Category Archives: Analysis

Alternatives, Analysis, Change, Customer Relationship, Decisions, Marketing, Operations, Sales

Future Jobs

This is a tough topic to tackle without sounding too trite or stale. But I now have children entering the job market and I have been continuing to do some networking with several people who are in a job search mode so it is on my mind. As usual I got to thinking about where to go and how to position for the jobs of the future. With the continual drive for cost reductions and all the talk about bringing certain jobs back on shore (as others continue to go off-shore), is there truly a way to future proof what you do for a living? I don’t know for sure, but as usual I do have a few thoughts on the topic.

It must be acknowledged and accepted that the rules of the game are changing. We must adapt or it probably will not end well. There will be those who will stubbornly hold out the hope for a return to the days when this country could manufacture and build its own products, and people could earn a living doing it. This was an ideal and golden time, but as we have all seen, there may be scattered exceptions, but by and large that economic structure has gone.

I think this was only the start. Almost every role that can be defined within an organization, can be subject to the same risk of off-shoring, out-sourcing, or whatever description you may choose to use for being moved to a cheaper labor oriented area. Production was moved off-shore because the labor was cheaper. The quality may not have been as good initially, but that can be and for the most part has been rectified. We all wanted the cheapest products possible, because they were good for the bottom line.

We have already seen instances where financial and accounting functions are being out-sourced and off-shored in the name of reducing costs. These are largely looked at as internal functions. They are usually associated with the overhead costs and functions, and as we know, everyone wants to reduce overhead. There are many people across the globe who are trained in the financial and accounting disciplines that perform these functions cheaper than they can be performed here.

We have already seen many instances where Research and Development, what was once a cornerstone of our growth engine, have been moved off-shore to lower cost countries. It seems that there are also many places with smart people who can write code and create products, with many of them working for significantly lower costs than here.

We have also seen the relocation and / or reduction of some of the Human Resource functions to other locations. Many of the repetitive steps associated with the simple recruiting and support functions can be and have been moved to lower cost countries. There has also been an explosive growth in the utilization of self-help and web portals as replacements for actual people.

Service and support is also similarly questionable. It is possible that this trend specifically associated with service may be reversing, but it is still highly probable that when you call for help or support on many products, your call is directed to an off-shore, low cost call center somewhere else in the world. People who predominantly talk on the phone as a function of their job, can have a phone to talk on in just about any low-cost country.

So, against this type of cost cutting and low cost country focus, what do we do for a living going forward?

I think for starters focus on one word: Customers.

The majority of business functions and disciplines that are at risk in being moved to low cost countries do not interface with customers.

Yes, I know that call centers and service have moved off shore and they deal with customers. And again, by and large customers don’t like it. It has been surveyed and noted as a major customer dissatisfier when it comes to support from vendors. And if given a choice almost every customer would prefer to deal with someone in their own time zone and their own country when it comes to support.

As I said, companies are recognizing what their customers want and this trend may be slowing, if not reversing as some of these service related positions return on-shore.

One of the inviolate axioms of business to business commerce is that “People buy from People”. It used to be the same for business to consumer commerce, but the internet seems to be changing that for commodity type transactions. I’ll get to that part a little bit later.

Selling will always be a function that requires direct customer interface. It will also invariably require face to face exchanges between the seller and the customer. In short, it cannot be off-shored easily, if at all.

As we continue to evolve to a service oriented economy, and as products continue to become more and more complex as well as more commoditized and interchangeable, having people who have the ability communicate specific value propositions, and more importantly be able to sell those value propositions in the new economy will be at a premium.

On the reverse side of the selling to customers, will be the implementation of the complex products and services that have been sold. It doesn’t matter if it is a good or service that has been sold. This brings us to the operations team. The reality is that most customers will not accept a “Do It Yourself” approach to the implementation of the good or service that they have purchased. They are usually going to want the company that sells it, to also be the one that puts it in.

Again, the direct customer interface from the operations team on the implementation of the customer’s purchase will be a key to that customer’s satisfaction, and potential future purchases. It can’t be off-shored and it can’t be minimized in its importance. The best product in the world can be sold, but if it is not implemented well, the customer will not be satisfied. This will be the case with both product and service implementations. Having good customer interfacing operations teams will also be a non-negotiable requirement for the future.

I have looked at specific individual customer interfacing roles up to this point, but what about broader multiple customer roles, such as Marketing?

For the most part in the past I have considered marketing an overhead function with a two-drink minimum. This is said with just a little tongue in cheek. However, if we note that individual customer interfaces are important then it is not too far a leap to expect that individual markets are important as well. Even though there is much written about the “global” economy, I don’t think that goods and services can be positioned and marketed the same way in Canada as they are in Brazil.

No one in Brazil will know what a Tuque is, and I have met very few in Canada who understand the importance of a good Caipirinha. Expecting one marketing approach to work in both regions will probably not be a good recipe for success. I do not think there will be a good or reasonable substitute for local market knowledge, cultural awareness, presence and positioning.

I suppose that the same could be said about lawyers and the specific legal requirements of each market. However, the less said about lawyers, the happier I find myself to be.

So where does that leave the organizational and business jobs of the future?

I think that it will be those outward facing, and customer interfacing roles that will be the jobs of the future. I don’t believe that customers will stand for the out-sourcing and off-shoring of them. It is the personal relationships and the trust that is built by direct customer interface that is the basis of a successful business relationship. There may come a time where that changes, but that may be in the “next” generation of business.

