Category Archives: Alignment

What is a “Plug”?

For some reason, I have been reading and thinking about forecasting for the last little while. One of the words that seems to be popping up more and more frequently in the business literature with respect to forecasting is the word “plug”. I have actually heard this word in past forecasting meetings that I have attended. I thought I might delve in a level deeper than just understanding forecasting, and look into one of the more favored words in the forecasting vernacular: “plug”.

Plug is an interesting word. The dictionary defines it as both a noun (a thing) and a verb (an action). I’ve also talked about words like this before. You used to go to a party, and now you can also go and party. I think that plug is a much earlier iteration of this particular phenomena. Usually a word is used as either a noun or a verb. I am not so sure that this is the case with the word plug when it comes to its business usage. I think that when you hear the word “plug” in business, it is both a thing and an action at the same time.

As a noun plug can usually mean either:

“an obstruction blocking a hole, pipe, etc.” or “a device for making an electrical connection, especially between an appliance and a power supply…”.

As a verb Plug can usually mean either:

“block or fill in (a hole or cavity)” or “mention (a product, event, or establishment) publicly in order to promote it.”

For now, I think I’ll ignore the appliance power cord and product promotion definitions for obvious reasons, and focus on the other two.

As the ends of various months, quarters, and years come into view, forecasting takes on a role of increased importance. Depending on the business performance, as these end of period times roll around forecasting can take on both a greater frequency and intensity, especially if the numbers are not in management’s desired range. As I have noted, forecasting is essentially the comparing of what you think the numbers are going to be with what you want the numbers to be.

I have also noted the “volumetric force” associated with forecasts. This is the management drive and desire for all forecasts to be either at or exceeding the desired targets. This desire to respond to or please management has a tendency to render forecasts possibly slightly more optimistic than what they might normally be, so that management can smile. But what do you do when the forecast obviously does not meet the desired levels?

You insert what is called a plug into the forecast.

You find a way to provide the management desired levels in the forecast numbers. You forecast the performance that is defined, and then you add in an amount equal to the difference between the goal and the defined forecast, which is undefined. This undefined amount is known as the “plug”.

You are in effect using the verb definition of the word “plug” as a noun. You are essentially filling a hole (a verb) in the forecast with a plug (a thing). It is normally the noun function that is turned into a verb, but here we have the verb function that is turned into a noun.

I guess it is a little thing (a very little thing) but it amuses me, so I have included it.

I have also noted in the past that if a forecast is knowingly presented to management, and it does not at least meet the desired targets, that whoever submits such a lacking forecast could be subject to a significant amount of incremental management attention and assistance. As I also noted this attention and assistance will usually continue until the forecast realigns with the desired targets.

The quicker the plug is inserted into the forecast; the faster management can feel better about the forecast.

I think this may somehow be related to the genesis of the saying “The beatings will continue until morale improves.” This quote is attributed to Captain Bligh, or the HMS Bounty, when told of the forecast associated with how the crew felt about reaching Pitcairn’s Island. It is also apparently quite applicable to a multitude of other management groups.

Plugs were developed in forecasts as a way to create a real and accurate forecast (that potentially does not meet management expectations), yet also provide an acknowledgement of the expectations of management in order to avoid the incremental assistance of management. Plugs are the as yet unidentified portion of a forecast, that will (hopefully) be defined in the future, and will result in the meeting of the desired targets.

This results in the equation:

Actual Forecast + Unidentified Forecast (Plug) = Presented Forecast

Plugs are an acknowledgement that the actual forecast doesn’t meet the desired levels, but the miss to forecast has been identified and is being worked, so that extra management reviews of the forecast (or beatings, as the case may be) are not going to be necessary.

On the surface, this type of forecasting technique sounds great. The actual forecast can be presented to management, as well as the desired number that management wants to see. They get both reality and what they want.

However, if you are going to use the Plug Gambit in a forecast, you need to understand that it is a double-edged sword, and it has a limited shelf life. It is a double-edged sword in that a forecast is being presented to management that is in essence telling them that their desired number is going to be achieved. If it is not, then there will be significant, and now merited management attention visited upon those that delivered such a faulty forecast.

The plug in a forecast also has a limited shelf life in that it is expected to reduce as time passes, and the measurement period draws to a close. An example is that a plug in a forecast during the first month of a three-month quarter might be acceptable. However, the same plug in the third month of a quarter should definitely garner incremental management attention.

So, there you have it. A plug is an artifice, inserted into a forecast in order to avoid (at least temporarily) unwanted incremental management attention associated with the forecast. It is an identified amount, but from an unidentified source. It can be sales to unidentified customers, or cost reduction from unidentified actions.

Once a plug has been inserted into a forecast, it is almost impossible to improve the level of the forecast. This is because as new opportunities are identified, they reduce the amount of the plug, as opposed to actually improving the forecast.

With this in mind, it is my understanding that the latest management approach to limiting the use of plugs in forecast is to in fact request and drive for improvements to any forecast that does contain a plug. This has the effect of requiring double the desired growth as the plug must first be filled before the forecast can be increased. This move by management will no doubt engender some as yet unknown, new methodology for forecasting, as the ongoing escalation associated with business forecasting continues.

This is very similar to the idea that the fastest cheetahs only caught the slowest gazelles. This natural selection meant that only the fastest gazelles (and cheetahs) survived. The ongoing evolutionary race is forecasted to continue going forward on the African Savannah.

However, I think it is pretty obvious that in this example, gazelles do not get to insert plugs into their speed forecast.

Self Help

“I love those automated attendants, recorded voice answering machines and the endless opportunities I get to push my own buttons whenever I make a call looking for someone to help me.”

Said no one, ever.

