Articles, essays, and talks

Internet piracy

2012-02-05T19:48:00.000-08:00

(Published in Manila Standard Today under the Greenlight Column, February 6, 2012)

On January 18, more than 150 million of Wikipedia’s daily users were caught by surprise when they were met with a message: “Imagine a world without free knowledge.” For 24 hours on that day, the site was on a ‘blackout’ in protest of the Stop Online Piracy Act and Protect Intellectual Property Act, which are being taken through the US Congress.

No to censorship

Other popular sites did not follow suit but posted protest messages on their sites. Google hosted a black patch on its US site and a message urging US lawmakers not to “censor the Internet.” Facebook founder Mark Zuckerberg wrote on his Facebook wall that his company was against the censorship law and urged Americans to further lobby congressmen about the issue. About 7,000 smaller Web sites either joined in the blackout for the day or posted some kind of protest.

At 5 a.m. of January 19, Wikipedia service was back and claimed victory, sporting a ‘thank you’ banner at the top of its page and a message ‘The Wikipedia blackout is over--and you have spoken.” The site claims that more than 162 million people had seen the blackout.

According to reports, so many people logged on to the Web sites of senators that several crashed. After getting their attention, several US Senators have publicly withdrawn support for the two controversial anti-piracy bills. A total of 18 representatives said they no longer approved of the SOPA and PIPA bills.

Protect intellectual property

The Stop Online Piracy Act and the Protect Intellectual Property Act in Congress are designed to curb the sales of pirated US products overseas, such as music, films, TV programs and eBooks. SOPA would allow a private party to go straight to a Web site’s advertising and payment providers and request they sever ties. Its most controversial provision is that it would have enabled federal authorities to ‘blacklist’ sites that are allegedly distributing pirated content that would essentially cut off portions of the Internet to all US users.

Supporters of these bills include the film, music, and publishing industries, which frequently see their products sold illegally through the Internet, resulting in billions of dollars of losses annually. They say the legislation is needed to protect intellectual property and jobs.

There is no question that online piracy should be stopped, but critics argue that the bills could go much further and amount to an attempt to control and censor the Internet. It could also hurt the technology industry and infringe on freedom of speech. Lawmakers in the US should balance the need to protect the media and publishing industries while upholding the rights of Internet businesses and consumers.

Texas Senator John Cornyn moved for the postponement of the bills, saying “Stealing content is theft, plain and simple, but concerns about unintended damage to the Internet and innovation in the tech sector require a more thoughtful balance, which will take more time.”

Florida Sen. Marco Rubio, who co-sponsored PIPA in the Senate, announced recently in his Facebook wall that he is withdrawing his support. “We’ve heard legitimate concerns about the impact the bill could have on access to the Internet and about a potentially unreasonable expansion of the federal government’s power to impact the Internet,” said his post. “Congress should listen and avoid rushing through a bill that could have many unintended consequences.”

Far-reaching implications

A balanced anti-online piracy bill will be eventually passed in the US in some other name and form; and this will have far-reaching implications the world over, including our country.

In the Philippines, where pirated movies, music, and TV programs are blatantly sold in malls, pirates download copyrighted online content, burn these on DVDs, and sell in commercial establishments.

Highlighting the state of piracy in the country was the much-publicized incident of Presidential Adviser on political affairs Ronald Llamas, who was photographed by a national daily buying pirated DVDs at a mall in Quezon City.

An anti-online piracy law in the US would reduce, if not totally eliminate unauthorized copying of content from the Internet; hence, possibly reducing the production of pirated DVDs in the country.

Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of DLSU’s RVR-College of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Workplace humor

2012-02-05T19:34:00.001-08:00

(Published in Business Mirror under Free Enterprise column, Februry 2, 2012)

WE Filipinos are a hardworking type. We usually spend more time at work than at home which makes the workplace a critical part of an employee’s well-being, happiness, and satisfaction in life.

Despite all the pressures at work, either from the boss, the long working and unholy hours, or the very work itself, why are Filipino workers still able to cope with the daily grind? The answer lies in one of the most salient characteristics innate to our culture—humor.

Cheerfulness is a predisposition among Filipinos. According to the 2009 Happy Planet Index (HPI), the Philippines was the 14th happiest place in the world. The HPI index measures happiness combining life satisfaction, life expectancy, among others.

That’s why in the workplace, there is a truism in the proverbial mababaw ang kaligayahan (literally translated “shallow happiness” or “easy to please”). One of the distinct characteristics of the Filipino is our unique sense of humor. We break out in laughter in even the smallest provocation. We easily laugh at the mirthful antics of a gay colleague, the slapstick of an office jester, the occasional humorous interruptions in a serious meeting, the funny text messages we receive, or even the blunders of the boss.

It’s just in our nature to find humor in any unexpected situations and incongruous behavior of others; and this is how we cope with the pressures of work and life in general. This is explained in the pioneering research of Dr. Maria Rhodora Ancheta, of the University of the Philippines entitled “The National Humor of the Philippines: Defining Filipino Humor in Contemporary Popular Culture Forms”, where she avers that laughter makes Filipinos survive and reduce conflicts.

How humor helps the Filipino in coping with workplace demands is supported by numerous studies. Studies have shown that humor in the workplace helps release strain and tension among workers and diffuse conflict. Humor also promotes group cohesiveness, build rapport among team members, and enhance team building among diverse groups, which helps to increase team performance.

Moreover, humor also allows workers to see novel connections and relationships by stimulating the right part of the brain; hence, promoting creative thinking.

But how do we promote humor in the workplace? In many cases, we see pronouncements among managers and leaders “to have fun” at work, oftentimes the last spiel in a PowerPoint presentation in a team or a townhall meeting; but does it automatically translate to behaviors that promote humor at work?

Workplace humor is a projection of the culture of the organization. The leader plays a critical role in the symbolization and projection of this culture. It’s incumbent upon the leader to promote a “fun” culture by first learning to laugh at himself or herself in front of the employees. According to a Harvard Business Review study on “What Makes a Good Leader,” one of the key qualities of a great manager is a “self-deprecating sense of humor.”

Leaders can produce a pun that points directly to the employee behavior, which interestingly can reinforce positive behavior as well as discourage negative behavior. Leaders can likewise use humor to bridge the gap between management and employees by reducing tension and status differentials. A leader with a sense of humor promotes a positive atmosphere that is conducive to teamwork, cohesiveness, and creativity that ultimately redounds to employee motivation and satisfaction.

As Eisenhower once said, “A sense of humor is part of the art of leadership, of getting along with people, of getting things done.”

For comments please e-mail rlugtu2002@yahoo.com

Newsmakers of 2011

2012-01-12T05:47:00.000-08:00

(Published in Focus, newsletter of Financial Executives of the Philippines, January, 12 2012)

Philippine business in 2011 was rife with gains, as well as losses. Some are outright disruptive in business, others are simply entertaining. What matter is that companies and business executives learn from the challenges of last year, and do better this New Year ahead.

I have listed top five newsmakers in 2011 that, in one way or another, touched our professional lives and personal lives.

Top of my list of newsmakers in 2011 is the real estate boom which the country has been experiencing these past few years and will continue through 2012, according to real estate advisory firm CB Richard Ellis Philippines. The surge in the industry is brought forth by expansions in business process outsourcing business, and rise in condominium developments.

Interestingly, the CBRE data and forecasts somehow contradict the CNBC list of the 10 most difficult countries to do business in from 50 of the world’s largest economies, based on a World Bank’s 2011 report, "Ease of Doing Business". The Philippines ranked fourth in the worst place for business. It was the lowest ranked Asian country.

Another big newsmaker was Philippine Long Distance Telephone Co. (PLDT) merger with Digital Telecommunications Philippines (Digitel), which was finally completed in October, despite opposition from various camps. PLDT purchased 51.55% stake in Digitel in what was dubbed by many businessmen as a "landmark share-swap transaction", which cost PLDT P69.2 billion.

In a media statement, PLDT Chairman Manuel V. Pangilinan said: "PLDT is extremely pleased to welcome Digitel to the PLDT Group. PLDT will continue to provide its consumers with the best value in terms of price, quality and range of products and services and we have committed to continue offering 'unlimited' type of services in fulfillment of this promise. In addition, Sun subscribers can benefit from PLDT’s extensive infrastructure and varied service offerings."

Not to be ignored as a newsmaker was Philippine Airlines (PAL) union strike which affected most of us businesspeople. On September 27, PAL canceled all domestic and international flights after its ground workers walked out in what was reported as part of the move of the Philippine Airlines Employees' Association (PALEA) strike. Reportedly, PAL management claimed that many of their equipment had been "damaged or intentionally disabled" by employees who joined the strike.

Prior to this, PALEA's planned "work stoppage" had been going on for months. Among its other grievances, the union opposed PAL management's move to hire contractual workers to fill up vacant positions.

Another newsworthy item was the closing down of Banco Filipino by the Bangko Sentral ng Pilipinas (BSP) in March. The Monetary Board placed the troubled bank under the receivership of the Philippine Deposit Insurance Corporation (PDIC) to assist its more than 170,000 depositors.

This was the second time that Banco Filipino has been shut down. It was closed by BSP in 1985 due to alleged insolvency, but in reopened with few branches in 1990s.

As a kid, I was an active “Happy Saver’s Club” depositor, that’s why it’s saddening to see an institution which was established in 1964, just close down.

Last in my list is the Forbes Asia listing of "The Philippines' 40 Richest" in its July issue. The report said that the net worth of the country's richest "collectively rose to an all-time high of $34 billion, up from $22.8 billion in 2010."

The Pinoy tycoons included in the list are: Henry Sy which topped the list with $7.2-billion, next was Lucio Tan with $2.8-billion, John Gokongwei Jr. placed third with $2.4 billion.

As highlighted by the magazine report, there are some "new faces" on the list: property developer Jose Antonio, at No. 24 with $245 million; Eric Recto at No. 25 with $200 million; and Rebisco founder Jacinto Ng Sr., at No. 35 with $115 million. The youngest tycoon on the list was Edgar Sia II, 34, at No. 40 with $85 million. Sia had sold a majority of his Mang Inasal stake to Jollibee for P3 billion.

I was searching for the name of Manny Pacquiao, but then again, maybe he could have made the list if the controversial fight with Marquez and the much awaited fight with Mayweather were included.

The New Year ahead is full of hope, as various government and private agencies forecast a GDP growth of 5-6%. In the midst of the huge problems in Europe, let’s all help steer the country to greater heights this year.
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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of DLSU’s RVR-College of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Can outsourcing be stopped, really?

2012-01-12T05:41:00.000-08:00

(Published in Business Mirror under the Free Enterprise column, January 11, 2012)

IN 2008, I wrote an article in BusinessMirror titled “Can outsourcing be stopped?” where I mentioned Barack Obama’s repeated spiel in his campaigns that, if elected, he would discourage companies from “shipping jobs overseas” by taking away tax breaks, or by giving benefit to those corporations that keep jobs domestically. From then on, the US government did not have a clear policy on outsourcing; thus, the business process outsourcing industry in the Philippines and elsewhere like India still experienced spectacular double-digit growth, helping spur the economies of the two countries.

But just last week, President Obama jumpstarted an effort to urge US business leaders to keep jobs at home instead of outsourcing them overseas as he rolled out a new election-year theme aimed at courting middle-class voters.

This has been the long-standing campaign of the US government against outsourcing, which was capped by the filing of House Bill 3596, or the “Call Center and Consumers Protection Bill,” in the US Congress seeking to discourage American-owned companies from outsourcing call-center work by publishing those companies that put up call-center operations abroad, preventing them from availing themselves of Federal grants or guaranteed loans, requiring call center employees to tell US consumers where they are located, if asked, and requiring call centers to transfer calls to a US call center if asked.

The bill places the power to choose and decide, not only to US businesses, but also among consumers. If approved, the Philippines, considered as one of the leading BPO service providers in the world, is expected to be negatively affected because apart from the pressure among US businesses, American consumers will now have the power to choose where their calls get routed to. That’s why the Philippine and Indian governments are stepping up to influence and lobby with US policy-makers to avert the passage of the bill.

If indeed the bill gets approved, what will happen to the BPO industry in the country? Which brings us to the pressing question – can outsourcing be stopped? Most likely not. US firms need to stay competitive in the global arena and outsourcing is one of the drivers to bring down cost.

Nonetheless, the BPO sector needs to brace itself from the short-term impact of the bill, if passed, as it may temporarily slow down business. It needs to stay competitive by continuing to deliver the right quality and cost.

What works well for Filipino call-center agents is that many US consumers prefer them over others due to our innate hospitality and natural adaptation of the American accent. But still, call centers in the country need to continually train to sustain, if not, improve the quality of their employees.

In the long run, the BPO sector needs to cushion the impact of outsourcing backlashes by focusing on innovation. In fact, an IDC survey among BPO clients in the US suggested that a third of the respondents look for BPO providers to drive innovation.

Innovation in BPO may come from three fronts: business model innovation which entails significantly changing the structure and/or financial model of the business; services/markets innovation which entails creating new or significantly differentiated services or go-to-market; and operations innovation which involves improving the effectiveness and efficiency of business processes.

One way of innovating markers and services is moving towards knowledge process outsourcing or KPO, such as research and financial advisory services, animation, healthcare advisory and so on. The KPO industry’s global market size will reach approximately $17 billion only in 2013-14, and India accounts for more than two-thirds of the global revenue.

Local BPO players need to incorporate innovation initiatives in the strategic planning process to provide focus in this area. Government and industry bodies alike should promote and recognize innovation in the BPO sector, so as to sustain its growth in the future.
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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of DLSU’s RVR-College of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Managing a small business

2011-11-26T20:42:00.000-08:00

(Published in Manila Standard Today under the Greenlight Column, November 21, 2011)

One of my students, Renzel, owns a small stall shop, Renzel’s Collection, that sells ladies’ clothing and accessories, and children’s wear. Like any other entrepreneur managing a small business, the big challenge that she faces is how to make her business, which has been operational for five months, profitable in the mid of all other competitors that sell almost the same product line in the same location inside the mall.

Having consulted entrepreneurs and even set up my own businesses, I helped her identify key challenges that she faces and how to cope with them.

Knowing your business
Key to succeeding in business is to know the ins and outs of the business itself—from understanding of competition, to knowledge of customers and suppliers.

In the case of Renzel, it’s necessary for her to identify who her target market is, which the working mothers is in her case. It’s important that she understands what products suit the needs of this market and what will differentiate her offering against competition. To learn this, she needs to survey all the competitors inside the mall and understand what they are offering. It’s also necessary for her to identify suppliers of ladies’ and children’s clothing that suit the tastes of her target market.

Business management skills
Small business owners need to understand the basics of business management—accounting and bookkeeping, financial management, production and scheduling, personnel management, time management and marketing. When the business grows, planning as a management skill becomes more important as the small business owner needs to plan for expansion.

In Renzel’s case, accounting and financial management is a basic knowledge that she has been practicing. Since she buys her inventory from wholesalers, procurement is an important area that she needs to focus on as it involves sourcing of suppliers, negotiating for purchase price and terms.

Managing her salespersons well is likewise important to retain personnel and motivate them to sell more effectively. She is doing this by giving her salespeople clear directions and at the same time motivating them by giving incentives.

Key to her growth is planning for expansion. Planning skill become paramount here as she looks for other mall locations that present promising potential. This involves surveying locations, planning for timing of investments, and opening and launching of new stores.

Sales and marketing
Special attention is given to sales and marketing skills, as small business owners usually are personally involved in selling products and services, as well as coming up with marketing activities and promotions to boost sales. A framework that I advise business owners start-ups is FAB—features, advantages and benefits. This involves describing the features of the products, showing or demonstrating the advantages, then eventually describing the benefits to the buyer.

Apart from personal selling skills, knowledge of marketing is important to entice buyers. Small business owners need to launch marketing promotions in forms of free gifts, contests and others to drive sales. In Renzel’s case, she came up with a loyalty card that she gives to customers. This card is stamped every time the customer buys, who will get a free gift when he or she accumulates a purchase of P2,000 in two months’ time. This move sets her apart from the rest of the other stores who lack, if not, do little marketing promotions to attract buyers.

Having adequate capital
Having adequate capital is essential in surviving during the first few months to one year of the business. My advice to small business owners is to always keep some buffer by doubling the estimated cash that is required during the first year to account for unforeseen cash outflow during the first year.

It’s also important to establish credit among suppliers and creditors like banks and private investors. These will help ease out the unexpected cash requirements when the business is taking more time to earn profits. But establishing credit history will take time that’s why during the first few months, the small business owner needs to use his or her own cash. This is where good inventory management becomes important.

In Renzel’s case, she needs to be wary not to buy too much inventory that will not move, but enough inventories to sell what customers are looking for. This entails studying buying trends and patterns of customers, and estimating what and how much of each product will sell.

Having the right attitude
The most important element of success of a small business is the right attitude of the business owner. The “must-do” and “never say die” mindset is needed to brush off temporary setbacks that beset a small business.

In Renzel’s case, she was disheartened initially due to low sales during the first few months of operations. But she immediately sprang back to face the challenges head on by planning a marketing campaign and promotions to boost sales. The drive to win is requisite for the success of small business owners.
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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of DLSU’s RVR-College of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Youth entrepreneurship

2011-11-26T20:31:00.000-08:00

(Published in BusinessWorld under the View from Taft Column, October 26, 2011)

My 16-year-old daughter, Frances, eagerly attended the Young Entrepreneurs Summit held at the World Trade Center last September. Thousands, including students, converged in this laudable undertaking aimed at encouraging entrepreneurship among the youth.

Interestingly, she along with friends also attended the Franchising Expo in SMX Convention Center during the same period. She was one of the few kids who attended that exhibition which was intended for prospective franchisees.

Studies have shown that entrepreneurial qualities, such as initiative, autonomy, risk taking, creative problem solving, and high internal motivation to succeed, emerge in children at a young age. I first discovered these qualities in my daughter when she was five years old, when she wanted to buy food in school and she didn’t have money. She got a Vick’s Vaporub ointment accidentally stashed inside her schoolbag by her yaya, and persuaded her classmates to pay one peso for every finger-full spread of Vick’s on the nostril. It may be a cliché, but necessity is the mother of invention. Children when faced with a problem start to develop thinking skills that help them solve the problem.

To further develop these qualities, experts argue that children in primary school should be made aware of entrepreneurship as a relevant occupational choice and a contributor to the bigger economy. Moreover, the learning environment should facilitate entrepreneurial cognitive development through experiential learning. Children’s entrepreneurial streak should be stimulated to interact with the environment and learn from mistakes and experiences.

That’s why at a tender age, I exposed my daughter to entrepreneurship in an experiential way. Starting at seven, she started selling things, from foodstuff to personal effects for kids. I encouraged her to sell by giving her extra money as capital but on condition that she would not sacrifice her schoolwork. At nine, I asked her to read Rich Dad, Poor Dad and How to Be a Teenage Entrepreneur, which she voraciously finished. When we went to the mall, I would point out to her the types of businesses there and why and why not a business may be successful. I also coached her marketing strategies to help her systematically compete and grow her experimental small business ventures.

As children grow older, children may lose their entrepreneurial spark, as argued by Gutner in his article, “Junior Entrepreneurs,” in Forbes Magazine. That’s why in order to preserve these entrepreneurial qualities among children to adulthood, they should be supported, encouraged, and facilitated. This can be achieved by actually letting the child become an entrepreneur himself or herself. Entrepreneurial readiness entails giving the child the opportunity to invest in a business venture and let it grow.

When my daughter turned 16, I loaned her five thousand pesos to invest in a multi-level marketing company, selling various products. She has experienced meeting new people, selling new products, and seeing her portfolio grow. After a few months, she was able to recoup her investment. This experience has started the preparations for her to venture into bigger business ventures, like becoming a franchisee of a water station or a food business which she learned from her meetings during the Franchising Expo. When she graduates college, I will be more confident that she can select, manage, and grow a more challenging entrepreneurial venture.

It’s heartwarming to see my daughter and her friends get interested in business at a young age. I hope that more and more kids today get interested into becoming entrepreneurs, because they fuel the growth of an economy. We need more entrepreneurs who can bring our country to the heights it has missed.

That’s why all sectors of society should have a stake in developing the entrepreneurial mind-set among students at an early age. Our school curriculum should include lessons in entrepreneurial awareness and readiness in primary and secondary levels. The private sector can help by promoting entrepreneurial ventures among students in universities through sponsorships, contests, and exhibitions.

Most importantly, we parents should be keenly ware of the development of our children. We should be helping during the development stages of our children, to promote behaviors of problem solving and initiative.
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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University’s Ramon V. del Rosario College of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Paper or plastic?

2011-08-01T08:49:00.000-07:00

(Published in Manila Standard Today under the Greenlight Column, August 1, 2011)

Every time I drive through MdDonald’s or Jollibee to buy my 5-year old son a burger meal, it’s always heartwarming to see the use of paper bags instead of the lowly plastic bag. In Pasig City alone, more than 320 “quick service restaurants” (QSR) including fast food chains such as have started using paper bags for takeout.

The new symbol
The paper bag has become the symbol of a new environmental revolution that’s sweeping the country and the world over. Conversely, the plastic bag has become the symbol of environmental scourge.

In January this year, the city council of Muntinlupa passed an ordinance prohibiting commercial establishments from using plastic bags and styrofoam. Los Banos likewise followed and other municipalities might follow.

Several malls owners have implemented a “no plastic bags’ day” once a week to lessens the use of plastic bags, which Malacanang expressedly supported.

The Department of Environment and Natural resources (DENR) is already studying alternatives to plastic bags. In fact the agency is supporting two Senate bills that seek to regulate the use of plastic grocery bags and push for the use of environment-friendly alternatives.

Ban plastic
Elsewhere allover the globe, many countries are already ahead in banning plastic bags. For example, Bangladesh started to ban the use of plastic bags in Dhaka, after being found to be responsible for the 1988 and 1998 floods which submerged a big part of the country. Previously, 9.3 million plastic bags were dumped in the city everyday, which goes into drainage and sewage lines.

Many more countries have taken the lead to ban plastics bags such as Mexico, India, Burma, Rwanda apart from the more industrialized countries like the U.S., England, and Australia. Other countries such as Italy, Belgium, and Ireland have chosen not to ban plastic bags, but to tax those establishment that use it.

Because plastic bags are not biodegradable, its destructive impacts to the environment is huge – from clogging drainage and causing floods to killing wildlife in the rivers and oceans. Despite these, there is still an estimated 500 billion to 1 trillion plastic bags that are used worldwide annually – of which close to 400 billion come from the U.S.

A sustainable solution?
While the biodegradable paper bag presents a tempered solution to the harmful effects of plastic bags, is its use a sustainable solution to protect the environment?

Paper comes from trees. Producing paper consumes natural resources primarily trees - lots of trees. According to the National Cooperative Grocers Association, the U.S. consumes 10 billion paper grocery bags each year, requiring 14 million trees. Paper bag production requires trees to be cut down, therefore reducing a major absorber of greenhouse gases.

Moreover, according to a Wall Street Journal report, producing paper bags consume more water and energy, and emit more greenhouse-gas emissions than that of producing plastics bags.

So what’s better – paper bags or plastic bags? Probably neither. But what paper bag use has brought to the fore is the consciousness to take care of the environment. It has spawned a movement towards finding sustainable solutions.

One solution is the use of biodegradable plastic bags. There are already technologies available to achieve this, and in fact the DENR is closely studying this. Another is the use of reusable bags which is now being practiced in big grocery stores across the country.

Other countries have resorted to alternatives that not only limit the use of plastic bags, but also give a boost to local industries. In Bangladesh, bags made of Jute, a vegetable fiber that is spun into coarse threads has seen a surge of exports by up to 70 percent year-on-year in 2010. The Jute bags are exported to eco-friendly foreign buyers which make this an alternative to plastic bags.

In the end, we have to find a sustainable solution to the urgent environmental problem.

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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Lessons from the Murdoch scandal

2011-07-21T08:49:00.000-07:00

(Published in Business Mirror under the Mirror Image Column, June 20, 2011)

It’s all over the press. News Corporation Chairman Rupert Murdoch has obviously metamorphosed from a venerable media mogul to a subject of assault from all sides.

Murdoch shut down the 168-year-old News of the World last week after it was accused of hacking and eavesdropping on the phones of politicians, murder victims and other famous personalities. There were also reports and revelations of cover-ups and potential bribery of the police, the resignation of top Murdoch executives and the death of a whistle-blower.

A scandal of this proportion is rife with invaluable business, management, and leadership lessons that we can learn from.

Clearly, ethical conduct is one of them. It’s obvious that eavesdropping on other people to get information and publish it is absolutely unethical, not to mention the reported police bribery to cover up. But what is glaring is the gap between what Murdoch is publicly preaching and what is actually happening.

A look at News Corp.’s web site leading to the Standards of Business Conduct reveal a letter from Murdoch saying, “hundreds of millions of people around the world trust us for the best quality and choice in news, sports and entertainment. This public trust is our Company’s most valuable asset: one earned every day through our scrupulous adherence to the principles of integrity and fair dealing.”

Moreover, the site provides links leading to extensive public commitments outlining “Trust in the Workplace,” “Trust in Our Employees,” “Trust in the Free Market,” and “Integrity of the Law.” It goes on with the conclusion that “the Company expects that every employee, at every level, will strive to conduct himself or herself with integrity.”

Trust and integrity are values that all of the stakeholders of News Corp. expect from it. The company may have focused too much on the bottom line, that hacking into cell phones was a way to scoop the competition.

The big lesson here is that profit alone will not make companies maintain its success. Companies that embrace ethical values such as trust and integrity get employee commitment, customer loyalty and shareholder confidence, leading to further growth.

The scandal also presents lessons in leadership. The gap between what Murdoch was stating as the chairman, and what has blown up as a corporate crisis, clearly shows a leadership gap as well. Leaders, in times of public crisis need to take full responsibility. James Murdoch, in his public apology, was quoted by The New York Times as saying that the company and the newspaper had “wrongly maintained that these issues were confined to one reporter”—an apparent attempt to put the blame on others and take partial responsibility.

Murdoch might learn from the example of James Burke, the CEO of Johnson & Johnson who had the unfortunate task of dealing with the disastrous aftermath of the cyanide-laced Tylenol capsules. He promptly acknowledged the problem, accepted full responsibility, and put his money where his mouth was: Not only did he offer to exchange all Tylenol capsules already purchased for Tylenol tablets. He changed the packaging to a more secure one to ensure that the problem would never happen again. Both the company and the brand emerged from the crisis with their reputations enhanced.

Indeed, Murdoch decided to close down the News of the World in an attempt to correct the wrongdoings and penalize those who are responsible. But critics see this as a long-planned business move intended to create an opportunity for other publications in his media conglomerate to publish on Sundays.

The scandal has already resulted in huge losses to Murdoch’s family, amounting to almost $1 billion from the drop in News Corp. (NWSA) stock since the phone-hacking scandal broke out.

Whether Murdoch will need to make additional moves and take more responsibility to salvage his company and its reputation remains to be seen.

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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it , or visit his blog at http://rlugtu.blogspot.com.

Hamburger Model of Happiness

2011-07-21T08:41:00.001-07:00

(Published in FINEX (Financial Executives of the Philippines) Focus, July 20, 2011)

In many cases, our employees and staff spend more time at work than in their homes together with their families. That’s why we as managers and employers seek to make the workplace as conducive as possible to their well-being and satisfaction. How do we make our employees happy in the workplace.

In the book “Happier” by Dr. Tal Ben-Shahar, he discusses the “Hamburger Model” of happiness, where he categorizes situations into four types of hamburgers, depending on the benefit or detriment to one’s present or future.

The first type is the vegetarian burger. This describes a tasteless vegetarian burger made only with the most healthful ingredients, which would afford one future benefits, in that one would subsequently feel good and healthy, and present detriment, in that one would not enjoy eating it. One example of this situation is a hardworking employee, working long hours to get the job done to build some savings to secure a future like owning a house; but he is not enjoying his job and finds it a daily grind.

The second type is the junk-food burger. This is a tasty hamburger that would yield present benefits, and that one would enjoy it, but future detriment, in that one would subsequently not feel well. This is exemplified by a hedonist who seeks pleasure and avoids pain, like a person who indulges in drinking, drugs, and sex, not thinking about tomorrow.

The third type is the worst of all possible burgers, which is both tasteless and unhealthy – in eating it, one would experience present detriment, in that it tastes bad, and suffer future detriment, in that it is unhealthy. This describes a person who has lost the drive and lust for life; someone who neither enjoys the moment nor has a purposeful future.

The last type is the ideal burger which exemplifies the happiness archetype. Happy people that knowingly perform activities that would bring them enjoyment in the present would also lead to a fulfilling future. This means finding enjoyment in our jobs now while saving some money for the future. Instead of asking “Should I be happy now or in the future?”, one should ask “How can I be happy now and in the future?”.

We have to strive to provide the ideal hamburger of happiness to our employees – such that they enjoy their jobs while living a purposeful life for the future.

Hacking

2011-06-25T00:01:00.000-07:00

(Published in Manila Standard Today under the Greenlight Column, June 20, 2011)

More than 360,000 of Citigroup Inc.’s U.S. credit card customers’ data was breached by hackers according to a statement of the bank posted in its website. This is the latest of the string of large-scale hacking and data breach against high-profile companies, and the cost to them is becoming staggering.

In April, Sony’s Playstation Network was attacked by hackers which affected more than 100 million online accounts. Sony expects it will cost it ¥14 billion (US$170 million) this financial year.

Earlier this month, Google blamed China of trying to hack the accounts of several hundred of Gmail account holders that included U.S. government officials, journalists, and Chinese human rights activists.

These statements from Google could seriously hurt its business. In fact last year, the Obama administration took up Google's complaints about hacking and censorship from China. Afterwards, Google partially pulled out of China, which resulted to a loss in market share to rival Baidu in China's huge Internet market.

In Citigroup’s case, letters were sent starting June 3 to people affected, and 217,657 customers have also been sent new cards, costing the company unforeseen expenditures and possible reduction in credit card use among its customers.

