Posts Tagged Economics
Innovation Matters!
Innovation matters. Big time. And, it makes a great difference to organization performance. I spotted this interesting blog post on Techcrunch, showing some interesting analysis of the mobile handset industry. An analyst from Deutsche Bank, Brian Modoff, pulled off this interesting analysis, showing that despite a small share of handset units and handset revenues, Apple and RIM have done a stellar job of garnering industry operating profits share. Its a disproportionate share!
Here are the charts:
Fascinating stuff!
5 comments June 2, 2009
Shai Agassi: A Bold Plan for Mass Adoption of Electric Cars
Shai Agassi, earlier a senior executive with SAP, is the founder-CEO of Better Place. In this TED talk, he blows us away with his thoughts about how we could make countries “oil-free” by 2020. He shares his passionate vision for an electric cars and a network infrastructure to enable the migration to and operation of emission-free vehicles.
Let me stop here and let’s hear from the man himself.
Add comment April 14, 2009
New Website from McKinsey
Consulting firm McKinsey has launched a new website called “What Matters”. The site builds on the knowledge derived from some of the best thinkers in the world. They asked though leaders to focus on 10 big issues and take a long view on these. Some of these issues include Geopolitics, Internet, Biotechnology, Energy, Climate Change, Innovation etc. Authors include Andy Grove, Rick Wagoner, John Thackara, Clay Shirky, Eric Schmidt, Gary Hamel among others.
Check it out!
2 comments March 31, 2009
An Interesting Employee Health Plan
I am no insurance whiz-kid, but, no doubt, it is a fascinating area. I find the field of actuarial science very interesting because of the way it borrows from multiple disciplines like mathematics, finance and economics. And, in many cases, some great application of behavioral economics too.
I was discussing a company’s employee benefits package with a group of people the other day. Specifically, I found their health insurance program very intriguing and couldn’t help chuckling about it.
This company is based in Singapore and has a self-administered health insurance plan i.e. the company doesn’t buy group insurance for the employees from the market, but instead provides health benefits to employees from it’s own funds. In Singapore, the medical system typically works in the following way:
- You have a health problem. You can go to a local clinic where a General Physician (GP) will try to diagnose the problem, conduct tests and suggest appropriate medication.
- If the GP’s treatment solves the problem, you are fine.
- In case the GP feels that you need to seek specialized medical advice & treatment, they would refer you to a Specialist doctor in one of the hospitals and then the patient has to take it forward from there.
- Needless to say, specialized medical care is more expensive than GP services.
The insurance plan of the organization I was talking about, reimburses 80% of the total medical expenses, if you go to the GP. And, it reimburses 70% of the total medical expenses, if you need to see the Specialists after the GP consultation. So, effectively, if you have bigger health problems, there is a lower percentage of reimbursement. One could look at this benefit structure as the company’s way to manage risks i.e. not making itself liable for higher payouts for medical bills of employees with relatively more complicated health problems. But, to me, there is a more subtle message in here. I also sense that this is a small, gentle incentive for employees to pay attention to their health and stay healthy. It is almost akin to having a small penalty if you have slightly complicated health problems.
The economics of incentives continue to fascinate me!
Add comment February 27, 2009
Don’t Forget to Incentivize!
The Strait Times carries a piece of news today titled “$100 m boost for service”. It says:
A $100 million push to bring Singapore service to the next level has been launched.
The money will go towards funding training and other programmes for staff and supervisors in the retail, food and beverage, health and transport sectors.
It will also be used to pay for research on service, and to monitor customer satisfaction levels.
Also part of the plan: Promoting, publicising and recognising good service.
While this is a well-intended initiative, I hope there is sufficient focus on “incentivization” of good service. As I noted in my earlier post on the “built-in” service charges in Singapore restaurants, the practice doesn’t adequately encourage great customer service, because the “incentive” is guranteed. So, in my humble opinion, a more balanced approach which focuses both on behavioral changes and up-skilling, alongwith dangling a ‘carrot’ would be more useful.
