Tuesday, June 19, 2012

Inflation

We have heard this word 'Inflation' a lot of times when we watch the news channel or read newspapers. Inflation in monetary terms is the rate by which the prices of goods and services are raising when compared to sometime in the past. Many economists claim that a controlled monetary inflation is good for the economy.

Apart from the inflation in currency, inflation in various other fields are witnessed today. For example, if anyone gets admitted to a private hospital in India, they spend a certain amount of time in the intensive care unit (ICU) no matter what kind of illness they initially had. A decade earlier ICU was used only for 'intensive' care. But now, ICU is just another ward. To combat the loss in value of ICU, some hospitals have introduced a CCU (Critical care unit). Some see that CCU is the new ICU. Isn't this inflation too?

Almost anyone who earn around 20,000 rupees a month gets a gold credit card. A gold card was something preserved for general managers and CXO level people a decade and a half back. Now, platinum and other levels have taken over as the superior levels in the credit card market. This has brought down the value of a gold card. Isn't this brand inflation?

A customer care executive of today is the receptionist a decade back. A marketing officer is someone who sells soaps door to door. Now, executives are at all levels such as a facilities management executive who sweeps the floor. There was a time when executives were the top level people who had great powers within an organisation. The value of executive has fallen down so much in the past years. Isn't this designation inflation?

In the earlier days, clothes are measured in inches or centimeters. Now they come in sizes. It was discovered that size 10 of today is an inch bigger than size 10 of last decade. Inflation has crept in size too.

A controlled monetary inflation is good for everyone. Inflation, in any other area, can only bring the value down. It makes us feel that we have access to bigger things such as possessing a gold card, or working as a customer service executive, or fitting into size 10 all the time or staying in a critical care unit. Although we are led to believe that we are doing greater things, in reality, we are only fooling ourselves.

Friday, June 01, 2012

Man versus machine


During the industrial revolution, the idea of mass production and distribution flourished. Large factories with machinery were installed. Workers in the factory work with the machines that produce various products which are then sold. Factory discipline came into existence. People started working for a specified number of hours a day in set patterns.

In those times, roughly the productivity of a worker is largely dictated by the productivity of the machine in which he worked on. If a machine is capable of producing 100 bottles a day, then the productivity of the worker is also the same. The output of the worker can only increase when the output of the machine increases. This is one of the main reasons for the fixed hours work culture to come into existance. The management team can clearly know in advance how much the factory can produce based on the number of hours the machine and the worker works. This is the era in which time and productivity are very tightly coupled.

Fast forward to the current times and see the life of a consultant or an IT engineer. The basic guideline still is to work for nine hours a day. The assumption is that the employee would produce a specified units of work in those nine hours. One of the common feedback from an appriser to the apprisee at the end of the year is the time the appraisee spends at work. Even if an employee has never missed deadlines, he would still be pulled up for not putting enough hours at work or for not working on the weekends.

Are we still living in the industrial revolution era? High end job needs free thinking and every person's productivity is different. An employee should be paid for the amount of his output rather then the time spent in office. Clearly, the time and productivity link is much weaker now when compared to the previous era. In organisations like Wipro, it is mandatory to spend specified number of hours at work even though the employee is perfectly capable of producing the output by working lesser hours. How does an organistion reward an employee with higher productivity, or punish less productive workers? Is it fair to judge an emplyee with the time he spends in office everyday, rather than his output?

One of my friends used to work till late night and work from home after that as well. One day, after completing his work, he sent a mail at 1 AM to his manager informing her that the work was complete. The next day when the manager asked him whether he worked until very late in the night, he said yes with a big smile on his face. The manager looked at him for a minute and said "Plan your work properly next time and try to be more productive"

Isint that the difference between a man and a machine?

Sunday, April 29, 2012

Fair plays and politics


Cricket is a gentleman's game. No matter at what level one plays the game, winning or losing does not matter. All that matters is whether the game is played with a gentleman spirit. This is especially tested when playing under extreme pressure to perform. However, the best players in the world know how to conduct with utmost dignity on the field. Rahul Dravid and Anil Kumble are among the greatest players the future generations can look up to.

