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Free Textbooks from Bookboon

2009-07-09T11:45:00.002+06:00

Bookboon.com is an online publisher of free books. It facilitate download of the books for free and without providing any personal details. The books are provided in PDF that are easy to print or read. It offers free textbooks in different subjects e.g. ACCOUNTING; BIOCHEMICAL ENGINEERING; BIOLOGY; CALCULUS; CAREER; CHEMISTRY; CIVIL ENGINEERING; COMPLEX FUNCTION THEORY; ECONOMICS; ELECTRICAL & ELECTRONIC ENGINEERING; ENERGY & THE ENVIRONMENT; ENVIRONMENTAL ENGINEERING;FINANCE; HRM; IT; MANAGEMENT; MARKETING; MATHEMATICS; MECHANICAL ENGINEERING; NANOTECHNOLOGY; ORGANIZATION; STATISTICS; STRATEGY

800th Anniversary Scholarships at Cambridge University for applicants from Pakistan

2009-06-23T11:36:00.003+06:00

The Cambridge University has introduced a new scholarship scheme for applicants for undergraduate admission from Pakistan for 2010 entry onwards. The 800th Anniversary Scholarships have been created with funding from Cambridge Assessment, parent of Cambridge International Examinations who provide school exams throughout Pakistan.

The scholarships to be held at the University of Cambridge are for school-leavers from Pakistan who meet the usual examination qualifications for admission to Cambridge. Applicants for all courses except Medicine and Veterinary Medicine are eligible to apply.

The scholarships are not available if you already have a degree and are therefore applying to Cambridge as an Affiliated applicant.The scholarships will cover the cost of your tuition fees and College fees together with a grant towards maintenance and travel costs for each year of your course. The maintenance element of the scholarship will take account of your financial circumstances.

The scholarships are competitive and are conditional on a College offer of a place tostudy at Cambridge, including meeting any immigration and English language requirements. Continuation of the scholarship from year to year will be conditional on satisfactory examination performance.

If you meet the conditions above and wish to be considered for an 800th Anniversary Scholarship should complete a scholarship application form (which will be made available on the Undergraduate Admissions website in due course) and apply for a place at Cambridge in the usual way, submitting a UCAS application and a Cambridge Overseas Application Form (COAF) together with your scholarship application form by 20 September 2009. Applicants for the scholarships will be interviewed in Pakistan in October/November 2009.

Contact:
University of Cambridge
Cambridge Admissions Office
Fitzwilliam House
32 Trumpington Street
Cambridge CB2 1QY [Map]
Information provided by admissions@cam.ac.uk
http://www.cam.ac.uk/admissions/undergraduate/international/

Herbal tea gives hope to diabetics

2009-06-23T11:22:00.002+06:00

[ABUJA] A tea made from the leaves of an indigenous African tree and bitter oranges is showing promise as a treatment for type 2 diabetes.

The tea, prepared by boiling leaves from theRauvolfia vomitoria tree — known as 'asofeyeje' in the West African Yoruba language — with fruit from the bitter orange tree, appears to regulate blood sugar levels, according to principal investigator Joan Iyabo Campbell-Tofte, a postdoctoral researcher at the University of Copenhagen, Denmark.

Type 2 — or adult-onset — diabetes is a life-threatening condition characterised by high levels of sugar in the blood. Often associated with obesity, the disease occurs when the body doesn't make enough — or doesn't properly use — the hormone insulin. Insulin moves sugar into cells, where it is needed for energy.

For the Danish study, 23 patients with type 2 diabetes drank 750 millilitres of asofeyeje tea every day while a control group drank a placebo. After four months, there was a reduction in blood sugar levels among asofeyeje tea drinkers. The results of the study have yet to be published.

Campbell-Tofte, who studied and later lectured at the University of Nigeria, says the tea seems to work differently from conventional diabetes treatments. Existing drugs aim to rapidly clear excess sugar from the bloodstream, while the tea appears to reduce blood sugar over time.

The researchers speculate that the tea works by improving the ability of polyunsaturated fatty acids in muscle fibres to transport sugar into cells.

Campbell-Tofte told SciDev.Net that she learnt about the tea from family and friends, who harvested 50 kilograms of leaves from the asofeyeje tree and 300 kilograms of bitter oranges for the research in the Nigerian state of Edo, where she grew up.

But though Campbell-Tofte is optimistic about the tea's therapeutic potential, she warns that any new treatment for diabetes would come "years from now".

The asofeyeje tree is native to Cameroon, Democratic Republic of Congo, Ghana, Liberia, Senegal, Sudan and Uganda. Traditional healers also use it as a purgative and a treatment for psychiatric conditions, leprosy and arthritis.

Sorce: SciDev Net

Interview Guide

2009-06-16T16:28:00.004+06:00

The interviewer hopes that YOU are the right person for the job. They are under pressure to fill the position so that they can get back to their own work. Therefore you are in a greater position of strength than you think. Concentrate on what you have to offer in the way of qualifications and experience instead of feeling intimidated.

An interviewer has 3 aims:
1) To learn if you are the right person for the job.
2) To assess your potential for promotion
3) To decide whether you will fit into the company environment.

The key to a successful job interview is in preparation
Be prepared: For the types of interview questions you will be asked
Be prepared: To ask questions yourself
Be prepared: To research the company
Be prepared: To look the part
Be prepared: To turn up on time

Job interview questions you may be asked
Q - How would you describe yourself?
A - You should describe attributes that will enhance your suitability for the position. Have some ready in advance.
Q - What are your long-term goals?
A - These should be career orientated. Make sure you have goals to discuss.
Q - Why did you leave your last job?
A - This could be for more responsibility; a better opportunity; increased income. Do not be detrimental to your previous employer. He could be the interviewer’s golfing partner.
Q - Why do you want this job?
A - Your answer should be: more responsibility or better opportunity or similar. Not: because it is closer to home or the gym.
Q - What are your strengths?
A - You should highlight accomplishments and experiences that relate to the position for which you are applying. Also, give examples of situations where your strengths have been demonstrated.
Q - What are your weaknesses?
A - This should not be a list of deficiencies. Don’t mention anything that could make the interviewer question your ability to do the job, for example “I am always late for everything.” Instead, discuss a weakness that could also be a strength such as “I am a workaholic!”

Last but not the least!

You should show interest in all aspects of the job and the company especially if shown around the premises.
Do your homework on the company and the nature of its business.
Take care in how you dress for the interview. First impressions still count!

Adapt to change

2009-06-10T14:06:00.002+06:00

2009-06-10T13:40:00.001+06:00

Uncreative people have an annoying tendency to kill good ideas, encourage bad ones, and demand multiple rounds of "improvements".

Digital Media

2009-06-10T12:12:00.003+06:00

The increasing power of computers, speed of networks, and the reducing cost of memory has enabled multimedia information to be handled as readily as numbers or text. One frame of an animation 1,000 by 700 pixels requires 700 kbyte of storage. For 30 frames per sec and 24-bit colour this would need 500 Mbyte. For a 5 minute animation this would require 150 Gbyte (not to mention backups, various revisions etc). Digital cinemas can receive films via the network and save the production costs of traditional film reproduction – typically $ 5millionfortheworld-widereleaseofamovie.

The Digital Media Alliance, Florida, defines digital media as "the creative convergence of digital arts, science, technology and business for human expression, communication, social interaction and education". Many traditional media companies now generate their content in digital form for distribution via CD, DVD, or the Internet. Marketing strategies for content increasingly utilize multiple media channels to hit different markets simultaneously. New media forms such as wikis, blogs, podcasts, and the distribution of user-generated content(e.g. YouTube) are all changing the nature of information and how it is stored, accessed, and distributed. Filtering, accreditation, and synthesis of content are created through new hierarchies of peers and information affinity groups on the Internet.

Source: Digital Convergence - Libraries of the Future

Stay behind your ego

2009-06-09T13:52:00.001+06:00

No one can objectively define what the difference between a Self and an Ego is. A division line never can be drawn between an Ego and a Self. The terms used as Id, Ego and Super Ego are the names of the different conditions of a same thing to which we call as ‘Self’. It is the word, which is used to denote our existence or beingness. In its very beginning the Id, the Self or the Ego exist in an state of unconsciousness where there is nothing than a display without perception, a listening without knowledge, and a feeling without understanding.

The core reason of our happiness depends up the fulfillment of our desires. On the contrary, in a simple way we feel bothered when some thing happens against our desires or will. So the most effective thing is to detach our ego from our desires. It means there should be a choice of carelessness or detachment in the case if a particular desire or need is not going to be fulfilled. A human being is virtually linked with this universe through his ego. Wherever or whenever the ego is attached with things, the human being is connected with the problems of world. The moment ego detaches itself from its belongings and desires; it experiences to be in a tension free tranquiller zone.

The detachment of ego form the happenings of life is a great art to be learned to live in tranquility. It is the same thing as to stay behind the ego to which the title of this article stands for. When a self doesn’t supports a desire it goes free from all effects. All the great personalities trained themselves to stay behind the ego, or else they cannot remain as normal men even after great failures. Big politicians, often face defeat in elections. It never leads them towards disaster. They remain alive like a normal man even if the whole country knows that they are defeated. Big players, film artists often face big failures but they continue normal because they know to stay behind their ego.

Never take a failure up on your ego. Hand it over to your luck. Even after great precautions and planning things can happen contrary to it. There is no guaranty for perfectness. What can the mankind do when he is deprived of sex, or love, or wealth or prestige or health? What can the mankind do when he suffers from a trauma or disaster? What will he do when all others are blaming things up on him? What will he do when his child is kidnapped and murdered? His wife fled away with a young man. His daughter left his house without his permission. These are the situation where the priority should be given to save ourselves from becoming mad. The next priority should go to handle the situation.

The contents were provided by Dr. Equbal Wajid to upload on blog.

Know Your Audience: A Tip for New Writers

2009-06-08T11:40:00.003+06:00

Nan Levinson speaks primarily to business writers in her book 'How to Sharpen Your Business Writing Skills', but her advice resonates with any writer who needs to share information or perspective about a subject.

Usually business writers, says Levinson, are trying to accomplish one of three things: “To present ideas, recommendations, or decisions; to explain something, or to persuade someone to agree with you or to join you in taking some action.” When you’ve decided what you need to accomplish, you’re ready to ask yourself such questions as “Who are my readers? Usually,” she adds, “there are several” including “higher-level readers, lower-level readers, peer-level readers, and external readers.”

Levinson offers these suggestions to help you tailor your message to your audience:

Consider the Reader’s Point of view
Your first piece of psychology involves identifying the benefits to your readers. Your second is to present your message with their perspective clearly in mind. Focus on readers’ concerns rather than on your own, and make your language reflect that focus. A good place to start is with the word you. Advertisers and salespeople have long understood the value of writing in the second person (you and your)…
Use an Appropriate Tone
Tone is the writer’s attitude toward the reader and subject matter as expressed – intentionally or unintentionally – in the way a message is written. Chances are, you’ve received memos or letter than annoyed or angered you by their tone. They may have been patronizing, intrusive, snobbish, demanding, or too familiar, and your response may well have been to crumple them up and toss them out.
Since an appropriate tone depends on an appropriate attitude, the psychology of persuasive writing begins at home. The key to controlling the tone of your writing is to imagine how the reader will respond and to choose words that will create the mood you desire.

Tips for Self-development

2009-06-06T11:46:00.002+06:00

In a short column "Getting to Done", written by Keith Robinson gives some advice of self development. As I read through the points he made, it occurred to me they are good personal-development tips, useful for just about any kind of situation.

Choose to change
Glenda Cloud says, “Change is inevitable, growth is intentional.” We prefer the comfort of where we are to the perceived risk in change. However, if we want to grow, we have to choose to change.

Work harder and smarter
As an employee it can be easy to show up, do what you’re told, then go home. While that is the easy approach, there is a lot of reward in being an extra-mile worker.

Don’t make excuses
Take responsibility for things that go wrong. It puts you in a position to change or correct them.

Master your time
Work smarter; get organized; manage your time and priorities; focus on what matters; plan.

Get out of your comfort zone
This goes along with choose to change. Learn new things. Develop new skills. Learn from the past and use it as a stepping stone to new experiences.

Communicate
This is good advice for any kind of relationship. Go out of your way to make sure people understand what you are saying.

Lead by example
Just because you communicate well doesn’t mean the message is always accepted. It’s easier to motivate and encourage by actions than by words.

Embrace risks
Don’t worry about failing or making mistakes. It happens to everyone. If you’re not risking anything, you’re probably not accomplishing much.

Be flexible
With your time, with your attitude, with your support, with everything except your principles.

Own it!
Be confident. Make decisions and stick to them. Own up to your mistakes.

Don’t settle for average
Always work to your very best. Hold yourself to a higher standard. No one goes far by just doing the minimum.

Stick up for your passions
You will always encounter people who try to boost themselves up by pulling you down. Ignore them! Your mind will question your actions or decisions. Ignore it! Is there something that you are passionate about? Listen to that!

What makes a good CV?

2009-06-05T11:25:00.003+06:00

There is no single "correct" way to write and present a CV but the following general rules apply:

It is targeted on the specific job or career area for which you are applying and brings out the relevant skills you have to offer
It is carefully and clearly laid out: logically ordered, easy to read and not cramped
It is informative but concise
It is accurate in content, spelling and grammar

Two Personnel Managers answered this as follows.

A CV should be quick and easy to read

It should be clearly and logically laid out so it is uncluttered and pleasing to the eye.
Keep it simple for easy reading. Two pages are ideal and definitely not more than three.
Clear and easy to read, well set out text, saves time for the reader.
Employment details well set out and concise.

The information must be honest and relevant

Unpretentious, succinct, honest and realistic.
If applying for a specific job, the CV should respond to the qualities and experience asked for in the advertisement, but still be honest.
Avoid detail about early experience. The last five years is more important.
Include reason for leaving, if relevant.

The CV should tell the reader about the applicant

What you have done and what you have achieved should be set out clearly.
Give some clues as to the personality of the applicant
Describe yourself in your terms. This is a good selling point.

