After much deliberation, I'm ready to report that "Capitalism at the Crossroads" has joined the prestigious list of books that have helped me think deeper and clearer about the world we live in.
As a kid, I've often wondered about finding common ground between corporate profits and the common good. It was easy to view the world as a collection of evil corporations driven by profits on one side, and a bunch of unsustainable or small-scale philanthropic organizations on the other. While this perception is colored with intangibles like good and evil, we cannot deny that companies are driven by margins. If there is any room for the common good in corporate portfolios, it better be profitable. The question is not whether there is common ground between corporate profits and the common good, but whether anybody wants to find it. Stuart Hart's book urges MNCs to go hunting for that common ground by discussing the opportunities and challenges businesses have in aligning profitability, humanity and the environment.
Coincidentally, I started following Umair Haque's blog and lectures while I was reading this book. The underlying similarity between Hart's and Haque's arguments is that businesses stand to benefit more by providing real or "thick" value to their customers than by being too concerned about profitability. They urge businesses to think about the whole as opposed to the parts. These guys do so, not only with their classroom theories, but also with numerous real world examples.
Thinking about the value you might destroy while you are trying to create value seems like common sense. Try applying this thought to the simple decisions you make during the day, and very quickly, you'll realize why businesses and governments fret about the "burden" of sustainability. We know that energy can neither be created nor destroyed. Value on the other hand, can be created and destroyed. It is futile to believe that the transfer of value needs to be rewarded, for it's just NOT energy. Let's dig value creation... Profits shall follow.
Friday, July 24, 2009
Sunday, June 28, 2009
Command to Democracy
Anybody who has used Google's services has known that they run them in beta for the longest time -- Gmail has been out there for 5 years with more than 100 million users, and it's still in beta. It has become very common in the IT industry to add features incrementally to an existing service, be it in alpha, beta or gamma versions.
It's important to separate the business model from the industry in this case, to truly appreciate the value offered by this approach.
Threadless, an up and coming start-up thrives on a business model that engages the consumer at a deeper level through in-market innovation. People get to grade designs for T-Shirts. The design's grade determines whether/how it gets printed and sold. Instead of planning inventories centrally, based on market research and the judgment of a select few, the company manages its supply chain based on actual demand which is driven by real value, not perceived value.
The concept is not irrelevant beyond the internet. In fact, it was not even pioneered by internet based businesses. World Water Corporation attempted to provide water and power to developing countries, using advanced technology, by getting several central governments signed up for multi-million dollar projects. The corrupt governments impeded progress and the initiative was not successful. On the other hand, KickStart, an international social enterprise based in East Africa, managed to provide water and power in rural areas, through its Micro-Irrigation Pumps, which were co-invented with its potential consumers, to ensure value addition, acceptance and affordability. KickStart was able to accomplish what WWC set out for, primarily, by collaborating with its customers early on in the process, and on an ongoing basis.
KickStart, Threadless and Google embody the transition of business operations from Command to Democracy. Instead of running a business in a command and control fashion, they engage with customers & other stakeholders in a deeply democratic fashion. This in turn helps them run a profitable operation which at the same time is focussed on the outcome -- the value customers gain through their products and services. That's what we call Win-Win.
It's important to separate the business model from the industry in this case, to truly appreciate the value offered by this approach.
Threadless, an up and coming start-up thrives on a business model that engages the consumer at a deeper level through in-market innovation. People get to grade designs for T-Shirts. The design's grade determines whether/how it gets printed and sold. Instead of planning inventories centrally, based on market research and the judgment of a select few, the company manages its supply chain based on actual demand which is driven by real value, not perceived value.
The concept is not irrelevant beyond the internet. In fact, it was not even pioneered by internet based businesses. World Water Corporation attempted to provide water and power to developing countries, using advanced technology, by getting several central governments signed up for multi-million dollar projects. The corrupt governments impeded progress and the initiative was not successful. On the other hand, KickStart, an international social enterprise based in East Africa, managed to provide water and power in rural areas, through its Micro-Irrigation Pumps, which were co-invented with its potential consumers, to ensure value addition, acceptance and affordability. KickStart was able to accomplish what WWC set out for, primarily, by collaborating with its customers early on in the process, and on an ongoing basis.
KickStart, Threadless and Google embody the transition of business operations from Command to Democracy. Instead of running a business in a command and control fashion, they engage with customers & other stakeholders in a deeply democratic fashion. This in turn helps them run a profitable operation which at the same time is focussed on the outcome -- the value customers gain through their products and services. That's what we call Win-Win.
