Evolution of Automation

As the nature of work has changed, so too have the methods of automation. Robotic process and intelligent automation tools can help businesses improve the effectiveness of services faster and at a lower cost than current methods.

Automation Technologies applied to our day-to-day activities in Business and IT operations have been evolving over a period of time. Starting from mere “scripts” (to automate mundane and repetitive tasks) to “orchestrations” automatic work flows and run-books and now Robotic Process Automation and Artificial Intelligence powered techniques that automates part of human reasoning/ decision making process, automation technologies have come a long way.

We are at a juncture today where technologies such as Robotic Process Automation (RPA) is going main-stream and disrupting the Business Process deliveries. Virtual Assistants are becoming real. IT Process Automation is getting to the next level with Autonomics and supported by AI-Powered technologies. In other words, Automation is fast becoming the next leap we can take to achieve better growth in the following years to come.

Process Automation and AI-Powered Technologies bringing reduced cost of delivery, higher quality and faster time to market. With adaptability and awareness, rpa is capable of automating activities that once required human judgment. Adoption of Autonomics and Cognitive technologies in IT operations are on the rise. Digital labour is getting real. Humans and machines co-exist for the increase of business efficiency.

Among leaders in the automation industry, robotic process automation is perceived as “offering unique capabilities and advantages over previous technologies.” The benefits of robotic process automation (RPA) are considerable. As it stands, around a quarter of back office workers spend time performing tasks that are repetitive and rule-based. Those tasks can, in many instances, be automated by robotic processes that are up to three times faster than the average human, work around the clock, are more accurate and are consistently available. The cost for the RPA now comes in at around one-third as much as an offshore employee and one-fifth as much as onshore staff. Furthermore, RPA can be easily scaled based on requirements, and therefore do not require the complexity of employment conditions.

The growth of RPA is happening quickly. RPA adoption and innovation is happening in a manner similar to the growth of business process outsourcing (BPO) and shared services markets twenty years ago, but it is accelerating and intensifying much more quickly. And as we look to history to help us predict the future, we cannot deny that automation; in particular, robotic process automation is today’s version of outsourcing – unstoppable.

Success Vs Procrastination

We all do come across people who daily face a vast rift between what they fully intend to do and doing it, in all facets of their lives. Just to clarify - Prioritization of work and therefore, delaying any work because some other is more important can certainly not be referred to as procrastination. While few don’t have any reason for procrastinating since it after certain duration gets imbibed in their habit and daily work-style. One speculation of procrastination is that few people like the adrenaline rush of postponing things to the last hour and find excitement in it. I am sure this rationality will find very few buy-ins.

 

Another logical rational follows: the fear of failure generally accentuates to more failure. The fear of failure often paves way to procrastination. One thing the fear of failure will never lead to is success. Pushing the "go" button may not guarantee success but it opens chances for you to succeed. On the contrary, having your foot on the brakes will never get you anywhere. Your odds of succeeding always go up when you just go for it simply because you already have the conviction of succeeding rather than having the outlook of fear. You will find yourself engulfed in a catch-22 situation - if you focus on not failing, in the end, you're really focusing on failing. The fear of failure will never drive you toward success. In fact, the fear of failure will push you farther away from success. The only way to move forward in your life is to get your foot off the brakes, and press the "go" button. Stop running away. Stop focusing on fear. Stop focusing on failure.

This leads to conclusion that procrastination is significantly associated with human psychology and therefore, opens gates for further discussion. Often success in any sphere means transformation or change and people are apprehensive about or reluctant to any kind of change. This is quite common and nothing peculiar about it. A very practical way of overcoming this obstacle is to be adaptive and learn to embrace change. Try to gauge what this change will bring about – more often than not one will realise the positives outweigh the negatives.

 

The road to success passes via good planning, commitment, punctuality and of course, hard work. Procrastinating things/work may lead to excitement, experience of working under pressure and sometimes, to success but it is definitely not the safest and surest way to success. In life, you should avoid one big risk at all costs, and that is the risk of doing nothing. Procrastination assassinates the opportunity in your hand. It will always keep you caught in the web of yesterday and consequently, you will never be able to move to today (forget about tomorrow). The best way to do something is to begin. To conclude, I will borrow a quote which I read few days back “Procrastination is like a credit card: it's a lot of fun until you get the bill.”

