Thursday, June 16, 2011

Strategy - 20

In the last blog we were talking about the concept of productivity and attempting defining it. In today's blog, we will try understanding this with an example. We would take simple situations of daily life and extend it to the context of an industry to really understand the concept of productivity.

We all generally have one resource at our disposal - time. If we look at the various things we could do investing the time we have, it becomes clear that we generally love to do the most "productive" utilization of time. We could probably use the time to teach a few kids something they have difficulty with, or use the time to read something or on one of or hobbies. We continue or decide to discontinue a particular investment (or spend) of the time at we have depending on the satisfaction we derive by using it in the particular activity.

Now, let’s get to the corporate context, more so to the Bangalore phenomenon of cabs (interchangeably car). One of my conversations with a cab driver gave me an insight that way this business works. There are the travels or tour cos or city taxi agencies which offer this service to the companies. Many a times the cabs offered by these agencies are not really owned by them. They are a property (or resource) of an individual who has given it to the agencies.

If we look at it from the investor's (the car owner's - he is looking at earning quite a bit from it!) perspective he could probably have used it himself or given it to a school to be used at peak hours or like in this case give it off to an agency (there could have been a lot more scenarios but we shall just freeze this to these). His returns on just owning a car, and using it for his personal use wouldn't make the car as productive, so he would like to rent it out. The second option of giving it to the school as a school car would give him some returns, but would be relatively less since the school might not use the car as frequently and pay a higher rent. In the third scenario, he would give it off to an agency; he could expect a higher return. The agency would use this car as a resource rent it off to offices in morning and evening, while by the day use it as a city taxi for a general passenger.

In the illustrations above, we clearly see the usage of the definition of performance as - "The comparative value an organization is willing to create using its productive assets with the value that owners of these assets expect to obtain".

Read in Kannada:

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