The Edge last week featured some interesting articles related to business. Here I’ll share a few which I think is interesting.

What do these people all have in common?

• Convicted felon Jeffrey Skilling (Enron Corp’s former chief, who is serving a 24-year prison term for fraud)
• Deposed CEO Stan O’Neal (Ousted by Merrill Lynch & Co after failing to know about mortgage risks)
• Struggling CEO Jeffrey Peek (He is seeking to sell CIT Group Inc’s assets after the lending company’s shares dropped 73% in the past one year)
• Unpopular American President George W. Bush

The answer: They all went to Harvard Business School.

But of course, make no doubt about it: Harvard Business School undoubtedly helped put them there in the hot seats in the first place. The article questions the role that Harvard plays in shaping leaders who succeed or fail. Circumstances that occur in life such as a bad marriage, death of family members, or a bad accident can affect executives. Basically it goes on to say that when students come to HBS they all carry with themselves their own set personality which cannot be changed by simply taking more courses in interpersonal relations etc.

A study on 50 HBS students before they enrolled until they graduated in 2006 found that one-third were still stuck in adolescence and had problems emphathising with people. Another third were found inclined to define right or wrong in terms of what everybody else was doing. This might explain why even well educated executives have fallen prey to the subprime-mortgage debacle. The subprime-lending spree shows that Harvard and other elite schools fail to mould managers who look beyond self-interest, the article says.

But of course, HBS has its share of corporate icons as well: US Treasury Secretary Henry Paulson, formerly head of Goldman Sachs Group Inc; Louis Gerstner, IBM; and Meg Whitman of eBay. Not to mention also New York City Mayor Michael Bloomberg and majority owner of Bloomberg News parent Bloomberg LP.

Many tech companies do not have MBA students as their CEOs or founders. My impression is that an MBA sort of encourages group-thinking and execution using conventional methods. But I don’t know much and don’t want to pretend that I know much either.

On a side note, I don’t think that I would be pursuing an MBA after graduating from Berkeley. I do intend, however, to pursue a Masters in Engineering and work at the same time, God-willing, through Stanford’s Honors Cooperative Program. 3 years at Berkeley, then off I go to work for 2-3 years in US while doing a part-time Master’s Degree Program@Stanford and also save up money to start a company. Then I would return home to Malaysia and do just that.

Haha… It’s so easy to dream

No, this is not an allegation. I have data to justify what I have stated above. A very interesting observation indeed.

So, it turns out that I have worked for iZZi Wireless Broadband for 3 months already (iZZi’s service is only available in the Klang Valley for now). Until this day, I have sold broadband packages to 37 customers (each package requiring an upfront payment of more than RM 1000, so I can deduce that this group of people belongs to the middle class or higher). But that is not the point.

The point is that out of my 37 customers, 27 customers use 012, 4 customers use 017, 2 customers use 016, 1 customer uses 013 and another 3 customers use 019.

The breakdown (out of 37 customers):
31 Maxis subscribers (84%)
4 Celcom subscribers (11%)
2 DiGi subscribers (5%)

Interesting huh? Despite the rampant and aggresive promotions by DiGi and Celcom, middle and upper classers are not that price sensitive and do not see the need to switch from their beloved Maxis. And of course, Maxis is also offering very attractive rates and packages. But of course, this goes to show that different subscribers target different niche groups, and this finding does not represent the proportion of subscribers that each of the telcos have in Malaysia. (my findings are limited to the Klang Valley and are targeted at more affluent Malaysian users)

Nice piece of info yeah?

Customer: One question, this internet package need to pay upfront right?

Me: Yes that is correct, it is packaged that way but you can pay monthly with credit card easy payment scheme.

Customer: New company always close down one what. What if three months down the road your company close down then how?

Me: We might be new and 8 months in the market, but we are actually doing quite well in sales and we are linked to a larger parent company.

Customer: What company is that?

Me: Mobif Berhad based in Penang .

Customer:  Established company also can close down what. Recently got this satellite TV company shut down… Then what happens then? Where will my money go?

Me: Sir, everything has a risk one. This is business.

Customer: No la dun wan to buy la scared later your company close down.

Me: =.=“ (sweat)

Some people ah I tell you… if you think like that, don’t need to buy anything la mister…

The Microsoft-Yahoo Marriage

Microsoft has launched an unsolicited hostile bid for Yahoo! at the price of USD 44.6 BILLION. They have the intention to take on the world’s No. 1 internet search leader, Google, which is by far the one with the largest market share of internet searches and is making much more revenue in online advertising than Yahoo’s and Microsoft’s revenues combined. This is a classic case of the No. 2 and No. 3 teaming up to compete with the No. 1. If successful, this deal would eventually mean that the world of search would be handled by a duopoly, Google and Microsoft. As David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer of Google puts it in the Google Blog:

So Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the Internet: openness and innovation.

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies — and then leverage its dominance into new, adjacent markets.

Indeed, Microsoft, the Windows OS and software giant is witnessing a boom in the growth of companies such as Google and Apple, which now directly threaten its very existence. It seems to be switching strategies to play catch-up with the online advertising leaders by offering a bid to swallow Yahoo!

