HOW TO PREVENT

RECESSIONUsing Ancient Wisdom

&Management Ideas

Academic Theory after Recession

•  Michael Porter now talks about "shared value" that goes beyond profits to benefit society and other stakeholders. 

• Rosabeth Kanter’s book (Super Cops) argues the same – profits with benefits to society.

• Others, too, are discussing the same issue – for example, Raj Sisodia at Bentley College has started a sort of movement he calls Conscious Capitalism which has people like Whole Foods CEO as board members.

Recently, some CEO's gave examples of how they and others are moving away from profit being the No.1 priority of business. The US Commerce Secretary, too, agreed with this idea of a former US President’s Foundation. What impact would this approach have on business? What should be the shape of Strategy?

• To answer this question, the book compares Profit to speed of a car. If a car is programmed to go at top speed only – there is great likelihood of a crash. The global economic crisis occurred when maximizing personal and firm’s profit was the ‘mantra’. It was like a car programmed to travel at top speed only.

• How were financial crisis averted in ancient India? What was their Strategy?

• The book uses Harvard Professor Michael Porter’s ingredients of Strategy: Optimisation Effort. It states that Profit should be an Optimisation Effort not a Maximisation Effort! It takes the example of a car’s speed, once again. If a car is programmed to optimise its speed, it will take many variables into account like: bumpiness of a terrain (to avoid jerks for passengers), fuel efficiency may be a criteria, or, it may foresee risk of crash and reduce speed etc.

• Which criteria to apply at what point of time is the program that education teaches. This judgment comes from ‘within’ a manager when he is in the driving seat.

• But, what is the need for change in thinking?• Can a financial crisis occur again?• Eminent economist Galbraith made a comment

many, many decades ago:• “I’m sure a crash like 1929 will happen again.

The only thing is that one doesn’t know when. All it takes for another collapse is for the memories of the last insanity to dull.”

• Many articles in journals prove a simple point – that research done in 1999 is not applicable in 2013. This begs a question: What is the guarantee that what is taught in 2015 will be applicable in 2025? 

• So, this book realises that debates cannot produce a cure for recession. Discovering the bitter pill that each individual in society has to swallow (through education) is a possible cure.

• It seeks to demonstrate how academic theory can be integrated with ancient wisdom. Then, opposing concerns of researchers, too, should find solutions from this book. How?

We seek ideas of Strategy that will remain constant overtime - but are ever adaptable to new situations in an ever changing world. If the basic ideas are right, such a study of Strategy will prevent recession. Where to get ideas of Strategy that have remained constant for thousands of years and have made a civilization survive? These are merged with work of Porter till 1999 in Chapter 1 to 5 of a study. Finally, they are applied to McGrath’s 2013 ideas of Strategy in Chapter 7(a). What behavior of firms can address concerns raised by Thomas Piketty of Paris School of economics? Chapter 4 gives a possible solution. Such a study of Strategy can help man, businesses and society prevent recession.

• But, first, two questions need answers that do not change every few years:

• (1) Can we prevent recession? • (2) How can we prevent recession?

• The study starts with ideas that are relatively steady, overtime. They may belong to religious traditions or spirituality – anything that is not so susceptible to change. After all, management study uses the best of all resources. It, then, uses its problems solving skills to adapt them to today’s reality. So, how to use the best of all traditions to solve problems of society? The study takes many ideas to merge them with management ideas.

What is Strategy?

• It is a method or plan of achieving a goal. • Therefore, ancient Indian tradition begins with

goals. Understanding goals leads to forming strategy, it adds meaning to man’s life.

• Why can the same goals not give meaning to a firm, too– to benefit oneself by serving society?

• Common goals for man and firm help serve self through society esp. when Profit may not be the No.1 goal.

Now let us answer the question:

“Can we prevent recession?”

• Recession is not a natural calamity. It is man- made. The cure of problem of recession, therefore, lies within man. Then society will get impacted. If acts of man do not harm society - quality of life changes.

• Management Education helps take responsibility of problems to find solutions. It uses the best of every resource available. It learns from the past, too. Then, it solves a problem.

