lunes, 11 de abril de 2016

Productivity vs. Efficiency




Productivity vs. Efficiency

I am constantly surprised by the confusion in the business world between Productivity and Efficiency. So let us take those concepts and explore them.

Productivity[1]: it is simply how much output we produce with a given input. It is regarded as a stimulus response model that an input causes an output. For purposes of simplicity we can say that it is output/input. It is a relationship between resources that come into an organization during a given period of time and outputs generated with those resources. Productivity answers a very simple question: by putting 1 USD of investment in, how many dollars came out?
There could be several ways to measure it. For example: # of customers served per employee, $ sales revenue per sq-ft of store area, etc. One of the most common measures is the ROI (Return on Investment): this measures for every USD of investment how many dollars were returned. The goal is to do more with less, and getting the job done with a smaller budget. Consider the impact on a country level. GDP x capita measures how much output every inhabitant produces on a macroeconomic level. This has absolutely nothing to do with efficiency, or with a company’s situation.
There are many measures that impact productivity: labor productivity, capital/equipment productivity, raw material productivity. Let us take another example. The process Outputs would be the number of bottles produced and sold, whereas Inputs are Labor, Equipment, Raw materials. Let us say that:
Week1: 1000 bottles produced and sold at 20 USD each gives an output of = USD 20,000.
Week2: 1000 bottles produced and sold at 15 USD each gives an output of = USD 15,000.
Output has decreased by 25%; Input has remained the same. Productivity has decreased by 25%.

Efficiency[2]: efficiency is performing in the best possible manner with the least resources, time and efforts. It is about doing things in the right manner, focusing on the processes it is defined as the extent to which time is well used for the intended task. It is a measurable concept, and can be measured in units of: time, effort and cost. It is very easy actually to visualize efficiency. How many sit-ups can you do per minute? How many pages can you read an hour? But most importantly it should be used for work reasons. For example, how many tickets or issues is your team resolving per month? How about individual performances?
Managers should never lose sight of efficiency metrics. But most importantly, never confuse productivity with efficiency. While efficiency focused on producing in a fast manner, productivity focuses on the generation of the value itself. What is efficiency without value added? The input transformed into output, and the relationship between the two, will give you the productivity. But if that input can be produced in an efficient manner, your productivity will actually increase as well. To boost productivity, increase output but also work more efficiently to reduce input.

