Tuesday, December 31, 2013
Wednesday, August 14, 2013
Sunday, June 16, 2013
Mail sent by Narayan Murthy to all Infosys staff
1-If you are working more than 9 hr then dont need to join Infosys.
2-If you are working on saturday and sunday dont join infosys (for IT).
3-Whatever time define in your task complete within time.
Fire all people who fall in criteria 1,2,3.
It’s half past 8 in the office but the lights are still on… PCs still running, coffee machines still buzzing… And who’s at work? Most of them ??? Take a closer look…
All or most specimens are ?? Something male species of the human race…
Look closer… again all or most of them are bachelors…
And why are they sitting late? Working hard? No way!!! Any guesses??? Let’s ask one of them… Here’s what he says… ‘What’s there 2 do after going home…Here we get to surf, AC, phone, food, coffee that is why I am working late…Importantly no bossssssss!!!!!!!!!!!’
This is the scene in most research centers and software companies and other off-shore offices.
Bachelors ‘Passing-Time’ during late hours in the office just bcoz they say they’ve nothing else to do… Now what r the consequences…
‘Working’ (for the record only) late hours soon becomes part of the institute or company culture.
With bosses more than eager to provide support to those ‘working’ late in the form of taxi vouchers, food vouchers and of course good feedback, (oh, he’s a hard worker….. goes home only to change..!!). They aren’t helping things too…
To hell with bosses who don’t understand the difference between ‘sitting’ late and ‘working’ late!!!
Very soon, the boss start expecting all employees to put in extra working hours.
So, My dear Bachelors let me tell you, life changes when u get married and start having a family… office is no longer a priority, family is… and That’s when the problem starts… b’coz u start having commitments at home too.
For your boss, the earlier ‘hardworking’ guy suddenly seems to become a ‘early leaver’ even if u leave an hour after regular time… after doing the same amount of work.
People leaving on time after doing their tasks for the day are labelled as work-shirkers…
Girls who thankfully always (its changing nowadays… though) leave on time are labelled as ‘not up to it’. All the while, the bachelors pat their own backs and carry on ‘working’ not realizing that they r spoiling the work culture at their own place and never realize that they would have to regret at one point of time.
So what’s the moral of the story??
* Very clear, LEAVE ON TIME!!!
* Never put in extra time ‘ unless really needed ‘
* Don’t stay back unnecessarily and spoil your company work culture which will in turn cause inconvenience to you and your colleagues.
There are hundred other things to do in the evening..
Learn music…..
Learn a foreign language…
Try a sport… TT, cricket………..
Importantly,get a girl friend or boy friend, take him/her around town…
* And for heaven’s sake, net cafe rates have dropped to an all-time low (plus, no fire-walls) and try cooking for a change.
Take a tip from the Smirnoff ad: *’Life’s calling, where are you??’*
Please pass on this message to all those colleagues and please do it before leaving time, don’t stay back till midnight to forward this!!!
IT’S A TYPICAL INDIAN MENTALITY THAT WORKING FOR LONG HOURS MEANS VERY HARD WORKING & 100% COMMITMENT ETC.
PEOPLE WHO REGULARLY SIT LATE IN THE OFFICE DON’T KNOW TO MANAGE THEIR TIME. SIMPLE !
Regards, NARAYAN MURTHY.
Thursday, June 13, 2013
Three Things I’ve Learned From Warren Buffett
I’m looking forward to sharing posts from time to time about things I’ve learned in my career atMicrosoft and the Gates Foundation. (I also post frequently on my blog.)
Last month, I went to Omaha for the annual Berkshire Hathaway shareholders meeting. It’s always a lot of fun, and not just because of the ping-pong matches and the newspaper-throwing contest I have with Warren Buffett. It’s also fun because I get to learn from Warren and gain insight into how he thinks.
