Res Ipsa Loquitor

It is a new site!

Deo Melgaco — Tue, 25 May 2010 12:35:00 GMT

Wow, great to see this change in the MSDN blog - I really like it. It gives me more motivation to write again... it has been a log time.

MBA Global Management Seminar I

Deo Melgaco — Tue, 16 Jun 2009 00:36:00 GMT

Let me start by the last work I did this week: the paper. Great opportunity to learn; I selected the EU and Mercosur as the trading blocs, and the amount of research I did was incredible. Fortunately the UOP library has a great deal of material that allows good understanding of forex instruments, and country economic data. I was impressed by the size of EU and also by the fact that Mercosur is considered the third free-trade agreement, behind only NAFTA and EU. These three blocs, though, have huge opportunities to continue improving and opening their barriers to member and non-member countries.

International trade is a very exciting subject, especially nowadays with a global economy totally interconnected. The discussions in class reflected this too; things such as the effect of exchange rates and management of exchange rate risks allowed me to learn new concepts and to make some others stronger. I also enjoyed the topics of monetary and fiscal policies, as well as the discission on what makes international economics so fascinating. It'll be interesting to see how the world's situation change in the next months now that we have more insight on global economy and the role of trading blocs. Finally, the discussions on the Big 3 and world operations were also highlights.

I can't believe we finished week 3 already - getting closer and closer to finishing this class and the whole program. Great!

Started my second-the-last class!

Deo Melgaco — Thu, 28 May 2009 01:55:00 GMT

Now it is only 12 weeks and I'm done with my MBA. It has been a long journey of learning - and it has been worth it. Started yesterday the seminar on Global Management, and international trade will be the thing for the next six weeks. Very exciting!

To start I had to compare two types of economic blocs. A trade bloc is actually a kind of trade barrier where members of the bloc can import among themselves with low or no tariff and impose higher tariffs on imports from outside the bloc. Examples are NAFTA, EU, MercoSul, etc. I selected to talk about free-trade area and customs union.

Free trade are is a kind of bloc where members remove trade barriers for participants of the bloc, and keep their own national barriers against countries which are not members of the block. NAFTA is an example os this kind of bloc. In customs unions, on another hand, members remove all barriers amongst participants and adopt uniform barriers against external countries. An example is the MercoSul, formed by Argentina, Brazil, Paraguay and Uruguay, having Bolivia, Chile, Colombia, Ecuador and Peru as associate members. Venezuela signed an agreement to be a member but it has not been ratified by the Brazilian senate yet.

Speaking of the Mercosur, I know that the it has had many challenges, economical and political implications. Recently Venezuela has signed an agreement to join, but because Hugo Chaves is Hugo Chaves, the Brazilian senate is putting resistance to approve the deal. In a declaration some time ago, Hugo called the Brazilian congress "subservient" to the U.S. Now he and his country may pay the price of his big mouth.

Another interesting episode was the attempt to create FTAA, the Free Trade Area of the Americas. It faced opposition from other formed blocs, mostly MercoSur, and has not become anything yet. In the meantime, MercoSur has increased his reach with associate countries... it is a political game. SO what we had was many bilateral treaties between US/NAFTA and other countries, which led to pressures on other blocs. The USTR.gov site's last press release on the FTAA is from 2005... I assume things are blocked for now.

So, the next six weeks will be great - I expect exciting discussions on international trade and its implications to business. Will keep the blog updated.

Almost done with the 10th class!

Deo Melgaco — Tue, 21 Apr 2009 00:55:00 GMT

Almost there! With only one week to go, I feel really close to the end of the MBA program, with just two additional classes for the concentration on Global Management. I think I have written before that this class on strategies for competitive advantage has been very useful in my job – very timely as we do planning for next fiscal year.

This week was almost all dedicated to advance the content of my strategic paper, so I would have a draft ready in time to share with the learning team. Also, working on the strategic plan alignment was a good exercise, since I chose my own department as the target for the strategic paper. It was a good opportunity to stop and think about these issues in my workplace.

The discussion questions were once again excellent material for thought. I liked the discussions on continuous improvement and operational control; it was good to see the diverse viewpoints and how people understand the issues. Excellent brainstorming regarding the topic; in my opinion it was clear the concept of continuous improvement as a way to achieve better operational control, although I can’t see one replacing the other.

