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Sciam: The Orgasmic Mind: The Neurological Roots of Sexual Pleasure

Scientific American Mind -  May 15, 2008

The Orgasmic Mind: The Neurological Roots of Sexual Pleasure

Achieving sexual climax requires a complex conspiracy of sensory and psychological signals—and the eventual silencing of critical brain areas

By Martin Portner

 

She did not often have such strong emotions. But she suddenly felt powerless against her passion and the desire to throw herself into the arms of the cousin whom she saw at a family funeral. “It can only be because of that patch,” said Marianne, a participant in a multinational trial of a testosterone patch designed to treat hypoactive sexual desire disorder, in which a woman is devoid of libido. Testosterone, a hormone ordinarily produced by the ovaries, is linked to female sexual function, and the women in this 2005 study had undergone operations to remove their ovaries.

After 12 weeks of the trial, Marianne had felt her sexual desire return. Touching herself unleashed erotic sensations and vivid sexual fantasies. Eventually she could make love to her husband again and experienced an orgasm for the first time in almost three years. But that improvement was not because of testosterone, it turned out. Marianne was among the half of the women who had received a placebo patch—with no testosterone in it at all.

Marianne’s experience underlines the complexity of sexual arousal. Far from being a simple issue of hormones, sexual desire and orgasm are subject to various influences on the brain and nervous system, which controls the sex glands and genitals. And many of those influences are environmental. Recent research, for example, shows that visual stimuli spur sexual stirrings in women, as they do in men. Mari­anne’s desire may have been invigorated by conversations or thoughts about sex she had as a result of taking part in the trial. Such stimuli may help relieve inhibitions or simply whet a person’s appetite for sex.

Achieving orgasm, brain-imaging studies show, involves more than heightened arousal. It requires a release of inhibitions and control in which the brain’s center of vigilance shuts down in males; in females, various areas of the brain involved in controlling thoughts and emotions become silent. The brain’s pleasure centers tend to light up brightly in the brain scans of both sexes, especially in those of males. The reward system creates an incentive to seek more sexual encounters, with clear benefits for the survival of the species. When the drive for sex dissipates, as it did with Marianne, people can reignite the spark with tactics that target the mind.

Sex in Circles
Biologists identified sex hormones such as estrogen and testosterone in the 1920s and 1930s, and the first studies of human sexuality appeared in the 1940s. In 1948 biologist Alfred Kinsey of Indiana University introduced his first report on human sexual practices, Sexual Behavior in the Human Male, which was followed, in 1953, by Sexual Behavior in the Human Female. These highly controversial books opened up a new dialogue about human sexuality. They not only broached topics—such as masturbation, homosexuality and orgasm—that many people considered taboo but also revealed the surprising frequency with which people were coupling and engaging in sexual relations of countless varieties.

Kinsey thus debuted sex as a science, paving the way for others to dig below statistics into the realm of biology. In 1966 gynecologist William Masters and psychologist Virginia Johnson—who originally hailed from Washington University before founding their own research institute in St. Louis—described for the first time the sexual response cycle (how the body responds to sexual stimulation), based on observations of 382 ­women and 312 men undergoing some 10,000 such cycles. The cycle begins with excitation, as blood rushes to the penis in men, and as the clitoris, vulva and vagina enlarge and grow moist in women. Gradually, people reach a plateau, in which they are fully aroused but not yet at orgasm. After reaching orgasm, they enter the resolution phase, in which the tissues return to the preexcitation stage.

In the 1970s psychiatrist Helen Singer Kaplan of the Human Sexuality Program at Weill Medical College of Cornell University added a critical element to this cycle—desire—based on her experience as a sex therapist. In her three-stage model, desire precedes sexual excitation, which is then followed by orgasm. Because desire is mainly psychological, Kaplan emphasized the importance of the mind in the sexual experience and the destructive forces of anxiety, defensiveness and failure of communication.

In the late 1980s gynecologist Rosemary Basson of the University of British Columbia proposed a more circular sexual cycle, which, despite the term, had been described as a largely linear progression in previous work. Basson suggested that desire might both lead to genital stimulation and be invigorated by it. Countering the idea that orgasm is the pinnacle of the experience, she placed it as a mere spot on the circle, asserting that a person could feel sexually satisfied at any of the stages leading up to an orgasm, which thus does not have to be the ultimate goal of sexual activity.

Dissecting Desire
Given the importance of desire in this cycle, researchers have long wanted to identify its key ingredients. Conventional wisdom casts the male triggers in simplistic sensory terms, with tactile and visual stimuli being particularly enticing. Men are drawn to visual erotica, explaining the lure of magazines such as Playboy. Meanwhile female desire is supposedly fueled by a richer cognitive and emotional texture. “Women experience desire as a result of the context in which they are inserted—whether they feel comfortable with themselves and the partner, feel safe and perceive a true bond with the partner,” opines urologist Jennifer Berman of the Female Sexual Medicine Center at the University of California, Los Angeles.

Yet sexual imagery devoid of emotional connections can arouse women just as it can men, a 2007 study shows. Psychologist Meredith Chivers of the Center for Addiction and Mental Health in Toronto and her colleagues gauged the degree of sexual arousal in about 100 women and men, both homosexual and heterosexual, while they watched erotic film clips. The clips depicted same-sex intercourse, solitary masturbation or nude exercise—performed by men and women—as well as male-female intercourse and mating between bonobos (close ape relatives of the chimpanzee).

The researchers found that although nude exercise genitally aroused all the onlookers the least and intercourse excited them the most, the type of actor was more important for the men than for the women. Heterosexual women’s level of arousal increased along with the intensity of the sexual activity largely irrespective of who or what was engaged in it. In fact, these women were genitally excited by male and female actors equally and also responded physically to bonobo copulation. (Gay women, however, were more particular; they did not react sexually to men masturbating or exercising naked.)

The men, by contrast, were physically titillated mainly by their preferred category of sexual partner—that is, females for straight men and males for gay men—and were not excited by bonobo copulation. The results, the researchers say, suggest that women are not only aroused by a variety of types of sexual imagery but are more flexible than men in their sexual interests and preferences.

When it comes to orgasm, simple sensations as well as higher-level mental processes probably also play a role in both sexes. Although Kinsey characterized orgasm in purely physical terms, psychologist Barry R. Komisaruk of Rutgers University has defined the experience as more multifaceted. In their book The Science of Orgasm (Johns Hopkins University Press, 2006), Komisaruk, endocrinologist Carlos Beyer-Flores of the Tlaxcala Laboratory in Mexico and Rutgers sexologist Beverly Whipple describe orgasm as maximal excitation generated by a gradual summing of responses from the body’s sensory receptors, combined with complex cognitive and emotional forces. Similarly, psychologist Kent Berridge of the University of Michigan at Ann Arbor has described sexual pleasure as a kind of “gloss” that the brain’s emotional hub, the limbic system, applies over the primary sensations.

The relative weights of sensory and emotional influences on orgasm may differ between the sexes, perhaps because of its diverging evolutionary origins. Orgasm in men is directly tied to reproduction through ejaculation, whereas female orgasm has a less obvious evolutionary role. Orgasm in a woman might physically aid in the retention of sperm, or it may play a subtler social function, such as facilitating bonding with her mate. If female orgasm evolved primarily for social reasons, it might elicit more complex thoughts and feelings in women than it does in men.

