Alisha's Management Blog

Lean or Fat!

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 17 Aug 2008 16:02:00 +0000

It is said Lean goes with Six Sigma. Six Sigma is the process Quality tool while Lean is the process Speed tool. I have warned earlier to stay away from applying any of this to non-repeatable knowledge based industry. But lets view this in the Services context.

What do I mean by services? I would say Tagging Baggage at the airport terminal is service. Cooking food and serving it in a Restaurant is a service. Designing a chip is not the service we refer to here even if you are an outsourcing partner to Intel and you are offering your services to them. Because that’s non-repeatable to a large extent on the time scale. i.e. you have a cycle time of 2 years and with non-repeatable nature of work. OK you do design, verify the chip and prototype it. But you do a different design each time and based on the different design you do different verification and prototyping. So application of Lean and Six Sigma to this would produce false positive results and will mask the problems and lead to failure.

First of the things I like to do is to get rid of all the Manufacturing related jargon. And then to understand that Lean is an analytical framework to make processes faster. And the only thing it essentially says is to remove waste which is there from 30-80% in any service process. Whats waste? In standard Lean terms it is termed as anything that doesn’t provide value to a customer. It goes implied that customer pays for value and that this would correlate to revenues.

The second thing I would like to do is to create learning throughout the organization. Third most of the waste arises from decisions that are not based on facts. Now this might seem contradictory to management philosophy of making decisions on partial data. But since you are talking of processes you would have lots of repeat data to base decisions on.

“Think big, act small, fail fast; learn rapidly”-Lean Principle

Lean does talk about empowering the team but it shouldn’t be confused with people oriented methodologies which have people at the centerpoint. People oriented methodologies also need to make decisions on facts and for that we will visit MultiVariateTesting in the next article.

Six Sigma: A Critique!

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 20 Jul 2008 14:34:00 +0000

I love six sigma, no, really!!! I was talking to someone who said “Six Sigma in the Knowledge Industry is like eating a Burger with Chinese Chopsticks” when I asked my brother as to what Six Sigma meant to him he told me “If you want someone to not interfere with the companies operations put him in the Quality department in Six Sigma projects”. Some more responses are “If you want to get promoted really fast Six Sigma implementation is the way to go” “It’s a sales buzz word to impress clients”

I started wondering and decided to have a deeper look at the methodology. And I love the knowledge economy and hence my assessment would have that in mind.

What do we have here? The fundamental principle of Quality.

“Eighty-five percent of the reasons for failure to meet the customer expectations are related to deficiencies in systems and process… rather than then employee. The role of the management is to improve the process rather than badgering the individuals to do better”-W.Edwards Deming

When was Six Sigma formulated? 1982 at Motorola. That was the industrial revolution and everything was production based. Wake up this is the knowledge economy. And who’s leading this economy? Oracle, Microsoft, Google, Yahoo, Sun and… Are they Six Sigma enabled? Hell No! the reason is primarily very simple. Six Sigma is a process methodology and is absolutely is a misfit for the Knowledge economy and companies. Does McKinsey or Lehman Brothers follow Six Sigma, ofcourse no. For Six Sigma to work you should have Repeatable and Reproducible Processes and Outcomes because that’s what you are going to improve. And this is based on the premise that in 85% of the cases human skillset and capability would have ZERO impact on the process. And you would achieve Six Sigma process capability if you reduce defects to around 3.4 defects per million opportunities.

So at McKinsey which is a knowledge based company. You don’t have operators yanking at machines producing Sugar Candy. So for every analysis decision that a McKinsey team takes could have 10 other options and the team could take 400 decisions to arrive at the right strategy for the company. So which means that there are 10^400 (10 to the power of 400) combinations in the decision making process and only one of the combinations is the right strategy. This number is more than the number of particles in the known universe and the chances of mistakes is 10^400 – 1 . That’s why Six Sigma will never work in a knowledge based environment.

So what about the revenue saving figures of various companies using Six Sigma? There are two aspects to it. The biggest profit figures are from manufacturing companies. But the services companies attribute revenue savings wrongly to six sigma benefits. While the concept of Six Sigma is irrelevant to knowledge companies the Six Sigma process improvement methodologies are generic problem solving tools which could be used in all companies across the board and it is this which benefits companies and not anything to do with Six Sigma. Basically its like going to Somalia and saying you spent $1000 to improve Living Standards by 6000% for a village. That’s what happens when problem solving methodologies are used in companies which use adhoc management techniques. They return results which are miscategorized as Six Sigma benefits.

And you could dismiss all this by saying that “The author is a proponent of People Based Methodologies”

Now I’m going to eat a Burger using a ChopStick. When I finish doing that in 3.4 million years I will get back to answering the comments on this article.

Growing the Salesforce

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 07 Jul 2008 13:12:00 +0000

“Attitude Aptitude Experience Training Skills Closure Rewards”

I did mention that Sales is the most performance oriented function in the organization today. Which is highly lucrative for MBA’s the others being Private Equity, Investment Banking and Management Consulting.

So the first thing that happens is when you create a taskforce to go out there and sell your products is that the sales people don’t have a clue about the product. And then you decide to bring in people who have a similar background. That’s the first flaw. The reason being organizations today don’t have the culture of investing in people and everyone wants to show quick performance figures and go up the ladder, so it better be good and it better be quick like 6months or 1 year which is enough time to prove that you have justified your paycheck.

Part two of the problem is to artificially jackup the sales targets to what you have proposed/agreed to the board or your Top Management.

So for the part one the solution lies in building a sales force. You get people with some experience in sales with an aptitude for the function and the attitude that’s needed to make it in your industry. You train them on the products and the market. And then they use the skills to go out and Close the deals. Followed by quick rewards as incentives and bonuses to the salesforce. Sounds simple? Its first principles but then no one is following it.

The second problem is drawn from organizations I know of who draw the sales targets on Excel sheets. So basically the Top Management says the target is 140% of the previous target. Where did that figure come from? Gut? Instincts? But this is a great way to break any salesforce. And what ends up happening is that the sales force tries to cut short the sales cycle in a bid to close more and more sales, promising anything and everything under the sun. Who suffers? The Engineering who tries hard to deliver but fails. Once you break promises you are soon termed by customers as illreputed company. And with that goes the future of the organization.

And it all started with some overshot numbers on the Excel Sheet. Or someone who needed to justify his paycheck.

Unless you are aiming for the IPO or a sellout at an exaggerated valuation. It is not worth the risk to overshoot sales targets in the short term. Because it’s a long term death wish. The answer lies in organic sustainable growth.

Failing Knowledge Economies

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 07 Jul 2008 13:09:00 +0000

We live in the knowledge economies and I have heard of PCMM and CMMi and god knows what. I used to follow the Carnegie Mellon Institute’s website 10 years back. And they have done a great job nevertheless. I see many consultants around me who say they are Six Sigma consultants or PCMM consultants and others. I also agree that sometimes a company is required to be Six Sigma compliant and have people maturity levels to compete for deals with various companies.

