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© 2012 Sanjeev Sabhlok's revolutionary blog
Thanks to Anil Sharma for his suggestion that I find out more about Eric Ries's The Lean Startup. In these couple of videos, below, lies great learning – for ALL kinds of projects that face uncertainty. (This also includes climate "science" and its predictions. And virtually every human endeavour excluding perhaps the job of a bank teller in State Bank of India (until India collapses due to socialism)).
Key definition: A startup is a human institution creating a new product or service under conditions of extreme uncertainty. In that sense, India Policy Institute is a startup, FTI is a startup, Freedom Party of India is a startup, Citizens' Government is a startup. Govrank is a startup. All these organisations can do with a reality check.
You can rapidly skip large parts of the second one now:
Key take home messages:
- Innovation involves FOCUSING on success, and validating your assumptions about the CUSTOMER as soon as possible. ["Ferocious customer-centric rapid iteration"] ["lean startups focus on validating their riskiest assumptions first"] ["Lean startups are driven by a compelling vision, and they are rigorous about testing each element of this vision against reality."] ["getting out from behind you computer and talking to real people"]
- Innovation involves PIVOTING (or rapidly switching AWAY) from a path that is not yielding great customer uptake ["pivot away from the elements of the vision that are delusional']
- Innovation does NOT mean asking customers what they want, but checking how they behave, what they DO. It is scientific and experimental. It does NOT rely on what people say.
- Organisations should build platforms (sandboxes) for projects that start and remain SMALL while they do a reality check. Good learnings from such small projects must be rewarded.
In brief, this is about rapid hypothesis testing, learning about customers, and a disciplined approach to product development.
Lean Startup principles
Here's a link to the principles.
The fourth indicator relates to the level of innovation in a society. This indicator, along with the next two I will outline, accompanies free societies but may also accompany societies that are not so free. These three indicators are best seen as ‘necessary but not sufficient’ indicators of freedom, to distinguish them from the first three which are both necessary and, all together, sufficient to characterize free societies.
Innovation depends upon the free and unbounded exercise of our intellect as no other human activity does. It requires completely fresh, new thinking. It requires the mind to be free of ‘hangovers’, biases and misconceptions that can prevent it from forming new links between disparate concepts. To say that ‘necessity is the mother of invention’ is only partly true. Primitive tribal societies had the greatest necessity in comparison to us, but were the least inventive. Only free societies respond to necessity with fresh, new thought. Tribal societies merely look in confused amazement at the heavens and dance around a fire with paint smeared on their bodies, hoping that the frenzy so generated, which dulls the brain, will appease the Gods and lead them to their next meal. The rate and level of innovation is therefore predominantly related to the level of freedom in a society. Tribal collectivist societies and socialist societies generally prevent innovation by blocking new ideas. In free societies the mind is allowed to range freely across the entire universe of known and unknown human thought. As a consequence of this different mindset towards life and its opportunities – a mindset that does not resist free exploration – free societies constantly churn up a storm of innovation in every sphere of life.
But innovation also appears to sometimes happen in societies that do not enjoy freedom. It appears, though, that such innovation is largely restricted to the machinery of war. The fanatic nationalism of Nazi Germany and imperial Japan led to a few of their scientists focusing single-mindedly on instruments of warfare. But such focus, or ‘evil genius’, is not versatile, and theft of intellectual property is the preferred method used by such societies. It would have been impossible for modern Germany or Japan to become as innovative as they are today in their post-World War II avatars had they not opened up and freed their economy after the war.
In comparison, Australia, with one-fiftieth of India’s population, not only produces more world-class swimmers, cricketers and hockey players than India does, but more research papers than India (Table 3). Its citizens have been awarded nine Nobel prizes[i] with eight of them being in science and one in literature, as against only nine, including only three in science, in India. On the scale of its population, India would have had to have 450 Nobel prizes by now to be comparably inventive.