Finally

It is hard to write a CV. It is technically difficult to condense many years of work into few paragraphs. Most people get much more criticism than praise in their lives. This can carry over into self-criticism and make it hard to be positive. We then undersell ourselves when writing a CV.

You can help each other produce your CV's. If you talk about it while someone else is listening your thoughts will become clearer.

Difference Among CV, Biodata And Resume

2009-06-03T10:36:00.000+06:00

People use the words RESUME, C.V., and BIO-DATA interchangeably for the document highlighting skills, education, and experience that a candidate submits when applying for a job. On the surface level, all the three mean the same. However, there are intricate differences.

RESUME

Resume Is a French word meaning "summary", and true to the word meaning, signifies a summary of one's employment, education, and other skills, used in applying for a new position. A resume seldom exceeds one side of an A4 sheet, and at the most two sides. They do not list out all the education and qualifications, but only highlight specific skills customized to target the job profile in question. A resume is usually broken into bullets and written in the third person to appear objective and formal. A good resume starts with a brief Summary of Qualifications, followed by Areas of Strength or Industry Expertise in keywords, followed by Professional Experience in reverse chronological order. Focus is on the most recent experiences, and prior experiences summarized. The content aims at providing the reader a balance of responsibilities and accomplishments for each position. After Work experience come Professional Affiliations, Computer Skills, and Education

CV. CURRICULUM VITAE

C.V Is a Latin word meaning "course of life". Curriculum Vitae (C.V.) is therefore a regular or particular course of study pertaining to education and life. A C.V. is more detailed than a resume,
usually 2 to 3 pages, but can run even longer as per the requirement. A C.V. generally lists out every skills, jobs, degrees, and professional affiliations the applicant has acquired, usually in chronological order. A C.V. displays general talent rather than specific skills for any specific positions.

BIO-DATA

Bio Data the short form for Biographical Data, is the old-fashioned terminology for Resume or C.V. The emphasis in a bio data is on personal particulars like date of birth, religion, sex, race, nationality, residence, martial status, and the like. Next comes a chronological listing of education and experience. The things normally found in a resume, that is specific skills for the job in question comes last, and are seldom included. Bio-data also includes applications made in specified formats as required by the company.

A resume is ideally suited when applying for middle and senior level positions, where experience and specific skills rather than education is important. A C.V., on the other hand is the preferred option for fresh graduates, people looking for a career change, and those applying for academic positions. The term bio-data is mostly used in India while applying to government jobs, or when applying for research grants and other situations where one has to submit descriptive essays.

Resumes present a summary of highlights and allow the prospective employer to scan through the document visually or electronically, to see if your skills match their available positions. A good resume can do that very effectively, while a C.V. cannot. A bio-data could still perform this role, especially if the format happens to be the one recommended by the employer.

Personal information such as age, sex, religion and others, and hobbies are never mentioned in a resume. Many people include such particulars in the C.V. However, this is neither required nor considered in the US market.

Over simplification is more complicated than you think: Pakistan under threat

2009-05-07T08:43:00.000+06:00

Recent reports of international media especially US media confirm that they look at Pakistan as a state that is collapsing. The grave situation is that Pakistani media is following this trend without considering the cultural ingredients and indigenous social, political and economical landscape of the country.

Ejaz Haider, the Consulting Editor of The Friday Times and OP-ed Editor of Daily Times, considered the hypotheses of this trend and wrote a wonderful article in the Friday Times in this context. Ejaz considered the reports currently having place in international media biased as they can not pass the test of sound analysis.

Ejaz emphasized that a state can not be considered "Fail" if its 30% population is under poverty line, or its corruption level is high. Hence poverty, poor governance, corruption, a broken court system, etc. are nothing new to Pakistan or, for the matter, to much of the developing world, including shining India. Author considered these reports “rely on simplistic rendering of facts presented out of context or as a montage of sorts for cumulative impact. . . Most of these reports rely on email contacts, interviews or phone conversations”.

The current problems are owed to US presence in Pakistan and roots may be linked with US role in Soviet occupation of Afghanistan.” The current problem was created by the eight years of Musharraf’s dictatorship; the army in cahoots with the Taliban; the violence is owed to India’s perfidy; because of poverty; use of force has compelled these people to retaliate, etc.”

Ejaz questioned that ‘why did no one talk about Pakistan as a failing state with all indicators of poverty, poor political and economic conditions, etc. before the insurgency?” There is just one issue “the insurgency”. “Can Pakistan deal with it ?” This is the thinking that lurking behind this doomsday scenario for the west. Narrow it down and it would read: “Can Pakistan deal with it on our terms.”

Author considered that we can face the current challenges with Dialogue, rule of law, and strengthen judiciary. He further wrote: "Pakistani State and Society is far more complex and multilayered for it to come apart in the way reports in the US press predict".

The Lessons of Adversity: What has Corporate America learned fro the Economic Crisis?

2009-05-02T12:14:00.005+06:00

"The Fortune 500 is having its worst slump ever, but the survivors have been taught a few things about thinking long term and sticking to principles", Rick Tetzeli wrote in his recently published article in Fortune Magazine's May 4, 2009. Rick highlights the learned lessons as follows:

1. Gorging on easy profits can be fatal.

Author recognised "Wall Street and Detroit tumbled for a lot of reasons, but high on the list is the fact that they thought the free buffet would be open indefinitely". In context of Wall Street, the beliefs were that "accepting risk would always pay off" and for Detroit "the assumption was that consumer preferences would be slow to change".

2. Highly disciplined companies can thrive in all seasons.

The companies highly disciplines companies although suffered yet they didn't suffer nearly as much as others. "IBM (No. 14 in Fortune 500 companies) has become the model for pushing itself up the technology learning curve, while Johnson & Johnson (No. 29 in Fortune 500 companies) has relentlessly taken the long view".

3. The tech sector is now a pillar of stability.

The technology sector's strength keeps growing. "Many of the tech companies that soared onto the list in the 1990s started as small, venture-capital-backed firms and have now become a mostly boring set of increasingly huge companies like Oracle (No. 113) and Cisco (No. 57)". And the future is promising. Michael Moritz, a partner at Sequoia Capital, which helped bankroll Google and Yahoo, looks at the list this way: "I've always felt that if the venture business could add one name to the list every five or six years, that would be a massive achievement. No other sector of the economy does that."

4. The Fortune 500 is still an old-boys' club - but it's changing fast.

The majority, 485 of the 500 fortune companies, are run by men. But the scene is changing slowly. Today 15 women run Fortune 500 companies is an all-time high, up from seven in 2003. Lynn Elsenhans took over Sunoco (No. 41), marking the first time a woman has helmed an oil giant.

5. The next five years may redefine everything.

Banking and automaking aren't the only industries that will be changed for good. Entertainment, publishing, and airlines face threats to their survival. And consider homebuilding: Five companies fell right off the list this year: Hovnanian, KB Home, Lennar, NVR, and Toll Brothers.

The author stressed that the behavior of American consumer is changing and companies are adjusting their sale offers. As Dollar Tree's stores CEO Bob Sasser says "We are positioned well for any economy. We sell things people need every day." The American consumer's focus on value vs. prestige may be changing in a lasting way.

6. American business - we hope - has been tempered by fire.

"If the next five years will be defining ones, they will also be years where we should see U.S. companies apply what they've learned from 2008".

7. Business will be more accountable.

There is a societal pressure on the companies to be more accountable and companies are preparing for the same. Ram Charan, a consultant to CEOs of many Fortune 500 companies, foresees: "a shift in the composition of executive pay. Corporate boards will try to ease the grip of Wall Street by adopting pay structures that consider all stakeholders, including employees and customers".

That would be a change we could all live with. And a sign that we actually learned something from the disaster.

How to Mitigate the Urgent to Focus on the Important

2009-04-09T11:07:00.004+05:00

I have just gone through a short essay of HBR. In this essay, Gina Trapani shared some important tips for effective time manegement and to ehance personal productivity.

Gina wrote "Busy people have two options when they decide how their workdays will go: they can choose to be reactive to urgent demands on their time, or proactive about focusing on what they decide is important. The only way to actually get things done is to mitigate the urgent to work on the important".

She further differentiate between urgent and important tasks: "Urgent tasks include things like that frantic email that needs a response RIGHT NOW; a sudden request that seems like it'll only take two minutes but often ends up taking an hour; a report you've got to write up before a meeting . . . Urgent tasks are usually short-term and we're drawn to them because they keep us busy and make us feel needed. But dealing with a constant stream of urgent tasks leaves you wrung out at the end of the day, wondering where all the time went, staring at the undone actual work you've got to complete”

She further considered “Important work moves you and your business towards your goals. The important stuff doesn't give us that same shot of adrenaline that the urgent requests do. It can involve thinking out long-term goals, being honest about where you are and want to be, and just doing plain hard work that feels boring and tedious".

Finally, She provides the following points and conceded that an awareness of the difference and a few simple techniques can help:

Choose three important tasks to complete each day. Write them down on a slip of paper and keep it visible on your desk. When you have a moment, instead of checking your email, look at the slip, and work on an item. Keep the list to just three, and see how many you can complete.

Turn off your email client. Shut down Outlook, turn off new email notifications on your BlackBerry, do whatever you have to do to muffle the interruption of email. When you decide to work on one of your important tasks, give yourself an hour at least of uninterrupted time to complete it. If the web is too much of a temptation, disconnect your computer from the Internet for that hour.

Set up a weekly 20-minute meeting with yourself. Put it on your calendar, and don't book over it — treat it with the same respect you'd treat a meeting with your boss. If you don't have an office door or you work in an open area that's constantly busy, book a conference room for your meeting. Go there to be alone. Bring your project list, to-do list, and calendar, and spend the time reviewing what you finished that past week, and what you want to get done the following week. This is a great time to choose your daily three important tasks.

The Great Recession

2009-03-27T10:25:00.004+05:00

Economists generally agree this is the worst economic downturn since the Great Depression, but they say despite pain, another depression isn't likely.

By Chris Isidore, CNNMoney.com senior writer

Last Updated: March 25, 2009: 5:19 PM ET

NEW YORK -- Is this the worst economy since the Great Depression? And what are the chances of the economy falling into another depression?

The answer to the first question is fairly clear. In most ways that matter to economists and average Americans, this is the worst economic crisis since the Depression.

The answer to the second question is not as clear. While the National Bureau of Economic Research officially declares the beginning and end of recessions, nobody does that for depressions.

Still, the general consensus of economists is that another depression is not likely. But the risks are greater than they were only a few months ago.

Why this recession is so bad

First things first: Even though it may seem obvious to most that this is the worst downturn since the Great Depression, the economy has experienced other serious recessions in the past, particularly in the mid-1970s and early 1980s.

But this recession dwarfs those two for several reasons.

In terms of length, the longest post-Depression economic decline was 16 months, which occurred in both the 1973-75 and 1981-82 recessions. This recession began in December 2007, which means that it will enter its 17th month next Wednesday.

The current recession is also more widespread than any other since the Depression. The Federal Reserve's readings show that 86% of industries have cut back production since November, the most widespread reduction in the 42 years the Fed has tracked this figure.

What's more, every state reported an increase in unemployment this past December, the first time that has happened in the 32 years that records for unemployment in each state have been kept.

"This is important because there's nowhere you can move to find a job," said Gus Faucher, director of macroeconomics for Moody's Economy.com.

Finally, during the past nine months, the drop in household wealth has been larger since anything on record in the post-World War II period.

Why this won't be another depression

So far during this recession, the nation's gross domestic product, the broadest measure of economic activity, has dropped about 1.7%. Forecasts of experts surveyed by the National Association for Business Economics work out to about a 3.4% decline in GDP over the life of this recession.

To be sure, there already have been some quarters where the drop was much more severe. The government will report its final revision of GDP for the fourth quarter of 2008 and economists are expecting that report to show an annual rate of decline of 6.6%. And some economists think the drop in the first quarter could be even greater.

But measuring the drop in economic activity from top to bottom is how economists judge a recession's depth. And a 3.4% drop would be the worst since World War II, and far worse than the average recession in that period.

Still, that's a long way from the 26.5% drop in GDP that took place between 1929 and 1933.

One of the main reasons why economists think another depression could be avoided is that it will take more than just a sharp decline in consumer spending and household wealth to spark a depression.

Even though household net worth has fallen a record $11 trillion, or 18%, during the course of this recession, the broader economy can weather such a shock.

Historically, stock market crashes and bursting housing bubbles haven't necessarily led to depressions. It takes a variety of economic factors and policy decisions to turn a recession into something even more serious.

"I don't know if you can make a causal link between a loss of wealth and a depression," said Lakshman Achuthan, managing director of Economic Cycle Research Institute.

Learning lessons of the 1930s

Significant policy changes since the 1930s will also cushion the blow.

Unemployment insurance, Social Security payments and larger government at the federal, state and local levels keep money flowing into the economy even as consumers and businesses pull back on their own spending.

"There's a lot more safeguards in place," said Keith Hembre, chief economist at First American Funds.

Hembre said the $787 billion stimulus bill passed by Congress in February will also spur more economic activity down the road.

In addition, the Federal Reserve, led by Great Depression expert Ben Bernanke, has pumped trillions of dollars into the economy with new lending programs the central bank has never tried before. That has swelled the supply of money. By way of contrast, the money supply tightened during the Great Depression.

There were many other policy mistakes made in the 1930s that economists say are not being repeated today, including stiff tariffs that killed international trade and government imposed limits on prices and production levels.

Even if Congress imposed "Buy American" provisions in the public works paid for by the stimulus bill, there is no call to move back to the strict protectionism of the 1930s or production and price controls.

"I'd like to think we've learned something, so in terms of policy we're doing better," said Achuthan.

Still, even if the United States does not enter another depression, that doesn't make the current economic crisis any less painful for many Americans. Also, few economists are predicting an end to the recession anytime soon.

Hembre said he is worried that the country could be in a period of prolonged economic stagnation similar so the so-called lost-decade that Japan suffered starting in the 1990s. He said continued weakness in housing and high debt levels by households and governments could hold the economy back for some time.

