Budget Terms

Team ET simplifies the important Budget items for its readers in a five-part series. We have, however, departed from the usual way glossaries are presented, in alphabetical order, to a flow-type format wherein terms are explained as the reader would encounter them in the budget. Read on... On the Budget day, the finance minister tables 10-12 documents. Of these, the main and most important document is the Annual Financial Statement. Annual Financial Statement Article 112 of the Constitution requires the government to present to Parliament a statement of estimated receipts and expenditure in respect of every financial year — April 1 to March 31. This statement is the annual financial statement. The annual financial statement is usually a white 10-page document. It is divided into three parts, consolidated fund, contingency fund and public account. For each of these funds, the government has to present a statement of receipts and expenditure. Consolidated Fund: This is the most important of all government funds. All revenues raised by the government, money borrowed and receipts from loans given by the government flow into the consolidated fund of India. All government expenditure is made from this fund, except for exceptional items met from the Contingency Fund or the Public Account. Importantly, no money can be withdrawn from this fund without the Parliament’s approval. Contingency Fund: As the name suggests, any urgent or unforeseen expenditure is met from this fund. The Rs 500-crore fund is at the disposal of the President. Any expenditure incurred from this fund requires a subsequent approval from Parliament and the amount withdrawn is returned to the fund from the consolidated fund. Public Account: This fund is to account for flows for those transactions where the government is merely acting as a banker. For instance, provident funds, small savings and so on. These funds do not belong to the government. They have to be paid back at some time to their rightful owners. Because of this nature of the fund, expenditure from it are not required to be approved by the Parliament. For each of these funds the government has to present a statement of receipts and expenditure. It is important to note that all money flowing into these funds is called receipts, the funds received, and not revenue. Revenue in budget context has a specific meaning. The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. So all receipts in, say consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which includes non-revenue receipts and expenditure. For understanding these budgets — Revenue and Capital — it is important to understand revenue receipts, revenue expenditure, capital receipts and capital expenditure. Revenue receipt/Expenditure: All receipts and expenditure that in general do not entail sale or creation of assets are included under the revenue account. On the receipts side, taxes would be the most important revenue receipt. On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure. Salaries, subsidies and interest payments are good examples of revenue expenditure. Capital receipt/Expenditure: All receipts and expenditure that liquidate or create an asset would in general be under capital account. For instance, if the government sells shares (disinvests) in public sector companies, like it did in the case of Maruti, it is in effect selling an asset. The receipts from the sale would go under capital account. On the other hand, if the government gives someone a loan from which it expects to receive interest, that expenditure would go under the capital account. In respect of all the funds the government has to prepare a revenue budget (detailing revenue receipts and revenue expenditure) and a capital budget (capital receipts and capital expenditure). Contingency fund is clearly not that important. Public account is important in that it gives a view of select savings and how they are being used, but not that relevant from a budget perspective. The consolidated fund is the key to the budget. We will take that up in the next part. As mentioned in the first part, the government has to present a revenue budget (revenue account) and capital budget (capital account) for all the three funds. The revenue account of the consolidated fund is split into two parts, receipts and disbursements — simply, income and expenditure. Receipts are broadly tax revenue, non-tax revenue and grants-in-aid and contributions. The important tax revenue items are listed below.


Corporation Tax: Tax on profits of companies. Taxes on Income other than corporation tax: Income tax paid by non-corporate assesses, individuals, for instance. Fringe benefit tax (FBT): The taxation of perquisites — or fringe benefits — provided by an employer to his employees, in addition to the cash salary or wages paid, is fringe benefit tax. It was introduced in Budget 2005-06. The government felt many companies were disguising perquisites such as club facilities as ordinary business expenses, which escaped taxation altogether. Employers have to now pay FBT on a percentage of the expense incurred on such perquisites. Securities transaction tax (STT): Sale of any asset (shares, property) results in loss or profit. Depending on the time the asset is held, such profits and losses are categorised as long-term or short-term capital gain/loss. In Budget 2004-05, the government abolished long-term capital gains tax on shares (tax on profits made on sale of shares held for more than a year) and replaced it with STT. It is a kind of turnover tax where the investor has to pay a small tax on the total consideration paid / received in a share transaction. Banking cash transaction tax (BCTT): Introduced in Budget 2005-06, BCTT is a small tax on cash withdrawal from bank exceeding a particular amount in a single day. The basic idea is to curb the black economy and generate a record of big cash transactions. Customs: Taxes imposed on imports. While revenue is an important consideration, Customs duties may also be levied to protect the domestic industry or sector (agriculture, for one), in retaliation against measures by other countries. Union Excise Duty: Duties imposed on goods made in India. Service Tax: It is a tax on services rendered. Telephone bill, for instance, attracts a service tax. While on taxes, let us take a look at an important classification: direct tax and indirect tax. Direct Tax: Traditionally, these are taxes where the burden of tax falls on the person on whom it is levied. These are largely taxes on income or wealth. Income tax (on corporates and individuals), FBT, STT and BCTT are direct taxes. Indirect Tax: In case of indirect taxes, the incidence of tax is usually not on the person who pays the tax. These are largely taxes on expenditure and include Customs, excise and service tax. Indirect taxes are considered regressive, the burden on the rich and the poor is alike. That is why governments strive to raise a higher proportion of taxes through direct taxes. Moving on, we come to the next important receipt item in the revenue account, non-tax revenue. Non-tax revenue: The most important receipts under this head are interest payments (received on loans given by the government to states, railways and others) and dividends and profits received from public sector companies. Various services provided by the government — police and defence, social and community services such as medical services, and economic services such as power and railways — also yield revenue for the government. Though Railways are a separate department, all its receipts and expenditure are routed through the consolidated fund. Grants-in-aid and contributions: The third receipt item in the revenue account is relatively small grants-in-aid and contributions. These are in the nature of pure transfers to the government without any repayment obligation. We now look at the disbursements section of the revenue account of the consolidated fund. It lists all the revenue expenditures of the government. These include expense incurred on organs of state such as Parliament, judiciary and elections. A substantial amount goes into administering fiscal services such as tax collection. The biggest item is interest payment on loans taken by the government. Defence and other services like police also get a sizeable share. Having looked at receipts and expenditure on revenue account we come to an important item, the difference between the two, the revenue deficit. Revenue Deficit: The excess of disbursements over receipts on revenue account is called revenue deficit. This is an important control indicator. All expenditure on revenue account should ideally be met from receipts on revenue account; the revenue deficit should be zero. When revenue disbursement exceeds receipts, the government would have to borrow. Such borrowing is considered regressive as it is for consumption and not for creating assets. It results in a greater proportion of revenue receipts going towards interest payment and eventually, a debt trap. The FRBM Act, which we will take up later, requires the government to reduce fiscal deficit to zero by 2008-09.
Receipts in the capital account of the consolidated fund are grouped under three broad heads — public debt, recoveries of loans and advances, and miscellaneous receipts. Public debt: Public debt receipts and public debt disbursals are borrowings and repayments during the year, respectively. The difference is the net accretion to the public debt. Public debt can be split into internal (money borrowed within the country) and external (funds borrowed from non-Indian sources). Internal debt comprises treasury bills, market stabilisation schemes, ways and means advance, and securities against small savings. Treasury bills (T-bills): These are bonds (debt securities) with maturity of less than a year. These are issued to meet short-term mismatches in receipts and expenditure. Bonds of longer maturity are called dated securities. Market stabilisation scheme: The scheme was launched in April 2004 to strengthen RBI’s ability to conduct exchange rate and monetary management. These securities are issued not to meet the government’s expenditure but to provide RBI with a stock of securities with which it can intervene in the market for managing liquidity. Ways and means advance (WMA): One of RBI’s roles is to serve as banker to both central and state governments. In this capacity, RBI provides temporary support to tide over mismatches in their receipts and payments in the form of ways and means advances. Securities against small savings: The government meets a small part of its loan requirement by appropriating small savings collection by issuing securities to the fund. Miscellaneous receipts: These are receipts from disinvestment in public sector undertakings. Capital account receipts of the consolidated fund — public debt, recoveries of loans and advances, and miscellaneous receipts and revenue receipts are receipts of the consolidated fund. We now take up the disbursements on capital account from the consolidated fund. The first part deals with capital expenditure incurred on general, social and economic services. Some of the biggest expenditure items under these heads are defence services, investment in agricultural financial institutions and capital to railways. The second part takes up the public debt (repayments of loans) and various loans by the government. The consolidated fund has certain disbursements ‘charged’ to the fund. These are obligations that have to be met in any case and, therefore, do not have to be voted by the Lok Sabha. These include interest payments and certain expenditure such as emoluments of the President, salary and allowances of speaker, deputy chairman of the Rajya Sabha, and allowances and pensions of Supreme Court judges, Parliament and so on. Budget at a glance: This is a snap shot of the budget for easy understanding. Nonetheless, it introduces some new concepts. While receipts are broken down into revenue and capital, unlike the consolidated fund, it shows the centre's net tax revenues. This is because a decent part of the gross tax revenue, as decided by the relevant Finance Commission, flows to the state governments. Budget at a glance also segments expenditure into plan and non-plan expenditure, instead of splitting into revenue and capital. Each of these is then split into revenue account and capital account. Before discussing plan and non-plan expenditure it is important to discuss the concept of the central plan. Central plan: Central or annual plans are essentially Five Year Plans broken down into annual instalments. Through these plans, the government achieves the objectives of the Five Year Plans. The central plan’s funding is split almost evenly between government support (from the budget) and internal and extra budgetary resources of public enterprises. The government’s support to the central plan is called budget support. We will take up plan and non-plan expenditure in the next part. Plan expenditure: This is essentially the budget support to the central plan and the central assistance to state and union territory plans. Like all budget heads, this is also split into revenue and capital components. Non-plan expenditure: This is largely the revenue expenditure of the government. The biggest items of expenditure are interest payments, subsidies, salaries, defence and pension. The capital component of the non-plan expenditure is relatively small with the largest allocation going to defence. Defence expenditure is non-plan expenditure.

