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Tuesday, May 31, 2016

Indian PSUs, still far from a digital deluge in Technology. 06-01

Indian PSUs, still far from a digital deluge in Technology

Public sector undertakings (PSUs) are the nation builders of India. Over the past couple of decades, they’ve catapulted the country onto the world stage in sectors from energy and finance to agriculture and transportation. Now they face a new challenge: digital, a force that’s impacting PSUs from the corner office to the factory floor. New digitally savvy rivals are gaining on traditional turf. The question becomes: Are PSUs ready to build the workforce of the future?

Maharatna. Navratna. Miniratna. The jewels of India’s public sector undertakings continue to shape the competitive landscape of India, contributing an impressive 25 percent of the overall gross domestic product.1 They represent some of the most trusted brands for consumers, and coveted employers for workers. Like other leading companies around the world, PSUs are investing in technology. Particularly digital innovation that will put them ahead of competitors, making them more agile and competitive.

But to date, one critical element of PSUs’ digital strategy has been overlooked: the workforce. It’s as if the prevailing thought is, “We’ll invest in the technology and our people will be digital by default.” But gaining the agility required to compete in the age of disruption goes beyond systems. It requires a deep shift for PSUs: in leadership, recruitment and organization. The current PSU culture is not well suited to such sweeping changes. Accenture Strategy research has identified the top ten attributes that correlate to successful culture change.

PSUs are on par with non-PSUs in only half of those attributes.2 PSUs rank in the bottom quartile for the remaining attributes, including talent management, adaptability and confronting conflict. In addition, current PSU employees are more skeptical about their organization’s readiness to leverage digital advances. Fewer than half (47 percent) of PSU employees, versus 56 percent of non-PSU employees, expect to derive productivity improvements or drive innovation from digital transformation.3 It’s a challenging starting point, but the direction is clear. PSUs in India need to embrace digital or witness their long-held national dominance quickly evaporate.

Accenture Strategy research has identified the top ten attributes that correlate to successful culture change. PSUs are on par with non-PSUs in only half of those attributes.

Digital has upended many traditional business models, philosophies and processes. One of those concerns the idea that leadership is practiced only at the top levels of the organization, by leaders who advanced through the ranks of an organization based largely on seniority. It was a system that worked well in an environment that was much less volatile and more predictable. Where skills like organization and delegation were paramount. While those skills are still important, there are other, more critical ones in the digital age.

 Leaders today need to thrive at building crossorganization and industry connections that lead to new sources of innovation. They need to influence all levels of the organization but without the authoritarian approach that marks traditional management. They also need to grasp new technologies and their impact on growth and gain the ability to experiment quickly and move on if the desired results aren’t achieved. PSUs need to open their organizations to feedback and ideas that lead to innovation. And flatten hierarchies, cutting out the layers and processes that impede agility. An influx of young talent signals a truth about PSUs in the digital age: old school leaders cannot lead digital transformation alone. They need to build mentors throughout the organization. And push out decision making to the edges by developing a pool of leaders with high digital quotient. Leading at the edge

The requirements of digital—to tap sources of innovation across functional boundaries and industries—means a change in the way PSUs are managed. Digital is horizontal. Traditional is vertical. While PSUs have invested in new systems and hardware to connect their operations, they have overlooked a critical element: the workforce. 73 percent of PSU employees recognize that digital will seriously transform the nature of their work over the next three years.4 They won’t be “digital by default.” Employers must rise to the challenge and change their current talent pools. Retraining them to handle new challenges and attracting a much more diverse new team. Let’s take energy as an example, an industry that is increasingly deregulated and privatized. As the industry shifts to a profit-driven business model, companies will need to recruit new skills like analytics, and sophisticated customer relationship capabilities. This will require expanding beyond the usual degrees in fields like IT and engineering, to backgrounds in statistics and internet marketing. In some instances, PSUs may want to tap into non-traditional sources of specialized skills such as on-line talent exchanges, or third-party partnerships.

Your workforce is not “digital by default”

73 percent of PSU employees recognize that digital will seriously transform the nature of their work over the next three years.

4 | Indian PSUs

To keep the sparkle in Maharatna, Navratna and Miniratna there are three things PSUs can do now to lead in digital: Define a disruptive business model Because of their traditional reach, and long-established marketplace presence, it used to be that no other rival could match the strength of a PSU. But digital allows startups to forgo brick and mortar infrastructure and rapidly achieve new levels of scale unheard of even a handful of years ago. Consider the Bank of India and ICICI Bank. In under two decades time, ICICI Bank has catapulted from startup status to competing neckand-neck with the PSU.5 How? By early on developing an aggressive online strategy that includes virtual banking and next generation mobile banking apps, among other digital moves. The message: it’s time for PSUs to get serious about digital investment. They need to take an ‘equity investor’ approach and incubate digital plays. That requires redesigning the organization for speed to leap ahead of competition instead of treating digital as adjunct to their current strategies. Leaders should learn from juniors With the long tradition of command-and-control leadership style, this flies in the face of management wisdom for most PSUs. But to survive in a digital world, senior leadership needs to turn to younger counterparts to gain a digital edge. This requires “reverse mentoring” where senior leaders learn from their younger counterparts. This learning goes beyond the basic skills like using apps and internet devices to learning about the internet of things, leveraging social networks for employee / customer engagement, and seeing opportunities where earlier none were apparent. PSUs are taking heed: in the general insurance sector, a raft of young officers were fast-tracked to the position of general manager in companies including National Insurance, New India Assurance and United India, among others. As a result, PSUs are starting to infuse new blood into their highest echelons.6 It’s a shot across the bows to PSUs that aren’t moving far, or fast enough.


