Giants of Enterprise: My favorite read of 2010

It has been almost a year since I first read Richard Tedlow’s “Giants of Enterprise” and I still haven’t got over the hangover. Several times I revisited the book for some specific incident or information like to check George Eastman’s early experiments and I ended up spending the next half an hour reading much more. It is a kind of stuff I had never read before. The book opened a door of a totally new discipline for me – that of “business history”.

What is “Giants of Enterprise” about? The book contains biographies of seven innovators who built large enterprises in America from railroads to microprocessors: Andrew Carnegie (Steel), George Eastman (Kodak), Henry Ford, Thomas Watson Sr (IBM), Charles Revson (Revlon), Sam Walton (WalMart), Robert Noyce (Intel). In my opinion to say that the book is a bunch of biographies doesn’t do justice to it.

Here are three things that I find unique about this book:

· Role of influencers: For each of the innovators, Tedlow identifies one or two key influencers in their life and shows how a few individuals influence formative minds. If your boss fires you, chances are high you will hate him. And if you don’t, it is almost certain you won’t continue to adore him. Well, even after John Patterson fired Thomas Watson Sr. from National Cash Register, Watson continued to adore his ex-boss. Watson’s son wrote, “Oddly, dad never complained of this treatment and revered Mr. Patterson until the day he died.” Watson told his son one day, “Nearly everything I know about building a business comes from Mr. Patterson”. As Tedlow writes – “Both men dominated their organizations. Both were big spenders on themselves and on the others. Both demanded, explicitly or implicitly, complete allegiance to their views. Both were, in a sense, totalitarians.” Tedlow shows how Tom Scott played a similar role for Andrew Carnegie.

· Psychology of turning points: One of the specialties of Tedlow is to identify one or two key turning points in one’s life and analyze them psychologically. For example, one such point Tedlow presents is the day Henry Ford announced on January 5, 1914, “The smallest amount to be received by a man 22 years old and upwards will $5 per day…” According to Tedlow, this was the point where Ford’s modesty became a thing of the past. He developed an insatiable appetite for headlines. To borrow Warren Buffett’s terminology, Henry Ford forgot about his “circle of competence”. And Tedlow concludes that from this point onwards it was all downhill for Ford. You may or may not agree with Tedlow. But I enjoyed his analysis.

· Anatomy of innovation: If a general reading about an innovation, say through wikipedia, can be compared to watching a dressed up man, then reading this book is like seeing the man in an operating theatre and a surgeon showing you the details from inside. Not everybody may like it. But for me, it is a like having a “flight simulator” to play with. If you want to know exactly at what point Eastman might have got curious about photography or how much money was he already making from his photography business before he quit his banking job or when did he realize that patents are not enough and he needed to create a brand (like Kodak) you can find it in the book with all the gory details.

“Chance favors prepared mind” is my favorite law of innovation. I found this book to be the best so far that gives a glimpse of what “chance”, “a prepared mind” and “favors” mean. Tedlow shows again and again that “success” is like any other addiction. One doesn’t know where to stop.

Personally “History” had lost to “Science” as a cool subject by a wide margin when I was in school. After reading Tedlow, it rekindled my interest in history. Thanks to Tedlow I got an opportunity to appreciate the worlds of Gita Piramal (Business Legends), Ramchandra Guha (India after Gandhi) and many more.

An article I wrote based on a story from this book:

Kodak: story of how George Eastman resolved the patent paradox

4 characteristics of an innovative culture

Last week I made a presentation on “Role of a manager as an innovation catalyst” to 50 odd managers at their company’s offsite. One manager asked me, “What are the characteristics of an innovative culture?” For some reason, I was not happy with my answer. Hence, the question stayed with me. Here is an attempt to present my view of 4 characteristics of an innovative culture in an organizational context.

Experimentation: The first sign that an organization is innovative is visible through the kind of experiments being performed. Typically experiments manifest themselves in the form of prototypes. For example, in a hospital the CEO showed me a checklist prepared by a nurse and subsequently institutionalized in all other branches. In another place, I saw a portal which sourced the latest blogs, ideas, news posted within the organization and showed it in different windows. In a place like Tihar Jail the prototype could very well be the notebooks of the inmates trying to learn alphabets (see the picture above).

