Vivek Sood's Blog, page 61

Out now! The 5 Star Business Network hits the shelves

 

Vivek Sood is passionate about business. With a career that has spanned multiple industries and continents, he has moved from success to success over the years. Now, the award-winning author shares his experience with the world in his eagerly anticipated new publication, The 5 Star Business Network. Available from 18 April 2013, the book offers clear, concise guidance that will benefit every CEO savvy enough to consult it.

Mr Sood’s extensive experience of the business world – ranging from international shipping to working with top executives on five continents – and his fascination with the nature of economic cycles provides him with a truly unique perspective of the challenges faced by today’s corporations. He travels the world, supporting businesses to develop their supply chains and business networks in order to become more efficient, more robust and more profitable.

Packed with up-to-date case studies illustrating the points made, The 5 Star Business Network engages the reader from the outset. Each chapter focuses on a different element of building the perfect 5 star business network – something which in the modern global economy no business can afford to neglect. 

Who will ‘Dellify’ the mobile phone industry?

Dellify (verb) – the process of changing an industry model from high cost, low flexibility, make-to-stock model to a low cost, high flexibility make-to-order model.

Before Michael Dell started his business from the college dorm, computer industry followed a very different model. It was been nearly 30 years, and it is hard to imagine those days when branded PCs were sold at a premium prices for out-of-date models that had been sitting in inventories for weeks, if not months. 

As I wrote in my recent book The 5-STAR Business Network

 

When Michael Dell started the computer company that bears his name in 1984, the cash-to-cash cycle time in the industry was 56 days on average, and as much as three times as long was well-accepted in the industry. In the book Direct from Dell: Strategies that Revolutionized an Industry, authors Michael Dell and Catherine Fredman describe the journey of phenomenal growth. Michael Dell started the company convinced that by selling PCs directly to the end-customers, he could better understand customers’ needs and provide more customized solutions.

 
In the PC industry, when Dell started his business, C2C of 50-150 days was the norm. Within four years of starting his business, he had reduced it to -4 days, an unheard of achievement. In fact, Dell was being paid before he bought parts for his product. In the next five years, he brought it down to nearly -40 days – a figure where it has consistently hovered ever since.
 
If you have not already calculated the bottom-line impact of C2C reduction for your business, divide your annual turn-over by 365 days and then multiply that by the cost of capital, obsolescence, and collection. You will be surprised by how high the number is. In Dell’s case the number worked out to several hundred of millions of dollars, a figure that easily allowed Dell to consistently take market share away from his high cost, fixed infrastructure competitors.

Mobile phone systems industry today is showing exactly the same symptoms at the PC industry was at that time. While there is a robust eco-system of suppliers of parts, only a handful of branded products manufacturers release limited number of fixed configuration models at periodic intervals. Similar low flexibility, high premium conditions have prevailed for the last few years – allowing Samsung, Google and Apple to enjoy robust margins and leeway to fight court battles that one judge labeled ‘part of their corporate strategy’. 
 
The key question then is – if the mobile phone industry is ripe for a transformation of its business model – who will get their act together first, and start selling custom build mobile phones delivered to your doorsteps in two week or less? Get it in the configuration that suits you – screen size, processors, memory, operating system, other specs and features – exactly the way you like it – with just the right accessories. 
 
A number of potential candidates come to mind – more of this topic in a later blog post. Meanwhile, I invite your thoughts.

Is the Apple about to fall from the tree? What we can learn from Apple’s latest share price wobble

 

Apple’s shares have taken a worrying dip. One of the technology giant’s suppliers, Cirrus Logic, which is estimated to earn some 90% of its revenue from Apple, reported a fall in sales which led to the dip in Apple’s shares. The news shows the vulnerability that corporations can face and how quickly things can change.

Creating a 5 star business network is all about reducing risk, enhancing efficiency and ensuring robustness for your organisation. When it comes to the use of technology, this is particularly important. Every investment in technology must have a proven return on investment – companies which are seduced by technology for technology’s sake open themselves up to unnecessary danger.

