Management Thinking: An Antidote to the Scarcity Mindset-I
Management Thinking: An Antidote to the Scarcity Mindset–II
Competition is more than a Scramble
The New Survival Strategy for Businesses
Could we have a Saner Debate on Reservation in Private Educational Institutions?
Management Thinking: An Antidote to the Scarcity Mindset–I
I would like to narrate a newspaper story I read a few years ago. An international team of businessmen were in an Asian country to negotiate a comprehensive deal on tapping some huge Natural Gas reserves in the host country. The negotiations broke down. At the time of returning to their home countries, the leader of the visiting team was asked by presspersons at the airport on what went wrong. His answer has an important lesson for all of us who want to free ourselves from a scarcity mindset that is a result of years of poverty, lack of national confidence and colonial incapacitation. He said something like this, “There was little in common between the two teams. The guys out here are NOT used to plenty. They negotiate from a position of scarcity.”A rude commentary, but a telling one. Scarcity mindset may be something to watch against. Getting trapped into a scarcity mindset on account of poverty and hunger is certainly understandable. But how about the intelligentsia that is over-nourished and over- clothed? Scarcity mindset is an irony here, coming as it does from a land of rich myths with a thousand noble characters. Remember Kunti, Yudhishtira, Karna and others?
The scarcity mindset has major implications. Take the issue of Competition. It is amazing how easily we understand the idea of competition; the problem is that our understanding is convoluted! Competition can be on the demand side or on the supply side. On the demand side, competitive mindset and scarcity mentality are synonymous. There is intense rivalry to take things: whether it pertains to the ration card or the identity card, cooking gas connection, or making contacts at high places. While competition can exist on the take side, there can be competition on the give side too. This supply side competition is something our society has not thought through adequately. That free market economics is predicated upon supply side competition (or the give side) is something we need to mull over and understand.
No doubt, in every transaction there is a give and take. Marketing may degenerate into taking over the territories to create unfair monopolies. It may result in taking over the mind of the customer by persuasive unethical propaganda. These are excesses which need balancing forces. However, let us not forget the fundamentals. The idea of marketing is rooted in the idea of keenly finding out what the consumer wants and giving choice to the customer, essentially ideas on the give side.
A predominantly take mentality reduces ourselves morally and spiritually. Scarcity becomes the Scarcity of the Mind. This manifests in many things. Take for instance, the mark-up given by companies to salespersons. I have seen many local companies having the mark-up percentage for volume slabs going down at higher absolute sales volume; a typical case of scarcity mentality on the part companies. If the company’s production function has diminishing marginal cost of production (which is the case with almost every production functions these days), the company will be better off paying higher sales commission at higher slabs to a salesperson. This makes better sense for the company not only from an economic perspective but also from behavioural and motivational perspectives.
Management as a field is replete with actionable ideas that are antidotes to the scarcity mindset. Take for instance the “And” Principle.
An excellent example would be seeking and creating customer satisfaction and profits at the same time. It took several decades of systematic management thinking and action to figure out that there is an enduring way to create excellent customer satisfaction AND a healthy bottom line for the supplier.
(Appeared in “TAPMI - Creation of Wealth” Series in Business Today, October 10, 2004)
Management Thinking: An Antidote to the Scarcity Mindset–II
In the first part of this article the idea of “And” principle as an antidote to Scarcity thinking was introduced. As an example of credibly pursuing “customer satisfaction” AND “profits” was cited. A similar revelation can be credited to Japanese management with respect to lowering of cost of production. They showed that lower cost of production and quality could both be had at the same time. It was a simple revelation that quality saves on otherwise wasted material, reduces cost incurred on account of returned good, and saves cost by retaining customers who would come back with repeat purchases.If we look carefully the field of management is replete with instances of such thinking. Another example from the Japanese is that of Just in Time (JIT) inventory system. JIT showed that stock-out costs and stock-carrying costs need not be trade-offs as traditionally understood. They both can be simultaneously lowered through a new reconceptualisation of the whole issue.
Currently, the inimitable Brazilian, Richardo Semler of “The Maverick” fame would have us believe, through his second book, “The Seven-day Weekend”, that taking time off from work and loyally serving the organisation may not after all be that exclusive!
