Category Archives: Analysis

Conflicting Internal Forces

I have talked in the past about the three internal organizational resources required for business success, and their trade-offs and interrelationships: Time, People and Money. The idea that if you have less time than desired to achieve a goal, it will require the expenditure of more people and more money to achieve it. If you have fewer people for the goal it will require more time and money. And so on.

I am now going to talk about the driving internal functional forces that are acting upon desired organizational goals. There are again three of them and to put them at their simplest, they are Sales, Finance and Engineering. I think in order to be a little more accurate it would be better to look at the conflicting goals of each of these functions with respect to the desired goal of the organization, instead of just the function itself.

The goal of sales is to get orders. There may be additional sub-requirements placed on them, but it is almost always quota attainment, as it pertains to orders, that is the measuring stick for sales. Achieve your sales order goal as a salesperson, and you get money, fame, glory, respect and most importantly, you get to keep your job. Fail to achieve your sales order goal and you don’t get the money, fame, glory or respect. More importantly, perhaps the first time you fail you may get a pass on keeping your job, but probably not the second time.

Sales in general doesn’t really care about finance or engineering. This is primarily because they are not paid to care about them. They are paid (usually in the form of commissions) to get orders. Sales usually wants the highest quality and lowest price possible as this helps enable their sales. The greater profitability desired by finance usually means a higher price, which usually makes sales more difficult. Sales will usually align with engineering on generating the highest quality solution but diverge when the costs of such solutions are taken into account.

The goal of Finance is margin or profitability. Again, there may be other sub-requirements, but finance’s primary role is to make sure that the organization brings in more money than it spends. Finance keeps score. It’s not enough to just bring in more than you spend. Finance quantifies how much more money needs to be brought in than is spent so that the business’s ongoing and future success can be assured. Future investments and corporate overheads (as well as salespeople’s salaries and commissions, etc.) have to be paid for.

Finance is usually focused on what could be called the margin percentage versus margin value balancing act. It is desirable to have a high margin percentage and high profitability on each sale. However, having high margins with low volumes will not generate enough profit to drive the business forward. Just as a high volume of sales with low margins will not generate the desired margin value. There is a desired financial equilibrium where both margin percentages and values are maximized.

The goal of Engineering is to make sure that everything gets done right. Engineering makes sure that products and solutions are configured properly. They make sure that components and solutions are available in the desired time frames. They make sure that services are costed and allocated correctly. In short, they make sure that the organization can in fact do whatever the salespeople are trying to sell.

Engineers are also believe that they are the primary group responsible for doing the people, time, money, analysis. Engineers are not usually interested in the sales aspect, other than recognizing if there are no sales there is no need for engineers. And they are not particularly focused on finances, as margin and profitability again have little direct effect on them. They are usually focused on the accuracy of the solution and will include whatever they deem appropriate (the people, time, money resources) to that solution to make it ever more accurate.

Of the three functions, sales is probably the most difficult. Sales is competing with external entities for each order, in addition to trying to balance the internal goals associated with the financial and engineering functions. Finance and engineering are only associated with internal functions, including sales. There is no competing engineering or finance function claiming that their financial wizardry or engineering prowess is superior. When they are forced to deal with external forces, it usually only through sales.

When these internal functions, and their associated goals are in balance, an organization can operate at near its peak efficiency. Sales pushes for orders, finance makes sure the sale is profitable and engineering makes sure that the sold solution is done correctly. Life can be good.

It is when an organization gets out of balance that we start to see significant issues. When an organization becomes too sales focused, margins and profitability can begin to slip as the quickest way to increase sales is to reduce price (this is just baseline economic theory). We saw an example of this some time ago when some stocks started being valued based on the assumptions of future sales and sales growth instead of the more standard stock and organizational valuation criteria. These stocks eventually came crashing down when it was realized that they would in fact have to start making money if they wanted to stay in business, regardless of how much they sold.

When an organization becomes too financially focused, growth, expansion and development can slow, again causing issues for the organization. Strategic opportunities can be missed because they may be deemed to either represent too much risk, or not enough return (margin) to be pursued. Being too safe from a financial point of view can be just as deadly to an organization as being too risky and focused only on sales.

With the increased global awareness and focus on the “cost of non-quality”, or more accurately the cost of not doing things right, there seems to now be an organizational drift toward becoming more engineering focused, since they are the organizational force associated with doing things right. I also think that this approach potentially has the greatest capacity for generating corporate issues in the future.

When an organization becomes engineering focused it has a tendency to lose sight of both sales and finance. With decreased input and parameter focus from sales and finance, engineering will continue to focus on accuracy and reducing the risk of an incorrectly engineered solution, almost to the point of trying to generate perfection in its solutions.

The issue here is that perfection usually comes at a very high cost.

Finance will continue to try to demand specific margin levels, while sales will want lower prices to enable the generation of orders. This is the recipe for the perfect organizational storm. Engineering generated increasing costs, finance generated desired margin levels, and sales generated reduced pricing demands to meet the market competition.

The point here is that the market, more or less, sets the market price for the organization’s goods or services. There can be some variations, sometimes based on the quality of your sales team, sometimes based on the quality of your solution, and sometimes it is based on other factors (such as the regulatory exclusion of a competitor from the market, etc.). If you raise your prices too much in response to the engineered increase in costs, sales volumes and hence margin values will decline. If you reduce margin percentages, again margin values can decline. This can become a lose-lose situation.

The organization won’t make any mistakes, but it may not generate enough business, or margins to survive for very long.

In allowing an organization to become engineering focused, you start down the road to becoming a cost-up pricing organization. This is the least market responsive type of organization. Since engineering nominally has no focus or interest in sales or margin, when an organization becomes engineering focused, it becomes almost entirely internally focused.

It is usually the position of the market that an organization that loses its focus on the customer or the market, doesn’t get to enjoy the benefits of that customer or market for very long.

Engineering in an organization is about reducing the risk associated with achieving a goal. But like everything else, this risk avoidance comes with a cost. It is not enough to tell engineering to make sure that the solution is correct. This direction invariably leads to the inclusion of all kinds of failure avoidance constructs, and their costs to be included in the solution. And since engineering can be a complex function, there are few outside of the engineering function that can understand or question it.

In the long past world of “Five Nines” of reliability, this was once the recipe for success, but in today’s “short life-cycle” disposable product world, few can afford it, and even fewer are willing to pay for it.

I mentioned earlier that engineers see themselves as the group that is responsible for solving the Time, Money, People resource equation. It is obvious that when none of these parameters are set, the solution is much easier to obtain. And without limits to these parameters, the costs of the risk-adverse solution can grow quite large. Organizations need to understand that the Time, Money, People equation requires parameters to be set. Time frames and budgets need to always be set before being handed to engineers to configure a solution.

Engineering is a key component to any solution. The functional internal conflicts between sales, finance and engineering will always come into play, and must always be balanced out. As organizations seem to continue to drift into a little more of an engineering-centric approach to customers and solutions, it should be safe to assume that left unchecked, the commercial and financial aspects of these solutions will re-emerge in the customer decision making process.

It is safe to say that you do indeed get what you pay for, but it is also safe to say that sales will have difficulty selling, and customers are probably not going to be willing to pay for an over-engineered solution of any type that does not take into account their commercial needs.

The Territorial Imperative

“The Territorial Imperative”, or more correctly, “The Territorial Imperative: A Personal Inquiry Into the Animal Origins of Property and Nations”, was written in 1966 by Robert Ardrey. It along with the “The Naked Ape”, or again more correctly “The Naked Ape: A Zoologist’s Study of the Human Animal” which was written in 1967 by Desmond Morris, are probably the first two books I read that were not written by Theodor Geisel, more commonly known as Doctor Seuss.

I didn’t choose to read them at that time. They were assigned to me one summer. I was getting ready to enter the fifth grade and attend a new school. I was told that they were preparatory work that needed to be completed before I could go to the new school.

I personally thought this concept sucked at the time, as summers were supposed to be school free, and here I was being required to read a couple of books.

What is interesting to me is that now, all these years later, these books and the topics that they covered are now coming back to me in the business world.

Initially both of these books were considered somewhat ground breaking in that they sought to explain the source of some human behaviors. Till then man (man as homo-sapiens the species, not man as a gender, for those of you who might have been getting ready to go full scale gender bias ballistic on me) was viewed as primarily a cognitive creature. What these books examined was the idea that man was also driven by certain instincts which also affected its behavior.

