All posts by Steve

Achievement, Creativity, Leadership, Process

Stop Using Best Practices

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Businesses, like just about everything else, are always looking for the best way to do things. Businesses also like predictability. They like to know what the response or result will be to any specific action that may be taken. It is because of these drives and desires that when something is dubbed a “Best Practice” all businesses seem to flock towards it. While on the surface this has all the appearances of a good thing, in reality I think it has a tendency to hold businesses back.

I think the idea of “Best Practices” is a business construct created by consultants to position themselves as invaluable to the progress and evolution of business. In other words, it was created so someone could get paid for it. This would be similar to a music critic who tried to position Justin Bieber as invaluable to the progress and evolution of music. I guess you truly have to be a “Belieber” to buy into either of them. I also do not know of any music critic that would propose such a thing, and still be allowed to retain their music critic membership card, or music critic certification, or music critic secret decoder ring or whatever it is that allows them to be accepted as some sort of music critic. Even so, there are people who are actually “Beliebers”, and there are also businesses that buy into the idea of best practices.

Personally I am a Jazz and Alternative Rock kind of guy. I guess this musical preference may also indicate why I am more attracted to the more original and less formulaic ways of doing things.

I am concerned that when someone claims that they have developed a “Best Practice” that they are inferentially removing the possibility that there may be some other different or better way of doing things. After all, what can be better than a best practice? An even better than best practice? A new and improved best practice? This also brings up the question to me of: who gets to declare something a “Best Practice”? How do they know that their “best practice” is better than anything else, including those methods that may not have even been tried yet? My view is that they don’t.

I seem to have gotten off into musical allegories here, so I guess I will try and continue in that vein. Just because John Phillip Souza may have developed what some music critics now consider to be the very best practice when it comes to the genre of music that is known as “Marches” does not mean that he has developed a best practice for music, or marching bands for that matter. In fact as I sit here the idea of people who march to the beat of a different drummer continues to work its way into my consciousness. To take this idea even a step further, I think I remember watching a college football game on television last year where at half time the band actually played a heavy metal song by the band Metallica, instead of a Souza march. As I recall it got quite an ovation from the crowd.

I think any business that aspires to something other than their own optimal performance is limiting themselves. The idea here is that optimal performance is a moving target. As times, competition and conditions change, so will the optimal performance target. I think this will be the case, as in a different case, for each individual business. It is the differences and the different approaches to their optimal practices that generate differentiation, and competitive advantages for businesses in the market.

Best practice has a tendency to be thought of as a process, or a way of doing things. The idea being that if you do things in the best way possible, you should end up with the best possible result. Herein lays the issue with best practices for me.

Any process that is deemed to be best without first comparing and adapting it to both the existing business environment and the known and desired goals will probably not work. For me the definition of a best practice is the process that will get the business from where it currently is to the goals that it has set for itself the fastest, least expensively and the most efficient way possible. Notice how the best practice is dependent on both the starting point and the desired end state.

There are many purveyors of the best practice solution who would posit that this is not the case. They would say that the proper system is to change the business to adapt to a known process. This sounds suspiciously to me that a consultant (or the equivalent) has generated some sort of process that if rigorously followed should generate a positive result. Instead of going through the effort of adapting the “Best Practice” to the current or new business environment, it is positioned that the environment must be changed or adapted to the process.

Wait a minute. How is that again?

That to me would be the equivalent of deciding on a time signature (beat) and a chord progression in music and then stating that all successful songs will need to follow that guideline. Classical music, waltzes, polkas, pop, rock, jazz, bluegrass, etc, etc, will not all fit into this best practice guideline. It is the creativity and ingenuity of the musician who takes their knowledge of music and generates a new song that determines how successful they will be. If there truly was a best practice in music that was to be followed, all songs would sound monotonously similar.

Just as it is with the creativity and ingenuity of business leader who takes their knowledge of the components of the business and combines them in a new way that creates a new more efficient business model or (gulp) practice.

Too many times it seems that businesses want to look at their practices and processes in isolation of the goals and objectives. As a would-be musician I practice in order to maintain my current (low) level of musical proficiency, and to hopefully improve. My goal is to play as well in the Jazz band as I do when I practice. I find that each time I perform with the Jazz band, by the very nature of having others in the band who I interact with during the performance, each performance is different from how I practice.

Sometimes it is better, and sometimes I wish I was better. It is the difference between having proficiency and trying to apply a best practice. It is the performance that counts, not the practice.

Driving an adherence to the idea of implementing an existing and defined best practice will stifle the creative ability of leaders to try and evolve and create new models for the business. The constraint of trying to change and to fit the business to the defined process limits the ability of the leader to define a new way or new direction, and the business’s ability to adapt to the changes in its environment. They will be locked into trying to recreate something that may have worked in the past practice, but may not fit with the current members of the business and the performance that they are being asked to give.

In music you look for people who have capability and proficiency, and can combine their talents with others to make the music. In business I don’t think that adherence to a best practice can be a substitute for capability and proficiency, and it may in fact hinder a business’s ability to change and adapt, especially when the music changes.

Alignment, Focus, Implementation, Long Term, Sales, Uncategorized

From Anything to Something Specific

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I really tried to take a break from putting out anything this week. The problem was that the closer I got to the end of the week the guiltier I began to feel at not writing anything. I tried to convince myself that my public would be disappointed at missing their weekly fix of my views on business and sales, and indeed I actually did get a question from a reader as to where was my post. However, the truth be told, it seems I am a creature of habit, and I am in the habit of providing my views on things, regardless of whether they are appreciated, or even requested, or not.

Oh well.

It was interesting that I wrote about golf last week, and then Tiger Woods announced his return from injury to play in this week’s tournament. This is a little bit interesting on several levels. First it is always interesting to have Tiger Woods in the field at a golf tournament. Love him or hate him he does draw interest. For me it’s a little bit more than that. Tiger Woods has always had a game plan whenever and wherever he plays. His preparation is the stuff of legend. In essence he plans his work and then works his plan. And he seems to do it better than just about anyone else. He has set the standard, whether it is on his recoveries or in standard execution.

Except this time. He acknowledged that he was not in optimal playing condition and has not prepared and practiced as he has before on previous recoveries, and that he was going to “play himself into shape”.

Many attribute this decision to the proximity of the next major golf tournament and Tiger’s pursuit of the record for the most major wins in a career. If this is truly the case then his latest move in returning to golf in a relatively unprepared state has a certain air of desperation around it and desperation in any endeavor, be it golf or business, is a cause for some amount of speculation and concern.

The same type of speculation and concern applies for businesses that are attempting a comeback from issues of their own. Businesses very seldom find themselves in any sort of difficulty as the result of a single event. Tiger hurt his back and had surgery. I am hard pressed to mention a similar type of singular event where as the result of it a business finds its ability to perform to be fully in question. Businesses don’t hurt their backs and have surgery which then require them to execute an immediate comeback plan.

