Local Revenue, Global Cost

I have been observing this phenomena in Malaysia that we are increasing paying cost that reflects the global cost while still earning, generally, local revenue. The recent increase in the fuel price is an obvious example. Other example includes the increase in food prices, be it rice or vegetables. The recent lifting of ceiling prices of steel and cement is also an indicator that we could no longer shield ourselves from paying what others from other parts of the globe are paying.

The issue about brain drain to be is principally driven by the fact that we are not paying the global cost for local talents. The easy way out for them, especially Generation-Y, is to go elsewhere and get paid better for the same amount of contribution that they provide to their employers. What more if they get better deal in work-life balance and better amenities and facilities in foreign land.

Unless your business earns foreign revenue through export, or selling locally to foreigners at the prices they are paying in their own country (like what some of our cabbies normally do), you are going to face tough challenges in balancing between revenue and cost.

How could our businesses be re-structured to manage this risk?

First, we should look at maximising return from the production of goods and services that are generated from our businesses. Could we export if we are not exporting yet? Or, could be increase our export if we are an existing exporter. The whole idea is to get more from the same amount of output since out cost to generate the output is increasing as well. we could also have another serious look at the market segment that we are selling at. Could we move up the chain and re-package our products and offer new value proposition to get better demand and pricing? Increasing revenue is about selling more to existing market and selling to new market that was not served before. What about the way you distribute your products and services?

Second is about productivity improvements. Could we generate more with the same resources? This may require product re-designing, process review, increase training and motivation among the employees and perhaps investing in new technology which would allow you to run your business differently. Its all about identifying opportunities for improvement and having the attitude of not accepting everything as given and untouchable.

Improvements in your supply chain is the third avenue which may enable your businesses to be more efficient. Under the present cirsumstances, the concern is not just about buying at the right price, but security of supply and product quality are also critical. When was the last time you review your supply chain?

I am sure you could also figure out other options that you could consider in making you businesses more resilient and sustainable. The key issue is to understand the shift in the business landscape and review your strategies before the environment turns against your business.

Under the present circumstances, I do not believe that entrepreneurs are not forewarned enough about how much more challenging the future would be. Ignorance is not an excuse, and you'll be paying dearly when your businesses lose their viability.

Pricing Strategy in an Inflationary Environment

While the recent hike in fuel price would certainly increase the cost to run your business, another factor that would create challenge to entrepreneurs would be how to price their products and services. In as much as we would like to pass the increase in cost to customers, this may not be feasible in all circumstances.

How do you develop your pricing strategy in an inflationary environment?

Consider the following three factors.

First is to establish whether your target market is price sensitive or not. If the market is mature, that is when you have a lot of players selling more or less similar products or services, then there is a high chance that pricing would be the determinant when customers make their purchasing decision. Pre-paid handphone card is an example. We can find outlets selling pre-paid cards almost everywhere now days. That's why the margin for the re-seller is very thin. Under such circumstances, increase in pricing would results in customers moving to the next cheaper competitors. Higher price would also exclude certain customers who may not afford to spend on your products anymore.

Second is to consider the impact to your cost structure and the cost of your competitors' products and services. Are they having the same problems? Any of them coming up with new sales strategy which will eat into your market share? Can you use this as an opportunity to differentiate your business and gain more market share by maintaining your present price level by controlling cost?

Finally, look at opportunities to re-package your products or services in such a way where your customers would have similar or better deal and you are not worse off.

Once you understand how the increase in fuel price impacts your customers, your competitors and your own business, you are in a better position to decide the way forward. The idea is to at least maintain the gross profit margin of your products.

Let's look as the following example for us to work out the pricing strategy.

Say presently your product is selling at RM 100 and your cost of sales is RM 80, your profit margin is RM 20 or 20%. If your cost goes up by 10%, that is RM 8, your margin is now RM 12 or 12%. For you to maintain similar gross profit, you have to sell your product at RM 167 to get back RM 20. How do your get the additional 67% in sales?

Your options are:

1. Sell the product at RM 167. However, can your customer absorb the increase in price or would they go to other competitors who are selling at lower price? One way to commit your customer for an automatic increment in prices is to have a "price escalation clause" in the agreement with your customer.


2. Increase your price by lower amount and you absorb the different. Here, is your business able to withstand lower profit margin?