Here are three things I’ve learned from Warren over the years:
1. It’s not just about investing.
The first thing people learn from Warren, of course, is how to think about investing. That’s natural, given his amazing track record. Unfortunately, that’s where a lot of people stop, and they miss out on the fact that he has a whole framework for business thinking that is very powerful. For example, he talks about looking for a company’s moat—its competitive advantage—and whether the moat is shrinking or growing. He says a shareholder has to act as if he owns the entire business, looking at the future profit stream and deciding what it’s worth. And you have to be willing to ignore the market rather than follow it, because you want to take advantage of the market’s mistakes—the companies that have been underpriced.
I have to admit, when I first met Warren, the fact that he had this framework was a real surprise to me. I met him at a dinner my mother had put together. On my way there, I thought, “Why would I want to meet this guy who picks stocks?” I thought he just used various market-related things—like volume, or how the price had changed over time—to make his decisions. But when we started talking that day, he didn’t ask me about any of those things. Instead he started asking big questions about the fundamentals of our business. “Why can’t IBM do what Microsoft does? Why has Microsoft been so profitable?” That’s when I realized he thought about business in a much more profound way than I’d given him credit for.
2. Use your platform.
A lot of business leaders write letters to their shareholders, but Warren is justly famous for his. Partly that’s because his natural good humor shines through. Partly it’s because people think it will help them invest better (and they’re right). But it’s also because he’s been willing to speak frankly and criticize things like stock options and financial derivatives. He’s not afraid to take positions, like his stand on raising taxes on the rich, that run counter to his self-interest. Warren inspired me to start writing my own annual letter about the foundation’s work. I still have a ways to go before mine is as good as Warren’s, but it’s been helpful to sit down once a year and explain the results we’re seeing, both good and bad.
3. Know how valuable your time is.
No matter how much money you have, you can’t buy more time. There are only 24 hours in everyone’s day. Warren has a keen sense of this. He doesn’t let his calendar get filled up with useless meetings. On the other hand, he’s very generous with his time for the people he trusts. He gives his close advisers at Berkshire his phone number, and they can just call him up and he’ll answer the phone.
Although Warren makes a point of meeting with dozens of university classes every year, not many people get to ask him for advice on a regular basis. I feel very lucky in that regard: The dialogue has been invaluable to me, and not only at Microsoft. When Melinda and I started our foundation, I turned to him for advice. We talked a lot about the idea that philanthropy could be just as impactful in its own way as software had been. It turns out that Warren’s brilliant way of looking at the world is just as useful in attacking poverty and disease as it is in building a business. He’s one of a kind.
Photo: Bill Gates
Friday, April 19, 2013
35 Quotes To Transform Yourself Into A Leader
Not everyone has someone directly influencing their transformation into a better leader. This is why I find quotes from some of the most influential leaders to be beneficial to the process.
In need of a bit of inspiration? Use the following quotes to transform yourself as a leader:
1. "To lead people, walk beside them ... As for the best leaders, the people do not notice their existence. The next best, the people honor and praise. The next, the people fear; and the next, the people hate ... When the best leader's work is done the people say, 'We did it ourselves!”— Lao-tsu
2. "Leaders must be close enough to relate to others, but far enough ahead to motivate them.” — John Maxwell
3. "Dictators ride to and fro upon tigers which they dare not dismount. And the tigers are getting hungry.”— Winston Churchill
4. "Control is not leadership; management is not leadership; leadership is leadership. If you seek to lead, invest at least 50% of your time in leading yourself—your own purpose, ethics, principles, motivation, conduct. Invest at least 20% leading those with authority over you and 15% leading your peers." — Dee Hock, Founder and CEO Emeritus, Visa
5. "All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership.”— John Kenneth Galbraith
6. "If a rhinoceros were to enter this restaurant now, there is no denying he would have great power here. But I should be the first to rise and assure him that he had no authority whatever." — G.K. Chesterton to Alexander Woollcott
7. "The task of the leader is to get his people from where they are to where they have not been.” — Henry Kissinger