The more usual reason that businesses find themselves in trouble is due to an inattention to the fundamentals of the business or the trends in the market. These types of issues tend to compound themselves over time and culminate with a “sudden” realization that there is a problem. With the realization that there is an issue comes the first reaction to desperately seek a quick solution.

I think it is fair to say that since most business issues did not result from an abrupt sort of event, quick solutions to the problem are not going to be easily implemented or particularly successful in resolving the issue. But that doesn’t seem to stop many businesses from at least trying them.

The two quickest solutions to business issues normally boil down to two simple approaches: Sell more, and Cut costs. Sometimes both solutions are attempted at the same time. Surprisingly enough, I think that these are probably the correct approaches, but that trying to apply them too quickly may only make the problems worse.

Just as many people are concerned that Tiger Woods’ trying to make a comeback from surgery so quickly might cause further injury to his back, making things worse.

There is an old saying in business: “You cannot cut your way to prosperity”. I think this is true. You may have to cut your way to survival, but you can’t cut your way to growth. With that in mind I am going to focus more on the “Sell more” aspect of businesses’ desperate responses to issues.

Too many times a business that finds itself in a recovery mode institutes a “Sell more” sales drive in order to drive incremental revenue, and hopefully incremental margin from it. Unfortunately under these types of circumstances “sell more” many times gets translated into “sell anything”. This usually results in the acquisition of many sales opportunities that do not adequately fit the proper deal profile for the business.

A proper deal profile for a business includes consistent, attainable deliverables; repeatable business products and functions that do not drain or strain business resources, pricing that enables contributory margins and profitability, and contract conditions that do not present onerous hurdles to the success of the engagement. These are the specifics associated with a healthy approach to sales.

Too often a business can get too anxious to rapidly try and recover from an issue that occurred over time. This can result in the “sell anything” approach to business in an attempt to generate revenue to help turn things around. All too often this approach results in lower margin deals and one-off opportunities that in the end not only do not add to efficiencies, but actually detract from them in the longer run. The sell anything approach is a scatter-shot pursuit of a specific solution, and as with most scatter-shot applications it results in far more “misses” than hits.

When a business is in any sort of difficulty, or is experiencing issues, incrementing in a number (large or small) of sales misses to the solution mix does not help. It only detracts from the situation, both in the resources spent ineffectively and the resulting number of sales deals that do not generate the desired or expected returns.

If it is deemed that the issue is sales or market related, and that a new sales direction or approach is required as part of the overall business recover solution, then a specific strategy and approach to new sales is called for. This will help minimize the number of extraneous or non-contributory deals that will be added to the business mix. When there are business issues, everything must be aligned and additive to the business solution. This includes the types and values of the sales opportunities that are pursued.

A business cannot allow the “Sell More” solution to become the “Sell Anything” solution. It will only  prolong the business’s recovery, or potentially even make things worse.

Will Rogers is quoted as saying “When in a hole, stop digging.” We also have the much older and unattributed quote “Don’t just stand there. Do something.” In business it would seem that the equivalent of the first quote might be “When in a hole, start selling”, with the equivalent rejoinder to the second being “Don’t just sell. Sell something specific.”

The idea of focus and discipline never goes out of style in business, even when times are tough, or recoveries are being attempted. Maintaining a focus on selling something specific and resisting the temptation of selling anything available will result in a better solution and stronger business over the longer run, and that is the focus that business needs to maintain.

Tiger Woods is a unique talent. We shall see if the departure from his proven successful preparation process pays off in his recovery attempt. It might pay off for him, but he did miss the cut in his first tournament back, and that is news in and of itself, since he so rarely fails to make the cut. Most of the time it does not pay off for a business to try for a quick recovery that departs from their specific processes either.

Analysis, Decision Making, Performance, Risk and Return, Self Analysis

Is Phil Mickelson Ruining Business?

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I was watching the U.S. Open golf tournament the other day. I enjoy doing that because it gives me the chance to watch people who really know how to do their job which in this case is to play golf. Believe it or not I think I actually learn a little when I watch them as well. Not much, just a little. I feel the only thing that truly separates me from them is talent. They have it and I don’t. That and age, and flexibility, and focus, and drive and probably a few other traits that I am not currently aware of.

What I noticed about this broadcast was that they seemed to focus on the players’ recovery shots. The course was set up so that if you weren’t in the fairway you were in trouble. What I saw was a lot of miraculous recovery shots that were attempted from this trouble, and only a select few that were successfully executed. However, the guy who eventually won didn’t seem to attempt the miraculous on every shot. Truthfully he was probably not in trouble as often as the others, but when he was, sometimes instead of attempting the miraculous he just chipped out. He then tried to put the ball on the green and make a putt to save par. He did that a lot. The other guys didn’t. He won by like eight strokes, which in golf terms is the same as lapping the field, or a knockout.

Let’s get this straight right up front. Phil Mickelson is an amazing golfer. He has won forty two events on the PGA tour. He has won five major championships. He has spent over seven hundred weeks in the top ten of the world’s golf rankings. I cannot hit my driver as far as he hits his six iron, maybe even his seven iron if he decides to hit it hard. He is a crowd favorite everywhere he goes because of his demeanor on the course and his willingness to interact with the fans. So why do I think that he is ruining business? I think of him as the father of the miraculous recovery golf shot. He makes a lot of them and they are all highlight reel material. When we see what we think of as an “everyman” like Phil Mickelson pull off the miraculous recovery, we think we can all do it, and not just in golf.

David Feherty on the other hand, is a former professional golfer. While he did win five times on the European golf tour, he has never won on the PGA tour and may not have spent a single week in the top ten of the world’s golf rankings. He retired in nineteen ninety four to become a golf announcer. It is widely accepted that he is far better as a professional golf announcer than he ever was as a professional golfer. Why do I bring up David Feherty in responding to my question as to why I think Phil Mickelson may be ruining business? It is simple. David Feherty provided the following quote regarding Phil Mickelson:

“Watching Phil Mickelson play golf is like watching a drunk chasing a balloon near the edge of a cliff.”

We are now getting close to the point. 

Phil Mickelson will hit some of the most incredible shots in golf that will end up getting him into some of the deepest trouble possible on a golf course. He has been known to get a little wild, or to make some foolish decisions at the most inopportune times imaginable. What is amazing about him is that he can then hit some of the most amazing recovery shots humanly possible and put himself right back in the game again. Notice that I said he “can” hit amazing recovery shots. That doesn’t mean that he always does. Sometimes it works and he is almost unbeatable. Many times it doesn’t, and then things only get worse. Golf, like business is very unforgiving of compounded mistakes.

While it is true that he has won so many times on tour, what is not so widely publicized is the number of times that he lost when he should have or could have won, due to the erratic nature of how he plays the game of golf. In 2006 Phil Mickelson lost the U.S Open on the seventy second and last hole. He came to it leading by one and needing only a par to win. It was not an especially long hole, but as with all major championships it was not easy.