Reflection: When you take the question, “How are you doing?” seriously, what you do next is called reflection. Similarly, when a team sits around after a milestone and asks, “What did we do right? What could we have done better?” it is a collective reflection. Why is reflection important? Because that is when you try to make sense out of the clutter in your mind. Only when I reflected did I realize the impact of Daniel Kahneman’s talk on “Psychology of intuition” on my thinking. Only after reflection a team may come to know the diverse set of assumptions under which development and test teams were working. Reflection is visible through the nature of communication in meetings, post project analysis reports, blogs, newsletters, quarterly communication etc.

Recognition: There are two forms of recognition: covert and overt. When an idea suggested by Paul Buchheit or David Grossman gets selected by the organization for further development it is a form of covert recognition. When Toyota announces gold, silver and bronze medals for the best innovators it is overt recognition. When TVS Motors sponsors Srinivasan to attend Kaizen conference in Malaysia that is also a form of recognition. When P&G’s feminine care division gives “Presidents Fail Forward Award” to the “team or individual that enabled the organization to significantly learn from a failure”, it also sends a message about what company values.

Collaboration: Collaboration happens at multiple levels: within a team, across teams, across business units and across companies. If “experimentation” is the first sign of an innovative culture, “collaboration” is the defining characteristic of innovation maturity. At Tihar Jail, collaboration was fostered through various communities like Legal Panchayat, Food Panchayat run by inmates. At another client, every year they form a cross-functional team and send them to the market and ask for their suggestions on the new trends and possible areas for new investments. This year I met a senior engineer who meets his friend from a different group for an hour every month to thrash out ideas – some of them turn out to be patents. I feel "collaboration" especially cross-functional collaboration is the toughest of these four to inculcate.

Related articles:

1. Edgar Schein's fundamental laws of organizational change

2. The myth of innovation DNA

When does an intervention begin? Story of Dr. Kiran Bedi’s first day at Tihar Jail

My engagement with my clients is called an intervention. It is similar to your doctor or fitness coach intervening in your regular routine through your working engagement with them. The objective is the same: help client become healthier. The question is: When does an intervention begin? There are two schools of thought. One school says that an engagement has two parts. The first one is about diagnosis which in an organization setting begins with surveys and/or interviews of various stakeholders and ends with planning of the intervention. The second part is the actual intervention. Prof. Edgar Schein belongs to the second school which says that intervention begins with the diagnosis itself i.e. with the first question you ask your client. Now, you might say, “What difference does it make?” Following story tells how much of a difference it can make.

The post of Inspector General (IG) of Tihar Jail, India’s largest prison was lying vacant for many months when Kiran Bedi was posted there. By then she had finished nine months of “paid wait” period after a full tenure as Deputy Inspector General of Police in Mizoram, in the North-East of India. The appointment was more like a “punishment posting”. One of the ex-IGs (Prison) told her, “What will you do there? There is no work there! I was IG (Prisons) many years ago; I received just two files a day. So I used to clear them from my home.”

Monday 3^rd May 1993 was Kiran’s first day at Tihar. She had made a brief visit the previous Saturday and met her direct reports. Without settling down Kiran went for a round of Prison No. 1 (there are 4 prisons in Tihar). It was just a 20-yard walk from her office. She had to pass through two giant gates before actually entering the prison wards. Wearing a uniform was not mandatory. So Kiran wore a full-sleeved pastel pathan suite topped by a waist-length Nehru jacket. “This gave me a full cover, with a sense of grace” She writes. The Superintendent of the jail, K. R. Kishore, followed her. There was no armed guard. She held a notepad in her hand to record on-the-spot observations.

As Kiran filed past the waiting prisoners, the Warders, perhaps from the force of habit, started to physically contain the prisoners without the slightest provocation from them. Some even waved their sticks menacingly the onlooking prisoners, in a gesture to show concern for her security. Kiran signaled the Warders to stop doing this.

There were blank stares all around her. Kiran stood there not knowing what expression would be most suitable for the moment. Not being in uniform had already communicated a desire of informal tone. She started wondering if our system was at all designed to help change offenders and forgive those who were willing to mend. Perhaps in continuation of the thought, she suddenly broke the silence by asking them: “Do you pray?”

No one answered.

She repeated: “I am asking you, do you pray? Please tell me.” She spoke in Hindi.

The men looked towards the Warders as if to ask them if they were permitted to speak. The Warders were confused.

Kiran moved closer to the bunch and directed the question to one inmate chosen at random.

He answered, “Yes, sometimes,” nodding his head.

“Very good. Who else does? You?” She pointed to another prisoner, again at random, getting even closer to the crouching men.

