Scenario Planning-Energy

Recently I have come across two energy scenarios till 2050 which may play out in future, called 'Scramble' and 'Blueprint'. Check out following link for a preliminary idea on what these scenario means http://dotearth.blogs.nytimes.com/2008/04/18/looking-forward-an-energy-scramble-or-a-blueprint/

In a workshop we later worked on same scenarios for EU and China. When asked that which of these scenarios is more likely to work out, majority said 'Scramble'. A 'Scramble' scenario seems plausible where every country is for himself and is more likely given today’s recessionary scenario and rising protectionism sentiments.

But there is a hope that countries may not 'Scramble' in the end, just because they now are educated about the possible scenarios and know the benefits of 'Blueprint'. Hence armed with both the scenarios and an informed knowledge about how future can turn out depending on today's action, there might be a conscious efforts from countries to take the 'Blueprint' way.

I feel, to ensure good decision making, one need to educate the decision-makers the alternate realities that may occur and the actions which lead to it. The decision maker then due to very human nature to do good, will take the right and proactive steps rather than being reactive to incidents and taking short-sighted decisions.

Will they come back, When the tide turns?

Everyone know that recession is temporary and is not going to last forever. It’s like a storm through which ships have to sail through. But it seems most of the ships are losing their bearing and getting disoriented. When the storm ends, will they be able reach where they had intended to go.

Employees and Customers are raison d'être for the companies. And there is a risk that in these hard times, myopic companies may loose them both.

Employees: During Oil Embargo, there were mass layoffs from affected oil companies. When the embargo ended, the employees were not willing to join back. They had lost their confidence in the companies.
This can be very well the case with companies today who are laying-off. Will the employees like to return to these companies? And even if they return, will they be as motivated and loyal as before.
Offering pay-cuts instead makes sense, since you provide security to an employee, don’t loose the tacit knowledge base and also create a sort of emotional bond and loyalty in hard times. A caveat though, the pay-cut should be non-discriminatory, i.e. everyone from top to bottom should take the cut.

Customers: Marketing is the first casualty in cost-reduction during recession, which can be justified to some extent. But a company needs to take care that it does not disappear from the minds of the people and when the economy recovers, customers have totally forgotten about the company. Then it will take more effort to gain back the share of customers mind and also the market. It’s critical for companies to preserve their market share at these times. A customer may not buy today, but if remembers you, then he may buy tomorrow.

E-Waste Recycling: A Cash Machine....

As part of our MBA, a team of me and my friends prepared a Business Plan for E-waste Recycling in Madrid. The opportunity is huge in Spain, in fact it is a big market all over the world.
E-waste (computers, laptops, mobiles, printers etc..), constitutes of plastics and many rare earth metals which pollute environment. And surprisingly, 95% of an E-waste can be recycled. A kilo of E-waste has more concentration of gold than what one gets from gold mines.

A large portion of E-waste generated in the world lands up in China and India, where it is processed by unorganised and informal players. According to a survey by IRG systems South Asia, a subsidiary of the IRG, Washington DC, USA, the total waste from electronic and electrical equipment in India has been estimated to be 1,46,180 tonnes per year. Add to this the E-waste shipped from developed nations and the opportunity becomes huge.

While collecting data and crunching numbers, the profitablility became glaring. Its the adoption of the idea that has been slow and many investors are not aware of this emerging sector.

How a bad mortgage got high rating when securitised?

I wondered how a pool of bad mortgages when securitised got high rating? There is extensive academic knowledge available on framework and calculations to assess risk. Then where did they fail to assess the risk?

As I sought the answer, I stumbled on the following blog, thanks to my Finance professor.
http://finance.blogs.ie.edu/archives/2009/03/li-a-revolution-after-black-scholes-formula.php

The risk assessment model 'Normal Copula' which failed is not to be blamed though for the crisis. The academic world was aware of its limitations but Bankers still embraced it for its simplicity and potential to devise new trading instruments.

