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Archive for the ‘Strategic Competition’ Category

The start to the world’s biggest sporting event, the FIFA World Cup 2010, is a lesson in poor risk management.

No, it’s not the political risks of South Africa: The country has managed the event spectacularly. The flop is an over-engineered ball, the Jabulani.

The ball flew over the goalie’s nest…

In every match that I have watched, the vast majority of free-kicks have sailed over the goal. Most corner kicks and other set pieces have overshot their targets. Many long passes have bounced over the heads of the recipients.

Those shots that make it to the goal are harder to predict and grasp. Many top goalies, including Italy’s Gianluigi Buffon, Spain’s Iker Casillas, Brazil’s Julio Cesar, Australia’s Mark Schwarzer, and England’s David James, have sharply criticized the ball.

As I see it, the strategies of FIFA, football’s international governing body, and Adidas, creator of the official ball, might have been overtaken by a marketing obsession that was not grounded in proper risk analysis.

The lure of reward

Adidas wanted to create a ball that’s fast. FIFA wanted to increase pace in an already fast-paced game, a game without the type of “time-out” interruptions you see in typical American sports.

Adidas claims the ball is the roundest and speediest yet. The speed and flight would translate into more goals. More goals = more viewer excitement, especially in the world’s biggest underdeveloped football market, the United States. The hope is that millions of soccer fans, fueled by goals galore in the World Cup, will shell out $150 to buy this sophisticated ball, generating a nice chunk of cash for Adidas and corresponding royalties for FIFA.

The neglected risks

1. Altitude. Adidas blames the ball’s strange movement to altitude. It’s surprising that Adidas marketers and designers did not take this adequately into account. Most places in the world, and especially South Africa, require balls that would behave predictably in different playing conditions. People play football on grass and sand and dirt and streets, and in different altitudes, not inside a lab.

2. Lab-idealism. Which brings me to the second point. Adidas claims that the ball reacts the exact same way each time a robot kicks it. But on the field, human players kick it, and the ball behaves to the unpredictable twitches and curls of each individual foot in ways that surprise the players. The ball’s “Grip N’ groove” technology makes its movement closer to “true flight.” Well, Adidas, this is a football, something you kick around, not launch into space from NASA’s Kennedy Center.

3. Strike Rate. Adidas and FIFA knew the ball would be difficult for goalkeepers to handle, especially in the air, resulting in more goals. But did they count the risk of strikers not being able to predict the ball’s movement?No wonder then, that Brazil’s main striker Fabiano called the ball “supernatural,” before adding, “it’s very bad.” The chart above  shows the reality: scoring is at a historic low.

4. Aesthetics. The aesthetics of the “beautiful game” is important. It’s not just that set plays were overshot. Some of the goals ascribed–fairly or unfairly–to the ball’s unpredictability were downright ugly to watch. Even the Slovenian striker who scored a goal against Algeria said the goal was helped by a ball “really difficult to control.”

5. Goodwill. People are questioning if Adidas is really working for the good of the game. Why fix something that already works very well? Adidas’s strategy and glitzy ads are proving a bit static against the torrent of criticism that the ball is generating. Players have called the ball “a disaster” and even “the worst ball ever.” People are talking about boycotting Adidas products. Adidas has hinted that mainly teams sponsored by rival companies are criticizing the ball. But we fans are watching the World Cup, aren’t we? And the ball’s strange movement is clear. In the days of networked consumers, bad word travels real fast.

6. Revenues. Will all these affect the bottom-line? All else equal, yes. If professional football players are unable to predict how the ball will behave, why would ordinary people buy this expensive object to replace their trusted leather footballs? However, Adidas’s Jabulani sales have been good in the US, but it’d be interesting to watch Adidas’s share price here as the competition progresses.

The need for risk analysis

This fiasco, from both a product and public relations standpoint, could have been avoided if Adidas and FIFA had properly conducted risk analysis as part of their lofty marketing plans, and gave such analysis importance. They would have known then that the risks of spoiling the quality of the world’s greatest spectator event by introducing an untested, unpredictable product is unjustifiable, even from the bottom-line perspective.

The World Cup is not the stage for these experiments. Yes, the Bundesliga and MLS used the ball, but most leagues in the world did not. As Italy’s goalkeeper Buffon said, “The World Cup brings together the best players in the world and to those players you must provide something decent. The new ball is not decent.”

Football is the world’s most popular sport partly because the game is beautifully simple. All you really need is a ball. The whole game revolves around this round thing. But Adidas and FIFA may have taken their eyes off it.

Is Adidas willing to risk a quality flop at the World Cup in order to maximize short-term revenues? Well, in a competitive market, one’s mistake is another’s opportunity. So don’t be surprised if Nike or Puma or Reebok comes up with a glitzy ad of their own that makes fun of an over-engineered ball playable only by Wall-E.