Forgetting Fear
But does it? Researchers are trying to crack this riddle by probing changes in brain activity during orgasm in both men and women. Neuroscientist Gert Holstege of the University of Gro­ningen in the Netherlands and his colleagues attempted to solve the male side of the equation by asking the female partners of 11 men to stimulate their partner’s penis until he ejaculated while they scanned his brain using positron-emission tomography (PET). During ejaculation, the researchers saw extraordinary activation of the ventral tegmental area (VTA), a major hub of the brain’s reward circuitry; the intensity of this response is comparable to that induced by heroin. “Because ejaculation introduces sperm into the female reproductive tract, it would be critical for reproduction of the species to favor ejaculation as a most rewarding behavior,” the researchers wrote in 2003 in The Journal of Neuroscience.

The scientists also saw heightened activity in brain regions involved in memory-related imagery and in vision itself, perhaps because the volunteers used visual imagery to hasten orgasm. The anterior part of the cerebellum also switched into high gear. The cerebellum has long been labeled the coordinator of motor behaviors but has more recently revealed its role in emotional processing. Thus, the cerebellum could be the seat of the emotional components of orgasm in men, perhaps helping to coordinate those emotions with planned behaviors. The amygdala, the brain’s center of vigilance and sometimes fear, showed a decline in activity at ejaculation, a probable sign of decreasing vigilance during sexual performance.

To find out whether orgasm looks similar in the female brain, Holstege’s team asked the male partners of 12 women to stimulate their partner’s clitoris—the site whose excitation most easily leads to orgasm—until she climaxed, again inside a PET scanner. Not surprisingly, the team reported in 2006, clitoral stimulation by itself led to activation in areas of the brain involved in receiving and perceiving sensory signals from that part of the body and in describing a body sensation—for instance, labeling it “sexual.”

But when a woman reached orgasm, something unexpected happened: much of her brain went silent. Some of the most muted neurons sat in the left lateral orbitofrontal cortex, which may govern self-control over basic desires such as sex. Decreased activity there, the researchers suggest, might correspond to a release of tension and inhibition. The scientists also saw a dip in excitation in the dorsomedial prefrontal cortex, which has an apparent role in moral reasoning and social judgment—a change that may be tied to a suspension of judgment and reflection.

Brain activity fell in the amygdala, too, suggesting a depression of vigilance similar to that seen in men, who generally showed far less deactivation in their brain during orgasm than their female counterparts did. “Fear and anxiety need to be avoided at all costs if a woman wishes to have an orgasm; we knew that, but now we can see it happening in the depths of the brain,” Holstege says. He went so far as to declare at the 2005 meeting of the European Society for Human Reproduction and Development: “At the moment of orgasm, women do not have any emotional feelings.”

But that lack of emotion may not apply to all orgasms in women. Komisaruk, Whipple and their colleagues studied the patterns of brain activation that occur during orgasm in five women with spinal cord injuries that left them without sensation in their lower extremities. These women were able to achieve a “deep,” or nonclitoral, orgasm through mechanical stimulation (using a laboratory device) of the vagina and cervix. But contrary to Holstege’s results, Komisaruk’s team found that orgasm was accompanied by a general activation of the limbic system, the brain’s seat of emotion.

Among the activated limbic regions were the amygdala and the hypothalamus, which produces oxytocin, the putative love and bonding hormone whose levels jump fourfold at orgasm. The researchers also found heightened activity in the nucleus accumbens, a critical part of the brain’s reward circuitry that may mediate orgasmic pleasure in women. In addition, they saw unusual activity in the anterior cingulate cortex and the insula, two brain areas that Rutgers anthropologist Helen Fisher has found come to life during the later stages of love relationships. Such activity may connect a female’s sexual pleasure with the emotional bond she feels with her partner.

Pleasure Pill?
Disentangling the connections between orgasm, reproduction and love may someday yield better medications and psychotherapies for sexual problems. As Marianne’s case illustrates, the answer is usually not as simple as a hormone boost. Instead her improvement was probably the result of the activation or inactivation of relevant parts of her brain by social triggers she encountered while participating in an experiment whose purpose centered on female sexual arousal. Indeed, many sex therapies revolve around opening the mind to new ways of thinking about sex or about your sexual partner.

Companies are also working on medications that act on the nervous system to stimulate desire. One such experimental compound is a peptide called bremelanotide, which is under development by Palatin Technologies in Cranbury, N.J. It blocks certain receptors in the brain that are involved in regulating basic drives such as eating and sex. In human studies bremelanotide has prompted spontaneous erections in men and boosted sexual arousal and desire in women, but the U.S. Food and Drug Administration has held up its progress out of concern over side effects such as rising blood pressure.

Continued scientific dissection of the experience of orgasm may lead to new pharmaceutical and psychological avenues for enhancing the experience. Yet overanalyzing this moment of intense pleasure might also put a damper on the fun. That is what the science tells us anyway.

 

Further Reading

• Infected with Insanity: Could Microbes Cause Mental Illness?
• Brain Injury's Toll
• Calendar: April / May 2008
• Are Immune System Molecules Brain-Builders—And Destroyers?

 

• Why Do Some People Sleepwalk?
• Blood Flow May Be Key Player in Neural Processing
• Disease for Darwinism
• Getting to Know Nutraceuticals

FT: A Sex and the City guide to media

A Sex and the City guide to media

By John Gapper

Published: May 15 2008 03:00 | Last updated: May 15 2008 03:00

It may not take a lot to make the New York Post, Rupert Murdoch's city tabloid, grumpy but the four actresses of Sex and the City , the new film of the television series, certainly provoked it this week.

The Post was dubious about the hat worn to the film's premiere by Sara Jessica Parker, who plays the lead character Carrie Bradshaw in the drama about the lives of four Manhattan women. Even worse than this faux-pas, she wore the hat in London, where the film's world premiere was held.

After London, which the Post dismissed as "the wrong city", the quartet is hitting Berlin tonight before returning to New York for yet another glitzy launch event in two weeks. New Yorkers must make do for now with posters of Carrie and her friends plastered around the city.

Even in its absence, however, Sex and the City is part of the Zeitgeist. Both the drama itself and the way it is being marketed say a lot about the future of film and television. In fact, here is my Sex and the City guide to the entertainment industry.

First, the world is bigger than the US. Carrie, Charlotte, Miranda and Samantha are jetting around Europe for the same reason that the Cannes film festival, which opened yesterday, includes the premiere of the planned summer blockbuster Indiana Jones and the Kingdom of the Crystal Skull. That is where the money is.

US films earned $17bn at the international box office last year, compared with $9.6bn at home. As a result, studios are becoming loath to invest in films that do not travel, such as dramas based on baseball. Because SATC is heavily identified with New York, the producer New Line Cinema hedged its bets with European premieres.

Second, paid-for is bigger than free. That sounds strange in the era of the internet, but entertainment for which consumers rather than advertisers pay is growing more powerful. Americans used to spend many more hours with media such as radio and broadcast television than with DVDs and video games but they are switching.

SATC is a prime example because it was a subscription cable television series made by Time Warner's Home Box Office. Indeed, along with The Sopranos , it was part of the Sunday night line-up of original programmes that turned HBO into one of the most powerful forces in entertainment, with annual revenues of about $4bn.

HBO's formula, which has since been mimicked by pay channels such as Showtime and even free cable channels such as AMC, the maker of Mad Men , was to make expensive and intelligent dramas that viewers could not find on broadcast television. SATC was too raunchy, The Sopranos was too dark and violent, Six Feet Under was too morbid etc.

