Resource Allocation & Strategy – Some Ideas

I teach ‘strategic management’ apart from ‘entrepreneurship’. Invariably the topic of ‘what is the most important activity of a strategist’ within the company, comes up. Without doubt, it seems to me, it is ‘resource allocation’. It involves making choices and decisions, both of which require considerable thought. Both of these look easy to people from outside, and they are the most difficult when seen through the eyes of the strategist.

So, when I saw this article from McKinsey & Co, I could not but share it with my students and colleagues. I am now sharing it here too:

Link: http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-nimble-resource-allocation-can-double-your-companys-value

It speaks of how dynamism in resource allocation can improve performance. It also suggest four principles to follow in this activity:

  1. Go Granular
  2. Focus on value creation
  3. Overcome biases
  4. Be agile

Though most of the article speaks directly to the managers / strategists of large companies, there are numerous insights for small and medium businesses too.

Happy Reading and Happy Thinking!

Most Valuable Customers?

All businesses need to identify, satisfy, delight and retain customers. But all customers are not equally valuable. While all entrepreneurs and leaders will agree on this, they find it difficult to identify which ones need more pampering than the others. To avoid risk, they shower equal love on all customers. But this ‘spray and pray’ approach has not really been valuable to the company.

Prof Peter Fader came up with a metric called ‘Customer Lifetime Value’ (CLV) to help solve this problem. Now he has teamed up with a few others to offer a tool that will help companies implement this. It is called ‘Zodiac’ (not the men’s apparel brand).

I read their interview in the Knowledge@Wharton – Link: http://knowledge.wharton.upenn.edu/article/160811b_kwradio_fader-mariychin-mp3-zodiac

Please read, even if you are a small business. It may help you find your most valuable customers. You will be surprised when you identify this list. ‘Valuable Customers’ not only buy a lot of your products but also remain verbal supporters of your product and ambassadors of your brand. So, listen to the interview and dig through your customer lists. There may be a few diamonds waiting to be discovered. They can help you grow!

India’s Youth: Demographic Dividend or Demographic Liability?

In a recent news item I read that India has close to 5 Crores (50 million) youth who are unemployed. Read this article to see this alarming trend: http://economictimes.indiatimes.com/articleshow/37623861.cms  The rate at which we are churning out graduates from our education system, this number will bloat. And this will happen gradually that we won’t notice it, until it happens. Can you imagine what will happen if they simply stay jobless for a few years? Our entire demographic dividend will become a demographic liability. Hence we need to create jobs and at a real fast pace.

Entrepreneurship is really a key tool in this process. Policy makers need to think and apply entrepreneurship in a larger context. Especially from within the educational systems. Most universities in India are still focussed on job creation. With jobs being far and few, this model of education is becoming archaic. We need more discussions on entrepreneurship within campuses. Students need to expose themselves to new trends, new careers, job technologies, etc so that they can explore taking up entrepreneurial initiatives.

It is not necessary that all of them start-up, but they can do things that are different, which can give them interesting jobs, create careers that never existed in the past decade, and may be provide for a few more jobs in their new found space. This approach is essential for society to resolve this ticking time bomb – Youth!

To avoid this time bomb from exploding an turning the much touted dividend and making it a disaster, entrepreneurship should be treated as a socio-economic tool. I am sure this alone will not solve this big challenge, but is going to be a sure tool in heading towards a solution.

Lets all think about this, because while the policy makers come up with a plan, we can do small changes in our own small ways: as parents, as teachers, as friends, as well wishers, as ecosystem players.

A good ecosystem will only enable healthy growth – let’s contribute our part.

Think about it!

Can Governments afford to pay USD2800 to simply have people stay alive?

