Saturday, May 31, 2008

Bangalore 10K run and a (N=1, R=G) model

Bangalore 10K run: It was a sheer joy to be part of the Sunfeast Bangalore 10K run a couple of weeks back. The amount of time I took to complete the run (1 hr 10 min) was almost 4 times my usual jog. However, the spirit of crowd gives so much energy; I did not even realize when the finish line came (it took me the next 3-4 days to recover though). There was another reason why the experience was very satisfying. The person who took the initiative to register me – my wife Gauri – completed the run in almost the same time as me and she had happiness all over her face for the rest of the day. What I did not know was that there would be a business associated with the race exemplifying C. K. Prahlad’s (N=1, R=G) business model that is going to generate a smile again on Gauri’s face in a week’s time. Before we look at the business, let’s take a short detour and understand what (N=1, R=G) is all about.

(N=1, R=G) model: In their latest book, “The new age of innovation” C. K. Prahalad and M. S. Krishnan present evolution of business models over the past century. The two pillars of this model are: (1) How many consumers does one product target? (2) Where all does the firm mobilize resources from? For example, let’s look at Ford’s Model-T which came out in 1908. It was a product based on “one model fits all” principle (“Any color is ok as long as it is black”). Moreover, the resources producing the car had to be with the firm all located in and around Dearborn, Michigan. Ford was one of the most vertically integrated firms. Now, compare this model to Amazon’s model. When I log-in to amazon, it displays the books (say, on innovation) which interest me. When I e-browse a book, it also shows me the reviews and also other books which are related to the topic. I certainly feel it is an experience unique to me. Where all does Amazon pull the resources from? From a number of bookstores across the world, developers in US, Europe, Asia, in short, all over the world. Prahalad calls this model (N=1, R=G) i.e. value is based on unique & personalized experience and is based on access to resources across the globe (as against ownership of resources co-located). Coming back to Bangalore 10K run. Both I and Gauri got emails from saying that to see our photos from the run, we need to go their website and type our bib-number. When we typed Gauri’s bib-number, there were 7 photos with Gauri in the centre (and my bib-number showed only one photo, I guess looks matter). Clearly an N=1 model. The firm is headquartered in New Zealand and is market leader in event photography. However, the people who took our photos were locals sitting back-to-back on a motorcycle while taking the snaps. I am sure the project was contracted to them. An R=G model.

You can read more about the book and C. K. Prahalad videos in this recent businessweek article.

Monday, May 26, 2008

Assessing efficiency of your internal innovation bazaar

Bringing Silicon Valley Inside: I read the paper “Bringing Silicon Valley inside” by Gary Hamel (HBR Sept-Oct 1999) after Prof. Krishnan mentioned it in his talk last week on “Efficiency vs. Innovation” at k-community meeting. Hamel and Valikangas have presented an extension of this work in the paper “Internal Markets: Emerging governance structures for innovation”. In this article, I present my understanding of the idea presented in the paper and also a tool for assessing your “internal innovation market”.

Limitations of Hierarchy: After studying Silicon Valley as if it is a giant organization with its own capital and resource allocation decisions, Hamel concludes that valley thrives on resource “attraction” rather than resource “allocation”. Traditional management hierarchy achieves “sustaining” innovation through exploratory activities aligned with and exploiting existing competencies and businesses. Hence, ideas which are not aligned with current businesses are likely to be ignored or suppressed. After all, if all ideas from Valley went to Bill Gates for approval, only those supporting Windows platform would have survived. According to Hamel, 3 markets are critical for radical innovation: (1) Market for ideas (2) Market for capital (3) Market for talent.

What are markets? A market is a place where buyers and sellers find each other, players compete for best goods & resources, where individuals exercise choice. It is also a mechanism for resource allocation and it is supported by social network of brokers, buyers and sellers.

