About Dalip Raheja

Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.

Adoption of Innovation: 3rd World Ahead of Advanced Economies?

mobileatmWhen the Gates foundation decides to attack a problem, you know it’s a serious problem with significant impact and they are going to commit some serious resources.  They are currently predicting an unparalleled improvement in the lives of the poorest and one of the key enablers of that is mobile banking .  While we still carry cash/credit cards, Africa, Asia and others have already been using mobile banking.  Apple pay was recently introduced in the advanced countries and continues to struggle while 2/3 of Kenya is already using mobile banking – a phenomenon called “leapfrogging” -large parts of the world will never know credit cards or physical banks and are going directly to mobile banking.

Safaricom (the leading telecom in Kenya) derives 18% of their revenue from banking (more than SMS/data combined) thus developing a new business model for telecoms.  They have human ATMs (81,000) or agents who act as local “banks”(what the Knights Templars used to do)-thus leading to more ATMs/capita there than in the US!! This also makes banking available where there is no electricity yet and phones are solar powered.

According to the Gates foundation, 2 billion people will have access to banking services which will fundamentally change their lives.  While only 10% of Tanzania have bank accounts, 67% have mobile phones resulting in the “leapfrog” effect.  While this clearly has an impact on the cost of banking services and access to micro loans and employment for the human ATMs, it also fundamentally changes social behaviors.  Savings may have been an alien concept when your wealth was stored in goods (cattle) or currency was hidden under the mattress but not anymore.  This allows them to deal with normal life downturns (bad crops), health emergencies, education etc. on their own with their savings and stay away from the predatory money lenders or indentured servitude to pay off loans.  Generations of a family have suffered because of loans that keep increasing the principal as bad crops continue.

 Bill Gates also theorizes that a number of innovations coming from these 3rd world initiatives will actually “trickle up” to consumers in the advanced countries and may threaten the banking industry at some time.  This will also open up these geographies as potential markets because there is a reliable payment system in place.

This is but another lesson that innovation provides little value unless it’s adopted. And while the phones being used in these countries are very basic with b/w screens etc., their huge adoption rate makes the realized value of the innovation humongous.  The lower adoption rate in the advanced countries makes the realized value significantly less.  Looking for innovation in all the expected places(advanced countries) may actually make us miss a lot of innovation taking place in the 3rd world.

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Do Lower Gas Prices Cause More Deaths – 9,000 of them?

gas1I’m sure you’ve been enjoying the lower gas prices.  Where the credit card would max out at $100 without filling my tank, it now costs around $60 for a tankful!  However, there are many un-intended consequences to this windfall.  This is a huge economic impact in less than a year – annually in the US alone, it means $14 Billion in the consumers pocket.  While that sounds like a great economic boon, if consumers use that money to pay down debt and not use it towards consumption, it can actually cause dis-inflation or deflation.

Transportation tax revenues which are a % of the price of gas have taken a huge toll and government transportation budgets will suffer.  Economies which are totally dependent on oil revenues are in turmoil which could lead to significant social and political upheaval (Russia, Latin America etc.).  Sales of SUVs (higher) and energy efficient cars (lower) have already seen a shift.  Other economic sectors are already feeling the impact (steel industry announced layoffs) because of lower demand for exploration.  Fracking for natural gas is becoming less and less attractive economically as an alternative.  The Keystone pipeline is facing the same issue as it is no longer commercially viable.

The one thing I’ve never understood is how prices can vary so much at different gas stations.  I was just passing a major intersection with 3 gas stations at the corners (Shell, BP and Mobil) and one of them was 10¢ higher than the lowest and the other was 20¢ higher – at the same intersection!  Surprisingly, there were more customers in the two highest priced gas stations, a phenomena that defies all logic.  You would think people would drive across the street for a $4 difference per tank?  What would you do – especially since all three are brand names?

Shankar Vedantam recently had a story on NPR where he points out that 9,000 more people will die due to the lower gas prices based on a recent study.  There are the obvious factors that people drive more and therefore more accidents cause more deaths.  Interestingly, it’s also tied to how we drive,  as people tend to drive more conservatively (therefore more safely) when gas prices are higher.  The composition of who is driving also changes.  When prices are higher, younger drivers drive less as they cannot afford as much gas and the inverse is true.  And younger drivers are far more risky on the road than older drivers.  More truck traffic because of lower gas prices is surely another contributor.  By the way, the people who tend to drive less in times of higher gas prices are the poorer people so the increase in the number of road fatalities due to higher gas prices impacts them the most.