The question on quality, efficiency and responsiveness also enacted good thinking and learning. The concepts of TQM and methods such as Six Sigma and ISO 9000 allowed good debate of ideas.

On to week 6 to close this class “with a golden key”, as we say in Brazil!

Blue Ocean, Value Chain and more

Deo Melgaco — Thu, 09 Apr 2009 04:01:00 GMT

Last week was busy in my MBA - the Environmental Analysis Paper took most of my time in research. I am happy with the end results, especially because I am using this exercise to help me the strategy for next fiscal year; at the end the result of this class may be my actual strategic plan, or very close. The timing of this class could not be better: the FY10 planning cycle has just started, and I have been using the concepts in the real life.

This week's discussions in class were, once again, excellent. The "blue ocean strategy" thread was really interesting; I had not heard about the concept yet, and as I learned about it I realized it makes a lot of sense. Along history, we can see many examples of companies who had their "blue oceans" until competition appeared and transformed it into a "red ocean". Innovation is the main factor that would allow a company to establish a blue ocean; I also thought about the opposite: companies that remain so much time in a "red ocean" until they lose sight of what it really important to drive shareholder wealth. Sometimes a whole industry collapses or loses its relevance; firms that realize that first, create their "blue oceans" and leave the moribund industry are the ones who write theis success stories.

The thread on value chain analysis was a highlight. I thought it was similar to the Six Sigma process improvement methodology. The interesting thing about value chain is that a company is never an isolated entity, and as such it is part of a value chain system, with upstream suppliers and downstream buyers; a firm's competitive advantage depends on this value system.

A discussion on the sources of competitive advantage was very enlightening; my opinion is that it is better for a firm to pull from the three sources (cost, differentiation and speed) so it can create its competitive advantage in the market. By pulling from these three sources, a company can have a better mix that makes it unique and difficult to imitate, which is the ultimate competitive advantage. In the end, the competitive advantage strategies need to match the industry stage, whether it is emerging, maturing, or declining, and its nature: fragmented, global, local, etc.

10th MBA class - almost there!

Deo Melgaco — Wed, 01 Apr 2009 05:18:00 GMT

Great start on my 10th class in the MBA in Global Management program; this class is really interesting and the concepts we started to discuss this week are very useful to any business leader. I find it very surprising sometimes that strategy is something all business people talk about but not everyone understands it well. There seems to be a lot of confusion between strategy and tactic, and about what is strategic planning and what is just strategy implementation. I liked the textbook's approach to the concept, and liked very much all discussions we had in the discussion questions' threads.

From the readings, I liked the comparison in on the differences between the 20th Century and the 21st Century approach to business; it is very enlightening on one side and a confirmation of what we see every day on the other. It is also shows the important changes in organizations and the way of doing business with the new paradigms of globalization and light-speed communication. Nowadays things change very quickly, as we have seen in the last few months, and the challenge for leaders is to embrace change and lead organizations to successfully face it. In fact, chapter 10 is great on the skills a good leader needs to manage strategic change in businesses, by taking in consideration the organizational culture.

A great discussion we had in class was about social responsibility; no doubt, a hot topic today given the tough times we face. Amongst the new trends for components of corporate mission, I learned about the sensitivity of customer wishes and concerns for quality, and the discussion also showed the importance of incorporating social responsibility too. Social responsibility includes economic, legal, ethical and discretionary responsibilities. Also interesting the arguments by Milton Friedman against CSR; for me it is a view with myopia; in the long term, a business that acts without social responsibility is going against stockholders interests anyway, and wealth maximization would work only on the short run.

The second week had a nice simulation provided by the university; it was a complete planning exercise starting with information gathering to build a SWOT analysis. It was the first time I used a tool that allowed matching the strengths, weaknesses, opportunities and threats and select strategies that could be used to address weaknesses and threats and explore opportunities and strengths. In the real life, I think it is possible to create an Excel model that can do the same; listing Ss, Ws, Os and Ts in a table and strategies in another, and then attributing a weight on each strategy in how it relates to each of the letters, it is possible to make a strategy selection using a mathematical model. Very interesting.

