Michael Dell's Operating Cash Cycle

I started reviewing for the exam, and I passed Module 4 again. It concerns Financing Growth.
Churchill & Mullins mention in their article “How fast can your company afford to grow?” about components of an operating cash cycle. They offer along the way a small schematic on this OCC should look like:



I would like to talk about Michael Dell, a great entrepreneur that revolutionized the computer. The result of his strategy would turn the above diagram around.

The customer first sends the criteria for the desired computer, after which he/she has to pay in order to allow green light for the PC to enter in the manufacturing process.
Thus from the company’s point of view, the “Goods Sold” come first in line, followed by inventory ordering. We considered in the diagram bellow that the inventory will be received faster than the money from the customer gets in the Account Receivable
This method probably does not reduce the operating cash cycle, but definitely increases the effectivnes of holding the inventory, since only required components are purchased. Days of Account Payable remains unchanged, but the “Duration Cash is Tied Up” is smaller. It is not marked in the diagram, but the “Duration Cash is Tied Up” would be in-between “Inventory Received” and “Payment Received”
We considered this case in which Inventory received comes in front of Payment Received, but if it would be the other way around, then the durations of the cash being tied up would probably be 0.
Also the “Days of Holding the inventory” (components that need to be assembled) is also reduced if not totally taken out of the equation in we consider that the assembly starts as soon as the components arrive.

Patents in genetics - related to the Entrepreneurial Growth class - Module 6

A brief definition of the patents can be found in Merriam Webster Dictionary:
“a writing securing for a term of years the exclusive right to make, use, or sell an invention”

Reading Module 6 for the Entrepreneurial Growth course, we find out that there are 3 types of patents:
1. Utility Patents: protects the working mechanism of a certain mechanism or service (ex: Intel micro chips or the patented specialized software of a company)
2. Design Patent: protects the way an object looks
3. Plant Patent: protects new plants that reproduce asexually (various species of vines)

Doing some individual research, I found out about a 1980’s case, which gave birth to another type of patent. I am referring to the Diamond vs. Chakrabarty Case.
Just to give you a quick briefing on the case:
-Dr Chakrabarty was a renowned genesist who modified a species of bacteria in his laboratory. The result was that the bacteria would eat oil. When thrown on a spot of oil, the bacteria would start to eat and decompose the chemical into other, non- greasy substances, after which it would starve.
-he saw this as a great invention so he went to the US Patent Office in order to get the protection rights. But the Office stated that the law says is clear that no living organisms can be patented. So they denied his request
-Dr Chakrabarty appealed the decision. Helped by General Electric, he went all the way to the US Custom Court Appeal and eventually the case was overruled in Chakrabarty's favor. "the fact that micro-organisms are alive is without legal significance for purposes of the patent law. […] A live, human-made micro-organism is patentable subject matter under [Title 35 U.S.C.] 101. Respondent's micro-organism constitutes a "manufacture" or "composition of matter" within that statute.”( John Paull “Beyond Equal From Same but Different to the Doctrine of Substantial Equivalence” M/C Journal 11(2) May 2008 ). The court saw the invention more as a detergent than as a living organism.
-after seven years, the US Patent Office declared that it issued the decree through which all life can be patented, except a full grown human being.

Patenting parts of life was admitted by a series of countries, including SUA, Japan and most countries in Europe, but some remain skeptic about the implications of such an action and decided to disagree on the issue (Canada for example).

Joel Bakan’s movie “Corporation: The Pathological Pursuit of Profit and Power” discusses more on this issue. The movie documents how genetic companies started to patent all discovered genomes as soon as the law was issued. They invested huge amount of capital in research in order to discover and isolate genes as fast as possible.
New species were created, like the Harvard mouse (see picture), a lab rat that requires permission from the institution in order to be used.

Now there are a lot of moral dilemmas involved here since genetic companies will eventually develop and own parts of human body.
The "good part" is that humans will have the possibility to “renew” themselves, raising their living expectancy. Many diseases will be cured or be one step closer to being cured (cancer in its initial phases can be extracted from the organism, and the infected organ replaced with a new one). Also the black organ market will be part of history.
Further more, consumption will increase (food industry – people will have less fear of destroying their bodies, since organs like kidneys or liver can be “replaced”; cigarette industry – don’t quit, just buy a new lung). I am starting to sound a bit Sci Fi, but there is some truth in what I just wrote.