Assessing your internal innovation bazaar: Do you have a market for ideas? Well, it will depend upon who is suggesting the ideas and who is selecting them. If only senior executives from current businesses suggest ideas and they are the ones who select them, result is known before the exam. On the other hand, if you have an ecosystem of customers, suppliers and employees who suggest ideas and a panel separate from current business selects them there is a good chance that radical ideas will survive. Extending these questions for the other two markets (capital and talent) I have created following three dimensional dashboard. Can you assess efficiency of your internal innovation market?

Friday, May 23, 2008

Top challenges and non-challenges in Innovation management

This month’s k-community meeting was hosted by Firstsource last Wednesday. K-community is an informal network of people in Bangalore interested in knowledge management. There were 2 presentations: One by Tharun from Firstsource and the other by Prof. Rishikesh Krishnan from IIMB. Tharun presented the tool Firstsource is using for logging and tracking ideas. Prof. Krishnan presented “Balancing Innovation & Efficiency”. There were representatives from various organizations like Capgemini, TCS, Wipro, Honeywell, Robert Bosch, Accenture etc.

During the networking session as well as during the presentations, people articulated their views on what they find challenging and not-so-challenging in managing innovation at their organization. Here is my take-away:


  • Innovation management tool: All organizations use some tool or the other for idea management. Some of them are made inhouse (like Firstsource, Wipro) and some of them are pay-as-you-use kind-of tools. In general, I felt that nobody was saying tool is a limiting factor.

  • Idea generation: People narrated their experiences in idea generation. Some organizations gathered 500 ideas through ideation workshops, while some other large organizations (like Wipro) got several thousand ideas when the initiative was launched.

  • Structure: I felt that putting a structure around innovation management (i.e. having a small separate team and identifying innovation champions within business units etc.) is something many organizations have put in place.


  • Idea selection: People mentioned 2 specific challenges in idea selection phase. One is having a robust criterion such that organization does not loose out on good ideas as well as it does not end up working on too many not-so-value-creating ideas. The other is to be able to connect ideas with other ideas in the organization or connecting ideas to other experts who can help expand on the ideas. Ideas, by their nature, are many times cross-functional (running across multiple businesses or sometimes they are related to non-businesses). A representative from Wipro mentioned how an idea which was logged by an engineer from Wipro’s Kochi office related to robotics (which was not a practice in Wipro) finanally helped Wipro start a robotics practice.

  • Getting semi-radical and radical ideas: The second challenge people mentioned is: How do we balance our innovation portfolio with appropriate mix of incremental and radical innovation opportunities? Currently 80% to 99% of ideas are incremental in nature and people felt not enough of radical innovation is happening in their organizations.

  • Sustainability of the innovation engine: Most people I talked to felt that sustaining the innovation engine is very difficult. Or perhaps, it is inherently cyclic in nature (sometimes it is running well, other times it is not). For most people, doing something innovative means doing extra and there is no incentive to do that extra bit. Structure and idea management tool takes you only so far.

  • Connecting KM with Innovation management: In most organizations, knowledge management and innovation efforts run parallel and rarely cross. Conventional wisdom says that knowledge creation and harvesting can’t be that separate. Prof. Krishnan commented something to this effect “Any movement (like CMM, KM) which Indian IT industry takes on seriously is finally reduced to fantastic processes without much soul in them”.

Thursday, May 22, 2008

Tech-ladder under Infy radar: challenge is to manage demand-side equation

Infy is undergoing major organizational restructuring (Economic Times, 22-May-2008, “Infosys plans organizational restructuring”). Among other things, providing more flexibility and movement for employees is one of the drivers. To quote from the article: One of the issues it will address is greater flexibility and movement of people within the organization. For instance, it could provide an alternative career path to employees who don’t want to manage people but who are technically competent.