Can Philanthropy be considered as part of Corporate Social Responsibility?

Following are excerpts from an interesting discussion I had on Linkedin.

Ashutosh Agrawal
MBA Student at IE (Instituto de Empresa) Business School, Madrid

Many companies, whose products do not directly benefit society, resort to philanthropy. Telephone companies giving away free telephones, companies giving away money to charities etc. What other means are available to them to highlight their social responsibility? Individuals do charities, so why not companies? Or they should just stick to making their operations (manufacturing, distribution, office buildings etc.) society & environment friendly?

Comments (4)

Liz Maw
Executive Director, Net Impact

I think so. Kellie McElhaney's book (Just Good Business) gives great examples of strategic and aligned Philanthropy, such as Whirlpool supporting Habitat for Humanity, and then donating appliances to the new houses. Kellie also talks about instances when philanthropy is not aligned or strategic, and questions whether that is the best idea. For example, she talks about Ford Motor Company supporting breast cancer, and suggests that they could focus instead on alternative energy / environment. (Note I may be getting this slightly wrong, but hopefully you get the gist of it!)


Ashutosh Agrawal
MBA Student at IE (Instituto de Empresa) Business School, Madrid

Thanks Liz. You brought out a good point that Philanthropy can be related to the area in which company is working. Then it makes sense..... But still Philanthropy in non-related areas (Ford example) can not be bad if the management feels passionate about the cause, or the cause is something important universally ( like AIDS, Cancer etc. ) I dont know... Its just my opinion.....


Josh Cleveland
Program Manager at Net Impact

I think you're right Ashutosh, that philanthropy is never going to be "bad" per se. I do think though, that some forms of it are unsustainable. I couldnt find any up to date stats but it would certainly seem that Ford would cut their breast cancer work in a downturn faster than Whirlpool. Why? because Whirlpool's philanthropy happens to be getting them into markets and building their brand in a way that Ford isn't. (Think of how the "Ford Tough" motto is strengthened by supporting breast cancer - doesnt seem that strategic.) That can be damaging to nonprofits that rely on those funds and then get left out in the cold eventually.


Ashutosh Agrawal
MBA Student at IE (Instituto de Empresa) Business School, Madrid

Thanks Josh for giving a new angle. U linked the sustainability effort with the organisation strategy. Then sustainability becomes a tool for branding and profits. I might be exaggerating but then for some companies, sustainability is a way to boost brand image or even customer base. I dont think that is bad since it is 'Win Win' situation and as u told, they will continue the efforts in downturn. But still it does not sound right..... Its the intention that matters. Maybe this downturn can be a litmus test for companies like Ford and others, as to whether they are really committed to sustainability?

M&A vs Organic Growth

Mergers & Acquisitions(M&A) has become a preferred vehicle to grow and expand in both related and unrelated areas. Cost reduction, economies of scale, acquiring competence, fewer competition, faster growth are some of the benefits of taking M&A route rather than organic growth.
But I was surprised to come to know that on average an M&A fail.

Mckinsey Qrtrly mentions that 40% of mergers fail to capture the identified cost synergies.

This is indeed very surprising. Some say that M&A only happens to increase the pay of top executives whose pay depends on size of the company. Others say that the failure to manage the change and cultural-fit is the main reason.

But it would be wrong to conclude that M&A are bad and one should go for only organic growth (There are many successful companies who have grown organically). The real challenge is to make M&A work and manage the associated change.

How Work Place Ethos Subdue Moral Judgements

Citibank orders a jet. Merrill Lynch CEO demands for a bonus and renovates the office. All of these at times of crisis (which was their own doing) and after receiving the public money for bailout. It makes me wonder how these powerful individuals are insensitive to what is happening outside. How toxic is the culture in these power corridors that one is unable to discern right from wrong? Or is the path to such positions filled with experiences that change a person and his value system.

Media has been harsh on such news, which is rightly justified. But also we need to look into what shapes a toxic corporate culture and how it can be avoided. Maybe Organisational Behaviour specialists can provide some answers.