That means that the internal facing business and organizational roles are at risk as a function the eternal drive for lower costs. Accounting, Finance, HR (some of the functions), Research and Development and Production / Manufacturing, all to one level of success or another can be and have been sent to lower cost countries.

What is also interesting to me is that historically a little more than forty percent of CEOs that are hired come out of the finance discipline. In good times this number percentage goes down as growth is a focus and in tougher times it goes up as the bottom line takes on even greater importance. Many others come from the accounting and engineering functions as well. My point is, as many of these internal accounting, finance and engineering functions get out-sourced, where will the future leaders come from?

If these entry level (and other) types of roles and positions are sent elsewhere, where will the future leaders get their starts. It is in these roles that we learn and gain experience. If the roles aren’t there to provide the experience and jumping off points, are companies also off-shoring the development structures that the future leaders have used to get started?

This could mean that in due time, future leaders would predominantly come from those countries that the jobs were off-shored to.

Accountability, Analysis, Decision Making, Empowerment, Leadership, Process Management

Judgement

I read an article the other day by Stephanie Vozza in “Fast Times”. (https://www.fastcompany.com/3068771/how-employees-at-apple-and-google-are-more-productive ) It was one of their “4 Minute / Work Smart” articles. I normally am not too inclined to read these types of articles, but for some reason I did read this one. While it was ostensibly about why employees at Apple and Google are more productive, there was a passage in it that both resonated with me, as well as rang significant alarms. It captured what I have been feeling, and writing about regarding business and leadership in such a succinct way that I felt I had to address it. In her discussion regarding Organizational Drag, and the associated costs and losses to business due to processes, Vozza said:

“This often happens as a company grows, as the tendency is to put processes in place to replace judgment.”

Wow. I think she hit the nail on the head. Process is implemented to replace judgement. I do think there ought to be a qualifier in ahead of that last statement such as “Most processes, when over implemented…”. Many processes when implemented as guidelines do provide a needed and efficient methodology for accomplishing repetitive tasks. It is when they are over-expanded, applied and relied on for all facets of an organization that they cause drag and sap judgement.

A quick Googling of the word “judgement” provides the following definition:

“the ability to make considered decisions or come to sensible conclusions.”

Let’s tap the brakes here for a minute. Are we really saying that we want to replace people’s ability to make considered decisions, or to come to sensible conclusions with some sort of follow by rote process? Isn’t judgement one of the key attributes of business leadership and business stewardship? And not just judgement, but good judgement.

There are a lot of people who have said something along the lines of:

“Good judgment comes from experience, and a lot of that comes from bad judgment.”

Will Rogers, the American humorist said it in the 1930s. Simon Bolivar, one of the great heroes of the South American Hispanic independence movements of the early 19th century, said it in the early 1800s. I think you get my point. A lot of people have talked about the need for, and how you get good judgement. We would all like to think we were just born with it, but that is usually not the case.

The primary method of gaining good judgement is to learn it through experience.

So, again let me get this straight. It seems that by implementing so many processes to avoid the potential costs associated with errors and bad judgement, businesses are both creating the incremental expense of organizational drag that Vozzie noted, as well as removing the opportunity for team members to practice and gain good judgement through the experience of learning.

I don’t know about you, but I came up through business hearing the mantra surrounding management’s desire that we take (reasonable) risks in our efforts to improve the business. This is in line with the risk and return economic model. This model would require the use of judgement to ascertain what the contributing factors to the risk were, and did the expected return justify the business decision in question. The process oriented model would remove these opportunities.

Process, when used as a guideline and milestone marker can be a powerful tool. It seems that whenever it goes beyond this and starts generating ever finer detailed steps, is when it starts to generate issues both in terms of organizational drag, and what I think is potentially the greater long term risk, the stunting of leadership growth.

The Fast Times article mentions the total cost lost to organizational drag associated with process at approximately three trillion dollars. That’s a three with twelve (count ‘em, twelve) zeroes behind it. This seems like a relatively expensive price to pay to avoid whatever the number of errors associated with bad judgement (the learning process) and the costs that they would generate. One would suspect that by just flipping a coin one would hope to be correct on average at least half the time.

By removing judgement in favor of process future leaders are no longer able to get the experience (and judgement) that they will need as they move into leadership positions. The process experience that individuals gain in its place may be useful in a more predictable or production line type organization (secondary type economy sector – producing finished goods, e.g. factories making toys, cars, food, and clothes), but as the economy continues its evolution further into a tertiary sector (offering intangible goods and services to customers) I would think that judgement, and in particular good judgement would not only be preferred, but a necessity.

I think one of the ways to deal with the “Process versus Leadership” issue may be to dial back the drive for process just a little bit. I think we have all heard the adage that if a little bit of something is good then a whole lot more of it should be better. I think we are all aware of the fallacy behind that type of thinking as well. But, it appears to be the creeping mind set of many companies as they grow in size and expand across different geographical and technological markets.

It is all too seductive to aspire to manage all sorts of diverse markets and technologies via standardized processes. If it worked once in one place it becomes a goal to make it work every time in every place. Once that process starts it appears to be a slippery slope of incrementing just one more step in each process to take into account each new business or market variation that must be dealt with. The desire for repetitive and interchangeable processes leads to both product and market biases that can result in multiple missed opportunities as well as the organizational drag that has already been noted.