Rewrite the value proposition to create competitive advantage To attract and retain the kind of talent digital requires, PSUs need to craft value propositions that include benefits to society as well as opportunities for personal growth. Previous generations of Indians were focused on climbing the socioeconomic ladder of success. Now that many have “arrived,” the focus of newer generations is giving back. PSUs, by the nature of their services, are about contributing to the good of the country. Companies need only to underscore that in their value propositions to attract new pools of talent looking for reward through social contribution. PSUs also need to emulate the offerings of their non-PSU competitors. Consider National Thermal Power Corporation.7 This PSU launched an innovative plan to attract and retain young talent at their often remote locations. They developed the concept of “PUPS,” which stands for providing urban facilities at projects. Included in the new facilities are cafes, libraries, Wi-Fi hotspots and other trappings of city living.

Brilliance of the jewels

Thanks to Accenture for the content.

Monday, May 30, 2016

The Psychological Quirk That Explains Why You Love Donald Trump

The popularity of the GOP front-runner can be explained by the Dunning-Kruger Effect.

Many commentators have argued that Donald Trump’s dominance in the GOP presidential race can be largely explained by ignorance; his candidacy, after all, is most popular among Republican voters without college degrees. Their expertise about current affairs is too fractured and full of holes to spot that only 9 percent of Trump’s statements are “true” or “mostly” true, according to PolitiFact, whereas 57 percent are “false” or “mostly false”—the remainder being “pants on fire” untruths. Trump himself has memorably declared: “I love the poorly educated.”

But as a psychologist who has studied human behavior—including voter behavior—for decades, I think there is something deeper going on. The problem isn’t that voters are too uninformed. It is that they don’t know just how uninformed they are.

Psychological research suggests that people, in general, suffer from what has become known as the Dunning-Kruger Effect. They have little insight about the cracks and holes in their expertise. In studies in my research lab, people with severe gaps in knowledge and expertise typically fail to recognize how little they know and how badly they perform. To sum it up, the knowledge and intelligence that are required to be good at a task are often the same qualities needed to recognize that one is not good at that task—and if one lacks such knowledge and intelligence, one remains ignorant that one is not good at that task. This includes political judgment.

We have found this pattern in logical reasoning, grammar, emotional intelligence, financial literacy, numeracy, firearm care and safety, debate skill, and college coursework. Others have found a similar lack of insight among poor chess players, unskilled medical lab technicians, medical students unsuccessfully completing an obstetrics/gynecology rotation, and people failing a test on performing CPR.

This syndrome may well be the key to the Trump voter—and perhaps even to the man himself. Trump has served up numerous illustrative examples of the effect as he continues his confident audition to be leader of the free world even as he seems to lack crucial information about the job. In a December debate he appeared ignorant of what the nuclear triad is. Elsewhere, he has mused that Japan and South Korea should develop their own nuclear weapons—casually reversing decades of U.S. foreign policy.

Many commentators have pointed to these confident missteps as products of Trump’s alleged narcissism and egotism. My take would be that it's the other way around. Not seeing the mistakes for what they are allows any potential narcissism and egotism to expand unchecked.

In voters, lack of expertise would be lamentable but perhaps not so worrisome if people had some sense of how imperfect their civic knowledge is. If they did, they could repair it. But the Dunning-Kruger Effect suggests something different. It suggests that some voters, especially those facing significant distress in their life, might like some of what they hear from Trump, but they do not know enough to hold him accountable for the serious gaffes he makes. They fail to recognize those gaffes as missteps.

Here is more evidence. In a telling series of experiments, Paul Fernbach and colleagues asked political partisans to rate their understanding of various social policies, such as imposing sanctions on Iran, instituting a flat tax, or establishing a single-payer health system.

Survey takers expressed a good deal of confidence about their expertise. Or rather, they did until researchers put that understanding to the test by asking them to describe in detail the mechanics of two of the policies under question. This challenge led survey takers to realize that their understanding was mostly an illusion. It also led them to moderate their stances about those policies and to donate less money, earned in the experiment, to like-minded political advocacy groups.

Again, the key to the Dunning-Kruger Effect is not that unknowledgeable voters are uninformed; it is that they are often misinformed—their heads filled with false data, facts and theories that can lead to misguided conclusions held with tenacious confidence and extreme partisanship, perhaps some that make them nod in agreement with Trump at his rallies.

Trump himself also exemplifies this exact pattern, showing how the Dunning-Kruger Effect can lead to what seems an indomitable sense of certainty. All it takes is not knowing the point at which the proper application of a sensible idea turns into malpractice.

For example, in a CNBC interview, Trump suggested that the U.S. government debt could easily be reduced by asking federal bondholders to “take a haircut,” agreeing to receive a little less than the bond’s full face value if the U.S. economy ran into trouble. In a sense, this is a sensible idea commonly applied—at least in business, where companies commonly renegotiate the terms of their debt.

But stretching it to governmental finance strains reason beyond acceptability. And in his suggestion, Trump illustrated not knowing the horror show of consequences his seemingly modest proposal would produce. For the U.S. government, his suggestion would produce no less than an unprecedented earthquake in world finance. It would represent the de facto default of the U.S. on its debt—and the U.S. government has paid its debt in full since the time of Alexander Hamilton. The certainty and safety imbued in U.S. Treasury bonds is the bedrock upon which much of world finance rests.

