Happy New Year!

Assess your grand settings carefully. Plan and Position yourself with an advantage.

Implement your plan for 2009. Good luck!

Pragmatic Strategic Guidelines in Unpredictable Times

Lately, there have been some chaotic situations that gotten us to reread our situational guidelines list

Following are some of our strategic guidelines for the traveling strategists:

• Plan and prepare early
• Focus on the safety of you (and your entire team)
• Leave early. Carry lightly. Travel fast and quietly.
• Use a transportation service that is trustworthy and reliable
  
• Leave for the airport before dawn breaks
• Arrive promptly and quietly
• Take rooms between 3rd floor and the 9th floor
  
• Never take rooms near elevators and exits
• Always have a min. of two escape routes
  
• Always have a lightweight "Go" bag of essentials available
  
• Carry a paper map just in case your PDA is not available
• Store your corporate data in a separate portable digital storage device
  
• Always carry a paper list of contact phone numbers (include fax #'s) and a calling card.
• Always have some "all-climate" clothes available in your clothing pack
  
• When traveling alone, keep one hand free and always be aware of your grand settings.

Why Plan?

"In planning, no useless move. In strategy, no useless move in vain." - Chen Hao

It has been said that a bad plan is always better than no plan. Why? One can always adjust a bad plan. The question is, how can one adjust their strategic focus when they have no plan?


Tactical Deployment

"In the field of observation, fortune favors the prepared mind." - Louis Pasteur

• Stay centered, relaxed, ground, calm and consciously aware
  
• Always play it safe
• Never make decisions based on emotions
  
• Never take large risk for a small gain
• Focus on executing a purposeful move that propels a gain of strategic value.

Copyright: 2008 © Collaboration360 Consultants (C360 Consultants).
Copying, posting and reproduction in any form (without prior consent) is an infringement of copyright

Competing in the Global Economy: Creating a Fast Start (1)

Regardless of the various crises', there are opportunities. How are you find it?

Anyone can claim that they know how to assess strategically. Whether they can do it, that would be a miracle.

We have two questions to our readers, "Do you know what is the supposed outcome after you have assessed the big picture? ..." The answer should be in terms of the context of Sunzi's The Art of War.

The second one is "What is your next step after you answered the 1st question?"

We are offering a copy of a Chinese strategy book to anyone who can give us the answer. Any takers!?

The Outcome from Poor Assessment

Regardless of the arena, strategic assessment is a necessity.

Following is our C360 process:

• Collect your data with a good intelligence gathering process.
• Assess your data.
• Verify and validate
• Re-assess one more time.

Always verify and validate your data yourself and with someone who has your best interest in mind.

###

Sunday, December 21, 2008 (SF Chronicle)
What investors can learn from Madoff scandal
Kathleen Pender
What can investors learn from the Bernie Madoff scandal?

It's not clear exactly how Madoff allegedly bilked wealthy and supposedly sophisticated investors out of $50 billion in a Ponzi scheme.

Unlike hedge funds, which are essentially unregulated, Madoff registered as an investment adviser with the Securities and Exchange Commission, but not until the SEC forced him to do so in 2006. For decades before that, he operated solely as a broker-dealer, which is also subject to scrutiny by the SEC and Financial Industry Regulatory Authority, the securities industry's self-regulator.

It will be awhile before we understand how the SEC failed to detect the fraud until Madoff's sons, who worked with him, turned him in this month.
But based on what we know so far, here are 10 lessons for investors who work with registered investment advisers.

1. Don't buy what you don't understand. Madoff reportedly told clients he invested in blue-chip stocks and then hedged his positions by trading put and call options on the Standard & Poor's 100 stock index. Although this is a fairly common strategy, it's hard for people who are not financial wizards to comprehend. "If you can't understand the strategy, you have no business investing," says Jay Gould, an attorney with the law firm Pillsbury Winthrop Shaw Pittman.

/// *** Don't build a plan if you do not understand what you are assessing

2. If it sounds too good to be true, it is. Madoff claimed to earn 10 to 12 percent, year after year, with nary a down month. In the real world, such consistent returns are as improbable as doubling or tripling your money in a year.

/// Perception is reality. Always look at the grand picture. Ask yourself does it make sense?