This thought process is laudable. Earlier this year I wrote in “Beware of technical ladder roles” how technical ladder is becoming a popular tool among HR heads to address the attrition challenge of the IT industry. However, organizations need to be careful how they trade the path. I feel that there are 2 major drivers for tech-ladder:

  1. Demand-side driver: If organization can have senior technical specialists, then they can help organization moving up the value chain by solution architecting and technically anchoring complex projects
  2. Supply-side driver: Experienced talent pool needs flexibility in their roles to leverage its strengths

Usually, the supply-side driver is the first one that gets attention and a tool like tech-ladder seems to address it. Until, as time passes, these so called “architects” and “principal engineers” realize that there is no “meat” in the job. This is where, I feel, proper homework needs to be done in defining “meaningful” roles which the business demands. This is what I wrote earlier this month in the article “Creating meaningful technical leadership roles in Indian IT services industry

“Creating a Desired Future” workshop: A satisfying experience

Hala, Raja and I facilitated a 2.5 day workshop titled “Creating a desired future” in the first week of May. The objective of the workshop was to enable mid-career assessment and action planning. It was a long weekend and school holiday season. With all these odds stacked against it, we had 10 enthusiastic delegates eager to explore their vision, mental blocks, strengths & action planning to achieve their desired future. Moreover, when you have representatives from areas as diverse as Film direction, HR, retail operations, insurance, IT you could not have asked for more. As Hala says, “When vision is powerful, it finds its own ways to put things together”

It has been nearly six months since we three started discussing this idea. Primary trigger came from our observation that most people go through an intense phase of introspection somewhere during their career. This was based on our personal experience as well as our interactions with our friends / colleagues. This observation was further supported by seminal work done by MIT Professor Edgar Schein on career dynamics. According to Prof. Schein, Although it is not clear whether this is a crisis or even a stage, there is mounting evidence that most people go though some kind of reassessment of themselves when they are well into their careers, asking themselves questions about their initial choices (“Have I entered the right career?”), about their levels of attainment (“Have I accomplished all I hoped to accomplish?” or “What have I accomplished and was it worth the sacrifices?”), and about their futures (“Should I continue or make a change?” or “What do I want to do with the rest of my life, and how does work fit into it?”). And we asked, “Can we assist people in this phase in a structured way?”

As each of us started to explore into different areas we began to see synergies. We realized that we can combine work done by Peter Senge (“Personal Mastery” from "Fifth Discipline"), Robert Fritz (“Path of least resistance”), Otto Scharmer (“Theory U”), Edgar Schein (“Career Dynamics”), and Marcus Buckingham (“Now, discover your strengths”). The challenge was to see how the gap between “current reality (CR)” and “desired future (DF)” can be bridged through an action plan that is anchored in one’s strengths. Raja and Hala have seen many visioning exercises in their consulting career where people find this gap between CR and DF far too intimidating.
As Ludi Goganovic, my friend who grew up in Germany and later worked in the US, observes, “In India, we have a lot more people doing a job for various reasons other than they being passionate about it.” Imagine the kind of place this will be if instead of say, 1% people following their passion, 5% start doing it. That is the grand vision.

Tuesday, May 20, 2008

Innovation ecosystem in India: An early-stage VC perspective

India’s innovation ecosystem dashboard: In an earlier post, we looked at how India’s innovation ecosystem dashboard looks vis-à-vis Cuba, Singapore, Israel, Germany, Eureka and Taiwan. Well, I thought it will be good to understand what is in the mind of a VC who is investing in India’s start-ups today. If you look at the dashboard, the investor axis is denoted by “$” and India ranks 1 on the scale of 4 as of now (Israel, Germany, Eureka and Taiwan, all rank 3 on 4 and Silicon Valley ranks 4 on 4). In this article, I summarize what I gathered from 2 interviews (1) Interview of Michael Moritz, Managing Partner of Sequoia Capital (Economic Times, Corporate Dossier, 24-Aug-2007) and (2) Sumir Chadha, Managing Director, Sequoia Capital India available as a podcast on (published 18-May-2008).

Sequoia Capital: Sequoia Capital is India’s largest early stage investor. (It also does late stage PE investments). The firm has earmarked $1 billion for investments in India out of which half has already been invested in sectors such as retail, construction, financial services, wireless. In 2006 Sequoia invested in companies like, TravelGuru and Minglebox when they were 2-3 people companies in a stage typically called “Powerpoint stage”. Sequoia has a successful history of early stage investments. Their investments today make 10% of NASDAQ value (most notable: Apple, Cisco, Yahoo, Google and YouTube).