And some economists aren't completely ruling out another depression.

In a paper for the National Bureau of Economic Research last month, Harvard University professors Robert Barro and Jose Ursua put the chance of a minor depression (which they defined as a GDP decline of at least 10%) at about 20% and a 3% chance of a major depression (defined as a GDP drop of at least 25%). Moody's Economy.com is forecasting a 10% chance of a depression.

Source: CNNMoney.com

Will the banks survive?

2009-03-26T09:05:00.007+05:00

A wave of troubled loans threatens to send weak ones into the arms of Uncle Sam.

By Shawn Tully, senior editor at large

February 27, 2009: 7:17 AM ET

(Fortune Magazine) -- On Friday, Feb. 20, investors watched in horror as shares of Bank of America plunged below $3 and Citigroup's stock broke $2, giving the two pillars of U.S. banking a combined market value of $26 billion - far below that of Kraft Foods.

Fear is spreading that if all that rescue money can't revive these stumbling giants, only one road remains. Everyone from former Fed chief Alan Greenspan to Senate Banking Committee chairman Chris Dodd is warning that the sole solution may be the once unthinkable one: nationalization.

How can it be that the banks are tottering after the government fortified them with hundreds of billions in bailout cash and guarantees on their troubled assets? For the past 18 months, the banks' problems with toxic securities, especially collateralized debt obligations (CDOs) and other exotic products that packaged subprime mortgages, attracted most of the attention - and alarm. Now the storm is entering an entirely new phase that's potentially even more dangerous: a historic meltdown in the bread-and-butter businesses of credit card, home-equity, and mortgage lending.

The scale of potential losses in consumer and business loans swamps what's left from the securities debacle by a factor of three or four to one. And the next wave, the looming defaults on commercial real estate loans financing the likes of half-leased retail malls, will soon cause a fresh round of pain. "We've now moved from the securities phase to the lending phase of the banking crisis," says Tanya Azarchs, a managing director in S&P's financial services ratings group. "For 2009 we expect that loan losses will be much worse than for 2008 and that securities write-downs will be much less."

***

Those looming losses make it inevitable that the government will shower the banks with more bailout billions - and get big ownership stakes in return. But that will fall far short of what most people think of as nationalization.

Speaking before Congress, Federal Reserve chairman Ben Bernanke said that nationalization means that the government takes 100% ownership, wipes out the shareholders, and runs the bank. "I don't think we want to do that," he said. He added that talk of nationalization misses the point. And he's right: The government already exerts tremendous influence over the industry, requiring banks that take federal money to limit compensation and modify mortgages, among other restrictions.

Moreover, the government seizes banks all the time. Since the beginning of 2008, the FDIC has shut down 39 insolvent institutions (leaving shareholders with nothing), reselling the branches, loans, and bad assets as quickly as possible. In the rare cases when it can't find a buyer, the FDIC will run the bank, as it is doing with Indy-Mac, which it took over in July. (A sale of Indy-Mac is now in the works.) And the agency is likely to be busy for some time to come: During the last banking crisis, from 1989 through 1992, it seized 1,368 banks.

The big banks, however, will get all the help they need to avoid that fate. The administration plans to put the 19 banks with assets of more than $100 billion through a rigorous financial analysis called a stress test. The banks will have to calculate their losses under severe conditions, including increased unemployment and continued home-price declines. The goal is to establish which institutions are so short of capital that they can't sustain current loan books, let alone expand credit.

Washington won't let those big banks fail: It will boost their capital by purchasing preferred stock that will pay a 9% dividend. If a bank has trouble paying the hefty dividend, it can convert the preferred shares into common stock. Hence, the weakest big banks may well end up with the government as their largest shareholder.

***

To understand the forces that will drive some banks into the arms of Uncle Sam, let's take a deep dive into their balance sheets. We'll concentrate on the four biggest U.S. institutions - Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Wells Fargo (WFC, Fortune 500) - because they hold almost half of U.S. consumer and business loans and account for most of the problem securities that haunt the industry.

First, let's examine the banks' securities portfolios. According to brokerage FBR Capital Markets, the four big banks hold almost $2 trillion in investment and trading securities such as collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and commercial and residential mortgage-backed securities - including the subprime paper that started the whole debacle. Accounting rules require the banks to mark almost all such assets to market-adjust their value according to prices brought by comparable securities in recent sales. But the markets for many of these assets are frozen, making it difficult or impossible to value them accurately.

That doesn't mean, however, that they are necessarily being carried on the banks' books for much more than they are worth, as is widely believed. In fact, banks have been marking the securities down for well over a year. According to Azarchs of the S&P, three types of debt are fairly valued or undervalued on banks' books: bundles of home loans backed by Fannie Mae (FNM, Fortune 500) and Freddie Mac, the notorious subprime CDOs that started the problem, and leveraged loans that shops like Blackstone (BX) and KKR used to finance buyout deals. The loans backed by Fannie and Freddie are essentially government guaranteed. Banks are carrying them at about 90 cents on the dollar, so they are fairly valued. The banks have marked down many subprime CDOs to 25 cents, and they are carrying the leveraged loans at around 75 cents. But Azarchs contends that a fair portion of those loans are producing income and will be paid back. "In both categories the potential losses in many cases, in my opinion, are a lot lower than their prices on the banks' books," she says.

Other securities are still overvalued: for example, mortgage-backed securities based on jumbo home loans, those too big to be guaranteed by Fannie and Freddie. Azarchs says that these securities at the four big banks are now marked at around 78 cents, probably an inflated number given the soaring mortgage default rates. Another area where the marks are too high is packages of commercial real estate loans. "Even if they're still paying full interest, many of the buildings backing them are worth a lot less than the loans," says Tom Barrack, CEO of Colony Capital, a private equity firm specializing in real estate. "They're really worth around 50 cents, and they're marked at 70 cents."

The banks also face losses on the insurance contracts they bought to protect against losses on many of these securities from monoline insurers such as Ambac and MBIA. Those insurers have run into trouble and seen their credit ratings cut, which forces the banks to take reserves against potentially uninsured losses, a trend that's bound to accelerate.

If the securities held by the banks do indeed contain plenty of bargains (alongside the overpriced merchandise), why aren't buyers lining up to take them off the banks' hands? The reason is threefold: First, buyers who have jumped in so far have been badly burned because of gyrating prices. In the fourth quarter, just when it looked as if once-toxic securities were raving bargains, prices collapsed as rates on everything from junk bonds to triple-A corporate debt exploded. Second, the buyers are financing their purchases with short-term loans, so they typically can't hold the assets until they mature. Instead, they're getting killed by margin calls from lenders. Third, potential buyers are sitting on the sidelines while Washington designs a plan for dealing with toxic assets that may give them a better deal.

The buyers' strike won't last. In early February the Treasury announced that it would provide up to $1 trillion in financing for private buyers to purchase illiquid assets. That program is bound to stir the vultures. A few investors are ready to pounce: "We see lots of fabulous bargains, with good assets often selling at 60 cents," says Michael Tennenbaum of Tennenbaum Capital Partners, an investment firm specializing in distressed debt. And Colony Capital has raised a $1 billion fund to purchase beaten-down bonds.

As more transactions occur, we'll get a better idea of how overvalued or undervalued various securities really are. According to estimates by FBR, the banks will end up writing down around 4.5% of their trading and investment portfolios, mostly over the next three years. For the big four, that would mean losses of $90 billion, or around $30 billion a year. That's a large number, but it's far less than the $150 billion the four (and the banks and firms they have acquired recently) have written down since late 2007.

***

Now let's examine the second, far more dangerous menace lurking in the loan portfolios. The big four hold $3.6 trillion in credit card, home-equity, mortgage, commercial real estate, and other consumer and business loans. Those loans are deteriorating with shocking speed: Default rates will soon surpass the worst of any recession in decades. Since mid-2007, for example, the charge-off rate for credit card loans has jumped from 3.8% to 7%. Overall, the four big banks suffered charge-offs of around 1% of their portfolios through the middle of 2007. For the fourth quarter of 2008 the figure jumped to 2.6%. And things are getting worse - delinquencies in all categories are rising. Star analyst Meredith Whitney predicts that credit card losses will climb above 10%, far higher than in any recent recession.

How high will the losses mount? FBR predicts the banks will eventually write off about 9% of their loan portfolios, with the vast bulk of losses coming in the next three years. That would hit the big four with around $300 billion - or $100 billion a year - in credit losses, more than three times the projected damage from their toxic securities.

And that explains the talk of nationalization. The challenge for the banks now is to earn enough money from normal operations that they can avoid taking additional government aid - which is not an impossible dream. Unless the U.S. falls into a near depression, it's likely that the majority will succeed. Among the big four, J.P. Morgan and Wells Fargo have the best prospects. They boast relatively strong capital ratios and are striving to stay ahead of the government by raising capital on their own. J.P. Morgan just announced a steep dividend cut that will save $5 billion annually and greatly strengthen its balance sheet. By concentrating on consumer banking, Wells Fargo mostly avoided the securities mess. It's likely to raise additional cash by selling the East Coast branches it inherited from its merger with Wachovia to concentrate on its powerful Western U.S. franchise.

And even BofA, saddled with the disastrous purchase of Merrill Lynch (see "Divorce - Bank of America Style"), could find a clear path out of the muck, although that's far from certain. The smart money is betting that Bank of America will soon launch a big asset sale, including Merrill Lynch's prime brokerage, which caters to hedge funds; reportedly, it has already put private bank First Republic on the block. That could give BofA sufficient capital to sidestep a bailout. Then the bank could rely on its powerful nationwide low-cost consumer franchise to rebuild its balance sheet. "Investors underestimated BofA," says Whitney. "BofA should be able to start building capital by the middle of 2009."

The true basket case among the biggest banks is Citigroup. Citigroup's core businesses in areas like credit cards, branch banking, and international corporate lending are so weak that it cannot generate enough revenue to compensate for the deluge of losses. That means its puny equity capital is destined to keep shrinking or disappear entirely. Citi executives are already asking Washington for additional aid in exchange for as much as 40% of Citi's common stock. And after the stress test, it will probably need more cash, making it all but certain that the government will end up with a majority stake.

How the government proceeds from there will say a lot about the future of the banking sector. The fear is that Washington will continue to prop up Citi and other wounded banks in their current form. The best course would be to force battered banks to sell enough assets to restore their financial health - if that's possible - or to dissolve. That would demonstrate that Washington is serious about reviving the industry - the one that is absolutely essential to the nation's economic recovery.

Source: Forune Magazine

Is The Euro At Risk?: A 'Newsweek' article

2009-03-25T13:29:00.002+05:00

Is The Euro At Risk?

Holger Schmieding

NEWSWEEK

From the magazine issue dated Mar 23, 2009

Is the death of the euro possible? As the global recession deepens, investors are certainly starting to worry that Europe's most ambitious integration project to date, the common currency shared by 16 sovereign nations, could break apart under the strains. The fact that the euro zone, far from decoupling from a U.S. recession, is now contracting at least as fast as the U.S. and the U.K. has added to the concerns. But the notion of a full-scale euro breakup looks vastly overblown.

The key reason the euro zone is not doing well is external, not homemade. Because companies around the world can slash their investment plans in times of uncertainty much faster than households can scale back their expenditures, the traditional exporters of top-quality machinery such as Germany are now suffering the brunt of the global downturn. This, in turn, weakens the euro. At some point, however, the worst of the global crisis will be over—with luck, sometime later this year. Once that happens, trading nations with a focus on investment goods, like Germany, should be able to recover lost ground.

The medium-term outlook for core Europe is still encouraging. German consumers had never joined in the credit-fueled party thrown by U.S. and U.K. consumers. While these consumers will probably need to restrain their consumption for years after the crisis, core continental Europe, as well as China and Japan, could enjoy an almost normal consumer upswing once the crisis is over.

Of course, we have to get to the medium term first. The global turmoil has hit the euro zone as a symmetric shock. All economies in the region are now contracting. In this sense, the euro area looks more and not less cohesive than it did a year ago, when regional real-estate booms were already turning to busts in some euro-member countries such as Spain, Greece and Ireland, while Germany was still enjoying strong export growth.

That said, markets are still shunning all kinds of perceived risks, and thus drawing a much clearer distinction between supposedly strong countries such as Germany and supposedly weak euro members such as Greece, Ireland, Italy and Spain, whose governments now have to pay much more than Germany to borrow on global capital markets.

This has led to speculation that some weaker nations might drop out of the euro, perhaps even solving funding problems the Zimbabwean way, by printing all the money the government wants in a new national currency. But Zimbabwe, which has taken this tactic to its extreme and is now reeling under hyperinflation and economic collapse, proves that this strategy doesn't work. Any country leaving the haven of the euro would risk devaluing its new national currency, and bond markets would demand very hefty risk premiums. These countries would thus find it much more expensive to borrow.

The occasional speculation in corners of the financial markets that a strong country like Germany might abandon the euro makes little sense either. Just imagine what would happen if Germany reintroduced its old Deutsche mark amid the current turmoil. Foreign-exchange markets would probably bid the independent German currency up quickly and strongly, further crippling the growth prospects of a country that exports half of what it produces. Given the extreme economic environment, a German currency might soar even more than in past crises.

The political logic also argues very strongly against a demise of the common currency. All member countries have invested a lot of political capital into the European venture. European leaders meet almost once a month to discuss a huge range of issues. If one country had to ask for urgent help in a particular financial crisis, it would be very difficult for its partners to refuse such a request. After all, that country's vote may soon be needed again in decisions on other matters.

Skeptics have expressed doubt that the euro zone has a pot of money large enough to bail out multiple European member states simultaneously. Yet there are various ways in which euro-zone members could help each other. For example, some European institution backed up by the member states may temporarily guarantee issues of new government bonds by a euro country in trouble. In a similar way, many national governments are already guaranteeing new bank bonds against a fee and for a limited number of years. A similar guarantee to another euro nation would give that member time to ride out the crisis and put its own house in order.

