ACREINC@20: SEEDS OF AN ENTERPRISE (PART 1, CHAPTER 2)

This is part 1, chapter 2 of a series of articles on The Asia-Pacific Centre for Research (Acre), Inc. which celebrates its 20th year as an enterprise on August 23, 2009. Acre, Inc. is a full service marketing research and IT consulting agency.

Seeds of enterprise are aplenty. In the history of ACRE, there were four. The first, which was the subject of part 1, chapter 1 of this series (posted on 12 July 2009), is the need to embrace and take a risk on new technology. The fourth will be the subject of part 1, chapter 3.

The two other seeds, which this chapter will discuss, relate to the intrinsic values of consulting – first, as an excellent source of employment and second, as an enterprise that can effectively function to provide other enterprises with boutique services that are unique and very specific.

A Source of Job Opportunities

Borrowing from Porter’s model on competition, service consulting has extremely low entry barriers. As an enterprise, it is easy to start. It requires a reasonable amount of financial capital, perhaps something that one saves after a few years of executive or technical work.

It relies mainly on human capital, the skills that the consultant already possesses either honed from work experience or learned from top graduate schools. Overhead and the cost of managing operations are low. The sophistication needed to become operationally efficient is rather on the soft side.

On the other hand, the skill needed to manage stakeholders and develop clients is quite high. Success and profitability depend a lot on value created for the client and the satisfaction (by the client) that such value has indeed been created. Many talented consultants come and go because of failure to create impact or value over and above what already exists.

Moreover, commitment to the objectives of the engagement, as defined and understood by the client, is a primary consideration. Such commitment must be demonstrated through a consultant’s passion for meeting deadlines, constantly communicating with the client and service orientation.

Consultants who move over from industry to consulting to academe have egos that become convenient plots for corporate horror stories. The dynamics in every engagement and in every environment are so diverse. Management doctrines and principles become effective only as they are understood and accepted.

Consulting, particularly on services, has tremendous potential for creating jobs – quickly and in a sustainable fashion. Government and job creators must have a deliberate strategy for supporting service consulting. Our employment statistics need every bit of support and creativity.

The latest Labor Force Survey (April 2009) indicates that our labor participation rate is only 64%. Unemployment rate plus underemployment rate are at a hefty 36%. You can imagine what it was during the pre-acreinc@20 days when the country was just starting to recover and government was hounded by military adventurism.

Supporting service consulting has a very low cost input and huge value added. For example in market research, one standard project provides temporary job opportunities for at least 10 people. An unusually big project may provide jobs for at least 50 people. When acreinc@20 expanded to data conversion in 1992, a natural service expansion because research deals a lot with data processing, the company employed about 70 encoders, 30 for the first shift and 20 each for the second and third shifts.

The thought of creating jobs and providing economic opportunities that required low-level entry skills and were potentially sustainable was certainly an important seed in the formation of acreinc@20 as an enterprise.

A Relevant Outsourced Service

Graduating with a master in business administration (MBA) degree in a prestigious school at a time when an MBA tag was at its premium was one of the highlights of my career both as an educator and businessman. I learned the fundamentals of managing an enterprise. It boosted my confidence with the thought that I had the resume to back up my deeds. The years in graduate school expanded my network. There, I met a future business partner, one of a few who successfully wrote and completed the business thesis within the last term. The other one is currently the Secretary of Labor.

In our business policy class where half of the enrollees transferred to another section after the first session, these two gallantly responded to every question fielded by a businessman-professor who was known for his quick wit and for terrorizing slow-thinking students. It was only in that class where I saw a junior executive classmate literally shaking as he stood up to respond.

About three years after graduation, my MBA classmate called me up and presented a business proposition. He had a technical background and just recently left a manufacturing outfit that he managed. He earned so much from his share of incremental profits, that is, profits that the firm earned over and above what it normally made before he was brought in to manage the company.

He had the cash. He had the technical knowhow. He knew the market. He just needed someone to razzle-dazzle the bankers and potential partners with some attractive financial packaging to complete the business start up puzzle. I was a young consultant with several clients in my list, a few years out of business school and with a flawless work experience. I was raring for some action and the desire to test my theories.

About a month from the time that we met, we had a corporation, a manufacturing plant with the basic facilities for precision engineering to produce wood cabinets for television and stereo, venture capital from a progressive bank for our working capital, and enough equity to retool some of the facilities we needed.

Venture capital was widely promoted by the bank at that time and we were among the few given that facility. I thought that the start-up time was record breaking. Later on, I learned that much of it was because of our background – two young professionals with an MBA degree. It was not about the project, definitely not.

