The Society I Want for the Country I Love

It is based on interconnectivity of communities --

• “The Community of the Future” published by The Peter F. Drucker Foundation for Non Profit Organization in 1998 advanced a proposition that the “The global community of the future will be at its best a series of communities that are interdependent and diverse, embracing differences, releasing energy, and building cohesion.”

• This philosophy was written before the onset of online communities and the new diaspora described by Bob Johansen which is creating millions of virtual communities with common interests and passion. Unfortunately, these communities, while connectible and connected, have short life span.

• Community is more ‘substantial and attractive than society,’ according to William Outhwaite, who also writes that community and civil society have a common origin in the late and medieval and early modern reception of Aristotle’s thought.

• Outhwaite also suggests that unity in a society or community is directly realized by its own elements because these elements are themselves conscious and synthesizing units.

Its source of strength are the individual community members

• “The Community of the Future also suggests that “The broader global community will be enhanced by the health of the many smaller communities that constitute the whole. Those living within each community define all community.”

It is more focused on values, less on material accomplishments

• More of communities, less of towns and regions

• Borrowing from John C. Bogle –

More value, less cost
More investment, less speculation
More simplicity, less complexity
More trust, less of counting
More professional conduct, less of business conduct
More stewardship, less of salesmanship
More of leadership, less of much management
More focus on commitment, less focus on things
More 18th century values, less of the 21st century values
More character, less of success.

The President I Want

Less of the creative promises. More of definitive targets.

Less discussion on what needs to be done. More commitment on what the Philippines would be at the end of the six-year term.

Less discussion on what problems we inherited from previous presidents. More of what the new president commits to pass on to the next generation.

I will vote for the candidate who can commit to the following targets by May 2016.

1. On basic education, a ratio of one classroom to 30 students (maximum) across all towns in the country with each classroom equipped with at least one computer and all the books required.

2. On tertiary education, University of the Philippines reclaiming its ranking as among the top 10 universities in Asia.

3. On law enforcement, a ratio of one police to 300 people across all Barangays with each police fully equipped with all the tools for effective policing.

4. On health, a population growth that is 20% less than the ratio in 2009 and an average life span that is 20% more than the level in 2009.

5. On revenue generation, 200% more than the level in 2009 including revenues generated by the BIR, BOC and BID.

6. On foreign investments, 200% more than the level in 2009 particularly in critical investment areas such as energy, transportation and infrastructure.

7. On environment, a forest cover that is three times more than the present level and all rivers, esteros and water bodies in urban urban areas free of vertical structure.

8. On transportation, Bicol and Baguio interconnected by high speed, efficient train systems.

9. On roads, a national road network that is 100% longer than the level in 2009 40% of which would have an average roughness index of 4.5 (at any given time).

10. On enterprise development, an SME population that is twice that of the 2009 level. Existing SMEs (of about 1.0 million) are given assistance to generate at least three additional employees (or at least 3.0 million new jobs in six years).

Mastery of Risk

October of each year is when we celebrate statistics and recall the significance of this discipline. The annual event goes by each year with just a ring of stakeholders, mostly statisticians and academicians, attending the conference that the Philippine Statistical Association and other institutions organize.

It is not surprising that the annual celebration is not as popular as other professional events such as information technology, marketing and human resource. The field of statistics has an image closely associated with cold numbers and algorithms.

Tools and procedures in statistics are made to sound very inclusive with labels such as logistic regression and discriminant analysis. Back in college, some colleagues avoided degree courses that required the subject statistics. The discipline generally attracted talents who were usually office-bound and preferred a profile that was low key.

I am quite familiar with this perception because I have had the opportunity to work with extremely talented people in the field of statistics. At the same time, I am quite involved in a business primarily driven by statistics.

It is interesting how Peter Bernstein describes the value of statistics. Bernstein is a consultant and author of six books in economics and finance including the bestselling “Capital Ideas: The Improbable Origins of Modern Wall Street.” He is also editor of The Portable MBA in Investment and founding editor of The Journal of Portfolio Management.

He says that “The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk.” The core of that idea is statistics, a discipline that allows decision makers to look at the past and, with the precision of a scientist, confidently manage the future.

Statistics, he says, guide us over a vast range of decision-making, from allocating wealth to safeguarding public health, from waging war to planning a family, from paying insurance premiums to wearing a seatbelt, from planting corn to marketing cornflakes.