The bottom line: global investors have bigger things to worry about at the moment than a breakup of the euro zone. In the medium term, the crisis may even enhance the position of the euro. Many European countries outside the euro, like Poland and Hungary, are now suffering as their currencies are battered badly. They are trying to get as close as they can to the protective umbrella offered by the euro. The lesson for them is that they should work harder to qualify for Europe's most exclusive club. If they can meet the requirements, their entry will eventually strengthen the common currency.

Schmieding is chief European economist at Bank of AmericaMerrill Lynch.

Source: Newsweek

In search of clarity: Unravelling the complexities of executive decision-making

2009-03-21T09:17:00.006+05:00

In search of clarity: Unravelling the complexities of executive decision-making
A report from the Economist Intelligence Unit Sponsored by Business Objects

EXECUTIVE SUMMARY

Decision-making is at the core of all business activity, as executives set strategy and manage operations by weighing a vast array of factors to arrive at the desired balance of risk and reward. The enormous growth of companies’ size and operations in recent years—particularly across borders—is making this process increasingly complex. It is cause for alarm, then, that executives themselves perceive the quality of decision-making at their companies as mixed at best.
Well over half of executives surveyed for this report—61%—characterise management decision-
making at their companies as moderately efficient or worse, a figure which climbs to 72% for large organisations. Nearly one in five—rising to over one quarter in North America—thinks that management frequently gets its decisions wrong. This may result in part from the greater challenges of running a business in a period of rapid growth, such as many of the surveyed companies are experiencing, but it suggests deeper problems as well. This is the key finding of a major programme of research, conducted by the Economist Intelligence Unit and sponsored by Business Objects, into how senior executives in different regions make decisions for their companies. It is based on a survey of 154 senior executives from around the world, as well
as a series of in-depth interviews conducted with practitioners. Other major conclusions of the research include the following:
Poor data leads to poor decisions. By far the most important input into decision-making identified by surveyed executives is good data. As one expert interviewed for this report remarks, “You cannot make proper decisions without proper information.” But the timeliness and quality of this information leaves much to be desired. Less than one in ten executives
in the survey receive information when they need it, and 46% assert that wading through huge volumes of data impedes decision-making. Worse still, 56% are often concerned about making poor choices because of faulty, inaccurate or incomplete data.
Approaches to decision-making vary by region. There are distinct geographic differences among respondents when it comes to how they take decisions, and to their reliance on technology in doin so. For example, Asian executives appear more likely than those in other regions to trust their own intuitio and judgement, while Europeans look more strongly
to the opinions of their peers. Asian executives also make greater use of technology to support decision-making. Companies need to take these cultural differences into account as they seek to improve decision-making tools and processes. Detailed, uniform decision-making processes may be hard to apply across different cultures; broad frameworks describing missions and values may work better.
The challenge only increases as companies grow. Executives at smaller companies are more confident in the efficiency of their decision-making than peers at larger companies, more reliant on people over process, more consultative, and less worried about data overload. This is an advantage of being small. The ability to retain these qualities is an important management challenge for companies in a period of rapid growth.
Too much art, not enough science? Senior management decision-making at the majority of
surveyed companies (55%) is largely informal and unstructured, with executives consulting others largely on an ad hoc basis. Most executives seem comfortable with these arrangements: only 29% think poor decision-making structures are a common cause of bad choices. This reflects a view expressed by several interviewees that strategic decisions always require a strong element of intuition or judgement.
Nevertheless, there can be no doubt that better data and processes would take some of the guesswork out of decision-making. Common metrics and greater use of automated information tools such as dashboards would also help to support better quality decisions.
Decision support tools need to be easier to use. Executives believe that technology can play a key role in improving decision-making, by making it quicker and easier to access and organise large amounts of information. This is hugely important as companies become larger and more complex and as the volume of data available rises. At the moment, however, too many executives do not feel comfortable using dashboards and other IT tools that could sharpen
their decision-making. Companies therefore need to develop decision-making tools that are sufficiently reliable and user-friendly to appeal to even the less technology-savvy members of the management team and wider workforce.

Who took the survey?
A total of 154 executives from around the world took part in the Executive decision-making survey, conducted by the Economist Intelligence Unit. The survey sample was cosmopolitan: 40% of respondents hailed from Europe, 31% from North America and 23% from Asia-Pacific. It was also senior—50% of respondents were C-level executives such as CEOs, CFOs and CIOs or board members, with the rest consisting of heads of business units and other senior managers. The majority of organisations were large: 53% had annual revenue of over US$500m, and 25% earned more than US$5bn. The main industry sectors represented were manufacturing (16%), technology (16%) and financial services (14%). For more detail on the sample and results, see the Appendix to this report.

Source: Economist Intelligence Unit

Confessions of a Economic Pundit: A Newsweek Story

2009-03-18T17:48:00.004+05:00

Confessions Of A Pundit

Economic commentators may be insightful, but they're not neutral. Market forces shape their views.

By Zachary Karabell |

With the financial system in tatters and trillions of dollars of public financing at stake, economic experts have become a priestly caste. Every day, on air, online and in print, dozens of economists and strategists proclaim their views on how bad the crisis will get and how long it will last. But there's reason to be skeptical. Even though a fair number of these economic forecasters are informed and astute, they are not objective or neutral. I should know, because I've been one. And while I have always said what I believe, what I believe sometimes has been subtly shaped by who pays the bills.

Economic experts should be viewed much the way we treat politicians and corporate executives—or anybody else with something to sell. Howard Schultz, the CEO of Starbucks, recently made the rounds of television news programs to announce a plan to sell instant coffee. He talked at length about trends in coffee consumption and consumer tastes. No one disputes his knowledge of the industry, but we understand that he's in the business of selling coffee.

Many professional economists are employed by major investment firms. Some are on staff, while others have their own research firms that sell analysis to hedge funds, mutual-fund companies and pension-plan managers. They are rarely interested in abstract academic questions, but instead apply economic data to investing decisions, such as what effect rising unemployment will have on bond yields or stock prices. Yet they are often called on by the media to comment on precisely those questions.

Like Schultz, all of these experts have agendas—not pernicious, but still instrumental to how they view the world. For many years, I was the chief economist for an investment firm that focused on growth stocks. By nature, managers who invest in growth stocks focus on the potential upside. They look for companies who are on an upswing. In representing the company, I tended to emphasize the cup-half-full view of the world, which was both in sync with how I actually view the world and in harmony with the imperative of the organization to convey to current clients a level of confidence and to inspire new ones.

Now take an economist or strategist employed by a bearish manager or a bond manager. They are likely to look for companies that appear strong but are actually weak, or at the relationship between interest rates, inflation and government policy. They may look to the credit markets rather than the stock market for signals and may be more cautious, conservative or pessimistic.

Other experts are in the business of selling their research. Alan Greenspan made his reputation and career as a partner of Townsend-Greenspan, whose clients were a who's who of old Wall Street. Successful research firms can command substantial fees, and buyers demand clear, succinct and unequivocal analysis and predictions. Investors want "actionable" ideas, not vague academic musings. Greenspan presented himself as someone who saw what others do not; he offered his clients clarity, not ambiguity, and they paid well for it.

Being wrong in the past is not much of a liability as long as one is right in the present. Known as Dr. Doom, Nouriel Roubini is nothing if not unequivocal in his views. His firm, RGE Monitor, has seen demand for its offerings soar after Roubini's predictions of plunging home prices and systemic collapse were vindicated. The ubiquitous Mark Zandi, who sold his consultancy to Moody's and now serves as their chief economist, has been a steady voice about the need for massive stimulus, and as the Obama administration has enacted much of what he has been recommending, that in turn has amplified demand for his input.

Such input can be quite lucrative. Financial-services analyst Meredith Whitney has graced magazine covers for her acerbic and blunt evisceration of the banks she has covered. Several weeks ago, she left her well-paid post at Oppenheimer to start her own economic consultancy, where she will charge many of her former employer's clients for her own unambiguous analysis.

There may be "experts" who knowingly skew their analysis to serve their own bottom line. But I believe they are rare. The issue is less the integrity of those selling their wares than the market forces that choose them. When times are good and people feel confident, experts who support that view find more traction—and more demand—than those who don't. When times turn troubled, as they most certainly are now, those whose perspective rhymes with the prevailing gloom appear wiser than those who do not.

Prominent experts, therefore, are often simply those whose voices are in harmony with today's mood and who have an easier time selling their stories. That doesn't mean that the analysis is inherently flawed—only that it is inherently market-driven. So the next time you hear from an "expert" on the market or the economy, bear in mind that at day's end, he or she is more Howard Schultz than Delphic oracle.

Karabell is president of River Twice Research.

Source: NEWSWEEK, issue dated Mar 9, 2009

New digital library of Islamic manuscripts online

2009-03-18T16:16:00.004+05:00

New digital library of Islamic manuscripts online

Princeton University has placed a new digital library of 200 Islamic manuscripts online for scholars to consult and study.

These manuscripts were selected from some 9,500 volumes of Islamic manuscripts in Arabic, Persian, Ottoman Turkish and other languages of the Muslim world in the University Library's Department of Rare Books and Special Collections. Princeton's extraordinary holdings constitute the premier collection in the Western Hemisphere and among the finest in the world, according to Don Skemer, curator of manuscripts.

The digital library is a major component of the Islamic Manuscripts Cataloging and Digitization Project, begun in 2005 with the generous support of the David A. Gardner '69 Magic Project. Eventually, all of the manuscripts will be cataloged online, which involves creating bibliographic records containing basic descriptive information that helps researchers decide whether to order microform copies or to visit the library in person.

"The Islamic Manuscripts Cataloging and Digitization Project was conceived specifically as a way for the library to improve access to these rich collections and share them worldwide through digital technology," Skemer said. "It is hoped that the project will make a contribution to international understanding and serve as a gesture of good will to a critical part of the world."

Michael Cook, the Class of 1943 University Professor of Near Eastern Studies and one of the leading Islamicists in America, said, "Princeton has 9,500 Islamic manuscripts in Arabic and other languages in a location that is very convenient for scholars based in North America, but far less so for those based in the Islamic world or Europe. Most of the collection is described in printed catalogs, and scholars can always obtain microfilms of the manuscripts. But the printed catalogs are old and not available everywhere, while microfilms often provide images of poor quality. The online digital library thus marks a major advance in providing up-to-date descriptions of the manuscripts to anyone who can log onto the Web, and in making at least some of the manuscripts available online in fine-quality digital images."

The digital library includes this Arabic botanical manuscript from the 15th century that is from the Robert Garrett Collection donated to the University in 1942.

Approximately two-thirds of the manuscripts were donated to the University in 1942 by Robert Garrett, a member of Princeton's class of 1897. But the library has continued to build this collection since then.

The digitized manuscripts date from the early centuries of Islam until the fall of the Ottoman Empire. They originated in all parts of the Islamic world, from Moorish Spain and northern Africa in the West, through the Middle East, and to India and Indonesia in the East. Subject coverage is fairly encyclopedic, including history, biography, philosophy and logic, theology (based both on the Quran and tradition), law and jurisprudence, language, literature, book arts and illustration, magic and occult sciences, astrology, astronomy, mathematics, medicine, and other aspects of the spiritual and intellectual life of the Islamic world.

While the digital library emphasizes rare or unique texts of academic research interest, it also includes a selection of Persian illuminated manuscripts and Mughal miniatures, such as a magnificent 18th-century Indian album of miniatures and calligraphy.

Princeton expects to add more manuscripts to the digital library in the future, besides producing the online bibliographic descriptions.

Click here for access to the digitized manuscripts. From this webpage, click on "View the Digital Library" and select any of the 200 manuscripts, which are listed both alphabetically and by subject and genre.

For more information about the project, contact Skemer at dcskemer@princeton.edu.

Source: Indonesian Islamic Philology

Interesting Story - Map of Knowledge and more

2009-03-17T17:08:00.004+05:00

A new map of knowledge has been assembled by scientists at the research library of the Los Alamos National Laboratory. It is based on electronic data searches in which users moved from one journal to another, thus establishing associations between them.

The map includes both the sciences and the humanities in a hub and wheel arrangement, with the humanities at the center and the sciences arrayed around them. The arrangement fell out naturally from the data and is not contrived, said Johan Bollen, the leader of the research team.

In the map, published in the current issue of PLoS One, the journals are color-coded as follows: physics, light purple; chemistry, blue; biology, green; medicine, red; social sciences, yellow; humanities, white; mathematics, purple; and engineering, pink. The interconnecting lines reflect the probability that a reader will click from one journal to another on the computer screen.

Similar maps have long been constructed on the basis of footnotes in one journal’s articles that refer to articles in other journals. Dr. Bollen believes that his electronic click map better represents scholars’ behavior than does citation analysis, as the footnote method is called.

One reason is that footnotes are often added for a variety of social reasons, like to flatter possible reviewers, improve one’s own citation count or impress colleagues with one’s breadth of reading. The clicks represent scholars’ actual use of information. Also, the clicks capture access to an article to use it for practical purposes, rather than just following citations, Dr. Bollen said.

A reader may click from one journal to another based on many other kinds of links besides citations, like a text search or an e-mail message, Dr. Bollen said.

“What we have is a map of worldwide scientific activity,” Dr. Bollen said. He plans to make his data publicly available so scholars can assess the impact of their or others’ articles and the degree of influence of scientific journals.

Source: The New York Times

Beat the Block

2009-03-16T17:48:00.003+05:00

In their book Yes, You Can! 1200 Inspiring Ideas for Work, Home and Happiness, (Reading, MA: Perseus Books, 1996), 101, Sam Deep and Lyle Sussman acknowledge that, "Getting started may be the most difficult task when you sit down to write."