Fiscal Deficit: When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit. Primary deficit: The revenue expenditure includes interest payments on government’s earlier borrowings. The primary deficit is the fiscal deficit less interest payments. A shrinking primary deficit indicates progress towards fiscal health. The Budget document also mentions deficit as a percentage of GDP. This is to facilitate comparison and also get a proper perspective. Prudent fiscal management requires that government does not borrow to consume in the normal course. FRBM Act: Enacted in 2003, Fiscal Responsibility and Budget Management Act require the elimination of revenue deficit by 2008-09. Hence, from 2008-09, the government will have to meet all its revenue expenditure from its revenue receipts. Any borrowing would only be to meet capital expenditure. The Act mandates a 3% limit on the fiscal deficit after 2008-09. Resources transferred to the states: A part of the Centre’s gross tax collection goes to state governments. In the Budget 2007-08, the states were to receive nearly 27% of the gross tax collections. The Centre also transfers funds to states by way of support to their plans. It also gives large grants

to manage centrally-sponsored schemes. The government counts small savings transfers to state governments, which are in the nature of borrowings, as resources transferred to states. Before March 31, 1999, the Centre used to borrow net accretions to small savings and lend them to the states. From April 1, 1999, states started receiving 75% of net small savings directly; the balance was invested in special government securities during 1999-2000 to 2001-2002. The sums received in the NSS fund on redemption of special securities are being reinvested in special G-secs. From April 2002, the entire net collection under small saving schemes in each state and UT are advanced to the concerned state/UT government as investment in its special securities. The expenditure and receipts Budget take up the respective heads in greater detail. Value-Added Tax (VAT) and GST: VAT helps avoid cascading of taxes as a product passes through different stages of production/value addition. The tax is based on the difference between the value of the output and inputs used to produce it. The aim is to tax a firm only for the value added by it to the inputs it is using for manufacturing its output and not the entire input cost. VAT brings in transparency to commodity taxation


In this concluding part we take a look at some of the important terms that figure in the Budget BHARAT NIRMAN: Bharat Nirman is the current UPA government’s ambitious programme for building infrastructure, especially in rural India. It has six components — irrigation, roads, water supply, housing, rural electrification and rural telecom connectivity. In each of these areas, the government has set targets that are to be achieved by the year 2009, within four years of its launch. CESS: This is an additional levy on the basic tax liability. Governments resort to cess for meeting specific expenditure. For instance, both corporate and individual income is at present subject to an education cess of 2%. In the last Budget, the government had imposed another 1% cess — secondary and higher education cess on income tax — to finance secondary and higher education. COUNTERVAILING DUTIES (CVD): Countervailing duty is a tax imposed on imports, over and above the basic import duty. CVD is at par with the excise duty paid by the domestic manufacturers of similar goods. This ensures a levelplaying field between imported goods and locally-produced ones. An exemption from CVD places the domestic industry at disadvantage and over long run discourages investments in affected sectors. EXPORT DUTY: This is a tax levied on exports. In most instances, the object is not revenue , but to discourage exports of certain items. In the last Budget, for instance , the government imposed an export duty of Rs 300 per metric tonne on export of iron ores and concentrates and Rs 2,000 per metric tonne on export of chrome ores and concentrates. FINANCE BILL: The proposals of government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill. It is the key document as far as taxes are concerned. FINANCIAL INCLUSION: Financial inclusion is universalising access to basic financial services (to have a bank account , timely and adequate credit) at an affordable cost. Exclusion from financial services imposes costs on those excluded ; these are typically the disadvantaged and low-income group. Exclusion forces them into informal arrangements such as borrowing from local money lenders at high rates. Financial inclusion remains a serious issue in India. The government has proposed a no-frills account to provide cheap banking. MINIMUM ALTERNATE TAX (MAT): This tax on corporate profits was introduced in 1996-97 and has been modified since. If the tax payable by a company is less than 10% of its book profits, after availing of all eligible deductions , then 10% of book profits is the minimum tax payable. Book profits are profits calculated as per the Companies Act, while profits as per the Income-Tax Act could be significantly lower, thanks to various exemptions and depreciation. PASS-THROUGH STATUS: A pass-through status helps avoid double taxation. Mutual funds, for instance , enjoy pass-through status. The income earned by the funds is tax free. Since mutual funds’ income is distributed to unitholders, who are in turn taxed on their income from such investments , any taxation of mutual funds would amount to double taxation. Essentially , it means the income is merely passing through the mutual funds and, therefore, should not be taxed. The government allows venture funds in some sectors pass-through status to encourage investments in start-ups . SUBVENTION: The term subvention finds a mention in almost every Budget. It refers to a grant of money in aid or support, mostly by the government. In the Indian context, for instance, the government sometimes asks institutions to provide loans to farmers at below market rates. The loss is usually made good through subventions. SURCHARGE: As the name suggests, this is an additional charge or tax. A surcharge of 10% on a tax rate of 30% effectively raises the combined tax burden to 33%. In the case of individuals earning a taxable salary of more than Rs 10 lakh a surcharge of 10% is levied on income in excess of Rs 10 lakh. Corporate income is levied a flat surcharge of 10% in the case of domestic companies and 2.5% for foreign companies. Companies with revenue less than Rs 1 crore do not have to pay this surcharge

