India Knowledge@Wharton | Leading for many an act

India Knowledge@Wharton | Leading for many an act

It is common sense that parents must adapt and change their roles as children grow up. But what about CEOs, who may be hired for one task, but face an entirely different one years, or even months, later?

The secret to long-term CEO success, suggests David Nadler, a consultant to boards and senior executives, is conceiving of a CEO’s tenure as a performance with a series of distinct acts. “Each act requires the CEO to lead, think and behave in fundamentally different ways. The successful ones are those who are able to make the transitions," Nadler said during a presentation at the 11th annual Wharton Leadership Conference.

Part of the CEO’s task, then, is to ruthlessly assess him or herself as the business context changes: “Do I have an understanding of what’s needed now in terms of new leadership requirements? Do I have a sense of my own leadership capabilities?"

The implications of Nadler’s model for the boards that make CEO hiring decisions are several. First, boards should assess a candidate’s range of experience to see if he or she can not only handle the current crisis, but also deal with unknown future crises. He also recommends that boards consider the idea of a “one-act CEO", hired on the basis of a renewable contract. “To find someone who is going to be a three- or four-act CEO may be an unreasonable expectation. Maybe we ought to make it okay to hire someone who takes the company to a certain point, understanding that then we’ll need a different set of skills."

How mid-tier Indian IT firms can stay competitive

For several years now, analysts have been predicting that the Indian information technology industry is set for a period of consolidation. It hasn’t happened yet.

Four large companies—Tata Consultancy Services (TCS), Infosys, Wipro and Satyam—have established themselves at the top. At the other end of the spectrum are scores of “mom-and-pop shops" subsisting on cut-price offerings and established business relationships. They may survive, but industry analysts don’t see much of a future for them.

Then there is the middle-tier: While the market will continue to be dominated by large services firms that have the size and scale to deliver both raw infrastructure and business process expertise, smaller companies that build specific expertise in select vertical markets, and even within specific business processes, will also remain competitive, experts say.

According to Ravi Aron, senior fellow at Wharton’s Mack Center for Technological Innovation, today’s mid-tier IT firms need to build a “strategic differentiation" platform to retain their competitive edge over rivals. “As the company expands, and if it lacks a well-defined basis for strategic differentiation, you will increasingly see that it is forced to deliver more— quality, features and client-specific calibrations of project delivery—for less. This is what the company ‘pays’ to win over a client."

Atul Nishar, chairman of Hexaware, a typical mid-tier company which had revenues of $187 million (about Rs748 crore) in 2006, says his company is working to create niche specialities for itself. “We have no ambition to be among the full-service big companies. We realize that the only way we can compete is by developing areas of excellence."

Aron points to i-flex solutions as another example. “i-flex is able to sell not just its products, but also a host of value-added services as a result of its standing in its business segments," he says. “They are not forced to make costly concessions to win deals."

Hexaware’s plan— building niche excellence and specialization—“is the right way to go", Aron says. “Access to larger deals characterized by greater complexity and risk—but also greater potential payoff for the software firm —is greatly diminished in the absence of strategic differentiation."

Downloading ‘wisdom’ from an online search

Prediction markets, where people bet on everything from the likelihood that a movie will be a hit to the chance that a politician will become president to whether the stock market will go up or down, are in vogue. But because prediction markets have to be managed, they aren’t always the ideal way to get information.

Wharton professors Albert Saiz and Uri Simonsohn have found a cheaper way to deliver some of the same benefits: an Internet search. The two professors argue in a new paper that the likelihood that a topic is discussed online, in relation to a given location, correlates with its relative prevalence in the real world.

“We are interested in the possible ‘wisdom’ resulting from the aggregation of a very specific kind of judgment, namely, the determination of which topic is worth writing about," they write in their paper. For example, they wanted to discern which countries, US states and big US cities people perceived as the most corrupt. So they plugged the appropriate terms into a search engine called Exalead. By assessing how many documents contained the word “corruption" within the same paragraph as the location’s name, they came up with corresponding corruption rankings.

Simonsohn points out that there is no way of knowing for sure whether these places are corrupt. What their searches told them was that many online documents referred to the locations and corruption in close proximity.

“The more often a phenomenon occurs, the more likely somebody is to write about it. Aggregate measures of what large numbers of people write about should be correlated with the relative frequency with which the discussed phenomena have occurred," the researchers write.

Simonsohn argues that some carefully worded Internet searches might allow marketers to save money by initially helping them to focus their efforts. A company such as Sony might try to assess online buzz when launching a new version of its PlayStation video game console. “When Sony launches a new PlayStation, that’s a huge logistics problem," he notes. “Which cities do you ship the most to? Suppose you measured buzz in different cities before you launched, then you could adjust the number of shipments so the cities with the most interest got more PlayStations."

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