This was pretty radical and somewhat heady stuff for that time period. I’m pretty sure that as a would-be fifth grader I didn’t fully grasp a great deal of what the authors were trying to get across. I knew that it made me feel somewhat funny though. That is funny-strange, not funny-haha.

For those of you who have not read The Territorial Imperative, the following is a quick synopsis:

“It describes the evolutionarily determined instinct among humans toward territoriality and the implications of this territoriality in human meta-phenomena such as property ownership and nation building. … Ardrey posited that man originated in Africa instead of Asia, that he is driven by inherited instincts to acquire land and defend territory, and that the development of weapons was a fundamental turning point in his evolution. The Territorial Imperative further explores these ideas with a special emphasis on man’s distinct preoccupation with the concept of territory. It goes on to elucidate the role that inherited evolutionary instinct, particularly the so-called “territorial imperative”, plays in modern human society in phenomena such as property ownership and nation building.”

https://en.wikipedia.org/wiki/The_Territorial_Imperative

More simply put Ardrey posited that one of man’s driving instincts is to own and defend territory.

With that idea in mind, now look back at every business organizational structure and office / cubicle arrangement and apply this thesis to it. It ought to be somewhat enlightening. It also ought to explain why, when we are hired on, we are given “our space”, be it a desk, or cubicle, or whatever. It is now our physical, as well as metaphorical territory. We instinctively know that we must “work” in order to defend it.

As we matriculated up through management we acquired larger physical territories (bigger cubes and eventually offices) as well as larger spans of control over others and their cubes and offices. These territories were then defended against both internal and external competitors.

But it seems that times are changing. At least when it comes to office space. Business organizations have started to move away from the concept of the business territorial imperative. Office size and location are seeming to be done away with as companies move to the “Open Office” concept.

In the open office structure, no one has any more territory that anyone else. In fact, there are no specific assigned locations of any kind. Instead of having “your” desk, cube, office, territory, it is first-come first-served in the seating arrangements. Desk, or more accurately table-space is shared. There is no distinction between levels and spaces. It is positioned as egalitarian and a better office structure for all those involved.

It seems to me that the more things change the more they stay the same. I was looking at some old pictures of office spaces in the 1950’s. It was some pretty interesting stuff. Below is one that caught my eye, primarily because it was in color. Most of the rest of them seem to be in black and white. For comparison’s sake, I didn’t want to try and compare a black and white photo to a color one. Take a look.

This is the modern office, circa 1958. That’s more than sixty years ago. It’s neat. It’s orderly. It’s “open”. What is not to like about it?

Now let’s fast forward a little more than sixty years to today. Here is a look at what is called a “Mezzanine Floor” open office design.

Except for a little better photography and perspective use, I’m not seeing a whole lot of difference, read “progress” here.

The difference is that in the 1950’s you had “your space”. You were assigned a desk. As small as it was, it was your territory. That is where you went to work. Now, you don’t. In the “open office” you can come in and sit anywhere. If you are promoted and given more responsibility, or assigned a new role, you still come in and the same rules apply. You come in and sit wherever you choose.

I don’t know how good or bad, this new (or in this case “old”) open office concept is going to be. I haven’t had the opportunity to try it out yet. But it appears that I will have this opportunity soon. I am going to be interested to see how this return to the past is going to work and how it will affect a workforce that has not been in this environment before.

Many people I know have said that they have in the past or are now currently working in such environments. I also notice that a very high percentage of them now “work at home” in a home office. This high correlation between open office environments and working at home is probably just a coincidence.

Really.

It is probably also a coincidence that “your” home office is a fixed location within “your” home.

The Territorial Imperative was a ground-breaking book. It submitted that man, while being a reasoning creature was also driven by certain instincts, one of which was to define its own territory. It was shown that the defining and defending of these territories was one of the basic drives, and a significant driving force in human growth and evolution.

Maybe I am reaching, but I find it interesting that the same principles could be applied, to a greater or lesser extent in organizational and office dynamics. I also find it interesting that we seem to be in the midst of a period where organizations appear to be actively removing this behavior driver.

In the past, the “trappings of office” were recognized as one of the driving forces that was a cause for people to input that extra amount of effort. You wanted the bigger office. It was a symbol of your success.

I guess on the other side of the coin, your bigger office might have been a symbol of someone else’s lack of success. In today’s age of participation trophies and ninth place ribbons, the desire may not be so much to remove the symbol of success, but to remove the symbol of the lack of success of others. I guess if everyone sits at the same sort of desk, with the same amount of space, with no predefined location, no one can feel bad, or good about their territory, or their apparent lack of it.

On the other hand, in today’s hyper-competitive business environment, reducing the office space allocated to each employee, regardless of relative organizational position, might be a pretty good way of reducing what was once thought to be a relatively expensive fixed cost.

It is interesting that the reintroduction of an office environment that was evolved away from, more than half a century ago is being viewed as a “new and improved” (to borrow from most new products advertising mantras) step forward. It will also be interesting to see how it changes office behaviors.

Will there be an increase in the flight from the office to the home office? Will there be a reduction in the commitment to the assignment and the company on a greater level since there will no longer be a defined territory associated with the office? Despite these and other potential questions, as well as the recent research that shows such open office environments are not particularly conducive to organizational productivity, (“The impact of the ‘open’ workspace on human collaboration”, Ethan S. Bernstein and Stephen Turban,  Published:02 July 2018 https://royalsocietypublishing.org/doi/10.1098/rstb.2017.0239 https://doi.org/10.1098/rstb.2017.0239) I think we are all going to get the chance to experience the open office for ourselves. We have seen that man is an adaptable species. He lives in igloos in the arctic and grass huts in the rain-forests, and just about everywhere in between. I guess he can try working in an open office as well.

Customer Wants

Sometimes, events in the universe just conspire to align themselves in such a way that a topic to write about becomes painfully self-evident. Such is what has happened over the last little period of time for me. I was the recipient of several surveys asking me as a customer, what I wanted. I also had the opportunity to read several surveys that had asked other types of customers what they wanted. These current events brought back recollections of past events that had already conveyed this topic into such clarity some time ago for me. I am of course talking about talking to customers, and more specifically what customers want.

What customers want is usually viewed as the holy grail of business conduct. If you can figure out what they want, you can create a product or service that will satisfy their desire. You can become famous and respected as a scion of business. You can be somebody.

One of the most popular methods for finding out what customers want is through the afore mentioned surveys. Another is industry forums and workshops. Yet another is actually talking to them face to face and just asking them. As I mentioned, I have recently had the opportunity to both read about and to some extent participate in these types of customer interactions. People had gone out, identified the customers, and asked them what they wanted. And lo and behold, they told us.

We now knew what they wanted. We could design and build the future around these responses. We had the information. We had the answers. We were off and running.

Not so fast.

Long ago in a galaxy far, far away, I was once responsible for a business unit within a company. I had taken the adage to heart. I had created a users’ group so that I could talk directly to my customers and understand what they wanted as well as what was dissatisfying them. It worked great, for a while.

Most of the time the problems, issues and requests that we discussed were well known to both groups, the company as well as the users. We prioritized them, focused our abilities, and instead of trying to solve them all at once, we solved a few at a time and made measurable progress. As we took the major issues and dissatisfiers off the list, they were eventually replaced with more and more arcane topics. They were still dissatisfiers, but not on the same level as those that we had already dealt with. Soon we found ourselves starting to try and prioritize and work on the arcane as opposed to the well-defined issues.

We surveyed the customers to try and understand “what they wanted”. They were not shy. We hadn’t put any limitations on what their responses could be, so they told us what they wanted. They had gone through a prolonged period of getting many of the products and issue resolutions that they were looking for, so their expectations were high regarding what our responses would be.

The subtle change that had occurred was that we were now specifically discussing things that they wanted, where in the past we had been working on topics that needed to be worked or corrected. These were now “want” to haves, as opposed to “have” to have topics. There is a different commercial model when it comes to correcting issues or providing already committed functionalities, then there is when it comes to fulfilling customer wants and desires.

We started discussing the parameters for the commercial model associated with fulfilling their desires. We started to ask them for money in order for us to deliver what they wanted. What they wanted was so arcane, and technically complicated, they we started asking for a lot of money.