And hence the need for the costly $500/hour consultants who enable Six Sigma in your organization. But the bottomline is this no amount of processes impact the People Based Organizations (Manufacturing/Production are Process Oriented Organizations). And considering everyone from telecom to software to embedded to pharma are all people based. It is not hard to see why there is little or no competition to the world leaders. If people are the key to success I don’t see many companies putting any effort on that front.

The whole bottomline in this learning is that having an MBA is good but thinking that Creating Excel Sheets gets you the results is behaving like an Ostrich which sinks its head into the Sand on sighting danger. Or better it can be termed as being in an alternate reality.

People People People!!! People is what gets you places. And while Processes and Statistics are necessary to measure monitor and control the growth of an organization it is not a substitute for People. And by that I don’t mean going out there and getting another PCMM certification.

Nurturing, grooming, communicating, leading is what gets people to work.

And in absence of that we will always hear stories of how people leave high paying jobs to do something they want. How exit interviews are full of lies. Nepotism, Empire building, Harrasment, Employee Turnover numbers, Employee Disatisfaction…

Sadly there is a dearth of leaders in organizations today. Its all about going up the ladder by hook or crook. Luckily for most excel sheets and cookie cutters do the trick.

Now once you have the people the second part is to build a Knowledge Ecosystem, a topic for another post.

On Going Global

aditya.yadav@gmail.com (Aditya Yadav) — Fri, 04 Jul 2008 13:46:00 +0000

India has gone global but sadly according to current figures its Real Estate industry has more PE investment than Technology companies. I was pointed to some real estate deals that were the costliest in the world. And as we all know Indians love Gold and Real Estate. Sadly for us the Chinese are in love with Technology.

According to McKinsey Germany and USA have the highest value added per annum per employee and India is 30 times lesser on those figures. China has the highest value added per employee per unit labor capital costs. And hence it is quite clear why the Chinese technology sector is booming. But labor costs in china are increasing as much as their productivity increases. What that means is if you put $1000 in china in 2007 and 2008 each you will get the same amount of output.

Sometimes native Chinese companies are more productive than the Foreign companies in China. The largest companies in both the segments are far more competitive than other smaller companies. In essence I would say in this world it is better to be a Technology company based out of China. And in China it is better to be a native Chinese company. And amongst that it is the bigger you are the higher productivity advantages you have.

So in plain and simple English terms don’t you think that’s a perfect market to be in? These are the perfect competitive reasons that are enabling China to be a Global Economy. But this post is about India. So lets talk about India.

Between India and USA all the core Technology work happens in USA. In India the foreign companies have better productivity and brand value than the Native Indian companies. And the bigger companies have almost the same productivity as the smaller companies i.e. in India there is no advantage in being bigger.

How did we end up this way is the question we need to ask ourselves and to find an answer and then to implement it to correct the Market Equations. Otherwise on a unrelated note it will happen that in 2100 A.D. we would say to ourselves “We cannot do anything today because we lost the Patent Wars a hundred years back and we couldn’t start then and we are left with no capability to do anything now” The bottomline is that this needs to be fixed urgently at both Macro and Micro Economic scales, both in terms of Federal Policies and Corporate Functioning.

But frankly nobody I talked to could disagree with my assessment and couldn’t also provide a solution.

Two Quotes

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 30 Jun 2008 16:23:00 +0000

"Usually there is nothing advantageous in choosing the familiar approach other than that it requires less effort and thinking and lesser blame for failure when it doesn't work out."

Another one from one of my friends

"A witty quote proves nothing. Not even this one."

I know two geniuses...

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 30 Jun 2008 14:08:00 +0000

One is Tesla and the other one is Bill Gates. I'm not saying there aren't others, ofcourse there are but the former two have created a great impact on this world.

This is an email within my peer group and it talks about Tesla. You all already about Bill Gates the Phillanthropist. Somehow as business leaders it is more difficult to create an impact on the world than perhaps leading the Army, Being the President, Dalai Lama, Nelson Mandela, Gandhiji, President Lincoln. This world is a place to live in and there are leaders in all fields of life which merit mention.

There is no Nobel prize for being the CEO of IBM or Sun. But it is leadership in all walks of life that change the world. And we have to learn to respect our leaders and learn from them. Somethings cannot be taught in schools. I personally think we kill all hopes of someone doing something for the world very early on in School and divert them into Money Minting Machines.

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I should be more careful with friends. You told me about this 2 months back and I got a chance to read it today. That's bad on my part. And I risk losing close friends due to my lazy habits.

I think this is the link you were referring to… http://en.wikipedia.org/wiki/Nikola_Tesla

This is what I think. Tesla was a genius and he was a very simple person with very modest family background but that said he was clearly eccentric like all geniuses. Edison's character hasn't come out very well either. This is an article on Tesla and will contain the viewpoint of his sympathesizers. Whatever be the facts they are always rewritten by winners, and history as we know it today might not normally be what happened, for there is no live witness and even if there was one alive today his opinion would be adulterated too.

The other thing I noted is that like all the best people he had grown beyond the fight for means and ends. Somehow there is a reciprocal link between them and achievements. All those who are successful in their fields have little regard for money and despite their genius don't spend even an iota of their brain on furthering their prosperity which they clearly could.

Even though today the world is much more organized in terms of harvesting gains from knowledge & research it still succumbs in parts to touts and people of mediocre thought process. But all I would say is that we shouldn't think of all this as mere artifacts of literature but as an act of bearing witness to the evolution of the species. For it is now that the world is growing and taking shape, the technology is mature and what now stands before us is the prospect of leaping across and beyond the boundaries of faith and science.

And jump we will.

Do send me more articles worth the calories burnt on reading them. For I would prefer intellectual simulation over the rich trash thrust down my throat everyday by the media. Today I have no regard for works of fiction but I still need a square meal for my brain, which we all do in some proportion as humans, without which it would decay into oblivion.

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How not to listen to customers: Sometimes you shouldn't!

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 30 Jun 2008 13:50:00 +0000

Why is this mentioned on this blog? Because it’s a classic case study of how not to listen to customers. All companies proclaim they are customer oriented companies and they have SLA’s to resolve customer problems in X hours. Sometimes customers don't really comprehend what they are asking for and its implications to the company theirs & ours and the industry. Like I say beware of what you ask you might get it. But considering that most companies management are not populists when it comes to strategy it is quite safe. But in some cases of community driven and open source projects it could be disasterous. And thats where the difference lies. The latter have massive manpower and will to get ahead but lack the coordination in terms of a unified strategy.

Please refer to http://www.iht.com/articles/2008/06/29/technology/digi20.php

But what is Randall Stross asking for here? He is saying something like this, Microsoft should scrap windows and create a new OS afresh. Isn’t this contradictory? First there is so much hue and cry because companies cannot run 10-15% of their programs on Vista and they are crying about not adopting it and how bad it is. And now they are asking Microsoft to create a new OS from scratch which will not be able to run any native legacy applications whatsoever. How is that going to solve any problem? If no current applications run on it other than perhaps Managed CLR apps which might run, if they are not using any OS calls, once the CLR is ported. Doesn’t that mean that Microsoft’s market share would drop from 90% to about 20% in no time. How good could that be for Microsoft?