Have the lower gas prices impacted your personal behavior?  I’m assuming that you are reviewing all your supplier contracts where fuel costs are significant cost drivers and  looking for relief – just like you had to agree to surcharges when they were high.  Of course, we are all waiting for airlines to slash ticket prices immediately (don’t hold your breath).  Are you starting to see any impact on your “order book” at all?  Clearly, lower gas prices have both micro and macro impacts but they are a mixed bag.  Such a large transfer of wealth from the producers of oil to the consumers of oil has many un-intended consequences.

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Did you send that RFP to the Government? And why Santa may be late.

amaon boxIf you have ordered something from Amazon and it was delayed, you may have the political gridlock in Washington to blame.  So call your local member of congress and complain loudly.  The U.S. Postal Service (USPS) is part of Amazon’s supply chain ……and it cannot keep up with the demand.  This brings up a number of interesting points to consider in what may be a changing landscape.

Clearly, Amazon found that current delivery systems in the market (e.g. Fedex, UPS) were not enough to meet their Value Drivers(volume, delivery schedule, cost etc .etc.).  USPS has been suffering contraction and their relationship with Amazon  is a great strategy to re-invent themselves (which also now includes acting as a banking system). After all, USPS already has the infrastructure for the proverbial  ”last mile” into your home and most people like their mailman.  Which by the way means that Amazon will have significant influence on the physical “last mile” and they are already into the content development and delivery business in a big way and getting bigger.  This raises the obvious question of how big is too big as far as Amazon is concerned?  You may remember the drone delivery strategy from last year?

Clearly, Amazon and other retailers may have outpaced the capacity of the overall delivery system and is now including the Public Sector in its supply base.  Does that mean that the next time you send out a logistics related RFP, you should include the USPS in it?  Perhaps you do already and if so, does it present a different set of challenges and risks to consider?  Are your negotiation tactics totally different?  In this case, one of the obvious challenges would be the union who is actually quite supportive ” We are in favor of the Amazon delivery business and Sunday parcel delivery — it’s fabulous and we want it to continue”.  The challenge is that USPS is not staffed up to handle the volumes, their temporary workforce strategy is not working and their entire workforce is overworked according to the article.  Year over year volumes are up by 300% and the expectation is that this is a long term increase and not a short term phenomena.  And the long term investment in increasing the USPS infrastructure including the workforce is a political issue which means you must include that as part of your assessment when looking at the USPS. 

Does Amazon look to invest in the USPS like they might with another supplier and is there a model for that?  Should that be of concern? Does that lead to privatization where your mailperson has an Amazon hat on?  When the USPS has to decide between your card to grandma and the Amazon package, which one do they choose?  Already Amazon customers are complaining that they are not getting on time delivery.  How much influence does Amazon have over the USPS?  Wait till that call from grandma! By the way, this is the same discussion happening in the virtual “last mile” issue between the FCC and the industry (net neutrality) – who controls delivery of content into the house.  And content developers are bypassing cable (Netflix, HBO) but that’s for another blog.

amaon boxDealing with the Public Sector as a supplier clearly has its unique challenges and one where public policy and politics enter into the picture.  It may also be the emergence of a new model where public sector institutions who have been under pressure to outsource and privatize are now actually a service provider to the private sector – they have become the Outsource (a totally made up word).  It is also an interesting tipping point (thank you Gladwell) where one of the most dominant disruptors of the old economy (Amazon) is teaming up with one of the oldest institutions of that old economy (USPS) to make sure Santa is on time.  And if he/she is not, then call your congressman and give them &^##.

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Is your Organization Trapped in the Fear Zone?

fear zoneThomas Friedman in a recent op-ed discusses the still lingering aftermaths of 9/11.  Without getting into the politics of his piece, I think there are very strong corollaries in the business world.  The gist of his thesis is that the long term effects of the “age of fear” has warped our institutions and priorities.  He borrows the term from David Rothkopfs book.  According to Rothkopf, “not only did we overstate the threat, we reordered our thinking to make it the central organizing principle in shaping our foreign policy.”  Friedman then states that fear of being blamed by the fearful permeates our foreign policy and Rothkopf underscores this by saying that it has “killed creative thinking”.  Significant resources have been spent dealing with the “fear” and away from other critical priorities (education, infrastructure etc.).  According to Friedman, “many more Americans were killed in their cars by deer last year than by terrorists”.

