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Using Ancient wisdom for better business

Ubiquity, Volume 2001 Issue August, August 1 - August 31, 2001 | BY John Gehl 


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This week Ubiquitytalks about ebusiness, transfunctional boundaries, and blockbuster movies with Mohan Sawhney, McCormick Tribune Professor of Electronic Commerce and Technology -- and director of the Center for Research on Technology, Innovation and E-Commerce -- at Northwestern University's Kellogg Graduate School of Management. Part I of this interview, On the Road to Nirvana, appeared in the July 17-23 issue.

UBIQUITY: From your book The Seven Steps to Nirvana and from our previous discussion, it's clear that you look at ebusiness both from quite a number of different perspectives. Tell us about your intellectual development.

MOHAN SAWHNEY: In terms of influences on me, I think that as you read the book you will find three or four themes that will come through. One is a very heavy reliance on stories, analogies and metaphors to explain ideas and concepts that may be difficult for readers to grasp. I find in my teaching, also, that metaphors, analogies, stories, fables have very powerful roles as pedagogical tools. They're often not used as much as they should be. Where does that come from? It comes from my Eastern heritage. It comes from growing up in India with very a rich tradition of stories and fables. And by the way, another thing I'd say about title, The Seven Steps to Nirvana, is that it also alludes to the fact that you can expect a lot of Eastern stories and ideas in the book. Every chapter begins with a fable or a story.

UBIQUITY: Yes; you certainly have a lot of stories to tell!

SAWHNEY: The rich traditional storytelling is from my Indian heritage. That is something that is one of the strands, or pillars, that you will pick up in the book, and it has been a very important part of my intellectual development. The second theme that you should pick up, and that is another important aspect of my intellectual development, is my training as a marketing person. My Ph.D. is in marketing, and that is my first love.

UBIQUITY: Where did you get your doctorate?

SAWHNEY: From the Wharton School at the University of Pennsylvania, and my thesis, by the way, was on motion picture box office forecasting. The second theme that you will see come through in the book -- and it's an important part of who I am and what I do -- is a very deep and intuitive understanding of customers, customer value propositions, and marketing as a fundamental basis for business and technology strategies. That's comes from a combination of my Ph.D. and MBA training.

UBIQUITY: But you have a technical background as well, isn't that correct?

SAWHNEY: Yes. The third thing that you will see, which also is an aspect of who I am and what I do, is my engineering background. My undergraduate degree is in engineering. What that gave to me is the ability to look at unstructured problems with an analytical frame of reference, to bring structure and vigor to problems that are very unstructured and ill-defined. I don't like the third-decimal -place type of research. I like the kind of research where there is no structure, no definition. I like to come in and try to bring some structure, some order, some method to the madness. I try to be someone who can recognize patterns.

UBIQUITY: How does that way of thinking show up in The Seven Steps to Nirvana?

SAWHNEY: This is most evident as you read, for instance, Chapter 5, which is the infrastructure chapter. In that chapter I had a monumental task to review and assess what was going on in the entire world of e-business infrastructure and software. I tried to do that by stepping back and thematically organizing the very confusing landscape and providing some structure to the problem. That is what I owe to engineering because engineering gives you an analytical way of thinking and structuring problems. It is typically applied to well-defined problems but I find that I can use the same analytical mindset and bring it to bear on very fuzzy problem areas.

UBIQUITY: What kind of engineering did you study?

SAWHNEY: Electrical.

UBIQUITY: And so what made you go from engineering to marketing?

SAWHNEY: To put it very glibly, I simply find human beings more interesting than machines. Marketing is the study of human behavior, and electrical engineering is the study of circuitry. I find humans to be infinitely more fascinating. But there is actually a deeper reason. And the deeper reason is found if you step back and ask the more basic question of what made me go into engineering to begin with?

UBIQUITY: Presumably because you found it interesting?

SAWHNEY: No, I had no interest in engineering. I grew up in India, where interest is not relevant. What is relevant is can you get into an engineering school, because, if you can, that provides social security. What I actually wanted to do was psychology, to study behavior, to become like Freud. But you don't make a living doing that in a Third World country. You either become an engineer or you become a doctor. Since I was no good at medicine, I became an engineer. I had an aptitude for it but not an interest. To me, engineering was the detour. So, in some sense, marketing represented to me a wonderful middle ground between doing psychology, which I couldn't make a living from, and doing engineering, which was too boring for me.

UBIQUITY: What attracts you to marketing?