Other firms using a strategy like Madoff's could not figure out how he made such returns in up and down years. Some brought their concerns to the SEC.

"Real put-option strategies can and do provide fairly consistent income, but not in all markets," Gould says.

3. Know where your money is and who is watching over it. Registered investment advisers must place client assets with a qualified custodian, usually a bank or brokerage firm. Advisers can use an independent custodian, which provides an extra layer of security, or an affiliated custodian, which apparently is what Madoff did. The custodian must provide quarterly statements, either directly to the investor or to the adviser to give to the client. "If the statement is delivered by the adviser, that is where there is the potential for the adviser to manufacture the statement," says Clifford Kirsch, a partner at the Sutherland law firm in New York. Madoff allegedly faked statements to make it look like his clients owned securities when in fact their money was being used to pay off other investors. If your money is with an adviser, find out where it is held, whether the custodian is affiliated with the adviser and what safeguards are in place to make sure the adviser can't swipe your money. If you give your adviser discretion to make trades in your account, do not give him or her permission to withdraw funds. And make sure statements are sent directly to you. "Nowhere is (Ronald) Reagan's old adage more applicable than in this case: Trust but verify," says Mercer Bullard of Fund Democracy, an investor advocacy organization.

4. Audit the auditor. If the client receives statements from the adviser (instead of the custodian), the adviser must submit to an annual surprise audit by an outside firm.
Madoff's sole auditor reportedly operated out of a tiny office in suburban New York. A legitimate firm of Madoff's size would have employed at least one brand-name auditor. If your adviser has an auditor, be sure it's reputable.

5. Are your assets insured? Most brokerage accounts are insured against fraud or embezzlement (but not against market losses) for up to $500,000 per account by the Securities Industry Protection Corp., a private, nonprofit entity.

Many brokerage firms purchase insurance that covers additional losses. Find out what insurance your account has and who provides it. (For more, see www.sipc.org.)

6. Diversify. Some Madoff victims had virtually all their assets with his firm, which violates the first rule of investing: Don't put all your eggs in one basket.
"One would never want to have all their assets with any one manager, no matter how brilliant or safe they are," says Joyce Linker, a principal with ThinkEquity who helps clients of the San Francisco bank evaluate money managers.

7. Beware of affinity groups. Many scam artists recruit clients through religious, ethnic or work groups whose members know and trust each other.
Madoff's clients included many wealthy Jewish people and nonprofits in New York and Florida who found him through word of mouth. "We've seen more people steal money in the name of God than any other mechanism," says Wisconsin securities regulator Patty Struck.

8. Understand fees. Sheryl Garrett, head of the Garrett Planning Network, an association of fee-only financial planners, says investors should fully understand how their advisers are compensated.
"Strongly consider not giving anyone trading authority or the ability to withdraw their fee from your account. You can write a check for the fee," says Garrett.

9. Stick with funds. If all of the above seems like too much work, stick with mutual funds, which are much more closely supervised.

10. Don't assume the SEC will protect you. "It's unacceptable that the SEC is not providing the basic level of protection that investors ought to be able to rely on," says Barbara Roper, director of investor protection for the nonprofit Consumer Federation of America. "They ought to be able to assume that the SEC is weeding out those kind of obvious con artists for them."
Unless things change at the SEC, Roper says, "Good luck. You're on your own. Cross your fingers. And hope for the best."

Net Worth runs Tuesdays, Thursdays and Sundays.
E-mail Kathleen Pender at kpender@sfchronicle.com.
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Copyright 2008 SF Chronicle
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A Thank You Note

Last month we did a presentation on applying Sunzi's The Art of War in business. We also demonstrated the basic framework of our process.

Following are comments from Dr Fellman, the Professor of International Strategy from University of Southern New Hampshire


"M.E. Hom has taken the ancient strategic writings of Sun Tzu (Sunzi) and incorporated them into a modern international project management methodology of unusually sophistication, flexibility and practicality. He combines the best elements of competitive intelligence, strategic planning and contemporary business theory into a process which can be practically applied by managers around the world.

Mr. Hom has been a frequent and well-appreciated guest lecturer in our MBA and MS courses and I give his process my highest recommendation. ..."

