Category Archives: rants

Why You Should Fear the Indian Juggernaut

When you think big consulting firm, it’s likely that you still think Accenture, A.T. Kearney or McKinsey, but I’m betting it won’t be long before you think Infosys, TCS, or Wipro. The Indian firms are on the rise, and it’s not just because of the cost. They are hard-working, driven, and, most importantly, the new generation of India companies is focussed on the right skills and attitude.

If you’re a North American company, the statistics in a recent article in the Harvard Business Review on “leadership lessons from India” should scare you. The skills that Indian leaders value most are the ultimate keys to success:

  • strategic thinking, the creativity to envision and articulate a path, and the ability to guide the organization there (61%)
  • inspirational, accountable, and entrepreneurial (57%)
  • careful talent selection, grooming, and the establishment of advanced business goals (52%)

In contrast, few supported the following the skills:

  • optimizing organizational structure and articulating core values
  • understanding competitors and markets and managing outside relations

Which is what I see too much of these days. If you don’t have a functioning team, reorganizing the organizational chart for the third time in a row isn’t going to magically create cohesion and bring prosperity. Leaders don’t articulate values in meaningless mission statements, they instill them in everything they do. And while competitive intelligence is important, it’s more important to understand your customer’s problems and the type of solutions they really require. It doesn’t do any good to build a better mousetrap if the house is infested with termites. And you can’t take on the world if your own house isn’t in order.

Furthermore, while they’ve been carefully selecting, training, and elevating talent through successively challenging real world projects, you’ve been cutting your top performers left and right simply because they fall to the right of the bell curve as you’ve yet to figure out that, in today’s information economy, you need more than a warm body in a seat. While it might not make sense to pay a janitor, security guard, or even a middle manager (who does nothing but convey messages up and down the ladder) more than the median, the same does not hold true when it comes to technology. The reality is that your top talent is worth their weight in gold while your underachievers would be worth more if you instead invested their salaries in coal. (Assuming your top earners are earning their wages on merit,) This is a case where you generally have to cut those who fall to the left of the bell curve. (The ability to cut & paste HTML and CSS does not a web developer make!) One of the big reasons you’re suffering so severely is because you’re asking under-performers to do more with less, when, chances are, they couldn’t even manage before the cuts.

They’re focussed on building companies, while you’re focussed on how to maintain your seven figure salary just for showing up to work. This is one place where Europe generally gets it more than you do. While compensation structures based on performance should be unlimited, salaries should not. Executives don’t deserve ten times the salary of their reports just for showing up to work. Salary-wise, a CEO should make the same as a lowly VP, who shouldn’t make much more than his top performer. The rest of her compensation should be based on corporate performance. If she grows the company valuation by fifty million, then she gets her million dollar bonus. If the company tanks, she gets nothing but her salary. It’s ridiculous that, in this climate, executives are still getting seven and eight figures for leading their company into bankruptcy, and then multiples of that when they are shown the door. If the only way they got the new Lamborghini was to work for it, maybe we’d see some progress.

And finally, they’re focussed on long term strategy while you can’t see beyond the next quarter. That’s why even the average multinational has a life expectancy of less than 50 years and why 85% of market leaders get displaced in a recession. If we don’t return to long term thinking, then the rising multinationals in India who are looking 30 to 50 years down the road, when they surpass us in GDP, will win. And since they have almost four times as many people, it’s very likely that they’ll stay at the top when they get there.

So unless you’re going to take a page from India’s playbook, you better start fearing the Indian juggernaut. Because the way things are going, I don’t see how it can be stopped.

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If You Think Black Swans Aren’t Deadly …

Consider these recent articles about Hannibal, the rogue killer swan who has, to date, brutally murdered 15 and injured at least 22 more swans in his attempts to drown any swan that gets too close.

Why does he do this this? Unknown, but the current theory is that the water, which is brackish, salty, and quite polluted, is the cause.

Moral of the story? Keep your supply chain clean!

Remember, Hannibal is only a white swan. Imagine what the black swan will do to you if he gets you in his sites!

Are You Measuring the Right Stuff?

It’s a simple question. Are you?

I’ll give you 4:1 odds that you’re not. Why? It’s hard to know what the right stuff is, and, these days, there seems to be an overwhelming focus on quantity, and not quality, and savings, and not value.

For example, if we’re talking about e-Procurement, many organizations measure the number or percentage of invoices processed through the system. (As many of the “leading” analyst firms report that as a good measure.) Sounds good, but since the 80/20 rule is just as applicable here as anywhere else, the reality is that 20% of your invoices take up 80% of your time (due to number of line items, number of amounts that need to be checked, number of errors that need to be fixed, etc.) and 20% of your invoices represent 80% of your spend. If those invoices are not being put through the system, then it hasn’t really reduced your processing costs all that much as the most significant cost associated with PO processing is the cost of the personnel doing the processing. What you need to be measuring is the % reduction in human interaction time. If a new system only reduces human involvement by 20%, it’s not working. Sorry.

If you’re measuring year-over-year savings, you’re not measuring the right thing. If your price went down 10%, but the market price of the raw materials dropped 20%, did you do a good job? No. And if your price went up 5% while market indices went up 15%, you did a bang-up job. You have to measure performance against market average, otherwise, you don’t know how good you’re really doing.