They offer these nine practical tips to help you "Overcome writer's block":

•	Ask yourself why you are writing this report, letter, or chapter. What do you want the reader to do or think about as a result of reading your work? As soon as you have the answer to this question, take a crack at an opening.
•	Skim paragraphs in a magazine, newspaper, or book for an inspiring literary device.
•	Set aside a half hour each day for writing as a means of reducing the overall intimidation factor.
•	Write first drafts freely and quickly with little concern for punctuation, spelling, neatness, or grammar.
•	Construct a storyboard. As ideas about your project come to you, jot them down on 3 × 5 cards and tack them on a wall. As you begin to see relationships among the cards, change their positions. As soon as the shape of your approach becomes clear, start writing.
•	Talk about your project with a friend or into a tape recorder. The more you talk, the more the ideas in your head will arrange themselves into a pattern in your mind's eye.
•	Place "who," "what," "where," "when," "why," and "how" down the left margin of a page, spaced about an inch apart. Write in the answers; then rearrange them into an outline you can work from.
•	Don't try to compose the introduction until the rest of the piece is written.
•	Write the conclusion first; then work on getting there.

Source: Yes, You Can!1200 Inspiring Ideas for Work, Home and Happiness;by Sam Deep, Lyle Sussman; Perseus Books (Current Publisher: Perseus Publishing), 1996. 270 pgs.

Reduce the Pain of ERP Upgrades With Better Planning: Executive Summary

2009-03-14T16:41:00.003+05:00

Reduce the Pain of ERP Upgrades With Better Planning
by Jim Shepherd
The key to minimizing the pain of ERP upgrades is to have both a long-term ERP
lifecycle strategy and a comprehensive tactical plan for the actual upgrade project.
In many organizations, the ERP system has become the application
support for the majority of business processes and the repository for
the corporation’s most sensitive data. As these systems become more
important and pervasive, there are often conflicting opinions about
how they should be maintained and updated. This is no longer a technical decision that
can be made by the IT department or dictated by the software vendor’s release schedule.
ERP upgrades are now important enough that senior management needs to fully understand
both the timing and project plan.
This Report offers guidance on developing an overall corporate strategy for maintaining
an ERP system by providing practical advice for planning and managing an ERP
upgrade project. Here are some of the areas that will be addressed:

• Why companies should periodically upgrade their ERP systems
• Defining the strategy and timing for ERP upgrades
• Consensus building and communicating the ERP strategy
• How to justify the cost and resources required for an ERP upgrade
• Creating a project plan for a successful upgrade
• Organization and governance options
• Resources, services, and tools available for upgrades

It is vital that the company develops a strategy for how often the software and underlying
technology will be updated so that the entire organization can plan and budget for the
inevitable costs and disruptions. Because upgrades are periodic events, it is also important
to create a repeatable process as well as a set of tools and skills to ensure the projects can
be executed efficiently while minimizing any risk to the organization.
Source: http://erp.ittoolbox.com/research/reduce-the-pain-of-erp-upgrades-with-better-planning-19365

Executive Summaries. Harvard Business Review, Mar 2009, Vol. 87, Issue 3

2009-03-11T18:35:00.001+05:00

MARCH 2009

|MARKETING|

COVER STORY

48 | In a Downturn, Provoke Your Customers

Philip Lay, Todd Hewlin, and Geoffrey Moore

Even as discretionary budgets are drying up, some B2B vendors have found a way to reach their customers' resource owners and motivate them to buy. They do this by identifying a thorny issue in the customer's company or industry and developing an original, compelling point of view about it. They pitch this point of view to a carefully chosen line executive in one crucial meeting and then prove its worth with a short diagnostic study. This is the essence of what the authors, all managing directors at TCG Advisors, call provocation-based selling.

Sybase, a data management and mobility company, was successful with this approach in the summer of 2008, as it tried to pry business out of financial services clients that were severely cutting their operating costs. Instead of probing for what those clients thought they might need, Sybase salespeople pointed out what they should be worried about: an industrywide failure to manage risk comprehensively. By revealing the scale of the threat and the opportunity, Sybase was able to sell its Risk Analytics Platform, a new tool for integrating risk management.

Provocation-based selling doesn't align with the customer's outlook; it provides a new angle on the situation. It doesn't identify and respond to the customer's "pain points"; it outlines a problem the customer hasn't yet put a name to. Framing a provocation creates a readiness to listen, and a diagnostic study converts the dialogue into a contract. The provocation-based sales cycle is resource intensive but appreciably shorter than that for solution-based selling -- and it leads to significant business opportunities.

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|IDEAS & TRENDS|

FORETHOUGHT

22 | When Economic Incentives Backfire

Samuel Bowles

Economic incentives become counterproductive when they undermine what Adam Smith called "the moral sentiments," such as the desire to be esteemed by others and to be viewed as ethical and dignified. Organizational and social policy makers, take note. Reprint F0903A

Another Challenge to China's Growth

Antonio Fatás and Ilian Mihov

Below $10,000 per capita, a country's income can grow even in the absence of good institutions. But at higher income levels, as China will soon discover, institutional quality starts to matter quite a lot. Reprint F0903B

Ethnographic Research: A Key to Strategy

Ken Anderson

Unlike traditional market researchers, who use highly targeted questions to extract information from customers, corporate ethnographers observe and listen in a nondirected way. Their method may appear inefficient, but it can yield rich data about product use. Reprint F0903C

Learning from Heroes

Jack Covert and Todd Sattersten

The best business books from the past 30 years offer simple yet profound advice for overcoming five recurring challenges. The lessons are strikingly similar to those learned by the heroes of mythology and popular culture. Reprint F0903D

Firms Still Willing to Pay Dearly for Talent

John T. Landry

Past economic crises curbed executive compensation -- but only temporarily. Companies continue to shell out hefty sums, even when performance is poor. Reprint F0903E

Performance Incentives for Tough Times

Timothy R. Hinkin and Chester A. Schriesheim

When there's limited cash for financial rewards, praise becomes an acutely valuable management tool. Through careful positive feedback, you can induce employees to chain several good efforts together into a pattern of excellence. Reprint F0903F

The Truths About IT Costs

Susan Cramm

Executives need to face seven truths about the waste in their IT budgets. Here they are, along with some strategies for managing each one. Reprint F0903G

Innovation Lessons from Genes

Todd Golub

If your innovation efforts need a shot in the arm, try emulating the medical researchers who seek cures for diseases by examining cells for unexpected commonalities. You might find answers to some of your most confounding business problems by looking for relationships among wildly different products or solutions. Reprint F0903H

A Conversation with Julia A. Stewart

The chairman and CEO of DineEquity, the restaurant company that owns the Applebee's and IHOP brands, says the key to managing for performance across more than 3,300 sites is to turn the workplace into a classroom. "When employees feel like they're learning," she says, "they become more enthusiastic about their work, and that shows through to the customer in a hundred different ways." Reprint F0903J

Reviews

Featuring Choose and Focus: Japanese Business Strategies for the 21st Century, by Ulrike Schaede
|HUMAN RESOURCES|

HBR CASE STUDY

33 | The Layoff

Bronwyn Fryer

Astrigo is in trouble. The home improvement chain has missed its earnings forecast badly and sales are falling. A 10% reduction in staff looks like the only choice. Layoffs, however, would undermine the retailer's longtime commitment to employees and the ability to provide its famed customer service. But tapping cash reserved for strategic acquisitions goes against the firm's values, too. What should the CEO do?

Board advisers Laurence J. Stybel and Maryanne Peabody, of Stybel Peabody Lincolnshire, suggest that the company borrow a page from McDonald's and declare Astrigo's intention to focus on the interests of long-term shareholders. This move would establish a framework that would help management make tactical decisions with more clarity and flexibility. The company could then use its cash to buy a little time to study the options. If Astrigo can't avoid layoffs, a last-in, first-out approach would be the least costly.

Former CEO Jürgen Dormann understands the challenge Astrigo faces. When he took over ABB, the company was in deep distress. After shaking up his executive committee, Dormann personally reached out to all 180,000 employees to enlist their help. They came back with ideas that saved $1.6 billion -- and rescued the company.

Management professor Robert I. Sutton thinks too many executives assume that layoffs are the best way to reduce costs. They don't factor in how long it takes to realize the savings from job cuts, the costs to hire and train people once business picks up, or the damage to morale and productivity. Astrigo's executives should consider alternatives such as pay cuts, reduced benefits, unpaid time off, and incentives for departure. If layoffs are inevitable, Astrigo should do them quickly, and firing the bottom 10% of employees would be the worst approach.

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|LEADERSHIP|

FIRST PERSON

43 | The Greening of Petrobras

José Sergio Gabrielli de Azevedo

Over the past eight years Brazilian energy giant Petrobras has transformed itself from a notorious environmental offender into a global leader in sustainability. In this article the CEO, a onetime leftist activist who believes business should drive social improvement, describes how the company turned itself around.

When Gabrielli took the reins, Petrobras was coming out of a tumultuous period. The state-owned monopoly had become a publicly traded corporation competing in an open market, and its operations were expanding rapidly. During this time a series of disastrous oil spills and accidents took place. In response, Philippe Reichstul, one of Gabrielli's predecessors, launched a $4 billion program for environmental and operational safety, comprising more than 4,000 projects.

Under Gabrielli's stewardship, the company approached environmental performance issues in three ways: improving its own culture and operations, influencing its suppliers, and championing renewable-energy development. At the center of its strategy is a program built on a set of requirements for performance in 15 areas. Among them is the stipulation that Petrobras's managers lead by example. Environmental policy is a boardroom consideration, and the company's top managers visibly demonstrate their commitment by joining the teams that go out into the field to audit health, environmental, and safety compliance.

Promoting environmentally sound behavior outside the company is another key requirement. To this end, Petrobras is pitting the firm's thousands of Brazilian suppliers against one another in a battle to see who's greenest. The company has devised a system to measure and monitor their environmental performance -- and awards contracts to the high scorers. It has also set its sights on becoming a world leader in biofuel, building a huge R&D network that stretches across Brazil and around the globe.

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|OPERATIONS|

58 | When Should a Process Be Art, Not Science?

Joseph M. Hall and M. Eric Johnson

Managers have gone overboard with process standardization. Many processes -- such as leadership training or auditing -- are more art than science. Imposing rigid rules on them squashes innovation, reduces accountability, and harms performance. Tuck professors Hall and Johnson advise companies to rescue artistic processes from the tide of standardization with a three-step approach.

1. Identify what should and shouldn't be art. Companies need art in variable environments (if, say, raw materials aren't uniform) and when customers value distinctive output. If those two conditions aren't present, mass processes (which eliminate variation) or mass customization (which controls it) will be required. Steinway & Sons, for instance, uses artistic processes to make concert pianos. Not only does the wood used in soundboards differ, but professional musicians appreciate the instruments' unique "personalities." Ritz-Carlton adopted an artistic approach to service after discovering that tightly defined procedures weren't meeting the needs of its diverse customer base. Once employees were allowed to improvise, customer satisfaction improved.
2. Develop an infrastructure to support art. Artists require proper training and metrics that help them maximize value for customers (such as continual customer feedback). Scientific processes can provide a stable platform for artists to work upon, but art and science should never be intertwined. Firms also must institute ways to mitigate failures, which are inevitable with variation.
3. Periodically reevaluate the division between art and science. Managers must ask: What new technologies can make a science of art? Do my customers value variation? How do the costs and opportunities of art and science stack up?

Art and science both have important roles to play in business processes. They need not be at odds but must be carefully harmonized.

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|STRATEGY & COMPETITION|

66 | Value-for-Money Strategies for Recessionary Times

Peter J. Williamson and Ming Zeng

In tough economic times, some companies have outmaneuvered rivals to become market leaders through value-for-money strategies. That is, they have enabled recession-hit consumers to economize (do less and spend less), become more efficient (do the same for less), or become more effective (do more but spend no more).

To implement such a strategy, argue this British professor and Chinese academic, companies must go beyond refining cost-cutting capabilities to develop expertise in cost innovation. That may not be good news for many U.S., European, and Japanese corporations, because multinationals from emerging markets, which have long experience with value-conscious customers, have already built cost-innovation capabilities that are unlocking mass markets in both developing -- and developed -- countries.

Some, like battery maker BYD, have learned to sell high-tech products profitably at mass-market prices through a combination of lower labor costs and manufacturing innovations. Others, like drinks purveyor United Spirits, have dominated industries by blanketing sizable niches in their home markets with a full range of products or customized options. And still others, like appliance manufacturer Haier, have used low-price offerings to turn small, unguarded niches into mass markets in developed countries.

In response, the authors argue, Western companies should turn to developing countries for vital lessons in lowering the cost of building brands and developing and manufacturing products. They should enter into alliances with emerging giants to gain cost-innovation capabilities. And they should use their superior financial strength to beat emerging giants at their own game of growing mass markets in developing countries.

Multinationals that fail to learn from emerging rivals are unlikely to weather the recession well -- or stay competitive for very long.

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|HUMAN RESOURCES|

76 | Making Mobility Matter

Haig R. Nalbantian and Richard A. Guzzo

Rotate up-and-comers through various functions, business units, and locations, conventional wisdom suggests, and you'll give them a chance to round out their skills and prepare for general management. However, mobility as a leadership development strategy can go wrong in many ways. It can disrupt operations and undermine accountability, demoralize managers who don't get to change roles, and cost a lot to implement. Perhaps worst of all, it can become an end in itself, causing other strategic and operational aims to get lost in the shuffle.

Mobility can be an excellent development tool when companies use it wisely -- as Marriott International, Corning, and United Health Group have done. The authors cite these successes and several failures, and offer a framework for solving the mobility equation in a way that's right for your organization.

Developing an appropriate mobility strategy entails answering three questions: What kind of mobility? Mobility for whom? And how much mobility? Your answers will depend on your company's circumstances and overarching objectives. For instance, to figure out what kind, you'll need to consider that changing a manager's function within a unit may help that person acquire the knowledge and skills to run that unit one day, whereas switching someone to a different unit may help develop broader leadership capabilities. To decide for whom, you can try "sponsored mobility," which means directing investments toward a chosen few individuals; "contest mobility," which means opening up opportunities to many; or a combination of the two. The approach you choose will depend partly on how robust a system you already have for identifying and retaining high potentials. Finally, to determine how much, you'll need a solid fix on which areas of the enterprise require the developmental benefits of mobility. Targeted analysis will show the likely impact on retention, promotions over time, and operational efficiency.

