
Urban Outfitters keeps winning because it was built by two people who, in co-founder Dick Hayne’s words, “knew nothing about the retailing business” when they started. The naiveté of the company’s founders 40 years ago, when they were just college students, freed them to make counterintuitive decisions that traditional retailers still resist copying today.
For example, Urban Outfitters hires artists, rather than analytical business people, to manage its stores. Because it hires people with strong aesthetic sensibilities (Hayne calls them “sensory merchandisers”), the company can give them unusual freedom in how they shape the interiors of the stores. If a manager sees an old wooden crate on his way to work and thinks it would look good in the men’s section, he can bring it to work and put it on display.

By making these seemingly innocuous and naive human resource decisions, Urban Outfitters created a powerful, disruptive force. Traditional clothing retailers won’t give their managers such freedom, because they hire analytical business school students, not quirky design and art school graduates. As a result, every Urban Outfitters store looks a little different, while every competitor’s store looks the same. And this difference—that the Urban Outfitters store near New York University looks different from the one near Boston University—really matters to Urban Outfitter’s core customers, college students. Traditional retailers will resist copying this element of Urban Outfitter’s strategy, because doing so would require firing their managers and hiring new ones.
Dissect the success of any fast-growing, innovative company, and you will see the same pattern at work. Innovators make choices the competition won’t follow.
After studying about 300 such companies and interviewing many of their CEOs, I’ve come to believe that innovators who make unorthodox decisions adopt five habits. If you and I adopt these habits, we too can start outthinking our competition—every day.
Habit 1: Imagine. Leland Stanford, the founder of Stanford University, wrote that “man cannot create what he cannot imagine.” To innovate, we must begin with a compelling vision of the future that is different from what others are imagining. Urban Outfitters’ co-founders, for example, imagined a store not only serving college students but also run by college students (after all, they were college student themselves when they started).
Habit 2: Dissect. Innovators then break apart the problem and find a leverage point others don’t see. For example, most retailers hoping to create a cool, college-student-friendly environment would likely start by hiring an interior design firm. Urban Outfitters, by contrast, focused on a different point of leverage: the store manager.
Habit 3: Expand. Innovators shift their perspective on the problem many times, generating more potential strategies than their competitors. Because they choose from a longer list, they have a better chance of finding the winning move, the strategy customers will love and competitors won’t copy. I drive my clients to expand their options to at least 50 potential strategies, versus the three or four their competitors are likely considering. For example, in a recent session with a financial services company I asked, “What is uncoordinated that we can coordinate?,” and they thought about creating a network of independent advisers. I then asked “where is the next battleground?,” which led them to distribution through mobile apps and investing heavily in Africa. Some of these strategies are complimentary (mobile apps in Africa), and some force you to choose (independent advisers might view mobile apps as a threat). The key is to expand your option set by generating 10 times as many potential strategies as your peers.
Habit 4: Analyze using a disruptive mindset. Because great innovators choose from larger sets of options, they can be more selective. They can sort through the ideas they think customers will love and  choose only those that competitors won’t copy. There are innumerable ways Urban Outfitters could have customized each store, but it happened to choose the one that was too complicated for traditional retailers to copy. Competitors would need to replace all their managers.
Habit 5: Sell. Innovative ideas are always inconsistent with prevailing logic and beliefs. Therefore to innovate you must change others’ logic and beliefs. Said Nobel Peace prize winner Muhammad Yunus, the creator of microfinance, “My greatest challenge has been to change the mindsets of people.” That is why Dick Hayne and other innovators like him are always selling, to investors, employees, recruits, and customers.
Practice these habits every day. Before you make a decision, think IDEAS—Imagine, Dissect, Expand, Analyze, Sell—and you will start making more innovative choices. You start zigging where others mindlessly zag, keeping your competition off balance and building your competitive advantage at every turn.

Enthusiasm Is Not A Substitute For Competence 03-29

Enthusiasm Is Not A Substitute For Competence

How to Prepare For An Investor Meeting

In the venture financing world, there are entirely too many CEOs and entrepreneurs that still believe their enthusiasm will justify their cause. But there is a cold hard reality that any fledgling business leader needs to understand.

Enthusiasm is not a substitute for competence.

Every investor I know, myself included, would tell you that the leadership team of a company is the single most important part of a startup’s plan. As such, the quality of your leadership is going to come under enormous scrutiny during your business pitch. And investors are experts at determining character.
A majority of the questions asked by investors following your pitch are likely not aimed so much at getting accurate information out of you, so much as they are to determine if you can realistically answer the question without making up fluff.
The key to preventing your enthusiasm from appearing unfounded is by making sure your analysis is complete and well-grounded.
If you’re an entrepreneur primarily rooted in the technical side of the business, you might be asking yourself how you are going to answer the business mechanics questions with any clarity.

Realize that knowing your skill set is a part of competency.

If you are a technically skilled entrepreneur, but not terribly experienced with operations, bring someone on to your team that can more adequately cover those skills. There is a reason businesses require leadership teams, rather than rely solely on one person.
No one is expected to be able to handle every facet of a company. It’s an impossible task. Simply make sure that you have included a range of performers in your project. If you plan on acting as the CTO, you’ll particularly require people skilled in operations management, finance, sales, and marketing.
Far better than fumbling through a question about how you intend to overcome scalability issues with your business, would be simply saying that you have someone on-board who can handle those problems. And then turning the floor over to them.

Proving business competency is dependent on knowing your identity.