It’s like Charles said in his recent post, “you’ll always think you [are] do[ing] a great job (until you benchmark)”. It doesn’t matter if you beat your performance goals by 50% if you’re still coming in 24th (out of 25). If you truly want to win, you have to be leading the pack, not trailing it, and for that you have to be measuring in a manner that will allow you to benchmark against the competition. (And not necessarily what the “analysts” tell you to measure.) So, are you measuring the right stuff?

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Sunk Costs ARE NOT Underwater Treasure

You’d think it would be painfully obvious that dollars sunk into historical IT investments have nothing in common with chests of Spanish Doubloons on lost underwater wrecks, but given the tendency for most organizations to hang onto their archaic IT systems, one has to wonder. Really, really wonder. Especially when many organizations are still drowning in red ink.

It’s not how much you spent on a system, it’s how much value it’s generating now. Maybe it was worth 1M a year and 2M in integration costs five years ago when it enabled you to streamline operations and shave 5M in the first 2 years, but if you’re still spending a million and not saving a single cent, then it doesn’t matter that you spent 7M — what matters is that you are spending 1M a year with nothing to show for it! Enterprise software prices have dropped considerably over the past decade while functionality has increased exponentially. Today, that Million will get you an end to end e-Sourcing AND e-Procurement suite with some professional spend analysis and category services thrown in (and then some) — a solution that could easily save you millions.

When evaluating your technology solutions, past expenditures should never enter the picture. Only current expenditures should be considered, and only in the ROI calculation. That’s all that matters — the expected return on the current solution vs. the expected return on a new solution. If a new solution has an expected ROI that is greater than the current solution (factoring conversion costs into account and amortizing them over the expected utilization period, which should never be more than a few years), you switch. It’s that simple.

And until you realize this, you’re never going to get the true analytics solutions you need to really cut costs. Remember, as I’ve been saying for years, Business Intelligence (BI) is not analytics. As echoed in this recent article on Analytics by Ritu Jain over in the Supply Chain Digest, a lot of users, industry analysts, and consultants have not fully grasped the difference between business intelligence (BI) and analytics. They continue to consider simplistic query and reporting and OLAP drill-down capabilities to be analytics, thus limiting themselves to traditional BI systems that provide simple alert, monitoring, and dashboard capabilities — and then use the erroneous sunk-cost argument to justify sticking with current systems that just don’t do the job.

And without these modern systems, the company will realize the cost savings potential of true analytical capabilities such as forecasting, data mining, predictive modeling and optimization [that] provide businesses with an understanding of why something is happening, when it can occur again, [and ] what will be the future impact of decisions, so that outcomes can be optimized. So bury your sunk costs in the history ledgers. That’s where they belong.

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You Don’t Put Up With This Crap When You’re Making a Major Purchase …

Let’s say you’re out to buy a new car, you know what you want, so you walk into the biggest dealership in the area, walk up to a salesman, point out the vehicle, and say:

“I want that one!”.

At this point the salesperson says:

“Fine Choice: Top of the line. Powerful engine. No Fade Paint Job. Exceptional Performance. I can let you have this beauty for only 40,000”.

At this point you’re a bit taken aback, because you thought the MSRP was 30,000 and you also thought there was a manufacturer’s rebate for 5,000 as part of the year end clear-out. So you go down the street to the next biggest dealership, walk up to a salesman, point out the same vehicle, and say:

“I want that one!”.

The new salesperson says:

“Excellent Choice. Solid vehicle. V6 engine. High quality paint job. Great performance. I can sell it for 35,000 and throw in service for three years.”

So you say to yourself that sounds about right, maybe the first person was confused about what car, model, and features I wanted and you decide to go back to the first dealership because you know they are bigger, move more inventory, and are more likely to be able to offer the best price. You walk up to the salesperson and say

“I just visited the dealership down the street and they said I could have that car for only 35,000.”

At this point, the first salesperson says:

“Oh, that car! Sorry, I misunderstood. I can let you have that car for only 20,000.”

At this point you say to yourself what the heck is going on here? You know that the automotive market is very competitive now. No one quotes a price above MSRP and no one drops the price, even on a luxury car, more than 20% anymore as the fierce competition for limited market share combined with the price transparency of the internet age has taken the vast majority of margin out of car sales. So if the sales person is dropping the price 50%, you know you’re buying a piece of junk that will be back in the shop every other month running up repair bills that will quickly exceed the purchase price of the car. So you get out of there as fast as you can and cut a deal with the second dealership for 27,000 after a fair round of negotiations.

In other words:

You Don’t Put Up With This Crap When You’re Making a Major Purchase …

So Why Do You Put Up With It When You’re Buying Your Enterprise Software?

It seems that not a week goes by where I don’t hear a vendor complaining about how a (certain) other vendor dropped their price by 50% or more at the last minute to steal the deal. You’re probably saying “what’s the problem with that, the customer negotiated a great deal, right”? Wrong! In many of these cases, the (certain) vendor in question literally bends the customer over the table, sticks a vacuum cleaner in their backside, and sucks out every dollar the customer has in one-time “implementation fees”, “support fees”, and “upgrade fees” as the initial quote didn’t include the “enterprise” version, didn’t include “training”, didn’t include (24/7) support, and didn’t include implementation costs, etc. (while the other vendor’s quote included all this at a price that, in the long run, would have been multiples less than the “best price”).

In other words, the next time a vendor suddenly drops their price by a ridiculous amount, tell them to take a hike — before they cut the bottoms out of all of your pockets with the knife they used to “slash” their price.

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