Even suggesting that these bonds pay back less than 100 percent would be cause for future buyers to demand higher interest rates, thus costing the U.S. government, and taxpayer, untold millions of dollars, and risking the health of the American economy.

This misinformation problem can live in voters, too, as shown in a 2015 survey about the proposed Common Core standards for education. A full 41 percent claimed the new standards would prompt more frequent testing within California schools. That was untrue. Only 18 percent accurately stated that the level of testing would stay the same. Further, 35 percent mistakenly asserted that the standards went beyond math and English instruction. Only 28 percent correctly reported that the standards were constrained to those two topics. And 34 percent falsely claimed that the federal government would require California to adopt the Common Core. Only 21 percent accurately understood this was not so.

But what is more interesting—and troubling—were the responses of survey takers who claimed they knew “a lot” about the new standards. What these “informed” citizens “knew” trended toward the false rather than the true. For example, 52 percent thought the standards applied beyond math and English (versus 32 percent who got it right). And 57 percent believed the standards mandated more testing (versus 31 percent who correctly understood that it did not). These misconceptions mattered: To the extent that survey takers endorsed these misconceptions, they opposed the Common Core.
My research colleagues and I have found similar evidence that voters who think they are informed may be carrying a good deal of misinformation in their heads. In an unpublished study, we surveyed people the day after the 2014 midterm elections, asking them whether they had voted. Our key question was who was most likely to have voted: informed, uninformed, or misinformed citizens.

We found that voting was strongly tied to one thing—whether those who took the survey thought of themselves as “well-informed” citizens. But perceiving oneself as informed was not necessarily tied to, um, being well-informed.

To be sure, well-informed voters accurately endorsed true statements about economic and social conditions in the U.S.—just as long as those statements agreed with their politics. Conservatives truthfully claimed that the U.S. poverty rate had gone up during the Obama administration; liberals rightfully asserted that the unemployment rate had dropped.

But both groups also endorsed falsehoods agreeable to their politics. Thus, all told, it was the political lean of the fact that mattered much more than its truth-value in determining whether respondents believed it. And endorsing partisan facts both true and false led to perceptions that one was an informed citizen, and then to a greater likelihood of voting.

Given all this misinformation, confidently held, it is no wonder that Trump causes no outrage or scandal among those voters who find his views congenial.

But why now? If voters can be so misinformed that they don’t know that they are misinformed, why only now has a candidate like Trump arisen? My take is that the conditions for the Trump phenomenon have been in place for a long time. At least as long as quantitative survey data have been collected, citizens have shown themselves to be relatively ill-informed and incoherent on political and historical matters. As way back as 1943, a survey revealed that only 25 percent of college freshmen knew that Abraham Lincoln was president during the Civil War.

All it took was a candidate to come along too inexperienced to avoid making policy gaffes, at least gaffes that violate received wisdom, with voters too uninformed to see the violations. Usually, those candidates make their mistakes off in some youthful election to their state legislature, or in small-town mayoral race or contest for class president. It’s not a surprise that someone trying out a brand new career at the presidential level would make gaffes that voters, in a rebellious mood, would forgive but more likely not even see.

But the Dunning-Kruger perspective also suggests a cautionary tale that extends well beyond the Trump voter. The Trump phenomenon may provide only an extravagant and visible example in which voters fail to spot a political figure who seems to be making it up as he goes along.
But the key lesson of the Dunning-Kruger framework is that it applies to all of us, sooner or later. Each of us at some point reaches the limits of our expertise and knowledge. Those limits make our misjudgments that lie beyond those boundaries undetectable to us.

As such, if we find ourselves worried about the apparent gullibility of the Trump voter, which may be flamboyant and obvious, we should surely worry about our own naive political opinions that are likely to be more nuanced, subtle, and invisible—but perhaps no less consequential. We all run the risk of being too ill-informed to notice when our own favored candidates or national leaders make catastrophic misjudgments.

To be sure, I don’t wish to leave the reader with a fatal hesitation about supporting any candidate. All I am saying is trust, but verify.

Thomas Jefferson once observed that “if a nation expects to be ignorant and free in a state of civilization, it expects what never was and never will be." The Trump phenomenon makes visible something that has been true for quite some time now. As a citizenry, we can be massively ill-informed. Yet, our society remains relatively free.

How have we managed so far to maintain what Jefferson suggested could never be? And how do we ensure this miracle of democracy continues? This is the real issue. And it will be with us far after the Trumpian political revolution or reality TV spectacle, depending on how you see it, has long flickered off the electronic screens of our cultural theater. 

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Wednesday, May 25, 2016

Tech Savvy: How Blockchains Could Transform Management 05-25

What’s happening this week at the intersection of management and technology.

Re-architecting the firm with blockchain: Is Craig Wright really Satoshi Nakamoto, the mysterious creator of Bitcoin? Who knows — and really, who cares? The bigger issue is blockchains, the distributed ledgers that underpin cryptocurrencies like Bitcoin.
Blockchain technology has so many uses that trying to summarize them can make veteran tech experts sound like PR hacks. “As such, it holds the potential for unleashing countless new applications and as yet unrealized capabilities that have the potential to change everything,” write Don Tapscott and his co-author and son Alex Tapscott in their new book, Blockchain Revolution:

How the Technology Behind Bitcoin is Changing Money, Business, and the World.

