The Interconnected World is economically more (not less) stable

Books after books, articles after articles have proclaimed that we have entered the age of turbulence. And the markets are flooded with books that give you the solution.

Sample this from Chaotics by Philip Kotler and John A. Caslione):

[T]he U.S. financial meltdown struck in 2008, with the seeds laid much earlier ... The fact is that we are entering a new age of turbulence, and moreover, heightened turbulence. ... The world is more interconnected and interdependent than ever before. Globalization and technology are the two main forces that helped create a new level of interlocking fragility in the world economy.

The italics in the above extract are from the authors.

Let us examine this concept of "interlocking fragility".

Suppose A supplies, exclusively, its raw material to B. If the market to which B supplies collapses, then B is out of business and so is A.

Now suppose, B supplies its different products to multiple markets, and one market collapses. B is hit and so is A, but they do not collapse.

Further, assume that A supplies to B and C. And both B and C supply multiple markets. The impact on A reduces even further.

The above illustration shows how interconnected world reduces turbulence from spreading. An analogy would be the very stable Geodesic Dome.

So where is this "interlocking fragility" coming from?

Here's my conclusion:

The economists and management gurus do not see (or do not understand) that this is a transitory phase. The interlocking is not yet complete. The rich countries are more interlocked and turbulence spreads among them very rapidly. However, as the other regional economies strengthen and as the world get more interconnected, collapse of one economy will merely cause a ripple. Interconnected world is risky for a market leader or a given market itself. Because of technology diffusion and market accessibility, tomorrow, an upstart can turn the tables on a behemoth, such as Microsoft or Intel. The gurus then incorrectly extrapolate this to the world economy itself.

As to why others are proclaiming the arrival of the age of turbulence, I can think of only two reasons:

a) Most if the gurus cannot see beyond America and Europe and possibly Japan. A myopic world view is interpreted to be "interlocking fragility".

and / or

b) This represents an opportunity to cash on paranoia and sell books. Don't believe me? Go to a book shop and see the number of books that offer solutions to the present economic crisis.

By the way, Peter Drucker wrote his book, Managing in Turbulent Times in 1980. Yes 1980. So this is not something new.

Tech Mahindra has got the Satyam equation all wrong

This is very apparent from the unconfirmed news of the latest round of job cuts at Satyam.
That some jobs are lost in any takeover or merger is expected. Especially if there are overlapping domains. I am not sure the overlap of domains justifies a job loss of the order of 10,000 (this is the number indicated to be on bench - obviously all will not go).

What concerns me more is the attitude of the new management. Management Guru, Peter Drucker, chanted, "Costs are inside, results are outside".

In vain, it seems.
Woes of Satyam will not end till they regain the confidence of the customers. Many have left. Others are deliberating. Getting rid of your most valuable asset (at least in the IT sector) - your people - is not the best way to impress customer.

Did Tech Mahindra bite more than it can chew and now shedding weight to cut losses?
Or was Tech Mahindra interested only in the few domains Satyam were strong in?
Either way they are making a mistake.
Such huge job losses will only lead to flight of other Satyam employees. And remember only those who are good get jobs. Satyam will lose good employees.

What should be done?
Well, I would ask my managers to take all the hands on bench and allocate them to existing projects depending on their existing skill. With these extra hands, I would ask the managers to give me gold-plated zero-defect output, ahead of schedule. This would give a clear signal to the existing customers that Satyam means business. That they will do whatever possible to regain customer trust. Customers should respond accordingly. This will also send loud signals to the employees - you are our main assets; please throw your weight with us. We will turn this damn thing around.

I believe non-technical staff will be first to go. Such as marketing people.
Come on! Do you mean to say, marketing chaps who have cultivated relationship with customers over the years are replaceable commodity?

If you are interested in my other posts on Satyam click on
did-credit-crunch-claim-satyam
three-wise-men-of-satyam
sad-case-of-satyam-employees

5 Must Read Business Management Books

Why am I publishing this list ... because it is winter vacations for the kids. And if you haven't read these yet, now is your time to catch up. 5 should be sufficient for a short winter break.

1. Managing For Results by Peter Drucker. The mother of all Management Books. A book can be written for every paragraph of Managing for Results and I suspect many are.

2. The Goal by Eliyahu Goldratt. A business novel that will teach you a new way of thinking. I like to read this novel again and again and again.

3. The Fifth Discipline: The Art & Practice of The Learning Organization by Peter Senge. Welcome to Systems Theory. Learn why time is an essential factor in any causal system. Application of its principles will turn your life and organization around.

4. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant by W. Chan Kim and Renée Mauborgne. A remarkable book, in my mind, only because the units of analysis are events and not companies. And also because CEO's in India use the term Blue Ocean Strategy to describe all their strategy.

5. Hard Facts, Dangerous Half-Truths And Total Nonsense by Jeffery Pfeffer & Robery I. Sutton. Read this book last. You might not want to read any other management book ever after.

Note: The photograph used belongs to Zsuzsanna Kilián. Please see her galleryfor more such photographs.

If I had to read only one book on management

If I were constrained to read one, and only one, book on management then I would unhesitatingly pick up - no, not The Goal! not even near - Managing For Results by Peter Drucker.

Managing For Results is needle sharp focused. Each sentence can launch a 100 books on management. One you have read Managing For Results every other management book reads like a corollary to the thesis presented by Drucker.

Just to give you the flavour of this book, I have reproduced a few gems that are present in the first chapter itself:
1) Neither results nor resources exist inside the business. Both exist outside.
2) Results are obtained by exploiting opportunities, not by solving problems (because of this sentence alone I have eliminated the word "problem" from my vocabulary)
3) Economic results are earned only by leadership, not by mere competence.

And all that in 1964.