But I have another serious concern. How does one protect himself from influences of a toxic culture when he walks in corporate corridors?

How practical is Closed Loop Manufacturing?

I was impressed by the concept of closed loop manufacturing, to model manufacturing units like biological units which use each other's output and there is no release of waste in environment. One can read more about it in the article http://www.kk.org/outofcontrol/ch10-e.html .

First I thought it was impractical because one will need to use suitable machinery, locate the industries near to each other and connect them. And how financially feasible it will be? But then I came across E-waste recycling and felt that it might not be that difficult. One can recycle 95% of any electronic waste which can go back into electronics and other products. The rest 5% waste, as the article (indicated above) suggests, the mother nature has the capability to absorb and recycle.

I hope closed loop manufacturing becomes a reality or else...... I am reminded of the opening scene of Hollywood movie 'Wall-E', with piles of waste everywhere and humans in space.

Who will be the Next Manufacturing Superpower?

This was exactly the question asked in cover story of DARE (a leading Indian business magazine) in its Aug 2008 edition. Responses were invited in form of essays and the contest was thrown open to all. The two best analyses get Blackberry. I never had a Blackberry before and was excited when I got one. The two best analysis, one of which is mine, can be read on the following link.

http://www.dare.co.in/announcements/contest/analyses-on-who-will-be-the-next-manufacturing-superpower-that-won-blackberry-bold.htm

A crucial point to be noted is that the essay is about 'Manufacturing' superpower not 'Economic' superpower. A manufacturing power does not necessarily mean economic power too.

Readers are invited to post their views.

How Satyam CEO went astray?

Satyam scandal shocked the corporate India. Many could not believe that a person like Ram Linga Raju did this. How could a shy and quiet person known for his rural initiatives and philantrophy succumbed to commit a fraud? Lets look at the issue with some compassion. He did not commit this fraud to amass immense wealth. Did he love his company so much, that he could not bear to see it ruined. Or did he succumbed to pressure from shareholders?

In any case, the question is back to ethics. At IE business school, we had one session on ethics and leadership which delved on how leaders go astray? How the surroundings affect them that they loose the ability to seperate wrong from right. Its good to know what factors cause derailment, but is selfawareness enough to prevent the leaders from making such mistakes. I doubt it. What is that one thing that can guide the executive in toughest of times? What can ensure ethics in face of severe dilemnas?

'Spirituality is the soul of ethics'. If that is true, which I do believe is true, then can spirituality help our leaders? I can hardly contemplate any spiritual person making such frauds? Should spirituality be made an integral part of any management training course?

Equity or Equality

A unionised environment poses a typical challenge to manager to strike a balance between equity and equality.

Equity : Treating everyone according to what they deserve.
Equality: Treating everyone same, without accounting for individual merit.
If a manager appreciates high performers, others see it as favouritism and oppose the move.
If manager treats everyone equally, the high performers get no motivation to perform well and may reduce their performance to the level of others.
So what does a manager do?

From my experience, equality is an easy way out, there will be no discontent, everyone is happy and performing at same (lower) level. On the other hand, practicing equity is lot more challenging, but yields higher performance.

Undoubtedly practicing equity is good, but its a tight rope walk for any manager in a highly unionised environment.

Spirituality in Management

During the advanced course of Art of Living at Bangalore Ashram, I met a person who had founded a small service company in Chennai. He had made everyone in his staff, do the Art of Living basic course and noticed a marked improvement in productivity and sales. I was surprised after hearing that.

In MBA at IE, as we discussed the challenges of implementing multi-teams and shared-leadership in an organisation, I was reminded of the words of that person. Many big companies in India, are motivating people to join spiritual courses and yoga. Spirituality should not be confused with religion. MIT Sloan research mentions benefits of a spiritual workforce. A spiritual workforce does not resist changes, is cooperative, happy and performs well in turbulent times. American companies are showing increasing interest in integrating spirituality into management. But is spirituality just another fad or has deeper roots, is left to be seen.

