Sunday, June 15, 2008

Statistics, Correlation and Kids behavior

I wanted to touch base upon a point from Freakonomics.

Was listening to the radio the other day, driving from work. Heard that a study has discovered that there was a high correlation between waking up early in the morning and getting good grades.
This was concluded by saying, early birds achieve good grades. Sounds logical right..!!

But after reading Freakonomics, there is an other way of looking at it.
When you are speaking of correlation, consider this statistic about the cities with most number of cops had the highest crime rate i.e; Washington DC and Denver. If we conclude it by saying that cops are causing all that crime, we've certainly goofed up.
Consider this tale about a Czar who found out that the most people died in the cities with the most doctors and decided to shoot all the doctors to increase the mortality rate.

By now you must have understood the folly in the correlation between early birds and their grades.
Speaking of correlation:
When we see a correlation between X and Y, it could be one of three possibilities:
X causes Y, Y causes X or X and Y are caused by an external factor Z.

So the reason for the higher grades could be any of three possibilities:

  1. The students who get up early in the morning to study, get more time to study (X causes Y).
  2. Actually, the students who are interested in studies tend to get up early in the morning. Obviously these students who are interested in studies are going to have good grades (Y causes X). It could be foolish to wake your son up early in the morning, just expecting his grades to catapult upwards.
  3. It could be their genes. Studies have shown that a child inherits 50% of his IQ from his parents. (Didn't say which parent, so I am assuming that both the parents are well educated.) So most of the time, the parents may be early birds themselves, which the child eventually imbibes. (External factor Z causes both X and Y)
Digressing here a bit.
It is interesting to read more about how much do parents really affect their kids. Studies show that 50% of the behavior is in the genes itself. Interesting to note a study of the children who were adopted into well educated families. The study found out that the IQ level of the adopted kids was most similar to the IQ level of their biological parents than their adopted parents.

I always wanted to find out a solution to what makes some kids enamor books while others don't. Heard from my sister that a lot of parents read books to their kids at a young age, which helps the kids form a fascination. Believed I had an answer.

Was speaking to my CEO the other day. He has read books for all his kids, while they were growing up. But only 2 of the 5 kids have enamored books. He thinks that it's more in the kid's personality. Its not easy to change that.
Hmmm.... wanna do more research on this, will update you

Tuesday, June 10, 2008

You gain strength, courage and confidence by every experience in which you really stop to look fear in the face. You must do the thing you think you cannot do. ~ Eleanor Roosevelt

Monday, June 9, 2008

Bring the Class to the Masses


Was researching on new product ideas, and in the meantime was reading "Freakonomics" by Steven Levitt. Stopped reading just after seeing this line, "DuPont had pulled off the feat that every marketer dreams of: It brought class to the masses.

The background: "In 1939, when DuPont introduced nylons, countless American women felt as if a miracle had been performed in their honor. Until then, stockings were made of silk, and silk was delicate, expensive and in ever shorter supply. By 1941, some sixty-four million pairs of nylon stockings had been sold - more stockings than there were adult women in the United States. They were easily affordable, immensely appealing, practically addictive. "


Further research on DuPont's miracle revealed that, "After the II World War ended the, the demand for nylon stockings grew so exponentially that the demand greatly exceeded supply for the next two years. The shortage led to several riots by impatient women who had stood in line for hours for stockings. Newspapers ran stories with headlines such as "Women Risk Life and Limb in Bitter Battle over Nylons." Nylon became far and away the biggest money-maker in the history of the DuPont company.

The basic business lesson to be learnt is that when you can create a product which brings class to the masses, you are going to revolutionize the market dynamics in your favor.

Looking back at some case studies,
The product that overnight revolutionized the Indian consumer market in 2000 was the Softy ice-cream. It based itself on the same idea of bringing the class to the masses. Pre 2000, quality ice-cream was a class product. Priced at Rs.25, it was a luxury for middle class. Students, middle class and lower middle class couldn't afford it as a regular recreation. It was considered a class product.
And then, the Softy happened. It brought the class product of ice-cream to the masses for just Rs.5. The people loved it and embraced it with frenzy. It brought money to everybody involved, from the equipment manufacturers,distributors, raw material suppliers to the mom-n-pop stores. The idea was such an instant hit, that every mom-n-pop store bought an equipment. My dad also wanted to buy one.
An other example, was the shampoo packaging. Pre 1990, shampoo was a class product. It was sold in bottles and they were expensive. Then the sachet packaging revolution happened. It brought the class shampoo to the masses for just Rs.1 It was a huge deal for the aspirer and the deprived class (Household income less than Rs.200000 per annum) who constituted 90% of the population in 1990. (The Bird of Gold: The Rise of India's Consumer Market. May-2007)
The recent case using the same principles are contact lenses. In 1999, contact lenses catered to the elite class. But starting 2000, competition entering the market and technological breakthroughs saw the prices coming down to meet the masses. And the sales just grew exponentially. (Tried getting solid numbers on this, but the report costs $3950.00. You can try one here.)


In the same breath, I would like to point out the other extreme point.
Any product that can bring class to the masses is going to enjoy huge consumer embracing, as long as it provides the core value of the product, which the consumer expects. It could be quality, reliability, service, etc.
Softy ice creams, provided good quality ice-cream, which was its core value devoid of its frills. The shampoo sachets provided the core value of the shampoo.
But a Chinese motorcycle manufacturer did not enjoy the same success. In 2002, they introduced a 100 CC bike for just Rs.20,000. Surely aimed at bringing the class to the masses, but failed miserably as they could not provide the core value which bike owners expect. It did not provide them reliability and after sales service.