Instead of being a little conservative, and probably winning or at worst tying, he went for it as he always does. He teed off and knocked his drive into the trees.

Instead of playing it safe and smart (as this year’s U.S. Open winner did on several occasions), and pitching out to the fairway where he could then rely on his well documented and much acclaimed pitching and putting skills to get his par, he went for the fabulous recovery shot. Mere mortals could not have hit the shot he was going to try and hit.

He was going to bend a shot around some trees and knock it on the green from more than two hundred yards away. It didn’t work. He hit another tree and the ball came rolling back toward him.

Now he is laying two, and he needs a four to win or a five to at least tie, and he is no better off than he was before.

He goes for it again because now he has to. This time he gets it around the trees, but misses the green and it ends up in a difficult lie in the greenside bunker. Now he needs to get it out of the bunker and in the hole in two shots just to tie.

He gets it out of the bunker, but misses the putt to tie and just like that he loses the tournament.

While Phil Mickelson is renowned for his miraculous recovery shots, there will always be the question of should he have avoided the trouble in the first place. Could he have played it smart and not hit his sometimes erratic driver, opting for a club that he could have more easily used to hit the fairway? Once in the woods could he have made a better choice that would have taken losing the tournament outright out of the equation, while still giving him the chance to win? Mistakes in golf, like in business can always happen, and when you do find yourself in trouble is it always the best course of action to go for broke on the recovery?

History has shown that most attempts at miraculous recovery shots fail, otherwise it would not be considered so miraculous when they succeeded. If they always succeeded they would just be recovery shots, not miraculous recovery shots.

Too many times it seems that businesses can find themselves in a difficult situation and instead of playing to their own strengths and capabilities, play for the miraculous recovery. Most of the time when they try the go for broke recovery in business, the business does indeed go broke. There are examples of successes using this approach. They usually end up in some business school case study where they are captured and passed down to future generations.

I think they are more like lightning strikes in a rain storm. They are relatively rare, individual events, and as the saying goes lightning doesn’t usually strike twice in the same place.

Actually in golf getting struck by lightning even once is not considered a good thing. That’s normally why we go inside when it starts to rain. Getting struck by lightning of a golf course will usually ruin your round, and probably any future rounds you had ever planned on playing.

In golf a steady performer is known as a “grinder”. A grinder is someone who works at minimizing their mistakes and maximizing their opportunities. A grinder usually doesn’t have less talent; they usually just don’t take as many risks. When a grinder makes a mistake or does find themselves in a difficult position, they weigh all the risks and rewards with an eye toward realistically minimizing the downside risk. They understand that they may not be able to win the tournament with a good decision, but that they can certainly lose it with a bad one. Making par after a mistake is not a bad score.

Tiger Woods is a possible example of the ultimate grinder. He has been the best golfer in the world for almost as long as Phil Mickelson has been in the top ten. He rarely makes mistakes to the point that it is extraordinarily uncommon that he ever beats himself. The majority of the other top ten golfers in the world are probably best described to one exten
t or another as grinders also. This means that the riskier, more swashbuckling approach to golf that Phil Mickelson so successfully uses is much more the exception than the rule for the truly successful.

Miraculous recoveries are attention grabbing by their very nature. Few of the attempts are really ever successful despite the numbers that are tried. Those that are successful however are very widely reported and seem to take on an image and a life all their own. Miraculous recovery attempts seem to have become the standard against which we want to measure all performances, be it in golf or in business.

A business that finds itself challenged might better learn from this year’s U.S Open winner. He calculated when to go for the miraculous, and when to play it smart and just chip out of trouble and play on. Phil Mickelson has finished second six times in the U.S. Open indicating he definitely has the talent and capability, but has never won. This year he was sixteen shots back. Businesses are also always competing and need to understand that while the miraculous is usually widely reported, that by its very nature cannot be expected to regularly occur.

Setting realistic goals for each shot a business is going to take is a key to a business’s ongoing success. It’s better to leave the miraculous recovery shots to the golfers.

Contracts

Who’s Your Partner?

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Sometimes I catch myself sounding (at least to my own ear) like Andy Rooney of “60 Minutes” fame, when I start asking questions that are obviously rhetorical. He would always ask some sort of simple minded question and then launch into an extended explanation of why it really was a simple question and therefore deserved a simple answer. Unfortunately (or fortunately, depending on your point of view) this is again one of those times.

When did we all fall prey to the metaphorical seduction of thinking we were, and more importantly wanted to be business “partners” when in reality we are, and will always be customers and vendors?

Have we ritualized the sales process to the point where we must now claim to be partners when we want to deal with each other? Isn’t it enough that one entity is trying to sell the other a good or service, and the other entity is considering buying a good or service? This is the essence of a healthy business relationship, not a partnership.

As usual, when in doubt about something, I go and look it up. Webster’s Dictionary, on line. I understand that this is viewed as an unfair practice in today’s day and age. The very idea of gathering information before putting forth an opinion runs totally against everything we learn, by watching television. No matter.

There were basically 4 definitions for “partner”:

• A person who shares or is associated with another in some action or endeavor; sharer; associate.
• A person associated with another or others as a principal or a contributor of capital in a business or a joint venture, usually sharing its risks and profits.
• A spouse; a husband or a wife.
• The person with whom one cohabits in a romantic relationship

Since this is a business and sales related forum, I think it is safe to say that it would not be in good taste to explore potential business partner definitions in terms of spousal or romantic relationships. Although there may be many good and potentially colorful examples of the exchange of capital for the provision of a good or service in this area, it is probably best to take the high road and just consider the first two business related partner definitions only.

The key word that I take out of the two business related definitions for partner is “sharing”. Partners usually share the risk and they share the (rewards) profits. This is the essence of a business partnership. You are diffusing and reducing your risk by having someone else share in it, and the price you pay for this risk reduction is that you must also diffuse and reduce your potential profit by having your partner share in that as well.

This is a basic tenet of economic theory associated with risk and return. If you want a greater return you must take a greater risk. Conversely, if you want to reduce your risk by having a partner assume some of it, then you must also expect to reduce your return because your partner will expect to share in that as well.

We often think of partners as being on the same team. This would mean that they both win or they both lose equally, and have a joint desire to minimize risk and to maximize profit. If a customer were to try and acquire a partner, wouldn’t that more correctly be seen as partnering with another customer to share the risks associated with the pending purchase?

But what happens if the supposed partners are not on the same team? What happens if the only way for your “partner” to minimize their risk is to shift that risk to you, and the only way for them to maximize their profit is to take that reward from you? Vendors, despite their seemingly most fervent desires cannot both sell and buy their own services and products. They can only sell them.

That doesn’t sound like the makings of a very harmonious partnership to me. What kind of partnership are you creating where the main objectives are to shift the risk to your partner and to appropriate as much of the return as possible for yourself? I think the best you can hope for here is an acceptable balance of the risks and returns between the vendor and the customer, and even that will take a lot of work.