3. Sell more of the same product to get back the margin. For example, you need to sell 2 units at RM 100 each to get back margin of RM 24. You could, for example, offer volume discount to encourage customers to go for higher volume. The challenge here is whether the market can absorb higher sales volume and whether there is capacity to purchase on the side of the customers.

From the above, the better risk mitigation measure is to prevent a huge increase in production cost in the first place. If cost can be contained through better purchasing strategy, using alternative materials which would not result in decrease in quality, higher productivity or re-engineering of your production process, the pressure to recover margin through price increases would be reduced.

Do you really know the cost of your product or services? Well, if you do not have this information, your decision making may not be reasonable and as demonstrated above, the risks to your business would be higher.

Under the present circumstances, all businesses are calculating the impact of the increase in the fuel prices and working out their responses. If you are still not sure at this stage of what to do next, that is the sign of close and present danger!

Waking Up to the Reality of Life!

It is now confirmed that we have to pay more whenever we fill up the tanks of our cars. Some of us thought that we, Malaysians, are insulated from the effect of global oil price increase due to the subsidy from the government and the fact that Malaysia is a net exporter of petroleum. The raise in the pump prices of petroleum products is a real wake up call for everybody.

I'm sure by tomorrow, you are going to pay more for your teh tarik and roti canai and more price increases will follow suit. Looks like cost to do business will go up as well and early indicators in the media suggests that we may be looking at an inflation rate of 5%, and that may seems low for some of us who has to pay significantly more for most of things that we buy.

What are the options that you have when it comes to managing the impact of fuel price on your businesses?

First is to look at the impact on your cash flow and make sure there is no adverse impact to your operational cash flow. You have to understand the expenditure that would be affected by the new fuel prices such as transportation and material cost. Next is to look for the effect on the collection pattern from your customers. Is there any customer which may be adversely affected. Transportation companies could be among the likely candidates for this category. Having understood the possible implications, you could more or less figure out how far you operating cash flow would be reduced.

Second, is to consider options in ensuring the higher expenditure could be mitigated. First option that would come to the mind of most entrepreneurs would be to cut expenditure. However, this has to be done after careful analysis as the last thing that you want is to make your business to be less attractive to you customers due to deterioration is product or service quality. This is where you should be able to differentiate critical expenditure and discretionary expenditure. A discretionary expenditure is those that you could do without while still maintaining you core business offerings. Getting your team to travel economy class instead of business class would not affect your service to your customers. Off course this may reduce the morale of your team members! You could for example list down the discretionary expenditures of your business and perhaps, by going through with your team members, you would be able to identify those that could be reduced or deferred.
The third step is to look for opportunities which come along with the price increase. Could you, for example, offer products which help others to reduce their business cost. Offering teleconference facilities for companies which have high number of face to face meetings could be a growth area. This would help to reduce travelling cost while at the same time enables people to have more time to do other productive things rather than travelling. Similarly, helping companies to communicate to their customers or team members using electronic means instead of paper based communication would also reduce cost while at the same time increasing the effectiveness of the process.

In short, we have to accept the reality of the regime where cost to run business will increase. Doing the same thing over and over again will not lead us towards different results. We have to do things differently and quickly as well.

Surviving the Perfect Storm

People are saying that we are now experiencing the "perfect storm" the confluence of events which created havoc in the global economy and affected everybody around the world. Never in the history of the world we have high fuel prices, weak American economy, the burst of the sub-prime bubble, high commodity and food prices and disasters such as those experiencing in Myanmar and China, all at the same time.

Whether we like or not, our businesses would be affected in one way or another. Although the prices of fuel are controlled in Malaysia, the subsidy required to maintain present prices requires the diversion of fund allocated for other productive spending of the government. So we would perhaps less infrastructure and spending on strategic initiatives which would enhance the competitiveness of the future Malaysian economy. Well the government has to balance between the divergent of interests, especially after experience significant setback in the last general election.

So, what options do you have as leaders of your business setups?

First, in my view, is to look at the effect of the market dynamics to the demand for your products or services. Does the increase in the general price level reduce the capacity of your customers to procure what you are selling? Does is change their behaviour and start to go for goods or services that are more value for money compared to yours? Is the demand going to be higher because the shift in buying trend is to your favour? Understanding the effect of the perfect storm to the demand level in your industry would allow you to appreciate the risks and opportunities that come along with the storm.

