Update on American university campuses in the Gulf

George Mason University has a campus in the Emirate of Ras Al Khaimah in UAE that will be closing. See details here. Please note the comments to this article that provide good insights.

In comparison, the campus of Texas A&M setup in Qatar under the requirements of Qatar Foundation (see details here) continues to thrive. The Qatar Foundation loosely requires that the educational institutions setup should show direct value to Qatar and to its future growth.

Please see details on the other university campuses in Qatar here that include Virginia Commonwealth University, Carnegie Mellon University, Georgetown Uniersity and Northwestern University.

If this interests you, then you may want to look at the Qatar Science and Technology Park here.

Slumdog Millionaire

It is interesting and entertaining that I have received over 100 calls from friends and acquaintances asking about the slums of Mumbai after having seen the movie "Slumdog Millionaire". I like to guide you towards my blog covering the slums around Mumbai here, to read about their ingenuity and see a video covering a few aspects of life in the slums.

Insights from China

In the past week I had the opportunity to speak with a friend and colleague Mr. Tony Tsai, currently Chief Executive Officer - BHG Retail Innovation Institute and Executive VP Operations - The BJ Hualian Hypermarket Co. in China. I present a consolidation of Mr. Tsai's brilliant insights below:

• The world's largest immersive and experiential innovation center for in-context consumer research is on track with first phase opening in October 2009, see details here. Please see more details on some of the work I was engaged in at Procter & Gamble at my colleague Mr. Franz Dill's blog here. Franz was one of the founders of the P&G's innovation center
  


• Approximately 20 million Chinese labor workers have returned to their rural homes during the Chinese new year. Yet, these laborers returned with earnings and there has been an up tick in spending in these rural areas in consumer and some discretionary spending
  


• Chinese funded construction has stopped while foreign funded investment continues to grow this year
  


• The largest retail chains of the world continue to scout, purchase and break ground on new facilities in China as it takes approximately two to three years to opening doors for business


• Large retailers are very aggressive in China. WalMart believes that in approximately 20 years China will be its biggest market (by square meters of space per number of stores)
  


• China remains the largest purchaser of USA Treasuries in the world


• Large number of plants have closed, for example the toy industry has gone from twenty thousand plants of all sizes to five thousand. A lot of consolidation is taking place


• China is being hit by the global economic down turn yet the recovery may already have begun, for example the government has approved close to a trillion dollars in infrastructure projects for the nation. Due to the extraordinary amount of cash in Chinese reserves, the debt situation is not impacted in any serious fashion, while keeping a bubble in the particular sector of spending from being created


• China already has a five year plan for infrastructure development, they are simply accelerating it. Approximately 20 million worker will be brought back into the labor force. A good rate for a farmer of rural worker is approximately $200/month


• China knows how to put extremely large work force into productive action and produce results


• In comparison, for example India may not be able to move as fast around decisions and execution as the democratic process may generate tremendous amount of debate


• Further strengthening this argument is that the city and provincial governments belong to the same political party
  

I asked Mr. Tsai how does the USA look from China, a few comments:

• Looks divided in two financially


• Also, financially, it is the repetition of distribution of wealth as it occurred during the down fall of the British Colonial Empire


• USA has a desire to support a high standard of living while the economics of the country do not support it

And finally, Mr. Tsai stated that Asia is realizing that USA will be a key player for a while but consumption from China and India will increase in volume first and then in value.

Corporate Life Won't Be Funny

"Corporate life won't be funny", so states The Economist in The World in 2009 in the article "The year of the CFO" here.

"No one will talk of EQ ("emotional intelligence quotient") any more. It will be EVA ("economic value added") instead. Thinking outside the box (at the best of times) will not be celebrated. Ticking boxes will be."

Brilliant - Yes? No? Yet, the Economist is taking a strong stand here on what it believes stating "We will hear less of "vision" and much more of "value"."

The article continues to obliterate the corporate function of Human Resources under the heading "Goodbye "talent", hello "staff"" where it states:

"The biggest loser in the struggle for power will be the human resources director. In the past five years HR has been enjoying the greatest power it has ever had. The “war for talent”, which companies have fought tooth and nail, will be over in 2008, neither lost nor won: there will be a ceasefire brought on by lack of funds and exhaustion of the troops. An old truth will be whispered by the brave: most workers are not terribly talented and most of them don’t need to be, as most jobs don’t require it. In 2009 a more elitist shift will occur: companies will worry about the performance of those at the top of the pyramid, while everyone else will be managed like a commodity. “Talent” will be a word we wave goodbye to. In 2009 the word “staff” will make a comeback, as will “headcount”."

This is how companies will behave because they have to yet such realities are not officially recognized. Some of the above has come to pass in the curtailing of what is now being seen as extravagance of the C-Suite such as company jet purchase, etc.