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|RISK MANAGEMENT|

86 | Six Ways Companies Mismanage Risk

René M. Stulz

Financial risk management is hard to get right even in the best of times. It can take one of six paths to failure, nearly all of them exemplified in the current crisis.

Relying on historical data. A risk manager who assessed real estate risk on the basis of statistics from the past three decades would have been sorely unprepared for the volatility of house prices in 2007.

Focusing on narrow measures. A daily Value-at-Risk (VaR) measure is commonly used for securities trading. But a daily measure assumes that assets can be sold quickly or hedged, so it doesn't apply to portfolios with which the firm may be temporarily stuck.

Overlooking knowable risks. Risk managers often distinguish among market, credit, and operational risks, which they measure differently and in isolation rather than cross-organizationally. They may also fail to assess new risks embedded in the instruments they use for risk mitigation.

Overlooking concealed risks. Risk takers may deliberately hide their risks, as happened at the French bank Société Générale in 2007. Or they may underreport them when their trading positions are complex and short-lived.

Failing to communicate. Sometimes even the most scrupulous risk manager cannot clearly explain a state-of-the-art system to the CEO and the board. In such a case, their confidence in the system's capabilities may be unwarranted.

Not managing in real time. It is difficult to hedge trading positions when their risk characteristics can change completely within a single day -- as can happen, say, with barrier calls.

The author advises practicing sustainable risk management: Never mind that catastrophic risks have extremely small probabilities; build scenarios for them and design strategies for surviving them anyway.

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|STRATEGY & COMPETITION|

TOOL KIT

101 | Option Games: The Key to Competing in Capital-Intensive Industries

Nelson Ferreira, Jayanti Kar, and Lenos Trigeorgis

All companies making big-budget investment decisions face the same basic dilemma: On the one hand, they must make timely, strategic investments to prevent rivals from gaining ground. On the other, they must avoid tying up too much cash in risky projects, especially during times of market uncertainty. The traditional valuation methods -- namely, discounted cash flow and real options -- fall short in resolving this dilemma. Neither one, on its own, properly incorporates the impact of demand and price volatility in an industry while also taking into account additional investments that the firm and its competitors may make.

In this article, Nelson Ferreira, an associate principal at McKinsey & Company in São Paulo; Jayanti Kar, an associate at McKinsey & Company in Toronto; and Lenos Trigeorgis, a professor of finance at the University of Cyprus and the president of the Real Options Group, present a valuation tool that overcomes the shortfalls of those analytic approaches. The tool, called option games, combines real options (which predict the evolution of prices and demand) and game theory (which captures competitors' moves) to quantify the value of both flexibility and commitment, allowing managers to make rational choices between alternative investment strategies. Option games will be of particular value to companies facing high-stakes decisions, such as those involving millions of dollars in capital investment, in a volatile environment in which their moves and those of their competitors clearly affect each other.

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|INNOVATION & CREATIVITY|

BIG PICTURE

109 | Tapping the World's Innovation Hot Spots

John Kao

Countries around the world are putting innovation at the top of their agendas. As a result, companies now have access to a global market for talent, capital, tax credits, and regulatory relief. Before setting up a research laboratory or a marketing office in one of the world's innovation hot spots, organizations must consider which of the emerging innovation models best suit their requirements. An astute company can also blend elements of each model in a systems integration approach.

In the focused factory model, countries concentrate their resources. Singapore, for instance, plans to increase funding for R&D in life sciences, clean technology, and digital media, and to provide benefits such as tax relief to attract companies interested in conducting research in those areas. GlaxoSmithKline and Novartis have already begun doing so at the biomedical research center Biopolis.

Countries adopting the brute force model hope to generate innovations by marshaling massive amounts of labor and capital. China, for example, is increasing funding for 10 universities in order to produce many specialists in every area of science and technology.

The goal of the Hollyworld model is to create the right environment for innovation by assembling a critical mass of skilled individuals. India, for example, is partnering the best graduates of its universities with Indians who have trained at educational institutions in the West.

Several countries have developed large-scale ecosystems combining funding bodies, research institutions, and business and academic collaboration. Finland's innovation system, for instance, is bolstered by strong governmental stewardship and the involvement of public and private players. Aalto University, scheduled to open in the autumn of 2009, will exemplify the country's holistic approach.

Source: Harvard Business Review

Value-for-Money Strategies for Recessionary Times - an article from Harvard Business Review

2009-03-11T18:04:00.004+05:00

Value-for-Money Strategies for Recessionary Times

Lessons Western businesses must learn from emerging-market companies to succeed -- at home and abroad

NO ONE NEEDS CONVINCING that the economic situation we're facing today is almost unprecedented. Yet much of the advice that executives have received is remarkably similar to what they heard during the recession in 2000. Particularly in Western enterprises, the preferred antidotes seem to be standard ones: Evaluate your risks, develop contingency plans, focus on your core, reduce costs, expect the unexpected, and so on. The unspoken objective appears to be to survive or, at most, to maintain market share.

Like many orthodoxies, however, this will not serve companies well today. The world has changed so much because of, among other reasons, deregulation, lowering of trade barriers, rapid technological advances, demographic shifts, and greater urbanization, that strategies that worked a decade ago are unlikely to do so anymore. Previously, downturns oft en favored incumbents, which possess economies of scale and customer relationships that allowed them to prevail over upstarts. What's different now is that companies from several emerging markets are poised to wrest market share from, or even take over, Western firms. What's more, recessions can alter industry dynamics. Studies conducted by both McKinsey & Company and Boston Consulting Group show that around a third of the companies in the first quartile of their industries tumbled from their perches during the 2000 slowdown. Only 10% of them had clawed back five years later, while 15% of today's market leaders vaulted to the top during that recession.

Smart companies perceive not just threats in a recession but also opportunities. Their goal is to grow so they can emerge stronger from the downturn. In fact, during the Great Depression of the 1930s, companies like General Electric, Kellogg, and Procter & Gamble outmaneuvered rivals to become leaders. They turned adversity into advantage in different ways, but a quick analysis reveals one common thread: During the Depression, these companies developed value-for-money strategies: They grew by delivering products and services that enabled hard-hit consumers to do more with the same resources and become more effective; to do the same with fewer resources, thereby improving their efficiency; or to do less with far fewer resources, which helped them economize.

Value for money has again become a strategic imperative -- and not just because of the recession. Even before the slowdown began, there were signs that it ought to be a major consideration for companies. In developed countries, increases in household income over the past decade have favored the top 20% of earners, while the spending power of most families has stagnated or declined. Many people in the United States, for instance, have found it difficult to maintain their standard of living after paying for such necessities as their mortgage, transport, utilities, and health care without borrowing money. More recently, small salary increases and the steady drumbeat of job losses have turned many consumers into value shoppers, as they tighten their belts.

Unsurprisingly, Wal-Mart has been gaining share from premium retailers, and apart from luxury cars, only sales of small or fuel-efficient vehicles have been growing over the past five years. In Western Europe, according to a recent Credit Suisse study, the market share of value-priced store brands rose by two percentage points in 2007 while that of premium labels fell by the same amount.

In developing countries, consumers are traditionally value conscious. Many have entered the consuming class recently and have limited disposable income. For instance, Credit Suisse projects that the number of Chinese households whose income exceeds their basic needs will rise from around 55 million in 2008 to 212 million by 2013. However, many of them will earn only a little over $5,000 a year. By 2020 in India, the market research firm Information Resources predicts, 5% of the population will be part of households that earn more than $4,000 per annum, but they, too, are unlikely to have much excess income. Meanwhile, upper- and middle-class consumers in both countries must stretch limited earnings to cope with rising aspirations and inflation. Business buyers in developing countries depend on low costs to gain competitive advantage, so they always look for value when purchasing equipment and services.

In both the developed and the developing world, therefore, delivering value for money has become critical. What capabilities must companies possess to thrive in this environment? Our research suggests that instead of refining cost-cutting techniques, companies should develop cost-innovation capabilities. They must learn to reengineer their cost structures in novel ways so they can offer customers dramatically more for less. That may not be good news for many U.S., European, and Japanese corporations, which have usually dealt with low-cost competitors by going upmarket and creating premium segments, both at home and abroad. Because smart emerging-market companies have built cost-innovation capabilities to unlock mass markets, that's no longer a viable strategy. Unless multinational companies learn from emerging rivals and, in some cases, from their own overseas operations, they are unlikely to weather the recession well -- or stay competitive for very long.

Three Dimensions of Cost Innovation

Innovation is traditionally associated with developing new products and services or with adding more functionality and features to existing ones. In both cases, companies expect customers to pay a premium. The idea of innovating to develop offerings that provide greater, or almost the same, functionality but at a lower price is unconventional. Some executives may regard it as silly: Why invest in research to sell products for less than the prevailing price? However, smart companies in emerging markets have done just that to appeal to the great mass of value-conscious customers at home.

The first wave of emerging giants offered low-cost products and services primarily by utilizing relatively inexpensive personnel, but the second generation has developed an additional competitive edge through cost innovation. This capability will not only stand those companies in good stead at home during the present downturn but also enable them to break into value-for-money segments in developed markets.

Cost-innovation strategies are disruptive in that they result in products or services that look inferior in some ways to existing ones but are more affordable and easier to use than incumbents' offerings. As we shall see next, they oft en render obsolete the market leaders' assets, capabilities, and experience by changing the rules of the game, by undermining traditional profit models, or by growing those parts of the market that incumbents are ill equipped to serve.

Emerging giants have developed the ability to deliver cost innovation in one or more of three ways:

Selling high-tech products at mass-market prices. Companies oft en apply the latest technology only to the most complex applications or sell it to early adopters. By restricting a state-of-the-art technology to a few segments initially and transferring it to mainstream markets over time, they capture the maximum value throughout its life and enhance the return on their investment in research and development. However, some newcomers from developing countries have found ways to offer the latest technology to mass-market customers at low prices.

By rewriting the value-for-money equation in the battery market, for instance, China's BYD has become a global market leader. Lithium-ion cells allow battery-powered devices -- be they cell phones or electric cars -- to work longer. When BYD entered the industry in 1995, four Japanese companies controlled the market, and they sold the batteries, which were expensive, to power only high-end products. Instead of trying to improve their performance, BYD focused on replacing the most expensive raw materials used to make lithium-ion cells with cheaper substitutes. It also learned to produce them at ambient temperature and humidity, which made it unnecessary to construct expensive "dry rooms" in plants. The company was able to reduce the manufacturing costs of the batteries from $40 apiece to just $12, making them competitive with lower-performance nickel-cadmium batteries. As BYD developed lithium-ion cells for more segments, costs continued to fall, and by 2007 its lithium-ion products enjoyed a 75% share of the batteries used in cordless phones, 38% of those used in toys, 30% in power tools, and 28% in mobile phones. Despite its low costs, BYD has never recalled products, whereas Sanyo and Sony had to do so after their lithium-ion batteries exploded in laptops.

Indian companies have also tried to take the latest technology to mass markets. For instance, the REVA Electric Car Company (RECC) developed its all-electric car for the middle of the Indian automobile market. Set up in 1994 as a joint venture between the Bangalore-based Maini Group and California's AEV, the company launched the REVA (short for Revolutionary Electric Vehicle Alternative) in June 2001. A small hatchback with a maximum speed of 50 miles per hour, it can run for about 50 miles in city-driving conditions when fully charged, at an operating cost of little more than one cent per mile. The REVA is available in several European countries including the UK, where it sells as the G-Wiz for around £8,000, and it is being test-marketed in the United States. It will compete with, among others, the Chevrolet Volt, the electric-gasoline-ethanol hybrid that GM plans to launch in late 2010. The larger Volt will run about 40 miles after a single charge before switching to a gasoline or ethanol engine. However, GM plans to sell it for between $30,000 and $40,000 in the U.S. -- more than twice as much as the REVA costs in Britain. Although RECC has been slow to scale up, the REVA's low price and inexpensive running costs could spur sales as the recession intensifies.

Some emerging giants are disrupting high-tech markets by taking a second look at less-sophisticated technologies. A Chinese company, Zhongxing Medical, transformed the medical equipment business by focusing on direct digital radiography in a novel way. DDR transforms an X-ray scan into a digital signal that a computer can analyze, bypassing the traditional chemical process. There are two types of DDR systems: linescan machines, which work best for standard procedures such as chest scans, and flat-panel imaging systems, which are ideal for sophisticated applications like heart scans.

General Electric and Philips have focused on developing flat-panel machines, which each carry a price tag of between $300,000 and $400,000 and offer the largest profit potential. Meanwhile, Zhongxing Medical's parent, China Aerospace, which bought line-scanning technology from the Russian Academy of Sciences in 1998, developed a DDR machine that was adequate for most hospitals' routine, high-volume radiography needs. It costs only around $20,000 to build, as compared with $150,000 to $200,000 for a flat-panel system. When Zhongxing Medical launched its DDR machine in 1999, it sold well because a large number of second- and third-tier Chinese hospitals could afford it on their limited budgets. Facing loss of market share, GE and Philips cut prices on their flat-panel machines by $100,000 to $150,000. Even so, Zhongxing Medical has a 50% share of the Chinese market today, GE competes at half the price it charged a decade ago, and Philips has withdrawn its line from the country. What's more, by investing its profits, the Chinese company has improved the performance of line-scanning devices, reducing scanning time from 10 seconds to two and making the process more comfortable for patients. Thus, the high-end profit pool that its multinational rivals rely on at home may come under threat soon.

Offering choice and customization to value customers. Customers usually have to pay heft y premiums if they want a large selection of products or customized offerings. That's because most companies in developed countries, which focus on gaining economies of scale, fear that if they offer a plethora of choices, their operations will spiral out of control. They will spend additional time making changeovers on manufacturing lines and lose money from write-offs on obsolete inventory. But companies in emerging markets have been able to transform the rules of variety and customization by learning to gain economies of scope. First, relatively low human resource costs allow them to hire large staffs to develop customized designs and handle changeovers. Second, they mix automated processes, to deliver quality, with human intervention, to gain flexibility. Third, niche markets are far larger in China and India than in the West, enabling companies to economically support a wide variety of offerings.

