Wednesday, June 27, 2012

Catalign Quarterly - June 2012

Catalign Quarterly is an attempt to put together insights relevant for fostering a culture of innovation in organizations. This is the third issue of the Quarterly.

Theme for this quarterly is “Design of strategy as if implementation matters”. If designing a good strategy is difficult then designing a strategy as if implementation matters is far more challenging. IBM’s ex-CEO Louis Gerstner expressed this well when he said, “It [IBM] had file drawers full of winning strategies. Yet, the company was frozen in place.”

In the first article we reflect on the 3 challenges in implementing a strategy as observed by Richard Rumelt. We explore an approach called "following the bright spots" in the second article. We summarize 3 of the lessons Sudhir Kumar learnt in implementing a strategy in Bihar. Finally I review a book "Understanding Michael Porter" by Joan Magretta.

1. 3 Challenges in implementing a strategy

2. Following the bright spots and its implications for designing a strategy

3. 3 lessons from implementing a strategy from Sudhir Kumar’s experience in Bihar

4. “Understanding Michael Porter” by Joan Magretta: A book review

I would like to thank Prof. Rishikesha T. Krishnan for the discussions on this topic.

Theme for the Sept 2012 quarterly is: Building experimentation capacity.

“Understanding Michael Porter” by Joan Magretta: A book review

Why I read the book: I got interested in “Understanding Michael Porter” by Joan Magretta when I read following remark of Porter in an interview which is an excerpt from the book. Porter said, “I used to think that most strategy problems arose from limited or faulty data, or poor analysis of industry or competition. But the more I have worked in this field, I have come to appreciate that some of the most significant barriers [of designing & implementing a good strategy] come from the many hidden biases embedded in internal systems, organizational structures and decision-making processes.” I thought here is an opportunity to understand Porter’s view on what is beyond “analysis” part of strategy. After all, Porter is the most cited author in business and economics according to Wikipedia. So, there were two questions in mind while reading the book. One, “What is the essence of Porter’s work on business strategy?” and the second, “What does Porter say about – design of strategy as if implementation matter?” I felt that the book did a great job in answering the first question in a simple and concise manner. On the second question, the book mostly remains silent.

Here are two things I liked most and one thing I found really surprising from the book. Let me begin with the things I liked.

Competing to be the best vs unique: In 1999, Westin Hotels and Resorts introduced its branded “Heavenly Bed” after investing tens of millions of dollars in testing mattresses, pillows and bed linens. Rivals didn’t leave much time in jumping the bandwagon. Hilton introduced Serenity Bed, Marriott -Revive Collection, Hyatt – Hyatt Grant Bed etc. Soon it resulted in a bloody Bed War. The consumer was the winner. However, how much the hotel industry benefited is debatable. Porter says that “Competing to be the best” leads to competitive convergence. Over time, all rivals begin to look alike. A much better thing to do is “competing to be unique”. And how do you do it?

Dual emphasis on value proposition and tailored value-chain: There are two sides to the strategy equation. One is what customers see different in you – the value proposition. The other, what you do differently in creating the value – the value chain. For example, for Southwest Airlines, the lowest cost is what its customers see and value. How does Southwest do it? By tailoring its value chain. For example, one of things it needs to minimize is gate turnaround time. That means draining the lavatories fast. To do this, it needs to hook up an equipment to service channels. This interfered with other activities. So Southwest got Boeing to reposition the service panel in new 737-300. That is tailoring the value chain – zooming in on the price and/or cost drivers and performing the activities differently or performing different activities to achieve the same goal.

Now, about the thing I found surprising:

Underlying economic model: What is the right goal for strategy? According to Porter, it is Return on Invested Capital (ROIC). I am sure it is a great goal. However, that’s not how Mark Zuckerberg or Steve Jobs looked at it when they started their companies. They were passionate about doing something – building a PC or a social network and they did it. In laying out the framework, Porter emphasizes how “rigorously grounded the framework is in economic principles”. Ironically, he makes strong assumptions about how rational the decision maker “ought to be”. That makes the underlying economic model shaky as human decision making is subjected to systematic errors of judgment or biases. So I feel Porter’s framework is like a chair designed for ultra-smooth surface and then used on a wobbly surface.

Overall, I enjoyed the book, found it useful and would strongly recommend it to anyone who wishes to get an overview of Porter’s work on business strategy.

Photo sources: (Porter's photo), (book cover)

Sunday, June 17, 2012

What is “change by being”? Stories of Ramana Maharshi and Eckhart Tolle

‘Change by doing’ doesn’t require much of selling. Whether it is a salt march, a war or the creation of Facebook, the act triggers a change process – sometimes quite massive. In contrast, ‘change by being’ is relatively less understood. Many people may not even consider it as a legitimate approach for change. And yet, I believe ‘change by being’ is just as powerful an approach as ‘change by doing’ if not more in bringing about a change. What is ‘change by being’? Let’s get a glimpse of it through 2 short stories of Ramana Maharshi and Eckhart Tolle.