As an example I would point to the everyday purchases that we all make. Despite my desire to share the risk of my food spoiling before I can eat it, my grocery store “partner” insists that I pay for my food at the grocery store in advance of eating it. The golf course “partner” where I play golf insists that I pay my fixed price green fee before I tee off instead of sharing the risk of my playing poorly that day and the resulting lower green fee that I would ask for based on my reduced satisfaction with my round of golf. Conversely I guess they could ask for a higher green fee on those days where I play well, but that so rarely happens that it is a “risk” that as a customer I would gladly sign up for.

They say that good fences make for good neighbors. I would assume that the business equivalent would be that good contracts make for good partners (if you insist on using that term).

The implied contract at the grocery store is that the food is fit for consumption on the day you buy it. If you wait too long or store it improperly, it is not the store’s fault, so you can’t ask for a refund. At the golf course they charge a fixed price and it doesn’t matter if you have a good day and use fewer strokes or have a bad day and use more strokes.

These are risks that as a customer I must take into consideration before I make the contract with the grocery store or the golf course “partners”. I must examine the food before I buy it to make sure it is in edible condition and see the golf course before I play it to make sure it is in playable condition.

As we move to larger more complex purchase contracts between businesses, we see that the terms associated with the agreement also get more complex. However these terms rarely include anything about “sharing” any specific risks or rewards. They are more focused on the specific responsibilities that each partner in the contract must fulfill, and the penalties that each partner may have imposed if they do not.

If marriage partnerships were negotiated with ferocity that these business “partnerships” are, I think it would be safe to say that marriage would in fact be a dying institution, but I promised earlier that I would not go down this interpersonal partnership road.

Suffice it to say that based on the onerous conditions and requirements that I have witnessed being placed in just about every business to business purchase contract that I have been a party to, either as a vendor or as a customer, there is very little that was contained therein that could even remotely be construed as “partner” or “sharing” oriented.

Being a trusted or valued partner is nice phraseology, but the bottom line, as it almost always is, is to get it in writing. With a contract in place you will invariably find that regardless of what side of the contract you are on, you will be called a “partner” to the contract when there is a desire to ask you provide something, and a “party” to the contract when there is a desire to compel you to provide something.

It just seems to be the way that vendor – customer partnerships work.

Relationship, Risk and Return, Roles, Sales

Answering RFPs

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Most customers are pretty smart. They have to be or they don’t get to stay customers for very long. They go out of business. Ever since the first business transaction occurred where a customer gave a vendor gold (or its fiat representative, money) and in return received something they either wanted or needed, customers have been asking the eternal question:

Did I get a good deal?

The answer is invariably, maybe.

If the customer received a product or service that met their expectations and fulfilled their needs, and parted with an amount of money that still enabled them to continue operations, then they are probably not unhappy. Notice I didn’t say happy. A customer will always find room in their heart to spend less money on something. If you gave a customer their desired product for free, they would probably wonder if they should have asked for you to throw in the installation of the product for free as well.

Here in lies the rub. How does a customer get a vendor to part with their highly desirable product or service for less money? Vendors want to raise their prices. Higher prices mean better margins, better profitability, higher stock prices and eventually a larger yacht for the CEO. Keeping the CEO happy seems to be the driving force behind most business decisions these days.

The answer as to how the various customer – vendor balances are achieved lies in the market’s dynamics. If there are many people chasing or wanting the good, and relatively few suppliers, then the balance swings in the vendors favor. A good example of this phenomenon can be seen in plethora of collector car auctions that are popping up on the various television channels.

These auctions are events where we can all vicariously watch a number of rather wealthy people throw incredible amounts of money at old cars. Why are they doing that? I don’t know. I only know that when I am watching them run the price of some vintage 1960’s AC Cobra up close to seven figures, I too want that car. I don’t want to drive that car. Who would risk an accident driving a car valued at a million dollars? I would like to have that car so I could sell it for a million dollars.

Perhaps the wealthy bidders on the televised auction have already obtained their larger yachts and need another type of good to serve as the latest trophy for their success.

The point here is that there seems to be more wealthy people throwing money at old cars than there are old cars for them to throw money at. Why is that? I think it is because they are not making any more old cars, only new ones, hence there is a limited supply of old cars. But here too the economic laws of supply and demand indicate that if there are more people that want a good than there are goods (old cars) available, the price of the good will go up. This is how you get million dollar AC Cobras.

On the other side of this spectrum is the situation where there is an industry dominated by a very few customers and relatively numerous vendors contending to be one of the chosen suppliers of a good or service to them. Examples of this market structure can be seen in the automobile manufacturing or communications provider markets. These are other examples of markets that are dominated by a few very large players with many vendors contending to be suppliers to them, but these are two that we should all be familiar with.

When these customers decide that they want to buy goods or services, they also hold an auction of sorts. They hold a silent auction, with one of the prime differences being it is not the buyer who bids the highest price that wins; it is the vendor that bids the lowest price that wins. This type of scenario is called a Request For Proposal (RFP), and the really fun part of this process is that again unlike the auto auction, no one gets to know how low the others involved in the process are bidding. It’s good to be the customer in an RFP process, just as the film director Mel Brooks once said “It’s good to be King” in his movie The History of the World.

Can you imagine how much more fun it would be if car manufacturers had to go through a process like this every time you wanted to buy a car? Think about what it would be like to have car manufacturers coming to you and disclosing to you the lowest price at which they would sell you a car, without knowing what the other manufacturers are bidding. We would all probably buy more cars just for the shear pageantry and enjoyment of the process.

A customer’s RFP process is designed to do one of two things: create a process that justifies the selection of the vendor, and product that they wanted in the first place, or to reduce the vendor decision process to the lowest common denominator – price, and then choose the cheapest provider.

The RFP process enables a customer to create a specification for the good or service that they wish to obtain, and have multiple vendors submit their lowest possible price for their good or service that meets the specification. A customer can favor one vendor over other vendors in this selection process by including terms or requirements in the RFP specification that may be more advantageous to one vendor’s capabilities, or conversely have requirements that are disadvantageous to the other vendors’ capabilities.

In either event, it is the responsibility of the sales team to have previously created the relationship with the customer that will enable this sort of influence of the buying process. If you are trying to answer an RFP that does not accentuate your company’s or products advantages, your sales team has not done their job. You can usually tell this is the case by how loudly the sales team is screaming for a lower price to be included in the RFP response. You are also probably answering an RFP that does accentuate your competitions capabilities, and their sales team has done their job.

On the other end of this RFP decision process, it may be possible that the customer has in fact created their own RFP with no input from any vendors. This is a rare occurrence. If this is the case you are now in the midst of what is known as a “Price War”. This is a situation where the vendor with the lowest cost basis, or the vendor willing to take the lowest profitability margin will win the opportunity to sell their good or service to the customer.