That might sound like hyperbole, but it seems like everywhere you turn these days you run into blockchains. Banks are trying to harness blockchain before its blows up their business models. IBM is betting on blockchains to give its revenues a bump. Disney has a blockchain team doing … well, who knows what.

What we haven’t heard very much about is how blockchain could fundamentally change how companies are managed and operate. That’s a good reason to take a closer look at Blockchain Revolution, in which the Tapscotts devote a chapter to the topic. “Blockchain technology is enabling new forms of economic organization and new portfolios of value,” they write. “There are distributed models of the firm emerging — ownership, structure, operations, reward, and governance — that go far beyond enhancing innovation, employee motivation, and collective action.”

Intrigued? If you’d like read more about how blockchains might change the everyday operation of a business, check out the excerpt from the chapter, reprinted with permission, below.
The innovation hub — same as it ever was? The Internet has wrought significant changes in how we work, but some things — innovation hubs, for example — remain remarkably durable. “For hundreds of years,” writes freelance journalist Emily Sohn in Nature, “regions developed specialities that often arose from access to a natural resource, but then intensified as people moved to the regions to be among the expertise. The Internet was supposed to change all that. Around-the-clock connectivity that allowed researchers and entrepreneurs to collaborate from anywhere at any time meant that distance would no longer be an issue, predicted popular economic theory of the early 2000s. A decade later, it hasn’t panned out that way.”

Sohn reports that global connectivity seems to have stimulated the growth of innovation hubs, like Silicon Valley, rather than shrunk them. “Innovators and PhD students are now clumped together in fewer places, often in big cities,” she says. “And collaborations are more likely to happen between researchers who live, or have lived, close to each other.”

New and existing companies can’t afford to buck this finding. Locating in innovation hubs gives them greater access to talent. It also boosts their performance: Sohn cites studies that show start-ups located in hubs are more likely to survive, and firms in hubs are more likely to file patents than companies outside hubs.

It turns out that no matter how easy it is to collaborate at a distance, proximity remains an essential element in stimulating innovation. It sets the stage for serendipitous meetings. Face-to-face interaction also creates feel-good reactions in our brains that promote trust and more effective collaboration.

It’s not that digital connectivity inhibits innovation. Far from it, reports Sohn. Rather, it stimulates the enhanced innovation that is already taking place within innovation hubs — in effect, supercharging it. It’s a finding worth keeping in mind that next time your company is considering where to locate a new business unit or research facility.

Putting data to work with knowledge graphs: A brief story popped up in The Seattle Times last week: A data analytics company named Maana announced it had raised $26 million in Series B funding from the investment arms of Saudi Aramco and Shell. In these (waning) days of billion-dollar start-up valuations, $26 million isn’t especially jaw-dropping. But the company does have has an interesting approach to data analytics, which uses “enterprise knowledge graphs.”
There are a couple of problems with data in big companies. First, there’s lots of it, and it’s often stashed in separate silos. “A single division could have over 60 different information systems that they work with,” CTO Donald Thompson told tech reporter Rachel Lerman. Second, you need to turn the data into useful insights and recommendations. Third, you have get those into the hands of people who can use them to enhance results.

Bearing in mind that I’m a layman at best, here’s how Maana approach works: Instead of placing the company’s data into a common pool, it sends out a search engine to crawl the various data silos in your company. Then, instead of simply delivering a list of results, it uses analytics and machine learning to construct knowledge graphs — kind of like the ones that Google introduced a few years back — that provide actionable recommendations based on the goals and needs of the business and delivers them to line-of-business applications. Maana has used cases on its website that show how this approach works and the results it has produced in operational settings in industrial and oil and gas companies.

Reproduced from MIT Sloan Management Review

Managing Tensions Between New and Existing Business Models05-25

The search for new business models forces established companies to experiment with organizational designs — and leads to tensions that should be anticipated and carefully managed.

Image credit : Shyam's Imagination Library
Exploring new business models is a recognized way for mature companies to renew their competitive advantage. Companies explore new value propositions, deploy value propositions in new segments, change the value chain, or experiment with alternative revenue models — all in a search for a different logic for value creation and capture. Sometimes this exploration goes far beyond the existing business model and requires the creation of a new business unit.

A sometimes unexpected consequence is the difficulty of fitting this new business unit into the existing organizational structure. While business model experimentation may be the raison d’être of many startup ventures, established companies typically face strong organizational rigidities that lead to tensions. Predicting these tensions and being open to experimentation with organizational structure can be the keys to a smoother business model exploration process. In this article, we report on a study of the European postal industry, in which we examined the organizational challenges that affect incumbent organizations in mature industries as they react to disruptive changes in their environment by seeking new business models.

Although the Romans had a type of postal service, the European postal industry as we know it today has existed for the past 500 years or so — one of the oldest, in Portugal, traces its history to 1520. For close to two centuries, established operators have been using essentially the same business model, pioneered in 1837 in the United Kingdom. In that model, senders pay a postal operator (usually through the purchase of a stamp) to bring a piece of mail or a parcel from A to B, with pricing dependent on some combination of distance, size, and weight. However, the postal industry has recently faced a rapid decline in physical mail as a result of digital substitution, while regulatory liberalization has boosted the level of competition in postal markets. Many postal operators have reacted by exploring new opportunities in the digital marketplace.

By interviewing managers and reviewing relevant information, we studied Danish, Portuguese, and Swiss postal operators to find out how they have dealt with the challenge of exploring new business models since the turn of the millennium. The organizations we studied strived to maintain their core business while at the same time incubating new ventures. Managers at all of the organizations felt there were potential new business models that they could benefit from developing, but when exploring the building blocks of these business models, they found that tensions emerged in their organizations. It required a separate process of organizational experimentation to find out how to organize for business model exploration.