To think of it all Microsoft products would need to be ported to the new OS and so would all the applications around the world. This seemingly simple suggestion would cost over a Trillion dollars if not more to companies. Imagine everything would need to ported from Oracle 11i, Oracle Database’s, SQL Server, Windows Media player, IE, Firefox you name it.

And everyone should be excited about this? Why?

Apple has a small market share and what worked for Apple will not work for Microsoft i.e. creating an OS afresh. I think the problem that everyone has with Vista is more of the Memory/Processor hogging nature than with other actual problems. I don’t buy comments like ‘We have to learn a new OS’ because the world will evolve and learning is a continuous process.

I bet everyone would be more than happy to spend 20 hours a day on Facebook trying to figure out all the app’s and writing messages to friends but they wouldn’t be able to spend a total of about 25 hours once to learn the Click-Use Vista.

Lets say I wrote a counter article about all the shortcomings of Linux and then would Linux developers be ready to recode the OS from scratch?

On the other hand a Trillion dollar business opportunity for software vendors would stimulate the economy or it could bring the world to a standstill. Even if a new OS is released by Microsoft in parallel we are looking at another 10 years before applications are ported to it. Those who want to learn how the evolution would take place in the view of a new OS have a look at Singularity or Cosmos and follow their progress. They will get bloated almost as soon as Windows did. Windows tries to give an Out Of The Box Experience and hence is a huge package while these OS’s could allow features to be plugged in or taken out. Is that Good? People aren’t willing to spend 20 hours learning Vista can you expect them to learn assembling their own OS how ever user friendly it is? I’m referring to end users.

I think as far as testing and upgrading applications is concerned it is worth the effort and will cause minor headaches compared to creating them afresh for a new OS. ;-)

Personally I would rather buy a more powerful machine with more RAM and Quad processors, than wait for a new OS, and carry on with my Business.

Gross Margins & World Wars

aditya.yadav@gmail.com (Aditya Yadav) — Tue, 17 Jun 2008 17:13:00 +0000

I’m located in India so wherever I see I can see Services companies around me specially in the IT space. I was reading the figures for Gross Margins for HP (6%) and IBM (12%) and every company I see around me otherwise has targets of 30-40% GM’s. Some people are proud to say that their projects have gross margins of 80%. That should be great wouldn’t you say? The more the gross margins the more would you grow. Not exactly here’s how.

There is tremendous pressure from Clients across the world on India and China with the coming of coutries like Mexico and Brazil entering the IT Services space to reduce billing rates. You won’t believe me if I told you that most projects in most companies have billing rates equal to the Daily Wage/Hourly Rates of McDonalds workers. The companies simply accept the demands and bid at even lower rates by employing armies of fresh college grads who haven’t absolutely no knowledge about how business works. To top it all companies are actively throwing out talent and shying away from the Intellegentia. Because they are costly. The only companies that can now afford talent are Product companies in Bangalore. Google is in Bangalore and to tell you frankly they offered one of my friend from a well known startup Rs 1 Crore (i.e. US $2,50,000 pa) to join as the Team Lead (Which is a very common position to warrant an offer like this under normal circumstances). That’s the cost of real talent.

We have bigger problems to solve than pushing Gross Margins up. Instead of throwing talent out of the companies we should concentrate on building a meritocracy. How many IT companies in India hire Ph.D’s? Do they need them?

When you have a country like India with one of the lowest per capita income in the world, one cannot pride by claiming that a certain firm provides employment for 1 million employees at the salary level of US Daily wage labourers.

We need to build ecosystems around the firms. Ecosystems in which the talent thrives and grows. Otherwise we cannot curb this situation which has grown into MacroEconomic problem at the level of countries. At the end of this decade in 2 years all the talent in India would have fled the country and with no means to nourish or replenish it. A college is like a nursery where you can seed talent but it needs the rich industrial environment to practice, grow and flourish.

On top of this there is an increasing emphasis on Process Compliance and Documentation. It is like training sportsmen for Olympics by putting elaborate processes in place to monitor them walk through the high jump hurdle, without any world class coaches to teach them to jump across. Creating graphs on the Excel sheets doesn’t get the job done how ever pretty the graphs are.

So you basically not only lose talent, you lose knowledge, you end up losing projects and any credibility and then you become yet another services company without any individuality. That amounts to no unique advantange amongst competitors and which in turn leads to a higher reduction in billing rates and then the Gross Margin falls down to where it started from. But now you have lost all capability to compete and sustain yourself as a world class company. That is a situation where you cannot return from. That’s the reason there are 10,000 services companies in India and other than the top 3 none ever stand out or grow any further.

All this can be avoided if you seed the company with 10% highly skilled talent and keep it that way. Otherwise you will end up going to war having an army of 10million soldiers with batons and no artillery or air power.

The Quality Conundrum

aditya.yadav@gmail.com (Aditya Yadav) — Tue, 10 Jun 2008 17:57:00 +0000

The world over Indians pride in their education system, while the rest of the world believes that the US education system produces better leaders. Most of the US MBA programs use collaborative, interactive, case based studies. Whatever the college is, its teaching philosophy is highly people oriented. Manufacturing companies use low skill labour and rely mostly on process based methodologies. VP / CEO’s of companies don’t comply with any metrics or processes to produce better, faster, taller CEO’s what they do is very individual and highly skilled.

If we can say that Process Based methodologies are used when the skill is low and People based methodologies are used when the skill is high. Could we say that we could solve quality problems in low skilled environments by using the Corollary that “Shifting to people based methodologies could push the skill level upwards and hence the Quality”?

If the conjecture holds true then we could in fact solve the so called Quality problem. It just has to be seen in a costly real life experiment and empirically proven.

An Engineer's View of Venture Capitalists (IEEE Spectrum, September 2001)- A Review

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 08 Jun 2008 16:46:00 +0000

Please refer to http://ycombinator.com/tredennick.html The statements in quotes have been paraphrased from the original article.

“The VC community is a closed one. It caters to a restricted audience. In fact, you don't get to meet a VC unless you have a personal introduction. Don't send them your business plan unless the VC has personally requested it.”

I personally don’t see a problem with this statement. Honestly the whole world works like that from trying to make a girlfriend to meeting the CEO of Microsoft. This is very simple to understand there are some pickup joints like a Pub/Discotheque and you can walk up to women there because you know they are there to meet men. CEO’s might come to conferences where you can meet them because that’s what they are to do at conferences. But the best way to get to know a woman is through an introduction through a mutual friend. Similarly Bill Gates would definitely meet you if your wife knew Melinda Gates and she introduced you to Bill. There is no big deal here infact. Some people will wait their entire life to get to know Cindy Crawford. Some would stalk her every day. If you stalk Cindy you will lose your credibility and chance and will be thrown into jail. Similarly if you run behind anyone too much they will not value you. Say what you have to say and walk away and leave it for them to come back to you. If you send your business plans to everyone it shows in the way you send it to one VC and he will ignore you, without saying anything about the greatness of your idea.

“VCs don't sign nondisclosure agreements. That affords them protection if they like your ideas, but they want to fund someone else to do them.”