Sunday, June 21, 2009
Capitalism 2.0
Folks are looking for green shoots of growth and yearning for an upbeat report on the economy. Many wonder which industry would help kick start the economy. Some say it would be green tech, some say it would be high tech, and the speculation goes on... Here's an economist who says that growth will not be spurred by an industry but by an institution -- a different kind of institution.
Umair Haque observes that capitalism as it's been practiced so far has led us to this mess, and claims that it is not sustainable any longer. He suggests that a collaborative capitalism should and will replace the status quo.
The beauty of Capitalism 2.0 is that it is not anything like socialism, as some might suspect. Interestingly, it shares some traits with Web 2.0 [the long tail, wisdom of the crowds], and underscores the importance of running a business that focuses not only on income, but more so on the outcome -- the value gained by its consumers.
If you have the time, I'd suggest you watch this video from Haque's session on the same topic, with several examples [Threadless, Etsy, Nike, Walmart, to name a few] and exhibits [Global GDP Growth & Interaction explosion patterns].
Umair Haque observes that capitalism as it's been practiced so far has led us to this mess, and claims that it is not sustainable any longer. He suggests that a collaborative capitalism should and will replace the status quo.
The beauty of Capitalism 2.0 is that it is not anything like socialism, as some might suspect. Interestingly, it shares some traits with Web 2.0 [the long tail, wisdom of the crowds], and underscores the importance of running a business that focuses not only on income, but more so on the outcome -- the value gained by its consumers.
If you have the time, I'd suggest you watch this video from Haque's session on the same topic, with several examples [Threadless, Etsy, Nike, Walmart, to name a few] and exhibits [Global GDP Growth & Interaction explosion patterns].
Umair Haque @ Daytona Sessions vol. 2 - Constructive Capitalism from Daytona Sessions on Vimeo.
Sunday, June 7, 2009
Energy Policy 101
Congress has started work on The American Clean Energy and Security Act, which, if enacted, will introduce a cap-and-trade system for curbing green house gas emissions. This officially fuels a much awaited debate on climate policy in the US. In the weeks and months to come, we will hear a lot about cap-and-trade and carbon tax, their effectiveness in fighting climate change, their price and their impact on consumers, workers and investors.
This is the first of a series of posts, through which I hope to communicate what I think you should know about energy policy to make sense of the information that is thrown at you.
1. Why?
If you'd like to challenge the need for regulation in this area, you may read my previous post.
2. What?
Carbon Tax - Carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of fossil fuels based on how much carbon their combustion emits. The price of commodities that cause higher emissions will increase as a result of the tax, thereby discouraging the use of such commodities and products. The intended benefit is that users of fossil fuels will seek alternative sources, thereby spurring innovations, and the tax revenue can also be used to fund such projects. This option is praised for its simplicity and impartiality.
Cap-and-Trade - The cap is a limit on pollution in terms of emissions. An emitter would have to hold permits/allowances [1 allowance to emit 1 ton of CO2] to emit carbon. If the emitter is able to contain emissions and ends up having an allowance-surplus, they may sell/trade those emissions to another emitter, who needs additional allowances to compensate for the excessive emissions they may have produced. In effect, this option would set a limit on pollution and set a market-driven price for emissions. This approach is lauded for its certainty with respect to pollution control.
3. Why Cap-and-Trade?
It is joked that Cap-and-Trade is the politically correct option, as it doesn't have the word "tax". Jokes apart, the underlying theory behind both approaches is to somehow make the stakeholders "feel the pain", so that they take action to wean themselves off of unsustainable ways of life. In other words, there are costs associated with both approaches that consumers, workers and investors/businesses will have to shoulder in varying degrees. Given that we will have to pay for reducing emissions any way, we might as well go with the option that has a better shot at getting the job done. The implementation of either approach will have to deal with challenges such as effective redistribution of revenue, alleviation of the impact of a regressive taxation framework and most importantly promotion of innovation. While the challenges are common, what gives Cap-and-Trade its edge is that it is the plan that has a clearly stated objective -- tangible limit on emissions. Isn't it funny that something so basic is obfuscated so much?!
4. Why-How?
Before we dive into the details of the Cap-and-Trade system, and which factors determine its success, it is important to recognize that the key to success lies in the design of a system that allows for effective incentives & penalties. The design of a market is no child's play, and this is especially true, when companies are to buy and sell the "right to emit CO2". As strange as that may sound, there is an invaluable opportunity to learn from research done in this area and through experiences from the cap-and-trade systems implemented in the US for SO2 in the 90s, and in Europe for C02.