Mantra of building and sustaining a Thriving Practice

The ease of delivering work remotely and the opportunity to control the type and amount of work you do are key trends that have led to verticalisation of practices and nowadays emergence of independent consulting/practices. I, myself, having established a consulting boutique which was short-lived and then presently working as a Practice leader in a Global conglomerate have myriad intricacies of establishing and growing a practice. Each practice is uniquely defined by experience, specializations and clients served, but all business/practice leaders share the challenge of building and sustaining a thriving practice.

Sell results, not services: Keep clients laser-focused on the lasting value you create, and bill based on scope of work and end results. Provide a range of possible cost scenarios and value-adds what you have offered or can offer. Presenting a mix of case studies, testimonials, and client showcases can also prove a powerful business driver--prospective customers want to see what you've done, so they know what you're capable of doing.

Flexible Structure: Business will wax and wane. And because no two projects are alike, you must remain flexible by cultivating a freelance support network. Use contractors from varied industries and disciplines who can introduce additional expertise and perspective. This approach also lets you reduce overhead, minimize risk, and better staff projects to meet clients' needs. You can also look for strategic alliances and partnerships (e.g. product partnerships, etc.)

Initially don’t try to be jack of all trades: Understandably, most businesses are revenue driven and in an attempt to meet the (revenue) target, we have tendency to go after anything to raise the figures in the balance-sheet. Though it is wise to diversify only after you have established your mark/brand and then you are looking other horizons to grow. It may prove lethal/ suicidal to venture into unknown/lesser known domains even when you have not established your practice. Over-aggression can sometimes engulf your own practice. The crux is to excel with your core-competency (what your practice is known for) first.

 

Solid and robust business plan: The rules of the game might have changed but few things remain the same. You need to have a robust business plan which considers most of the possible scenarios, what-if situations, plan-A,B. A reality check here – there is no fool-proof plan. A robust business plan is a well-thought strategy and therefore, reduces the chances of probability.

 

Networking still works: Develop and nurture a strong network. Most successful consultants receive the majority of work from their trusted network. It is indispensable to create an environment that provides you with an ongoing flow of opportunities. Attend networking events, utilize blogging and social media, or create an email newsletter to keep your network up to date. There are many ways to build and nurture a strong network, but the key is to be active. More importantly, develop strong relationships with existing/old customers who can refer you to new ones and at the same time reward you with you more work

 

Excellent core team: Ultimately, it is your team which is going to deliver. Everything can prove to be a marketing gimmick if you team fails to deliver. This makes it paramount to handpick your core-team who has to play a pivotal role in expansion of the practice.

Despite making sure that you have ticked all the above boxes, a lot of the success depends on your leadership and your instincts. You need to have a vision and definitely passion for what you are doing else you will find yourself changing the lane every now and then and frequent change in lane can be fatal (for business).

Selection of Vendors while Outsourcing - Look Under the Surface

Selecting an outsourcing vendor implies a complex process to gauge not only what the provider can do, but also the way it’s done. If your organisation’s assignment falls in the wrong hands, it could endanger organisation’s strategic plans. In return, with a well-selected provider, you will see savings, enhanced product value, and greater speed to market, thus giving your business a competitive edge. Therefore, effective and meticulous due diligence of each vendor is of extreme significance, having high impact on the business and the future plans of the organisation. Today we rarely buy anything without doing our comprehensive research. The story is no different while selecting a vendor – we need to perform a detailed under the surface study as we do while estimating the size of an iceberg.

Generally, Request For Information (RFI) is issued when a company seeks to gain market intelligence regarding options available to meet its requirement. Typically the company enquires the vendors about services they could potentially provide, what differentiates them from other vendors in the marketplace, etc. With an RFI the company does not state a particular intention to award a contract. However, since responding to an RFI is time-consuming for suppliers, generally suppliers will only respond to the RFI if they expect that the buyer will eventually issue an RFP or RFQ.