a letter to the headmaster

Application to the headmaster(December 20, 2004)We rarely fail to make the grade in technology but often fail to do a good job of oral or written communication. Sample 1 "... I, G. S. Dora ,a B.Tech (CSE) graduate with 74% in aggregate, passed out in 2003. I hereby attache a copy of my resume for your kind referrence. Waiting for a positive response Frok You. Thanking You..."Sample 2 "... I am B.tech computer sc & Engg. gradute passedout in2003 with 70.07%.I here by paste acopy of my resume for your kind reference. I request you just give me chance to prove my worth in your company."Sample 3 "CURRICULAM VITAE Objective: - To Find Challenging & Adventorous Field Involving Tremendous Tasks & Opportunities Where Work Should be Continous & last for a lifetime."Sample 4 "... Here with please find my attached resume for your kind consideration so that I can have a professional advancement in real time environment, if given a chance. I assure you that I shall prove diligent & candid in the execution of duties bestow on me..."I receive at least fifty such unsolicited mails enclosing job applications everyday. They often come from students across the country who are about to graduate. They also come from engineers and masters in computer applications with so-called 'work experience'.Uniformly, the mails are written with complete disregard for basic grammar. The English is terrible. Some young people, who have tasted 'short messaging system' (SMS) on mobile phones, do not know that it is downright irritating to read an email written in SMS jargon. Since I see a good sample day in and day out, I am entitled to conclude that there is a disconcerting problem with our system of education.It is an expensive 'defect'. Years ago, Motorola discovered that the average worker had problems reading, writing and doing simple mathematics. It had to re-train workers to rectify a defect that had flown through the education system. Motorola traced the defects all the way back to kindergarten, and started the K2 program for corporate involvement in improving education. The message is simple: if children do not learn the 3Rs well, that defect flows into the workplace where it is far more expensive to correct. Worse, most workplaces are unlikely to get involved in fixing the defect at their expense, and will instead opt to live with it - which hurts the organisation even more.I studied in a government school in an obscure place in Orissa called Keonjhargarh. The medium of instruction was Oriya. As part of learning English, our teacher made us write applications to the headmaster, seeking leave of absence on imaginary grounds. He also asked us to write letters to a friend, the subject of which was invariably woven around how you spent the holidays. Looking back, those were useful lessons in communication at an early stage of life. He taught us to leave margins on all sides of the paper and space after the salutation, and to end with an appropriate closure.The emails I get today make me wonder if I am from another planet. Before you think I am using precious newsprint on a trivial matter, ask a customer of any leading Indian software company on their No. 1 gripe. You will hear that it is the quality of communication. We seldom fail to make the grade in technology. We know how the math works. But we do not do a good job of oral or written communication. Worldover, the known No. 1 reason for project failures is not technology, but communication. The solution starts with learning to express oneself in simple and clear terms.The problem is a matter of priority. For elite academic institutions, this is probably not a big issue because their screening process ensures that the students who get in have an acceptable level of written communication skills. But for the vast majority of India's engineering colleges and technical institutes, it is quite another story.Given the time a student spends in college, it is not a huge task to get them to fix their communication skills. A return to the good old 'application to headmaster' could make the difference. Only, this time, add email etiquette to the list.

A Mind for Future

HR SPECIAL: GUEST COLUMNMinds For The Future
A true professional must be able to deliver products and services that are complete in all respects
BY SUBROTO BAGCHI25 April 2008
How relevant would you be as a professional in 2020? How do you really know that you are building what it takes to succeed in the future? Howard Gardner, leading thinker of our times and teacher at Harvard says, you need to develop “Five Minds for the Future” in a book with the same title. He should know because he has been working on how the mind works, its complexity, the concept of intelligence and the multiplicity of intelligence for many decades now. I believe his work will impact organisations of the future the same say Juran and Deming impacted the manufacturing economy with their understanding and framework for Total Quality Management. I also believe that Gardner has special relevance to India because India’s doom and deliverance can both be triggered by its large population. The Indian educational system and the way organisations look at human resource development, fall far short of what it would take to create the professional of the future. According to Gardner, the future would belong to those who develop five minds: the mind of discipline, synthesis, creativity, respectfulness and ethics. Let me explain what he means by each of these.
First and foremost, the professional of the future must master a basic discipline. Those who do not solidly stand for one would have to take instructions from others. They are very unlikely to lead others. Empirically speaking, mastering any discipline takes ten years. This is a sobering fact for a country that churns out doctors and engineers and plumbers like a factory and individuals believe that a professional qualification is all you need to become a professional. A decade of dedicated practice in a discipline alone makes someone a complete professional and there is no short cut to it.
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While the future would need us to build the mind of discipline, the fact is that all complex problems, in whatever field we can think of, would necessarily require multi-disciplinary approaches to resolve. My favorite role play is one in which I ask groups to imagine that a hijacked airliner is going to land in 30 minutes and participants must have a game plan to handle the situation immediately. It takes no time at all for people to realise that from something as dramatic as a plane hijack to more routine organisational issues — from a heart surgery in a hospital, cracking a crime or a design of a new product — each one requires a multi-disciplinary view of things. That is where, in addition to mastering a core discipline, one has to develop the mind of synthesis. Major decisions would require inter-disciplinary thinking and great synthesizing capability.
The third mind for the future is the creative mind. Experiments done by Gardner and others indicate that all human beings are creative as children, the capacity peaks in five-year-olds and in most of these children, wanes by the time they are in their 20s. For example, give a five-year-old a pencil. Moments later, the child converts it into an imaginary airplane and can fly it for hours. This capacity to see one thing and conceptualise it as something it is not, is what visionary leadership and breakthrough innovation is all about. Where the world sees a computer, Steve Jobs sees an iPod. Where telecom companies saw switches and instruments, John Chambers simply saw software and the Net.
The fourth of the five minds is the respectful mind. It is amazing we do not know enough about this one professional characteristic — our engineering and MBA curriculum do not talk about it. How basic does it get? A little while ago, we saw that the professional of the future would need to master a given discipline and at the same time, all complex problems and their solutions are inter-disciplinary in nature. That means solutions would need many experts to come together and collaborate. Now that is the precise point. Bring in five experts from five fields and you will get differing views and as they argue and fall apart, the world moves on. Hence, true professionals must learn how to develop a respectful mind so that other experts collaborate with them.
Finally, Gardener talks about developing the ethical mind. For a professional worth the name, ethics is finally about the capability to self-certify the completeness of a given assignment. In a post-colonial culture in India, we only work under supervision. That cannot any longer be the case; a true professional must be able to deliver products and services that are complete in all respects without the need for scrutiny and oversight.
The author is the co-founder of MindTree where he currently works as Gardener
(Businessworld issue 29 April-05 May 2008)