5. How?
I appreciate your commitment, if you've gotten this far... I know... all you did was skim through and look at the last paragraph! Will cover the "How?" in a separate post.
This is the first of a series of posts, through which I hope to communicate what I think you should know about energy policy to make sense of the information that is thrown at you.
1. Why?
If you'd like to challenge the need for regulation in this area, you may read my previous post.
2. What?
Carbon Tax - Carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of fossil fuels based on how much carbon their combustion emits. The price of commodities that cause higher emissions will increase as a result of the tax, thereby discouraging the use of such commodities and products. The intended benefit is that users of fossil fuels will seek alternative sources, thereby spurring innovations, and the tax revenue can also be used to fund such projects. This option is praised for its simplicity and impartiality.
Cap-and-Trade - The cap is a limit on pollution in terms of emissions. An emitter would have to hold permits/allowances [1 allowance to emit 1 ton of CO2] to emit carbon. If the emitter is able to contain emissions and ends up having an allowance-surplus, they may sell/trade those emissions to another emitter, who needs additional allowances to compensate for the excessive emissions they may have produced. In effect, this option would set a limit on pollution and set a market-driven price for emissions. This approach is lauded for its certainty with respect to pollution control.
3. Why Cap-and-Trade?
It is joked that Cap-and-Trade is the politically correct option, as it doesn't have the word "tax". Jokes apart, the underlying theory behind both approaches is to somehow make the stakeholders "feel the pain", so that they take action to wean themselves off of unsustainable ways of life. In other words, there are costs associated with both approaches that consumers, workers and investors/businesses will have to shoulder in varying degrees. Given that we will have to pay for reducing emissions any way, we might as well go with the option that has a better shot at getting the job done. The implementation of either approach will have to deal with challenges such as effective redistribution of revenue, alleviation of the impact of a regressive taxation framework and most importantly promotion of innovation. While the challenges are common, what gives Cap-and-Trade its edge is that it is the plan that has a clearly stated objective -- tangible limit on emissions. Isn't it funny that something so basic is obfuscated so much?!
4. Why-How?
Before we dive into the details of the Cap-and-Trade system, and which factors determine its success, it is important to recognize that the key to success lies in the design of a system that allows for effective incentives & penalties. The design of a market is no child's play, and this is especially true, when companies are to buy and sell the "right to emit CO2". As strange as that may sound, there is an invaluable opportunity to learn from research done in this area and through experiences from the cap-and-trade systems implemented in the US for SO2 in the 90s, and in Europe for C02.
5. How?
I appreciate your commitment, if you've gotten this far... I know... all you did was skim through and look at the last paragraph! Will cover the "How?" in a separate post.
Monday, May 25, 2009
Recession -- Not for Ideas
One would expect stronger players to thrive and weaker ones to disappear into obscurity during times of recession. The recession that we're in right now lets us hold on to higher expectations. Not only is this a time for sound business practices to be rewarded and flawed ones penalized, this is also a time for various out of the box ideas.
As businesses realize that the markets in which they operate have changed drastically and that they will stay as such for the next several years, they are taking steps to secure market share and to increase profitability. We see the emergence of trends that underscore the cognizance businesses display in catering to the needs of the thrifty consumer and in coaxing money out of the marginalized consumer. While it will be almost impossible to write about each and every event that has contributed to my inference, here are some that you might find interesting...
1. Online TV: An average American household spends $700 a year on cable/satellite and watches 15 out of 100 channels that it pays for. The recession is making many of these households wonder if this is really something they want to continue. Although 80% of American households subscribe either to cable or satellite TV today, viewership for online videos is also on the rise. A tipping point powered by the reliability of the online entertainment experience will enable the majority to cross over, giving up cable/satellite for watching shows on TV using the internet. While the cable guys [read internet service providers] are trying their best to impede progress by delaying infrastructure upgrades, several start-ups are mushrooming, taking us toward that tipping point. Options are plentiful, including, but not limited to TVs that can be hooked on to the internet, gaming consoles [Xbox, Wii] that will play online videos, custom devices [Roku] that play content from providers such as Netflix and Amazon and applications [Boxee] that aggregate content from the web and provide a social networking experience in the process. While these options cater to the consumer who is keen on a cost-effective, customized living room experience, they don't help reduce the reliance on the infrastructure needs that are being delayed by the highly competitive [sarcasm] internet service provider industry. Nevertheless, there are also businesses aiming at making the cross-over possible with the existing infrastructure! Bit Gravity, for instance is focussed on adding the "reliability" ingredient that is much needed to make the tipping point a reality.