Web research does provide us some of the key areas to rate a vendor on, such as company overview, market expertise, strengths, etc. All these things can be commonly found after some basic research, and a few discovery demonstrations. Nevertheless, we still see cases where a company has selected a vendor, and that vendor continues to fail on their delivery of the solution. You would think that these failures would be picked up on during their extensive, informed research, but there is more to a company than the aforesaid points. Here we discuss few additional factors to consider when selecting a vendor while outsourcing a business process, service, etc.—those that go beyond pricing, features, and tools.

Financial Health: As mentioned earlier, it is criti­cally important to examine and evaluate the vendor’s financial well-being as well as their services. Today, mergers and acquisitions have become so common that it is not rare that a company’s control is sometimes in the hands of VCs. Venture capital investment, loans and lines of credit to keep operations going—many more complications which necessitates to examine the financial details of the vendor.

i. Search the Web: Look for press releases from investors on your vendor, and read carefully on whether the investment firm is providing capital, or actually purchasing the vendor. Do basic read of the company profile through trusted agencies e.g. D&B, Gartner, etc.

ii. Scrutinize Debt to Equity Ratio: Core finance people would easily understand this while for others, let me quickly explain - this is a swift way to see the financial health of an organization without prying into their books. The Debt to Equity ratio will indicate how much they owe versus how much they own. Understandably, companies with low debt to equity ratio are preferred.

iii. Analyse Annual Growth Rate: Analysing annual growth rate for a horizon of 3-5 years would be good. It provides a more accurate depiction of how the company has fared financially over the past few years. Another similar parameter to study would be annual net income growth rate for the same period.

iv. Cash Flow details: Sometimes companies go bankrupt despite having good annual growth and income. Shortage of cash aggravates the survival, eventually making the go kaput.

Referrals: Besides looking for case studies, it is recommended to get some referrals from some of their customers. This is a good yardstick to gauge their capability, credentials, scalability, quality of workforce, global and functional/industry exposure – this can be inferred from the referrals and the customers they have. Remember, selecting right vendor is important not only as an investment in a solution but it can also be an investment in the people within the vendor-company. Multiple inputs from their customers add dimensions to the vendor (e.g. implementation track record, consulting assignments, etc.) and also give you an indication of the health of the company.

PoCs and Workshops: If you find two vendors at par, then it might be time to suggest a workshop or proof of concept. These are typically 1-2 day engagements with the vendor whereby you give them a simple set of requirements, and ask them to implement it on a small scale. This demonstration makes it powerful and you can get a glimpse of how your future relationship with the vendor will be, and how they work when implementing your solution/business process.

In the contemporary digital world where information is available at behest of our fingertips, there are still those data points that are not publicly known, and getting the right answers can make a big difference in your decision. So it’s important to do your research. Lastly, remember that outsourcing is a long-term relationship, and choosing the right vendor is crucial to meeting your technology, business, and financial objectives. If you base your decision on following the steps above, you will eliminate (or at least minimize) the risks of engaging in a wrongly-selected affiliation that can not only fail to improve your business, but even do harm.

Intricacies of Family Run Enterprises

When we say family business, the first thing most of us envisage or visualise is a small or mid-size company with local-market focus and concentrating on one-business space, at the same time companies having similar problems such as arguments over succession-planning. Now wait a minute before you continue with same notion. Think about the top big companies. Walmart, Ford, Samsung, LG, Fiat, News Corp, Tata Group, Marriott, Reliance Industries and Cargill – these are few companies tasting success globally and are family businesses. Few of them have thrived in diversifying selling from salt to software and from textiles to vehicles.

Let me give few more facts which may reveal more things. Family firms account for up to 90% of businesses in the world - and in several nations, these companies are a strong and durable support of the economy. The contribution of older, long-established family firms to a nation's economy is excessively greater than that of many public firms. As per BCG, the family firms contribute more than 30% of all companies with revenues exceeding $1 billion. A Morgan Stanley study shows that family firms generated Return on Equity of 18.5% as compared to 14.1% from non-family corporations. The sustainability of family businesses is another feature. Few of the oldest companies are family owned business e.g. Faber-Castell (8^th generation), Moller Group (7^th gen), Kongo Gumi (46^th generation, Japanese construction company), Barone Ricasoli (Italy) – many of these being more than 500 years old. All these evidently establish the fact that the family-controlled firms have a very strong and dominant role in the global economy.