There is an entire textbook on Strategy, titled “Strategy: Process, Content and Context” by Bob De Wit and Ron Meyer that exhorts the readers to transcend the dichotomous limitation set by traditional either-or thinking and embrace the AND thinking. The idea is not new. Perhaps Friedrich Hegel’s idea of dialectic wherein thesis and antithesis would clash to create something bigger called synthesis was a suggestion towards AND thinking. It is interesting to note that his ideas could so well apply to something as practical as Management, far removed from Hegel’s original philosophical canopy.
The idea of positive-sum games that most of us are keenly aware of is a variation of the AND principle. Positive-sum games seek to create benefits for both the parties in any transaction. This is a big lesson coming as it does from management and allied fields. If we observe carefully, in many societies most transactions are marked by effort by each one to outsmart the other. The strong underlying belief is one of “my gain is your loss.” Ideas such as multiple stakeholder management, learning organisations, knowledge management etc. are replete with suggestions of expanding the mental canvas to play positive-sum games.
All told, scarcity mindset may be the biggest enemy of wealth creation. Whether we are referring to wealth of the financial or non-financial variety, the important issue is the very approach towards wealth itself. Scarcity mindset plays havoc particularly with intangible wealth such as trust and social capital. With scarcity mindset one just will not be able to conceive that sharing can be mutually beneficial; after all one’s gain is only at the cost of others. All transaction would then become, at best, tactical and at worst, a matter of snatching.
Scarcity mindset seriously erodes the power of noble thinking and action, and it sabotages cooperative behaviour. Nobility becomes a matter of luxury for the “moralist” for indulging himself or herself. In other words, nobility would then have no practical value except for self-indulgence. Over a period of time, a possibility conjured by human imagination that could have been realised collectively would simply become a casualty of scarcity mindset. Nobility would then be badmouthed as excessively ambitious overreach! Interestingly, if we observe carefully, the scarcity mindset is so ubiquitous that it does not arrest our attention. It is all over us that that we have no way to step out and observe it.
Was this the context of Gautama the Buddha’s great teachings wherein he exhorted us with the three noble truths, noble silence, the noble eight-fold path and the noble.... (Appeared in
“TAPMI - Creation of Wealth” Series in “Business Today”, December 05, 2004)
Competition is more than a Scramble
As a nation our conception of Competition seems to be shaped by minimal skirmishes that ordinary life presents. True competition means something much richer.After decades of socialist rhetoric, our nation’s grey (and greying?) cells are now getting stimulated with tons of free-market mumbo-jumbo. Ideas after ideas confuse and confound us. The worst of these “idea marauders” is “Competition.”
It is said that Darwin’s Theory of evolution is a difficult idea to grasp. Not so among our compatriots. Suddenly it seems such an obvious theory and we love the Briton for it. To all of us in the subcontinent who are happy to be fed and clothed, Darwin’s thesis rhymes simplistically, monotonously and sweetly in our ears, all suitably adapted to the local milieu.
The fittest shall survive
None but the fittest shall survive
The strong shall inherit
None but the strongest shall inherit
This blessed earth
And all the material (and non-material) wealth
The pious amongst us knoweth.
The point is we do not understand what Competition really means. For most Competition is still the zero-sum games that we all play under inadequate supply conditions, like those we experience with the great Indian train journey. The scramble for body space, leg space and luggage space all define competition for us. It is such rawest forms of human exchange that condition our idea of Competition. And we seem to have difficulty in coming out of this mindset.
The train journey manoeuvres cannot be dismissed as instinctual, unpremeditated animal action. It appears that everyone thinks he or she is being “strategic” -- making complicated calculations to appropriate maximum space, beating the slant of the sun, or making clever manoeuvres to detrain most efficiently. Behind these competitive dynamics with the “other” individual(s), lurks an investment of human intelligence no animal can match. In a supply-choked society, tactical thinking passes for strategic thinking.
True understanding of Competition in the free-market economic sense requires understanding of both demand and supply sides. On the supply side, collectively, we seem to lack a mature understanding of the freedoms and dignity due to the supplier, the role of the entrepreneur, the freedom to carry on businesses unhindered by government agencies once the ground rules are specified, etc. Any minor misdemeanour by the supply class becomes a case of greed and an occasion to build further “safeguards”. The cynical attitude is carried not only by politicians and bureaucrats but also laypersons.
For free market to succeed, we need to internalise that
1. A truly competitive economy seeks to create a large number of healthy suppliers to match the needs of a large number of buyers. Together they work it out in the marketplace that leads to higher efficiency and effectiveness in using different factors of production.