The best known example is China's Goodbaby, which sells customers 1,600 kinds of children's strollers, car seats, bassinets, baby walkers, playpens, high chairs, tricycles, and bicycles -- four times more than its rivals offer but at comparable prices. The Shanghai-based company has a product that meets practically every need, from strollers that can handle uneven surfaces to those that fold away with two simple movements. It covers the entire price spectrum, selling the Rolls-Royce of strollers for $600, as well as inexpensive ones that retail for $30. One of its first products was a stroller that could be converted to a child's car seat, enabling cash-strapped parents to do two jobs for the price of one. A $400 million company, Goodbaby can do this, in part, because it invests 4% of its annual revenues in research -- twice the average for the toy industry worldwide. It employs 220 designers at R&D centers in China, Germany, France, the UK, the U.S., and Japan, and it comes up, on average, with two new products a day. By 2008, Goodbaby controlled 80% of the Chinese stroller market and 25% of the U.S. market.

Variety helps some companies in emerging markets retain their leadership. India's United Spirits, for instance, is the country's largest marketer of alcoholic beverages and one of the largest in the world. This $1 billion company offers consumers 140 brands of such spirits as whiskey, rum, gin, and vodka, as well as several types of beer and wine, managing as many as 151 brand variants and almost 3,000 SKUs. The company attracts buyers from most socioeconomic strata because it offers products at just about every conceivable price point. That's a lesson that the Indian tobacco giant ITC, too, has taken to heart. In the early 2000s, the $5 billion company diversified into the ready-to-eat foods market and the grocery business, selling staples such as flour and spices, confectionery products, and snacks. It also entered the personal care products business, offering fragrances, soaps, shampoos, conditioners, shower gels, and deodorants. In both lines of business, ITC presents customers with a larger choice of products than most of its multinational rivals do. This has also enabled the company to get prime display space in India's small retail outlets and crowd rivals off the shelves.

Both variety and customization have been instrumental to the success of Shanghai Zhenhua Port Machinery (ZPMC), which controls 54% of the global market for harbor cranes. Tapping into China's low-cost pool of technical personnel, it employs around 800 design engineers. Instead of experimenting with breakthrough technologies or developing sophisticated functionality, these engineers focus on customizing standard designs. Every port's layout and mix of operations is different, so ZPMC meets customers' requirements by offering them a large choice of models and by customizing solutions quickly, which gives it an edge over rivals.

Turning premium niches into mass markets. Most companies define a niche market as one that consists of relatively few customers willing to pay premium prices for goods and services that meet their specialized requirements. They don't check to see if there may be a wellspring of latent demand choked off by high prices and poor value-for-money offerings. Smart companies from emerging markets -- such as China's Haier, which has captured 60% of the U.S. market for electric wine refrigerators in less than a decade -- have succeeded by tapping into that demand and turning niches into volume markets.

A niche can blossom into a surprisingly large value segment. In 2002, Shinco, the largest manufacturer of DVD players in China, wished to enter the global market. It didn't want to challenge Sony, Panasonic, and Samsung head-on, so it chose to focus on the portable DVD player segment first. Shinco found this niche attractive for three reasons: One, the price of portable DVD players was high relative to tabletop players, which gave Shinco room to increase the value customers would get. Two, the demand for portable players was latent Value-for-Money Strategies for Recessionary Times 72 Harvard Business Review | March 2009 | hbr.org because the prevailing high prices were putting buyers off. Three, Shinco could leverage an error-correction technology it had developed for handling pirated DVDs to compensate for the jumps that occurred when people used its players on cars or trains. Within months, Shinco launched a portable DVD player that was 30% to 50% cheaper than competing products. According to one estimate, the market grew tenfold in the first year after its entry, and Shinco became the industry leader, with a 30% share.

Companies don't lose money when they shift from high-margin to high-volume products and services. For instance, although cellular telephones are commonplace in India today, even among fishermen and farmers, that didn't seem likely when companies started offering mobile telephony services back in 1995. Then, the first mobile telephone operators charged much more than the state-owned landline-based companies did. Mobile devices were expensive, consumers had to pay between $500 and $1,000 to get a connection, and each call cost around 32 cents, which was prohibitively expensive for most Indians. After 2002, leading mobile telephony companies such as Bharti Airtel and Reliance Telecom started lowering prices to grow the market and consolidate the industry. What started as a premium business then quickly became a mass market: By 2007, Reliance Telecom had 100 million customers, while Bharti Airtel catered to 65 million customers. They're still profitable: The Indian companies generate only a quarter of the income that Western companies usually earn from a customer, but they enjoy higher margins because of their low-cost business models.

Counterstrategies for Multinationals

In our experience, companies in developed countries usually defend against emerging giants at home by shifting their focus to high-end segments. This strategy oft en proves ineffective. Volumes at the top end are small, so incumbents end up with insufficient units over which to spread their investment after they've lost the mass market. Production levels quickly become subscale and manufacturing costs rise. Meanwhile, rivals from developing countries can spread the costs of R&D departments and manufacturing infrastructure across larger volumes. Since their revenues from mass-market sales match their fixed costs, they can set a price that covers only their variable costs when they target upmarket niches and grow them into mass markets. As a result, the incumbents' disadvantage intensifies as they retreat to higher-end market segments.

Instead of moving to the high ground, U.S., European, and Japanese companies can capture value-for-money markets all over the world by using one or more of five approaches.

Go beyond low-cost sourcing in emerging markets. Almost all companies in the developed world source directly or indirectly from countries like China and India to cut costs. To grow, they must make bolder moves that involve relocating as many stages of the value chain as possible, from R&D to customer service.

Take computer peripherals maker Logitech, which set up a global production center in Suzhou, China, in 1994 and closed its plants in Ireland and the United States. When that big bet proved insufficient to maintain its competitive advantage, the company added a major design hub in 2005. Eighty designers work at the Suzhou facility, and the number will soon double, since Logitech is shifting most of its product development there. Several other companies are doing the same: Foreign firms were operating 700 R&D centers in China by 2008.

A few information technology giants have shifted the base of their globalization initiatives overseas. For example, in December 2007, Cisco set up a globalization center in Bangalore and located its chief globalization officer there. The CGO implements the company's global strategy, collaborating with functional leaders and developing disruptive business models aimed at creating new channels, markets, processes, and technologies. Earlier, in August 2005, Intel shifted responsibility for its channel platforms group to Shanghai. Running the group out of China allows the company to nurture demand in other emerging markets, as well as in segments of the developed world that need advanced technology at inexpensive prices. Cisco and Intel want their India and China operations to take their cost-innovation capabilities global -- something their Silicon Valley headquarters may not be able to pull off, being, as they are, far away from unfamiliar markets and oriented toward selling high-tech products for dollars, not low-tech goods for pennies.

Develop products in emerging markets and bring them home. Few multinationals have exploited the full potential of the innovations developed by their foreign subsidiaries. The primacy of the parent organization and the idea that the home base is the font of all innovation die hard. Faced with today's complex challenges, however, some forward-thinking multinationals are reassessing the role of developing markets in their innovation strategies.

In 2006, Diageo, the London-based alcoholic beverages manufacturer, set up an innovation group in Hong Kong. This group seeks technologies and spots trends in Asia that will help create innovative products for the company's global portfolio. Unilever has long used India as a source of innovation, developing products there that it can sell globally. More than 250 scientists work in two research centers in Mumbai and Bangalore, and they have bagged around 600 patents. Recently, the two centers led the development of Pureit, an inexpensive water-purification system that meets the stringent criteria of the U.S. Environmental Protection Agency. Hindustan Unilever launched the product in India in 2008, and it plans to sell Pureit in other emerging markets in Africa and South America in the future.

Similarly, Hewlett-Packard's laboratories in India are developing the Shop Owner's Management Assistant, a simple, low-cost device that small retailers can use to track inventory. It's basically a Linux-based computer with retailing soft ware that can help shopkeepers with inventory management and billing for both bar-coded and nonbar-coded commodities, and even generate a few standard reports. HP meant the product to be used by India's mom-and-pop retail stores, but the company has found that wholesalers and manufacturers also want it, because it enables sales representatives to track customer inventory. The company intends to sell the device throughout the developing world, and it anticipates a market for it in the developed world, too, among many small and medium-sized enterprises that can't afford more conventional inventory-tracking systems.

Invest in brands as you would in emerging markets. The current crisis is, we hope, a once-in-a-lifetime event in Western markets, but waves of political coups, hyperinflation, downturns, and currency fluctuations are common in developing countries. Executives in developed economies can learn something from the marketing strategies and branding tactics that work in such volatile environments. For instance, Western companies oft en think of TV advertising as a primary brand-building vehicle. However, they can't afford the daunting cost and high wastage rates of TV ads when launching value-for-money products. Executives must find alternative ways to get the message out -- which cannot include the internet in many developing countries.

The Taiwanese computer maker Acer uses a novel channel. For more than a decade, it has put its name on the heavy-luggage trolleys and small carts used inside Asia's airports. Business fliers and vacationers who can afford to travel by air are both potential laptop buyers. They can read Acer's message for five or 10 minutes, as they walk from cars to gates or from baggage claims to exits. The amount of time the Acer name and tagline are displayed to potential customers is the equivalent, therefore, of 10 to 20 half-minute television ads, which represents a high impact/cost ratio.

In fact, emerging giants oft en use cost-effective tactics to break into developed markets. In July 2004, when Haier was trying to build awareness of a new line of air conditioners in the United States, it teamed up with Target. They set up a temporary Target store filled only with Haier products in Times Square in New York and offered customers free delivery and other promotional incentives. Haier sold 7,000 air conditioners in seven hours -- a feat that received coverage in the media and set off a lot of chatter on the web.

Combine your capabilities with those of emerging giants. Multinationals have traditionally formed joint ventures with local companies to break into developing countries. Now, however, they must find ways to combine their skills with local firms' cost-innovation capabilities. Yesterday's one-sided joint ventures must give way to alliances that both broaden penetration in emerging markets and target value-for-money segments in developed economies.

For instance, when 3Com and Huawei joined forces in 2003, they hoped to win share from Cisco all over the world. For its part, 3Com brought its brand, a global distribution network, detailed knowledge of customers in the United States and Europe, and a set of product add-ons that completed the Chinese company's offerings. Huawei brought its product line, sizable market shares in developing countries, cost-competitive service capabilities, and design and engineering resources. The alliance enabled 3Com to compete effectively with Cisco by revitalizing its product range. It helped Huawei accelerate the global penetration of its technologies, enhance its reputation, and learn how to build a multinational company. So successful was the tie-up that in 2008, Huawei and 3Com decided to merge -- a move that the Bush administration thwarted. It may not be easy for a deficit-laden U.S. government to prevent such deals in future.

Acquisitions are another way to absorb new capabilities. In October 2001, Emerson Electric paid $750 million for Avansys, one of the world's leading producers of power supply devices for telecommunication equipment providers and data centers. At the time, experts felt the price was too high, but Emerson argued that Avansys was an outstanding company that brought complementary products, a young and talented workforce, and capabilities it could leverage to enhance its business worldwide. The move has paid off handsomely: Emerson Network Power has become a global leader, generating sales of $3.6 billion in 2008 -- an 11% increase over 2007 -- and margins of 12.6%. In the same way, in 2005, PalmSource, which made operating systems for mobile devices, bought China MobileSoft. The Chinese company had developed a wide range of soft ware for mobile phones, including a dozen applications, operating soft ware for smartphones and feature phones, and a version of Linux optimized for mobile devices. The combination has provided PalmSource with a line of soft ware that enabled it to power mobile phones at practically all price points in all regions. That's partly why in May 2005, Japan's Access, a rival provider of soft ware for mobile devices, acquired PalmSource for a heft y $324 million.

Invest in growing mass markets in developing countries. In the past, many Western multinationals concentrated on small but profitable high-end segments in the developing world, particularly as an entry strategy. Since growth in the developed world has stalled, it is no longer enough to view sales in emerging markets as the icing on the cake. It's not just that developing countries offer the biggest potential for growth: Western multinationals that don't meet emerging multinationals on their home turf will give them free rein to build scale and experience. So developed-country companies must invest heavily in growing mass markets in developing countries.

Nokia's experience in China demonstrates the benefits of such a strategy. The cellular phone manufacturer started out by focusing on upper-end segments, where margins were attractive, but had to reconsider its strategy when the foreign companies' share of the mobile phone market fell from 95% in 1999 to 45% by 2003. That's when Nokia and other multinationals decided to invest in the mass market, a strategy that raised their share to 65% by 2007. Once outflanked by local competitors that offered customers a large choice of models, the Western multi nationals have expanded their product ranges considerably. They now even offer such popular features as recognition of handwritten Chinese characters for text messaging.

Nokia launches two or three new models every month in China, having mastered the trick of delivering variety at low cost. Instead of introducing initially high-profit devices to a small market and gradually lowering the price as demand increases, as it does at home, Nokia, like its Chinese counterparts, has invested in producing a wide variety of products in the expectation that the volume of demand these offerings create will generate profits. The company invested around $5.7 billion in China between 2002 and 2006. It targeted the low and low-middle segments of the mass market with phones that retail for less than $40 (without any subsidy from the telecommunications operator); some sell for as little as $8. As a result, Nokia became the leader in the low-end segment, while still dominating higher-priced segments, enjoying a 40% share of the entire Chinese mobile phone market in 2006.