I think leaders may need to start thinking of the drive for processes as points on a scale. On one end of the spectrum there is a fully structured, process oriented organization. This would be an organization where very little judgement is required, the function or market are stable and little variation is required.

Accounting comes to mind, but that might just be me.

On the other end of the spectrum would be a completely judgement based organization where each new opportunity is unique and would require its own new set of potential processes for implementation. I am sure there are other examples, but organizations that conduct search and rescue operations along the lines of the freeing of the trapped Chilean miners in 2010 might be a good example of such a unique organization.

Obviously, in reality most businesses lie somewhere between these endpoints. There will most likely be multiple organizations within the business that are distributed along the process – judgement scale. What concerns me is that as process continues to be implemented in greater detail and into new areas, business run the risk of both alienating their current leaders in that their judgement will no longer be desired, and hampering the development of their future leaders as the opportunities to gain judgment are replaced with the continually more complex process.

Businesses need to begin learning to resist the desire to replace judgement with process, and understand that there needs to be a balance between the two. Just as many organizations seem to have a built-in resistance to change, they also seem to have a built-in desire for predictability which process seems to satisfy.

However, nothing comes without a cost. The implementation of process can create a stable, repeatable, predictable organization, but its costs can be seen in the organization’s inability to quickly respond to changing conditions, the resulting costs associated with organizational drag, and reduction in the use and availability of good judgement.

Analysis, Business, Decision Making, Long Term, Sales, Time

The Short Horizon

As the pace of business continues to accelerate, there seems to be one aspect of the business process model that is struggling to keep up: The Business Case. There was a time where capital expenditures were looked upon as long term investments by the business. The life-cycle and pay-back processes, as well as the accounting amortization of these investments, were expected to last years, and in some instances, even decades. The average business case became attuned to these norms.

But those days are long gone. As the speed with which technology has changed has continued, by necessity the business case used to justify the new or incremental investment has needed to become shorter. If Moore’s law of eighteen-month capability doubling (it was actually Intel executive David House, who predicted that chip performance would double every 18 months. Gordon Moore, for whom the law is named, was the co-founder of Fairchild Semiconductor and Intel, and whose 1965 paper described a doubling every two years in the number of transistors per integrated circuit was the basis for the coining of the “law”) is to be believed, then the asymptote for the length of an acceptable business case should approach that eighteen month to two year limit as well.

That doesn’t mean that a product’s useful life is only limited to eighteen months. I think quite the contrary. There are aspects of the Public Switched Telephone Network (PSTN) that have been in place for more than fifty years, and are still providing beneficial service to the communications carriers and their subscribers alike.

On the other hand, people are known to line up and over-night camp out every eighteen to twenty-four months in order to be the first to get the next generation of the Apple iPhone.

It appears that customers who are being asked for either capital or operational expenditures associated with technology oriented products, are driving their partners and their vendors to ever more rigorous and aggressive value propositions and rates of return. This is the genesis of the short horizon business case.

The simplest definition of value is how much money is made or saved over what period of time. The more you make, or the more you save over a given period, the better the value. In the past it was acceptable for a business case to extend out over a long enough time period as to show an acceptable return. If the initial business case for the sale didn’t make sense for one period of time, it was easy just to lengthen out the time frame until it did.

What appears to be happening is that as the rate of technological based product change has continued at the speed of Moore’s Law, the period that a customer is willing to measure value has shrunk. Business cases still need to show the customer value, they now must do it in far less time. The tried and true form of extending the business case period to make the value and pay back equations work is now gone. Customers will no longer accept it, and are driving for shorter and shorter review periods.

I think there are several factors in addition to technical obsolescence that are helping to drive a short horizon on the business case:

As each new generation of technology arrives it almost exponentially drives down the (residual) value of previous generations. I think it is no secret that one generation old technology is viewed as old and disadvantaged, and that two-generation old technology is probably approaching the zero value state. We have all seen this in our consumer based technology purchases as well. Products get old so quickly that we have developed a disposable attitude toward them. With Personal computers now going for a few hundred dollars, what is the value of a two-generation old computer? What was once repaired and retained is now simply expected to be replaced.

How would consumers (and manufacturers) react if the same logic was applied to say, automobiles and two to three model year old car was considered almost valueless?

We also see (comparatively) decreasing operational returns as each new technology generation is introduced. This means that as each new product gets smaller and more efficient the value of generating operational savings associated with the previous generation of product also tends to get devalued.

The idea of saving something with what you have is not as attractive as the possibility of saving more with something new. I guess this is what they call “Marketing”.

I think one of the final evolution’s of the short horizon business case is the “Cloud”. I am sure everyone has heard of this thing. It’s in all the magazines.

One of the many ways that manufacturers and vendors have adapted to the evolving business case rules is to try and remove both the obsolescence associated with technology and to more closely align the delivered solution with the customer’s need. The idea being that if a customer only needs a four-unit solution but the technology only comes in six or eight unit increments, there is a delivered solution miss-match.

By delivering a function from the cloud as opposed to a product based solution, the vendor has effectively removed technology obsolescence from the customer’s decision process, as well as matched the required amount of solution with the required amount of need.

The net result is a much shorter period needed to achieve the required business case. Customer purchases can be made in smaller increments, which in turn only require smaller pay-backs. Future product purchases and existing product obsolescence are removed from the customer’s decision criteria as the customer is now only purchasing the product’s function, not the product itself. The obsolescence issue, and all the other costs associated with operation of the product are now retained by the vendor (and should be built into their business case).