First it is a legal liability to sign too many legal documents. You are opening yourself up to being sued. With the kind of money VC’s have one mistake would make them liable to lose everything in their fund. So yeah I guess it is normal for VC’s to reduce their liability as do I. I don’t sign too many things. That said the way the brain works once an idea is inside one’s brain it becomes difficult to classify it as classified. Our brain is not a filing system which can categorize and lockup ideas within itself. Once an idea is in someone’s head it is bound to appear in some form somewhere else where he/she is involved. So to expect someone to be able to create a filing cabinet inside his head of the 10,000 ideas he/she comes across during the month would be unrealistic. The best thing to have is to have ideas that cannot be copied easily or be so far ahead in your business so that someone else who copies will be far behind and you will be able to capture the market by the time they launch their prototype.

“VCs are sheep. VCs either all fund something or none of them will. If you ride the crest of a fad, you've a good chance of getting funded. If you have an idea that's too new and too different, you will struggle for funding.” That’s debatable. It is like this. There is no way of telling if the stock market would go up or down the next minute. Forget about predicting how a business will turn out in the next 7 years (The normal time it takes to exit the business successfully) No amount of mathematics or financial wizardry will give you a definite correlation to any of the parameters you choose. So some VC’s consciously decide to follow other bigger VC’s in whatever investment they make. The bigger VC’s follow examples of sectors (which they have mapped) and understand and has startups previously funded by them which have succeeded. That’s one way of predicting the outcome. Everyone has to base their decisions on something. VC’s are humans like us. They are not visionaries or born with a purpose to work for global betterment or specifically nanotechnology.

“VCs aren't technical. Mostly, they aren't engineers-- even the ones with engineering degrees. An engineering degree is a starting point. If you design and build things, you can become an engineer; if you work on your career, you can become an executive or a venture capitalist.”

Most VC’s either have Engineering Degrees and have gone on to do an MBA at Wharton or Sloan. So for one thing the elite VC’s are highly educated. Sadly that’s not true for all of them. But whatever the case maybe. If they don’t practice engineering they are bound to lose grasp of it. And even if they could be engineers for some part of their life’s they wouldn’t understand the whole breadth of technology. So like all our commerce or business graduates they spend a lot of time with techies learning the latest buzz words and hurl it out in their conversations without understanding what the implications of what they are saying are. But that’s true for every CEO of a Pharma company or Coca Cola. Don’t you think they go home and ask their kids to tell them what Facebooks App’s are and which ones are the most famous? That doesn’t mean they are bad CEO’s. Everyone has to work in a diverse environment with expertise in one or two subjects and mediocre knowledge of others and everyone has to manage somehow. How technical do you expect the VC to be to grasp biotech, nanotech, silicon wafer tech. , Web 2.0 all in one go?

“Experts aren't very good. The VC will send at least one "expert" to evaluate your ideas. Don't expect the expert to understand what you are doing.”

First I think the word Expert is overhyped. Everyone from an IIT Engineer to a Ph.D in Mathematics to Nobel Laureates’ will say something in public as if they know everything about it and will rush back home or their labs and when no one’s watching will rush through the math’s and equations to figure it out and try for another 2 months or so. I’m surrounded by Managers, Leaders, Engineers who behave like they know everything. Being an Expert is over hyped. I have seen many people try and convince others by dropping Designations e.g. “I was the Director Of Engineering of Yahoo.” The bottom line is to find out who has the paper and pen and is drawing shapes on the paper and convince him a bit more about your idea. If the Expert was the brother of the woman you desired wouldn’t you give him extra attention. Ditto!!!

“VCs don't take risks. VCs have a reputation as the gun-slinging risk-takers of the electronics frontier. They're not. VCs collect money from rich people to build their investment funds. Answering to their investors contributes to a sheep mentality. It must be a good idea if a top-tier fund invested in a similar business. VCs like to invest in pedigrees, not in ideas. They are looking for a team or an idea that has made money. Just as Hollywood would rather make a sequel than produce an original movie, VCs look for a formula that has brought success.”

Hey! Everyone is there to make money. You want to make a quick exit and so do the VC’s. They are trying to make money too. Its about supply and demand. The money is in demand and in short supply. Every person with money will try to reduce risk in whatever way they can conceive of or deem fit. If something has worked in US and is being copied in China. VC’s will rush to it. Because that’s the fad and known to work. When someone gets a chance like that it is normal that they won’t look for anything else. The problem is your problem, you have got something that no one’s ready to pump money into. So like everyone with pathbreaking ideas you have to be ready to slog it out till you can prove to the world that what you are doing is infact what they need. But the thing is if you can do that with little help you would find yourself on the Forbes List of Richest People in the world. Because you would have done it without losing much equity early on in your startup life. That’s what happened with Mr. Gates too. So look at things from a positive standpoint. You will end up one of the richest people in the world. Yooo Hoooo! Do you have it in you to slog it out?

“Venture funds are big. Too big. If your idea needs a lot of money, say $100 million, then you have a better chance of getting money than an idea that promises the same rate of return for $1 million.”

No Comments!!!

“VCs collude. VCs collect in "bake-offs" that are the VC's version of price fixing. They discuss among themselves funding and "pricing" for candidate start-ups. Pricing sets the number of shares and the value of a share, and is typically expressed in a "term sheet" from the VC to the start-up. VCs optimize locally.”

Its like this. I have known entrepreneurs who already KNOW that their business is worth $13m instead of $100m OR who would take anything (Irrespective of what they claim or are asking for) If the VC says Valuation=$33m or if the VC says Valuation=$56m they would take either option anyway. It shows on their face. I’m not talking about being a Hollywood hero and telling a VC that you expect $1bn valuation either. But most entrepreneurs are not businessmen. They simply have to understand that the financial industry depends on supply and demand. Which is a very simple Economic concept. Money is in demand and in short supply through a limited set of VC’s. They WILL call up their friends and ask if they are funding you or not and at what price. But it normally doesn’t happen in places where there are lots of VC’s and the amount can be funded by a 1000 VC’s according to their criteria. So the best bet is to make enough money to be able to stand on your feet before you ask someone to buy you a bicycle. Not because the necessary condition for riding a bicycle is to be able to walk but simply because if your dad doesn’t buy you the bike you would be able to walk a reasonable distance on your own and not cave into anything you consider unreasonable according to you. The cost of startingup is at an all time low.

“VCs don't say no. If the VC is interested, you can expect a call and, eventually, a check. If the VC is not interested, you won't get an answer. Saying "no" encourages you to look elsewhere-- that's not good for the VC, who prefers to have you hanging around rather than going elsewhere for funding. Fads change; the herd turns; your proposal may look better next year. In addition, the VC may want more due diligence from you-- to add your ideas to a different start-up's plan.”