In his new book, The 5 Star Business Network, international business guru and award-winning author Vivek Sood examines the importance of developing a 5 star business network and the relationship between information technology systems and this process. In this must-have publication for any business looking to survive the challenging global economy, Mr Sood provides practical guidance and detailed examples to show every company how it can enhance its core structure and processes in order to achieve enhanced success and increased profitability. 

5-STAR Business Network – A Company is known by the company it keeps

I am always amused to see the starry eyed stories of success of the companies in the business press. Many of the stories do not go deep into the real reasons for that success or to trace how transitory it can be, if those reasons disappear. It was not that long ago that Apple was the darling of the newspapers and magazines. The Company could not do anything wrong, and its market valuation was almost bigger than that of PIGS combined market value. 

I noted the key reasons for its success – its 5-STAR Business Network – in my just released book. I also cautioned that managing this business network, carefully nurtured by Steve Jobs based on his personal relationships as much as organizational protocol, will be delicate task, particularly after Steve Jobs was gone. That is why this article in Wall Street Journal today caught my eye. 

I think by now it is a common knowledge that after Steve Jobs, Apple just is not the same company. A number of missteps have been noted in the press. There were missteps when Jobs was around, but somehow they did much lesser damage then. As one commentator noted on the WSJ article - 

Where Steve Jobs goes, so goes Apple.

I am not as sure yet whether this is true or not. However, what is amply clear is that the main street has noticed the change.

Another sign of the change is what is happening with in the 5-STAR Business Network of the Company. Samsung is openly challenging the company to a duel. Some of its other suppliers are not faring all that well either. For example, see this news report - 

Apple shares plummeted more than five percent Wednesday after Cirrus Logic, a supplier of Apple components, slashed its own profit guidance, suggesting its Apple business had weakened.

The news report goes on to say:

Shares in Apple are well below their 52-week peak above $700 in September as the California tech giant faces tougher competition from South Korea’s Samsung and others in the busy smartphone and tablet technology space.

The sell-off came after Cirrus, which relies on Apple for a majority of its sales, warned that profits for its fiscal fourth-quarter, through March 30, would be lower.

Investment Banks were quick to downgrade Apple and comment on its trouble based on the information from Apple’s supplier. To my knowledge, only one journalist, Adam Satariano of Bloomberg could make the connection across the entire 5-STAR Business Network and see the ripple effect percolating through the business network. He commented in his article:

 

Apple’s breakneck growth to $156.5 billion in revenue last year, from $24.6 billion in 2007 when the iPhone debuted, supports an ecosystem of at least 247 suppliers across the globe. They relied on Apple to deliver $30.1 billion in orders in the latest reported quarter, according to supply-chain data compiled by Bloomberg. As a result, many are now vulnerable after building up inventory in anticipation of continued growth, according to Michael Hasler, a lecturer at the University of Texas in Austin.

“This is the downside of that really positive story of being an Apple supplier,” said Hasler, a former supply-chain executive at Applied Materials Inc. “Your fortune is directly linked to Apple. Until recently, that hasn’t been a bad thing.” …

…While Apple accounts for a large chunk of Cirrus’s revenue, Jabil Circuit gets 13 percent, Broadcom 15 percent and Flextronics 8 percent of their sales from Apple, according to supply-chain data compiled by Bloomberg.

There is not a better example of the prominence of the 5-STAR Business Network in today’s economy. We will see the bull-whip effect ricochet across the global technology sector, and beyond. A Company is indeed known by the company it keeps.

As China’s economic slowdown surprises analysts, what more can its companies do to spur growth?

 

China’s economic slowdown has surprised analysts this week, with a number of key performance figures failing to reach predicted levels. Annual growth dropped to 7.7% for the January to March 2013 quarter, from 7.9% in the previous quarter. Industrial output rose only 8.9%, against analysts’ predictions of 10%, and fixed asset investment rose at an annual rate of only 20.9%, while it had been expected to achieve over 21%.