In more developed economies, statistics, as a discipline, has been transformed into a very important engine for governance and corporate decision making. Practitioners work hand in hand with corporate decision makers. There are many proven practical applications that benefit industries and government. Three hot applications are fraud detection, credit scoring and micro-targeting.

The goal of fraud detection is to manage or prevent the commitment of fraud. Fraud is a billion dollar menace. It affects government and private banks, insurance companies and many other institutions. Fraud has a broad definition and includes money laundering. Hot money that travels from one country to another is considered fraudulent. After the 9/11 incident in America, it became a hot application to manage the unrestricted flow of dollars financing terrorism and terrorist activities.

Through a clever application of computer-aided statistics, governments and banks are able to process terabytes of transactions and identify, with a high degree of confidence, the most likely fraudulent cases. This telescoping enables intelligence units to focus on the more likely fraudulent transactions with ease and precision at the least cost.

Credit scoring is an old application but is not as extensively used in the Philippines as it is in other more developed economies including those in Asia. The use of statistics in credit scoring enables users to create a working model that predicts, with a determinate level of confidence, customers who are good, moderate or bad credit risks. Used with powerful computers, this model may be deployed to identify, at the point of contact, customers who should be approved or denied of service without the need to elevate the decision to top management.

Microtargeting is a new application. Its application as a campaign strategy started in the 2004 presidential election in the United States. Its value was fully exploited by Barack Obama when he won the presidential nomination for the Democratic Party versus Hillary Clinton. It uses the same principle in analytics and statistics.

The discipline of statistics is so important to leave the task of celebrating and promoting its value in the hands of statisticians alone. The primary beneficiaries – decision makers and government executives – must find time to partner with the practitioners to drive the widespread use of statistics in decision making.

To paraphrase Bernstein, the capacity to manage risk, and with it the appetite to take risk and make forward-looking choices using statistics, are key elements of the energy that drives the economic system forward. Let us support statistical month.

The Asia-Pacific Centre for Research (Acre), Inc. is doing its share in promoting the value of statistics in decision making by organizing this year’s SPSS Users Group Convention around the theme of Discovery. This will be held on October 22, 2009 at the Sofitel Hotel in Pasay City. To register, contact Veronica Nicolas (Veronica_Nicolas@spss-ph.com)

(for comments, email to nick.fontanilla@gmail.com or abfontanilla@yahoo.com)

acreinc@20: 2nd Phase of the Corporate Journey

As I write this article, stockholders of SPSS, Inc. are preparing to decide on IBM’s offer to acquire SPSS, Inc. With the concurrence of management and an attractive premium for all common stocks, the acquisition is almost like a done deal. I believe that IBM will greatly benefit from this acquisition. First, it will fortify its consulting portfolio with downstream software applications. Second, it will acquire the capability to provide predictive analytics to growth-driven sectors. Third, SPSS is the leading analytics company and offers unique products and experience.

Acreinc has been SPSS’ partner in the Philippines for most of its corporate life. We share and are committed to SPSS’ mission of driving the widespread use of data-driven decision making. The time and resources Acreinc has invested to carry out this mission is I believe disproportionate to the predictive analytics’ current market size which. We call it advocacy and our social contribution towards improving the competitiveness of local companies.

We are not certain how IBM would restructure the distribution system in the Philippines. As an advocate of data-driven analytics and decision making, Acreinc will continue to invest on people, resources and marketing in the areas of predictive analytics and statistics. We are too deep into this advocacy to retreat. Hopefully, we will be given the same opportunity by IBM to provide decision makers with a powerful tool for analysis and decision making.

Predictive analytics in fact underscores the very essence of the second phase of our corporate journey. It is in this phase from 1995 to 1999 when we re-engineered Acreinc’s corporate business – from a research company providing IT solutions to an IT Solutions company providing research. There is a world of difference between these two major corporate strategies.

Acreinc Reengineered

In research, we were more focused on the implementation of a contract and less focused on marketing to get the contracts. In analytics, we were more focused on sales and marketing to get the contracts and less focused on the implementation. That difference alone needed a major shift in our corporate resources and methodologies.

Going though the second phase of our corporate journey, we had mostly technical persons and had little resources in marketing and market development. Re-engineering our human resource was probably the most challenging task. We needed to change the orientation of our programmers, data analysts and statisticians. We had to make them more customer-centric and sales oriented.

In the beginning, most of our people avoided answering the phone afraid that the caller was a sales prospect and would be asking questions about products and services. Slowly, they got the essence of customer service and how analytics could value add to the customers’ business. It took all of three years to re-invent our human resource from a strictly technical orientation to a customer-driven orientation. There were some Acreinc employees who responded to the shift in orientation with flying colors. They became the backbone of our new operations.