1 comment February 3, 2009
Grim News from Singapore
Fresh off the press in Singapore, Today has an article with some really grim predictions from economists from Credit Suisse. They forecast an astounding 300000 job losses in 2009 in the island nation. Interestingly, about 200000 of these job cuts are going to be for foreigners, leading even to the total population shrinking by 3.3%. Some top-of-the-mind thoughts on the impact of such an event:
- Many of these jobs are held by well-paid expats, who also help, in their own way, consumer spending. With this outflux of people, consumer spending is also likely to take a hit, further fuelling the downturn.
- This does not portray Singapore’s policy of attracting and retaining foreign talent. The “make hay while the sun shines” syndrome is not great for building an image as a top-talent destination.
- Worst case – even if this happens, can companies look at a “CRM” kind of a solution to manage talent? I think this will be especially relevant for roles which are highly specialized and/or senior level. A nice starting point to think about this can be found at this SystematicHR blog post.
2 comments January 21, 2009
Dismal State of The Indian Tourism Sector
I came across a few numbers browsing through stuff on the internet. And, I was quite shocked to see something. This is to do with the state of the Indian tourism industry. While some of these data are from different timeframes, they intuitively make sense.
As per this article in The Economic Times, India received a total of about 5 million tourists from abroad. Contrast this to the tiny island-nation of Singapore – it got over 10 million tourists in 2007 alone! I mean India is hundred times bigger than Singapore and has far too many attractions and things to see & do. The culture is rich, there are great food choices, there are the hills and the plains and the beaches and the backwaters. But, the numbers fall very short of expectations. It may be just inadequate marketing. Or it can be bad perceptions about the tourism & general infrasructure in the country. Or it can even be poor word-of-mouth from tourists who had a not-so-pleasant experience. Whatever is the case, there is an urgent need to come up with a holistic approach to tap this important revenue stream.
What do you think are the top reasons for the below par performance of the Indian tourism sector?
2 comments January 11, 2009
2008 Round-up: Most Popular Posts
Wow! Was that 2008 that just zipped past me!! Time flies.
It has been an eventful year for me. I got promoted. I left my job at Gallup India. I got married. Yay! I had a wonderful vacation in Thailand. Yay, Yay!! I joined Towers Perrin in Sing a pore. I went about Singapore. And so on.
Meanwhile, a lot of posts on this blog got quite popular. And, I thought it will be a good idea to do a quick round-up of the various things I wrote about in 2008.
- The concept of “Micro-Boredom” and how the mobile phone has become my saviour.
- My wishlist from the grand-daddy of internet – Google.
- The business case for Employee Engagement. This post got a lot of attention and was eventually published on the front page of Deccan Herald’s Career Supplement DH Avenues.
- I got myself an iPhone 3G and wondered if it is “smart-phone” enough. Subsequent fixes from Apple have resolved some of my issues with the almighty phone.
- I borrowed from some research by my company to think about “deal-structuring” for employees or how we could maximize employee RoI from their relationship with organizations.
- 2008 was the year of economic ‘pain’. I mused about how we could manage differently.
- I am bowled over by the wonderful system of ‘incentives’ in Singapore. But, why are restaurant staff here not incentivized enough to provide great service to customers?
- I became a fan of TED. Fascinating stuff. Kevin Kelly impressed with his talk on the next 5000 days of the web.
- Mumbai will not forget 2008 so easily. Neither will I. I blabbered as Mumbai took the bullets.
- I started thinking about simplifying the interfaces of enterprise applications. I think this is a big big opportunity.
- I stumbled upon an idea to convert the employee benefits system into a ‘marketplace for benefits’. I have completely given up on looking at traditional system thinking on solving this critical problem that so many organizations face. An innovative and experimental approach is more likely to lead to a solution. I am looking for organizations who would like to partner with me on such an experiment.
And, if you think, I have bored you enough with this serious stuff, go straight to my alternate blog at Tumblr to enjoy some really cool pictures, videos, quotes and fun stuff. Or meet the shutter-bug in me at Flickr. Or, just head straight to my FriendFeed page to get a snapshot of all my online activity and networks.