Even less than 30% of family-run enterprises are successful to survive to second generation and the figure comes to a low 10% from second to third generation. Despite this, these figures are far better than small businesses not controlled by family. Though family run businesses also deal with routine issues that emerge around turf battles, they also have additional problems – such as succession issues, dealing with family discord. John Kotter in his book “Leading Change” also touches upon the challenges faced by the people who lead family businesses.

Lets gradually look deeper into the functional operatives of the family controlled enterprises which have led to their tremendous success. Family businesses concentrate more on survival than performance. They sometimes relinquish the excess earnings available during heydays in order to increase their possibility of survival during rough times. While non-family businesses focus more on performance that too short-term performance. The family businesses often invest with a 10- or 20-year horizon, concentrating on adding value for the next generation. Apropos expenditures, the family run companies have more prudent and economical cost-structures which explain that most family businesses enter recessions with leaner cost-structures.  This also elucidates the reason family-run enterprises always maintain low debt ratio. Family businesses believe in the organic growth and generally do not prefer acquisitions that too of big companies and into different business.  A study reveals the rate of acquisitions of non-family run enterprises is almost double to that of family-run enterprises. It is common myth that the owners of family-businesses are conservative people. Well, the family businesses do always keep an eye on diversification. On one hand companies such as Ford, Michelin, New Corp and Walmart still continue to focus on their core-business while on other, there are companies – Cargill, Tata Group, Hyundai Group and LG – epitomise diversification. A study shows that 46% of family businesses are highly diversified while the same figure is mere 20% for non-family businesses.

Honestly, it is really tough to answer whether any business is more enduring or universal than a family business. In his book “Centuries of Success”, William O’Hara very aptly commented ““Before the multinational corporation, there was family business. Before the Industrial Revolution, there was family business. Before the enlightenment of Greece and the empire of Rome, there was family business.”

Mushrooming Malls and Dynamics of Successful Malls

Shopping at malls is becoming a popular phenomenon world over. There is a huge sum invested in such properties beginning from its development to managing, leasing, marketing and so on. So the big question is - How can mall developers maximise the returns on their investment? Malls across India have turned out to be the central institution of modern shopping culture. The environment is full of choices and lures, which takes the consumers’ soul into the temptation of buying the world. People of all races, creeds, ages, and social status flock to shopping centres to participate. The ascendancy of malls as a significant shopping, social interaction and entertainment destination has a major impact on retail strategies and the retail landscape in numerous Indian companies. In India malls are amongst the very few options available where people can conveniently shop keeping in mind the country’s extreme weather conditions, lack of utilities such as absence of washrooms and parking spaces on high streets. Another reason for the growing mall culture in India is that the country is currently deprived of good entertainment places where people can spend quality time with their families, and  hopping centre is perhaps one such great entertainment place.

With the increasing number of malls in India, and many more in the pipeline, mall management has been identified as the key to success of malls. Therefore, it is critical to have a well thought-out mall management strategy and the first step to address this urgent need is to understand the factors that determine mall management. With malls becoming the preferred choice for shopping these days, it is clear that the retail real estate industry in India has a promising future with lots of growth opportunities. However, managing a complex entity such as malls is not easy. Therefore, it has become all the more imperative for mall managers to take into consideration the needs of all the stakeholders such as customers, retailers, employees and statutory bodies.

With the mushrooming of malls in India, the competition among them is becoming intense. As the competition intensifies, the need of the quality mall management becomes evident. A major challenge for mall developers these days is attracting and winning over the hearts of increased number of customers and retailers, although it brings ample opportunity in disguise to serve the lifestyles of the shoppers through deliberation of mall experience. Since shoppers today are quite informative and value their time and money, the priorities on which they evaluate the services of the malls generate a lot of challenges and opportunities for mall developers and retailers to study shoppers’ preferences while selecting a shopping destination. Against the backdrop of shoppers’ choice of the shopping malls, it is necessary to have a look at the determinants of mall management which shoppers assess before gathering an enjoyable experience. Mall management implies positioning a mall, attracting the best tenants, formulating tenant mix policies, promotions and facility management. The influx of malls in India as cynosure of social activity becomes instrumental for the retailers to acquire space in shopping centres. Malls’ ambience and facilities become the competitive advantage for retailers as these attract and induce more foot-fall in the region.