Investment criteria: Sequoia looks for founders and management teams who are enthusiastic and passionate about a product or a service that is addressing a very large market. As Moritz says, “It sounds easy but it is very difficult to find the triple combination of markets, management and product”.

What is missing in Indian technology ecosystem: Sumir articulates clearly that Indian technology industry lacks product management expertise. One reason being that the gap between where the engineers sit and what customer needs is large. I agree with Sumir. In my technical leadership workshop, I usually ask participants what they think product manager’s primary responsibility is. I am yet to get the correct answer.

Common mistakes while pitching to VCs: Sumir mentions 2 common mistakes: (1) Market sizing: For a VC like Sequoia to get interested the business should have a potential to reach $100M in 5 years time. A $10M or $20 M is not attractive enough. (2) Lack of self-confidence.

Should Indian Entrepreneurs be in India or in Silicon Valley? Sumir answers this well. He says, “Move wherever your customer is.”

State of research in India: “Abysmal” is how Sumir sums it up. India has great teaching institutes but terrible research institutes. It is no surprise that on the “E-R&D” axis on the dashboard, India ranks 1 out of 4.

Overall Sequoia is bullish about India notwithstanding the looming downturn. Sumir says, “For early stage, we invest through up and down cycles. For late stage, a bear market is a good time to enter”.

If you want to be plugged into VC activity in India, I recommend: India's Deal Chronicle.

Saturday, May 17, 2008

Is your business model sticky?

This is a roadside cobbler shop after the business is closed for the day. (Thanks to my friend and consultant S R Raja for the picture and the discussion on business model). It displays the shop’s fixed assets which is a suitcase (more like a trunk) with “Mochi Ki Dukaan” written on top (which means “Cobbler’s shop”). What is unique about this shop is that the suitcase is cemented to the footpath (or sidewalk). Moreover, this happens to be a posh locality in Mumbai called “Five Gardens” in Matunga. What an innovative way of making the business sticky!

“Stickiness” to me is analogous to “addiction”. Is your customer addicted to your products or services? The best example of stickiness is, what else, your favorite cigarette brand. You will be either a Wills-person or a Goldflake-person, not both (Similarly you are either a Times of India addict or Hindu addict – not both). Irrespective of the font size of the statutory warning on the cigarette pack or increase in tax levied by P. Chidambaram, you will keep buying your favorite brand. That is “stickiness” in cigarette business.

In consulting business (the business I am in), unlike in cigarette or newspaper business, the stickiness lies not with any product or service but in the relationships you build. To quote Dr. Alan Weiss from his book “Million Dollar Consulting”: If you learn nothing else from this book, heed only this: Consulting is a relationship business. A special product may make you competitive. Differentiated services may make you distinct. But only carefully crafted relationships will create a breakthrough firm.

No wonder veteran Strategy consultant V N Bhattacharya mentioned to me the other day, “Consulting has a long gestation period”. I guess “patience” is a foundational competence to enter this business (perhaps any business). If you are not there for a long haul, don’t even think about playing the game. I will be testing my patience (along with a few other competencies) when I run tomorrow in Bangalore’s 10K run. Are you game?

Wednesday, May 14, 2008

What is your business model?

“What is your business model?” is a question I get asked often ever since I started my own business in 2006. Initially, I used to go blank as I really did not have anything to say other than the fact that I was into “Consulting”. In Indian context, “consulting” is almost equivalent to “training” (This is something I realized over last 2 years). I had not even defined my first training offering then. I used to get looks indicating, “This guy has no clue what he is up to” (And they were right).

I have become better at answering the question now. That does not mean I have complete clarity on my business model. “Answering a question well” and “having clarity” are two separate things. But my favorite definition of business model comes from Guy Kawasaki’s The Art of the Start. It involves answering 2 questions:

  • Who has your money in their pockets?
  • How are you going to get it into your pocket?

Answer to the first question defines who your customer is and his pain area. The second question involves creating a sales mechanism such that your revenue exceeds your cost.