There are a million ways to make a million dollars. Which means there is some reason you are putting countless hours of toil into this particular venture.
Your personal motives and passions will give your company its identity. The company’s identity will set the tone for every relationship it creates and every operation it runs.
If the bottom line really is your only concern, there is a very high chance that your view of your venture’s potential is going to leave your head in the clouds and your enthusiasm at an all time high. On the other hand, if you are engineering a business that will create value, something beyond high profit margins, your passion is likely to be a bit more grounded and methodical.
To create more than profit, it’s imperative that you know what makes you a true believer in this business. What is driving your company that makes it any different from the league of competitors it already has? What value are you offering your consumers beyond the usual, “it does what it does really, really well.”
When you understand what you really believe in, you’ll understand why there is cause to be enthusiastic about your business in the first place. And if you can convey those reasons in your pitch, you might even be able to convince your investors to share in that enthusiasm.
Having the opportunity to bend an investor’s ear shows that you’ve proven that there is potential for your idea. Now is your chance to demonstrate that your team has the competency to capitalize on it.
Enthusiasm is necessary if you’re going to hold your audience’s attention long enough to make your case. But you have to know why there is any value to the project and how you are going to make it a reality if you plan on taking things further. Enthusiasm counts, just be sure it’s not the gilding to a hollow idea.
When you walk into your meeting, you will be far more likely to secure funding if you know that the sweat you put into your preparation can match the eloquence of your presentation.

5 Most Destructive Phrases in Business 03-29

5 Most Destructive Phrases in Business

oops2 24976How often have you been in a productive business meeting only to have it come to a grinding halt because of something someone said? It happens all the time. A negative comment or a pessimistic concern can not only bring down morale, it can derail an entire strategy. I am convinced that there is no limit to what a team can accomplish if they were to eliminate these five destructive phrases.

1. "I can't (fill in the blank)."

Few other words in the English lexicon irk me more than the word "can't." Okay, technically, it is two words conjugated. Nevertheless, "can't" is a killer. It is one of the most commonly used ways of dodging and dishing off responsibility. It is just another way of saying "won't," as in "I won't do what I need to do to get it done." Remember, whether you think you can or think you can''re right.

2. "That's not the way it's done."

Like every paradigm throughout history, at some point or another, things change. Conducting business status quo may keep you on the current trend, but to be a standout, you must do and think unlike anyone else. Great ideas and concepts come from disruptors who drive outside the lines, and nothing revolutionary ever came from doing things "the way they are done."

3. "That's impossible."

My dad once told me that the only thing that is impossible is for a man to have a baby. Everything else is in the realm of possibility. I replied by saying, "You can't make the sky green." He then proceeded to draw a picture and color the sky green. It was an exaggeration, but I got the point. We are limited only by the limitations we place on our own realm of possibility. And, by his rationale, even my dad was wrong. Arnold Swartzenegger had a baby.

4. "If we only had money."

Many entrepreneurs and managers, myself included, often dream and quip of the endless business possibilities we would have if only we had the flexibility of a huge financial war chest at our disposal. Unfortunately, you do not have Apple's $150M cash reserve, so get used to it. Remember, however, that even Apple started out in a garage with very little money.

5. "The problem is (fill in the blank)."

There are 7 billion people in the world. Of them, 6.999 billion of them are really, really good at identifying problems (note: that is not a scientific study). The rest are the successful business leaders who are really, really good at identifying solutions. The only time the word "problem" should come up in a meeting is if it is preceded with the words "I think I've have found a solution to the ..."
If you want to differentiate yourself as a business leader, then 86 these phrases from your vernacular. It goes beyond thinking positively, as you need to act positively as well. And, in order to encourage your colleagues to do the same, I suggest having a "Phrase Jar" at your next meeting. Punish anyone who utters one of the above phrases by requiring them to contribute one dollar to the jar. Require them to deposit two dollars for the word "can't." It is that destructive and annoying, and let's face it, it is actually two words conjugated.

Thursday, March 28, 2013

Mumbai’s Models of Service Excellence 03-29

The Globe

Mumbai’s Models of Service Excellence

Courtesy: Harvard Business Review

In July 2005, Mumbai was battered by unusually heavy monsoon rains. In just 
12 hours, more than 25 inches deluged India’s business capital. That, combined 
with record high tides, wreaked widespread havoc, bringing the city to a virtual standstill. 

As the water rose waist-high in many areas, people found themselves stranded at railway stations, in trains, and on roads and sidewalks. Among them were many of Mumbai’s dabbawalas, who deliver meals prepared in customers’ homes to their offices and then return the empty dabbas (metal lunchboxes) the same day. 

Nevertheless, on the second day of the flooding, even before the city had limped back to life, the dabbawalas were back on the job, wading through the water. They quickly became a symbol of gritty resilience.

The 5,000 or so dabbawalas in the city have an astounding service record. Every working day they transport more than 130,000 lunchboxes throughout Mumbai, the world’s fourth-most-populous city. That entails conducting upwards of 260,000 transactions in six hours each day, six days a week, 52 weeks a year (minus holidays), but mistakes are extremely rare. Amazingly, the dabbawala service is legendary. 

How can a poorly educated, decentralized workforce perform so beautifully in an environment that can charitably be described as unpredictable and challenging? 

The answers hold lessons not only for companies seeking to expand in emerging markets but also for all developed economy enterprises whose ranks are dominated by unexceptional talent. 

Even firms that can afford to hire stars typically depend on a cast of average people to support them. The dabbawalas’ success is proof that with the right system in place, ordinary workers can achieve extraordinary results. After hearing about the dabbawalas, I traveled to Mumbai to uncover what they might teach us about managing a superior Too few managers seem to recognize that they should nurture their organizations as communities—not just because they care about employees but because doing so will maximize productivity and creativity and reduce risk. 