Yahoo!
Brian McGuiness/Agence France-Presse — Getty Images

Reactions gathered about this bid go both ways. Some say that if Microsoft and Yahoo join hands, the world benefits from having a more sizable competitor for Google, thus enabling users to enjoy the benefits of healthy competition that churns out better innovation. Perhaps this might be so, but Google’s search technology is far more superior to that of MSN’s or Yahoo!’s. Proof? Just use it yourself. It has been ages since I have used a Yahoo! search engine or MSN Search. When I did, Google inevitably gives me more quality results for my searches. So the Microsoft-Yahoo company must come up with an even better technology to rival Google’s PageRank algorithms.

Microsoft

Here’s what Steven Ballmer, CEO of Microsoft Corporation wrote in a letter to the board of directors of Yahoo!:

Microsoft and Yahoo! can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:

— Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.

– Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.

– Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.

— Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.

However, another concern is the integration of two behemoths with its different set of cultures and work-ethics. Also, Yahoo! and Microsoft are now bleeding talent to many other start-ups such as Facebook, Mozilla and many younger start-ups. By the time the acquisition is over, the talents that drove both Yahoo! and Microsoft may already be drained. Many of the engineers there have left or are talking about leaving.

In the meantime, Google has came out publicly against the bid by Microsoft, referring the offer as a threat to competition.

A NY Times article reports:

Privately, Google, seeing the potential deal as a direct attack, went much further. Its chief executive, Eric E. Schmidt, placed a call to Yahoo’s chief, Jerry Yang, offering the company’s help in fending off Microsoft, possibly in the form of a partnership between the companies, people briefed on the call said.

Google’s lobbyists in Washington have also begun plotting how it might present a case against the transaction to lawmakers, people briefed on the company’s plans said. Google could benefit by simply prolonging a regulatory review until after the next president takes office.

What would happen next?

This blog post is adapted from The Edge Malaysia (the week of January 28, 2008) exclusively for ErnSheong.com.

AirAsia

AirAsia X is a new long haul budget airline operated by Air Asia X Sdn. Bhd. It has a company culture very similar to that of AirAsia. Both share the same ticketing website, livery, uniforms, and management style. (Wikipedia)

The Edge correspondent Ooi Ying Nee interviewed AirAsia X’s CEO Azran Osman-Rani, a man who is very much hands on in his approach of management. He is one who does not believe in depending on reports to do business in this day and age. He is not afraid of getting his hands dirty on the ground. At times he can be found manning the company’s check-in counter at the Low Cost Carrier Terminal in Sepang, standing on the tarmac loading luggage, or even inspecting the plane with his technicians on a late night shift. With that Azran says that he is able to be in close touch with how his airline operates.

Manager@Work front cover, The Edge

A bit of background: Azran Osman Rani has a Bachelor’s degree in Electrical Engineering and a Master’s degree in Management Science from Stanford University in the United States (what a coincidence, if I were to go to Stanford I would have picked the same combination to graduate with!). More on his career path later.

I will report the article in the following format:

Question
Summary of what he said in first person format.

Here goes:

Does AirAsia X have a culture distinct from AirAsia’s? How do you differentiate the two brands?
Ultimately, we are gearing towards a single unified culture, be it AirAsia, AirAsia X, AirAsia Indonesia or Thai AirAsia. Despite having different shareholders, Tony Fernandes (group CEO of AirAsia) emphasizes that it is all one unique culture. In essence, the underlying brand is AirAsia. What we at AirAsia have been trying to do is to create an upbeat atmosphere and a hype place to work in. At times, I receive feedback from others in many informal ways, be it the guy on the ramp or at parties. Formal hierarchy or structure cannot be depended on sometimes. These informal chats allows information to travel faster and more importantly encourages the freedom to voice out.

So the culture is the same although it is two different companies?
Of course, it is imperative that the balance sheet is remains separate. AirAsia X has the advantage in the sense that it is still a private company and thus we can do private fundraising first. Had we been a public listed company, we would not have been able to let Virgin and two other private equity firms to come on board. However, being a single big unified company allows AirAsia X to enjoy economies of scale by pooling with AirAsia. Pilots and the crew can switch to AirAsia X since the planes we are using (A330) is just a longer version of that which AirAsia uses (A320).

Richard Branson and Tony Fernandes announcing their partnership in AirAsia X

AirAsia hires its staff from a pool operated by AirAsia. How many people are actually AirAsia X employees?
We have 60 people working only for AirAsia X and more than half of that are in the engineering team because AirAsia X uses a different aircraft type. We have small finance, marketing and HR teams. However, although we have senior people in security and in-flight operations, the actual staff is from AirAsia. It is a model that has benefited us. I am not so definitive about having a distinct organization for the sake of it. As for AirAsia X, it only makes sense to pool with AirAsia.

How sustainable is the long term as the airline expands? Does AirAsia X intend to hire its own staff in the future?
I would rather hire new people as part of the AirAsia pool. The AirAsia Academy gives us a large competitive advantage. We need not worry about acute pilot shortages because we have a steady pipeline via the academy. We need not go out and poach from other airlines and pay ridiculously high wages. We also open up opportunities to Malaysian pilots who left to fly for Middle East airlines, but want to return home to fly.

