The OM Group @ ISB

In their article, http://www.thehindubusinessline.com/todays-paper/tp-opinion/scale-in-india-a-must-for-make-in-india/article7431350.ece , Piyush and Seshadri argue that Make In India will happen when small manufacturers are able to connect to the larger global supply networks. The current equilibrium of low productivity, outdated technologies and disconnected supply chains can not be sustained if modern manufacturing enters India. Rather than uproot them enmass their suggestion is to transform the supply base. Their warning is timely because already cheap imports are pushing Indian firms to non-existence.

I have been reading with interest the efforts made by several new players to use idle and spare resources to create new business models. I have borrowed the title from today’s NY Times. The idea is as old as B&B. One can rent rooms, cars, computers, labor, etc. Definitely, those in need of employment or additional money can use the business networks to contract safely. It also improves resource utilization. However, safety, reliability, service level guarantees remain a concern. What also characterizes these arrangements is that the contract between the business network operator and the service provider can vary greatly.

The short story in New York Times about Faber Castell makes one think. There are secrets to pencil making! And it takes a week to make one. This company in its 252nd year of existence across eight generations seems to trumpet the victory of manufacturing excellence over competition and changing tastes.

A legend passes away. I was saddened to read “Eiji Toyoda, Promoter of the Toyota Way and Engineer of Its Growth, Dies at 100.” I have learnt so much third and fourth hand about the Toyota Way. It is humbling how the philosophy of the The Toyota Way resonates in every setting. The philosophy reflects human endeavor and gives meaning to innovation and productivity improvement in any setting. It is a unique blend of the East and the West. It is also a very personal philosophy. So many firms, individuals and societies have benefitted from reading about The Toyota Way. I invite readers to contribute their personal learning here as a tribute to the legend.

I read with great interest today’s article in the New York Times on one farmer’s crusade to demonstrate that one must know one’s land to get better yield. I was really attracted with the following words:

‘Thompson said, “Get along, but don’t go along.” He refused to believe that chemicals (and government subsidies, which he eschewed) could solve every problem that confronted them.’

Lone farmers have been experimenting on their farms for hundreds of years. However, the practical wisdom is passed only by word of mouth. As families grow and ownership changes the wisdom is soon lost and new cycles of trials begin.

One challenge to the big data community is to capture this experience and make it usable to individuals and policy makers. Given the latest fad related to me by Bharat Ramaswami of ISI of switching to bio-fuel, the world may face a shortage of food  within a few decades. The temptation to switch is driven by the desire to profit from the land. But the base case for land use has to be made using micro-level data which we could be gathering right now.

New York Times carried an article on worker safety in Bangladesh and beyond. Every time there is a failure in safety or quality control the world looks surprised. Unfortunately, these violations reflect the safety and quality standards regulations within each host country. No amount of pressure from outside the country can replace the laws of the land. For example, along Kondapur road near the high rise buildings of the Hi-Tech city in Hyderabad, there are two glass workshops. The workers do not wear masks or shoes while cutting and buffing glass. Most workers are young and perhaps unaware of the dangers of inhaling glass particles. Many deliveries in India are made on the backs of labor when investing in a dolly for moving heavy cargo costs only a fraction of the profits of retailers. Like these ínnocent’ violations of safety how many more are hidden behind the walls and doors of sheds and homes in India? Even large scale catastrophes can not prevent such gross violations on a small scale. It is the failure of law that allows businesses to continue such practices.

The main events on the Dreamliner’s saga are listed below. We have used public sources for this sequence – there could be major omissions. Please let know if you find any.

What can we learn from this sequence of events? Some may say that the project was too ambitious. Others that Boeing used too many new and untested technologies, new suppliers and partners. Still others might point to the inflexibility introduced due to initial decisions. Of course, one could also say that Boeing weighed three outcomes, stop, proceed and fail, and proceed and succeed. What other main factors could have contributed to this sequence of events?

Note: Each of the event titles have been taken verbatim from the original articles.

In the article “How important is manufacturing to emerging markets?” Rob Minto, editor of the FT’s emerging markets desk in London identifies several interesting themes. One surprising theme is that even India has made large strides towards improving its ranking (from 14 to 10) and aims to continue on this path and increase the share of manufacturing in the GDP. A second theme is the demand for services from the growth in manufacturing has contributed significantly to growth of output in China. He suggests that the connection between manufacturing and services  growth is stronger in emerging markets than in mature economies. There are many implications of this finding, starting with whether the nature of these services is different in EMs, how are these services being staffed and managed, to whether the services play an important role in raising productivity or capturing value in the manufacturing sector.

A news item in the Business Standard talks about insurance companies not being in favor of the Insurance and Regulatory and Development Authority’s (Irda) proposal to standardize the life insurance product. The rationale is that life insurance requires some degree of customization and standardization might lead to undiffertiated products. Another way to differentiate might be through better – faster, reliable and more responsive service; Progressive and USAA are some examples that come to mind.

A recent New York Times article describes Zara’s strategy in retailing fashion goods in the global marketplace. Zara has invented a new form of forecasting fashion. Prior to the Internet word of mouth was perhaps the best way to identify trends. Zara added a quick response system to this and made that a profitable combination. What is fascinating is Zara’s rate of expansion into China. It suggests Zara is trying to reach customers of a certain demographic segment. Other retailers should be watching these moves closely and trying to understand beyond the strategy how China has become a huge and profitable market. It is also some what intimidating to think about the head start Zara has in collecting information about customers.