It did not care about decency, or whether there was a broad enough audience to draw advertisers, because it was funded by 29m subscribers. Meanwhile, broadcasters switched to reality shows that were cheap to make - far cheaper than the $2.5m per hour a top-rank drama can cost - and reached big audiences.

That made sense in the moment but it means that HBO and Showtime, which makes Dexter and Weeds , hold more valuable long-term properties. The deal struck by HBO with Apple this week to charge $2.99 for episodes of The Sopranos and Rome on iTunes (and the standard $1.99 for SATC ) shows its pricing power.

Third, the small screen is bigger than the big screen. Box office receipts of $9.6bn in the US last year were easily outstripped by the $23.4bn of DVD rentals and sales. Digital technology allows studios to exploit new forms of distribution, including iTunes and video-on-demand. Some 20 per cent of HBO's revenues come from reselling its dramas.

Furthermore, the power of pay television is not only biting into broadcast networks but is posing a challenge to Hollywood. Subscription channels used to rely almost wholly on re-running Hollywood films and, even now, 70 per cent of HBO's output consists of studio films. The transfer of SATC from the small to the big screen is a symbol of a shift in the power balance.

A decade ago, actors, directors and scriptwriters far preferred to work in film. Complex and sophisticated dramas were found in cinemas while television was a forum for soap operas and bland drama. The rise of HBO and Hollywood's switch to making blockbusters for the 12-24 year-olds who comprise 41 per cent of frequent film-goers is changing that.

The rise of pay television as an artistic force is matched by a decline in the value of run-of-the-mill films in the secondary market. Three Hollywood studios broke away from a deal with Showtime last month to form their own pay television channel after the latter complained that it was paying too much for films and could make its own dramas.

Fourth, adults are bigger than teenagers. Young people have held sway over Hollywood in recent years because they can be relied upon to go to the cinema. But pay television has tapped an adult audience that has been under-served by film studios and can now watch dramas at home on high-definition televisions.

That is breathing life into dramas made for adult niche audiences rather than big teenage and college-student cohorts. Hollywood studios are responding to this. "Studios are being much more deliberate about choosing demographic targets and developing films for them," says Geoff Sands, a consultant at McKinsey & Company.

As adult targets go, you do not get much better than SATC . It started out as a quintessentially American television series and has ended up as a film seen first by Londoners and Berliners. Romance, promiscuity, fashion and all, it is the very model of a modern media enterprise.

john.gapper@ft.com

Copyright The Financial Times Limited 2008

Models and Acceptance in Organizations

Darwin's marriage and war in Iraq: the missing link

By John Kay

Published: May 14 2008 03:00 | Last updated: May 14 2008 03:00

The University of Cambridge has put online the complete works of Charles Darwin. Not just On The Origin of Species but also his personal papers, his views on matrimony as well as his views on evolution.

Darwin, scientific rationalist and child of the Enlightenment, set out in two opposing columns the pros and cons of marriage. A wife would provide "children, companionship, the charms of music and female chit-chat". She would be "an object to be beloved and played with", though he did not seem to attach great weight to this, conceding only that a wife was in this respect "better than a dog anyhow". But Darwin also noted the disadvantages. The absence of the conversation of clever men at clubs, the prospect of "being forced to visit relatives, and to bend in every trifle". Above all, the loss of time.

Most people feel, I suspect, that there is something not quite right about this cold-blooded evaluation. It concerns marriage in general, rather than marriage to any particular woman. Despite his commitment to rationality, Darwin seems to have thought this too. Below his assessment he scrawled: "It is intolerable to think of spending one's whole life, like a neuter bee, working, working - only picture to yourself a nice soft wife on a sofa." He ends: "Marry - marry - marry QED." The following year, Darwin wed Emma Wedgwood. They had 10 children.

QED stands for quod erat demonstrandum , used by mathematicians to end a proof, which translates as "that which was to have been proved". With that expression, Darwin gives the game away. His purpose was not to guide himself to the correct decision, but to rationalise a decision he had already made.

For a time, I ran a company that sold models to large corporations. Although we urged clients to use these models in their decision-making, we did not actually do so ourselves. When I posed the question why, I realised that our analysis served the same function for our clients as Darwin's list of pros and cons. People did not use our models to help make decisions, but to justify decisions they had previously taken. The results might be used internally to seek approval for an investment or an acquisition, or externally to persuade investors or regulators to give support. The board, or the main shareholders, would insist on the appearance of the formal process we were hired to provide.

The modern world of business and politics is plagued by spurious rationality and bogus quantification. Almost everyone who has been responsible for a big decision in a large organisation will have had the experience of picking the best person for the job - and then sitting down to invent objective-sounding reasons for the choice. And if this process is at best distracting, firing someone involves extensive play-actingthat frequently undermines the morale of everyone involved. The desire to do what is right is overtaken by the necessity to do what is easy to defend.

In the new economy bubble, analysts devised new valuation metrics. Their use faded as rapidly as the share prices of the companies they were used to assess. The purpose of the calculations was not to inform those who were uncertain whether to buy, but to give reassurance to those who had already decided to buy. That rationalisation helped inflate the bubble: the story influences the outcome.

Evidence-based policy is sought by government, but mostly the result is policy-based evidence. Only facts and arguments that support the desired policy are admitted, so the analytic basis of decision-making is eroded not enhanced. In the run-up to the Iraq war, the results were disastrous. In the Middle East, British and US governments, like banks in the credit crunch, enjoyed the most extensive information and analytic capabilities available. Yet they made elementary and catastrophic mistakes. Darwin saw through his own pretence of rationality. But bureaucracies engaged in self-justification frequently mislead themselves - more often, perhaps, than they mislead the public. That is how the organisations that place most emphasis on rationality and transparency in decision-making come to make such bad decisions in practice.

www.johnkay.com

Copyright The Financial Times Limited 2008

FT: Google triumphant: Search wars look settled

Google triumphant: Search wars look settled

By Richard Waters in San Francisco

Published: May 12 2008 19:54 | Last updated: May 12 2008 19:54

Eric Schmidt was doing his level best late last week not to gloat. With Microsoft dropping its attempted takeover of Yahoo, the Google chief executive had just seen his arch-rival abandon its most direct attack yet on Google’s growing dominance of online search and advertising.

“I’m happy to be crowned winner,” Mr Schmidt said, before quickly adding: “But as we’ve learned in the election cycle, it goes back and forth.”

The political analogy may have been ill-judged. Like Hillary Clinton after last week’s primary results, Microsoft has never looked more on the defensive. For a company that has always scorned the idea of big mergers in the past, the pursuit of Yahoo was the clearest admission yet that the software company was running out of options as it tried to counter the rise of Google.

“The failure of the Microsoft/Yahoo merger eliminates the biggest short-term threat” to Google’s unrivalled position on the web, says David Yoffie, a professor at Harvard Business School. For now, its momentum “seems unstoppable”. Michael Cusumano, a management professor at Massachusetts Institute of Technology, describes Google’s now-unchallenged dominance even more bluntly: “They’re sitting on a goldmine.”

The scale of Google’s victory over Microsoft in online advertising, sealed by the failure of the Yahoo takeover approach, is hard to exaggerate. By next year, half of the world’s online advertising – set to reach $55bn (£28bn, €36bn) in total – is expected to flow through Google’s systems. Of that, slightly more than two-thirds will come from advertisements that run on Google’s own websites. The rest represents advertising that the internet company, acting as a broker, places on other companies’ sites in return for a small cut of the action.

