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G-20 summit a success – is the world really getting “flat” ?

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It is not just travel,communication and the Internet -that's turning the world flat as Thomas Friedman famously pointed out. The most amazing image from the G-20 summit is of Queen Elizabeth and First Lady Michelle Obama putting their arms around one another. When there was a gasp of protest from royal watchers, Buckingham palace quickly quashed any concerns about breach of protocol. It tells us a lot about the British Monarch who recognizes the changing "flat world".

The camaraderie of the G-20 leaders also sent a strong message to businesses around the world that we live in one world and must work together to solve the problems of our time, notably the current economic crisis.

Does this mean that all Governments are on the same page? Will global B2B and supply chains become seamless – immediately?

Or at a more mundane level will wireless phone providers start charging the same domestic price for global roaming? Not immediately but we'll get there probably sooner than we imagine!

Google’s April Fool – GMail Autopilot

Is this Google's April Fool joke ?

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The G-20 meeting and global supply chains

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World leaders are gathering at the G-20 meet in London to find common approaches to deal with the global financial crisis. Let's hope that there is some solid movement forward despite some concerns with more bailouts by France and Germany. A quick ,common and global approach is imperative to bring some measure of stability to global supply chains.For supply chains run on flow of money,goods and services and information. Both money and goods and services are not flowing well and the recession is fueling unrest in the developed world raising risks in parts of supply chains – not used to risks.You load a truck with goods in Western Europe and expect it to reach and don't need to have contingencies in place as in many developing markets.

A positive aspect in all of the current situation is that today there is instant global information flow and media coverage – and this should help resolve the crisis at multiple levels including at the G-20.

Managing risks, actuaries and lessons from AIG- where was the human factor?

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Actuarial sciences are primarily mathematical and depend on past data. Since there was no past data the risk of insuring the mortgage-backed securities was underestimated. AIG insured banks for the securities they bought and these debt swaps were an unknown collection of mortgages- some of whom were simply bad loans.

It is not yet clear as to what happened to the human factor in all of this. Maybe the insurance piece was handled from London and there was no real understanding of what was happening on the ground in the US as AIG went on taking on balooning risks. For example, several years ago someone mentioned about a real estate agent he knew who just collected her 6% commission on a home sale being totally uncertain as to how the buyer was going to pay the mortgage. This kind of information was available and discussed accross communities in America as the AIG crisis was building up.

The buyer,seller, real estate agents, real estate closing lawyer, the bank's lawyer in every now defaulting loan closing day would have had a sense of the dubious nature of the loan. Why did not the risk guys at AIG pick it up? Or did they -and nobody listened?

Banks know that there is risk and that is why they buy insurance and that is why AIG is paying up and US tax payers have to foot the bill of this now enormous risk.

Going forward, business will have to re-examine their methods of gathering not just past data but new data that is readily available but in this case had not been built into the actuarial models. Raw numbers and technology cannot replace the human factor where human, qualitative real time input must be sought from the ground to get a better sense of the real risks.

The Stimulus Package, Recovery and Diffusion of Innovations

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Innovation is about change, change in a product, in a service or process. However, no matter how appropriate the innovation is it takes an understanding of innovation diffusion to get the target market to adopt it.

The stimulus package is an innovation to deal with the recession and hopefully most pieces will work. The "diffusion" of each initiative will take time.And every time you get stuck in traffic because of lanes closed due to repair think positive ! Maybe it's the stimulus package making its way to your town or commute….

Local Governments should consider putting up signs at construction locations that are funded by the stimulus – so that drivers feel more upbeat as they get through traffic congestion.

Some visible and physical signs will also start reducing the fear that people feel in a recession.

The Recession and Buyer-Seller (B2B) Relationships

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Marketing and Supply Chain went through a paradigm shift in 1987 when Dwyer,Schurr and Oh published their article Developing Buyer-Seller Relationships. Since then many scholars have used the marriage analogy to understand long term B2B relationships, business markets (SRM)and even consumer markets (CRM ) . Every link of the supply chain is a B2B relationship and it needs to be stable like a solid marriage, so that the next link in the value chain gets reliable product or service.

NBC reports that divorce is down 49% in DC due to the recession as it is simply not affordable by both parties !Similarly I guess B2B relations tend to continue in a recession as it is too expensive and risky to look for new partners both on the buy side and sell side of the business.

On a lighter vein B2B marketers and Supply Chain Managers need to smile with the country song it's cheaper to keep her.

Closing Newspapers changing Ad World

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I have found myself not signing up for subscriptions renewals for magazines and papers I love even when the rates are really cheap ( some as low as 10$/year promotional rate). It's simply that I can't find the physical magazine or paper when I need to find it. On the other hand, I can always find the same thing online- pretty easily.