We activated a sales team whose members had the competence to not only provide the technical part of a consulting engagement but to also attend to very demanding pre-sales activities. The sales cycle for analytics products at that time was about eight to 16 months. Sales funneling and client management systems had to be customized because none were available.

That phase was an important learning experience. It provided us with the competence in sales and marketing layered on top of our technical competencies. Our sales profile reversed. In the beginning, research revenues accounted for 70% of total. Towards the middle part of this phase, software revenues accounted for 50% of total even if the volume of research continued to grow. It was this combination that enabled us to venture into other downstream software applications.

New Solutions

It was during this phase when we decided to expand our product mix to include other downstream applications, that is, software products that were used for decision making and analysis.

First on the block was a German product whose objective was to optimize production in heat-generated power plants. In this type of operation, efficiency (higher production) was inversely related to plant integrity (plant maintenance and sustainability). Performance of executives with responsibilities in efficiency was based on total production. Conversely, performance of executives in plant maintenance was based on the upkeep and continuing operation of the plant.

In this environment, the higher the heat level in the plant, the bigger the production volume. However, the higher the heat level maintained in the plant, the higher the chances of breakdown. There was a mismatch in the objectives. To make decisions, executives were using primarily experience and gut feel. The product that we sold provided an optimal solution based on linear programming. It defined optimal levels of production and plant maintenance.

Second on the block was a U.S. product whose objective was to trace and mitigate system losses in the transmission of electricity from the power generating plant to users and clients. At that time, government allowed distribution and production companies to incur system losses of up to nine percent. Companies absorbed system losses over and above the nine percent hurdle rate. The majority of distribution companies were in fact incurring losses that were more than the cutoff rate of nine percent.

Third on the block was a U.K. product on performance management, Balanced Scorecard in particular. We later supplement this with a U.S. product that included other performance management frameworks such as activity based costing and activity based management. This became acreinc’s third division. We continue to maintain this division and provide software and consulting services to many companies in the Philippines.


(This is Part 3 of a series of articles on the history of acreinc@20. It is about organizational and corporate transformation from 1995 to 1999. There is usually a time in the life of an enterprise where management challenges the business and the concepts that gave the enterprise its corporate life. Should we continue to be a player in the industry where we now operate? How can we leverage the resources and experience that we have to expand or venture into other businesses? How do we create an enterprise that grows faster and earns more? This is one of the most challenging moments of Acre, Inc. It was at that time when the environment was changing and business was growing fast. The speed by which technology was changing was also very evident, putting pressure on capital investments and process improvement. For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

acreinc@20: growing pains (Software Division)

A Pain is a Pain

A pain is a pain no matter how you put it and in whatever context it comes up. I wrote this article in the first class section of a Philippine Airlines flight (PR811) to Davao on 19 September 2009. As a first class passenger, I was entitled to all first class amenities from boarding to the in-flight services. PAL customer relations upgraded me to First Class because I was bumped off from the first flight of that same day.

But enjoying all these privileges (including a free round-trip ticket to any local destination) did not ease up a bit the pain of being bumped off and of missing my scheduled meeting for the day. It also did not erase from memory how I thought I was callously bumped off.

I thought that I was literally chosen to be bumped off, not randomly as the PAL staff claimed. I was ahead of three other passengers on the same flight to Davao to approach my counter. These three other passengers got the boarding pass. I was bumped off.

I was almost impressed with the effort made by the customer relationship group and the counter staff, but as they were about to hand over to me a ticket for the original flight I was booked, they decided to release that board pass in favor of another passenger. Somehow, so I thought, everyone decided that I was the chosen one, that is, I was chosen to be bumped off.

From this experience, three things about PAL’s operations come to mind – staff competency, revenue management, and customer relationship management. If there were elements that led to this pain, they were probably at the top of the list. They were what I thought significantly contributed to the scenario where I was bumped off. I am prefacing my third article of part 2 of this series precisely because of these three points.

Data Driven Decision Making

In the last 20 years, Acre, Inc. has invested a lot of its resources to promote data-driven analytics and decision making specifically SPSS. This has been a very painful and expensive advocacy. I cannot say that we have gotten back the resources that we put into promoting SPSS -- thus, the term advocacy rather than investment. Yet in other countries, my counterpart SPSS partners have moved forward and are now reaping the benefits of their investments in SPSS data-driven analytics.

