What would China do?

After yesterday’s post, Google’s China Game, several lively discussions ensued. On Twitter, on emails with friends around the world, and on the telephone. The topic?

What would China do? And what will it mean?

While there was no consensus, three distinct possibilities were identified.

Nothing/ business as usual

This one is the simplest. In financial muscle comparison, Google, a business with a market capitalisation of approximately US$ 186 Billion and US$ 14.5 Billion in cash is a flea compared to the mammoth, the juggernaut called China, with a GDP of approximately US$ 4.33 Trillion with about US$ 1.6 Trillion cash reserve.

China does not really have to react to Google’s announcement from yesterday.

Denial/ business as usual

Even so, Google’s announcement and allegation of hacking is a public humiliation for China. The US State Department expressed its concern and asked for ‘an explanation’ from China. The White House too is waiting to hear from China. Ooh, remember the cultural cross-wires I mentioned yesterday?

So China responded. With a denial. Worded as follows:

“China’s Internet is open… China has tried creating a favorable environment for Internet. China welcomes international Internet companies to conduct business within the country according to law. China’s law prohibits cyber crimes including hacker attacks.”

There we have it. The denial which may provide a way for Google to salvage its quest for profits in China. And for the US to save face and carry on trading with China. Or which may not. Either way much will be discussed on radio, television and of course, the web.

Trade and technical retaliation/ business as unusual

This is the one to watch. Because this is the long-term game. Not only is the current world order in flux, but the western countries, hitherto world leaders in economic terms, are also in financial dire straits with large deficits.

China meanwhile is the largest exporter, mainly of manufactured goods to the USA, Hong Kong, Japan, Germany and South Korea amongst others. Its cash reserves aside, even the partial list of holdings of its sovereign wealth fund is impressive. China’s main buyers are faced with ailing domestic manufacturing sectors, rising unemployment at home, and aging populations.

Even so, as importing nations feel the pressure to keep standards of living at a level pegging, it seems China really has the importers by the short and curlies. Or does it (read the link in entirety)? If demand for its goods drops, can China keep exporting at the same prices? If it drops prices, the buyer nations can take it to WTO for dumping, the same forum where China has recently complained about the USA. And so on.

The possibilities are endless. It is no longer a one-time game, it is an ongoing game of chess.

Copyright: ๑۩۞۩๑~OTH~๑۩۞۩๑/ http://www.flickr.com/photos/oth313/814906385/

Copyright: ๑۩۞۩๑~OTH~๑۩۞۩๑/ http://www.flickr.com/photos/oth313/814906385/

It is plain to see that this game goes beyond what individual companies may or may not experience as non-technical or technical (pun intended) trade barriers.

It is about governments, it is about political hegemonies, it is a war of values  and freedom (May be! I am not so sure), it is the tug-of-war between the imperatives of the domestic industrial recovery and the obligations to world trade, it is (as my friend Alan wrote yesterday) about the RealEkonomik. It is about the new world order as the financial crisis, the new policy imperatives, the recovery plans and the electorates of democratic countries may drive.

I will go a step further and say: the realpolitik is the realekonomik.

Let battle commence.

Google’s China Game

This morning, my Twitter stream was full of two things: Google’s planned exit from China and the Haitian earthquake.

The BBC reported the Google development with a headline with quotation marks around ‘may pull out of China after Gmail cyber-attack‘, which parses the Google Official blog content regarding the matter conservatively but in my view, accurately.

Industry commentators have varied opinions: Robert Scoble says Google stopped ‘playing footsie’ with the Chinese government long ago, while TechCrunch says the decision is about business and not thwarting evil.

When after PirateBay, I wrote a post titled “I’m just a dumb pipe”, there was disagreement both online and offline with my contentions about strategic intent and societal contract. Google’s China entry strategy had had to contend with both.

