Ayesha Khanna

Strategy + Business | December 2009
By Ayesha Khanna and Parag Khanna

Western Dominance in Decline

Ben Simpfendorfer
The New Silk Road: How a Rising Arab World Is Turning Away from the West and Rediscovering China
(Palgrave Macmillan, 2009)

Nandan Nilekani
Imagining India: The Idea of a Renewed Nation
(Penguin Press, 2009)

Nirmalya Kumar, with Pradipta K. Mohapatra and Suj Chandrasekhar
India’s Global Powerhouses: How They Are Taking On the World
(Harvard Business Press, 2009)

Ian Bremmer and Preston Keat
The Fat Tail: The Power of Political Knowledge for Strategic Investing
(Oxford University Press, 2009)

Robert P. Smith, with Peter Zheutlin
Riches among the Ruins: Adventures in the Dark Corners of the Global Economy
(AMACOM, 2009)

The best books on globalization this year offer insights into three directional trends that are changing the topology of global trade and influence: the deepening of regional ties across emerging markets; the continuing rise of powerful new global players; and, finally, the intractability of risk factors inherent in emerging markets and regional networks, and how best to analyze them. Indeed, as the United States loses its hegemony as the primary engine of global growth, the new drivers of growth deserve intense examination.

New Ties That Bind

Traditionally, the West has myopically viewed globalization from the perspective of how its influence has spread eastward, but globalization also entails the deepening of economic, political, and demographic ties between any two regions, not just between the countries in the Organisation for Economic Co-operation and Development (OECD) and the rest of the world. The simultaneous rise of the economies of China and the Persian Gulf region, for example, is no coincidence. They are intimately connected and contributors to one another’s rising prosperity, as skillfully described in this year’s best book on globalization, Ben Simpfendorfer’s The New Silk Road: How a Rising Arab World Is Turning Away from the West and Rediscovering China.

Simpfendorfer, a Royal Bank of Scotland economist based in Hong Kong, has the unique vantage point of having worked in Damascus and Dubai, as well as in many countries in East Asia. He uses the southern Chinese city of Yiwu as a microcosm for the reopening of the Silk Road. Until recently an out-of-the-way village, Yiwu is a revealing node because its residents make their fortunes selling cheap “made in China” goods to the developing world, not to the U.S. and Europe.

Yiwu’s rise as a trade center — its annual trade fair drew 3 million visitors in 2007 — and the repaving of the Silk Road are due in part to the United States’ harsh response to the attacks of September 11, 2001. Difficulties getting U.S. visas forced Arabs to take their business elsewhere at the very time they were amassing capital from high oil prices. The growing demand for oil from India and China provided a natural alternative, and Gulf-Asia trade burgeoned. Saudi Arabia’s oil exports to China hit US$31 billion in 2008, and China’s exports to the Arab world pulled even with those of the U.S. at about $50 billion, a trend embodied in the sprawling Dragon Mart on Dubai’s outskirts (the largest trading hub for Chinese goods outside the Chinese mainland) and Chinese car dealerships in Damascus.

This new Silk Road is not only slicked with oil, it is technologically enhanced through multilingual B2B websites such as Alibaba.com, which have dramatically lowered the costs of trade between the Persian Gulf and China. And it is reinforced by the migration of labor; at least 10,000 Chinese work on building oil terminals in Saudi Arabia on the coast of the Red Sea. This also means that 10,000 potentially idle young Saudi men are not working at oil terminals, something for which China may eventually suffer political blowback. But for now, China’s baggage in the Arab world remains very light, unlike the Gulf region’s conflicted relationships with the U.S. and other Western nations.

Shifts in trade are usually followed by shifts in finance, and here the evidence Simpfendorfer offers is equally revealing. Arab and Chinese businesses continue to court one another’s sovereign wealth funds, looking for capital infusions and building trust, while many U.S. companies and markets look more and more like dry holes. Even before the economic crisis struck in 2008, Gulf countries had begun a gradual shift of foreign exchange reserve holdings to euros, and the European Union is in the final stages of free-trade negotiations with the Gulf Cooperation Council. China has also telegraphed its desire to diversify investments and currency reserves away from the U.S. dollar, in essence signaling a certain ideological unity with its new Arab partners.

The political ties on the new Silk Road are evident in the frequent reciprocal summits to which Saudi Arabia’s King Abdullah and China’s President Hu Jintao bring planes full of executives eager to sign deals. Oil trading, foreign investment, arms deals, and the rhetoric of diplomatic alignment are all part of the mutual reinforcing.

In using the Silk Road as a metaphor, Simpfendorfer reminds us that the trade networks between the Middle East and Asia date back centuries, illustrating how globalization is not an entirely new phenomenon either. He also points out that the Silk Road was in fact plural; it was many routes in multiple directions. Much like the new world order, it had no single center.

The New Silk Road is a window into the deepening commercial and cultural ties that define globalization outside the Western domain. English may be the necessary global language, but it’s insufficient to understand and capitalize on today’s multidirectional globalization. Simpfendorfer’s first-person observations plausibly sketch the many individual threads that will likely be woven together to create tomorrow’s geopolitical alliances.

India’s Bid for Economic Leadership

It is remarkable how in the past few years the analytical perspective on globalization has shifted from Westernization to the rise of two Asian giants. The literature on Asian globalization has also matured; the overly simplistic language of “Chindia” is gone, with each nation now being treated as a confident competitor in its own right — and it is India that has gained ground, at least in publishing-volume terms, over the past year.