It has been well documented for some time that customer satisfaction is adversely affected whenever a customer has to deal with or must navigate through one of those automated phone answering systems. Normally when they call, they have a question, or need help with an issue. They want to talk to someone. Otherwise they would have just sent a text. Or accessed the company web page and sent an email. But no, they had hit a threshold where this type of technological linking was not good enough. They wanted to ask another human being to help them. And yet despite their need for support and desire for human interaction, they are denied.

The problem is so rampant that there are now commercials by certain companies appearing on network television espousing the point that when you call them, you actually get to speak to “a real human being”. Some companies now feel that it is now a competitive differentiator that they will have a real live human being answer your call and that you actually get to talk to them when you call them. It is interesting how quickly times changed initially to the automated systems, and then just how quickly they are changing back. There can only be one reason for this service technology whiplash.

Money.

Companies originally saw these systems as opportunities to reduce the cost of support by in effect making the customer responsible for some of their own issue or support request. They would need fewer support people if they could make customers work a little bit in the identification of the type of issue they were calling about. Fewer people needed for support equated to reducing the cost of support. This is always thought of as a good idea for the bottom line.

What they learned was that for the most part customers didn’t really like this type of automated system. It may have saved the company money in their support costs, but it made their customers unhappy. And unhappy customers were not as likely to buy more equipment or products from the vendor that made them use an automated attendant system when they needed support. This is normally thought of as a bad thing for both the top and bottom lines.

Companies learned, or actually relearned the old adage:
“Penny wise and Dollar foolish”. (It is actually “Penny wise and Pound Foolish”, but, I live in Texas, USA, so I have taken a foreign exchange liberty here.)

They may have saved a few pennies with the automated systems which enabled them to reduce the number of people required to deliver customer support, but it ended up costing them many dollars in lost sales from their customers who were not particularly impressed or happy with the support that they got.

Now we have companies advertising that they are using people to answer their service calls, just like everyone used to do thirty plus years ago. Go figure.

While it is interesting to discuss the migratory aspects of the types of customer service and support, I think it might be time to discuss a group that may not have fared so well in the evolution of support: The Employee.

It is no secret that companies must spend significant amounts of money, time and effort supporting their own communications and networking needs. Every company has a corporate network. Every employee has a Personal Computer. The employee productivity gains that have been created are enormous and well documented.

It has also put an enormous strain on and demand for corporate Information Technologies (IT) teams for support by these employees. Security and the ability to keep hackers out has almost become an industry unto itself. Requests for networking, applications, upgrades and support continue to grow as the complexity of what is required by the corporate knowledge worker increases. In the age of Virtual Offices (VOs) the demand to deliver these services to locations outside the classic organization structure or office has boomed.

And what is the diametrically opposed force that companies must deal with in this time of burgeoning employee technology demands?

The desire to reduce, or at least limit the growth of Information Technology support costs.

Companies are facing explosive demand for new and innovative Information Technologies applications and services by their own people in order to continue to generate ever better productivity, but are having to temper responding to this demand due to a desire to keep their IT costs in check. There are many innovative ways that companies are dealing with this issue, and unfortunately there are also several ways that may not be considered quite so innovative.

When I was in college, I once had a physics professor who was preparing us for a rather extensive round of midterm exams. He informed us that once the test was passed out that there would be no talking. He also said that if we had any questions we would be encouraged to raise our hands. He noted that by raising our hands above our heads, blood would obey the laws of gravity and flow out of our arms. This would in turn increase blood flow to our brains. This in turn would cause an increase our brain activities in the firing of synapses and neuron transmission, which in turn should enable us to solve the problem on our own.

I am not sure, but I think the gist of his comments were that we were not to ask him questions, because it was a test.

I am concerned that many of the IT leadership of many businesses today seem to ascribe to the same school of thought when it comes to staff support. If you don’t believe me, try and find the internal organizational phone number to call and actually talk to someone real time if you need IT help with you technology based connections. Emails and instant messaging are by far the preferred mode of communication if you need help. And if by some chance you do locate the telephone number for IT support, I think you have guessed it: You get to deal with the corporate IT automated attendant.

It seems that what was once done for you as a valued productivity asset of the company, when it comes to new applications and upgrades, are now being pushed down to you to try and do on your own. The new definition for employee service seems to include unlimited numbers of IT based emails with directions on how to update, upload and upscope the many new, mandatory or desirable IT capabilities.

Sort of a raise your hand and hope for increased blood flow to the brain when it comes to IT support.

I think part of the reason for this internal support shift is that the cost of IT and support is a very identifiable amount. There are direct numbers, budgets and staff associated with it. In budgeting and costing terms, it has become a very identifiable target. There is a defined amount being spent and as such becomes a prime candidate for cost reduction.

The issue that arises is that for every identified and quantified dollar that is saved from the IT budget, there is not a specific quantifiable amount of incremental time or lost productivity that can be identified or captured by the employees, as they are forced to pick up the slack. The measurable IT budget is reduced and a real dollar cost reduction is recognized. But it is far more difficult to measure how much is “spent” when all the additional hours that all the individual employees must now spend completing these IT tasks are totaled up.

An extra hour or two, here and there spent by each employee doing what was once an IT task gets lost in the count. The employee’s work load doesn’t decrease to accommodate this new additional effort. The deadlines aren’t extended because there is now more to do. It’s just another issue to deal with.

Just like happy customers are known to buy more products, happy employees are known to be more productive. However, employee productivity is something of a subjective measurement where IT budgets are very quantitative. This leaves the decision in the realm of reducing a measurable budget, known quantity at the risk of reducing an unmeasurable, unknown employee satisfaction and productivity quantity.