Move With The Flow, Learn To Let Go

We tend to cling to every object in our lives. We hold on to our profession, relationship or possession as if our entire world depends on them. We are so busy clinging to our own lives, that we have forgotten to live with the flow. We are afraid to move ahead, afraid to let go.
Life in essence is like an unobstructed, unrestrained, uncontrolled flow of a river. Life flows at its own pace and the ultimate source of all our pain and sufferings is our tendency to cling to and obstruct the flow. Professional life stagnates, relationships are broken, possessions are lost; all because we refused to let go when we were actually required to let things take their own course.
Why do we cling? We cling because change scares us; we cling because we are afraid to face the unknown, to face challenges; we cling because we feel secure if the status quo is maintained; we cling because we refuse to believe that life can never be static; because we refuse to accept the transience of everything; we believe that everything is in our hands. We do not have enough faith in life and that higher force which is omnipotent and omnipresent. In the chaos of existence, we have lost touch with our higher self. Most of us lead a life which is similar to that of a child who is lost in a crowd, separated from his guardians. He has nobody to place his faith on. He is afraid, insecure, suspicious about everyone and everything.
We live under the false illusion of having everything under our control. The spirit of getting things done becomes a problem when we continue to cling on even after we have exhorted all our efforts. We are overwhelmed by a sense of despair and disillusion when things move beyond our control. It is at this stage we need to learn to let go. Several times relationships are broken just because we tried too hard to make them work. We didn’t give the breathing space they required to grow. We didn’t let go and let them take their own course.
Professionally or personally, once all the efforts are made towards achieving a goal, we must learn to let go and let life take the best course. It might or might not be of one’s choice, but if we have faith, we will realise that it inevitably is the best course. We need to believe that forces above us are far better equipped to make judgments for us. We must learn to have faith in their judgment. Letting go, however, does not mean turning into a fatalist. One cannot sit idle in life and expect life to take care of itself. Karma, the fulfilment of one’s duties is the ultimate objective of all human existence and if we fail to fulfil our duties towards life, life inevitably fails us.
When God gives us dreams, He shares them with us. Whatever we consider our dreams, are actually His dreams and He gives us the capability to realise them. The part we are required to play is to ensure the optimum usage of the capabilities bestowed upon us. And once we have played our part with utmost honesty and effort, we need to let go, step aside and let God step in to fulfil our dreams. After all, they are His dreams, too.

Coping with Adverse Times

Different people measure success differently. While some may define success as the number of cars a person has, others see it simply as a steady job that pays the bills. Whatever the definition, most people shudder to think of themselves as a failure. Thomas Alva Edison, the inventor of the light bulb and 100 other inventions once said of his failures, "I have not failed. I've just found 10,000 ways that won't work." To top that when he was a youngster, his teacher told him he was too stupid to learn anything. He was counseled to go into a field where he might succeed by virtue of his pleasant personality.Bill Gates [Images], one of the most successful men of our times too went through tough times. In retrospect he says, "It's fine to celebrate success but it is more important to heed the lessons of failure."A newspaper editor fired Walt Disney [Images] because he "lacked imagination and had no original ideas". The list of people who succeeded after failures is long. However, great success doesn't happen to everyone. Twenty-eight-year-old Hemant Sabnis says success eluded him for almost 10 years."I tried for many jobs but could not get any," recollects the engineering graduate. "I was absolutely fed up. I must have sent out thousands of applications. I even got selected for a few interviews. And then something would go wrong. Either my qualification was a problem; sometimes even my body language was a problem."He remembers the times when he was so down in the dumps that he refused to meet people. "I would avoid my friends. I stopped going out," he reminisces, "Nothing interested me. I had almost lost all faith in myself."What then salvaged this young man? His father's trust in him. "My father is retired. He had a lot of aspirations from my sister and me. I realised that I wasn't being able to fulfill his wishes. That hurt even more than not being able to land a job," he adds. Then came a time that seeing his son morose saddened the father. "He told me that it was okay if I did not have a job. He was more hurt that I was depressed. It was then that I decided to give it one more shot," he says.This time around the circumstances were the same but Hemant's outlook had changed. He was now more positive. "I decided to try a different approach at interviews. I read up on how to be more jovial and smiled through my interviews," he says. And after three tries he was successful. He now works as a junior engineer in an iron moldings factory in Kolhapur. "I know the path ahead of me now. I also know there are a lot of people like me out there. I want to tell them that they need to have faith in themselves first. Things will eventually fall in place," he smiles. When the going gets toughVikas Bhande* from Mumbai has a similar tale to tell. Vikas was born into a poor family where his mother, the sole breadwinner, was employed as a maid. He recollects days when they had little or no food. "For years my mother did people's dishes and scrubbed people's floors," says this spunky 25-year-old, "Her aim was to provide education for all three of us. My other siblings though didn't study too far."Vikas was always interested in studies. However, one incident changed the purpose of his entire life. That was in his fifth standard. "I failed my exam in the fifth standard," he recollects, "My brother and sister had already made it clear that they are not going to study. My mother was very upset. She had pinned her hopes on me and I had let her down."His mother cried that entire night and prayed to god. "I always thought my mother was strong. I had seen her smile through the toughest of situations," he remembers, "When I saw her cry like that, I realised I had disappointed her. I was ashamed of myself."That's when he decided to change the tide. "I studied very hard the next year and came third," he smiles. Since then there was no looking back.He studied diligently even through their tough times. "Trouble began when I reached higher classes and my expenses started mounting. When I passed my tenth my mother's employees decided to sponsor my education. That's how I completed my education," he recollects.While pursuing his own studies, Vikas realised he could supplement the family income by taking tuitions. "I started taking tuitions. I saved up and did a course in networking," he recollects, "Today I have my own little business where I look after networks of small companies. I have even hired two people."His mother stopped working when Vikas' tuitions were enough to cover family expenses. Today with her only daughter married and her two sons taking care of her needs, Vikas says she has little to complain of.Ask him how he did it? "After my first failure, I never had time to think or cry over my situation," he recollects, "I knew I had to get my mother out of other's homes. There was nothing else on my mind."Secret ingredientsThese two stories probably do not warrant a bravery award. Yet these two brave men teach you a lot about failure. Here are some life lessons to learn from them:Have faith in yourself and your abilities.Don't be too proud to ask for help.One door closes, but another door somewhere is opening. Be alert.Work towards improving yourself all the time. Never be complacent.If today is not going the way you want it to, don't fret. Tomorrow will be a brighter day.Set your own standards for failure and success. Be rigid about your limits on failure, but not about success.Bear in mind that neither success nor failure is everlasting. However, you can work towards making your success last longer.Work hard, smart and faithfully. You will never know when you will be recognised for your effort.Don't feel disheartened or sad, do something that energises you.Smile. It will obscure the darkness of failure and outshine the glory of success.*Names changed to protect privacy
Posted by P K Kothari at 6:54 AM

Stay Hungry. Stay Foolish Steve Jobs

'You've got to find what you love,' Jobs says
This is the text of the Commencement address by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, delivered on June 12, 2005.
I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.
The first story is about connecting the dots.
I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?
It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.
And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.
It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:
Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.
None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.
Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something — your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.
My second story is about love and loss.
I was lucky — I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation — the Macintosh — a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.
I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me — I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.
I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.
During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I returned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.
I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.
My third story is about death.
When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.
Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.
About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.
I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.
This was the closest I've been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:
No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.
Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.
When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.
Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.
Stay Hungry. Stay Foolish.
Thank you all very much.