The continued drive for more value has driven customers and business cases to the short horizon. Capital for technology can no longer be viewed as a long-term investment. It must be judged and justified by how quickly it can pay back on its cost and the relative business value it generates. It is this drive for better business returns that continues to reduce the time scale associated with the business case.

This trend would appear to potentially be a seed cause for future changes to the way business is conducted. On one hand it will continue to make the sale of capital based technology products more difficult. By demanding shorter pay-back and business case periods, customers are in essence expecting lower prices for products, and higher value delivered. That is a demanding and difficult environment for any supplier.

It should also continue to drive product virtualization and the Cloud as ways for suppliers to retain costs and risks, and hence remove them from the customer’s business case. This will continue to be an interesting market, but not all technologies and products may be potential candidates for the cloud.

It could also be argued that a potentially unexpected result of the drive to align business cases with product life cycles could be the reversal of Moore’s Law. It has long been expected that there is some sort of limit to the capacity doubling process. It has been going on for over fifty years. There are recent articles in no less than the MIT Technology Review, Ars Technica, and The Economist (to name just a few) that are now stating that Moore’s Law have in fact run its course.

And this may also be of benefit to business. If customers want to align their capital business case length with the product’s life cycle, and the current eighteen to twenty-four month life cycle of the product makes this increasingly difficult, then one of the solutions may be to lengthen the product life cycle to more than twenty-four months. If there truly is a link between business case length and product life cycle, then this could be a possible solution.

This will be an interesting cause and effect discussion. Is the potential slowing of Moore’s Law going to cause the reversing of the short horizon trend associated with customer’s business cases, or is the demand for short horizon business cases going to accelerate the slowing of Moore’s Law due to business necessities? Either way, customers are requiring businesses to change the way they put together the business case for capital technology sales, and that is having a significant effect on how business can successfully get done.

Alternatives, Analysis, Communication, Efficiency, Information, Process

Brevity

I’ll let everyone know up front that this article is going to be somewhat brief, or at least shorter than the average article that I usually post.

It is probably no secret that while I think I may understand and appreciate the concepts and the thought that goes into creating a project and process oriented business (I have a PMP certification to this point), I also recognize that there is the potential for significant overhead and non-productive work to be attracted to this type of business structure. It is easy to say that you have got to take the good with the bad (as the beginning of the famous anonymous quote goes), but I am not so sure that is the case. Project and process structures were created in order to generate efficiencies in business. But who, if not ourselves, is responsible for making sure our projects and processes remain as efficient as possible?

This brings me to my topic: Is it just me, or more accurately, is it just my imagination or have all of business’s documents and presentations been getting longer, more detailed, more complex, and less functionally useful or justifiable?

A process at is simplest is defined as: “a series of actions or steps that are taken to achieve a particular goal”. I couldn’t make that up. It came straight out of the dictionary that way. The idea here being that it is possible to break down a complex work requirement (goal) into a series of simpler tasks and functions. This breaking down process is called “work decomposition”. I didn’t make this one up either. Although somewhat paraphrased, it comes directly from the Project Management Body of Knowledge (PMBoK) handbook.

So the idea of taking the complex and breaking it down into a series of simpler, repeatable steps is the goal of a process. This is a good thing.

So what has this got to do with the burgeoning size of documents and presentations you might ask. I think it has a lot to do with it.

As we continue to try and bring finer and finer granularity to the work requirement, we find ourselves documenting and presenting on ever more specific and smaller topics associated with the overall process and goal. Instead of presenting on sales, we now are discussing the various sales and support team engagement processes and when they come into play in the overall sales process. We don’t necessarily look at orders, but all those functions associated with the order process. Now each team will create documentation and presentations on their specific roles, when they engage and who they hand off to when they are done.

I can remember being asked to review a thirty-one-page document (not presentation, an actual Word document) regarding one of these team’s engagement process. That is correct. Thirty-One pages.

I do not begrudge anyone their function or role, but I am concerned that if it is felt that thirty-one pages are required to try and define one’s role in the greater scheme of a sales process, then it may be just possible that we have reached the point of decreasing returns on the value of the incremental process documentation investment.

The add-on effect of this process granularity can now also be seen in volume of slides and presentations that are now also being generated.

There was a time (long, long ago, in a galaxy far, far away) when overhead slides and overhead projectors were somewhat expensive and cumbersome items. This had the knock-on effect of limiting the size of presentations. Now with the proliferation of personal computers, bandwidth to connect them and the sharing of desk-tops each new image now represents only a slightly greater utilization of an ever more abundant resource. If you think you need more slides, go for it. As the great Yogi Berra once said: “The limitations are limitless”.

It now seems that fifty slide presentations are no longer the exception, but instead have become the norm.

The net here is that we seem to be producing ever greater amounts of documentation, be it written word or image / presentation based, about ever smaller and more specific topics.

It is said that work will expand to fill available time (C. Northcote Parkinson, in one of my favorite books: “Parkinson’s Law”) and that demand will expand to meet available supply. It now seems that the expansion of our ability to share information has also come with the desire and ability to share ever more of that specific information. Now it appears that the volume of what we share has increased in accordance with our ability to share it. Technology has enabled us to share more, in finer and finer detail, to the point where it seems that we may have lost our bearings as to what level of detail represents a useful or appropriate content materiality.