After several years of almost outlandishly unrealistic portraits of India’s rise that glossed over its crumbling infrastructure, fractious politics, and impoverished masses, in Nandan Nilekani’s Imagining India: The Idea of a Renewed Nation, we finally have an inspiring yet balanced account that takes these challenges head on. Nilekani, the hero of Thomas Friedman’s The World Is Flat: A Brief History of the Twenty-first Century (Farrar, Straus and Giroux, 2005), a former co-chairman of IT giant Infosys and now a cabinet minister in the Indian government, knows that for India to achieve global respectability, the success of firms like Infosys must spread to companies throughout India. As a CEO and statesman, he elegantly glides between national history, entrepreneurial autobiography, trend forecasting, and public policy — taking the attitude that “what’s good for India is good for Infosys” and focusing on how to improve access for all Indians to health, education, jobs, and infrastructure. (Also see Nilekani’s “India’s Demographic Moment,” s+b, Autumn 2009.)

Although so much of the talk about the Indian market opportunity revolves around the “bottom of the pyramid,” Nilekani wants to shrink the pyramid’s base by growing the middle class while also ensuring a dignified and sustainable life for those who are worse off. The twin foundations of this strategy are IT and the promotion of English-language education above all else. Exuding a confidence that rivals China’s pronouncements about its economic future, Nilekani states, “We can, first of all, reasonably assume that within a few years we should be able to have ubiquitous connectivity to cover every Indian home, hamlet and town.” Such ambition is coupled with a detailed strategy for harnessing an emerging demographic dividend created through the combination of economic growth and a boom in the number of working-age people. This will create tremendous business opportunities for foreign firms and Indian entrepreneurs alike, particularly in products such as low-cost computers and PDAs.

To realize this vision, Nilekani says, universities must be stripped of ideological dogmas and produce more experts in health care and alternative energy; informal and non-unionized labor must be empowered as service distributors; and more states must follow the business-friendly model of the state of Andhra Pradesh, which features India’s best highway system and emphasizes competition instead of subsidies.

The recent electoral victory of the Congress Party–led alliance ought to mean greater support for and confidence in India’s ability to establish more such zones of innovation. The India of the past, where entrepreneurs were considered “devious capitalists” and computers referred to as “job-eating machines,” is beginning to look like the U.S. of the 1990s, whereas Nilekani’s India of electronic ID cards and e-governance is proving to be a progressive experiment worthy of investors’ attention. After the book’s publication, Nilekani left Infosys to become chairman of the Unique Identification Authority of India, a $6 billion smart-card project aimed at providing Indians with personal ID cards.

Where Nilekani champions India as a market destination, Nirmalya Kumar, Pradipta K. Mohapatra, and Suj Chandrasekhar focus on the nation’s growing status as a player in the global arena and the effect this will have on the next phase of globalization. Their book, India’s Global Powerhouses: How They Are Taking On the World, offers a deeper look at the way India’s major multinationals are pursuing globalization on their own terms. Kumar, a marketing professor at the London Business School, and his coauthors argue that these firms, which include the Birla and Tata groups, can leverage vast assets and tolerate high debt-to-equity ratios to complete international deals, such as Tata Steel’s 2006 acquisition of Anglo-Dutch steelmaker Corus and the 2007 merger that created ArcelorMittal, the world’s leading steelmaker.

Based on extensive interviews with deal makers in major Indian firms, the authors’ case for eventually seeing more Indian companies (as opposed to Chinese companies) among the top multinationals rests on arguments similar to those of Nilekani — namely that Indians’ command of the English language and comfort with diverse, multiethnic workforces result in relatively frictionless outbound acquisitions. The fact that outbound investment surpassed inbound investment for the first time in 2006, a major turning point for “Brand India,” lends credence to this reasoning. Further, they expect to see Indian companies competing globally in a greater variety of industries. Indeed, this well-selected set of cases, which includes Hindalco’s global aluminum empire and Suzlon’s international windpower supply chain, demonstrates that India has already branched out beyond IT and manufacturing, with biotech and other sectors certainly on the near horizon.

Both Imagining India and Global Powerhouses see India as a rival to China in the global arena, competitive thanks to its younger demographic profile, English proficiency, and higher-value finished goods. The fact that Indian companies have proven that they can pull off multibillion-dollar acquisitions overseas gives them an additional advantage. Many questions remain, however: Will India’s publicly traded companies be allowed to hold high levels of debt? What will happen when the country’s dominant family-owned model is confronted with international management practices — and scandals on the magnitude of Ramalinga Raju’s billion-dollar fraud at Satyam Computer Services? India has reached well beyond its borders, but a turbulent global economy means that there is no guarantee of smooth progress.

Risk and Reward in New Markets

Major Western firms, such as Coca-Cola and GM, have reported greater profits overseas than at home for almost a decade now, and global expansion into faster-growing economies seems essential to all First World companies that can afford it. But even though emerging and frontier markets, such as Sri Lanka and Romania, are undoubtedly the next major globalization story, they are volatile and unpredictable. Yet few companies take political risk seriously. Most either rely on experts and “insider advice” or simply ignore the subject as too complex and intangible to integrate with day-to-day strategy.

