( I had written this blog on 26th Sept 2008 - I could have bought long on Android:) )
As the debate of bailout hangs in balance, there were forward looking business milestones with release of Android and Oracle’s Storage Server Hardware. They are important milestones as both of them are collaborative effort and also both of these highlight that new elements of business needs to evolve. I am sure these are no indicators of improvement in economy but definitely they announce “The show must go on”.
Cornered- Class (Corner Office) – New Term.
I am reading lot about Corner Office and I couldn’t understand why the offices of CEO, COO were termed as Corner Office (definitely they were not once cornered in the office), now I know it’s because the offices in which they prefer to sit is at the corner and they have windows on two or more walls facing outside office building, but the irony is what they see from window is a spectators view of the outside world and what they miss to see is the inside of the building where real-action lies. So hopefully this corner-office term gets merged into open-door else CEO, CFO offices will remain cornered from reality at times.
Google – The Genie
The release of Android SDK and the simultaneous launch of first smart phones based on Android by T-Mobile comes as a wonderful news. I am not concerned about its comparison with i-phone, as such comparison are inevitable and its good for business. What I am excited about is an excellent mix of Google’s Business model. This SDK release was part of an open source handset model. Google has always stood unique in its business model, the unique aspect of this business model is they market without looking to market. They have a brand without any branding. They sell an idea without making us feel we are buying, in a sense they are trying to make us adept to their product in a natural way. But with this release they proved that they are an excellent collaborator, they can work along with several organizations in shaping business patterns. This is a new aspect of their business model where they infused innovation to the market by collaboration. I was trying to analyse what makes them to succeed and the economics lectures of this week helped me to see what they are doing. They are creating economy of scope as they know they have brilliant minds and they are using these brilliant set of people to perform tasks of software development in more areas. Where they don’t have scale like in this scenario they can’t manufacture mobile so they collaborated and create the economy of scale as the entry into the market is difficult because of high input. Though what is store in future for android is difficult to speculate but Apple will find it tough for ensuring its economy of scale and economy of scope doesn’t get wrong with this new competition. I guess Exadata Storage Server and Oracle-HP Database Machine is a step towards ensuring economy of scope as well for both of these companies by trying to bring in a new product to market with their existing strength.
Classroom course
The action in classroom is now getting complex as at one hand we have to appear for quiz on what we learnt and on other hand we need to ensure we are on track with the future learning. I guess this is what needs to be maintained in real-business scenario of not getting off-track from past at the same time ensuring that future is not derailed. We learnt why monopoly economy is inefficient and why perfect competition is so perfect but I guess we are always between both of these extremes. In accounting every chapter is followed with superb case discussion, I need to be honest to admit that I am not reading the cases regularly but I have started to feel what I am missing out. The case reflects the theory in true sense.
Quizzing Time ahead
What will be structure of “bail-out”? Though this is the quiz which everyone is trying to answer around the globe, unfortunately what is instore for our accounts and stats quiz next week is is all on us when we appear at the appointed time. I have not done well in the previous quizzes and thus there is a pattern of non-performance. Lets see what is in store next, till then enjoy your week with open eyes and open minds as when everything is closed we can only open our vision and thoughts.
Friday, May 21, 2010
Thursday, May 20, 2010
This is reproduced from an article which I wrote for Rotman's student magazine in Sept 2009.
Anatomy of Colossal failure
Lehman Brothers Bankruptcy
- Sanjeev Sharma
Lehman Brothers, the fourth-largest U.S. investment bank, succumbed to the sub-prime mortgage crisis which led to the biggest bankruptcy filing in history on this day (15th September 2008) exactly one year ago. The 158-year-old firm, which survived the railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, could not survive sub-prime mortgage crisis. This incident is one of those inflection points, which will stand out as a lighthouse in oceans of financial crises. Rather than analyzing the financial, structural or political reasons for this failure, on which three books are already published (with doubtless more to come), I will try to focus on some salient learning points to help us grow into fiscally responsible managers, instead of limiting ourselves to being what we may provisionally call “Pigeonhole Experts”.
"...senior management also have the responsibility of creating a corporate environment that actively cultivates legitimate, logical opposition to inefficiencies and risks posed by maintaining the status quo."
A “Social Guardian” hat On Senior Management’s Head
An institution with total assets of $639 billion – more than the gross domestic product of Argentina – had gone up in smoke. Though this might seem abrupt and sudden demise of a Wall Street icon, the reality is there is no smoke without a fire. The senior management often terms early signs of failure as false-alarm. The advantage of being as big as Lehman or GM is that you often survive your mistakes. However, Lehman’s demise surely is a salutary warning to all believe that big organizations are invincible. Lehman’s fall generated a massive tremor in the global economy and countries like Latvia, Lithuania, Iceland and Hungary were caught in a frightening downward spiral which caused political unrest in these countries. Thus, managers of big organizations should understand that they are also the torch bearers for value creation. If they falter, they induce darkness all around. That’s why I believe, senior management in big organizations like GE, GM and Citigroup often have to act and think as “Social Guardians” in the global economy. Thus future managers should be made cognizant of the consequences their decisions have on society.