SAWHNEY: The reason I love marketing is that it's a field that engages both sides of your brain. It's left brain in that it allows analytical thought, modeling, and quantitative analysis. At the same time, there's a lot of creativity and judgment and intuition and subjectivity. It's a field that blends my creative and right brain instincts with my left brain training. It's a nice middle ground between what my intrinsic interest was and what I could make a living doing. I'm pretty happy with marketing as a discipline.

UBIQUITY: How did you become interested in e-business?

SAWHNEY: E-business represents a very interesting middle ground between marketing and engineering and technology. The reason I enjoy this domain so much is because it brings all of my background -- technology and marketing and strategy -- to bear on the problem. The last thing that you will see in the book, which characterizes my upbringing and training, is that I like to cross boundaries. I like to expand boundaries and look across functional areas. That's why I find this so fascinating because one is forced to think cross-functionally. In fact, I mention in the book that I don't like the word "cross-functional" because it assumes that you have silos and then you connect them. I like the word "trans-functional," which is you transcend functional boundaries. That's what I tried to do in the book. It's not a book about marketing. It's not a book about finance. It's not a book about technology. It's not a book about organization. The book touches upon every functional area and weaves these disparate functional areas into a rich tapestry. And that tapestry is what business is about.

UBIQUITY: When you use powerful and evocative words like "transformation" and "Nirvana," it's hard for a reader not to think of larger societal kinds of questions. Do you see hope for some large transformation in the matter of people's lives?

SAWHNEY: Absolutely. It's certainly something I've been spending time thinking about and talking about. As you know I come from India, a country that has a unique set of opportunities and a unique set of challenges.

UBIQUITY: Do you play any active government or business role now in India?

SAWHNEY: I have been in dialogue and discussion with senior people in the government. I am on the advisory committee on telecom for the government of India and I have worked closely with the state governments in Andhra Pradesh, Punjab, Marastra and different states. I'm very close to the ideas of people like Chandra Babu Naidu, who is the Chief Minister of Andhra Pradesh. He's called e-Cyber CM because he uses information technology and the Internet to transform how the government does its business. Naidu had a wonderful quote. He said that the state of the art can be used to transform the art of the state.

UBIQUITY: In what way is the Indian government using technology to transform the art of the state?

SAWHNEY: For instance, in Andhra Pradesh. they are using technology to bring basic civic services to citizens. A whole bunch of civic services -- whether it's land title transfer, birth and death registration, driving licenses, ration cards or vehicle registration -- are now being provided to common citizens through kiosks in Andhra Pradesh.. In fact, when Bill Clinton went there he got a driver's license at a kiosk. So that's one area bringing civic services down to the population. Naidu has linked all of his 200 district headquarters with video conferencing. Every morning he has a video conference call with his district chiefs and uses the technology to keep in touch with the government at the local level. He also uses video conferencing technology to do town meetings with citizens. He hosts town meetings that are broadcast remotely through these locations to connect citizens with the government. The last area that they're using technology in is helping agriculture. For instance, one of the applications that they are working on is remote sensing and remote imaging through satellites to look at deforestation, land use and irrigation to decide what priorities they should have in terms of irrigation projects and forestry initiatives. There is a whole host of initiatives that the general domain of e-government can address. Technology promises to be one way to jump over the divide between the haves and the have nots. Third World countries have an advantage of being able to leapfrog, in technology terms, because they don't have to go through all of the experimentation that the U.S. has to go through.

UBIQUITY: So would you say you are optimistic about the future?

SAWHNEY: I am very optimistic about the potential for information technology, e-business and e-education to change the lot of the common man, even in the Third World. The challenge is in sharing universal access through public institutions, through kiosks, through our public library, through schools, and then getting the private sector to contribute and engage in joint initiatives with the government both in terms of laying down the infrastructure, such as optical fiber networks or hardware, as well as providing civil services. India is making good headway and there's a healthy competition at the state level to engage in these initiatives. I do think that the public, the non-profit and the government sectors can benefit from some of the same ideas applied at a more macro level. You can re-engineer government just like you can reengineer a business.

UBIQUITY: Are there any final points you'd like to make about The Seven Steps to Nirvana?

SAWHNEY: I particularly point you to page 143, where I discuss duality and linkage. Why duality forces us to think in terms of black and white. Why the truth is always gray and somewhere in the middle. You can get some pretty deep insights into why enlightenment means discovering the truth that always lies in the middle. To that extent, I think a final parting comment on the book is that The Seven Steps to Nirvana looks at the big picture. It's a philosophical book. From that perspective, on one level it is easy to read because of the metaphors and the stories. But at another level, it's a bit challenging to internalize the true implications. The book can be read at different levels. I just hope that people take the effort to dive down below because I talk pretty deeply about these issues. This not an airplane read, is what I'm saying.