How hackers work
Hacking refers to various activities that include breaking passwords, writing and releasing viruses and worms, denial of service attacks, accessing restricted electronic information owned by others, or any other activities that involves accessing a computing system without the right authorization.

Hackers will release a program into the network which will record everything that is going on. After filling itself with data such as personal and financial information, the program then sends this data back to a server. The hacker, in most cases will take that data and sell it to someone interested. It is those people who but this data that will inflict more harm to the aggrieved company.

Business cost of hacking
According to data security experts, hacking and other malicious computer viruses are costing businesses globally more than $1 trillion each year. This only includes the cost of data loss and cleaning up the breach, and does not include the reparations to affected customers.
But the biggest cost of hacking, which is more often underestimated, is the loss of trust of customers. This results to the reduction in the use of a product or service, if not, the total loss of the customer himself or herself.

For instance, if you used your credit card at a certain restaurant and the card number data stolen and used for some malicious purpose a week later. Most likely you would suspect the restaurant of stealing your card number and would not patronize it anymore, even if the problem is not directly linked to the restaurant.

That’s why Sony and Citigroup are offering reparations to affected customers to avoid losing them altogether.

Protecting your company
The most important thing that your company can do is to invest in security. There are a lot of security solutions available in the market now that detects and stops potential threats to your company’s electronic data.

Your employees should also be well trained in basic security techniques in using and accessing company data, especially though the Internet. Your company also needs to have well trained professionals that run your IT system.

The proverbial “an ounce of prevention is better that a pound of cure” holds true when it comes protecting your companies electronic data.
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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Managing transitions

2011-04-21T21:22:00.000-07:00

(Published in Manila Standard Today under the Greenlight Column, April 18, 2011)

A local bank recently invited me to deliver a talk to its senior executives about managing change and transitions. This is opportune time for the bank as it is undergoing changes and its attendant transition in areas of strategy and organizational structure changes.

My talk centered on how to manage transitions in particular as opposed to managing change. There is a distinct difference. Change is situational, an event. It happens when something starts or stops. Transition is psychological. It’s a psychological process that a person goes through to detach from his/her old identity and become directed to a new one. Transition takes longer than changes, and this is where the complication comes in – the roller coaster ride of emotions involved among those affected by the change. These are the wisdom behind the seminal book of William Bridges, “Managing Transitions”.

It was an interesting talk because I related my experience as a senior executive and chief executive of a company in leading and managing change and transitions. Our organizations initiate planned and unplanned changes in response to the ever changing environment.

In fact, in the 2010 CEO Study conducted by IBM on a global scale, eight out of ten CEOs expect high to very high levels of complexity in the business environment over the next vive years, and less than half feel prepared to handle it. There is a glaring 30% “complexity gap” that CEOs are confronted with such as entry of new competition, war for talent, and changing customer tastes. Hence, CEOs implement more changes such as structures and policies for quick decision making, improvements in customer intimacy and insight, and simplification of products and processes.

These changes oftentimes result to changes in strategies, structures, and policies. Employees likewise face changes in forms of reorganizations, a change in role or promotion or change in boss. Organizations and people in transition follow three phases as outlined in the framework of Bridges.

The First Phase
Whereas change is usually situational and focused on a new state or objective, transitions begin with letting go of the old ways of doing things and leaving the comfort zone. For example, employees affected by a change in structure may find them selves doing a different role or doing other tasks.

Letting go of the old ways is difficult and may entail casting out old beliefs and assumptions. The task of a manager is to help people deal with the employees tangible and intangible losses and mentally prepare them to move on. This can be achieved by compensating for the possible losses to people, giving information repeatedly, and showing how endings ensure the continuity of what really matters.

The Second Phase
This phase is the most critical phase as its management will determine the progression to the next. This is an uncomfortable place where people go through psychological adjustments. This is when anxiety rises and motivation falls among employees; where productivity suffers and old weaknesses reemerge with a vengeance; where the organization is vulnerable to attack from the outside and sabotage within.

This is when managers help get employees get through it, and capitalizing on all the confusion by encouraging them to be innovators. This is the phase where communication is key. The manager should strengthen the channels of communication and relationships.

The Third Phase
Finally, after the journey through the tumultuous stage, a rebirth happens. This manifests itself through noticeable changes in people’s behavior and attitudes towards work and the change that’s taking place.

The role of the manager is to help people develop the new sense of identity, experience renewed energy, and discover the new sense of purpose that make employees reenergized to work anew. Managers capitalize by communicating the vision and goals of the company. This is also the phase where managers identify resources, and provide knowledge and skill training,. To build self esteem and confidence among employees, managers should identify and celebrate small successes.

For managers to achieve the desired outcome of the change program, they must progress through all the three phases. Some transitions may be fast taking only months while others will take years. But what’s key is being aware of the phases, being conscious of the actions that needs to be taken, and being sensitive of the progressions from one phase to another.

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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Renewable energy

2011-04-13T09:33:00.000-07:00

(Published in Business Mirror under Mirror Image column, April 13, 2011)

Another round of oil-price increase! The Department of Energy (DOE) confirmed this on Sunday due to the continuing rise in global crude prices from $4 to $5 per barrel. If this pushes through, this would be the 12th time oil companies increase their price since the year started, as the unrest in the oil-producing countries of the Middle East continues to escalate.

This is the perennial dilemma of our country as an importer of fuels and oil for our energy needs. It means that when the price of oil increases, Filipinos have to bear the brunt of the upward spiral of fuel and power costs.

It is opportune time for the government and the private sector to focus on the development of renewable energy (RE). Using RE means that we use energy sources that are not clean and reliable, but sustainable, such that it addresses our country’s problem on energy security. Since the signing of the Renewable Energy Act of 2008, we have seen massive developments and significant investments in RE. Apart from government support, according to the DOE, our country has a vast potential for RE development.

Wind energy

The Philippines is the largest wind-power producer in Southeast Asia at 33 megawatts (MW). Wind energy has a huge potential of producing 76,600 MW. This is attributed to the country’s location in the Asia-Pacific monsoon belt, with good-to-excellent wind-resource potential in over 10,000 square kilometers of windy land areas. Wind- turbine technology is already mature and there are advanced systems that are both cheaper and more efficient than previous design.

Geothermal energy

We are already the world’s second- largest producer of geothermal energy at 2,000 MW. It provides 27 percent of the country’s total electricity production generated in power plants. The electricity produced by geothermal plants is cheaper than that produced by coal-fired plants. The country’s rich terrain boasts a geothermal potential of 4,000 MW. Geothermal power plants abound in Luzon, Negros, Mindanao and Leyte.

Hydropower

Given that the country is surrounded by water, the potential for hydropower is 10,000 MW. There is already an installation of hydropower with a generation capacity of over 3,300 MW. It is projected that more than 10 percent of electricity requirements of the country will be supplied by hydropower generation.

Ocean energy

Due to the archipelagic nature of the Philippines, its ocean-resource area consists of 1,000 square kilometers. This presents a vast ocean energy that has a potential of 170,000 MW. Already commercially available in other countries, tapping the ocean as an energy resource involves technologies that use the power of temperature difference, tides and waves to create energy. Initial ocean-energy potential sites identified include the Hinatuan Passage, Northeastern Samar, Camarines, Surigao, Catanduanes, Batan Island, Tacloban, San Bernardino Strait, Babuyan Island, Siargao Island, Ilocos Norte and Davao Oriental.

Solar energy

The country has an annual potential average of 5.1 kilowatt-hour (kWh)/m2/day. With this rich resource, solar-power producers are expected to generate a combined 125 MW this year, 130 MW in 2012, and another 95 MW by 2013. This will be complemented by downstream industries, such as solar panels and wafers, a major component of solar-power producers, manufactured in the country by the US-based SunPower and Solaria.

Biomass

Biomass-energy production in the country varies from the use of bagasse as boiler fuel for cogeneration, to fuel wood and agricultural waste for kiln, furnace, and oven use for cooking and heating purposes. Biomass has a potential of producing 500 MW, with bagasse alone having a potential of contributing 230 MW. Resource for biomass is aplenty, with the Philippines being the second-largest coconut-oil producing in the world and 10th in sugar-cane production.

It is laudable that the government and the private sector are working together to develop RE and realize its potential. A study led by the United Nations Development Programme (UNDP) and the DOE shows that the country will derive a net benefit of P48 billion through the development of 2,500 MW of RE projects, which can, in turn, be used to build infrastructure, roads, schools and provide social services. Apart from this, RE is environment-friendly and sustainable; hence, helping reduce greenhouse gases from conventional coal-fired power plants.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Solar power

2011-04-07T08:09:00.000-07:00

(Published in Business World, under the View from Taft column, April 7, 2011)

The Fukushima nuclear disaster and the rising oil prices have highlighted the huge and promising potential of renewable energy (RE) around the world and in the region. A raft of news reports on companies investing in RE fill the national dailies almost every day since the start of the year. Since the signing of the Renewable Energy Act of 2008, we have seen a deluge of investments in hydropower, wind, biomass, ocean energy, and solar power.

The latter deserves special attention as we see massive deployments of it this year. According to the Philippine Solar Power Association (PSPA), solar power producers are expected to generate a combined 125 MW this year, 130 MW in 2012, and another 95 MW by 2013.

One major player is Lopez-led First Philec Solar Solutions (FPSS), which plans to build a solar power plant in Cavite that is projected to deliver 2 megawatts and is scalable to 5-MW in the coming years. The first FPSS installation was at sister company First Philec Solar Corp. in Sto. Tomas, Batangas, which now supplies 75 kilowatt-peaks (kWp) of electricity and will expand to 200 kWp.

Another major player is Cagayan Electric Power and Light Co. (Cepalco) Inc., which is investing P2.24 billion to build four more solar power plants in Misamis Oriental to augment its power sources for the next 20 years. This is on top of its existing 1-MW solar facility.

Other investors that have started preparing for their respective facilities include Dutch-based SunConnex, which plans to invest $100 million for solar projects with 10-MW initial capacity, then eventually expand to 50-MW in future; South Korean-listed firm Youil Ensys, which plans to invest $160 million to put up two solar power plants with a combined capacity of 40-MW in the Visayas; and Filipino-Japanese venture Eco-Merge Philippines, which plans to invest $150 million in the construction of 41-MW of solar power projects in the next three years starting with a 11-MW solar farm in Camarines Sur this year.

These investments signal the optimism in the long-term viability of solar energy. One reason of such confidence is the strong government support. The Renewable Energy Act allows the players to enjoy non-fiscal and fiscal incentives. A key non-fiscal incentive is the institution of the feed-in tariff (FIT) rules in May this year. FIT is a structured rate to be charged by RE developers that will guarantee their returns over 15 years. According to industry sources, the FIT would likely range from P10 to P19 per kilowatt-hour, but costs may go down once more players come in, which will ultimately benefit the national government and consumers. Fiscal incentives include a 10-year duty-free importation, income tax holiday, and tax exemptions.

Moreover, there are available financing mechanisms to support investments in RE. In fact, First Metro Investment Corporation and Global Business Power Corp. have signed an agreement to encourage and help develop prospective RE projects in the Philippines. Solar energy projects can likewise be a part of the Public-Private Partnership (PPP) program of the government.

In addition, there are opportunities for driving down costs by developing downstream manufacturing and application areas in the value chain. Solar panels, a major component of solar power producers, are already manufactured in the country by US-based SunPower and Solaria. The wafers supplied to SunPower are cut from silicon ingots by its joint venture with local Lopez Group’s First Philippine Solar. The latter has recently signed a joint venture with Nexolon of Korea to put up a 400-megawatt solar wafer facility in Laguna, a strong sign of the vibrant solar energy sector.

Lastly, there are opportunities for solar power companies to gain operational efficiencies at the onset. This can be achieved through the implementation of technologies such as distributed monitoring and control systems, plant optimization and performance monitoring, string combiner boxes, temperature transmitters, inverters, and high efficiency uninterrupted power supply (UPS) and cooling solutions for control rooms that allow solar power producers to balance regulatory compliance with cost and risk mitigation.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University. He is the country manager of Emerson Network Power Philippines. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Information democratization

2011-03-19T02:09:00.000-07:00

(Published in Business Mirror under the Mirror Image column, March 15, 2011)

A few hours after the horrific tsunami in Japan, people all over the world flooded Facebook and Twitter with entries trying to communicate to loved ones affected by the catastrophe. Many postings expressed prayers and concern, along with news about friends and relatives in Japan.

The social-networking sites also became an invaluable source of information among relatives of Japan migrants on immediate news and real- time updates about the situation and emergency warnings.

Corollary to these, a number of Facebook causes have helped raise huge sums of money for Japan’s tsunami victims. The American National Red Cross, through Facebook Causes, has so far helped raise $75,825, donated by 1,770 people aided by 3,757 promoters. The Northern Japan Earthquake Relief Fund, on the other hand, has so far raised $21,611, through 2,104 members through Facebook Causes.

In stark contrast, abject indifference and utmost ignorance deluged social-networking sites, although not significant in number, with such comments as “But that what happens when you bomb the Pearl Harbor… karma” and “Thinking of all the poor animals in Japan. It’s only Mother Nature reminding the people of Japan who’s boss. Treating animals like s**t will come back to you.”

These only show how much the social-networking sites and the Internet, in general, have democratized the flow of diverse information and opinions. The democratization of information makes it possible for ideas, knowledge, opinions and cultural diversity to be accessible anywhere, anytime and to everybody.

For example, the upheavals in Egypt were attributed to instigations in Facebook. A Newsweek report said that 43,000 people had signed up in one of the protesters’ Facebook page, inviting people to take to the streets and show protest, leading to a series of protests and the eventual ousting of Hosni Mubarak. The 17 million Internet users in Egypt, or 20 percent of the population, have led to the growth of access to blogging and social-networking sites. There are already 5 million Facebook users in the country.

But despite this, Facebook sites adorning Mubarak, such as “Support Hosni Mubarak” and “We Love Egypt Support Mubarak,” garnered only 90 and 25 “likes,” respectively. This leads us to another feature of information democratization, that is, it’s achieved by giving everybody a say in what’s important but, at the same time,
aggregating the results.

This aggregation of information and opinion form the concept of “Wisdom of Crowds,” as described in the seminal book of James Surowiecki, which argues that an aggregated information results in a decision that is better than any single member of the group.

The Internet has the capability to aggregate common theme, information and ideas. Google search results are based on page-rank system that iterates so that some votes and searches coming from more important pages count more than other votes. Vote casting in social- networking sites have the ability to consolidate opinions on certain causes and issues.

This is why some governments are putting a clamp on the Internet to preclude the growth of malcontent views. Arab news channels are reporting that Libya has blocked access to the Internet to quell the horrific aggressions against Qaddafi. China has blocked the word “Egypt” in searches of Web pages, an ostensible sign that the country’s government is concerned about the impact of protests in the Middle East.

But for how long can other governments put a stop on information democratization. At the height of the protests in Egypt when Internet access was cut off by the government, Google launched a special service that allowed people in Egypt to send Twitter messages by dialing a phone number and leaving a voicemail.

People find ways.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Facebook addiction

2011-01-12T06:27:00.000-08:00

(Published in Manila Standard Today under the Greenlight Column, January 10, 2011)

I was recently invited by a Communications Arts class of De La Salle University to talk about the ill effects of Facebook among the youth. “Ill effects among the youth?”, I asked.

I have studied the good, the bad, and the ugly sides of Facebook in the workplace. We always see its good side because most of us are active users. But the dark side in the work place is apparently the decline of productivity based on a number of studies.

But understanding the ill effects among the youth struck me because I have two teenage daughters who spend hours in the veritable social network site; and I oftentimes ask them to stop and instead concentrate on studying. So this topic interested me as I wanted to understand its potential ill effects to my kids.

Surveying Facebook users
To put some credence in the talk, I asked the student organizers and my daughter to help me to conduct an exploratory study through a survey among high school and college students. I based the questionnaire on the findings in the collection of research studies called “The Facebook Project”.

We got fifty respondents from age 16 to 20, and a mix of boys and girls. Not surprisingly, 60 percent of the youngsters spend an hour daily. But interestingly, more than 60 percent have 500 or more “friends”. This correlation between the time spent on Facebook and the number of “friends” may lead to a vicious cycle – that the more time a youngster spends on Facebook, the more “friends” he or she accumulates; and the more “friends he or she accumulates, the more time is spent on the site.

Another marked finding is the 60 percent of the respondents agreed that they “feel good” when a “friend” leaves a comment on their Facebook status. This may be a natural response as seeing “friends” comment on your status may be a sign of social acceptance.

The trouble with “feeling good”
But what’s worrying is the possible bad effect of “feeling good”. It’s been established in several studies that excessively “feeling good” about something leads to addition, like in drugs or alcohol. In fact, US psychologists say that excessive use of Facebook leads to a condition called Facebook Addiction Disorder (FAD). Dr. Michael Fenichel, who has published numerous writings on FAD, describes it as a situation in which Facebook usage “overtakes” daily activities like waking up, getting dressed, using the telephone, or checking e-mail.

There are an estimated 350 million around the world who have admitted to being addicted and more than 500 groups for “addicts” have been created on Facebook, where members laugh about their dependence on the site.

According to Joanna Lipari, a clinical psychologist at the UCLA who was interviewed by CNN, some of the signs that one is addicted to Facebook include the following:

1. Losing sleep over Facebook When using Facebook becomes a compulsion and you spend entire nights logged on to the site, causing you to become tired the next day.
2. Spending more than an hour a day on Facebook. The average person needs to spend only half an hour on the site, according to Lipari. This is below the one-hour daily usage of the youngsters we surveyed.
4. Ignoring work or studies in favor of Facebook.
5. On the extreme side, being stressed and anxious when one doesn’t log into Facebook in a day. This means one already needs help.

Restricting access
With the potential bad effects of FAD, many companies and even universities in the US have limited the access to Facebook Many companies locally have restricted access to the social networking site due to its potential effect of productivity. Likewise, schools should be restricting its use within the premises.

But despite its potentially destructive effect, Facebook is still a great way of connecting and maintaining relationships with friends. But like most activities, moderation and controlled use are key. Parents should intervene if they see their kids are getting “addicted” to Facebook.

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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Rock, paper, scissors

2011-01-05T04:58:00.000-08:00

(Published in Business Mirror under the Mirror Image Column, January 5, 2011)

I attended the silver reunion of Batch ’85 of the Manila Science High School on December 29. The ice-breaker the organizers ran was a rock-paper-scissors (RPS) game. This entailed pairs from the 30-plus who attended the reunion to run one round of RPS, with the loser giving P20 to the winner. The winners in the previous rounds were then pitted against each other, and the winnings were given to the victor of the succeeding rounds, until finally there was just one big winner with over P1,000 in prize money.

Being a confessed ex-geek, I knew there was a strategy in this game and not pure chance. I read some studies on RPS that the most likely choice of a player was scissors. So my strategy was to always choose rock in the first round.

True enough, during the game, I won several times using the rock strategy, until finally only Jude, a batchmate, and I were left. Unluckily, I succumbed to my opponent’s superior strategy that countered mine. But it was fun, nonetheless.

RPS is a classic game that children and adults play to resolve conflicts and disagreements by leaving the decision to chance. It reminded me of a scene from The Simpsons wherein Bart and Lisa were going to play RPS for the last cupcake. Lisa, thinking: “Poor, simple Bart. Always throws rock every time.” Bart, thinking: “Rock! Good ol’ rock! Nothing beats rock.”

However frivolous it may seem, history and modern society are rife with examples of serious RPS matches. George Washington and the British general, Lord Cornwallis, were reputed to have lost to the French military officer, Comte de Rochambeau, in an RPS match to decide who would be the last to leave Cornwallis’s tent after the signing of the British surrender at Yorktown in 1781.

In 2005 a Japanese electronics tycoon forced the giant auction houses, Christie’s and Sotheby’s, to play rock-paper-scissors to decide who would auction his company’s $17.8-million art collection. Christie’s consulted the 11-year-old twin daughters of an employee, who suggested scissors, because “everybody expects you to choose rock.” Christie’s won the contract.

Another example in 2006, a Florida judge ordered two attorneys to play RPS when they could not agree on where to hold a deposition, even though their offices were a few floors apart in the same building.

The foregoing illustrations may seem like strange ways of settling conflicts, but there is wisdom in RPS. In fact, these examples are rationalized in the book Rock, Paper, Scissors—Game Theory in Everyday Life by Len Fisher, where the author prescribes variants of RPS in conflict resolution. The reason is that the game is played with no dominant strategy among the players. Thus, situations that seem to be at an impasse (for instance too many free-riders in overfishing) can be resolved by adding strategies and changing them to rock-paper-scissors situations.

One application is in social traps—situations in which a group of people act to obtain short-term individual gains, which in the long run lead to a loss for the group as a whole. An example of a social trap is overfishing (paper approach), which results in the loss for the community (rock move which is beaten by paper). By introducing a third approach of volunteerism (scissors approach) among community members to fight overfishing, it reduces the size of the community that allows this to happen; hence, forcing the overfishers to eventually stop.

Now, this is not to suggest that we use RPS in major decisions that we make. There are various superior conflict resolution and decision-making approaches available. But RPS represents the realism and metaphor of the fun, as well as serious levels of strategy and decision- making in everyday life, and as such deserves some attention on the following grounds.

First, RPS embodies the human aspiration for fairness in dealings with each other. Since the players are in control in choosing their moves, the outcome is perceived as fair and acceptable.

Second, laughable as it may seem, RPS can, indeed, be used as an approach to break an impasse but requires skill. As the World RPS Society avers, playing the game is a more complex combination of strategy, skill and observation.

Last, RPS represents a dichotomy of decisions that we face every day—from serious business decisions to the mundane “fighting over the last cupcake.” It’s the stark contrast between the sober and the silly, which makes life more interesting and exciting.

As we welcome the New Year, we will be again facing rock-paper-scissors situations in our lives. Let’s make it more exciting.

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Reynaldo C. Lugtu Jr. teaches strategy, management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Education

2010-10-21T06:23:00.000-07:00

(Published in Business Mirror under the Mirror Imgae Column, October 19, 2010)

After four gruelling years in high school, my eldest daughter is, at last, graduating and entering college. I’ve been trying to prod her to take up entrepreneurship or entrepreneurial management because of her knack for selling things and making money since she was four years old. But, surprisingly, she wants to take up fashion design or interior design.

It’s not too bad because she said she wants to put up her own business designing clothes or homes. What is more surprising is that she said the majority of her classmates are taking up arts and hospitality courses—from culinary arts to hotel and restaurant management.

This struck my incurable curiosity, and I did my own surveys. After talking to friends and colleagues, they confirmed that, indeed, kids these days are taking up arts and hospitality courses in college apart, of course, from medical technology and nursing courses. The latter courses are understandably still popular. The Commission on Higher Education (Ched) projects medical and allied courses to still top the list in 2010, growing from 517,253 to 756,778 enrollees, or a 46-percent jump. Despite many reports that there is already an oversupply of nurses in the country and a declining demand for nurses abroad, it’s interesting that many still take up this course, perhaps in the hope to follow in the steps of successful nurses who made it big abroad.

It is notable that hotel and restaurant management is gaining ground, placing second with more than 160,000 enrollees in school year 2008-09. Allied courses in culinary arts are also on the rise with its growing popularity. Moreover, culinary arts is becoming so popular these days that there’s already more than 10 schools that cater to students in this discipline.

These augur well with the global demand for hospitality and culinary professionals, where these are highly sought-after in countries such as Canada and Australia, and even in cruise ships.

Albeit still small in numbers, it is noteworthy that other discipline groups in craft and industrial, and fine and applied arts have experienced double-digit growths in recent years. Testament to this is the steady increase of student enrollees in De La Salle College of St. Benilde, which offers various arts courses from multimedia arts to interior design.

This also bodes well for global and local demand for designers, graphic artists and multimedia arts professionals, which are desired by knowledge-process outsourcing (KPO) companies that do offshore work for American and European firms. KPO refers to the outsourcing of high-value complex tasks and processes, such as design and animation. It has contributed more than a billion dollars in business for the country and growing double digit every year.

What is sad is that the Ched has noted a decline in engineering and technology and information-technology enrollment this year, albeit single digit only. This does not mesh well with the theme of the Philippine Development USA Forum held recently and attended by President Aquino, Science and Technology Secretary Mario Montejo, ICT Commission Chairman Ivan Uy, among other local business leaders. In the forum, the need for a strong science and technology foundation was emphasized as a catalyst for growth. There is a stronger need now to promote science, engineering and technology courses among our youth to avert the possible decline of university enrollees.

Another sad news is that teacher-training enrollment, however, has been declining in the last 10 years by 28 percent, which explains the chronic shortage of teachers in the country. This spells bad news to the proposed 12-year extended basic education in the country. The dearth of teachers is a perennial problem that needs to be addressed…somehow.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the DLSU College of Business and De La Salle University, its faculty and its administrators.

Social networking

2010-10-14T06:34:00.000-07:00

(Published in Business World under the View from Taft columng, October 13, 2010)

On October 9, I attended the Manila Science High School Grand Alumni Homecoming, where my batch mates and I (Batch ’85) were the Silver Jubilarians. The mood was festive as batch mates, classmates, and friends mingled the whole afternoon until a night of singing and dancing.

Our batch had the most attendees, with 50 of the 270 who attended. This high attendance can be attributed to the tight network that our batch had established. From the simple beginnings of an e-mail group in the early 2000s, our network has evolved into a more sophisticated Facebook account. Our network has cultivated not only personal relationships but also business and professional connections.

The benefits of social networking to professional life or to the workplace may not be clear to many companies, but they are many. Social networks allow organizations to reach out to and target select groups and individuals. Many sales and marketing professionals use Facebook to connect to and be friends with clients and potential customers. Most customers appreciate the personal touch; furthermore, the sales and marketing professionals can gain access to the customer’s own network of contacts.

Marketing practitioners also use social networking to promote the company among customers and the general public. More and more companies are putting up Facebook sites to reach customers, conduct market research, and enhance their reputation.

Human resource practitioners can also use social networking to search for candidates for employment. LinkedIn, the biggest professional social network, is widely used by recruiters in searching and reaching potential employees in a cost-effective manner.

Apart from the business uses of social networking, surfing Web sites such as Facebook, YouTube, and Twitter at work could actually increase concentration levels and increase workforce productivity, according to a 2009 University of Melbourne report. The report said that people who surfed the Internet at work for a reasonable time -- less than 20% of their total time in the office -- were more productive by about 9% than those who did not surf. The reason for this was due to the way a working day was broken up into smaller chunks of time.

Social networking also enhances personal bonding among employees, especially in virtual teams. In today’s workplace where team members are scattered in different locations, social networks such as Facebook and Twitter enhance team bonding and communication, which are otherwise difficult to achieve. Greater bonding and clearer communication increase the team’s productivity.

While social networking in the workplace clearly has benefits, it is not without its share of controversies. A growing argument of many companies is that social networking in the workplace is more of a boon than a bane. In fact, more and more companies here and abroad are banning social networking sites such as Facebook and Twitter.

One argument against social networking is the decline of productivity in the workplace. According to a 2009 study in the US, companies that allow employees to access Facebook in the workplace lose an average of 1.5% in total employee productivity. The survey of 237 employees also showed that 77% of workers who have a Facebook account use it during work hours.

However, the decline in productivity is not the only threat of social networking in the workplace. The risks of viruses, malware, and offensive content that employees put into their social network are perhaps more dangerous.

So how do we settle the score for and against social networking in the workplace? It depends on the company’s assessment of the risks and benefits involved. A company may ban access to social networks among certain employee groups while allowing access among marketing practitioners and salespeople. For companies that see the benefits of social networking among employees, several policies can be implemented.

One would be to restrict access to during lunchtime and before and after office hours. Web filtering software allows administrators to implement such time-based access.

Another would be to educate employees on the risks of malware and on the type of language they can use that would not compromise the company’s confidential information and reputation. Additionally, employees could be taught not to click on suspicious links and to be careful about giving out personal details online. All of these can be part of security and usage policies that employees need to comply with.

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The writer teaches management and marketing courses in the MBA Program of De La Salle University. Readers may e-mail him at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Cited in:
1. "Employers restricting employees rrom social networking sites", http://www.oppapers.com/essays/Employers-Restricting-Employees-From-Social-Networking/591546

Nonverbal cues

2010-09-06T06:26:00.000-07:00

(Published in the Manila Standard Today under the Greenlight column, September 6, 2010)

I recently attended a business meeting in Thailand where colleagues from Asia Pacific countries gathered to present and discuss business priorities. A favorite dinner staple topic among my colleagues was the hostage crisis in Manila. But more interestingly was the observation of many on the speech delivered by President Aquino to the local and international press where he smiled instead of showing grief.

Having read the explanation of President Aquino, I quickly defended him. I told everyone that the president’s smile has been misunderstood – he was smiling because of the absurdity of the situation with the police using a sledge hammer and the difficulty of breaching the bus. I also told everyone that the President apologized for having offended certain people.

This makes us realize the importance of understanding nonverbal communication in diplomacy and international business. According to studies, more than 90 percent of the content of a message is contained in non-verbal cues. Fifty five percent of the content of a message may be transmitted by facial expression alone, such as smiling and frowning. Thirty five percent of the message content is derived from inflection and tone of the voice. Only 7 percent of the message content is due to the words in the message.

This lends nonverbal cues great importance in interpersonal and public communication. But because nonverbal messages take place on a subliminal level, it makes it more difficult to understand and master when differences in cultures are involved. Nonverbal cues are open to misinterpretation when one does not understand its meaning outside our own culture.

For instance, eye contact in Western cultures is associated with openness and sincerity. But in some other cultures, it is considered rude and discourteous. People from cultures who use a lot of touch could unintentionally appear inappropriately friendly in more reserved cultures. An Italian friend would greet my other friends with at least two kisses on the cheek. Some understood the expression, others looked at my friend with amazement.

Non-verbal communication and behavior can be governed by situation. Professionals and executives in formal meetings are conscious of the expressions and words they say. Similarly, in informal settings like dinners and drinks, the same executives can loosen up and convey less restrained nonverbal cues. But in both situations, one danger area is the use of humor and subtle meanings which may be conveyed by the tone of the voice, but may be misinterpreted and missed among other cultures.