Second is about to understand the effect of the changing demand to the competitive elements in your industry. Does is make competition more intense as demand is shifting to cheaper goods which has lower profit margin? How would you, as a business, differentiate yourself further from the "me too" businesses? Can you retain margin and volume by being more focus towards a certain segment of the market? Should you sell more abroad? By understanding the affect of the storm to the competitive elements within your industry and on your major competitors would indicate to you the options that you could consider.

The third step is to consider your firm's ability to seize the opportunities or managing the risks identified. Do have the people, technology, marketing capabilities or even adequate funding? Your key business processes would also need to be reviewed to support any changes in direction and value proposition that you may decide to pursue. Historically, the failure to support changes in business direction with changes in how things are done and how people think and behave, resulted in failure to achieve the desired intention.

Different business entities would experience different implications from the perfect storm. The longer the global economy remains stormy, the higher the uncertainty level and more challenging the business environment would be. This requires leaders of business to be on their toes in ensuring the sustainability of their businesses could be maintained.

It is obvious the present challenging scenario could not be left attended. Ignore it at you r own peril!

Post Election Strategic Review - Some Tips

As the saying goes, the people has decided. The outcome of the 12th general election certainly went beyond the expectation of most Malaysians. In as much as the politicians are wondering what's next, the business community would also be figuring out the implications of the changes brought by the results of the election.

What are the areas the we, business people, should review?

I would be interested to explore the possible changes in the areas of changes in overall national development strategy, policy changes at the federal and state levels, policy implementation issues and hanges in social elements.

Let's have a further look at each of the elements.
Overall national development strategy

With the Barisan National government being returned to power, albeit with just a simple majority, the overall development strategy is not expected to be changed significantly. Furthermore, the corridor development plans which were announced before the election are expected to be followed through, perhaps with further refinement to reflect the changes in the political dynamics. Overall, the thrusts of the corridor development plans would to be retained as most of the strategic thrusts reflect the desire to have balanced development, moving forward.

Policy changes as the federal and state levels

We should expect changes in policy, especially with the changes in the state government in Penang, Kedah, Perak and Selangor. The new state governments are expected to advocate policies which were promised in the general elections, reducing cost of living, free education and fairer distribution of wealth. Being new, there would be some learning curve which the new state governments would be going through.

At the federal level, the government would certainly be reviewing the policies which may have caused the erosion of support from the people. One interesting area is the subsidy of petroleum price, which has grown to be a large portion of the federal government budget. This would be a very challenging issue as the sustainability of the level of subsidy which is popular among the people. The longer the subsidy is retained at the present level, less development expenditure could be incurred, particularly with the increase in the global oil price. Furthermore, the cheaper the price of petroleum the higher the consumption and the faster Malaysia is moving to be a net importer of petroleum.

There will be new faces in the Cabinet as a number of ministers lost their seat in the Parliament. I would expect new ministers may introduce new policies, as what happened in the past, one way or another. This would not be clear until the new cabinet is announced.

Policy implementation issues

As what happened in Kelantan, when the federal and state government are not from the same party, tensions will emerge in state-federal relation, especially in allocation of federal funds. It would be interesting to observe whether the federal government would establish the "federal development department" in the states where Barisan Nasional is not in power. Furthermore, since states have limited sources of income by virtue of the power given by the Constitution, it would be interesting to see how the new state governments exploring new sources of income to finance new initiatives and deliver the promises made in the general election.

The civil servants would also need to adjust to the new policies of the state government. This is also a critical area to observe as changes in policy requires the implementers, the civil servants, to understand and execute. Furthermore, it is expected that there would be changes in heads of certain state controlled organisations such as the state economic development corporations, which are critical in the state economic development.

Changes in social elements

One clear message in the last general election is that the Rakyat wants more transparency in the way the government is ran. This would require governments to make their policies clear and reduce the discretionary powers, especially among the politicians, in their capacities as ministers or head of government agencies. Ultimately, the Rakyat expects the wealth of the nation to be managed in their best interest and those who are corrupts should be kicked out from office instead of being glorified unnecessarily. Definitely, corruption and abuse of power have to be addressed in a more aggressive manner!