I hope that this article had some impact on the way you see the future of genetic medicine. But for now, we just have to stay with the stem cell research ;)


Sources:
http://en.wikipedia.org/wiki/
http://www.bustpatents.com/
http://digital-law-online.info/
http://caselaw.lp.findlaw.com/
John Paull “Beyond Equal From Same but Different to the Doctrine of Substantial Equivalence” M/C Journal 11(2) May 2008

CREATIVITY - Book analysis: De Bono, Edward - Six Thinking Hats ----- PART 3

Impressions about the book:

The book was really interesting. It showed a new completely new thinking process that may solve many problems faster and more effective. The book was very well structured and contained a lot of real life examples that really made a difference.
By applying the Six Thinking Hats principle, creativity is boosted due to nature of the process employed since it allows division of the task and enables one to dedicate its focus to only on one part of the assignment at a time, thus reducing the complexity of the chore. One can dedicate exclusively to the emotional part or the informational part or to creativity, criticism and so on.
Another advantage is the ability to switch the thinking perspective, so that all the participants have the chance to see the task from the same angle. Everybody is aware of each other’s hats they are wearing, and their actions are not considered offensive as long as they play the role (this mainly applies to the use of the black hat, a necessity in every decision taking, but whose actions may have as an indirect effect making some participants uncomfortable).
I considered this book a real pleasure to read and I found it very educative.


The picture of De Bono is taken from www.wikipedia.org, last visited on 5/10/08

CREATIVITY - Book analysis: De Bono, Edward - Six Thinking Hats ----- PART 2

As I promised, I will continue to talk about the hats. I found some spare time during the weekend that I put to good use ;)
I will talk about each hat separately.
In my next blog posting I will probably give a brief summary about the book. So stay tuned.

THE WHITE HAT:

The author tells us the best circumstances in which to use the hats. Even though no order is mandatory, in some cases it is recommended. I found his arguments pretty solid.
It is better to be used towards the beginning since it reveals all the background available info. But it can also be used at the end to put all the pieces together and summarize the ideas created.
The hat does not generate ideas. It is neutral in that aspect. It only lays them out and defines the objective, asking the factual question that needs to be searched for. Thus it points out the parts that need to be worked on (the missing information).
It is important for the wearer to communicate just the pure fact out. He/she should be neutral in that aspect since any subjectivity may easily influence the outcome. De Bono gives as an example a lawyer, who even though it may seem to asks factual questions like “Where were you” or “What did X say when you approached him”, it actually represents the opposite side of the white hat, since he/she tries to “bend” the story through these questions in such a way that it will make his/her client innocent.
Own opinions are not allowed when using this hat. Even if statements such as “allegations, gossip and hearsay” (De Bono, 34) are allowed, these beliefs need to have realistic foundations (be checked as facts) and not be mere opinions of the speaker
The author also does a good job in describing how the rest of the participants should prepare themselves for the debate. He does not advise anyone to start any discussion with a preconceived idea. The ideas that help reach the final decision should evolve naturally, as more and more thoughts are added, making the context more comprehensive. De Bono points out that the Western culture does exactly the opposite, since it just bends the preconceived idea till it fits the shape that all the participants agree upon (he refers to the consensus meetings). The white hat hinders this kind of rationale, since it offers everyone who is wearing it to renounce to his/her preformed ideas and contribute with objective facts.

THE RED HAT

As I mentioned in my previous blog, the red hat symbolizes feelings and emotions. Feelings will appear while making any decisions, so the red hat merely enables them to be openly revealed and ensures that they do not remain hidden. They should not be justified, since this may inhibit their conception. The red hat comes as a complement to the white hat.
De Bono starts his analysis by stating the advantages of using the hat. First he talks about ordinary emotions, such as dislikes, sympathies, fears and so on. The author tells us that it is better to bring these thoughts to the surface, so that everybody is aware of them and their influence on the decision making. Furthermore, people do not have to spend time trying to figure their colleagues feelings about a certain issue. They can just offer them the hat and let them confess, thus setting aside any ambiguities, confusions or misconceptions that might have arisen if that person would have remained silent. This way, counterbalance measures may be established in order to render the final result as fast and objective as possible.
De Bono continues his idea, talking about more complex judgments, such as sense or intuition, which are feelings that need to be nurtured. The red hat enables the persons wearing it to express their “hunches” which are at the source of creativity and discoveries. But they should look only for those “intuitions” which are based on judgment and experience. Good entrepreneurs “seem to have this feel for situations” (De Bono, 57) which gives them an extra sense, if you may call it that way, with which they may see new opportunities based on their experience and knowledge in the field.
I was amazed by the amount of practicabilities the hat had. For example, the time spend on a negotiations can be greatly reduced. Since the "negotiation" is due to the existence of variable values (De Bono, 65) (different valuations of the same object), by stating each of the party’s perceived values directly (make them wear the hat), maters can be resolved much faster.

