Acreinc@20: Seeds of an Enterprise_Part 2, Chapter 2

As a technology-driven research company, Acre, Inc. had opportunities to venture into related businesses. Two investments come to mind. The first was predictive analytics through SPSS. SPSS is an important component of acre, Inc.’s corporate journey. The second, which will be the subject of another article, was performance management.

I visited the SPSS office in the Spring of 1989 and met with Chris Havanagh, then the President for SPSS International. In that meeting, we explored the possibility of Acre representing SPSS in the Philippines. At that time, it was rather difficult to get a licensed copy of SPSS and get the assistance or training for using SPSS. Chris had a beautiful corner room in one of the prestigious buildings along Michigan Avenue. It had a view of Lake Michigan in all its splendor.

Chris and his international team were in the process of rebuilding and strengthening SPSS, Inc.’s presence in Asia. Until that time, sales and marketing of SPSS were done by a distribution company based in Hong Kong which managed many other software and hardware products. Chris asked me to meet with him in Singapore in July of that year. The meeting in July informally sealed the partnership, a deal that was later formalized in 1991.

SPSS, I learned, was a learning and teaching organization. That very well matched what I thought would be an important corporate policy of Acre, Inc. As a learning organization, it used scientific knowledge engineered by scholars in universities as the seed for developing products and services. As a teaching organization, it promoted this knowledge using information technology as the front-end platform. Its mission then of driving the widespread use of statistics for decision making was also Acre, Inc.’s mission of providing decision makers with analytical tools and analytics for sound decision.

Who is SPSS?

Two themes have dominated the evolution of SPSS Inc. as a company: First, making difficult analytical tasks easier through advances in usability and data access and enabling more people to benefit from the use of quantitative techniques in making decisions; Second, developing a domain expertise centered on analyzing data about people, their opinions, attitudes, and behavior.

SPSS, Inc.’s success was anchored on a collective conviction that analyzing data, and incorporating the results into the decision-making process, leads to better decisions – therefore better corporate results. That was a conviction that also served as an important seed in the development of Acre, Inc. as an enterprise.

SPSS sprung in 1968, led by three young men from different professional backgrounds -- Norman H. Nie, C. Hadlai Hull and Dale H. Bent. Together, they developed a software system based on the idea of using statistics to turn raw data into information essential to decision-making. They named this revolutionary statistical software system SPSS which stood for Statistical Package for the Social Sciences.

The product vision came out of the need to quickly analyze volumes of social science data gathered through various methods of research. The initial design on SPSS was done at Stanford University. The intention was to make this tool available only for academics and not for international distribution.

The product concept evolved through a combination of these professionals’ skills and specializations -- Nie, a social scientist and Stanford doctoral candidate, represented the target audience and defined the parameters; Bent, a Stanford University doctoral candidate in operations research, had the analytical expertise and designed the SPSS system file structure; and Hull, who had recently graduated from Stanford with a master of business administration degree, developed the program.

As is typical of creations born of necessity, SPSS quickly caught on at universities throughout America creating a demand for this product. It became apparent to the three developers of SPSS that they had a viable IT product. An enterprise was born. They had to work on pricing, shipping and other business issues. They made sure that tapes of source code were sent to a small, but enthusiastic, user community, and continually maintained and enhanced SPSS.

The early success of SPSS was directly related to the quality and availability of the documentation that accompanied the software. McGraw-Hill published the first SPSS user's manual in 1970. Once the manual was available in college bookstores, demand for the program, particularly among students and faculty, took off. The rest as they say is history.

Over its forty-one year history, SPSS Inc. has evolved into an international corporation that delivers analytical tools and solutions to organizations around the globe. While customers and their industries vary, they share a common need to gather insight from the analysis of data. The Company's analytical technology from its early beginnings has enabled organizations to learn from the past, understand what is happening today and anticipate the future in order to manage it effectively. Today, SPSS has close to 300,000 installation sites and around 3.0 million users worldwide and the list is growing.