No to “Yes Boss” Culture
Lawrence G. McDonald, author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers notes that the senior management around Lehman CEO used the corporate equivalent of brass knuckles on the staff, moving people into jobs and regions that they weren’t suited for in order to weaken and intimidate them. This kind of militaristic attitude discourages analytic thought-processes and cultivates in its stead herds of sycophants, which, like parasites, infect the core of any organization as they did in the case of Lehman Brothers. Thus, senior management also have the responsibility of creating a corporate environment that actively cultivates legitimate, logical opposition to inefficiencies and risks posed by maintaining the status quo. This is a tough process; however it is also especially crucial in the finance industry which is especially prone to the “Black Swan” syndrome (i.e. the devastating consequences of unpredictable and unexpected risks).
These are some short but succinct learning points from a post-mortem of the Lehman Brothers corpse. While the world is still going through the trillion dollar chemotherapy treatment of bailouts, it is important to understand that a side-effect of this treatment would itself create a long-term disease with more Lehman-like casualties unless we change our business behaviour towards real innovation rather than fake speculation, and drive consumer spending with real needs rather than insatiable greed. I propose we observe 15th September as a “Leaders Learning Day” – as nothing could be more compelling than learning from historical failure as that of Lehman Brothers.
Anatomy of Colossal failure
Lehman Brothers Bankruptcy
- Sanjeev Sharma
Lehman Brothers, the fourth-largest U.S. investment bank, succumbed to the sub-prime mortgage crisis which led to the biggest bankruptcy filing in history on this day (15th September 2008) exactly one year ago. The 158-year-old firm, which survived the railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, could not survive sub-prime mortgage crisis. This incident is one of those inflection points, which will stand out as a lighthouse in oceans of financial crises. Rather than analyzing the financial, structural or political reasons for this failure, on which three books are already published (with doubtless more to come), I will try to focus on some salient learning points to help us grow into fiscally responsible managers, instead of limiting ourselves to being what we may provisionally call “Pigeonhole Experts”.
"...senior management also have the responsibility of creating a corporate environment that actively cultivates legitimate, logical opposition to inefficiencies and risks posed by maintaining the status quo."
A “Social Guardian” hat On Senior Management’s Head
An institution with total assets of $639 billion – more than the gross domestic product of Argentina – had gone up in smoke. Though this might seem abrupt and sudden demise of a Wall Street icon, the reality is there is no smoke without a fire. The senior management often terms early signs of failure as false-alarm. The advantage of being as big as Lehman or GM is that you often survive your mistakes. However, Lehman’s demise surely is a salutary warning to all believe that big organizations are invincible. Lehman’s fall generated a massive tremor in the global economy and countries like Latvia, Lithuania, Iceland and Hungary were caught in a frightening downward spiral which caused political unrest in these countries. Thus, managers of big organizations should understand that they are also the torch bearers for value creation. If they falter, they induce darkness all around. That’s why I believe, senior management in big organizations like GE, GM and Citigroup often have to act and think as “Social Guardians” in the global economy. Thus future managers should be made cognizant of the consequences their decisions have on society.
No to “Yes Boss” Culture
Lawrence G. McDonald, author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers notes that the senior management around Lehman CEO used the corporate equivalent of brass knuckles on the staff, moving people into jobs and regions that they weren’t suited for in order to weaken and intimidate them. This kind of militaristic attitude discourages analytic thought-processes and cultivates in its stead herds of sycophants, which, like parasites, infect the core of any organization as they did in the case of Lehman Brothers. Thus, senior management also have the responsibility of creating a corporate environment that actively cultivates legitimate, logical opposition to inefficiencies and risks posed by maintaining the status quo. This is a tough process; however it is also especially crucial in the finance industry which is especially prone to the “Black Swan” syndrome (i.e. the devastating consequences of unpredictable and unexpected risks).
These are some short but succinct learning points from a post-mortem of the Lehman Brothers corpse. While the world is still going through the trillion dollar chemotherapy treatment of bailouts, it is important to understand that a side-effect of this treatment would itself create a long-term disease with more Lehman-like casualties unless we change our business behaviour towards real innovation rather than fake speculation, and drive consumer spending with real needs rather than insatiable greed. I propose we observe 15th September as a “Leaders Learning Day” – as nothing could be more compelling than learning from historical failure as that of Lehman Brothers.
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