Unless you know that you are the lowest cost supplier of the desired good or service, this is also known as a waste of time. Trying to win a price war RFP process is not usually a profitable endeavor.

The only thing worse that some unprofitable business is a lot of unprofitable business. The idea of economy of scale does not hold when it comes to unprofitable business and large RFPs.

I believe that everybody in business at one time or another has responded to an RFP. Some of us have even won them and become the selected vendor. I think that most of the times that I have been successful have been because of the influencing work that was done prior to the RFP being issued. I also think that most of the time we have all been sorry for the RFP competitions that we have won purely on price.

This probably holds true for the customers as well. If they are not willing to enable the vendor to provide their incremental or differentiate value, but only their price, then they will probably not get any incremental value in return either.

I find it even more interesting that even after all of this customer – vendor type of interaction associated with the RFP and purchase process, all the hoops that customers will create and that the vendors must leap through, and all the price discounts that will be demanded, weaseled and cajoled, the buyer will almost always refer to the selected vendor as their “Partner’.

Humor, Resume, Self Analysis, Style

Get a Real Title

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People who know me know that it is only on the very rare occasion that I may get just the teensiest bit sarcastic when people, places, things, etc, strike me as being silly. I enjoy humor. I seem to find it everywhere, even when I am not especially looking for it. I guess a more correct phrasing would be that the humor and silliness of the business world just seems to find me. Occasionally my approach and public comments regarding what I find funny aggravate my wife, and now she reminds all of our friends not to encourage me when the silliness finds me and my sarcastic twin emerges and starts commenting. Fortunately she is not around right now, and yet another source of silliness in the business world has found me, so please bear this in mind.

I guess I am lost as to what has occurred within the business world that has enabled people to bestow upon themselves, or upon others the latest collection of self aggrandizing job titles that appear to be proliferating on both resumes and the online networking sites that everyone in business now seems to be members of. If I didn’t know better I would say that it looks as though there is a tacit competition amongst the various business players to see who can come up with the most grandiose job title for themselves. If that is indeed the case we seem to have quite a lot of “winners” out there.

I have to believe that the current “Title Wave” started with the many comedians of the past and their stand-up comedy routine monologue searches for laughter. I think the great George Carlin was one of the first to refer to garbage men as “sanitation engineers” as a way of uplifting their roles in society, and Rosanne Barr refused to refer to herself as a house wife and opted for the more resume friendly “domestic goddess”. Who would have thought that from these humble and humorous beginnings business people would now generate an entire new lexicon of job titles, with the only difference being that today’s purveyors of new age job titles are not trying to elicit even the smallest chuckle from the audiences reading their resumes.

In looking at some of the various job and occupational titles that are now being crafted with such care, they appear at least to me, to fall into three general categories:
• Chiefs
• Eastern Philosophers
• People born in or lost in the 1980’s
I am sure that there must be others, and possibly even potential sub categories of the ones I have named, but for me they seem to all fit into these three. It is interesting how that works out. With everyone striving to differentiate themselves from everyone else, they have succeeded in all looking relatively if not inanely the same. I suppose it is the same phenomenon that causes all teenagers to grow their hair long so that they can look and be different. If they all have long hair, how can you tell which one is different? But I digress.

In this case “Chiefs” are not the professional football team from Kansas City. There used to be a politically incorrect saying that when a business was deemed to be too management heavy it was said to have “too many chiefs and not enough Indians”. This however no longer seems to be the case based on the ongoing proliferation of “chief” titles. In the past there were essentially two “Chief” titles: the Chief Executive Officer (CEO) and the Chief Operations Officer (COO) as the primary chief titles in an organization. Now we must include a few of the more recent ones that I have witnessed:
• Chief Visionary Officer – okay, you got me here. Some people are visionary and some are not. How do you get to be the Chief visionary? Business keratotomy?
• Chief Creative Officer – Same as above. Some are creative and some aren’t. I guess the person that came up with this one first gets to claim the prize.
• Chief Thought Provoker – While I am always in favor of more thinking in business, I don’t think I would hire this person to make sure we do it.
• Chief Inspiration Officer – Now I’m really starting to get lost, or inspired. I’m not really sure which.
• Chief Elation Officer – I think we have officially made it into the silly realm.
• Chief Instigation Officer – I would like to see this job description. How would you do succession planning for this one?
• Chief People Herder – Despite the title, I can see a need for this function. I think most of us refer to this role as a “Project Manager”.

I could not make these up. While I like to think of myself as being somewhat visionary and creative, I know I am not that visionary or creative.

The next general set of new age titles that are appearing seem to be associated in one way or another with Eastern philosophies. I am not sure why. Perhaps the owners of the following titles watched the movie “Teenage Mutant Ninja Turtles” one time too many (which in itself would be an oxymoron as watching it one time could be construed as one time too many) in their more formative years. A few of these new titles are:
• Marketing (or insert any other business discipline here) Ninja – I can stretch to see the skill level association, but the rest of the silent killer / warrior connotation is lost on me.
• Marketing (or insert any other business discipline here) Guru – Same as above I guess, but probably not as warrior like. Marketing seems to attract these types of titles. The last group that I am aware of that had a “Guru” was the Beatles in the 1960’s.
• Marketing (or insert any other business discipline here) Sensei – Staying with our bad movie theme, this how the bad guys in the original Karate Kid movie referred to their teacher. True martial artists refer to their instructor as “Mister – insert last name” (as in Mr. Miyagi in the afore mentioned Karate Kid) as a sign of respect.

Eastern philosophy has always had a role in business. I have extolled the virtues of Sun Tzu, and the twenty fifth century B.C. Chinese general’s “Art of War” several times in the past from a strategy point of view. Despite my appreciation of the book, I don’t think I would try to title myself as a “Business General”. On the other hand, maybe I should.

The final group of new position titles seems to me to be best associated with the 1980’s. Just like “Teenage Mutant Ninja Turtles” and “The Karate Kid” may have engendered the Eastern philosophy bent of new business titles, it seems that other 1980s movies and cultural phenomenon may be responsible for other titles. Here are a few of the more entertaining examples:
• (Insert a business discipline here) Evangelist – Weren’t Jim and Tammy Faye Baker television Evangelists? Just asking.
• (Insert a business discipline here) Magician / Wizard – I get the feeling some people played Dungeons and Dragons (a lot) in their formative years.
• (Insert a business discipline here) Jedi – Yet another movie (Star Wars) reference. Just because you call yourself one, does not mean the Force will be with you.
• (Insert a business discipline here) Warrior / Overlord / Badass / Demigod – These were lame descriptors back in the 1980s. They don’t work now in business either.

I understand the desire for people to set themselves apart from others when it comes to who they are or what they do, but have we allowed ourselves to propeller off into a relatively strange place for business when we use and proliferate such titles. These are actual titles – if you don’t believe me, go out on Linkedin, the business networking site, and do a search on any one of them. I suspect you will get several hits on each one.