• How were man’s actions transformed in the past? Ancient wisdom, thus, has a role in modern management.

“How can we prevent recession?”What can help transform man and society?

• This study uses Ancient Indian wisdom. For, it enabled prosperity with balance in society for thousands of years.

• Current Management thought, many believe, creates prosperity.

• How to apply current management thought using this resource? This is the task here.

• Ancient Wisdom, in all traditions, gives a Strategy of Life.

• Religion, Parents and Teachers impart it. • The idea of God brings out the good in man. • The purpose of education, too, is to bring out

this goodness. • Then, man is incapable of harming society.

Education gives skills, tools and techniques for doing a task, job or business. It is like a surgeon’s knife which can cure. In untrained

hands, it leads to murder….

• So, ancient Indian wisdom began education by disciplining the mind, first.

• This creates Awareness within man about himself and his role in society.

• Then it imparted skills for a trade, vocation etc. • These skills are used within norms, discipline or

Limits of society – just as a surgeon’s knife knows Limits.

• This two-fold approach is used here, too.

• Part A creates Awareness, builds Attitude towards work, Life.

• Part B is Study of Limits. • Education is about searching for Truth.• Part A makes man Aware about Truth - about

himself & society, leading to Strategy of Life. • Part B shows how this is to be applied in

society. This gives us Strategy of Firm.

PART -A

• Part A: Recognising Individuality of man, different paths of developing attitudes in tune with ‘inner nature’ of man are given. For example: Profit not being the No 1 priority is an Attitude.

• It also identified man’s ‘inner faults’ that impede implementing these attitudes.

• These include: Anger, Desire, Greed and Attachment.

• Man uses his body, heart and intellect. All three, together, create balance.

• Different people have different skills in using each of them.

• It classified what path would appeal to what ‘inner nature’.

• This led to transformation of man – training him to manage thoughts.

• This book does not impose ancient Indian ideas of life on strategy of firm. It does the opposite.

• It applies Porter's definition of Strategy to ancient Indian idea of how to live life. 

• Michael Porter of Harvard has given three ingredients of Strategy:

• 1) Simple Consistency• 2) Reinforcement • 3) Optimization effort.

• Part A shows how ancient Indian tradition teaches these three ingredients by asking man to Speak Truth, Follow Morality.

• This occurs when he speaks and acts according to what he thinks.

• If there is duplicity in thought, word and behaviour - then man, firm, and society suffer.

• This tradition refers to it as: 'Unity of Thought, Word and Deed' (Trikarana Shuddhi).

• It builds Character and brings out best in man.• This is an expression of Porter's simple consistency- at

work in life of man. • This Strategy of Life is basis of Firm’s Strategy.

PART - B

• Part B: Man’s action in society is Limited by morality and ethics. These are awakened ‘within’ by awakening Conscience – resulting in Best Practices. These are the Strategy for Life.

• In ancient Indian tradition, the 4 Purusharthas (Dharma, Artha, Kama Moksha) were the Strategy for Life. They converge with eight fold path of Buddhism.

• When Strategy of Firm emerges from Strategy of Life, then ethics guide man’s actions in the firm.

• Then: Man, firm, cluster, industry and society are in balance.

• The 4 Purusharthas or goals (4 ways of ‘C’ing) are identified as:

Co-operation - Dharma is expressed through co-operation of body parts of man, society.

Focussed ‘Concern’ Artha gives meaning to life – expresses distinction of man (it leads to concern for others: incl. Customers, society - leading to prosperity with morality)

Competitive Response Kama means desire. ‘First deserve then desire’. This training makes one compete with oneself (improve) to deserve more. It ensures continuous improvement and excellence.

Compatibility Advantage: Duty detached from desire leads to response compatible with needs of society, nation and nature.

• Part B starts with Co-operation as the First Purushartha as 1st in the 4C Approach: Porter’s work on Competitive Advantage of Nations shows how the National Diamond depends upon Co-operation.

• This is true not only at national level – but also for development of Cluster and Industry.

• At the firm level, too, Strategy depends on it.