In the African plain faster cheetahs are able to chase down the slower gazelles. That left only the faster gazelles to reproduce the next, faster generation of gazelles. This in turn meant that the slower cheetahs were then not be able to chase them down and did not survive. That left only the still faster cheetahs to reproduce the following even faster generation of cheetahs. On and on it has been going, with both species currently topping out at speeds of approximately seventy miles an hour during the chase. There is a question as to where this evolutionary cycle will lead.

Previous generations of business structures and communication technologies seemed to have had an effect on limiting the number, topic and volume of documents and presentations created and communicated. As the speed and capacity of each succeeding generation of business structure and its communications capability has increased, so it seems has the number, topics and volume of documents and presentations that it has created.

Who can be sure what the future holds for business organizational structures. It is however expected that our ability to connect, share and communicate will continue to expand. This would lead me to the somewhat gloomy supposition and expectation that with this expanded communication capability we should expect to continue to see an expansion in the number and volume of documents and presentations created and shared to fill it.

I think that sooner or later the limitations imposed by each individual’s available time will have to kick in and start to curtail their ability to read or process this information deluge. I would hope that we would then see the pendulum start to swing back toward brevity and the informational value associated with the document or presentation, not its volume.

I have always valued the clear and concise. Fifty-page presentations and thirty-page process guides are usually neither. We seem to be in an age where we create them because we can, not because we need them. We need to get back to sharing the information we need, not all the information we have.

I told you I would be brief, or at least shorter than usual.

Accountability, Achievement, Analysis, balance, Challenge, Change

Millennials

If you have anything to do with electronic communications or media, you have probably heard about or possibly have already have seen the video by Simon Sinek on millennials in the workplace. It is very good. If you haven’t seen it, you can see it here:

https://www.youtube.com/watch?v=hER0Qp6QJNU.

There seems to be an ever increasing amount written, or in this case videoed in business about the most recent generation to enter the work force, millennials, and how businesses must change and adapt to deal with them. With this in mind it seems that I should be no different and add my input into the conversation. However, I do think I may have a different take on the situation.

Before we go too much further, let’s do a little generational definition work. There are at the current time predominantly three generations working today: Baby Boomers – who are defined as those who were born after the mid-1940s and prior to the early 1960s (the youngest of whom are now in their mid-fifties and approaching the end of their working period), Generation X – who are defined as those born after the early 1960s and into the mid-1970s (the youngest of whom are now well into their forties and are entering their prime working period), and Millennials – There are no precise dates for when this group starts or ends, but most demographers and researchers typically use the early 1980s as starting birth years and ending birth years ranging from the mid-1990s to early 2000s.

The oldest millennials are now reaching their thirties and have been in the work force for some time, while the youngest are either preparing to enter or have just entered the workforce.

The reason I bring up this generation definition and demographic information is to set something of a baseline when discussing all the generalizations that are being made. We all like to sort things into groups as it makes it easier for us to model and respond to group behaviors as they affect the business performance. Although individual traits can vary widely across a demographic, I will try to adhere to those demographic traits that seem to be widely accepted as baselines.

As an aside, I have often said that demographics can be broken down into only two groups of people in the world: Those that like to divide people into two groups and those that don’t. But I digress….

In Sinek’s video discussion he points out many of the generational characteristics of the millennials. He also states several times that it is not their fault that the millennials believe and behave as they do. They are the products of their parents, schools, societies and times. They were taught that they as individuals matter and that their opinions and output count regardless of accuracy or being correct. They were the generation that got “participation trophies” in competitions when they did not win. They now enter the business world at the standard entry level positions and expect the same sort of attention and acclimation that have received throughout their past regardless of their performance.

In short, their baby boomer and generation-x parents gave them unrealistic expectations of how the business world would work, and now so much is being written (and videoed) about how the business world is going to have to change and adapt to these somewhat unrealistic expectations.

Really?

It is quite possible that perhaps I missed the same sort of business workplace demographic analysis associated with expectations of the baby boomers (who still make up the largest demographic in the workplace) or generation-x as they entered the workplace. I suppose it was just expected that they would have to adapt to the environment they had if they expected to be successful.

I think it is safe to say that everyone wants to matter, and have an effect on the business or organization that they work for. I think most people want to feel and be fulfilled by the work that they do. This has been a standard for all new hires from all generations. I don’t think that the millennial generation is the first generation that expected and felt entitled to these roles without first proving themselves.

What is interesting to me is that it seems that the millennial generation is the first generation that business is actually contemplating changing its order of things in order to better accommodate these expectations. At least there is a significant amount being written about how business should, may, possibly change in order to better accommodate the coming millennial workforce generation.

As a brief example, in the past the workforce migrated from the cities to the suburbs to better accommodate their home and lifestyle choices. They did this knowing they would have to commute to work. Over time some businesses migrated out of the city centers to better accommodate their work forces (and truth be told, to reduce the costs associated with expensive urban center floor space). This migration occurred across decades.

There is now a widespread belief that millennials are a key factor in the new gentrification of many urban areas, and as a result some businesses and organizations are contemplating migrating back to the same urban centers that they left. This is being contemplated in order to better accommodate and attract a portion of the workforce who by all measurements are the most junior and currently least productive components.

To be fair I think that there are several other factors that are also coming into play when we look at some of the changes that organizations are both contemplating and implementing. It is possible that some of these changes have been instigated as a result of the millennial influx into the workforce, and some of them may have already been in process and are just attributed to the millennials based on the timing of the change and the generational influx into the workforce.