The takeaway: Managers shouldn’t think of themselves merely as leaders or supervisors; they also need to be architects who design and fine-tune systems that enable employees to perform at optimal levels.To understand how to accomplish that, let’s explore the ways in which each of the dabbawalas’ pillars contributes to a system that is focused on achieving one simple goal: on-time delivery. a Clockwork Design

A key to the dabbawalas’ operations is the Mumbai Suburban Railway, one of the most extensive, complex, and heavily used urban commuter lines in the world. Its basic layout allows delivery people with bicycles and handcarts to travel short distances between the stations and customers’ homes and offices. by train to the station closest to its destination.

 There it is sorted again and assigned to another worker, who delivers it to the right office before lunchtime. In the afternoon the process runs in reverse, and the dabba is returned to the customer’s home. 

To perform their work most efficiently, the dabbawalas have organized themselves into roughly 200 units of about 25 people each. These small groups have local autonomy. Such a flat organizational structure is perfectly suited to providing a low-cost delivery service. (Dabbawala customers pay only about 400 or 500 rupees, or $7 to $9, a month.) There are other delivery services that charge more and cater to local groups, but as far as I know, the dabbawalas have no significant rivals at their price point and scale. Even though the service has been in business for more than a hundred years, no one has been able to replicate it. A regulatory mechanism. The railway system sets the pace and rhythm of work. 

The daily schedule determines when certain tasks need to be done and the amount of time allowed for each. For instance, workers have 40 seconds to load the crates of dabbas onto a train at major stations and just 20 seconds at interim stops.The tight schedule helps synchronize everyone and imposes discipline in an environment that might otherwise be chaotic. In addition, it provides clear feedback when performance slips. If a worker is late dropping off his dabbas at a station, his delinquency is immediately obvious to everyone, and alternative arrangements then have to be made for transporting his dabbas on another train. Problems can’t be swept under the rug and must be dealt with promptly.

Many service businesses lack a built in mechanism like a railway. But they can adopt a system that confers similar benefits. For example, many product development teams set up a schedule in which they cycle repeatedly through the design-build-test process, rather than doing each step once and waiting until late in the game to perform testing. This allows them to get quick feedback on work and find problems early. Workers have 40 seconds to load the crates of dabbas onto a train at major stations and just 20 seconds at interim stops.

With the support of Harvard Business School’s India Research Center (IRC), I reviewed the literature on the dabbawalas, interviewed workers and supervisors in their organization, and accompanied them during a typical delivery 

 I analyzed their operation and its inner workings. The dabbawalas have an overall system whose basic pillars—organization, management, process, and culture—are perfectly aligned and mutually reinforcing. In the corporate world, it’s uncommon for managers to strive for that kind of synergy. While most, if not all, pay attention to some of the pillars, only a minority address all four. Culture, for example, often gets short shrift: 

It is partly the railway system that creates demand in the first place. Crowded 
trains make carrying dabbas difficult, and office workers don’t regularly eat out—because of the expense, a preference for home-cooked food, and the poor quality of the few office cafeterias that exist. So office employees have their lunches prepared at home and delivered by the dabbawalas after the morning rush hour.On any given day, a dabba changes hands several times. In the morning a worker picks it up from the customer’s  home and takes it (along with other dabbas) to the nearest train station, where it is sorted and put onto a wooden crate according to its destination. 

The dabbawalas essentially manage themselves with respect to hiring, logistics, customer acquisition and retention, and conflict resolution. This helps them operate efficiently and keep costs low and the quality of service high. 

All workers contribute to a charitable trust that provides insurance and occasional financial aid—for example, when a worker needs to replace a bicycle that’s been stolen or is broken beyond repair. 

Each dabbawala is an entrepreneur who is responsible for negotiating prices with his own customers. However, governing committees set guidelines for prices, which take into account factors such as the distance between a customer’s residence and office and the distance between that office and the closest railway station. 

Because dabbawalas own their relationships with customers and tend to work in the same location for years, those relationships are generally long-term, trusting ones. The dabbawalas within a group don’t have a monopoly over any particular area; they’re encouraged to seek out new customers, even in a building that is served by a colleague. 

However, once the relationship is established, no other dabbawala is permitted to go after the same customer and “steal” him. 

The dabbawalas take advantage of their more-relaxed afternoon schedule to interact with customers to share information about upcoming changes, collect monthly fees, and discuss any issues. When someone wants to join a local dabbawala group, the group will assess whether there’s enough demand to add another person. New hires are trained on the job by the group. They learn to assist in all activities. After a probation period of six months, they can buy into the business with a sum equal to 10 times their expected monthly income. So, for example, if a new hire expects to make 7,000 rupees (about $126) a month at a particular unit, then he would need 70,000 rupees to become an equity partner who would share in the profits. 

Workers with more than 10 years of experience serve as supervisors, or muqaddams. Every group has one or more muqaddams, who supervise the coding, sorting, and loading and unloading of dabbas and are responsible for resolving disputes, overseeing collections, and troubleshooting. They also pick up and deliver dabbas themselves. Members elect representatives from among the muqaddams to serve on two managing committees that meet monthly to tackle operational and organizational issues as well as problems that cannot be resolved at the local level.


Simplicity, Flexibility, and rigor For the dabbawalas, having the right process in place means more than simply implementing efficient work flows. It also entails just about everything in the organization, including the way information is managed, the use of built-in buffers, and a strict adherence to standards.Simple codes. To convey information, the dabbawalas rely on a system of very basic symbols. 