So what can Chinese companies do to spur their country’s economic growth and what lessons can the international business community learn in the process? International businessman Vivek Sood’s new book, The 5 Star Business Network, holds the key to unlocking each company’s true potential through the development of its 5 star business network. From small, local companies to global corporations competing on the world stage, the lessons provided in The 5 Star Business Network promote efficiency, growth and scalability for every business. Mr Sood explains,

“Having worked across several continents and in a wide range of industries, I have been fortunate to learn first-hand some of the most important lessons that businesses need to know. The development of 5 star business networks is such a key factor in running a successful company, yet one that many businesses often overlook or approach in the wrong way. I am thrilled to finally be able to reach out to all companies, no matter their location, and provide them with the resource they need in order to become more efficient, generate increased revenue and drive forward their success.”

Will BitCoin ever amount to anything more than a bit?

When I wrote my just released book The 5-STAR Business Network I included just one paragraph on Bitcoin, using it as an example of emerging business network of dubious quality. Here is what I wrote in the book:

An interesting phenomenon that is just emerging is online currencies being traded between the informal networks. These go far beyond online payment and clearance systems such as PayPal and serve as crypto-currency. So far these crypto-currency networks such as Bitcoin and its clones are operating at the legal fringes of most economies. Further developments are being watched with interest by the central banks, supra-national bodies and the political economists. We will draw the line here for our discussion of semi-underground networks because one can go too far in researching and describing these and stray into illegal or unethical networks quite unknowingly. 

I did not really expect most readers of the book to be familiar with Bitcoin, or any of its clones. I wanted to mention in passing that such networks could eventually lead to something worthy of distinction or die away. Little did I know that barely before the book was released Bitcoin shot up in notoriety, first by rising phenomenally, and then by falling equally hard. The rise and fall of Bitcoin, in short run, or even in long run is not my concern here. There are plenty of news-stories filled with theories about the gyrations of this crypto-currency, now that Bitcoin is almost a household work. 

The key question I ask is the long term impact of the emergence of this phenomenon on the businesses and 5-STAR Business Networks around the world. To look for clues, I turned to National Intelligence Council’s (NIC) latest Global Trends report, Global Trends 2030: Alternative Worlds, which forms a fascinating read. I encourage the reader to download it for free from this link, and peruse it at their leisure. This 140 page report covers a wide range of topics but I will quote the most important bits below:

The empowerment of individuals and diffusion of power among states and from states to informal networks will have a dramatic impact, largely reversing the historic rise of the West since 1750, restoring Asia’s weight in the global economy, and ushering in a new era of “democratization” at the international and domestic level.

We have more than enough information to suggest that however rapid change has been over the past couple decades, the rate of change will accelerate in the future. Accordingly, we have created four scenarios that represent distinct pathways for the world out to 2030: Stalled Engines, Fusion, Gini Out-of-the-Bottle, and Nonstate World.

Multinational businesses, IT communications firms, international scientists, NGOs, and others that are used to cooperating across borders and as part of networks thrive in this hyper-globalized world where expertise, influence, and agility count for more than “weight” or “position.”

No doubt then, that the report writers see a future made up to such non-state actors forming multitude of cross-national networks, and Bitcoin in just one such network, though it sits more on the fringe rather than in the middle of the business world. It is also starting to gain legitimacy. As per The Economist

On March 18th the Financial Crimes Enforcement Network, an American government agency, proposed to regulate Bitcoin exchanges; this suggests that the agency is unlikely to shut them down.

While as a store of value, Bitcoin or its clones may or may not be a suitable replacement for money. Wild gyrations in prices tell us that they are neither good investments, nor good store of value. Unknown complex computer algorithms that create new bitcoins somehow do not create the perception of scarcity that deep underground tunnels for gold mining do. 