It is a stunning victory that raises two overriding questions. Will Google be able to use the respite provided by the disarray at Microsoft and Yahoo to carry its dominance of search over into other areas of online – and broader digital – advertising? And should it now be a cause for alarm that one company is in a position to control so much of the lifeblood of the internet?

To some extent, the Microsoft/Yahoo debacle merely confirms something that had already become apparent: the internet search wars ended almost as soon as they began, and Google won. It accounted for around 70 per cent of the estimated $16bn of advertising placed on search engines last year, a share that continues to rise.

Microsoft and Yahoo were late to see the danger, beginning their own search initiatives four to five years ago. A merger would at least have created a second player with the scale to try to compete, says Sir Martin Sorrell, chief executive of WPP, the advertising group. Separately, the two now face continued erosion, he adds. Sir Martin also takes issue with a potential partnership with Yahoo, currently under discussion, that would give Google an even bigger share of the search advertising market.

The eventual limits of the fast-growing search market, which accounts for almost half of all online advertising, are still impossible to discern, but it is already a business that stands comparison with the technology industry’s most fabled success stories. On the current trajectory, Google’s revenue – almost all of it coming from search – will probably surpass the income that Microsoft generates from the Windows operating system some time next year.

There is no guarantee that the search company will alight on another idea as powerful as its advertising system, says Mark Anderson, a veteran technology commentator. Yet that may not matter for some time, he and most other industry insiders say. “I think it’s enough for the next 10 years,” says Mr Anderson. “When God gives you a golden goose, you have to hold it tight.”

Google has spent much of the money from this gilded fowl, and the time afforded it by the failure of its competitors to mount a tougher challenge, preparing for what comes next. Through the acquisitions of DoubleClick and YouTube, it has placed big bets on display advertising and online video. These deals have been the most visible part of its attempt to stake out a position in some of the most promising new areas of digital advertising, says Rishad Tobaccowala, a new media expert at Publicis, the advertising and marketing group.

This is most evident in the video and mobile worlds. Through YouTube and its test of a digital advertising system with EchoStar, the satellite television company, Google has put itself in a position to catch the wave of traditional television advertising as it moves to the web.

In mobile, meanwhile, Google has spent a frenetic year preparing the ground for what it claims will be a bigger business than even its current PC-based one. That has included fighting to open up part of the mobile spectrum in the US so that users get guaranteed access to its services, investing $500m in a high-speed WiMax network, grabbing a prime spot for its services on Apple’s iPhone and launching its own mobile technology platform, known as Android. “They have understood better, they have positioned themselves better, for where the world is going than anyone else,” says Mr Tobaccowala.

This does not mean that success is guaranteed. “The best technology doesn’t always win,” says Prof Yoffie. “History is littered with better technologies that have been left by the wayside.”

The biggest danger may well be that fear of Google’s growing power will prompt a backlash from the very companies it will need on its side as it tries to expand out of search. “The mobile carriers are very concerned about letting Google dominate advertising on mobiles the way it has on the PC,” says Prof Yoffie. That echoes the earlier struggles of another tech industry giant: Microsoft found it hard to break into the mobile industry for similar reasons, while the traditional media industry kept the software company at arm’s length for years after the arrival of the internet out of fear that it would become a gatekeeper with the power to intercede between media companies and their customers.

The parallels with Microsoft are compelling and help to explain why Google is becoming widely feared, says one person who has worked closely with Google for a number of years. Microsoft used its dominance of computer operating systems to build a second market in software applications, eventually dominating that market too.

“These days, the applications are newspapers and television and video games and communication devices,” this person says. According to this view, as these information services are digitised and move to the internet, Google’s advertising system will become the financial platform on which many of these businesses depend – in much the way that Microsoft’s operating system became the backbone for the technology ecosystem of the PC.

Despite the discomfort this causes, however, Google’s status as the internet’s most effective money-maker makes it hard to ignore. That helps to explain Yahoo’s plan to cast itself as a more trustworthy ally of other internet companies – and why many will be hoping it recovers to become a stronger competitor to Google.

So if Google is about to enter a golden age that rivals the heyday of Microsoft on the PC or IBM on the mainframe computer, should this be a cause for concern? Both of those technology companies were criticised in their industry for growing so powerful that they eventually squashed innovation, drawing the attention of antitrust regulators. Does a similar fate await the young idealists who have vowed “Don’t do evil” with their search engine?

The case against a dominant Google is summed up by Sir Martinof WPP. Without the prospect of a strong rival that would have been created by a combination of Microsoft and Yahoo, advertisers could be left with little choice, he warns.

For their part, Google executives make a number of claims for why their particular corner of the advertising business is not susceptible to monopolisation – and why bringing even more advertising into their system should actually help customers.

“What we’ve seen in the past when we’ve done substantial expansions of our network, advertisers have really benefited, they’ve been really happy to be able to get increased reach for their targeted ads,” says Sergey Brin, one of Google’s founders. “For them it just means more sales with clear and accountable profit margins,”

Larry Page, his co-founder, adds that since Google merely runs an auction in which advertisers bid against each other, rather than actually setting the prices for advertising placed on its sites, it cannot affect pricing. “In general having more inventory available to advertisers is very positive for them – they have one powerful interface where they can bid on one type of advertising and have that against as wide a range of inventory as possible,” he says.

Yet this heavy focus on the financial efficiency of Google’s brand of online advertising ignores the fact that many customers want more choice in the types of advertising they use and more ability to negotiate unique ways to present their message, says Prof Yoffie. “Google doesn’t have the reputation for being the easiest company to deal with, and with less competition it will be even less easy,” he adds.

That will not matter as long as advertisers are able to switch their business to other online advertising networks, counters Mr Schmidt. “Advertisers always have multiple choices so it always makes sense for them to use more than one,” he says. “It is incorrect to assert that there’s lock-in or an opportunity for dominance in the advertising space.”

Switching between advertising suppliers in a market as concentrated as internet search may not be as simple as this suggests, though. Big advertisers that want to buy a large volume of “clicks” a week may find that other search engines cannot guarantee them the volume they need, says Sandeep Aggarwal, an analyst at Collins Stewart in San Francisco.

Also, the cost of building the technology to connect with Google and learning how to get the best out of its search system means that many of its customers have made a big investment, says Prof Yoffie. “There are real switching costs,” he adds.

Even some of Google’s admirers agree that the limited choice in search – and, potentially, other areas of digital advertising – does not sit well with customers. “Generally, advertisers like to have four or five suppliers in a market,” says Mr Tobaccowala.

The argument for overlooking this, he adds, is that most big advertisers direct only a very small percentage of their budgets to search – and besides, the upheaval under way on the internet is so great that any lopsidedness in a particular part of the industry may well prove insignificant in the long run. “With all that change, I’m less concerned about one company climbing on the others,” Mr Tobaccowala says.

That is certainly how Google’s leaders see it. The search company and its rivals are racing to invent the future of advertising, says Mr Page, and this rapid innovation is by far the dominant force in shaping the competitive landscape.

If Google tries to rub salt into Microsoft’s wounds by pressing ahead with an alliance of its own with Yahoo, it will get a chance to find out whether regulators agree with this sanguine view.

