Book Reviews
Review of ‘The Silo Effect’
What causes tunnel vision in organisations?
 
book review, The Silo Effect, Gillian Tett, Little Brown, Sony, Sony Walkman,In late 1999, Nobuyuki Idei of Sony stood up to address the majestic Venetian ballroom in the Sands Expo and Convention Centre in Las Vegas, writes Gillian Tett, in one of her many gripping stories in this new book called The Silo Effect. Once a year in November, the titans of the computing and electronic world gather here for the Comdex trade fair. Some 20 years earlier, the Japanese firm had launched Sony Walkman, which changed how millions listened to music. Following its success with radio and televisions in the 1960s and 1970s, it had introduced camcorders, digital cameras and video recorders in the 1980s. In the 1990s, it had jumped into computers and had also bought into a vast music and film empire—generating hits such as Star Wars and Stuart Little.
 
Idei called out for Steve Vai, a wild-haired guitar virtuoso, on to the stage. Vai casually pulled out a little device, the size of a packet of chewing gum. This was the latest Sony invention: a digital music player called the Memory Stick Walkman. The same company that had changed how the world listened to music back in 1979 by launching the Walkman was attempting to repeat the same trick, writes Tett. 
 
But then something strange happened. Idei stepped forward and waved another device, narrates Tett. It was a Vaio MusicClip, a pen-sized digital audio-player. This device too recorded music. Sony had just offered not one—but two—digital Walkmans. This seemed odd. When consumer companies launch new products, they tend to keep the presentation simple, to avoid confusing customers (or their own salespeople), writes Tett. Soon after, the company produced a third offering, known as the ‘Network Walkman’. Years later, when some of Sony’s own leaders looked back on that day, they realised that it had been a sign that a once-successful company was sliding towards disaster, points out Tett.
 
The reason Sony unveiled not one, but two different digital Walkman devices in 1999 was that it was hamstrung by silos: different departments of the giant Sony empire had each developed its own, different digital music devices. None of these departments, or silos, was able to collaborate with each other, or agree on a single product approach. The different digital Walkman products, thus, competed with each other and cannibalised each other, writes Tett. That, in turn, made the products far weaker than anything that Sony had produced before. The products failed. In walked Steve Jobs and took away the market for portable digital music with iPod.
 
Gillian Tett blames Sony’s decline on metaphorical silos (a structure for storing bulk materials, usually grains, in different ‘compartments’). And also to the fact that regulators failed to see the 2008 crisis. Silos blindsided the Swiss banking giant UBS, leading to a gigantic $30-billion loss. A trained anthropologist, who is now the US managing editor of Financial Times, Tett’s thesis is that while the world is more interlinked, as a common system, than ever before, our lives and minds remain fragmented. Large organisations are divided, and then subdivided, into numerous different departments, she writes. These often fail to talk to each other—let alone collaborate. Professions are increasingly specialised, understood by a tiny pool of experts. Silos proliferate. 
 
Silos have an important function. We live in an incredibly complex world where information, data, roles and actions need to be structured into separate spatial, social and mental boxes. Silos help us to tidy up, classify and arrange our lives. Otherwise, there would be complete chaos. But this also encourages turf wars, duplication, communication barriers—all leading to wasted resources and overlooked costly risks. 
 
What is the way out? Tett gives the examples of collaborative practices at Facebook that is determined to avoid the fate of Microsoft and Sony. The famous Cleveland Clinic promotes cross-disciplinary collaboration by trying to reclassify its activities according to body parts instead of dividing medicine into doctor specialities. The New York administration has used data sitting in different dark corners of vast offices to detect patterns of building fire in poorer districts. However, the problem with this thesis is that the word ‘silo’ is not robustly defined. Also, the causes of failures in Sony, or Bank of England, could be many, including silos. Blaming it on silos alone could be fallacious. Nevertheless, this book is an interesting read. 

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US Bankruptcy Lawyers Strip Cash from Coal Miners’ Health Insurance
Workers often bear the brunt of the coal industry’s decline. One case stands out: 208 Indiana miners, wives and widows whose health care may fall to financial engineering.
 
This story was co-published with The Daily Beast.
 
There was plenty in the complex deal to benefit bankers, lawyers, executives and hedge fund managers. Patriot Coal Corp. was bankrupt, but its mines would be auctioned to pay off mounting debts while financial engineering would generate enough cash to cover the cost of the proceedings.
 
When the plan was filed in U.S. bankruptcy court in Richmond last week, however, one group didn’t come out so well: 208 retired miners, wives and widows in southern Indiana who have no direct connection to Patriot Coal. Millions of dollars earmarked for their health care as they age would effectively be diverted instead to legal fees and other bills from the bankruptcy. 
 
As coal companies go bankrupt or shut down throughout Appalachia and parts of the Midwest, the immediate fallout includes lost jobs and devastated communities. But the Indiana case stands out as an example of how financial deals hatched far from coal country can also endanger the future safety net. 
 
At issue is health insurance promised to people who worked for the Squaw Creek Coal Company in Warrick County, Indiana, near Evansville, who, like other retired union miners, counted on coverage after they turned 55.
 