HBR article “Why Business Models Matter” by Joan Magretta (May 2002) gives 2 critical tests to check whether your business model is sound. They are:

  1. Narrative test: The idea here is to narrate the story of your business and check if the story makes sense.
  2. Numbers test: Do some basic math and see if the numbers add up.

I would have certainly failed both the tests when I started my business. Fortunately, I got my first customer and the first cheque before I understood what my business model is. After receiving cheques from 20+ customers I am still not happy with my business model.

If these simple definitions and tests do not satisfy you, then you should check out “What is a business model?” article on Alex Osterwalder’s blog. Alex has been doing research on business model design for past several years and has published extensively on this topic. You will also find a business model design template there.

Sunday, May 11, 2008

Creating meaningful technical leadership roles in Indian IT services industry

In the previous post titled “Rs.15 Lakh salary dilemma” I articulated the fundamental issue Indian IT services industry faces in developing technical leadership. Let’s look at various approaches the industry is taking:

· Creating account based roles: Delivery team for a large account is typically has anywhere from 500 to a few thousand engineers (e.g. see Acc1, Acc2 etc in BFSI vertical in the picture). A senior architect in an account would typically be responsible for managing business requirements, proposing solutions and associated architecture, partnering with customer’s technical experts, identifying growth opportunities in the account by connecting dots and partnering with sales in converting them into business, developing talent etc. Such a person may or may not be billable (or sometimes partly billable). However, the value created by such a person in terms of ensuring C-SAT and identifying growth opportunities more than justifies the investment from the organization. The challenge in making these roles work is that they require deep domain expertise and product depth which an offshoring team typically lacks.

· Creating practice based roles: Practices are horizontals which cut across multiple verticals. For example, Oracle, SAP, Peoplesoft are practices in IT horizontal in the picture. This is an area where there is more scope of creating experts. Architects in a practice work with domain experts in creating a technology solution. They are consultants to an account and usually get billed for the consultancy they offer. Depending on the organization brand, one may command differential billing for such people. This justifies their salaries relatively easily. Typical challenge is that many times it is not enough to know say Oracle well. One should be able to do a comparative analysis of Oracle, Peoplesoft and SAP. Experts in Indian IT industry are yet to get to this level (many have a tendency to identify themselves with one technology such as Oracle).

· Fixed price projects: As the organization matures in its capability to manage a complex project all by itself, it gets into fixed price projects (FPP). In FPP, it does not matter whether you have 10 people in the team or 15. What matters is whether you are able to deliver the result in a given cost. Focus shifts from maintaining an average cost per person to building a highly productive team. This justifies having senior technical leaders in the team.

· Developing solution accelerators and/or Intellectual property: Many IT services companies (all Tier-1 companies) are developing re-usable frameworks (also called solution accelerators) in order to reduce time-to-market for the customer. This is an area where senior technical leaders should play a key role. Many times this responsibility is with a group which is separate from horizontals and verticals (e.g. Corporate Technology Group).

Many of these situations need a mindset which is value-oriented rather than effort oriented. For an industry that has succeeded with a time-and-material model for a couple of decades, it is going to take some time before this becomes a serious force.

Saturday, May 10, 2008

Developing technical leadership: Rs. 15 Lakh salary dilemma

I remember having a chat with a practice head (let’s call him Arun) of a mid-sized Indian IT services company. It was evident that topic of technical leadership was close to Arun’s heart. He himself had grown through the ranks as a techie in the initial part of his career. Now Arun is responsible for developing competent engineers in this practice and making them available to various business verticals and more importantly making them billable. He does not have any senior technical folks like senior architects or principal engineers in his group. To explain this situation, he said, “Look Vinay, as salary of a specialist approaches Rs.15 Lakh, his value decreases for my business. I don’t have a way to leverage their expertise profitably. I encourage such folks to become project managers or else I don’t have any place of them”.

Let’s call this issue “Rs.15 Lakh salary dilemma”. This issue is not specific to Arun’s company. It is representative of the entire IT services industry. I referred to this in an earlier post called “Two faces of Moving Up the Value Chain (MUTVC) Syndrome”. And it is not very difficult to see why this dilemma arises.