When the cost of cost reductions is reviewed in such a manner, it is best to expect continued pressure on corporate IT budgets for the foreseeable future.

I think it is probably safe to assume that there will be a point where there is a recognition of the value of supporting employee satisfaction and productivity via increased, direct tool and technology support. My guess is that corporations are probably getting close to that tipping point.

When bellwether companies such as Yahoo! and IBM have already decided that there is in fact greater value to the company when employees interact with each other in the office as opposed to the convenience of working via Virtual Offices, it probably isn’t too far a leap to think that they will also recognize that the small, but highly visible investment in the IT resources to support them is also probably money very well spent.

Why Do It

There is a brand out there that struck advertising gold with their catch phrase “Just do it”. We all know who they are, so I will not go there. For sneakers, exercising and sports it was brilliant. How incredibly “Zen”. It truly tapped into the psyche of every would-be athlete on the planet. Like so many other marketing trends in society it seems to have also found its way into our business vernacular. I am not so sure this is a good thing. Like process for process sake, just doing something for the sake of doing it, without examining the value or reason for doing it in business can be a waste.

I think we need to remember what drives organizations and what should cause them to take actions. Organizations exist primarily to bring value to its share holders. It does this by providing value to its customers. It seems that too many times they have a tendency to confuse activity with progress, much the same way that process can be confused with control.

I am convinced that there are three simple driving forces for actions in business. I am sure there are many that would potentially argue this point and say that there are actually a myriad of driving forces for action in business, but stick with me for a moment. When I look at the root cause analyses of all types of actions in business, and boil them down to the basics, I still keep coming back to these three:

Actions can be customer driven.
Actions can be revenue driven.
Actions can be cost driven.

If there are business decisions that result in activities that when analyzed cannot be attributed to one of these categories, I would probably challenge that it is an action or activity whose relevance should be called into question.

In other words, if an organization is doing something that cannot be attributed to one of these causes, I would ask why they are doing it.

Customer driven actions are just that, actions that benefit the customer primarily without regard to any other considerations. This means that they can be actions that are not in the current financial best interests of the business at that time. They are “investments” in the customer relationship which will hopefully produce greater returns to the business at a later date.

These are actions that are the result of externally focused decisions. They are actions designed to further the relationship or build incremental trust with that specific customer. They are usually strategic in nature and are focused on the longer term view of the business, not its immediate profitability.

Revenue driven actions are actions designed to grow the business, either through the acquisition of new customers or the expansion of business with existing customers. Since they don’t specifically focus on business profits or margins (they are looking at the top line, not the bottom line) they can be mixed between external and internal in their business focus.

These actions tend to be shorter term focused than the long term customer driven actions in that there is some consideration to the business results that are input into the decision and action process.

Cost driven actions are specifically internally focused and are used to target shorter term results. They are the result of decisions that are usually focused on the business performance and are designed to directly affect profitability and margins.

Cost driven actions are not solely defined by infrastructure or staff reduction types of actions. Some cost driven actions can be taken as a method of avoiding or reducing known costs. For example, business actions such as corporate wellness activities can also be considered cost driven actions. They are solely internally focused. They are designed to help improve employee productivity by reducing stress and resulting sick days. They also help reduce corporate healthcare costs and insurance premiums by reducing the claims and medical costs of employees who are in general healthier because of them. All of these improvements directly affect the corporate bottom line.

There may be some that believe that some actions are based on meeting legal or regulatory requirements, and should be categorized separately. I would argue that these too are cost based actions based on the argument that they are internal in nature (not affecting customers or revenue) and only affect costs in the form of what it costs to adhere to them, as well as what it will cost if they are not adhered to.

The tradeoffs between these decision drivers and actions are reasonably clear. There are the primarily short term affects of internally focused actions (such as cost cutting), the midterm effects of revenue growth actions (such as sales programs and discounts), and the long term aspects of customer relationship investments (such as faulty product replacements and customer satisfaction actions) and their effects and values to the business. There is the tradeoff between an external (customer needs) focus and an internal (primarily profitability) focus that must be balanced.

It is the business leader’s responsibility to continually monitor and balance the internal and external decision focus, and the short term – long term effects on the business. If they become too focused on the short term business performance, future revenue streams and customer relationships can be negatively affected. If they focus on the longer term and customer relationships, shorter term business performance may suffer due to the increased investments that are required.

Sometimes these decisions and actions can align and be complementary to each other. This alignment between short and long term decision and action, between internal and external focus then becomes relatively simple. Other times they will not be complementary in nature and tradeoffs will have to be made between the performance of the business today and the investment needed for the business to perform tomorrow. Cost actions will need to be balanced against investments in revenue growth and customer relationships.

I think the bottom line here (if you pardon the pun) is that customer focused decisions and actions are what keep any business or organization in business and should be prioritized above the others. After all, it is the customer that supplies the order that gets turned into revenue that ultimately drives profit. Forgetting, or re-prioritizing this axiom can in some instances occur briefly, but probably at the long term peril of the business. There are always other competitors in the market that regardless of their situation who will be willing to make the incremental investment in a customer.

I realize that I have greatly simplified the decision and action criteria here for an organization. However I do think that it is somewhat justified. We do have a tendency to make business as complicated as we want. I seem to have reached the point where I prefer a simpler approach as opposed to a cross functional team creating a new process and program to document the approach.

As I noted at the opening, it seems that too many times organizations undertake actions that don’t seem to support any of these key reasons for taking them. If there was a check and balance arrangement where processes or programs were reviewed with an understanding toward these criteria, they might be modified or removed all together.

Since this would be for all intents and purposes an internal only review, it would probably be classified as a cost base decision criteria and action.