Opportunities for Malaysians, in all aspects, should be distributed based on merit to ensure enhanced competitiveness of the country as a whole. At the same time, those who are not well off need to be supported, irrespective of race or beliefs. I would really like to understand how this is managed, by both Barisan Nasional and the new state governments.

Network-Centric Competition: What We Could Learn From Politics?

Today is the nomination day for the Malaysian 12th general election. I have a classmate and few other friends who would be taking part as candidates. In the next few days, the political parties would be competing to convince the voters of their merits to be given the "trust" as their representatives in the Malaysian parliament.

A part from the question of who is going to win, I am observing a pattern in line with the network-centric competition that was discuss in my earlier post. Let's look at how the network-centric concept is applied in this general election.

Malaysians generally arrange their political affairs along the racial lines. In view of this, most political parties are associated with certain races, although there are a few which have all races as members. If we could equate races as markets, such arrangement enables the parties to have their own niche and focus. They could offer and package solutions according to the target groups which would be more homogeneous. However, to win in a general election, the parties have to convince the majority of Malaysians and not just their target segments. Hence, the solution is to create networks among themselves, or in political term is "alliance".

In this general election, I could observe the competition are basically between two types of alliances, the Barisan Nasional model and the Barisan Alternatif model. Lets consider the features of the two models based on the network-centric competition concept.

The Barisan Nasional is arranged in the classic network-centric structure where it has clear network leader, which is UMNO. UMNO is able to be in this position in view of the number of seats that it wins in every general election (it had more than 100 seats in the last parliament). Such a dominant position enables UMNO to assert significant influence over the direction of Barisan Nasional and shape the policy and structure of the coalition. The other main component of the network is MCA which represents the Chinese. Although the number of seats is lesser, it has influence over the key economic players in the country. It has a clear structure and discipline mechanism and those who fail to observe the expectation of the group would be disciplined accordingly (network governance).

Although the components of Barisan Nasional represent various interest groups, Barisan Nasional goes into general election as a single entity. Therefore, it is able to capture the votes of various interest groups by getting them to vote for a single brand. As such, although individually the components may have different offerings to their supporters, collectively those support is blended and consolidated into votes for a single coalition.

The Barisan Alternatif which was born around the 1999 general election is not a cohesive as Barisan Nasional. It has no clear network leader although the leaders of the components are portraying that they are working as a group. In this general election, the components are trying to coordinate which seat should be fought by which component and there is no coordination on policies and strategies, as far as the public is made aware of. Each component has it own offerings and carries different brands although the candidates of smaller components are using the symbol of the larger components is certain seats.

As a result, the Barisan Alternatif, although has a common aim of denying the Barisan Nasional its two-third majority, is a more diffuse network-centric competitor.

In the era where voters are getting more and more mature and demanding, they would be looking beyond the promises and goodies that are offered during the campaign period. The network which is seen to be more organised and structured would have the edge.

Who says business cannot learn from politics? But make sure you just pick up the positive elements only!

Network-Centric Competition in a Flat World - Opportunities for SMEs

The world is flat, this is what peole is talking about nowdays. The term "flat world" perhaps was popularised by Thomas Friedman who describes the levelling of the world through 10 Flatenners including workflow, open sourcing, outsourcing, offshoring and supply channing, driven and enabled by technology and spread of information.

The flatenning of the world requires enterprises to re-look at how they deal with the concept of time, space and knowledge, the deep fundamentals which will continue to change on an ongoing basis. Alvin Toffler in his book the Revolutionary Wealth decribes the phenomena of "de-synchronization" where different groups of people react to change at different speed, creating opportunities and risks for them, depending on which groups they belong to.

Today, most of us has our own "spatial reach" - the places we have been, the origin of good and services we use and consume, the places where our friends come from, the source of news and information we have access to and the source and places of wealth we create - among others. Knowledge, the source of new wealth, keeps on being created, discovered and become oblolate as faster rates. The best part about knowledge is it is non-rival, if I transfer my knowledge to you, we ended up with both with the same knowledge.

Another transformation in the market that is exciting to be observed is the shift from competition based on supply chain to competition based on network of enterprises. Companies such as Li & Fund has managed to demonstrate that new capabilities that would create competitive edge is "network orchestration" where the orchestrator designes the overall supply chain, drawing together multiple suppliers at different locations to deliver the products desired by customers at the quality and prices determined by the customers. Yes, the customer is the central of gravity of the network.