- Dr. Phil Fellman, Professor of International Business, University of Southern New Hampshire


His comment on one of our previous presentations
“The Chinese students said that on the Mainland, they don't study Sun Tzu, so they found it very interesting and also very new. They were deeply impressed by your level of knowledge and I was very grateful to have you as a guest lecturer.” -Dr. Phil Fellman

What Divides the Wheat From the Chaff

Survival is not a strategy, neither is change and hope.

One cannot have a strategy without assessing and understanding the grand picture. Guessing the forthcoming situation is not a good idea. It wastes time, resources and effort.

In good times, it is easy to make money when everyone is making money. Making the right decisions in chaotic times is what separates the wheat from the chaff.

With our Compass AE process, your company can do the following:

• assess the grand situation with extreme accuracy;
• position your project team toward success (through our process); and
• implement your plan with no faults.

Your project team will always make the right decision.

Copyright: 2008 © Collaboration360 Consultants (C360 Consultants).
Copying, posting and reproduction in any form (without prior consent) is an infringement of copyright
#

Survival Is Not a Strategy
In these perilous economic times, the layoff memos often follow a familiar refrain: “We have cut costs by 20 percent. That gives us an additional year’s runway. Or two.” But while yes, companies can cut costs and prolong their survival, when it comes to startups, just because they can doesn’t mean they should.

I’m speaking here of venture-backed startups, which represent a small minority of companies. The sole purpose of most companies is to create a steady income stream for their owners and operators — in other words, survival. Venture-backed startups, on the other hand, are created with the sole purpose of a successful exit.

Why growth is crucial

Whether that exit comes in the form of an acquisition or an IPO, in the meantime, the lifeblood of any startup is growth, be it in terms of customers, usage, revenues or profits. Under most economic conditions, an IPO is impossible without revenue and profit growth, and we are unlikely to see that change any time soon. From an acquisition point of view, stagnant companies are valued at low multiples of revenue, say 1x-2x. And while popular meme suggests that flat is the new growth — given the downturn in the economy, the argument goes, even keeping revenues flat is sufficient — this argument does not apply to startups.

By definition, startups are supposed to be attacking nascent market opportunities and unsaturated markets, and as such should be able to grow even during a downturn. If a startup cannot find growth in this environment, it’s a clear message that the market opportunity might be better served by an established company. Of course, growth in profits or revenues are far better than just growth in usage, but even growth in usage is better than stagnation on all three fronts. There is at least the possibility that a company with strong usage growth might one day be attractive to an acquirer with a good monetization engine.

It’s no fun to work at a startup that isn’t growing. Stagnation leads to low morale, with people sitting around waiting for the axe to fall. Rather than let the company become a zombie, management would be doing their investors and employees a favor by pulling the plug and returning the remaining capital to investors.

Why VCs often don’t put companies out of their misery

Founders and executives have a lot of emotional capital invested in their companies, so when it comes to making the ultimate decision, their reluctance is understandable. What’s surprising is how often VCs let companies turn into zombies. The reason for this is a subtle misalignment of interests between VCs and their investors. As long as a startup still appears to be, on some level, alive, VCs can carry the company on their books at the valuation set by the last round of financing. Once they pull the plug, the fund will receive pennies on the dollar, a loss that has to be recorded on the books and doesn’t look good when the firm goes to raise their next fund. Every VC portfolio, therefore, has its fair share of zombies.

Another contributing factor is excessive preference overhangs. Investors receive preferred stock with the right to get back their invested capital ahead of common shareholders in an exit; in some cases they have the right to receive a multiple of their invested capital ahead of common shareholders. The total amount that investors need to receive before common shareholders can participate in an exit is called the “preference overhang.”

If a company has raised so much capital that any realistic acquisition will be below the overhang, then common shareholders stand to receive nothing from the sale — and company management has no incentive to look for such an exit. In such cases, it’s important for the VCs and management to agree to restructure the preference overhangs to make such exits attractive to management. Otherwise the company is destined to become a zombie.

Every startup founder and employee has to consider three possible outcomes: success, failure and zombiehood. Success is much better than failure, but quick failure beats wasting years of your life on a zombie. If you are a company founder, and you are considering layoffs to extend the runway (perhaps on the advice of your venture investor), you should look in the mirror and ask yourself whether you are cutting away your growth opportunity and just choosing a lingering death over a quick one.