Upgrade ur Skills S Bagchi

Upgrade yourself from the world of codingHow does one build a successful technical career? SUBROTO BAGCHI gives you the nine key factors.
THE other day, I met a bright young engineer in MindTree and asked him what his ambition was. He was very clear. “I want to be an architect”. My next question to him was, what does he read? He looked surprised and then replied that he does not read much outside what appears on a computer screen. My next question to him was whom all does he admire in MindTree among the three best architects? He named the predictable three. Then I told him what the fundamental gap was between him and the best three. It was about the ability to make intelligent conversation about any subject under the sun — a capability borne out of serious reading habits.The next thing I asked him to do was to poll these three on what were the six books they had read last. The result was amazing. The three named eighteen books in all — of which at least six were common. Ninety percent of the books had nothing to do with information technology. The exercise proves a key point — to be a great nerd, one has to have interests outside writing code. However, many engineers think that the path to a great technical career is about technical skills alone.Long back, Bell Labs conducted an interesting study - closely watching the common characteristics among a group of technical professionals who rose to the top. The exercise revealed nine key factors outside just technical competence that differentiated brilliant technical folks from the masses. The study was conducted by Robert Kelly of Carnegie Mellon and Janet Caplan of Williams College. As I see the Indian industry today, I think the study done at Bell Labs remains relevant in every detail. The Bell Labs engineers who did extremely well for themselves - as they progressed in their career, showed the following qualities that differentiated them from their peers: taking initiative, cognitive ability, networking, leadership, teamwork, followership, perspective, organisation savvy and show-and-tell capability. Let us look at each of these and see what lies underneath.Taking initiativeThis is about accepting responsibility above and beyond your stated job. It is about volunteering for additional activities and promoting new ideas. None of these will jump out as apparent as a young engineer gets in to her first job. She will tend to think that her career progress is really dependent only on the ability to write code. The concept of initiative begins by looking for technical and other opportunities in the organisation and volunteering for them. The idea of volunteering is little understood — both by organisations and individuals. In the days to come, it will gain increasing prominence in our professional lives. Initiative is also about two other things — dealing constructively with criticism and planning for the future. The latter is a function of many things — a good starting point is to start mapping the environment, learning to understand how the future is unfolding and then stepping back to ask, how am I preparing myself?Cognitive abilitiesThe concept of cognitive development is about understanding the interplay of technology and trends in how they are getting deployed. It is also about recognising the business eco-system in which technology works. It is about situational understanding and consequence thinking. The importance of consequence thinking is very critical. It asks us to look beyond the immediate deliverable of a task and it is about asking who will be impacted by my work, what is the end state? People in our industry just think in terms of modules and seldom ask where is it going, who is my customer and more importantly - who is my customer’s customer? Cognition is a key faculty that determines how much we are able to read patterns, make sense of things. Refining cognitive skills helps us to go beyond stated needs of our customers to explore unstated needs.NetworkingWe tend to think of networking in a social sense. As one grows higher in life, we are often as powerful as is our network. Building a professional network requires us to step out of the comfort zone to look at whom can I learn from. Quite often, and more as one progresses in life, the learning has to come from unusual sources. At MindTree, we expose our people to social workers, architects, graphic designers, teachers, people who lead government organisations, leaders from client organisations. The interesting thing about benefiting from a network is that it works like a savings bank. I need to deposit in to it before I withdraw. We all have heard about how important internal and external knowledge communities are. Again, in MindTree, we encourage people to belong to 26 different knowledge communities that run on a non-project based agenda and are vehicles of learning. These create networking opportunities and open many doors.LeadershipNext to networking is development of leadership skills. Many technical people associate it with “management” and shy away from developing key leadership skills like communication, negotiation, influencing, inter-personal skills, business knowledge, building spokespersonship and so on. Take for instance negotiating as a skill. Imagine that you are an individual professional contributor. Why should you learn to negotiate? Tomorrow, your organisation becomes member of a standard body and you have to represent the organisation as a technical expert. You will find yourself needing to negotiate with powerful lobbies that represent a competing viewpoint or a rival standard. Unless you have honed your capability alongside your hacking skills, you will be at a complete loss. Yet, you do not discover your negotiating capability one fine morning. You need to work on it from an early stage. Negotiating for internal resources is becoming another critical need. You can choose to remain an individual professional contributor but from time to time, you have to create mind share in the organisation where resources are limited and claimants are many. Establishing thought leadership is another key requirement of growth and independent of whether I want to be a technical person or grow to be a manager, I need to develop as a leader who can influence others.TeamworkOur educational system does not teach us teamwork. If you ever tried to solve your test paper “collaboratively” - it was called copying. You and I spent all our school and college life fiercely competing to get the engineering school and seat of our choice. Then comes the workplace and you suddenly realise that it is not individual brilliance but collective competence that determines excellence. Collaboration is the most important part of our work life. Along with collaboration come issues of forming, norming, storming, performing stages of team life. Capability to create interdependencies, capability to encourage dialogue and dissension, knowledge sharing become critical to professional existence. All this is anti-thesis of what we learn in the formative years of life. Add to it, our social upbringing - our resource-starved system tells us to find ways and means to ensure self-preservation ahead of teamwork. In Japan, the country comes first, the company (read team) comes next and I come last. In India, it is the other way round.FollowershipThe best leaders are also great followers. We can be great leaders if we learn and imbibe the values of followership. Everywhere you go - there are courses that teach leadership.Nowhere you will find a business school teaching you followership. Yet, when solving complex problems in life, we have to embrace what is called “situational leadership”. I have to be comfortable being led by others, I must learn to trust leadership. Many people have issues reporting to a test lead as a developer, or being led by a business analyst or a user interface designer. In different parts of a project life cycle, people of varied competence must lead. I must be comfortable when some one else is under the strobe light. I must have the greatness to be led by people younger than I, people with a different background or a point of view. That is how I learn. PerspectiveThis is the hardest to explain. It begins with appreciating why I am doing what I am doing. Quite often, I find people having a very narrow view of their tasks; many do not see the criticality of their task vis-à-vis a larger goal. So, a tester in a project sees his job as testing code or a module designer's worldview begins and ends with the module. He does not appreciate the importance of writing meaningful documentation because he thinks it is not his job or does not realise that five years from now, another person will have to maintain it.I always tell people about the story of two people who were laying bricks. A passer by asked the first one as to what he was doing. He replied, “I am laying bricks”. He asked the second one. He replied, “I am building a temple”. This story explains what perspective is and how the resultant attitude and approach to work can be vastly different. Organisational savvyAs technical people grow up, they often feel unconnected to the larger organisation. Some people develop a knack of exploring it, finding spots of influence, tracking changes, creating networks and in the process they learn how to make the organization work for them. The organisation is not outside of me. If I know it well, I can get it to work for me when I want. Think of the difference between one project manager and another or one technical lead from another. One person always gets the resources she needs - the other one struggles. One person knows who is getting freed from which client engagement and ahead of time blocks the person. One person reacts to an organisational change and finds himself allocated to a new project as a fait accompli - another person is able to be there ahead of the opportunity. Larger the organisation, higher is the need to develop organisation savvy. It begins with questioning ones knowledge about the larger business dynamic, knowing who does what, tracking the work of other groups, knowing leaders outside of my own sphere and a host of other things. Importantly, it is also about tracking what the competitors of the organization are doing and keeping abreast of directional changes.Show and tellThis is the bane of most Indian software engineers. We all come from a mindset that says; if you know how to write code, why bother about honing communication skills? Recently, we asked a cross section of international clients on what they think is the number one area of improvement for Indian engineers? They replied in unison, it is communication. Show and tell is about oral and written communication. Some engineers look down upon the need for communication skills and associate it with people who make up for poor programming prowess. It is the greatest misconception. Think of the best chief technology officers of companies like Microsoft, Oracle, IBM Global Services or Sun. Their number one job is evangelizing.If they cannot forcefully present their technologies, nothing else will matter. So, every engineer must pay attention to improving the ability to present in front of people, develop the ability to ask questions and handle objections. In a sense, if you cannot sell the technology you create, it has no value. So, building salespersonship is a key requirement for technical excellence.The foregoing points are not relevant if you have already filed your first patent at the age of eighteen. Everyone else, please take note.