I know it sounds boring, but I think most businesses are interested in what talents people have, what they can do and what value they can bring to the organization. If the targeted organization is responsible for creating new job titles, then we probably have some over achievers identified here. If the organization is interested in getti
ng on, and ahead with the business disciplines and functions that drive a business, then they will probably be looking for those that can find a better way to demonstrate their business prowess and skills.

On the other hand, maybe I should just start auditioning for the newly created position of Chief Sarcasm and Silliness Ninja Evangelist.

Management Style, Nerve, Style

Introduce Yourself

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Some time ago I went out to a dinner party / birthday party for a friend of mine. This in itself is something of an anomaly in that I am not renowned for my witty conversational capabilities and hence do not get invited out to many parties. I suspect they actually wanted my wife to attend and couldn’t figure out a way to get her to come that didn’t involve inviting me, so they went ahead and just invited me but made sure to tell me that they wanted me to bring my wife.

I had met this friend many years ago when we were in a dads and daughters organization that was designed to get dads to spend time and develop relationships with their daughters. We started when our daughters were in kindergarten, and it was one of the best organizations I have ever been involved in. I would tell you the name of it but it has since been declared to not be a “politically correct” name, and they have changed it. I liked the politically incorrect name and won’t relate the new “corrected” name here. I will say that the old name had something to do with Native Americans and princesses, and I think my daughter and I had a great time together in this organization.

The point of that somewhat lengthy introduction was to bring up the point that there were several people at this birthday party that I had never met before. I suspected that these unknown people were friends of my friend’s lady friend. I hope you followed that. I suspected that this had to be the case since my friend was not friendly enough to have that many friends. As you might guess, it was a friendly get together with many of his friends and several of her friends.

Another interesting point that I noticed was that due to apparent comfort levels and familiarity his friends tended to sit together on one side of the large table and her friends tended to sit together on the other side. This generated two sets of conversations but with little to no interaction between the groups. It reminded me of several customer meetings I had attended in the past where the customers sat on one side of the table and talked amongst themselves and the vendor sat on the other side of the table and talked amongst themselves until the actual meeting got started.

The actual party had not really gotten started yet either, so there seemed to be only one thing to do, and I did it. I stood up, now with all eyes upon me, and walked over to the other side of the table and started introducing myself to each individual that I didn’t know on that side of the table. I introduced myself to everybody. Men, women, friends, everybody got an introduction and a handshake. I don’t think the waiter really cared who I was, and his hand was still damp from wiping off the table but that didn’t stop me from introducing myself to him either. The only thing missing was the exchange of business cards, but who brings business cards to a friend’s birthday party?

That being done, everybody else joined in and started to introduce themselves, and like the customer meeting where everyone does their own introductions, the energy level of the party started to rise.

Of course it could also have been the abundance of wine, but for purposes of this discussion I am going to go with the increased human interaction as the primary catalyst for getting things moving. I have witnessed this same phenomenon at the aforementioned customer meetings, the vast majority of which did not serve wine.

The fact is that given the opportunity, people will interact. They will interact even better if they know who they are interacting with. The best way for them to know who they are interacting with is to take the first step and introduce yourself.

As I think more about it, I find it interesting that my daughter (now in college) has also recognized my view of introductions to the point where she now instructs her various boyfriends to walk up to me, introduce themselves, shake my hand and look me in the eye, if they truly wish to receive a passing grade from me. I can’t possibly be as fierce as she has made me out to be, but I find I do like the ones that do provide an introduction without being asked. On the other hand, those that have shown up at our house and honked the horn out by the curb in order to get her to come out in anticipation of avoiding this friendly contact have been known to wait for a significant amount of time, and then eventually having to come to the door and go through the face to face introduction anyway, before they are allowed to escort my daughter out on their planned activities.

I have since started to apply this self introduction process in several instances other than customer meetings and parties. While working in a large company it is not uncommon to see or pass by other people in the hallways. In the past it seemed it was proper protocol to just nod or smile at these people in order to acknowledge their existence, and not much more. I now stop and introduce myself. I start the conversation. I ask them what they do and where they are located in the building, and provide them the same information.

In doing this I have met several interesting people in the organization and have gotten a better idea of who has which responsibilities. I have also found that it is in fact possible to engage Co-Ops, new hires and other members of the so called “millennial” generation in at least basic conversations. In the past I had just assumed that there was something more interesting occurring on their smart phone than in the interpersonal surrounding of the office environment.

It seems that subconsciously we all understand and accept the premise that if we are really going to work together, we are going to have to know and understand each other. It was interesting to me that it truly became a conscious approach to this topic for me as a result of my friend’s social event. I assume I had been only partially aware of it at any of the previous business events that I had been party to. Perhaps this was due to the fact that as a matter of course there is usually a formal introductory portion of any business meeting agenda. It can be handled by the leader of the meeting or each individual may be allotted the opportunity introduce themselves to the group. We all get the opportunity to inform each other of who we are and what we do before we get started, right?

But it is not the same.

Standing up and being introduced, or introducing yourself to the crowd is not the same as walking over and introducing yourself personally to an individual and shaking their hand. It doesn’t carry the same interpersonal value. It doesn’t show the same amount of care and effort to make that connection. It is about as impersonal way to meet people as is possible. As I noted before, it is just a protocol for a meeting.

As we continue to become more of a virtualized society, where more and more of our communications are conducted electronically, we seem to be losing the ability to make that face to face interpersonal connection. It is interesting that as I continue to push myself back into this realm with the people I meet and those whom I used to just pass by in the office hallway, it seems to be both unexpected and well received.

It is a small step, but I think we all need to get back into the habit of introducing ourselves and making that interpersonal connection with those people we meet, and those people we work with, and especially those people who want to date my daughter. I know I think better of those boyfriends of hers that make the initial introductory effort, and I think the same applies for those of us that make the same introductory effort in our professional environments as well.

Organizations, Self Analysis, Style

The Executive Suite

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It’s hard to say what will get me started on a topic. It may be something I see or notice. It might be some offhand comment that I hear. Something clicks and off I go. I recently visited a customer friend of mine and went through the usual security screening before entering the building. I presented a photo ID, filled out the form on who I was seeing, passed through the Magnetic Resonance Imaging device similar to what we now go through at the airport, provided a blood sample for disease testing and had the inside of my mouth swabbed for DNA testing. I was then issued a day pass security badge and allowed to enter the building. I then took the 14 minute elevator ride to the top floor where I got off and waited. Yes, waited for someone else, with an entirely different and more special access badge to come and let me into the Executive Suite of offices to see my friend.

I guess it is time for me to address one of the last bastions of corporate elitism in business, the executive suite. Sometimes called the “ivory tower”, sometimes called “mahogany row”, the executive suit has been a source of wonder for me, for years.