The millennial generation is the first generation in the workforce that grew up in the connected world. They are video games, personal computers, and cellular phones. They are immediate feedback and immediate gratification. They have seen the rise of virtual offices and have watched their parents work from home. I have a couple of kids that are millennials and I watch them and I learn from them and their friends.

They are also, as Simon Sinek said in his now famous video, a generation that has come by this feeling of entitlement naturally. Their baby boomer and generation-x parents were determined that their millennials would not fail. Sometimes this was accomplished through the efforts of the children. Many times it was through the efforts of the parents to reduce the obstacles and lower the bar to assure clearance.

The result is an expectation of success, or at the very least accommodation of their expectations regardless of the effort expended. They have been told how good they are for so long that they believe it. They have been given trophies for playing regardless of whether they have won or not, to the point where they believe their participation is valuable in and of itself.

I think that there needs to be recognized that there is a symbiotic need between the millennial generation workforce and the business organizations of today. Millennials will need to work to survive and organizations will need millennials in their workforce to pursue and grow their markets. If organizations make drastic changes solely to accommodate millennials they risk alienating the current majority of their workforce who are not millennials. If millennials do not learn and rapidly come to grips with the idea that there may not be participation trophies and progress can be based on competitive merit, they too will face a very bumpy acclimatization to business.

The speed of change has increased. What once took decades can no longer be expected to take decades. However, business still requires a fiduciary responsibility to its shareholders. What makes sense to the majority of the business at large in general makes sense for the business. Business and organizational change based on millennial matriculation into the workforce should be expected as their demographic increases over time.

On the other hand, I await the next wave of business articles and documentation on how the millennials are going to have to change and adjust their habits and expectations in order to participate, let alone succeed in the organizations that they enter. I don’t think that business can be expected to change to the level to wholly meet the expectations that millennials have. There will need to be some sort of middle ground established so that neither the business nor the millennial will be overly disappointed or disillusioned in what they get.

Alternatives, Analysis, Decision Making, Self Analysis

Instinct

It has been a somewhat interesting week. Many items have caught my attention and seemed as though they would be good topics to write about. I may save a few of these ideas for later articles. Some of them are probably better left out or forgotten. I don’t mind wandering off into some potentially arcane or hard to relate to business topics occasionally, but I don’t want to generate just another rant about this topic or that one and then try to relate it to business.

What I thought that was interesting today was the idea of instinct. I think we all have a basic idea of what instinct is, but since I am eventually going to relate it to business I think I may want to start out at a reasonable baseline. May favorite way of doing that is to go out to Merriam-Webster and retrieve the following “simple” definition of instinct:

“Something you know without learning it or thinking about it”.

Okay, a couple things here. First, when did Merriam-Webster start providing a “simple definition”? Really? Have we actually come to the point where we are abridging our definitions into the simplest of vernacular? I couldn’t make this up. There is now a “simple” and a “full” definition. I fear for where our society is going at this point, but I promised not to propeller off into some sort of a rant.

Second, I think I’ll go with the “full” definition, because I guess I am just that kind of person:

“A natural or inherent aptitude, impulse, or capacity”

Either way, I think you get my point. We have all met people in business that just seem to know what to do and when to do it. They make good business decisions. They can extrapolate limited data and input it into very good solutions. They make smart choices. They are said to have good instincts. But do they really?

We usually hear of “good instincts” as it applies to athletes. It seems to be some sort of method for describing why an athlete who is not biggest, fastest or most imposing physical specimen is so good at what they do.

I have mentioned in the past that I have become something of a hockey fan. Even I find this rather interesting since I grew up in the desert southwest and currently live in Texas, which as we all know is not considered a hotbed of hockey fandom. Go figure.

With that in mind, the best example of this good instincts phenomenon that I can think of is the hockey player Wayne Gretzky. The leading scorer in the history of the National Hockey League. The man who’s nick-named “The Great One”. The measuring stick for all other great hockey players.

He was not particularly big as hockey players go. He was not the fastest skater, nor did he have the hardest shot. He just scored, a lot. When he was asked how he did it, he said he didn’t go to where the puck was, but where he thought the puck would be. Based on his success it looks like he had great instincts.

Or did he? I’ll get back to this a little later as well.

Let’s fast forward to the opening day of the National Football league and the first game of the season for the Dallas Cowboys. I am not a particular Dallas Cowboys fan. That person in our house would be my wife. I am however wise enough to sit on the couch quietly while she cheers her team on. I guess it is our version of “together” time.

The game in question was a see-saw affair and was reasonably exciting. It was coming down to the last few seconds when a field goal could steal a victory for Dallas. With no time outs and just a handful of seconds left on the clock a pass was thrown to the Dallas receiver on the sidelines. All he needed to do was step out of bounds and stop the clock.

But this is where his instincts kicked in.

Instead of stepping out of bounds and stopping the clock, which in this instance was the most limited resource in the situation, the receiver turned and tried to run up field and gain a few more yards. I don’t blame him (my wife does however) because every receiver’s instinct is to maximize the gain on each individual play. Needless to say he was tackled in bounds, time ran out and Dallas lost.

It is apparent that in this instance his instincts were wrong.

Time was in fact the most importance aspect of the situation. He needed to understand that and adjust his behavior appropriately. He needed to think about where he was and the situation he, and the team were in and act accordingly.

This is easy enough to say when you are sitting on a couch next to someone who is cheering wildly, and not down on the field actually competing.