The lid of a dabba has three key markings on it. (See the exhibit “Cracking 
the Dabba Code.”) The first is a large, bold number in the center, which indicates the neighborhood where the dabba must be delivered. The second is a group of characters on the edge of the lid: a number for the dabbawala who will make the delivery, an alphabetical code (two or three letters) for the office building, and a number indicating the floor. The third—a combination of color and shape, and in some instances, a motif—indicates the station of origin. Customers supply small bags for carrying their dabbas, and the variation in the bags’ shapes and colors helps workers remember which dabba belongs to which customer. The coding system contains just enough information for people to know where to deliver the dabbas, but it doesn't allow for full addresses. 

The dabbawalas, who run the same route for years, don’t need all those details, and inserting them would clutter the lid, slow the sorting process, and possibly lead to errors. This insight is applicable in many other contexts. People operate in a visual world. Whether you run an airline, hotels, or a university, how and what information is conveyed can make a huge difference. 

Less is often more because it can reduce confusion. Recognizing this, Delta Air Lines recently redesigned its boarding passes to make them less cluttered and to highlight key information such as the destination city. The simple coding system is crucial given the extremely tight tolerances of airline operations. Buffer capacity. 

Even with an efficient.coding system, workers still have a tiny margin of error for certain tasks. The allotted time for picking up a dabba at a house, for example, might be only 30 to 60 seconds, and any number of small delays could easily have a cascading effect that slowed thousands of deliveries. So, to stay on schedule, each group has two or three extra workers who fill in wherever they are needed, and all members are cross-trained in different activities: collecting, sorting, transporting, finance, and customer relations.

At Toyota, the group and team leaders are also reserve workers, ready to fill in quickly for any task or function. They need just enough extra capacity to handle cracking the dabba code SOuRce comPAny intervieWscode of the dabbawala at the destination station who will make the deliverycode for the destination: sant buildingFirst floor the name of the customer may also be included here if multiple deliveries go to the same floor)1 1 SN 1 number for the district the dabba is going to: ballard estate mark showing the originating station: Kurla simple symbols tell the dabbawalas where each lunchbox needs to go.problems and emergencies but not so much that it bogs down the operation and becomes wasteful overhead.Rigorous adherence to processes and standards. This minimizes variations that might throw a wrench into the works. 

The dabbas, for instance, are all roughly the same size and cylindrical shape. To encourage customers to conform, containers incur an additional fee when, say, they are so large that they require special handling. Unusual containers that interfere with the delivery operation are simply not accepted. 

This uniformity allows the dabbas to be packed quickly onto crates, which are also a standard size so that they can be efficiently loaded onto trains. The dabbawalas strictly observe certain rules. For instance, they don’t eat until they have completed all their deliveries. 

Workers are fined or fired for repeated mistakes and negligence. Customers are also expected to abide by the process. Those who are repeatedly late in having their dabbas ready for pickup and don’t respond to warnings are dropped. The system empowers front line workers to take action—just as Toyota does in its manufacturing plants, where workers who spot problems can pull an “and on cord” to halt a production line so that they can be addressed immediately. 

Of course, no process is bulletproof. Dealing with customers who are a few minutes late preparing their dabbas is one thing; handling a citywide disruption like a major traffic jam or a torrential monsoon is an entirely different matter. 


I offer the dabbawala system as another case in point.Emotional bonds and a shared identity. Dabbawalas, who range in age from 18 to 65, tend to remain in their groups for their entire working lives. (There is no mandatory retirement age.) 

As a result members of each team care deeply for one another. In one group that I observed, an elderly worker who was no longer able to carry large loads of dabbas helped in other ways and was paid the same salary as everybody else. 

New workers are typically friends or relatives of existing members, and though Mumbai is a melting pot of religions, ethnicities, and dialects, most dabbawalas have the same culture, language, values, work ethic, diet, and religious beliefs. Many come from the region around the city of Pune and can trace their roots back to warriors who fought in the 17th century for Chhatrapati Shivaji, the founder of the Maratha Empire in western India. While on the job, the dabbawalas wear the same style of clothes and white Gandhi caps, making them easy to identify. They 
are largely uneducated: Only 15% have attended junior high school. 

A handful are women, who typically perform administrative functions or special services (such as pickup or delivery at irregular times) that command a higher fee.Undoubtedly, their strong ties contribute to the dabbawalas’ extraordinary track record. 

The dabbawalas have shown that with the right system, an organization doesn’t need extraordinary talent to achieve extraordinary performance. Leaders who see themselves as system architects can obtain the same results. 

But getting organization, management, process, and culture aligned and self-reinforcing is one thing; maintaining that harmony is another. Dell, in its heyday, had an exceptionally well-tuned operational model, but then the market changed, and the company has yet to fully recover. 

The dabbawalas, too, are facing challenges as their market undergoes a transformation. But with judicious adjustments to their four pillars, they may continue to achieve amazing results. And that’s a lesson managers of all enterprises should take to heart.

The dabbawalas’ homogeneity also plays a part. In an era when many companies strive for diversity in their workforce, its downside—less alignment—often is ignored. 

There are advantages to uniformity: 

It creates a strong identity and sets boundaries that are necessary in a highly variable environment. That said, the rules cannot be so rigid that they don’t allow for flexible responses to problems that occur every day. It is all about balance.