2. State of the States: I appreciate the best intentions to avoid any traffic blockages in Atlanta's roads during the Memorial Day weekend, when many have been expected to be on the road. However, I was able to attribute the multitude of cop cars I've seen on the roads this weekend to another reason -- GA Governor Sonny Perdue signed into law increased speeding fines few weeks ago. With rising deficits, every state is trying to improve the efficiency of existing revenue streams and create some if possible. Few weeks ago, California governor, Arnold Schwarzenegger wanted to debate whether marijuana should be legalized, as that would help create a revenue stream for the state. After all, businesses are not alone in customizing revenue models.
3. Mint.com: It's no secret that the thrifty consumer likes to stay on top of expenses and save money as much as possible. That's why Mint.com is enjoying 3000 new memberships everyday. It's giving Quicken and Microsoft Money a run for their money, by providing an online tool to manage personal finances, free of cost. Using the valuable spending patterns that you share with the web site, it presents customized offers from various financial institutions, thereby fulfilling the business's revenue needs. The recession has increased the population that feels the urge to be cost-effective. Innovators are capitalizing on this relative adversity and putting in place revenue models that benefit those who want to save.
4. For Sale: While folks are having enough of a hard time finding the right price for carbon, here is Nobel laureate Gary Becker floating the idea of finding the right price for an immigrant's American Dream -- yes, a price tag on US citizenship. He expects you to find this radical and repugnant at first, but explains that you might feel different once you get familiar with the idea: Becker advocates a price [TBD - prices mentioned in the article range from $20,000 - $50,000] that will ensure that the approach fulfills the following goals:
a. provide an opportunity for several illegal immigrants to get legalized
b. attract talented immigrants
c. provide a revenue stream for the country
d. reduce the likelihood of illegal immigration.
Becker also talks about a loan system to encourage those who cannot afford a down payment of $50,000 for the American Dream.
While this idea itself may not have anything to do with the recession, I'm wondering if #c may increase the attention the idea receives, in light of the economic times we live in.
It's hard to generalize if it's a good time to be a buyer or a seller. It doesn't hurt however to be an observer, if that's all you'll ever be!
As businesses realize that the markets in which they operate have changed drastically and that they will stay as such for the next several years, they are taking steps to secure market share and to increase profitability. We see the emergence of trends that underscore the cognizance businesses display in catering to the needs of the thrifty consumer and in coaxing money out of the marginalized consumer. While it will be almost impossible to write about each and every event that has contributed to my inference, here are some that you might find interesting...
1. Online TV: An average American household spends $700 a year on cable/satellite and watches 15 out of 100 channels that it pays for. The recession is making many of these households wonder if this is really something they want to continue. Although 80% of American households subscribe either to cable or satellite TV today, viewership for online videos is also on the rise. A tipping point powered by the reliability of the online entertainment experience will enable the majority to cross over, giving up cable/satellite for watching shows on TV using the internet. While the cable guys [read internet service providers] are trying their best to impede progress by delaying infrastructure upgrades, several start-ups are mushrooming, taking us toward that tipping point. Options are plentiful, including, but not limited to TVs that can be hooked on to the internet, gaming consoles [Xbox, Wii] that will play online videos, custom devices [Roku] that play content from providers such as Netflix and Amazon and applications [Boxee] that aggregate content from the web and provide a social networking experience in the process. While these options cater to the consumer who is keen on a cost-effective, customized living room experience, they don't help reduce the reliance on the infrastructure needs that are being delayed by the highly competitive [sarcasm] internet service provider industry. Nevertheless, there are also businesses aiming at making the cross-over possible with the existing infrastructure! Bit Gravity, for instance is focussed on adding the "reliability" ingredient that is much needed to make the tipping point a reality.
2. State of the States: I appreciate the best intentions to avoid any traffic blockages in Atlanta's roads during the Memorial Day weekend, when many have been expected to be on the road. However, I was able to attribute the multitude of cop cars I've seen on the roads this weekend to another reason -- GA Governor Sonny Perdue signed into law increased speeding fines few weeks ago. With rising deficits, every state is trying to improve the efficiency of existing revenue streams and create some if possible. Few weeks ago, California governor, Arnold Schwarzenegger wanted to debate whether marijuana should be legalized, as that would help create a revenue stream for the state. After all, businesses are not alone in customizing revenue models.