Anand Rajaraman is a co-founder of Kosmix and Founding Partner of Cambrian Ventures. Disclosure: He is also an investor in Giga Omni Media, parent company of GigaOM.

http://gigaom.com/2008/11/21/survival-is-not-a-strategy/

One's Comment on a C360 Presentation

A note of appreciation and endorsement of my process

M.E. Hom has taken the ancient strategic writings of Sun Tzu (Sunzi) and incorporated them into a modern international project management methodology of unusually sophistication, flexibility and practicality. He combines the best elements of competitive intelligence, strategic planning and contemporary business theory into a system which can be practically applied by managers around the world. He has been a frequent and well appreciated guest lecturer in our MBA and MS courses and I would give his process my highest recommendation.
--- Dr. Philip Vos Fellman, MBA Yale, PhD Cornell Professor of International Business Strategy Southern New Hampshire University School of Business

Strategizing from a Superior Position

One trademarked move of the Chinese Strategies approach is creating misdirection at one point while attacking from another.

This following article is from Stratfor.com (an astute group dedicated to analyzing geopolitics)

#
Last Wednesday evening, a group of Islamist operatives carried out a complex terror operation in the Indian city of Mumbai. The attack was not complex because of the weapons used or its size, but in the apparent training, multiple methods of approaching the city and excellent operational security and discipline in the final phases of the operation, when the last remaining attackers held out in the Taj Mahal hotel for several days. The operational goal of the attack clearly was to cause as many casualties as possible, particularly among Jews and well-to-do guests of five-star hotels. But attacks on various other targets, from railroad stations to hospitals, indicate that the more general purpose was to spread terror in a major Indian city.

... More important than the question of the exact group that carried out the attack, however, is the attackers' strategic end. There is a tendency to regard terror attacks as ends in themselves, carried out simply for the sake of spreading terror. In the highly politicized atmosphere of Pakistan's radical Islamist factions, however, terror frequently has a more sophisticated and strategic purpose. Whoever invested the time and took the risk in organizing this attack had a reason to do so. Let's work backward to that reason by examining the logical outcomes following this attack.

An End to New Delhi's Restraint
The most striking aspect of the Mumbai attack is the challenge it presents to the Indian government — a challenge almost impossible for New Delhi to ignore. A December 2001 Islamist attack on the Indian parliament triggered an intense confrontation between India and Pakistan. Since then, New Delhi has not responded in a dramatic fashion to numerous Islamist attacks against India that were traceable to Pakistan. The Mumbai attack, by contrast, aimed to force a response from New Delhi by being so grievous that any Indian government showing only a muted reaction to it would fall.

... This time, however, the attackers struck in such a way that New Delhi couldn't allow the incident to pass. As one might expect, public opinion in India is shifting from stunned to furious. India's Congress party-led government is politically weak and nearing the end of its life span. It lacks the political power to ignore the attack, even if it were inclined to do so. If it ignored the attack, it would fall, and a more intensely nationalist government would take its place. It is therefore very difficult to imagine circumstances under which the Indians could respond to this attack in the same manner they have to recent Islamist attacks.

What the Indians actually will do is not clear. In 2001-2002, New Delhi responded to the attack on the Indian parliament by moving forces close to the Pakistani border and the Line of Control that separates Indian- and Pakistani-controlled Kashmir, engaging in artillery duels along the front, and bringing its nuclear forces to a high level of alert. The Pakistanis made a similar response. Whether India ever actually intended to attack Pakistan remains unclear, but either way, New Delhi created an intense crisis in Pakistan.

The U.S. and the Indo-Pakistani Crisis
... The crisis with India produced an opening for the United States. Eager to get India to stand down from the crisis, the Pakistanis looked to the Americans to mediate. And the price for U.S. mediation was increased cooperation from Pakistan with the United States. The Indians, not eager for war, backed down from the crisis after guarantees that Islamabad would impose stronger controls on Islamist groups in Kashmir.

In 2001-2002, the Indo-Pakistani crisis played into American hands. In 2008, the new Indo-Pakistani crisis might play differently. The United States recently has demanded increased Pakistani cooperation along the Afghan border. Meanwhile, President-elect Barack Obama has stated his intention to focus on Afghanistan and pressure the Pakistanis.