The initial work starts with the location analysis. An important dimension of mall management is its location as in India nearly majority of the visitors depends upon public transport facilities. People who frequently visit the mall are those who stay nearby, so proximity to home or work place is an essential criterion of any shopping centre. Other factor which comes under consideration while formulating the strategy is the anchor tenants. Anchors in the malls are chosen very carefully since they are the footfall generators for the entire mall. For example, apart from multiple luxury brands available in the malls, almost all malls do accommodate multiplexes and departmental stores/super markets – the latter being the footfall generators. The promotions and the other activities constitute to the differentiating factor of any mall. Promotions such as monsoon bonanza, winter offer, festival arrivals, etc. are few which we often come across. Other activities such as contests, celebrities’ appearances, musical events, etc. are few things through which malls try to allure more footfall. Brand positioning of the mall is also very critical. While national and international retailers set the brand positioning of a mall, regional tenants add uniqueness to it, which help them stand out of the crowd. Stressing that there should be a fine balance of national, international and regional retailers in any particular mall. Localising the mall in tune with the local needs and preferences of the catchment thus becomes very important. This becomes all the more important as today’s consumer owes no loyalty for a shopping centre unless it meets her high expectations and has something unique to offer.

Business Imperatives in the Era of Analytics

There has been a lot of buzz about Big Data. It is claimed to be the next frontier of innovation, competition and productivity. It is a growing torrent..!! Lets see whether there is dearth of evidence for all these claims. Per a recent research by McKinsey, 30 billion pieces of content are shared on Facebook every month. Around 40% project growth in global data generated per year compared to 5% growth in global IT spending. Approximately $600 billion is the potential annual consumer surplus from using personal location data globally. Around 60% can be the potential increase in retailers’ operating margins possible with big data. Per IBM recent report, 90% of the world’s data was created in last 2-3 years. This is just the tip of the iceberg – of the amount of data we have and the potential it has.

Big Data and analytics actually have been receiving attention for a few years but the reason of discussion is changing. Earlier companies used to think how to get the relevant data and use analytics to make sense of it. Now, companies see that their competitors are exploiting the data and they are left behind. Companies get many advantages from using data and analytics – how they improve in pricing, how they can offer better customer-care, how they can improve in segmentation and how they can optimize inventory management. The key is to focus on the big decisions for which if the companies had better data, better predictive ability, better ability to optimize, they would make revenues/profits. There is no point of mining data where it would not fetch worth revenues or profits.

Key success for exploiting data analytics comes down to three things – data, models and transformation. Data is the creative use of the internal and external data to give a broader view of what is happening in the organisation (e.g. operations, customers, marketing, sales, etc.). Modeling is using this data into workable model that can either help them predict better or allow optimizing better in terms of business. Finally transformation – is about enabling the company to adapt the company to take advantage of this data in models – such as using tools for managing and monitoring. For implementation, companies need to have people who have sense of business as well as understand analytics else they will end up making naïve business decisions. Besides, companies need to focus – meaning do not try to change several things at once rather just try to and focus on 2 or 3 things.

Analytics can help companies synthesize data into insights – help in key decision-making, thus increasing revenues and profits. In top performing companies, analytics have replaced intuition as the best way to answer questions about what markets to pursue, how to configure and fix price-offerings and how to identify where operations can be made more efficient in response to cost and environment constraints. Many business leaders are anxious to capture the benefits of new intelligence but they need to take analytics the full distance. Top companies are enacting their business analytics and optimization vision, making it possible to operationalize decisions and optimize business performance across the enterprise. To achieve this, they are using various tools, effective governance. Driven by intelligence, companies can better anticipate supply chain constraints and competitors’ countermoves. A focus on driving change – in people, business processes, in organisation structure and management systems – has the greatest impact on achieving breakaway performance.