And then one after another, voices joined in saying, “Yes, I also do. I recite the path. Most of us pray at our own timings…”

Perhaps the first human contact was made. She probed on, “Would it be better if ‘we’ say a prayer together? Would you like to?”

They fell silent again. They had never prayed together.

Then one of them, with one by one the staff and the other on me, said hesitantly, “Yes…” Others nodded their heads in agreement, wanting to be part of the prayer.

She said: “All right, which prayer should ‘we’ sing together? Can you suggest one?”

Silence.

“Do you know ‘Aye Malik tere bande hum, aise hon hamare karam, neki par chalen (O Lord we are your creation/ May our actions be worthy)?” She asked.

This time there was an enthusiastic and instant response, “Yes!”

She said: “Get up to sing together.”

“Close your eyes and sing with me”

And they sang. Kiran says, “When our eyes opened, theirs and mine, I felt we had together succeeded in giving out the first signal of mutual trust which could set the pace and for our work relationship from now on”

Imagine if Kiran had sent out a survey through the Warders as the first step to gather the data!

Source: “It’s always possible: Transformation of one of the largest prisons in the world” by Kiran Bedi, Sterling publishers.

Killing an idea: The good, the bad and the ugly way

If you are serious about innovation, then killing an idea should be normal. And even if you feel, you don’t kill ideas, chances are high ideas are getting killed anyway by not allocating resources to them. So the action need not be that of commission (pulling the trigger) but could very well be that of omission (not supplying enough oxygen). Hence people serious about innovation activity don’t debate whether we should kill ideas or not. The real question is, “What is a good way to kill ideas?” In this article let’s look at the good, the bad and the ugly way to kill an idea.

The ugly: Alan Robinson and Dean Shroeder narrate this story of a lieutenant colonel in their book “Ideas are free”. In the mid 1960s, as the Vietnam War was intensifying, the lieutenant colonel put an idea into one of Pentagon’s suggestion box. His office produced a constant stream of reports for senior officers, all with the fame format – an executive summary, a table of contents, and a thick divider sheets with protruding alphabetically ordered tables to identify the various sections. The divider sheets came in standard packets of twenty six, one for each letter of the alphabet. Most reports had only 5 or 6 sections and hence only 5 or 6 dividers in each packet were used. Lieutenant colonel suggested that if one report used sections A through F, begin the next report with section G. He thought his idea would save the office several thousands of dollars every year. One day he was summoned to the office of his commanding officer.

“Is this yours?” the general asked.

“Yes, sir”

“Eat it”, the general said.

“Excuse me, sir?”

“Eat it. Now!” the general ordered. The lieutenant colonel stepped forward, took the paper from his superior, put it in his mouth, chewed it up and swallowed it. He was abruptly dismissed and nothing was ever said about it. Decades later, after that lieutenant colonel retired as army’s top generals, he still remembered the incident.

The bad: Dan Ariely is a professor of behavioural economics at Duke University and also at MIT and known more for his best-selling book “Predictably Irrational”. He narrates following incident during an interview at PurpleCar in July this year: Dan met with a group of 80 people around May-Jun 2010 from this big big software company based in Seattle. This group had been working in an incubator on some new ideas. They came up with this idea that they thought would revolutionize the computer industry. They met with the CEO a week before Dan met them and CEO told them that he’s burying the project. They had worked on it for two years and Dan felt he had never seen a more deflated group of 80 people in his life. It was bad way to just bluntly telling people that their idea is killed. The CEO did better than the army general but could do much better. How?

The good: Dan did something interesting. He asked the group, “What would you do if you were to kill a project and not deflate the project team?” Lots of ideas came up. What if the CEO allowed them to present their work? Not just the product but the thought process and ideology around it etc. and then say, “Look we have decided to cancel it but there is lots to learn from it.” Or let the team share working prototypes with people in the company and see what they feel about it (something similar actually happened with Google’s AdSense)

Perhaps Bill Packard of Hewlett-Packard (HP) understood some of this several decades ago. This is how David Hewlett recalls Bill’s “hat-wearing process” in “The HP Way”. Upon first being approached by a creative inventor with enthusiasm for a new idea, Bill immediately put on a hat called “enthusiasm”. He would listen, express excitement where appropriate and appreciation in general, while asking a few general and not too pointed questions. A few days later he would get back to inventor wearing “inquisitor” hat. This was a time for very pointed questions, a thorough probing of the idea, lots of give-and-take. Without a final decision, the session would be adjourned. Shortly thereafter, Bill would put on his “decision” hat and meet once again with the inventor and with appropriate logic and sensitivity, judgment was rendered. No wonder many HP folks remembered the method with admiration.

