Monthly Archives: October 2014

Airbnb: Employee Work-space and Motivation

Source: Airbnb (https://www.airbnb.ca/jobs)

While rummaging through news articles on the top start-ups of 2013/14, I stumbled upon Airbnb, a $13 billion company that connects travelers with people looking to rent out lodging. However, even more so than the business idea, I was fascinated by the work-space maintained by the company – “you find wide open space, carts of homemade gluten free healthy desserts being pushed around, a few dogs sitting by their owners, and rows of employees sitting side by side working together”, as described in the article and audio interview here.

Source: Airbnb (https://www.airbnb.ca/jobs)

This idea, which some say is inspired by Google, is radical and disruptive of the traditional “professional” work-space. Why does it work? Well, disruptive innovation is as important within the organization as it is for developing products/services that attract customers. By disrupting the work-space and changing it from a rigid to a flexible and liberating environment, Airbnb has learned the art of motivating its employees and in turn, elevating them towards productivity and innovation. By fostering employee engagement, Airbnb unlocks the intrapreneurial spirit in its human capital. The question one may ask is, “Is this worth spending millions of dollars on?” Most definitely, yes.

Why is employee motivation and happiness so important? Well, employees are the heart and soul of a company. Employees affect and, even to an extent, control the quality of production, customer service, innovation and the many other facets affecting business success. Establishing such a liberal working environment leads to decentralization, and hence, gives rise to a more productive workforce in both the short and the long run. As they say, a brilliant business idea is worthless without a motivated and productive workforce to implement it..

https://www.youtube.com/watch?v=nE6mDCdYuwY

The Importance of NPV: From Multi-billion Projects to Everyday Life

Property of Tata Motors

Since the acquisition of Jaguar Land Rover in 2008, Tata Motors has finally begun to invest the company’s fortunes, and it is doing so with a bang! The company has capital investments plans of setting up multiple factories in China, Brazil, and the United States. Please find the article here. These investment projects will amount upwards of a billion pounds, and thus, has extremely high financial risks involved. Why is Tata Motors so optimistic with this investment then? Well, simply because Tata understands the Net Present Value (NPV) [and of course, many more qualitative and quantitative factors] of the revenue generated from its investments..

Net Present Value Property of TutorsOnNet (http://www.tutorsonnet.com/)

The setting up of these factories will allow the company to benefit from various advantages such as a direct entry into lucrative markets while avoiding import tariffs and currency fluctuations. Overall, these factors will greatly enhance the company’s ability to generate profits in the long run. These profits, when adjusted to the present value by accounting for inflation and/or interest rates, must obviously justify the massive capital investment. If the NPV figure wasn’t positive or healthy, it would be unwise to invest in these offshore mega-factories.

The concept of NPV has greatly broadened by ability to understand capital investment, whether on such massive business scales or in my everyday life. Now, I am compelled to think about the present value of any future earnings before making any financial decisions. In a way, it has enhanced my risk assessment skills, and have given my analytic skills greater depth.

Privatization: A panacea for Britain’s economic and corporate ills?

The British government plans to use the proceeds from the sale of the Eurostar stake and other assets to reduce public debt. Credit Christian Hartmann/Reuters

To reduce the country’s crippling public debt, Britain plans to sell government-owned assets worth $32 billion by 2020. This includes the proposed sale of the government’s 40% stake in Eurostar International, the high speed train service operating in Europe. However, this strategy has received harsh criticism from Railroad Unions, and spokespersons for the government’s incompetence to assess the assets’ true values. Please find more details on this article here.

In my opinion, however, privatization will have longer lasting positive impacts other than just the reduction of fiscal debt. For one, increased pressure from private shareholders and the private incentive to maximize profits will cohesively lead to greater efficiency in these corporations/industries. This long term advantage, for instance, can help reduce the costs of production of the Eurostar, eventually allowing the service to be provided at a more competitive and economical price. This can negate the disadvantage that accompanies most privatized public goods, that is, disregard of public interest. Another advantage is that the short term-ism of governments can be avoided which results from governments focusing on short term welfare to boost their standings in upcoming elections.

But, given the nature of the rail industry, the government should maintain the necessary regulations to keep check on the private monopoly formed by the sale. This legal factor from the PEST analysis will ensure that the private monopoly doesn’t exploit the Brits. Hence, the sanctity of the public good can be fostered, while increasing the one-time revenue of the nation.

The debate of privatization is always a heated one, especially when it concerns public goods/services. But, given the inefficiencies of command economies, it is only viable that “the invisible hand of the free market” is allowed to sparkle magic, albeit with slight supervision from the government.