Copyright The Financial Times Limited 2008

FT: Truck maker heeds firemen’s call

Truck maker heeds firemen’s call

              By Hal Weitzman

Published: May 12 2008 19:42 | Last updated: May 12 2008 19:42

Anyone who thinks “fire-engine red” is a standard  colour would be surprised  by the paint laboratory at the back of the Pierce factory in Appleton, Wisconsin. On the wall are 125 metal plates, each painted a slightly different reddish hue.

“If you’re going to spend half a million dollars on a fire truck, you’ve got to be able to choose the exact colour you want,” jokes Jim Michal, vice-president of manufacturing for Oshkosh Corporation, the heavy truck maker that acquired Pierce in 1996.

Many western manufacturers have tried to stay competitive in the face of low-cost overseas competition by closely tailoring products to their customers’ needs. Oshkosh takes this approach to the extreme, customising its trucks according to individual buyers’ needs and collaborating with customers on redesigning its vehicles.

Its experience shows how such a strategy can pay off: in the past decade, Pierce has grown at an average rate of more than 11 per cent a year. With revenues last year of $600m – up from $180m when it was bought by Oshkosh – it is now the leading maker of fire trucks in the US with a market share of about one third in North America.

Tim Solobay, chief of the Canonsburg Volunteer Fire Department in Pennsylvania, agrees that Pierce’s customisation strategy helps attract buyers. “We went with Oshkosh because it’s just easy working with the company – you know it won’t become an engineering nightmare.” Pierce trucks are popular with volunteer teams, of which there are about 34,000 in the US and which account for 80 per cent of the company’s sales.

Mr Solobay is beaming at his new fire truck, parked on the factory floor – a slice of classic Americana with rows of gleaming vehicles bearing the emblems of fire departments from Jacinto City, Texas to Downers Grove, Illinois.

Mr Solobay says this is his third point of contact with the company: first, he and his crew met a local salesman to talk about design features, then, last December, they visited the factory to talk in more detail about customising the vehicle. On this return visit – a four-day trip – they check the results and take delivery.

Mr Michal says Pierce’s strategy of working with customers is two-pronged. First, the company tailors each vehicle, from the artwork on its grille to the water-pumping technology. “The customer has an option list for specifications,” he says. “The result is that no two vehicles are exactly the same.”

While that makes Pierce vehicles (such as the one pictured below) among the most expensive on the market, it also wins fierce brand loyalty among purchasers. Mr Solobay says his fire department is paying about $30,000 more than it would for a vehicle from a rival, but adds that for a fire truck that is only replaced about every 20-25 years there are other considerations, such as dependability and the unique features the company offers. “These are top-quality vehicles,” he says. “We know that because our other fire trucks are from Pierce.”

Oshkosh is so confident that its customers will stick with the Pierce brand that in April – while the US industrial sector appeared to be mired in recession – it increased the price of its vehicles, citing rising steel costs.

Charlie Szews, Oshkosh’s president and chief operating officer, says the tailoring strategy has been honed over decades. “We operate in relationship markets. These products last up to 50 years – there are still Pierce fire trucks from the 1950s that operate in the field. We have to think long-term.”

The second part of Pierce’s strategy involves using contacts with customers to aid redesign and spur innovation. Before undertaking a fundamental redesign of its basic fire truck model two years ago, Pierce surveyed its customers to get ideas for improvements. Then the company invited more than 100 firefighters to visit the factory to give them more detailed feedback. It put them in groups and asked them to design their ideal fire truck from scratch.

The company fed ideas from this exercise into the redesign: it removed a pillar from the windscreen and changed the location of wing mirrors to improve visibility; made door handles bigger so they were easier to use for firefighters wearing gloves; and installed side airbags for extra protection.

Oshkosh also used the opportunity to measure firemen – and found out they were, on average, taller and broader than federal guidelines on cab heights and seat widths had led them to expect. As a result, the company widened the standard seats in their trucks.

During a standard sales process, too, the company has a lot of time to get to know its customers. As with the Canonsburg fire department, customers who buy a fire truck infrequently – such as volunteer departments serving rural areas – typically have three meetings with the company over the course of the six months leading up to a sale. Up to 10,000 visitors a year come through the factory to inspect and collect their vehicles, and Pierce uses the opportunity to collect feedback.

“We line them up with a series of lunches and dinners while they’re here so we can hear their ideas,” says Mr Michal. “At every meal we have a staff member from a different department go out with them to chat informally. Then the employees document what’s been said and send it on to the engineering department or the marketing department.”

Bob Bohn, Oshkosh’s chairman and chief executive, says the ability to listen to customers in such an informal setting is an invaluable part of the production process. “It gives them a chance to really tell us what they like and what they don’t like,” he says.

It is only through taking advice on its products from their users that Pierce has been able to claim a progressively larger slice of the fire truck sector, the company says. “These markets only grow at about 1-3 per cent a year,” says Mr Szews. “We need to think differently in order to increase our market share.”

Vehicles built on front-line experience and first-hand feedback

While Pierce’s relations with its customers go deeper than most, Oshkosh adopts a similar approach across other units. Employees in its military arm, for example, spend months living in the field when US forces are testing prototypes and 20 per cent of the division is devoted to parts and servicing. The company has two facilities in Iraq and one in Kuwait dedicated to repairing and refurbishing military vehicles.

Mike Conger, Oshkosh
vice-president and general manager of operations, says his experience of living for three years near government “proving grounds” where vehicles are tested and delivering vehicles to the field is typical of how the company works with the US military. “I could walk around and talk to the staff sergeant or the chief warrant officer and get direct first-hand feedback about how our vehicles were performing,” he says.

As is standard for US military contractors, members of the Defense Contract Management Agency, a unit of the Pentagon, also work on site with Oshkosh. The company brings the dozen-strong DCMA team in to its operations as much as possible, with federal staff sitting in on twice-daily production meetings as well as inspecting quality and processes. Mr Conger says: “We hear the customer’s expectations right on the shop floor, and our employees hear it first-hand.”

Copyright The Financial Times Limited 2008

             

                 

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FT: Penguins offer safer surfing for junior web users

Penguins offer safer surfing for junior web users

By Maija Palmer

Published: May 12 2008 03:00 | Last updated: May 12 2008 03:00

The founders of Club Penguin - Lane Merrifield, Lance Priebe and Dave Krysko - are possibly some of the nicest guys in the internet business. They give millions of dollars a year to children's charities and are fierce advocates of family values.

Mr Merrifield looks more like a kindly primary school teacher than an executive, the kind of man you might trust to look after your children. This is what parents are, in effect ,doing as they let their children join Club Penguin, the virtual online world for six- to 14-year-olds.

What started out as a sideline project in the sleepy holiday town of Kelowna, British Columbia, Canada, is rapidly growing into a global phenomenon.

Club Penguin has 20m users and analysts estimate up to 10 per cent of them have persuaded parents to pay about £4 a month for souped-up access to the site. Stephen Prentice, senior analyst at Gartner, notes: "Kids' virtual worlds are the success story. If you exclude online games, around nine out of 10 virtual world users are probably under 12."

Club Penguin became so successful that last July it was bought by Disney for $700m (£350m). It is now building an international presence with Disney's backing, beginning with the opening of a UK office earlier this month. It is also hiring a marketing executive for the first time since it was founded in October 2005.

There is some irony in the fact that the Club Penguin founders now find themselves owned by a big US company. All three originally moved to Kelowna to escape the corporate rat race. And, they had started the site in order to create an advertisement-free zone for children that also offered entertainment.