8. "The task of leadership is not to put greatness into humanity, but to elicit it, for the greatness is already there." — John Buchan
9. "Leadership is the art of getting someone else to do something you want done because he wants to do it.” — Dwight D. Eisenhower
10. "The best is he who calls men to the best. And those who heed the call are also blessed. But worthless who call not, heed not, but rest." — Hesiod, 8th Century BC Greek poet
11. "Never give an order that can't be obeyed." — General Douglas MacArthur
12. "Leadership must be based on goodwill. Goodwill does not mean posturing and, least of all, pandering to the mob. It means obvious and wholehearted commitment to helping followers. We are tired of leaders we fear, tired of leaders we love, and of tired of leaders who let us take liberties with them. What we need for leaders are men of the heart who are so helpful that they, in effect, do away with the need of their jobs. But leaders like that are never out of a job, never out of followers. Strange as it sounds, great leaders gain authority by giving it away.” — Admiral James B. Stockdale
13. "Great leaders are almost always great simplifiers, who can cut through argument, debate, and doubt to offer a solution everybody can understand." — General Colin Powell
14. "Men make history and not the other way around. In periods where there is no leadership, society stands still. Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better.” — Harry Truman
15. "Leadership is intentional influence." — Michael McKinney
16. "The leader is one who mobilizes others toward a goal shared by leaders and followers. ... Leaders, followers and goals make up the three equally necessary supports for leadership." — Gary Wills, Certain Trumpets: The Call of Leaders
17. "All Leadership is influence.” — John C. Maxwell, Injoy, Inc.
18. "You cannot be a leader, and ask other people to follow you, unless you know how to follow, too." — Sam Rayburn
19. "Your position never gives you the right to command. It only imposes on you the duty of so living your life that others may receive your orders without being humiliated." — Dag Hammarskjöld
20. "The final test of a leader is that he leaves behind him in other men, the conviction and the will to carry on." — Walter Lippmann
21. "The function of a leader within any institution: to provide that regulation through his or her non-anxious, self-defined presence." — Edwin H. Friedman, A Failure of Nerve
22. "People ask the difference between a leader and a boss. The leader leads, and the boss drives." — Theodore Roosevelt
23. "Humans will probably always need the help of especially gifted moral leaders in order to extend the bonds of caring and trust beyond the easy range of the family and the face-to-face community. Such bonds have become essential to the future of humanity." — Paul R. Lawrence, Driven To Lead
24. "You don't lead by pointing and telling people some place to go. You lead by going to that place and making a case." — Ken Kesey
25. "The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant." — Max DePree
26. "Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall." — Stephen R. Covey
27. "As a leader, you're probably not doing a good job unless your employees can do a good impression of you when you're not around." — Patrick Lencioni
28. "Leadership is not magnetic personality, that can just as well be a glib tongue. It is not ‘making friends and influencing people,’ that is flattery. Leadership is lifting a person's vision to higher sights, the raising of a person's performance to a higher standard, the building of a personality beyond its normal limitations." — Peter F. Drucke
29. "Leadership is the ability to establish standards and manage a creative climate where people are self-motivated toward the mastery of long term constructive goals, in a participatory environment of mutual respect, compatible with personal values." — Mike Vance
30. “Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.” — General George Patton
31. "A leader is a dealer in hope." — Napoleon Bonaparte
32. "Lead and inspire people. Don't try to manage and manipulate people. Inventories can be managed but people must be lead." — Ross Perot
33. "When the conduct of men is designed to be influenced, persuasion, kind, unassuming persuasion, should ever be adopted. It is an old and a true maxim, that a "drop of honey catches more flies than a gallon of gall." — Abraham Lincoln
34."My own definition of leadership is this: The capacity and the will to rally men and women to a common purpose and the character which inspires confidence." — General Montgomery
35. "High sentiments always win in the end, The leaders who offer blood, toil, tears and sweat always get more out of their followers than those who offer safety and a good time. When it comes to the pinch, human beings are heroic." — George Orwell
Courtesy:
Ilya Pozin:
Founder of Ciplex. Columnist for Inc, Forbes & LinkedIn. Gadget lover, investor, mentor, husband, father, and '30 Under 30' entrepreneur. Follow Ilya below to stay up-to-date with his articles and updates!
