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ICSI International ConferenceMonday, 12 May 2008

Creating Solutions for Effective Performance in Slowing Global

Economy Presentation by

Balwant Kulkarni

Director (Academics)

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Creation is a process

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Solutions are a response to problems

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Problems are well defined and understood

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You need to unleash creativity through the systems at all levels of

organization

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Mindset that is attuned to solutions looks at problems as opportunities in disguise

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Volatility in Stock Market is not an enigma

George Soros and Warren Buffet have

made their fortunes by being one step ahead of

volatility

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Statement of problems sometimes show grave

approach

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Let us look at the following statements:

• The measure of the pressure that human activity exerts on the resources of the earth was 60 per cent of the earth’s capacity to renew itself in 1960.

• It has presently reached 130 per cent of the earth’s capacity.

• We are no longer living off the earth’s revenue account. We are eating into its capital.

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Scientists project that if China and India grow the

way the West has, within 25 years they will require

another whole planet earth to support them alone!

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Scientists and technologists have looked at evidentiary

proof of the earth’s physical resources

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Mental and intellectual resources of the human kind are

immeasurable and infinite

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Statements of problems sometimes overlook human

creativity

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They also overlook the blessedness of the humankind

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They may also be overlooking the crookedness of the

humankind and its greed

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As Mahatma Gandhi said

“the world has enough to satisfy everyone’s need but

does not have enough to satisfy a single man’s greed.”

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Was the sub-prime mortgage crisis in the US a reflection of the human

greed?

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US economy was expected to go into a

downturn

The prediction followed years of cheap liquidity

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Cheap liquidity created a lot of new risk vehicles in which

people were investing

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JP Morgan Chase taking over Bear Stearns with

the aid of the US Federal Reserve could be a creative solution.

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TATAs’ creation of Nano could be an economic

statement of performance through smallness

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Creativity at practical level is called innovation

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Schumpeter stressed the role of innovation and

creativity to turn up the wheels of the economy

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Innovation may be a process that is

breakthrough or that is incremental

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Innovation may occur systematically in a company

or sporadically

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Innovation is a process by which varying degrees of

measurable value enhancement is planned

and achieved

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National Knowledge Commission says… innovation may be achieved by…• Introducing new or improved goods or

services • Implementing new or improved

operational processes• Implementing new or improved

organizational/managerial processes to improve market share, competitiveness and quality, while reducing costs.

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Entrepreneurship and intrapreneurship are products of creative

human mind

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Schumpeter also looks at entrepreneurship as solution to economic

depression

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Out of destruction a new spirit of creativity arises

Innovative entry by entrepreneurs is the force that will sustain long-term

economic growth

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Companies that once Companies that once revolutionized and dominated revolutionized and dominated new industries have seen their new industries have seen their profits fall and their dominance profits fall and their dominance

vanish as rivals launched vanish as rivals launched improved designs or cut improved designs or cut

manufacturing costsmanufacturing costs

Example Xerox in copiers or Example Xerox in copiers or Polaroid in instant photographyPolaroid in instant photography

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The policy option is acceleration of productive

growth in an environment of high economic growth

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This will free the entrepreneurial spirit in

the economy

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High and uneven inflation enhances risk

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It is inimical to innovation and risk

taking

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The pickup in productivity tends to create even greater increases in

aggregate demand than potential aggregate

supply

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Monetary policy should deliver low and stable

inflation

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It should also be expected to deliver low and stable

inflation

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That way the monetary policy can give sustainable

growth its best chance

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Accelerating productivity growth entails a

matching acceleration in the potential output

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This causes a corresponding rise in the real incomes

available to purchase the new output

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Chinese economy grew by 11.2% in the last

quarter of 2007, when the US GDP growth was flat

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Chinese Government showed that domestic

consumption accounted for a bigger slice of GDP growth than investment

and exports

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This happened for the first time in China since

the year 2000

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This happened in China in spite of the inflation rate higher than the rate in

India

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With 40 percent of the world’s population between the two countries, plenty of

opportunities exist

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What is required is strong leadership and business initiatives

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Sino-Indian bilateral trade stood at $38.7 Billion in

2007

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Proper management by both States can ensure stability for bilateral relations,

South Asian security, and the evolving global balance of

power.

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The Elephant and the Dragon will have to learn to tango