We started with a bang. We ended (after three years) with a bigger bang. The due diligence study was not diligent enough. It was done for a purpose, that is, to start the business and get it going. As an investor with a financial stake, I did not have the objectivity to recognize the pitfalls and safeguards. I was too involved with making the concept work.

The demand for precision wood cabinets was high. The design for television and stereos at that time required a high ratio of wood to TV. In fact, in the first two years, we did very well and captured a fairly good share of the market. We deliberately closed our eyes on the trend – from wood to synthetic and from a high to a low ratio of wood to TV. We knew it was happening. Our youthful enthusiasm and recklessness got in the way.

In retrospect, if we had a consultant or someone without an emotional stake on the business, we could have intelligently managed the risk and put in the safeguards to make the operations more sustainable. On the third year, the demand for knife blocks in the export market was really booming and the karaoke (the design of which was for wood cabinet) was starting to become a trend. We started developing the designs and systems. However, we decided to call it quits. We lost the energy to retrofit for a new system.

That became one of the seeds of acreinc@20, the realization that there is an intrinsic value for consultants and people with the professionalism to dig through the maze of trends and statistics to recommend ‘go or no go.’ Acreinc@20 started as a marketing consultant with expertise in market research, statistics and financial analysis.

(This is the second chapter of part 1 of a series of articles on the history of acreinc@20. Part 1 talks about the pre-acreinc@20 days and attempts to answer the questions: What were the conditions that led to the development of this new enterprise? What were the challenges? What were the management and enterprise development principles that became the bases for the new enterprise? What were the resources needed to start it up and roll over for long-term viability? For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

ACRE@20: SEEDS OF AN ENTERPRISE (Part1, Chapter 1)

I once asked acreinc@20 employees about ‘word processor.’ The usual response was either a blank stare or the dull smile of youth vilifying anything older than they are. Other responses associated the words with ‘word processing’, something similar but not quite the same.

IBM defined the term word processing as "the combination of people, procedures, and equipment which transforms ideas into printed communications." The term was used to refer to dictating machines and ordinary, manually-operated selectric typewriters.

Wikipedia refers to a word processor as an obsolete type of stand-alone office machine, popular in the 1970s and 80s, combining the keyboard text-entry and printing functions of an electric typewriter with a dedicated computer for the editing of text.

Sometime in 1986, when I was in my second contract as president of a multinational research company, our Chairman decided to invest in word processors which I recall was an Amstrad. It was expensive, something in the vicinity of US$5,000 each.

It combined the best features of an IBM selectric typewriter and the more obvious advantage of a computer even with limited memory. Using a high-quality single-use magnetic cassette tape and a cartridge with standard fonts, it created top-quality and uniform print on a bond paper. It was perfect for report-heavy research and consulting companies whose quality of output was sometimes judged by the quality of the printed documents.

Combined with a small program that allowed users to type to memory one record (single line of about 80 characters) and make corrections before commanding the printer ball to start rolling, the word processor became a welcome and safe transition from snowpake-dependent selectric typewriters. Its predecessor and the first word processing program, the Electric Pencil, was written by Altair programmer Michael Shrayer.

It was also a good reason not to fully migrate to desktop IBM computers that used the unattractive dot-matrix machines and WordStar to print documents. IBM computer or its clone was starting to gain popularity among research companies in other countries. Although the company was locally processing reports using data collected in 16 counties, the chairman decided it was not useful enough for the Philippine environment and probably too advanced for local workers.

WordStar, something that Acre employees considered old stuff or ‘jurassic’ when I mentioned it, was the first commercially successful word processing software program. It was developed and released in 1979 by Micropro International for microcomputers and worked wonderfully well with the IBM microcomputer (which later became known as the IBM desktop computers).

The word processing concept was designed to distribute secretarial work to other staff members and do away with the executive or private secretary or to allow one secretary to perform various administrative tasks for three or more executives. Invention.com reports that “The labor and cost savings of this device were immediate, and remarkable: pages of text no longer had to be retyped to correct simple errors, and projects could be worked on, stored, and then retrieved for use later on.”

Defined as the manipulation of computer generated text data including creating, editing, storing, retrieving and printing a document, word processing became the standard tool for staff and secretarial work. WordStar was the preferred software program to perform these tasks. Version 3.0 of WordStar for DOS was released in 1982. Within three years, WordStar was the most popular word processing software in the world.