The site's popularity - it made a profit within four months - showed the founders they had found a gap in the market.

Safety features were a big selling point from the outset. Mr Merrifield's wife is a clinical psychologist specialising in childhood and helped shape the site; his sister and mother, both teachers, also offered advice.

Virtual Worlds Management, which tracks networking sites and virtual worlds, estimates that there are more than 100 youth-focused virtual worlds either live or in development, with 52 of them aimed at children under seven. Disney alone is understood to be developing up to 10 virtual worlds aimed at children.

The fact that many of these sites are associated with commercial brands such as Barbie, Beanie Babies and Bratz worries parents concerned about their children being exposed to too much advertising online.

Safety is also a problem. A recent survey by Ofcom, the UK communications regulator, found that nearly half of all British children have a profile on a social networking site, including a quarter of all eight- to 11-year-olds with online access. These children are theoretically too young for Facebook, Bebo and MySpace, which have minimum age limits of 13 or 14. However, many find ways round the age restrictions. Given that last summer MySpace alone detected and deleted 29,000 convicted sex offenders on its service, parents concerns are real.

Their search for safer online alternatives - sites that are more closely monitored and where children cannot reveal personal information - plays to Club Penguin's strengths. It employs more than 100 moderators who monitor the site for unsafe behaviour. They are trained to spot bullying, or attempts to share contact details.

Pictures cannot be posted on the site. Instead, children are represented by a colourful penguin. Filtering software prevents phone numbers being published.

Club Penguin's culture of niceness is key to its success. But how well it can continue to walk the fine line between wholesomeness and commercial pressures is unclear. Mr Merrifield says that Disney has been very hands-off with the company and lets it do things its own way.

Mr Merrifield admits the company could create soft toys based on its virtual penguin characters but he pledges this would only be done with careful consideration. "It will be very purposeful. It will be based on what the audience want," he says.

The question is: which audience is he talking about? Eight-year-olds do not mind commercialism - they love toyshops. It is parents who resent it, and Club Penguin will have a tricky balancing act to please both sets of customers.

Copyright The Financial Times Limited 2008

FT REPORT - BUSINESS EDUCATION 2008: Back to school for lessons on leadership

"If you catch them four or five years [after receiving their MBAs] they will tell you they wish they'd paid more attention to their organisational behaviour professors, because it turns out those are the skills they now need most in the job," he says.

==

FT REPORT - BUSINESS EDUCATION 2008: Back to school for lessons on leadership

By Andrew Baxter
Published: May 12, 2008

Seventeen years after receiving his MBA, Todd Loudenslager was back at school last month. The senior risk officer at US Bancorp's consumer bank, now 51, was taking part in the Kellogg School of Management's Post-MBA programme.

The programme claims to be unique - a three-week course, just for MBAs, that enables participants to catch up on business trends and management thinking in the decade or more since they received their qualification, and brush up their leadership skills.

"My boss had said there was a need to get me into some kind of advanced education, something at a higher and broader level than bankers' school," says Mr Loudenslager.

The Kellogg programme is not the only way MBAs can refresh their knowledge with short courses. In the UK, Ashridge Business School runs a three-day MBA Refresher weekend, while Harvard Business School in the US has its three-day Breakthrough Insights programme, open to the school's MBA and executive education alumni. It also has a week-long programme aimed mainly at women MBAs returning to the workplace, called "A New Path".

Then there are any number of executive education courses with content that appeals to middle-ranking or senior executives who may have long since given up trying to get into the suit - or dress - they bought for their MBA award ceremony.

The leadership programmes at Henley Management College are popular with MBAs, as is the three-week, Advanced Management Programme. At Cranfield School of Management, short courses that attract MBAs include the Business Leaders Programme (five plus seven days) and the five-day Director as Strategic Leader course.

At ESCP-EAP European School of Management, the Milestone executive education programmes are particularly attractive to MBAs wishing to move up to the next level of leadership, says Davide Sola, the school's UK director. An example is the school's three-day Advanced Leadership Workshop.

The need to catch up on new academic research and business trends is one obvious reason for MBAs to feel the urge to get back into the classroom. Sometimes participants on advanced management programmes may even get a head start on others when it comes to exposure to new thinking.

The business adviser Ram Charan, for example, has long been a teacher in programmes at Duke University's Fuqua School of Business. Recently, says Kip Kelly, Fuqua's director of executive education, Mr Charan has been teaching from his new book on innovation* even before it hit bookshops.

Refreshing leadership skills that may not have seemed so important to MBAs aged, typically, 28 or 29, is another reason to come back to school. Everyone would have taken some kind of leadership class in their MBA, says Brenda Ellington Booth, Kellogg's academic director for executive programmes, but for younger participants this would have been "interesting but not that relevant. Now you have more experience, you may be in a different industry, you have more direct and indirect reports, so we have a leadership week [the final week of the Kellogg programme]."

Narayan Pant, Insead's dean of executive education, says a lot of MBAs come back to the school's leadership programmes for this very reason. "If you catch them four or five years [after receiving their MBAs] they will tell you they wish they'd paid more attention to their organisational behaviour professors, because it turns out those are the skills they now need most in the job," he says.

Stephen Burnett, Kellogg's associate dean and director of executive education programmes, says many courses attract MBAs but are not designed on the assumption that participants have the qualification.

"This means that you always have to revisit a few basics to ensure that everybody is up to speed," says Prof Burnett. "With our post-MBA programme, we don't have to do that, because we know what you had and can build on that."

The $23,000 course is intensive and Mr Loudenslager says it "often felt like a firehose". But he says the time - 10 hours of classes a day from Monday to Friday and half a day on the first Saturday - was used wisely.

Away from the short courses of executive education, there is the Post-MBA Diploma in Advanced Management offered by Schulich School of Business at York University in Toronto. Thunderbird School of Global Management in Phoenix runs a Post-MBA Masters in Global Management. There is more on these courses in an extended version of this article at: www.ft.com/businesseducation

*The Game Changer - How You Can Drive Revenue and Profit Growth with Innovation, by A.G. Lafley and Ram Charan. Crown Business

FT: The Arab comic-book hero

The Arab comic-book hero

By Tobias Buck

Published: May 6 2008 21:08 | Last updated: May 6 2008 21:08

Suleiman Bakhit’s dream of becoming the Walt Disney of the Arab world began in a Minnesota classroom full of American first-grade students.

The young Jordanian student (pictured below) was there in January 2002 to talk about Arabs and Muslims. He wanted to explain to these children that the men behind the attacks on New York and Washington four months earlier were a radical fringe, that their atrocities should not stoke fears of the wider Arab world. We, Mr Bakhit was trying to say, are not so different from you.

“Then one of the boys asked: ‘Do you have Arab superheroes? Is there an Arab Superman?’ And it hit me. There are none. So I asked myself – what would an Arab superhero look like?” Mr Bakhit recalls. “Slowly, I started sketching and thinking. I taught myself how to draw.”

In 2005, Mr Bakhit returned to Jordan. He had studied human resource development in the US, a rare qualification in the Arab world, and job offers poured in. But the question raised by the little boy in Minnesota had not gone away.

Over the next three years, Mr Bakhit not only honed his drawing skills, but he also developed his first story, a tale about a gang of Arab children in the year 2050. He became increasingly convinced there was not only a market for his stories and characters but that there was a real hunger among young Arabs for indigenous content and for home-grown superheroes who would speak to their aspirations and talk in their language.