Searching the source of "low-cost car" idea in India

“Don’t go looking for the source of a river” goes a saying in my mother tongue – Marathi. A BBC documentary does exactly that as it traces the source of river Ganges from Gangotri to Gomukh to a trickle up the snow peaked mountains. As the documentary shows the real source is usually far more obscure and mostly impossible to find. Perhaps the same principle is applicable to ideas. The closer you look at an idea, you start seeing some other idea(s) which was a source for this idea. In this article, I will try to do to the idea of “low-cost car in India” what BBC did to river Ganges.

Today low-cost car in India is synonymous with Tata Nano. From mid 80s to 90s, it was Maruti 800. In fact, Maruti 800 was used as a reference while designing Nano. Where did Maruti idea come from? R. C. Bhargava, Chairman of Maruti Udyog Limited (MUL), tells the history of the car in his book “The Maruti story”. It is the first detailed biography of a product developed for Indian market that I have come across. Where did Maruti idea come from? It leads us to a different Maruti.

In November 1970, the Cabinet decided to manufacture a small car in public sector and discussions were held with foreign car makers, including Renault, Ford and Nissan. However, the estimate of Rs. 57 crore as initial investment turned out to be too much for the time. Instead private entrepreneurs wanting to manufacture a low-cost car were talked to. Eleven letters of intent were issued, one of those receiving the LoI was Sanjay Gandhi. Out of the 11 LoI, only three were converted into industrial licenses. Apart from Sanjay Gandhi, the other two went to Manubhai Thakkar of Vadodara and Sunrise Auto Industries of Bangalore, perhaps non-serious players by design.

Ever since his return from Britain, Sanjay had been obsessed with the idea of making a small car. He along with Captain Tillu an instructor at Delhi Flying Club, set up a workshop in 1966 in Gulabi Bagh, a congested locality in north Delhi. The workshop had minimal equipment and two mechanics. Maruti Motors Limited (a private company) was registered in 4 June 1971. Later Sanjay acquired 297 acres of land for Maruti in Gurgaon for Rs. 35 lakh. A prototype of the car was demonstrated at the India International Trade Fair in 1972. Another prototype was sent for testing to the vehicle research department of defence ministry, which gave it the certificate of roadworthiness. The car was test driven in Jammu & Kashmir, Rajasthan, Haryana, Punjab and Uttar Pradesh. Sevety-three dealers were appointed and each had to pay a deposit. Commercial production never started.

It was an impossible proposition considering the need to manufacture and procure all the required components, including gearbox and engine, locally. Two things shifted the priorities away from the project: First, the national emergency which came into force in June 1975 and subsequently Janata Party came to power in Jan 1977. And second, the aircraft crash on 23 June 1980 that killed Sanjay Gandhi. Sanjay's unfinished dream acted as an emotional force for Indira Gandhi to push government to start a small car project called Maruti Udyog Limited incorporated on 24 Feb 1981. Was Sanjay's Maruti Motors the first low-cost car project in India?

In late 1950s government formed an Ad Hoc committee on the Automobile Industry under economist L. K. Jha to look into the possibility of manufacturing a low-cost passenger car. It was meant to cater to those whose monthly salary with below Rs. 1,000. The committee, dubbed the Cheap Car Committee, studied different models and collaborators and submitted a report in 1960 laying out the criteria that should decide the model. The committee received 24 proposals from various firms including Hindustan Aeronautics, Renault, Hindustan Motors, Premier Automobiles, Telco (now Tata Motors). However, the tenure of the committee was over before it could take any action.

Does it really matter where the source of an idea is? What matters a lot more is how much impact the idea eventually makes, just like river Ganges.

Electronic Voting Machine: An innovation from Bharat Electronics Limited (BEL)

Imagine you are designing a product that will be used by several hundred million users within a matter of a few days. What do you think would be your topmost requirement? Usability? Reliability? For Electronic Voting Machine (EVM) designed by Bharart Electronics Limited (BEL), it was “security”. In a country where the election story is never complete without rigging and booth capturing, this is not surprising. Last Wednesday we got an opportunity to listen to the EVM story from Mr. I V Sarma, Director R&D, BEL at the Innovation forum meeting held at IIMB. EVM was first introduced in a Goa state election and rolled out nationally in 2004 General Election.