Table 3: Number of Research Papers Produced
|
No.
|
Country
|
Papers published
(2000 SCI CD-ROM)
|
|
1
|
USA
|
2,62,892
|
|
2
|
Japan
|
68,056
|
|
3
|
UK
|
63,972
|
|
4
|
Germany
|
63,365
|
|
5
|
France
|
44,990
|
|
6
|
Canada
|
31,929
|
|
7
|
Italy
|
31,673
|
|
8
|
Russia
|
23,041
|
|
9
|
PR China
|
22,061
|
|
10
|
Spain
|
20,546
|
|
11
|
Australia(pop. 2 crore)
|
19,067
|
|
12
|
The Netherlands
|
18,826
|
|
13
|
Sweden
|
14,278
|
|
14
|
Switzerland
|
13,828
|
|
15
|
India(pop. 100 crore)
|
12,127
|
|
16
|
South Korea
|
12,013
|
Source: ‘Is Science in India on the Decline?’, Current Science, Vol. 83, No. 2, 25 July 2002.
Moving beyond scientific papers and Nobel prizes, we could consider the level of innovativeness in our industry. But given the shelter provided from competition under our mercantilist and socialist regime, our industry cruised well into the 1990s by using Western inventions of the 1950s. For instance, Hindustan Motors continued to produce Ambassador cars – the Morris of the 1950s vintage – well into the 1990s. Industry is only now becoming slightly more innovative than before.
[This is Extract from my book, Breaking Free of Nehru]
A recent issue of The Economist had an excellent summary of the rapid changes occurring in the world – as innovation shifts to the East, in particular to India. This is as an inevitable consequence of India currently being (in many ways) the world's largest free market laboratory (see my post here), even as Western nations have followed the social democrat path and tied their hands behind their backs (see this post).
Does this mean in any way that India WILL succeed? No. Its governance is in shambles, despite private infrastructure trying to fill some crucial gaps in that area. India desperately needs leaders who can provide good governance. FTI is the only entitly focused solely on this goal.
==EXTRACT==
(Source: The other elephant, Economist, 4 Nov 2010)
India is producing a legion of new global giants that are competing head-to-head with established American companies. Look at Arcelor Mittal and Tata Steel in steelmaking; Bharat Forge and Sundram Fasteners in car parts; Hindalco in aluminium rolling; and a host of companies, including Infosys, Tata Consulting Services (TCS), Cognizant and HCL Technologies, in information services. Twenty years ago India had no global companies worth mentioning. Today the Tata group earns 60% of its revenues abroad, and Indian companies ranging from natural-resource firms, such as Reliance Industries, to health-care companies, such as Pirmal Healthcare, have been snapping up American brands.
American companies are also setting up shop in India. Bangalore and Hyderabad have “electronic cities” crowded with America’s leading companies. In Bangalore Cisco spent $1 billion on its Globalisation Centre East and General Electric (GE) opened a swanky research centre. IBM employs more people in India than in the United States.
India has long since turned itself into the world’s back-office—subjecting paper-processing hubs such as Kansas City to the same forces of competition that devastated former industrial cities such as Gary, Indiana. Now Indian-based companies are moving into an wider range of services: reading CT-scans and X-rays, processing legal documents and helping with animation. They are also moving into sophisticated niches. TCS and Infosys compete directly with IBM and Accenture in consulting. American companies are adding to the trend by moving more of their important operations to India: John Chambers, Cisco’s boss, has decreed that 20% of the firm’s leadership should be in Bangalore.
Companies in India are challenging American ones in an area that they have long considered their own—innovation. The Boston Consulting Group’s 2010 survey of innovation notes that the number of American companies on its list of top innovators is declining while the number of Indian companies is rising. It also points out that the Indian firms place a higher value on innovation than the American companies.