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Note: A fuller version of this article was published as “India’s Edge in Legal Process Outsourcing” on August 10, 2009, in China Daily. It was co-authored with Matthew Sullivan, a principal at Red Bridge Strategy, where he leads the LPO Advisory Practice.

Despite the global export slump, India’s emerging Legal Process Outsourcing (LPO) industry has been booming.

In the last 12 months, the LPO sector in India has reported 200 percent growth, unaffected by the economic crunch.
LPO revenues grew from $80 million in 2006 to $225 million in 2007, and are expected to reach $640 million by 2010.
Just a few years ago, there was virtually no industry called LPO.
Some multinationals such as GE and Microsoft, which had become comfortable working in the Indian environment, decided to experiment with the use of English-speaking Indian lawyers to process legal work in other jurisdictions.
Local vendors quickly adapted India’s tested outsourcing model to offer routine legal services such as e-discovery and document review.
And so began the growth of the LPO industry.
Noting India’s success in offshore services, China has been trying to grow its own footprint in the industry, especially since 2000.
But China has managed to get only 10 percent of the world’s share of outsourced services, compared to India’s 37 percent.
If China wants LPO coming its way, it will need to pay attention to four factors that helped the process grow in India.
The first, of course, is India’s command of English, the language of not just LPO but most offshore industries.
The Indian legal system, in addition, is built upon the British system, which makes Indian lawyers familiar with Western legal concepts.
Thanks to the government’s emphasis, 200 million Chinese are now learning English. But getting trained in the law in English is a different game and will require decades of sustained effort.
A shortcut, though expensive, might be government sponsorship of Chinese graduates to attend English-speaking law schools in the region, including those in South Asia.
Second, India’s federal and state governments have invested heavily in the economic infrastructure of IT and business process outsourcing. LPO uses the same infrastructure.
China has made strides in IT infrastructure, as well, but Chinese outsourcing firms are still small compared to Indian giants like Infosys and Wipro.
The influence of Chinese outsourcing firms over State policies and resources is also correspondingly smaller.
Third, even though LPO can offer savings of 30 percent to 70 percent for Western firms, many have yet to come on board because of concerns about information and data security.
Any vendor that wants to win business must maintain the confidentiality and sanctity of privileged attorney-client information.
As long as the Chinese government remains interested in controlling Internet activity, India will retain a big advantage.
Finally, the Indian government has undertaken worldwide campaigns to showcase India’s strengths to reduce investor sensitivity to economic and political risks.
Successive campaigns, from BJP’s much-criticized “India Shining” to the current “Incredible India” initiative, have ensured that Indian policymakers make frequent friendly visits to Western countries, and that each visit is accompanied by productive discussions and events with bankers, investors and trade organizations.
India’s success in LPO came from a regional competitive strategy that weds skillful private entrepreneurship, wise economic policy and strong public diplomacy.
While China has a stronger infrastructure than India, it will probably need to rethink some aspects of its political and diplomatic strategies if it wants to wrest a bigger share of the lucrative knowledge-based services market.
Jalal Alamgir, Ph.D., is the author of India’s Open-Economy Policy (London: Routledge, 2009), and teaches international relations at the University of Massachusetts, Boston. Matthew Sullivan is a principal at Red Bridge Strategy, where he leads its LPO Advisory Practice.

In the last 12 months, the LPO sector in India has reported 200 percent growth, unaffected by the economic crunch. LPO revenues grew from $80 million in 2006 to $225 million in 2007, and are expected to reach $640 million by 2010.

Noting India’s success in offshore services, China has been trying to grow its own footprint in the industry, especially since 2000. But China has managed to get only 10 percent of the world’s share of outsourced services, compared to India’s 37 percent.

If China wants LPO coming its way, it will need to pay attention to four factors that helped the process grow in India.

The first, of course, is India’s command of English, the language of offshore industries. The Indian legal system, in addition, is built upon the British system, which makes Indian lawyers familiar with Western legal concepts.

Thanks to the government’s emphasis, 200 million Chinese are now learning English. But getting trained in the law in English is a different game and will require decades of sustained effort. A shortcut, though expensive, might be government sponsorship of Chinese graduates to attend English-speaking law schools in the region, including those in South Asia.

Second, India’s federal and state governments have invested heavily in the economic infrastructure of IT and business process outsourcing. LPO uses the same infrastructure.

China has made strides in IT infrastructure, as well, but Chinese outsourcing firms are still small compared to Indian giants like Infosys and Wipro. The influence of Chinese outsourcing firms over State policies and resources is also correspondingly smaller.

Third, even though LPO can offer savings of 30 percent to 70 percent for Western firms, many have yet to come on board because of concerns about information and data security.