Here’s to a peaceful and fulfilling 2009. Cheers!
2 comments December 25, 2008
Steve Job’s Worth to The Shareholders
However, cliched it may sound, but I firmly believe that employees are the biggest asset for an organization. Though there is no definitive way of measuring the “human” value, it makes sense intuitively. I came across this article by Jeff Segal from BreakingViews, where he does some simple calculations to indicate the value of Apple’s various businesses and the value of its ever-charismatic leader Steve Jobs.
He values the Mac business at about $19 billion.
iPod business at $14 billion.
iTunes store at about $1 billion.
iPhone business at $17 billion (that’s simply wow!).
Other businesses at $11billion.
Roughly, these add up to about $60 billion dollars, which is about $20 billion less than Apple’s market cap. And, Jeff concludes, that Steve Job is worth $20 mind-blowing-billions to Apple’s shareholders. That is the premium for a truly innovative leader. In a way, it makes all the more sense for companies to get the best people and invest in them. People assets can be as big as or even outgrow the core tangible business assets.
Add comment December 19, 2008
How About a “Market” for Employee Benefits?
In most of my client assignments, I get opporutnities to interact with employees during one-on-one interviews and focus groups. I try to understand their points of view about the organization they work for. Inevitably, compensation & benefits comes up as a discussion point. And no suprises here – nobody seems to be satisfied with what they get. Not only do I see people dissatisfied with their compensation, but the mix of benefits (insurance, retirements, vacation time, medical leaves etc.) too registers discontent. Employees compain of not getting what they want and the right quantum of benefits. To make the situation worse, most employees feel quite helpless about this situation, seeing ‘changing jobs’ as the only resort to get what they want. So, employees change jobs and land up in another company, where their needs may still be unmet and they may feel disillusioned again. The vicious circle!! And, ultimately, both the organization and the employee are at a loss. Organizations incur attrition costs and lose human assets, while employees continue to feel bad about their RoI from the relationship with the organization.
Optimization of benefits is a challenge which many organizations grapple with. Each employee has his / her own expectations and sometimes one wonders – how much can you customize! Customizing benefits is quite a task. How does one design systems that meets the needs of all the employees. The standard response of most HR professionals is – “do a survey”. Sure, surveys serve an important purpose and provide crucial data-driven intelligence about what employees want. But, the pitfall is that surveys report ‘averages’ and an average is merely a simple summary score. Employees are asking for customization, not averages!
So, how do leaders address this significant problem?
I have an experimental approach which would put the onus of the core task of ‘customization’ on the employees themselves. What HR should lay down is a “base set” of benefits mix. It should stipulate the minimum days of vacation, medical leaves, basic health / life insurance etc provided to all employees. This base set should act as the ‘floor’ or minimum entitlements. Next, employees need to be allotted “benefit credits”. And we transform the old one-way benefits system into a two-way “market” for benefits! Employees could use the credits to enhance any parts of the benefits program to suit their personal requirements. All “top-ups” or benefits enhancement would cost “credits”, reflecting their real world values. And, employees would be empowered to make their own choices from the basket of benefits available to them. Of course, the basket should have a reasonable number of options for employees to choose from. So, for instance, Mr. X who has already taken up a medical plan for 10 years on his own and doesn’t want anymore, could use his “benefits credits” to get more vacation days or enhance contribution to his retirement corpus or simply redeem the credits for cash to boost base pay!! The system empower the employees and puts them in-charge of their benefits, subject to “regulation”. In fact, the “trade” data from such an experiment would help HR leaders derive the importance of the various benefits options and help in fine-tuning the program for subsequent years.
The system descibed above may appear unstable and too unstructured. But, “structure” is afterall structure, and is inherently inflexible. We can’t be using traditional system design techniques to solve problems which the same techniques have not addressed adequately in so many years. Of course, the system I propose may fail too, but I feel it is about time we start trying new things!
4 comments December 16, 2008
Service Charge Built Into Your Restaurant Bill in Singapore – No More, Please!!