3. Mint.com: It's no secret that the thrifty consumer likes to stay on top of expenses and save money as much as possible. That's why Mint.com is enjoying 3000 new memberships everyday. It's giving Quicken and Microsoft Money a run for their money, by providing an online tool to manage personal finances, free of cost. Using the valuable spending patterns that you share with the web site, it presents customized offers from various financial institutions, thereby fulfilling the business's revenue needs. The recession has increased the population that feels the urge to be cost-effective. Innovators are capitalizing on this relative adversity and putting in place revenue models that benefit those who want to save.
4. For Sale: While folks are having enough of a hard time finding the right price for carbon, here is Nobel laureate Gary Becker floating the idea of finding the right price for an immigrant's American Dream -- yes, a price tag on US citizenship. He expects you to find this radical and repugnant at first, but explains that you might feel different once you get familiar with the idea: Becker advocates a price [TBD - prices mentioned in the article range from $20,000 - $50,000] that will ensure that the approach fulfills the following goals:
a. provide an opportunity for several illegal immigrants to get legalized
b. attract talented immigrants
c. provide a revenue stream for the country
d. reduce the likelihood of illegal immigration.
Becker also talks about a loan system to encourage those who cannot afford a down payment of $50,000 for the American Dream.
While this idea itself may not have anything to do with the recession, I'm wondering if #c may increase the attention the idea receives, in light of the economic times we live in.
It's hard to generalize if it's a good time to be a buyer or a seller. It doesn't hurt however to be an observer, if that's all you'll ever be!
Sunday, May 17, 2009
What is Creative Tension anyway?
It never occurred to me [until now] that I should bother to say why I named my blog Creative Tension. So here we go...
I read about Creative Tension in Peter Senge's phenomenal work, The Fifth Discipline: The Art and Practice of the Learning Organization. I must say that this is as much a book for individuals, as it is for organizations. You can learn more from Senge, than you can from any "self-help" guide.
Typically, there is a distance between where we are today and where we envision ourselves being, in due course. This is why we journey and this is that which makes the journey worthwhile. Senge says that the disparity between where we are today [reality] and where we envision ourselves being [vision], gives rise to a "tension" between the two. This tension is "creative" because it energizes us to get a better sense of reality and to work toward the vision.
In business, politics and in personal spaces, we see people in pursuit of generating and sustaining creative tension. In this blog, I intend to share my observations of such pursuits.
I read about Creative Tension in Peter Senge's phenomenal work, The Fifth Discipline: The Art and Practice of the Learning Organization. I must say that this is as much a book for individuals, as it is for organizations. You can learn more from Senge, than you can from any "self-help" guide.
Typically, there is a distance between where we are today and where we envision ourselves being, in due course. This is why we journey and this is that which makes the journey worthwhile. Senge says that the disparity between where we are today [reality] and where we envision ourselves being [vision], gives rise to a "tension" between the two. This tension is "creative" because it energizes us to get a better sense of reality and to work toward the vision.
In business, politics and in personal spaces, we see people in pursuit of generating and sustaining creative tension. In this blog, I intend to share my observations of such pursuits.
Saturday, May 16, 2009
Ready to lead
With what looks like a healthy combination of strategically planned research, innovative technology & government subsidies, China's BYD Auto pulled it off -- the first plug-in hybrid.
China is well known as an amazing follower with its unrivaled production & consumption capacities on one hand and cheap & committed labor on the other. Now, the China-watchers have something else to talk about -- China, the follower, who is ready to lead.
China's rapid mass-urbanization has challenged the country to create sustainable solutions to control the demands placed on its natural resources by today's technologies. The country is aiming high [higher than the US] in terms of fuel efficiency standards and renewable energy usage levels. The result is that China has not only produced inexpensive plug-in hybrids with indigenous talent, but has also built ultra-efficient power-plants that reuse "wasted heat", by collaborating with Western multinationals.
It's green tech initiatives such as these, that's gotten folks wondering how one could compete with China. In today's globalized world, China masquerades as many a character -- valuable customer to the multinationals that want access to its market, low-cost supplier to firms that want to reduce production costs, collaborator & competitor to those innovating the next big thing. Needless to say, seldom does one country gets to play these roles, at the same time. While there's plenty to be said about the synergies that exist and those that can be leveraged, I'll conclude this post with one thought -- this follower is ready to lead.
China is well known as an amazing follower with its unrivaled production & consumption capacities on one hand and cheap & committed labor on the other. Now, the China-watchers have something else to talk about -- China, the follower, who is ready to lead.
China's rapid mass-urbanization has challenged the country to create sustainable solutions to control the demands placed on its natural resources by today's technologies. The country is aiming high [higher than the US] in terms of fuel efficiency standards and renewable energy usage levels. The result is that China has not only produced inexpensive plug-in hybrids with indigenous talent, but has also built ultra-efficient power-plants that reuse "wasted heat", by collaborating with Western multinationals.