However, as medium of exchange Bitcoin or its clones may be on to something. In a world where most supermarkets, or even book-stores are not complaining when they earn a margin of 2%-5%, it appears ludicrous that credit card companies can command a transaction fee that is equally high. These high fees, and the processes that accompany them were designed in the days of coaches and buggies when none of the efficiencies of modern communication and transportation were available. Whatever happens to the lawsuit with $7.25 Billion settlement in “eight years of antitrust litigation that accuses Visa and MasterCard of conspiring to inflate retailers’ interchange, or swipe, fees on credit card transactions“ (Reuters) in the long run sophisticated networked shoppers will become aware of the power of  crypto-currencies to facilitate cheaper international transactions. As per the Economist

Some legal businesses have started to accept Bitcoins. Among them are Reddit, a social-media site, and WordPress, which provides web hosting and software for bloggers. The appeal for merchants is strong. Firms such as BitPay offer spot-price conversion into dollars. Fees are typically far less than those charged by credit-card companies or banks, particularly for orders from abroad. And Bitcoin transactions cannot be reversed, so frauds cannot leave retailers out of pocket.

No doubt this is just the start of a big trend for the future. However, The article in Economist notes rightly that just as Napster started a revolution in digital music that eventually led to iTunes and beyond, Bitcoin may have already started a revolution in the digital payments that could lead a long way away.

What are your thoughts?

 

Has Intel missed the mobile boat?

Intel has long been the model of Innovation. In particular, its famous tick-tock product development strategy has been hailed as a case study for learning how to balance the current product profitability with the pipeline of future products. For example, when I was researching an appropriate public domain case study for my book The 5-STAR Business Network I could not find a better example of Advanaced Product Phasing (APP) than Intel. At that time I wrote in the book:

Gordon Moore, Intel’s founder, predicted that the number of transistors on a chip would double every two years. Moore’s law was put in practice for many years and it ultimately led to Intel’s tick tock strategy. Intel’s ‘Tick Tock’ strategy was developed in 2007 and refers to the change in their processor technology. Each year, the ticks and tocks alternate, ticks refer to downsizing of the previous microarchitecture and tocks refers to new microarchitecture. During a tick cycle, new process technology is developed, which enhances the performance of previously produced microprocessors. A tock cycle consists of an entirely new processor or product. Many say that this rhythm of development sets Intel apart from other companies, as having a fixed timeline allows the business to produce products at pre determined intervals, and yet manage the product profitability carefully. ‘Intel has successfully alternated and delivered the next generation of silicon technology as well as new processor microarchitecture year after year’ (podtech.net). —

— Overall, Intel appears to be doing the impossible: investing in new technology while simultaneously maintaining and investing in their existing product line-up developments. This system creates a pipeline of continuously flowing products, which are both innovative and sold in large volume, making Intel one of the most successful Fortune 500 companies while producing the largest amount of microprocessors in the world.

Intel managed its transition from a manufacturer of memory to micro-processors admirably. During the transition from memory to microprocessors, Intel’s number one concern was becoming the best microprocessor company. Former CEO Andy Grove created a system called Strategic Long Range Planning. Essentially, this strategic framework allowed Grove to do things his way. ‘I became very distinctive in prescribing the strategic direction from the top down. This defined the strategy for all of the groups, and it provided a strategic framework for different groups at different levels of management.’ (Grove as quoted on aomonline.org) 

However, the next transition – to mobile processors is proving to be far more challenging. To start with, Apple is not as easy a customer as IBM was for PCs. Samsung produces its own processors. Other players in smartphone market are too small to give any economies of scale in large scale manufacturing. 