sábado, 9 de abril de 2016

Innovation is the Key




Innovation is the Key

Everyone speaks about Innovation[1]. Innovation this, innovation that; we are a very innovative company… But what is innovation? Innovation is as simple as taking something existing and transforming it to something that creates new wealth or improves the well-being of society. An innovation can be big or small, brand new or just a little bit different. It all has to start with an idea. It takes 3 steps:
1.       Ideate: an idea is born, and if other people like the idea it goes through.
2.      Create: the idea was experimented with and materialized into usable prototype.
3.     Validate: as more people tested and approved the idea, the more that simple idea then made sense, and money!
Innovation can be Disruptive[2] or Non-disruptive (Sustaining). The concept of Disruptive innovation was introduced in 1990s by Clayton Christensen[3] an American scholar and educator writer of the book The Innovator’s Dilemma. A company follows a path of Sustaining Innovation when it improves it’s products performance based on feedback from it’s best and largest customers. It’s usually about reducing defects and making something faster or more powerful. In contrast, a disruptive innovation often involves lower performance in many of the key features valued by the market. It often means more defects and more speed or power. A disruptive product appears as if it is doing everything wrong. A large company with sophisticated and demanding clients can’t adopt such a technology. Sustaining innovation satisfies a customer’s current needs whereas disruptive technologies and business models evolve to meet customer’s future needs.
Following a Sustaining Innovation path makes a lot more sense in the short term, but it can ultimately doom the company to failure. On the other hand, dedicating valuable resources to a niche and unproven opportunities doesn’t make sense, but can be the future of the company. Disruptive innovation is born from a niche that exists in a market that is neglected by current market offerings. That small market segments cares not about traditional performance features. Large companies need to listen to their customers in order to continue successfully with their sustaining innovations. But they need to look at niche markets and how they use their products in order to identify potentially disruptive innovations and embrace them. This is good news for Start-ups: as long as their innovation has the potential to improve performance rapidly, it’s actually a good thing that their initial market is small. This gives them more time to fine-tune their technology and they don’t need to worry too much about their largest competitors. The only way for giants to fight back is to launch their own disruptive innovation. To succeed, they must treat the project as a separate unit with a different business model and growth expectations. Ask what job the customer needs to get done, segment customers by job and develop low-cost solutions to get the job done.
Think of Disruptive Innovation as a strong shift in an industry. An example is when the computer came along and overtook the typewriter. There was very good electronic typewriter when the computer came out, but nobody thought that computers where going to threaten that industry, since at the beginning computers where so clumsy, nobody even knew what they were going to be used for!! Also, think of analog photography going to digital photography. They are exponential technologies: at the beginning they are deceptive, things are evolving slowly and they are not as good as the existing product offerings. But then they evolve, scale and increase by orders of magnitude, and they all of a sudden become much better than the existing product or services offering. Another very actual example is the Shale Oil Revolution[4] which introduces horizontal drilling as a new technology to reach reservoirs that were already discovered but previously inaccessible. This represents a Disruptive Innovation that changes the whole face of the industry, by increasing the available global reserves to sky limits. By driving down the costs, it has a negative impact on the most expensive oil extraction processes like offshore oil.
Consider though that innovation does not have to be something complex. Any small change can be innovation. A change in the companies’ processes will count as innovation, and as such might encounter resistance. This happens a lot when implementing or upgrading a new software. A change in an accounting software might mean process efficiencies and less working hours for the people in the accounting department. This might mean more free capacity for other tasks, or a reduction in the head count. The Financial Manager himself might resist it. Less people under his command will mean less power in the organization. Not all Managers are in favor of process efficiency and might be only interested in guarding their fortress.
Lean has introduced Business Model Innovation with the Lean Canvas[5]. An organization’s business model can be described with 9 basic building blocks: Customer Segments, Value Proposition, the Channels to each Customers, Customer Relationships, Revenue Streams, Key Resources and activities required to create value, the Key Partners, and the Cost Structure of the business model. These are structured in a Business Model Canvas. It is a tool that helps map, discuss, design and invent new business models. This works for Start-up entrepreneurs just as well as for the most Senior executives.
Entering the Fourth Industrial Revolution, innovation is Key to survival. Big companies must innovate or face extinction. Entrepreneurs must reach those markets that big companies fail to capture. Eventually, they will take the place that those large companies have left empty. A global mindset is absolutely necessary, to capture those business opportunities and rapidly expand them into the target markets. Knowing how to work and collaborate with people from different countries and cultures will become more and more important in a Globalized World.


jueves, 7 de abril de 2016

Kings and Queens




Kings and Queens

Things are different in different countries and different regions. Many times I get asked if I am Norwegian or not. Well, I am. I am also asked if I am Argentinian or not. I am as well. But how can it be? Can you be both? As a matter of fact, you can. Consider the difference between Kingdom and Republic.
Kingdom: Norway, as most northern-european countries, is a Kingdom (and we like it that way, so it’s not going to change). This means there is a Monarchy (Kongehus), and a Royal Family. Norway is a Constitutional monarchy, this means there is a parliament with a Minister of State that is democratically elected for a 4-year period and a fully democratic institutional system. But there is also a historical and long term Royal Family, who is there to protect the interests of the everyday citizen against political interests, assuring equality and freedom for ALL. A constitutional monarch has three main political rights which he could freely exercise: the right to be consulted, the right to advise, and the right to warn. Some constitutional monarchs, however, still retain significant power and influence and play an important political role. This would not be the case of Norway, since the Monarchy does not have seem to have as much influence as it should.