THE BLACK HAT

Also names “the hat of caution” (De Bono, 71), the black hat analyzes what things to avoid and be careful about – analyzes the risks of an idea or the dangers it may bring. The wearer must point out things that do not fit in the overall scenario, things that might cause problems later on. By implementing a logical thinking pattern, this hat relies on criticism (not to be confounded with emotional criticism, which falls under the red hat).
This hat does not favor balanced arguments. It should focus only on the negative aspects of things, the pessimistic view. Focusing only on he cons of every argument, “the black hat legitimizes the value and importance of caution” (De Bono, 75). It points out weaknesses in a project, making it easy to decide whether the plan should continue or be abandoned.
It is important not to argument the thinking, but merely to point out areas that require caution. Also it should not be abused, since it always was easier to criticize than to come up with something productive.

THE YELLOW HAT

This hat comes in play in order to counterbalance the black hat. It is conceived to render the benefits of the ideas and find out opportunities. It represents the optimistic way of looking at things. Compared to the black hat, the yellow one is harder to apply since the brain is more inclined to detect dangers than values. Its goal is to set value into ideas; view them in a “speculative-positive” way (De Bono, 91).
The author very well points out the small details that may make huge differences. For example self interest is very important when wearing the hat, since people think more positive if the idea came from them. But often times this is not the case, so the wearer must deliberately search for optimistic ideas. For that it must always ask him/herself the following question “what to focus on in order to make the idea happen?”
Again, De Bono reminds us to use the hat cautiously. It should not be used to the extreme, and make people overoptimistic since they might loose touch with reality. The author gives a good example and refers to lottery fanatics, whose persistent actions and overconfidence rend them more failures than wins.
Nonetheless, these ideas that point out long shots chances should be mentioned, since once they are said, chances of increasing their occurrence odds can be thought out, making them in some cases viable initiatives.
Positive ideas are best to be justified. But this is not a set rule. Speculations are also encouraged, as long as they lead to constructive ideas. The black hat should be very active when such a case appears and do its best to filter the information afterwards as much as possible in order to determine its feasibility. The yellow hat can come again after the black hat and correct those ideas that were criticized.

THE GREEN HAT

It is used to promote new ideas and new approaches. The hat either improves the existing ones or comes with alternative possibilities. It involves risky exploration of unfamiliar territory.
De Bono sets this hat apart from the rest. Even if all the prior hats demanded for the wearer a certain input: white – information input, red – feeling, black – criticism and so on, the green hat demands actual effort to be invested. He/she is to come up with new ideas, so the green hat wearer may demand time and brainstorming for generating them. Also, instead of judging (as the black and yellow), the greet hat wearers re-quire “movement” (De Bono, 124) meaning passing the idea through different circumstances in order to encourage creativity.
I was intrigued by the radical approach the author makes in order to promote green hat thinking. He says that provocations are encouraged in order to generate thoughts. Placing extreme ideas (some of which may be even illogical or absurd) may be accepted in this scenario. The results may be either to remain stuck, to end up at in the same place you started or come up with a new pattern that may turn out to be helpful.
Overall, as far as I understood, the goal of the green hat is to generate as many ideas as possible in order to have alternatives from which to choose at the end, even if some require you to go beyond the obvious. The creativity process may be and it is recommended to be paused in any moment in order to allow the thinkers to find any alternatives or new ideas within that paused stage that may lead to other solutions (branching).

THE BLUE HAT

The author says that “The blue hat is for thinking about thinking.” (De Bono, 145) What he tries to say is that it acts as “manager” whose main task is to control.
The author goes through all steps in which the hat may prove useful. If we use it at the beginning the wearer will define the situation, the purpose of the discussion, the goals that need to be achieved. The blue hat defines the strategy that will be adopted, maintains discipline along the way and makes sure that the main discussion doesn’t alter from its main course.
The hat, as the author mentions should be used by the facilitator, chairperson or leader of the session. Once the person undertakes that role, he/she cannot change it. Nevertheless, others may suggest alternatives procedures to him/her. Still the main role of the hat wearer is to monitor and not to interfere in the discussions, unless he/she wants to make adjustments to the direction of the discussion or impose discipline.
At the end of the discussion, the blue hat wearer will ask fort the outcome or summary of the work and see the progress done. Even though he/she is allowed to make comments along the way with what he/she observes, a summary and a conclusion are essential since it summarizes all the scattered ideas that were said during the discussions. Even if no progress was done, the blue hat still has to mention that.

CREATIVITY - Book analysis: De Bono, Edward - Six Thinking Hats

De Bono struck me even from class as a remarkable person. He is best known for his lateral thinking concept also knows as structured creativity. He considers that people should be more creative, so he devised a series of techniques like lateral thinking (more on that topic can be found in his 1992 book called “Serious Creativity”) which were considered to be more effective than existent unstructured creativity methods such as the well known brainstorming method.
The book that intrigued me the most was “Six Thinking Hats”. I will discuss it throughout my next postings on the blog. The full title is: De Bono, Edward (2000). Six Thinking Hats Little, Brown and Company, Boston. This book seemed very friendly and full of useful examples that clarified the concepts he tried to explain. It is comprised of approximately 180 pages that are divided into 42 chapters. There are several copies at the Jönkoping Library and I advise you to go through it if you have the chance.

