Wednesday, August 15, 2007

Call this globalization

Today, a Swedish company warned global consumers, about batteries made by a Japanese firm in China.  This is globalization!  On a serious note, Nokia issued the warning about defective batteries. Don't you see an increasing trend towards blaming China - refer to my earlier post on this issue.

I believe that consumers should have a right to penalize firms when they issue such recalls and warnings.  There should be a bill of rights for users which gives them the right to claim the full-value of the product when firms issues such warnings after five or six years of a product's launch.  Increasingly, it is becoming acceptable for firms to release defective products, defective - due to lack of oversight and due diligence, and then recall them or issue warnings. In way , the market does penalize these firms through the stock price and consumers penalize them by not buying the firm's products, probably, in their future purchase incidence.  However, I call for a more stringent active penalty - paying back existing customers who have been using the defective product unknowingly.  The issue is beyond whether a firm did this with malice or otherwise.  To me, the firm did not follow due-diligence.

On an even more serious note, I see patterns in how pharmaceutical firms recall drugs as well.  Although many would like to blame the FDA for not having a fool-proof system in place, the issue is more to deal with how firms manage their "potential" block buster drugs.  To satisfy wall Street's hunger for consistent blockbuster drugs, many firms push their clinical trials too fast and this often results in lack of large-sample and long-term studies.  Clinical trials using small sample sizes with a frequentist approach to estimation are a recipe for disaster.  The interpretation of effect sizes is almost always absent and more often a 95% significance is seen as a "significant" effect.  Almost every drug has a side-effect, and therefore, the issue is whether the benefits outweigh the costs.  The last decade has seen a lot of drug-recalls and it seems to me that this is a fallout from decreasing due-diligence on the part of firms and lack of statisticians who can meaningfully interpret findings at FDA.  The time has come for a change.

1 comment:

Vamsi Mocherla said...

I do agree with you on the lack of trials (clinical or elsewhere) whether its batteries for phones or for people, a.k.a drugs. In the increasingly competitive world of costumer attainment, deadlines are being aggressively pushed forth. Moreover, all the six-sigma and quality standards are not seriously adhered to owing to escalating costs.

In a product development cycle, testing takes about 70 % of effort and time and hence the cost in direct proportion. This is where companies are saving big on time and money. I am a victim of the above and I do agree on your viewpoint.

Keep up the good writing.