Consider that there were many changes in the Norwegian Royal House since the first King of Norway Harald Fairhair in 872. The lineage changed from Norwegian to Danish to Swedish, to Danish again. King Harald V is the current ruler. He was the son of Olav V and Princess Martha of Sweden. Olav V was the son of Haakon VII; known as Prince Carl of Denmark and Iceland until 1905, he was the elected first king of  Norway after the 1905 dissolution of the union with Sweden. He was a member of the House of Schleswig-Holstein-Sonderburg-Glücksburg.
Now everyone wonders why we pay so many taxes to have a Royal Family, and here is why: they are responsible for aligning the population so that everyone is and feels part of the Kingdom. In a Kingdom, it does not matter where you were born. If you were born abroad, you are still part of the Kingdom, it is your blood-right as Heir to the Kingdom. I would assume though that the people that were born in the Kingdom are part of the Kingdom as well, although this seems as well difficult to understand for some people who enjoy doing “ethnical segregation”.
I am a personal fan of the Norwegian Royal Family. I heard a lot about them being born and raised in Argentina. Instead of buying the People magazine, my Norwegian mother would buy the Hola! (Hello!) magazine from Spain. I would find out all about the Royal houses, mainly from Sweden and Norway, as I joined my mother and grandmother for coffee, cake and waffles. Now that was not your everyday typical “Argentinian” conversations! Not to mention they would switch a lot between Spanish and Norwegian (mixing dialects from East Oslo and Telemark). I also found out about the shock for conservative Norway when current Crown Prince Haakon married Mette-Marit, who already had a child from before. This comes to show you about cultural differences. Whereas in liberal Netherlands King Williem-Alexander married a foreigner, Argentinian Maxima Zorreguieta, in Norway marrying a single mother was a shock in 2001.
Republic: let us take the example of Italy in Europe, so we don’t have to wander so far away (although the same case applies to Argentina, being a Republic as well). In a Republic, if are born in the Republic, you are from there. If you are not born there, you are not from that place. Consider the example from Nouriel Roubini: born in Turkey to Iranian parents, he grew up in Italy but he is not Italian. The children of Italian residing abroad will still get Italian passports via Jus Sanguinis, but they will not be considered Italian in Italy. However, they will not have integration issues. Italians, and Southern Europeans, are much friendlier than Northern-europeans. Consider the case of Spain. Even if it is also a Kingdom, it might be that direct Spanish descendants are not considered Spanish if they move to Spain. This has to do with the influence of the Roman Empire. Most countries in Europe were at some point Kingdoms of course, but the Kingdoms of the South were not as strong as the Kingdoms of the North, since they had a common ruler: The Emperor of Rome. Even if UK and the Netherlands did get Roman influence, it was not as strong or historical. Northern European countries do keep traditional Royal Families even today, which are well connected to each other through bloodlines.
Interesting are the cases of the Netherlands and the UK. These countries have had BOTH Roman AND Germanic influence. As such, they keep the best of Both Worlds. They are different though: UK is more imperialistic and the Netherlands more liberal. They are the most open to migration (as open as it gets, of course), and multiculturalism. As such, they have a better chance of succeeding considering the challenges that lay ahead. Now a half-norwegian, half-argentinian like myself is not really like a polish, as some people would think, since Poland did not have any Roman influence. Having had both Roman and Germanic influence and being a liberal, it is the Netherlands the culture I feel most identified with. Cristian Bøhnsdalen (born and raised in Argentina) of the Kingdom of Norway! (fra Norge!).





lunes, 4 de abril de 2016

Modern Management Theory: Chaos Theory




Modern Management Theory:
Chaos Theory

Edward Lorenz[1] introduced the concept of Chaos Theory[2]. While the military were focused on predicting the weather day to day, using vast computers to do it, Lorenz used an early desk computer to build a simplified model to look at the underlined mathematics to see if the weather had hidden patterns. His model came when he ran the model first with one set of numbers and then again with what he thought were the same numbers but which the computer had rounded off making them minutely different. What he found was that this tiny difference in starting numbers instead of having no effect dramatically changed his results.
One of the main scientific assumptions that were made was that a small area in a large system simply disappears, it has no consequence. Like a small imperfection in a single part in a long assembly line that would make no significant difference to the final outcome. This is the assumption that Lorenz challenged. His accidental discovery had tremendous applications to the real world. He could see that when a system changed, it needn’t be because at that moment something had caused it to changed, it could be that the seeds of it’s destruction had been there and were only growing, hidden in the mathematics all along. The moment the system diverged was the end result of a tiny, unnoticeable change a long time ago. Lorenz called it “the Butterfly effect”. The Linear system assumed that the world is a quiet place were nothing really surprising happens. We will be fine, we just need to know how it works and we can work everything out. Computers allow us to explore things inputting data that previously would have been thrown away, but as it turned out they changed the system all together.
The concept of Butterfly effect[3] is a term used to described how small changes can affect large, complex systems. The term comes from the suggestion that if a Butterfly in Brasil flaps it’s wings, a few weeks later Texas has tornados instead of clear blue skies. It is a reminder of the impact that we have daily. Do we really realize that our behaviors, moves, and actions touch all of the people we come in contact with? Minor actions can create major results. We are all small fractions in the world, but even the smallest actions can create ripples that change the world. 