Saturday, January 26, 2013
PickYour Angel Investors Wisely
A great deal has been written about angel investing in recent years. Angel investing has become the sport of choice for many successful entrepreneurs in Silicon Valley (e.g., Dave Morin,Chris Michel, Ariel Poler, etc.). What's more, it has spawned a whole new class of venture funds -- once called Super Angels, now called Micro VCs (e.g., First Round Capital, True Ventures,SoftTech VC, etc.). And now traditional venture investors (e.g., Greylock Capital, Andreessen Horowitz, CRV, etc.) have created programs to invest small amounts of money in large numbers of startups. Unfortunately, as seed investing moves from a boutique practice to more mass market, its value is diminished dramatically.
As a general matter, I think that more seed funding is a great thing. It is certainly beneficial -- often times essential -- for small companies to raise a little bit of money to help validate an idea or market. But historically one of the most valuable things about angel investment was that it was accompanied by an angel. That angel wouldn't just invest in the company, he or she would serve as an indispensable advisor to the company as well. Not only did you get money to propel your business forward, you also got the help of someone who had run the startup gauntlet before you.
Regrettably, what once was a boutique business has in many instances become mass market. While there are some angels and Micro VCs can provide meaningful time and attention to their entrepreneurs, there are a number of folks out there who think that angel investing is a volume business. Needless to say, as the number of companies financed by any given investor grows, the amount of help that investor can give to each company diminishes proportionally. These investments become more about the placing of bets than they do about helping entrepreneurs succeed.
Sure, some of these stock pickers will make some good bets and even make some money. But it won't be any thanks to them. As a general matter, early stage entrepreneurs don't just need money, they need help and advice. And if help is no longer part of what you get from your seed investors, I believe the likely success of those investments will diminish.
Worse yet, taking seed investment from traditional venture investors can be counter-productive. It is impossible to imagine how a VC firm that is investing in dozens of early stage startups can find the time to be helpful while also working with their more traditional portfolio. You may get a little of their money and a little of their reputation, but you will get it at the expense of any real help in building your business.
So why have VC funds started investing in seed rounds? They do it because they think it gives them an option on future financings. By putting a little bit of money into a company's seed round, they get a seat at the table. And from that seat, in theory, they can keep track of how well it is going and preemptively finance the "best" companies that they've seed funded. The only problem with the theory is that these traditional VCs don't have the time or capacity to actually keep track of all the companies they've seed funded. So they aren't capable of being pre-emptive. Instead, they expect an early look at any Series A financing, despite the fact that they haven't earned the right by actually being helpful to the companies they have seeded.
More importantly, traditional VCs are incapable of providing one of the most important and valuable angel services -- introductions to future investors. As is becoming increasingly clear, investment is the life blood of the startup world. The problem that companies seed funded by traditional VCs have is that there is a natural assumption that any company that does not receive follow-on funding from its earlier VC investor is fundamentally broken. There is virtually nothing that a VC can say in his or her introduction to other investors that won't raise eyebrows. So taking angel money from a traditional venture investor is a bet on that firm funding your Series A. Unfortunately, if that doesn't work out, you're back is up against the wall. [1]
It is true that money is fungible. But investors are not. The choices you make when raising seed capital can have a meaningful impact on the long-term success of your startup. So find investors who will bring you value beyond the dollars in your bank account. Find investors with the time and inclination to help you. Find investors who will increase your chances of raising additional capital, not diminish those chances. Great angel investors are invaluable. So pick your partners well.