“It got to the point where I either got started or not. It was time to put up or shut up,” Mr Bakhit says. So in 2005 he used $50,000 – some of which was from his personal savings and some from an outside investor – to set up Aranim Media Factory, the first comic book publisher in Jordan and one of only three in the Arab world.

Mr Bakhit’s business style, too, is visibly out of the ordinary. He never wears a suit and tie; his office is littered with DVDs, plastic toys and a bewildering array of exercise machinery; and he rides a big, gleaming motorbike.

The company is housed on two floors of an unassuming building in Amman, Jordan. The first thing that catches a visitor’s eye is graffiti proclaiming “The Impossible Dream”. Inside, there are huge prints depicting the varied and rapidly growing cast of heroes, villains and lovable rogues that populate Aranim’s comic universe.

There are Mansaf and Ozi, two Jordanians whose single-minded pursuit of the country’s national dishes (which the heroes are named after) plunges them into trouble. There is the square-jawed Jordanian fighter pilot, a real-life figure who died in a legendary battle with the Israeli air force.

And there is the group of spiky-haired kids (see left) who wake up in the year 2050 only to discover that both oil and grown-ups have disappeared for good, setting the stage for a futuristic voyage of discovery.

They, and many more, are the brainchildren of Mr Bakhit. He sketches their figures and draws up the storylines before handing the colouring and detail work to a team of artists located around the world. He keeps five employees in Jordan, but most of the work is done by freelance comic artists in countries from Brazil to Japan (see box).

The choice of characters and plots must give Arab readers heroes and stories they can identify with, he says. “There is no media right now that reflects our aspirations and dreams, or that is simply targeted towards entertaining us. We are hungry for content. There is a lack of indigenous content, and a lack of content that is tailored towards the young.”

As a boy, Mr Bakhit used to devour comics from the US and Japan. But, he says, there was always one problem with imported superheroes: “I was a big fan of Superman and Batman. But I could never see myself in them. We don’t like our heroes to wear their underwear on the outside. The whole Spandex thing just doesn’t resonate in our culture.”

Although the offices of Aranim – an amalgamation of “Arab” and “animation” – seem chaotic, the company is working according to a well-ordered business plan.

Funding is secure, Mr Bakhit says, thanks to grants by the King Abdullah Development Fund, and he expects Aranim to become “seriously profitable” in the next two to three years after an upfront investment of $2m-$3m dollars.

“We have to take it bit by bit. For the next two years, my goal is to establish the intellectual property and the brand,” says Mr Bakhit. “At some point you reach the tipping point – when people really start loving your characters – and that’s when you start capitalising on that through licensing, merchandising and other sales”.

His plan is to win as wide an audience as possible for his characters, including by distributing teasers of Aranim’s comic books for free. The first big launch is scheduled for the middle of this year, when Aranim will publish three of its comic books at the same time.

Mr Bakhit plans to focus on the Jordanian market for the time being, but he believes many of Aranim’s stories will also resonate in other Arab countries, and possibly even in the west.

However, given the region’s low spending power and what he says is a traditional reluctance to spending money on books, let alone comics, Mr Bakhit believes that he cannot rely on direct sales alone to turn a profit.

Instead, he is banking on revenue from merchandising, advertising and spin-offs, such as computer games based on Aranim characters. One such game is already in the works, as is the first line of plastic toys featuring his creations. The prototype – a fearsome Arab warrior on horseback – glowers from a shelf next to his desk. He is also working on an animated television series, production of which is set to be completed in 2010.

While profits are important to the 29-year-old, Mr Bakhit says that his real ambition goes far beyond making money: “I want to become the Walt Disney of the Arab world – the guy who created all these great characters and gave so many kids hope.

“I love what I do. Even if I don’t get rich, I will be fulfilled.”

Global production methods matched with guerilla art tactics

There is virtually no tradition of comic books in the Arab world, explains Suleiman Bakhit. Until a few years ago, the only cartoons that were available came from the US and Japan, and even those failed to win a wider audience.

This meant that among the biggest challenges for Aranim Media Factory was finding artists able to turn Mr Bakhit’s sketches into the finished article. He quickly realised, however, that he would have to look beyond Amman, the Jordanian capital where his company is based, to find the right talent. “One of my first artists was a guy from Brazil,” he recalls. “I was browsing the net and saw his work, so I sent him an e-mail and asked whether he could work for me.”

Since then, he has added collaborators in Britain, Germany, Japan and China to his stable. “We agree a monthly rate, they e-mail their work and then I wire them the money,” Mr Bakhit says. The speed and flexibility of the process, he says with a laugh, is akin to “guerrilla” warfare.

This summer, Mr Bakhit, plans to bring all his artists to Jordan for the first time, not least to share their expertise and skills with the budding cartoon talent of Amman.

Copyright The Financial Times Limited 2008

FT: Rebooting the Indian green revolution

Rebooting the Indian green revolution

By Amy Yee in New Delhi

Published: May 2 2008 03:00 | Last updated: May 2 2008 03:00

Ajit Singh, a farmer in the poor northern state of Uttar Pradesh, had never seen a computer until four years ago when ITC, the Indian agribusiness-to-hotels conglomerate, installed a PC in his village, Kurthia.

Now the thin 47-year-old farmer visits the ITC station, known as an "e-choupal" after the Hindi term for "gathering place", every day for online access to news-papers, crop prices, weather forecasts and farming techniques. As ITC's village manager, he passes on what he gleans to fellow farmers.

Knowing the fair market value of crops allows farmers to fetch better prices and circumvent local traders who used to dictate terms. Farmers can also sell wheat and other crops to ITC.

The result has been a big jump in crop productivity. Annual incomes in Kurthia have risen from Rs40,000- Rs50,000 ($1,000-$1,230) before e-choupal to Rs100,000- Rs120,000 now, says Mr Singh.

ITC has rolled out 6,400 e-choupals across India since 2000. The initiative has gained new relevance as New Delhi urgently tries to tackle threats to food security, the growing gap between rich and poor and stagnant agricultural growth that has added to soaring food prices,

India "needs another green revolution", the UN Economic and Social Commission for Asia and the Pacific (Unescap) recently urged. "Growth and productivity in agriculture are slowing, and the green revolution has bypassed millions."

India has the most to gain from improvements in agriculture because it is home to nearly two-thirds of Asia's poor, most of whom rely on farming, Unescap said.

Middle-class Indians are eating more and better food. Yet its population of 1.1bn is growing at about 1.4 per cent and food grain production increased just 0.9 per cent last year, according to ministry of agriculture statistics.

Agricultural growth has steadily decelerated because of years of under-investment as attention has focused on high-growth manufacturing and service industries.

But big strides can be made with relatively simple measures. In Kurthia, which is 40 km from the bustling holy city of Varanasi, the e-choupal consists of a computer in a modest house rigged with a small satellite dish. Farmers pose questions that are e-mailed to ITC -agricultural scientists and experts at agricultural -institutes.

Yogesh Bhrigulanshi, a farmer and the ITC local manager in nearby Bisuari village, says rice yields have risen 70 per cent, to 3,900kg per acre, since the arrival of the e-choupal. "We used to use fertiliser without any knowledge," says Mr Bhrigulanshi. "We used to use pesticides for any disease on plants. Now we know which pesticide to use and if it needs to be used."