Organizations have a limited number of resources. It seems in many instances they have an almost unlimited number of objectives and desires, many of which are somewhat conflicting. The business’s resources need to be spent or invested on those objectives that keep the customer in the forefront of the decision criteria and can best be aligned to provide the greatest return to the organization. These returns need to be balanced between the short and long terms.

Saying Yes

I have written a few times in the past about the requirement that leaders are obliged to present a dissenting opinion when they genuinely feel that there may be a better alternative solution. I have also noted that that the word “no” can be one of the most important and valuable words in the leader’s lexicon. Having a different or contrary opinion does not make anyone any less a member of the team. It makes them someone who continues to maintain a different perspective on the business knowing that the diversity of opinion is a key to business health.

It is an exceedingly difficult line for a leader to walk. Many times a dissenting opinion can be confused with open opposition, which is something most managers cannot tolerate. Sometimes management doesn’t want to hear a differing opinion. Many times they can be quite content with a single perspective. What do you do when you have much to say to the contrary, but all that is desired of you is to hear you say “yes”?

I think we have all probably been in a situation like this from time to time. Most of the time situations like this are usually transient. Sometimes there is complete alignment on business topics. Occasionally there is divergence of opinions. Many times there are aspects of both alignment and divergence of opinions. This is what is known as a healthy business environment.

In this sort of business environment differing opinions are understood and accepted. The challenge is to the idea or the process, not the individual. The objective is to try and get to the best solution. As I said, this is in an ideal environment. Unfortunately individuals are prone to differing behaviors in the business environment.

Issues such as cultural differences, personalities, management styles and differing individual versus corporate objectives can come into play. Any one or more of these factors can contribute to a situation where the differences of perspective, opinion and approach are no longer the exception to the management alignment, but seem to become the standard.

In many instances there can also be “opinion drift”. If another manager sees that the alignment of opinion is better rewarded than the healthy discussion of alternatives, eventually a polarizing of positions and opinions can take place. It can fall more and more to the leader to make sure that the contrary is both heard and considered.

In time a situation can evolve where management is no longer looking for a specific or studied input on any new idea or direction. As more and more opinions drift into total alignment with management all that is desired is for all the various team members to align and say yes to each new process or direction and immediately get behind it. There can be a total breakdown in the structure of the healthy challenge business model. Contrary views and opinions in such an organization can begin to be viewed as oppositional and divisive.

Before leaping to specific conclusions along this line of thinking, as always it is best to take a step back to understand and assess the situation. Sometimes it only feels as though the stars are aligning and that everyone is aligning without due consideration. A complete management alignment along the lines described is a pretty rare event in my business experience.

On the other hand, I can hear the words my dad used to say in just about any situation that could even be remotely considered a parallel to this. His favorite was:

“Just because you are paranoid doesn’t mean that they are not out to get you.”

He would also say:

“Aim low because the bad guys* could be crawling.”

*Dad actually used a more colorful word for “bad guys” that also started with a “b”, but I know my mom occasionally reads this and she doesn’t like it when I use such colorful language.

Needless to say, you needed to take what dad said with a grain of salt.

Sometimes the best approach to a potential situation, particularly one that involves the input and behavior of others, is to not be in a hurry to resolve the perceived issue. This approach runs almost entirely contrary to everything we have seen, learned and thought about business leadership.

We have learned that those who recognize the issue first, are the first to take steps to resolve the issue and those that do in fact resolve the issues first are the ones usually rewarded. This approach does normally work when identifying and resolving business issues. However when the issues are not business or performance in nature and are more personality or management style related, an immediate and direct approach may be difficult.

It is best to remember that it always takes two to have a difference of opinion. In most instances no one sees themselves as being either wrong, or in the wrong. Sometimes a mismatch of this type can occur.

It is again at times like these that I think back to my dad and what he told me about these instances. He said:

“I may not always be right, but I am always boss”

I think that this was his way of telling me that while I was under his purview I was the one responsible for finding a way to rationalize our cultural or generational differences. Since he was the one paying the bills at that time, it did make a certain amount of sense.

However the parent offspring relationship is not the same as the leader team member relationship when it comes to differences of opinion. Leaders need to understand that differences of opinion, even prolonged ones, are something that should be expected. The recognition by the leader that opinion diversity needs to exist for the business to stay healthy is key. Differing opinions do not mean wrong opinions.

One of the best ways to establish a baseline for dealing with these management differences is to revisit past differences with an eye toward what the different positions were and what the eventual resolution of the difference was. Facts are normally everyone’s friends. The historical record has a funny way of refocusing the disagreement away from positions and more toward resolutions.

Business is about performance. Performance comes from taking the right positions and making the right choices. The historical record is always very clear along these lines. If the right positions are taken, contrary or aligned, the business performance will reflect this. If they weren’t then there are usually second and third “adjustments” that get made as the corrections are implemented.

I have found that members of teams that I have been leading are in many instances much closer to the specific issues at hand than I was. Because they have been closer they usually had a better vantage point from which to derive a solution. It has served me very well in the past to stop, even when I am so absolutely sure of the elegance, purity and accuracy of my solution, and truly understand why they are saying “no” when all I wanted to hear was “yes”.

In many instances I was fortunate to have done so. We can all be prone to having blind spots in our solutions when we are so sure of their accuracy. When someone wasn’t ready to go along with the desired solution, it usually was for a good reason, and that reason probably needed to be reviewed and possibly incorporated into the actual solution.

It almost always made for a stronger final solution.

All leaders will always want their teams to say yes, but will be open to addressing and incorporating differing or contrary opinions. This is how solutions are strengthened. Other managers may be less tolerant and accepting of differing positions with the resulting opinion drift I mentioned before.