It is safe to assume that 80% to 90% of IT services projects are Time and Material (T&M) contracts with average billing rate around USD 3000 per person per month. This translates to around Rs.15 Lakh per anum. As salary of an engineer starts to approach the billing rate, it starts pinching the profitability. The next natural step is to do what is called “re-profiling” of the team in which the engineer with Rs 15 Lakh salary either becomes a manager or he sees that there is no place for him. A junior gets inducted in the team which brings the average cost of the project down restoring the margins. Company is lucky if this engineer becomes a good manager, else sooner or later he moves on to another company which offers him an attractive role.

This supply chain equation by itself is not bad. It looks something like this:

In this simplistic case, it is assumed that the average billing rate Firm-2 can command is more (say USD4000) than what Firm-1 can command (say USD3000) due to its ability to execute more complex projects. Things work fine until Firm-1 realizes that its business is getting commoditized and it needs to get into doing what Firm-2 is doing (e.g. System integration, end-to-end solution building, consulting etc). Now what should Firm-1 do? How much should it invest before it can expect to move to the next stage in value chain? This is the dilemma of the business leaders. And mind you, Firm-2 might be facing the same issue as its cost structure will be different from Firm-1 and it wants to grab pie from Firm-3 and so on.

To summarize, any IT services firm with T&M as the predominant mode of servicing will find it a challenge to retain and leverage engineers with salary approaching average billing rate. We will see how companies are approaching this issue in the subsequent article.

Thursday, May 8, 2008

Innovation ecosystem in India

I have written about my fascination for “ecosystem view” in an earlier post on “technical leadership ecosystem”. Being an entrepreneur myself and a student of innovation management, my eyes become big when someone presents a dashboard for innovation ecosystem.

Well, one such dashboard is indeed presented in a report titled “NASSCOM-BCG Innovation Report 2007” (see the executive summary PDF at the bottom). The report is focused primarily on IT-ITES industry (no surprise as that is what NASSCOM’s focus area is). It addresses 3 aspects of the innovation agenda: (1) factors that form a powerful imperative for innovation agenda (2) the firm level agenda and approach; and finally (3) recommendations to expand and rev up the innovation ecosystem in India. It is the last aspect that caught my attention first. It depicts following view.

Before we interpret the dashboards, let’s look at what the 5 dimensions stand for. As the picture shows, the 5 dimensions stand for (1) Government (2) Industry bodies (3) Firms (4) Educational and research institutes (5) investors.

Top row shows innovation ecosystem of India, Cuba, Singapore and Israel. The bottom rows shows that of Germany, Eureka, Taiwan and Silicon valley. Among all the exhibits, India happens to have the poorest ecosystem while Silicon Valley has the most robust one.

Look at the data from Eureka (exhibit number 5, second from left on the bottom row) which is a loosely coupled inter-governmental initiative in Europe. Eureka has 35 member states and EU countries as full-time members. It has 11,000 partners from industry including 40% SMEs, research centres, universities and national administrators. It currently has 600 innovative projects underway with budget of Euro 1.8 Billion and since inception, Euro 24 Billion have been raised and 1,800 projects have been completed – amongst them were airline e-Tickets and digital radios.

Well, what do I see when I look around? First, I feel that things aren’t that gloomy. I attended 2 barcamps on innovation in the last 4 months (one in Mindtree and the other in Wipro) and each had 100+ participants from at least 2 of the ecosystem elements: Firms and educational institutes. All my company’s financial reports get submitted to Registrar of Companies (ROC) online with digital signature. I book my airline and railway tickets online (indicators that government is not idling). “StartupCity”, a VC summit organized Smart Techie to be held on 24th May in Bangalore has at least 20 VCs signed up. Two of my engineering classmates started their technology startups in incubators set up in IIM Bangalore and IIT Mumbai. 4th India Innovation Summit will be held in Bangalore in June.

Did I say we have “arrived”? However, the lead indicators look good at this point.