In this sense, Ian Bremmer and Preston Keat’s The Fat Tail: The Power of Political Knowledge for Strategic Investing is long overdue. The authors, both at the prestigious consulting firm Eurasia Group, draw on years of top-level advisory experience to provide the first accessible and rigorous treatment of political risk for business executives. “Fat tail” is a statistical term that refers to a bump at the end of a distribution curve where there is added risk, but the likelihood that a particular event will occur “appears so catastrophically damaging, unlikely to happen, and difficult to predict, that many of us choose to simply ignore it. Until it happens.” The authors’ main point: Black swans, as Nassim Nicholas Taleb calls them, can be political as well as financial.

Such is the volume’s tone as it takes the reader through a wide variety of events that wreaked havoc in capital markets, including the Russian ruble devaluation of 1998, the 2003 PDVSA oil strikes in Venezuela, the 9/11 terrorist attacks, and the passage of the U.S. Sarbanes-Oxley legislation in 2002. Indeed, as shown by the critical firestorm that forced state-owned China National Offshore Oil Company to withdraw its bid to acquire Unocal in the U.S. in 2005, local political sensitivities impact investments everywhere, even in the United States.

Bremmer and Keat turn the amorphous notion of risk into a catalog of former secretary of defense Donald Rumsfeld’s oft-quoted “known unknowns” and “unknown unknowns,” covering warfare, energy supply disruptions, terrorist attacks, coups and civil wars, expropriation and breaches of contract, currency controls and defaults, global warming and demographics, and, of course, corruption. Along the way they offer sensible resilience mechanisms to prepare for such events (e.g., risk mapping, data collection, scenario analysis), ensure continued operations (e.g., personnel location), and hedge strategic bets (e.g., joint ventures).

But lest we begin to believe that political risk is fully manageable, Robert P. Smith’s Riches among the Ruins: Adventures in the Dark Corners of the Global Economy (written with Peter Zheutlin) provides a stark reminder that “frontier markets” can be a euphemism for the chaotic Third World. Smith, the founder and managing director of the Turan Corporation, which specializes in emerging-market sovereign debt, takes us on a tour of places where he says you have to “hold on to your wallet and your life”: El Salvador, Guatemala, Iraq, Nigeria, Russia, Turkey, and Vietnam.

In the 1970s and ’80s, before dollarization and Bloomberg terminals, sovereign debt–trading middlemen like Smith relied on chutzpah and instinct to determine bond prices and find trusted money changers. For such financial swashbucklers, understanding people was as important as, if not more important than, understanding markets. Clearly, improvisation was Smith’s greatest gift: He carried large volumes of cash internationally, set up local holding companies to collect debts, and sent alias-named proxy lawyers to scout for contacts and information — anything to get the job done.

Even as the sovereign debt trade has grown into a $1.7 trillion industry conducted by multinational banks and investment firms, Smith’s characters are alive and well today, just dressed better and using BlackBerrys instead of rotary-dial telephones. After reading this book, one wonders how Arab and Chinese investors described by Simpfendorfer will treat the frontier markets of Uzbekistan, Afghanistan, and Pakistan that lie between them on the New Silk Road.

Smith witnessed every incident in The Fat Tail taxonomy, from arbitrary currency controls to coups to expropriations. His implicit reminder is that emerging markets are a long-term investment. It’s a reminder that would have been worth hearing in late 2008, when the worldwide flight of capital to safety caused foreign direct investment in the developing world to plummet. Many analysts threw the baby out with the bathwater, and the U.S. became the default market of choice even at near zero percent yield on Treasury securities. But, in fact, by April 2009, the Wall Street Journal was already reporting a surge in emerging market indexes. Growth had not gone negative, and foreign exchange reserves and high savings rates combined to restore stability.

This isn’t to say that recoveries are permanent. Smith’s description of Russia in 1997, when he and others bought in heavily on the assumption that Russia was too big to fail, inadvertently reminds us of Russia in 2007: too dependent on high oil prices and with weak regulations and enforcement. Just over a decade ago, the Russian stock market lost 75 percent of its value; in 2009, it has lost at least 60 percent. Emerging markets can always submerge again.

In the evolution from Smith’s boots-on-the-ground adventures to Bremmer and Keat’s more detached, methodological approach, an interesting mutual appreciation appears: Smith thinks that his adventurous tactics are no longer relevant in a world of real-time, electronic information, yet Bremmer and Keat argue that local political knowledge is still essential to staying ahead of the curve. In other words, paying more attention to data is not enough — good instincts are also essential to figuring out all the unknowns.

A Warning to Established Players

An unmistakable conclusion that we share with all the books featured in this essay is the assertion that the U.S. has lost its status as the preeminent driver of globalization. Thus, we predict that two trends will typify the next phase of globalization: First, stronger regionalism in terms of deepening economic integration in areas such as East Asia, Latin America, and the Arab world will be driven by local powers such as China, Brazil, and Saudi Arabia. Second, the global playing field for firms, capital, and strategies will become much more level as Western companies lose the automatic edge they once held in trust and credibility. (See “Capturing the Asian Opportunity,” by Andrew Cainey, Suvojoy Sengupta, and Steven Veldhoen, s+b, Winter 2009.) Companies in emerging and frontier markets may not become global leaders in their own right, but they will surely be powerful players in their own domains and beyond.

Ayesha Khanna is managing director of Hybrid Realities, a research and strategy consulting firm, and author of Straight Through Processing for Financial Services: The Complete Guide (Elsevier, 2008).

Parag Khanna is a senior research fellow at the New America Foundation and author of The Second World: How Emerging Powers Are Redefining Global Competition in the Twenty-first Century (Random House, 2009).