Understanding which environment you are in will be a key in deciding how you can respond when someone is looking for you to say yes.

Clouds

I’m having a little trouble getting started on this topic. With the number of articles already written about clouds in the various business publications, it seemed that it would be only a matter of time before I got around to talking about it. I am now paraphrasing a speech by Winston Churchill in that it appears: “Never has so much been written by so many and understood by so few”.

Churchill was of course referring to the RAF and the Battle of Briton early in World War Two, but this variation also seems somewhat apropos for the market battles looming for the hearts, minds and most importantly pocketbooks of corporate customers now as well as in the future.

I went out and tried to find the simplest definitions for clouds that I could. I did this for two reasons. The first is that there is already an incredible amount already written on these topics (as I noted above) and the second is that I am just the tiniest bit lazy and don’t want to have to rewrite all of it. You will notice this trend throughout this article. Here is what I came up with for “Clouds”:

1. The second studio album by Canadian singer-songwriter Joni Mitchell, released on May 1, 1969.
2. A visible mass of liquid droplets or frozen crystals made of water or various chemicals suspended in the atmosphere above the surface of a planetary body.
3. A service with any resource that is provided over the Internet. The most common cloud service resources are Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS).

I’ll skip the first two definitions for now, and focus in on the third one.

I think the evolution of the name “Cloud Services” actually came from the fact that it was difficult for technology companies to draw a “network” when using the early iterations of the Microsoft PowerPoint application for presentations. The simplest ClipArt icon that conveyed the idea of a network without having to draw in all the complexity was a “cloud”. That was what was used in all network related presentations. We all became familiar with it. Hence the cloud became synonymous with describing a network and cloud services have become synonymous with services delivered over the network.

The power of PowerPoint. If early iterations of the presentation application had contained interesting representations of multi-sided geometric shapes instead of clouds, it is possible that we might all be discussing “Polygonal Services” instead of “Cloud Services”.

Getting back to Cloud Services. Software as a Service (SaaS) is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet. Platform as a Service (PaaS) refers to the delivery of operating systems and associated services over the Internet without downloads or installation. Infrastructure as a Service (IaaS) involves outsourcing the equipment used to support operations, including storage, hardware, servers and networking components, all of which are made accessible over a network.

The question that initially came to my mind when looking at all of these items “as a Service” was why would anyone want to do all of this over the network instead of buying the stuff and doing it the way that it had been done?

The answer seems to lie in the potential efficiencies that may be gained. Moving to “the cloud” focuses on maximizing the effectiveness of the shared resources. In the past each company and its associated users, had to purchase its own dedicated resources, whether it was software, computing or network infrastructure. Cloud resources are usually not only shared by multiple users but are also dynamically reallocated per demand. This can work for allocating resources to users across a single company, or multiple companies.

The claim is that moving to the cloud allows companies to avoid upfront infrastructure costs, and focus on projects that differentiate their businesses instead of on infrastructure. It is also claimed that the cloud allows enterprises to get their applications up and running faster, with improved manageability and less maintenance and enables Information Technology (IT) organizations to more rapidly adjust resources to meet fluctuating and unpredictable business demand.

Cloud computing is viewed as having become the vanguard offer for cloud services in that it can provide a highly demanded service or utility with the advantages of high computing power, cheap cost of services, high performance, scalability, accessibility as well as availability. Cloud vendors are claiming to be experiencing growth rates of up to 50% per year in this area. Cloud services are provided to an organization by moving away from a traditional CAPEX model (buy the dedicated hardware and depreciate it over a period of time) to the OPEX model (use a shared cloud infrastructure and pay as one uses it).

So, if the computing piece of corporate infrastructure seems to work in a “cloud” environment, then every piece of corporate infrastructure ought to work in a cloud environment, right?

I suppose this could be the case, but when I look at it a little more closely it seems that cloud based services are best applied to those capabilities that could almost be considered a commodity. In the case of cloud computing it is the basic amount of computing power and memory that are commoditized. In buying a cloud based computing service you purchase an amount of memory and a number of processing units, both of which could be considered commodities at this point.

By extension, there seems to be groups that are trying to commoditize other customer infrastructure aspects in an attempt, or in preparation for them becoming a cloud based service. If we think of routing as a commodity we end up with a number of bits (megabits, gigabits, etc.) routed per second. The same sort of approach would be applicable to switching. Pretty soon you may be able to take everything down to a function, instead of a platform or piece of equipment, and provide it as a service.

The question is when will companies and businesses be ready to look at their infrastructures, platforms and software in this way?

The most recent market analysis that I could find (from 2014 I think) shows that the total data processing market is approximately $115 Billion in annual revenue, while the Hosted / Cloud services portion of it is about $13 Billion (or a little over 11%) annually. While the portion of the computing market being served by cloud based solutions is a significant amount of money, it is still a relatively small but growing amount of the available market.

It is widely thought that computing services are the lead capability driving cloud services. That would indicate that other platforms, applications and pieces of infrastructure have not taken root in the cloud based structure and grown to the extent that cloud based computing has. That doesn’t mean that they won’t. It just means that they haven’t yet.

The market growth rate forecasts and estimates for Infrastructure as a Service (IaaS – computing, and other infrastructure capabilities) are reasonable, or at least it seems so to me. But when IaaS represents only 11% of the market, even a 50% growth as claimed by some suppliers only takes it to 15% of the market. Such is the next layer down analysis that must be done when such large percentage growth claims are made. Even at these growth rates and assuming there will be no slow down in its adoption, it appears that full Cloud Services market acceptance and utilization may still be a little ways off.