Strategy is a game, where every move has a counter-move and outcomes, both foreseen and unforeseeable. More precisely, it is a repeated game, where it is absolutely essential to know what game one is in and not to misestimate or underestimate one’s opponent, as Chinese military strategist Sun Tzu wrote:

So it is said that if you know your enemies and know yourself, you can win a hundred battles without a single loss.
If you only know yourself, but not your opponent, you may win or may lose.
If you know neither yourself nor your enemy, you will always endanger yourself.

I must admit I was a little sceptical about Google’s justification about entering China. Google said it believed that the “benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results”.

So what went wrong? Three things in my view:

Cultural cross-wires: While writing this post, I searched to find any statements that the Chinese government might have issued when Google entered China. I didn’t find anything. What I find were interesting references to China having blocked Google, despite Google agreeing to censor results etc, and to a Chinese representative denying there is any censorship of the internet in China. Both references are from 2006. Did Google misread the signals or the intent of the Chinese government? Were the signs always there? Enough has been said about cultural miscommunication, straight-talking versus hint-dropping styles of communication but I think the Chinese government was always non-committal. Which means both parties were playing different ‘games’. Not a good sign.

Corporate hubris on the part of Google: It led to an underestimation, on Google’s part,  of the Chinese government’s desire to control China’s public, China’s public image and China’s growing economic might. By any means. Legal or illegal in Google’s view. Moral or immoral in the view of any one else.

Confusing vision (“creating a more open Internet”) with strategic choice (“agreeing to censor some results”): Agreeing to censor does not create a more open internet. We all know friends who live and work in China and play a game of cat-and-mouse with the government, using a proxy server till the government catches it and shuts it down, then finding another. And on and on it goes. Am I advocating disengagement? Not at all. It is important to engage with even the most intransigent of adversaries, but it is not the job of a public company whose shareholders may benefit some but lose more, should Plan A fail. On a related note, VentureBeat has an interesting assessment of how good or bad Google’s censorship in China was.

My friends, who work in human rights, are naturally pleased with Google’s consideration of withdrawal from China. For Google, it is a mixed basket – it is not a PR triumph (because sceptics are not easily pleased), nor is it a strategic win (China is a big and growing market and Google could be vacating the space for a competitor).

And the tragedy in all this?

Because Google agreed to censorship, most of the Chinese people probably won’t know it is quitting now. For them, it is business-as-usual! So much for open internet.

Obama's Nobel Prize: Lessons for Business

To say that all hell broke loose on Twitter, when the annoucement came in on late morning on October the 9th, is to euphemise. For once, world peace was achieved as a chorus rose in unison wondering why Mr Obama had been given the Nobel Peace prize. Jokes at his expense flew around, without fear of people being labelled “racist”. I confess I contributed too. People wondered how it could be an award for future performance, I called it his “anticipatory No-Bail”. Several Alice In Wonderland references were inevitable but I spare you those in this post.

Mr Obama is the President of the United States, one of the world’s largest democracies and an economy with an eye-watering deficit, fighting two seemingly never-ending wars away from home, facing-off with Iran after tough talk during the elections, and facing tough fights regarding healthcare and other reform at home. He humbly accepted the award and promised to donate the prize money to charity.

So what lessons can a business leader learn from the episode? I see three main things of varying importance depending on one’s business and its place in society.

Don’t drink your own Kool-Aid (or sometimes, just say “no”!).

Awards can be irresistible even to the most limelight-eschewing people. Indeed many industry awards require business leaders (or their PR departments) to nominate themselves/ their companies for the scrutiny of a deciding panel. Notably the deadline for this year’s Nobel peace prize nominations was within two weeks of Mr Obama having been in office.

But whether one accepts an award humbly, like Mr Obama did, or with a wild celebratory party, the main question to consider is if it is well-deserved or simply a case of the business lapping up its own PR.