Most strikingly, Indian companies have produced a new type of innovation, variously dubbed “frugal”, “reverse” and “Gandhian”. The essence is to reduce the price of a product or service by a breathtaking amount—80% rather than 10%—by removing unnecessary bells and whistles. Tata Motors is selling its “people’s car” for $3,000; GE’s Indian arm offers a medical ECG machine for $400; Bharat Biotech sells a single dose of its hepatitis B vaccine for 20 cents and Bharti Airtel provides one of the cheapest wireless telephone services in the world. These frugal products are likely to disrupt established Western companies (including GE itself) by forcing them to engage in a bloody price war.
To add to this general turbulence Indian-based companies are also on a hiring binge. For decades America has gorged itself on a seemingly limitless supply of brilliant Indian PhD students and entrepreneurs. Half of Silicon Valley’s start-ups were either founded or co-founded by Indians. But these paragons are now returning en masse to the mother country (just as America makes life more difficult for immigrants). Why work for a sluggardly American firm when Infosys is growing at double digits? Why live in a flimsy bungalow in the Valley when an Indian company will provide you with a villa in a gated community, membership of a country club and a chauffeur-driven car?
Creating huge amounts of wealth is not rocket science but policy makers across the world prefer to live in their interventionist delusions, inveigled by quack economists (particularly Keynesians) . The simple lesson of economics: that people should be left free to trade, compete, and innovate, is the hardest lesson for interventionist policy makers to imbibe.
Here's some common sense evidence about that mega-welfare state Sweden, that landed on its nose some time ago, and has finally been rescued (figuratively) by Adam Smith (of The Wealth of Nations fame). This is an extract from an excellent article in The Economist, entitled, "Smart work: Faster productivity growth will be an important part of rich economies’ revival" (7 Oct 2010). Note that I disagree with the last few paragraphs of this report from The Economist - where it suggests a range of interventions that governments might consider. In my view the government must step out of the way. That's its only job (and mandate). No intervention except to regulate for accountability and justice.
The world is at a cross-roads. Those nations that do not deregulate to the bare minimum, and focus purely on what a government should do, will lose out quite badly to those that do. This means the welfare state, in particular, must go. Of course there are challenges facing the overly regulated welfare states of the West in moving towards this desirable goal (for that see this). Tightening of the belt needs to be accompanied by some longer term considerations.
(On a related topic, here's a very interesting article from the same issue of The Economist: The other demographic dividend: Emerging markets are teeming with young entrepreneurs)
===EXTRACT===
Smart work: Faster productivity growth will be an important part of rich economies’ revival
"In the aftermath of its banking bust in the early 1990s it not only cleaned up its banks quickly but also embarked on a radical programme of microeconomic deregulation. The government reformed its tax and pension systems and freed up whole swaths of the economy, from aviation, telecommunications and electricity to banking and retailing. Thanks to these reforms, Swedish productivity growth, which had averaged 1.2% a year from 1980 to 1990, accelerated to a remarkable 2.2% a year from 1991 to 1998 and 2.5% from 1999 to 2005, according to the McKinsey Global Institute.
"Sweden’s retailers put in a particularly impressive performance. In 1990, McKinsey found, they were 5% less productive than America’s, mainly because a thicket of regulations ensured that stores were much smaller and competition less intense. Local laws restricted access to land for large stores, existing retailers colluded on prices and incumbent chains pressed suppliers to boycott cheaper competitors. But in 1992 the laws were changed to weaken municipal land-use restrictions, and Swedish entry into the EU and the creation of a new competition authority raised competitive pressures. Large stores and vertically integrated chains rapidly gained market share. By 2005 Sweden’s retail productivity was 14% higher than America’s.
"The restructuring of retail banking services was another success story. Consolidation driven by the financial crisis and by EU entry increased competition. New niche players introduced innovative products like telephone and internet banking that later spread to larger banks. Many branches were closed, and by 2006 Sweden had one of the lowest branch densities in Europe. Between 1995 and 2002 banking productivity grew by 4.6% a year, much faster than in other European countries. Swedish banks’ productivity went from slightly behind to slightly ahead of American levels.
"All this suggests that for many rich countries the quickest route to faster productivity growth will be to use the crisis to deregulate the service sector."
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