The next users group meeting came along, and naturally, this issue was a major topic of discussion. The customers were unhappy. They were dissatisfied. They were not getting what they wanted. It came time to have “the talk” with them individually, and as a user group in general.

We set up the session and cleared the agenda. We started off by making sure that we had in fact properly scoped and defined the specific desired capability that they said they wanted. We wanted to make sure that we were answering and addressing the proper topic. We had.

We then asked the question that hence forth has always accompanied any time in the future that that I have asked a customer what they wanted. We asked:

“Are you willing to pay for what you want?”

It is easy for anyone, customers included, to come up with a list of things that they want. The issue here is always two-fold: Are you willing to pay for it? And, do you have enough money to pay for it?

Usually when customers are surveyed about needs, wants, desires, there is little in the way of a perceived economic model accompanying these questions. Wants invariably well exceed available budgets and the ability to purchase these wants. The different relative costs associated with the various desires can have a significant effect on the priority with which the customer views them.

A good example would be a survey about cars. You can be asked what kind of car you would want. You may “want” an exotic super-car. They are nice cars. You may not have enough money on hand, nor the desire to re-mortgage your house in order to buy an exotic super-car. Even though you may want one, you may not be willing to pay what it costs to buy one.

Such is the issue we ran into way back when. We asked only about “wants”. Such is the issue that seems to continue to plague more recent industry survey and customer communications.

Getting back to my historical lesson, most of the customers agreed that they would be willing to pay something for their desired functionality. It is interesting to note here that I said “most”. There were some that were not. I think by now you know where I will be going with this.

I then shared what the order of magnitude estimate was for the company to develop the desired capability and explained that even though it might be contrary to common opinion, we were a “for profit” organization. The stockholders were funny that way, and sort of insisted on it. Based on the business case and the relative number of interested customers, we then shared an order of magnitude individual customer price for the desired capability, based on the assumption that all interested customers would purchase it at the estimated price.

The majority of the customers indicated that they were not interested in the capability at the estimated price. We then looked at the remaining customers and indicated that their price would go up in proportion to the number of customers that were no longer interested in purchasing the capability.

The result of the discussion was that we publicly addressed the dissatisfier and quantified to the customer what it would cost them to be satisfied, and then mutually decided that we would not develop and supply the customer desired functionality. We would instead work with them to see if there were work-arounds or other methods of addressing the desired functionality.

During the course of this interaction it became clear that what customers want is indeed an important aspect of the process of creating customer satisfaction. You have to know what they want. Many times, it is within your ability to provide it, and to provide in such a way or at such a price point that it makes sense for all involved. However, as technology has evolved, and as budgets continue to tighten, sometimes the usual economic model will not work.

In today’s business climate, any time that you are looking to have interactions with customers regarding “what they want” as a method of gaging which products to create or which strategic directions to pursue, it will probably be in everyone’s best interest to include questions regarding if  that customer would be willing to purchase that desired product or functionality, and what specifically (at lease to a rounded order of magnitude) what they would be willing to pay for it.

All customers have a list of wants and desires. If you only ask them about those wants and desires you may find yourself trying to design and build products, services and functionalities that customers may be unwilling to purchase, even though they may want them. I think the number of people that may want an exotic super-car is far greater than the number of people that are actually willing to pay what it costs to buy one. I’m pretty sure about this because as I drive around in my distinctly non-exotic super-car, I see so many others driving around in their non-exotic super-cars.

As an aside I can’t believe that so many other people actually wanted all those minivans that they are driving around in. Perhaps that will be something to analyze in a future edition.

I think that we all need to be aware of what customers want. I also think that unless we normalize these wants with information regarding which wants they are willing to pay for, and how much they might be willing to pay for each one, we can lead ourselves into some difficult business situations.

Good, Fast, Cheap and the Future

I was casting around for a topic to write about. I had several candidates. Whenever I get an idea I write down the basics of it in my notebook. This happens to be a real notebook, with paper pages and a bound cover. Not a computer. I very rarely type at a moment’s notice, but I sure can pick up a pen and scribble with the best of them.

In any event what finally tipped the scales toward this topic was the NCAA selection committee’s decisions on who gets to play in March Madness (who gets to go dancing as they say) and who doesn’t. It wasn’t so much the actual selections that got my attention, as it was all the hype and fury that goes into the prognostications associated with filling out the tournament brackets and predicting the winners, losers and future match-ups.

It seems that what comes next is of more than passing interest to some people.

Being in a technology-based industry, in an increasingly technology-based world, I have been doing some reading as to what comes next in technology as well. It may seem like a stretch to compare filling out your NCAA March Madness bracket to predicting what comes next in technology industries and business sectors, but there you have it.

I have read and seen many methods used for predicting the next steps in our technological future. Some are internally focused (business focused). Some are externally focused (customer focused). I saw some that were citing universal constants and the laws of physics as the driving factors. Anything that equates physics to business always intrigues me.

But as I thought through all of the hype and hoopla surrounding predicting the future, as I stared somewhat forlornly at my unfilled NCAA bracket, I realized that while I had absolutely no idea beyond what I saw on ESPN regarding who’s who in college basketball, I had been in business and the technology industry for a while, so maybe if I relied on that instead of what others said I should rely on, I might be able to make some sense of what was coming.

Despite every pundit’s proclivity to try and make things seem complicated, I have found business to come down to, and be reasonably explained by the holy trinity, as it were, of business: Good, Fast, Cheap. I think these are the factors that affect and in effect, can be used to predict the future.

Simply put, they are: Good, or quality. Fast or speed of acquisition or delivery. And Cheap, how much you are willing to pay.

Now I agree that there are other influences, such as governmental regulation, and social and environmental consciousness, and even marketing and advertising, but I think Good, Fast, Cheap dominate the decision and prediction landscape. I’ll look at a couple of disparate industries to see if these ideas hold true.

The auto industry is always one of my favorite industries to look at. It has changed from a labor intensive “we’ll tell you what kind of car you’re going to buy”, to an automated, highly competitive customer driven, “We’ll tell you what kind of car you’re going to make if you want our business” industry. That’s what makes it fun to look at.

It is well known that there are market segments within both the automotive industry and its customer base. These tiers are based on car size and pricing levels. Smaller economy cars, all the way up to larger, more luxurious cars. This is because not everyone has the same level of “Cheap” or price. However, there are various sub-markets that do seem to behave similarly based on this factor.

Fast, for the most part, is going to be a given for cars. Dealerships abound, and interestingly enough seem to occur in close proximity to each other. This means that you can go in, compare products relatively easily, and select and drive home with your purchase. You can’t get much faster than immediate gratification.

That leaves Good, or quality as to what I would expect the primary differentiator to be, at least for now within the automotive industry. This is where things can get interesting. If you can’t spend any more money than you can afford for a car, and you can’t get it any faster than now, the perceived quality of the car will be one of the major, if not deciding factor on what you buy.

Yes, I know design and style, etc. are going to come into play. Have you noticed how similar in appearance cars within the same market segment look. If you don’t think so, look again.

It is interesting (at least to me) that the New York Times noted that General Motors first offered a Three-Year bumper to bumper warranty in 1989. https://www.nytimes.com/1988/09/17/style/consumer-s-world-for-1989-new-cars-and-warranties-come-in-all-lengths.html

Now such warranties can extend to six-years and in some instances 10-years, and I would suggest that they are viewed as a competitive advantage / disadvantage capability.

Now Elon Musk and Tesla have created a very high quality, electric car, and they are challenging some of the status quo in the industry. And the industry is reacting, as all competitors work to bring out competitive electric models as quickly as possible. But again, I would position that the economics of quality will be the driving factor of what the future holds for the automotive industry.

Now I’d like to look at the technology industries. I’ll focus somewhat on communications and networking, but I think much of the topic will be applicable across most technology industries.

Good, or Quality used to be the driving force in communications. Reliability, redundancy, etc. were the required thresholds to cross. But they cost money and they took time. People learned that they could get “Good Enough” for a whole lot less than what they paid for Good. I have referred to this as the race to the bottom. How low a quality for how low a price was acceptable. It turns out in retrospect, pretty low.