Therefore, one of Islamabad's first responses to the new Indo-Pakistani crisis was to announce that if the Indians increased their forces along Pakistan's eastern border, Pakistan would be forced to withdraw 100,000 troops from its western border with Afghanistan. In other words, threats from India would cause Pakistan to dramatically reduce its cooperation with the United States in the Afghan war. ...

We expect the United States to pressure India not to create a crisis, in order to avoid this outcome. As we have said, the problem is that it is unclear whether politically the Indians can afford restraint. At the very least, New Delhi must demand that the Pakistani government take steps to make the ISI and Pakistan's other internal security apparatus more effective. Even if the Indians concede that there was no ISI involvement in the attack, they will argue that the ISI is incapable of stopping such attacks. They will demand a purge and reform of the ISI as a sign of Pakistani commitment. Barring that, New Delhi will move troops to the Indo-Pakistani frontier to intimidate Pakistan and placate Indian public opinion.

Setting the Stage for a New Indo-Pakistani Confrontation
That will set the stage for another Indo-Pakistani confrontation. India will push forces forward all along the Indo-Pakistani frontier, move its nuclear forces to an alert level, begin shelling Pakistan, and perhaps — given the seriousness of the situation — attack short distances into Pakistan and even carry out airstrikes deep in Pakistan. India will demand greater transparency for New Delhi in Pakistani intelligence operations. The Indians will not want to occupy Pakistan; they will want to occupy Pakistan's security apparatus.

... In the meantime, the Pakistanis certainly will withdraw forces from western Pakistan and deploy them in eastern Pakistan. That will mean that one leg of the Petraeus and Obama plans would collapse. Washington's expectation of greater Pakistani cooperation along the Afghan border will disappear along with the troops. This will free the Taliban from whatever limits the Pakistani army had placed on it. The Taliban's ability to fight would increase, while the motivation for any of the Taliban to enter talks — as Afghan President Hamid Karzai has suggested — would decline. U.S. forces, already stretched to the limit, would face an increasingly difficult situation, while pressure on al Qaeda in the tribal areas would decrease.

Now, step back and consider the situation the Mumbai attackers have created. First, the Indian government faces an internal political crisis driving it toward a confrontation it didn't plan on. Second, the minimum Pakistani response to a renewed Indo-Pakistani crisis will be withdrawing forces from western Pakistan, thereby strengthening the Taliban and securing al Qaeda. Third, sufficient pressure on Pakistan's civilian government could cause it to collapse, opening the door to a military-Islamist government — or it could see Pakistan collapse into chaos, giving Islamists security in various regions and an opportunity to reshape Pakistan. Finally, the United States' situation in Afghanistan has now become enormously more complex.

By staging an attack the Indian government can't ignore, the Mumbai attackers have set in motion an existential crisis for Pakistan. The reality of Pakistan cannot be transformed, trapped as the country is between the United States and India. Almost every evolution from this point forward benefits Islamists. Strategically, the attack on Mumbai was a precise blow struck to achieve uncertain but favorable political outcomes for the Islamists.

... So it is up to Rice, in one of her last acts as secretary of state, to come up with a miraculous solution to head off a final, catastrophic crisis for the Bush administration — and a defining first crisis for the new Obama administration. Former U.S. Defense Secretary Donald Rumsfeld once said that the enemy gets a vote. The Islamists cast their ballot in Mumbai.

#

This situation is similar to two classical strategies from the Ancient Chinese 36 Strategies system. The following are from [http://www.chinastrategies.com]

[Strategy #2 of 36 Strategies: Besiege Wei to Rescue Zhao]
When the enemy is too strong to attack directly, then attack something he holds dear. Know that in all things he cannot be superior. Somewhere there is a gap in the armour, a weakness that can be attacked instead.

Warring States Era China
This strategy derives its name from a famous incident that occurred in 354 BC. At this time one of China's most renowned strategists, Sun Bin (A descendent of the even then famous Sun Zi) was an advisor to the king of Qi. Sun had earlier been at the court of Wei but another minister, Pang Juan, became jealous of Sun's cleverness. Through court intrigues he had Sun framed as a spy, sentenced to mutilation, and imprisoned. Sun escaped and fled to Qi. Several years later the king of Wei appointed the same Pang Juan as commander of the army and sent him to attack the capital of Zhao. The king of Zhao immediately appealed to Qi for help. The king of Qi consulted his advisors who all spoke in favour of rushing to aid their ally, only Sun Bin recommended against attacking. Sun advised: " To intervene between two warring armies is like trying to divert a tidal way by standing in its path. It would be better to wait until both armies have worn themselves out." The king agreed to wait.