Based on the above observations, the flat world creates opportunities for small and medium enterprises to be significant and meaningful to their customers through a "network-centric" approach where either their become the network orchestrator or they belong to a network of companies producing and delivering goods and services demanded by their customers. The network-centric approach is based on the realisation that vertical integration is no longer possible due to the diverse needs and wants of cutomers as well as the speed goods and services become obsolate. Such approach means the SMEs need not have all the innovation, production and distribution capabilities but work together with like minded enterprises, synchronised by the network orchestrator, in metting the demands in the markets they serve.

How do SMEs be part of this? They have to get rid of two beliefs that most enterprises have:

• Not Invented Here (NIH) - where people in the organisation only support their own ideas and are not open to knowledge and ideas from outside the organisation


• We Know Everything (WKE) - where people in the organisation believe that they know all that are required to be competitive in the market

The two main road blocks are mainly in the mindset of people. Therefore, for a network-centric approach to be adopted and successful, the major change that needs to happen is in the hearts and minds of key people in an organisation. This is where leadership would be really critical in transforming an enterprise from taking the world on its own to working together with groups of other enterprises towards fulfilling the demands of common ultimate customers.

A network-centric approach requires new capabilities to be developed within the network itself and within the network members. At the larger network, a leader has to take responsibilities over the success of the network as a whole and need to introduce and enforce clear rules and protocols for network members to observe. At the individual network member level, the ability to connect and perform based on the overall network strategy would be very critical.

In the final analysis, the flat world enable more enterprises to be significant and meaningful to their customers. Technology and information are two major drivers that level the world and having the capability to access and making sense of them would create opportunities for being more competitive. A network-centric approach is where customers is the major focus and the network of enterprises, lead by an orchestrator, align their innovation and supply chain to meet the demands of the customers at the quality and prices which make sense to the customers. A network-centric approach enable enterprises with lesser capacity and capability to offer quality and competitive goods and services based on the overall strength of the network.

Well, what would you do next?

Making Change Happens!

Well, we are now in 2008, another chapter in our life is ready to be written. For most people, new year means new aspirations and resolutions. Businesses have the same too. New strategies, new initiatives etc. However, as what we have experienced before, how sustainable the aspirations, resolutions, strategies and initiatives? Would all these lead to better outcomes, in life or business?

Different people have different ways in trying to make change to happen and in the manner it was planned. To me for organisations, there are five key elements that have to be managed to make change happens in the way we plan. I group them as 5Ps.

The first is Plan or strategy. The change has to lead to a certain outcomes that benefits the organisation as a whole and the stakeholders as well. This is the job for those who are in the leadership of the organisation. Not only the strategy or plan has to be developed, it has to be communicated to others in the organisation in the manner the people understand and excite them.

At the end of the day, it is the People in the organisation that drives and sustains the change, the one that really makes the change happens or not. As discussed earlier, the people should be engaged and should be given opportunities to be involved in setting the plan. This would encourage better understanding and buy-in. Furthermore, people would be committed to any initiative which they themselves propose. Its about the battle for the hearts and minds, command and control no longer works nowdays, in most cases.

It would be good if champions could be identified to promote and lead the change. This would be those that are respected and trusted by their peers and at the same time are also committed to the case for the change. The champions would be the ambassadors of change and would encourage others to participate as well as addressing the concerns and challenges that surface along the way.

The linkages between the change, the outcomes and performance measurement should also be clarified. People would like to see how does the whole scheme work and how they would benefit at from the whole affairs. This could be the tricky bit as some management may have difficulties in linking change to performance. Having clear milestones which people could to to cherish their success in making change happens should be made available to get the feeling of change across the team members.

We could not expect a different result if things are done the same way, over and over again. One of the elements which have to be reviewed is the Process in which things get done in the organisation. This covers the whole spectrum of processes right from how policies are determined, how decisions are made right to how the toilets are cleaned. One approach is to review the processes and identify the few ones that could make major differences and focus on changing them first. The idea is to clearly demonstrate to people that the commitment to the change is real.

Some of the changes in the processes could only be done if suitable Platform are made available. This would include tehcnological platform as well as knowledge and regulatory platform. Pleasent work environement could also be considered a platform due to how important human capital is to organisational development nowdays.