It seems now that there are generations of people who have never known high quality communications, or anything other than disposable platforms and devices, so they have no baseline to compare to. To them Good Enough is all they have ever had, so it is acceptable. So that leaves Fast and / or Cheap as the driving forces for the networking future. Maybe.

I also think that Cheap has also run its course in communications. Who here remembers when communications providers would “give” you a mobile phone as part of your service agreement? They don’t do that anymore. In fact, it seems that they have now established an upper boundary for what people will pay for a phone, in addition to their service contract. That limit seems to have been explored by Apple and its iPhone X at around One Thousand Dollars. https://www.theverge.com/2018/8/21/17763322/iphone-x-galaxy-note-9-smartphone-pricing-2018

That brings us to Fast, or speed of availability. It has been approximately Ten years since the last generation of wireless capability (4G) went into trial and delivery to the market. https://en.wikipedia.org/wiki/4G 5G is now just hitting the market as well, but probably won’t see ubiquitous coverage for another year or two. The speed we are talking about here is measured in years, if not decades.

The last major evolution / revolution in non-wireless communications, be it the analog to digital, digital to Internet Protocol, or the advent of cable providers entering the non-TV communications market, has also been years if not decades in the past.

So where does that leave us? The Good (quality) of communications has already been taken down. Can it go lower? Maybe, maybe not. The Cheap of communications has already been taken down, hit the floor, and started to bounce back up. This is obviously in response to the communications providers desire to continue to make money and stay in business. The Fast of communications has never been that fast to begin with.

I think it is going to be a combination of “Good” and “Cheap”. Quality is already low. However, if we are to believe the new applications and uses of communications, quality will probably have to come back up. I don’t know about you, but I don’t think I want my self-driving car operating on the quality of networks that we have come to accept as “Good Enough”. Either that or the definition of Good Enough is going to have to be revised upwards, drastically.

Basically, this means that people will be expecting more, but probably will not be willing to pay more for it. The past technology iterations will have already taught them this behavior.

Cheap, as I said has already hit the bottom and seems to be coming back up. But not everyone will want or need the “luxury” service. Many will want, or only be able to afford the “Economy” service. I think you will see in far more granularity than is available now, a tiering, or set of communication strata put in place, very similar to what we see with the automotive industry: Luxury models to Economy models.

The issue will be that how do you create communications networks able to deliver Luxury to Economy levels, that are priced at levels that are already ingrained in the user’s market segment? That would mean that the capability to deliver Luxury would have to be built, but the ability to deliver Cheap, where desired or required would have to be available.

I think the technology to be able to deliver this type of capability is in development now. I don’t think the “Cheap” capability of the service providers being able to make money on that type of technology-based capability has quite been worked out yet. It will cost the providers a lot of money to build this capability. This will probably engender a price that their end user customers are probably not willing to spend. That and it will probably a fair amount of time before the technologies are truly available. I think we have an economically induced wait in order to see what’s next, at least in communications.

Time Cards

Time cards have been a symbol of manufacturing productive efficiency for years. I think we have all seen images of production and manufacturing associates dutifully standing in line to “punch in” at their appointed shift on the time clock. It seemed to be a marvelous mechanism to maintain, measure and direct those resources associated with production, in the most efficient manner. It is where the phrase “on the clock” originated. You came in and they started paying you when you “clocked in” and they stopped paying you when you “clocked out”. It was efficient.

By the way, the “Time Clock” that has become so universal when talking about clocking in and clocking out, first made its appearance on the business scene in the late nineteenth century.

” An early and influential time clock, sometimes described as the first, was invented on November 20, 1888, by Willard Le Grand Bundy, a jeweler in Auburn, New York. His patent of 1890 speaks of mechanical time recorders for workers in terms that suggest that earlier recorders already existed, but Bundy’s had various improvements; for example, each worker had his own key. A year later his brother, Harlow Bundy, organized the Bundy Manufacturing Company, and began mass-producing time clocks.” https://en.wikipedia.org/wiki/Time_clock

There then arose the dichotomy in business where there were those that were “paid by the hour” (those on the clock), or waged employees, and those that were paid a set amount per period of time, or salaried employees. Waged employees were referred to as Non-Exempt and Salaried employees were referred to as Exempt. These definitions were laid down in 1938 by the Fair Labor Standards Act.  https://www.investopedia.com/terms/e/exempt-employee.asp

Below is a brief comparison of the differences between the two:

So, why am I talking about one hundred and thirty year old inventions (Time Clocks) and eighty year old employee definitions (Fair Labor Standards Act)?

The reason is pretty simple. As the production and standardization processes that have been used in manufacturing have found their ways into the other disciplines and aspects of business, so has the cost tracking and charging of those resources responsible for doing the manufacturing.

We are now asking our exempt employees to fill out time cards associated with the work they are doing. This in and of itself is probably not a bad thing, however it engenders a new and different behavior in the exempt employee. It is this new “Time Card” behavior in exempt employees that can a detrimental effect on the business.

For lack of a better definition, exempt employees are paid by the “job” as opposed to by the “hour”. If an exempt employee must work late hours and weekends to complete their assignment, they do not get paid any more. They do however get the satisfaction of knowing the completed their task, regardless of how long it took them.

The idea of having exempt / salaried employees track their time, was to better associate costs directly with specific projects or activities. This association gave rise to the exempt employees who could directly associate their activities with specific items or revenue producing functions, and those that could not associate their work with specific items. Those that could be directly associated with specific products, projects and functions were called “Direct” labor, and those that could not be directly associated were called “Indirect” labor.

“The essential difference between direct costs and indirect costs is that only direct costs can be traced to specific cost objects. A cost object is something for which a cost is compiled, such as a product, service, customer, project, or activity. These costs are usually only classified as direct or indirect costs if they are for production activities, not for administrative activities (which are considered period costs).

The concept is critical when determining the cost of a specific product or activity, since direct costs are always used to compile the cost of something, while indirect costs may not be assigned to such a cost analysis. It can be too difficult to derive a cost-effective methodology for the assignment of indirect costs; the result is that many of these costs are considered part of corporate overhead or production overhead, which will exist even if a specific product is not created or an activity does not occur.” https://www.accountingtools.com/articles/the-difference-between-direct-costs-and-indirect-costs.html

The following as a good way to think about this. I promise I will get to my point about Time Cards and why this is important soon.

So, all of this work associated with slicing and dicing the time that salaried employees spend on their various activities is being done to understand what portion of their work can be directly associated with a cost object (Direct) and what portion cannot (Indirect). Why is this important anyway? It’s pretty simple.

All businesses want to reduce, minimize and otherwise exit overhead or indirect costs from the business equation.

Every business has the objective of reducing indirect costs, otherwise known as “Overhead”. As noted, these are the costs that cannot be directly associated with revenue production.

So, when Exempt, salaried employees are asked to fill out time cards, and they have multiple options, both “Direct” and “Indirect” to associate their time with, which are they going to choose? Knowing the corporate desire to minimize, reduce and exit Indirect and overhead costs from the business, they will naturally migrate their time charging to “Direct” functions and charges.

On the surface this might seem like a wonderful way for companies to reduce overhead, and in some instances, it will work. However, if you have the financial responsibility for one of these cost objects, you will want to be able to closely monitor the number of people and the amount they can charge to your cost object. This monitoring, or policing activity and capability again creates an incremental overhead.

It is essentially a transference of the overhead responsibility from the labor pool owner (of salaried, exempt employees), to the Cost Object owner.

Labor pool owners are always going to try and minimize the amount of their labor that is not directly associated with a revenue producing cost object. They will want to show the preponderance of their time, as reported by time cards, as being directly associated with a revenue producing function. Engineering groups, development groups, support groups and just about every other group will begin to display this behavior once time cards are utilized in this fashion.

The fear for them is that if they show too much time spent on overhead functions, they will be subject to a cost reduction activity in an effort to reduce overhead.

The results of this “Time Card” behavior are manifold:

  • With the pressure to be associated with, and charge to only Direct costs, the direct costs associated with specific cost objects can become inflated by excessive charging. Since direct costs are “above the line” in accounting and margin terms, this could result in inflated and non-competitive prices.
  • There will now be a somewhat adversarial relationship in place between those groups wanting to charge directly to cost objects, and those groups that are responsible for maintaining those cost object budgets, and the corporate inefficiencies and friction that this creates. There is also the non-productive time that will be spent challenging, changing and rectifying those charges as they come in.
  • There is non-productive time, effort and cost for increasingly capable corporate tools to maintain, monitor and control this type of charging effort. How do you control who should and should not charge to a cost object?