So how do we deal with nonverbal communication? First is to become aware of the cultural nuances of verbal and nonverbal communication. Sensitivity and cross-cultural training can reduce nonverbal errors when working with individuals from other cultures. Awareness of the situation at hand is also important to understand the underlying perceptions and behaviors of other participants.

Second, we have to be more aware of our perceptions and behavioral patterns. Do we have biases and stereotypes that limit our understanding of other cultures? How do we feel when a Westerner colleague speaks to us in a more powerful tone and aggressive facial expressions?

We also have to be more observant of others so we learn their nonverbal cues. Take note of similarities and differences in traits and expressions.
We can also try to get feedback from colleagues and friends on how they react to nonverbal cues. The key is building cultural sensitivity by better understanding how others feel and react, and from there we ourselves adjust to the situation.
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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University College of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Paradox of control

2010-07-16T22:43:00.000-07:00

(Published in Business Mirror under the Mirror Image column,July 13, 2010)

I was listening to a morning AM radio program as the commentators were discussing the latest mandate of President Aquino to stamp out jueteng, coming from a report that the small-town lottery was just a front for illegal-numbers game.

Then the commentators interviewed former President Joseph Estrada, where he pointed out that all previous presidents—from the time of President Cory Aquino—wanted to stop jueteng, but all ended up in futility. It was only former President Estrada who wanted to legalize the numbers game, and legitimize the employment of more than 200,000 jueteng minions and for government to collect billions worth of taxes.

After hearing the radio-program discourse, it dawned upon me how gargantuan a task President Aquino is facing to eliminate jueteng after failed attempts from past administrations. Jueteng has become so institutionalized in our society that controlling it seems impossible. How can our leaders take control and put a stop to the illegal-numbers game? Is jueteng something that can be totally controlled or instead be regulated?

Leaders, be they in government or in business, are expected to be “in control” of the situation in which their business or administration find themselves. If an unexpected event occurs, like the Gulf oil spill that Obama is now facing, or the global financial crisis in 2009, leaders are supposed to pronounce that “things are under control.” But how can leaders or managers be expected to be totally in control when there are factors that are “beyond their control,” such as the entry of a new competitor, or an unexpected disaster, or a new regulation?

Organizations, as well as society as whole, are always in a state of flux. Change is constantly happening, be it gradual or sudden. But is this the natural state of organizations and society which is one of chaos, with dynamics of its own, and one which can even shape the leader? Should Mr. Aquino instead accept the fact that jueteng cannot be eradicated, and should, therefore, legalize it?

It’s incumbent upon the leader to accept change and the complexity that goes with it. A leader should understand how much he or she can exert over an organization or society which is always in a state of flux at the same time, and accept the fact that he or she is “not totally in control.” Society, like organizations, has a self-organizing and transformative nature. Groups and institutions have the intelligence to self-organize, as pointed in the book of Surowiecki’s Wisdom of Crowds.

Hence, a leader should appoint competent and trusted people to run departments and sections. They, in turn, should appoint reliable and trusted managers and staff. The leader should regularly and constantly engage in active conversations with his or her managers to communicate a clear vision, purpose and direction; and should allow these groups and departments to self-organize and creatively find ways. It’s like “losing control” but still “in control.” Dee Hock, the founder of Visa, called this chaordic organizations—combining chaos and order but still creatively working toward a common purpose.

Leaders and managers find that they live with the paradox of being simultaneously “in control’’ and “not in control.” To become an effective leader, one should learn to accept and live with this paradox by still creatively taking part in spite of “not being in control.”

So can jueteng be eliminated under this new administration? Only time will tell if the situation can be shaped by the current administration, or the other way around. But expectations are high.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc. Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Making decisions

2010-06-23T02:53:00.000-07:00

(Published in Business Mirror under Mirror Image column, June 23, 2010)

Sixty thousand barrels of oil a day, according to US government estimates, are being spilled into the ocean as a result of the Gulf of Mexico oil leak, which started in April. According to senior officials, this is the worst environmental disaster the US has ever faced, and there is no end in sight until relief wells come into operation, probably in August.

British Petroleum, which operates the leaking oil well, said the disaster has already cost it $2 billion. The number of claimants, standing at 64,000, is still growing as the oil continues to spew from the broken wellhead. The damage to the environment will entail huge amounts to repair.

In the investigation of the US House of Representatives, BP’s CEO was accused of being oblivious to the risks of his company’s deep-water operations; he said he was “deeply sorry” for the catastrophic Gulf coast oil spill.

A closer look at the root cause reveals a combination of misjudgment and faulty facilities. A BBC report said a rig worker claimed a leak was found even weeks before the accident in one of two control pods directing the flow of hydraulic fluid. Both BP and the operator of the rig were informed, he said.

As the report went, instead of shutting down the entire rig to carry out the necessary repairs, BP just closed the defective unit. This meant it was relied entirely on the other control pod to cope with the problem, which at the time some workers were already describing as “a nightmare well”.

Was the BP CEO utterly unmindful of the risks associated with deep-water operations? Wasn’t he in control of the situation and unable to assess the uncertainties? Were the rig workers and supervisors oblivious of the imminent disaster but just shrugged it off as something under control?

Accidents like oil spills during production are mainly due to human mistakes, as well as equipment failure. Human errors happen when one ignores uncertainty and assumes predictability. It’s always tempting for decision-makers to just believe that their own ability and actions can overcome the effects of uncertainties.

When making decisions, it is supremely important to take full account of uncertainty. One model, put forward by Makridakis, Hogart and Gaba in their book Dance with Chance, is to use the three A’s—first Accept, second Assess, and third Augment the uncertainty of the situation.

Accepting that uncertainties are beyond one’s control is the first step. This entails not sitting back and waiting, but taking a realistic view of uncertainties, but a concerned view that accidents are not within our control.

It’s surprising that despite numerous oil spills and accidents in the past, executives of oil firms still take the relaxed view that everything is under control.

This brings the need to assess the situation—understanding the information at hand. This means assessing what relevant information is needed to make a decision and understanding the potential impact of that decision.

Instead of shutting down the entire rig to carry out the necessary repairs, BP just closed the defective control pod, which meant relying completely on another defective control pod. This decision failed to assess the potential dangers of continuing operations with a defective control pod.

Last is to augment. It’s unfortunate that many people fail to augment and end up having to deal with surprising consequences. Augmenting is the most important step in dealing with uncertainties as this entails actions that mitigate risks through disaster planning and preparedness.

Equipment and facilities enhancements and modifications, and advancement in new technology will be needed to minimize the risk of such deep-water oil leaks. Building a culture of tighter safety might have prevented the disaster. Tighter regulations, as well, are needed to augment the safety measures of oil companies.

It seems that BP executives failed to augment the uncertainties they’re facing, and instead continued to operate on defective facilities. This is how disasters happen.
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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Smart Grid

2010-04-11T21:53:00.000-07:00

(Published in Manila Standard Today under the Greenlight column, April 12, 2010)

Hours of brownout plagued Mindanao at the start of the year, crippling business output by fifty percent. The Mindanao Grid continued to experience generation deficiency because of the limited available capacity of the state-run National Power Corp.’s hydropower plants, most of whose water reservoirs are drying up because of El Niño.

In the Visayas, the Cebu Energy Development Corp.’s coal unit had to undergo an emergency shutdown in March, significantly cutting down the Visayas Grid’s available capacity.

In the meantime, the second unit of the Palinpinon geothermal facility in Negros Oriental, went on an emergency shutdown, causing the Visayas Grid to lose some badly needed capacity.

Bad luck or just plain and simple lack of foresight?

Whatever it is, the whole value chain of power supply – from generation, to transmission, to distribution - needs to undergo transformation to make the power grids more intelligent, digitized, and efficient, ushering the age of the “smart grid”.

While at its core the message is accurate, the smart grid is much more far-reaching than its frequent portrayal as simply the appearance of sophisticated new energy management tools in the home. It encompasses other things desired by customers such as easier access to renewable generation, faster restoration of outages, and richer products and services. Within utility organizations, it will require fundamental shifts in business strategy and industry business models, unprecedented collaboration with stakeholders, redesign of business processes and applications, and renewed focus on the roles, competencies, compensation, performance, and structure of the workforce.

Companies and governments across the globe are rising to the challenge by focusing efforts to effectively manage anticipated changes in demand, accommodate growth in distributed (especially renewable) generation resources, expand access to power, empower citizens, and encourage a stronger focus on conservation.

On the Mediterranean island of Malta, for example, power, water, and the economy are intricately linked. The country depends on electrically powered desalination plants for over half of its water supply. About 75% of the cost of water from these plants on Malta is directly related to energy production. Meanwhile, rising sea levels threaten Malta’s underground freshwater source. Additionally, the government of Malta has set an objective of transforming the island into a competitive knowledge economy to encourage investment by foreign companies. Meeting all of these goals in a short period of time presents a complex series of challenges that require immediate attention to ensure that the country has a sustainable and prosperous future.

In light of this need, the Maltese National Utilities for Electricity and Water are completely transforming their distribution networks. All 250,000 electricity meters will be replaced with smart devices. These and the existing water meters will be connected to advanced applications to enable remote reading, management and monitoring throughout the entire distribution network.

Companies on similar journeys will need to manage four separate project streams: the smart grid technology implementation itself, domain-focused projects (e.g., grid operations, work and asset management, customer experience and management), value chain integration, and management of the transformation across strategy, finance, organizational structure, and stakeholders. These companies will benefit from evaluating where they are best positioned to begin their efforts, and where they may need to develop new capabilities before initiating work.

IBM, in collaboration with the Global Intelligent Utility Network Coalition and the American Productivity and Quality Center, developed a Smart Grid Maturity Model (SGMM) that can help utilities assess where they stand in this regard. This maturity model’s structure emphasizes the likelihood that most companies will implement specific solutions gradually over time, re-evaluating results along the way and using the outcome to make decisions on the best steps for continuing development.

In order to promote the model’s widespread adoption and use, IBM handed over the Smart Grid Maturity Model to Carnegie Mellon University’s Software Engineering Institute (SEI) earlier this year. SEI will assume primary responsibility for the ongoing governance, growth and evolution of the model. In addition, the World Energy Council will be a channel for global dissemination, participation and adoption of the model using its worldwide network of member committees.

Utilities are increasingly being viewed as a critical link in solving the challenges we all face related to effectively managing our energy resources and environment. The industry is now clearly in a transition toward becoming a vibrant, competitive, innovative influence on the global economy. The decisions made today about the world’s electricity networks will impact our lives for decades to come.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of the De La Salle University Ramon V. del Rosario Sr. Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Technology strategy

2010-03-10T23:14:00.000-08:00

(Published in Business Mirror under the Mirror Image column, march 10, 2010)

In an unprecedented move, Barack Obama announced in 2009 the appointment of Aneesh Chopra as the country’s first chief technology officer [CTO]. In the official statement, Obama said, “Aneesh will promote technological innovation to help achieve our most urgent priorities—from creating jobs and reducing health-care costs to keeping our nation secure.”

He also said the CTO “will develop national strategies for using advanced technologies to transform our economy and our society, such as fostering private-sector innovation, reducing administrative costs and medical errors using health IT, and using technology to change the way teachers teach and students learn.” Succinctly said, the CTO is responsible for the technology strategy of a country and in many companies.

Any country like the US or even the Philippines needs a technology strategy to progress, in much the same way as companies do. That’s why in recent years we have witnessed a growing appointment of CTOs and that attention to technology strategy.

But because of its relative novelty as an area of strategy and management, there is interestingly a dearth of material that directly describes what technology strategy is and how to formulate one. This is partly to blame for the misunderstanding of many companies, leading to missed opportunities or costly technology mistakes.

There is now a sea of supposed chief technologists who err in forecasting and estimating a technology’s potential, costing a company a fortune. For example, the CTO of a local firm invested heavily in buying the software asset of a foreign company with the aim of developing this for the company’s own use, only to discover later on that the company lacked competencies in wielding the software; hence putting the project to a full stop after several years.

So what is technology strategy? A distillation of various descriptions available leads us to the following definition—that technology strategy is the alignment of technology vision with business strategy by integrating company processes with appropriate technologies. Technology vision should be inextricably linked to business strategy for increased efficiencies and growth opportunities.

A simple framework based on classical strategic management can help CTOs formulate technology strategy. The fundamental ideas of this framework are (1) that technology strategy is influenced by the external and internal environmental forces; (2) the business strategy influences the technology vision; (3) the technology strategy of a company (or a country for that matter) emerges from its technological capabilities and competencies; and (4) the implementation of technology strategy, through the experience it generates, serves to further develop the firm’s technological capabilities and competencies.

The technology strategy is shaped by the constantly evolving business environment, both in terms of new opportunities and new threats, may it be a new manufacturing process or a new software to make operations more efficient. Business strategy is developed to take advantage of or counter changes in the business environment. The CTO then aligns technology vision with business strategy by integrating company processes with the appropriate technologies. If the CTO has a good understanding of technology and changes in the technological environment, he or she can develop a technology strategy in advance of changes in the business environment.

Taking stock of the technological capabilities and competencies of a firm are a crucial starting for a technology strategy. An inventory of these capabilities in terms of assets, people and other resources will help the CTO baseline his or her standing. From this baseline the CTO can assess the gaps relative to the technological vision.

Implementing the technology initiatives within the organization builds learning and experience among the CTO team members and the whole organization. To maximize the learning from technological mishaps, the implementation team should be accountable yet with enough room to make mistakes. A truly effective technology strategy not only takes into account the technology initiatives but the development of organization members themselves in terms of improvements in competencies and productivity.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc. Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University Ramon V. del Rosario Sr. Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at rlugtu.blogspot.com.

IBM opens Asean Telecom Center of Excellence

2010-02-16T21:01:00.000-08:00

By Mary Ann Ll. Reyes (The Philippine Star)

MANILA, Philippines - IBM has opened the ASEAN Telecom Center of Excellence (CoE) to accelerate telecommunications solution development and streamline product delivery in the region.

In a statement, the global technology giant said this will help ASEAN telecommunication service providers compete more effectively in the fast-changing market.

The center will bring together cutting-edge technical skills, specialized offerings and industry best practices to meet the rising challenges in ASEAN’s telecommunications industry.

Located in Kuala Lumpur, Malaysia, the ASEAN Telecom CoE leverages IBM’s globally-integrated network of capabilities and partnerships. The CoE offers a range of new telecommunications software solutions based on IBM’s Service Provider Delivery Environment (SPDE) 3.0 framework, as well as hardware, services and business partner applications.

Clients will include telco operators, network equipment suppliers, independent software vendors (ISVs) and extended service providers.

“To sustain growth in this competitive industry landscape, service providers must offer customers a more positive and differentiated user experience while reducing complexity and cost,” said IBM Philippines country manager for telecom and utilities industry Rey Lugtu.

He said the CoE offers the ASEAN telco industry an unparalleled level of expertise and support to speed implementation and facilitate effective use of applications and technologies.

“This is very beneficial to the Philippines, wherein the telecommunications industry remains one of the more exciting and rapidly growing sectors in the country,” he added.

The CoE is staffed by technical and telecommunications experts with experience in deploying service creation, service delivery as well as business and operation support systems.

According to research firm IDC, the combined telecommunication services market of Indonesia, Malaysia, the Philippines, Singapore and Thailand, would reach $35.7 billion in 2009.

Malaysia, the Philippines, Singapore and Thailand were expected to show modest growth at a four percent to six percent range.

Vietnam and Indonesia, each with double-digit expansion rates, would demonstrate higher growth as they are at the early stages of the technology adoption curve and currently addressing the digital divide in their markets.

“By supporting ASEAN’s telecommunications service providers in innovation efforts which leapfrog traditional technologies plans to be world-renowned leaders, we have established a unique position in the industry. We will continue to help telecom providers improve their competitive capabilities by enabling them to combine their strategic assets with innovations that address new market opportunities,” Lugtu said IBM is one of the world’s largest technology suppliers to the telco industry. More than 90 percent of the world’s communications service providers are IBM clients.

1st Mindanao Technology Summit

2009-11-03T06:28:00.000-08:00

The Green Valley College Foundation, Inc., is one the fastest growing educational and training institution based in the City of Koronadal, South Cotabato. One of our major milestones for this year is to bring to our region the 1st Mindanao Technology Summit 2009. The summit will be a gathering of students, instructors/professors, IT professionals and businessmen with interests in the field of IT and IT enabled services. It will be held at the South Cotabato Gymnasium and Cultural Center, City of Koronadal, South Cotabato on November 21, 2009.

Organized by our institution in partnership with a multinational company, International Business Machine (IBM), it shall center on the theme “ICT and Beyond.” The radical developments in the field of ICT opened up emerging business and career opportunities for Filipinos. Awareness of these opportunities will make us more responsive to the challenging times.

Keynote speaker is Mr. Reynaldo Lugtu Jr, who will speak on the future of IT and II careers in Philippines. He is professor of marketing and management in the Graduate School of Busisness, De LaSalle Universtity and Country Manager, Communications Sector of IBM Philippines.

Learning

2009-11-02T02:12:00.000-08:00

(Published in Manila Standard Today under the Greenlight column, November 2, 2009)

As I write this, I am in a classroom in INSEAD Singapore, attending a two-week executive education on business and management. Coincidentally, it’s also my birthday today, October 29, and I’m away from my family.

My teenage daughters, Frances and Renee, had asked why I would sacrifice a birthday celebration with them, and instead go back to school. In an apologetic way, my cursory answer was that the schedule was fixed beforehand; but what I told them with great pride was that it’s an invaluable opportunity to learn from the fourth-ranking business school in the world.

I went on in saying that the most important personal asset in your life is your education; that you should never stop learning. As a Chinese proverb goes, “learning is a treasure that will follow its owner everywhere.”

Indeed, as an adult learner, I am one of those business executives who are sent by their companies to business school and training camps to learn new skills and knowledge, with the objective of applying these on-the-job; and ultimately resulting to enhanced business results.

Companies spend tons of money in running training programs. But are companies’ getting their money’s worth? Are management training programs effective? What if two competing companies used the same training program with the same approach and content? Who will eventually have the advantage?

Trainings and executive education are not as effective due to a number of factors: inadequate training materials, lack of qualified trainers, deficiencies in program design and evaluation, excessive reliance on conventional techniques, and others. Learning institutions and human resource departments already know how to address these issues.

But perhaps the most important factor is the learning process itself – does one know how he or she learns in an optimum way. The manager or employee that continuously learns how he or she learns has the advantage over his or her competitors and even peers.

To most adults, learning is an acquired skill and not an innate talent. You can improve your learning capacity at any age in various ways. One is to understand your learning styles such as learning through seeing, through listening, and through touching or experiencing. Another is to understand your strengths so that you can match what you learn with the format that works best. Still another is to use the facilitator to intervene when you couldn’t relate to the lessons. Lastly, it’s just simply asking one’s self “How does this relate” or “What’s my take away from here”.

How I maximize my learning in the executive education I am attending now is to combine all of these approaches, with emphasis on the experiential aspects such as case study discussions and reflections at the end of each session. I also draw diagrams and frameworks on paper to show relationships of variables, as I am more of a visual learner.

As competition becomes stiffer and knowledge becomes the most important asset of organizations, the victors will be those whose managers and employees learn how to enhance their learning. They will need to evaluate what they learned and benchmark their performance with the application of new-found knowledge. Then they will further enhance their learnings on how they learn. This will be the source of competitive advantage of companies in this age of knowledge.

After attending this management program in INSEAD, I will definitely find opportunities to apply the learnings to my work, and share these to my students. And when I get back home, I shall tell my daughters that now I’m wiser, not older.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University Ramon V. del Rosario Sr. Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Happiness

2009-10-22T07:14:00.000-07:00

(Published in Business Mirror under the Mirror Image column, October 20, 2009)

All of us, in one way or another, have been affected by the super-typhoons Ondoy and Pepeng. But in the televised news reports that I’ve watched, it never failed to amaze me that Filipinos could still laugh and smile while being interviewed by news reporters in front of their wrecked homes. Even American soldiers on a rescue mission seemed to be wondering why affected Filipinos were all smiling, giving them “high-fives,” amid the catastrophe.

If you think about it, there is a truism in the proverbial mababaw ang kaligayahan (literally translated “shallow happiness” or “easy to please”). To many of us Filipinos, happiness is watching Wowowee and reveling in the antics of Willie Revillame and his bevy of curvaceous dancers. Happiness is patiently lining up in a lotto outlet, waiting for one’s turn to get hold of a ticket to one’s dreams. Happiness is treating one’s family to a weekend lunch, spending a hard-earned minimum day’s wage in a burger joint.

Are these true examples of happiness? The latter has been the metaphor of Dr. Tal Ben-Shahar, in his book Happier. Aptly called the “Hamburger Model” of happiness, he categorizes situations into four types of hamburgers, depending on the benefit or detriment to one’s present or future.

The first type is the vegetarian burger. This describes a tasteless vegetarian burger made only with the most healthful ingredients, which would afford one future benefits, in that one would subsequently feel good and healthy, and present detriment, in that one would not enjoy eating it. One example of this situation is a hard-working employee, working long hours to get the job done to build some savings to secure a future like owning a house. But he is not enjoying his job and finds it a daily grind.

The second type is the junk-food burger. This is a tasty hamburger that would yield present benefits, and that one would enjoy it, but future detriment, in that one would subsequently not feel well. This is exemplified by a hedonist who seeks pleasure and avoids pain, like a person who indulges in drinking, drugs and sex, not thinking about tomorrow.

The third type is the worst of all possible burgers, which is both tasteless and unhealthy—in eating it, one would experience present detriment, in that it tastes bad, and suffer future detriment, in that it is unhealthy. This describes a person who has lost the drive and lust for life; someone who neither enjoys the moment nor has a purposeful future.

The last type is the ideal burger which exemplifies the happiness archetype. Happy people who knowingly perform activities that would bring them enjoyment in the present and would also lead to a fulfilling future. This means finding enjoyment in our jobs now while saving some money for the future. Instead of asking “Should I be happy now or in the future?” one should ask “How can I be happy now and in the future?”

So what explains the happiness of Filipinos in the face of adversity? What explains the results of surveys year after year that show Filipinos are one of the happiest people on earth? A 2007 Survey Research Hong Kong showed in its Asia-wide happiness survey that despite poverty, 94 percent of Filipinos were more contented with their lives than other Asians.

In adversity or not, Filipinos find happiness in the moment through their families, good health and religion. This is according to the 2007 study of the National Statistical Coordination Board (NSCB), which showed that Filipinos ranked family as the most important source of happiness. This is testament to our culture of sociability and conviviality; that we find solace in the company of others, be they immediate family or a family of friends.

How about the future? The 2007 and 2009 study, called AXA Life Outlook Index, stated that Filipinos were the most optimistic people in Asia. Consistent with the NSCB findings, this may be the result of our religiousness—the belief that God will take care of us in the future, that in the future we will see our grandsons and granddaughters who will bring us immeasurable joy. That’s why crisis after crisis, Filipinos are able to spring back to face another day and live for the future.

It’s truly laudable that Filipinos are finding the ideal hamburger of happiness—enjoying the moment and living a purposeful life for the future. But it’s also unfortunate that politicians are taking advantage of this Filipino trait for selfish gains. Poverty has afflicted generations of Filipinos as a result of callous corruption and patronage politics. But because we are mababaw ang kaligayahan, we are content and happy with what we have. Still, we deserve greater happiness now and in the future.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc. See link to Business Mirror article

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of Graduate School of Business, De La Salle University. He may be e-mailed at rlugtu2002@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it , or visit his blog at http://rlugtu.blogspot.com.

Growth of Cloud Computing

2009-09-07T06:28:00.000-07:00

(Published in Manila Standard Today under the Greenlight column, Spetember 7, 2009)

Major business and market trends are spurring the growth of cloud computing among companies and governments, even as this newly emerging IT concept is still being refined.

Cloud computing is an approach to a shared IT infrastructure in which large pools of computer systems are linked together to provide IT services. Cloud computing accesses "virtual" resources, and therefore, is not limited by the power and capabilities of local or remote computers. It is the next generation of enterprise data centers, which operate like the Internet, providing extreme scale and fast access to networked users. Cloud computing offers a simplified, centralized platform for use when needed, lowering costs and energy use. Unlike grid computing, which distributes IT for a specific task, cloud computing is used across an entire range of activities. The platforms can be externally hosted services, but are also used inside companies, especially those which operate globally.

The uses of cloud computing will increase over the next three-to-five-years because the following trends impacting business and consumers continue to accelerate:

The Web is interactive, not static
Today Web content is transformed every day by users around the world, who contribute and exchange information. Wikipedia, and YouTube are prominent public examples. In addition, social networking, and other collaborative tools are rapidly growing in use within company firewalls. Workers, especially those in research and development, use Web applications to collaborate on work projects across the globe.

Cloud computing meets the high-performance demands of the dynamic Web by using existing infrastructures to process massive amounts of information in split seconds.

To conduct online brainstorming sessions among their workers, for example, China Telecom and Sogeti, a European professional services firm, turned to internal cloud computing platforms. High performance cloud computing is able to collect input from 18,000 Sogeti employees, in real time, sort and analyze it for business use.
Energy Efficiency

As energy costs climb and concerns over carbon emissions increase, the need for energy efficient IT is gaining greater attention. Cloud computing is able to use IT resources efficiently, and reduces the amount of power needed to run data centers. According to Info-Tech Research Group, most computer servers run full time, but are used at only 10 to 20 percent of capacity. Cloud computing saves energy and operating costs by pooling IT resources. Its platforms are able to scale up or down as needed, putting computer power to use, rather than drawing energy while remaining idle.

Continued Innovation
Global competition means companies need to get new ideas to market faster, and they look to technology to help them speed up results. This need for continued innovation is a major driver of cloud computing, which offers robust computer power at lower cost.

At a Wuxi, China industrial park, tenants, mostly start-up software companies, are able to access an entire IT infrastructure by plugging in their computers. The industrial park worked with IBM to create a cloud computing center which it hosts for its tenants. IT is part of the industrial park's infrastructure, along with heat, lights and water. For software start-ups, this means lower costs in developing products. They avoid buying and operating their own servers, applications or tools and pay only for the IT services they actually use. Vietnam in 2008 established a cloud computing platform at its National University to build IT skills among its workforce more quickly.

Simplicity for users
Technology continues to grow more sophisticated, but users want IT to remain simple to use. Delivering software-as-a-service over the Internet is an example of the trend toward simplicity. It is also a precursor of cloud computing. By purchasing a service, rather than buying software outright, a company uses up-to-date software without the complexities and costs of managing or upgrading it.

Cloud computing brings similar simplicity to the entire range of IT. Some cloud computing platforms are hosted externally and purchased as a service. This is appealing for smaller firms that have limited technical staffs. However, many companies, especially larger firm, are likely to opt for internal platforms, especially in industries, such as finance, which require security and privacy.

Structure for vast amounts of information
The Web provides quick access to a huge quantity of information, but sorting through it is a challenge. Search technologies, such as Google, exist because of this need for order and structure as information expands faster than the human mind can assimilate.

Every day millions of Internet users contribute text, pictures, and audio to Web sites around the world. The Web's value as a tool for productivity could be jeopardized without the ability to find data that users need, quickly and accurately. Cloud computing brings order and structure by being able to integrate widely diverse kinds of information. It delivers more computing power for handling massive amounts of data, as well as a simpler infrastructure to manage complexity.

Over the next decade, cloud computing will continue to transform as it adapts and responds to these major business and market trends, which are likely to dominate the technology landscape long into the future.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle University, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Smarter shopping

2009-08-22T07:21:00.000-07:00

(Published in Business Mirror under the Mirror Image column, Aug 18, 2009)

NOTHING, you’d think, would be more dynamic or up-to-the-minute than how we buy and sell. From the early Greek agoras to the modern superstore, markets have always been the most sensitive barometers of economic and societal change.

However, today’s retail model is struggling. It’s still largely a system built for the realities of an earlier era—a linear, push-based process where products are manufactured in isolation and put into market en masse from factory to truck to store, for customers who do the majority of their shopping in suburban malls.

This served very well the needs of manufacturers, retailers and consumers half a century ago. But today, this system is straining to adapt to global supply chains, new ways and venues for selling—both physical and virtual—and a very different kind of consumer.

Global retail today sees lead times as long as six to 10 months, forcing vendors to make significant bets on inventory, consumer trends and distribution methods—bloating supply chains with a stockpile of $1.2 trillion in excess merchandise.

At the same time, retailers lose a staggering $93 billion in missed sales every year, simply because they don’t have the right products in stock to meet customer demand. And that demand is more demanding and immediate than ever before: in the US, over 92 percent of adults conduct research online and seek the opinions of others before they ever purchase a product from a store.

According to the February 2009 report of Euromonitor International, in the Philippines, retailing remained resilient in 2008, supported by the expansion of large retailers into provincial areas increasing incomes, as business-process outsourcing (BPO) continued to post vibrant growth.

The high inflation rate, which increased the prices of basic commodities in the first half of 2008, only slightly depressed sales of grocery products in 2008. Store-based retailing registered healthier current-value growth compared with 2007, while growth in nonstore retailing decelerated. This is relatively good news for the industry and for our economy. But we can do better.

To do business with shoppers on a smarter planet, retailers and manufacturers need a smarter system, one that bends retail’s global supply chain to these new realities. It needs to be interconnected, so the system can be fed by customer insight at every point in the process—all the way from design to distribution. It needs to be instrumented, so every item of inventory can be tracked and accounted for. And it needs to be intelligent, so vast amounts of customer data can be analyzed and turned into real value in real time.

You can see examples of this right now: 1-800-FLOWERS.COM Inc. is tearing down the walls between its 14 brands through a flexible Web platform that lets the company respond to customer needs faster and more efficiently. Outdoor retailer Moosejaw is giving its customers a seamless shopping experience across all channels (retail, Web, mobile, etc.) and is infusing customer feedback and reviews back into a system designed to continuously improve the products and customer experience.

The German Metro Group, one of the largest and most international retailing companies in the world, has introduced RFID technology throughout its entire supply chain, to help them get the products its customers want on the shelves when they want them. And top clothing designer Elie Tahari has built an inventory-reporting platform that’s helped it better match its products to customer demand.