Managing the Tensions

Our research points to three key areas of tension almost any existing business will face if it attempts to discover entirely new business models. Whether management succeeds in handling those tensions will determine their success in identifying and implementing new business models.

1. Don’t settle too quickly on structure. Top management is typically trained to see organizational structure as a means of executing strategy. As the business historian Alfred D. Chandler put it, “structure follows strategy.” In the case of business model exploration, however, our research suggests it’s a mistake for management to settle too quickly on a strategy and structure for the new business. In 2006, the Danish postal service, Post Danmark A/S, acquired Strålfors, an information logistics company, and subsequently positioned some of the company’s other innovative ventures within this subsidiary. It was thought there were possible synergies in merging products, but the fit was less than perfect, and as one manager put it, ultimately the business units “moved a bit around over the years.” The Danish and Swedish posts subsequently merged to form a new company, now called PostNord AB. PostNord at one point signaled to the market that Strålfors was for sale but then, in the fall of 2015, announced that it would retain ownership of Strålfors, after all. A manager from another postal operator offered a similar account of the struggle with how to fit a new venture into an old company, pointing out how that operator had to “constantly learn and modify … how we organize ourselves.”

The lesson for any organization wanting to explore new business models is to not settle too quickly on a structure for the new business. In fact, the organizational structure can more usefully be thought of as one of the essential building blocks of the business model — that is, as an aspect of the new business that needs to be fully explored and experimented with before you can learn what works best.
2. Balance top management support and experimentation. Exploring new business models is a strategic decision aimed at adapting the company’s activities to an evolving business landscape and discovering new revenue streams. At the postal operators we studied, this involved numerous initiatives. For example, the Swiss Post decided there might be an opportunity to expand its partnerships with online retail businesses beyond picking up and delivering parcels. The Swiss Post could leverage its established, trusted brand by selling secure sockets layer (SSL) certificates, digital signature solutions, and email certificates to online retailers and other businesses. However, setting up the new business unit involved the creation of new capabilities, both on the IT and the sales sides. It was recognized that this new business unit would be very different from the organization’s existing core business. The solution involved acquiring a startup that had developed some core solutions in this space and then building the business with a mix of management and staff hired from outside as well as transferred from the core business.

Management clearly identified a need to protect the fledgling business from above. The new business unit was a strategic initiative and as such needed to be shepherded by top management. As one manager told us, “We really managed to make sure that from the top … these organizations were protected. You need to have ownership by the CEO; otherwise, this is destroyed extremely quickly.” However, it was also gradually recognized that top management should not try to steer the new business unit. As one manager said, “It is clearly an advantage if people [in the new business unit] are a little bit remote of the headquarters. The headquarters has an existing way of doing business … you develop much more successfully if you give these people space and distance to the core.” This implies a balancing act for top management between protecting and coaching, on the one hand, and leaving the new business unit to experiment, on the other.

3. Expect a power struggle for resources. Any new business model has to grow and coexist with existing business models that may be stagnating but still provide the lion’s share of revenues for the company. Managers of such existing business models can be powerful and may have turf to protect in the internal struggle for resources. They and their employees may feel threatened if the new business unit becomes too successful. Furthermore, the new business model may not be profitable for a long time, leading to the risk that needed investments are diverted from more profitable parts of the business. One manager told us that this “has perhaps been the biggest barrier — that we are competing and working to get access to the same IT resources within the company.”

Top management needs to manage this potential competition for resources between the new business and the old core business. One way to achieve this is to accept multiple business logics, as well as multiple performance management and measurement systems. As one manager explained, “We quite successfully managed to convince the internal management that, for the moment, revenue streams shall not be the most important performance indicator.” Alternative metrics could include the estimated market potential, for example.

A point to consider is the importance of communicating across the company why it is engaging in business model exploration and how this will benefit the company in the long term. Conflicts for scarce resources within the organization cannot be avoided completely, but they can be softened if employees across business units build a shared understanding of the objectives of the business model exploration.

The Organizational Dimension

The business model canvas framework developed by Alexander Osterwalder and Yves Pigneur has become a very popular way to understand the potential building blocks of business models. The canvas highlights nine such building blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships, and cost structure. However, organizational designs and the associated organizational tensions that emerge during the process of business model exploration are not well addressed by the existing tools. Companies exploring new business models may not fully recognize that these tensions will almost inevitably emerge and thus may be ill-prepared to manage them.

Understanding these tensions should help in managing the challenges of concurrent business models.
The tensions we highlight imply that the design of an organizational structure that accommodates both new and older business models needs to be considered an intricate part of business model innovation. Organizational design has to be questioned and experimented with as part of the exploration. A top management team that is prepared for such exploration and aware of the organizational dimension of business model exploration may well be more likely to succeed at business model innovation.

Tuesday, May 24, 2016

Talgo high-speed trains for Indian Railways’ Delhi-Mumbai route: 7 things to know 05-25

Talgo high-speed trains for Indian Railways’ Delhi-Mumbai route: 7 things to know

Hold your horses, passenger! We may soon get to enjoy the luxury of Spanish coaches on the Rajdhani and Shatabdi express trains.

Indian Railways is all set to experiment with high speed Talgo trains which, if successful, will lead to the replacement of the existing LHB coaches with these fancy Spanish beauties.