If it is not well-deserved, customers and other interested parties will soon let the business know. But if PR is the objective, then, provided you did not self-nominate, saying “no” can garner as many headlines as, if not more than, accepting may. Could Mr Obama have said “no”? Possibly. It would be precedent-setting but no more than the prize itself being given for expected performance in the future.

Can you imagine how much more discussion and positive PR about Mr Obama’s humility and general wonderfulness as a human being and a leader might have come if he had said “no”?

Celebrate success, not potential.

Companies hire business leaders for their past successes and their future potential. The salary may be negotiated based on both, but bonuses are contingent on actual results, for delivering on the promise.

Can you imagine giving your “Business Development Star of the Year” award to a new recruit, however senior she may be or however wonderful her prior record in the industry? What possible impact could such a decision have on the morale of others on the team? Does such a decision burnish or tarnish the team’s view of the leaders’ judgement?  From many perspectives, it is wise for business leaders and firms to celebrate success, not just potential. This is one of the reasons why the Nobel Peace prize being given to Mr Obama has generated so much unwelcome buzz.

A funny and poignant mnemonic to remember this golden rule comes from another Nobel Peace prize recipient, Al Gore, who famously said in a speech: “I am Al Gore, and I used to be the next president of the United States of America.

Engage with your publics but do not become the instrument of their appeasement.

The Nobel is unlike any other prize. It is decided upon by a committee nominated by elected representatives of a country. It is generally given out ex-post and not in anticipation. Some scientists wait 3 or 4 decades to gain Nobel recognition. Two things – both political – stand out about this year’s Peace prize.

In the history of the Nobel prize to date, with 800 prizes awarded, only 12 black people have been given the Nobel, of which 8 were for Peace, 3 for literature, 1 for economics and none for Science. Why is this worth a mention? Because much coverage of the prize deems necessary that Mr Obama’s racial heritage be mentioned.  Wangari Maathai, a former Nobel Peace prize recipient, speaking on BBC’s News 24, also said that it was one of the reasons why Mr Obama’s prize was well-deserved. Mr Obama probably does not want to be the poster-boy of the Nobel Committee’s “race-inclusive” decisions. Especially at a time when he is at pains to say that race is not behind his policy measures being opposed at home. But having been given the prize, he is caught in the middle of this politically sensitive issue.

Further, I am not sure if describing the Nobel Peace prize as a “call to action” is very smart. As a visionary statement, it is all warm and fuzzy, I agree. But as a pragmatic step, it sounds like a mere prize is going to be allowed to influence, however subtly, a sovereign state’s foreign policy! The Nobel is unlikely to win him plaudits and friends inside his own country. His current battles and his real publics are at home, not in the wilderness of Europe.

Many business leaders face such dilemmas when engaging with their broader publics. How far should they go before the publics try to influence their decisions or nudge them along inflexible or undesirable strategic trajectories? And how to avoid being exploited to serve the objectives of another firm or organisation?

I am sure others see different lessons in the episode. Feel free to agree, disagree and contribute your thoughts below.

Related reading:

Henrik Hertzberg in the New Yorker on Nobel Surprise;

Lost opportunities: Mahatma Gandhi and Gwen Thompson

To most people, Mahatma Gandhi stands for truth and non-violence. There is also a subtext of renunciation, austerity, simplicity and community. There was a predictable outcry when Montblanc announced a limited edition, 18 carat gold pen with Gandhi’s image and a saffron garnet on the clip. Only 241 gold pens would be made available for the price of Rs1.1M (or $23,000, €15,800, £14,400). Gandhi walked 241 miles in the Salt March of the 1930s.

Gandhi’s great grandson Tushar Gandhi had opposed the auction of Gandhi’s spectacles earlier in the year. He however sees nothing wrong with the pen and his charity will receive a small sum from each pen sold. Montblanc’s CEO says the company wanted to talk about Mahatma Gandhi’s values including non-violence, peace, education and tolerance. There is now, however, a court case in India for Montblanc’s violation of the Emblems and Names (Prevention of Improper Use) Act, 1950 which specifically cites Gandhi’s image. So much for discussing Gandhian values – between commerce, marketing, image rights, blame and counter-blame.