In other words, it seems that it is very wise to be aware of and prepared for cloud based services, but in the mean time it also appears that for at least the next few years the current capital based equipment solutions and services market systems will still be the majority market approach for business infrastructure, platforms and software. Cloud based services for these capabilities, for at least the shorter term will probably be a smaller, but potentially growing part of the market.

As Joni Mitchell said in the song “Both Sides, Now” on her 1969 Clouds album:

“I’ve looked at clouds from both sides now
From up and down, and still somehow
It’s cloud illusions I recall
I really don’t know clouds at all”

Wow. She wrote that forty six years ago. I’d say that’s pretty good but then I always liked Joni Mitchell.

The Optimal Meeting Length

I think that the new business reality is that it is the rare event when something actually gets done without first having a meeting. We need to know who will be Responsible for the action to be taken, and who will be Accountable for taking it, and who will need to be Consulted before it is taken and who will be Informed of its being taken. We will spend hours in meetings in this type of analysis before we actually do anything. We seem to have evolved the business approach that having a meeting about something is the same thing as taking action.

With all this time being spent in meetings trying to decide how to split the accountability and responsibility for doing anything, it got me to thinking: What would be the optimal length for a meeting, not just one of these deciding how to take action meetings, but any meeting?

I looked. There is any number of books available on line purporting to help people run efficient and effective meetings. I was in a meeting when I Googled that so I really didn’t have the time to read any of them. Who knows some of them might actually hold the key. But since we are in the here and now I will take my kick at the can (and utilize some of my own web sleuthing) to come up with what I think is the optimal length for any meeting.

There will be a few meeting ground rules.

• For it to officially be considered a meeting it must be visual in nature. That means that you either have to be there in person, or attend via video. Audio attendance at a meeting only is a phone call / conversation regardless of how you want to describe it, and it enables everyone associated with the call to multi-task doing email, play solitaire, or any other distraction they may so choose.

• If it is a real meeting it will have an agenda. If you don’t have set topics, speakers and time frames it is not a meeting. It is an unstructured discussion, or lunch. Without an agenda you should not expect to get anything done.

• The only computer that is to be open during the meeting is that of the person presenting. Open computers enable everyone to multi-task (see the first bullet above) instead of paying attention to the topic of the meeting. It’s also discourteous to the presenter.

• There should be no refreshments of any kind at the meeting. No bagels or muffins for a morning meeting. No coffee or soft drinks. The object of the meeting participants should be to get something done, not get fed and watered. If you really have to bribe people with food to get them to come to your meeting, maybe you don’t really need to have a meeting.

• Finally, there will be no leaving the meeting and coming back for any reason. No taking phone calls. No smoking breaks. And lastly, no bathroom breaks. Get that done before or after the meeting. Don’t disrupt it by having to go.

I understand that these rules will take a lot of the fun out of meetings. People will actually have to show up and pay attention. I know this is a lot to ask, but I do think it is critical that we get back to the old outdated ways of actually getting things done. Show up. Do your work. Then go do something else.

Now when we are talking about meetings, we are talking about the internal gathering of company employees. They can be called reviews, or updates, or deep dives or just about any other euphemism that you can come up with for having people get together for a business purpose. I will refer generically to all these events as “meetings”.

I am also going to specifically exclude meetings with customers from this discussion for the time being, since those types of meetings are held only with the consent of the customer and at their discretion. Many of the ground rules I have laid out would and should apply, but some (such as food and refreshments) may not.

With the ground rules in place and the meeting defined as not including customers we can get started on how long a meeting should take, or should last, depending on how you want to look at it.

Research (Google) shows that the average person goes to the bathroom about six times a day. That same research also shows that the average person stays awake about seventeen hours a day. Using simple math that means that the average person goes to the bathroom on average once every three hours or so (actually a little less than that). I think this is a good upper bound for a meeting’s length.

Now if we use a little probability theory, because not everyone goes to the bathroom at the same time, we will find that on average for any meeting of two or more people someone will have to go within half the average time frame. That means that our maximum meeting length is now slightly less than an hour and a half.

Even better.

Now on to other research (Google) topics. Estimates for the length of human attention span are highly variable and depend on the precise definition of attention being used.

• Transient attention is a short-term response to a stimulus that temporarily attracts/distracts attention. Researchers disagree on the exact amount of human transient attention span; some say it may be as short as 8 seconds.

I think it is safe to assume that senior management is more Transient Attention oriented.

• Selective sustained attention, also known as focused attention, is the level of attention that produces the consistent results on a task over time. Some state that the average human attention span is approximately 5 minutes; others state that most healthy teenagers and adults are unable to sustain attention on one thing for more than about 20 minutes at a time, although they can choose repeatedly to re-focus on the same thing. This ability to renew attention permits people to “pay attention” to things that last for more than a few minutes, such as long movies.

Attention span, as measured by sustained attention, or the time spent continuously on task, varies with age. Older children are capable of longer periods of attention than younger children.

It doesn’t say anything about executives or managers. Insert your own experience based limit here, however my experience has taught me that they tend to align with younger children.

I have been writing this for an hour or two and I think I need to take a break. I’ll be right back….

Okay, if we accept that people can pay attention to a single topic for up to twenty minutes, but that they can continue to “refocus” on interesting topics in order to stay engaged for longer periods of time, the question now becomes; how many times can they refocus? This is where true science comes into play.

In baseball its three strikes and you’re out.

Asking people to maintain their attention, and refocus multiple times while limiting the number of bathroom breaks is a lot to ask. Asking people to refocus their attention three times for a total of sixty minutes seems to be about the limit of reasonable expectation.

There you have it. A scientific explanation. No meeting should be more than one hour long. If you can’t get it done in an hour then you probably need to re-look at what it is that you are trying to accomplish in the meeting.