While quaterly profits do not tell a full story, Intel has just annouced the second quarter in a row where its profit fell more than 25% – this report in Wall Street Journal carries the full story. In its press release Intel said:

“Amidst market softness, Intel performed well in the first quarter and I’m excited about what lies ahead for the company,” said Paul Otellini, Intel president and CEO. “We shipped our next generation PC microprocessors, introduced a new family of products for micro-servers and will ship our new tablet and smartphone microprocessors this quarter. We are working with our customers to introduce innovative new products across multiple operating systems. The transition to 14nm technology this year will significantly increase the value provided by Intel architecture and process technology for our customers and in the marketplace.”

No doubt, the continued softening of the PC market is not only hurting HP and Dell, but also partly responsible for what is happening at Intel. The key question is that while Intel is extremely good at Advanced Product Phasing (APP), is it capable of proving itself adept at Fire-Aim-Ready (FAR) Innovation? Without innovation, and creation of new product for where the market is moving too – cloud based mobile gadgets, Intel is likely to continue to lose ground.

What should Intel do in this scenario? Make a deal with Apple at any cost? Invent its own mobile gadgets? Help create an equivalent of Dell for the mobile market? What else? You comments are welcome below:

Read synopsis of THE 5-STAR Business Networks

Review THE 5-STAR Business Networks

 

As PC sales plummet, award-winning businessman Vivek Sood reveals the key to successful IT project deployment

 

Research firm IDC, which has been tracking the IT industry’s sale of PCs for nearly 20 years, has reported that global sales of PCs plummeted by 14% in the first quarter of 2013. The increasing popularity of tablets and smartphones is thought to be behind the slump.

With technology developing so fast, the importance to businesses of using the best IT tools and running slick, efficient IT development projects is constantly increasing. Mistakes in this area can be extremely costly and time-consuming, allowing competitors’ businesses to capitalize on the errors and race ahead with taking market share.

Using high profile examples of successful and unsuccessful IT system deployments, leading international businessman Vivek Sood examines the critical issues in his much-anticipated new book, The 5 Star Business Network. Mr Sood shows businesses how to develop their 5 star business networks while leading IT projects with vision, planning them with exactitude and executing them with precision.

The already-popular author commented,

“I felt the time was right to share my ultimate business network development secrets. The 5 Star Business Network shows every company how it can become more efficient and profitable, including in relation to its IT infrastructure and project delivery.”

The 5 Star Business Network is due for publication later this month. 

Airlines are adjusting their 5-STAR Business Networks to the new economic reality

As the economic centre of the world moves more and more towards its more populous nations in Asia, a number of businesses are realising that they must adjust their business models, as well as their 5-STAR Business Networks to this new reality. Take the example of airlines industry. A recent article in Bloomberg explains 

Seven of the world’s 10 busiest routes by passenger volume are in Asia, according to the report, with the globe’s busiest link being between the South Korean island of Jeju and Seoul, followed by flights between Sapporo, Japan, and Tokyo.

There is do doubt then that the airlines in rest of the world will have to move to get a piece of action in this growing market. Not only is the market penetration much lower in Asia than it is Europe and the US, but also lack of surface infrastructure makes it doubly attractive to fly over all those bad roads and railway tracks. The two major alliances of the airlines – Oneworld and Star alliance – are a result of an old business model which is now struggling to adjust. Qantas found a way around by making a an alliance with Emirates that could hugely benefit both the companies on trans-continental flights to and from Australia, via Asia to Europe. Lufthansa is talking about starting a low cost carrier focused on Asia. Bloomberg reported:

Air France, Lufthansa and Iberia of Spain are among former flag-carriers revamping short-haul operations in an effort to end losses and stave off the advances of Ryanair and its peers. Cologne-based Lufthansa said last month it might also establish a low-cost operation to Asia in response to airlines that have exploited the Gulf’s geographical position to grab a growing share of lucrative inter-continental transfer traffic.

As I noted in my book The 5-STAR Business Network, the changing economic reality always creates an imperative for newer business models – to survive and thrive. There is no doubt airlines will need to create much more robust and engaging business models in coming years. 

What is your view on the emerging business models in the airlines industry? How can the airlines ensure their survival amid the current turmoil? Please comment below.

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