The first Talgo train trail run is expected to head from Mumbai to Delhi. If all goes well with it, following gauging results, Talgo trains will be rolled out on the other routes.

What is Talgo?

Talgo is one of the leading companies in the Spanish railway sector. It started out in May 1941, and has now has businesses almost all around the world. Talgo's headquarters lie in Madrid, Spain.
Here's all you need to know about the Talgo trains that we are about to welcome on our railway tracks:

1. A Talgo 250 can run at the speed of 250 kmph. However, trials in India will only be conducted at 150-160 kmph.

2. Its lighter trains can cut travel time by 30 per cent. In fact, Talgo trains are expected to cover the Mumbai-Delhi stretch by 12 hours, unlike the Rajdhani which takes 17 hours.

3. Talgo train coaches would save up to Rs 1 crore as compared to the LHB coaches used in Rajdhani and Shatabdi trains. They are also said to require "less maintainance".

4. Unlike that for Japanese bullet trains, no major overhauling of tracks is said to be required for running Talgo trains in India.

5. Amenities like footrests, reading lights, tables, audio entertainment control, etc. are provided for every individual seat. The trains also come with monitors for video entertainment.

6. Talgo trains have the technology to keep interiors pleasant even when the temperature outside crosses 50 degree Celsius or drops below -20 degree Celsius.

7. Talgo's official website also promises shower units, in-house restaurant and a cafeteria car for pasenger coaches.

8. Talgo trains' can also reduce Railways' energy bill by 30 per cent, as its "reduced weight and inalterability against atmospheric agents is translated into lower energy consumption".

9. Talgo 250 was the first high speed train to run in Central Asia. In Uzbekistan, it runs on a daily basis.

10. Pretty and efficient, yes, but these fancy Talgo trains will make train travel more expensive than it is now.

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India’s ‘first solar-powered train’: 05-25

India’s ‘first solar-powered train’

Last year, Northern Railways had fitted one coach of the Rewari-Sitapur broad gauge passenger train with solar panels. (Northern Railways image)

With Indian Railways aggressively focusing on renewable energy, India’s first solar panel-fitted train is all set to commence trial runs shortly. What makes this trial run special is that all coaches of the train would be lit from power generated by the rooftop solar panels.

Last year, Northern Railways had fitted one coach of the Rewari-Sitapur broad gauge passenger train with solar panels. However, this would be the first DEMU (Diesel Electric Multiple Unit) broad gauge train, in which all coaches have solar panels, says Railways.

The solar-panel powered train will be tested on the Jodhpur division of the North Western Railways. The DEMU train which is being used for the trial run has eight coaches, with each coach fitted with twelve solar panels.

The DEMU solar-powered train which is being used for the trial run has eight coaches, with each coach fitted with twelve solar panels. (NW Railways image)

Each solar panel will generate 300 watt of electricity, which means 3.6KW of power per coach. This, the Indian Railways says will be enough to provide electricity for lights and fans inside the coach. However, enough power would not be generated to run air-conditioners.  (Don’t miss out! Stunning images of Talgo high-speed trains for Delhi-Mumbai route)

Is Railways planning to run ACs on solar power in future? That remains to be seen, says Tarun Jain, the Chief Public Relations Officer of North Western Railways. “We will begin trials of this solar-panel fitted train shortly. We are awaiting some final clearances. After intensive trials, we will be able to gauge the performance of the solar panels. Only then any decision on scaling up the scope of the solar panels can be taken,” Jain told FE Online.

The solar train is not the only green initiative taken by the Indian Railways. Last year, Indian Railways had introduced India’s first CNG DEMU train on the Rewari-Rohtak section of Northern Railways. The DEMU train runs on dual fuel system – CNG and diesel. Railways have modified the 1,400 HP engine to run on dual fuel – diesel and CNG – through fumigation technology.

India’s first CNG DEMU train. (Northern Railways image)

The train comprising of two power cars and six car coaches has been manufactured by Integral Coach Factory at Chennai with the CNG conversion kit being supplied by Cummins.

Solar power plant at Katra station. (Northern Railways image)

Also, a 1 megawatt solar power plant was set up at Katra station in 2015, a move that can save up to Rs 1 crore annually on energy bills. This is the biggest rooftop solar plant built in Jammu and Kashmir and the largest solar power plant built by Indian Railways.

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Top of the Unicorn Club: these are the 10 most valuable private companies 5-25

Top of the Unicorn Club: these are the 10 most valuable private companies

Image credit : Shyam's Imagination Library

There are some businesses around the world which expand at a dizzying rate. These companies have achieved "hypergrowth", doubling their revenues in less than two years.

In the past few years, the number of companies that have mastered hypergrowth has increased. This is mainly due to the digital transformation of economies, more accessible (and cheaper) capital, and the emergence of new global markets such as the Asian middle class, according to a study from the World Economic Forum, 'Mastering Hypergrowth'.

While companies from a range of sectors are experiencing hypergrowth, unsurprisingly, technology start-ups provide prominent examples of the trend. One example is Finnish mobile games developer Supercell, which recorded a $2.3bn revenue in 2015, just three years after launching its first product.
If a start-up grows quickly enough, it might turn into that mythical and elusive creature: the unicorn, a private company valued at $1 billion or more. There are currently 174 companies on Fortune's Unicorn list, and below are the 10 highest-valued private companies. 