It's green tech initiatives such as these, that's gotten folks wondering how one could compete with China. In today's globalized world, China masquerades as many a character -- valuable customer to the multinationals that want access to its market, low-cost supplier to firms that want to reduce production costs, collaborator & competitor to those innovating the next big thing. Needless to say, seldom does one country gets to play these roles, at the same time. While there's plenty to be said about the synergies that exist and those that can be leveraged, I'll conclude this post with one thought -- this follower is ready to lead.
Saturday, March 28, 2009
Earth Hour -- Finger, not the Moon
Earth Hour began in Sydney in 2007, when 2.2 million homes and businesses switched off their lights for one hour. This year, Earth Hour has been transformed into the world’s first global election, between Earth and global warming. In order to cast your vote for Planet Earth, you need to turn off your lights at the minimum between 8:30 PM and 9:30 PM today.
In December 2009, world leaders will meet at the Global Climate Change Conference in Denmark and discuss strategies that would replace the Kyoto Protocol. The WWF are trying to provide the results from today's "election" as evidence to the widespread urge across the world to take action against global warming.
While it is pretty straightforward to understand why WWF is promoting this effort, it may be worthwhile to examine the skepticism surrounding it.
1. Hour of no power will increase emissions:
Bjorn Lomborg, author of Cool It and The Skeptical Environmentalist argues that people resorting to candles during the Earth Hour will emit more carbon and pollute the air further, as candles are almost 100 times less efficient than incandescent light globes, and more than 300 times less efficient than fluorescent lights. If you use one candle for each extinguished globe, you're essentially not cutting CO2 at all, and with two candles you'll emit more CO2. Moreover, candles produce indoor air pollution 10 to 100 times the level of pollution caused by all cars, industry and electricity production.
There are some skeptics that say that the publicity done for the program will increase the emissions more than what can be saved in that one hour.
2. How can we measure the success of this effort?
This is not a controlled experiment, and it will not be possible to accurately determine the reduction in emissions or the number of people who participate in Earth Hour 2009.
However, there have been several efforts in progress to encourage people to measure their carbon footprint, so that individual lifestyle changes may have a positive impact on global emissions eventually. Ranging from online applications on Facebook that help track your footprint based on your lifestyle to workbooks that help monitor and control emissions based on your energy usage, there are plenty of resources you can tap into, if you're committed to making environment friendly decisions.
3. To-be or not to-be?
Many have been intrigued at the idea of measuring the impact of Earth Hour on emissions. If you're one of them, you'd be depressed to read this paper, which reports that individual lifestyle changes done during the Earth Hour are not effective in reducing emissions.
The Buddha said "Don't Mistake the Finger Pointing at the Moon for the Moon". It is important to recognize that this is a symbolic effort aimed at conveying a message. If more than a billion people across the world, from the Las Vegas strip to Sydney participate in an effort, it indisputably sends a message. Earth Hour is not poor symbolism, as long as it does not [and it will not] increase emissions drastically.
So, I will vote for Planet Earth, not by turning my lights off during that 1 hour, but through this post, for it is important that you and I recognize Earth Hour as the finger pointing at the moon, and send a message to our leaders that we need to act on global warming. From breathing to breezing through the street, everything we do emits carbon. It is not going to be easy to reduce emissions. Bjorn Lomborg argues in the same post, that "each nation should sign up to spend 0.05 per cent of its gross domestic product on low-carbon energy research and development. The total global cost would be 10 times greater than present spending, yet be 10 times less than the cost of the Kyoto Protocol on carbon emission reductions. This response to global warming is a realistic, achievable one."
Needless to say, there's many a mile between the finger and the Moon. Let the journey begin.
Monday, March 9, 2009
I am Pat, and You need a Nudge?
Happy St. Patrick's Day, but this post has little to do with that!
Human Impact (I) on the environment equals the product of population (P), affluence (A: consumption per capita) and technology (T: environmental impact per unit of consumption).
With growing global population, rise of the middle-class in India, China and in other emerging economies, and the use of unsustainable technology, the human impact on the environment is set to grow on an ongoing basis. Thomas Friedman illustrates the exponential growth of this impact with interesting examples, in his recent book "Hot, Flat and Crowded". One scenario that caught my attention was the impact of giving a light bulb to each of the billion people who will be born between now and 2020 -- 20 new 500-megawatt coal-burning power plants.