Some time ago I had asked a Wall Street Journal subscription person if I could get only the online version, no – I was told because they need to sell the paper version to show the official "circulation" numbers. I guess – this was one of the drivers that drove the Newspaper business to the ground. Every region has its beloved paper going out of business. The Rocky Mountain News is one such example, closed just short of a 150 year run. How very avoidable!

Some reports suggest that Newspapers lost out to free online advertising on Craigslist. They also suggest that a slow move to "online" editions that were free ( like New York Times – now ) is another reason. I guess Newspapers did not understand the changing business they were in. The "news" business has been changing radically with the Internet and you can choose exactly what news you want to hear,read and see. Online Ad delivery systems like Google AdWords then appear with very relevant ads when you look at a particular news item online. The advertiser does not pay unless a reader actually clicks through. Sales results for Ad spending have become increasingly important- particularly in this tight economy and here again paper editions can't compete.

Should the print media be looking at "what business are we in" ? The perennial marketing question made famous by Theodore Levitt in 1960 in the Marketing Myopia ….

Supply Chains and Distribution Channels (B2B) really don’t talk to each other

The IBM Study (Accessed February 2009) points out that visibility and risk are important concerns of supply chain managers. The summary of the report suggests that companies seem to be more in touch with their suppliers than their customers when it comes to aligning supply with demand. More bluntly the buy side and the sell side have little clue about what’s developing on either side of the firm’s value chain.

The stark differences in orientation,training and lack of communication between the market end of a company (the B2B end or distribution end) and its back end supply chain function is intriguing. There was a time when these functions were combined together as a “commercial” function which went out of fashion in the late eighties and business school academia,consulting companies and companies themselves pigeon holed sales, marketing and distribution in one bunch and the the supply chain,materials,logistics and procurement as another bunch of functions. If the CEO didn’t actively promote the communication and co-operation between these functions – you landed up with things like the mortgage mess. Those coming up with derivatives never really needed to understand the different types of mortgages that were actually being given out.

ERP systems and particularly Web 2.0 applications will hopefully help better coordination in organizations and till they kick in – some old fashioned “talking” between the marketing and supply functions should help keep the value chain straight.

About StratoServe.

Banks must start lending for supply chains and B2B to work

Supply Chains and B2B is about the flow of goods and services across links of the value chain. Three components that make up this flow is the actual good or service, information about demand and supply at various points of the value chain and money that moves from B2B in reverse. The money pays for the variable costs (like direct raw material) and other fixed costs like salaries, rent etc.

Normally payments take 30 days or more to materialize and in the meanwhile businesses work on bank credit for working capital. With payment uncertainty from the customer businesses must be able to borrow if the economy is to move. This is not happening and Banks are acting “once bitten twice shy”. The US Fed is also reluctant to intervene.

Unless Banks loosen up and loosen up fast, this downward spiral will continue.

Note: This post was published on February 18, 2009 and refers to the Great Recession of 2007-9.

About StratoServe.

From Culture’s Consequences to “Project Match” – IBM needs to add home country fixed costs

IBM has come up with a rather controversial "Project Match" offer for laid off employees to work in "growth" markets in India, Nigeria, Eastern Europe etc. IBM is telling its laid off employees to look at opportunities in the IBM subsidiaries where the local market is growing. The catch is that you get paid the local salary which might be just 20% of the current home salary.

If your job is outsourced then the logic seems to be to move you to the "source".

While IBM's idea seems blasphemous to a high cost country employee- it tells us something about the full circle that globalization has come to. In the 1980's IBM was perplexed as to why various subsidiaries understood and implemented "central commands" so differently. So the now famous Geert Hofstede was commissioned to figure out why this was so. Hofstede came up with culture's consequences and changed the way we look at national culture and its impact on work at subsidiaries of an MNC.

Today, what would a laid off IBM-US employee do with his/her kids college expenses and 401K and mortgage if they took a job at 20% salary ? IBM and other multinationals need to look at the possibility of covering some of these "fixed" costs if the idea is to work.

But if you have an expat offer (which takes care of these costs) and have not yet been laid off – this is the time to take it up!

StratoServe

Google’s April Fool – GMail Autopilot

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The G-20 meeting and global supply chains

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Managing risks, actuaries and lessons from AIG- where was the human factor?

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The Stimulus Package, Recovery and Diffusion of Innovations

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The Recession and Buyer-Seller (B2B) Relationships

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Closing Newspapers changing Ad World

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Supply Chains and Distribution Channels (B2B) really don’t talk to each other

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Banks must start lending for supply chains and B2B to work

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From Culture’s Consequences to “Project Match” – IBM needs to add home country fixed costs

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