Ramana Maharshi: David Godman narrates the story of a “miserable, crabby” woman who visited Ramana Ashram during 1940s in one of his interviews. The story was narrated to him by Arthur Osborne’s daughter. During that time Osborne’s house at Tiruvannamalai was a place where foreigners who couldn’t find a place to stay would be put up. One evening a miserable, crabby woman was sent to Osborne’s place by Ashram folks. The next day she left for the Ashram after breakfast. When she came back for lunch she was radiant and glowing with happiness. Hosts were happy and curious to hear about the “transformation story”. However, the woman remained silent throughout the lunch. Finally, the hosts couldn’t resist it anymore and asked her, “What happened? What did Bhagwan do to you?” The woman was surprised. She said, “He didn’t do anything. He didn’t say anything to me. I just sat there the whole morning and then came back for lunch.”

Eckhart Tolle: Tolle narrates the story of one of his neighbours Ethel , a “middle aged, intelligent and highly educated” woman in the book “A New Earth”. One night at 11 o’clock Ethel wanted to see Tolle urgently. It was clear that she was under stress. She was trembling as she took out papers from a file and spread them on the sofa. Tolle says, “I looked at her with no thought and no judgment and listened in stillness without any mental commentary.” Ethel kept talking. She was worried about a dispute which arose after she had refused to pay service charges for the repairs at her house. Ethel kept talking for ten minutes and then suddenly stopped. Then she looked at Tolle and asked, “This isn’t important at all, is it?” Tolle said, “No, it isn’t”. She sat quietly for a few more minutes, picked up her papers and left. The next morning when she saw Tolle on the street, she asked, “What did you do to me? Last night was the first night in years that I slept well.”

Did both the stories involve a change? Yes. Did the stories involve an action? Almost no visible action from Ramana or Tolle. So, what is happening here? I don’t know. But I like Tolle’s approach – which begins with complete acceptance of the situation – without being judgmental about it. Perhaps this creates a mirror so clear that the other person sees herself and the futility of the conflict with utmost clarity. That leads to the change.

David Bohm calls a person like Ramana or Tolle “a catalyst” – a person who “makes possible certain action without itself taking part, but merely by being what it is.”

Can anyone become a catalyst by creating such a mirror? Eckhart feels that it needs practice. For most of us, the mirror is tinted – in fact, heavily tinted. With practice it can become clearer. I hope it is like building stamina.


Tolle’s story is on page 175-176 of “A New Earth” by Eckhart Tolle.

“Catalyst” analogy of David Bohm is on page 173 of “The ending of time” which contains dialogues between David Bohm and Jiddu Krishnamurti.

Thursday, June 7, 2012

3 Lessons in implementing a strategy from Sudhir Kumar’s experience in Bihar

Sudhir Kumar (SK) played a key role in turning Indian Railways around during 2004-2008. However, initial years in his tenure in Bihar were disastrous. He was shunted, frustrated and according one wise-old colleague accelerating towards martyrdom. What did the angry young man learn about implementing a strategy during this period? Let’s look at 3 lessons in this article.

1. First learn to survive: When SK was posted to Bihar as a fresh IAS officer, he wanted to “quickly sort out the whole world” – especially the corrupt system. He says, “While I was honest, I was also impolite, abrasive, and saw words like ‘compromise, adjustment or tact’ as signs of cowardice and weakness”. One of his first projects was to arrest the theft of electricity in Patna. He discovered that many prominent people were involved in the illegal activity. He began to go after the top honchos to send a strong message to the bad guys. Is it difficult to guess what happened next? SK was transferred to a different post. The system revolted in unison to make SK ineffective. SK learnt his first lesson: To accomplish a mission, first learn to survive in the position.

2. Empower the beneficiary: One of the assignments was to build wells for the poor. Initially, SK and team executed the project with remote control. All the decisions about selection of well site, their diameter, depth, material to be used were made sitting at the head quarter. The primary users of the well were not consulted at all. The scheme was a failure in terms of how useful these wells turned out to be. Later the approach was modified to empower the people on-the-ground in making these decisions. SK says, “As outsiders, our judgements would never be as good because we had limited data on ground realities.”

3. Start where you can easily make progress: In another project SK & team was to increase tax revenue by arresting tax evasion. One option was to attack the unorganized sector like spices or cashew nuts. However, in this category it was difficult to get authentic information. The other option was to look at organized sector categories like scooter, motorcycle and cellphone. In this category, the first sale at the point of origin was in white currency. SK started with the second option where computers could be used to maintain and track the data. It worked very well. Later on when SK worked with Lalu Prasad in Indian Railways this lesson was very useful.


Changing tracks: Reinventing the spirit of Indian Railways” by Nilakant V. and Ramnarayan S, Collins Business, 2009, pp 29-34.

Sudhir Kumar’s photo is from IIM Indore site.