How This Tiger Got Its Roar

IT WAS THE KIND OF CALL THAT makes a young man grow up fast. On Aug. 11, 1966, Azim H. Premji was a senior at Stanford University in Palo Alto, Calif., studying for finals after summer school. When the phone rang, his mother was on the line from India with devastating news: His father, M.H. Premji, had died of a heart attack at the age of 51. The younger Premji quickly booked a flight and left for the funeral, expecting to be back at Stanford in time for the fall semester. Instead, his father's death marked a fateful change of direction for the 21-year-old. Rather than pursuing his dream of bringing aid to the developing world as a policymaker at the World Bank, he found himself thrust into the nitty-gritty details of saving a failing company in a backwater economy.Fortunately, entrepreneurship runs in his blood. Premji's grandfather was founder of one of the largest rice-trading companies in India. Then, in 1945, M.H. Premji launched a cooking oil company called Western India Vegetable Products. But when the young Azim Premji arrived home he found the operation in shambles. And to his dismay, he discovered that his father had selected him to run it, a duty he felt he couldn't shirk. "It's like being thrown into a swimming pool," says Premji, who finally got his Stanford degree six years ago. "To avoid drowning, you learn to swim quickly."Since his plunge into the deep end of commerce, Premji built the company, later renamed Wipro Ltd. (WIT ), into one of India's tech services powerhouses. Today the business provides software programming, engineering design, and back-office services for more than 500 of the world's largest corporations. One of the keys to Wipro's early success was its ability to tap into India's vast pool of young technology graduates willing to work for wages as much as 80% lower than those in the West. But labor arbitrage is only part of the story. Wipro and other leading Indian tech outfits have learned to deliver first-quality work, top-notch customer service, super-efficient human resources, and, increasingly, technology innovation. Once considered unschooled upstarts, Wipro and its Indian counterparts have become innovators in doing business in a networked world.When Premji took over his father's business it was anything but global. It had about 350 employees, mostly in and around Bombay, and just $3 million in revenues. The company was publicly traded, and not long after Premji assumed control he faced shareholders for the first time at the annual meeting. Premji, who was self-conscious about his age, had grown a mustache in an effort to add some gravitas. But restless investors weren't impressed. One stood up to complain about the stock's lousy performance and demanded that Premji sell the company. "'There's no way a twit like you can run it,"' Premji recalls him saying. "More than anything else, that made me determined to prove him wrong," says Premji.It was time for a crash course in capitalism. Premji had never taken a business class, nor had his father taught him anything about running the company. So he visited a professor at a leading management school in Bombay and asked him to recommend some textbooks. He bought a pile of them, and over the next year he stayed up late into the night reading every one. From his readings he learned business basics and systematically built a company based on modern principles and practices. Those early years taught him the necessity of continuous improvement. "You were constantly questing for excellence," he says.The company's mainstay was buying peanuts from farmers and crushing them to produce shortening and edible cakes. The key employees were the buyers, who would evaluate a farmer's harvest by tasting the peanuts to make an estimate of the oil they contained and then set a price. Premji improved that system by asking farmers to send in samples that the company could dry and weigh to calculate the oil content. He transformed what had been an art into a precise business process, and he established Wipro's practice of routinely measuring every aspect of its business.PREMJI ALSO took an uncompromising stand on ethics. In the late 1960s and early '70s corruption was rampant in India, with government officials demanding handouts, customers asking for kickbacks, and farmers bribing clerks to tamper with weighing machines. Premji decided that his company had to be held to a higher standard, which he believed would ultimately enhance its stature with customers and employees.Once the cooking oil business was back on track, Premji broadened his horizons. He had no grand vision of what Wipro could become, but he saw opportunities and didn't want to miss out on them. He diversified, first into soaps and beauty products, then venturing even farther afield by manufacturing hydraulic components for construction equipment. The next step: computers. After the Indian government passed new rules in the late 1970s that required foreign companies to operate through Indian-owned affiliates, IBM (IBM ) pulled the plug on its operations. "When IBM left, it created a vacuum," says Premji. "So we decided to zero in on info tech. "Premji and his lieutenants knew nothing about computers, but that didn't stop them from trying to make them. They rented a 4,000-square-foot office in Bangalore, home to several of India's top technical and management colleges, and decided to build a minicomputer that would sell for far less than an IBM mainframe but do similar work. Within a year, Wipro shipped its first one. It later got into the PC business and quickly became the leading computer company in India.But the good times weren't to last. In the early 1990s, India liberalized its economy. With rules relaxed, including the local-partner requirement, the world's top tech companies flooded into the country. Wipro faced a crisis. Premji believed there was no way the outfit could beat Compaq, Hewlett-Packard (HPQ ), and IBM in the PC business. The big brands had huge sales and vast research and development budgets, allowing them to underprice and outengineer Wipro and the other home-grown Indian PC outfits.What Wipro did next set the stage for its emergence as a tech services powerhouse. The rescue plan was to sell engineering expertise to the world's top technology companies. "We saw that while the door was open for others to come into India, it was also open for us to go out. So we decided to become a global company," says Sridhar Mitta, Wipro's longtime chief technology officer, who later left to found e4e Inc., a rival tech services company. The first aim was designing software for telecom gear, but Wipro quickly followed with hardware and chip design. Its leaders saw they could set up similar operations and sell their services to a wide range of Western corporations -- not just technology companies but also banks, manufacturers, and retailers.Were the giants of Western capitalism ready to hire a tiny, no-name Indian outfit to perform important brainwork? Not very quickly. So Premji decided Wipro needed to do something to boost its credibility. The solution: Focus on quality. In 1995, Wipro received certification from the International Organization for Standardization for manufacturing quality. Then it adopted the programming standards of Carnegie Mellon University's Software Engineering Institute. In later years, Wipro was quick to implement Motorola Inc.'s (MOT ) Six Sigma quality program. And today it's busy applying Toyota Motor Corp.'s (TM ) lean manufacturing techniques to its software programming and business-process outsourcing operations worldwide.Practically every move Wipro made turned into an uphill battle. Subroto Bagchi, the longtime Wipro executive who is now chief operating officer at MindTree Consulting, remembers what it was like to gain a foothold in Silicon Valley. He moved his wife and two daughters to a two-bedroom apartment in Cupertino and set up an office in the dining room. He bought a PC and a fax machine at Price Club using a friend's credit card and immediately began churning out proposals as quickly as his fingers could type. His children would be watching cartoons in the next room, but when they heard the phone ring, they knew to put the TV volume on mute so Dad could pick up the telephone receiver and say: "Wipro Technologies."As the company's first salespeople spread out across the U.S. in search of customers, they were like nomads. They got leads from technical people -- often other Indians -- who they knew in companies such as Intel, Seagate, and Sun Microsystems (SUNW ). Arriving in a new city, they'd camp out in a cheap motel and thumb through the telephone book looking for potential customers. "Nobody had heard of us," says Sudip Banerjee, president of Wipro's Enterprise Solutions business unit. "We'd make dozens of phone calls. Nobody would return them."Wipro's big breakthrough came with General Electric Co. (GE ) In 1990 the two companies had set up a joint venture, Wipro GE Medical Systems, to make and sell medical equipment in India. So GE was familiar with Wipro when it decided to shift some of its software development to the country. The entire Wipro management team, including Premji, pitched in to woo the Americans. "It was a large piece of business and gave us credibility," says Banerjee.Twice in a little more than a decade, Wipro spotted fundamental shifts in the business environment and then scrambled to create new businesses. Today the company is doubling down on its bet on engineering services, which already represent 35% of its $2.4 billion in revenues. In the past 12 months it has spent $100 million to purchase three engineering design firms in the U.S. and Europe. "We're able to evaluate opportunities at the right time and put together an act to make a commercial success of it," says Premji.One of Premji's most important accomplishments has been creating a sinewy management culture that thrives even under intense competitive pressure. He established two core principles that are instrumental in building the character of his leadership team. The first is rare among India's family-controlled companies: The chairman is not king. While Premji owns a controlling stake in Wipro, he shares authority and responsibility with his subordinates. The second key principle: Premji believes in a zero-politics culture. At Wipro, backstabbing, playing favorites, and kissing up to the boss -- tactics that sap much of American executives' energy -- simply don't work. Open and honest disagreements are not only tolerated, but also required -- of everyone.THE CHAIRMAN'S STYLE ISN'T just to encourage his lieutenants to debate one another: Premji insists that they debate him as well -- or even take him to task for his decisions or actions. "The man takes frontal criticism, and it's celebrated. You can openly disagree with him," says Bagchi, the former Wipro executive who launched Wipro's U.S. business from his dining room table. He recalls a time in the early 1990s when he was in charge of the company's quality initiatives and Premji had asked him to also handle office-building projects. When Bagchi was slow to get something done, Premji called him at home one afternoon as he was having tea with his mother. Bagchi resented Premji piling more on his plate. "'What do I have to do with real estate?' I told him: 'Don't expect me to do your clerical jobs for you!' I actually screamed at him over the phone," Bagchi recalls. Bagchi's mother was appalled at the outburst and, after the call ended, lectured him about showing proper respect to the boss.The maternal tongue-lashing made Bagchi worry that he might have crossed the line. Would Premji be furious with him? Yet back in the office a couple of hours later, he ran into Premji in the hallway, and the chairman didn't even mention the episode. By Premji's rules of conduct, Bagchi's reaction had been just fine. Bagchi was supposed to let him know exactly what he felt. "He would tell us: 'My job is to push you. When you reach your limit you need to push back,"' recalls Bagchi.For Premji, openness is more than a personal style. It's a strategy. "I find that people excel when they're provided a fair, free, and apolitical environment," he says. "At Wipro we strive to provide an open culture that encourages diversity of opinions. An organizational ability to encourage and harness diversity of thought is a significant competitive advantage."Playing the game of business according to Premji's rules has worked well for Wipro. It's expanding revenues consistently at some 30% annually, while the overall tech services industry is expanding at about 5% per year. Meanwhile, operating margins in its tech business top 20% -- more than twice the level of large Western services outfits.Think of Wipro's success as a wake-up call for Americans who are complacent about the future of their companies or their job security. With its work ethic and intense drive to win, Wipro is a reminder of the America of 100 years ago. "Are we hungry enough?" asks Nicholas M. Donofrio, executive vice-president for innovation and technology at IBM. Donofrio's father was an Italian immigrant who worked three jobs to support his family in the gritty factory town of Beacon, N.Y. Now, Donofrio questions whether Americans still possess that kind of drive. "If we amble along and take our time, the Indians and Chinese will close the gap and perhaps even surpass us. You can see the passion in their eyes. They're people on a mission."The challenge is the same for American individuals and companies: If they mean to succeed in a world of borderless commerce, they will learn to be as relentlessly self-improving as Premji and Wipro.