The discussion questions were also excellent; the discussions helped to consolidate the topics of industry analysis and the global environment. A firm needs to pay attention to the environment and to its internal strengths and weaknesses in order to be able to have a good strategic plan; industry analysis is something a firm cannot neglect. Regarding the global environment, companies today need to scan it constantly since a mesh of relationships with customers and suppliers is so globalized that national borders lose meaning in the economic context. A firm, even if it operates only “locally” or “within borders”, needs to include global environmental scanning to have good strategic planning.

The week was also intense in the learning team, with the research for the strategic adaptability paper. Strategic Adaptability is a very interesting matter; I liked the comparison my team did with Charles Darwin theory of evolution: “It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change.”

Windows 7

Deo Melgaco — Wed, 21 Jan 2009 07:59:00 GMT

I loaded Windows 7 Beta on my production laptop - a nice upgrade experience, without any surprise. I had first to update my machine to Vista SP1 since it was a requirement to upgrade to Windows 7; I have been running Windows Vista 64-bits on a Dell Inspiron D820 since 2007. It is noticeable the improvements in performance; Windows 7 really delivers on the promisse to be a lighter operating system even when upgrading from a previous version.

Commenting on my MBA - I

Deo Melgaco — Wed, 21 Jan 2009 07:52:00 GMT

Another great busy week, with lots of time invested in a benchmarking research for this week's case study in my MBA program. In my discussion question this week, I chose to talk about the six reasons customers buy online, according to authors Kerin, Hartley, Berkowitz, & Rudelius (2004): convenience, choice, customization, communication, cost, and control. It was an intense discussion with other students. Other discussion questions posted by students also allowed excellent learning opportunities, by reading about different standpoints and experiences.

I liked also the food for thought threads initiated by the instructor; they promoted good discussion as well. The discussions on the case study, the commpany situation and assumptions, possible solutions and implementation were vital to grasping this week's concepts. The discussion on alignment between product development and firm's strategy were a highlight. As a certified project management professional, I enjoy seeing how critical strategy implementation is, and how important is to know the project management discipline and its relationship with successful strategies. The importance of involving stakeholders was well stressed.

A review of the 4 Ps of marketing mix was important, especially when reviewing the reasons for new product failures - certainly things that need to be taken in consideration when planning solutions. The company in the case study needs to be careful on things such as "insignificant point of difference", "poor execution of the marketing mix" and "incomplete market and product definition".

Ready for another week of learning!

People Management and Leadership

Deo Melgaco — Wed, 30 Apr 2008 07:54:00 GMT

Part of the people manager’s responsibilities is to provide clear, achievable goals to all employees; then assess how they are progressing toward those and support them in their endeavor to accomplish. Lack of motivation most of the time means that some goal - or more than one - will not be achieved. As a leader, the inspirational part of the work come to place to make sure the energy levels are high and the correct focus is applied to these defined goals. Different people will react to different motivational messages, and management must communicate very clearly the mission, vision, goals, and the strategies to achieve these goals. This helps employees to understand the importance of what they do and how they fit into the execution of these strategies.
Building continuation commitment is not that difficult - the carrot - but what makes it more complex is to work on the affective commitment. People may lack motivation because of management. That's why I believe so much that people management without leadership skills won't work very well - at the end of the day, people need the inspiration provided by a good leader; this is what will help to build emotional commitment and keep the best performers in the organization motivated toward reaching a shared vision. And with strong affective commitment, employees will work smarter, happier, and more motivated to achieve goals to that support the leadership’s vision.

The Prisoners Dilemma

Deo Melgaco — Sat, 08 Mar 2008 06:27:00 GMT

This week in my MBA, the instructor presented a question regarding the classical Prisoners Dilemma. In the prisoners dilemma two thieves are captured and separated so they cannot communicate. If neither prisoner confesses they will only be charged with 3 years each. If both confess they will get 5 years each. On the other hand, if one confesses and the other does not, the prisoner who confessed will walk free and the other thief will serve 10 years.

What is the best option for each thief?

