By Pratik Nayak
“You cannot teach an old dog new tricks”
This little phrase has a huge implications in the government, business and society scenario, the three major forces that affect our lives.
The society-government aspect[/b]
Argument-1:
From Cabinet reshuffles to concerns about national security, Japan experienced a whirlwind of activity last week. Here are some events that I found to be of particular interest:
In an effort to get the Japanese economic recovery back on track, Prime Minister Naoto Kan appointed Kaoru Yosano (and several others), a veteran politician and former Finance Minister under the Aso administration, to the same post yesterday. Though Yosano has encouraged a hike in Japan’s five percent sales tax for years, his words have yet to translate into action. Given the economic progress made (or lack thereof) during the Aso administration, I find it difficult to believe that anything will change following the reshuffle and reappointment of veteran politicians to the same posts. You can’t teach an old dog new tricks.
An editorial published by the Mainichi Shimbu indicates that the growing number of elderly in Japan are seeking to avoid an economic crisis in Japan…without reform. The article goes on to say that the elderly welcome deflation, as it allows them to maximize their pensions and are actively discouraging politicians from raising much-needed tax hikes. Though many economists and politicians disagree with this view (a group of economists predict that Japan’s economy will implode within three years without structural reform), the growing number of elderly in Japan gives them unprecedented say in the matter, regardless of the effects the lack of change would have on the younger generations. Until the younger generations learn to speak up for themselves, however, there is very little that can be done. Most Japanese politicians are already in their sixties and seventies, and more often than not, represent the very individuals opposed to fiscal reform in the country. Without representation from members of the same age bracket, Japan’s economic decline is sure to continue as the voices of the aged drown out the whispers of those most affected. Apathy may well be considered Japan’s worst enemy.
[/list]
The Business aspect[/b]
Argument 1:
Outsourcing: You Can’t Teach an Old Dog New Trick(Its more like you don’t want to)
Sunk Cost and Capability
Technology is one of the largest fixed costs faced by banks. New platforms cost tens – even hundreds – of millions of pounds to build, let alone maintain, develop and replace. Removing a major product line and giving it to an outsourcing provider is also not cheap or easy.
New entrants tend to have few if any of these problems. Indeed, outsourcing offers the opportunity to acquire capability without sinking a huge amount of capital. Metro Bank has communicated the benefits of its relationship with Temenos, which is based on ‘pay-per-transaction’, rather than infrastructure costs. Furthermore, outsourced relationships can be more attractive to potential buyers, rather than being faced with a costly and time-consuming IT integration programme, just at the time they want to be leveraging increased scale from the acquisition. The thing to notice here is that companies even when venturing out into new markets and competitive domains are reluctant in using their own resources in developing the complete business skeleton and all the competencies required. Instead they outsource some of the core skills and competencies required in the new business from firms who already have the required skill sets.
If we consider the case of HP which is the largest computer maker in the world then we will find that it is under a lot of investor pressure because of its under performing stocks. The reason being its low margin PC market. Its loyal customer base is eroding fast because of new innovations pouring into the market. HP’s new CEO Leo Apothekar has been quite busy in planning stratergies that can help the company make more profit. For this HP is now setting its eyes on software and services market and is already in talks with AUTONOMY corp. Which is a software firm. It won’t be surprising if we hear of an acquisition in the near future. In this case HP is neither making its old employees learn the tricks of this new trade which would involve a lot of unlearning and even more learning nor is recruiting new workforce to help HP gain ground in this market because that would mean a lot of time, money and resources being invested. That is why HP would definitely want an asset which already has the domain and market knowledge required to compete in the software services market. AUTONOMY corp. probably ticks all the right boxes for HP.
Speed to Market
In the largest banks, it is generally accepted that major new product or channel innovations take a lot of time. Unperturbed by stories from new entrants getting from scratch to market in six months or deliver major innovations in months, it is simply accepted as the flipside of the many benefits associated with greater scale.
However, a hybrid model does exist, whereby strategically-important innovations and developments are delivered through third parties, enabling quicker market entry and, potentially, first mover advantage. For new entrants, speed to market is absolutely critical, as they continue to burn capital until they turn a profit. For the incumbents, who are normally already delivering profits, the capital burn does not seem anywhere as critical and the urgency to get to market is therefore often correspondingly smaller.
Argument 2[/b]:
You can't teach an old dog new tricks. Translated, it means that, if you want to change mindsets, you have to catch them young. Indeed, that is what is happening in the India-China relationship. Over the past year, some 50 Indian companies (there are no accurate numbers) must have started their China operations. In most cases, they initially send a point man to explore the possibilities. The number of Indians moving to China as a result would not be more than 100. Add to this already existing Indian companies expanding operations, and you will end up with another 100. "We are hiring Chinese software engineers," says V. Rajanna, till recently the man in charge of TCS's China operations. There is a high cost attached to getting people from India.
This shows that companies are not wasting time, money and resources on training their Indian employees. Employees who have worked in India for quite sometime are accustomed to the ‘Indian way of working’. Getting these employees to get in tune with new cultures for the smooth running of businesses in these new environments demands time and money, instead companies are getting human resources from the same working environments only.
[/b]The Society-Business aspect[/b]
Now the world economy is finally truly global and the implicit protection of western workers from the self imposed economic exile of billions of potential competitors is irreversibly gone. For western workers to remain the most productive, they must remain on average better or at least have more investment capital at their disposal but sadly now their competitors not only have the education but also have a substantial amount of capital. Now the problem lies in the
Educational stagnation in the west. Baby boomers in the United States and Germany will soon retire but have neglected to ensure that their children replacing them are on average better educated from themselves. Meanwhile there has been a rapid expansion of education particularly in developing Asia. Now this current generation of Asia is as educated and in some cases even better than their western counterparts.
It is not only education but also technology which has a lot to do with this scenario. It is well established that job generation in both agricultural and manufacturing sectors at wage levels that will sustain a middle class standard of living has declined dramatically in the west as a result of mechanization.
Now the question is “Where will all these people with long established skill sets and mind sets go?” . Which kind of business will be willing enough to invest time & money to tweak these skill sets to be able to make them fit in the current economic scenario? Not many.
Its not that one cannot teach an old dog new tricks, its more about the willingness to do so.
Today’s Markets are “Red Oceans”. Red, because of the cut throat competition happening at every moment. No one would like to lose out by investing valuable time, money and resources on the old to get it ready to compete with the new. Replacing the old with the new seems to be a much more sensible option.