By building intelligence into our entire retail system, retailers, manufacturers and suppliers can eliminate inefficiency and waste at every step of the chain—crucial in the current economic downturn. Even more important, retailers can better serve the new breed of empowered consumer, whose needs for high-value, individual service and low prices will only grow.

Going forward, the watchword of commerce may no longer be caveat emptor—“let the buyer beware.” In a smarter retail system, it is the seller who must be—and can be—vastly more attentive and responsive.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of the Graduate School of Business, De La Salle University. He may be e-mailed at rlugtu2002@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it , or visit his blog at http://rlugtu.blogspot.com.

DSLU and BPAP launch two Leadership and Management Programs for BPO employees

2009-07-29T19:58:00.000-07:00

De LaSalle University and the Business Processing Association of the Philippines (BPA/P) recently launched two leadreship and management programs for BPO employees to address the management skills gap among BPO supervisors and managers. The programs are starting in September 2009.

The programs are:

Enhancing Your Supervisory Skills
(Supervisory Skills Program)

Recommended for: Supervisors / Team Leads in BPO companies

Course description
This five-day course will give you an overview of the competencies that a supervisor in a BPO company must possess to succeed in his / her task of helping the people working under him / her to achieve their full potentials. Through various participative learning approaches, you will be able to enhance your ability to inspire others, to communicate well, to assess performance, and to effectively handle work-related problems, among others.

Course content
1. The Role of the Supervisor in the Organization
2. Key Supervisory Skills
3. The Adapt-able Supervisor (Understanding Self and Others’ Behavior)
4. Performance Diagnosis and Coaching
5. Communication Skills
6. The Purpose Driven Supervisor
7. Problem Solving and Decision Making: Data-based Analysis for Effective Business Results

Registration
To register, please complete and return the attached Registration Form. Fee is P14,500 per individual, and covers participants’ meals, and course materials. Participants will also be given individual certificates for completing the five-day module.

Program requirements- Two (2) certified true copies of transcript of records
- Six (6) pieces of passport-sized photos
- Updated resume

Schedule
Five (5) consecutive Mondays per run, 9 a.m. to 5 p.m.

Venue
De La Salle University – Graduate School of Business (GSB) campus, 5th Floor, RCBC Plaza Tower II

Contact details
For inquiries, you may visit us at the following address: De La Salle University – Graduate School of Business (GSB) Campus, 5th Floor, Tower II, RCBC Plaza, Sen. Gil Puyat Avenue corner Ayala Avenue, Makati City. Or you may contact the following people:

Course Director: Mr. Reynaldo “Rey” Lugtu, Jr., Email: rlugtu2002@yahoo.com
Secretary: Ms. Aileen Negrillo, Telefax: 753-4617; Trunkline: 753-4611 local 105

The Effective BPO Manager
(Certificate Course in BPO Management)

Recommended for: Current and potential managers in BPO companies

Course description
This 15-day course was designed to answer the BPO industry’s need for well-trained managers, who are able to respond in a dynamic fashion to the rapid changes in the business environment. Developing the industry’s pool of managerial talent is critical if the industry is to sustain its impressive growth in the succeeding years.

Through this course, you will learn the fundamentals of various managerial areas such as finance, operations, and human resource / talent management. You will also go through activities and exercises that will hone your business planning, critical thinking, and decision making skills.

Participants will be given individual certificates for completing the 15-day course. Completion of the Certificate Course in BPO Management entitles the successful participant to credit equivalents in the regular MBA Program of DLSU, provided that all admission requirements of the DLSU – GSB and the requirements of the Commission on Higher Education (CHED) are met, and provided that the participant passes a validating exam administered by the University for the said purpose. Credits will be valid within two years after the completion of the certificate course.

Course content
1. Management Principles, Organizational Behavior, Ethics
2. People Management in BPOs
3. Critical Thinking and Strategic Decision Making
4. Operations Management in BPOs
5. Financial Management in BPOs
6. Strategic Business Planning

Registration
To register, please complete and return the attached Registration Form. Fee is P46,000 per individual, and covers participants’ meals, course materials, and certificates.

Program requirements
- Two (2) certified true copies of transcript of records
- Six (6) passport-sized photos
- Updated resume
- Letter of purpose of participation in the course, addressed to: Mr. Raymund B. Habaradas, Director, Professional Development and Training Services, Angelo King Institute for Business and Economic Research and Development, De La Salle University, 5th Floor, Tower II, RCBC Plaza, Gil Puyat Avenue cor. Ayala Avenue, Makati City.

Schedule
Fifteen (15) consecutive Saturdays per run, 9:00 a.m. to 5:00 p.m.

Venue
De La Salle University – Graduate School of Business (GSB) campus, 5th Floor, RCBC Plaza Tower II

Contact details
For inquiries, you may visit us at the following address: De La Salle University – Graduate School of Business (GSB) Campus, 5th Floor, Tower II, RCBC Plaza, Sen. Gil Puyat Avenue corner Ayala Avenue, Makati City. Or you may contact the following people:

Program Director: Mr. Reynaldo “Rey” Lugtu, Jr., Email: rlugtu2002@yahoo.com
Secretary: Ms. Aileen Negrillo, Telefax: 753-4617; Trunkline: 753-4611 local 105

Future of outsourcing and offshoring

2009-06-18T08:12:00.000-07:00

(Published in Business World under the View from Taft column, June 18, 2009)

Amid the mixed forecasts on the global economic rebound, experts on the outsourcing and offshoring industry are consistently painting a rosy picture toward the end of the year. According to the 2009 edition of the Black Book of Outsourcing, more than half of companies polled say they expect their spending on outsourcing services to come back and return to pre-recession levels.

Similarly, a Business Processing Association of the Philippine (BPA/P) survey among industry players showed that 96% of respondents representing organizations that provide non-voice Business Process Outsourcing (BPO) services believe that 2009 prospects for their organizations are good, excellent, or outstanding. More than half of the respondents, 51%, said prospects are excellent.

All these forecasts bode well for the local industry, but more likely than not, the industry will never be the same after the global slump that we are experiencing. I forecast three major directions where the global as well as local outsourcing and offshoring industry is headed:

1. Governance will become a major criterion for outsourcing vendor selection and a competitive advantage among players

With Satyam’s CEO falsely boosting the company’s earnings numbers in January 2009, and the recent ban of Wipro in doing business with the World Bank, the corporate governance crisis in the outsourcing sector deepened. These incidences made clients think twice before contracting with vendors.

After the post-Indian governance crisis, clients all over will be taking a more stringent stance on making governance, especially corporate and operating governance, a major criterion in outsourcing provider selection. From the vendor’s side, a good governance practice will become a competitive advantage to close more outsourcing contracts. With these in mind, more established and governance-focused outsourcing vendors should prepare to capitalize on the rise of similarly governance-focused clients.

Local and medium-sized outsourcing providers will need to adopt stricter and more comprehensive governance structures and practices to compete with the bigger and more established players.

2. Strategic companies that focus on innovation will prosper

There has been much discussion in the BPO industry that companies that move up the outsourcing value chain are able to win and retain more clients and improve profitability. However, playing in this higher value chain, i.e., the knowledge process outsourcing (KPO) space, such as financial analysis or engineering outsourcing is not a guarantee for success. What is more critical is that BPO players need to continually innovate on all fronts.

In fact, a 2005 McKinsey Study strongly advised that the Indian IT-BPO sector can generate over US$10-15 billion of additional revenues by 2010-over and above its $60-billion export target — provided it makes innovation its chief growth catalyst. Moreover, a 2005 IDC survey among BPO clients in the US suggested that 35% of the respondents look for BPO providers to drive innovation.

Innovation among outsourcing providers may come from three fronts: business model innovation, which entails significantly changing the structure and/or financial model of the business; services/markets innovation, which entails creating new or significantly differentiated services or go-to-market; and operations innovation, which involves improving the effectiveness and efficiency of business processes.

The industry is replete with examples on award-winning innovative BPO players, from Evalueserve to Genpact As we witness a slowdown in outsourcing activities amid recession, innovative companies will take advantage of the slower pace and strengthen their business models, service deliveries, and operations through innovation.

Local BPO players will need to incorporate innovation initiatives in their strategic planning process. They will also need to develop a culture of innovation that rewards creative and innovative ideas.

3. Outsourcing providers will consolidate to take advantage of economies of scale and specialization

Stronger outsourcing customers will take advantage of the tougher marketplace and demand higher levels of service at a lower unit cost. Hence, vendors will be forced to consolidate through mergers and acquisitions. Weaker competitors, in order to survive, will get absorbed by strongers companies, while others will be forced out of the playing field.

As a result of the global financial crisis, a wave of consolidation is already taking place in the financial services and insurance BPO. Economies of scale and breath of service in specific vertical industry knowledge, e.g. insurance, will be the key drivers for consolidation. Large BPO players will absorb niche players to complete the full value chain in a vertical industry. Consolidation is also taking place on a horizontal level, e.g., contact center services and human resources outsourcing, to capitalize on specialization and economies of scale.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of the Graduate School of Business, De La Salle University. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Smarter healthcare

2009-06-08T00:55:00.000-07:00

(Published in Manila Standard Today under the Greenlight column, June 8, 2009)

The problems with our health care system are well-known and well-documented- and endlessly debated. What’s not so apparent is that many of them arise because the system isn’t, in fact, a system.

Connecting the system
Rising costs, limited access, high error rates, lack of coverage, poor response to chronic disease and the lengthy development cycle for new medicines- most of these could be improved if we could link diagnosis to drug discovery to health care are providers to insurers to employers to patients and communities. Today, these components, processes and participants that compromise the vast health care system aren’t connected. Duplication and hand offs are rampant. Deep wells of life-saving information are inaccessible.

Take for instance, in 2005, the Health Education Reform Order (HERO) reported that the total health care expenditure in the Philippines amounted to P165 billion, or about 3.5 percent of the GNP. Local health care spending has been focused on ‘sick care’, paying for products and services for patients to treat diseases when people have already developed them or are in the advanced stages. There is a clear need for improvement.

A smarter health care system starts with better connections, better data, and faster and more detailed analysis. It means integrating our data and centering it on the patient, so each person ‘owns’ his or her information and has access to a networked team of collaborative care. It means applying advanced analytics to vast amounts of data, to improve outcomes.

Using technology for smarter health care
Smarter health care is instrumented, so our health systems can automatically capture accurate, real-time information. IBM’s joint initiative with Google Health and the Continua Health Alliance enables individuals and stream data from medical devices. Implanet, a French orthopedics manufacturer, is using RFID technology to track surgical implants from manufacture until they’re inside patients. And health care providers in Denmark are using predictive health systems with advanced telemetry to monitor elderly patients in their homes, sharing data instantly.

Smarter health care is interconnected, so doctors, patients and insurers can all share information seamlessly and efficiently. Sainte-Justine, a research hospital in Quebec, is automating the gathering, managing and updating of critical research data, which is often spread across different departments. Then they’re applying analytics to speed childhood cancer research and improve patient care—while drastically lowering the cost of data acquisition and enhancing data quality. Servicio Extremeno de Salud, a public health care service in Spain, has built a regionally integrated system that lets patients go to many health centers within the region, knowing a doctor there can have the patients’ complete, up-to-date records for faster and more accurate treatment.

Replicating smart ideas
Smarter health care is intelligent, applying advanced analytics to improve research, diagnosis and treatment. Geisinger Health Systems is integrating clinical, financial, operational, claims, genomic and other information into an integrated environment of medical intelligence that help doctors deliver more decision s and deliver higher quality care, all because they can easily turn information into actionable knowledge. And IBM is helping some of the world’s top universities develop a global network of medical data, giving doctors diagnostic resources that were once unimaginable. These repositories currently hold millions of digital images.

Smarter health care systems like these hold promise beyond their particular communities, patients and diseases. The smart ideas from one can be replicated across an increasingly efficient, interconnected and intelligent system. This should result in lower costs, better-quality care and healthier people and communities. In other words, we’ll have a true health care system, with the focus where it belongs- on the patient. Let’s build a smarter planet.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of the Graduate School of Business, De La Salle University. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Road to a brighter future–smarter transportation systems

2009-06-03T06:57:00.000-07:00

(Published in Business Mirror under the Mirror Image column, June 3, 2009)

Traffic congestion is choking the air and economies of cities everywhere. Worldwide, cities are wrestling with the environmental, economic and social impact of increasing urban congestion, resulting from too many vehicles on roads built during the last century and demand simply exceeding capacity.

According to the US Department of Transportation, traffic congestion costs the United States $200 billion annually. Not only is this a huge waste of money, the Texas Transportation Institute reported that it also contributes to a loss of 7 billion hours stalled in traffic and $2.3 billion gallons of wasted fuel per year.

In the Philippines there are 3,000 passenger buses making a total 32,000 trips that go along Edsa daily, according to the Metro Manila Development Authority (MMDA). An average bus can accommodate 60 people. Occupancy rate of these buses is only 66 percent per vehicle. This means that on the average, public buses along Edsa have 640,000 empty slots available per day. A daily income ranging from P7,680,000 to 19,200,000 for these buses are lost due to poor transportation-management systems.

The problem is only getting worse as mass urbanization is increasing dramatically. By next year, 59 cities worldwide are forecast to have populations of 5 million or more, up nearly 50 percent since 2001.

Doing nothing is no longer an option. Building more roads isn’t the answer, either. We need to make better use of existing infrastructure—such as roads and rail tracks—while also building new, smarter transportation systems.

Cities that embrace new models and technologies across all transportation modes will be best positioned to address the impact of mass urbanization and thrive in an increasingly competitive global market.

New transportation solutions, such as congestion charging and real-time traffic prediction and management, are playing a significant role in helping cities to reduce congestion, improve their environments and, ultimately, enhance the quality of life of their citizens.

By creating smarter transportation systems, we’ll be able to predict the need for passenger transportation based on population trends, changes in where people live and work, as well as local events and the congestion at a given street intersection.

We’ll be able to recognize patterns and be able to rapidly adjust schedules, traffic routing, vehicle spacing, and speeds to changing conditions and for safety.

But these systems won’t be completely effective until they are instrumented, interconnected and intelligent, and this is starting to happen.

We’re already instrumenting vehicles in all modes of transportation, the infrastructure they move on, streets and traffic lights, aging bridges, high-speed railroad tracks and trains, airline baggage and aircraft parts, subway tunnels, ticket systems, and even the mobile devices carried by travelers so we can understand where they are going, when, how often and perhaps why.

Instrumentation is all about sensing what is happening right now, whether it is the temperature of a train wheel bearing, the location of a misplaced suitcase, metal fatigue in a bridge, or the number of cars on a highway at 6 a.m.

Within a single mode of transportation, collecting and sharing information across the operating ecosystem can yield dramatic capabilities. Extending this concept across modes of transportation exponentially increases the potential benefits.

For example, a high-speed passenger train is running at 350 kph from Beijing to Shanghai. Digital video surveillance and on-train sensors recognize that the train has slowed unexpectedly. Without human intervention, the system instantly relays this information to the train following four minutes behind, automatically slows the second locomotive at a safe rate of deceleration, and notifies the operator.

Intelligent transportation systems can play a key role in improving the quality of everyday life for urban citizens, reducing traffic congestion, improving air quality, and improving road access for public transportation and emergency vehicles.

In Stockholm, Sweden, a seven-month congestion-charging pilot saw traffic entering the city decrease by 25 percent, a 40-percent drop in greenhouse gases such as carbon dioxide and an increase of 6 percent in the number of travelers using public transport.

What we need is a smart transportation system equal to the needs of the 21st century—a system that reduces travel times and increases mobility, a system that reduces congestion and boosts productivity, a system that reduces destructive emissions and creates jobs.

The movement of people across town or across the globe is a critical factor affecting our economic vitality, the quality of our lives, access to work, energy consumption, carbon emissions and the climate. In the end, the people of the world depend on transportation for survival.

Cities, regions and nations need to use integrated approaches to provide smarter transportation systems that serve the needs of a growing world, which balance the merits of different modes of transportation while enhancing capacity, safety and efficiency.

Smarter transportation can drive economic growth and improve quality of life. We can’t allow poorly conceived transportation to destroy the neighborhoods we live in, or the planet we share.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of the Graduate School of Business, De La Salle University. He is country manager, communications sector of IBM Philippines. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Communications for a smarter planet

2009-05-12T06:14:00.000-07:00

(Published in Business Mirror under the Mirror Image column, May 12, 2009)

What’s the sound of a planet talking? A century ago, the answer was simple: people conversing in person or over wired networks.

Today it’s not just everyone, but also every thing talking to every other thing, in constant motion.

An estimated 2 billion people will be on the Web by 2011—and they’ll be doing more than talking. Video on demand, IP or Internet television and Internet TV will account for nearly 90 percent of consumer Internet traffic by 2012. When people talk, it will be to many more people—via social-networking sites, whose memberships will top 500 million in the next three years.

Consider that 10,000 security cameras in London are connected to the Web, feeding it video 24 hours a day. Or take the 300 connected sensors on a bridge in Minnesota; add the 800 monitoring another in Hong Kong—and multiply by the millions of roads, bridges and buildings in cities around the world. Now add billions of intelligent phones, cameras, cars and appliances, and millions of miles of smart power lines and roadways.

Is it any wonder that in just three years, Internet traffic is expected to total more than half a zettabyte? (A zettabyte is a trillion gigabytes—1 followed by 21 zeroes.)

A smarter planet will require a smarter communications infrastructure. High-speed broadband, as important as it may be, doesn’t make a network smart. We need the network to be multidirectional instead of point-to-point. Smart networks must be infused with advanced analytics and intelligence so they can identify connected, instrumented things and collect relevant data from them. They’ll have to be built on a foundation of standards and software that allow trillions of devices and objects to “talk.” And we’ll need next-generation digital platforms on which telecom providers can create and deliver all kinds of services.

Fortunately, smarter communications are at hand. India’s leading private telco is using IBM’s digital platform to deliver new services dynamically to hundreds of millions of people. A US hospital is applying a pervasive wireless infrastructure, bar coding and RFID (radio-frequency identification) to manage its assets and administer medications—helping to increase both patient safety and operational efficiency.

A network operator in Taiwan is offering customized advertising based on subscriber purchasing patterns—while individual subscribers of one Chinese telecom provider are collaborating directly with the company to create new services. And a university in California worked with a leading technology provider for the first wireless parking solution to be integrated with payment stations.

Closer to home, Smart Communications, in collaboration with IBM Philippines, has expanded its Load Connect service to other areas. This is an automated service that enables real-time reloading of airtime and Smart Money though a machine that accepts and recycles multiple bills.

A thinking, communicating planet will spur advances in everything from science and medicine, to business and technology—to possibilities not yet imagined—and will help billions of people join the global economy. When things communicate, systems connect. And when systems connect, the world gets smarter.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of the Graduate School of Business, De La Salle University. He may be e-mailed at rlugtu2002@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it , or visit his blog at http://rlugtu.blogspot.com.

Smart power

2009-02-22T21:22:00.001-08:00

(Published in Manila Standard Today under the Greenlight column, Feb 23, 2009)

For most of the last century, the world’s electrical grids stood as an engineering marvel of the modern age and a global symbol of progress. The cheap, abundant power they brought changed the way the world worked — filling homes, streets, businesses, towns and cities with energy.

But today’s electrical grids reflect a time when energy was cheap, their impact on the natural environment wasn’t a priority and consumers weren’t even part of the equation.

Back then, the power system could be centralized, closely managed and supplied by a relatively small number of large power plants. It was designed to distribute power in one direction only — not to manage a dynamic global network of energy supply and demand.

As a result of inefficiencies in this system, the world’s grids are now incredibly wasteful. With little or no intelligence to balance loads or monitor power flows, they lose enough electricity annually to power India, Germany and Canada combined for an entire year.

Take for example, if the U.S. grid alone were just 5% more efficient, it would be like permanently eliminating the fuel and greenhouse gas emissions from 53 million cars. Billions of dollars are wasted every day generating energy that never reaches a single light bulb.

Fortunately, our energy can be made smart. It can be managed like the complex global system it is.

We can now instrument everything from the meter in the home to the turbines in the plants to the network itself. In fact, the intelligent utility system actually looks a lot more like the Internet than like a traditional grid. It can be linked to thousands of power sources – including climate-friendly ones like wind and solar. All of this instrumentation generates new data, which advanced analytics can turn into insight, so that better decisions can be made in real time, i.e. decisions by individuals and businesses on how they can consume differently, decisions by utility companies on how they can better manage loads, and decisions by governments and societies on how to preserve our environment. The whole system can become more efficient, reliable, adaptive...smart.

Smart grid projects are already helping consumers save 10% on their bills and reduce peak demand by 15%. Imagine the potential savings when this is scaled to include companies, government agencies and universities.

IBM scientists and industry experts are working on smart energy solutions like these around the world. We’re working with utility companies globally to accelerate the adoption of smart grids to help make them more reliable and give customers better usage of information. We’re working on seven of the world’s 10 largest automated meter management projects. We’re even exploring how to turn millions of future electric vehicles into a distributed storage system, so excess power can be harnessed and returned
to the system.

Our electrical grids can be a symbol of progress again — if we imbue the entire system with intelligence. And the good thing is — we can.
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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He is Country Manager, Utilities and Communications Sector of IBM Philippines. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Governance in offshoring and outsourcing

2009-01-26T21:40:00.000-08:00

(Published in The Manila Times under the Managing for Society column, January 27, 2009)

When Ramalingam Raju, chairman and CEO of India’s fourth largest outsourcing vendor, Satyam Computer Services, admitted on January 7, 2009, that he had illegally boosted the company’s earnings numbers and created a fictitious cash balance of more than $1 billion, the corporate world was shocked by the weak, if not the lack of corporate governance in one of India’s most admired firms.

Like a prognostication coming true, the World Bank banned Satyam in 2008 from participating in its procurement contracts for eight years, when it discovered Satyam employees had accessed sensitive information in its database. In 2003, Satyam won a lucrative five-year “sole source” contract to design, write and maintain all of the World Bank’s information systems. The contract, which began at $10 million, had grown to over $100 million by 2007. In 2008, the contract was not renewed.

The Indian corporate governance crisis deepened recently when the World Bank decided to ban India’s third largest outsourcing group, Wipro, from dealing with the agency for four years. The agency’s decision was based on its findings that Wipro offered shares to World Bank employees when it floated stock in the US in 2000.

But what will strikingly emerge from these governance lapses from Indian outsourcing vendors is a razor-sharp focus on a more robust governance framework with two major pillars—corporate governance and operating governance.

Corporate governance (CG) framework spells out the various regulations, laws, practices, and benchmarks used to govern a corporation. This framework is directed toward fulfilling organizational obligations to its shareholders. Shareholders, board of directors, management and employees form the four-tier hierarchy impacted by the CG framework. Efficient coordination between the four tiers and smooth inter-tier operations form the basis of an effective CG policy.

Past governance problems in the corporate world, such as those at Enron, Global Crossings, Worldcom and others, have resulted in new legislation such as the Sarbanes-Oxley Act, stronger regulations and tightened supervisory framework which vary from country to country.

Particularly in India, the corporate governance crisis is a big blow to its local outsourcing industry, and may have a deep impact on the global outsourcing industry, in terms of regulatory, commercial and governance frameworks. We will see the Indian government reexamining its corporate governance framework aimed at strengthening it or ensuring that the existing frameworks are stringently implemented. Governments in other offshoring and outsourcing destinations such as those in the Philippines, should also evaluate their existing governance frameworks to protect the growing industry.

Operating governance (OG) framework, on the other hand, is directed towards the fulfillment of obligations between the outsourcing provider and client. It enables the outsourcing provider and client to mutually manage their relationship, expectations, contractual agreements and services. It includes management, control, measurement and assessment, with quantifiable measurement being a key component of OG. It is guided by a defined set of standard, documented processes and best practices. The alleged security breach in the information database of World Bank by Satyam employees is a breakdown in the control aspect of OG.

With a focus on the aforementioned governance frameworks amid the Indian governance crisis, clients all over will be taking a more stringent stance on making governance a major criterion in outsourcing provider selection. On the provider side, a good governance practice will become a competitive advantage among vendors to bag more outsourcing contracts.

That’s why we forecast that the more established and governance-focused outsourcing vendors, the likes of IBM, will win over the current and former clients of Satyam. These providers are also well-prepared to capitalize on the rise of the likewise governance-focused clients.

As with the local and medium-sized outsourcing providers, it is also critical for them to adopt stricter and more comprehensive governance structure and practice to compete with the bigger players.
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Reynaldo C. Lugtu Jr teaches management and marketing courses in the MBA Program of De La Salle University Ramon V. del Rosario Sr. Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Can outsourcing be stopped?

2008-11-19T03:18:00.000-08:00

((Published in the BusinessMirror under the Mirror Image column, Nov 11, 2008)

Now that President-elect Barack Obama will be inaugurated on January 20, 2009, many are holding their breath, especially the business-process outsourcing companies in India, the Philippines and others, as to how he can turn around the outsourcing of jobs from the United States. In debates and on the road, Obama repeatedly said that if elected, he would discourage companies from “shipping jobs overseas” by taking away tax breaks, or by giving benefit to those corporations that keep jobs domestically.

“We can keep giving tax breaks to companies that ship jobs overseas, or we can give tax benefits to companies that invest right here in New Hampshire,” Senator Obama said at a joint appearance with Sen. Hillary Clinton in Unity, New Hampshire.

According to CIO magazine, economists and legal advisers contacted about those comments said they are unaware of any specific tax breaks aimed at offshoring or outsourcing tech jobs. Instead, they said, Obama may be targeting broader tax-deferment strategies, such as the ability of multinational firms to avoid taxes on profits by moving money overseas.

But can corporate tax policy alone really do much in stopping the offshoring of US jobs? Some analysts don’t believe so. “Any plans for a Tax Code change are like trying to plug a hole in a leaky dam with your finger—to believe the US government Tax Code promotes outsourcing is a major misconception of the fiery debate around outsourcing offshore,” according to Joe Greco, director of California State University-Fullerton’s Center for the Study of Emerging Markets. Also, according to a Computerworld report, Nielsen Co., the media company known for audience measurement, has given up tens of thousands of dollars in local tax breaks this year after signing up with an outsourcing provider based in India.

Back in 2004, John Kerry was, likewise, criticized for using the same tax-policy argument against offshoring. Factcheck.org, a political-analyst group, pointed out that taxes “are a very small part” of companies’ decisions to move jobs offshore. Those at a 2005 Brookings Institution summit on trade also said taxes had little to do with outsourcing. In addition, Joel Slemrod, a tax expert at the University of Michigan’s business school, said that, “For those who see [offshoring] as a problem, this is not a solution.”

And so US companies continue to outsource. One glaring reason is the huge cost differential between the United States and offshore providers. A programmer can be hired in China for $12 an hour while the same goes for $56 in the United States. Depending on the skill and location of the offshore vendor, the international wage ratio can reach 100:1 as corporations outsource to where they can reduce costs and maximize profits. Experts predict that the significant cost differential between the United States and other countries will continue for 30 years.

Although cost reduction is the major reason US companies do offshoring, there are a number of others why firms do it. According to a 2004 Outsourcing World Summit report, of the Western firms that do offshoring, 9 percent want to gain access to skills and 3 percent require innovation from the outsourcing vendor, and the number is growing. And why not? China and India graduate a combined half a million engineers and scientists a year, versus 60,000 in the United States; India and the Philippines are already recognized globally as the hotbed of information-technology innovation and creativity in the areas of programming, animation and design.

Many of the outsourcing professionals and executives in India and the Philippines are not bothered by the pronouncements of Obama during the campaign. Outsourcing will continue to flourish in the coming years as corporations find ways to stay competitive. As India’s Finance Minister P. Chidambaram commented, “Once Obama is in office, he will realize that it is an interconnected world, and countries have to work together.”

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA program of De La Salle Uiniversity Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit his blog at http://rlugtu.blogspot.com.>

Challenges in the power sector

2008-11-02T23:14:00.000-08:00

(Published in the Manila Standard Today inder the Greenlight column, Nov 3, 2008)

I recently attended the 17th Conference of the Electric Power Supply Industry held in Macau from Oct. 27 to 30, which was attended by the region's foremost leaders, experts, practitioners, professionals, academics, equipment suppliers and service providers in the electricity industry to meet and exchange knowledge and expertise.

The apt theme of the conference, "Power sector in the fast climate changing world," summarizes the urgency among industry players to be cognizant of the impact of power production and distribution on the environment.

Balancing act
As the Asian power sector is experiencing unprecedented rapid growth in electricity demand, environmental awareness is likewise on the increase. The challenge this pose is how industry players can do a balancing act between meeting demand and preserving the environment.

This issue is compounded by fuel price volatility, which has witnessed peaks and troughs these past years, aggravating concerns about the future availability of some energy supplies and over¬dependence on particular fuels in many countries.

The current financial crisis' has increased the strain among industry players, as large institutional as well as ordinary consumers of electricity may potentially reduce their usage. This may affect the structure and competitiveness of many national electricity markets, which will evolve at a greater or lesser pace. New investors are appearing as others leave the stage.

Uniting to tackle the challenges
The conference delegates, numbering a over a thousand from 17 member countries, recognized these issues and were all in unison to tackle the challenges that they face. These were further punctuated by Mr. Lau Si Lo, representative of Macau chief executive, in his opening remarks when he said, "We will employ cleaner fuels as well as actively explore the use of alternative fuels and renewable in Macau. We ~e keen to promote energy efficiency by enforcing demand-side management through public campaigns, enhanced price signals, energy management, new technologies and other methods."

Technology providers likewise demonstrated their solutions to address some of the issues. For instance, IBM has created and demonstrated the Intelligent Utility Network (IUN) solution to transform the way power is delivered and managed, analyzed and used.

One pillar of IUN is advanced meter management (AMM), which enables utilities to remotely collect usage data via sensors¬ eliminating manual meter readers in the field. Instead, smart meters automatically collect and transport the reads, at regular intervals or on demand. AMM analytics then extract meaningful knowledge from volumes of data, which enables informed decisions about operations during times of high demand.