Acre, Inc. as SPSS Partner in the Philippines

As a technology-driven research company, Acre, Inc. had the opportunity of demonstrating to clients and prospects the practical value of using a statistical software for analysis and decision making. In retrospect, the transfer of technology to clients was not easy. Acre, Inc. spent most of the next four years educating the market through seminars and workshops, an investment that did not reap benefits until many years after. It was a mission which we had to do and accomplish.

Fortunately, there were executives from multinational companies and university professors or researchers who were users when they were in the United States. That became the core of Acre, Inc.’s SPSS clients. But the market was huge and the potential great. Spreading the widespread use of statistics in decision became Acre, Inc.’s strategic platform in promoting SPSS and its consulting services.

There were organizational challenges in the early years. First, there were very few statisticians then. The few graduates who were available preferred to work in government agencies or multinational research companies. Even those who were courageous enough to venture into other industries did not have the mental preparation to sell a software product. On the other hand, business or commerce graduates with the appetite for selling and marketing did not have the skills to guide clients and prospects on the value of statistics for decision making.

The physical challenges were formidable as well. The operating system was MS DOS and the system configuration was very lean, not suitable for heavy analytical and computational processes. SPSS was cut up into several modules. The demand for memory and space was much less than if all the statistical and data management procedures were integrated into one program. Although the SPSS MS DOS version and its modular design were designed to work efficiently in the desktop environment, clients were expecting a mainframe performance.

The greatest challenge was administrative foremost of which was bringing in the products and the thick operating manual into the Philippines. There were no clear cut rules on the value of software products which were openly copied and pirated in the local market. There was no definition as to how the product should be valued and treated. The product was essentially knowledge which had value only if a license became available. Without the license, the value of the product was just the cost of the diskette which even at that time was just a few pesos. There were occasions when I had to challenge the assessment of the Bureau of Customs by abandoning the shipment.

Those were challenges that were really cut out for a teaching and learning organization. I must say that these were challenges that Acre, Inc. managed extremely well.

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. Source of basic information on SPSS is the http://www.spss.com )

Acreinc@20: Seeds of an Enterprise_Part 2, Chapter 1

Today, 23 August 2009, Acre, Inc. officially marks its 20th anniversary, an important milestone in its corporate life. It is just appropriate to celebrate this occasion by going back in time on that day when we started the company until 1994.

Why 1994? The first five years are said to be the most crucial in the life of a new enterprise. It creates the foundation for long-term viability and a corporate image on which it will be judged – positively or negatively. On completion of the company’s business papers, I went around North America to meet with selected multinational research companies that had no representation in the Philippines. I knew them from the past as business associates. I got only one message from all of them. Come back after five years.

Three business concepts define the first five years of Acre, Inc. These are market and social research, information technology and data conversion.

Market Research

At the onset, in 1989 until the early part of the 90s, Acre, Inc. established itself as the leading consulting company for travel and tourism. This was at a time when other consulting companies did little to cover this industry and focused more on the growing personal care industry and fast moving consumer goods (FMCG). It was also at that time when the Philippines was at the waning point of an era when it claimed to be the convention center in Asia.

Acre, Inc. was the preferred consulting company of the Department of Tourism, Philippine Convention and Visitors Bureau and other institutions involved in travel and tourism not only for research but also for other consulting engagements. That opportunity provided enough energy to fuel the company well into its initial five years. It was also a company of choice among several other clients in four industries – banking and finance, pharmaceutical marketing, and science and technology – when these four industries were not a popular target for research and account executives.

This defined how the company positioned itself in comparison with other established and newly established research companies. It focused on five industries (including media) but extended its service to include research and consulting. Examples of its consulting engagements were economic studies, financial studies and marketing campaign studies. Management insights, conclusions and recommendations were part of a standard report to clients, and the company actively participated in management brainstorming sessions.

Towards the latter part of this period, the company must have completed close to 50 economic studies ranging from tourism to heart valve to forestry products to herbal medications underscoring its competence and facilities for consulting and marketing research. Many of these products had been commercialized and some are still in the process of commercialization based on the original economic and marketing studies. The company was also heavily involved in product launch, re-launch and branding.

As we ended the first five years, it was no longer necessary to partner with the more established multinational research companies. As a matter fact, we started to establish an association of marketing research companies based in Asia with a similar positioning and facilities. While this became a convenient arrangement for some time, it did not provide the corporate stability to sustain the partnership. This remains in the vision and future of Acre, Inc.