We start by creating a payoff matrix:

	Prisoner A Confesses	Prisoner A does not Confess
Prisoner B Confesses	A 5 years; B 5 years	A 10 years; B free
Prisoner B does not confess	A free; B 10 years	A 3 years; B 3 years

Although it is apparent that the option to not confess is the best for both prisoners, it is not what happens because it is an unstable choice. The best option for both is to confess because one prisoner does not know what the other will do. As prisoner A does not know what B will do, if he chooses to not confess and B ends up confessing, B goes free and A takes 10 years. In order to minimize the risk of paying 10 years, the prisoner must confess.

If they could communicate and arrange a strategy, the best option would be to agree to not confess and be sure they will get only 3 years.

The best case scenario individually would be to confess and be sure that the other does not, but even if they could play a positive sum game, it would be very unlikely that either prisoner would agree to pay 10 years and let the other go free... unless there is a great amount of money hidden somewhere and the prisoner who goes free gets the money and hires a good lawyer to take the other one out of jail :-)

The interesting thing about the prisoner's dilemma as a strategy exercise is that no matter how you look at it, the best strategy is to betray the other prisoner and confess. In strategic scenarios, the decision maker will usually want to know what the other player will do, and this is not possible in the prisoner's dilemma because they can't communicate - one can trust his friend in the other room... but he cannot really predict what the other prisoner will do. Humans love freedom, and prisoner A, knowing that prisoner B would not confess anything (he trusts him), then the best option for Prisoner A is to betray B and confess so he walks free. So, confessing is the best option for A. Prisoner B can think the same and therefore the best strategic move for him is to confess. Now, if prisoner A knows that B would betray him (he does not trust B), then the best strategy is also to betray and confess, otherwise he might get 10 years while B goes free. Again, B may think the same and betray. From any standpoint, the prisoner should select to betray the other in order to preserve his own freedom - or at least part of it.

As written in Wikipedia (http://en.wikipedia.org/wiki/Prisoner%27s_dilemma), "rational self-interested play results in each prisoner being worse off than if they had stayed silent."

Mathematically, this is called Nash Equilibrium (remember Beautiful Mind?). Wikipedia gives a great coverage at http://en.wikipedia.org/wiki/Nash_Equilibrium:

"Stated simply, Amy and Bill are in Nash equilibrium if Amy is making the best decision she can, taking into account Bill's decision, and Bill is making the best decision he can, taking into account Amy's decision. Likewise, many players are in Nash equilibrium if each one is making the best decision that they can, taking into account the decisions of the others. However, Nash equilibrium does not necessarily mean the best cumulative payoff for all the players involved; in many cases all the players might improve their payoffs if they could somehow agree on strategies different from the Nash equilibrium"

The Prisoners Dilemma is a Nash Equilibrium where the best option strategically (and mathematically) is to both prisoners to "defect" instead of "collaborate" to each other. This option that gives equilibrium to the problem is not the best option globally because the best option is unstable: both prisoners remaining silent is better globally but it is unstable.”

In the prisoner dilemma, the defect strategy only works better if it is a one single instance. If it is a continued game, the cooperation is the best strategy; in fact, there are studies on this where even the alternate cooperation and betrayal is better strategy than always betrayal in the long run. For two companies which expect to be playing in the market for a long term, the betrayal strategy does not payoff in the long run.

Again, I will refer to Wikipedia:

"If two players play Prisoner's Dilemma more than once in succession (that is, having memory of at least one previous game), it is called iterated Prisoner's Dilemma. Amongst results shown by Nobel Prize winner Robert Aumann in his 1959 paper, rational players repeatedly interacting for indefinitely long games can sustain the cooperative outcome. Popular interest in the iterated prisoners dilemma (IPD) was kindled by Robert Axelrod in his book The Evolution of Cooperation (1984). In this he reports on a tournament he organized in which participants have to choose their mutual strategy again and again, and have memory of their previous encounters. Axelrod invited academic colleagues all over the world to devise computer strategies to compete in an IPD tournament. The programs that were entered varied widely in algorithmic complexity; initial hostility; capacity for forgiveness; and so forth.

Axelrod discovered that when these encounters were repeated over a long period of time with many players, each with different strategies, greedy strategies tended to do very poorly in the long run while more altruistic strategies did better, as judged purely by self-interest. He used this to show a possible mechanism for the evolution of altruistic behaviour from mechanisms that are initially purely selfish, by natural selection."