We need to change the ways [technology] in which we produce, consume and recycle products that we choose not to consume, in order to minimize the impact that we have on the environment. While incremental improvements in technology can be helpful, you can imagine that it may not be sufficient to reverse the impact growing population and affluence will have on the environment. So, what we need is a series of breakthrough innovations in several industries that will promote a more sustainable product life cycle.
Businesses are driven by profit, and they tend to resist creative destruction, as breakthrough innovations often come with risks. To promote sustainability, governments across the world have come up with regulations for several decades and have learnt that the best mechanism is to provide a market based "nudge" to businesses. Carbon Tax and Cap and Trade are popular nudges that have been debated extensively. Operative word -- extensive. Will dive deep into that debate in my next post. Signing off for now, Pat.
Human Impact (I) on the environment equals the product of population (P), affluence (A: consumption per capita) and technology (T: environmental impact per unit of consumption).
With growing global population, rise of the middle-class in India, China and in other emerging economies, and the use of unsustainable technology, the human impact on the environment is set to grow on an ongoing basis. Thomas Friedman illustrates the exponential growth of this impact with interesting examples, in his recent book "Hot, Flat and Crowded". One scenario that caught my attention was the impact of giving a light bulb to each of the billion people who will be born between now and 2020 -- 20 new 500-megawatt coal-burning power plants.
We need to change the ways [technology] in which we produce, consume and recycle products that we choose not to consume, in order to minimize the impact that we have on the environment. While incremental improvements in technology can be helpful, you can imagine that it may not be sufficient to reverse the impact growing population and affluence will have on the environment. So, what we need is a series of breakthrough innovations in several industries that will promote a more sustainable product life cycle.
Businesses are driven by profit, and they tend to resist creative destruction, as breakthrough innovations often come with risks. To promote sustainability, governments across the world have come up with regulations for several decades and have learnt that the best mechanism is to provide a market based "nudge" to businesses. Carbon Tax and Cap and Trade are popular nudges that have been debated extensively. Operative word -- extensive. Will dive deep into that debate in my next post. Signing off for now, Pat.
Sunday, March 8, 2009
Ford's Get Well Plan
Following up on my previous post, I tried to read about Detroit's reinvention/rescue plans. Ford emerged as the only beacon of hope. While I must admit that I did not follow any rigorous research procedure to follow the trend, I'd be surprised to learn otherwise, even if I had.
Incremental improvements are just as important as breakthrough innovations. Ford seems to have gotten this straight in its approach toward addressing the current crisis. Needless to say, this approach can help any company to its better days, especially when operations are aligned with the right vision. While Ford's share may not reflect this promise, it is very much a promise today -- untested, but full of potential.
Ford Explorer's 2011 model is on a diet plan to shed more than 150 pounds, with lighter weight steel. The plan also involves an "Ecoboost" engine that leverages sophisticated software from the 21st century and fuel efficiency techniques that date back to 1940s. It seems that these technologies could allow Explorer to supercede Toyota's Highlander Hybrid in highway fuel economy.
Even the best hybrid cars come at a premium today, and the return on investment is not clearly superior to that of regular cars that are otherwise fuel efficient and of high quality. There is a lot of buzz about electric cars, but it would be wishful thinking to hope that we will somehow be able to leapfrog both the technology and the cost differential at the same time. Given that the average car-buyer will try to get the most bang for her [based on Mark Penn's comments on car-buying soccer moms who represent the majority of car-buyers in the US, from his book Microtrends] buck, and that she will do so in a time when global sustainability will be put to test, with rising demand for oil and other commodities across the world, the demand for a fuel efficient automobile should be on the rise. This should be the case, at least for the next decade, assuming that we will have cost effective options that are also fuel efficient, by then.
There is a demand, and Ford seems to be eager to supply. Will the sale happen? That is anybody's guess at this time. All I can say is that Ford is full of promise today.
Incremental improvements are just as important as breakthrough innovations. Ford seems to have gotten this straight in its approach toward addressing the current crisis. Needless to say, this approach can help any company to its better days, especially when operations are aligned with the right vision. While Ford's share may not reflect this promise, it is very much a promise today -- untested, but full of potential.
Ford Explorer's 2011 model is on a diet plan to shed more than 150 pounds, with lighter weight steel. The plan also involves an "Ecoboost" engine that leverages sophisticated software from the 21st century and fuel efficiency techniques that date back to 1940s. It seems that these technologies could allow Explorer to supercede Toyota's Highlander Hybrid in highway fuel economy.