A simple mission. Of course, corporations typically have much more heterogeneous work forces. But they can learn from the dabbawalas’ devotion to their simple mission: Delivering food on time, every time. For the dabbawalas, that task is akin to delivering medicine to the sick, and serving food is like serving God. That explains their extreme dedication to their jobs during the floods of July 2005. 

In addition to unifying the workforce, a straightforward mission can be connected to concrete goals that workers can be measured against on a daily basis, making it much more powerful than abstract, lofty objectives like “spread excellence everywhere” and “always delight the customer.” a Self-reinforcing SystemThe individual pillars help explain certain aspects of the success of the dabbawalas. But to truly understand how they do what they do, you must look at the whole and consider the ways in which the pillars reinforce one another. 

Take the coding system. It is simple and visual, which allows a semi literate workforce to sort dabbas quickly. That allows the use of a hub-andspoke organization in which railway stations serve as hubs and the need for centralized management is minimal. This is an important lesson for executives who mistakenly think they can alter just one pillar without taking into account the impact on the other three. 

Consider what happened when companies like Microsoft and Hindustan Unilever were interested in having advertising materials and product samples delivered along with the dabbas. After conducting trial experiments, the dabbawalas found that the extra time required to affix flyers or samples to the dabbas was too big a disruption to their system, and the projects were tabled. 

Over the years, the dabbawalas have received plenty of recommendations for increasing their revenues or improving their operations. But the suggestions are usually rejected after careful scrutiny reveals their impact. “Some business school students suggested we use motorcycles instead of bicycles,” recalls Raghunath Medge, the head of a dabbawala governing committee. 

“But then our people would have to learn how to use them, get driver’s licenses, deal with the Regional Transport Office [the department of motor vehicles], and costs would increase for the customer.”

 That’s not to say that the dabbawalas oppose change. They acknowledge they must adapt to major trends sweeping India, such as the exploding numbers of women entering the workforce. This shift will put a big crimp in their operations because in India preparing lunches and packing them in dabbas has traditionally been a woman’s domain. 

Consequently, the dabbawalas have started to collaborate with small companies and canteens that provide freshly prepared meals. At the same time, they have rebuffed any proposals for backward integration—for example, setting up their own kitchens. The reason is simple: They won’t allow themselves to be distracted from their core mission of delivering dabbas on time. 

Successful companies that have a strong central mission but find themselves in a changing environment should take a similar path: They should articulate what their core is, constantly experiment around it, and explore new opportunities but be careful not to deviate too far. 

Courtesy Harvard Business Review

Using the Crowd as an Innovation Partner 03-29

Using the Crowd as an Innovation Partner

by Kevin J. Boudreau and Karim R. Lakhani

Courtesy HBR

Photography: Michele Sereni
Artwork: Jacob Hashimoto, The Other Sun, 2012, acrylic, paper, thread, bamboo, Ronchini Gallery, London
To answer the most vexing innovation and research questions, crowds are becoming the partner of choice. Apple has turned to large numbers of users and developers distributed around the world to propel its growth by creating apps and podcasts that enhance its products. Biologists at the University of Washington used crowds of external contributors to map the structure of an AIDS-related virus that had stumped academic and industry experts for more than 15 years. Despite a growing list of success stories, only a few companies use crowds effectively—or much at all.
Managers remain understandably cautious. Pushing problems out to a vast group of strangers seems risky and even unnatural, particularly to organizations built on internal innovation. How, for example, can a company protect its intellectual property? Isn’t integrating a crowdsourced solution into corporate operations an administrative nightmare? What about the costs? And how can you be sure you’ll get an appropriate solution?
These concerns are all reasonable, but excluding crowdsourcing from the corporate innovation tool kit means losing an opportunity. The main reason companies resist crowds is that managers don’t clearly understand what kinds of problems a crowd really can handle better and how to manage the process. Over the past decade we’ve studied dozens of company interactions with crowds on innovation projects, in areas as diverse as genomics, engineering, operations research, predictive analytics, enterprise software development, video games, mobile apps, and marketing. On the basis of that work, the supporting body of economic theory, and rigorous empirical testing, we’ve identified when crowds tend to outperform the internal organization and, equally important, when they don’t. In this article we offer guidance on choosing the best form of crowdsourcing for a given situation. We also review how technology is helping managers address these concerns. Crowds are moving into the mainstream; even if you don’t take advantage of them, your competitors surely will.
Beyond “Make or Buy”