Security was implemented in EVM at three levels: Technical level (tamper-proof hardware and software design), operational level (security during voting process) and procedural level (throughout the deployment process). For example, the selection of EVMs for polling stations is a random process. Moreover, the machine has no operating system, no network and no external devices connected to it. Imagine a BEL product manager telling this with pride to a Nokia product manager! In spite of this, there were several court cases filed against EVM and it hasn’t lost any yet. For a detailed analysis on security of EVM and its possible loopholes, look at a recent study, “Security analysis of India’s Electronic Voting Machine” by Prasad et. al. presented at the 17^th ACM Conference on Computer and Communications Security (CCCS’10) this month.

Apart from security, what were the other challenges in developing EVM? Sarma mentioned two more:

• Simplicity: EVM had to be used for diverse and many illiterate people. Ease of use was important. Hence, the design is kept as close to the ballot paper as possible. Similarly the operating mechanism is similar to the old style. A polling officer presses a button which releases a vote and then the voter presses a button.

• Reliability: It had to work in adverse weather conditions sometimes without electricity and should be light-weight. In fact, in the last general election the kit had to be carried on a 45km trek to reach a remote destination in J&K valley.

The idea of EVM originated within BEL to automate an internal election. And then Election Commission picked it up. Guess what was the first hurdle it hit? Indian constitution didn’t permit electronic voting. So a bill had to be passed in the parliament!

What kinds of enhancements are planned to EVM? One problem with the current device is that the voter does not have any way of knowing that the vote has been cast. The new version of EVM will have a small paper strip (2 inch x 2 inch) that will fall off giving a visual cue to the voter. EVM is currently being exported to Nepal, Bhutan and Namibia. Patents are filed both inside and outside the country to protect the IPR.

So what is in the next big innovation coming from BEL? One is weapon locating radar and the other is software defined radio.

What legends learn from gambling: Warren Buffett & the Rules of the Racetrack

I don’t gamble. At least that is what I would have liked to believe. “Nice people don’t gamble” is what I was told in school and at home. But when I look back on various decisions I took – like my investment in Satyam stock or leaving the job to become self-employed – each looked no different from a gamble. What differed were the odds and the stakes. Now I no longer look at gambling as – stuff that only other people do. It is something we do all the time whether we know it or not. What do people learn from real gambling? Here is an interesting tale from the chapter titled “The rules of the racetrack” in Warren Buffett’s biography “Snowball” written by Alice Shroeder.

“Pop, there is just one thing I want. I want you to ask the Library of Congress for every book they have on horse handicapping.” This is what Warren told his dad Howard who was at that time a Congressman living in Washington D. C. Howard cribbed, “Well, don’t you think they’re going to think it’s a little strange if the first thing a new Congressman asks for is all the books on horse handicapping?” Sixteen year old Warren persisted (1946) and got several books from the library. He studied them all and created his models. Tested them on old data he found in old racing forms in North Clark Street in Chicago. Through this process Warren discovered The Rules of the Racetrack:

1. Nobody ever goes home after the first race.
2. You don’t have to make it back the way you lost it.

The racetrack counts on people to keep betting until they lose. Couldn’t a good handicapper turn these rules around and win? Warren was to discover the answer first hand soon.

Warren found a new friend to go to racetrack with, Bob Dwyer, his high school golf coach. Together they started going to the racetrack in Charleston, West Virginia. Dwyer taught Warren advanced skills in reading the most important tip sheet, the Daily Racing Form. Warren recalls, “Sometimes you would find a horse where the odds were way, way off from the actual probability. You figure the horse has a ten percent chance of winning but it’s going off at fifteen to one.”

Then one time, Warren went to Charleston by himself. And he lost in the first race. But he didn’t go home. He kept on betting and he kept on losing, until he had lost more than $175 and his pockets were stripped nearly bare. This is what Warren recalls:

“I came back. I went to the Hot Shoppe, and I treated myself to the biggest thing they offered – a giant fudge sundae or something – and there went all the rest of my money. While I ate, I figured out how many newspapers I had to deliver to make up what I had lost (Note: Warren used to deliver Washington Post in the morning). I was going to have to work more than a week to make back the money. And I’d done it for dumb reasons.

You are not supposed to bet every race. I’d committed the worst sin, which is that you get behind and you think you’ve got to break even that day. [That is when I really learned] The first rule is that nobody goes home after the first race, and the second rule is that you don’t have to make it back the same way you lost it. That is so fundamental, you know. It was the last time I ever did anything like that.”

It is time we give some respect to bookies. By the way, which school do they go to?