This is the time when organisations should institutionalise data-driven decision-making rather intuition and harness Big Data. To find the ways that are most appropriate for a given company, leaders need to figure out how the company’s data might address specific business needs. But three of the ways that every organization should think through are:

• Creating a data-driven culture

• Informationalization

• Big data/advanced analytics

Putting data to work requires changes in how companies typically operate when it comes to data. It takes a laser focus on data quality, disciplined data-management, the right talent and a facilitating organizational structure. These are, certainly, the business imperatives if the companies do not wish to be left behind in the era of Big data and analytics.

Why does the organisation’s IT Strategy go wrong?

In this era of economic fragility and ferocious competition, often IT takes the biggest hit when companies attempt to curb the costs. It wont be wrong to say that it is a totally foregone debate how important is IT for the success of any company. Despite the adverse economic ambience, IT remains fastest growing outlays for most of the companies.

Mostly companies fail to understand the business needs and thus end up wasting resources on services/projects which do not meet the business requirements. The scrimmage over the allocation of resources leaves IT and its business clients (which may be different department within the same company or altogether external clients) in delirium. Companies invest a lot of time, money and resources on IT projects which are actually irrelevant or not of much relevance for the business needs. IT strategy within any company cannot exist in isolation. In order to attain strategic alignment, it becomes paramount to list down lucidly the business objectives/goals through IT-business coordination and collaboration. Each of the ongoing and upcoming IT projects needs to be evaluated under the microscope for its relevance to business, cost of project, resources and time required and of course the risks involved. Based on the parameters such as regulatory necessities, business criticality, etc., all the projects should be segregated into “must do”, “good to have” and “can be postponed” categories.

For any company, the key questions to be asked are – is there a clear IT strategy for the firm? Does it align with the business goal/strategy? Whether IT services for the company is captive or outsourced, the organisations must check the IT spending because many companies get IT driven or are struck with IT wave. Many companies often find their IT expenditure skyrocketing and the stiff challenge they face is to curb the IT expenditure. In doing so, they generally cut the expenditure haphazardly, curbing many critical IT projects hurting the business. This calls for robust tracking tools to monitor IT usage, making IT expenditure more transparent. It is also required that companies periodically relook their IT and find whether they are using technologies/software which are outdated as they do for their operatives in other departments. As we might have witnessed, legacy systems continue to exist in many big organisations e.g. many banks still maintain their databases in mainframes. On one hand mainframes are supposed to be most secure, on other their maintenance costs are very high which is why organisations are migrating possible applications from legacy systems to open systems or rather new platforms which offers safe, secure environment– having low maintenance costs. The organisations should regularly perform IT security and risk assessment. This leads to the complexity of maintenance, migration and upgrade of company’s initial base of IT assets. Streamlining the entire system, considerably, simplifies the businesses’ underlying IT need.

The role of IT is to enable the business by ensuring that there is a strong and clear relationship between IT investment decisions and the organization’s overall strategies, goals, and objectives. To achieve this, organisations must ensure that IT funding and solutions align with business strategies; they must organize IT's financial, technical, and human resources around business value; and they must provide oversight of IT-related activities to manage IT-related risks. Conclusively, in my opinion a company’s IT strategy can be successful if it is able to answer following key questions (which they, often, dont):

•  Is there a clear IT strategy aligned with the business strategy, goal and objectives?
• Where is business, voraciously, consuming IT costs and what is driving these costs?
• Is it easy and efficient (including cost-effective) to implement IT changes or new IT infrastructure?
•  Are there clear procedures/tools to monitor IT expenditure and are they enforced?

EXPLOIT and Explore - Success Mantra of Outstanding Companies

No company can have a stagnant strategy to which it can align perpetually. The operatives in the contemporary highly competitive market are dynamic and are constantly changing. No company can sustain with a rigid strategy. Companies must focus on both short term as well as long term and act accordingly. A long time debate in the field of business strategy has been on exploit and explore. In the domain of product development, we often come across the famous 4 Xs – explore, expand, exploit and exterminate. Both are considered essential for any company to prosper the business. By exploration, we mean innovation, risk taking or even players from altogether different business domain and at times even reinventing. They need to look for new opportunities which may be in terms of geographic market area, customer segment or avenues of operating line of business. Exploring these new possibilities, basically, prepares for them for the unforeseen future which can often be adverse. While exploitation points to leveraging the certainties to generate revenues/funds to survive today (and for future too) and also imitating the best practices of the competitors.