A good explanation is shown in the movie Jurassic Park:

The Nuclear Age brought with it a tremendous potential of possibilities. There was a peak of optimism towards the potential technology could do in the 1950s, associated with technological development but also cultural that came after the World War II. In the 1950s the future was going to be a planned utopia, of wide boulevards and shining skyscrapers were we would all be happy and prosperous. The computer allowed us to see and control another dimension: the future. With the power of the computer, policy makers thought that they could now predict and control the economy. Governments and corporate films confidently portrayed a future of equilibrium, stability, progress and prosperity. This flawless future was disrupted by the Chaos Theory, which includes unpredictability to modern systems.
Consider the application of the Chaos Theory everywhere. It has been of course proven that the economy cannot be predicted even with the most advanced computational system. Climate and weather changes cannot be predicted either. Human behavior is unpredictable as well, regardless of probabilities and estimations, people are just people and will behave differently. In the information Age, and as we approach go deeper into the 21st century, Chaos Theory is there to remind us that, whatever our accomplishments, we are after all just people.

jueves, 17 de marzo de 2016

Akamasoa and the most successful economic model in the history of mankind!!!




In the city of Antananarivo in Madagascar, one man made the impossible happen. With only the only support of his faith in God, one man accomplished the unthinkable: he lifted a whole city out of poverty. No resources, no money, no institution behind him. Father Opeka[1] is an Argentinian Priest of Slovenian origin born and raised in Argentina who belongs to the Order of Lazarus. At age 20 he travelled to Ljubljana in Slovenia to complete his training, finishing his studies in the Catholic Institute of Paris. He wanted to help his fellow brothers, from any nationality, but Argentina was NOT a poor country, poverty levels reaching 3% in the 1960s. In 1975 he was ordained priest in Buenos Aires and was nominated responsible of area of Vangaindrano in southeast Madagascar. In 1989, he was nominated director of a seminary in Antananarivo, the capital. That is when his legend began.
When arriving at Antananarivo, he was touched by the misery and poverty of the people living in the area. The people were sharing survival efforts with dogs, pigs and other animals, a revolving image. Father Opeka knew that he could not talk, but act. Garbage, cans, used batteries, everything was recycled from the slum by the local inhabitants and sold in the main streets of the capital city. Father Opeka asked God for help to do anything for these children. He did not know how, but he knew that he had to take these children away from hell. They started with nothing but the passion and the Faith that God would not allow something so monstrous to happen. From the 800 families that existed in this place, there were up to 7 deceased children per family.
Being white was the first obstacle. Years of slaughter, persecution, repression towards the black race made it difficult for white people to be accepted. Through football, Father Opeka gained the trust of the inhabitants of the village. The celebration of the goals and team spirit brought the people together, bringing happiness and joy. He gave the example, by getting in the mud to work in the rice fields side by side with the people, pushing forward the value of working. He ate and drank with them, and developed many sicknesses due to bacteria. It was very strong to see the image of people dying from deceases. He defended justice and the right to live, and convinced the people that God had not abandoned them. Work, schooling and discipline was his recipe to fight poverty.
He founded Akamasoa: the good and faithful friends. It is a place for the poor built by the poor. He surrounded himself with 412 collaborators, almost all from Madagascar. No money, but a lot of faith. He appointed a team of staff helping him to manage the daily activities and provide continuous support to people. Father Opeka was a bricklayer, handicraft which he learned from his father. He challenged his collaborators to turn a mountain of granite into stone and bricks: materials that could be used in construction.[2] 2500 people that were on the street and lived off garbage began to work on the project. Then he proposed to build a landfill as a source of work, and created a company selling natural fertilizer. The organization was consolidated with housing construction. First it was forbidden to live within the landfill and precarious boxes rose at the edges of the landfill, to reduce the health risk. Then, the shanties were being replaced by brick houses, two stories, that he was rising, at the same time taught how. He built a community, were an acceptance process must be passed before moving to real housing. Those that want a place in the community must work, educate and feed their children, and have respect for the “Dinah”, a letter that defines the rules of life. The inhabitants work in job positions they themselves have created. Everyone has a job, when a man works, he is part of the society, he feels proud, he has honor and dignity. A part of the effort is destined to the village, and another part is destined to their families. It is through work that poverty is fought.
A house is built every four days for the community. The goal is that the families have a place that they can call their home, their residence. People pay a mortgage on their house which is adapted to their salary. The essential is for people to participate, nothing is given away for free. When the people that were poor and excluded feel they have their own home and residence, they feel pride, and so begins their life to change. Father Opeka provides tools for the poor people so that they can themselves come out from poverty. It is about fighting poverty and beating poverty. Akamasoa is 75% self-sufficient in revenue, due to the creation of stone and gravel quarries, to the craft and embroidery workshops, to a compost center next to the public rubbish. Thanks to the workers, the benefits they generate and some external donors most of Akamasoa’s public services are financed, including their health system. Today 82% of the students in Akamasoa finish high school, and most of them continue through to University.
Akamasoa has in 20 years grown to become a real city. It is formed by 5 urban cores divided in 17 neighborhoods, the population is 17.000 people, from which 60% is under 15 years old. All children go to school. Besides the kindergartens, Father Opeka has raised 4 primary schools, a bachelorship for the older, and 4 libraries. 10.000 children are going to school. When the young are finished with their education they can choose a craftsmanship, like carpenter. The older can take a position as trainer to teach the younger. The Saint Pierre Stadium in Akamasoa was built to stimulate the younger to practice sports. Basket and Volleyball is practiced for girls. There are also 3 additional courts for football practice and 11 courts for Basket and Volleyball.
In 2012 Opeka was nominated for Nobel Peace Prize united by Slovenian European Parliament Representatives Regardless of political party. With no resources, no money, no skilled people, just sheer raw leadership, one man achieved the impossible: he took thousands of people out of poverty. His economic model proves that development can be reached by high levels of trust and collaboration, by setting a set of common rules that will work as group values. This did not come without resistance from government officials, who initially opposed his work but eventually had to accept it due to his rising popularity. Taking this example into account, my skepticism lies with the catholic church. Father Opeka did his work outside the ecclesiastic hierarchy, and with no support from it. His theory, and success, lies in understanding that the human being needs to work to fill like a useful and valuable member of society. He considers that the worse that can be done to the poor is to have them living on welfare.
So the question is, why has the Catholic Church not replicated his model amongst the regions or communities under it’s influence? Father Opeka proves that, with the right leadership, people do want to work, be included and have the possibility of living a valuable and meaningful life. Whatever culture they belong to, people need hope and a future to look forward to. By getting in the mud and working together with them, he inspired the poor and got them to achieve the impossible: to take responsibility of their own lives (and destiny).