However, in the current edition of the IPL, the number of Indian players that show dissent and involve in unnecessary argument is raising. The normally sedate Munaf Patel was close to hitting an on-field umpire over a decision and was found guilty on another occasion for verbal abuse. Ashwin picked up a few fights as well in this edition. One with Steve smith and one with Praveen Kumar.

Not surprisingly, the Chennai super kings and the Mumbai Indians are among the bottom of the fair play list this year. Twenty 20 is a hit and miss game. It is not the purest form of Cricket. As a team, you win some and you loose some. But, how you play and how you conduct yourself is of utmost importance in cricket. Though Chennai or Mumbai are not in the best of its form, both can put match winning performances on any day and could even win this edition. But, for me, improving their fair play rating in the second half of this IPL edition is more important than winning the title. As MCC puts it, play hard, play fair!

On the other side, Sachin Tendulkar became the first cricketer and an active sportsman to become a member in the upper house of Indian Parliament. Many hope that he can bring about changes in the way sports authorities are run in the country. Sachin is the biggest sportsman in Inida. No doubts about that. But, if you look at his wonderful carrier, you may find that he was never successful as a captain. He failed to get the best out of his players and even for Mumbai Indians, he was tactically not the best among other T30 captains.

He has never held a leadership post and has no experience in politics. He has never took a post in the state cricket association or the national cricket academy. Also, he has never spoken about his desire to improve sports facilities in India. Hence it took me by surprise when i heard about this new job. But why Sachin Tendulkar? Why this obsession when there are people who could do a better job than him? For instance, Anil Kumble has a much better CV than Sachin for this job. Giving sachin this post , when there are better people around, is a mistake!

Monday, March 19, 2012

Mahalakshmi

It was raining heavily. For the past three days. Streets became rivers and cars became boats. Tropical cyclones are not uncommon in southern coastal parts of India, but every year three days of cyclonic storm provides water to the community for the complete year. This year, the storm is accompanied by recurring lightning and loud thunders.

Kumar was standing outside the corridor starring at the empty streets filled with dirty water. He carefully pulled a pack of cigarettes from this pocket and lit one of them using a cheeta fight match box. Under the dimly lit entrance of the government maternity hospital Kumar's face can be barely seen. A bright lightning filled the dark village street when he exhaled the first puff of smoke.

His face can be barely seen even under brightest of the lightning. He is only a five feet tall man in his mid thirties, weighing 80 kilos. Adding to that, his skin colour was as dark as kajal. In South India, there is always an obsession with the colour of the person and people with darker complexion are considered inferior. Another obsession in most families is having a son to ensure continuity of the family after their time is over. Also, at the time of marriage, a son is considered an asset while a daughter is a liability.

Kumar was puffing away cigarette after cigarette. He had been in the same position a couple of times in the last five years. His thoughts went to the day when he became a dad for the first time. When the nurse showed him his first daughter, he was disappointed on more than one count. He not only was unhappy to become a father of a girl child, but also was unhappy that her complexion was exactly like his own. If a daughter is considered a liability, a darker one is a double liability.

Kumar puffed away another cigarette when he heard a faint voice by his side. When he looked down, he saw an old beggar asking for either food or money.

"It has been 3 days since I had anything to eat" she begged.

Kumar wanted to chase her away. He was too nervous to confront anyone at that stage. He pulled out his wallet from his pocket and gave her two rupees.

The beggar then thanked him for the money and left. Kumar didn’t utter a single word. When he was about to place the wallet back in his pocket, he closely looked at a photograph in this wallet. The photo contains a nice looking, smiling, white complexioned woman standing next to him. He touched her face in the photo. Another lightning filled the place with bright light while his thoughts wavered to the time he was in the hospital the second time.

"Congratulations Kumar! You are blessed with a girl child" the beaming nurse said.

Kumar was disappointed, yet again.

"And she looks exactly like you. Isn’t that great?" she exclaimed

Kumar was almost in tears. He was utterly disappointed twice in two attempts. The least of his expectations was to have a daughter who looks as beautiful as her mother. Every clause of his prayers was unanswered.

Third time in five years, he was standing at the end of the corridor, puffing away smoke. This time, he had a clear plan to avoid disappointment. He knew that he had no control over the gender of the child his wife is giving birth to. But, he thought he had a lot of control over what could happen afterwards.