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Arabian Business | Nov 8, 2009

By Ayesha Khanna and Jaime Fitzgerald

The global recession has negatively impacted transshipping, tourism and real estate in Dubai, three of its primary economic sectors. To counter skepticism about its future, Dubai has been touting the Dubai Health Care City (DHCC) whose Phase I is going to be completed in 2010 as the world’s new center of medical tourism and an emerging pillar of the Emirates’ economy. Indeed, given that medical tourism is a multi-billion dollar booming industry with 2-3 million patients seeking treatment in foreign countries annually, Dubai seems to be in the right place at the right time. But medical tourism is now an increasingly competitive marketplace, with Singapore, Thailand and India leading the way among a group of over 35 countries that cater to international patients. Several of these competitors are in the Middle East region itself with both Jordan and Lebanon being top contenders, and Abu Dhabi close behind Dubai in developing its healthcare offerings.

So what can Dubai do to secure top ranking in the industry and attract a significant percentage of the millions of medical tourists swarming the globe today? The primary attraction for medical tourists is financial savings (if they are coming from the West) and quality of care (especially if they herald from developing countries). For example, a heart bypass that costs $130,000 in the US costs only $10,000 in India. Similar cost structures exist in Thailand and Singapore as well, two other well-known providers in the region, and thus Dubai does not offer a cost advantage versus these areas. Dubai has partnered with Harvard Medical International (HMI) to provide a renowned and trusted name as its strategic collaborator. However, HMI has, in fact, developed over 50 programs in more than 30 countries across five continents and most medical tourism hubs have alliances with similarly well-respected institutions, thus diluting the uniqueness of this partnership in Dubai. The Government of Dubai needs to employ a coherent strategy leveraging customer information and analytics in order to develop a competitive edge in this industry. Other governments such as those of Singapore, South Korea and Malaysia are already collaborating with their local health industries to improve the profile and attractiveness of their medical tourism sector. In other words, the hundreds of million dollar investments in healthcare facilities and alliances at DHCC while commendable and necessary are not enough to give Dubai an edge over its competitors, all of which are following similar paths. Only with a highly sophisticated and dynamic strategy that is both responsive to market trends and technologically innovative can Dubai become one of the top destinations for international patients, and in the process, diversify its economy and experience high growth. Five strategies ranging from understanding and targeting customers better to using state of the art information technology to strengthen and increase the longevity of customer relations will help Dubai sustain competitive advantage on an on-going basis.

Targeted Customer Marketing and Services – Identifying relevant customer segments is the key to building having a strong client base. Thousands of UAE citizens traditionally went to the US for medical treatment. However, visa barriers since September 11^th meant fewer patients from the Middle East and Gulf states could pursue treatment in the US. Now they go to other medical hubs, including 90,000 UAE citizens per year just to Thailand alone. Targeting and capturing a greater share of this market should be the first priority for DHCC. A strong regional and domestic customer base also protects Dubai from recessions in other regions of the world.

Ironically, the US now suffers from out-bound medical tourism because of the bloated, inefficient and expensive healthcare system in the country that makes treatment unfeasible even for the insured. Then there are the 50 million uninsured Americans, and even those who have free healthcare like US army veterans suffer long waiting times for basic procedures. According to Paul Keckley, executive director of the Deloitte Center for Health Solutions in Washington, D.C., 600,000 Americans will travel abroad for medical treatment, looking for cheaper better medical care. This reality is not lost on Jordon, ranked #1 in medical tourism in the Middle East by the World Bank, which regularly appeals directly to the cash strapped and frustrated US population. Recently, the head of Jordan’s Private Hospitals Association, Dr. Fawzi al-Hammouri, advertised treatment packages as “less than 25 percent of what you have to pay in the U.S.”

Another massive market for Dubai are patients from Canada and Britain, all of whom suffer from long waiting periods that are characteristic of publicly funded healthcare. Carefully profiling and analyzing each kind of customer, their needs, and their motivations for seeking healthcare abroad will allow Dubai to prioritize and target high value customers. This kind of customer segmentation and profitability analysis is common in multinational organizations such as Pepsi which continually calibrate their marketing and products to customer preferences and needs.

Superior Customer Experience – According to Josef Woodam, author of Patients Without Borders, patients highly value the customer experience in terms of the attention they receive, the quality of treatment, and the attractiveness of local tourism. Dubai is already a popular tourist destination and is planning to leverage its experience and services in tourism to enhance the value of the medical stay of international patients. Other countries are similarly working in the same vein. South Africa, for instance, offers luxurious resorts and safaris as part of its medical care packages (one leading provider is called appropriately Surgeons & Safari, and is run by Lorraine Melville, a Founding Member of the Medical Tourism Association of South Africa.)

But customer experience is far more than just adding tourist attractions to patient treatment. When Joseph Pine and James Gilmore wrote about customer experience in their pioneering article “Welcome to the Experience Economy” in Harvard Business Review in 1998, they wrote about how “an experience occurs when a company uses services as the stage–and goods as props–for engaging individuals in a way that creates a memorable event.” Customers respond to an experience which is not only functionally reliable but also emotionally rewarding. Companies that have thought deeply about customer experience management such as Starwood Hotels & Resorts have found high returns on the effort. Thus, Dubai must pay attention to the end to end experience of a patient’s interaction with the country’s medical process if it is to successfully differentiate itself from other market players that are less adept at seamlessly managing customer experience.