Innovative solutions from the Philippines
The Philippines delegation, which included Manila Electric Co., National Transmission Corp., and National Power Corp., shared their expertise, innovation and experience to address many of the issues raised during the conference. In fact, it's laudable that the Philippine representatives, Meralco in particular, delivered the most technical paper presentations to a foreign audience, from a variety of topics-from business intelligence to improve operations to energy efficiency in the electricity industry. Many of the papers presented by the Philippine delegates were innovative solutions to technical, process, and people issues-a clear testament of the innovative talent of Filipinos.

It is also timely that the leadership in the local power sector was recognized by CNBC, the media company, when it nominated Meralco's chairman and chief executive, Manuel Lopez, for the 7th Annual Asia Business Leaders Awards. This is truly an honor for the country. Mr. Lopez is nominated together with a roster of accomplished business leaders in the region, including Mr. S Ramadorai, chief executive and managing director of Tata Consultancy Services Ltd. of India, Dr. Viroj Mavichak, managing director of Thai Oil PCL, among others.

The Philippine power sector, with the leadership of its executives and professionals is truly poised to face the challenges of the industry.

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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle University, Ramon V. del Rosario Sr. Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.>

Meet the new breed of power customers

2008-09-17T09:22:00.000-07:00

(Published in Business Mirror under the Mirror Image column, Sept 17, 2008)

Historically, the relationship between utilities and consumers has been rather lopsided—utilities had the power, both literally and figuratively. But the confluence of climate- change concerns, rising energy costs and technology advances leading to greater consumer involvement is now radically redefining that relationship.

IBM’s recent surveys of 1,900 energy consumers and nearly 100 industry executives across the globe reveal major changes under way—a more heterogeneous consumer base, evolving industry models and a stark departure from a decades-old value chain. We believe companies need to prepare now for a participatory network that enables customers to choose from a wide variety of suppliers, actively manage their consumption and even sell back surplus power they generate.

In decades past, as long as the energy flowed when and where required, residential and small commercial customers were satisfied, leaving all the decisions about their energy supply to their trusted providers, even if they were unhappy with the bill.

But times have changed. Growing reliability concerns, fear for the environment’s future and ever higher energy bills are making some consumers want to manage more of their energy-supply decisions themselves. If utilities and regulators allow them to be more active participants, these customers are willing to shoulder more responsibility.

Given this shift in consumer attitudes and the rapid advancement of new technologies, what will the industry look like in five to 10 years? How quickly will utilities and regulators respond to these emerging consumer needs? And how much control do consumers really want?

To help answer these questions, we surveyed 1,900 consumers in six countries—Australia, Germany, Japan, the Netherlands, the United Kingdom and the United States. In our “consumer” group, we included residential households and small commercial customers, but excluded large commercial and industrial companies. We also interviewed nearly 100 industry executives in Europe, North America and the Asia-Pacific region—one-third from large firms with revenues greater than $5 billion, and the remainder from smaller utilities.

Based on the insights from our consumer survey, interviews with utility executives and our own industry experience, we anticipate a steady progression toward a participatory network—a technology ecosystem comprising a wide variety of intelligent network-connected devices, distributed generation- and consumer-energy management tools. Although the precise time frame for reaching this end state is unknown, our research suggests a few major milestones. Within five years, the percentage of the world’s electric utilities that will be generating at least 10 percent of their power from renewable sources will have doubled. In that same time frame, we believe sufficient supplier choice will allow meaningful consumer switching to emerge in most major competitive markets. Also, based on both consumer and utility responses, we expect utility-demand management initiatives to expand dramatically and electric power generation by consumers to make tremendous inroads within 10 years.

The IBM report demonstrates an industry that is fast approaching a tipping point, where increasing consumer involvement, climate-change concerns and technology advances are converging to create a very different way for energy to be generated, distributed and managed. Each of these is fueling the others, and the entire combination is catalytic.

Consumer involvement
When energy providers are not willing or able to satisfy their needs, consumers will have an increasingly viable alternative—the means to generate their own electricity. According to the IBM consumer survey, one-half or more of the consumers were interested in self-generation if they could save 50 percent on energy costs, have 100-percent reliability at no additional cost or sell power back to the utility. Among the utility- industry executives surveyed, more than half believe that the availability of new technologies could move a significant percentage of residential and small commercial customers to self-generation within the next decade.

Climate-change concerns
Utilities are making major investments and operational changes to respond to climate-change concerns and policies, the report observes. According to the IBM Institute for Business Value/Economist Intelligence Unit 2007 Utility Industry Executive Survey, within five years, the percentage of the world’s electric utilities that will be generating at least 10 percent of their power from renewable sources will have doubled. The IBM consumer survey found that, outside of the United States, one out of every four survey respondents had computed the climate-change impact of their energy usage. Among those who currently do not have the option of choosing renewable power sources, more than 60 percent expressed an interest in doing so.

Technologies driving industry change
IBM’s paper contends that, from a technology perspective, smart meters, network automation and analytics and distributed generation will drive the most industry change in the near term. Smart meters can provide motivated consumers with the actionable information they need to better manage consumption and energy costs. The movement toward an intelligent utility network that leverages network automation and analytics in conjunction with smart meters provides further benefits to both utilities and consumers, including fewer outages, faster restoration of service and lower greenhouse gas emissions.

Prepare for a participatory network
Leveraging the new technology ecosystem will help utilities harness innovation to meet key objectives in coming years, including:

-- Preparing for an environment in which customers are more active participants;

-- Capitalizing on new sources of real-time customer and operational information, and deciding which role(s) to play in the industry’s evolving value chain; and

-- Better understanding and serving an increasingly heterogeneous customer base.

The utility industry is advancing toward a stage where consumers can, and increasingly will, demand equal footing with their providers. Those utilities that are fully prepared to share responsibility with their customers and help them meet their specific energy goals will have a significant competitive advantage. Based on our research and analysis, we believe a full-fledged participatory network will ultimately emerge. Elements of such a network are already in place within several major markets. The question is not if a fully participatory environment will emerge, but when.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc.

Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He is country manager, Utilities and Communications Sector of IBM Philippines. He may be e-mailed at rlugtu2002@yahoo.com, or visit his blog at http://rlugtu.blogspot.com.

Nuclear renaissance

2008-06-24T06:36:00.000-07:00

(Published in the Manila Standard Today under the Greenlight column, June 23, 2008)

The Philippine government has recently expressed to seriously study the option of opening the mothballed Bataan Nuclear Power Plant to bolster the country's energy supply. And why not? In this age of US$135 a barrel of petroleum, many economic planners in countries across the globe are prodded to consider nuclear energy as a more economical and efficient energy source.

In a recent article by Sam Knight in the Financial Times, he describes this transformation of the nuclear industry in the next 20 years as “renaissance” or rebirth. This is an apt description for a once dead industry.

Revival
So it was once dead. No new reactor has been built in the US since 1979, when an accident at the Three Mile Island power plant caused the reactor core to melt. The construction of nuclear power plants in the last 22 years since the Chernobyl incident was on a standstill, with the exception of Japan, South Korea, and France. No new nuclear reactor has been built in the US since the Three Mile Island accident in 1979, wherein the reactor core melted. In 1971, the ASEAN endorsed a nuclear-free zone concept with the creation of a “regional nuclear safety regime”. In the 1990’s, Italy and Germany which are the early developers of nuclear power assured that they will phase out their nuclear energy completely.

Now, in this era of nuclear rebirth, many nations have declared to initiate and scale up their nuclear programs to reduce their dependence on oil. Only recently, the Italian government declared its intention to restart construction of nuclear power plants by 2013, In 1987, after more than 20 years of being a nuclear-free country. The UK government expects the new generation of nuclear power to supply significantly more of the country's electricity than the 19 per cent the existing ones deliver, and in fact planned to maximize the contribution from nuclear sources in the next 10 to 15 years. Across Europe, politicians are reassessing nuclear policy, opting to extend the life of existing reactors like in Germany and Sweden, or built new reactor altogether like Russia.

Growth of nuclear power in Asia
East and Southeast Asia are the only regions in the world where nuclear power generation is growing significantly. According to the Nuclear Issues Briefing Paper published in 2007, the region boasts 109 operational nuclear power plants, with 18 more under construction and around 110 in the planning stage. Moreover, much of the startling growth is in China (10 units), Taiwan (6 units), India (15 units), Pakistan (2 units), Japan (55 units) and South Korea (20 units). Additionally, regional leaders at the 13th ASEAN Summit in Singapore in November 2007 issued a statement promoting civilian nuclear power, alongside renewable and alternative energy sources.

This nuclear renaissance, though controversial and politically incorrect to many, is an uncomfortable way to mitigate the energy crisis, apart from reducing the dependence on fossil fuels and therefore reduce greenhouse gases and global warming. It is one of the most efficient and cleanest alternatives to coal and gas-based electricity production, and it's responsible for only less than 20% of electricity production.

Continuing fear
But despite these, many fear and reject nuclear power due to possible safety breaches and accidents, such as Chernobyl and the Three Mile Island accidents, and the Kashiwazaki-Kariwa nuclear power plant leakage in Japan in 2007 due to an earthquake. But is our fear of nuclear power well-grounded?

A nuclear accident, such as those mentioned above, is a “black swan” or an outlier, an event that lies beyond the realm of normal expectations, as Nassim Taleb puts it in his self-same book. Key to reducing, if not, eliminating the fear of nuclear power is understanding the risk associated with it Why are we willing to risk our health, the environment, and our very existence with the use of fossil fuels over an improbable catastrophic nuclear meltdown of a reactor?

Taleb, in his book, says the focus of the investigation should not be on how to avoid any specific black swan, for we don't know where the next one is coming from. The focus should be on what general lessons can be learned from them.

Lessons learned
And indeed we learned. It is estimated that the probability for a plant to have a serious flaw has decreased from 0.1 to 0.01 during the developmental phase of the nuclear industry. At the same time the equivalent frequency of accidents has decreased from 0.04 per reactor year to 0.0004 per reactor year, and this is according to a study by Jussi vaurio in 1984!

Another positive development is through a player in this nuclear industry, Thorium Power based in Russia which currently qualifying its proprietary thorium (a silvery metal which is thought to be between three and four times more abundant) fuel designs for use in existing and future commercial nuclear reactors. These designs have three major benefits: no production of nuclear weapons-usable materials in spent fuel, reduced nuclear waste, and improved industry operating economics. The technology will be commercially available in 2013.

Operating the Bataan Nuclear Power Plant will definitely provide a huge breather to the oil crisis; and there are available technologies and best practices now to prevent nuclear accidents and make nuclear energy more efficient. But a potential flaw is execution. Our society is rife with examples of infrastructures fraught with corruption-laden contracts and sub-standard materials that undermine its very purpose. Political will would play a huge part.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Uiniversity, Graduate School of Business. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com..

Oil versus rice

2008-06-04T02:59:00.000-07:00

(Published in Manila Standard Today on Jun 3, 2008, under the Greenlight column)

Like the proverbial oil and water, oil and rice shouldn’t mix as it will spell disaster. Increasing prices of oil and rice in the world markets have hit the Philippines hard which caused the prices of goods to climb. Inflation is forecasted to rise to a record high of 5.5. to 6.5 percent in May and might reach 9 percent in June. In this era of oil price of 120 dollars-a-barrel and tight rice supply, overall food prices already rose 12 percent, and the price of rice alone rose to nearly 25 percent from a year ago. As a result, poverty in this country may reach record highs – truly a disaster.

Indeed, oil and rice (or food for that matter) are two commodities that have a powerful impact on economies, countries, and its people. Individually, they have become threats to national security of countries the world over.

Nations’ dependence on oil and its shortage will pose greater risk on national, global, and energy security. Oil will become a geopolitical weapon used between the oil-producing and oil-consuming nations which will result to the possible explosion of Middle-East conflict. It has been reported that oil, among other factors and considerations, played a role in the Bush administration's decision to invade Iraq. With 70% of the oil reserves of the Organization of the Petroleum Exporting Countries (OPEC) residing in the Middle-East, the depletion of oil in the future will pose greater risk of large-scale conflict.

On the other hand, the alarming price increases of staple foods (e.g. rice and wheat), have brought riots in about a dozen countries – from Philippines to Haiti - threatening national and food securities. Early this month, five big Asian rice exporters - Burma, Cambodia, Laos, Vietnam, and lead by Thailand - agreed in principle to form a cartel to be known as the Organization of Rice Exporting Countries (OREC) that would manage rice price-fixing, akin to OPEC. Many lawmakers around the region have already expressed concern on this planned cartel, as it could control the staple food and price it beyond the reach for millions of people. Thailand eventually dropped its plan amid opposition.

Unlike oil and its organized OPEC which has a global control of petroleum, a possible OREC in Asia has only a regional dominance. Rice exporters do not have the capacity to establish cartel in the same magnitude as OPEC, as there are over 80 countries producing rice.

The security risks associated with oil and rice, seemingly are separate impacts that nations need to prepare for. But in combination, they may pose the greatest threat and risk ever known, because one is inextricably linked to the other.

For one, many experts agree that the rising price of rice is not due to its shortage but to the uneven distribution. There is enough rice in the world to feed its entire people. The problem lies in the distribution of rice from other rice producers (apart from the ASEAN exporters) to the rest of the countries that need it; and distribution and logistics require fuel, i.e. oil, to transfer goods from one place to another. The higher the price of oil, the higher the distribution cost, the higher price of goods transported.

Another link between oil and rice is the increasing production of biofuels. As a result of the Kyoto Protocol to reduce the world’s dependence on oil, the World Bank said that almost all of the increase in global corn production from 2004 to 2007 went to ethanol production in the United States, depleting supplies for other uses. Critics including the World Bank, are blaming that the rise of biofuel production as contributing to the soaring price of food (rice and wheat) around the world.

Oil and rice are two separate commodities that should be tackled in combination. Nations should still be reducing its dependence on oil by developing alternative sources of energy apart from biofuels such as solar and wind energy. But they should also be developing new technologies for producing higher-yield, disease-resistant grains.

Energy and food security are two issues that need to be figured out as one. And we have the biggest stake on this as the Philippines is a net importer of oil, and was the world’s biggest importer of rice last year.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

A future in content

2008-04-04T18:54:00.000-07:00

(Published in Businessworld Online on April 3, 2008 under the Openhouse column of itmatters.com.ph, see link)

High growth in digital content offers significant opportunities for telecommunications service providers.

But their ability to capitalize on this potential is a point of contention and debate. Telcos clearly need upgraded networks and technology platforms to handle more sophisticated content and to extend their market.

And, equally important, they must begin delivering value beyond just access, providing a change in consumer experience and grabbing their share of emerging channel advertising revenue.

The market for digital content is growing rapidly and is forecasted to reach $135 billion by 2010. Naturally, the telecommunications industry is focused on gaining a sizeable share of this market, as voice telephony revenues decline. With digital convergence blurring the boundaries of telecom and media, service providers can now expand their market to include areas of media and advertising -- creating a new “telemedia” industry.

As cable companies, satellite broadcasters, ISPs and telecom providers fish in each others’ ponds, the convergence of formerly separate services is creating both new opportunities and risks for participants throughout the “telemedia” value chain.

Looming bandwidth crunch

The most promising areas of advanced content services are television and video.

However, delivering all but the most basic digital content services over networks is challenging. Even with higher compression technology like MPEG-4, delivering HDTV, multi-room TV and the like, as well as voice, gaming, Internet surfing and other communication services means that every home must have a bandwidth of 20 M/bits or more.

Delivering additional HD streams into the home will require even higher bandwidth which is not easy to deliver over an access network originally designed to carry narrowband voice.

As demand for high-definition television (HDTV), real-time video-on-demand (VoD) and other next-generation services increases, we are heading toward a bandwidth crunch in many countries with the possible exception of parts of south-east Asia including Singapore and Korea, where 95 -100 percent of households can obtain very high speed access.

To deliver bandwidth-intensive content services and the experience consumers’ demand, telecom providers will have to make major investments in upgrading their networks with returns that are highly uncertain and likely to be positive only in the long term.

IBM’s model of the economic implications for investing in the two alternatives to ADSL -- fiber-to-the-cabinet (FTTCab) and fiber-to-the-home (FTTH) -- shows that additional revenue from content is critical to the business case.

However, the investment case for upgrading existing networks is also critically dependent on achieving high penetration rates -- in the range of 30%-50%, depending on the option chosen.

Differentiation beyond access

Consumers are demanding more flexibility, choice and control. The young and technologically savvy, in particular, do not want to be passive consumers -- they want to control their own schedules, produce their own content and share it with their peers.

Thankfully, the telecom industry can address this demand for flexibility, choice and control.

One way is by extending scope of services which involves augmenting content services and create new interactive services that were previously not feasible. Examples include interactive multiplayer gaming, instant conferencing and even interactive television.

There is evidence that such interactive services increase loyalty, but more critically, they drive non-content revenues such as voice and messaging from which telecom providers derive significantly higher margins.

Another is by delivering a convenient user experience by making content accessible from any device (PC, handheld, television) across any network (wireless, wireline) at anytime and by anyone. This will require telecom providers to resolve the complexity of rights management, content portability and charges across platforms.

Crucially, it also involves delivering and managing end-to-end service quality and the consumer experience regardless of the device or network over which content is consumed.

Empowering individual users and communities involves stimulating the consumer experience in the “walled garden” of a telecom provider for both IPTV and mobile whilst enabling access to telecom services from applications in open distribution platforms such as MySpace or even Second Life.

In IBM’s most recent Media and Entertainment point-of-view, we identified four emerging media business models:

traditional media of professionally produced content within a conditional access environment;
new platform aggregators (e.g. YouTube, MySpace and Second Life) that rely substantially on user generated content in open distribution environments;
walled communities that embrace user and community contributions but within a walled environment; and
content hyper-syndication where professional content owners bypass traditional distributors and make content directly available to consumers in open distribution platforms.

Telecom providers will have to be careful to avoid becoming clones of traditional media distributors when incumbent media companies are themselves grappling with disruptions caused by new platform aggregators such as YouTube and Myspace.com.

Reinventing “walled garden” involves:

leveraging capabilities such as presence and location to enhance collaboration among subscriber social networks;
providing trusted and third party authentication among participants in a social network; and
encouraging user and community content such as college sports and community programming over IPTV.

Telecom providers can also provide a “white label” content distribution service to third-parties to distribute branded content to their subscriber base without having to invest in building their own infrastructure. These virtual branded content distributors within a “walled garden” could become the digital content equivalents of Mobile Virtual Network Operators (MVNO) and could also bundle other telecom services (such as voice and broadband) in their offerings.

Telecom providers can also collaborate with new platform aggregators by enabling the integration of network capabilities such as location, presence, voice and conferencing in Web 2.0 and virtual world applications such as Second Life.

Finally, as professional content owners bypass traditional content distributors and deliver content directly to consumers, telecom providers can lower their entry costs by providing them with managed open content distribution platforms with end-to-end service quality and management and multi-channel capabilities.

In short, telcos must look to combine their investment in service delivery platforms and Information Management Systems (IMS) with new digital content services; invest in service quality management to enhance the end-to-end user experience across multiple networks and devices; and enable users to control their content experiences.

Advertising

As with traditional media, advertising will be a critical component of digital content revenues. But telecom providers still haven’t figured out how to attract ad share.

However, telecom providers have a number of unique capabilities that should make them attractive as an advertising channel, especially as the proliferation of digital channels and audience fragmentation impels advertisers to seek new ways to reach consumers.

Interactivity, presence, location, customer insight, control of more than two billion mobile devices and, in some cases, close relationships with local advertisers from the yellow pages heritage have the potential to make telecom IPTV and mobile attractive channels for a share of future advertising revenues.

The future

The digital content market offers traditional telecom operators significant opportunities for adding value, but it also carries perils -- not least of which are the scale of the capital expenditure required to deliver advanced video services.

Bundling rich content with combinational interactive services, delivering on the “4A” vision of content accessible, anywhere, anytime, on any device and by anyone and investing in end-to-end service quality management, offer opportunities for differentiation.

Advertising will be important, but above all, telecom providers will have to undergo organizational, cultural, technological, operational and business model transformation as they transition from being providers of network connectivity to enablers of the consumer’s digital experience.

The Future of Energy

2008-01-24T05:36:00.000-08:00

(Published in BusinessWorld under the View from Taft column, January 24, 2008)

At the crack of the New Year, after much of the holiday jubilations, we were all greeted by the alarming newspaper headlines which read “world oil price hits $100 a barrel”. The price of oil has more than doubled over the last 12 months, and has been vacillating to near $100-a-barrel in November last year.

Although oil price is back to the 90-dollar-a-barrel levels nowadays, there is still much uncertainty on the future of this precious commodity and the future of energy in general is still uncertain because oil resources are fast being depleted.

According to the Energy Information Agency (EIA) of the U.S. government, world demand for oil is expected to increase by 54% in the first 25 years of the 21st century. About 40%, will come from Asia, mainly because of China and India because of their rapidly growing economies

But the supply cannot meet oil demand forever. The EIA predicts that the world will hit peak production between 2013 and 2037, after which production will fall by three per cent annually. At this point, oil prices will surely hit record highs unless governments around the globe discover new oil reserves or use alternative energy sources.

Our dependence on oil and its shortage in the future will bring forth new threats and risks to governments, public safety, and the environment. The lack of energy to fuel economic growth would have devastating effect on the general populace. The increase in energy use by nations will drive up the prices of oil, of oil-dependent products and services such as the manufacture drugs and other consumables, and transportation and other services.

In addition, oil will become a geopolitical weapon used between the oil-producing and oil-consuming nations which will result to the possible explosion of Middle-East conflict.
It has been reported that oil, among other factors and considerations, played a role in the Bush administration's decision to invade Iraq. With 70% of the oil reserves of the Organization of the Petroleum Exporting Countries (OPEC) residing in the Middle-East, the depletion of oil in the future will pose greater risk of large-scale conflict.

The increased use of oil will also accelerate global warming and pose greater risk to mankind’s the safety and health. Despite the framework set by the Kyoto Protocol to reduce the carbon dioxide emissions of industrialized nations to an average of 5.2% below 1990 levels by 2012, many observers see this as a remarkable failure. According to recent data released by the European Environmental Agency, 13 of the 15 original nations belonging to the European Union have actually increased their emissions over the past 16 years. In four years time, the EEA predicts that the 15 will exceed the target by 7%. And all these are happening because of the increasing use of oil and other fossil fuels.

Thus, it is imperative that we cut our dependence on oil and find new sources of renewable energy. James Canton, a futurist and author of “The Extreme Future” forecasts that new energy sources should be abundant, reliable, renewable, clean, affordable, and secure in order to reduce the world’s dependence on oil.

The most promising future source of energy that passes the criteria of Canton is hydrogen. It’s the most plentiful gas in the universe. It also has the highest content per unit of weight of any known fuel. It is renewable, reliable, clean (a hydrogen powered car gives out water as exhaust) and secure as it is available everywhere. More than $5 billion is being spent around the world by industry and governments alike for research and development on hydrogen as a potential energy resource.

What’s noteworthy is that Toyota has already made great strides in converting its automobiles into hydrogen-powered vehicles. Toyota has already launched a number of models in the US that runs a hybrid electric/hydrogen engine.

Wind power is another alternative source of energy that’s being developed all over. One local example that’s laudable is Smart Communication’s use of wind-powered cell site in Cebu. Not only did it utilize renewable energy, but also it significantly reduced fuel consumption and maintenance costs of the cell site.

Another alternative source of energy is biofuels. The Philippine Biofuels Act of 2006 is a commendable move by government to reduce its dependence on oil. It aims to require oil companies to blend biodiesel and ethanol into diesel and gasoline. Aside from generating huge savings for the country, this would also lead to the reduction of pollution caused by fossil fuels’ emissions.

These are just some of the alternative sources of energy that we can look forward to in the future. But we should all keep on developing and looking for other sources of renewable energy, because our survival depends on these.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

National innovation strategy

2007-12-10T05:23:00.000-08:00

(Published in the Manila Standard Today under the “Greenlight” column, December 10, 2007)

“Filipinnovation” is the catchword of the recently held Philippine National Innovation Summit, which was organized by the Department of Science and Technology (DOST), IBM, Asian Institute of Management’s Policy Center and the Intellectual Property Office, in cooperation with other private organizations and government agencies. Not only does the new word show the natural innovativeness of Filipinos in wordplay, but more importantly it captures the soul of the Philippines’ national innovation strategy – that we Filipinos need to embrace innovation as a way of life in order to stay competitive in the global economy.

Presenting a framework for focusing energies
The summit is laudable as it was able to cover three major aspects of the national innovation strategy - human capital, industry and public policy - each one having specific directives. This will serve as a road map for the stakeholders in the Philippines’ National Innovation System. A national innovation system (NIS) is the flow of technology and information among people, enterprises and institutions that are crucial to achieve an effective innovative process on the national level.

In the human capital aspect, the agenda includes technology forecasting, academic capabilities, and addressing “brain drain” or the exodus of skilled workers from the Philippines to other countries. The industry aspect covers private sector partnership, best practices comparison and public management. Under the public policy aspect, areas that need to be addressed are sharing of experiences and expertise in government offices, and performance assessment and certifications.

Such elements in the NIS serve as a framework for which to focus our energies on as a country in drawing up implementing guidelines and tactics to truly realize the vision of Filipinnovation.

Hence, a follow through of the innovation summit is requisite. But the key questions that need to be asked and answered are: In what areas do we innovate, products and/or services or process? Do we focus on radical innovations or incremental ones? In what industries or sectors do we focus?

Approaching innovation differently
Such questions are relevant because, as a developing country, we need to approach innovation unlike developed economies. This is the thesis put forward by Professor Charles Edquist of Linköping University, Sweden for the UNIDO World Industrial Development Report in 2001.

Take the aspect of product and/or service versus process innovation. Product innovations may be goods or services - it is a matter of what is being produced. On the other hand, process innovations may be technological or organizational and it concerns how goods and services are produced. As an example, an industrial robot is a product when it is produced and a part of the process when it is utilized in production.

Edquist argues that product or service innovations are more important for developing countries because these are the main mechanism behind changes in the production structure. In other words, the vision and creation of a new product or service will ultimately lead to changing the mode of creating the product. Therefore, a developing country will benefit from the domestic and international consumption of a new product as well as from the new ways of producing these products, which may lead to productivity and efficiency gains; thus, a doubly positive impact to the firm.

One good example is the Filipino innovation – the electronic load. This service, pioneered by Smart Communications, is a way of “loading” one’s cellphone with credits via texting a purchased code to the telco service provider. This service has revolutionized the way a telco service is produced and distributed, eliminating costly physical distribution infrastructure because it is fully electronic.

Another approach that our country can adopt is to focus on incremental innovations rather than radical/breakthrough innovations. The incremental mode involves a step-wise approach of gradually improving existing products or processes. This is a much easier path for developing countries because it entails relatively less investment and faster turnaround of “improved” products.

In the electronic load example, this service has been used by telco service providers in the country to develop other services such as those in money transfers, mobile commerce, and the like.

Another aspect that needs to be considered on a country level is in what industries or sectors do we focus our innovation efforts. This is relevant because no single country provides the optimal mode of innovative competitiveness in every industry. Furthermore, there are differences in the relative innovative capabilities between industries, as this is function of the distinctive technological capability of each industry.

This is exemplified by the strong innovation systems of Japan in automobiles, the United Sates and other countries in information technology, and India in the business process outsourcing sector.

Focusing on our strength
So in what sectors do we, as a country focus? One obvious strength of Filipinos is in the creative industries. Our country is well known globally in many creative industries such as music, arts and dance, crafts, and design. Filipinos are naturally creative as evidenced by the Ifugaos’ widely known Rice Terraces and the “I love you” computer virus created by a Filipino programmer.

A growing industry that uses the creative talent of Filipinos is the information and communication technology industry. We have witnessed the growth of sectors in the ICT such as animation, gaming and content development and software development. Related to these is our country’s strength in the business process outsourcing sector wherein players can develop “innovative” service offerings to foreign clients that harness our natural creative talents. These include illustrations, editing, photography, screenwriting, creative writing, proofreading, cover design, journalistic writing, graphic design, storyboarding, video editing, instructional design, and music composition.

Underlying all these considerations in the implementation of a national innovation strategy is the importance of the participation of the private sector. Firms are the main drivers of innovation as they are the ones that produce products and services.

But firms do not innovate in isolation. That is why collaboration among various groups – among firms, with customers, suppliers, the government and academic institutions – is crucial to ensure the success of any innovation strategy.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com/.

Ethical Issues in BPO

2007-10-12T06:57:00.000-07:00

(Published in the "Business Mirror" under the Mirror Image column, Oct 10, 2007)
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The Philippines emerges as one of the favorite destinations for the estimated $150-billion business-process outsourcing (BPO) industry, according to a recent global study by Diamond Management and Technology Consultants. The consulting firm projects the local BPO sector to grow 50 percent in the next three to five years.

In this hypergrowth BPO sector, similar to other fast-growing industries like the telecommunications- industry growth in the late ’90s, firms focus their time, resources and energy on hiring and building up of operations. In this break-neck pace, what many companies neglect are the ethical norms and standards that they need to uphold.

One ethical issue that BPO firms need to contend with involves ensuring employee safety, health and welfare. The irregular working hours of BPO employees, specifically call-center agents, is taking a huge toll on their health, resulting in a condition known as shift-work-sleep disorder. This occurs when an employee’s work schedule requires him or her to work when the body wants to sleep, and then try to sleep when the body expects to be awake. The symptoms of this disorder are tiredness, difficulty in sleeping, and reduced level of alertness according to sleepeducation.com web site.

Likewise, medical experts like Dr. Lim Li Ling, deputy director, sleep disorders unit, Singapore General Hospital, warn that ageing would set in very early for sleep-deprived youth working continuously on night shifts in BPO firms. Also, their overall performance could be affected due to lack of proper sleep.

Apart from health effects, sleep disorders can also affect the social and family life of many BPO employees, according to Dr Prithakachari, a neurology specialist. Catching up on sleep during the day or during free time can cause one to be irritable, which can hurt one’s relationships with others.

A 2006 issue of Contact News Magazine, a local publication for contact centers, cited a number of anecdotes on the ill effects of working at night among call-center agents, such as illicit office affairs and rampant pregnancies, which many agents blame on the long working hours that naturally bring people together.