[1] On the rare occasion that my partners and I seed fund a startup, we work hard to alleviate the concerns I've described above. We only invest in a very small number of seed stage opportunities and we commit meaningful time and attention to those businesses, often going on the board (for example, I was the earliest investor in the likes of WePay and Splunk). Moreover, we take a substantial lead role in the seed financing, so there is no negative presumption when we introduce the company to our VC friends for the next round of financing. We will invest along side the new VC, but have no need to lead the Series A ourselves. Needless to say, this approach won't scale to dozens of startups. But it will increase the likelihood that those business we seed fund are successful.
Courtesy: http://www.ventureblog.com/2013/01/pick-your-angel-investors-wisely.html
Thursday, January 24, 2013
Asia Driving Onwards: how can investors capture the enormous economic potential of Asian economies?
Asia's position as the new growth engine of the world economy is one of the most discussed macroeconomic trends of our times. So how can investors capture the enormous economic potential of Asian economies? After all, capital market developments in Asia have been divergent, both regionally and in different asset classes.
GDP Growth by Country enlargeSince the turn of the millennium average growth in the emerging world has surged to rates that are three times higher than in developed economies. This growth has largely been driven by Asian economies. A flourishing Asia has secured an increasing share of global GDP at the expense of the developed world. According to IMF estimates, developed countries will see their share of global GDP decline by 17 percent between 1992 and 2015, an unprecedented deterioration. At the same time, developing Asia's share of global output is expected to increase by 18 percent.
Asian government debt levels are looking attractive relative to G7 levels enlargeIncreasing Resilience to Global ShocksExternal shocks such as the financial crisis, the Eurozone debt crisis or lackluster growth in the US may have slowed Asian growth, but they have not derailed the structural growth story in the region. Equipped with significant cash reserves and policy flexibility, Asian economies have been able to steer through these choppy waters without sinking and have subsequently resumed their growth trajectory. Moreover, the legacy of the Asian crisis in the late 1990s ensured that both companies and governments have focused on balance sheet discipline.1 Comprehensive reform of their macroeconomic framework and of the financial sector has considerably reduced the region's vulnerability to external shocks. Debt levels for Asian economies are expected to decline further, while the creditworthiness of Western economies is increasingly in question.
Supportive DemographicsPositive demographic trends have been a key component of emerging economies' growth. While Western economies struggle with ageing populations and higher dependency ratios, the number of people of working age in emerging economies has grown rapidly thanks to population growth. The expansion of the working population in turn has increased the consumer base, thus bolstering private consumption, which is key for economies to master the transformation from an economy reliant on external demand to one powered by domestic demand.2
Advanced Legal Framework Fosters CredibilityIt must be noted that that more than just strictly economic factors, such as low sovereign-debt levels and relatively favorable demographics, have enabled Asian economies to narrow the gap with global economic giants such as Germany and the US. There have also been considerable improvements in political and legal institutions. In recent years, the credibility and transparency of fiscal, financial and central bank structures have improved significantly as authorities have recognized the importance of areas such as property rights in fostering global confidence in Asian economies.
Appetite for Consumption – Asia Grows, Asia SpendsAsia's future path of economic growth is likely to be determined by how well the region can manage the transition from export-based growth to self-generated growth. Domestic demand expansion can be achieved when consumption and investment increase and the savings surplus is reduced. To achieve this expansion, policymakers need to encourage fixed asset investments, reduce barriers to consumption growth and introduce supportive measures. The improvement of the investment environment, the allocation of government expenditure to infrastructure development and the development of social safety nets, such as health, education and pension systems, will encourage consumption and reduce the savings ratio.
Long-term observers of Asian economies believe that the rise of the Asian consumer is going to be the next megatrend in the global economy. Experts compare the impact this will have on the world to the rise of the American consumer in the 1950 post-world war era and expect it to have considerable implications for companies, investors and governments across Asia and the rest of the world.