I had a friend who was so hated by everyone. He used to goto every girl in college and tell her he liked her and then when some of them came back to him after a while he told some of them “Sorry I have moved on. Thanks anyway” Trust me when there is money involved. Even if you tell someone you don’t need him and he needs you he will come back again and again, specially if that someone stands to make a hundred million dollars by coming to you. You just have to be good enough to realize if someone needs you or not. Which is a pretty human trait. And after that everything will boil down to supply and demand. Now that doesn’t mean you be impolite. Just say you have a specific time frame and have a Plan B. Don’t worry too much The VC’s who usually come in earlier get better multipliers than who come in later. So they make more money by coming in earlier and they know that. They are hard pressed for time and its valuation implications.

“VCs have pets. The VC's version of a pet is the ‘executive in residence.’”

Eric Schmidt was brought in by the Google VC’s as the CEO and look what he has done for Google. So I don’t want to comment either way. But only, if you don’t agree with something you should have the guts/sophistication to say no and that you would like to consider someone else.

“Your idea, your work, their company. The VC's CEO gets 10 percent of the company. VC-placed board members get 1 percent each. Your entire technical team gets as much as 15 percent. Venture firms get the rest. Subsequent funding rounds lower ("dilute") the amount owned by the technical team. Venture firms control the board seats. The VC on your board sits on 11 other boards. Board members visit once a month or once a quarter, listen to the start-up's executives, make demands, offer suggestions, and collect personal stock options greater than all of the company's engineers hold, with the possible exceptions of the chief technology officer and the vice president of engineering. The VC's executives control the company. You and the rest of the engineers do the work.”

Sweets. Life was never designed to go by your definition of fairness. Its all about money. If you are not careful enough you will lose everything. And that’s true for everything in life. With women, children, school grades, friends, jobs. Life is tough. But the mathematics and the game plan behind dilution and takeovers is not. You just have to figure it out yourself.

I never ever review other articles. But this article was one which I really wanted to talk about. There is no point hating anyone or grumbling over something. The financial world is pretty straightforward and has the same human beings which inhabit the rest of the world.

"The best businessmen in the world are good psychologists too."-Aditya

Look Ma My Cookie Cutter

aditya.yadav@gmail.com (Aditya Yadav) — Sat, 31 May 2008 14:10:00 +0000

Cookie-Cutter: means "lack of originality or distinction"

There are so many things to do in this world and as we grow up our brain adapts and creates cookie-cutters for the most common tasks. When we were babies we fiddled around with toys trying to pick them up and as we grew up we learnt to stretch our hand forward and open up our fingers, position our hand better around the object and then to grasp it and withdraw our hand, closing towards our mouth. Once we get a cookie cutter to grab objects we seldom try any other approach. It takes months to learn to grab a baseball or a cricket ball. Once you learn it you stick to it for the rest of your life.

Bravo! We have learnt to pick up things. We do the same thing in our lives in our jobs. This is really good for operations but really bad for any business that needs to be the worlds best. You can create a 10^th global ranking organization out of Cookie Cutters but never the worlds best.

“We have quality issues” No problem, create a circular mentioning our policy for quality assurance, send it to the customers. Send a memo to our employees mentioning our checklist before we push something into production. Lets watch the dashboard for the next 3 months for results. Or else we will go back and do this a couple of more times.

That’s the problem. That’s a cookie cutter. That’s what all managers do. They have learnt through some readymade solutions that they know seldom bounce. And anyone who asks for anything is to be served the Cookie-Cutter solution. You know you don’t have to behave like McKinsey and say Structure Structure Structure in everything you do. But even if you don’t go that far you simply have to resist dishing out your three favourite cookie cutters, my manager in my previous job had 3 of his favourites the round one, the square one and the heart shaped one. And I hated all of them. How many times have I screamed in my head ‘This is what is sinking the company’ but who was I to say something. I was perhaps the lowest most form on life in the organization. And we had other workshops, brainstorming sessions,360 degrees, trainings, processes... You know what they all had in common? They were all cookie cutters. They were served in my face with the same ignorance… with manufacturing precision, without any originality, doomed to fail.

I have always valued Grey Hair, my father has absolutely no Grey Hair but I still think he is one of the most genuine genius’s on this planet. But I have always preferred someone in his late 20’s or early 30’s when I needed to do something important. Because unlike those Grey Haired clueless people who everyone hates but learns to live with, the former actually do arrive at better solutions (They need umpteen times more capable moderator for the brain storming sessions)

This is an open ended theorem that could be proved or disproved for decades. It is such that arguments both ways will both hold true without falsifying the other side.

But I will end my theorem with “Grey Hair<=> Bunch of cookie cutter’s” Hence Conjectured with loads of honest ambiguity to allow the meager genuine geniuses to pass through and violate this theorem.

Entrepreneur Ageing

aditya.yadav@gmail.com (Aditya Yadav) — Tue, 27 May 2008 15:22:00 +0000

An entrepreneur starts out with a skill or technological asset that he and the founding team has acquired that may or may not be needed by the rest of the world. When an entrepreneur starts off he is ignorant (refer. Corporate Ageing article on the fundamental timeline of an organization) most of the entrepreneurs don’t transition into innocence and rather die out due to a cash crunch. The longest phase of a startup is innocence. This is where some startups get the break they long for and breakout with exponential customer base. And they move to being calculative. Most entrepreneurs have a limited one track experience of one technology and they are limited to that technology and all their plans and calculations are limited to that. It takes humility to accept ones limitations and to beg borrow steal to acquire a broad skillset and become a technology generalist. But that’s where entrepreneurs move to being innovative. They still do not have the resources to try it all out and they usually sell out/make an exit and turn investors. They expect other entrepreneurs to make money for them and they spend a lifetime waiting for their next success. Most entrepreneurs do not move onto the innovative stage and stay stuck to their original single track of technology that made them successful. They still try other ventures and call themselves serial entrepreneurs but there aren’t many successful examples of serial entrepreneurs. The biggest successes are ones who have made it really big on their first startup and never had to start from ground zero again.

Beg, Borrow, Steal: M&A, Our Career Options

aditya.yadav@gmail.com (Aditya Yadav) — Tue, 27 May 2008 15:15:00 +0000

No not literally. But it’s a catchy way to start a controversial topic. All of us consider ourselves as Ethical and Honorable firms. Before we start lets refer to two things here

The list of acquisitions by Microsoft

The list of acquisitions by Google

It is easy to note that a companies like Microsoft, Google and Yahoo have grown a lot since their inception. And they are considered to be the most innovative companies in the world. Some would say Yahoo is Dead. I would just say referring to the Corporate Ageing article I wrote earlier that Yahoo is having trouble moving from Calculative to Innovative despite all the money. It needs a fresh rethinking of its Operations & Strategy. Perhaps a lot of people need to be let go. Lets concentrate on Google and Microsoft for the time being.

Microsoft started its lifecycle by acquiring Dynamical Systems Research and created Microsoft Windows Operating System out of it. It went ahead to acquire ForeThought, Vermeer Technologies Incorporated , Jump Networks, Visio Corporation and deriving PowerPoint, FrontPage, Outlook, Visio respectively from them. Google acquired Applied Semantics and Sprinks and created AdSense/AdWords which is their bread and butter today.