The executive suite is that part of the organization’s building or campus that for whatever reason is off limits to everyone, including the mere mortals that work there. It is the part of the building where the access door is locked, and even in the age of high security magnetic badge access for entry into the building, those that are not chosen cannot enter the executive suite. I understand the concept of security for the staff and the building, but exactly who are the executives in mahogany row protecting themselves from with this incremental access denial point, inside a building which is populated by their own employees? If you are going to be allowed in the building, surely you should be cleared to access all floors and regions of that building, right?

I have mentioned many times that I am old school when it comes to business. That does not mean that I particularly ascribe to the way things were done. It just means that I am aware of the way things were. The executive suite to me is a part of the way things were. It has even entered our lexicon of corporate terms in that “getting a key to the executive washroom” is the sign of an executive’s success. I don’t know why executives would need a special bathroom, but then I don’t understand why they are locking the access to their offices from their own employees and staffs. It is also probably a vestige of the hierarchical business world that has run its course and worn out its usefulness. In the age of political correctness, egalitarianism and immediate access, having senior management working behind an extra set of locked doors seems to me to be both an anachronism and the wrong message to send to the rest of the corporate team.

I have worked in and visited several locations where the executive suite was a cherished and protected aspect of the corporate culture. You longed to feel the extra padding and more plush carpet under your feet. You got to appreciate the upgraded office art and inspirational images that adorned the walls. To be called in there was to walk on hallowed ground. After being in an executive suite, walking around on the industrial strength, geometrically patterned, low wear, indoor – outdoor carpet that the rest of the building walks on just won’t do.

Most of the time the executive area is cloistered away from the prying eyes of the uninitiated, behind a solid wooden door. Occasionally, and perhaps a little perniciously, there is sometimes a glass door as the access point to mahogany row. That way the general business population can walk by, and see how the executives live, much like the children that walk by the window of a candy store only to gaze upon that which they cannot have. I could also assume that the reason for a glass door would be so that the casual observer could per chance walk by and gaze upon an executive in the midst of his work day and marvel at his or her work ethic.

However it has been my experience that executives upon entering the pearly gates of the executive suite immediately go into their offices and close the door so that they have yet another barrier separating them from the masses. With the door closed and being fully sequestered from the herd it is hard to guess what they are doing.

The locked door to the executive suite seems to be a vestige of a bygone era. I once had the opportunity to work in an environment where the only access to the executive suite was by a very small, cramped elevator. The various stairwells were locked from the inside to keep people from gaining entry to the hallowed ground (or in this case floor).

I finally worked up the gumption to ask the residents why the limited access and the small elevator. I was told that the facility was actually built in the 1950’s, and back then there was a genuine concern that if the labor resources on the manufacturing floor became so disenchanted with the management team that they decided to charge them, they wanted the elevator to be so small as to limit the number of them that could access the executive area at one time. This is a true story.

I then noted that the 1950’s were more than half a century ago and that it might be time to change the facility’s configuration. I was looked at as though I was from another planet. I actually seem to get that look a lot. Still it was interesting to me how this segmentation of the executives from in this case the waged manufacturing staff had far outlived its usefulness (if it was really ever useful at all), but that there was no desire to change it, even fifty plus years later. In fact there seemed to be subtle and tacit resistance to any mention of changing it.

I think this is in part due to the idea that so many people passed by the outside of that special door on their way up that when they actually get to have an office on the secured side of it, they want to continue perpetuating the segregation. It seems to be that if they went through the wondering of what was going on in there and the pining to be a part of it, then everybody else will have to go through the same wondering.

I have tried to think of other organizations that have retained this same idea of general access for the standard population, but segregation of a specific group away from the rest. It took a while, but I actually came up with a couple of institutions that initially started out with this organizational configuration and have maintained it, quite successfully for literally hundreds of years.

These institutions are prisons and zoos. It seems to me that the only potential difference is that the executive suite door locks are on the inside and the prisons and zoos have the door locks on the outside. This would logically lead to the question: Did the Executive Suite get it wrong when the put the lock to the door on the inside?

The answer to that question seems to fully depend on which side of the door to the executive suit that you are currently working.

Analysis, Risk and Return, Self Analysis, Strategy, Value

Big Deals

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I try to avoid starting off by asking a question, but sometimes I just can’t help myself. Is it just me or does it truly seem that in many instances it is possible for business egos to get in the way of business IQs as the size of the business opportunity increases? This big deal blindness is a phenomenon that I have encountered several times in the past. As the magnitude of the numbers being considered for whatever purpose (sales, costs, scope, merger, etc.) increase, there seems to have been some instances in the business past where the momentum of the deal takes over and the basic principles of business analysis and management appear to be forgotten.

This type of behavior does not seem to be confined to any one company or industry, but rather emerges unexpectedly for a while in one place and then just as quickly goes dormant again. But not until after some sort of a business millstone has been placed around the corporate neck. It then takes all of the business’s senior leadership to formulate the path back to recovery. Meanwhile the general process is that those responsible for “the deal” have already declared victory, taken their bows and then very quickly exited stage left.

I am not specifically talking about Mergers and Acquisitions here (M&A) when I talk about things such as the magnitude of the deal, but rather more along the line of basic internal business conduct. However, I think some of the lessons that have been learned by some of these humongous M&A failures of the past can equally be applied to business situations that are more related directly to the operation of the business.

Here are a few lessons for business deals that leaders ought to take into account, at least in my opinion, before they start looking at the next big opportunity, at least in my opinion:

• Unlike the Bob Dylan song (Times They are a Changing), the times are not changing. The same basic rules apply to big epic opportunities as they do to the smaller ones. Profitability still matters. Core competencies still matter. The magnitude of the deal disproportionately increases the risk of the deal if the probability of success is based on a significant change or transformation away from what has been the business’ norm is associated with the deal.

The success of the deal is usually associated with doing something that you already know how to do, to a great extent. Growth and expansion by necessity mean that you need to take on some new aspects and scope with each deal, but unless you are relying at least in large part on your known core competencies, the big deal that is supposed to be a game changer or entry into a new market is usually an even bigger risk.

• In too many instances it seems that management may have felt the need to make a big, bold, landscape shifting, game changing sort of deal. This may be as a result of a desire to get into a new market or in response to some sort of internal or external business pressure. The idea appears to be to make a dramatic market statement or splash in order to signal some sort of new direction.

Few businesses do the new, big and splashy right the first time. Unfortunately if the deal is big enough and as a result generates a situation that is bad enough, there may not be the second opportunity to do it right. Change associated with business core competencies or structure takes time. It can’t be forced as a result of a big deal. A certain amount of ego is essential for leadership. Too much ego results in deals where the mouth has written a check that the brain can’t cash.

Deal success usually comes about as the result of doing the basics well. This capability evolves from doing similar types of deals on a regular basis, understanding what your deal or market sweet spot is, and maintaining a stable business approach. If you have been successful doing smaller deals in one area, the chances of having issues with a larger magnitude deal outside of your knowledge area are significantly increased.