Focus Shifting to Domestic DemandThe rise of Asian economies that started in Japan already half a century ago has been a story of production. Led by China, increasing prosperity was largely based on export-driven growth and made Asia the world's biggest factory of electronics, toys and automobiles. So far, it was mainly the US that bought Asian products, causing Asian countries to run permanent trade and current account surpluses. The US on the other hand had to deal with ever increasing current account deficits. Almost half of the US deficit has been with Asian countries. In other words, the US consumption engine was the main driver for Asia's production engine. In the past decade, rising wealth particularly in China has created a new consumer for the region's goods. This has made China's economy increasingly less reliant on exports; low wages and cheap currencies are no longer the primary focus. Unsurprisingly, boosting domestic consumption is the key theme of China's 12th five-year plan (for the 2011–2015 period). In fact, if Asian countries manage to shift from being export-driven economies to ones powered by domestic demand, Asian currencies will have plenty of room to appreciate from here, thus simultaneously increasing Asian consumer's purchasing power.
The Rise of the Asian ConsumerThe Asian consumer has tremendous development potential. While accounting for half of the world's population, developing Asia only produces 30 percent of global GDP. Chinese consumption only accounts for 35 percent of the country's GDP, compared to 65 percent in the US. At the end of 2008, Asia's population of 3.5 billion people spent less than 7 trillion US dollars while the US population of only 0.3 billion people spent 10 trillion.3 Previously held back by high savings rates, there are signs of a cultural shift among Asian consumers. China is already the world's largest market for many household products, such as TVs, refrigerators and air conditioners. China has surpassed the US as the world's largest automobile market. Although lagging behind a couple of years, India's consumer market is seeing similar signs of development. India is already the world's fastest-growing cellphone market in the world.
Excerpt from the Credit Suisse white paper "Asia – Development, Financial Markets, Infrastructure and Consumption, China"Asia's Middle Class to Become the Centerpiece of Asia's Economic FutureA large part of consumption growth in Asia is expected to come from Asia's new middle class.4 Today, Asia accounts for 28 percent of the global middle class in terms of number of people. This share could double by 2020. China's middle class alone by that time would be bigger than the entire residential population of the European Union. By 2030, two billion people are expected to belong to this bracket.5The growing affluence goes hand in hand with rapid urbanization. Middle class consumers mostly live in urban areas, which is why Asian cities have been the fastest growing cities since the turn of the millennium. Consequently, the urban Asian-Pacific population is expected to grow by over 21 percent over the next decade.6 The OECD7 estimates that Asia's middle class accounts for 23 percent of today's total consumer spending. The same estimates peg it at 54 percent by 2020 and it could easily reach 66 percent by 2030.
1 Aberdeen, Asian Bonds: A misunderstood opportunity, 20122 BlackRock Investment Institute, Are Emerging Markets the Next Developed Markets?, August 20113 McKinsey Quarterly, Think regionally, act globally – Four steps to reaching the Asian consumer, 20094 It is difficult to accurately define middle class. Homi Kharas, in a study published by the OECD in 2010, defines households as middle class that live with daily per capital incomes between USD 10 and USD 100 in purchasing power parity terms. The Chinese academy of Social Sciences, a state research institution, sets down the yardstick at around USD 7300 in annual income (as of 2009). Other international market researches are setting the threshold at 10,000 or more.5 According to Goldman Sachs6 Singapore Economic Development Board, Future Ready Today – Understanding the psychology of the new-Asia consumers7 OECD, The Emerging Middle Class in Developing Countries, 2010
Courtesy: https://infocus.credit-suisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=379887&lang=EN&WT.mc_id=CS%20International%2023%2E01%2E2013-379602
Wednesday, January 16, 2013
Peter Drucker’s Advice to CEOs:: Don't Hand the Keys to CFOs
by Ron Baker
On December 21, 2006, my mentor, George Gilder, wrote on his blog about the last time he saw Peter Drucker live. It is such a profound piece that goes to the heart of how accounting is becoming increasingly irrelevant to the spirit of enterprise, it is worth quoting in full:
“The last time I saw Peter Drucker, he was keynoting a Forbes conference in Seattle for CEOs. In the auditorium at the International Trade Center next to the bay, they had wheeled out the great man to the middle of the stage in a great fluffy easy chair.