I have been in Singapore for close to three months now. It’s a nice place to live, work, eat and travel and that is enough to make me stay here. But, the thing that fascinates me the most about the place is the “design of incentives and disincentives.” Once you start noticing the minute details about how they have built the nation and systems, you feel amazed at the power of incentives. There is an incentive here for all the “right” behaviours and disincentives for all the “wrong” ones. Let me pick up some common examples. Singapore, for most parts of the 20th century, was a dirty country. To discourage littering, the government enacted heavy fines and followed it up with superb enforcement. Fines for littering can be as high as $5000 and repeat offenders might be sent for “behaviour – correction” activities like cleaning of public parks! I know it sounds like an overbearing idea, but it has worked for the country. And then, there is the much-admired Electronic Road Pricing system and taxes on automobiles, which disincentivizes people to own cars and drive downtown during peak hours. The pricing of parking lots, roads and cars themselves, coupled with a super efficient public transport system, incentivizes people to take public transport instead of driving around, adding to the congestion and polluting the environment. There could even be an incentive for taking early morning trains to town and easing off the peak hours. Every action or inaction has a price to it. Since it needs talented people for the economy, there are incentives to take up Permanent Residence in the country and enjoy several benefits. There are strong disincentives for smoking as it is a major cause of health problems and puts a burden on government spends. Heavy taxes make cigarettes quite expensive and there is no way you can legally get cigarettes from other countries without paying the hefty duties.
While I frantically look for such incentives, I have been disappointed with one particular system – the system of service charge or tipping at restaurants. Most eating places have the service charge of 10% included in the bill. Tipping is discouraged in most eateries and even prohibited at the airport and other places. Now, I eat out a lot and try many restaurants and whenever I fork out the dollars, I expect reasonable service. But, I find that missing in so many of these places. Having a fixed, pre-determined service charge could act as a disincentive for providing great customer service and lead to complacency or indifference in the minds of the men and women who work in these restaurants. They are effectively guaranteed the tip, irrespective of how they treat the customers! I simply fail to understand this in a place like Singapore, which goes all out to encourage the right behaviours.
Here is the link to a nice read (slightly dated) on this topic http://www.singaporeangle.com/2006/11/service-charges-replace-with-tipping.html
Update: Check out another similar post by me.
2 comments November 11, 2008
Managing Differently in Challenging Times
As everybody talks feverishly about the world economy slipping into a recession and people draw numerous parallels between previous depressions and the current situation, I thought about putting down 5 broad management principles that we can adopt and do things differently this time around:
- In most downturns, managers typically tend to narrow their focus on operational efficiency and cost-optimization alone. A better way to manage will be to be “ambi-dexterous” and maintain focus on both topline and bottomline.
- In most cases, downturns have trigerred the tendency to source talent from low-cost talent pools with a view to minimize costs and at the same time ensuring ‘adequate’ staffing. Instead, organizations should be looking at tapping diverse talent pools to build up a diverse work-force which ideates using different perspectives. This enriches the problem-solving processes with alternative thinking. Some cues can be found in the Creative Class.
- Most downturns are accompanied with a free-fall of the “axe” or downsizing. Instead, forward-looking leaders need to focus their existing people assets on most “high-yield” activities and maximize gains.
- Economic slowdowns tend to create a general environment of gloom and employee morale takes a big hit. It is critical to keep employees motivated and engaged during these trying times. And, who is better placed to drive engagement than the “people managers”. From “employee engagement” being a HR responsibility, leaders need to ask their managers to be accountable for employee engagement.
- Finally, like most situations in life, we tend to take a short term view in times of a slowdown. From a short-term focus on protecting margins and pleasing the stock markets as much as possible, leaders and managers need to take a long term view towards balanced and sustainable growth. We need to remember that equity, as an asset class, has a tendency to trend upwards. So, we just need to be doing the right things and in due time, value will be realized.
Also read this interview with Mark Mactas, CEO of Towers Perrin on “Leadership in Turbulent Times.”
1 comment October 21, 2008