Blog - A double edged sword for marketers

Many companies are using blogs to promote their product, some have been successful and some others have burnt their hands. The reason being that a blog once initiated, remains no longer in control of an individual person or a company. As opinions of visitors start pouring in, the blog develops an identity of its own.

Successful companies take a deft & ethical approach to the blog. Some ground rules: negative comments are to be thanked for as feedback on the blog, no comment should be deleted or rephrased. The company may contact the blogger and request him to moderate his comments if they are unduly harsh. Never try to rig the blog by faking the users and comments (known as flog), as the blogging community will realise it in no time and the negative news travels faster on internet. The negative publicity then gathered can permanently damage a company's reputation. There will be some blogs out there whose topic will be relavant to the company product. For instance a company launching a beauty product may find blogs on beauty tips. A company should visit such blogs and give relevant comments (as the company, no faking again) and leave their blog address for bloggers to click and follow to the company blog. Similar strategy may be followed with the experts on the said product line who maintain their blog. Taking the same example, blogging on the blog of a beauty expert will oblige him to reply and comment on the company blog.

A blog is very transparent world on internet and a honest, ethical and strategic approach can yield positve results at literally no marketing cost. One last comment, if the product itself is bad, dont blame the blogging community. Bad news travel faster and in no time the company will know that on its blog, much before the market research team informs the same.

Why Lehman Brothers & others fall

Lets keep aside the technical details of subprime crisis & investment decisions of Lehman Brothers, and think holistically as what caused fall of these giants & the financial crisis.

Was it greed & unethical practices? I thought we came of that age after the Enron, Tyco episodes and introduction of corporate governance.
Or was it policies of Bush Administration?
Or the fundamental financial structure was flawed, which happened to be hidden till now?
Or any other reason??

As the whole world gets sucked slowly into the crisis, with every single page of WSJ & Economic Times carrying the gloomy news, one is forced to think that whether this mess could have been avoided somehow?
Only after we answer the above questions, as what went wrong in holistic sense, then only we can go to next pertinent question, as how such avoidable crisis can be avoided in future?

Suggestions for New Threads

If anyone wish to start a new thread on any meaningful topic, post your comment here. I will be very happy to start a new post on the suggested topic.
Looking forward to suggestions.

Renewable Energy Sector

I was surprised to notice that many of the MBA students here are looking forward to the career in Renewable energy sector. It is indeed a very welcome development. But why, has renewable energy sector caught their attention. Well, everyone here, after MBA wants to do something meaningful in his/her life. In today's world when everyone talks about global warming & oil crisis, its obvious to see the energy sector in a larger context as means to contribute to society & environment.

Also renewable energy sector is the one, which is growing in spite of energy crisis. This sector is still attracting the investment, making it a viable career path, in recent times of layoff. In the social responsibility forum, the companies representatives did tell that they are staffed with all young generation, and not much of the people are willing to join oil companies.

The present MBA batch mirrors the same sentiment. For many students here, going into energy sector is a career change. I hope that recruiters will not harp much on the relevant previous experience and give the chance to these motivated individuals.

Social Responsibility Forum at IE

A Corporate Sustainiblity Forum was organised at Instituto de Empresa, Madrid. It was a great success. Many topics like social business, financing options, hybrid business models were also touched upon. Speakers from various companies like those in High-Tech industry, FMCG, Energy gave an overview of their efforts in direction of social responsibility, through their products.

The efforts in renewable energy sector was inspiring. These sessions saw a high attendance, as many students at IE look forward to career in renewable energy after their MBA. But what caught me by surprise was that even oil companies were already sensitised towards the looming oil crisis & were making investments in this sector.

There are many companies whose products do not lend them towards social responsibility, like companies making arms & ammunitions, cigarette making companies etc. How can these companies too like oil companies can contribute towards social responsibility??