Another ethical issue is the hiring practices of some BPO firms here and abroad. Considering that human-resources (HR) consultants are handsomely paid by BPOs—to the tune of P5,000 to P15,000 for every candidate selected—ethics have been cast aside for monetary benefits.

One example is India-based EXL Service, which was the victim of such an unethical HR practice. To their consternation, the company discovered that rival BPO companies could go to any length to procure the list of employees. A rival BPO tried to bribe EXL’s transport vendor, since this vendor had the company’s complete list of employees and their addresses.

EXL Service vice president (HR) Deepak Dhawan said, “Ever since the incident occurred, we’ve taken adequate security measures to see that this sort of a breach won’t happen again.”

The huge incentive to successfully hire BPO employees has led to poaching. This worldwide problem of the BPO industry has resulted in higher attrition rates and higher cost of hiring.

The stiff competition for talent also results in laxity in hiring practices, which has been disastrous in many respects. A rude wake-up call in the Indian BPO sector happened in 2006 when a handful of BPO employees was arrested for illegally transferring funds from customer accounts. In this case, the ethical responsibility of BPO firms to ensure that information is tightly secured for their clients was compromised.

One industry move that’s worth emulating is that of the BPO organization in India. Recognizing the need to establish and uphold ethical standards in the BPO industry, the National Association of Software and Service Companies (NASSCOM), the BPO trade body in India which is credited for the growth in the Indian BPO, recently launched the “Best Practices in Ethics’ Framework” for the BPO industry.

This has been designed around the following principles to which all the member-companies will voluntarily adhere: employee-friendly policies; safety and security of employees; code of ethics in hiring; corporate social responsibility; and industry initiatives. The ultimate aim of this initiative is to create a set of guidelines which will help in attracting and retaining talent and solving the issue of attrition.

It is commendable that our local lawmakers are stepping up to address some of the issues. Sen. Mar Roxas II has filed Senate Bill 2071 that seeks to amend three provisions in the Labor Code to help BPO workers. He is pushing for free transportation and free medical assistance for call-center agents and other night workers to ensure safety and fitness to work.

Additionally, the proposed bill also suggests that call-center employees be allowed to work under compressed or flexible time arrangement.

It is, likewise, laudable that many BPO firms are providing welfare facilities for their workers. But they should also provide health and safety training, apart from sleeping quarters and transportation.

It is also imperative that there be an agreement among BPO firms to formulate a code of ethics in hiring to minimize, if not eliminate, poaching among industry players.

Best practices and methodologies in hiring are, likewise, necessary to prevent “bad” hiring of BPO employees that may compromise the security of information provided by BPO clients.

Upholding the ethical responsibilities of BPO firms to their employees, clients, and even competitors and peers will reap benefits by ultimately reducing attrition and improving client satisfaction. Recognizing the need for effective manpower development is key to the growth of the BPO sector.

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“Mirror Image” is a rotating column featuring writers from the DLSU Professional Schools Inc. Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com/ (link to the Business Mirror article, link to other citations)

Innovation in BPO

2007-09-12T19:08:00.000-07:00

(Published in the Business Mirror under the Mirror Image Column, Sept 12, 2007)

The BPO sector has grown by spectacular levels, providing employment to more than 200,000 BPO professionals. It is projected to grow on the average 38 percent until 2010, contributing more than $12 billion in revenue.

Similar to the experience of India, much of the growth in the Philippine BPO sector has been driven by relatively lower labor costs. This has been the salient characteristic of the first phase of global BPO development which took place in the 90’s through the early 2000’s, where clients and providers alike placed emphasis on cost, efficiency and productivity. As clients in the US and Europe searched for ways to bring down cost further, they turned to providers in India, Philippines, and others to provide low labor costs to perform customer care, HR, and accounting BPO services.

As established BPO providers are besieged by new entrants from China, Latin America, and other relatively lower cost countries, new sources of service differentiation become crucial to maintain and get more clients. This is when the second phase of BPO development took place starting in the early 2000, which is characterized by the focus on quality.

Adoption of quality standards is the direction of local BPO players now through the implementation of quality standards and practices such as Six Sigma, Total Quality Management, ISO 9000, and Capability Maturity Model. To survive in the long run, it is a must for BPOs to adopt any or a combination of these quality programs.

But these advantages in cost and quality are fast eroding as BPO services become commoditized and the sector reaches maturity. In fact, the global business process outsourcing sector is likely to see only a modest growth of 2 percent in 2007, after a continuous average growth of 14 percent annually during the last five years, according to Technology Partners International, a sourcing advisory firm.

It is now imperative that BPO providers set the stage for their next phase of evolution and momentum - the third phase of BPO development which focuses on innovation. In fact, a 2005 IDC survey among BPO clients in the US suggested that 35 percent of the respondents look for BPO providers to drive innovation.

Moreover, a 2005 McKinsey Study makes a strong case for innovation by suggesting that the Indian IT-BPO sector can generate over US$ 10-15 billion of additional revenues by 2010—over and above its US$ 60 billion export target—provided it makes innovation its chief growth catalyst.

This is the reason why the National Association of Software and Service Companies (NASSCOM), the BPO trade body in India which is credited for the growth in the Indian BPO, established the NASSCOM Innovation Forum to build innovation as the key differentiator for the Indian IT and BPO industry.

Corollary to this, it also instituted the NASSCOM Innovation Awards in 2004 to promote and recognize Indian IT and BPO companies who have instilled innovation into existing competence and have created new ideas, products, processes or technologies that drive businesses to achieve higher profits.

Innovation in BPO may come from three fronts: business model innovation which entails significantly changing the structure and/or financial model of the business; services/markets innovation which entails creating new or significantly differentiated services or go-to-market; and operations innovation which involves improving the effectiveness and efficiency of business processes.

One Indian BPO that bagged the Innovation Award in the area of business model innovation is Kale Consultants which created `a platform-based BPO business model' for the travel and transportation industry.

Explaining the difference between a BPO and a platform-based BPO, Mr Vipul Jain, CEO and Managing Director, Kale Consultants, said that in the former, the customer had the infrastructure and process manual in place where payment is settled on hourly basis. "In a platform-based BPO model, we run the customer's revenue accounting system on our "platform" in our premises with the data shared by him. We actually transform from the customers software to run the process on our platform” said Mr. Jain.

Another Innovation Awardee is Evalueserve, the global research and analytics firm, has been recognized for its business intelligence services, customized reports and value-added research for clients in different industry verticals. Evalueserve is a pioneer in services innovation and has created the new business segment called KPO (Knowledge Process Outsourcing). The company is one of the first KPO providers of research and analytics services from India serving the global market. Evalueserve has been successful in differentiating itself from the traditional offshoring models.

An Innovation Award finalist in the area of operations innovation is Genpact, a global BPO player based in India with 19,000 employees. which developed a model to curb BPO employee attrition. This eventually helped the company reduce its direct cost by 12 percent amounting to about $3.3 million, thereby improving operational efficiency.

The list of innovative BPO companies in India goes on, which is testament to the focus of the Indian BPO sector in innovation as a differentiator. Our local BPO players can likewise take the innovation route to differentiate its services and compete against the emerging low-cost countries.

Local BPO players can incorporate innovation initiatives in the strategic planning process to provide focus in this area. A culture of innovation should likewise be promoted by management, and creative and innovative ideas should be rewarded.

Government and industry bodies alike should emulate the NASSCOM Innovation Forum and Innovation Awards to promote and recognize innovation in the BPO sector, so as to sustain its growth in the future.
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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com/
See other citations on this article: BPOs evolution from cost-saving to innovation
and Innovations by Indian BPOs

Sustaining growth in the BPO sector

2007-07-25T06:39:00.000-07:00

(Published under "The View from Taft" column, BusinessWorld, July 12, 2007)

The global business process outsourcing sector is likely to see only a modest growth of 2 percent in 2007, after a continuous average growth of 14 percent annually during the last five years, according to Technology Partners International, a sourcing advisory firm. TPI said the first quarter of 2007 saw the lowest number of BPO contracts signed in the global context since the first quarter of 2003. The contract value was also the lowest since the third quarter of 2002.

Despite this gloomy backdrop in the BPO global landscape, the global BPO market is projected to reach 173 billion dollars by 2007 – a huge market considering that the Philippines only garnered $3.45 billion dollars in 2006.

According to estimates of the Business Processing Association of the Philippines, the BPO sector’s revenues are expected to grow almost threefold to $12.1 billion by 2010 from the end-2006 level of $3.45 billion. Leading this growth is the call center subsector revenues which will reach $5.29 billion in 2010, a significant 97-percent growth over three years.

How can such growth in the local BPO sector be achieved despite the slowdown in the global market? The answer lies in the transfer of BPO business from maturing markets to emerging ones like the Philippines.

According to research firm Evalueserve COO Ashish Gupta , “as BPO has got commoditized [in India], the very low end work will soon shift to destinations like Bangladesh and the Philippines”.

India’s low-end BPO such as call centers and transcription services are already shifting some of its operations to the Philippines, with the recent setting up or ramping up of operations of companies such as Infosys, HTMT, IBM Daksh, and Genpact.

Despite these, it’s still arguable that the Philippine BPO sector will soon slow down, become commoditized, and reach maturity just like what’s happening now in the global market and in India.

So how can the country sustain the growth in the sector in five to ten years? Key to sustaining the BPO revenue growth is to understand how to renew our country’s sources competitive advantage.

Our country has clinched a small piece of the global BPO pie, through a number of competitive advantages such as relatively lower wages, and good supply English-speaking resource pool in with business and finance backgrounds. However, these advantages are eroding fast as new emerging low-cost countries are stepping up to capitalize on the BPO opportunities, such as Bangladesh, Pakistan, and Latin American countries.

To sustain a major revenue and employment source for our country, it’s urgent now for our country to invest in and develop new sources of advantages to sustain a major revenue and employment source for our country. But what do we develop? What do we invest in?

TPI predicts that the softening of growth in BPO globally will be offset by the potential of knowledge process outsourcing or KPO. KPO refers to the outsourcing of high-value complex tasks and processes to specialized service providers. As compared to traditional BPO, KPO delivers ‘knowledge’ or content expertise that demand advanced analytical and/or technical skills and some decision-making or decision-support processes; rather than process expertise that simply involves executing standardized processes. Some examples of KPO are market research services, data search, integration and analysis, research and development services.

Our country has been engaged in KPO areas such as animation, engineering design, software development, and digital content, but they comprise only 12 percent of the total BPO revenue. We need to develop these subsectors and increase their share in the overall BPO revenue. Government and industry can help achieve these by developing a good supply of resource pool of animators, developers, and engineering, and helping BPO and start up firms to offer these services to client abroad.

Another approach with bigger impact to sustainability is developing and transforming the current BPO offering i.e. call center, back office and transcription services to KPO services. For example, call centers that we know now i.e. inbound and outbound calls, may evolve to higher-value KPO activities such as those involving complex technical support and data analysis for product development and marketing. This would involve upgrading the skills of call center agents with its attendant technologies, and upselling and marketing the service to existing and potential clients.

According to estimates by research firm, Evalueserve, revenues from the KPO market will grow globally from US$1.29 billion in FY 2003, to US$17 billion by FY 2010. This implies compounded annual growth rate of 46 percent, for the global KPO market. Given our talented human resources backed by government and industry support, we should be able to capture some of this market.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo or visit his blog at http://rlugtu.blogspot.com/.

Cost-effective niche marketing through alternative media

2007-06-28T00:47:00.000-07:00

(Interview with Prof. Rey Lugtu by JOSEPHINE B. VALLE Researcher, BusinessWorld, for the Best Practices Forum series, published in BusinessWorld, June 27, 2007)

After designing a product or service around a specific target market, a company will have to communicate its message to its audience. For this, it has an array of media to choose from. On one end, there is the traditional television (TV), print and radio, and on the other are the more non-traditional or alternative means.

Perhaps the most utilized alternative media is the Internet through tools such as E-mail, online advertisements, Web sites and Web buttons, among others.

Value-for-money real estate developer Phinma Property Holdings Corp., for example, maintains a Web site that showcases its projects with features such as virtual tours to further educate its prospective buyers of its offerings. It also maintains a mailing list through which it Emails details of projects to prospective buyers.

Although TV and print still comprise bulk of Phinma Property’s promotions, Phinma Property’s Associate Vice-President for marketing and design Grant Orbeta related that the company sees a growing trend in alternative media such as those provided
by the Internet.

For Level Up, a company engaged in the delivery of content consumed by virtual gaming communities, the Internet serves not only as a medium for communicating but is the product itself.

“When we communicate with our market using online media, they are already in a setting where they can readily consume the product,” said Jose Carlo Medina, director for new media of the online gaming firm.

“Think of it as doing product sampling of a shampoo brand for a group of 10,000 individuals who are inside one gigantic bathroom,” the Level Up executive added.

The edge of online media, Mr. Medina said, is that it is so captivating such that the market will be leaning forward to consume your message as opposed to listening to the radio or watching TV, which could be very passive.

“We also get to reach more target users and get real-time data on user behavior,” said Mr. Medina.

The Internet also facilitates inquiries and actual transactions, what we now call as e-commerce.

“Digitization technologies have lowered the cost of production, thus, allowing lower cost of marketing products and services to niche markets,” said Reynaldo Lugtu, Jr., De La Salle University Professional Schools professor of management and marketing.

A classic example cited by the De La Salle professor is the online music store of iPod, iTunes.

“iTunes has more than five million songs compared with atypical music store of 55,000 tracks... iTunes distributes all sorts of music to even the esoteric music lovers,” noted Mr. Lugtu.

“The Internet has allowed marketers to reach various niches more cost-effectively,” said the professor.

Mobile telecommunications, particularly text messaging, is another venue for communication brought about by the advent of new technology.

Phinma Property’s Mr. Orbeta related, “We’re thinking of a way that will make it easier for buyers to get information by text because text is becoming a commonplace item.”

The Phinma Property executive disclosed that the company is in the process of evaluating some software that would automate the processes of getting inquiries through text as well as sending promo information through text broadcast.

Another powerful alternative tool for communicating with the market is what marketing gurus call “buzz” or word of mouth.

For one, health care company Intercare Healthcare Systems, Inc., whose niche is the integration of traditional and alternative medicine, recognizes the importance of “buzz” as a marketing method.

“We did a study before; every person we treat had on the average six referrals,” said Jose Jesus Roces, director of shared services of Intercare and professor of marketing
at the Asian Institute of Management (AIM).

“So in terms of marketing, we ensure that part of our efforts is that we provide what we call the Intercare experience,” added Mr. Roces.

Likewise, Phinma Property’s Mr. Orbeta related that many of the company’s new buyers are, in fact, referrals by previous buyers of its other property developments.

As such, public relations and customer relations play important roles in the marketing efforts of the company. Corollary to this, corporate social responsibility is also a thrust of the company.

While both traditional and alternative media educate the market about what a company has to offer, alternative means provide more flexibility with regard to zeroing in on more specific market segments.

This does not, however, put one medium above the other. In fact, it is not necessarily the medium that is key to niche marketing but the method of communicating.

AIM’s Mr. Roces said, “Forget broadcasting... when you are in niche marketing, you are ‘narrowcasting,’ focused communication.

“It’s not about not utilizing the media but about utilizing what is appropriate at a specific time.”

At Intercare, for example, when the company advertises in broadsheets, it still targets specific areas. When Intercare gets television exposure, it is through various talk show appearances by Intercare’s Director of clinical services Martin Camara.

In terms of radio, Intercare engages in radio advertising through alliances for certain events like sports tournaments.

Through all these traditional media exposure, the approach is still non-traditional, it is still narrowcasting.

“If you keep doing what everybody else is doing, you will not be heard above the noise,” Mr. Roces explained of the company’s methods.

Meanwhile, Phinma Properties employs television and print ads but carefully designs its ads around its target market.

“We can’t do those conceptual types with a nice picture and one nice sentence because those are more catered to the high-end buyers,” related Phinma Property’s Mr. Orbeta.

In the end, there is truly no one specific formula for what medium will work for a certain company or industry, explained Mr. Roces.

“The application is that you have to have a value proposition, identify who you are valuable to and then communicate to that segment.”

For Phinma Property’s marketing executive, the most effective communication would be a combination or mix of means tailored fit to one’s target market.

Niche marketing: Targeting the unserved markets

2007-06-27T00:40:00.000-07:00

(Interview with Prof. Rey Lugtu by Ernesto Calucag, Senior Researcher, BusinessWorld, for the Best Practices Forum series, published in BusinessWorld, June 27, 2007)

Many entrepreneurs think that selling to the widest possible market is the likeliest path to success. But given the cutthroat competition that prevails in today’s business environment, the “take all comers” approach has not been very effective, most especially for small businesses competing headon with the bigger players.

Thus, one exceptional business strategy has emerged, and that is for small businesses establishing themselves in a niche market. Because no matter how hard they try, no large company can be all things to all people. There will always be segments of the population whose needs for particular products and services are going to be unmet — leaving room for small businesses to succeed by meeting those needs.

A niche, in marketing terminology, is a small market consisting of an individual customer or a small group of customers with similar characteristics or needs. It could be similar interests, hobbies, age group, gender, social background, ethnicity, religion, lifestyle, and educational background, among others.

“Market segments are large identifiable groups within a market, such as the rich segment, the middle class segment, and the masa segment,” said Reynaldo Lugtu, Jr., marketing professor at De La Salle University Professional Schools. “A niche, in contrast, is a more narrowly defined group within the segment, which may seek a special combination of benefits, such as the class AAA niche within the rich segment, for jaguar cars or upscale condominium markets,” he explained.

Niche marketing is, therefore, targeting this small market that is not being readily served by mainstream products or services. A niche product could be a totally unique offering or a variation of a common product that is not produced and marketed by main marketing firms. And while there are many niche possibilities to explore, Mr. Lugtu noted that local companies, similar to pursuing a market segment, are still guided by the market feasibility rules of profitability, growth potential and sustainability.

Jose Jesus Roces, marketing guru from the Asian Institute of Management, added that niche marketing could also be described as “looking for that special place where you can leverage your competencies in a very competitive situation.” That is, as a strategy, niche marketing is all about positioning, until a firm finds itself valuable to a significant number of its clients.

Mr. Roces said that contrary to common notion, niche marketing is not exclusive to small companies. The bigger market players also exercise the strategy, as a way to widen their revenue base.

“Everyone should develop their niches, whether big or small. The ‘big company, big spender’ attitude is not a common trait these days,” he said.

An example is Johnson & Johnson which has more that 170 affiliates or business units that pursue niche markets — from diabetes care products to eye-care products. Another example is the offering of Smart Communications, Inc. called Smart Link that provides communication services to Filipino seafarers.

Mr. Lugtu explained that these big firms utilize what is called a “market or top-down approach” where a large market is broken down into smaller pieces or segments.

The segments are further broken down into niches that are defined by a specific group of people or consumers, and then the company finds a product or service to address the specific needs of this niche.

Another method is the “product or bottom-up approach” where the marketer starts from the needs of a few customers, produces the specialized product, and gradually builds up a larger customer base.

Mr. Lugtu mentioned that a prime example of this approach is the entry of virgin coconut oil, which started to address the desire of consumers for a natural and effective way of promoting health and treating illness. The product has grown such that it is now a multimillion dollar industry here and abroad.

Local beverage companies also used the same concept when they launched flavored water and blended colas, a growing niche product intended for young and sports-savvy customers.

SUCCESSFUL NICHE MARKETERS
In a crowded marketplace of health care practice, Intercare Healthcare Systems, Inc. successfully found a niche when it decided to offer a unified integrated approach towards health care.

Combining the best of what both traditional and alternative health care methods have to offer, Intercare’s winning niche is its treatment programs that are “complete, comprehensive, powerful and effective.”

Intercare is a health, wellness, fitness, and vitality center. Aside from its holistic wellness programs, the company’s team of clinicians further allow it to maintain a significant and growing number of clients in its niche market. It is quite known as an authority in chiropractic medicine in the country.

One of its founders and clinicians is Martin Camara, an internationally known chiropractic specialist, who regularly gets invited to major sports events, such as the Olympics and Asian Games.

Notably, Mr. Camara was the only Asian to serve at the last Winter Olympics in Torino, Italy.

Intercare’s team of clinicians also includes experts in acupuncture, rehabilitative medicine, and stress management.

In the property sector, Phinma Property Holdings is considered a niche developer, as it concentrates in making affordable medium- rise housing in the capital.

Grant Orbeta, Associate Vice- President for marketing and design at Phinma, said niche marketing is built in the product line itself.

“I believe no other developer that comes close to us as far as pricing is concerned. So we really don’t have to do any extra effort as far as niche marketing is concerned because it’s inherent in our business plan,” Mr. Orbeta said.

To maintain its niche market, the company targets a specific income level and from this, develops its own buyers profile, its main tool in growing its potential market.

“We have a buyers profile all the way back to our projects in 1996. We keep maintaining that and we try to monitor trends on buyers’ income, civil status, size of the family, where they originally resided and what made them decide to buy that particular property,” he added.

Finding a niche among OFWs entails understanding traits unique to segment

2007-06-27T00:30:00.000-07:00

(Interview with Prof. Rey Lugtu by JOSEPHINE B. VALLE Researcher, BusinessWorld, for the Best Practices Forum series, published in BusinessWorld, June 27, 2007)

Of the many market segments in the Philippines, the overseas Filipino workers (OFW) segment seems to have the x-factor, attracting companies from different sorts of industries be it banking, real estate or cars.

Real estate developer Phinma Property Holdings Corp. known for its “best-value-for-money” homes, for one, acknowledges the growing allure of this market segment.

“Because of the affordability of our units and the locations, we’ve really been catering to local end-users where the market is still strong in that segment. But, we cannot discount the fact that the OFW market is really growing,” said Phinma Properties assistant vice-president for marketing and design Grant Orbeta.

Mr. Orbeta recalls the OFW market started getting attention around 2001. Since then, it has been expanding and companies pursuing this segment have likewise grown.

“Perhaps in the next three or five years, it will continue to grow more,” said the Phinma Properties executive.

Demand for jobs overseas has been improving, now with more employment opportunities for professionals. With this, the salary range of OFWs has also widened compared with a few years back.

However, targeting the OFW segment has its challenges said Phinma Properties’ Mr. Orbeta. “OFW marketing is a science,” he said.

As with targeting any market segment, one has to carefully understand his target — where they come from, where they are, their salary range, and many other details to draw a good profile of his market.

The added challenge to this usual market profiling, however, is the characteristics unique to overseas Filipinos which companies have to consider.

The Phinma Properties executive said as an example, “We found out that OFWs tend to buy [properties] in their original places of residence... this is a way of showing off.”

At the same time, these overseas Filipinos are exposed to different market practices in the countries they are located, thus approaches would also have to be tailored fit to these differences.

On the other hand, the good thing with the overseas market segment is that information on them is readily available from different government agencies. Thus, companies planning to target this segment would not have a hard time obtaining the necessary information for them to make a marketing plan.

Another hurdle for a company targeting the OFW market is the obvious distance of the client from the product. Compared with local buyers, communication with OFWs could take more time, so too could decision making.

Fortunately, the Internet and other technological advancements have extended the reach of the domestic players to a wider audience, even to farther places.

“One good example is Pinoydelikasi.com, an e-commerce site that markets and sells various Filipino food products including danggit, dried pusit, dried mangoes, canned Filipino specialties and other items,” said De La Salle University Professional Schools professor of management and marketing Reynaldo Lugtu, Jr.

For Phinma properties, Mr. Orbeta explained that the company tries to provide virtual tours in its website to bring the properties in a way closer to the market. He disclosed that the company is also even contemplating putting up live webcams at its project sites for those outside the Philippines to see the developments at the project sites in real time.

It is this match of technology, information, improving OFW conditions and the opportunities in the local scene that makes the OFW market very attractive to most companies.

Tri-media’s role in securing niches

2007-06-27T00:04:00.000-07:00

(Interview with Prof. Rey Lugtu by Ernesto Calucag, Senior Researcher, BusinessWorld, for the Best Practices Forum series, published in BusinessWorld, June 27, 2007)

As mass markets continue to fragment into millions of niche markets by the minute, business owners and marketing professionals alike are in a hurry to find the right combination, whether traditional or new media tools, to lure their choice of niche market.

But even with newer marketing tactics, experts believe traditional marketing media, or the use of television, radio or print media, still remains an effective marketing tool when it comes to communicating with your target niche consumers.

Marketing Professor Reynaldo Lugtu, Jr. from De La Salle University Professional Schools said that traditional media’s effectiveness is very evident in the way bigger companies advertise their new products in the market, particularly those who want to conquer new business segments as their way of widening the revenue base.

“Television, radio, and print advertisements are pull marketing approaches that are intended to entice the prospective specific group of consumers to buy the product or service. So the traditional media still has a place during these days when new niches prop up almost everyday,” he said.

Pull marketing approach is employed in the market or topdown approach in niche marketing where the large market is broken down into smaller pieces or segments, and these segments are further broken down into niches that are defined by a specific group of people or consumers. The company then finds a product or service to address the specific needs of this niche, and promotes the product to entice prospective buyers to buy.

Generally, the market or topdown approach in niche marketing is employed by companies in the fast moving consumer goods industry, telecommunications services industry, and financial service industry.

In the emerging context of pull media, experts said it will be even more important for marketers to maintain an intimate connection with consumers. So the first rule in using any traditional medium is whether it can reach the targeted consumer.

Marketing experts say there are three types of consumers today. The younger consumers under 24 are living their life on Friendster, YouTube and other social media. And it is not certain that they’re entirely ignoring traditional media.

The middle group, consumers aged 25-35, are equally comfortable in both traditional and new media. Meanwhile, the 35-plus crowd is said to have both feet firmly planted in the traditional media world.

With this, Jose Jesus F. Roces, marketing guru at the Asian Institute of Management, noted that in order for a niche marketing plan to be effective, advertisers need to go back to their audience. Build the media plan, benefits and creative strategy specific to them.
For one, niche marketers should remain flexible when it comes to using traditional media. That is, they should be open in combining these with other media channels in order to effectively reach the target market.

“Before using any traditional media, advertisers should take note that is has to be appropriate, it has to resonate, it has to be directed to the specific segments,” he said.

Television, he said, is here to stay, although the medium is known to be the priciest among the three.

Radio and print, are somewhat recognized as niche media since advertisements in these media can be localized. As such, they can be employed in targeting geographic segments, such as Metro Manila, Cebu and Davao markets.

Print advertisement can further be localized based on special interest publications, and therefore be used to reach a niche market more cost effectively.

Niche marketing (full transcript of Interview from Businessworld)

2007-06-26T21:11:00.000-07:00

(Interview with Prof. Rey Lugtu by BusinessWorld, for the Best Practices Forum series, published in BusinessWorld, June 27, 2007)

BW: What is niche marketing all about?

Prof. Rey Lugtu: A niche, in marketing terminology, is a small market consisting of an individual customer or a small group of customers with similar characteristics or needs. Niche marketing is, therefore, targeting this small market that is not being readily served by the mainstream product or service. A niche market is characterized by the following:

-It should be profitable to serve that market
-It should have enough number of buyers to make your business sustainable
-The market should be growing or has growth potential so that you can continue meeting the demand for a long time.

The above characteristics may be termed niche characteristics. They could however, just as well apply to a market segment. However, market segments, in contrast, are large identifiable groups within a market, such as the rich segment, the middle class segment, and the masa segment. A niche is a more narrowly defined group within the segment, which may seek a special combination of benefits, such as the class AAA niche within the rich segment, for jaguar cars or upscale condominium markets.

Other observed differences are that:
-a niche is usually smaller in size compared with that of a segment
-a niche focuses on individuals that require special set of benefits, such as those that buy and take virgin coconut oil to promote health – in a segment we focus on a so-called homogeneous group, such as those that instead buy vitamin supplements instead to promote health.
a niche fulfils a specific need in contrast to a segment where the emphasis is on being a manageable part of the market.

Just like market segments, market niches can be found and defined within geographic areas, a specialty industry, ethnic or age groups, or any other particular group of people. Sometimes a niche product can be a variation of a common product that is not produced and marketed by the main marketing firms.

BW: How do marketing professionals and companies develop their own niches and what marketing approaches (methods) do they use to serve the niche?

Prof. Rey Lugtu: Identifying and targeting a niche have two general approaches:
One is market or top-down approach where a large market is broken down into smaller pieces or segments, these segments are further broken down into niches that are defined by a specific group of people or consumers, and then the company finds a product or service to address the specific needs of this niche.

This approach is normally pursued by bigger companies that offer many products to serve various niches. Examples are Johnson & Johnson which has more that 170 affiliates or business units that pursue niche markets – from diabetes care products to eye-care products. Another example is the offering of Smart Communications for seafarers called Smart Link that provides communication services to Filipino seafarers.

The market or top-down approach uses the pull-marketing concept, i.e. where the marketer develops advertising and promotional strategies that are meant to entice the prospect to buy the product or service.

Another approach is the product or bottom-up approach where the marketer starts from the needs of a few customers, produces the specialized product, and gradually builds up a larger customer base. An example of this approach is the entry of virgin coconut oil in the market, which started to address the niche of consumers who desire for a natural and effective way of promoting health and treating illness. It has now grown into a multi million dollar industry here and abroad.

A variant of this approach is called push marketing, where the marketer starts from the needs of a few customers then the company markets the product to all segments hoping the product creates a niche. This approach has been applied by local beverage companies which launched flavored water and blended colas, and launched and advertised them through mass media in an effort to find a stable niche in the long run.

The product or bottom-up approach uses the push marketing concept where in the marketer develops advertising and promotional strategies geared toward the marketing and distribution channels to entice them in promoting the product.

BW: What different market segments advertisers pursue nowadays to sell their products and services. In what industries do they exactly cater to?

Prof. Rey Lugtu: Generally, marketers of consumer goods segment the market bases on socioeconomic classes, i.e. rich segment, middle class segment, and the masa segment. Mass media is replete with advertisements targeting the masa segment such as packaged consumer goods (e.g. instant nnodles) and mobile phone services (e.g. Smart and Globe). Other marketers have segmented the market based on age groups, such as the youth segment (e.g. Smart Addict Mobile) and the elders segment (e.g. Sustagen Prime).