Even the best hybrid cars come at a premium today, and the return on investment is not clearly superior to that of regular cars that are otherwise fuel efficient and of high quality. There is a lot of buzz about electric cars, but it would be wishful thinking to hope that we will somehow be able to leapfrog both the technology and the cost differential at the same time. Given that the average car-buyer will try to get the most bang for her [based on Mark Penn's comments on car-buying soccer moms who represent the majority of car-buyers in the US, from his book Microtrends] buck, and that she will do so in a time when global sustainability will be put to test, with rising demand for oil and other commodities across the world, the demand for a fuel efficient automobile should be on the rise. This should be the case, at least for the next decade, assuming that we will have cost effective options that are also fuel efficient, by then.
There is a demand, and Ford seems to be eager to supply. Will the sale happen? That is anybody's guess at this time. All I can say is that Ford is full of promise today.
Sunday, February 1, 2009
Minding your own business
Jeff Jarvis argues in his book What Would Google Do? that Detroit should learn the power of collaboration and open design from Google. While there are challenges in implementing a cost-effective business model around collaborative automobile design and production, perceiving the concept with an end-of-the-pipeline mentality doesn't help either.
CarZen provides an excellent recommendation service that suggests cars that suit a buyer's needs. I was reminded of the innovative supply chain model that Dell pioneered during its initial days of glory -- letting customers make their own computer, and assembling the personalized computer through JIT inventory management. Detroit may not be eager to merge CarZen's recommendation service with Dell's personalized assembly line to make cars that serve unique customer needs.
Nevertheless, it is important that auto makers understand the business they're in. As Rishad Tobaccowala of ad giant Publicis points out, auto makers ironically are not in the business of making automobiles, but in the business of Navigation and Entertainment. Given that people need to navigate from point A to point B, and spend considerable time doing so, it should be a no-brainer that adding value in the process of fulfilling these needs should help differentiate and reap profits.
When McDonald's founder Ray Kroc asked a group of B-School graduates "What business do you think I'm in?", the graduates thought that he was just fooling around. Ray surprised them claiming that he was not in the business of flipping hamburgers, but in the business of real estate. He went on to detail that the focus of his business plan was to sell hamburger franchises, and that the location of those franchises was key to their success. We know that McDonald's doesn't make the best burgers in the world, nor does it provide the best dining experience. Yet, it takes some pondering to determine the actual business that a player is in. Recognition of the basics can be a profound experience, and can indeed be transformed into a black swan with the right execution strategies.
The idea of a personalized car may be romantic, to say the least, and may not be Detroit's silver bullet even in this era of personalization. Meeting energy efficiency goals stipulated through regulations screams "end-of-the-pipe" and may come at a cost [if not approached holistically]. It needs to be said that leaders identify themselves not by following the fads of the day, but by identifying their purpose for existence and by changing the way the world operates, not due to an urge to do so, but simply by following function.
CarZen provides an excellent recommendation service that suggests cars that suit a buyer's needs. I was reminded of the innovative supply chain model that Dell pioneered during its initial days of glory -- letting customers make their own computer, and assembling the personalized computer through JIT inventory management. Detroit may not be eager to merge CarZen's recommendation service with Dell's personalized assembly line to make cars that serve unique customer needs.
Nevertheless, it is important that auto makers understand the business they're in. As Rishad Tobaccowala of ad giant Publicis points out, auto makers ironically are not in the business of making automobiles, but in the business of Navigation and Entertainment. Given that people need to navigate from point A to point B, and spend considerable time doing so, it should be a no-brainer that adding value in the process of fulfilling these needs should help differentiate and reap profits.
When McDonald's founder Ray Kroc asked a group of B-School graduates "What business do you think I'm in?", the graduates thought that he was just fooling around. Ray surprised them claiming that he was not in the business of flipping hamburgers, but in the business of real estate. He went on to detail that the focus of his business plan was to sell hamburger franchises, and that the location of those franchises was key to their success. We know that McDonald's doesn't make the best burgers in the world, nor does it provide the best dining experience. Yet, it takes some pondering to determine the actual business that a player is in. Recognition of the basics can be a profound experience, and can indeed be transformed into a black swan with the right execution strategies.
The idea of a personalized car may be romantic, to say the least, and may not be Detroit's silver bullet even in this era of personalization. Meeting energy efficiency goals stipulated through regulations screams "end-of-the-pipe" and may come at a cost [if not approached holistically]. It needs to be said that leaders identify themselves not by following the fads of the day, but by identifying their purpose for existence and by changing the way the world operates, not due to an urge to do so, but simply by following function.
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