Customer experience management requires understanding what customers value, and then using that information to improve, automate and integrate business processes. Creating a positive customer experience is a continuous evolution based on careful management and monitoring of feedback provided by customers, which is then incorporated into key interactions with the customer.

Disease Management for the Aged and Chronically Ill– Most patients undertake medical tourism for one-off or treatments, yet the majority of the world’s burgeoning aging population suffers from chronic diseases such as diabetes, cancer, and arthritis. Medical tourism hubs usually don’t cater to the aged or chronically ill, yet these two groups will soon comprise the majority of patients seeking medical care. The world’s population, especially the developed world, is aging at a very high rate. In fact, the 50+ age-group is the fastest growing segment of the world population. Take just a few examples that underscore this fact: 50% of the European Union’s population will be over 65 years of age within a few years; every seven seconds, an American turns 50; between 2000 and 2050, the number of elderly men and women in Asia will more than triple, with Japan having the most rapidly aging population in the world; and by 2030, the number or retirees in Italy will surpass the number of active workers.

Dubai can be one of the pioneers of innovative long term disease management , which necessarily involves both in- and out-patient care, in the medical tourism marketplace. It can achieve provision of long-term attentive care through virtual support, well managed information systems that track patient cases and even satellite workers that provide periodic home visits. Companies such as Canada’s New IT Healthcare provide tools for intelligent distance patient monitoring and need to be integrated with the business processes of the medical facilities in DHCC to provide a seamless e-health environment for each patient. Since DHCC is starting anew, it does not suffer from the paralyzing legacy systems and paper based processes for healthcare facilities in most countries. It has already made the commitment to electronic medical and health records as a fundamental pillar of patient service, and this should in turn greatly facilitate providing long-term care for aged and chronically ill patients.

Innovative Health Delivery Models – Dubai should attempt to build a healthcare city of the future, creating quality care using telemedicine and the latest technological devices to track and manage patient health. For example, the Fraunhofer Institute for Experimental Software Engineering (IESE) in Germany, which undertakes innovative software design, is developing intelligent homes which will help with the care of the elderly. The core of the smart home consists of several hidden devices with sensors which document, track and monitor the activities of the patient. The data collected, such as how often the person goes to the bathroom, can be used by doctors to analyze the patient’s health and contact the patient should the behavior imply illness. Telemedicine, or virtual consulting, where the doctor communicates with the patient over email, video or phone, will increasingly become prevalent. Medical tourism should not be limited to medical travel; in fact, its definition should expand from medical treatment that is outside one’s country of origin to one that is independent of geography.

Early adoption of this kind of integrated medical solution consisting of both virtual assessment and follow-up care will definitely put Dubai ahead of the game. Dubai will have to leverage specialists in knowledge and information management and partner with the makers of smart devices to create the capabilities to execute this kind of approach.

Specialization and Leadership in Research and Innovation – Specialization tends to emerge naturally in some countries, but Dubai can make conscious choices since it is planning its healthcare economy. Brazil, for example, is known for plastic surgery while South Africa is known for dentistry and India for cardiology and fertility treatments. Countries in the Middle East are also advertising their specialization. The Lebanese Ministry of Tourism recently hosted the launch of Image Concept, a Dubai based company which specializes in connecting Gulf patients interested in cosmetic surgery to surgeons in Lebanon. The Ministry’s Director General, Mrs. Nadra Sardouk, commented, “Cosmetic Tourism is a widely recognized and appreciated concept and we are very hopeful that this initiative will contribute to our economy and benefit tourism and medical sectors.” Dubai will also need to invest in particular health services to differentiate the country from competitors.

In addition, it is important for Dubai to establish thought leadership in medical research and innovation. Of all the medical tourism hubs, Singapore has been the most successful in this regard, building a reputation in bio-technology, stem cell research and cancer treatment.

In conclusion, Dubai must think of itself as a corporation and utilize information technology and analytics to provide customized positive experiences to target patient populations. Only this approach will help Dubai create and sustain a competitive edge in the medical tourism marketplace.

Ayesha Khanna is Partner and Jaime Fitzgerald is Managing Partner of Fitzgerald Analytics, a management consulting firm which specializes in information management and analytics. Ayesha Khanna is also Director of Hybrid Realities, a strategic consulting firm focusing on the impact of technological innovation on social and economic trends.

Link to article: http://www.arabianbusiness.com/569065-rebranding-dubai-

Foreign Policy | May 5, 2009
By Ayesha Khanna and Parag Khanna

Pakistan’s hubristic and shortsighted leadership has been caught off guard by both the strength of the Taliban and virulent autonomy of militant groups such as Lashkar-e-Taiba. The current “wake-up” operations to retake Swat and Buner are crucial, but not decisive. Halting Predator drone strikes against senior al Qaeda and Taliban commanders would be no panacea either because American popularity and public acceptance of the Pakistani Army are already near zero in the tribal areas. Resentments will outlast such tactical switches. A much deeper strategy is needed that simultaneously tackles the political, military, economic, and social dimensions of Pakistan’s failure.