Let’s start by noting the fundamental differences between crowd-powered problem solving and traditional organizational models. Companies are relatively well-coordinated environments for amassing and marshaling specialized knowledge to address problems and innovation opportunities. In contrast, a well-functioning crowd is loose and decentralized. It exposes a problem to widely diverse individuals with varied skills, experience, and perspectives. And it can operate at a scale that exceeds even that of the biggest and most complex global corporation, bringing in many more individuals to focus on a given challenge.
In certain situations, that means we can solve problems more efficiently. For example, we worked with the Harvard Clinical and Translational Science Center (known as Harvard Catalyst) to design a contest to solve a tough computational biology problem that had immediate research and commercial implications. To provide a platform for the contest, we enlisted TopCoder, a company that administers computer programming competitions. The two-week contest attracted viable solutions from 122 solvers—a staggering number. Many of the solutions surpassed the quality of those developed over the years by the school’s own scientists and by experts at the National Institutes of Health.
In addition to benefits of scale and diversity, crowds offer incentives that companies find difficult to match. Companies operate on traditional incentives—namely, salary and bonuses—and employees are assigned clearly delineated roles and specific responsibilities, which discourages them from seeking challenges outside their purview. But crowds, research shows, are energized by intrinsic motivations—such as the desire to learn—that are more likely to come into play when people decide for themselves what problems to attack. (Can you imagine any company paying a salary to an employee who’s just floating around looking for a problem to solve?) The opportunity to burnish one’s reputation among a large community of peers is another strong motivator (as is money, to be sure). Also, crowds are often more cost-effective per output or per worker than traditional company solutions.
So although internal, crowdlike approaches to creativity and idea generation, such as “jams,” “idea marketplaces,” and “personal entrepreneurial projects,” may increase the scope for exploration and flexibility inside companies, they are qualitatively different from and fall short of the full capability of external crowds. At the same time, it should be said that the benefits of the crowd do nothing on their own to offset the management worries mentioned above. We will describe the safeguards and other mechanisms that address those worries.
Crowdsourcing as a way to deal with innovation problems has existed in one form or another for centuries. Communities of innovators have helped kick-start entire industries, including aviation and personal computing. The difference today lies in technology. Over the past decade tools for development, design, and collaboration have been radically transformed; they’re getting more powerful and easier to use all the time, even as their prices plummet. At least as important, online crowdsourcing platforms have become much more sophisticated, making it ever simpler to manage, support, and mediate among distributed workers. Companies can reinvigorate (with incentive systems, for example) and redeploy crowds across a continual stream of problems. In essence, the crowd has become a fixed institution available on demand.
Having determined that you face a challenge your company cannot or should not solve on its own, you must figure out how to actually work with the crowd. At first glance, the landscape of possibilities may seem bewildering. But at a high level, crowdsourcing generally takes one of four distinct forms—contest, collaborative community, complementor, or labor market—each best suited to a specific kind of challenge. Let’s examine each one.
Crowd Contests

The most straightforward way to engage a crowd is to create a contest. The sponsor (the company) identifies a specific problem, offers a cash prize, and broadcasts an invitation to submit solutions. Contests have cracked some of the toughest scientific and technological challenges in history, including the search for a way to determine longitude at sea. The Longitude Prize was established by an act of Britain’s Parliament in 1714 after a host of brilliant scientists, including Giovanni Domenico Cassini, Christiaan Huygens, Edmond Halley, and Isaac Newton, had tried and failed to come up with an answer. The winning solution, one of more than 100 submissions, was a highly accurate chronometer that enabled the exact triangulation of location. It came from John Harrison, a carpenter and clockmaker from the English countryside, who was eventually awarded about £15,000.
Contests work well when it’s not obvious what combination of skills or even which technical approach will lead to the best solution for a problem. Running a contest is akin to running a series of independent experiments in which, ideally, we can see some variation in outcomes. Therefore, of the four forms of crowdsourcing, contests are most useful for problems that would benefit from experimentation and multiple solutions. Today online platforms such as TopCoder, Kaggle, and InnoCentive provide crowd-contest services. They source and retain members, enable payment, and protect, clear, and transfer intellectual property worldwide.
Although a company might in the end use only one of the solutions it receives, the assessment of many submissions can provide insight into where the “technical frontier” lies, especially if the solutions cluster at some extreme. (In contrast, internal R&D may generate far less information—and a lingering question about whether an even better solution might still be found.)
We have learned that contests are most effective when the problem is complex or novel or has no established best-practice approaches. This is especially true when you don’t know in advance what a good solution will look like. Just last fall the pharmaceutical company Merck worked with Kaggle, a predictive analytics crowdsourcing site, to streamline its drug discovery process. The standard practice for identifying chemicals that might be effective in targeting particular diseases involves testing hundreds of thousands of compounds, and there is no cost-effective way to test all of them against all potential disease mechanisms. So Merck set up an eight-week, $40,000 contest in which it released data on chemical compounds it had previously tested and challenged participants to identify which held the most promise for future testing. The contest attracted 238 teams that submitted well over 2,500 proposals. The winning solution came from computer scientists (not professionals in the life sciences) employing machine-learning approaches previously unknown to Merck. The results were spectacular enough to merit a front-page story in the New York Times, and the company is now implementing the solutions.