However, many marketers, in their pursuit to develop other markets, have been breaking down these segments into smaller segments or niches. One example is the offering of Smart Communications called Smart Kid, which targets the “kids” niche of the mobile phone market wherein Smart also offers value-added services for kids and parents such as games and location finder.

The working women market has evolved from a niche to a larger market segment. Credit card companies have developed products and service that cater to this segment.

A strong market that has a number of potential niches in it is the overseas Filipino workers (OFW) segment. There are around 5 million OFW with remittances that could hit $11.8 billion in 2007. These present huge opportunities for marketers to target this growing segment and capitalize on certain niches. For instance, Smart recently launched the Smart Services Hub, a platform will enable mobile operators and banks to serve the remittance needs of migrant populations in their respective countries. Through the platform, migrant workers will be able to send remittances to their countries via SIM-based services anytime, anywhere -- all at the speed of a text message.

Another niche marketing was launched by Bank of the Philippine Islands (BPI) in 2006 called “Expat Pinoy” (BPInoy) program that addresses the needs of Filipinos working abroad. Compared with other banks tap the overseas Filipino market only for the remittances or cash transfer business, the program will immediately provide as “pabaon,” or send-off package, to expatriate Filipinos an international automated teller machine card, a BPI Mastercard credit card and a 24/7 counseling service to assist them in managing their finances.

Another emerging niche is the business process outsourcing (BPO) employees niche market. This group aged 19-35 years old, normally works in call centers and other BPO’s usually in the metros during the night shift. This group which numbers to about 200,000 and growing rapidly by 30-40 percent until 2010, has created a culture of its own, with the same tastes in music, food, fashion, and lifestyle. The average starting salary of these employees is $275 a month is well above minimum wage of about $6 a day, and they are spending everything!

Niche marketers in the fast-food and restaurant bar business have started to realize this by opening during the night-til-dusk shift, and offering promotions to call center employees.

Many marketers in the consumer goods industry have not yet taken steps to capitalize on this fast growing niche. There are obvious potentials for niche products such as night cosmetics and beauty care products, vitamins and food supplements, and other services that open during BPO hours.

BW: TV, radio and print are still the most-used mediums of advertisement. How effective are they in serving/advertising the niche markets? In what industries does each one is associated with when it comes to reaching the intended niche market?

Prof. Rey Lugtu: TV, radio, and print advertisements are pull marketing approaches that are intended to entice the prospective consumers to buy the product or service. As discussed previously, pull marketing approach is employed in the market or top-down approach in niche marketing i.e. a large market is broken down into smaller pieces or segments, these segments are further broken down into niches that are defined by a specific group of people or consumers, and then the company finds a product or service to address the specific needs of this niche, the advertises or promotes the product to entice prospective buyers to buy.
Generally, the market or top-down approach in niche marketing is employed by bigger companies in the fast moving consumer goods (FMCG) industry, telecommunications services industry, and financial service industry.

Since radio and print advertisements can be localized, these can be employed in targeting geographic segments e.g. Cebu market, Davao market.
Print advertisement can further be localized based on special interest publications, and therefore be used to reach a niche market more cost-effectively. For example, the Village Voice publications in upscale villages in Metro Manila can be used by niche players to market products and services such as high-end cars and upscale restaurants.

BW: More specific target markets may need to be reached through nontraditional yet more precise means. What are the various nontraditional means and how each can be effective in promoting the products and services?

Prof. Rey Lugtu: The advent and growth in information and communication technologies (ICT) has lowered the distribution cost of digital products and services. Corollary to this, digitization technologies has lowered the cost of production; thus allowing for the lower cost of producing and marketing products and services to niche markets.

One clear example of this is iTunes, the online music store of iPod. iTunes has more than 5 million songs compared to a typical physical music store of 55,000 tracks. iTunes distributes all sorts of music to even the esoteric music lover – from Jamaican music to Acid Jazz tracks.

Another example is Amazon, which carries 3.7 million titles compared to 100,000 titles of a typical large physical bookstore. Amazon distributes book titles for even the very specialized niche buyers – from those who look for weed gardening to readers who look for subjects on Asian poetry.

These long list of songs and books titles address specific requirements of many niches, thus constituting the “The Long Tail” of demand for niche products, as coined by Chris Anderson in his seminal book “The Long Tail”.

What is means for local marketers is that products that can be digitized and/or distributed digitally via the Internet can prove to be viable and even profitable. Take for instance mobile content being distributed by wireless operators like Smart and Globe. Each of these operators would have hundreds of content providers producing hundreds of content categories – from ring tones, to a MMS picture of movie stars – which translates to thousands of content categories which address a specific market need or niche. The cost of production of these thousands of content is low because everything is digitized. Likewise, the cost of distribution via the wireless operators is low, which makes it possible for wireless operators and content providers to make money out of thousands of types of content.

The Internet has also enabled enterprising Filipinos to reach the OFW and migrant Filipinos abroad. One good example is Pinodelikasi.com, an e-commerce site that markets and sells various Filipino food products including danggit, dried pusit, dried mangoes, canned Filipino specialties (adobo, bistek tagalog, pork adobo, calderetang baka and bopis), and other items, including a Banaba tea (mixed with Pandan) called Haliya. It has grown into a profitable and viable business model that the World Trade Organization nominated Pinoydelikasi.com for best e-commerce model.

The Internet and even the mobile phone usage in the Philippines has allowed marketers to use these tools to reach various niches more cost-effectively. Though there are only about 10 million Internet users in the country, it is growing rapidly and coalescing into specialized user groups that niche marketers can target.

Creative Outsourcing

2007-06-26T06:13:00.000-07:00

(Published in The Manila Standard Today under the Greenlight column, June 26, 2007)

Business process outsourcing is a sector that has undoubtedly witnessed spectacular growth over the last few years, providing employment to more than 200,000 BPO professionals. It is projected to grow on the average 38 percent until 2010, contributing more than $12 billion in revenue.

The main drivers in this growth are BPOs in areas of contact center, back office services such as HR and payroll services, and transcription services such as medical transcription, These “lower value” BPO services all account for more than 87 percent of the total information technology enabled-services (ITES) revenues. Though industry experts project a double digit growth for these groups of BPO services until 2010, what’s worrying is that the growth is slowing down, and even plateauing in five years according to many industry practitioners. This is due to the maturing market, especially in the contact center area, and the entry of other countries such as Russia, Latin America, and other low-cost countries.

Growing KPO
The aim of the government though the Center for International Trade Expositions and Missions (CITEM), the export promotions arm of the Department of Trade and Industry, to sustain the growth of the BPO sector. CITEM plans to achieve this not only by enticing more foreign investors to locate in the country for skills-based BPO activities such as finance and accounting, but also to develop “higher-value” BPO called Knowledge Process Outsourcing (KPO).

KPO refers to the outsourcing of high-value complex tasks and processes to specialized service providers. As compared to traditional BPO, KPO delivers ‘knowledge’ or content expertise that demand advanced analytical and/or technical skills and some decision-making or decision-support processes; rather than process expertise that simply involves executing standardized processes. Some examples of KPO are market research services, network consulting and management, data search, integration and analysis, remote education, website services, research and development services, among others.

India and China, the top global leaders in the outsourcing market, are already ahead of our country in the KPO arena. China, with its large pool of scientists, has had a head start in research and development outsourcing. India, on the other hand, holds the lion’s share in the KPO market, forecasted to reach 71 percent or US$12 billion by 2010. This is due to India’s competitive edges in engineering and technology. Indian educational institutions annually churn thousands of professionals that serve the KPO technical services market.

Tapping the KPO market
If the Philippines want to partake of the huge potential of KPO, how then can we compete against the sheer size of scientists, engineers, and technical professionals that India and China produce every year?

The answer lies in the innate creative talents of Filpinos, who are well known globally in may creative industries such as music, arts and dance, crafts, and design. Filipinos are naturally creative as evidenced by the Ifugaos’ widely known Rice Terraces and the “I love you” computer virus created by a Filipino programmer.

The innate competitive advantage of our country, which is the creative minds of its people, can be harnessed by industry and government to carve a niche in the KPO sector, known as creative outsourcing that is hard for other countries to imitate.

Creative outsourcing currently includes animation, developing gaming content and e-learning and e-publishing. But according to Outsource2India, an Indian creative outsourcing provider, other creative services that can be outsourced include illustrations, editing, photography, screenwriting, creative writing, proofreading, cover design, journalistic writing, graphic design, storyboarding, video editing, instructional design, and music composition.

Animation services, a particular creative outsourcing service, has seen a stellar growth these part years, and projected to grow 60 percent until 2010, contributing to $ 800 million in outsourcing revenue.

Identifying Areas of KPO Opportunities
Even India-based BPO OfficeTiger believes in the creative talent of Filipinos. It set up shop in the country as the springboard for its legal services outsourcing and expects to make Manila the main center for creative "pre-media" outsourcing work, including desktop publishing, composition, typesetting, and graphic design.

According to Joseph Sigelman, co-president of OfficeTiger, design work is another place where Filipinos have an edge. He says he has found incredible depth of design talent in Manila; the kind of talent that is hard to come by in Bangalore, Hyderabad, or Chennai.

Digital content production outsourcing is also another area which Filipino creativity comes into play. A fast growing BPO segment growing annually close to 100 percent, our country can capitalize on the Filipino ingenuity in gaming content development and mobile phone content production

Capitalizing on Filipino talent
The opportunities creative outsourcing augurs well with the innate creativity of Filipinos. But the challenge now is how to develop this natural creativity among us, and channel it to capitalize on the vast opportunities before us.

One approach is for existing BPO players to expand their service offerings to include creative outsourcing. This will involve engaging in adjacent creative services, i.e. graphic design for pre-media outsourcing work, and developing this service into a productized creative outsourcing offering.

Another approach is for the local creative industry players, with the help of government, to organize themselves and offer and market creative outsourcing to foreign markets. There are a lot of accomplished local firms engaged in advertising, visual arts, cinema and audiovisual media, literature, and multimedia arts, that can extend their services to clients abroad.

Key to these approaches is an increased supply of creative talents from universities and vocational schools. Fortunately, a number of schools have stepped up to develop the local talent that industry requires.

For example, De LaSalle College of Saint Benilde School of Design and Arts offers courses in animation, digital film-making, multimedia arts, and others. The school has experienced a fast growth in enrollment over the past years, owing to the accolades that the graduates garnered in local and international competitions, and the growing awareness of arts and design among the Filipino youth.

According to estimates by research firm, Evalueserve, revenues from the KPO market will grow globally from US$1.29 billion in FY 2003, to US$17 billion by FY 2010. This implies compounded annual growth rate of 46 percent, for the global KPO market.
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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com

Knowledge process outsourcing

2007-04-16T06:45:00.000-07:00

(Published in Manila Standard Today under the Greenlight column, April 16, 2007)

A trade delegation organized by the Center for International Trade Expositions and Missions (CITEM), the export promotions arm of the Department of Trade and Industry, is scheduled for a tour of United States and Canada in June.

Delivering content expertise
The goal is to sustain the growth in local business process outsourcing sector by enticing more investors to locate in the country for skills-based BPO activities such as finance and accounting. Of particular interest in this mission is the increased understanding for higher-value BPO called Knowledge Process Outsourcing (KPO).

KPO refers to the outsourcing of high-value complex tasks and processes to specialized service providers. As compared to traditional BPO, KPO delivers ‘knowledge’ or content expertise that demand advanced analytical and/or technical skills and some decision-making or decision-support processes; rather than process expertise that simply involves executing standardized processes.

Some examples of KPO are market research services, network consulting and management, data search, integration and analysis, remote education, website services, legal and medical advice, research and development services, distributed product development, among others.

Emerging higher-value services
The major strength of such tasks and processes is the value that these services provide to the outsourcing organization, as opposed to the traditional cost-saving aspect that firms expect from outsourcing low-value business processes like customer and HR support services. As organizations in the Americas and Europe experienced huge successes in outsourcing their low-value business processes, e.g. contact center services, to low-cost Asian countries such as Philippines and India, there is now an emerging market for higher-value services that capitalizes on the supply of technical and business skills of host countries.

This opportunity in KPO is precisely the reason why the Philippine government should seriously look into this emerging sector. According to estimates by research firm, Evalueserve, revenues from the KPO market will grow globally from US$1.29 billion in FY 2003, to US$17 billion by FY 2010. This implies compounded annual growth rate of 46 percent, for the global KPO market.

These present huge opportunities for established BPO organizations in the country, apart from new potential ventures that will specialize in domain expertise. For one, the success of established contact centers, back-office support services, and shared services by multinational firms, has prepared them for the emerging demand for KPO services.

For instance, legal outsourcing firm Baker & McKenzie, has been operating legal transcription and other document management services in the country for a few years now; but beyond these, it has started providing research and analysis support services for their 70 offices worldwide.

Already a number of local BPO players and new business ventures are shifting to or establishing KPO initiatives in various areas such as financial research, medical advice, and web services.

Another opportunity is the higher returns that KPO services fetch relative to BPO deals. As the value-add in knowledge intensive industries increase, the billing rates in KPO are 50 to 100 per cent higher than that in BPO.

This, however, translates to higher investments in new processes, systems, and infrastructure. But the high income and related investments in KPO translate into higher revenues bringing in a multiplier effect, which means more funds for further investments into KPO and even in the traditional BPO.

Capitalizing on KPO
One may wonder why further invest in BPO, after much aggrandizement on the opportunities in KPO. Well, the global growth in KPO may lead to a growth in the local BPO business.

According to Evalueserve COO Ashish Gupta,“as BPO has got commoditized [in India], the very low end work will soon shift to destinations like Bangladesh and the Philippines”.

As the Indian KPO sector is forecasted to increase its share in the global KPO sector to 71 percent or US$12 bn by 2010, the BPO industry in India will soon be overtaken by the emerging KPO sector, which will prove to be the biggest revenue grosser in future. As a result, India’s low-value low-return BPO sector may shift some of its operations to relatively low-cost countries such as Philippines. Already a number of BPO companies from India have been setting up or ramping up operations in the country, such as Infosys, HTMT, IBM Daksh, and Genpact.

So how do we, as a country capitalize on this huge opportunity in KPO? As one moves towards KPO, domain expertise becomes key. In this respect, government and the private sector alike, should jointly draft a plan towards targeting a specific group of KPO initiatives. We should take stock of our pool of graduates and entering college students, and understand which skill areas our country can specialize in.

One obvious domain area is in the field of business and accountancy. The Philippines has more than 100,000 accountants and business-related college graduates, the biggest pool in the region. About 3, 000 accounting graduates become certified public accountants every year. With this resource base, local BPOs and entrepreneurs may engage in KPOs in the financial and market research and advisory services areas, which may probably be our country’s competitive advantage.

Ensuring qualified professionals
To ensure the continuous supply of qualified professionals for the KPO sector in particular, and BPO sector in general, the government and the industry should strengthen their partnership with educational institutions by offering BPO/KPO appreciation sessions in high school to guide students in the courses they will take in college.

Additionally, BPO/KPO-related courses in selected colleges and universities should also be offered which will provide critical skills to prospective BPO professionals while they are still in school.

A noteworthy undertaking is the initiative of De LaSalle Professional Schools Graduate School of Business to offer an MBA elective called ‘Managing Business Process Outsourcing’ starting first term of school year 2007-2008. This course will equip potential managers, professionals, and entrepreneurs alike with the concepts and skills in managing a BPO/KPO. Interested readers may join our MBA students in this course.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Campaigning on the Internet

2007-03-08T04:32:00.000-08:00

(Published in the Business World under the "View from Taft" column, March 8, 2007)

When Sen. Hillary Clinton announced her presidential campaign in January, her website immediately drew 150,000 new sign-ups – people registering their e-mail addresses with the site, the New York Post reported.

Also, during the campaign launch, a web forum, which is like a cyber town hall meeting hosted by Hillary on Yahoo!, drew a near-record of 35,000 people.

Interestingly, a large part of these Internet traffic forms related to the Clinton campaign has been from the 18-to-24-year-old group, and Hillary’s campaign office issued a statement that "could be good news, as the 2008 election will almost certainly be strongly influenced by the Web.”

The role of the Internet as a vehicle for political campaign has been growing in importance over the past years, as Internet connectivity becomes affordable and more pervasive.

In fact, a 2004 study by the Pew Internet and American Life Report shows that 13% of the 1,506 adults surveyed regularly find election information via the Internet. This is up 4% from the 2000 election. In addition, 20% say they occasionally receive campaign news from the Web.

Another 2006 survey of e-Voter Institute, a US trade association of Web publishers and political solution providers, revealed that an overwhelming percentage of the 250,000 American respondents said they believe the 2008 US election will hinge on the internet.

Those surveyed also expressed a number of expectations they had for candidates. More than 85% expect candidates to have a website. More than 70% expect that they will leverage email. More than two-thirds expect that candidates will use the internet for fund-raising, posting video commercials and running online campaign ads. More than half expect candidates to blog. And the web is seen as second only to TV as the "most effective medium" for campaign advertising, and as a source for researching candidates.

These positive findings augur well for the forthcoming May 2007 Senatorial and Congressional elections, where the Commission on Elections (Comelec) already approved the use of electronic campaigning (e-campaigning), pending the drawing up of guidelines as of this writing. With around 12 million internet users in the country, composed principally of the youth segment, the web presents an opportunity for candidates to reach and convince an internet-savvy audience.

Candidates can use the various approaches to market themselves through the Web or through peer-to-peer SMS in inexpensive and easy-to-deploy ways.

Personal Websites
A personal website is the most basic approach for a candidate to have a web presence – a sort of personal brand in the web. It can present an extensive description of a candidate’s background, experience, accomplishments, and political platform. Apart from the content, website design and ease-of-use are important considerations to sustain the interest of the reader.

Most of the political figures in the US have their own websites. It is surprising that among our senatorial aspirants, only 5 out of 24 candidates – Angara, Escudero, Lacson, Pangilinan, and Villar – in the administration and opposition tickets have personal websites. Although 12 out of the 24 candidates have Wikipedia entries that describe their background and accomplishments, these entries do not substitute for a personal website that potentially can launch the political platform of a candidate.

Web Forums
A forum is a form of a web dialog or bulletin board, a method of communicating directly with participants. It can either be restricted to those registered to a site or open to the public. Essentially, since forums are postings on a web page, those involved create back and forth dialog, just not in real time.

Senator John Kerry, winner of the Iowa Democratic presidential caucus, has a web forum on his website that is well visited. Topics of interest include Campaign News and Discussion and Homeland Security. Visitors can read forum postings, make personal comments, or start a new discussion themselves.

Blogs
A blog (short for weblog) is simply an online journal or newsletter that is frequently updated and intended for general public consumption – one's online diary. Many of the political websites in the US contain their own community blogs, but of the five local “Senatoriables” with personal websites, only two have blogs.

Blogs are effective because they allow users to not only read current and breaking news but also to join in and post their own comments or information. This engenders a sense of involvement for the visitor.

Social Networking Sites
A social networking site such as Friendster and MySpace focuses on the building and verifying of online social networks for any purpose. Users can upload their pictures and can be "friends" with other users. Some major social networks, such as MySpace, have additional features, such as the ability to create groups that share common interests or affiliations, upload videos, and hold discussions in forums.

Of the 24 Senatorial candidates, only four have Friendster sites. These are used for posting news and interest discussions. These sites would be more effective if, together with traditional campaign materials, they are promoted to the youth segment.

One may argue that despite the 12 million internet users in the country, probably a handful only will visit the e-Campaign sites of the Senatorial candidates. What the politicians and campaign managers are discounting is the potential of these tools to make or break a senatorial winner, especially for those that will hover in the 10th to 15th spots. Moreover, the absentee voters in many parts of the globe, composed of OFW’s and residents, are more and more becoming internet-savvy and keen to use the various web communication tools.
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Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools Ramon V. del Rosario Graduate School of Business. Interested readers may e-mail him at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Learning from China

2006-11-15T04:07:00.000-08:00

(Published in the Manila Standard under the Greenlight column on November 6, 2006)

"Our businessmen come to Nanning looking for products as candidates for integrative trade with China,” President Arroyo said at the opening ceremonies of the 3rd China-ASEAN Expo (CAEXPO) and the 3rd China-ASEAN Business and Investment Summit (CABIS) on October 31, in Nanning, China.

She further said that Filipino businessmen participated in the expo "looking not only for products to bring home, but for industries where Chinese and ASEAN manufacturing can collaborate to produce for our own domestic markets and for the rest of the world."

This was an opportune time for Filipino businessmen and executives participants, who will be part of the strengthening of “integrative trade” within the East Asian region to reduce dependence for exports on Western markets.

Managing in an unpredictable environment
But perhaps what is more important for the Filipino participants to learn from this exhibition in particular, and from China in general is how Chinese entrepreneurs and businessmen were able manage effectively and grow their business empires within a short span of time, in a highly volatile and unpredictable environment.

Succeeding in China is tougher than usual. “Chinese companies face extremely high levels of uncertainty across multiple dimensions,” said Donald Sull in his book “Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs,” where he analyzed the success secrets of leading Chinese firms that have thrived in the country’s volatile market.

The highly volatile macro-environment in China is characterized with unpredictable regulation and industrial policy, uncertainty from integration into global markets with the onslaught of deep-pocket multinationals into China, low access to global technology markets, uncertain access to and cost of capital, macroeconomic jolts (e.g. depreciation of renminbi), and unclear and shifting intellectual property rights.

But despite these obstacles, “an elite group of Chinese companies, [with examples from Legend, now known as Lenovo with its merger with IBM PC division, to UTStarcom, an emerging global telecommunications vendor] managed not only to survive, but to thrive amidst the unpredictability that characterized China’s move to a market economy and integration into the global economy,” avers Sull.

No difference from China
The Philippine macro-environment is no different from that of China, with perhaps less volatility and unpredictability. We face the same issues but with less intensity. Notwithstanding, we hear many businessmen and entrepreneurs complain about the same set of factors – the devaluation or appreciation of the peso which affects either exporters or importers, unpredictable regulatory environment especially with every change in the administration, entry of multinational firms which compete with local companies, and intellectual property issues.

This is probably the reason why, unlike in China, we have not witnessed the growth and ascension of new Philippine firms in a regional scale in the last 15 to 20 years. The fragile and sometimes volatile environment in the Philippines has the potential to destabilize the strategic frameworks and undermine growth efforts of Philippine firms.

Chinese management skills
So what can Philippine businessmen and entrepreneurs learn from their Chinese counterparts? In Sull’s findings, the Chinese firms possess a variety of valuable management skills, including their ability to decide and act rapidly based on information and facts at hand and on the ground, rather than depending on their long-term plans.

Chinese entrepreneurs have also mastered “active waiting”, a skill that consists of anticipating and preparing for opportunities and threats that a manager can neither anticipate nor control in a highly unpredictable market. Instead of the usual “wait-and-see” attitude that we often see among local entrepreneurs when confronted with uncertainties, Chinese managers’ focus on “timing-based competition” grounded on three windows of opportunity - customers, competitors, and context (including external factors other than buyers and competition) - which consistently matter in evaluating whether the timing is right to pursue an opportunity.

This “active-waiting” approach helps them react quickly to a constantly changing environment; but this is not to assume that being fast beats the slow. A Chinese firm, Wahaha, for example, pioneered the children's nutritional drink segment. However, in some cases, Wahaha followed early players who educated consumers on the benefits of packaged milk, carbonated drinks, and bottled water.

Right opportunity
Success, therefore, depends on mustering up much of the company’s resources for the right opportunity at the right time. But deciding and acting quickly at the right time depends, to a large extent, on whether the three factors - customers, competitors, and context - are aligned. Internal factors, of course, influence a manager’s ability to act quickly; but much of timing depends on factors principally outside the control of the entrepreneur or businessman.

Perhaps more than just products or services to sell to and from China, our business leaders and entrepreneurs can learn from their Chinese counterparts on how they manage effectively in turbulent markets, in spite of the unpredictable external forces that beset them.

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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.

Can entrepreneurship be taught?

2006-08-07T01:40:00.000-07:00

(Published in the Manila Standard Today, under the Greenlight Column, August 7, 2006)

The Department of Education (DepEd) has introduced this school year the “Know About Business” (KAB) curriculum for pilot implementation in selected public and private high schools in the country using an entrepreneurship module developed by the International Labor Office (ILO) head office in Geneva, Switzerland.

KAB, which has been implemented or is under pilot testing in more than 20 countries in Africa, Asia and Latin America, aims to promote awareness among the youth of the opportunities and challenges of entrepreneurship and self-employment, as well as their role in shaping their future and that of the country’s economic and social development.

This program is perhaps the first of its kind in the country. But actually, teaching entrepreneurship is nothing new. Entrepreneurship is being taught in many schools around the globe. In the country, a number of colleges and universities offer undergraduate and graduate degrees in entrepreneurship. The De La Salle Professional Schools (DLS-PSI) offer entrepreneurship courses in its MBA program. In my Management Principles class in the MBA program of DLS-PSI (0ne of the first courses taken by the students), I devote an entire session on introduction to entrepreneurship.

Developing the entrepreneurial mindset
But despite the widespread evangelization of entrepreneurship in universities and schools, still many believe that entrepreneurship cannot be taught. Supporters of this view believe that entrepreneurs are born with innate gifts to seize the moment and capitalize on an opportunity. They argue that one cannot teach someone to dream and transform this into reality, the way entrepreneurs do.

In addition, Newton and Henricks of Entrepreneur Magazine in the US observes that “the business students who filled the multiplying classrooms [of entrepreneurship classes] weren't all planning to start businesses of their own. Some just wanted to pad their resumes with courses that would convince potential employers they possess the entrepreneurial mindset.”

While an educator might not be able to teach someone to be like Bill Gates or Tony Tan Caktiong, he or she may help the student develop an entrepreneurial attitude and thinking - achievement-oriented, opportunity-seeking, innovation, risk-taking, and control over one’s life – that may later lead him or her to start a business venture. A case in point is the study by the UCT Graduate School of Business in South Africa has found that “exposure by South African school students to an experiential entrepreneurship program, significantly increased the likelihood of individuals reporting that they have the skills, experience and knowledge to start a business. It did this while simultaneously increasing their knowledge of business.”

Applying the values of entrepreneurship
Indeed, countless studies point to the importance of entrepreneurial activity in market activity, job creation, and ultimately to economic progress though new and sustained business ventures. Many of these successful ventures can be attributed to “graduates of entrepreneurship”.

While many students of entrepreneurship courses do not end up setting up their own businesses, the entrepreneurial mindset and attitude learned will not be useless. Many may apply the values of opportunity-seeking, innovation, and risk-taking in private companies, either to start a new product category, enter new markets, or recommend new ways of doing business.

Spurring innovation via intrapreneurship
Creating something new inside an existing company rather than through a new venture, also called “intrapreneurship”, helps in spurring innovation and business activity, just like entrepreneurship. One good example of a successful intrapreneur is Art Fry of 3M, who in 1974 was a church choir singer thought of a paper marker for a choir hymnal that would adhere to the page but not damage it when it was pulled off. He used company resources, sourced his own materials, did his own market research, and created his project groups to give birth to the ubiquitous Post-It Notes, making it the flagship product of 3M. According to William Coyne, retired senior VP of Research and Development of 3M, "Ten years from now, I expect half of 3M's sales will come from products introduced in the previous four years". New products like these, apart from new services and new business models, will likely come from innovations created by intrapreneurs.

Teaching them young
That is why teachers of entrepreneurship, especially for adult learners, should include modules of intrapreneurship for those who do not end up starting a business venture, but rather working in a corporate environment. If entrepreneurship can be taught, so is intrapreneurship.

It is laudable that DepEd’s “Know About Business” program for high school students, not only includes modules that ask “Why entrepreneurship?” and “How do I become an entrepreneur?”, but also modules asking “How do I find a good business idea?”. In this way, our schools will develop more entrepreneurs and intrapreneurs alike with enterprise know-how, and ability to innovate and capitalize on opportunities.

It is said that it is easier to learn while young, and the young high-school learners are key contributors to society and economic development in the coming years. More entrepreneurs and intrapreneurs of this generation will mean more jobs, more innovations, and economic progress in the future.

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Reynaldo Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com.

Remote management

2006-07-31T05:59:00.000-07:00

(Interview with Prof. Reynaldo Lugtu, Jr, by Sam L. Marcelo, Special Features Writer, BusinessWorld, published July 31, 2006)

The bundy clock is a throwback from an era that primarily used time spent at the desk as a measurement for an employee's productivity. In those days, working always meant going to the "office" - the physical space that ensured interaction between management and the rank-and-file.

Working in the same environment allowed supervisors to swoop in unexpectedly and literally read over someone's shoulder to see if a report was being done correctly. being in the same place also made it easier to instill a sense of belonging and company loyalty, and employees could mingle at the proverbial water dispenser, swap ideas, or indulge in tales from the rumor mill.

While wireless connectivity does not automatically mean that employees will never darken their office's doorstep, it does mean flexible hours and less opportunities for "bonding with coworkers. Technology is spawning a new breed of workers who possess a different set of values and habits. Just as hardware and software have to be upgraded, business must also accomodate the changes in their "peopleware" by revising management strategies

Who is the mobile worker?
Reynaldo Lugtu Jr, professor of management principles and marketing of high-tech products and innovations at De La Salle University Professional Schools Inc Graduate School of Business, said that much of the mobile workforce comprise marketing and sales professionals, consultants, and technical support.

"Mobility is a form of empowerement -- giving workers the resources, both psychological (support, motivation) and physical (mobility tools, PDA's, cellphones, laptops) to make decisions on how to use their skill, time, and other company resources to help the company achieve its goals", said Mr Lugtu.

He described the mobile worker as more adept, since nontechnical job-related skils such as time management and troubleshooting would be required of him.

The mobile worker alo benefits from little direct supervision and so he must be confident of his role within the organization.

"To address the potential feeling of isolation and disconnection among mobile workers, companies should regularly communicate the organization’s purpose, mission, and vision," said Mr Lugtu. He added that a solid identity and a culture of teamwork would instill a sense of responsibility and accountability among employees regardless of their loaction.