Now let’s go back to Wayne Gretzky. He gave us the definition of his “instinct”. He thought about where the puck was going to be and went there to meet it. Was the puck there every time he went to where he thought it would be? No. But he was right enough to become the leading scorer in the history of professional hockey.

The point here is that as he said, he “thought” about it. It was not instinct as we currently like and want to define it. He was able to process the game situation, formulate a plan and implement it in such a way as to be in the right place at the right time in order to score. He did not just skate around waiting for people to pass him the puck. He was always aware of the situation and adjusted accordingly.

It seems to me that Gretzky’s “instinct” was more related to the way he saw and thought about the game as he played it. He was able to process the various locations and movements on the ice and anticipate where he thought the puck would be. Then he would go there. Since hockey is a game of split second decisions as I said he wasn’t right all the time, but he was right more often than anyone else.

Now let’s talk about business. Businesses love predictability. When things are predictable, just about anyone can anticipate what is going to happen.

In hockey this would be the equivalent of everyone knowing where the puck was going with the result that all of the players would be clustered around Gretzky waiting for the puck.

But in business, like hockey, not everything is predictable. Most everyone thinks in different ways and reacts differently to different inputs. For every Wayne Gretzky or Steve Jobs, there are a number of different elite players or leaders in the game. After all, someone else had to pass Gretzky the puck in order for him to score.

I think “instinct” whether in sports or in business is not some unseen or unconscious force associated with performance, but rather the ability to process and make connections between multiple inputs and variables that result in good decisions. It is the ability to think, sometimes faster than your competition, and most times more accurately than your competition.

Knowing where to go to meet the puck, or when to get out of bounds instead of turning and running up field, or when to invest in a new product or technology comes from understanding the multiple inputs associated with each situation, thinking through the alternatives, selecting and acting upon the best one.

As I said, Gretzky did it a lot. Jobs seemed to do it more often than not. We all remember the iPod, Mac and iPad. Does anyone remember NeXT computer or the Apple Lisa? Just asking. I am sure the Dallas receiver has made many more good game play decisions than bad ones. It’s just that his last bad one had such an immediate and visible result.

Not everyone makes the right decision every time. Instincts or not, business is very much like every other game out there: How quickly can you get to the right decision. How people think and process information obviously has a great deal to do with the decisions that they make. Different situations call for different types of thinking and decisions.

I think it is our natural instinct to migrate towards people who think and act like we do. This is a normal sort of reinforcement behavior. We tend to like people who agree with us as it reinforces the decisions we make. We need to think a little more about that. I think we need to actively encourage contrary behavior and thought processes. I don’t think we should view this behavior as open defiance or insubordination, but more as a check sum verification.

In looking at a replay of the Dallas receiver’s last play of the game, one of his team mates can be clearly seen trying to get him to run out of bounds instead of up field. It seems he didn’t see him or if he did, he didn’t pay attention to him. Either way it was obvious someone else had thought about the game situation and come up with a different decision for that situation.

As I have said, not everyone makes the right decision every time. And sometimes our instincts are wrong. It’s always good to listen to and think about other possible solutions before relying on instinct and turning and running up field.

Alignment, Analysis, Markets, Strategy

Clouds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Analysis, Differentiators, Leadership, Performance

Cost Plus

Do customers really care what it costs a company to provide a good or service to them? We have all heard that the vendor – customer relationship is supposed to be more like a partnership these days, but does it really? How much more would a customer be willing to pay to have that partnership? Do we really care what the cost of the car is that we decide to buy, and by extension how much that automobile manufacturer makes on each car we buy? I don’t think so. Do we really want to have a “partnership” with that automotive manufacturer, or do we just want to buy a car? I think people, and companies are more concerned about the price they pay and the value they receive for the good or service, more so than the cost the provider bears to provide the good or service.

I think this is a pretty interesting distinction. Customers are concerned with a supplier’s price, not with the supplier’s costs. Customers are concerned with the value they perceive they will get from the good or service, not the profit (or possibly lack thereof) that the supplier will recognize from the sale. In short, costs and associated profitability are an internal supplier issue, and prices are an external customer issue. In short it seems that it is the customer’s decision on whether or not they make the purchase decision, and it is the supplier’s decision on whether or not they stay in business.

I will look at a couple of examples to illustrate this point. People do not seem to care how much Apple makes on its iPhones or Macs or any of its other products. Apple is hugely profitable. They make an incredible amount of money on every product unit they sell, yet every year we see people line up (or even more unexplainably, camp out) in order to get the next new iteration of Apple’s products. They willingly spend the money. They don’t care how much Apple is making. They perceive the value and make the purchase. And every year Apple creates a new iteration of the product to feed this cycle.

On the other end of the spectrum, people did not perceive the value proposition of the products being produced by Studebaker, American Motors, Chrysler and General Motors at various times in the past. They didn’t care that these companies were not making enough margin on their products to remain in business. They did not like the designs, the quality or the prices enough to pay what the manufacturers needed to stay in business. Studebaker and American motors are long gone. Chrysler and General Motors would also have departed were it not for governmental intervention.

Economics teaches that the market sets the relative price for all readily substitutable goods and services. This price point is usually referred to as the intersection of the “supply” and “demand” curves. Unless you can influence or control the supply curve, you are pretty much at the mercy of the market when it comes to the price of the good or service.

Aha! You should be pointing to the fact that Apple does not control the supply of smart phones into the mobile phone market. As such, how can they set their price so high and make so much money? The answer here is that Apple does not in fact control the mobile smart phone market. Apple controls the supply of iPhones in the mobile smart phone market, and it has been shown that more than forty two percent of people buying smart phones want an iPhone.