When he puffed his last smoke, the same nurse appeared with the same beaming smile.

"Is it a boy this time?" he asked with great anticipation, not even caring to ask about the state of his wife. According to him, three daughters are too much to handle.

"No" The nurse replied. "But, she is gorgeous just like your wife. I have never seen a newly born child as beautiful as she is"

Kumar stood motionless. It does not matter to him how beautiful she looks. It does not matter to him, as long as she is not male.

The nurse took him to a dark corner and said "There has been only one boy in the whole of today. All others are girl babies"

"Did you manage to..." he asked with some hesitation.

"Yes. I have exchanged your girl with the boy from room 23 in the first floor" she said.

"Thank you" he said. "You have no idea how important this is for me"

He opened his bag and gave a small parcel to her.

"This one has the remaining 50 we talked about" he said in a hiss. She slipped the small package under her skirt and disappeared quickly.

Being constantly pricked by his feeling of guilt, he assured himself that he had done the best possible thing for him and his family, even though it means that he would be bringing up someone and pass on his values, traditions and wealth to someone who does not belong to his bloodline.

He opened his wallet again and saw the beautiful eyes of his wife in the photograph. His eyes became moist yet again.

"They have for a separate room in the first floor. It means that they should be reasonably wealthy and so she would have a better quality of life than living with him" he assured himself.

On his way to the second floor to see his wife and 'son', he stopped in the first floor. It still was raining heavily outside. He looked at his wife's photo once again. He was unable to control his urge to see his daughter, who is as good looking as his wife.

He knocked on room 23 saying "Hi, my wife is in the next room. I just happened to see your child from outside and she looks beautiful" while stepping in. The kid’s mother was still unconscious. He saw a middle aged woman with excessive makeup on her face, sitting by the side of Mom and daughter. She was wearing a silk sari and was wearing a couple of gold necklace to go with golden bangles and rings.

Kumar felt happy for the first time that day. His feeling of guilt slowly started leaving him as he thought her new family would give her all the comfort to lead a quality life. He saw his daughter from a close range for the first time. He froze for several moments as he fighted tears from falling onto her.

"Mahalakshmi" he said. "She looks like a Mahalakshmi and she has a beautiful eyes"

"Yes, she has. Isn’t she?" she exclaimed.

Looking at her happiness, he asked "Are you her Aunt?"

"Not exactly. But I take care of both of them now"

"Are you not unhappy that you have a daughter instead of a son?" he asked.

"Unhappy? You must be joking. Look at her. She is the prettiest I have ever seen" she said with joy and pulled out a lipstick from her handbag.

Looking into the small hand held mirror, she smiled and said "And in some years, she will be the rockstar in my business"

Friday, September 30, 2011

Politics and business in India

On a fine september day, the anti corruption crusader Anna Hazare asked all "clean"
politicians to quit their respective parties, join hands and form a new party. He feels that this is the best way forward for India to have sustainable growth.

However, in my opinion, there are a few basic flaws in his statement. The bastc fact is that finding candidate for every constituency could prove difficult. That aside, a party should have a set of principles, mission and vision for the future of itself and for the country. In the developed countries, political parties have different ideologies and principles. Some of them are pro-business while others appreciate larger government. These principles should attract people and politicians to join a particular party.

So, Mr. Hazare's statement confirms that the party ideology has nothing to do with the development of the country. It inturn means that the role of government in the India Inc. success story in the past decade was minimal. The growth was mainly driven by private entrepreneurs, whose spirit and hunger has driven the country to greater success.

Without these bunch of jokers, the corporates could have taken the country to greater glory. Htwever, the corporates had to forge a nexus with the ruling government for a share in production. This was confirmed through various scandals including the 2G spectrum scandlal that has emerged in that last yeat. The Jan Lokpal bill addresses all the corrupt practices by the government. It has been alledged that the corporates are orchestrating and funding the agitation for Jan Lokpal bill. Is this not a conflict of intrest from the corporate's point of view? If the allegation is true, why would the corporates do this when they have a partnership with the ruling politicians? Why is the UPA government not insisting Anna to include corporates in his version of the bill?