There are many such examples from the business world.  We were working with a Fortune 15 client,  helping them re-engineer their Supply Chain processes which were dis-proportionately dominated by lowest price considerations and ignoring significant Value Drivers (including risk).  While we were in the midst of our work, they had a major disaster of epic proportions at one of their “manufacturing” sites….caused by a combination of their suppliers.  As was Predictable and Inevitable, the pendulum swung all the way to the other side.  We sat down with the leader and told him what was about to happen – suppliers that they had been doing business with for years would no longer be “qualified”, no one would sign off on any decisions unless everyone else had, their processes would come to a grinding halt, the risk department (a small sleepy unit of 3-4 people prior to the disaster) would gain prominence and accountability yet not have the competency to deliver etc. etc.  The leader was not able to take any action on any of these and sad to say, all of these came true.  This was 2-3 years ago and that supply chain organization is still trying to recover, after the predictable change in leadership.  The “Age of Fear” had set in.

Friedman goes on to cite Gautam Mukunda from Harvard who says because of this very real phenomena, we have been distracted from building resilience.  We are investing in low probability / high impact items (terrorist threats) and not investing in high probability /  high impact items (education, infrastructure) or in low probability /  high payoff innovations (internet).

Think about how corporations have handled situations like this – GM (ignition switch), McDonald’s (contaminated meat from suppliers), Takata (seat belts), Boeing (Dreamliner) and the list goes on and on.  How many of these organizations have moved into the Fear Zone, how long will they stay there and how will they get out?  Do they realize that they are multiplying the cost of the original disaster many times over by being in the Fear Zone?  Do they even know that they are in the Fear Zone?

Has your organization spent any time in the Fear Zone?  Over reaction to some minor audit points?  Do you know how to recognize the Fear Zone and how to deal with it?  Would you like to know more and discuss?

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How Good Are Your Collaboration Competencies?

collaborationIn a recent discussion with a client who is the Global VP of Services, the question of Collaboration came up from a unique perspective.  In his industry, they often partner with competitors and suppliers to respond to and deliver solutions to their customers.  And while they feel pretty good about their negotiating competencies, he was very concerned about the lack of collaboration competencies,  especially where you are faced with multi-faceted relationship structures (competitors and suppliers).  And when he layered on the fact that they were projecting a very healthy growth trajectory over the next 3-5 years, I had to point out that their ability to respond to that kind of demand  was totally dependent on their ability to develop those collaboration competencies as quickly as possible.  Now before you think that this may not apply to you, I would ask you to think about all those critical supplier relationships you have that for whatever reason you will never be able to break and therefore the only way to enhance the value of those relationships is through Collaboration? Or the amount of Collaboration you need internally to be successful in your role?

As our discussion continued, these points became quite apparent to him.  For his organization to meet those growth targets (and their order book over the next 2-3 years already supports those growth targets), they were at risk because the critical competency that was needed was Collaboration and as we all know, developing a competency has a lead time associated with it,especially one that typically doesn’t get a lot of attention.  The Collaboration competency requires a totally different way of thinking and traditional competencies around negotiations can get in the way.  For our client, this critical competency  was sorely needed within his organization when  dealing with those external relationship structures.

Developing these competencies can actually be a competitive edge for every organization.  Let’s take the example where you have a supplier who has a near monopoly.  Your ability to mine more value through Collaboration with that supplier gives you an edge or  your ability to create a new supplier (as a credible threat) might require collaborating with some of their other customers in the same predicament. Where there are long standing supplier relationships that your stakeholders will never let you change, you can still generate significant value with those suppliers through Collaboration.  Your sales organization may be contemplating entering a new market and the only way you can provide them with a Supply Chain to support that new market is through Collaboration.  How about when you might have to Collaborate with competitors to create a new Supply Base because it’s a regulatory requirement.

In our experience in dealing with this issue with clients, we have often found that the attitudes held by senior leaders around collaboration are the most challenging.  And unfortunately, those attitudes are allowed to permeate through their organizations.  Your organization may be totally different :-) ?  Organizations are designed with competing goals which add to the complexity.  Our basic attitudes have long been developed (as early as school) in a competitive environment, not a collaborative one.  I still remember the biggest challenge my kids had when they went to college was with team assignments that had  no active intervention from the professor.

We think that this will soon be recognized as one of the Next Practice competencies that create an explicit competitive advantage for organizations.  And if your goal is to stay ahead of the curve and Best Practices that others are pursuing, then Collaboration should be your clarion call for 2015.  

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