• The Second C or Purushartha is focussed ‘Concern’: Co-operation should be directed towards creating a focus on improving both – Total Quality of Life and Output.

• This is true for both Man and the Firm. Its Management is undertaken with a concern for customer, firm, cluster, industry, society, and nation.

• Just as man’s body is dependent on Panch Pranas, body of business, too, depends on five life breaths in this tradition.

These include: Attitude based Costing Re-engineering of Business Processes

continually Creative market International Marketing Total Quality Management.

Some visuals of Creative Market, Business Process Re engineering and TQM

Creative Market: The ‘influencers’ and the customer - their inter-play.

Creative Market: The shaping and reshaping of customer wants

THE TQM WHEEL

• The third ‘C’ or Competitive Response needs a change in assumptions: A desire (Kama) for Profit maximization is basic assumption of ‘80s economic theory.

• This became assumption of Capitalism. Profit Maximization is sought to be replaced by Profit Optimization to ensure balance in society.

• This is in tune with Optimization Effort – Porter’s 3rd ingredient of Strategy.

• Example of car at max speed only v/s Optimum speed. Latter prevents crash!

• Optimization Effort requires a different understanding and ‘software’.

• It incorporates multiple objectives - and their varying nature – across time.

• In ancient Indian tradition ‘five life forces of business’ in tune with ‘nature of nation’ determine strategy of firm.

• What optimum strategy makes balance emerge within man, firm, society, nation and family of nations and with nature? It should lead to transformation of man & society.

• Strategy begins with transformed manager who decides Strategy.

• It needs scientific enquiry, transforming inner nature of manager, national character, developing broad understanding of man and mankind etc.

• The Life forces of business, in this tradition are- Production, Collection, Protection, Connection, Direction

• Piketty’s Research on ‘Capital in 21st Century’ (Paris School of Economics) can help us here.

• It can explain the ‘why’ about ancient Indian Theory of Competition.

• It verbalises what current marketing theory may wish to express.

• It has studied the history of income and wealth distribution over twenty countries since the Industrial Revolution.

• The study of equality and inequality in society was the focus of the study.

• The main equalizing force – both within and between countries is diffusion of knowledge and skills. This is the focus here.

• What leads to inequality is identified.• When rate of return on capital ‘r’ exceeds the rate

of growth ‘g’, wealth disparities increase towards extreme.

• This coincides with ancient Indian view about Price and Optimization effort.

• Price determines profit and profit determines return on capital.

• The unrestrained desire for profit leads to rising inequality in society.

• Thus ancient Indians taught self restraint. • It awakened voice of conscience and ingrained a

natural ceiling on desires in man. • This constrained inequality in society and

prevented over exploitation of natural resources.

• Its approach transforms man’s life through education. For, in this tradition – just as Piketty postulates – education was the greatest equalizer.

• It does not simply impart information of tools and techniques or impart skills. In fact, imparting skills was done after transformation of man.

• Then, these skills could not be misutilised. • Hence morality and truth was the most important

Best Practice of Management leading to balance.

• Porter’s Optimization Effort is elevated to Profit Optimization in 4C Approach.

• It replaces Profit Maximization strategies of capitalism, economic theory and competitive strategy.

• Optimization Effort is explained as changing speed of car to suit terrain.

• Thus, when growth slows, Optimization effort implies business should adjust Piketty’s ‘r’, too!

• Understanding this academic concept does not ensure its practice.

• Three stages of wisdom Jnana to Sujnana to Vijnana led to moving man from Swartha to Parartha to Parmartha!

• The spiritual practices trained man’s mind to overarch selfishness to seek enlightened self interest and, finally, highest good of all!

This movement can be shown in Diagrams…

The ‘influencers’ and the customer: their proposed inter-play.

(The individual, empowered with wisdom, communicated within ambit of shared values, to

determine direction of growth of Knowledge, technology and socialization process)

The firm and shared values (McKinsey7S model)

4C’s: The customer, home nation, firm and society’s compatible interaction (on basis of shared values) during the process of value

creation.

Man Management and 4C approach: Simple Consistency of Shared Values of Man,

firm and Society get Reinforced in Optimization effort to create balance.