Tuesday, May 17, 2016

Trump willing to meet N.Korea's Kim, wants to renegotiate Paris climate accord 05-18

Trump willing to meet N.Korea's Kim, wants to renegotiate Paris climate accord


Republican presidential candidate Donald Trump said on Tuesday he is willing to talk to North

Korean leader Kim Jong Un to try to stop Pyongyang's nuclear program, proposing a major shift in U.S. policy toward the isolated nation.

In a wide-ranging interview with Reuters, Trump also said he disapproved of Russian President Vladimir Putin's actions in eastern Ukraine, called for a renegotiation of the Paris climate accord, and said he would dismantle most of the Dodd-Frank financial regulations if he is elected president.

The presumptive Republican nominee declined to share details of his plans to deal with North Korea, but said he was open to a face-to-face meeting with its leader.

"I would speak to him, I would have no problem speaking to him," Trump said of Kim.

North Korea's mission to the United Nations did not immediately respond to a request for comment on Trump's remarks.

Trump also said he would press China, Pyongyang's only major diplomatic and economic supporter, to help find a solution.

"I would put a lot of pressure on China because economically we have tremendous power over China," he said in the half-hour interview at his Trump Tower office in Manhattan.
Trump's preparedness to meet Kim contrasts with President Barack Obama's policy of relying on senior U.S. officials to talk to senior North Korean officials. Obama has not engaged personally with Kim.


The New York billionaire said he is "not a big fan" of the Paris climate accord, which prescribes reductions in carbon emissions by more than 170 countries, and would want to renegotiate it because it gives favorable treatment to countries like China.

A renegotiation of the pact would be a major setback for what was hailed as the first truly global climate accord, committing both rich and poor nations to reining in the rise in greenhouse gas emissions blamed for warming the planet.

On Russia, Trump tempered past praise of Putin, saying the nice comments the Russian leader has made about him in the past would only go so far.

"The fact that he said good things about me doesn't mean that it's going to help him in a negotiation. It won't help him at all," he said.

Turning to the economy, Trump said he planned to release a detailed policy platform in two weeks that would propose dismantling nearly all of Dodd-Frank, a package of financial reforms put in place after the 2007-2009 financial crisis.

"Dodd-Frank is a very negative force, which has developed a very bad name," Trump said.


Trump said he perceived a dangerous financial bubble within the tech startup industry. He said tech companies were attaining high valuations without ever making money.

On the U.S. Federal Reserve, Trump said that while he eventually wants a Republican to head it, he is "not an enemy" of current chair Janet Yellen, who was appointed by Obama.

"I'm not a person that thinks Janet Yellen is doing a bad job. I happen to be a low-interest rate person unless inflation rears its ugly head, which can happen at some point," he said, adding that inflation "doesn't seem like it's happening any time soon."

Trump said he would maintain the current level of benefits for Social Security recipients, a position championed by former Republican presidential candidate Mike Huckabee. He said he would not raise the retirement age or impose a sliding scale of benefits depending on income levels.

He said the depleted Social Security Trust Fund would be replenished by the increased tax revenue that would flow into the government from the higher job growth spurred by his economic policies.
(Reporting by Steve Holland and Emily Flitter, additional reporting by Alana Wise; Editing by Paul Thomasch and Ross Colvin)

Realizing gender equality’s $12 trillion economic opportunity 05-18

Realizing gender equality’s $12 trillion economic opportunity

Investing in access to essential services and reducing the gap in labor-force participation rates could significantly expand the global economy by 2025.

In 2015, the McKinsey Global Institute published The power of parity: How advancing women’s equality can add $12 trillion to global growth. This report, which focused on the enormous potential associated with narrowing the gender gap, found that if every country did so at the same historical rate as the fastest-improving country in its regional peer group, the world could add $12 trillion to annual gross domestic product in 2025. That’s some 11 percent higher than it would be under the business-as-usual scenario.

So what will it actually take to turn this potential into reality? Our new discussion paper, Delivering the power of parity: Toward a more gender-equal society, provides an agenda for action and investment, quantifying the progress needed on 15 gender-inequality indicators. It finds that while much of the $12 trillion opportunity comes from advancing gender equality in the world of work, progress there is closely tied to tackling gender gaps in society more broadly. In particular, improved access to services in six areas could unlock economic opportunities for women: education, family planning, maternal health, financial inclusion, digital inclusion, and assistance with unpaid care.
Addressing these areas would require incremental annual expenditures of $1.5 trillion to $2 trillion in 2025—20 to 30 percentmore than would ordinarily be spent given the current trajectories of rising population and GDP (exhibit). But the results would empower millions of women and men alike, delivering economic benefits that are six to eight times higher than the social spending estimated.

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World Bank Funding For India’s Rooftop Solar Mission 05-18

World Bank Funding For India’s Rooftop Solar Mission

India’s solar ambitions have received a major boost with the World Bank approving a US $625 million loan to support the installation of rooftop solar power systems across the country.
The Government of India’s National Solar Mission has set a goal of installing 100 GW of solar capacity by 2022, 40 GW of which is designated for rooftop solar.

The World Bank loan is aimed at financing at least 400 MW of new Grid Connected Rooftop Solar Photovoltaic (GRPV), buttressed by a co-financing loan of US $120 million and a US $5 million grant from the Climate Investment Fund, to help the Indian market overcome teething problems which have hampered uptake in rooftop solar.

Despite an estimated potential of 124,000 MW, rooftop solar in India has been sadly neglected in favour of larger scale solar plants. Energy consultancy firm Bridge to India’s latest Solar Handbook (PDF) says the 40 GW target for 2022 seems “a very remote prospect” without more focused policy support and an effective net metering program from government.

