Businesses are fountainhead of ideas: Harvard don

Last Updated: Fri, Nov 09, 2012 14:30 hrs

New Delhi, Nov 9 (IANS) The most innovative ideas and thinking arise first in business, not in a university or business school, says Harvard don and management guru Robert S. Kaplan.

"Business faces continual competitive challenges and somewhere, within that big sector, there are brilliant ideas and innovations," Kaplan told industry and business leaders at a FICCI event here Thursday evening.

Kaplan, who was here to receive the Global Management Guru Award instituted by Birla Institute of Management Technology (BIMTECH), rued the fact that many management and societal problems were caused by poor measurements.

Constructing an accurate cost and profitability model for an enterprise with hundreds of products and serving millions of customers in thousands of stores would have been virtually impossible 40 years ago, said Kaplan, the world's leading authority on strategic performance measurement.

Advances in computing software and hardware had made such a project economical and almost routine, noted Kaplan, according to a BIMTECH statement.

Kaplan said his key insight was measuring the cost of unused capacity (the cost of supplying resources is equal to cost of using resources plus the cost of unused capacity.)

This simple but powerful explanation provided the foundation for his Activity-Based Costing (ABC) Theory.

As companies reduce the quantity of demands on the organisation's capacity-supplying resources -- through process improvements and lean initiatives, by increasing batch sizes and reducing product variety, etc. -- one created unused capacity in these resources, which managers could then redeploy or eliminate, he said.

Welcoming Kaplan, a professor at Harvard Business School, FICCI vice-president Sidharth Birla said entrepreneurial Indian businesses could draw lessons from Kaplan's work to achieve sustained growth.

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