When it comes to investment in new technology, management has to focus on the strategic needs and the outcome that are expected out of the investment. Gone are the days where people invest in technology because others are doing so as well!

The final elements which is very important is Principles, the values that are internalised by the team member. Everybody has to work for the cause on which the organisation is established. The drive form the hearts will drive real performance. How to do this? Well, that the Five Million Dollar question!

I suppose this new year would be approached in a new way so that we could be proud of ourselves and the organisations we serve at the end of the year. Change will continue to happen, what is critical is does it happen in the way we want?

Its that time of the year again

We are at another end of an eventful year, again. For people in professional services industry, this is the period that they hope does not exist. Most key clients are either on holiday, overseas or other sound reasons why they should not be in the office. Most will defer any new contracts or engagements until the new year or worst, after the Chinese new year. Even to collect your fees may be tough as cheque signatories may not be around although the cheques are ready for signing for a while already.

What am I mumbling about?

I am discussing about the period where most people do nothing. However, when the new year starts, most will be singing new plans, ambitions and targets. How do they suddenly pull out the rabbit from the hat, just like other business people?

Some people are serious about planning for the future, some just feel they need something new while others couldn't be bothered to look ahead at all. This is a free world, people are entitled to do what they like. Off course, the consequences of their attitude and behaviour would not be the same.The one who take planning and execute their plans have better chance to be successful. Those that run their business as usual may not necessarily going to go bust just because of that, but may have higher chance to be so or simply would fail to capture new opportunities appearing in the market place.

So, what is in store for us in Malaysia for 2008? Wait, I am taking out my crystal ball!

I see few trends that are worth to be considered.

On the political front, we may be going for general election again. I am not going to speculate on the outcome. However, once the general election is over, the government (I am assuming no significant change from the present) will be able to make tougher decisions on issues that require strong actions. The issues like petroleum subsidy, implementation of the Ninth Malaysian Plan (we will be halfway of the plan by then) require strong commitment from the government. I am not also surprised if the long awaited Goods and Services Tax (GST) will be announced as soon as the election is over to enable enough implementation period and enough time for people to adjust so that it would not be an issue in the next election.

Economically, the growth trend would continue especially with further spending from the Ninth Malaysian Plan projects which will mitigate whatever effects arising from reduction of export abroad which is expected as the consequences of higher petroleum prices globally and the financial chaos due to the sub-prime debacle which is hitting the US and other capital markets globally. The challenge for the small and medium enterprises in Malaysia, which make up around 95% of businesses, is how to capture the economic opportunities. Those that rely solely on handouts from the government would have to compete more with their own kind and their number grows. I suppose looking at the larger market and being more competitive would be the only way to sustain your business. They should start to take seriously the intent of the Malaysian government in encouraging Malaysian businesses to move up the value chain and be part of the global business supply chain.

Our society will continue to learn how to live in a more global and networked world, hopefully. The push for enterprises to be more socially responsible would create further interest in this area. I hope companies are not only concern about CSR after they make profits but in how the profits are made and how their behavior affects the society. The demand for accountability would be more visible, especially from those who got their power from the public (read politicians, especially those who are in the government) and the civil servants. This is where enterprises could play their role by not involving with practices that compromise public interest. Knowledge based business would be growing, as Malaysia as a whole invests further in human capital development to have more people to drive the economy forward.

Technology will continue to influence our live next year. With new technology based business solutions and tools, businesses could improve their competitive edge by venturing into new business, improve production and work processes as well as extending their market through new delivery channels. Its would be interesting to observe the rolling out of the WIMAX services by the companies that were awarded with the license. Further growth in broadband panetration would certainly create more opportunities to businesses to use the web to capture new markets.

With the recent summit on environment over in Bali, I expect the Malaysian government and Malaysians generally would be more concern on how we could enjoy development and growth without further demaging whatever that is left from our environment. I suppose companies which could make themselves visible as "environmental friendly companies" would be given favourable preference in contracts and tenders, other things being equal. Let's watch this space as well. There would also be a lot of business opportunities in saving the environment!

I suppose the above trends would only be meaningful to businesses which look at them and try to identify business opportunities or threat that come together. Further, they need to work out plans and initiatives to capture the opportunities. This has to go to the level where specific people is given responsibility to ensure specific outcome to happen and this has to be tracked on a continuous basis. If not, you will get the old year overhang and your new year will not bring much different.