The main role of an ideal government is to regulate the corporates. Very little corporate corruption have not involved any government role. From 2G scam to the mining scam, corporates have partnership with the government. Now the corporates want a check on their partners in the government. Why?

Why does multiple political parties, especially in states like Tamil Nadu,compete in a election when most of the parties have no differences in ideologies? But, they all do have same vision, mission, values and principles. LOOTING!

Please refer the article below for the main news:
http://www.thehindu.com/news/national/article2450168.ece

The dreamliners and the extra wide bodies

The Boeing 787 or the "Dreamliner", developed by Boeing, is one of the hottest aircrats that is entering passenger service. The main difference between other aircraft and 787 is that most of the body of the aircraft is made of carbon composite material. This material has higher strength to weight ratio which means that the desired durability and strength of the body can be achieved with less weight.

This is a major breakthrough as the persistently high oil prices is hurting the airline industry. The growth in the aviation industry in the developed western market is feeble. However, due to higher growth rate of GDP in the developing world means higher demand for oil. Due to the new-found hunger for energy by the developing world, developed world has to pay higher prices for oil and energy even though their growth rate is close to zero. Hence, there is a greater need to run fuel efficient aircrafts to cut down the cost of running an airline. Fuel is the most expensive expense in an airline's income statement.

Therefore B787 is a highly welcomed aircraft as it provides higher fuel efficiency due to reduced weight. The components are more durable and hence the cost of maintenance is less as well. According to official statements, B787 is 20% more fuel efficient than similar sized aircrafts and it incurs 30% less maintenance cost. Apart from fuel and employee costs, MRO (Maintenance, Repair and Overhaul) is one of the major recurring expenses for the airline. If the Dreamliner can deliver the promise of reducing recurring MRO expense by 30%, it could potentially help the airline to break even with a lesser load factor than normal.

The dreamliner is 20% lighter than a similar sized aircraft, so it is 20% more fuel efficient, releases 20% less CO2, flies 20% more distance than an aircraft with similar sized fuel tank. On top of this, Dreamliner emits 60% less noise. Also, the cabin pressure at cruise altitude is 25% lower. This can help travellers to cope with jet lag better.

To counter B787, Airbus, the rival company for Boeing, is offering a similar aircraft called A350XWB (Extra Wide Body) in its product line. If the official records are to be believed, A350XWB delivers 8% reduction in the total costs than operating a B787. Most of the statistical figures are deceptive as no one clearly understands the underlying assumptions in the cost calculation. However, if A350XWB can deliver the same operating performance as B787, it is a great news for the airline industry.

ANA (All Nippon Airlines) operates the first Dreamliner on November 11, 2011. ANA deploys this aircraft on a domestic route in Japan and later it intends to operate the aircraft for Tokyo-Frankfurt service. This is not a surprise as airlines normally use the most fuel efficient aircraft for its longest route as more fuel can be saved.

What can an aircraft like the Dreamliner do to the airline industry in the near future? The dreamliner is a mid sized long range jet with the best fuel efficiency. This opens up the possibility of opening up routes for which the demand is average. For example, in the far east, for an airline like ANA, it opens up the possibility of starting direct services to less glamorous destinations like Glasgow or Manchester. The seating capacity in a 3 class configuration is around 210. It is almost half when compared to 777 jet.

Airlines make money when the load factor (the ratio of total occupied seats to total number of seats in an aircraft) is higher. This is because airline is a very high fixed cost industry. The incremental cost for carrying one additional passenger in an aircraft is very less. The cost of fuel, pilots, cabin crew, airport parking, take off and landing taxes are the same no matter how many traveler travel in an aircraft. The variable cost of taking an additional passenger is perhaps the cost of food and other services provided by the airline.

B787 provides an opportunity to start routes that seemed unprofitable earlier. With smaller capacity and higher range the problem with load factor can be resolved easily than other aircrafts. The problem with the capacity was probably one of the reasons why full fare airlines are operating in a hub and spoke model. For British Airways, London Heathrow is the hub airport. If a passenger wants to fly from Glasgow to New York in British Airways, then the customer is transported to London Heathrow hub in a smaller aircraft (A320) and then the customer is transported in a bigger 777 or a 747 aircraft to New York. In the hub, the airline uses smaller aircraft to get passengers from smaller locations, gather them and use bigger aircrafts to travel to longer distance cities.