Pakistani President Asif Ali Zardari arrives in Washington this week at a tough time for his country. Gen. David Petraeus has stated that the next two weeks are crucial to Pakistan’s survival, while counterinsurgency expert David Kilcullen has claimed that the country could collapse within six months. Indeed, Gen. Ashfaq Kiyani, Pakistan’s Army chief of staff, could declare martial law imminently if his military’s counteroffensives in the Swat region prove ineffective against the Taliban. But irrespective of whether the Army takes over yet again from civilian authority, Pakistan has been a failure for over a decade, and the essential prescriptions to restore the state apply to both the elected government and the military — and preferably a coordinated effort between the two.

It is now the Pakistani government that must actively, but constructively, agitate in restive provinces to regain the upper hand — or risk losing even its nominal sovereignty over Pashtun-dominated areas forever. On the political level, the National Assembly must pass a constitutional amendment to integrate the Federally Administered Tribal Areas (FATA) into the North-West Frontier Province (NWFP) and mandate a fresh round of provincial elections. Only in this way can the government offer an alternative to the hands-off Frontier Crimes Regulation that has abetted the Taliban’s rise in authority in the tribal regions. Zardari must also finally sign the Political Parties Act to enable the formation and campaigning of political groups. Together, these steps would constitute an assertion rather than a surrender of sovereignty — and they would justify a strengthened presence of the Frontier Corps and police to monitor elections in the FATA while forcing the Taliban to consider secular options.

A smarter balance between military and police efforts is also needed. Pakistan should launch its own, indigenous version of the NATO-led provincial reconstruction teams (PRTs) that have had some success in maintaining local order, building relationships with district-level authorities, and stimulating small-scale economic activity in Afghanistan and Iraq. The Pakistani government’s focus to date has been almost exclusively on military-driven counterinsurgency, but real success requires boosting police recruitment and training while deploying civilian forces to oversee the construction of roads, schools, hospitals, and government offices. For its part, the military must now focus on internal defense, disrupting militant networks that have gained strength even in the Punjabi heartland.

Under the forced apathy of ineffective governance, Pakistan’s disaffected masses have developed greater tolerance for antigovernment forces such as the Taliban, no matter how intolerant they are. The silent majority is increasingly becoming acquiescent, allowing radicals to find safe haven among them rather than repelling this insidious threat. While wealthy Pashtuns flee Taliban intimidation in Peshawar and some of the elites of Islamabad and Lahore gloomily consider abandoning Pakistan altogether, what remains of the country’s educational system and economic resources must be directed toward national stabilization.
Giving millions of mainstream Pakistanis a stake in the economy is the only way for the country to avert a deeper failure. A country in existential crisis does not have the luxury of separate education and labor policies. Twenty million children ages 10 to 17 are not in school, and of the almost 25 million Pakistanis ages 18 to 24, more than half have either not completed school or graduated but remain underemployed. Many in these poor and disenfranchised classes are listless young men; most suicide bombers are the 18- or 19-year-olds who come from their ranks.

The textbook approaches to supporting secondary education don’t make sense unless the economy is geared toward employing the educated. So much international research and commentary on Pakistani education has focused on madrasa reform, ignoring the older portion of the population that most needs to be engaged. Vocational schools must get immediate funding to recruit and train able-bodied youth in basic engineering and construction work, and university students should be dispatched to participate in PRTs as well as “Teach for Pakistan” programs. There are many shura councils in the FATA, including even in North Waziristan, that have expressed a desire to receive outside assistance provided it works with them rather than around them.
International assistance must support each of the aforementioned strategies seamlessly, but to date this has not happened. In both Pakistan and Afghanistan, recent years have seen a USAID gravy train of contracts for U.S. and European companies and NGOs with little accountability or effectiveness. Not surprisingly, they have been outspent, at least in terms of effectiveness, by even the 100 rupees per day the Taliban will pay the families of boys from NWFP to join its campaign. The State Department, White House, Congress, and Pentagon are presently at odds over how to certify or validate that Pakistan is spending U.S. assistance on the right purposes — to say nothing of the $5.3 billion in aid pledges that Pakistan received at the recent donors conference in Tokyo. President Zardari has to use his Washington meetings this week to make progress on spending this money right.

If the protests against the Taliban that have recently rippled across Pakistan are any indication, the elite are becoming quite vocal. Now this sliver of Pakistan’s population must mobilize with the help of its government, the international community, the rest of the country, and Pakistan’s extensive diaspora. Pakistan has been unhelpfully called the “most dangerous country in the world.” Its citizens must now decide if that is the case.

Ayesha Khanna is a partner at Fitzgerald Analytics, a strategic management consulting firm.
Parag Khanna is a senior research fellow in the American Strategy Program of the New America Foundation and author of The Second World: How Emerging Powers Are Redefining Global Competition in the Twenty-first Century.

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Forbes | February 17, 2009
By Ayesha Khanna

Switch on the TV, open a magazine, eavesdrop on a cocktail party conversation, and sooner or later you’ll hear a self-professed expert tout either networking or résumé buffing as the key to success in the economic slump. But tweeting on Twitter or taking a tutorial on how to connect with people by talking sports will only get you so far. If we’re serious about preparing for tomorrow, the financial crisis reminds us of the importance of acquiring adaptive skills today in order to thrive in the industries that will come.

–Big Brother Is Back. President Barack Obama’s $787 billion economic stimulus package, the largest in U.S. history, can have a more direct effect on your career than you might have thought. Every major consulting firm has been licking its lips at the prospect of advising the government. Why should you be any different? Develop and market your skills in the areas where the government is going to invest most. Where are those? To begin with, the plan outlines billions of dollars of public sector investment in transportation projects ($48 billion), education ($100 million), health care ($140 billion) and clean energy. Each will require varieties of both blue-collar and white-collar experience that many, many people have.