To consolidate its position, Nokia has since appointed 100 distributors in cities across China, established 300 franchised sales outlets, and recruited more than 5,000 salespeople to promote its products in every corner of the country -- not just on the eastern seaboard, where many of its Western competitors remain. The company has merged its four joint ventures into a single holding company in China that is one of its five regional units worldwide. Tellingly, Nokia's China manager reports directly to the mobile phone division's head at its Espoo, Finland, headquarters.
* * *

Clearly, companies in emerging markets are transforming the value-for-money equation. The threat that poses to Western multinational giants, combined with the squeeze on future incomes that the developed world will feel as it pays off the debt racked up to cope with the current financial crisis, calls for a change in mind-set. Rather than wait for the recession to run its course, Western companies must rethink the role of emerging markets right away if they wish to develop cost-innovation capabilities that will help them secure long-term competitive advantage.

Reprint R0903E
IDEA IN BRIEF

• Despite the global recession, the value-for-money segment -- made up of people who want to be more effective (do more but spend no more), become more efficient (do the same for less), or economize (do less and spend less) -- is likely to grow in both developed countries and emerging markets.

• Companies from emerging markets are better prepared to cater to this segment than Western multinational giants are.

• Enterprises can employ several approaches -- using their subsidiaries in developing countries to design new products and teaming up with emerging giants, to name two -- to break into these markets worldwide.

• This recession is the right time for Western companies to develop the capabilities that will allow them to crack open the value-for-money market and thereby remain competitive.
3 Types of Cost Innovation

Today's emerging-market companies are dominating value-for-money segments at home and abroad not just by taking advantage of lower labor costs but through sophisticated cost-innovation capabilities, which generally take one of three forms:

Selling cutting-edge technology at mass-market prices

BYD turned into a global market leader by bringing down the cost of manufacturing lithium-ion batteries so dramatically that they became viable substitutes for the lower-performance nickel-cadmium cells.

Offering a large choice or customizing products

UNITED SPIRITS has maintained its position as India's largest alcoholic beverage manufacturer by using flexible processes to offer 140 brands of spirits that cover almost every price point in the market.

Blowing up niches into mass markets

HAIER captured 60% of the U.S. wine-refrigerator market in less than a decade by lowering prices so much that a small, unguarded niche became a volume business.

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by Peter J. Williamson and Ming Zeng

Peter J. Williamson (p.williamson@jbs.cam.ac.uk) is a professor of international management at Judge Business School and a fellow of Jesus College, University of Cambridge, in the United Kingdom. Ming Zeng (mzeng@alibaba-inc.com) is the executive vice president of strategy at the Hangzhou-based Alibaba Group and an adjunct professor of strategy at Cheung Kong Graduate School of Business in Beijing. They are the coauthors of Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition (Harvard Business Press, 2007).

Source: Value-for-Money Strategies for Recessionary Times. By: Williamson, Peter J., Ming Zeng, Harvard Business Review, Mar2009, Vol. 87, Issue 3

Open Source Software - 'Free' As In Markets

2009-03-09T19:33:00.003+05:00

Open Source Software - Free As In Markets

“Free software is free as in markets, not free as in beer,” open source software analyst and trainer Nick Mailer told public sector delegates at this month’s Headstar masterclass on the use of open source solutions in the public sector.

As this catchphrase suggests, free and open source software is not necessarily cost-free, but offers a freedom of ownership and use not possible with most proprietary software.

“Open source software is not the same as public domain software, there is a system of licences that govern its use,” Mailer said. One of best known licences is the ‘GNU’ licence, named after GNU (
http://www.gnu.org ),
a free and open source computer operating system. GNU (a recursive acronym short for ‘Gnu’s Not Unix’)
is built around a ‘kernel’ of another well-known piece of free software, Linux, with the combination known as GNU-Linux.

Under the GNU Public Licence, users of the software are granted four freedoms, which together define the culture of the wider free and open source software movement. These are the freedom to run the program for any purpose; the freedom to study how the program works, and adapt it to your needs; the freedom to redistribute copies; and the freedom to improve the program and release your improvements to the public. The GNU project is overseen by the Free Software Foundation, a non-profit organisation funded by supporting companies and individuals.

The terms of this type of licence do not apply if a programme is adapted to distribute within a single organisation, Mailer said – there has to be a decision to distribute the software to a wider audience after adaptation.

In the public sector, it is not entirely clear what this would mean, as it has not been tested in law, but it is likely to mean that the full terms of a licence would apply if a piece of open source software is adapted by one public agency and then used by another, he said.

So what solutions are out there?

There are now free and open source solutions for all standard computing tasks, from file back-up to desk-top publishing, Mailer said. His own company, the web hosting specialist Positive Internet, uses open source software in every aspect of its work, including staff desktops and internal business systems.

Good collections of open source tools include the websites SourceForge.net (http://sourceforge.net) and Freshmeat.net (http://freshmeat.net), Mailer said. The internet itself is based on open source software – neither Google or Facebook could have been created without it – and among the most widespread free solutions are the set of technologies known as the ‘LAMP stack’, he said. This acronym refers to refers to Linux operating system; the Apache web server; the MySQL database; and the PHP, PERL or Python programming languages.

One of the key reasons people are increasingly drawn to open source solutions is the fact that they offer built-in technical advantages, Mailer said.

Many free software solutions are developed continually by online communities of hundreds of thousands of volunteer developers working together, interacting in a structured way to ensure that every new improvement or feature is based on peer review, he said.

“Unix is not just a piece of software, it’s a culture. And it has spawned an ecosystem of small programmes that are designed to do one thing only very well, and interact with other programmes in specific ways that do not deposit a lot of unnecessary silt to clog up the operating system.

“The resulting programmes are more functional than many commercial programmes, for example VLC is an open source video player that does not want to take you to a commercial media portal all the time. Nothing is oblique, because it is all open and documented – programmes talk to each other and know about each other. Bugs do exist, but they tend to be spotted and patched more quickly.”

Above all, open source communities do not face the kinds of commercial pressures faced by developers of proprietary software, Mailer said. “The proprietary problem is that there is a strain between technical, financial and marketing agenda. This means there is a pressure to release new software versions too early, which in open source would have been released as Beta versions or had more testing.”

“They need new releases to make profits – it is a rational approach. So they say upgrade, or don’t use our product. But with free software, you have a rational technical agenda. There is a point behind each upgrade.”

With closed source code, upgrading an operating system or a piece of software also often means that other pieces of software stop working or conflict, and you have to check each piece individually to see if separate upgrades are needed, Mailer said. “The ecosystem is artificially constrained.” However, with Linux ‘distributions’ software packages often upgrade each other automatically since each one has access to the other’s code.

Ultimately, “if a proprietary project goes wrong, you can’t do anything about it, because it’s not yours to do anything about,” Mailer said.

The need to restrict access to source code leads to other restrictions, he said. For example, you can boot a computer directly from a Linux distribution held on a pen drive to see if it works, since there are no restrictions on how the software can be held or transferred.

Another strength of open source software that could be of huge importance and value to public bodies is the potential to access data more easily in the future, as archives or public records. The use of open formats means that even where technologies are outdated, it should be evident how one can gain access to information that has been stored, Mailer said.

As an example of how proprietary formats can lead to obsolescence, he cited the BBC’s Domesday Project of the mid 1980s, which had stored information about the UK on laser disks in formats that quickly became outdated and unreadable. “The joke was, it was harder to read the BBC Domesday disks than the original Domesday book,” he said.

Of course, the main reason people are drawn to consider using free software is that it is generally not only free as in markets, but free as in beer as well – or at least, that it is free to licence, even if there may be costs incurred in training staff or installing and tweaking the software.

The key to a true understanding of the costs of switching to open source – the total cost of ownership – is to break the process down into clear costed stages, Mailer said.
The first cost is incurred even before deployment, in the analysis stage – this is the work needed in working out what to do, ‘pre-training’, perhaps involving attending courses or conferences and planning the best course of action.

These costs are real, but they should be similar to those incurred with using proprietary solutions, because whatever course is taken careful planning should be carried out and any deployment will lead to changes which one needs to anticipate. “Planning costs may be higher for free software, as there could be more cultural change involved, but in fact upgrading proprietary software could be an even bigger change for people, and open source software might be better at opening older versions of documents,” he said.

The second stage is procurement. “Free software can cost you as much as proprietary software, or it can cost you nothing. Procurement costs certainly should be less, but they could be the same or only a little bit less if you buy packages that include installation, maintenance, upgrade or training. Remember though that if other services like these are included, you are distributing your maintenance and upgrade costs, not just buying CDs containing one copy each of the software. It is important not to double-count these costs when calculating total cost of ownership.”

Training costs could well be comparable for open source software if it is unfamiliar to staff, but it should also be seen as an opportunity to boost IT skills and get better value from your systems, Mailer said. “Training should raise skill levels, not just shift them from one software package to another”.

Upgrade costs should be where you see real savings with open source solutions in years to come, he said, as these should be lower and less frequent.

One recent high profile public sector deployment has taken place in the German city of Munich, where the city council has been migrating office software and then desktop operating systems from proprietary to open source.

Interestingly, the council has found that overall costs of the new systems have been roughly equal to the old system, Mailer said, but other benefits had accrued. For example, the organisation now has more flexibility as it is not locked into proprietary systems, and the process of switching over uncovered huge areas of past inefficient practice, such as thousands of duplicated document templates.

What of common objections to the use of open source software, or reasons for people’s reluctance to experiment with it, particularly in risk-averse public bodies?

A common one is that it is seems less secure, since everyone knows the source code, and there is no-one to sue if problems occur, Mailer said.

In fact, this should not be the case, he said. For one thing, the way open source software packages tend to work well with each other means that security patches are often deployed in one go across multiple packages. “They are able to do this because all the source code is open. This is what happens with free software – there is a network effect. This also means earlier versions can remain stable for longer.”

There is also a pretty good track record for open source, Mailer said. “It shouldn’t surprise us that people are sceptical, but there are good historical antecedents. Without open source software, the internet itself would not exist, but in the early days of the internet people raised the same objections that they now do against open source: who can I sue if it goes down? Yet it works.”

Another worry often voiced by potential users is that open source products might become dormant after their organisation has adopted them, but in fact the risks of this are no higher than with proprietary software, he said. “With open source, you can revivify dormant projects yourself, or search the web to see if there is another group of users that is still active. But in the proprietary world, once a project is dead, no-one is aloud to revive it without permission: so here there really can be an extinct volcano.”

A more thorny issue is that of the ‘recalcitrant application’ – the bits and pieces of old proprietary software running within an organisation to carry out a specific critical task that cannot be changed and cannot run on Linux, for example.

Organisations have a few options, Mailer said. The first is to recode the application, which might be a showstopper, but might be possible. The second is to use software tools such as Wine, which allows Windows applications to run on Linux. Wine is not a Windows emulator but a translator, that tries to translate system calls to work within Linux, and the older the application you are trying to run, the better this is likely to work, he said.

Another possible tool is Mono, a cross-platform development application that allows applications to run within Linux. If all else fails, you can run an application under virtualisation, or in a ‘ghetto’ of its own, which can be structured to access the main infrastructure on Linux, Mailer said.

So should organisations look to switch over to free software wholesale?

“For most people, the best approach will be to run a hybrid system,” Mailer said. “You can migrate some layers to start with, so it’s not so scary – introduce small projects, one by one, which you can still access through proprietary systems to start with so it doesn’t look unfamiliar.

“You might try using an open source web browser to start with, for example, and increase from there. Migrate as time and inclination allows – then it will be easy to revert at any stage.

“You should have an environment where you at least look at the alternatives.”

When it comes to the reality of implementation, it is likely that your biggest problems will be non-technical, Mailer said. “Little empires have been built, and political war may break out. People may say their skills relate to the old system, and cannot be translated. But you could tell them: ‘look, you have a huge range of generalised wisdom that you only think is specific’.

“When staff do complain about the switch, giving a technocratic answer is not that interesting. Cost savings are also not that interesting to everyone. You need to enthuse them, to stress that free software is free as in freedom. You could invite people to submit ideas for improvement, and act on them.”

In the end, you will get as much out of open source software as you are prepared to put in, Mailer said. “You have to work to maximise the benefits of open source, it is not just magic dust to sprinkle. If you don’t respect the communities behind it, it will just be just a tokenistic move.

“Don’t promise too much, manage expectations, make it clear that there will be problems, but emphasise the philosophy and say it makes us master of our own destinies.”

Source: E-Government Bulletin Live

UK: Master Scholarships in International Development Programmes, University of Manchester

2009-02-27T08:28:00.006+05:00

Master Scholarships in International Development Programmes, University of Manchester, UK

The Institute for Development Policy & Management, (IDPM).

Two Bursaries are available for Home and Overseas applicants to the following Development Master's programmes:

Deadline for applications for Master's Bursaries Friday 29th May 2009.

Each bursary will be for the value of £2,500 and will be paid against a student’s fee at enrolment. The awards are open to Home and Overseas students and will be awarded on academic merit. Applicants who wish to be considered for this award should submit a covering letter outlining their reasons for pursuing their chosen programme and future career aspirations. Applicants should also list any personal or professional experience that they feel is relevant to their chosen Master’s programme and/ or Development studies in general. Applicants must have submitted a formal application for their chosen Master’s degree before the closing date of 29th May. Applications received after this date will not be considered for the awards.

Applications for the Master’s programmes can be submitted online

General enquiries prior to a formal application can be made to:
Paul Arrowsmith
Recruitment & Admissions Administrator

paul.arrowsmith@manchester.ac.uk

Source: University of Manchester, UK

Scholarships for Female Students from Developing Countries

2009-02-24T18:23:00.001+05:00

Scholarships for Female Students from Developing Countries, The Margaret McNamara Memorial Fund (MMMF)

The MMMF was established in 1981 to honor the late Margaret McNamara and her commitment to the wellbeing of women and children in developing countries. The purpose of the grant is to support the education of women from developing countries who are committed to improving the lives of women and children in their home countries. Previous grant recipients studied agriculture, architecture, urban planning, civil engineering, education, forestry, journalism, nursing, nutrition, pediatrics, public administration, public health, social sciences, and social work.

Applications can only be submitted by accessing our website at www.mmmf-grants.org and completing the online application form.

Visit our website at www.mmmf-grants.org to see whether you will be eligible.

Applications close: February 28, 2009

For Further Scholarship Information and Application, please visit this link.