I think we all knew this is where I was going with this topic. We seem to have broken our lives down into hour intervals starting with our classes in school. If you can teach Einstein’s Theory of Relativity to twenty five disinterested teenagers within a one hour class, you should be able to have far less than twenty five adult business people come to conclusion on just about any topic within the same interval.

By the way, time does indeed slow down, the closer you get to the speed of light.

This interval sits comfortably within the average need for a bathroom break, and it is short enough that it doesn’t require too many refocusing events. It is the optimal length for a meeting where the objective is to actually get something done. It enables the meeting attendees to get in, get out and move on to the next topic. By limiting the time one would expect (hope) to drive the attendees to come to a conclusion within that time.

If there are more topics to be covered they need to be broken down into other multiple one hour meetings.

Of course, none of this one hour meeting logic applies to how long a luncheon meeting should last.

Make Your Customer’s Business Simple

Sometimes it is hard to think of business as simple. Perhaps as we have evolved from a production oriented society to more of a consumer and service oriented society we have evolved the notion that business is complex. Maybe it is because of our dependency on the tools and technology now required to conduct business has evolved as has the perceived complexity of the infrastructures that we must have to support them. Think about the power that we now have on our desk tops and in the palms of our hands. Despite all of this, I think that business is only complex if we decide to allow it to be complex, or worse yet, make it complex of our own accord.

Technology has effectively removed time and distance from the business equation. Anyone, anywhere at any time can access a global marketplace where they can “do business” with just about anyone else that they wish. It has also made everyone smarter, in that the only reason for anyone to make an uninformed purchase decision is because they chose not to get informed by using their aforementioned powerful desk top or hand held tools.

But if business is really not all that different why do companies continue to insist on changing and continue to invest in developing and creating new and better products? Why do companies still have sales teams and operations groups and all the other corporate functions that have been the mainstays of business organizations for hundreds of years? If business is really changing then why are so many things about it still remaining the same? When business’s reorganize, they invariably “shuffle the cards” associated with their organizations, but they are still the same cards.

I think it may be in that in its simplest form business is about delivering value. The value can be in the form of a product that can be as simple as a clay pot or as technically complex as a cloud based data storage system, or in the form of a service such as simple as a freshly mowed yard or the complex capability to operate and maintain that cloud based data storage system. The quantification of the value provided is determined by the amount of currency that will be exchanged for the clay pot, mowed yard or cloud based storage system.

There you have it. This is still pretty simple. Business is about exchanging money for something of value. I guess that is actually the definition of commerce, but in this case it is also business.

com•merce/ˈkämərs/ The activity of buying and selling, especially on a large scale.

It seems that it is from this point that we have decided to add complexity to the business formula.

Since business cannot fundamentally change the simplicity of exchanging money for something of value, it tends to change how it goes about pursuing this exchange. It organizes itself to simplify the pursuit. Then it reorganizes. It changes in response to a perceived competitive threat. It centralizes. It decentralizes, distributes and diversifies.

In short organizations drift into an internally focused approach to commerce and business. Since it is so difficult to change a customer, organizations tend to focus on changing themselves. It seems as though that there is a belief that if an organization can convince itself that it is changing in order to make itself easier to do business with, an organization can become that much better at doing business. This is an almost purely internally focused concept. Unfortunately business and commerce must usually be done with the external world.

This is an approach that invariable runs out of momentum. Organizations seem to believe that by endlessly trying to make themselves easier to business with, it makes it easier for the customer to do business. This is a key point. Just because an organization has tried to make itself easier to do business with does not mean that the organization has made it easier for the customer to do business. I guess a good example of this would be making it easier for the horse and buggy driver to buy buggy whips does not necessarily help him sell more buggy rides around Central Park.

It is a debatable trade-off of how much value is associated with the complexity a company can introduce into their systems and processes in an effort to reduce a customer’s complexity in dealing with them. Increased complexity comes at a cost or in this instance a price to the customer. An internally focused business confuses the value of removing customer complexity in dealing with a vendor, with the actual removal of complexity from a customer’s business.

This is a rather circuitous way of saying that the focus should not be on making it easy for a customer to do business with you. That must be a given. The focus should be on how you make it easier for your customer to do business with their customers. That is where the true value of commerce is.

There is a certain amount of value that a customer will recognize in an organization that makes itself easy to do business with. There is far more value that a customer with recognize in an organization that makes it easy for the customer to do their business.

This is where we get back to concept of “simple” in business. How do you make it easier for your customer to do business? How do you help them remove the complexity associated with their customer commerce? How do you reduce their risk? How do you help them increase the perceived value of the good or service that they are offering to their market?

It is no longer good enough to just make it easier for your customer to buy your good or service. Everybody has just about mined out this opportunity with the law of decreasing returns starting to take greater and greater affect versus the input required to affect the change. The better approach now needs to be how do you make it easier for your customer to sell their good or service. What expertise can you contribute to their success? Remember it seems to be the tools and technology that is complex, not the business.

Expertise has been and still is a product. But as I noted earlier, as products that make up our tools, and the infrastructures to support them have evolved and become more complex, it seems that expertise associated with operating these tools and infrastructures continues to be somewhat overlooked.

Organizations continue to try to restructure themselves to make it simpler for their customers to do business with them. They also try to restructure to make themselves more efficient at conducting their business. I think the next logical step in the evolution is to no longer think about how you can restructure yourself to conduct your business, but how you can help your customer restructure themselves to make their business easier to conduct.

I think the question for the future is no longer how can I be easier to business with, but more how can I make you easier for your customers to do business with? What customer complexity can you remove from their organization? It should no longer be what device can you sell them that is more efficient, but what can you do for them to make them more efficient.