Information Technology

As a technology-driven research company, Acre, Inc. had opportunities to venture into related advocacies and businesses. Two investments come to mind. The first was predictive analytics through SPSS. SPSS is an important component of acre, Inc.’s corporate journey and will be the subject of another chapter.

The second is an efficiency tool that the company introduced to companies in the Philippines. Acre, Inc. partnered with a scientist to introduce computer-aided design/computer-aided manufacturing (CAD/CAM) to manufacturers of personal care products in the Philippines at a time when this tool was not yet well known and product development was dependent on foreign specialists.

First client was Johnson & Johnson. First product was the J & J alcohol which to this day uses the same packaging that Acre, Inc. helped develop and design. The protocol for developing a product at that time started with an artist’s sketch of the desired package. The first sketch led to several others until the final design was approved. The approved design was sent to Australia and converted into a computer file and later into a machining file. Once approved, a positive prototype was chiseled using a numerically controlled machine and a material that was either hard plastic or wood.

A prototype enabled decision makers to hold the product and see the design at various angles. On approval, the machining file was then converted into a negative setup that was used to cut up a mold needed to mass-produce the packaging. This part of the product development process usually took 12 months to complete. Much of the development was done in Australia. It took Acre, Inc. two weeks to complete the process. It took J & J management another two months to complete the process and to introduce the product to the market. First-to-market depends so much on the speed to production. CAD/CAM, at that time, provided a platform for competitive advantage.

Unfortunately, the venture ended with that engagement. Other multinational companies based in the Philippines did not want to alter their development process even if their counterparts in North America and Europe were actively using CAD/CAM. J & J product managers attempted to use the same development process but were not armed with a budget to pay for the development cost.

This advocacy of introducing new efficiency and development tools continued well into the late 1990s and into the 21st century. These included efficiency tools to optimize efficiency in the production of heat-generated power, to define system loses in the transmission of generated power to consumers and industrial users, and to manage bad debt in competitive industries with tens of thousands of unpaid accounts.

Data Conversion

As a technology-driven research company, Acre, Inc. had programmers, computers and facilities for managing data and using the data to generate reports. This was a facility that was needed to encode data and convert the data into time-sensitive reports.

A rare opportunity came when the Department of Tourism and Bureau of Immigration sponsored a project to electronically encode arrival/departure cards. Acre, Inc. won the bid and was the contractor for these two agencies for five years. It involved encoding of around 600,000 A/D cards per month or around 7.2 million cards per year.

To this day, data conversion or data encoding remains one of Acre, Inc.’s core competencies. However, the company uses a variety of technologies including the optical character recognition (OCR) and other tools for data capture.

(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)

ACREINC@20: SEEDS OF AN ENTERPRISE (PART 1, CHAPTER 3)

An internet-circulated story tells of a teacher who brought a glass jar to his class. He took out a bag of marbles and stuffed them inside the glass jar until it was filled up to the rim. He asked, “Is the jar full?” The students said yes.

The professor then pulled out another bag of sand and slowly poured the sand into the glass jar until the spaces in between the marbles were all filled up. He then asked the students, “Is the jar full?” Embarrassed, the students said yes.

He got the cup of coffee on his desk and swiftly emptied it into the jar. As the coffee slinked into spaces in between the sand, he asked, “Is the jar full?”

The teacher explained that we take life as being full, often with things that are not so important and therefore fail to find space for those that have more significance and should fill up our lives. On hindsight, this story presents a viewpoint that inspired the founding of Acre, Inc. 20 years ago.

In chapters 1 and 2 of Part 1 of this series on the 20-year journey of Acre, Inc, I talked about three of the four seeds that served as inspirations that led to the establishment of Acre, Inc. These seeds were external. The fourth seed of enterprise is internal, an idea that is more difficult to rationalize and explain. For lack of a better term, I will call it value creation.

There are three elements in this seed – generational wealth, rightful knowledge, and desired future.