Managing in difficult times

The author is COO and president (US operations), MindTree Consulting
Peter Drucker is the most-read author on modern management theory. Drucker, an ageing California-based immigrant, is regarded as a philosopher with depth, simplicity and an uncanny ability to anticipate future. Peter Senge, a professor at MIT, is acclaimed as a thinker with high impact. His seminal work, The Fifth Discipline, brought into focus the importance of systems theory to modern-day managers. I remain in awe of both men as much as I am surprised how few Indians are aware of both the Peters.Some time back, I came across a video conversation between Peter Drucker and Peter Senge. The two Peters talked about managing in difficult times. In this instalment of Arbor Mentis, I am going to talk about four important lines of thought that touched me. Drucker, who talked in most part, highlighted the concepts of planned abandonment, need to focus on opportunities, preserving values and learning from non-profit organisations. The concept of planned abandonment deals with 'letting go'. It is a difficult thing for many designers and architects of products, services, or even business models. According to him, you have to move on when things look 80% complete. Similarly, you need to destroy your own creation when everything is looking just perfect. Creative people and technologists become so attached to their creation that it becomes their life. In time, it becomes a deadly embrace. The next concept is about focussing on the opportunity, not on the problem. An example Drucker gives is how a mediocre orchestra like the Chicago Philharmonic became world class in the hands of a new conductor. Drucker went to check the man out. When asked how he managed to uplift the standard, he said that the gap between the excellent people in any organisation, and those who are average is always constant. So the trick is to raise the level of the top performers, and, automatically, the overall performance level moves up. Peter Senge gives his own example of how every teacher has a problem student who is disinterested in the class. The teacher often makes it his or her personal challenge to reform this one student. Inordinate amount of finite energy is focussed on the problem student at the cost of the more attentive ones. The trick is to recognise where the natural flow of energy is, and go with it.Next, Drucker talks about values. But first we must understand that most of the time, we are really dealing with the challenges of growth. However, growth of any kind is inherently destructive. It happens because of the tension between centripetal forces of continuity and centrifugal forces of change. The secret, according to Drucker, is in emulating nature. Nature found out early on that the way to create vast amounts of change is to find out a core of constant values, and keep spinning around it. For example, nature created animals on the principle of polar symmetry. Physically, we are all symmetric at the poles. Once nature found out about the power of polar symmetry, it kept that as a constant value and created a two-legged animal, a four-legged animal and even a centipede around it. The number of times a heart beats in a human being and a salamander is constant. Keeping that value as constant, nature has been able to create endless variations of life forms around it. In an organisation's context, the polar symmetry or the heartbeat is the value system. Once we get that right, it is possible to grow without getting destroyed. Finally, Drucker talks about learning from non-profit organisations. It is about volunteerism. The industrial and post-industrial workplaces use a number of monetary instruments to motivate employees. Stock options and bonuses work only in good times; they backfire in bad. The key is to learn from voluntary organisations, where people give their best even without any of these. Drucker is convinced that 'for profit' organisations have more to learn from 'not for profit' organisations than the other way round.

The raw material mindset

The raw material mindset
India has the golden chance to present itself as designer of monuments, not supplier of granite
Subroto Bagchi
The author is COO and president (US operations), MindTree Consulting
It happened to me many years back on a visit to Washington, DC, home to the most-visited monument in the US, the Vietnam Veterans Memorial: "A place to remember those who served during a turbulent time in US history... a place for the nation to heal its wounds." The memorial lists 58,226 names, in the order they died or were reported missing. At the end of all those names, there is a line that says: "This granite was imported from Bangalore, India."We have been a nation that supplied to the world raw materials, rather than finished products - granites, rather than the monument's design. The world discovered us for spices in the 1st century A.D. Since then, we have been spice-sellers to the world. Meanwhile, McCormick dominates the bottled spice business, and has pride of place in supermarkets. While we export spices, who leads the food business? The best chefs keep coming from Italy.After spices, it was the turn of Indian silk. The world discovered that one in similar antiquity - with the advent of the Silk Route. For centuries we bred silkworms and spun silk, but who calls the shots on the ramp? Versace, Giorgio Armani, Chanel, Yves St Laurent. Then came software services. For decades, most Indian companies have focussed on supplying grey matter that is equivalent to quarried granite and raw silk. This behaviour is driven by a desire to live off the land, to do what has the least risk and low value-add. Not stopping there, the whole pharmaceutical industry came up on the strength of the bulk drug business. As a nation, we need to break that mould. Proponents of continuity would argue that the raw material mindset was critical to establish our presence in the world market and that now we will automatically go up the value chain. By itself, that assumption is severely flawed.Yves Doz is a world-renowned professor at INSEAD, France. He explains that by doing something well, you do not automatically graduate to the next level. He argues that there are three layers of value someone can add, and each of the three require a different mindset. The lowest layer of value-add is the technical, adaptive layer. Raw granite, frozen shrimp, cotton bales and manpower: all fall into this category. You have least risk, least value-add, and lowest margins and highest susceptibility here.Then comes the experiential layer. Here, you do not play on your ability to intermediate between the access to raw material and the end user of it. You 'step into the shoes' of the customer, and create valuable products and services. Confronted with the challenge of introducing a new car in Europe, Nissan flew in its car designers to Frankfurt. They rented different makes of cars and drove 2,500 km all over the continent to get a sense of what it takes to be a motorist in Europe. Then they went back to design a car for Europe. It is not about a car. It is about stepping into the shoes of a motorist to experientially feel the need.At the highest level is what Doz calls the existential layer. This is where Sony or Mercedes Benz, or Swatch operates. They not only know how to get into the shoes of the customer, but as Doz says, "they creep into the mind of the customer." When a teenager in the Bronx or Mumbai or Tokyo walks with a sway in his step after putting on a pair of earphones, Sony knows what is going on in his mind and works backward from there to create products and services. Each layer we talked about is separated from the other by a glass ceiling. If these layers represent the so-called value chain, the conclusion is that you do not go up the value chain. You decide where you want to be on the value chain, and perch yourself there.India is on the cusp of interesting new times. It appears that finally the butterfly will emerge from the cocoon. In that emergence, we have the golden opportunity to present ourselves as designers of monuments, not suppliers of granite. I sense that the break from the past is coming from very unusual new directions. More about that next time.