2. The supplier is no saint and it requires the collective wisdom of the buyers to keep him on his toes! But then, he is a necessary entity. The balance of power between the buyer and supplier keeps the system in fine mettle. Adopting market forces to mediate the economic affairs of society rather than leaving it to the machinations of politicians and the whims of bureaucrats requires this realistic understanding.
3. Long-term healthy suppliers would rather seek out other combatants who are alive and healthy with whom they enter into a social contract without value-reducing hit-and-run guerrilla warfare (or, at the other extreme, cartelisation). Bad suppliers fight to the last and leave no fruits for anyone to enjoy.
4. Good suppliers automatically prevent bad suppliers from entering the arena. The dynamic balance of power between suppliers and buyers (and amongst suppliers) ensures a minimum entry barrier.
5. The supplier exists not because of an executive order from the government by the legitimisation provided by the buyer.
6. Applied to any society, the Competitive Paradigm carries bigger and nobler ideas of “choice to the customer” or “efficient utilisation of resources” “enlightened civil society-backed businesses” etc. Competition as part of state policy should only be a manifestation of higher societal norms.
7. True competition recognises “the smart other”. This carries possibilities for cooperation. Within such recognition resides possibilities for creating positive-sum games with entities not traditionally thought of as partners. Cooperation need not be cartelisation.
If we understand Competition properly we will stop vulgarising Darwin’s theory of evolution and, more importantly, reap the benefits of free markets. (Appeared in “TAPMI - Creation of Wealth” Series in Business Today, August 15, 2004)
The New Survival Strategy for Businesses
The homoeostatic impulses of the business paradigm cannot be wished away. The new role of businesses is to have faith in these and yet engage the society in fruitful dialogue.Biologists have observed that when an organism is threatened, it quickly mobilizes sufficient hormones such as the adrenalin for flight or fight. Flight maintains the status quo (for instance of the power equation between the predator and the victim among others) and fight risks change. There is no prior knowledge on how the organism would react. Not even the individual organism knows before hand.
But go deeper, and we find that behind the urge to flight or fight lies the same quest - the quest for a constancy of internal milieu. This idea was suggested by Claude Bernard over a century ago in his Introduction to Experimental Medicine where he said that the “constancy of the internal milieu was the essential condition to a free life." This urge later came to be christened as homeostasis.
No organism whether biological or otherwise is free from homeostatic impulses. If we understand this in the context of modern corporate organisations, we would have understood much about businesses and their role towards society.
What underlies the homeostatic impulses that modern managements of corporate organisations strive to maintain? Several things. Belief in and action towards greater effectiveness and efficiency, greater accountability and responsibility, greater striving towards fairer rewarding of the deserving and removal of the undeserving, superior financial returns to shareholders, promise of long-term economic sustainability, better control on outcomes, better predictability and better measurements, among others.
Ideologically these may conflict with societal aspirations of employment generation, social security, equitable distribution, special treatment and nurturing of the under-privileged, need-based equity rather than merit-based equity, and several other legitimate societal concerns. A free market society cannot, and should not, wish away these concerns. Unless these concerns are addressed squarely there would be backlash against management ethos that would result in outcomes that businesses and free market enthusiasts do not wish. Let us not have the baby being thrown with the bath water!
We need to move away from ideologies to pragmatic action. It appears that modern corporations are beginning to address social concerns NOT through a change in ideology but through ambitious conversations with stakeholders, unprecedented stakeholder sensitivity, complex systems of measurement to take into account multiple stakeholders that have been unthinkable just a few years ago, and paradigmatic shifts in defining the very identity and purpose of business organisations.
Today we find large commercial banks enabling poor farmers obtain quick and corruption-free loans that make economic sense to these banks, a marketer of FMCG goods educating a women’s self-help group to evaluate their own products more critically with a view to enhance competitive advantage vis-à-vis the competitor, empowering the downstream small business partners and retailers with access to “confidential” company databases that ultimately foster better business returns to the principal company along with better financial performance of the downstream channel partners, or being more transparent with the public about the firm’s pollution discharges to prevent environmental backlashes.
Such impulses towards inclusiveness, innovativeness, openness and transparency cannot be left to chance. They need to be fostered and developed consciously through education, actionable research, development of methodologies, exchange of ideas between industry and academia etc. The name of the game would not any more be altruism and do-goodery. It would be institutionalised engagement by corporate organisations with different stakeholders that would recognise conflicts and incorporate these in complex and effective ways into corporate decision-making that ensures, in the best manner possible, economic, ecological and social survival of business organisations. Such acts would well go beyond regulatory compliance.