In the above example, British Airways cannot deploy a 747 or a 777 aircraft to fly directly from Glasgow to New york as the demand wont match the available capacity. A smaller aircraft such as A320 cannot be deployed as the range for smaller aircraft is not enough to reach the destination. Hence the hub and spoke model works. The problem with the demand and range is one of the most important reasons for low cost long haul airline NOT to emerge.

Also, for an airline like British Airways, it is difficult to expand operations form the existing hub as the airport runs at a 99% capacity. At some point of time in future, the airline must break away from the main hub and establish secondary hubs in the same city or elsewhere. The merger with Iberia could solve the problem for now, but the airline would need a secondary hub at some time in the future. The airline could also pragmatically choose to fly point to point and slowly break away from the traditional model. The dreamliner or an A350XWB is well placed to solve this problem as well.

Air Asia X is the first airline to start a long haul low cost service. The airline is profitable and they use A330 and A340 aircrafts. According to official figures, B787 and A350XWB are smaller, more fuel efficient, and has higher range. Air Asia X has already ordered A350 for their operations in future. A few more airlines could potentially emerge with similar strategies.

On November 11, when all eyes are on ANA, there could be some airline thinking about starting a big low cost long haul point to point service in the near future. The unthinkable only about a few years ago, has now become thinkable. Exciting times ahead!!

Thursday, September 29, 2011

Kingfisher to close LCC operations

Kigfisher is grounding its low cost operation 'Kingfisher Red' as it wants to focus on its full service model. After a little over four years, Kingfisher has realized the bitter truth that LCC and full service cannot co-exist. Big carriers like British Airways and Delta have tried LCC operations and have failed. In the FMCG market, a company like Unilever can produce and succesfully market both Lux and Lifebuoy brands. But, in the aviation market, LCC and full service are different beasts and it requires different DNA to manage altogether.

However, there are a few important lessons to learn from this failure. Generally a low cost airline make money by cutting cost whereever possible. Hence, they do not provide any in flight entertainment, in flight meal and loyalty program. Also, most of the successful low lost airlines, such as Ryan air, have extensively used a single aircraft model strategy. For example, all of Ryan air's fleet comprises of B737 type aircraft. So, Ryan air only requires only one pool of pilots who are trained to fly B737. This applies to cabin crew, maintenance staff and load controllers, who only require training and license for a single aircraft type. A lot of money can be saved in MRO (maintenance, Repair and Overhaul) area. In the case of Kingfisher Red, they operate ATR42, ATR72, Airbus A319 and A320. So, Kingfisher Red was unable to take advantage of the cost synergies a single aircraft type can provide.

All the established low cost carriers make it clear that the more they fly, the more money they make. Hence, it is very important to utilise the aircraft efficiently. Kingfisher airlines have a bad on-time performance record and hence the aircraft utilisation is not as per the industry standards for a low cost carrier.

The average age of Kingfisher fleet is atleast two times more than that of Easy Jet and Ryan Air. With ageing fleet, the cost of maintanence is high. Most importantly, these aircrafts are average on fuel efficiency. With low aircraft utilisation and fuel efficiency, Kingfisher struggled to break even due to high operating costs.

The time between an aircraft touching down, deboarding passengers and baggages, boarding new passengers and taking off is called tuenaround time. If the turnaround time is lower, and on-time performance is higher, the aircraft utilisation is better. SouthWest airlines, the most succesful LCC, has the best turnaround time of all airlines. Hence, SWA enjoyed the best aircraft utilisation. Kingfisher was unable to turn its aircraft around like the way SWA did.

Kingfisher was also largely working on a hub and spoke model even for its low cost operation. LCC generally do not use hubs as they travel point to point across several cities within a day depending on the demand.

One of the most surprising piece of data is that the load factor in Kingfisher full service economy was better than the load factor in Kingfisher Red class. This fact is amusing because not a lot of people would buy tickets in full fare airline when they have the low cost option. For most of the domestic routes operated by Kingfisher airlines, there is pressure from LCC airlines such as SpiceJet and IndiGO. If Kingfisher airlines can compete with LCC better, why not Kingfisher Red compete in the same market ? There should be some other factors that should have influenced the poor performance of Kingfisher Red, such as poor selection of routes and timetables. Better routes and timetables could have saved Kingfisher Red from being in red since inception.