India remains a heavy coal-consuming nation, but is one of the lowest per capita consumers of energy on the world; with over 200 million people living off-grid. According to the World Bank, power shortages force manufacturers and industrial users to rely on expensive and polluting diesel-based back-up power supplies.

“India is endowed with huge solar energy potential, and the World Bank is strongly supportive of the government’s plans to harness this potential and increase India’s solar PV capacity to 100 GW,” said Onno Ruhl, World Bank Country Director in India.

“This project will support this target, by providing financing to some of the 40 GW of solar PV which will be placed on rooftops.”

In January this year, as the country announced it had reached an overall solar capacity of 5.6 percent, the Indian Cabinet Committee on Economic Affairs increased the budget for GRPV programs by more than 8-fold, in an effort to install 4200 MW of rooftop solar power systems throughout the country out to 2019-20.

The World Bank project will be implemented by the State Bank of India (SBI), and will support a range of rooftop solar options; including commercial and industrial PV systems. With many citizens unable to afford upfront ownership of systems, the SBI Rooftop PV Program will include third-party ownership, leasing, rooftop rental, as well as direct end-user ownership.

“Today, the only available option for those who want to install solar PV is to pay the entire cost up-front. The variety of financing mechanisms on offer under this program will represent a major innovation for the rooftop market,” said Mohua Mukherjee, Senior Energy Specialist and World Bank’s Task Team Leader for the project.

“Most importantly, the scope of the project will go beyond simply making finance available, it will also improve the investment climate for solar PV, and increase the `Ease of Doing Rooftop Business”.

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Monday, May 16, 2016

Are economic statistics in danger of becoming irrelevant? 05-16

Are economic statistics in danger of becoming irrelevant?

Reliable economic statistics are a vital public good. They are essential to effective policymaking, business planning, and the electorate’s ability to hold decision-makers to account.

And yet the methods we use to measure our economies are becoming increasingly out of date. The statistical conventions on which we base our estimates were adopted a half-century ago, at a time when the economy was producing relatively similar physical goods. Today’s economy is radically different and changing rapidly – the result of technological innovation, the rising value of intangible, knowledge-based assets, and the internationalization of economic activity.

In light of these challenges, UK Chancellor of the Exchequer George Osborne asked me ten months ago to assess the United Kingdom’s current and future statistical needs. While my research focused on the UK, the challenges of producing relevant, high-quality economic statistics are the same in many countries.

Recent technological advances have radically altered the way people conduct their lives, both at work and at play. The advances in computing power underpinning the digital revolution have led not only to rapid quality improvements and product innovation, but also to new, connectivity-driven ways of exchanging and providing services.

One particular challenge for economic measurement stems from the fact that an increasing share of consumption comprises digital products delivered at a zero price or funded through alternative means, such as advertising. While free virtual goods clearly have value to consumers, they are entirely excluded from GDP, in accordance with internationally accepted statistical standards. As a result, our measurements may not be capturing a growing share of economic activity.
Consider the music industry. Downloads and streaming services have now largely replaced CDs, the dominant medium in the 1990s. And yet the money has not followed; the industry’s revenues and margins have both plummeted. As a result, its contribution to GDP (as we currently measure it) may be falling, even as the quantity and quality of services are increasing.

Two methods can give us a rough estimate how much digital economic activity we are failing to capture in our measurements. We can use average wages to estimate the value of the time people spend online using free digital products, or we can adjust telecommunication services output to account for the rapid growth in Internet traffic. Both approaches suggest that accounting for these types of activities could add between one-third and two-thirds of a percentage point to the average annual growth rate of the UK economy over the past decade.

The digital revolution is also disrupting traditional business models. The reduced search and matching costs offered by a range of online platforms are unlocking the market for skills (known as the “gig economy”) and the market for underutilized assets (known as the “sharing economy”). This, too, causes conceptual and practical measurement challenges for established GDP calculus. The traditional statistical distinction between productive firms and consuming households leaves little room to account for households as value creators.

Measuring GDP, it turns out, is like trying to hit a moving target. The digital revolution is likely to be followed by yet another wave of disruptive technology, including advances in materials science, artificial intelligence, and genetic engineering. As the economy evolves, so must the frame of reference for the statistics we use to measure it.

Consequently, internationally agreed statistical standards will almost always be somewhat out of date or incomplete, as they are bound to lag behind changes in the economy. National statistical offices should explore measurement issues that go beyond the prevailing standards, rather than use compliance as an excuse for their failure to innovate.

One solution would be to establish a continuing program of research into the measurement implications of emerging economic trends, conducting one-off studies at first to gauge their potential quantitative importance. This could then guide the development of experimental statistics capturing the new phenomena.

New techniques of collecting and analyzing big data, such as web scraping, text-mining, and machine learning, provide an opportunity for statisticians. Governments already hold some administrative data, but their use for statistical purposes often requires legislative changes. Unlocking this trove of information would extend statistical samples to near-census size, increase their timeliness and accuracy, and reduce the respondent costs to businesses and households.

Ensuring that data accurately reflect a changing economy is one of the hardest tasks faced by national statistical institutes worldwide. Success requires not only understanding the limitations of traditional measurements, but also developing a curious and self-critical workforce that can collaborate with partners in academia, industry, the public sector, and other national statistical institutes to develop more appropriate methods.

The UK is by no means alone in facing these challenges. But we need to act quickly. Otherwise, the speed of economic change will render our statistics irrelevant to modern life.

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