UBIQUITY: Well, it's no doubt one of the few business books out there with Nicholas of Cusa mentioned in it. But it's very interesting and very easy-to-read.

SAWHNEY: I had fun writing it. My co-author and I have a common interest in metaphors and stories. At one point we had thought, Let's do a book that we would call something like "Hooks for Hats, Ancient Wisdom for Contemporary Times," full of metaphors with hooks that you hang your hats on. It would be basically a collection of stories with morals that have a business context. We wanted to do a little 100-page book with nice illustrations and so on. That was at the back of our minds and then the e-business idea became salient so we applied the same style. But we came up with a very different book. Which basically leaves the idea open that I still may do that other book someday given that "Who Moved My Cheese?" sold millions of copies. But that's a project for another day. Fr now, tens of thousands will do. Millions will have to wait.

UBIQUITY: Millions would be good. Come to think of it, you mentioned earlier that your PhD thesis was on motion picture box office forecasting. Let's test your thesis. What are your predictions on how well "Pearl Harbor" will do at the box office? We'll note for the record that this conversation is taking place three weeks after that movie's release.

SAWHNEY: It will be a disappointment. It is the classic illustration of the blockbuster fallout pattern where you put in a huge amount of advertising and it opens very big. Then it falls off very, very sharply. It's been out for three weekends and the last weekend, it only did $14 million in box office returns, which is disastrous. They stayed too close to a tried and tested formula, which was the "Titanic," copying that movie to a tee. What we've learned about the movie business is that original ideas really take off. I saw the movie last week. It looks like a "Titanic" story that happens to be about Pearl Harbor, despite the fact that they did a really good job of the action theme. In trying to ensure the marketability of the movie, they have a little bit for everybody. There are action sequences, the love story, and the love triangle. It ended up a bloated movie that is three hours long. The length really hurts too because they can schedule fewer shows. All in all, it had very high expectations going in but it's going to be somewhat disappointing. Although, eventually it will do OK because of the international sales.

UBIQUITY: You probably can't summarize a Ph.D. thesis in a few sentences, but can you suggest the gist of your model?

SAWHNEY: Actually it's quite simple. The model was a macro flow model. I looked at the decision process, or the adoption process, that a person goes through when deciding to see a movie. They get exposed to advertising and have a positive attitude, then they talk to people, then they go see the movie, then they like it or they don't like it. And then they talk to other people, who then talk to other people. What I did was model the different stages that a person goes through and how people interact with each other. I built a macro flow model that represents all these flows across different states: unaware, aware, positively disposed, somebody who's seen it and is spreading positive word of mouth, and negative word of mouth. Once you've got the states and flows defined, then all you need to do is to calibrate how many people are in each state and how those states progress over time. Technically speaking, it's a semi-Markov process. I won't get into what details here. Let's just say that once you can model the transition probabilities then you can figure out how this situation's process and progress.

UBIQUITY: How do you calibrate the model?

SAWHNEY: What you need is data on the movie's advertising plan; how people will respond to the ads; whether they like the movie or not. I would test the movie with a small audience. I tested their responses to advertising. I tested how they reacted to all of the promotional material. That allowed me to calibrate what would happen if the movie were launched. I used that model to predict how the word-of-mouth diffusion process would proceed, and what the movie would do. Basically, to calibrate the model all you need is to simulate what would happen in the marketplace and then build a decision support system around that that allows you to play around with the basic parameters and say well, what would happen if you double advertising? What would happen if you increased the number of theaters in which you launched the movie? What would happen if you used this trailer instead of this other trailer? All that is possible because once you've got the model calibrated you can change parameters and see what the outcomes would be. The biggest contribution was my ability to model the word-of-mouth process. Forecasting models have been built for consumer packaged goods for a long time. The problem with movies was how to predict the word-of-mouth diffusion process.

UBIQUITY: That's fascinating. And does the model work?

SAWHNEY: Yes, it does. This is another interesting issue about e-business. I couldn't get the studios to adopt it because they don't believe in science. There's a difference between having technology that works and getting organizations to adopt it.

Mohan Sawhney is co-author, with Jeff Zabin, of The Seven Steps to Nirvana: Strategic Insights into eBusiness Transformation, published by McGraw-Hill. The book is now available in bookstores and through Internet booksellers.


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