Time cards, like process can be a good thing. But like process, they should not be viewed as a replacement for judgement. When you move costs associated with time cards from indirect labor to direct labor, it may solve a corporate desire to reduce perceived overhead and indirect labor expenses, but it also creates several new issues and expenses associated with monitoring and controlling those charges. Due to how costs are accounted for in direct versus overhead items, it can also change both the cost profiles, margins and ultimately pricing profiles in the market.

Time cards in the salaried or exempt employee environment can and will change behaviors. Labor resource groups will increase their focus on having cost objects to charge to as opposed to understanding that there is to be expected a certain amount of slack time that they will have. Instead of the labor resource pool manager managing this slack level, time cards in essence transfer this issue to the cost object owners to try and control and manage.

Time cards for salaried and exempt employees can provide a better level of visibility into how time is spent and what employees are working on. It does however carry with it what is known as “The Observer Effect”.

I always try to sneak a little physics into any discussion.

“Observer effect (physics) In physics, the observer effect is the theory that simply observing a situation or phenomenon necessarily changes that phenomenon. This is often the result of instruments that, by necessity, alter the state of what they measure in some manner.”    https://en.wikipedia.org/wiki/Observer_effect_(physics)

As long as business is aware of how behaviors are changed, and what may need to be done to compensate for these changes, there can be value in them. However, without those considerations they can create an entire new set of issues for a business to deal with, and may result in little to no efficiency gains.

The Overton Window

I am going to bet that not many people have heard of the “Overton Window”. There can be many reasons for this. One is that it is a relatively new concept. Another may be that is usually used in conjunction with the prevailing political debate. Finally, it was generated in a “Think Tank” type environment and those types of terms do not usually migrate out into the greater population. Be that as it may, I think it is a very interesting term in that to me it is just as applicable to business (and probably many more environments that I have not considered) as it appears to be to politics.

First, a little history and definition as to what the Overton Window is and how I came about looking into it.

I first came across the term “Overton Window” while reading one of the plethora of political analyses purporting to explain what is currently occurring in American politics. It discussed how various individuals were responsible for shifting what was, and what wasn’t politically acceptable to discuss. As I wish to discuss business and not politics I won’t name any of the individuals but suffice it to say there are not as many people as you might think that are capable of or are shifting what is acceptable in the current political discourse. The majority of them are usually just credited with screaming about one thing or another, depending on which side of any given issue they happen to reside.

So, since the Overton Window was mentioned, and I didn’t know what it was, so I then went and searched the term on the web. The following is the simplest description that I could come up with:

“The Overton window is the range of ideas tolerated in public discourse, also known as the window of discourse. The term refers to Joseph P. Overton, who claimed that an idea’s political viability depends mainly on whether it falls within the window, rather than on politicians’ individual preferences. According to Overton’s description, his window includes a range of policies considered politically acceptable in the current climate of public opinion, which a politician can recommend without being considered too extreme to gain or keep public office.”
https://en.wikipedia.org/wiki/Overton_window

So, basically the Overton Window is the range of ideas that are “acceptable” to talk about at any given time. That doesn’t mean that they are the correct ideas. It only means that they are politically correct, or ideas that can be talked about without significant fear of a negative response.

We have all seen examples of what the possibly best solution to any specific problem may be, only to find out that the prevailing political climate renders this solution politically unacceptable. It also notes that this window can shift depending on a variety of factors. Ideas that may be in the window at one time, or for one administration, may not be in it at another time or for another administration.

“Overton described a spectrum from “more free” to “less free” with regard to government intervention, oriented vertically on an axis, to avoid comparison with the left-right political spectrum. As the spectrum moves or expands, an idea at a given location may become more or less politically acceptable. Political commentator Joshua Treviño postulated that the degrees of acceptance of public ideas are roughly:
• Unthinkable
• Radical
• Acceptable
• Sensible
• Popular
• Policy
https://en.wikipedia.org/wiki/Overton_window

The Overton Window (with Trevino’s degrees of acceptance) is usually depicted as follows:

https://en.wikipedia.org/wiki/Overton_window

As I have noted before, reading about something like this always gets me to thinking, which as I have also noted before can be a dangerous thing for me to do. It got me to thinking about why so many organizations talk so incessantly about the need for change, but then react with an immune system like resistance response to those proposals that can in fact generate real change.

It got me to thinking that the Overton Window is a limiting factor in that according to its precepts, only those changes that fall within the relatively modest window can or will be acceptable. True or significant change would probably place that policy outside of the Overton Window, which would mean that it is politically unacceptable for consideration.

This would explain why only minor or incremental types of changes seem to find their way into the corporate (or political) application. Too great a change, regardless of its potential necessity or benefit would find itself outside the range of acceptable change for the then business (or political) administration.

The only way to compensate for the smaller than necessary amplitude of change is to increase the frequency of change. I think that the idea of many, smaller changes being more acceptable than fewer, larger changes is what has given rise to the now industry standard vernacular of business such as:

“The rate of change is not going to slow down anytime soon. If anything, competition in most industries will probably speed up even more in the next few decades.” – John Kotter
http://www.ideachampions.com/weblogs/archives/2011/04/1_it_is_not_the.shtml

On the other hand, and probably a little less known or accepted we have:

“If you want to make enemies, try to change something.”
– Woodrow Wilson https://toprightpartners.com/insights/20-transformational-quotes-on-change-management/

I’ll let you guess who’s proposed changes were within the Overton Window and whose changes were probably outside of it.

I think what Overton recognized about politics is probably reasonably applicable to business as well. All organizations have a political aspect to them. This is the personal and interpersonal side of things. Stakeholders have committed to a then acceptable and approved course of action. Significant change or movement away from that direction could cause a perceived loss face or position.

So, how can this change limiting window be moved or enlarged?

In politics, the answer is relatively simple: Elect someone else. If those in office refuse to accept that a new direction is needed because of whatever commitments and ties they have to the current direction (or whichever special interest group), replace them with someone new who’s views more closely align with the new direction or change that is desired.

Okay, so what do you do in business to expand an organization’s ability to change, since you can’t readily elect new business leaders?

Therein lies the issue. Organizations are not elected. They are put in place from the top down. CEO’s are selected in a closed environment by Boards of Directors. The CEO’s then surround themselves with executives that will support and enable their programs. This type of directional change then cascades in one form or another throughout the organization. On the other end of the organizational spectrum, managers likewise look for team members who will also support and enable their objectives and assignments.

With this sort of top-down approach to organizational structures it would appear that in order to affect a desired or needed change of any significant magnitude, you would have to make a change at least one to two levels above the desired change location in order to affect the Overton Window that is limiting the desired change. Normally, as a matter of course, changes of this type, or at this level do not occur easily in a business organization, unless the entire system, and its performance are under a great deal of stress, and by then, many times it is too late.

I think the concept of the Overton Window does a very good job of explaining why organizations talk so much about the need for change but seem significantly limited as to the size, type and amount of change that they can actually affect. As long as the existent organizational team and structure remain in place, change of any real magnitude will be very difficult when the topics and paths lie outside the window of acceptable discourse for the existing team.

While it may be desirable and sought after that change be made from “the bottom up”, this type of change can only really occur when the bottom of the structure, or in the political sense, the voter makes the change by electing someone else, and the management structure (those elected) listens to and responds to the mandate. In a business organization the mandate comes down from the executives, not up from the employees.

Change in any environment is difficult. I think the concept of the Overton Window goes a long way toward explaining why so many organizations say they want to or need to change but fail to make any significant or meaningful changes. It is usually not until the situation reaches a point where it becomes incumbent to replace specific organizational or business leaders with others, who may have a different window as to what is now the new and acceptable discourse on what and how to change.

Low Hanging Fruit

There are many “executive speak” phrases that seem to dot the business vernacular landscape. I have talked about this before. Many of these phrases seem to have evolved due to the desire of managers to fill a void in a conversation by saying something without actually providing any valuable information. I liken these phrases in business communications as the nutritional equivalent of Pop Tarts to food. There are probably some calories for sustenance in there somewhere, and as a change of pace they are sweet and acceptable on occasion, but if you make a steady diet of them, it is probably bad for your health.