The siege of Zhao had lasted more than a year when Sun Bin decided the time was ripe to come to Zhao's aid. The king of Qi appointed prince Tian Ji as general and Sun as military advisor. Tian Ji wanted to attack the Wei forces directly to lift the siege of Zhao, but again Sun advised against direct intervention saying: " Since most of Wei's troops are out of the country engaged in the siege, their own defence must be weak. By attacking the capital of Wei, we will force the Wei army to return to defend their own capital thereby lifting the siege of Zhao while destroying the Wei forces in turn." Tian Ji agreed to the plan and divided his army into two parts, one to attack the capital of Wei, and the other to prepare an ambush along the route to the capital.

When the Wei general Pang Juan heard that the capital was being attacked, he rushed his army back to defend the capital. Weakened and exhausted from the year long siege and the forced march, the Wei troops were completely caught by surprise in the ambush and suffered heavy losses. Chao was thus rescued while Pang Juan barely escaped back to Wei to recoup his losses. Sun Pin would later defeat his nemesis Pang Juan using another classic strategy.

[ Strategy #6 of 36 Strategies: Clamor in the East, Attack in the West]
In any battle the element of surprise can provide an overwhelming advantage. Even when face to face with an enemy, surprise can still be employed by attacking where he least expects it. To do this you must create an expectation in the enemy's mind through the use of a feint.

Song Dynasty China
Once there was an official who was transferred to the capital. The front part of the inn where he stayed was a teahouse, and across the street was a shop that sold expensive dyed silks. Whenever he had nothing to do, he would sit at a table watching the people and activity on the street. One day he noticed with surprise that several suspicious looking characters were walking back and forth observing the silk shop with great interest. One of them came up to his table and whispered: "We're in the robbery business and we're here to steal those fine silks. Since you noticed us I came to ask you not to mention it."

"That has nothing to do with me," the official replied. "Why should I say anything about it?"

The fellow thanked him and left him. The official thought to himself: 'the silk shop has its wares openly displayed on a busy street. In broad daylight, with a thousand eyes watching, if they have the skill to steal those silks, then they must be smart thieves indeed.' So he watched carefully to see how they would manage it. But what he saw was only the same people walking back and forth in front of the silk shop. Sometimes they gathered on the left, sometimes on the right. The official sat watching until after sunset when everyone had gone and the shop had closed.

"Those fools." said the official to himself. "They were putting one over on me." When he returned to his room to order some food, he discovered that all his belongings were gone.

# # #

Strategies like these are used in situations when time and resources are to one's advantage, when there is no need to rush, and detailed planning can be carried out.

The attackers had the benefit of formlessness. Therefore they were able to maximize this opportunity to its fullest.

--- eof

Assess the Grand Situation Before 2009

As another year passes, the global economy is getting tighter. The intensity of competition becomes greater. So what is your strategic move?

Those with the skills and the proper network will thrive . Those who don't have one of the two will survive through their basic instincts, until a grand opportunity is created and maximized.



Five simple questions:
q: What is your approach to assessing the grand economy?
q: How do you assess your position in this grand economy?
q: How do you assess your competitor's position in this grand economy?
q: What macro and micro variables are you using for your assessment?
q: What is your foundation for assessing the grand picture?

Forget about politics. Focus on understanding the grand picture first. Understand what object connects to what. Unless the competitors have the grand political influence and/or the grand access to the top tier of the value chain, the politics should not matter that much.

Understand your strategic position and how its connects to the grand picture.

Know what is your grand picture. Then, build your grand plan based on it.

Where there is a crisis, there are opportunities.

By assessing properly, one can either creates it, finds it or waits for it. This is the Dao of Strategy.

2009 should be our year of thriving, not surviving.


Good luck!

Copyright: 2008 © Collaboration360 Consultants (C360 Consultants).
Copying, posting and reproduction in any form
(without prior consent) is an infringement of copyright