–The Gig Economy. Tina Brown, the publishing veteran who recently launched The Daily Beast, has been doing the rounds on CNN and elsewhere heralding the age of what she calls the “gig economy,” where instead of having a job everyone just has a flurry of “free-floating projects,” or “gigs.” She fears this trend, for being a gigster is a difficult and a second-best choice for most. Either way, the structural shift toward providing modular services is clear. Incorporate yourself (as an S corporation or limited liability company, etc.), and start building your brand. Create a Web site, publish articles, circulate your credentials and learn to collaborate in virtual teams. Inoculate yourself against having your work outsourced by hybridizing, combining skills that make you both a generalist and a specialist at once, such as management and technology, or law and bioethics. Once markets pick up, the talent wars will start again worldwide, and those who have invested in brand management will command the highest fees for their services.

–Health Care. The entire developed world is aging, and Europe is growing old even faster than America. By 2030, more than 70 million Americans will be over 65. Already 25% of the federal budget is spent on health care, and Obama has promised to modernize the bloated industry. Thirteen of the 20 fastest-growing jobs in the U.S. from 2004 to 2014 are expected to be health care related. Don’t run to med school–or turn the page–just yet, though. You can become a registered nurse in just two to three years, on average. If you’re a software engineer, think about getting into automating health care business processes. Health-related work spans the whole supply chain–consulting, banking, equipment, insurance, and more. It can be the gift that keeps on giving, in good economic times and bad. Think about what a broad range of capabilities it really involves.

–Globalized knowledge. The credit crisis has inspired a return to regulation; Governments will monitor trade, investment and other points of vulnerability in an all too interconnected world. International law in trade, taxation and immigration will become very hot. So too will talent arbitrage, meaning high-end human resource management to move and manage skilled labor across firms and borders. Be willing to go where white-collar work is rebounding the fastest. Knowing emerging markets in and out will be a big help. If you’re a political scientist or have done a Peace Corps stint or taught English or studied abroad, reconnect with your exotic past to advise firms on security and risk issues in Brazil, Russia, India, China and beyond.

–Green Capitalism. If you’re passionate about recycling, now’s your chance to make more than the 5 cents a bottle you can get at the local Food Emporium. Like health care, energy efficiency has moved from niche to mainstream, encompassing engineering, product development, non-profit advocacy, litigation, and a host of other areas. Obama has promised up to 5 million “green-collar” jobs in everything from research and development to solar-cell installation to building re-insulation.

–Genomics. A stream of steady breakthroughs will deliver jobs to thousands in health care, pharmaceuticals, genetic counseling and computational biology. Whether or not you’ve got a scientific or medical background, try to boost your marketability by adding genomic know-how to any expertise you have in software, management or statistics.

–Information Management. After its employees, a business’s most valuable asset is its bits and bytes of data, and that’s increasingly true even for bricks-and-mortar companies. Technology is the key to managing the tsunami of information. Strategic information management–data governance, business analytics, knowledge management, information technology infrastructure–are all getting hot as firms seek clarity in complexity. As James Canton claims in his book The Extreme Future: The Top Trends That Will Reshape the World in the Next 20 Years, knowledge networks will be the foundation of our future economy.

–Parlez vous? The languages of the future will be very much a function of the rising prosperity and populations of America’s trade partners. If you’re willing to be a global nomad, immerse yourself beyond your pidgin Chinese, Arabic or French to position yourself as a cross-border relationship manager. If you’re using the downturn as an opportunity to enroll in law school, business school or pursue other education, try an intensive language course on the side. It’s a great way to network, too.

So, yes, tweet away, but make sure you have more to say about yourself and your skills than will fit into a mere 140 characters.

Ayesha Khanna is a senior adviser at Fitzgerald Analytics, a strategic management consulting firm. She has worked for 10 years on Wall Street on technology governance and strategy initiatives, and is author of Straight Through Processing for Financial Services (Reed Elsevier, 2007).

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BusinessWeek | January 13, 2009
By Ayesha Khanna and Parag Khanna

The incoming President has a prosaic wish list for his IT czar. Obama needs to adopt practices that work overseas and for business.

President-elect Barack Obama has promised to appoint the world’s first governmental Chief Technology Officer (CTO). On its transition Web site, www.change.gov, the incoming Administration has published a list of goals for the soon-to-be anointed CTO: broadband expansion, boosting science/tech education, health-care computerization, patent reform, and e-government.

The goals are well-intentioned. What is missing is an effective and efficient strategy. So-called “czars” have been appointed for drugs, the war in Iraq, the financial industry, and the auto sector—none of them have worked very well. The Obama team needs to be careful not to reinvent the wheel, focusing instead on technology lessons from the countries that have overtaken the U.S. already, the practices of companies that have top CTOs, and a flexible strategy for implementing policy across the sprawling federal government.

Singapore and Estonia
The U.S. may be the first country to have a CTO. That doesn’t mean other countries have not put in place effective tech leadership. In the past 28 years, Singapore has had six national plans that have progressively modernized the government infrastructure, starting from computerization of civil services to the current “Intelligent Nation 2015″ or iN2015 plan, which in vivid detail envisions a future where every individual and organization has seamless access to technology.