Companies have been able to gain market share as well as revenue through exploration. It is widely assumed that innovation leads the way to success which is why a lot of companies spend a lot on research. Unfortunately, we don’t have a single metric or parameter to gauge the exploration quotient or score of the companies on any scale. Albeit, generally a company is said to innovative based on the number of patents it owns, the expenditure on research and development and the new products it comes up with. Of late, Apple has been on the innovation spree and has been credited as the most innovative products – courtesy to gadgets like iPod, iPhone, iPad, etc. which revolutionised multiple industries such as music, mobile telephony.  If patents are weapons, companies such as Motorola, Intel, Canon, Lucent (originally AT&T Technologies) are armed to teeth. No wonder, these companies have tasted success from time to time.

On the other hand, companies have been successful exploiting the current conditions. Companies tend to improve their operations, marketing and sales force and business processes. Amazon rise is heavily propelled by his excellent supply chain. McDonald’s has always focussed on gaining excellence in the operational. Nokia is another example in this list.

In an ideal scenario, companies should keep a balance between exploration and exploitation. These two dimensions of business strategy should go hand-in-hand. They should combine the ability to run operations effectively with the capability to develop new fantastic products which would appeal to the customers. Outstanding companies are able to achieve this. Apple’s success cannot be solely attributed to its innovation. It was led by legendary Steve Jobs who improved the operations drastically, understood the call of the hour and was pivotal in shifting the manufacturing base to China. This reduced the manufacturing costs, keeping the margins high. Through, marketing campaigns Apple is always able to maintain the hype before launching any new product. These all contributed to the overall success of Apple. Unfortunately in real world, most of the companies are not able to attain this balance. Exploring new opportunities munches time as well as resources at disposal for improvement of existing processes.

With this practical issue, the debate arrives a point leading to a tussle between exploitation and exploration – which holds the priority. Companies have been able to compensate for exploration by being excellent exploiters. On the contrary, the reverse – exploration does not compensate for exploitation. Many market leaders are more efficient but may not be more innovative than their competitors. They stress on former at the expense of latter though not totally ignoring exploration. Innovation is vital to companies, but also difficult to perform since there are many ways to approach the subject. Besides, there is no control on the results of research while companies can control the operational processes and marketing campaigns. A perfect example can extracted from the rivalry of Glaxo and Wellcome few decades back. Wellcome had always more patents per sale than Glaxo till 1970s but as we know Glaxo was clearly much ahead in the market share between the two. Glaxo excelled in exploiting existing resources through great marketing and more importantly, it was honest to realise its research constraints. Christian Stadler in his book “Enduring Success” emphasizes on the scope of buying exploration capabilities. Continuing on the same set of companies – exploration became part of Wellcome’s DNA as exploitation became part of Glaxo. Glaxo continued to operate on same model – be competent in certain activity and bear the reward. Though it was indulged in research efforts, it was mainly through acquisitions and takeovers. Its most successful product till date Zantac (medicine for ulcers) was developed in laboratories of Allen & Hanburys, one of Glaxo’s acquisitions. When the expiration year of Zantac was approaching, Glaxo was successful in acquiring Wellcome itself thus adding more weapons in its armoury. It continues to grow and focus on research through taken – an example of late was acquisition of SmithKline Beecham.

Nonetheless, no company should do an excessive exploration. An overkill of innovation is most likely to backfire as was the case in Ericsson. Ericsson was pioneer in multiple technologies e.g. GPRS, 3G, etc. All this was done at the expense of exploiting current market. Huge expenditure on research and excessive bet on future technologies hit its business hard and it had to combine with Sony to save its mobile business.

Emerging risks Vs Innovation

        “You only find out who is swimming naked when the tide goes out.”