In an internally focused, product driven world this sounds complex. It is easy to believe that because it is different than they way organizations have been thinking, but when you think about it, it should be pretty simple.

From Anything to Something Specific

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.

Substantive Changes


I think we have all either been part of a business that was in a troubled condition, or been asked to work in a business that was in a troubled condition. Either way the objective was to improve the performance of the business so that it would no longer be considered a troubled business. Left to themselves troubled businesses will tend to continue to be troubled businesses. They won’t fix themselves. That being said, I have found that the only way to improve a troubled business is to make substantive changes.


 


I want to take a moment here to clarify the difference between substantial changes and substantive changes. Substantial changes are big, visible changes. They attract attention and provide the illusion of progress. Substantive changes are those that change the way the business operates. They are usually not nearly as big or seemingly apparent as the substantial ones.


 


Substantial changes tend to come in the form of reorganizations – groups are combined or divided in the hopes that the leader will be able to make substantive changes to the new combined or divided organization, executive programs – programs where new metrics or measurement methodologies for example are put in place to help better quantify the issues are put in place, or new processes and reviews – teams and meetings to help try and reduce poor business decisions or behaviors.


 


As I have said these types of changes tend to be showy. They tend to get a lot of internal corporate “press” and extol the business virtues that are trying to be maximized. They are usually accompanied by catch phrases such as “change our corporate DNA” and “improve our customer satisfaction”.


 


And in the longer run, it has been my experience that they usually don’t work.


 


Substantial changes also tend to communicate to the business that you have not identified what the real issues are with your business. For example, how can your “corporate DNA” be the root cause of your issue? Certain business behaviors possibly, but I don’t think the DNA is the issue.


 


The best business performance improvements that I have seen have been as the result of a careful analysis of what the desired business state or goal is, an understanding of what is currently being done, and even more importantly, why things are currently being done the way they are. By understanding the “why” of things you can get to the underlying reason for the improper behavior or performance.


 


Some of examples of this phenomenon from my experience include a business performance issue where inventory was deemed to be too high for the business. This tied up cash and affected both the balance sheet and the P&L. It was decided that greater efficiencies could be gained by putting the entire inventory function in one location. There were many reorganization announcements and a great deal of senior management attention was paid to the issue, but it didn’t seem to improve the inventory levels.


 


When a deeper analysis of the inventory was done it was found that the inventory levels were in fact at the appropriate levels for the products being supported. The real issue was that there were too many old products being supported. The issue was not really an inventory one; it was a product management one. Products were not being retired or discontinued in an appropriate or timely manner. Once that was resolved, inventory levels came down to a more acceptable level.


 


Another example was where the profitability of the entire business, not just the individual customer projects within it was called into question. An entire new system of reports was called for to help identify where the failings occurred. The frequency of reviews and the number of attendees was increased to catch the issues before they adversely affected profitability. A significant amount of management time and effort was expended but the profitability did not improve.


 


A deeper analysis here showed that the sales team got the same commission for the sale of an unprofitable project as they did for a profitable one. The real issue was not one of being unable to implement a project efficiently, effectively and profitably; the issue turned out to be the price for the deals that sales was quoting. They were simply reducing the price for “strategic” opportunities and making up for the reduced value of each by increasing the volume of sales. When the sales compensation plan was modified to include margin targets and incentives, the overall profitability of each deal and the business improved.


 


It is very tempting to make big, sweeping changes to a business to try and improve its performance. They tend to make a big splash but not much progress. It is much more difficult to try and understand why business is being conducted in its current manner, and then to make the substantive, but usually subtle changes that are required to correct business performance issues. It may take a little more effort and time, but it is much better for the business.

“When Growth Stalls”


I recently had the opportunity to listen to Steve McKee, the author of the book “When Growth Stalls” speak at a conference. He studied the phenomenon of how some small companies on a very good growth trajectory seemed to stall out and plateau as they became medium sized and larger companies. I think the 4 basic topics that he covered are applicable across the market in general today, not just for smaller growing companies.

 

1.      Lack of Alignment: Steve spoke about the fact that as management teams grew with the company, their alignment tended to vary more. I think that this is the case today with various issues such as when “revenue growth at all costs” groups do battle with “profitability at all costs” groups within company leadership teams. It is easy to say you want both, but it is a very precarious balancing act to try and implement.

 

2.      Loss of Focus: Similar to lack of alignment, loss of focus deals with a decline in the passion and commitment to success that drove the company’s earlier success.  It seems to have become a “job”, not an avocation or career. Good enough has in fact become good enough.

 

3.      Loss of Nerve: When issues arise it now seems that the first (and sometimes only approach) is to scale back. We now scale back on R&D investment. We scale back on Marketing. We scale back on what we need for future success. It is here that he asked the best question I have heard in a long time:

 

“What do we need to do to remember that this economic crisis is a gift?”

 

Or in other words, what can we do with respect to our relative positioning to our competitors in the market to be more successful than them. Times of instability can be times of market opportunity if properly approached.

 

We seemed to have forgotten this concept across the board in the market lately.

 

4.      Finally he spoke about business and marketing inconsistency and how “stuck” companies seem to change these items more / too quickly. As every business struggles to move forward they continue to try “new” things. New organizational structures. New marketing campaigns. What they fail to notice is that change also starts everything over. You must give each new structure or campaign time to be successful. It is a failure to stay with a bad structure or campaign too long, but it is also a failure to not give them enough time to be successful.

 

Steve McKee struck a chord with me and I will try to use and apply some of the comments and approaches he mentioned. Hopefully we will all be able to get the system“unstuck”, and moving forward in a more healthy market in the near future.