As for the marketing, the article states:

"The marketing director will also lose out. He has already been kicked once by the decline of advertising and kicked again as the power of the internet has made his traditional tools useless. In 2009 his budgets will fall further, as will his status."

I believe the consumer will reach for value in both old and new fashions, for example, coupon clipping is going to become an art, we will see coupon trading among neighbors, and of course hitting the same grocery chain's multiple stores on the mornings of triple coupons till the data syncs from the various stores back to the data warehouse. An example of new methods utilized by consumers will be online - observing and waiting for the right price, bargaining (EBay) and near-geo selling for both buyer and seller (Craig's List) will take off.

I recently discovered that my predictions may already be running behind the curve as a CEO of a Software as a Service company informed me that he hired a sales person from the Craig's List who is producing great results for him. Fascinating!

Yet, the most entertaining quote of the whole article is:

"As for the corporate-social-responsibility supremo, he will be told to take a gap year indefinitely."

Prediction - No-nonsense brands will prosper in 2009

In the article "Flight to value" here in The Economist's The World in 2009, it states:

"Any brand built around do-gooding notions of organic, corporate social responsibility, or caring for the environment may need to rethink, ... , as value of money rises up the consumers agenda."

Does that mean the dollar store styled value chains are going to prosper in the USA? The market seems to agree with this conclusion hence giving confirmation to the above article's conclusion - have a look at the Family Dollar Stores, Inc.'s (Ticker FDO) trading price and volume chart here for 2008 and 2009.

What about the luxury brands? The article states:

"Luxury brands are in trouble."

Yet, the following prediction in the article may be the one I would be interested in closely observing:

"... 2009 will see the arrival of big emerging-market brands into the developed world. ... Mahindra, an Indian conglomerate with a strong brand, ... will launch a small, fuel-efficient sport-utility vehicle in America."

I believe value will drive purchase intent, quality and/or brand will trump price in some cases and finally if the economic conditions continue to decline as they are, family budgets will be the final driver on decisions of the above two.

UAE Business Insights

The Kipp Report here is a good source for business information related to the UAE in specific and the GCC (Gulf Cooperation Council) in general.

Couple of interesting articles of note, (1) The projects on hold in Dubai here, these include mostly real estate projects while some power and industrial infrastrucutre projects, (2) "Capital Boom" - Abu Dhabi continuing to make major investments in UAE here.

Globalization and Recession

"There's a dangerous tendency to resort to protectionism when things get tough. In 1929, American tariffs turned a domestic financial crisis into a global economic crisis that inflicted damage for years to come."

States Mr. Jeff Immelt, chairman and CEO of General Electric in an excellent article "Time to Re-Embrace Globalization" here in The Economist's, The World in 2009. Mr. Immelt lays down six "Points of Principle" in the article that drive the debate within GE. Summarily, they are:

• A strong international trade system is fundamental
• Continued economic liberalization enhances growth
• Protectionism must be resisted
• Global trade must be fair
• Governments must pursue domestic policies that allow their citizens to thrive in the global economy
• Each of us must contribute

It may seem that the above is apropos for the current USA administration, yet an article from The Mises Institute provides an interesting look at the previous USA administration here from 2003.

Mr. Immelt ends by stating - "True leaders must re-embrace globalization".

Manufacturing Renaissance

In The Economist's, The World in 2009, Sir John Rose, Chief Executive of Rolls Royce writes:

"... manufacturing brings huge benefits. It penetrates the economy of the whole country... It pays well... stop treating manufacturing as a relic of the industrial revolution.High value-added but avoids bewildering distortions of income. It drives and enables a broad range of skills and stimulates the growth of services. In short, it creates wealth."

Even though Sir Rose speaks specifically to the British economy, yet his excellent article "Made in Britain" here applies to all the developed countries with lessons for the developing ones.

It is also interesting to note that Sir Rose specifically calls out the nuclear industry as ripe of breakthrough stating specific to Britain:

"If we can become a nuclear "first mover" we will develop our nuclear capability and supply chain, enabling us to benefit from a growing global market."

Manufacturing Excellence Awards

With a focus on British manufacturing industry, the MX Awards (website here), provide a an insight on what are the key evaluation criteria in manufacturing in this early part of the 21st century. I am confident there will be change and in short order when economics may trump "ease of use" in favor of "fulfillment of need", or vice versa when the health of the global financial markets returns and credits begins to flow again.

The Manufacturing Awards magazine 2008 is an excellent read here.