                                                                                                            -  Warren Buffet

Much has happened in the past few years to shake the historical assumptions underpinning business and business models. The global economic meltdown is first and foremost of these changes, which has combined with issues surrounding global climate change, the price of oil and supply chains, even talent. The consequence has been a sea-change in the way businesses are run. In effect, they are transforming the very nature of many companies’ business models. Companies need to prepare for a new reality in which emerging risks increasingly impact their earnings and long-term strategy. Those that develop the ability to manage emerging risks will gain a significant competitive advantage over rivals who lack this level of sophistication. The unfamiliarity of emerging risks is the fundamental reason companies still struggle to identify and assess them. Companies need to develop the ability to integrate emerging risks into their decision making.

Given the crossroads that emerging risks are creating for companies, they cannot be ignored in the path of growth. In addition to spending time identifying what highly improbable event could impair them, companies should pay increased attention to assessing the quantum of a financial shock that could destabilize their business. Designing a framework to achieve this is not easy. Companies that operate in the same industry and even geography can have very different exposures to emerging risks, depending on their financial structure, etc. After determining the companies’ capacity to withstand such shocks, , they should examine the potential impact of emerging risks from another angle: risk-adjusted scenario planning. By doing so, they not only gain insight into specific situations or a series of events that can result in a loss, but also understand how the range of potential outcomes will impact their company’s portfolio of businesses. Such planning exercises can reveal not only how potential risks can impair a business, but also how risks can enable a company to gain a competitive advantage. By designing such frameworks, companies can anticipate outcomes and quickly respond when an event strikes. They will be able to pinpoint areas of vulnerability under different market conditions, and the net impact on the overall organization. These insights allow companies to focus on initiatives to mitigate emerging risks and to capitalize on the resultant market conditions.

  “Crack-brained meddling by the authorities (can) aggravate an existing crisis.”

                                                                                                                  - Karl Marx

Regulation is becoming increasingly stringent and multi-layered. As governments recognise that they cannot afford to provide for the populations in these important areas from health to retirement, there will be increasing need for the people to take more responsibility for their own welfare. The result will be more government imposed regulation on the industry. IFRS 4(phase II), Solvency 2 and other regulatory initiatives have implementation dates in 2012. Most in the industry believe that the burden of the regulatory compliance will only increase in this coming decade. Many industries—banking, telecom, transport, and energy, to name a few—face an increasing level of regulation. While there is a legitimate case for more consistent regulation and oversight, such as to reduce regulatory arbitrage, it is less obvious that we really need more or tighter regulation. Financial regulation imposes significant costs on the economy. For instance, excessive regulation can stifle financial innovation, reduce the flow of credit to worthy firms and consumers, and impede economic growth. Thus, what we need to prevent future crises is a more dynamic approach to regulation and oversight -one that is strong precisely when market forces become weak.

                                 “Innovation is the central issue of economic prosperity.”

-          Michael Porter

The severe decline in trade, FDIs and access to international financing pose a risk to the global business that underpins innovation. In the current scenario managing risks means correction. Most of the companies that are successful today are so because they took great innovative steps during recessions when others went into red. As Jack Trout said differentiate or die! It’s not an mp3 it’s the IPod. It’s not a TV it’s a Sony. It’s not style it’s Zara. Just look at Apple Inc. - the name itself has become synonymous to innovation. It may be among the very few companies unaffected by the economic downturn. All thanks to its innovation-driven culture. It has, within a decade, revolutionised five industries – music, retail, computers, animation and movie. Similarly, the story of Nokia, a company which has reinvented itself four times, first as a manufacturer of boots, then televisions, then computers, and finally mobile phones. As a result of this, the Company is very serious about innovation, simply because it knows that its survival depends upon that next killer product line. As a result of this, innovation has been written into the DNA of the organization.

Growing aversion to risk combined with other factors (such as difficulties for investors to exit) is already drying up many sources of seed and venture capital. Everyone talks about corporate antibodies that resist innovation, but what about corporate white blood cells. Finnish experience in the deep recession in the 1990s is an example of how knowledge can become the driving force in economic transformation and growth. Korea turned its major 1997 financial crisis into an opportunity to undertake a major reform of its economic incentive and institutional regimes. However, the primary ingredient in innovation isn't brains, but guts. Clearly, innovation will be one of the keys to manage the emerging risks from the downturn.