Manage Decisions

An interesting reading on how earnings of MBA graduates from ordinary schools compare to top B-school graduates in the long run. Check the link below: MBA Pay: A Crystal Ball

In the process of investigating the causes for wall street failure, I has come across this rather interesting article on how quantitative finance was pushed to the edge by wall street to generate profits and how eventually the same tools later contributed to the demise of financial engineering. Gaussian Copula Function, a mathematical formula created by David X Li to price collateral debt obligations received inarguable acceptance from Wall Street and was put to work instantaneously in the global financial markets. The formula provided solution to the most compelling questions of Wall Street to measure, model and model correlation amongst risky assets prone to uncertainty. As Wall Street’s appetite for quick profits grew, billions of dollars of assets (mostly mortgages) were bundled and sold to investors. Later as housing reversed gear and started declining, the correlations widened causing panic and devastation that is evident in the financial markets now. Wired Magazine has run an excellent cover story on this topic which provides a deep understanding of the mess created by profit savvy Wall Street executives.

Here is the link – Recipe for Disaster: The formula that killed Wall Street

An easy to understand video on Credit Default Swaps -

Some additional links on Gaussian Copula function

Credit Derivatives

Today, while I was looking for some articles on IT management, I found some excellent articles posted on Tech Republic about project management. I thought I will share this with others. Check the link below:

Tech Republic blogs on PM

The ongoing turmoil in the financial markets has been blamed on the management failure to recognize the importance of sound risk management practices. Greed for profits drove management to indulge in over leveraging assets on the basis of faulty quantitative models which assumed the continuation of unrealistic economic prosperity. Everyone joined the race for the fear of being left behind. Even the most prudent, risk averse companies  deserted their corporate values in the race to harvest massive profits. With the fear of systemic failure gripping the financial markets, there is now a big push to emphasize and enforce Enterprise Risk Management (ERM) policies.  Here is an interesting article which talks about the urgent need for ERM in the financial services industry.

ERM push among banks

Oscar awards won by Slumdog Millionaire:

Best Picture – Slumdog Millionaire

Best Director – Slumdog Millionaire

Adapted Screenplay – Slumdog Millionaire

Best Achievement in Cinematography – Slumdog Millionaire

Film Editing – Slumdog Millionaire

Sound Mixing – Slumdog Millionaire

Best original score – AR Rahman for Slumdog Millionaire

Best original song Oscar – AR Rahman and Gulzar for Slumdog Millionaire’s Jai Ho.

Sound mixing  – Slumdog Millionaire.

Check out the oscar video -

This is a test of the software (although not necessarily the spelling ability of the poster, or is that postee).

Anyway, testing is something that seems to be ignored in most business environments (particularly IT, ironically).

So lets see how this post plays out…

I came across this youtube video on effective decision making process from Dr. Paul Schoemaker, Founder, Decision Strategies International . This is my first video posting.

The growth of internet based business models has seen tremendous growth in the past ten years since the dawn of the internet era. Over years, several organizations doing business through the Internet have come out with their own set of unique propositions to succeed in the business. For instance, online retailers like Amazon.com, Buy.com and Travelocity.com have been successful by cultivating relationships, offering exemplary customer service and customer discounts. Companies like Hotmail, Google and Yahoo made business by providing free products and services. Social networking sites have identified new revenue streams for their business through advertising. An online auction business like e-Bay has transformed auctions that were limited to garage sales and flea markets into highly evolved e-marketplaces.

Internet has been instrumental in creating lots of new business models, both innovative and legitimate. Most online businesses are successful except for a few which failed during the dot-com bust because of flawed business models. The online business models continue to evolve and firms have started combining many different models as part of their overall business strategy. Nine major categories are used to classify a number of different types of business models that have been identified in practice among Web-based enterprises:

Brokerage model – Brings market makers, buyers and sellers together and facilitate transactions. Examples include Orbitz.com, Priceline.com, eBay.com, Paypal.com & amazon.com

Advertising model – An extension of the traditional media broadcast model where content and services are mixed with advertising messages in the form of banner ads. Examples include Yahoo.com, Monster.com, Craigslist.com & google.com.

Infomediary model – Assists buyers and/or sellers understand a given market by independently collecting data about producers and their products. Examples include Doubleclick.com, Edmunds.com & collsavings.com

Merchant model – facilitates wholesalers and retailers of goods and services to sell online. Examples include Amazon.com, BarnesandNoble.com & itunes.com

Direct manufacturer model – Allows manufacturer to reach buyers directly. Examples include Dell.com

Community model – Community members are introduced to contextual advertising and sale of ancillary products and services. Examples include Redhat.com, Wikipedia.com, Flicker.com, myspace.com, facebook.com, Friendster.com & Orkut.com

Affiliate model – Provides purchase opportunities wherever people may be surfing. Examples include Amazon.com, google.com

Subscription model – Users are charged a periodic fee to subscribe to a service. Examples include Netflix.com, Listen.com, Classmates.com & AOL.com

Utility model – An on-demand model where metered services are based on actual usage rates Examples include Slashdot.com

Internet in some ways is not nourishing new business models. A striking example would be the online newspaper business model where a move from the traditional model to an online one has made readers worth less (in terms of advertising revenue generated), made content available for free and ultimately lose ownership over readers choices. Some of the early internet startups failed for various reasons, some of which include being non-innovative, offering services for free, creating technology or products too early to be adaptive, massive infrastructure and marketing costs and developing a critical mass of buyers and sellers at the same time.