By comparison, Obama’s prosaic wish list is nothing to write home about—but his Administration can learn from Singapore’s phased and segmented approach. Even tiny countries like Estonia have emerged from years behind the Iron Curtain to quickly create e-government infrastructures that would shame the U.S. bureaucracy today. Indeed, Estonia has become an exemplar of e-government, where everyone votes and pays taxes online, not to mention pays parking tickets via mobile phones. The country’s image as a leader in tech did suffer a blow, however, when Russian cyberwarriors hacked the government’s electronic infrastructure in April 2007, bringing the country to a standstill: Even customers paying for milk and bread in grocery stores suddenly found that their bank cards didn’t work. A deeply interconnected technical network is as valuable as it is vulnerable. Estonia is a valuable case study in how to protect oneself from the susceptibility of technology.

Detractors will be quick to say these countries are so small; it’s far easier to have broadband penetration among Singapore’s 4 million than the 300 million in the U.S. Scale does matter, but if the principles of technology reform are sound, then scalability is a question of time, not of possibility. Even China talks of building an information superhighway for its 1.5 billion citizens. The U.S. should have no less ambitious a goal. In economic theory, modernizing economies experience “catch-up growth” and quick, high returns from emulating and adopting high-technologies. America’s CTO—like officials from the United Arab Emirates—should travel widely and send emissaries to gather lessons from others’ experiences while taking note of their mistakes.

Digital Natives vs. Immigrants
Government-sponsored innovation is nothing new: The U.S. Defense Dept. created the Internet, and Japan’s automobile sector grew according to a conscious government plan before becoming world-beating. But by and large, technology innovation now comes from the private sector, with the government playing catch-up. To paraphrase Marc Prensky’s famous terminology, corporations are now “digital natives,” while the government is a “digital immigrant,” learning the new language of technology but retaining a heavy accent.
Who might assume the CTO role? Among the reported contenders are Hewlett-Packard CTO Shane Robison; Google Chief Internet Evangelist Vint Cerf; and Vivek Kundra, CTO of Washington, D.C. But plucking a well-known executive as the government’s tech guru will not substitute for continuous public-private collaboration to ensure that innovations are adapted to the government setting. Areas where discussions would be especially useful range from building energy-efficient infrastructures such as green data centers and cloud computing to providing citizens online government services using Web 2.0 technologies.

New York Mayor Michael Bloomberg has launched an aggressive “customer-oriented government” initiative, led by Paul Cosgrave, CIO of the city’s Department of Information Technology & Telecommunications (DoITT). In order to tackle poverty, the DoITT worked with Accenture (ACN) and Irish software company Cúram Software to roll out ACCESS NYC, a free online service that prescreens individuals anonymously and provides information on their eligibility for 21 different city, state, and federal programs. Consolidating the screening and application process for a range of programs into one online tool saves time and money for all involved, notably needy individuals.

Obama’s education and health-care priorities for the CTO cannot simply be parceled out to various departments and agencies. The Administration will need to adopt an approach that can be spread across the government—using, for example, a so-called service-oriented architecture that would let the Administration roll out applications independently but using a common set of standards.

Visas and Green Cards
This approach would have helped avoid past mistakes. Take the disaster of FBI background checks for student visas and green cards. The current manual process involves poring over files and soliciting dozens of records from an array of departments by mail and fax, keeping applications stuck for years. Increasingly, disgruntled graduates depart for more welcoming countries like Canada, leaving the U.S. to suffer brain drain. But if police records and other files are stored in databases, departments can more easily integrate with each other and exchange data in a streamlined manner. Similarly, when someone is in fact a danger to national security, important information is not inaccessibly compartmentalized—such as when the 9/11 hijackers were being followed by the FBI yet were issued green cards by the Immigration & Naturalization Service.
Building technology around standard protocols helps in integration not only between federal departments but also, eventually, between state and federal departments, which are more often than not completely out of sync.

Far from being limited to domestic affairs, the CTO could well be a commercial diplomat, working with the Commerce Secretary to expand the country’s edge in high-tech exports. The Defense Dept.’s creation of the Web was seized on by Silicon Valley, launching the sustained economic boom of the 1990s, which saw American tech companies reach the commanding heights. Now with tech exports from Japan, India, and others nipping at America’s heels, strategic partnerships between the government and tech companies could become a pillar of foreign policy. The CTO’s office can spearhead international road shows for innovative U.S. firms ready to export user-friendly e-government platforms. The U.S. may lag behind Europe and the Far East in some areas, but much of the world has yet even to get off the ground, meaning the CTO can play a crucial role in introducing American tech firms to emerging markets. This effort can take inspiration from Google (GOOG) and Microsoft (MSFT), which have multiplied their global customer base by adopting their products to foreign languages and cultures.

Beyond Obama’s to-do list for the first American CTO, these guidelines will make the position more consistent with the modern-day definition of a CTO as the CEO’s thought partner in mapping out a strategy for growth and operational efficiency. To start anywhere else would be to doom the CTO to an isolated, antiquated back-office IT role, dangerously incapable of enhancing American competitiveness in the 21st century.

Ayesha Khanna is a senior adviser at Fitzgerald Analytics, a strategic management consulting firm. She has worked for 10 years on Wall Street on technology governance and strategy initiatives, and is author of Straight Through Processing for Financial Services (Reed Elsevier, 2007). Parag Khanna is a senior research fellow in the American Strategy Program at the New America Foundation and author of The Second World: How Emerging Powers Are Redefining Global Competition in the 21st Century (Random House, 2008).

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