With that in mind, I can’t seem to help myself but to go after the one executive speak phrase that seems to continue to grow in popularity, never ceases to amaze me, and all the while driving me crazy at the same time. Am I the only one that must fight the urge to speak up and call people out when they hear the phrase “Low Hanging Fruit”?

I Googled the phrase, just to see if it was really there as well as to provide a relatively equal basis to start this discussion from. I don’t know what I really expected, but it definitely was not the relatively large number of hits that Google delivered. I guess it is even more ubiquitous that I suspected. I selected Dictionary.com as my initial source, since I seem to go to them quite often for just these types of definitions. They said:

low-hanging fruit
noun
1. the fruit that grows low on a tree and is therefore easy to reach
2. a course of action that can be undertaken quickly and easily as part of a wider range of changes or solutions to a problem first pick the low-hanging fruit
3. a suitable company to buy as a straightforward investment opportunity
https://www.dictionary.com/browse/low-hanging-fruit

Now, I get the first definition. There really can’t be any argument about it. It is logical and follows directly from the phrase. Its fruit and it is low to the ground. Got it. It is the second and to some extent the third definitions that I take issue with.

It is at times like this that I feel compelled to step up on any available soap box, set my feet approximately shoulder width apart for good balance and announce to all who might listen, what I like to call “Gobeli’s First Law of Low Hanging Fruit”. In this case, it goes like this:

“There is no such thing as low hanging fruit when it comes to business courses of action, or investment opportunities. Anybody who says there is, is trying to sell you something.”

It doesn’t seem to matter what the discussion is about, or which business discipline is being mentioned. Everybody seems to want to use the term “low hanging fruit”. At the risk of sounding like I am propellering off on some sort of a rant, I need to start out by saying, I just don’t get it.

The instances where I have witnessed the phrase low hanging fruit being used are relatively succinct: During a presentation. When implementing something new such as a new program, project or product. When describing in a new recovery plan because the last program, project or product failed to enable the attainment of the then described low hanging fruit.

The basic idea that is trying to be conveyed is that whatever is being attempted, is going to get off to a fast start because there are quickly and easily obtainable results, as definition number two above would indicate, that are available. This phrase is designed to get management agreement and approval for whatever is being discussed.

It also sounds good and seems to indicate that this should be a “Oh my gosh, how did I miss that!” kind of moment.

It implies that the person uttering the phrase either knows that much more or is that much smarter than everyone else associated with the then current discussion. It hints at that person having either mysteriously or miraculously unlocked some sort hidden business or universal truth or secret that will enable them to make the difficult, challenging, or here to fore unsuccessful, easily attainable and wildly successful in the future.

I will be the first to say that just because I have never witnessed a miracle does not mean that they do not happen. I will say however, that I have heard “we will first grab the low hanging fruit” exponentially more often than I have ever seen such fruit actually grabbed. This leads me to Gobeli’s Second Law of Low Hanging Fruit:

“There is no such thing as Low Hanging Fruit. There are a lot of very bright people around. If there ever was anything even resembling low hanging fruit, one of these very bright people has probably already been there and grabbed it.”

Most people who truly recognize the existence of low hanging fruit keep their mouths shut and just go get it. Once they get it they will then take a bow, and then usually indicate how much more difficult it will be to get any further fruit, thereby keeping management’s expectations somewhat in check for future fruit attainment forecasts.

They don’t go and broadcast or publish the existence and location of low hanging fruit. It is not up for debate or discussion. It is like “Dark Matter”. There is a lot of somewhat esoteric evidence (that only physicists seem to be able to understand) that it probably exists, but nobody (including said physicists) has actually found some and examined it. If low hanging fruit ever did exist, it was an immediate challenge and all out race to get it first. Once obtained, it is gone. If it continues to exist while remaining only slightly out of reach and requiring only a little more time or investment needed to obtain it, it was probably not low hanging fruit in the first place.

As I noted Low Hanging Fruit is a term that is usually used to try to convince someone to do something. My personal experience is that when the term has been used, it was usually used to try and convince someone to do the wrong thing. This leads me to Gobeli’s Third Law of Low Hanging Fruit:

“Low Hanging Fruit is a term that is used to make something look easy. Nothing in business is that easy. It takes a lot of smart people working hard, together to be successful in business.”

Everyone wants an easy answer. We have all been inured to it by our thirteen second soundbite television environment. Simple answers may sound simple, when in fact they are surprisingly complex and difficult to implement.

I understand that on occasion I can sound something like a skeptic. The good thing about being a skeptic is that it is relatively hard to be disappointed. I also like to remember the old adage: “If it sounds to good to be true, then it probably is.” This doesn’t seem to stop us from wanting low hanging fruit to be true, though.

There are inevitably other competing ideas and directions vying for management attention and blessing. Several of them also probably have their here to fore unidentified low hanging fruit out there just waiting to be grabbed as well. All that they need is the time, money and management blessing that is currently being sought.

To me, low hanging fruit is a myth. It will always take time, money, effort, determination and possibly even a little luck (as defined by the phrase “Luck is when preparation meets opportunity” – the Roman philosopher Seneca) for any initiative to be successful. The idea that success in business can be had as simply as wondering over and picking all the fruit off a tree that is within arm’s reach is not something that I have ever seen occur.

The theory of the Black Swan (just because you have never seen something does not mean it doesn’t exist. Swans were only thought to be white until black ones were actually discovered) suggests that such improbable events can occur. However, in all the world, up to this point, only one species of black swan has ever been discovered. And it does prove that there are indeed exceptions to just about every rule.

On the other hand, I have heard that we will be grabbing the low hanging fruit twice already today.

The only story regarding low hanging fruit that I think truly applies comes from the Bible, of all places. It involves a serpent, the first woman and low hanging fruit. It doesn’t seem that that one turned out very well either.

It doesn’t seem to stop us though, from looking for that supposedly easy win.

Not Invented Here

I had the opportunity to read an interesting article about Apple the other day. For the first time in a very long time Apple missed its top line guidance and market expectations by a little more than eight percent. In September of 2018, Apple had a market value of over a Trillion dollars, becoming the highest valued company ever. Today they are worth a little more than seven hundred Billion dollars. They lost more than four hundred Billion in market value because of this miss to expectations.

This seemed to be an overreaction to a relatively small miss to expectations, and has been directly blamed on the Apple CEO, Tim Cook. He is an excellent operations person who has continued to make Apple one of the most efficient companies in the world. https://www.cnn.com/2019/01/07/tech/apple-tim-cook/index.html

However, it seems that he is no Steve Jobs.

Apple has been a paragon of inventive and creative product and market genius. However, their then resident genius, Steve Jobs, passed away in 2011, and they have been unable to generate the next big technological thing ever since. Apple has gotten admirably more efficient under their now operations based and influenced leader, but they have not demonstrated the creative technological leadership that enabled them to get to the top. When they missed their forecast last quarter, this lack of perceived creativity was identified as the greater reason for the value decline.

I have had the good fortune to have had the opportunity to do a lot of different things in my career. Sales, Marketing, Product Management, Operations, Delivery and Customer Service to just name a few. I have never been anywhere near the stratospheric levels of Jobs or Cook, but it has been an interesting and enjoyable ride none the less. I also think that the opportunity to experience that kind of broader or varied career is going away. As companies continue their drives toward being process driven, nominally in the name of efficiency, the opportunity for people to step outside of their slotted functional lane and get that broader business experience continues to diminish. The result seems to be a pervading feeling that once you have become categorized within an organization, you cannot become anything else.

I am sure we have all felt that way at least one time or another within our respective careers. We see an opportunity, possibly to do something different, and we are judged as an improper fit for it simply because we have been performing a function that is not deemed to be an appropriate precursor to the desired role. Whether or not we may have been able to perform, or even excel in the role was secondary. It was not in our “lane” so we did not get to even try.

People within specific functions within an organization seem to have hit the point where they, as a business entity realize that since they may not be able to move outside of their assigned and expected responsibilities, that they also do not want anyone coming in from somewhere else to perform those same assignments and responsibilities. This role protectionism then becomes an ingrained and self-perpetuating attribute of the organization.