ITC plans to invest $1bn on e-choupals in the period to 2015 to connect farmers to information, products and services. The hope is that as rural incomes rise, farmers will buy more products and services, ranging from seeds and fertilisers to insurance and healthcare.

Rural standards of living have improved. Mr Bhrigulanshi bought his second mobile phone last month and two years ago purchased a television. His 11-year-old son, wearing a white uniform and striped blue tie, goes to an English school that costs Rs25,000 ($625) per year. That compares to the $7 annual cost of his previous government school.

There is still a long way to go. Farmers say there has been little improvement in roads, electricity and water over the years. Government agricultural subsidies for fertiliser, pesticide and equipment do not reach them. Subsidies should be provided through private parties, Mr Singh suggests.

They remain sceptical of the Indian government's recent promises to invest heavily in agriculture and waive $15bn (€9.7bn, £7.6bn) worth of loans to farmers. Writing off bad loans means "defaulters benefit. Those who have paid do not have any benefit," opines Mr Bhrigulanshi.

"Government always talks about farmers when elections come," adds Mr Singh. "But practically, we are not seeing anything."

Copyright The Financial Times Limited 2008

FT: The reflective route to success

The reflective route to success

By Richard Waters

Published: April 30 2008 03:00 | Last updated: April 30 2008 03:00

Never undersell yourself. That was the first business lesson learnt by a young Pat McGovern, at the time an undergraduate at Massachusetts Institute of Technology. More than four decades later, it is one of a handful of basic business principles, followed with uncanny single-mindedness, that has enabled the 70-year-old Bostonian to build one of the publishing world's biggest fortunes.

Mr McGovern, who had landed a job with a computing magazine in the early 1960s, had gone to meet the head of one of the biggest computer makers of the day. His interviewee asked him to carry out a census of the technology used by the rudimentary information technology departments - something the would-be journalist agreed to do for him for $40,000.

"He said, 'Pat, you don't understand - nobody would believe and use information as cheap as you're proposing to provide it. Double your price, make it $80,000, and then people will take it seriously'."

The next tip was equally valuable. Do not work just for one company: sell the research to other computer makers as well. He followed the advice, asking would-be customers for a 50 per cent down payment - and within days found himself with nine $40,000 cheques.

Mr McGovern, founder and chairman of International Data Group, has made a habit of listening to what his customers say. It may be a classic business truism but few have pursued it so rigorously. His biggest mistakes, he says, have come from not listening to customers closely enough - and from over-extending in pursuit of new markets (see below).

IDG, the private company in which he owns 80 per cent of the shares, produces revenues of $3bn and has become, among other things, one of the leading foreign media concerns and venture capitalists in China.

The sheer range of those operations - IDG comprises more than 100 separate businesses - is a testament to an approach perfected early on. Following his customers and researching the next big markets has freed Mr McGovern from one of the most common traps in business: clinging too long to one successful idea or geographic region, even as markets change.

His first market research business brought him into contact with the IT managers who were to become his next customers. Talking to the users of technology on behalf of the computer makers, he quickly found they had a burning need to understand how their counterparts were using technology. That led to a magazine for the fledgling industry, Computerworld.

Having defined his business aim as providing education about technology (it was Thomas Watson of IBM who told him there would be great demand for this), it was only natural to expand into conferences and other events, which now make up a quarter of revenues.

With its roots in market research, IDG also set about analysing where future markets would lie. The result: in 1972, after only eight years in business and with about $20m in revenues, IDG began launching technology magazines internationally, starting with Japan and working down the list of the world's biggest economies. By 1980, Mr McGovern had alighted in China - at a time when others were still treading carefully there.

"[Other US companies] brought along three staff people, a lawyer and an accountant, and they started negotiations - so of course the Chinese brought out their staff and it took three years," he says. "I came over by myself, as the founder, and I was ready to do a deal. What happens is [the Chinese] will produce the president at your level. If you have the CEO come over, they'll have the head minister come."

All this was made possible by a financing model that most entrepreneurs would envy. From those first nine cheques for advance payment, all IDG's businesses have involved collecting revenue before incurring costs, producing enough cash flow to save him from looking for outside capital. (The only up-front investment came from the sale of his car for $5,000, he says.)

Mr McGovern says another principle has served him well: when a business starts to get too big, break it into smaller units, hire and motivate others to lead the new operations, and step back.

"The importance of speed to market really occurred to me back in 1969," he says. "I'd been away for a couple of weeks, and there was a big stack in my in-basket. People were waiting for me to approve a personnel hire, or buy some new office equipment, or something."

Many entrepreneurs find it hard to take the logical next step and delegate, but it seems to have come naturally to a man who cultivates an unassuming manner.

"All of those management books are written about how you, as the manager, are the key person controlling everything: you're a master strategist," he says. "It is great for the ego of the book buyer, but in reality, you can see that the best returns on capital are not achieved by bigger companies. They are achieved by venture capitalists, who are always starting small, passionate companies."

The aspiring publisher quickly adopted the same approach for developing his own businesses. "It became my new philosophy: find a market, get a leader, give them the resources they want, then get out of the way and be a cheerleader."

Perhaps it is not surprising that this business style has led Mr McGovern into venture capital itself, turning IDG into one of China's most successful start-up investors. It began almost by chance. With the early success of the Chinese version of Computerworld, "our immediate profits [in China] were growing faster than we could find things to invest them in in the media business," he says. So IDG did the next logical thing, using the surplus to back internet and media entrepreneurs who were finding it hard to raise capital.

The $400m that IDG put to work in nearly 200 start-ups has since returned $1.6bn, Mr McGovern says. That has drawn the attention of other foreign investors and IDG is now looking to expand its Chinese investment funds to include later-stage and buy-out funds.

Others in his position would have retired to the golf course long ago, but Mr McGovern is still looking for business opportunities. He says he will continue until 2020, when he plans to focus full-time on philanthropy.

"I think the Buddhist statement that the journey is the reward is very true," he remarks. "When you're doing something you're proud of and happy to do, you're having a great time. When you reach the destination, depression sets in because there's nothing more."

Take the cues from your customers, not your competitors

Pat McGovern believes it is when you stop listening to customers and start taking your cues from competitors that things go wrong.

"When we presumed our competition knew what the market wants and we imitated them, we typically had problems," the founder of IDG says. Yet listening to customers alone is not enough: poor market research can blind a business to its own customers' wishful thinking.

That was the case with IDG's venture into television in the early 1980s, a move welcomed by the publisher's traditional print advertisers. Those customers, however, had not taken into account the full cost of making television ads and quickly backtracked, leaving the venture high and dry. The first technology bubble at the end of the 1960s also brought a sobering lesson in the need to look beyond customers' immediate demands. At the peak, Mr McGovern says he came close to expanding Computerworld from a weekly to a daily publication - a move that could have saddled his young business with massive overheads.

"Our business was growing 20 per cent a month for a year - and then it dropped 20 per cent a month for a year," he says. "Don't expect these things to last, and don't make any large permanent capital commitments."

That was a lesson that Mr McGovern himself failed to heed in another technology bubble, at the end of the 1990s. The Industry Standard, IDG's internet magazine, went from boom to collapse as fast as the industry it covered.

"We went from [revenues of] $25m to $200m in one year, and then we built in $120m of fixed costs. Then the next year, revenues went down to $60m. We still had the $120m of fixed costs - it was an impossible situation."

Copyright The Financial Times Limited 2008