There are some fundamental pains that are endemic to the Philippine analytics market. First, decision makers prefer to employ qualitative judgment (or gut feel) even in the absence of or without the benefit of analytics. I attribute this to the managers’ financial orientation, reliance on decision-making tools acquired in classrooms and seminars, and prevailing management practices.

Second, the Philippine market remains wedged in a system where the IT division makes the final and important decisions on IT-driven investments. In other countries where decision-making has been more incisive, investments in IT-driven processes had been more of a responsibility and decision of the users.

In one of the premier universities in the Philippines where I also teach, the IT literally made the decision on the scope and type of analytics software that the university acquired for its computer laboratories. The decision was made based primarily on financial considerations even if that decision breached the process and the recommendation of the users. It was as if IT had to approve and decide on the book to be used by the professor and students.

Staff Competency

Why staff competency? I had the luck of queuing in a counter where the counter clerk was less competent than the others. Even if I was first to the counter than three other passengers in other counters, the staff assigned in my counter was not as fast in typing and processing as those in the other counters. As a result and because of PAL’s practice to overbook, I lost my chance to get a seat and boarding pass. Different service skills translate to different service quality. The customer relation staff who attended to me admitted that indeed the competence of counter clerks differ.

There was an attempt to upgrade me and give me a boarding pass. As that boarding pass was to be handed to me, the supervisor over-ruled the decision and ordered my boarding pass cancelled and shredded. The supervisor’s decision was based on his assessment on who deserved to get the boarding pass. Unfortunately, that was not me. His judgment was most likely flawed, discriminatory and ill-advised.

His judgment was not aided by data-driven decision making tools which is a practice now common in other airlines in other countries. I can only guess, but I suppose that cost considerations prevented PAL from investing in the appropriate tools. I can say this because I know that PAL had been actively searching for such a tool. Somehow, they never made a decision or the investment was downgraded to something that cost less.

Revenue Management

Why revenue management? Revenue Management (RM) is a pricing and revenue optimization tool. It focuses on how a firm should set pricing and product availability given different scenarios and resources. It is also known as yield management the objective of which is to maximize the use of resources given certain capacity constraints and customer demand.

It is commonly used in the airline and hospitality sectors. Airlines practice price discrimination throughout the booking schedule based on several pre-defined conditions such as capacity, timing of booking, customer profile and type of service provided. Now, RM is tightly integrated in the supply chain management of many other industries.

Under this framework, there are customers who benefit from the application of RM and there are those who become victims of RM. The concomitant result is supposed to represent an optimal solution for the company, that which gives the company the most profit.

It is not meant to be an equitable solution for customers. As such, users of revenue management are expected to exercise due diligence and to exhaust all possible remedies and strategies to increase profit generated from the optimal solution and, at the same time, minimize customer dissatisfaction. This is where I thought PAL failed – to exercise due diligence and to exhaust all possible remedies.

In my recent encounter with PAL, I did not see any evidence of a data-driven decision making tool powered by a quantitative model that makes use of past data, consumer profiles, and analytics.

Customer Relationship Management

Why customer relationship management? PAL’s solution applied to my problem was a solution after the fact – an aftermath. What I believe PAL failed to do was to apply a solution before the fact – the beforemath.

Best practices in quality and performance management demand a solution that manages the beforemath and avoid the pitfalls of an aftermath. The highest level of ISO requires a system that manages the beforemath. Even the Computer Maturity Model (CMMI), a standard for defining capabilities of software development companies, has several grades the highest of which requires a methodology for predicting customer problems and requirements. The supply chain management system is heavy on such data-driven decision making tools.

These three elements are representative of the decision-making landscape (or lapses) in the Philippines – the lack of data-driven decision making tools and the absence of an organizational discipline that demands the application and implementation of such a framework to delight customers. What we in Acre, Inc. are proud of is that despite these pains, we have persevered and continued to advocate the mission of driving the widespread use of data-driven decision making analytics. We are committed to continue with this advocacy.

(This is Part 2 of a series of articles on the history of acreinc@20. Part 2 talks about the start-up years from1989 to 1994. What is the main purpose of the business? What are the secondary purposes of the business? What markets and customers will the enterprise aim to serve? In what processes should it excel in a business where systems, methods and technology are victims of obsolescence? In what way should the enterprise position itself in an industry dominated by multinational companies or companies that have been operating for many years? This part discusses the important decision-making days and documents the impact of these decisions on the future of the enterprise. Some are book-line strategies and decisions. Some are blue ocean scenarios. For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)