Kingfisher Red has mulitple aircraft types, uses old leased aircrafts which are low on fuel efficiency, got a bad turnaround time and on-time performance. Running a low cost model calls for higher proactiveness and sadly KF had to exit from LCC market. The combined losses over the years have eroded the company's equity completely. It requires immediate cash injection, better aircraft utilisation, capacity cuts, closure of non-profitable routes among many other initiatives.

The demise of Kingfisher Red could be a great news for SpiceJet and IndiGo. Especially IndiGo is the airline to watch. It has brand new highly fuel efficient A320 fleet, operates on a point to point model with low turnaround time, high on-time performace and better Debt to Equity ratio among all Indian carriers.

Moreover, it uses only one type of aircraft. Indigo has a great vision for expansion. It ordered 180 A320 aircrafts last year, which was a record at that time.

The flamboyance of Vijay Mallya and miserness of LCC do not match. It was indeed a sad day for Indian LCC market. Focusing on full fare service is probably best suited for the airline for now. However, a better understanding of LCC could have saved Kingfisher Red. SpiceJet and IndiGo could do well in the near future to capture the additional market share.

Saturday, October 30, 2010

Project management -- A funny answer

Posting my answer to one of the questions asked in the Project Management exam during my MBA. When i read this now... it really looks funny... read it for yourself!!! Wonderful, yet so funny, in Subba Iyer's classes

Question:

Midway through the project, you have the following issues:

a. Your schedule is slipping by about 30% and the next 2 major milestones are at risk.

b. The payment application and its integration to the accounting system have severe performance problems. Subba Iyer is not very happy with this because this was one of the reasons that the project was awarded to you.

c. 3 key members out of 14 have quit the project.

d. There are motivation problems within the team members.

e. Some one within the client organization has told Mr. Subba Iyer that perhaps your organization isn’t geared to finish the project.

Under these circumstances, your CEO looks up to you to stand up before Subba Iyer and his colleagues and give them a status update. Clearly you are nervous.
Describe your approach, your assumptions and the best-case scenario that you would work towards.

Answer:

Hmmm… that is a difficult situation to handle, especially if Mr. Iyer is on the other side! But, I will give it my best shot.

First, I had to do my homework on all the allegations (from a to e above) and find out the root cause for all of them (If not already known).

30% slippage is a lot and hence there should be a plan B in place to counter that. I will honestly look at the root cause of the slippage and see whether it is internal issue or something external to our company that is causing this.

If it is internal, then I have to fix it by adding more skilled workers in the project with immediate effect. I would do all I could to pull in resources as the CEO has all his support for my project. If it is external in which we have absolutely no control, then I’d flag it to Mr.Iyer to deal with it.

The performance issue would be looked at to understand what the problem is in it. The project is only on its half way stage now and I would argue that the performance is not the final and it would only be improved over time and would assure him to show performance improvements in a specific agreed time and quietly push my CEO to pull in resources to see the real issue and fix it when it is still dark!

It is inevitable that frustrated people would quit the organization if they were put in projects such as this. And the motivation level would also be less given the situation of the project. These are some things that the project manager has to deal with internally. I would argue to Mr.Iyer that additional resources with the required skill set would be pulled in to cover for 3 lost resources.

I will show my resource plan, updated project plan, contingency plan and a contingency plan for my contingency plan to ensure that we are doing whatever we can to bring the project on track.

The bottom line is, I will not disclose the root cause of the issues to Mr.Iyer but will come back and quietly push my CEO to pull in a few strings and get the project going and show improvements in the next meeting to Mr.Iyer and gain his confidence.

At the end of the day, I should realize that this is only a project (even though it is a make or break project for me). If I get nervous, that will have bad effects on my team. All I would do is shield my project team from Mr.Iyer, take all the stick and ensure that the project team is motivated and is on its own. At the same time, I will put a lot of pressure on my superiors, such as my CEO, and make them nervous so that they give enough attention to my needs for the project.