The list of the award categories are:

• PricewaterhouseCoopers Award for Customer Focus
• Autodesk Award for Product Innovation
• Institution of Mechanical Engineers Award for Process Innovation
• WMG Award for Logistics and Resource Efficiency
• DMG Award for Business Development & Change Management
• Professional Engineering Award for People Effectiveness
• BP Award for Best Partnership between Business and Education
• National B2B Centre Award for Integrated e-Business
• ERIKS Award for Financial Management
• Arup Award for Sustainable Manufacturing
• National Skills Academy for Manufacturing Award for Manufacturing Excellence Best Small or Medium Enterprise
• BERR Manufacturing Advisory Service Award for Manufacturing Excellence Overall Winner

China: Consumerism, Reform and Growth in the Last 30 Years

"I remember when an absolute ludicrous sort of index of how things were progressing was there was a fad in the early eighties for high heeled men’s shoes as... the heels grew higher you knew the reforms were advancing.”

States Mr. Orville Schell of the Asia Society in New York in an excellent Economist interview on the last 30 years of economic growth in China below:

Debunking "Wisdom of Crowds" Myth - Two Examples

Crowds are not wise... crowds are equivalent of herds. Communities formed by choice are ones that constitute anything close to wisdom. To clarify how I look at defining wisdom, please see the diagram below:


Wisdom is the country of gods!

I am providing two examples, and these are not anecdotes.

First example: Did Toyota Prius make economical sense? No! I will let the reader search through the plethora of data out showing how buying a used or a modern car was far more economical than buying a Prius in the short and long term. See graph below of a test conducted by Good Clean Tech.

Yet the crowds thronged to buy the Prius creating an instant back log. As soon as the oil price dropped, the Prius is lined up on Toyota's dealership lots.

USA's oil consumption is nicely creeping back up and steadily climbing, see here from CENIMAR. Now, would a "wise" crowd try to dig themselves into the same hole they just climbed out of?

Second example: Consider the recent case of the investment manager Bernard Madoff. Please read and hear details here on NPR. Unfortunately the financial markets are full of other similar concerns.

I rest my case!

Health Care Consumers - Choices?

By way of Mr. Harish Mamtani, an excellent article in WSJ "Outsourcing Health Care to India" here. This is a consumer service market place that has come to a head in deciding what direction it is going to take.

One of USA's leading companies in this sector is Indus Health (see here) founded by a good friend Mr. Rajesh Rao who currently is its CEO. Rajesh is a visionary entrepreneur with breakthrough successes to his name. While discussing Rajesh's proposition with folks in the USA in the last couple of years, I used to get the distinct impression that the health care service providers considered Rajesh to be ahead and early to market. Yet, I believe Rajesh has shown himself to be a true trail blazer... his perseverance and commitment has resulted in Indus Health perhaps defining the right path to successful implementation.

An article this month on Business World "In Sickness And Recession" here states:

"Rajesh Rao, CEO, of IndUShealth, a North Carolina-based company that facilitates medical travel of American patients to Indian hospitals, estimates that a company with 1,000 employees typically can hope to cut its healthcare costs by half a million dollars every year by outsourcing treatment options for its employees to India. Rao should know because even before the Serigraph announcement made headlines across the US, he has been helping American corporates send employees to India. Today, Rao, has at least 12 mid-sized employers availing his corporate programme (translating into 40,000-50,000 subscribers) and he says he has been tripling his volumes year on year since he started in 2005, when it was just a trickle."

Another article from Smart Money "As Health Costs Soar, More Find Care Overseas" provides an excellent overview of the "what" and "why" of outsourcing of health care, see here.

UPDATE: Upon reading my blog, Rajesh forwarded two excellent articles from the Economist weighing in on outsourcing Health Care.

In the article "Operating Profit" here, the Economist asks: "Why put up with expensive, run-of-the-mill health care at home when you can be treated just as well abroad?" A question every health care consumer is going to start asking if already not doing so. This article especially focuses on the costs associated with various medical procedures.

In any service model with a distributor going out to the end consumer, the consumers continuously strive for better value... just like WalMart did not run the mom and pop stores out of business necessarily - the small store did not have a competitive advantage or distinction that could compete with "Every Day Low Prices" equity and delivery on that equity of WalMart.

Similarly, the article concludes that:

"Medical tourism promises to be what Aetna’s Dr Cutler calls “a disruptive market force that improves cost and quality here in America.” Whether or not it turns out to be all its boosters wish for, it will be a force to be reckoned with."

The secret here is that the multi-nationals are not driven to become international, it is the consumer who will reach out if the corporation does not deliver on the need. It is true with products, it is true with services!

In the Economist article "Importing Competition" here, the Economist declares - "The coming boom in medical travel could help both rich and poor". This article highlights the issues with a health care system (i.e. US) which is not being repaired as the consumer is leaving it as they would a rusted out car for something new... and not improved, but a fundamental shift in how the service is organized and conducted, the anciliary opportunities for the distributor, the provider and finally the customer of it all. Hence, outsourcing health care to corporate while health tourism to the consumer.

In the end the consumer always wins! The one who delivers on the need successfully, is a bigger winner.