What did you think of the AirAsia culture when you first joined, coming from Bursa Malaysia, Astro and McKinsey?
Though I come from a corporate background, it has been an easy assimilation on the personality front. I have always been comfortable with jeans without a tie. Astro was a place where, because it dealt with dial media, it was rather open, especially during the days when I started Astro Indonesia from nothing up. Also, there were a lot of young people in Astro, who were less fixed in their methods. Certainly, Bursa was a bit of a challenge.

The Sky is the limit for AirAsia X.

Why did you decide to take on the job? How did Tony Fernandes lure you from Astro?
Tony called me to work in an organization that competes globally in an unprecedented category. At the time, AirAsia X was being featured in many top newspapers and magazines around the world; it will change the industry globally. That’s how we got Richard Branson to come in to invest. Not many Malaysian companies can say that they are not just copying the big global industry leaders but are actually leading the way in the front. Hence, this was a very unique, once-in-a-lifetime opportunity. The airline industry has been doing things for the same way for the past 80 years and we have come to shake things up to do something revolutionary.

What part of the job excites you the most?
The buck stops with me and that’s what is incredibly fascinating about it.

One of AirAsia’s cost cutting measures is training its employees to take on multiple jobs. Does that apply to you as well? What do you do as CEO of AirAsia X?
Let’s be clear about it. I am responsible for the performance of AirAsia X ranging from the revenue we garner, how many people we can fly and how efficient the organization is run. That is the bottom line. I spend most of my time with the customers to know exactly what people are experiencing. Hence I spend a lot of time replying e-mails and taking calls. I also spend a lot of time making sure that everybody knows the vision and breaking down a very complex business into four or five basic objectives. When I came, I told people that there are only two things that will get them the sack. First is not trying at all. Second is not being a team player. If you hide or hoard data or information, if you are not helping someone else out, that’s it.

You mentioned that the company has to have values that are critical for a start-up. AirAsia X has a huge supporter, AirAsia. Does it has the characteristics of a start up still?
Of course. We’re starting very small, with one single plane going against Singapore Airlines that has over 100 planes. We have a small team. We cannot afford divisions. People need to move extremely fast and they need to sustain that intensity. The pace is faster than AirAsia because things are now more institutionalized there given its scale. Also, given our long haul model, we are doing things much more differently from AirAsia.

AirAsia X

How has your background in consultancy and your previous jobs prepared you for this role as CEO of AirAsia X?
My whole professional career, from what I went through in Stanford, to what I did in Bursa, to Astro, to here, is really all about implementing a systems approach to ensure interconnectivity in business. At Stanford, Management Science was about looking at every aspect, not just the engineering aspect, the marketing aspect or the finance aspect. In consulting also (McKinsey), it is also about figuring how all things tie up and what’s the right path to settle problems, as it is never just a sales issue or an administration issue. In Bursa, there were technology issues, people and marketing issues, and challenging regulatory aspects. I was brought in to tie everything together. In Astro, I started Astro Indonesia from a piece of paper. For that, you need the engineering and broadcasting teams to work in tandem with the marketing team and the content production team as well as the sales force and the call center. You’ve got to link everything up so that it interlinks. I am also a firm believer in effective comminication skills.

Tell us about your management style. How different is it to run a no-frills airline as opposed to your job at Astro?
I read a book called ‘Situational Leadership’ and I am is a great believer in ‘different strokes for different folks.’ When it comes to working with people, I am very open. I don’t believe in layers or talking to five direct reports. I go to everyone, even the ramp boys loading the bags. I don’t believe in big fat reports and analysis, I believe in talking if you have got an issue. When a private equity firm asked me for my market research and a report that shows the size of the long-haul future market, I told them flatly, ‘don’t have one.’ I go to the Matta fair and you see these aunties and uncles shoving to grab promotional fares. Evidently, travel is price elastic.

How do you get people to ’snap to it’ without them snapping themselves?
Culture is hence important. You work hard, you play hard. We have fun with each other and thus spending time working hard in the middle of the night becomes fun. If they are used to going home at 5.30pm, they would have been removed already. People here are people who are hungry for more.

What have been the biggest challenges since the launch of the airline’s first flight?
Oil price and the availability of aircraft. Now even with all the money, you cannot get planes because Boeing and Airbus are delayed in their production line and even old planes are thus being held on to by other airlines. I cannot venture further without planes, therefore these are my two main big variables

The rest of the interview touched on delays and how AirAsia X handles them. According to him, AirAsia X will fly to three or four cities in China when they get the chance. Australia, four or five cities. Others are India, South Korea, and Japan. Once they get the A340, they could fly to the UK. That alone takes 25 planes, he says. Once the advanced next generation planes arrive, they could do Europe direct, New Zealand direct and Los Angeles direct. Routes are the easy part. He mentions that getting the planes, confirming the launch, working with the right airport partners and executing the plan is the hard part. In essence, he says that at the end of the day it is all about how well the execution is done.

What a challenging and exhilarating job!