Revolution 4.0 and the Man of Tomorrow: Post-industrialism, Inequality and the Knowledge Based Economy - Part 2



The Fourth Industrial Revolution is here: the world is changing at unprecedented rates. We are entering the age of post-industrialism, the Knowledge-Based Economy. Whereas in capitalistic societies owning the means of production was the most important, today knowledge is the base of success for modern societies. Revolution 4.0 and the Man of Tomorrow will take you through the last 200 years of industrial revolution in world history, to understand the rapid changes in the cultural landscape of Europe and identify the trend in economic development. Also, the untapped potential of the richest region based on natural resources in the world: South America. Framing the analysis in a historical perspective, the focus is on the most challenging question of all: what is the origin of inequality, and what can be done about it? A new, revolutionary theory will challenge modern economic theory. Your life and your view of the world, will never be the same after reading this book, that I promise you!!!

Get it HERE: 
http://www.amazon.com/Revolution-4-0-Man-Tomorrow-Post-industrialism-ebook/dp/B01D27FSJU/ref=sr_1_2?s=digital-text&ie=UTF8&qid=1458283609&sr=1-2&keywords=revolution+4.0

Revolution 4.0 and the Man of Tomorrow: Post-industrialism, Inequality and the Knowledge Based Economy - Part 1




The Fourth Industrial Revolution is here: the world is changing at unprecedented rates. We are entering the age of post-industrialism, the Knowledge-Based Economy. Whereas in capitalistic societies owning the means of production was the most important, today knowledge is the base of success for modern societies. Revolution 4.0 and the Man of Tomorrow will take you through the last 200 years of industrial revolution in world history, to understand the rapid changes in the cultural landscape of Europe and identify the trend in economic development. Also, the untapped potential of the richest region based on natural resources in the world: South America. Framing the analysis in a historical perspective, the focus is on the most challenging question of all: what is the origin of inequality, and what can be done about it? A new, revolutionary theory will challenge modern economic theory. Your life and your view of the world, will never be the same after reading this book, that I promise you!!!

Get it HERE: 
http://www.amazon.com/dp/B01D0P604Q/ref=cm_sw_r_fa_dp_eDD6wb0JAHJ8V