Let’s talk about Gwen Thompson then. She is a doll launched by the American Girl Doll company in 2009 and costs $95. What’s so special about Gwen? Well she is homeless and lives in a shelter with her mother. Her deadbeat father has apparently abandoned them. Beside the obvious ‘homeless people cannot spend $95 on a doll’ argument, the doll faces other flak too such as portraying men as irresponsible, women as helpless and the fact that some people are homeless as just another reality of society.

American Girl Doll company, who will not be donating any proceeds from the sale of the doll to shelters or charities helping the homeless, says: “Our singular goal with these stories is to help girls find their inner star by becoming kind, compassionate and loving people who make a positive and meaningful difference in the world around them.”

The similarity between both stories is that companies sought – whether strategically or as an after-thought – to spark a broad conversation about certain values. And that the way they went about it backfired. The companies look cynical and exploitative and their noble explanations a hasty ex post rationalisation.

Why? In Montblanc’s case, they have misread how Gandhi’s memory is revered in India. I say this with confidence as an Indian who also recognises the cynicism which makes it legitimate for some to exploit the Gandhi name more than for others. But in the case of the American Girl Doll company, I only offer a working hypothesis. The company underestimated the conflict between the American value of self-help and the collective guilt a society feels about not helping its unfortunate members enough.

Leaving aside the question of taste, in both cases, genuine opportunities were lost for the brands to get more real, more involved with the issues at hand. With my sceptical hat on, I would not be surprised to know if both companies are secretly rubbing their hands in glee over the free publicity and dialogue generated about them and their products. Very Skokie-like. Not very smart.

So, should companies not touch some topics and some people? That is definitely not my suggestion. But it is wise to pick the person, the message, the timing, the marketing message and any beneficiaries carefully. All public conversation should not be sought or courted. Sometimes the best conversations are those that are private, low-key and purposeful without publicity.

Related reading:

Gandhi sells and how (from India Today; may require registration)

Top 10 Dubious Toys where no. 1 is Homeless American Girl (from Time magazine)

Beyond privilege: managing information asymmetries

Healthcare Services Outsourcing to India?

This post emerged from a question asked by a friend on LinkedIn. The question was:

Are (sic) Healthcare services outsourcing from India the next big opportunity? Health-insurance companies based out of the US are giving the option to customers, to get their surgeries / medical procedures done from Indian hospitals. Is it now time to give healthcare outsourcing its due?

The question fascinates me on several fronts. I work with India investors interested in several sectors, including Outsourcing. I also work with investors keen on biotechnology and pharmaceutical sectors. In addition, I work in comparative health policy which, with my strategy hat on, I cannot help but frame in the context of the comparative advantage of nations.

As an investment opportunity, Healthcare Services Outsourcing (HSO), which also goes by the names ‘medical tourism‘, ‘health tourism’, ‘medical travel’ etc, is a no-brainer. If an investor from Britain or America wishes to invest in facilities in India that cater exclusively to economically well-heeled but health-wise, down-at-heel patients from developed countries, the returns are easy to make. The case is not hard to make from the perspective of the 3Ps of healthcare – payer, provider and patient.

The economics stack up pretty easily from the payer’s perspective although I think there is a divide between private sector payers, such as insurance companies and public sector payers such as the UK’s National Health Service (NHS). Take it with a pinch of salt, if you will, but here is an interesting ‘ready reckoner‘ of relative costs and waiting times in the NHS with those in India. The comparison does not include the cost of poorly understood risks, of corrective action when things go wrong and the cost of any adverse impact on future healthcare premia.