Sunday, June 8, 2008

Indian infrastructure hurdles


Read an interesting article in Financial Times on the realistic infrastructure situation in India and the issues which could burst the growth bubble, if not addressed. I've just added the highlights of the report. If interested, you can read the article here.

  • India’s infrastructure is stretched close to breaking point.
  • In the near term, India’s economic growth is going to hit a speed limit.
  • India’s Planning Commission, in its approach paper to the 11th five-year plan, acknowledges the gravity of the problem and calls for infrastructure spending to rise to 8 per cent of GDP in the period 2008-2012 from 4.6 per cent. Link for India's 11th five year plan: http://www.planningcommission.nic.in/plans/planrel/11thf.htm
  • The peak electricity deficit this year rose to an eight-year high of nearly 14 per cent, according to Morgan Stanley, leading to blackouts that forced companies to install costly private back-up systems. This is a huge disadvantage for our manufacturers, trying to compete in price with international producers with good infrastructure.
  • Mumbai has not added a single new generating plant for more than a decade.
  • India has just one per cent of the world’s vehicles but 10 per cent of global road fatalities. This owes to the fact that "The national road-building programme has slowed in the past two years, falling to just over 500km last year from 2,500km in 2005, despite soaring sales of trucks and cars."
  • Indian manufacturing, despite pockets of excellence, is on the whole struggling to become competitive: India’s share of global goods exports stood at just 1.2 per cent in 2005, compared with China’s 9.9 per cent.
  • Small and medium-sized businesses, which generate the bulk of new jobs in any economy, are suffering most from the lack of high-quality public infrastructure. Unless this is resolved, economists warn that India’s demographics – half the population is under the age of 25 and 40 per cent under the age of 18 – will prove a liability rather than an advantage.
  • With India’s working age population set to increase by 71m to reach 762m in the next five years, the Asian Development Bank has warned that the country faces a potential employment crisis.
  • As the telecoms and aviation sectors show, where private capital and management disciplines have been introduced, the results have been remarkable. It has become one of the fastest-growing telecommunications markets in the world.
  • Poor infrastructure is India’s Achilles heel. But it is also the area that is receiving the most attention from policymakers and one that offers significant opportunities to private investors, both domestic and foreign.
Unless the infrastructure issue is placed high up in the priority list for the government at the expense of short term fall in GDP, many of our advantages like young population and huge size of domestic consumption could turn into a bane rather than a boon.

Friday, June 6, 2008

Leadership

Leadership is solving problems. The day soldiers stop bringing you their problems is the day you have stopped leading them. They have either lost confidence that you can help or concluded you do not care. Either case is a failure of leadership.
~Colin Pow

Thursday, June 5, 2008

If you think you can do a thing or think you can't do a thing, you're right.


Henry Ford

Wednesday, June 4, 2008

Making people feel special

How does a person retire in a company???

How is his last week going to be like?

She says that she is retiring and will not be in here from next week. Friday would be her last day. Everyone meets her once during the day and say bye. And she vanishes…..

That is what I expected.

But this is how it happened in our company..

Gayle was retiring this week. There was a banner put up, saying there was a retirement party at break today. I was not too willing to go, put just dropped in, coz I shared a good rapport with her and I liked her professionalism at work.

What was inside the room completely astounded me. There was Gayle sitting at the head of the table. There was a huge cake in front of her. The whole table was filled with all sorts of cut fruits. People all over the crowded room. People from every department were there. Then the CEO himself was making preparations from half an hour ago, laying out the cake, checking if everything was right.

When the party started, more surprises begin to flow. I had never imagined, how special you can make a person feel, on her special day.

The CEO himself started off the celebration, by saying how he was trying to put up a speech for Gayle, and he had so many memories of her dedicated work, that the whole experience touched him. Then he brought up a photo album from 1987, the year when Gayle started working here. There was a photo of her, trying to hide her face. She was far away in the photo. The next surprise was the CEO picked up a photo, where he tried to zoom into her and then showed the picture to everyone in the plant. The same thing you do with your dearest friend. The whole experience touched everyone. Then he said a few words of how special she was to the company and how dearly we are going to miss her. All his words were expressed sincerely with a deep feeling.

The entire room was in the same feeling of missing her from next week, of not seeing her smiling face again first thing in the morning. It just touched me. Gayle was happy, people were admiring her for her work in the last 23 years. Tears were rolling, but she could not stop smiling.

Last week was speaking to some people and they were saying how they loved working here. I did not understand that. But today I can see why everyone loves working here. I was trying to see the expressions of the people who've joined this company just 2 weeks ago. They were just spell bound. They must have just walked in to blindly work for some company from 6 to 4, so that they could pay their bills. But what they are experiencing is completely different. I guess, a few must have been dreaming what their retirement party would be like.....

One important thing if you are the CEO, make your people feel special.

For Gayle’s retirement party, it hardly takes 40 mins, but if he supervises all the arrangements and does some homework, all the people in the company feel special, that this is a company, where every employee is treated as a family. And the CEO, taking special interest in making someone feel special, that could be one of their best days of her life.

If you are the CEO, you just being there just makes the person feel special. And all your people understand how special they are.

Dont kill the creativity

“People will work hard when they are given the freedom to do the job the way they think it should be done, when they treat the customers they way they like to be treated. When you take away their incentive and start giving them rules, BOOM, you’ve killed their creativity.”

"I cant understand why people are afraid of new ideas, I am afraid of the old ones." - John Cage