Contests are also useful for solving design problems, in which creativity and subjectivity influence the evaluation of solutions. Tongal, a crowd-powered advertising agency, routinely solicits submissions for campaigns for consumer products firms. In the summer of 2012 Colgate-Palmolive worked with the Tongal community on a two-month, $17,000 challenge to develop ads for Speed Stick’s “Handle It” campaign, and selected one of the resulting submissions for its $4 million Super Bowl buy. In the Kellogg School of Management’s ninth annual Super Bowl advertising review, the Tongal ad ranked 12 out of 36—outperforming ads by Calvin Klein, Volkswagen, Coke, Toyota, and Pepsi.
Tongal is just one of a number of contest platforms available to companies facing design challenges. HYVE has worked extensively with firms as diverse as Intel and Procter & Gamble to deploy crowds in the thousands to invent uses for both new and existing products and technologies. Other firms in this space include Quirky (new product and service concepts) and crowdSPRING, DesignCrowd, and 99designs (logos and graphic design).
There are, of course, management challenges in running a crowdsourcing contest. First is identifying a problem important enough to warrant dedicated experimentation. The problem must then be “extracted” from the organization—translated or generalized in order to be immediately understandable to large numbers of outside solvers. It must also be “abstracted” to avoid revealing company-specific details. That may involve breaking it down into multiple subproblems and contests. And finally, the contest must be structured to yield solutions the organization can feasibly implement.
A contest should be promoted in such a way—with prizes and opportunities to increase stature among one’s peers—that it appeals to sufficiently skilled participants and receives adequate attention from the crowd. The sponsor must devise and commit to a scoring system at the outset. In addition, explicit contractual terms and technical specifications (involving platform design) must be created to ensure the proper treatment of intellectual property.
Crowd Collaborative Communities
In June of 1998 IBM shocked the global software industry by announcing that it intended to abandon its internal development efforts on web server infrastructure and instead join forces with Apache, a nascent online community of webmasters and technologists. The Apache community was aggregating diverse inputs from its global membership to rapidly deliver a full-featured—and free—product that far outperformed any commercial offering. Two years later IBM announced a three-year, $1 billion initiative to support the Linux open-source operating system and put more than 700 engineers to work with hundreds of open-source communities to jointly create a range of software products.
In teaming up with a collaborative community, IBM recognized a twofold advantage: The Apache community was made up of customers who knew the software’s deficits and who had the skills to fix them. With so many collaborators at work, each individual was free to attack his or her particular problem with the software and not worry about the rest of the components. As individuals solved their problems, their solutions were integrated into the steadily improving software. IBM reasoned that the crowd was beating it at the software game, so it would do better to join forces and reap profits through complementary assets such as hardware and services.
Like contests, collaborative communities have a long and rich history. They were critical to the development of Bessemer steel, blast furnaces, Cornish pumping engines, and large-scale silk production. But whereas contests separate contributions and maximize diverse experiments, communities are organized to marshal the outputs of multiple contributors and aggregate them into a coherent and value-creating whole—much as traditional companies do. And like companies, communities must first assess what should be included in the final aggregation and then accomplish that through a combination of technology and process.
The strength of the community is its diversity, but it lacks cohesiveness. Companies create cohesion with structures and systems (such as incentives) that align values. They hire employees for “fit” and colocate them so that they can interact directly, become socialized, and share a culture. Moreover, employees gain specific experience and knowledge in the narrow fields where the company focuses. A crowd, in contrast, may draw participants from around the globe—from varying companies, domains, and industries—who have their own interests and motivations. That makes crowds harder to control.
Consider Wikipedia. In less than a decade the internet-based encyclopedia has disrupted the reference world and demonstrated the value of large-scale, highly diverse collaboration within a new organizational model. Wikipedia uses an automated process to coordinate and aggregate the crowd’s edits and keep track of all changes. The size of the Wikipedia crowd, with multiple people typically examining any given article, ensures a thorough monitoring of content quality.
Wikipedia shows that collaborative communities are most effective when they tackle projects whose orchestration is relatively simple. Crowd collaboration relies on extensive task modularization, standardized routines, and technology to facilitate coordination. Norms, knowledge sharing, teams, and leadership emerge to deal with what little decision making and coordination are required, but these structures are much looser than the ones found in most companies.
Organizations can assemble their own communities, but doing so may be difficult and time-consuming, especially when resources must be dedicated to curating the platforms. Most corporate crowd initiatives involve only modest amounts of coordination—for example, FAQ pages to which customers can contribute. Some companies, particularly technology and electronics firms, take this a step further by building systems that allow customers to support one another as well as seek answers from the company itself. Verizon, the U.S. telecommunications company, relies on its community of users to help address one another’s technical questions. Facebook relied on its vast user community to translate its website and services into multiple languages. Lego, the Danish toy company, now works with its community of fans to come up with new designs and products. And IDEO, the design and innovation firm, has developed the OpenIDEO platform to create a global community of design professionals interested in solving tough social problems in areas as diverse as human rights, urbanization, maternal health, and water sanitation.
But collaborative communities work best when participants can accumulate and recombine ideas, sharing information freely. So protecting intellectual property is next to impossible. Companies should maintain a strict division between proprietary assets and community assets and attempt to derive profits from complementary businesses. Google makes its Android operating system for mobile devices free and open; its profits come from the monetization of mobile search, the algorithms for which are proprietary.
Crowd Complementors