I think that this is the genesis and essence of what we have all come to refer to as the “Not Invented Here” syndrome. This is the bias that arises within organizational functions that simply states that if you have not previously been in that function, you are not an acceptable candidate for that function. The idea is that if you are not currently in a sales role, you are not qualified for any potential sales role. The same could be said for almost any other functional discipline (Marketing, Finance, Accounting, etc.) within the organization.

It is probably reasonable to say that in many instances they are a good thing. There are several disciplines that do require extensive, and specific training. I am not sure I would like someone in the admissions office of a hospital to apply for the job of neurosurgeon just because they both work at the same hospital, at least not without the proper medical training to support the application. But that is just the point. Any discipline can be learned by just about anybody, if they are given the opportunity to learn it.

I think this is the reason that it seems that companies are turning increasingly to external candidates when it comes to innovation. The existing people within an organization are already categorized, rightly or wrongly into a role. It doesn’t matter that the Sales person may have some very good ideas about how to Market a product or service due to their experience in directly interfacing the customer. They are a sales person. If a Marketing person is needed, the company will go out and get one of those.

Just as Apple was led to its present position by an inventor (Jobs), his internally sourced replacement, Cook, was not an inventor, but an operations specialist. It is also interesting to note that while Jobs was one of the people associated with the founding of Apple, he was actually sourced externally from the company when he was made the CEO in 1995. In 1985 John Scully was the CEO of Apple, and Steve Jobs was the head of the Macintosh group when he was fired. He had spent the previous ten years in roles outside of Apple.

My point with all this history and comment is that organizations create their own resistance to internal change. Ideas that are not generated within the organization are resisted. The cross pollination of people, and their ideas between organizations within a greater company is becoming more and more difficult to achieve.

The age of specialization, and the codification of it into process, continues to reinforce the internal “Not Invented Here” resistance to change and innovation. It is in essence the creation of the internal position that if one group cannot have input into, or movement into any other group, then no other group can have input or movement into the first group.

This leads to the position that in the future true change will probably have to come from outside of the organization, but from outside of the company. Since the internal resistance to movement between organizations within the company will continue to increase, the only way for an organization to change will have to come from entities that are not bound by having to deal with that internal resistance.

Getting back to Apple briefly. Apple still generated two hundred and sixty-five Billion dollars of revenue in 2018. They still have over two hundred and eighty-five Billion dollars in cash on hand. This makes Apple the equivalent of the eighteenth largest country on the planet (approximately the size of Switzerland) as measured by Gross National Product (GNP).

I don’t think Tim Cook’s job as Apple CEO is in any immediate danger with that kind of performance.

But what I do think is that if Apple wants to resume the growth and market leadership that is associated with it being an inventive and creative bellwether within the industry, they will eventually have to look outside of their organization to find that new inventive and creative leader. Their current leadership and structure are probably not conducive to enabling that sort of creative and inventive executive evolution.

This would also seem to indicate that unless organizations can find a way to overcome the continued creation of walls limiting inter-organizational movement, or the inertia associated with process codification, true change for organizations will also probably need to come from external sources as well. Meaning, it will need to be sourced to those who do not have any vesting in the current roles or processes.

In many instances Not Invented Here refers to the concept that external ideas are met with resistance by internal organizations. I think at a little deeper level it extends more to the people within organizations. The idea is ingrained that only the finance organization can generate people and ideas that are versed in and capable of benefiting the financial aspects of any issue or organization. The same goes with the other disciplines within an organization.

As an aside, I have found this to be the case almost in the extreme with lawyers, but that is possibly due to my own personal bias due to my past dealing with lawyers. Many lawyers believe only they can be versed in legal issues, while also believing every organization issue is rooted in legal topics. I once worked for a chief operating officer who said that he believed that lawyers within his organization needed to be periodically “flogged”, just so they would understand what their specific role was within the organization. While this is definitely not the approach with all lawyers, I have met many who could probably benefit from such treatment.

Generating change requires that an organization does something different. Doing something different generates risk associated with the doing, the result of which is unknown. Organizations, and processes are designed to reduce just this sort of risk. Once these types of organizational people, opinions and processes are rooted, anything idea or activity other than what is currently being done is “Not Invented Here”.

I guess what this means to me is that if people truly want to have an impact and make a change, then they will probably have to go somewhere else, regardless of where they currently are, to do it. And, if organizations want to change, they will probably have to look outside of their own structure to locate those change agents that they want or need. That will probably be because the with the way they are currently working, they are also not invented here.

Old Technology

The phrase “old technology” should send shivers down just about everyone’s collective spine. If you have anything prior to an iPhone X you have old technology and are therefore not cool. If you have anything other than an i9 Core PC, with all the associated bells and whistles you are obviously riding jockey on a dinosaur of a computer. Golf clubs are now touting their technological advantages associated with adjustable club weighting and aerodynamics which are designed to improve everybody’s game, even though average golf handicaps have remained relatively level over the last decade.

This is all only sort of interesting until you start looking at what may best be described as “old technology” companies. Then it starts to hit much closer to home.

Companies that have been recognized as technology leaders and driving forces are now racing as fast as they can to try and out run the old technology moniker. Networking carrier giants such as Verizon and AT&T in this country as well as their foreign counterpart’s British Telecom, Deutsche Telecom and many others have all either announced or already enacted layoffs in the multi-thousands of people, each, in 2018. The same goes for big iron providers such as IBM and Hewlett-Packard. The same goes for networking equipment suppliers such as Ericsson, Nokia, Siemens and Cisco. Going further upstream, there have also been significant layoffs recorded across the entire semiconductor industry. The total number of technology and large company layoffs in 2018 is more than five hundred thousand people.
https://www.gadgetsnow.com/slideshows/18-technology-companies-that-announced-job-cuts-in-2018/photolist/65031261.cms

https://www.cnbc.com/2018/12/07/how-to-spot-job-layoffs-coming-even-in-a-good-economy.html

Yesterday’s technology leaders must now deal with all that old technology that they now have. Yesterday’s technology suppliers must now deal with supporting all that old technology. And they must all do it while continuing on the treadmill that brings forth the latest and greatest new technology. It appears to be an unsupportable model.

Just as 3G cellular was replaced by 4G which now faces the dawning reality of 5G, and PC cores became dual cores, which became quad cores, technology always marches on. It becomes faster. It becomes smaller. It becomes more efficient. Then it becomes a commodity.

This begs the question, can people become “old technology”? Technology companies of all types now find themselves in a race to divest themselves of their old technology as quickly as they can, in order to stay relevant in the new technology environment. With this shedding of old technology also comes the shedding of those workers and employees associated with that old technology.

As the Chinese curse states, we probably do live in interesting times. What was once the vanguard of new technology companies are furiously trying to reinvent themselves as they try to avoid becoming the old guard of old technology. What was once viewed as a competitive advantage in having technology savvy people is now becoming a burden as technology life spans and cycle times continue to become shorter and shorter.

Moore’s Law states that we should see a doubling of the number of transistors on a dense circuit board (re. processing power) every 2 years, and sure enough this has been very close to the case. The first cellular network was put into service about thirty-five years ago (1983) and today (2018) we are seeing the fifth generation of mobile communications make its appearance. If my math is correct, that equates to a new mobile network build out about every seven years. The same sort of progression in capabilities can be seen in just about every technology platform in existence. https://en.wikipedia.org/wiki/4G
https://en.wikipedia.org/wiki/Moore%27s_law

So, what does this all mean.

I think to start, that it means if you are tied in some way to a specific technology, any technology, you risk becoming so associated with that technology that you as an employee in turn risk becoming considered outdated and past your usefulness when that technology hits its “old technology” finish line.

Now this is not a hard and fast rule. Those radio engineers that understood the 4G cellular network are probably your best bet for resources to understand the new 5G network engineering requirements. Probably. But as the lessons learned in the previous generations of mobile communications are applied to the next generations, are all of those resources going to be required? I point you back to the list of resource shedding companies that I noted earlier.

Supporting previous generations of technology continues to decline in importance as the next thing is now the best and most important thing. And the next thing is usually more efficient than the previous one.

And just as off-shoring and automation permanently changed the employment landscape for the manufacturing industries, so it is now coming to pass for the technology industries. As the relative cost of technology comes down (its price is actually remaining relatively level as its capabilities and speed expand), so the relative cost of the people required to implement and support that technology continues to rise.