Any vendor that wants to win business must maintain the confidentiality and sanctity of privileged attorney-client information. As long as the Chinese government remains interested in controlling Internet activity, India will retain a big advantage.

Finally, the Indian government has undertaken worldwide campaigns to showcase India’s strengths. Indian policymakers make frequent friendly visits to Western countries, and each visit is accompanied by productive discussions and events with bankers, investors and trade organizations.

India’s success in LPO came from a regional competitive strategy that weds skillful private entrepreneurship, wise economic policy and strong public diplomacy.

While China has a stronger infrastructure than India, it will probably need to rethink some aspects of its political and diplomatic strategies if it wants to wrest a bigger share of the lucrative knowledge-based services market.

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One war, numerous militarized incidents, competition for economic and political influence over the region, supply of military aid to each other’s neighbors, key players in overall grand strategy, and old civilizations with worldwide diasporas and competing cuisine.

Forget all that.

India’s external affairs minister S M Krishna met with his Chinese counterpart yesterday, and then reassured everyone by issuing the following statement:

India and China may be competitive in economic and trade areas, but they are not rivals. There is enough space for both India and China to grow.

“Space,” huh? I guess each other’s space programs don’t see it that way. From launching satellites to making plans for manned flights to the moon, the program of each has taken cue from that of its rival. It’s the next space race of the world.

Anyway, rivalry is actually not a bad thing. Rivalry, as opposed to competition, connotes the importance of strategy. Two countries, or companies, can be competitors just by existing in the same competitive space. But two rivals make policies by considering each other’s moves.

Strategic policymaking between rivals, as I have argued in my book and elsewhere, makes government efficient and privileges pro-growth economic policies. In the 1970s, improvements in India’s strategic culture, bureaucracy, and industrial policy owed much to the war and subsequent rivalry with China. The pace and extent of India’s open-economy policies since 1991 have been influenced considerably by China’s policy path since 1978.

And in the end, all that has been a very good thing for the Indian economy. So, long live the rivalry.

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Many analysts are putting trust in Asia to pull the West up from the slump into which it has fallen due to its profligate appetite for credit. In addition to production and trade, The Economist recently hoped that Asian consumers would become shopaholics, like their Western counterparts. Never mind that rampant credit-fueled consumerism was a major part of the problem facing the West.

But a dose of reality was injected recently by Minxin Pei, who doubted Asia’s ability to fill in for the West. Pei wrote in an article in Foreign Policy: “Even at current torrid rates of growth, it will take the average Asian 77 years to reach the income of the average American.”

The problem with most economist-driven expections of Asia’s ability to pull the world out of a slump is that such analyses ignore the crucial part that politics, and states, play in economic globalization.

But if lack of ability is one issue, so is a possible lack of willingness.

Political scientists and political risk analysts for decades have pointed out that international financial movements take place only within parameters allowed by states. Ian Bremmer of the Eurasia Group recently restated that observation, from the angle that post-financial-crisis state capitalism is now the main decision-making prism.

What this means is that competition between states will inevitably dampen Asia’s ability and willingness to clean up the mess left by the West. As I have argued in my book, India’s Open-Economy Policy, India’s political rivalry with China, whether in securing energy or in inward foreign investment, will be the first influence on its international economic policies. China’s assessment of the US and Japan will determine its foreign acquisitions. US interpretation of Chinese influence in the Middle East and Africa will also temper cooperation toward free markets.

On top, you have respective Buy American and Buy Chinese policies. These have stayed below maximum so far — but put all of these together and the expectation that Asian consumerism or dynamic growth will be West’s savior is just economic optimism, not political reality.

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My book, India’s Open-Economy Policy: Globalism, Rivalry, Continuity (London and New York: Routledge, 2008 ) has been selected by Asia Policy as one of two dozen recommended books for its 2008 Policymakers Library. It was one of only two books on India. Needless to say, I am happy.

The link above will take you to Routledge’s site where you can preview the first chapter of the book. 

So what is it about? It’s easy to take India’s successful open-economy policy for granted now. But when the policy was initiated in 1991, its success was far from assured. The book explains why India’s open-economy policy has continued unabated despite widespread political risks. It draws implications for countries seeking to politically market grand or controversial ideas.

It’s about large-scale change management strategy, risk mitigation strategy, and the political marketing and cultural acceptability of economic policies.

The book also deals fairly comprehensively with China. A perception of rivalry with China and China’s success with open-door policy gave Indian policymakers an urgency to catch-up. The book shows how this urgency was marketed politically to defuse some of the policy risks arising from India’s fractious domestic politics.

In addition to the political marketing, Indian policymakers also had to establish the pro-market policies in a culture that was historically skeptical about capitalism. The book also points out how this transformation was accomplished by some maverick policymakers.

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