“Close to 90 years old—at the end of the previous century gazing toward the next—he was the numinous name and Delphic presence at the conference. Everyone leaned forward to hear what he had to say.
“Then a gasp shook the rows of CEOs. The conference management stood there stricken, unable to move: ‘For the Love of Malcolm’s motorcycle...What is this?’ The CEOs sat popeyed.
“The hoary sage’s balding pate flopped back in the chair as if he had fallen asleep...or worse.
“Perhaps Forbes had erred in staking a major conference on an aging guru seemingly well over the hill and in parlous health.
“Then his entire body fell forward. I was ready to run up to catch him if he should tumble toward the crowd. But he somehow caught himself. His eyes opened, and he looked out intently at the throng of CEOs. Everyone sighed with relief. He was awake. He had their attention.
“Drucker growled: ‘I have just one thing to tell you today. Just one thing...’
“Wow, I said to myself, it better be good.
‘No one,’ he continued, ‘but no one in your company, knows less about your business than your See Eff Oh.’
“Huh?
“This was the era of the heroic Chief Financial Officer (CFO). Scott Sullivan of Worldcom, Andy Fastow of Enron, clever, inventive folk like that.
“You remember them. Across the country, CFOs were in the saddle. CEOs would not move without consulting them. What could Drucker have meant?
“He was stating law number one of the Telecosm. Knowledge is about the past. Entrepreneurship is about the future.
"CFOs deal with past numbers. By the time they get them all parsed and pinned down, the numbers are often wrong. In effect, CFOs are trying to steer companies by peering into the rearview mirror. Past numbers do not have anything much to do with future numbers.
“Moreover, CFOs tend to focus on internal problems. But most internal problems cannot be solved internally.
“Determining business outcomes are decisions made by customers and investors and both are outside the company and not directly managed by the company. Their views can change in an instant, casting all the existing numbers into oblivion.
“To reach customers and investors takes outside vision and leadership, not internal problem solving.
“Tech companies should not try to solve problems. Solving problems sounds good, but it is a loser. You end up feeding your failures, starving your strengths and achieving costly mediocrity.
“Don’t solve problems — that’s the CFO’s forte and pitfall. Pursue opportunities.”
A Deteriorating Paradigm
Approximately 70% of the average company’s value cannot be explained by traditional Generally Accepted Accounting Principles financial statements.
Adding more arcane and picayune rules to GAAP, requiring mark-to-market accounting, or converging existing GAAP with international accounting standards, will not solve this problem.
The accounting model is suffering from what philosophers call a deteriorating paradigm—it gets more and more complex to account for its lack of explanatory power.
In all fairness to accounting, it never was meant to predict value prospectively, only to record transactions retroactively. In effect, accounting can only measure the price of exchanges after they have taken place. Abraham Briloff, a professor of accounting, contended that accounting statements are like bikinis: "What they show is interesting, but what they conceal is significant." Accounting can audit the drunk’s bar bill but can’t explain why he’s an alcoholic.
This is why accounting can only record the “goodwill” of a business until after is has been sold. Accounting has no way to place a value on that goodwill until a transaction takes place. That is why my late colleague, and Chartered Accountant, Paul O’Byrne said goodwill is the name accountants give to their ignorance.
The best an accountant can do is to extrapolate the past into the future, and unless one’s theory is that the future is going to be the same as the past, this technique is fraught with hazards. This was Drucker’s point at the CEO conference in Seattle.
CEOs and entrepreneurs have to create the future, not relive the past. The only way to effectively do that is with a theory of the business, which requires one to get outside of the four walls of the organization and connect with external reality — where all value is created.
http://www.linkedin.com/today/post/article/20130113204047-38251380-peter-drucker-s-advice-to-ceos
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