The formalities done with, the day was devoted to the modalities of creatingwealth in the digital economy. That, Krishna Palepu, professor of finance atthe Harvard Business School, said indicated a major paradigm shift from thesocialist sixties, when energy was invariably expended on distributingwealth. This, Palepu said, added a function of a rise in the market economy,globablisation, reduced transaction costs, and young financial technologieslike venture capital and stock options which have evolved over the last25-odd years. IT, the professor argued, is not one of the primary drivers ofthe sweeping changes. Instead, he pointed out, it remains a catalyst.

Explaining how, he said there are two reasons why transaction costs remainhigh in an economy. Either buyers and sellers don't have access to the sameinformation base, or, assuming they do, more often than not, there is aconflict of interest. In both cases, there are no winners.

Given the new realities though, such costs are reduced by the presence ofinfomediaries which, in turn, is on account of the kind of strides IT hastaken over the last couple of years. The implications of these changes,Palepu said, were that there now exist vast opportunities for innovation andentrepreneurship. On the flip side though, competition is relentless, andthere is constant pressure from customers and investors to create value. Theproblem lies in the fact that value creation is awfully difficult.

There are two dimensions to it. One, you create a unique proposition byidentifying a "non-trivial customer problem." This is accompanied byarticulating why that solution is superior to other alternatives.

The second aspect to it is execution. Less than 10 per cent of strategiesare effectively implemented, he said. This is where the essential differencelies. "In the old economy, clever strategy provided competitive advantage.In the new economy, strategy has to be dynamic. So, excellence in executionis the key source of competitive advantage," he added.

There are reasons why excellence in execution is not reached. Primarily, itboils down to communication, which people who implement a strategy have notunderstood it well. Then there are systems barriers. This comes in whenmanagements focus on operational controls and not on strategic learning andfeedback. Finally, incentives are not aligned with strategy.A way out ofthese bottlenecks is to implement a performance protocol. Simply put, a toolto measure strategy and monitor systems for value propositions.That, hesaid, is like playing in a symphony. "There is room for a lot of creativity.

But it is played to a very tight script."In a parallel session, Maharashtrafinance minister Jayant Patil spoke on e-governance. "We have 2.3 millionemployees in 10,000 offices. Changing their mindsets is a mammoth task."But,he said, the state government is working at it. Forty thousand employeesare being trained every year, 3,000 offices are being connected, and a V-satbackbone is being put in place. In the long term, the government is lookingat using optical fibre at the taluka levels, he said.

The minister promised that his government will post all tenders over Rs 10lakh on the Internet, and that all databases will be put in the publicdomain. Then there is the Rs 5,000 crore which have been ploughed intocreating irrigation. That, Patil said, ought to be monitored closely, forwhich the state is contemplating global positioning systems (GPS).

But, he added, at the end of the day, it is not hardware and connectivitythat is enough. Applications are needed.And all of these changes, Patilsaid, are on account of a hard lesson that he learnt. "People don't get fedup with parties. They do with systems. Change the systems and people supportit."