Information systems are strategic to the extent that they support a firm’s business strategy . Most internet based business models used the Internet and its own information systems to support its strategy in several ways. In my opinion, IT is a strategic weapon rather than a survival tool. Opinions are highly contextual and can differ depending on the situation. In case of brick-and-mortar companies having an online presence maybe an extension of their business strategy, but for companies like Amazon and e-Bay, which entirely depend on the internet for survival, IT/IS is a critical core competency for sustained competitive advantage. A well established internet strategy built into the overall business strategy will provide competitive advantage and this can be illustrated through the success stories of Amazon, e-Bay, Yahoo, Travelocity & Google. Information technology has been extensively used by online businesses to leverage intangible, complementary human and business resources such as flexible culture, strategic planning-IT integration, and supplier relationships resulting in sustainable competitive advantage and business agility.

As increasing competitive pressures drive ever changing business needs, Enterprises are increasingly relying on Information systems to attain business agility and deliver competitive advantages.

Porter’s value chain is a framework for thinking strategically about the activities involved in any business and assessing their relative cost and role in differentiation . Value can be created by differentiation along every step of the value chain, through activities resulting in products and services that lower buyers’ costs or raise buyers’ performance. The sources of value creation come from policy choices, linkages, timing, location, sharing of activities among business units, integration, learning and institutional factors.

Information Systems (IS) is pervasive and affects every point in the value chain. It is also affecting competitive scope and reshaping the way products meet buyer needs. Every value activity performed within a firm has the information processing component which encompasses the steps required to capture, manipulate, and channel the data necessary to perform the activity. From logistics to servicing, IS is performing optimization and control functions, transforming products and processes providing more judgmental functions. IS is helping firms re-design manufacturing tools, improve logistics, promote marketing, boost product performance and enhance customer service. It is enabling globalization of firms.

IS is able to affect the industry structure by altering each of the five competitive forces and create industry attractiveness. It has helped firms establish competitive edge by lowering costs and enhancing differentiation, spawn new business by making existing businesses technologically feasible, create derived demand for new products and establish new businesses within existing ones.

I have provided examples of Information Systems within an E-Business environment which create immense value for the enterprises. These systems include manufacturing, supply chain, financial, performance management and business intelligence applications.

Value creation extends through every primary and support activities of the value chain.

Value is created in e-business systems by means of:

Transactional efficiencies  – Achieved by reducing distribution costs, streamlining inventory management, simplifying transactions allowing individual customers to benefit from scale economies through demand aggregation and bulk purchasing, streamlining the supply chain, and speeding up transaction processing and order fulfillment, thereby benefiting both vendors and customers.

Complementarities  - E-businesses can leverage this potential for value creation by offering bundles of complementary products and services to their customers.

Lock-in – The value-creating potential of an e-business is enhanced by the extent to which customers are motivated to engage in repeat transactions and by the extent to which strategic partners have incentives to maintain and improve their associations.

Novelty – new products or services, new methods of production, distribution, or marketing, or the tapping of new markets, innovate in the ways they do business, that is, in the structuring of transactions.

Examples:

Implementing an enterprise wide Manufacturing Application will help optimize production capacity, from raw materials through final product — regardless of manufacturing methodology. Businesses can automate customer orders, optimize subcontracting, and manage for cost, quality, and compliance.

Using Supply Chain Management Technology , firms can automate all key supply chain processes, from design, planning and procurement to manufacturing and fulfillment, providing a complete solution set to enable companies to power information-driven value chains. Companies can reduce spending on goods and services, streamlines procure-to-pay processes, and drives policy compliance

Implementing a Financial System will meet the growing demands of global financial reporting and tax requirements with one accounting, tax, banking and payments model.

It will also enable shared services across businesses and regions.

The implementation of Performance Management Applications will support a broad range of strategic and financial performance management processes and enable management excellence. It will drive profitable growth for a company by delivering predictable results, improving transparency and compliance, and increasing business alignment.

The implementation of Business Intelligence Applications will deliver intuitive, role-based intelligence for everyone in the organization which will enable better decisions, actions and business processes and deliver value from multiple data sources.

Today, IT must be conceived of broadly to encompass the information that businesses create and use as well as a wide spectrum of increasingly convergent and linked technologies that process the information.

I ran across this interesting article about the role of Google Apps in the enterprise arena.

Check out the link below – Is Google Apps Good Enough for the Enterprise?

A side shoot on techies worth following on Twitter – The 10 best techies Twitter