How is that for a deal? The base pay for all people should be made USD 2800. Read news here: Base (unconditional) Income for all adults: http://www.reuters.com/article/2013/10/04/us-swiss-pay-idUSBRE9930O620131004 All you have to do is simply live and you will get USD2800. This has been an interesting referendum proposed recently in Switzerland. Why are people asking for such a basic pay? It looks like a challenge not only for people in Switzerland, but all over the world – reducing jobs! Why? I think the problem is automation. With more and more activities being automated and slowly robots taking over most mechanical tasks, too many people have not much to do. At the least, the volume of effort has come down, leading to much needed reduction in labour force. Read this article: Machines will do most of the work: http://www.innovationexcellence.com/blog/2014/06/27/the-coming-workless-future/#sthash.DFY39hP3.uxfs

Increasing competition and economic slowing down has caused many organisations to reduce workforce and invest in technology. Everyone wants cost savings. But is all this sustainable? Only time will tell. But in the near term, will governments be able to bear increasing social security costs? If developed countries have this problem, the bigger problem with developing countries is beyond cash – it is about what to do with the young minds. Can you imagine having millions of energetic youths simply sitting at home spending time playing games, tweeting, and FB’ing friends? Sadly that’s beginning to happen. Where’s the end?

Its time policy makers start thinking! Enabling entrepreneurial living and teaching people the spirit behind this is probably the only hope!

Think about it!

Reliance Industries to enter media business

The biggest deal so far in the Indian media industry. But it is another small part of the conglomerate called Reliance Industries. Why is there so much of a mixed opinion with the recent acquisition of Network18 Media by Reliance? While there seem to be many reasons to be worried about media independence, it also seems stretched. Here is a link giving reasons why media independence may die: http://www.forbes.com/sites/meghabahree/2014/05/30/reliance-takes-over-network18-is-this-the-death-of-media-independence/

Reliance has a heavy balance sheet, heavy with cash. Hence it is a big responsibility of its management to constantly seek new opportunities. Mukesh Ambani is known to be a very entrepreneurial businessman, trained personally by his dad, the legendary Indian Entrepreneur, Shri Dhirubhai Ambani. With the acquisition of the potential to launch 4G services across India (a few years ago), it was quite imminent that Reliance will need some solid content strategy. With data services expected to explode over the next decade, they have positioned themselves for this ride. So, in many ways it also seems like a interesting strategic fit for the company to have identified and picked up Network18. Here is another story showing how this deal happened: http://www.medianama.com/2014/05/223-how-reliance-industries-acquired-network18-a-detailed-timeline-of-events/

Reliance has had a competitive advantage – the ability to conceive of and implement large scale strategic projects on-time and within-costs. This makes the new 4G rollout best placed in their hands. While this will propel the data services industry to grow leaps and bounds, make people across India gain the power of information on their handsets, will it restrict the media to not speak its mind – only time will tell. But one thing that consumers can look forward to, is competitive rates for data usage in a market that seems to be exploiting consumers of information on their mobile sets. Reliance did that earlier with the launch of the mobile phone schemes; will they do it with the data revolution that is just about beginning?

Read, think and watch for only time will tell. But with more speed and possibly at a lower cost, people will be able to consume a lot more information and a lot more easily. Won’t that open up a lot more opportunities for entrepreneurs in the digital space?

Think about it!

Do MOOCs upend traditional business education?

MOOC (Massive Open Online Course) – http://en.wikipedia.org/wiki/Massive_open_online_course

Are MOOCs scaring traditional models of business education? Though the number of people enrolling for these courses seem to be on the rise, the number actually completing and gaining a certificate seem to be a let down – 3% – 5%. Here is a study that talks about this and some rather surprising trends on how MOOC’s are faring and how they may impact traditional education. Link: http://knowledge.wharton.upenn.edu/article/moocs-upend-traditional-business-education/

There are important lessons from the study for both receivers and providers of online content. It doesn’t seem like pricing for certification with the content delivered free has been a very interesting revenue model so far. But it is also important to not miss the fact that the volumes may over time justify the revenues, especially the margins.

It also looks like MOOC’s if used well could bring to business schools a fresh set of students who may add diversity to a good program. It will bring improved class discussions, perspectives, as well as greater markets to business schools. Hence it does seem a worthy experiment for most business schools to offer some form of MOOC or online courses, that students can take prior to choosing a business school. It seems like a real differentiator!

While there are no final words out on the matter of whether people would prefer to stay at home or continue in their jobs and take courses online to complete higher education – but assuming that this will be the future, seems far fetched! At least in the current context, especially in a developing country context.

It doesn’t seem like MOOC’s will replace traditional business schools in developing countries for a long time. But will B Schools use these channels as sources of drawing in more students, creating more markets for themselves is something worth watching as a trend.

Think about it!