It goes unsaid that the best of the best in the industry have been out-innovated by smaller firms targeting and succeeding with technological breakthroughs. Somehow the best way to innovate is in groups of 10-20 without any corporate bureaucracy. Which also says a lot about the way even the best known companies operate. The top performers are often ignored and the top is usually filled with people who are outright incompetent (however educated they are) or have gained incompetence by sticking to one-track narrow business vision or by adopting bureaucracy whole and sole. Creating Excel and Presentations is their business. Which is what I said in an earlier post on hierarchy at technology companies (which proposes the best way for tech companies to operate, its not the depth of the pyramid that’s wrong its who’s at top that needs changing)

Now that we have identified the source of the problem and a possible solution for it. Lets also acknowledge that it might not be possible to change easily. So the next part is the learning from all this. The most important thing to note is that you can be God Sent/Ph.D. from Stanford or MIT/Chinese/Japanese/India/German but they way innovations and the brain works is that once you move forward in one direction using up a lot of your energy it becomes difficult to evaluate and switch to alternative approaches, and also it becomes costly to try out the myriad variations to solving a problem. This is where startups succeed and get bought over by the best companies of the world. So if you hit the Corporate Mid Life Crisis (which basically means a bottleneck in the innovation process, could happen at any stage in the corporate lifeline) your company could be filing 300 patents a year but that one innovation that’s going to change the world could still elude you. You have to beg, borrow, steal. Which is why most of the topmost companies spend a whole lot of time attending and sponsoring Startup Competitions, Seminars and Conferences. Just to pick up that one good idea that they need. Creating a presence also goes side by side.

Lets draw the analogy to our own personal career, having a Mentor is a standard prescription. But no mentor can be effective enough. You would need to beg, borrow, steal some knowledge and skills from your colleagues and industry experts. In the same light forums, expert discussion groups are a nice idea. Being in touch with people across the world in various labs would help too. An MBA would work well too, perhaps not so much so for the classroom teaching but more so for networking and the 2 years of job break would give a better perspective and a chance to try out various unknown/impossible/hidden alternatives.

Enoughsaid, it is far easier to integrate acquired skills into a personal repertoire rather than integrating e.g. a Skype acquisition into eBay business. This has to do with an M&A culture in a company. Companies who are startups have difficulty integrating an acquired technology while companies like Microsoft who have started with acquisitions in their foundations face lesser difficulty. It’s an unconscious management mindset that you either have or have not. If the M&A is a career stunt by a top VP or CEO then it is bound to fail. If the acquisition is not heartfelt and accepted by the engineering ranks or if the acquired company team members are treated as outsiders then again the integration fails.

My Payday: Job vs. Entrepreneurship

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 19 May 2008 16:52:00 +0000

Salary and payday make the most of discussions at coffee tables. Usually the CEO’s salary is the highest in most conventional companies but equally in some companies there are people who earn more in terms of salary compared to the CEO (Usually where the CEO is taking a token salary).

Lets look at a few facts…

Company	CEO	CEO’s Salary	CEO’s Total Stake	Company Revenues
Cisco	John Chambers	$13m	$272m
EMC	Joseph Tucci	$4.7m	$81m
HP	Mark Hurd	$26m		$108Bn
Microsoft	Steve Balmer	$1.3m	$12Bn	$51Bn
Google	Eric Schmidt	$480,000	$6.6Bn	$16Bn
Apple	Steve Jobs	$1 (One Dollar)	$851m	$24Bn
Oracle	Larry Ellison	$61m	$24Bn	$18Bn
IBM	Samuel Palmisano	$21m	$74m	$99Bn

The first thing to note here is that Steve Balmer, Steve Jobs and Larry Elison were founders in their respective companies. I’m assuming Steve Jobs was fired from Apple and lost his stake, now he just has $851m (Unconfirmed speculation about how he has such less stake in Apple) but he is an exception otherwise Founders of Companies are worth the most in this list of CEO’s. (Bill Gates is also a Microsoft Founder though not the CEO but is the Richest Man in the world). The richest non-founding CEO in the list is Eric Schmidt from Google at $6.6Bn

So the rule of the thumb is if you want to DO WELL do an MBA and take up a job and slog it out for the rest of your life and you will do well. If you want to DO REALLY WELL you have to start your own company (Assuming you know what you are doing) and help change the world and then slog it out for the rest of your life. THIS IS MY MESSAGE TO ENTREPRENEURS. Entrepreneurship is difficult and has a psychological aspect of the entrepreneurs social circle. E.g. in India it is considered more respectable to work in a Reputed Company (???) at a salary of $10,000-$40,000pa than trying something on your own. The former is also related to Stability and Sane-ness.

In the table I drew up above it is obvious that everyone who became the CEO due to a JOB (even though they are some of the most reputed, talented and educated people in the world) simply cannot compare to the FOUNDERS OF SUCCESSFUL COMPANIES.

The mantra for Starting up is to normally work in a job for 3-4 years and then startup, unless you have a degree from Harvard Business School, MIT or Stanford. So that you can go back to being considered for a job in a favourable lateral hiring. Contrary to popular opinion 4 years of unsuccessful Entrepreneurship experience is equivalent to Zilch and not even compared to your batchmate who has so called gone through the rigours and stability of a regular job and would be your senior by now. You should know you are risking this.

Other thing I have noticed is that people in Jobs at so called Reputed Companies will have inflated Ego’s while an Entrepreneur has gone through unsuccessfully through a humbling experience.

I could keep on writing more and more but I guess my point is made and you have the above table to show others who are skeptical about being an entrepreneur. Succeeding or Failing is another matter. I have compared Success in a Job vs. Success In a Startup.

The Art Of Software Development

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 18 May 2008 10:53:00 +0000

I was never a proponent of Process Centric Software Development Methods. I personally prefer People Centric Methods. I have been using them for the last decade and these are the only methods that succeed. Companies who have process centric software development methods are some of the poorest software development companies in the world.

This is the Powerpoint Presentation with the details. Click here. I'm too tired today maybe I will extend this post another time.

Corporate Ageing

aditya.yadav@gmail.com (Aditya Yadav) — Thu, 15 May 2008 17:05:00 +0000

There is a revolution happening at GE. And Jeff Immelt is at the helm of it. Why is this important? It will be evident as we discuss “Corporate Ageing” (Don’t look up the term up on google yet. I coined it a few years back). Whats corporate ageing? Well, the concept is simple. When you start a company aka Startup; VC’s ask you if your core team members have worked with each other before, that’s the first stage ‘Ignorance’, no one knows each other or how things will work out, what to do and what not to do, or how to do things. The company grows through it to a stage where its ‘Innocent’ where leaders in the company usually throw the dice and keep their fingers crossed hoping that things would work out well, so much so for their corporate strategy. Then the company becomes ‘Calculative’ where some best practices are documented, they know their business and stick to things that work and they can predict outcomes to a certain extent. The last stage is ‘Innovative’ where the company takes risks and innovates. The only point to note here is that the transition from Calculative to Innovative is primarily by crossing a monetary threshold.

In big companies you can say that the Corporate Division is Calculative but the Engineering is Innocent. You can place different verticals, sister companies, divisions on different points on the timeline. This also lets you understand why divisions between companies don’t gel together. Because their placing on the Corporate Ageing timeline is different, which shows their thought process and behavioral traits. But that’s the matter for a different article.