RE: ”3 Terrible Strategies for Companies Seeking Growth” by Umair Haque: The Road to Success

Businesses: Don’t you fret!

According to Mr. Umair Haque, as discussed in his (external) blog post in the HBR, the only way businesses can prosper in today’s not-quite recovered economy is by strategy. Haque states that strategy is “about building an institution that can compete.” According to him, “Competitiveness isn’t merely short-term profitability. It is about all the things that underlie lasting, healthy prosperity.” Well, which competitive advantage is Haque talking about? Sustainable competitive advantage or transient competitive advantage? Here lies the knowledge deficit.. The esteemed author leaves this conclusion to be drawn by the readers and/or businesses themselves, albeit with three suggestions of what should NOT be done.

In my opinion, given the ever-changing nature of the business cycle, isn’t it only logical to keep one’s advantages “transient”? Please read Rita Gunther McGrath’s article (HBR, June 2013) on Transient Advantage for more information.

The Business Cycle

Customer perceptions and industries change greatly as an economy progresses from a boom, reaches a peak, slows down into a recession, crumbles into a trough, and so the cycle continues. If businesses focus on fixed industries rather than targeting ever-evolving arenas, they will fail to “get the job done” for their customers. Tools such as the Value Proposition Canvas can be extremely effective in evaluating the needs of customers, and should be used not on ad-hoc but continuously. The consequent customer satisfaction can not only help develop strong relationships (another aspect of Transient Advantage), but also lead to both short and long run prosperity. This will satisfy many other stakeholders including shareholders and other investors, the economy, etc.

Thus, I argue that the most effective way to overcome the problems discussed by Haque is by avoiding the development of a “much too” comfortable strategy that will only lead to complacency in the long run. I agree with some of the concepts of sustainable competitive advantage. However, given today’s high velocity industries, transient advantage seems to be the true road to success.

Bibliography

Haque, Umair. “3 Terrible Strategies for Companies Seeking Growth.”Harvard Business Review. N.p., n.d. Web. 11 Oct. 2014. <http://blogs.hbr.org/2014/10/3-terrible-strategies-for-companies-seeking-growth/>.

Enbridge vs First Nations: Can money buy you everything?

The Yinka Dene Alliance has warned Enbridge not to trespass on the traditional territories of its six First Nations. The Yinka Dene Alliance is opposed to Enbridge’s $7.9-billion Northern Gateway oil pipeline. Photograph by: GORDON HOEKSTRA

Enbridge’s $7.9 billion Northern Gateway oil pipeline project has been greatly hindered by the external social factor of the First Nations. As mentioned in an article by The Vancouver Sun, the President of the project states that the predicted start up year of 2018 for the pipe line seems to be an achievable target given the protests by the Yinka Dene Alliance. While 26 of the 40 First Nations have given permission for their land to be used in return for an equity in the project, the Yinka Dene Alliance seems adamant on its decision. For it, the district holds tremendous physical (a source of myriad types of fish, etc.) and spiritual value.

Enbridge must understand the social aspects of this conflict. In its attempt to use money as a motivator, the company has failed to recognize the perception of these First Nations. If it’s to successfully convince the Yinka Dene Alliance, Enbridge must familiarize itself with the cultural implications of the project for the alliance. Having done so, the project can be shaped in a way that reduces the negative social aspects of the development on these First Nations. These efforts can then be carefully publicized using suitable PR campaigns. Enbridge, however, must be very subtle with these campaigns so as to avoid them seeming like mere showcases of superficial empathy. Also, by implementing a Total Quality Management (TQM) system in its project, along with appointing external safety auditors, Enbridge can remove any inhibitions regarding the environmental concerns of the project. This can help the company gain the confidence of the opposing First Nations.

I feel that the above solutions are a more effective long run approach than offering equity to First Nations. These communities give social aspects more importance than monetary endeavors, and by completing its Corporate Social Responsibility, Enbridge can “bridge” the gap between the proposal and actual materialization of its Northern Gateway project.

Bibliography

“Northern Gateway Pipeline through BC Unlikely to Start up by 2018.” The Vancouver Sun. N.p., n.d. Web. <http://www.vancouversun.com/news/metro/Northern+Gateway+pipeline+through+unlikely+start+2018+project/10174245/story.html>.

“There Will Be No Pipeline.” The Vancouver Sun. N.p., n.d. Web. 05 Oct. 2014. <http://www.vancouversun.com/news/There%2Bwill%2Bpipeline/10122968/story.html>.