When I learned to use WordStar, I found it functional but less than friendly and perfect. Yet the features presented a big leap from the typewriting and word processing era. Features like foldering, retrieving, editing, saving and on-line copy-paste writing made this software a real time-shaving tool. These days, it is hard to imagine the time spent by employees to manually cut a word, sentence or paragraph from a printed document and paste that on another page of the same document.

When I visited Michigan State University for a faculty exchange program, the standard word processing software used in the graduate school of business was no longer WordStar. WordPerfect knocked WordStar out of the word processing market after the poor performance of WordStar 2000. Seymour Reubenstein, the programmer who developed WordStar, confessed that he didn’t know much about business and relied merely on his programming skills. WordStar, however, remained the standard in the Philippines until foreign buyers and clients knocked some sense on local decision makers in the mid-1990s and Microsoft Word became the preferred word processing program.

When our chairman invited me to sign a third and longer contract, what came to mind were these two things -- word processor and WordStar -- and the feeling that the country was being pushed back into the dark ages as the rest of the world sky-rocketed into the era of new methods and technologies. What the country needed at that time to catch up or even stay close was an environment where decision makers allow new ideas and new technologies to prosper. That thought blossomed to become one of the seeds that created acreinc@20.

(This is the first chapter, part 1 of a series of articles on the history of acreinc@20. Part 1 talks about the pre-acreinc@20 days and attempts to answer the questions:What were the conditions that led to the development of this new enterprise? What were the challenges? What were the management and enterprise development principles that became the bases for the new enterprise? What were the resources needed to start it up and roll over for long-term viability? For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)

ACREINC@20: Lessons in Enterprise Development

This is the start of a series of articles on The Asia-Pacific Centre for Research (Acre), Inc. Acre, Inc. is a full service marketing research and IT consulting agency. It will celebrate its 20th year as an enterprise on August 23, 2009.

In terms of assets and using Department of Trade’s definition, Acre, Inc. remains an SME after 20 years. As compared to the criteria set by Colins and Porras (Built to Last), Acre, Inc. has yet to cross the bridge of greatness which these scholars set at 50 years or more of sustainable operations. In terms of annual revenues, Acre, Inc. has yet to break into the category of the top 1,000 corporations in the Philippines.

However, there are other criteria, not usually emphasized in management books and industry standards, where Acre, Inc. has done considerably well. The company deliberately and purposely focused on these standards to create breakthroughs and raise the bar of excellence in management, marketing research and enterprise development.

I will be writing these articles from several perspectives.

First, as the founder of Acre, Inc. and as its Chief Executive Officer. From this perspective, I may be able to share historical insights and milestones which contributed to the continuing viability and struggles of Acre, Inc.

Second, as an educator. I have been a part-time professorial lecturer at the DLSU Graduate School of Business since 1987 teaching courses in strategic management, performance management and marketing management. From this perspective, I may be able to step back and evaluate Acre, Inc.’s history with objectivity to present lessons in enterprise development and decision making.

Third, as an entrepreneur. I am managing several SMEs including those that I have founded. I have helped many other entrepreneurs start a business. From this perspective, I may be able to internalize and share the challenges of enterprise development – the start up problems, day-to-day challenges, and the kind of business environment that tends to influence long-term viability of companies, large or small.

Fourth, as a student of performance management. As I write this introduction, universities and practitioners are testing and implementing new and more responsive concepts in performance management. As a student, I continue to keep an open mind on the principles that could best work in industry and government. From this perspective, I may be able to rely more on the more recent principles in management and rely less on current standards or dogmas.

This series comes in six parts. I hope that I will have the time to blog these articles way before the deadline on August 23, 2009. I do not discount the possibility of blogging articles other than what should be included in this series if conditions dictate.

The first part includes the pre-Acre, Inc. days (pre-1989). What were the conditions that led to the development of this new enterprise? What were the challenges? What were the management and enterprise development principles that became the bases for the new enterprise? What were the resources needed to start it up and roll over for long-term viability? This article attempts to provide answers to these questions and summarize lessons learned in the pre-Acre, Inc. days. This is a very interesting phase in the life of Acre, Inc. and, if I may, in the life of an enterprise conceived through a combination of randomness and purposiveness.

The second part is about the start-up days (1989 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.

The third part is about organizational and corporate transformation (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.