This kind of partnership would require of us to conceive of modern corporate organisations as heterogeneous. They will no more be centralised leader-driven entities. There will be all kinds of pulls and pressures from multiple stakeholders. To balance these various and pulls there would be spokespersons who would champion for the cause of stakeholders. A higher level of communication and understanding would be required amongst the members of the organisation. We will have to design new forms of organisations that respect and celebrate plurality: all this without losing the business impulse towards higher effectiveness and efficiency, greater accountability and responsibility, economic and other forms of sustainability, goal direction action and measurement systems.
It will be important not to seek ideological purity. Never mind whether we are on the right or left of the ideological divide. As Alexandra Stoddard says in her book, The Art of the Possible, let us be wise enough to be “... able to do good on earth in our own unique way, being grounded, using our talents wisely, while enjoying the process (of bringing) meanings to our lives”.
Appeared in “TAPMI - Creation of Wealth Series" in Business Today, June 20 , 2004
Could we have a Saner Debate on Reservation in Private Educational Institutions?
Today members of the higher education field and other ordinary citizens in our country are facing a big dilemma. The dilemma is whether to support the judiciary or the legislature (aided by bureaucracy) on the issue of reservation in privately funded institutions. It looks as if the triads of a democratic society (executive-judiciary-legislature) are on an internal collision trip to fight a zero-sum war game, where one’s win is another’s loss. In other words, the stage is set in such a way that either the judiciary will win or the legislature-bureaucracy nexus would win. There is no possibility of a win-win for everyone.In this fight where the daggers are drawn and the two camps have begun the fight, the poor citizen is caught in the war of words and potentially damaging deeds. It is a fight where only black and white exist. The common man has to take a position either of these positions though common wisdom would have it that there is a middle way!
What will that middle way look like? Let me try and explore it. First, collectively we all could perhaps agree on the following axioms to start with:
1) Private entrepreneurs in the educational field is desirable. Some of the finest educational institutions all over the world are started and nurtured by private enterprise.
2) It is in the interest of private educational entrepreneurs too that an equitable society exists within which they conduct their business.
3) Reservation in education is desirable to create equity but it cannot be mandated merely by a non-time-bound quota systems.
4) Through judicial interventions it is possible to create institutional mechanisms that will deliver social equity without sacrificing entrepreneurship.
5) Many private institutions and individuals associated with such institutions too are deeply concerned about social and equity issues.
Next, given these we could come up with the following institutional arrangements:
1) The educational enterprises could come together on a common platform and declare that they are interested in equity and therefore set aside a percentage of gross revenue for offering scholarships to those who belong to lower socio-economic rungs of society.
2) The court could advise on how to form and sustain an association of private educational enterprises and create a common base for coordinated efforts in a professional manner without adverse influences from outside (whether of politicians, bigger and more powerful educational entrepreneurs, bureaucrats etc.)
3) The legislature could enact a bill that requires the formation of a Commission that will ensure that the spirit of equity and social justice is being promoted by private entrepreneurs through the association activities).
4) The judiciary could specify a timeframe within which the association is formed and policies developed and implemented. It could mandate a feedback mechanism that will ensure that the private sector is sticking to their promises.
Reservation is a good idea, but it has to be implemented sensitively. This requires more than just number pushing. The gross number syndrome seems to be ubiquitous. I studied undergrad engineering at one of the top technology institutes in India and I was fortunate to be taught by some of the finest professors anywhere. But the design of roll numbers was grossly insensitive; any number starting with 400 upto 499 were reserved for the insensitively labelled “SC/STs.” Is this our convoluted sense of transparency, I wondered even as a student. The system may have changed but it certainly offended my sensibility despite being not a belittled victim of the numbering system.
I think it is time now for entrepreneur-captains (and all of us in the educational field) to take a bold stand and say that social equity is as much our concern as the politician’s or the bureaucrat’s. We could come together for a positive cause (and not simply be seen as opposing their elected representatives and bureaucrats) and work in concert with people’s representatives, judiciary, bureaucracy and civil society. We could collectively, with their help, develop a system of scholarships, earmarked funds, special coaching, mentorship, and decisive deliverance from social exclusion our society is notorious for.
Appeared in Deccan Herald, Bangalore Oct 09, 2005