Lets see what happened with Google as an example. When Larry Page and Sergey Brin started writing their search engine and trying to raise capital. They were Ignorant about everything. They were Innocent till the stage when they tried out Adsense. And after it worked out they became Calculative. Then they Head Hunted Eric Schmidt from Novell who pushed Google to Innovative which also came about with $14bn per annum influx of money from Adsense. Now Google is an Innovative company. (Please don’t read this by comparing number of patents filed by Google over the years, this is on the Corporate Ageing timeline, in terms of corporate culture)

Lets see whats happening at GE. When Edison started work on the light bulb he was Ignorant. GE evolved through that becoming Innocent and staying Calculative with their Six Sigma methodology for the most part of the century. That way GE is the slowest Ageing company. Jeff Immelt is pushing GE through Innovation. They have long crossed the monetary threshold but GE is a slow growth company (In terms of Corporate Ageing).

There are a few reasons for that Leaders cannot be calculative and innovative at the same time. I say that and Jeff agrees with that from what I know. When a company becomes a company of immigrants and learns to work with that and has the money it suddenly becomes Innovative. Think of it this way when the company has accurate measures to measure everything from a pin moving on the production floor to quality and inventory. It is suddenly over measuring for its own good. It is a bottleneck that prevents leaders from risking anything to avoid going out of bounds of the Organizational Metric Boundaries. This blocks innovation. Suddenly when you have enough money and corporate immigrants they break through the threshold barrier and kick start innovation and risk taking.

More on Corporate Ageing in a later article.

Hierarchy at technology companies

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 02 Mar 2008 09:44:00 +0000

What are technology companies? Every company uses some or the other technology to create its product/ services but that doesn’t make them technology companies. Tech companies are ones whose past/present/future will be decided by the success of the creation or application of the technology around which their business revolves. So Toothpaste is not a technology product. Nor is Coke. A shoe to certain extent. But Microprocessors and Software…Certainly!

So the above statement also gels well with our intuition about what a technology company is. This article proposes “Let the whole company report to the CEO and the CEO report to the CTO. And the CTO and CTO report to the Board. With the CTO with Veto powers over all decisions made inside the company. And the Board with power to make the ultimate decisions.”

Absurd? No! not really. That’s how all the technology companies function informally. The CEO being dependant on the CTO to make all the strategic decisions. The only thing this article is proposing is that this arrangement which works rather amazingly well and should be the only way for the Technology Companies to work, should be Formalized. How about calling it the “CTO Prime Corporate Structure”???

Sorry guys I’m no good at Coining English Terms. But I think the point has been made.

Private Companies are easier to run

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 02 Mar 2008 09:44:00 +0000

… if you know what you are doing. Many times in life you will encounter a situation when your boss has not gone through the same career path as you have and has a different perspective to things. Maybe he is a Wharton MBA in finance and you are an ace engineering scientist at Intel with a Ph.D and Post Doctoral Research experience. That’s something we call can identify with. And…

When you run a company, people inside the company and outside the company have different perspectives too. Of the inside forces a company has to deal with are

1) The middle management

2) The top management

3) The Board of Directors

4) Investors

Of the forces a company has to deal with are

1) The self proclaimed critics

2) The so called industry veterans/experts

3) The Wall Street

4) The Early Adopters

All the above 8 groups have different perspectives to things. To summarize the middle management doesn’t share the same vision as the Top Management or the Founders of the company or even the Investors. The Top Management has to take the strategic decisions to keep the company afloat and survive the dark waters ;-) (Sorry to put it that way but I kind of think that’s true) The investors are too busy thinking about their retained stake and returns on investment and dilution with further investment. But they have learned to be patient with time and are not that trigger happy any more.

The self proclaimed critics in the industry are people who have little or no implementation experience and have not walked the path themselves. That makes them different from the Industry Veterans. The latter on the other hand have vested interests and their own set of biases. For example they think that Microsoft or Google is invincible, so you never tell them that you plan to take on them anyway. But the ground reality is that “Many Kings came and Many Kings Went. Challenging a king was always considered Treachery/War but then there was one Alexander” Maybe Google and Microsoft are great Kings but they might not be Alexanders, only time would tell. Then comes the Wall Street, if you are a public company they want quarter on quarter returns and they don’t care if you are revamping your product line or restructuring your corporate structure or shifting your mission. All they want at the end of each 3 months is whether your Revenues etc. etc. grew at e.g. 15% compared to the same time last year. The Early Adopters are the ones that take your products whether they be Medicines or Chocolates or Microprocessors or Software. What they turn around and tell the world will affect the way people look at your product. If they say something adverse the number of people even picking your product off the shelf would reduce to 15-20% of what they would have been.

This doesn’t apply to startups alone. I have been trying to pen this down for quite sometime now. This applies to product launches by Fortune 100 companies and Startups alike.

So if you are launching a new product, do away with the Middle Management. The Top Management would have to get involved. The Top Management should have Founders/Owners if possible. They would also be on the board so that reduces the groups to Two inside the company (The Top Mgmt. And Investors) The Investors are easier on us poor souls these days and are waiting for that magical 7^th year Exit that will give them Nirvana. So it basically boils down to Managing the expectations of JUST ONE GROUP inside the company THE TOP MANAGEMENT.

Everyone in the second group is extremely dangerous to handle. No one can handle the self proclaimed critics but the industry veterans can be engaged in a WIN-WIN scenario by creating an ecosystem around the Product that you are launching. The Early Adopters similarly should be involved with the Product Engineering to guide on issues. They are like the first customers to your New Restaurant. You simply have to please them as much as you can. They are like reporters who will write columns about your Cuisine.

Most of all keep your Company private. If while doing all this you are also listening to the Moanings of the Wall Street you will miss the High Tide. If you are a public company with no other choice. Think seriously about launching another Private Company/Startup for that project and keeping that private and then merge it with the main company later. Yeah I know its tougher than I make it sound. But you have to sit back and figure all this out yourself.

It pays to push the boundaries

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 02 Mar 2008 09:43:00 +0000

Sometimes you make more money by being the second in an industry and being second in many other industries and geographies where the market leader is not present or someone else is the market leader. But a business is not always about making the most money or about making an easy buck. That’s a shallow proposition presented by shallow companies which are struggling with survival thinking that cutting throats gets them the one magical ingredient to make it big. Successful companies create an ecosystem around themselves.

But the best part is the companies that succeed or succeeded big time at some time in the past have always ‘Pushed the Boundaries’. That’s what is identical amongst all successful companies in their path to success.

What is a Boundary? A Boundary is an accepted Norm of what is considered normal and what is not. A Boundary also demarcates between what is also considered as normal thinking and what is not. So to push the boundary means defying the norms (No we are not talking about doing illegal things) we are talking about things like a fashion designer creating a Pink Colored Line for Men, or a Doctor prescribing IceCream to treat a cold, or FedEx declaring it would deliver next day what come what may. It is things like these that make a company stand out from the rest and if it makes monetary sense and appeals to the taste of customers those companies succeed big time.