The fourth part is about the company’s physical environment (part of 2000 to 2005). Should we transfer from the tourism center to the financial district? Is it better to investment in an office space rather than lease the space? How far ahead should we plan our physical facilities? For over 10 years, Acre, Inc. was located at the Philippine International Convention Center (PICC) where all facilities were conveniently available. However, it was a city or two cities away from most of its clients. At the same time, PICC was no longer as tenant-friendly as in 1990.

The fifth part is about going back to the basics – the company’s core ideology and roots (2007 to present). With opportunities in research growing, should the company invest in this industry or should the company continue to find opportunities in the IT sector? Can research and IT, as separate businesses units, co-exist or should the company focus on only one business? Alternatively, should there be a third operating division that will focus on performance management, an area where the company has been well recognized? It is in this period that research experienced robust growth but mainly from foreign research clients and partners. Foreign companies from different countries started reviewing business opportunities in the Philippines. In 2008, there were more inquiries for research not only for the Philippines but also for other countries in Southeast Asia. It is also during this period when our talent pool was considerably more than at any point in the company’s history.

The sixth part is about the future of research, predictive analytics and performance management. Is research a growth sector? Will IT continue to grow? In which specific sectors in IT will growth continue? What should be the future of Acre, Inc.? Alan Kay writes that the best way to predict the future is to invent it. The picture of Acre, Inc. on its 50th year has been defined. The first 20 years of the company comprise the first big milestone. There will be other milestones, some shorter in years, and they will be discussed in this article.

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

Politics of the Sidewalk

Where I live, one has to walk or jog on the street. Not that the street is free of traffic. The area has one of the highest per capita car ownership in NCR. Rather, sidewalks have been taken over by gardens and fences. This scene is typical of many residential and commercial areas in Metro Manila.

Marikina City Mayor Marides Fernando, speaking during the general membership meeting of the Philippine Institute for Supply Management, shared some insights on how the city transformed Marikina to a local government unit that most city mayors envy.

The city implemented several initiatives one of which was simply to give back to the walking public the sidewalk that they deserve. It was a simple initiative that immensely contributed to the transformation of Marikina into a well-governed, multi-awarded city. That initiative turned out to be an effective driver that changed the way Marikina residents and visitors behaved.

Alex Lacson’s book talks of 12 simple things that every Filipino should do. One of these is to follow traffic rules. It is a basic value driver. Following traffic rules drives other important and positive social values. Obeying traffic rules, like proper use of the sidewalk, needs two basic ingredients – a responsible user and rules that are uniformly applied and well implemented. One cannot prosper without the other.

Obviously, Marikina City decided to create an environment where side-walking became pleasurable and street-walking inexcusable. Some statistics: Sidewalk concreted, curbs and gutter : 247.60 kilometers. Cleared Sidewalk : 219.49 kilometers. Total Length of Bicycle Lanes : 24 kilometers.

It is a good, basic program for every city or municipality that envisions a respectable quality of life. It is not going to win elections. However, it will put the city on the governance map and can certainly add political points for future elections.

There are three important dimensions, probably more, about sidewalks – social, economic and political.

Social dimensions of sidewalk

Along some main thoroughfares in Metro Manila, you see many sidewalks used as playground – for basketball, badminton and kids’ games. Occasionally, they are used as an extension of the dining room for parties and social drinking. They become a resting or practice ground for fighting cocks. Sometimes, they become a second bedroom during summer or when the house gets so crowded. It is common to see residents and commercial establishments use these sidewalks for parking. Sidewalks disappear once it is landscaped by the adjoining occupant. They are everything for anybody except as a sidewalk.

Economic dimensions of sidewalks

Around the Remedios area in Malate, cafes take over at night or whenever permitted, following the practice in some places in France and Italy. Sidewalks become romantic meeting places where you get the best coffee and food. In Divisoria, Quiapo, Paco and other designated public markets, sidewalks disappear as vendors and stalls take over. They become free spaces for the huge underground economic enterprise.

Political dimensions of sidewalks

Sidewalks in a city have stakeholders with political clout or influence. Those that have dominated have interests that usually clash with public order. The last time I visited Divisoria was a few years back when I gave my nephews a tour of the city. Very visible were unrestrained economic and social interests which could only be tolerated by political realities. The same may be said with the situation in Baclaran. Visibly tolerated, for obvious reasons, are socially disadvantaged people who, for lack of a workable social assistance program, practically live along the sidewalks. Cause-oriented groups would take up their cause for any attempts to remove them.

Giving back the sidewalk to the walking public is a simple government gesture that could possibly lead to positive social, economic and political changes. It represents many positive things -- Rule of law. Social equality. Safety. Convenience. Unity. Environment. Discipline.

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