Happy New Year 2008!

A Week On Innovation

I was fortunate to be in Penang again, this time to do few things in my capacity as the President of the Malaysian Institute of Accountants. Interestingly, all the events that I attended had to do with "innovation", the catchy word that is gaining more significant in today's world which is full of uncertainty. First, I attended a discussion session with the faculty members of the School of Management at the Universiti Sains Malaysia (USM). I shared my thought on issues relating to the accountancy profession and what the future would be. The faculty members did not disappoint me as they post me with questions ranging from PCAOB to how a more sustainable business governance could be shaped, by focusing on the heart of people rather than creating more rules. Significant portion of the discussion was also on Islamic Finance, which is gaining popularity and where Malaysia aspire to lead the world.

At the end of the session, as what we normally do in Malaysia, I was handed a souvenir. In line with the institution that I was visiting, I was handed a book. This is where I got excited. It is about what sort of university USM is going to be in the future. USM is considering a number of models such as virtual university, industry lead university, government lead university and a number of other models that would make USM significantly different from where it is now.

Hey! They are also concerned about the future after all and dare to consider models that are totally different from what USM is used to be! It gives me confort that our institution of higher learnings are innovating themsleves. What would be interesting is whether they are allowed to be different, since being different means they may need to be lead by different group of people who perhaps, would be more confortable of being challenged, at least intellectually.

Next, I attended the MIA Business Forum 2007 with the theme "Driving Innovation". The highlight of the conference was round table discussion attended by CEOs of Malaysian and global companies. All of them talked about competitive edge, competing globally and the need to nurture quality human capital. Innovation is not limited to scientific discovery only but covers a wider areas including business process, supply chain management, distribution and a host of other areas. The message is very simple, without innovation there wouldn't be competitive edge. Without competitive edge your business is not going to survive! Period.

The MIA Penang annual dinner was held in the evening. What has got dinner to do with innovation? I noted few things. One was the theme of the dinner, Baba and Nyonya Night. The theme allows people to be innovative in choosing their attire. The dinner hall was also innovatively decorated in such a beautiful way in line with the theme. Second was the violin performance. The lady performer was energatic and dancing around in line with the tune of the songs, no longer a violinist stands still! Well, at least for me, violin performer will never be seen in the traditional light again.

So, over two days, I observed professors, lecturers, CEOs, diners, event managers and performers displayed the concept of innovation. Everybody wanted to achieve differentiation and attain competitive edge. I trust this would be pursued by all Malaysians, so that Malaysia will continue to be a great country for a very long time.

What Happened to the Teotihuacán?

I had the opportunity to visit Mexico recently to attend the International Federation of Accountants Council meeting. It was held in Mexico City, a city with around 20 million population. Besides spending my time in meetings and seminars (I shared Malaysian Institute of Accountants experience in having a mutual recognition agreement with the Ikatan Akuntan Indonesia), I went to visit one of the most visited site outside Mexico City on the last day of my stay, the Teotihuacán pyramids.

Like many of the archaeological sites in Mexico, Teotihuacán guards secrets we have yet to unravel. The origins of Teotihuacán are uncertain, although it is thought some of the inhabitants arrived from the Valley of Mexico to the south, refugees from an eruption of the Xitle volcano, which caused major devastation and forced the survivors in the region to seek a new place to settle. Construction of the city probably started in the first two centuries BC, and the civilization reached its high point between 350 and 650 AD.

One of the greatest mysteries of Teotihuacán is that no one knows where the huge population that lived here eventually ended up. It is as if they vanished without a trace. What happened? Building pyramids was never easy. So I supposed they should be a group of people with high intelligence and at least, with superb design and project management capabilities. Reflecting this on business, I am sure you could recall brands or companies that were dominant in the past but are no longer in existence. This is meant to suggest that no matter how successful you are now, the future depends on how you seek opportunities from the dynamic business environment and how successful you are in managing the ever changing risks. You simply cannot be in a standstill position!

Many people in business tend to be complacent upon reaching certain level of success. However, as what I always preach, what worked yesterday may not be so tomorrow. It's all about looking forward, undertanding trends, identifying and capturing opportunities and ensuring your business remain competitive against major competitors, which could also change in nature and number. Competing as a contender is definately different than competing as a defender.