It is the thought process that separates the winners from the rest. And the only person standing between you and your success is yourself. It is up to you to take it from here.

Are Middle managers Innovation bottle necks ?

aditya.yadav@gmail.com (Aditya Yadav) — Sun, 02 Mar 2008 09:41:00 +0000

Oh My Gosh!!! That’s it. Companies have always talked about flat structures and VP’s always have their pet projects they always look at personally. But nobody puts their finger on it. This is it “The Middle Managers are Innovation Bottlenecks” The origin of innovations are from the ideas inside the first thinkers head. Nobody will be able to replicate that idea/passion/originality or whatever you call it better than the thinker who thought of the idea behind the innovation.

In a company anyone can innovate or plant the idea. But if it comes from the grass roots it is clipped by the middle management. If it comes from the middle management it is clipped by the top management. What remains is a Meta-Idea or an idea in the minds of the top management which originated somewhere else and is in line with his vision of things. This is a Meta-Idea, the so called inspiration for the rest of the company to work on. The bottom rank in the company works towards realizing this idea which is now coming from the Top Management. The middle management is just going to sit there and diffuse the implementation of this already diffuse Meta-Idea. So it’s best for Corporate Innovation to do away with the middle management in the path breaking innovation projects.

It’s not that middle management is a corporate Idea and Implementation diffuser. It is just the way the corporate structure functions in multi-billion dollar companies.

That said this way. I’m off to prepare for my daughters upcoming first birthday bash. And I’m doing away with the middle men. It’s important to me and I’m going to organize it myself. I will talk directly to the caterers, flower shops, gift shots, invitation card printers etc.

Prime, subprime mortgage, inflation and the US Economy Slowdown

aditya.yadav@gmail.com (Aditya Yadav) — Wed, 06 Feb 2008 04:32:00 +0000

One of my close friends was asking me whats happening in the world economy and what should be his strategy? In short I told him to do a Warren Buffet.

Any country’s economy in the world whether it be Spain, China, New Zealand or Canada or even Trinidad revolves a lot around Mortgage and Lending money. People borrow money with an intention to do something that would give them more money than what they are paying to borrow that money. To build houses, dams, roads etc. Prime mortgage is that section or Mortgage industry where credit scores are high, investment criteria are strict and not everyone qualifies. Sub-prime mortgage is below that where you can get a loan even if you have poor credit scores, can’t meet the terms and conditions for repayment and so on.

Even in the two line definition in the above paragraph you can see that Sub-prime mortgage sounds like a risky affair. People default on loans all the time and their Collateral is auctioned or repossessed and sold to make up for that. No issues there either. The problem happens is that when people default in massive numbers. So in the US this year lots of defaults happened in the sub-prime mortgage space. The people defaulting were linked to or had invested in other economies, markets. They had to be pulled out to recover the default. This is how the cris is spreading from US to other countries and even indirectly as the value of the US bonds and guarantees goes down.

Now lenders will start saying that previously I used to lend at say 4%/annum interest but everyone is defaulting around me and the risk is high I’m not going to lend any money till I get 13%/annum as I need returns in line with the risks I’m undertaking. Soon as this phenomenon picks up inflation goes up. Interest rates goes up. And more people default (through indirect connections) in the prime mortages.

As more and more houses get auctioned Real Estate prices dip to half what they were. Consumers cut down on spending to repay loans and the market see’s a slump. Distress sales in the stock markets lead to Equity indexes falling with Financial Institutions pulling out to repay their dues.

All in all it’s a good time to sit back and get ready to be FIRED FROM YOUR JOB. But other than that to stash up all your money and to jump into the Stock Market or Real Estate market at half the price levels from 3 months back. i.e. do a Warren Buffet.

What do good managers do best?

aditya.yadav@gmail.com (Aditya Yadav) — Thu, 31 Jan 2008 15:53:00 +0000

It doesn’t take a Harvard Degree to figure that one common thing between all good managers. That one trait that enables them to manage better than the rest. They organise all information around them into manageable ways and they play mind experiments with the information arriving at decisions in split seconds. If you invest in 200 companies your investments are unmanageable. But if you invest in 200 companies and organize them into 10 buckets of 20 companies each and the buckets denoting companies from pharma, technology, real estate and so on. And then you follow news and do mind experiments with the information of certain sectors going down or picking up you will be able to strategise your investments better. Though this is a very basic example and it seems rather obvious. But this according to me is the one thing that great managers have in common.

“They organize information around them in manageable ways and play mind experiments on those pieces of information”

The P2P Revolution is about to begin

aditya.yadav@gmail.com (Aditya Yadav) — Sat, 26 Jan 2008 05:22:00 +0000

These are very exciting times at MetaASO, my startup. We should be releasing our Mermaid line of products very soon. What is Mermaid?

1) Mermaid is a suite of FREE P2P v2.0 (Peer to Peer) products that do not require any servers.

2) They allow you to create your own private P2P network. Which means that only those people who have access to the network can use it. So you can create a network for your family, friends, company, country, club etc.

3) Currently only 5 products are going to be released. They are Mermaid Movie, Multisource, Webcam, News and Meeting.

4) Mermaid Movie enables you to broadcast WMV files, even of HD quality in real-time around the globe.

5) Mermaid Meeting enables you to have text/audio/video/screen sharing meetings.

6) Mermaid Webcam allows you to broadcast your webcam/mic. to the world.

7) Mermaid News allows you to share news in real-time with your network.

8) There are 4 platforms supported-

a. Windows XP SP2 32-Bit (The most common OS in the world) + .Net Runtime v3.0

b. Windows XP SP2 64-Bit + .Net Runtime v3.0

c. Vista 32-Bit

d. Vista 64-Bit

Linux(s)/Unix(s)/Mac will be supported in the near future.

An internet connection >= 256kbps is required.

9) The softwares can be downloaded free from the website when they are released in a month.

The urls are: http://mermaid.metaaso.com , and http://www.metaaso.com

Mermaid intends to change the way our society functions for the better. We intend to bring the world closer and make it a cozier place. We want to put the power in the hands of people to start their own tv channels, radio stations, news networks. We also believe that the best software’s should be free. This is the way the internet should be and is going to be in the future.

The revolution is about to begin…

Fundamental Analysis/Business Plan???

aditya.yadav@gmail.com (Aditya Yadav) — Mon, 07 Jan 2008 14:51:00 +0000

Hi,

I was talking to a friend of mine who said he doesn't want to spend too much time creating a business plan and wants to spend all his time developing the business instead of running around trying to raise capital. I'm not sure if he won't have to run around. But let me try help him with creating the business plan. A Business Plan is a strategy document and I will spend sometime on addressing that in another post. But a business plan has sections dedicated to financial projections that I'm going to address now.

I have created a financial projection spreadsheet with some important ratios. If you are used to doing fundamental analysis this sheet will look familiar. I was trying to locate some ready made spready sheet from edgar service of PriceWaterhouseCoopers but I guess it has been taken down.

So have a look at the sheet and lay around with it. It should suite being incorporated in business plans of most startups without much modification except for the numbers.

Here is the link.