The third type of crowd-powered innovation enables a market for goods or services to be built on your core product or technology, effectively transforming that product into a platform that generates complementary innovations. Consider iTunes, organized around Apple’s core mobile products—the iPod, the iPhone, and the iPad. Through iTunes, vast pools of geographically distributed developers create a staggering array of complementary innovations such as software apps and user-generated podcasts.
Unlike contests or communities, complementors provide solutions to many different problems rather than just one. The opportunity lies in the sheer volume of solutions. Platforms like iTunes allow the core business to collect licensing or transaction revenues from complementors, who sell their products to customers of the core product (such as iPhone owners). The variety of complementary goods does more than generate revenue. It can expand demand for the product itself, by making it more useful. Increased demand, in turn, can prompt an increase in the supply of complementary innovations, and pretty soon you have a nice set of network effects.
To be sure, crowds aren’t always the best way to create complementary products. They make sense only when a great number and variety of complements is important. Otherwise, a few partners or even an internal organization will better serve the goal. Clearly, we don’t need thousands upon thousands of tennis ball developers.
When deployed in the right context, crowd complementors can yield powerful competitive advantages. They account for Apple’s ability to muscle in on both the audio market, edging out such well-regarded manufacturers as Bang & Olufsen and Bose, and the smartphone market, edging out Research In Motion (BlackBerry), Nokia, and Sony. Ford Motor Company is following suit, with plans to convert its vehicle electronics, entertainment, and hardware systems into an open platform that will enable outside developers to innovate. Ford’s rationale is that their innovations will create more demand and value for its products and allow it to compete with Google and Facebook, which are themselves competing in automotive-related services such as mapping, traffic notification, geopositioning, and social information.
The first challenge to using the crowd as a complementor is providing access to the functions and information in the core product. That is accomplished through technological interfaces or hooks that enable external developers to create complementary innovations in a frictionless way. This may be relatively easy when the core product is simple, such as a data feed from a website. More challenging are cases in which complementors have to dial into core product functions and build on them. Third-party developers, for instance, must use application programming interfaces (APIs) to access a software vendor’s capabilities in order to develop complementary applications. For example, Canada’s Yellow Pages Group worked with Mashery, a third-party provider, to create an API that makes its geolocalized business listings and associated content available to app developers.
There are also advantages to assembling complementor crowds that are specific to a company’s own platform. Think of the enormous ecosystems around Microsoft, Facebook, and Apple, each of which operates on a model that stimulates adoption on both the complementor and customer sides to kick-start positive interactions and initiate growth. (How to get this started is a classic chicken-and-egg problem that has received much research attention in the past 20 years and goes beyond the scope of this article.) The strategies of those companies require considerable industry experience and support and depend on the particulars of the situation. They involve the design of the core product, setting prices for different sides of the platform, setting expectations, and creating a wider set of inducements, among other issues.
If you are exposing your technology and assets to outsiders, you must make sure they’re protected. Unlike contests, which can carefully control the exposure of assets to elicit a single, narrow solution, complementor platforms must give outsiders more-flexible access to develop a wide range of solutions. Some form of developer’s agreement or contract is now accepted industry practice.
Crowd Labor Markets
Whereas contests offer crowds rewards for coming up with solutions to specific problems, labor markets match buyers and sellers of services and employ conventional contracting for services rendered. These are not platforms that a company would want to build itself but, rather, third-party intermediaries such as Elance, oDesk, Guru, Clickworker, ShortTask, Samasource, Freelancer, and CloudCrowd. Rather than matching workers to jobs within companies for long-term employment (as more traditional labor market intermediaries do), these highly flexible platforms serve as spot markets, matching skills to tasks. They often perform on-demand matching to give immediate support at an unprecedented scale. For example, the California-based oDesk boasts 2.5 million workers and more than 495,000 registered clients; it monitors its own performance not in terms of placements but in terms of hours worked.
Critical to the success of these flexible spot markets is the growing sophistication of their technology infrastructure and platform design, which allow transactions to be effectively governed. The supporting platforms provide reputation and skills evaluations, bidding systems, procedures for recourse, monitoring technologies, and escrow services that keep payments in a third-party account to minimize conflict between buyers and sellers. This arrangement means that labor contracts can function outside the context of long-term employment relationships, radically reducing start-up and transaction costs. In this sense, the model, along with collaborative communities, comes closest to overlapping with (if not necessarily substituting for) a traditional company organization.
Spot labor markets work when you know what kind of solution you are looking for and what an appropriate solver looks like. Because spot labor markets must identify qualified workers before the fact and collect meaningful performance data, they organize projects and participants in familiar categories such as web development, software development, design and multimedia, sales and marketing, and customer service. Such standardization makes it easier to evaluate workers’ skills and productivity, make good matches, and set expectations on all sides. The platforms themselves go even further to help ensure high-quality matches by measuring the skills and capabilities of workers and needs of employers, collecting abundant data on performance and feedback, and then allowing these data to be used in future matches. The data can be translated into algorithm-based analytic support of pinpoint matching for future jobs, going beyond the usual search functions of traditional employment sites like (Try doing that with employees buried inside organizations, who are largely unobserved and unmeasured.)
Labor markets’ low transaction costs allow for extremely “bite-size” outsourcing. For example, services may cost literally pennies per task—as on the crowdsourcing marketplace Amazon Mechanical Turk. Particularly suited to labor markets are repetitive tasks that require human intelligence but for which it would be difficult and expensive to hire full-time employees—for example, simple data entry, annotating photographs, or cleaning data sets. It is now even economical to perform large-scale “human computation”—essentially outsourcing tasks that a person can perform better than a computer can, such as identifying people in photographs. Instead of relying on machine-based algorithms, Twitter uses the spot labor market on Amazon Mechanical Turk to respond to user search queries for trending topics. National Geographic recently deployed a crowd of about 28,000 to sift through satellite imagery of Mongolia in search of Genghis Khan’s tomb.
Spot labor markets should be less a radical departure from than an extension of current hiring and outsourcing practices. Like outsourcing, they give companies flexibility and access to a greater variety and depth of skills. They do a better job of matching talent to tasks than was ever before possible.
The management challenges in exploiting spot labor markets are minor compared with those in other forms of crowdsourcing. The biggest concern may be identifying which tasks to farm out and who within your organization should manage them. A few personal assistants within a company, for example, might match the productivity of many more if they were invited to manage a crowd pool of support.
Ideally, our mode of organization will always produce high motivation, achieve seamless coordination, and harness world-class knowledge. But any approach to organizing comes with challenges. This is true of both companies and crowds; each has strengths and weaknesses and comes with trade-offs. In the end, though, crowds expand the capabilities of companies; they should be viewed as another tool for organizational problem solving.
The technology that has turbocharged crowdsourcing’s potency and application is still relatively new, so it is too early to fully understand the depth and reach of crowds across the economy. Nonetheless, recent experience and mounting research suggest that we may just now be seeing the outlines of a genuine expansion in capabilities—one with important implications for solving the most enigmatic problems, which might go unsolved if kept inside companies, and for taking care of a number of more-categorizable tasks. The management challenges, while real, are hardly crippling. But they demand that we put as much energy and intelligence into designing systems for organizing work outside company walls as we do for work within them.