Out of sight, out of mind?
Measuring the performance of mobile workers is a straightforward exercise since sales results and customer calls can be used as metrics.

Mr Lugtu cautioned that although mobile worker's productivity is determined by output rather than by his punchcards, this does not mean that managers can rest easy as long as deliverables arrive on time. Simply put, mobility does not render the hours spent at the office irrelevant. " Competition is getting stiffer and tougher...Mobility is supposed to improve and increase productivity," said Mr Lugtu.

For him, optimum use of mobility is illustrated by a salesman who uses regular office hours to make customer calls and slack time (after or before office hours) for connecting to the backoffice or answering email. In other words, wireless connectivity extends the effective working hours of an employee.

The future of work

2006-07-27T05:29:00.000-07:00

(Published in the BusinessWorld under the View from taft column, July 27, 2006)

In the recent 95th International Labor Conference in Geneva, Switzerland, the Philippines through then Labor Secretary Patricia Sto. Tomas, urged the international community to redefine the meaning of work. She cited that work has been traditionally defined as an activity for which one was paid and that which was done inside national boundaries, effectively excluding OFW’s as well as cooks, maids, and other mundane tasks.

Perhaps work needs to be redefined to account for the shifts that are taking place that shape its very meaning. Indeed, technological change, globalization, and shifts in demographics are affecting patterns and nature of work in developed as well as developing countries.

Advances in digital automation technology will replace more routine work involving processing of information or transactions with individuals. Already we are seeing this trend in the banking sector where Internet banking transactions have steadily increased over the years as more banks adopt such technology, effectively reducing over-the-counter transactions.

In addition, advances in information and communications technology (ICT) are ushering in a new form of working called telecommuting (also called telework). With portable computers, high speed internet connectivity, and ever-present mobile communications devices, many employees today can work almost anywhere, at least part of the time, other than one’s “official work station”. Already IDC, a research firm, is predicting that the global mobile workforce is expected to grow by more than 20 percent in the next four years, with 878 million mobile workers by 2009.

These technological shifts impact the nature of work in two ways. First, as digital automation replace information processing work, more and more work will shift towards those which involve analyzing information, solving problems, and making complex decisions (e.g. managers, salespeople, customer service reps, nurses), aptly referred to by a McKinsey study as “complex interactions”. Second, as more companies adopt a mobile workforce approach, knowledge workers will be more empowered and will be working in a more decentralized setting.

Dovetailing with these technological trends is the impact of globalization on the nature of work. As noted by Thomas Friedman in “The World is Flat”, “there will be an inexorable flow of jobs from developed world to the developing world, as these new jobs regularly become commoditized and more easily tradable..”

Because of well-developed ICT infrastructure and skilled labor force, the Philippines is now a strong contender for business process outsourcing (BPO) sector which includes call centers, medical transcription and animation firms. It will remain to be the most important sector in the next five years, accounting for 1.2 million workers to date. Sadly, what impedes the continuous growth of the BPO industry, specifically the call center sector, is the degeneration in English skills – only three to five agents are hired out of 100!

The nature of work is also being shaped by changing demographics, specifically the changes occurring in the supply side of work. Demographic changes in the developed world such as declining birth rates, aging population, and the emerging Generation X’ers and Y’ers who dislike menial and “dirty” work have spawned a demand for the importation of labor from less developed countries like the Philippines. This is why our country will still supply a significant number of workers – technical workers, nurses, caregivers, and skilled laborers – to the developed world in the coming years.

All these forces - technological change, globalization, demographic shifts – will truly change the kind of and the way we work in the years to come. It is, however, notable that in the preceding discourse, one important issue sticks out like a sore thumb – the need to continually upgrade workers’ skills.

There in more pressure now than ever to constantly upgrade skills and acquire knowledge in the workplace. The rapid “flattening of the world” and technologically changing workplace is driving workers to have skills faster than before. Acquisition and upgrading of skills that help one perform work - such as technical skills, information-handling skills, English-language skills, complex interaction skills and skills for labor required by the developed world - is the responsibility of the individual in order to survive in the coming years.

Ideally, the right skills should be properly distributed between developed and developing countries, so as to achieve what the International Labor Organization (ILO) envisions as “decent work”. According to ILO, “decent work sums up the aspirations of people in their working lives… work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organize and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men.”

However, reality is still far from this vision. As Thomas Friedman observed, “there are fewer and fewer decent jobs for those without a lot of knowledge”. Still a lot of low skilled laborers leave for the Middle East despite the high risks involved. And still many unschooled young women leave the country as “entertainers.”

That is why public policy should be placing education at the top of the national agenda. Bulk of our national budget should be spent on building schools and sustainable skills development programs through training centers to help prepare the citizenry for the changes in the nature of work. NGO’s as well as the private sector should step up to help the nation in skills development and training of its constituents and employees.

So as a rejoinder, is there a need to redefine work? Can we truly define what work really is, or can we just describe its future? Perhaps what is important to us now is to understand where the nature and pattern of work are headed, without losing sight of our collective goal for decent work for all of us.

As ILO puts it, “decent work is the heart of social progress”.

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Reynaldo Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com.

Business model innovation

2006-06-15T20:15:00.000-07:00

(Published in Business Mirror, under the Mirror Image column, June 14, 2006)

“Business model innovation is becoming the new strategic differentiator”- this is one of the findings in "Expanding the Innovation Horizon," the 2006 IBM Global CEO Study reporting on the agenda of CEOs in the next few years. The results are based on interviews conducted recently by IBM and the Economist Intelligence Unit (EIU) with 765 chief executives from around the world.

With ever changing markets, globalization, and stiffer competition, companies need to innovate to survive and grow. According to the study, innovation is no longer about inventing new products and services, but more on innovating business models and competing in new ways.

So what is a business model and how can it be the centerpiece of innovation? Amit Singh Sisodiya, author of “Business Models - An Introduction” defines business model (which he also referred to as business design) as “the mechanism by which a business intends to generate revenue and profits…it describes how a company plans to serve its customers and involves both strategy and implementation.”

Business models are “stories that explain how enterprises work - it answers certain questions: Who is the customer? How do we make money? What underlying economic logic explains how we can deliver value to customers at an appropriate cost?”, as Joan Magretta puts it in her Harvard Business Review article “Why Business Models Matter”.

The common theme among these definitions and in business literature is that a business model describes a specific way the business expects to make money.

Operationally, a business model may be represented by a simple diagram of linked processes that transforms inputs to outputs. It should be simple enough to stay in the minds of the CEO, owner, or manager. Many business models have withstood the test of time owing to its simplicity and sustainability.

For instance, a popular model that has been in existence for long is the subscription business model. This model has been used by newspaper and magazines publications, telecom service providers, and even software service providers. It involves tying a customer to a service or product delivery instead of selling direct; thereby ensuring a recurring payment to the service provider apart from building long-term customer relationships.

Such good business models are a source of competitive advantage among successful companies, whether it is an established business or a new venture; and in many cases are sustainable and hard to duplicate. Take for example Dell’s make-to-order business model which it had perfected together with its superior supply-chain management, making it unrivalled in this sort of business model.

A good business model is, therefore, essential to the success of any organization,. However, when a business model results to organizational success, many companies adopt it resulting to cutthroat competition, and later to the erosion of business model value.

This is why organizations, to survive and stay ahead of competition, need to continually reinvent business models – business model innovation as it is called.

“Business model innovation is a way through which a company can differentiate itself from its competitors and thus avoid strategic convergence that leads to declining profits…companies can pursue new business models by seeking new segments out of the markets they are serving or by identifying unmet customer needs and trying to meet them,” asserts Phani Madhav, in his article “Business Model Innovation”.

For example, Smart Communications has pioneered the application of the “sachet” business model in telecom services by providing low denomination electronic loads to low-income subscribers segment.

Business model innovation, even so, is not limited to seeking new market segments or customer needs. It is also about “significantly changing the structure and/or financial model of the business” as the IBM CEO study puts it.

For instance, PLDT launched WeRoam wireless internet connectivity to its corporate clients with an innovative business model twist – by bundling a Thinkpad laptop together with the connectivity and offering the whole package via monthly subscription for 12 to 18 months. The structure of the offering is changed from the straight-sell, disparate components into a bundled-subscription model that adds more value to a customer.

Indeed, business model innovation can give the firm a sustainable competitive advantage by increasing customer value. But how can organizations make sure that business model innovation if part of its day-to-day practice and philosophy?

For one, organizations need to establish a kind of culture that is conducive to sustainable innovation – one that allows creative expression among organization members without the penalty of committing mistakes. Such cultures should also invest in equipping employees with the proper business skills, and in rewarding those who contribute to successful innovations.

In addition, organizations need to conduct a regular business model audit of its different “ways of generating revenue and profit”. Such audits may ask questions as: Is our current business model creating the best value to our customers? Is there a better way of serving our customers that maximizes value to them? Are there market segments that we can tap into? Such questions force the organization members to challenge the status quo.

Organizations can also tap into the ideas from external sources – partners, customers, and suppliers – leading to collaborative innovation. External partners are a rich source of innovation through joint undertakings. As reported by the IBM Study, “companies with higher revenue growth reported using external sources significantly more than the slower growers.”

In sum, organizations need to continuously innovate on business models to stay ahead of competition by providing the best value to its customers. To ensure this, business model innovation should be a part of the company’s best practices.

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Reynaldo Lugtu, Jr. teaches Management Principles and Dynamics, and electives in marketing and business management in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com.

The Importance of ICT in Today’s Business Environment (The Future of Travel Agents)

2006-03-31T17:27:00.000-08:00

(Speech delivered before the National Association of Independent Travel Agencies – Philippines, Inc. (NAITAS) General Membership Meeting, March 31, 2006)

Interview from Businessworld on "The Emerging Mobile Workforce"

2006-03-15T06:15:00.000-08:00

(Interview with Prof. Reynaldo Lugtu, Jr, by Sam L. Marcelo, Special Features Writer, BusinessWorld for the Corporate Wireless Business Solutions supplement, March 2006)

BW: In your article "TheEmerging Mobile Workforce", you said that "some employees may abuse the newfound freedom from mobility, and instead spend their time away from the workplace on personal matters." Isn't it that output of employees is more important than howmuch time they spend at the workplace? Used to be, the bundy clockplayed a role in paying employees-- with mobile/wi-fi technology (andflexible hours) how should performance be judged? Would you say thatas long as employees deliver, how much time they spend at theworkplace is irrelevant?

Prof Rey Lugtu: Much of the mobile workforce right now are working as marketing and sales professionals, consultants, technical support, and other business executives that need to visit clients and business partners. Measuring the performace of such workers are straighforward -- sales results, customer calls, etc. Many believe that as long as these mobile workers deliver, their time spent in the office is irrelevant.

However, competition is getting stiffer and tougher. A salesman that makes customer calls from 8am to 5pm and uses slack times (lunch time or after 5pm) for conneting to the backoffice and answering mails, is more likely to outperform a colleague or beat a competing salesman who instead spends time on personal matters or on using his/her connectivity tools to surf the Net. Moreover, the former obviously is more productive than the latter; and this is precisely one of the main reasons why employees are empowered to be mobile -- to improve and increase productivity.

BW: You also said that "some employees may dislike the change to mobility and feel isolatedand disconnected from the other colleagues and management; therebyfostering fragmentation instead of unity." What kind of personality should a mobile worker possess?what traits should HR look for in a potential field employee? and if employees spend less time at the office, how can management inspirecompany loyalty in them, how can a sense of belonging be instilled?

Prof. Rey Lugtu: Mobility is a form of empowerement -- giving workers the resources, both psychological (support, motivation) and physical (mobility tools, PDA's, cellphoens, laptops) to make decisions as regards how to use their skill, time, and other company resources to help the company achieve its goals. The degree of empowerment of worker is a function of the the skills required for that worker i.e. the more empowered the worker is, the more skills he/she requires. So a mobile worker, empowered as he/she is, requires more skills than an non-mobile one.

For example, a technical support person who is empowered by the organization to attend to customers' technical queries and problems is provided such mobility tools as mobile phone, laptop with connectivity, etc.and is allowed to access his/her emails or back-office infomation remotely. Such employee, to fully maximize the potential of mobility, should possess skills, apart from his technical job-related skills, as time management, office software application skills, technical know-how trouble shoot connectivity problems, etc.

Apart from these, authors Thomas and Velthouse define empowerment as the individual's attitudes toward their work and their role in the organization; it takes into account the employees' beliefs about the meaning of thier work apart from their capability to do their job well. It also involves an individual's sense of self-determination and autonomy in influencing work outcomes. Operationally, a mobile worker, as empowered as he/she is, should have the right attitude to work away from the office, with little direct supervisions from a supervisor. He/she should be self confident about his/her role in the organization, that he/she is determnined to achieve his/her and the company's objectives. HR practitioners should look for these qualities when hiring a mobile worker; and should strive to instill and develop these traits on potential current pool of employees.

To address the potential feeling of isolation and disconnection among mobile workers, companies should regularly communicate the organization’s purpose, mission, and vision; and inculcate a sense of identity and culture of teamwork to the entire workforce. This will instill a sense of responsibility and accountability among mobile employees who will strive to utilize mobility and its tools to help achieve the organization’s objectives.

Anatomy of the crowd

2006-03-14T07:51:00.000-08:00

(Published in the Manila Standard Today under the Greenlight Column, March 13, 2006)

Manny Pacquiao was pegged a 10-8 underdog in the Las Vegas sports book betting windows a week before his rematch fight against Erik Morales; and this after Pacquiao was pegged the 7-5 choice earlier. As the fight neared, the odds became even until more bettors placed their wager on Pacquiao on the day of the fight itself, making him a 10-9 favorite. True enough, more bettors got their winnings as Pacquiao kayoed Morales.

Wise Crowds
The collective wisdom of the bettors, despite the vacillating odds, turned out to predict the winner in the historic boxing fight. This crowd of diverse bettors, as James Surowiecki put it in his book “Wisdom of Crowds”, is “remarkably intelligent”, and is “often smarter than the smartest people in them” under the right circumstances.

Surowiecki argues that “four conditions characterize wise crowds: diversity of opinion (each person should have some private information, even if it’s just an eccentric interpretation of known facts), independence (people’s opinions are not determined by the opinions of those around them), decentralization (people are able to specialize and draw on local knowledge), and aggregation (some mechanism exists for organizing and turning private judgments into a collective decision”

Examples of crowd or group intelligence abound in society and organizations alike. For instance, the Hollywood Stock Exchange (HSX), a play-money market where diverse and independent traders bet on the box office success of movies and on the outcomes of major entertainment awards predicted seven out of eight of the major awards in the recent 78th Oscars. In fact, experts agree that the HSX, as an aggregator of collective decision, performs better than 4 out of 5 columnists in predicting the Oscars.

Also, some corporations have tried tapping the wisdom of their employees by setting up ‘decision markets’. Surowiecki cited a division of Eli Lilly called e.Lilly, “has been experimenting with using internal stock markets [as decision aggregators] and hypothetical drug candidates to predict whether new drugs will gain FDA approval.” This is an important for drug companies to know, “because their whole business depends on them not only picking winners—that is, good, safe drugs—but also killing losers before they have even invested much money in them.” Employees, drawing on their knowledge and diverse backgrounds, are able to pick product winners.

Foolish Crowds
But where the conditions that characterize crowd wisdom are absent, mass mania and collective follies are bound to come out, as described in the 1841 work of Charles Mackay titled “Extraordinary Popular Delusions and Madness of Crowds”. For Mackay, crowds “think in herds” and “go mad in herds, while they only recover their senses slowly and one by one”. Herding precludes independent thinking and judgment among crowd members.

Likewise, Gustave Le Bon a French writer who in 1895 published the controversial classic “The Crowd: A Study of the Popular Mind”, argued that “when the crowd did act, it invariably acted foolishly as in the case of riots”.

Evidently so, many rallies and demonstrations have ended up in violence and mishaps due to the “unwise” judgment of crowds. Like all other stampedes, the unfortunate ULTRA stampede where 71 people died is a clear example of how crowds can get out of control. Clearly, the crowd that gathered in the grounds of ULTRA lacked diversity, and in fact, homogenous in a way with a singular aim of joining the contests and hopefully get the winnings. This resulted to a “herding effect” in the crowd which, when compounded by the lack of organization erupted to crowd chaos.

Traffic jams are another example of crowd folly, where the vehicle drivers’ thoughts and driving decisions are dependent on the other surrounding vehicles’ movements. In certain areas in Metro Manila during rush hours, majority of the drivers share the same thoughts – to beat all other vehicles and reach one’s destination faster – thus, violating diversity and independence.

Politicized Crowds
If a crowd can be as wise as it is foolish, does our democratic elections pass Surowiecki’s own criteria of diversity, independence, and decentralized specialization? Do we as a people exhibit diversity of opinion, where majority of our voting public is below poverty line and relatively few voters have truly unique knowledge about politics? Do we display independence of thought when voters routinely acquire political biases from those around them rather than attempting to understand and analyze the issues for themselves? Do we demonstrate decentralized specialization during elections, when very few voters have specialized knowledge of any policy issues? Is representative democracy through the secret ballot the only way of aggregating the collective decisions of the people?

Our national leaders and organization managers alike can perhaps draw from the knowledge of crowd dynamics, to understand how they can tap into the collective wisdom of groups and crowds, and to aid them in decision making and policy formulation.

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Reynaldo Lugtu, Jr. teaches Management Principles and Dynamics, Special Topics in Business Management, and Marketing of High-Tech Products and Innovations in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com.

Complex Interactions

2006-02-17T07:41:00.000-08:00

Published in Businessworld, View from Taft column, February 16, 2006

The emergence of the information and communications technology (ICT) and allied industries in recent years has lead to the phenomenal growth in employment opportunities in various sectors. For instance, the number of professionals in the business process outsourcing (BPO) sector has been growing exponentially since 2001; and to date, there are around 100,000 employed call center agents, customer service reps, BPO managers, and other IT professionals that interact with clients from all over the globe and other parts of the value chain.

Likewise, the growth in telecommunications services sector has resulted to the growing number of professionals in software development, sales and marketing, and even entrepreneurs and business managers whose jobs are anything but routine.

These professionals and employees not limited to the ICT industry, such as customer service representatives, managers, and salespeople, make up the fastest growing services segment. And their jobs involve the most complex type of interactions with other employees, customers, suppliers, partners and other organizations. Such complex interactions require employees to analyze information, solve problems, deal with ambiguity, and make complex decisions based on deep experience, knowledge, judgment, and instinct.

This trend in employment has already been discovered by a 1997 study of consulting firm, McKinsey, on job trends in a number of sectors in developed and developing countries, which found that companies are hiring more workers for complex than for less complex interactions. This is because the quality of human capital has more lasting advantages in terms of productivity gains.

In a recent follow up research titled “The next revolution in interactions”, McKinsey emphasized that complex interactions typically require people to deal with ambiguity and to exercise high levels of judgment. These workers (such as managers, salespeople, customer service reps, nurses, mediators, brokers, and consultants) must apply deep experience, which economists call “tacit knowledge”.

According to the study, “successful efforts to exploit the growing importance of complex interactions could well generate durable competitive advantages.” While many companies especially in developed countries have reaped the benefits of outsourcing clerical and production jobs, automating, and reengineering to improve labor productivity, these have been short-lived as other companies adopted similar process improvements.

But the competitive advantage gained by companies by raising the productivity of their human capital through the exploitation of complex interactions, is more enduring as this is much harder to imitate.

Consider, for example, two vendors selling to a large account. Vendor A employs three salespeople to cover the three different business units of the large account. But these salespeople, due to probably limited knowledge and experience, interact only with the assigned client group and the back-office support of their organization. Their decisions on certain marketing parameters as pricing and product offering may be less exhaustive and takes more time to implement.

Compare this with Vendor B, which employs only one salesperson to cover the three business units of the large account. This salesperson, on the other hand, has more industry experience, deep knowledge of business concepts, and interpersonal communication skills. Moreover, he or she interacts with not only the clients and back office support, but also with other suppliers, potential partners, and industry groups to help him or her spot opportunities and decide on solution and product offerings and sales strategy in a faster and more responsive way.

Obviously, the productivity of the salesperson in Vendor B is greater than that in each of the salesperson in Vendor A. But one may argue that because of deeper experience, the former may command a higher salary than the latter. True enough based on the McKinsey research, “workers who undertake complex, interactive jobs typically command higher salaries, and their actions have a disproportionate impact on the ability of companies to woo customers, to compete, and to earn profits.” Thus, “the potential gains to be realized by making these employees more effective at what they do and by helping them to do it more cost effectively are huge.”

So how can companies enable their employees to handle and manage complex interactions? Firstly, organizations need to adopt policies and structures that are conducive to the effective and efficient handling of complex interactions, such as flexible work hours and availability of “representation” budget to allow the highly skilled worker to organize face-to-face interactions with ease. Key to retaining these talented professionals are HR and management policies that allow them to perform their functions with minimal slow-down effects of organizational bureaucracy.

Secondly, McKinsey points to the use of technologies to enable managers and employees alike to make available critical information to help them make decisions more effectively and quickly. The use of mobile devices and services, such as WeRoam wireless Internet service through a laptop coupled with collaboration applications such as instant messaging, empowers the highly skilled worker to perform multiple tasks and interact with the various players in the value chain “by helping them to recognize complex patterns, to solve novel problems, and to manage interpersonal and group dynamics.”

Lastly, organizations need to implement practicable training and mentoring programs to help inexperienced workers acquire and learn the necessary skills and frameworks to help them handle complex interactions.

In other words, the worker should be empowered to make decisions that influence the organization’s direction and performance. Empowered workers, with the right skills and experience, manage complex interactions far better than those lacking these; thus, resulting a competitive advantage to organizations that are more lasting and harder to imitate.

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Reynaldo Lugtu, Jr. is a lecturer in Management Principles in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com.

Tipping points

2005-11-11T07:46:00.000-08:00

(Published in BusinessWorld, under The View From Taft column, Nov 10, 2005)

When seven cabinet secretaries and three bureau chiefs of President Arroyo resigned on the Friday of July 8, immediately followed by resignation calls from the Liberal Party, the Makati Business Club, former President Cory Aquino, and civil society groups, many believed it was the start of the end for President Arroyo.

Well, we know what happened. All succeeding events and elements during those times failed to bring about a “tipping point”. A critical mass of people did not congregate in Makati or at Edsa Shrine to set the stage for another revolution against the presidency.

Conversely, both Edsa 1 and Edsa 2 revolutions were effected by tipping points or, in the words of Malcolm Gladwell, author of The Tipping Point: How Little Things Can Make a Big Difference, by “one dramatic moment in an epidemic when everything can change all at once”.

What makes events such as Edsa 1 and 2 reach critical mass proportions? What makes new products get adopted by consumers in a wildfire manner, like the spread of SMS use in the country? What makes people vote for political darkhorses like Senatorial elections winner Jamby Madrigal? Gladwell explains why such ideas, messages, behaviors, objects, or any innovation spread or diffuse like viruses to create an epidemic – a tipping point.

Drawing from the works of Everett Rogers, author of Diffusion of Innovations, Gladwell posited three rules of the “tipping point” – the Law of the Few, the Stickiness Factor, and the Power of Context – that offer a way of making sense of epidemics. These explain, in layman’s terms, what diffusion theory is all about – that is, the process by which an innovation is adopted by members of a community.

The first rule is “The Law of the Few”, which is akin to the “Innovators” or “Visionaries” in diffusion theory literature, states that there are exceptional and adventurous people out there who are capable of starting epidemics. One type are the Connectors who know many people with social connections, and spread messages. Another are the Mavens who possess a lot of information and provide of the message. Last are the Salespeople who persuade people of the message. It makes sense in concentrating resources on these groups of people when effecting tipping points.

Both Edsa 1 and 2 were started by a few people – civil society leaders, religious leaders, and men in uniform – who knew the message of national reform and spread this message to their social “connections”. Edsa 1 showed the power of word of mouth in spreading the message to the larger populace. Edsa 2 demonstrated the power of text messaging in spreading the “epidemic”.

Text messaging was adopted and started by a few subscribers of Globe Telecom in the mid 90’s – a period when mobile phone post-paid subscription can only be afforded by a few. Likewise, Jamby Madrigal’s candidacy was endorsed by Judie Ann Santos and spread by her manager-cum-columnist who served as her “salespeople”.

The second rule is “The Stickiness Factor” which is all about the content and packaging the message to irresistible levels that compels a person into action. Diffusion theorists refer to this as the “awareness” and “interest” stages of the adoption process.

The ideas of “national reform” and “people empowerment” were obviously sticky messages that prodded people to congregate at Edsa. Likewise, the idea of text messages was a powerful and sticky form of communication. Also, the popularity and mass appeal of Judie Ann Santos, and the snappy “Ja-ja-ja-jamby” jingle were so haunting that many Filipinos remembered Jamby Madrigal during the elections.

The last rule, the “Power of Context”, states that a tipping point takes place depending on the circumstances of the environment – what diffusion theorists refer to as “time and the nature of the society to whom the innovation is introduced”.

In this respect, Edsa 1 and 2 happened because of the urgent need for reform during those times. Text messaging tipped in 2000 when both Smart and Globe interconnected their SMS services. Jamby Madrigal was the choice of many voters during the 2004 Senatorial Elections probably because they saw a rehash of candidates and considered her as an alternative.

Just as potential epidemics as Severe Acute Respiratory Syndrome (SARS) and other maladies were stopped from spreading, tipping points can be arrested by working on these “rules”. For instance, to arrest the spread of bird flu virus, governments all over the world are monitoring the migratory patterns of wild birds and targeting them on arrival to a country. They are trying to modify “the power of context” or the environment of the potential epidemic.

As a rejoinder, the July 8 resignation of cabinet members failed to bring forth a tipping point because the “sticky” message was countered. On the same day, the government showed its force on national television, with the rest of the Cabinet, senators, congressmen, and mayors expressing their support for the President. Moreover, our context in society now is probably one of “people power fatigue” and that perceived absence of an alternative to the presidency.

Understanding tipping points and the rules that govern them is important in marketing innovative products and services, and in advancing causes and campaigns. Competition and opponents can also slow down, if not, halt a tipping point by countering the “sticky” message and modifying the “context” behind the tipping point.

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Reynaldo Lugtu, Jr. teaches Management Principles and Marketing of High-Tech Products and Innovations in the MBA Program of De La Salle Professional Schools. He is currently doing his dissertation research on Diffusion Theory. He is an executive in an IT services firm. He may be e-mailed at rlugtu2002@yahoo.com.

The emerging mobile workforce

2005-10-31T07:47:00.000-08:00

(Published in the Manila Standard Today under the Greenlight column, Oct 31, 2005)

Our company recently acquired a number of subscriptions of WeRoam from a telecom company which was distributed to all personnel, who are most of the time in the field, either on sales calls or servicing clients. WeRoam is a wireless internet service that runs on GPRS (General Packet Radio Service) and EDGE (Enhanced Data for Global Evolution) technologies, providing up to 220 kbps (kilobytes per second) connection speed and nationwide coverage to laptop users.

After only a few weeks of usage, my colleagues and I have discovered a new way of working – true mobility that maximizes the utilization of our time. What is amazing with these new technologies is that it allows one to connect to the Internet, access back-office applications and collaborate with colleagues, customers, and suppliers wirelessly and while on the move anywhere in the country, thereby tremendously increasing productivity. Does this signal the emergence of a new workforce – the true mobile workforce?

Transforming how we work
The mobile workforce has evolved through the advancement of information and communications technology (ICT). Mobility was enhanced with the advent of mobile phones, PDA’s and laptops, allowing people to work anywhere while staying in touch. In the earlier days, connectivity to the Internet was limited to dial-up access through telephone lines.

These technologies support mobility completely and transform the way we work and communicate.

Benefits of mobility
There are many advantages of having a mobile workforce. For one, many studies point to the productivity and efficiency gains brought forth by mobility and wireless connectivity among employees. One research study which I authored and published in the cover story of Asian Communications in 2002 titled “How Employees Use SMS”, discovered that work-related use of SMS (short message service) among field employees leads to work efficiency gains and improved collaborative decision-making.

Another benefit of a mobile workforce is that companies can reduce their capital costs for offices and associated infrastructure, since employees will be most of the time in the field. Employees likewise reduce their transportation costs associated with commuting to and from the workplace.

Lastly, a mobile workforce acts as a “disaster recovery” facility, enabling employees to continue with their work wherever they are even if the offices becomes uninhabitable; or when transportation to and from the workplace becomes dangerous due to calamities.
Drawbacks in implementation
While the benefits of a mobile workforce are clear, there are however drawbacks in its implementation. Some employees may abuse the newfound freedom from mobility, and instead spend their time away from the workplace on personal matters.

Also, employees, untrained in the use of mobility tools and technology, may not fully maximize the full potential of mobility and result to wastage of investment and resources.

Finally, as in any alternative way of working, some employees may dislike the change to mobility and feel isolated and disconnected from the other colleagues and management; thereby fostering fragmentation instead of unity.

Developing effective strategies
Despite these downsides, many companies are still heavily investing in the tools of mobility, and are developing effective strategies to deal with the emerging mobile workforce.

One strategy is for companies to communicate the organization’s purpose, mission, and vision; and inculcate a sense of identity and culture of teamwork. This will instill a sense of responsibility and accountability among mobile employees who will strive to utilize mobility and its tools to help achieve the organization’s objectives.

Moreover, companies need to standardize mobility tools and technologies in the entire organization; and develop user training and retraining programs to ensure that all mobile employees in the company are aware of the capabilities of the tools and how these can help them achieve their performance goals.

In conclusion, the mobile workforce can bring tremendous benefits to the organization in terms of productivity and efficiency enhancements and cost savings. Managers and organization members should maximize the full potential of this empowerment in order to help achieve the goals of the organization.

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Reynaldo Lugtu, Jr. teaches Management Principles and Dynamics, Special Topics in Business Management, and Marketing of High-Tech Products and Innovations in the MBA Program of De La Salle Professional Schools. He is an executive in an IT services firm. He may be e-mailed at rlugtu2002@yahoo.com.