At least to some providers, the risks are manifestly clear. In the recent days, the UK’s NHS, which is also a payer, is asking patients to pay for corrective surgery after elective surgeries abroad go awry. For an opposite perspective – how costs to NHS add up when un-entitled foreigners abuse its free-at-the-point-of-delivery health service – see this short video from Sky News.

From the patient’s perspective, the prospect of reduced waiting times is enhanced often by the possibility of an exotic holiday in a two-fer. Not just that, patients can often get treatments which are rationed or otherwise unavailable from their provider such as obesity operations not easily available on the NHS.

The business model “HSO as medical tourism” is therefore easily fundable. The question is – in Guy Kawasaki’s succinct words – here: it is fundable, but is it viable? From the perspective of comparative advantage of India as a nation, one needs to ask: is it sustainable? Let’s examine this a bit.

India has a sufficiency of factor conditions such as good, English speaking doctors and now good infrastructure to deliver advanced surgeries and treatments. That is an attractive proposition on its own for HSO providers and seekers. But as far as domestic demand conditions are concerned, Indians carry a disproportionate burden of diseases such as malaria on the one hand, and diabetes and heart disease on the other. So there is a need. But a considerable number, estimated between 15% and 25%, remain in extreme poverty, so the purchasing power is curtailed. “HSO as business model” focuses on the factor conditions but sustainable comparative advantage for India will arise from not its relatively smaller magnitude factor conditions but also its considerable demand conditions.

The experiences of doctors in India, working on the coalface are instructive – on the one hand, about the larger failures of public health policy and practice in India, and on the other, about their value as intensive learning or potential for ‘knowledge transfer’, if you will.

Much discussion was generated by a BMJ editorial, titled Poor Countries Make The Best Teachers. My response was:

“… a doctor in the United States, who had trained in India, told me an anecdote that shows the flipside of Byrne’s experience on elective as a medical student in India, a learning experience she described as second to none. In a lecture during my acquaintance’s residency, she noticed that her professor and other residents were puzzled by the x-ray film of a boy’s limbs. They could not identify what could possibly have been wrong with him. The doctor, who had seen much rickets in India, identified it correctly and to the amazement of her colleagues. Poor countries, sadly, still provide reasons to train Western doctors in diseases that may not afflict the West right now but, with mass scale migrations, could easily become a problem in the future.”

What does this mean for investment opportunities? Well, a lot, if we think differently about HSO.

* A better, scalable and sustainable investment would lie in raising the profile of the usefulness of training doctors from developed countries in India. This will enable doctors from developed countries to understand, diagnose and treat better those diseases, which were hitherto geographically confined or eliminated, but are now resurgent and truly ‘globalised’, thanks to travel and mass migration.

* In return, the doctors from developed countries could teach the Indian doctors about innovative methods such as advanced surgical techniques, give equipment and test kits, as well as help with public health programmes particularly expanding capacity and service delivery.

* Indian healthcare system, in turn, could invest some of the profits to provide essential preventative services and public health programmes to its poor populace. India’s main factor conditions, the doctors, could therefore become not just financially better off but also more influential stakeholders in this healthier future for all.

How is that for a model for healthcare services outsourcing?

Yes, I know this is not a fashionable view. But it certainly is the most sustainable way to go forward where good health and access to good healthcare is not the privilege of the few ‘haves’ but the fundamental right of the many ‘have nots’.

As for why I am arguing a case to reduce the primacy of the potential of “HSO as medical tourism” model, I prefer to let Cicero explain that.

“The man who can hold forth on every matter under debate in two contradictory ways of pleading, or can argue for and against every proposition that can be laid down – such a man is the true, the complete, and the only orator.”

Over to you, and Santé!

Related reading:

Credit crunch and public health

Health and the Indian Economy – one of my guest posts on the Indian Economy blog

The world’s front-office? – an old post examining India’s outsourcing industry

New York Times says Uninsured Put a Strain on Hospitals. How about ‘Poverty and inadequate access to healthcare puts a strain on human beings’ for a title?