• Sometimes deal momentum takes over and supplants common sense. When a large opportunity or deal is first noted, it begins to appear in the various business forecasts. It doesn’t matter that it may be exploratory or of initially low probability. The longer it stays visible, the more it becomes part of the expected fabric of the business. Eventually it becomes expected and sometimes even counted on as part of the business results.

It is very seldom that any amount of caution, qualification or warning can stop this progression. It eventually evolves that big deals that have been around for a while become deals that “cannot be lost”. Once this mentality has set in it leads to a set of seemingly logical steps that culminate in an illogical deal. Costs can be shaved, schedules can be condensed and onerous terms accepted all in the name of getting the game changing big deal done.

This type of deal behavior would normally result in a difficult environment for success if the opportunity was associated with a core competency of the business. When it is associated with a new market or an unproven capability the performance and results are usually not so pretty. The budgets and the schedules are usually the first items to be impacted, with the profitability and customer’s satisfaction very close behind.

Perhaps again we are seeing another business manifestation of one of C. Northcote Parkinson’s Laws, specifically Parkinson’s Law of Triviality, from his 1957 book “Parkinson’s Law”. In it amongst other topics, he examines the amount of time and attention that businesses spend on smaller (trivial) items as opposed to the larger, more complex and more important ones. In summary:

“He dramatizes this “law of triviality” with the example of a committee’s deliberations on an atomic reactor, contrasting it to deliberations on a bicycle shed. As he put it: “The time spent on any item of the agenda will be in inverse proportion to the sum [of money] involved.” A reactor is used because it is so vastly expensive and complicated that an average person cannot understand it, so one assumes that those that work on it understand it. On the other hand, everyone can visualize a cheap, simple bicycle shed, so planning one can result in endless discussions because everyone involved wants to add a touch and show personal contribution.”

Big deals are an important aspect of any business’s growth plan. They require a significant amount of discipline as businesses seem to get more anxious to close them, the closer they believe they are to closing them. (Perhaps this can now be cited as Gobeli’s Big Deal Corollary (BDC) to Parkinson’s Law if Triviality.) This phenomenon can result in final agreements that are far from the original big deal concept and far from beneficial to the business. The risk associated with the big deal increases rapidly if it is outside of the business’s normal operating area, or is associated with senior management’s plan for the transformation of the existing business or business model into something else.

Big deals are quantum events that must be given at least the same amount of deliberation if not more than that associated with the standard business conduct, regardless of the business’s desire or dependence on their closure. If you are going to try to successfully change the business, it is also probably better to not start the change, or make it dependent on a big deal.

Predictability, Self Analysis, Time

The Past

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A lot of people may think that I live in the past because of all the references that I make to it. I read business books that are hundreds of years old because I have decided that almost all new business books and articles are a recycled version of the classics with some modern jargon thrown in to make it seem fresh and contemporary. I compare present generational norms and business performance to the past because they are good benchmarks and yardsticks for what has been done as compared to what is now being done. Those comparisons do not always favor the past generations or business performance. I am eminently aware of the past because without knowledge of the past how would we know what direction we are going? I am definitely aware of the past but I definitely don’t live in the past.

It’s time to get a little esoteric, but why not? George Santayana, the twentieth century philosopher, poet and essayist wrote is his book “The Life of Reason”, (1905):

“Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it.”

Many think that Winston Churchill was the author of the famous quote “Those that fail to learn from history are doomed to repeat it”, but he was in fact paraphrasing Santayana. This is just a small literary nugget for your historical learning pleasure.

The key point here is that the retention of what we have learned is the key to progress. This would logically mean that the future is built upon the past. Go figure. It takes a visionary to be able to interpret what was and extrapolate to what’s next. Just as Sony took the leap from portable transistor radios to portable cassette players (the then ubiquitous, and now all but forgotten Sony Walkman – ranked as one of the top TWO technical inventions of the last fifty years), Steve Jobs and Apple took the next leap along the same path with the now ubiquitous iPod (which ranks number THREE behind the Walkman). Contrary to popular belief these products did not materialize out of thin air. They had their roots in the past.

Conversely, there is the ubiquitous financial caveat contained in every investment prospectus that I have ever read, that states very clearly:

“Past results are not a guarantee of future performance”

In business as in sports we always keep score. That is how you tell who is successful and who is not. A very good example of this is the batting averages of baseball players. While the player’s batting average is not a guarantee of the performance of any individual at bat, it does give an indication about what you might expect from that player over time. There are always hitting streaks and slumps that must be factored in, but in general past results are a reasonable predictor, not guarantee, of each player’s future batting performance.

This fact may also be demonstrated in the Walkman – iPod comparison as well. The Walkman was indeed a game changer in the market, but not anymore. The iPod has supplanted it – but it was not until after twenty years had passed where the Walkman was dominant that the iPod was introduced, and even then it took a few years.

The same concept would logically be analogous to business. Understanding past business performance allows you to understand what worked well and what didn’t. Just like knowing individual batting averages or team won-loss records may give you an insight into how they may do for the rest of the season (although no guarantee), in business we like to know who has been profitable, how profitable they have been and how long they have been profitable. It doesn’t mean that they will continue to perform the same way that they have done successfully in the past, and it doesn’t mean that they will have to change everything if they were not successfully done in the past, but it is a good indicator (not a guarantee). There are hopefully always ways to do good things better and ways to improve on failures without starting changing everything and in effect starting anew, or returning to the “infancy” that Santayana mentions. There is that retention of the past thing again.

Staying with my esoteric bent I am going to go a little further into the past. Heraclitus, the fifth century B.C. Greek philosopher said:

“Nothing endures but change.”

This statement has been quoted and paraphrased by everyone from Plato to Diogenes to the latest business management books de jour . We like to all say that the only constant is change. The concept comes from three thousand years in the past, but still seems reasonably applicable today.

However, staying focused on your past is like trying to drive a car forward by looking in the rearview mirror. I don’t know who said this one, and it didn’t seem to be so valuable a quote to spend the time looking it up. Even so, it is reasonably accurate. But you do need to have some idea of where you have been if you are to successfully get to where you want to go. The past is where you were, the present is where you are and the future is always a goal.

So enough already with the philosophy and esoteric. What has this got to do with business?

The past is no guarantor of the future, and we know things are going to change. Knowing the past allows us to understand what the business has done right and what it needs to improve. Even the most disruptive of market forces take time to take effect. Walkmans replacing radios, iPods in turn replacing Walkmans, CDs replacing LPs, digital replacing analog technologies or even automobiles replacing horses for transportation did not happen overnight.

It takes people who understand the past and the trends and directions that it has imparted on the present to make sense of and deal with the present. It is the visionary who understands the past and the trajectory that it has put us on, that can take the next leap and either extend or modify this trajectory as is called for in business to realize the future. The past is useful in that it tells us where we have been in comparison to where we are. It is also a necessity if we are to recognize what we must change and what we should retain to get to the future. You can’t live in the past but you need to be aware of and understand the past if you are to make it to the future.