Generational Wealth

Generational wealth usually suffers through generations, with heirs dividing the wealth of forebears. There were many landed families whose third or fourth generation successors did not enjoy the luxury of their ancestors. I have encountered many such cases in Negros. My nephew-in-law whose family comes from that province suffered the same fate. Whatever was left for his generation had to be surrendered to the agrarian land reform program.

Fortunately, my generation did not get much from our parents except the power of knowledge and education. What was passed on to us was less than 50 hectares of unproductive property spread out in two provinces and one city. We therefore have little to pass on to our children. Following the tradition of dividing wealth would further dissipate this generational wealth and leave practically nothing to the next generation of 13 children.

From anecdotes and readings and advice of lawyer-friends, this trend is reversible in two ways, something that we are experimenting on. First, keep the passed-on property intact by converting land into shares of stocks and creating wealth by engaging in productive enterprises. Second, create new wealth through enterprise development activities.

What stirred up the birth of Acre, Inc. in 1989 was more of the second idea – creating new wealth through enterprise development. Catalytic entrepreneurship is about converting a new idea into an enterprise. Classic examples of this type of entrepreneurship are Cars (when horses were the popular means of transportation), Video Tape (when the bulky projector was the mode of viewing movies), Fax Machine (when Telex and Telegram were the preferred means of communication) and Walkman (when the big stereo components were the standard).

There is a second type of entrepreneurship, one in which the entrepreneur translates an existing enterprise that is more responsive to consumer needs and has a potential mass market. I’d like to think that Acre, Inc.’s inception is in the border and overlaps between these two concepts. We wanted to apply the full weight of technology in research.

Economic Value Added (EVA), a management framework popularized by Stern Steward, suggests that management’s objective should be to build capital, not destroy it. By monitoring performance based on EVA with a built-in threshold for policy decisions, management institutionalizes an environment where resource management is geared towards building capital and moves away from activities that destroy capital.

EVA became popular in the late 90s and became a standard management metric in the 21^st century. Without the accounting equation of an EVA, the principle of building value from what exists was really the idea that spurred the start of Acre, Inc. The desire to add up to what has been passed on to my generation and to share more than what the present generation enjoyed.

Rightful Knowledge

Helene Deutsch wrote, “The ultimate goal of research is not objectivity, but truth.” This philosophy was not just a thought in putting up Acre, Inc. It was a commitment, a promise.

In the beforemath of the snap election in 1986 that brought an avalanche of protest and put Cory as president of a revolutionary government, a large research agency put Marcos ahead of Cory in a pre-election poll conducted in Metro Manila. When experts analyzed the results, the agency did not report the big percentage of non-response and used those who responded as the base. In an environment of fear, such as during the martial law years, voters tend to be non-committal when asked for their preference.

Unfortunately, this subversion of truth was repeated in the 2004 elections. GMA was made to appear the winner in Metro Manila which was far from the truth. Many voters were undecided because the alternative candidate was a popular movie actor and did not have much in resources to communicate a legitimate platform.

“The ultimate goal of research is not objectivity, but truth.” That is a seed that helped build Acre, Inc.

Desired Future

A lot of the articles I have written and published talk about a desired future. The article on Marketing Convergence, which became the theme of the Philippine Marketing Association during the term of Donald Lim, is the most downloadable piece in the Acre, Inc web. It is used as a material in a class in marketing in one of the leading universities.

“The best way to predict the future is to invent it,” writes Alan Kay. Ralph Waldo Emerson is more resolute about the idea of creating a desired future when he wrote “What we call results are actually beginnings.”

This seed is not about a desired future for Acre, Inc. This seed is about a desired future for our country. A future where the country ranks high in all aspects of development. Based on a discipline of strategic thinking and decision making.

Acre, Inc.’s unwritten advocacy follows the mission of SPSS – to drive the widespread use of data-driven decision making. Since its founding in 1989, it has invested (without expecting a short-term returns) in data-driven decision making tools and frameworks.

We have trained thousands of executives on these tools and frameworks, often for free. I continue to spread this gospel to executives in industry and government. Among these tools and frameworks are analytics, deployable predictive analytics, CAD/CAM, balanced scorecard, EVA, ABC/M, BPE, and many more.

(This is the third and last 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)