Day trading on the job front

The lure of lucrative jobs at a very young age today is akin to the attitude of day traders during the Internet boom
CONVERSATION in an elevator: two engineers in their mid-20s exchanging notes. "How much did you ask?" "Eighty-five," comes the reply. The job interview has obviously taken place on company time. So what? The two engineers are oblivious to the fact that the elevator is a public place and that they are not alone. The casual, almost cynical, transaction reminds me of day traders during the Internet boom.Day trading, for the uninitiated, is buying and selling stocks in order to make a gain, in one day. It requires the intuition and the risk-taking abilities of a gambler. It is not about tomorrow, it is not about anything you would remotely call long term. The Internet arrived. And day trading shifted from the floor of the stock exchange to the virtual world. Many sensible professionals learnt about ways to make money without leaving the suburbs - all you needed was a PC and a modem. People quit their jobs and got on to day trading. Then the world stopped. Billions of dollars of losses later, the day-trading folk - flower children of the late 1990s - are still picking up the pieces.It is ironic, however, that the lesson is lost on many other people. The workplace is not a gambling den. To some, the most critical issue is to know who is getting how much money and where. There is no view of tomorrow and what the real wager in the game is. The initial years of a career are akin to the years spent in internship by a young surgeon. Inherent talent or skill does not matter. Real learning comes by watching senior doctors at work, learning to pick up signals while doing the rounds holding on to someone's coat-tails, and sharpening one's knowledge, skill and attitude. More importantly, these are the years when one learns to learn.But where is the time to learn to learn? I meet 20-something people who are convinced that they are ready to become the chief of finance or marketing or human resource of their organisations. They cannot wait and must get there before a 'batchmate' does. Telling them to ease up is like preaching celibacy to a teenager.Recently, I met one such give-me-the-chief's-job-or-I-will-go-elsewhere youngster. He just could not wait. I have a very simple thing to say to his kind. Think of nature. By the time you enter your teens, you have the ability to procreate. But society has realised that the ability to procreate and to parent are two different things. That is why even though at 12 you are physically ready to be a dad, you wait till you are 30. To the youngster I met, only functional knowledge mattered. That is like the ability to procreate, not the ability to take up parenting.On another occasion I was speaking to a competent professional who had just changed jobs to join MindTree. I asked him what his motivation was in stepping out of his earlier organisation. "Peer pressure," he replied. The last time I had known people talking about peer pressure was in the context of smoking or drinking. Here was an otherwise sensible, full-grown human being, educated in the best of institutions with a good job on hand. Yet, he walked out because all his friends who had joined the organisation with him were gone.One makes a job change for substantive reasons - each job change can be a snake-and-ladder game. It is not just about the job title and salary you get. In the early years, it is critical who you work with, how much headroom there is to learn and contribute, how competent the environment is to provide tough feedback, so that you are ready for larger challenges.Another group of young engineers I met at an industry event asked me if it is true that staying in one place for long makes you lose your worth. The answer lies in observing the track record of people who have made an impact during their lifetime. Seldom will you see that they have been mindless job-hoppers. They certainly haven't made job changes of the day trading or the peer-pressure kind. People at the top are invariably the ones who have made two, at best, three changes in their entire career.

Human Spirit Knows no bound S.Bagchi

LATHA was born to a truck-driver in a slum in Bangalore. She was born with a form of cerebral palsy that took away her ability to stand on two legs. Life delivered her as a cripple. In the eyes of society, she was doubly burdensome - girl children are considered burdens anyway, but she was also handicapped.Her parents gave her away to a missionary. Latha was raised at a convent away from her family. The missionaries realised the nature of her handicap and enrolled her at the school of the Spastic Society of Karnataka. We discovered her there when we were launching MindTree Consulting in 1999. We were looking for a visual identity for the organisation and decided to try working with children who had cerebral palsy.In a unique experiment, a week-long exercise was conducted with 10 children. They were briefed about the company's mission, vision, values and DNA. Our DNA was settled as Imagination, Action and Joy. She was one of the 10 children who were asked to render the concept of Imagination, Action and Joy into MindTree's visual identity. Latha, who was in the class-10 level of non-formal education at the school, did not make it with her design, but she won our hearts with her enthusiastic smile. We asked her to come and intern with us. We wanted to see if someone like her could run the front office of a consulting organisation. And over the last five years, she has grown up to fully take charge of our front office.When Latha joined us, she had just come from the doubly protected environment of the convent and the school. Though she was studying for her class-10 level non-formal exam, she talked like a small child and had a poor attention span. But we refused to sympathise. We believed that she had to learn her work, and if she challenged herself, she could scale. She did.As soon as she started with a stipend of Rs 5,000 a month, her long-lost family rediscovered her. She wasn't a handicapped person anymore. Her economic viability made her very wanted. They persuaded her to leave the convent, and come to live with them. They even tried marrying her off. And Latha was clearly not in a position to take her own decisions. We were also in a quandary: do we intervene or do we not? Were these her personal issues even though their outcome could hurt a shared goal of proving that a person like Latha could become part of the so-called mainstream? Were we selfish about nurturing that goal? These were not easy issues. Latha and the organisation worked their way through these challenges. Eventually, she emerged a winner.Today, Latha has a respectable place in society. She earns well and is even on MindTree's stock option plan. She comes to work as regularly as the sunrise. She knows her work and does it very professionally. Not stopping at that, she has trained two students from her school - both are earning members of society today. One of them is Lavesh who was a complete introvert. Many people with cerebral palsy are like that. Being part of a social system that focuses on the disability of an individual ahead of anything else, they tend to withdraw. It is both a defence mechanism and an inevitable trap.Months after coming into contact with people at MindTree, Lavesh has largely forgotten his past. He is not what his appearance or manner of speech is, he is what he knows and what he does. One day, when Lavesh was managing the front office, a visitor came looking for Abraham Moses, our administration manager. Moses was caught up with other work and, quite unlike his normal self, came to meet the visitor late. Lavesh chastised Moses and told him that while keeping a visitor waiting might be OK for Moses, it wasn't OK for him. Moses gracefully apologised, and was let off.One Latha has shown the way to one Lavesh, and to 1,300 other MindTree minds. Like Lavesh and Latha, we all have some disability or the other - some are pronounced, some are not. Latha has taught us that we are not our disability. We are our dream.