I think the technology labor market is changing. It was not so long ago that business careers spanned one or possibly two iterations of a specific technology. Now with the two to seven-year generational technology horizons, a career should anticipate covering at least five and as many as ten or more technology shifts.

Being associated with a specific technology is no longer going to be good enough. It will more and more come down to which generation of that technology you are associated with, not just the type of technology itself. As businesses come to grips with the significant costs associated with supporting any technology other than the most recent iteration, the chance to be considered “old technology” will continue to grow.

It will no longer be good enough to be considered a subject matter or technology expert, because the subject matter and the technology will continue to change, and so will its strategic importance. And, if you are too closely tied to that technology, so will your strategic importance.

Customers too are facing this new market with increased issues. As they try to stay technologically current and relevant, they too will need to redirect resources away from the support of previous generations of technology. That doesn’t mean that the technology will be removed by the customer. It just means that the resources associated with sustaining it will by necessity be reduced. These limited resources will need to be continuously redirected toward the next generation of technology.

The old generation, both the technology and the associated people will continue to exist for some time. However, the market for them will change considerably. We have already started to see this market evolution in action. The cost associated with companies supporting old technology is starting to force them to sell off their outdated or older product lines to third party companies for continued support. These are companies that are making a business out of supporting old technology.

This is however, a double-edged sword. It is true that new technology companies will no longer face the cost and resource drain of supporting their old technology products, nor have to pay their old technology people, but they will now have to compete directly with their own old technology for the customer’s order. If the old technology can continue to be supported, will it be possible for the customer to delay the new technology purchase?

Buy selling off their old technology lines to other companies, they will in effect extend the life cycle of the old technology, otherwise no one would buy them. Customers could effectively delay buying decisions until prices, applications and values are more in line with their economic means.

So, what does this mean for the half million technology and large company employees that have been shed this year?

I think it means that there are probably more to follow in the coming near future as the new (and old) technology models and markets start to take hold. New technology companies cannot support their old technology businesses and structures. Old technology companies will have to become more efficient at support in order to make their business models work. They both will continue to drive all aspects of their business that do not directly interface with the customer i.e., Sales and Installation / Operations, to lower cost labor sources as the drive to reduce costs continues to intensify.

It used to be in the technology industries, that if you were a technology subject matter expert, you were in a relatively desirable position. Now, being too closely associated with a specific technology should at best be considered a short-term advantage as that technology will invariably age out rather quickly and receive the old technology tag. Technology careers and opportunities will not so much be about the depth of knowledge one has or accumulates about a specific technology, but the capability to move to and learn the latest technology quickly, before they get classified as old technology.

Staying Relevant

It’s hard to think of really where to start here. Everyone everywhere has already talked about the ongoing, continuous change that is constantly occurring in business. Even I have written about it, and I actually do try to stay away from those ubiquitous, and somewhat trite types of topics. As they say, no good can come of that.

However, those of us that have had either the good, or bad fortune to inhabit one of those industries that are subject to the technological whims of change, have an added issue with which to cope. In an environment where the “next thing” is always perceived as the now “best thing”, how do you fight what can best be described as career inertia, and remain relevant in your organization, and to a larger extent, your industry?

Charles Holland Duell, was the commissioner of the United States Patent and Trademark Office from 1898 to 1901. Duell has become famous for, during his tenure as United States Commissioner of Patents, purportedly saying “Everything that can be invented has been invented.” However, this has been debunked as apocryphal by librarian Samuel Sass who traced the quote back to a 1981 book titled “The Book of Facts and Fallacies” by Chris Morgan and David Langford. In fact, Duell said in 1902:

“In my opinion, all previous advances in the various lines of invention will appear totally insignificant when compared with those which the present century will witness. I almost wish that I might live my life over again to see the wonders which are at the threshold.”

I bring up this often mis-cited tidbit for a couple of reasons: the first is that even more than a century ago the speed and relevance of change was already being anticipated, and the second, is that relevance seems to be in the eye of the beholder. It is not so much what you think about your relevance to various opportunities, but what others think of it.

For the most part now, Duell is thought of as an out of step, foolish curmudgeon that had the audacity to state that nothing new was ever going to be developed or patented, when in reality he foresaw that both the magnitude and rate of future changes was going to be unprecedented.

An interesting urban myth, but I have digressed.
I think I’ll look at how both time, and technology work against just about everyone in business. I think this is a position that is somewhat out of step with some of the current thinking.

There is a school of thought that says experience is a good thing. But in order to gain experience you have to have been around either a company, or an industry for a while. The up side of experience is that in order to have remained around for a while you probably had to learn a few things. The down side is that time has passed, and that you may have been pigeon-holed into a role which is defined by your experience.

Robert Heinlein is an author of many famous books and multiple great quotes. I have read most of his catalog, and I have cited him often in many of my quotes. One of his most famous, and one of my favorites is:

“Live and learn, or you don’t live long.”

This is especially true in business. If you haven’t learned from your previous experiences, you probably aren’t going to get the chance to have any experiences in the future.

But how much is that experience worth in business? By just being around for a while, chances are that you are also going to experience salary growth. Yearly reviews, pay raises and inflation are an ingrained part of the business compensation structure. The longer that you are around, usually the more you end up costing the company.

Also, in today’s organizations it is reasonably well documented that management would prefer specific subject matter experts as opposed to very broad experiential histories. Again, that means that the longer you are around, the higher the probability that you are going to be associated with a specific business, technology, and capability set.

But what happens when the baseline business or technology changes? Strategic directions change. Digital has replaced analog. Wireless has replaced wire. Optical has replaced copper. Unleaded has replaced leaded. Transistors have replaced tubes. Fuel injection has replaced carburetors. The list obviously goes on and on.

It is not uncommon for relatively more experienced, and expensive people to be associated with what was once but may no longer be viewed as strategic businesses within an organization. In instances such as this, the opportunities for advancement can dwindle, and in the longer term so can the opportunity for employment.

So, what can be done to prepare and avoid such issues? How do you stay relevant in the face of ongoing change?

My suggestion for the first step in maintaining relevance is to understand the current environment. Employment is now a cost – benefit, or value proposition. As long as it is perceived that you are delivering more value to the business than you are costing it, chances are that things will continue.

That would mean that the correlation to the idea that the longer you are around, the more you probably will be making, is that as time passes it is probably expected that you need to be generating greater value. This is usually much easier said than done. It also means that if time is passing, and you are remaining in the same role, that it becomes more and more difficult to be perceived as generating greater value.

Value is normally associated with orders, revenue, costs and earnings. Understanding your relationship with, and ability to quantify your effect on these topics will go a long way toward defining your value. The weaker your relationship with these key metrics, the more tenuous your value proposition may be viewed.

The second step is to align more with a specific business function or discipline, and not so much with a specific business unit or specific product set or technology. Accountants, Financial Managers, Sales Staff, Project Managers, etc., can usually ply their trades across different industries and business units. This doesn’t mean that it will be easy to move from one industry to another. It merely reduces some of the perceived barriers that will normally be erected when someone is experienced in one industry and not another.

Next, as Heinlein said, if you are not learning, you are probably not going to be around for long. Take courses. Take training. Most companies have training programs to help increase both the depth of knowledge in specific disciplines, as well as programs to support external trainings and certifications. Use them.

If you are planning on being around for a while, it will be expected that you will have to know more in order to maintain your employment value proposition. Learn about other technologies and disciplines. Understand and become more conversant in the process and project orientation that most businesses are currently in.

Finally, it is incumbent on you to challenge both yourself and the organization by demonstrating your willingness and ability to move out of your comfort zone, or area of expertise, and take on new roles. Most of the time no one will come looking for you to take on a new role. You must step up, and out on that proverbial limb and make the first move.

Otherwise it will probably be assumed that you are content where you are, and there you will get to stay. Until something changes.

This approach requires an active awareness and participation. Businesses will normally present you with the opportunity to learn many diverse topics, disciplines and technologies. They will also usually present you with the opportunity to at least try to move into something else. It is up to you to search them out and take advantage of them. Very few companies require you to take courses to stay abreast of new trends within business. Fewer still will actively try to reposition you into new strategic product and businesses.

These are some things that you have to do.

It takes extra time. It involves extra effort. It requires your own initiative.

Otherwise you may be risking your relevance expecting the things you have been doing to be as important, and relevant, to the business in the future as they are today.