“We were assured as miners we would have lifetime health-care benefits — no one ever envisioned that we would have to worry about these other things that were going on,” said Bil Musgrave, 59, one of the retired miners in Indiana. “A lot of them depend entirely on this.”
 
Secure health insurance has been one casualty of the wave of bankruptcies. Companies in decline are seeking to offload those obligations onto taxpayers, putting more stress on an already-strained federal safety net. An effort is underway in Congress to protect at least some families facing a loss in benefits because of the industry’s turmoil, but its prospects are unclear.
 
Squaw Creek, where Musgrave started working almost 40 years ago, opened as a joint venture between Alcoa, and Peabody Energy, the world’s largest private-sector coal company. The unionized surface mine in Warrick County, Indiana, near Evansville, powered Alcoa’s huge aluminum plant nearby. The venture mostly petered out by the late 1990s, though mining has since resumed in the same area, using non-union miners.
 
Under their union contract, miners who worked at least 20 years at Squaw Creek were entitled to a pension and to health care coverage once they reached 55. For many of those who are still under 65, this coverage is what they rely on; for those who are on Medicare, it offers a supplement to cover the extensive health care costs many of them now face. Some suffer from black lung disease, while others, including Musgrave, have fought cancers they believe are linked to industrial waste dumps at Squaw Creek.
 
The Squaw Creek miners thought little of it when, in 2007, Peabody passed what remained of its Alcoa venture — some environmental reclamation work at the mine — to an offshoot called Heritage Coal, a subsidiary of a new entity Peabody created called Patriot Coal. The health care obligation for the retirees was assumed by… Continue Reading…
 

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Nifty, Sensex showing no strength – Thursday closing report
Nifty has to stay above 7,900 for the market to continue to head higher. Bank Nifty is already weak
 
We had mentioned in Wednesday’s closing report that Nifty, Sensex may put in more gains for which Nifty has to stay above 7,880. The market indices in the Indian stock markets were range-bound during the day and closed with marginal gains. Bank Nifty however, closed with a marginal loss. The market indices were subdued after key economic data showed a slowdown in manufacturing activity for the last month.
 
 
The markets made healthy gains within minutes of opening and continued their upward trajectory on the back of Tuesday's monetary easing by the Reserve Bank of India (RBI), overnight rally in the US markets, supportive Asian markets and strengthening rupee value. However, the upward momentum lost its steam as the latest Nikkei India Manufacturing PMI (Purchasing Manufacturers Index) for the last month showed a contraction. The PMI was at a seven-month low of 51.2 in September 2015.
 
Markets analysts said the less-than-expected PMI data impacted sentiments and erased the gains made during the day's trade, as profit booking was also witnessed.
 
The rupee continued to gain strength on Thursday. It gained 7 paise and closed at 65.51 against a US dollar around 5.00 p.m. from its previous close of 65.58 against a greenback. It touched a day's low of 65.48 against the US dollar.
 
The Indian rupee had gained 38 paise on Wednesday to close at a five-week high of 65.58 against the US dollar.
 
The positive Asian markets have supported sentiments here. Japan's Nikkei index was higher by 1.92%. The Chinese markets -- Hong Kong's Hang Seng index and Shanghai Composite Index -- will remain closed till 7 October 2015 (Wednesday), on account of the Chinese national day.
 
Sector-wise, healthcare, capital goods and consumer durables witnessed healthy buying support. On the other hand, automobile, banking and information technology (IT) index came under heavy selling pressure.
 
The S&P BSE healthcare index zoomed by 260.11 points, capital goods index increased by 110.89 points and consumer durables index was higher by 96.29 points.
 
However, the S&P BSE automobile index receded by 78.81 points, banking index declined by 73.37 points and IT index was lower by 27.25 points.
 
HCL Technologies announced on Wednesday after market close that its first quarter earnings may be hit on account of client-specific issue, cross currency impact and longer transition deadlines for some of its complex projects in infrastructure management services. In a sharp market reaction the company’s share price fell by more than 12.5% in Thursday’s trading.
 
Major Sensex gainers during Thursday's trade were: Lupin, up 3.62% at Rs.2,107.05; Sun Pharma, up 2.57% at Rs.890.75; Tata Consultancy Services (TCS), up 2.01% at Rs.2,639.70; Dr.Reddy's Lab, up 1.80% at Rs.4,230.05; and Larsen and Toubro (L&T), up 1.54% at Rs.1,489.30.
 
The major Sensex losers were: BHEL, down 2.85% at Rs.199.70; Gail, down 2.60% at Rs.294.25; Maruti Suzuki, down 2.33% at Rs.4,579.85; Vedanta, down 1.82% at Rs.83.55; and HDFC, down 1.15% at Rs.1,199.25.
 
The Indian markets will remain closed on Friday on account of Gandhi Jayanti.
 
The top gainers and top losers of the major indices in the stock market are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 
Among European indices, DAX was at 9,672.13, up 0.12% and the FTSE 100 was at 6,143.23, up 1.35%.

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