So, if you feel that your business is quite successful, please remember of what happened to the Teotihuacans!

Management Lessons From Golf

I just came back from Kota Kinabalu attending some official functions. Somehow, I managed to have a golf game at the Sutera Harbour Golf and Country Club with few friends. One may wonder what is the relationship between golf and management matters? Baharuddin, my buggy mate really assisted me to improve my game that day, in fact I played my best game ever on the second nine! Did I changed my swing to drive longer? No! I played my normal game but with a slight twist, I managed my game.

Having seen how badly I performed on the first few holes, Baharuddin started to coach me, in the most diplomatic way. He started by encouraging me to accept that a golf game is not about me competing with other players but its about me competing against myself and the golf course. "Just play within your capabilities" he told me.
Next was about course management. "You don't have to overdrive your playing mates, just place the ball where it is easy for you to hit your next shot" he added. When I started to play to my capabilities, my game totally changed. The ball started to remain on the fairways instead of going into the roughs, as what would normally happen during my previous games. It took me less shorts to reach the green.
"Don't overestimate your self and underestimate the course" was his next advice. I was using higher clubs as I thought that I could make the distance. My using lower clubs, my ball started to be closer to the targets, instead of falling short as what I usually manage. As my game improved, so was my confident. In fact I managed to score three pars in a row.
After the game, I felt very pleased and did not feel the normal pain that I used to experience as I was fairly relaxed during the game. Reflecting what had transpired on the golf course, there are a few lessons that I learned which could also be used in managing business.

First is about knowing yourself, your capabilities and weaknesses. This is important so that as managers of business, we do not venture into areas where we are not capable. If we fail to acknowledge where we are week, we may expose our business to unnecessary risks.

Second in about planning and executing your plan well. "Failing to plan is planning to fail" is a saying that we are often reminded of. However, we have to execute the plan, based on the capabilities that we have. We cannot compete with a competitor on the same ground if our capabilities and strengths are different. Fine our niche and play our strength.

Off course, sometimes we have to change plan. In golf, if the ball falls away from our target, we have to change direction to reach the pin. This principle is also the same in business, except in business we are not that sure where "our business pin is" if we do not have a plan.
Finally, not necessarily exhaustive, is about being coached by somebody that is sincere in wanting you to be successful. Every manager or entrepreneur may have areas that require improvements and with somebody who have the skills to guide, the future could be better for those who are willing to be coached.

I suppose its time for me to head towards my next game of golf!

Taking On Problems Head On

In running a business,in most cases, things may not happen as planned. A new competitor could suddenly appear, sudden shift in customers' preference or events that happen thousands of miles away could create chaos in the market such as SARS and the latest, the sub-prime loan debacle in the US.

While some may feel the sense of hopelessness due to circumstances which may not be in their control, an entrepreneur has to move on and make things work. Otherwise, all his investment may flow down the drain. We have to take on problems head on and not to bury our heads in the sand. Doing nothing may not solve anything, in fact, could worsen the problems.

What are the steps that we need to do to resolve the problems we face?

First, one has to accept the reality that he has a problem that need to be resolved. This acceptance would trigger the mind to figure out the solutions. The longer we deny reality, situation could deteriorate to a point where solutions no more solutions could be found.

Second, we have to identify the "ideal position", how would it be when the problem is resolved. This would provide us with a frame of mind as to what the possible outcome would be. If we worry too much about the issues and not considering what the end would be, we may get sucked further into the issues.

At this stage your would be able to see how far you are from the end of the tunnel. As a third step, this is when you would consider the options that is possible and the chances of them to be successful. Once you have the sense of their achievability, you could decide to pursue a number of options simultaneously, as what others would say, to keep the options open. How far this is practical depends on the resources available at your disposal. If would not hurt if you seek views from people who you trust and could provide valuable advice.

The forth step is where you have to really put your effort in following through with what you have decided. A long the way, you would find that some of your assumptions may not be valid and new options may need to be considered. Circumstances could also change that what was possible may not be so. As we are in the real world, this has to be accepted as well. The only constant in the world now is change. Time could be important in most cases since most window of opportunities may not be available forever.

Finally, after all the thinking and hard work, hopefully the problems are resolved, not all the time though. If some of the steps have to be repeated, so be it. That how the world works.

Good luck.