Introduction

The author starts by describing the huge impact this thinking strategy has done around the world. De Bono claims that by using the method of the parallel thinking of The Six Hats, corporations can reduce their project team discussions from 20 days all the way to two days. For that, he uses a series of examples, starting with IBM, a company whose researchers announced a reduction of 400% of the time spend in meetings. Norway’s Statoil Company, a firm that had a problem once with one of their oil rigs (costing them $100.000 a day), also solved its issues within 12 minutes by implementing the thinking hats strategy! The statement was given by Jens Arup, a certified trainer working for the corporation. More examples of successful implementation are given, from businesses like Siemens all the way to the judicial system.

As far as I understood, the success behind the strategy is the possibility to separate emotions, information, creativity, etc which make our decisions way to complicated. By simplifying our thinking, the author claims that we are able to reduce confusion and allow ourselves to successfully focus and process simpler decisions. By placing ourselves in the character defined by the hat we are wearing, we can narrow our field of vision and take the best decision for only that particular role we are playing.

The parallel thinking ideology the author is using is based of analyzing all aspects of the problem, not only from one perspective. De Bono uses an example involving four people observing a house. Instead of fighting who is the one who sees the house correctly, he suggests that they should rotate and inspect all views, thus having at least one moment when everyone is looking in the same direction.
Hats implement the same logic. They make the people rotate around the issue, but everyone will take the other’s role and eventually inspect the problem with the same eyes as the others did or will do. Overall, as far as I understood, Hats label thinking and direct the way people should perceive an issue, so that the aspects of the problem are viewed in parallel from all perspectives by everybody.

Why hats? The author gives a number of reasons:
-symbol to indicate a role, a direction of thinking
-easily can be put or taken off
-it is visible by the rest

The author also sets some confinements when using the hat:
-hats describe directions of thinking, and not descriptions, meaning that the idea said should be under the umbrella of the thinking concept assumed by the color of the hat. One should not state an idea and then describe it using different hats, but form the idea towards the direction imposed by the hat he/she is wearing.
-the hats are not descriptions of the behavior and thinking of people, but roles of behavior.
-hats should “rotate” among the debate participants. One should not undertake only one role, under one hat color. Still all can wear the same hat at the same time, if collective thought is required.
-the rules of the game should be respected by everyone. Aggressiveness in thinking is allowed only under the hat that allows you to (e.g. yellow hat)

De Bono justifies his theory by writing about the feedback he received from several people who implemented the hat concept. He shows some of the benefits that resulted from adopting his ideology:

Power: this method allows the experience, knowledge and intelligence of all the members of the group to be used at full potential. Everybody’s ideas –pros and cons- can be heard once they go through all the hats; both strengths and weaknesses can be said.

Time saving: parallel thinking makes all the members look in the same direction at every moment in time. By stating the ideas in parallel, no one makes counterarguments at another one’s thoughts, but merely places his/her new solution along side the existing one. This way, all the alternatives scenarios are thought, and there will be only one debate at the end that will determine which idea from all the alternatives will be implemented.

Removal of Ego: removed by rotation – the subject is analyzed objectively this way

One thing at a time: narrowing the fields we have to cover when we make a decision. For example by wearing the green hat we only look at new ideas, white hat - only focus on information and so on.

Before he starts describing the hats in detail, De Bono gives us a brief introduction about what the hats symbolize. I will cite the author’s description:

White Hat: neutral and objective. Concerned with objective facts and figures
Red Hat: suggests an emotional view like anger or rage
Black Hat: somber and serious. Person should be cautious and careful. It points out weaknesses in the ideas.
Yellow Hat: sunny and positive. Optimistic aspects that cover hope and positive thinking
Green Hat: symbolizes creativity and new ideas
Blue Hat: concerned with control, the organization of the thinking process and the use of other hats.

The usage of the hats can differ. Overall, there are two main alternatives:
-single use, in order to cover the idea from the perspective of one hat (for example “we should see this issue from the perspective of the Black Hat”)
-sequence use: use the hats in sequential order for full coverage. Not all hats should be used and the sequence itself should be random, in order not to influence the outcome. Some orders may be recommended though, like for example using the yellow hat after the black one, since it would be better first to see the beneficial part before analyzing the back draws. If there are few beneficial aspects of an idea, there is no need to continue, since chances are that the thought will fail once it passes through analysis of the black hat. Also the red hat should be used among the first, in order to reveal all the resentment one has about a certain subject before proceeding into the matter.

In my next posting I will discuss in detail about the Six Thinking Hats.