What Satya Nadella did at Microsoft

17. March 2017

Date: 16-03-2017
Source: The Economist

The world’s biggest software firm has transformed its culture for the better. But getting cloud computing right is hard

A DECADE ago, visiting Microsoft’s headquarters near Seattle was like a trip into enemy territory. Executives would not so much talk with visitors as fire words at them (one of this newspaper’s correspondents has yet to recover from two harrowing days spent in the company of a Microsoft “brand evangelist”). If challenged on the corporate message, their body language would betray what they were thinking and what Bill Gates, the firm’s founder, used often to say: “That’s the stupidest fucking thing I’ve ever heard.” Read the rest of this entry »

Indian outsourcing specialists must reboot their strategies

21. January 2017

Date: 19-01-2017
Source: The Economist

IT firms need an upgrade in the face of technological and political shifts

COMPUTERS slow as they age, and before long must be replaced by newer models. Something similar is true of the business models of Indian IT firms. Specialised in running global companies’ outsourced back-offices, the likes of Infosys, Wipro and Tata Consultancy Services (TCS) used to be national champions growing at double-digit rates. Their prospects have dimmed of late; an entire industry built on the back of globalisation is fretting about the incoming American president. But Donald Trump is merely the latest threat to their operating systems.

Over three decades, Indian IT has become a $140bn industry built on a simple proposition: rich-country companies could trim costs by getting tedious behind-the-scenes IT work done by cheap engineers in India. The Indian firms hoovered up bright graduates—the big three have over 700,000 employees in total—paying them starting salaries of $5,000 or so, a decent local wage. After gaining some experience, tens of thousands were dispatched to client sites in Europe or America, along with a few expensive local staff. The rest ensured their clients’ computer systems kept ticking over from cosy cubicles in Bangalore, Hyderabad and elsewhere. Read the rest of this entry »

Conclusion: Answering the machinery question

26. June 2016

Date: 23-06-2016
Source: The Economist

Glimpses of an AI-enabled future

THE ORIGINAL MACHINERY question, which had seemed so vital and urgent, eventually resolved itself. Despite the fears expressed by David Ricardo, among others, that “substitution of machinery for human labour…may render the population redundant”, the overall effect of mechanisation turned out to be job creation on an unprecedented scale. Machines allowed individual workers to produce more, reducing the price of many goods, increasing demand and generating a need for more workers. Entirely new jobs were created to oversee the machines. As companies got bigger, they required managers, accountants and other support staff. And whole new and hitherto unimagined industries sprang up with the arrival of the railways, telegraphy and electrification.

To be sure, all this took time. Industrialisation caused pervasive labour-market upheaval as some jobs vanished, others changed beyond recognition and totally new ones emerged. Conditions in factories were grim, and it took several decades before economic growth was reflected in significant wage gains for workers—a delay known as “Engels’ pause”.

Worries about unemployment gave way to a much wider argument about employment conditions, fuelling the rise of socialist and communist ideas and creating the modern labour movement. By the end of the 19th century the machinery question had faded away, because the answer was so obvious. In 1896 Arthur Hadley, an American economist, articulated the view of the time when he observed that rather than destroying jobs, mechanisation had brought about “a conspicuous increase of employment in those lines where improvements in machinery have been greatest”. Read the rest of this entry »

The imperial CFO

17. June 2016

Date: 16-06-2016
Source: The Economist: Schumpeter

Chief finance officers are amassing a worrying amount of power

THE days of imperial CEOs have long gone. Today’s chief executives do their best to contain their egos and, instead, project a modest image. They talk about “servant leadership” and make a point of cultivating their “stakeholders”. Many bosses leave the limelight to company founders and big-name investors. And yet a new authority figure has emerged within companies, much less exuberant than old-fashioned autocratic CEOs but just as determined to amass power: the imperial CFO.

Chief financial officers barely existed 50 years ago: company accounts were administered by mysterious people called “comptrollers”. Today, CFOs are at the heart of all the world’s big firms. They are the only corporate officers other than the boss who are able to monitor every corner of an organisation. They are the only executive other than the chief who is feared by everybody: a “no” from the CFO means that your precious project is dead. Russell Reynolds, a search firm, calls them “co-pilots”. At one high-profile company, Twitter, the CFO, Anthony Noto, is arguably doing most of the piloting. Read the rest of this entry »

Keeping it under your hat

15. April 2016

Date: 14-04-2016
Source: The Economist: Schumpeter

An old management idea gets a new lease of life

APPLE and Tesla are two of the world’s most talked-about companies. They are also two of the most vertically integrated. Apple not only writes much of its own software, but designs its own chips and runs its own shops. Tesla makes 80% of its electric cars and sells them directly to its customers. It is also constructing a network of service stations and building the world’s biggest battery factory, in the Nevada desert.

A century ago this sort of vertical integration was the rule: companies integrated “backwards”, by buying sources for raw materials and suppliers, and “forwards”, by buying distributors. Standard Oil owned delivery wagons and refineries in addition to oil wells. Carnegie owned iron-ore deposits and rail carriages as well as blast furnaces. In his 1926 book “Today and Tomorrow” Henry Ford wrote that vertical integration was the key to his success: “If you want it done right, do it yourself.” He claimed he could extract ore in Minnesota from his own mines, ship it to his River Rouge facility in Detroit and have it sitting as a Model T in a Chicago driveway—in no more than 84 hours. Read the rest of this entry »

The measure of a man: Performance reviews: not dead yet

17. February 2016

Date: 17-02-2016
Source: The Economist

Employers are modifying, not abolishing them

IN RECENT months the business press has reverberated with cheers for the end of performance reviews. “Performance reviews are getting sacked,” crows the BBC. They “will soon be over for all of us”, rejoices the Financial Times. Such celebration is hardly surprising. Kevin Murphy, a performance-review guru at Colorado State University, sums up the general feeling about them: an “expensive and complex way of making people unhappy”. The problem is, they are not in fact being scrapped.

A survey in 2013 by Mercer, a consulting firm, of 1,000 employers in more than 50 countries reported that 94% of them undertook formal reviews of workers’ performance each year and 95% set individual goals for employees; 89% calculated an overall score for each worker and linked pay to these ratings. It is true that a number of big companies have announced that they are abandoning annual performance reviews; this month IBM did so, joining Accenture, Adobe, Deloitte, GE, Microsoft and Netflix. In reality, though, they are no more getting rid of performance reviews than a person who shifts from drinking whisky to wine is becoming teetotal. Employee reviews are being modified, not abolished, and not necessarily for the better. Read the rest of this entry »

The fashion for making employees collaborate has gone too far

25. January 2016

Date: 21-01-2016
Source: The Economist: Schumpeter
Subject: The collaboration curse

IN MODERN business, collaboration is next to godliness. Firms shove their staff into open-plan offices to encourage serendipitous encounters. Managers oblige their underlings to add new collaborative tools such as Slack and Chatter to existing ones such as e-mail and telephones. Management thinkers urge workers to be good corporate citizens and help each other out all the time.

The fashion for collaboration makes some sense. The point of organisations is that people can achieve things collectively that they cannot achieve individually. Talking to your colleagues can spark valuable insights. Mixing with people from different departments can be useful. But this hardly justifies forcing people to share large noisy spaces or bombarding them with electronic messages. Oddly, the cult of collaboration has reached its apogee in the very arena where the value of uninterrupted concentration is at its height: knowledge work. Open-plan offices have become near-ubiquitous in knowledge-intensive companies. Facebook has built what is said to be the world’s biggest such open space, of 430,000 square feet (40,000 square metres), for its workers. Read the rest of this entry »