While other manufacturers might like to try and convince the market that their product is a readily substitutable alternative to the iPhone, it looks like they have not been entirely successful there.

While on the other side of the example, it has been shown that one manufacturer’s car can be substituted for another’s. We have seen this in the branding and segmenting that goes on in the automobile market. Segmenting is a process where a very large market is in essence broken down into several smaller market segments. That is why we have “economy” cars all the way up market to “luxury” cars.

It may not be logical to expect that a Hyundai is readily substitutable for a Mercedes-Benz, but it could be expected that a BMW, Audi or possibly a Cadillac, could suffice. It has been shown that there are certain brand loyalties in the various automotive segments, but as market trends, automotive designs and prices move, these can be overcome and new loyalties established.

However the point remains the same. Customers are not so much concerned with the cost of the Hyundai, Mercedes, BMW, Audi or Cadillac. They are concerned with the price. And even more specifically the relative price and the relative perceived value. A person looking for a “luxury” car could buy a cheaper “economy” car for a lower price, but would not receive the perceived value they want. Conversely an economy car patron might want a luxury car, but can’t afford it.

So now the question that this leads to is:

If customers do not care what the supplier’s cost for a good or service is, why do so many suppliers create their customer market pricing based on their internal costs associated with their good or service?

This is known as “Cost Plus” pricing.

If it is the market price, or the relative competitive market price that is of primary concern to a customer, why would a supplier base their prices on their costs, which are irrelevant to the market? If you are a low cost supplier and use this method you could undershoot the competitive market price and forego significant revenue and margin. You can bet that Apple did not make this mistake, judging by their revenues and earnings reports. They saw the price the market would bear and adjusted their price upwards accordingly. They are letting the other suppliers try to compete on price.

On the other hand, if you are not the low cost supplier, but rather a less efficient higher cost supplier, basing your prices on your costs could bring you in well above the market price. While Apple may be able to sell its products at a premium, I’m not aware of too many other suppliers that enjoy a similar market position. You can ask the extinct Studebaker or American Motors how that higher cost versus the market price thing worked out for them.

I guess Oracle might be another company that tries and somewhat succeeds it setting its own market price. Larry Ellison, the CEO at Oracle has always done things his own way. But then again, he likes to build yachts to race in the America’s Cup (a really expensive pastime) and he does own his own Hawaiian island (Lanai) so he must have figured something out.

The major difference between Apple and Oracle is that I am not aware of anybody that “likes” Oracle the way the like Apple (they are rarely, if ever mentioned in the same breath), and I have never seen anyone line up in the street to be the first to buy the latest iteration of Oracle’s database systems and applications.

“Cost plus” pricing assumes that a supplier has a competitively based cost structure. This may or may not be the case. Regardless, the market doesn’t really care. What the market (and the associated specific customers) cares about is the price and the relative perceived value that is derived from the good or service.

Those goods and services where there is a perceived high value and not a readily substitutable alternative can and do charge a premium in the market regardless of their cost structures. Those goods and services where there is a perceived readily substitutable alternative, regardless of the market value, can only command the market price, also regardless of their cost structures.

It seems that the only times that cost plus pricing can be used is if the supplier has a competitive cost structure (which will be difficult to ascertain since suppliers rarely share such information), or if the supplier controls the supply of the desired good or service, in which case the supplier can price in any manner they choose include cost plus methods.

In most other cases suppliers need to be cognizant of the prevailing market prices and trends, and strive to keep their costs reduced so as to retain their profitability at those market pricing levels.

Accountability, Achievement, Analysis, Efficiency, Leadership

Getting Better

One of the things that I have learned as I have gotten older is that age doesn’t make you any smarter. It just provides you the experience to recognize the things you didn’t know the first time you saw them. It was Randy Pausch, the author of “The Last Lecture” who said:

“Experience is what you get when you don’t get what you wanted”

I have wanted many things that I have not gotten, so needless to say, I think I have probably gained a lot of experience. Some of this experience I think I probably could have done without, but I gained it anyway. What I think I now recognize is that sometimes solving some issues or fixing some problems may be beyond our individual or collective reach. The key to situations like this is to recognize them, and instead of trying to make the quantum leap from thoroughly screwed up to pristinely perfect, just try to make them better.

One of the other things that I have experienced is that just about every situation that I have been in falls into this category.

It’s now election season and the number of talking heads earnestly speaking directly to us through our collective big screen televisions is growing. The various media outlets are lining up behind their favorites, and the various positions on the issues are being identified. In short it is the same thing all over again.

People are searching for the best thirteen second sound bite regarding their personal favorite unsolvable problem. Whether it’s the national debt, immigration, unemployment, or any other issue, it seems everyone is jockeying to position their glib and simple solutions to the Gordian knot style problems that are besetting us.

For those of you that are unfamiliar with the Gordian knot, in ancient times there was a knot that was thought to be unsolvable or intractable. When the knot was presented to Alexander the Great, who at the time was the acknowledged leader of the known world as a challenge, instead of trying to untie or solve the knot, he simply took out his sword and cut it. Believe it or knot (pun intended) this is thought to be the genesis of phrase and concept of “outside the box” thinking (True!).

When I look at today’s slate of candidates I am concerned that any of them that may in the remotest of possibilities be mentioned with or the even more remote possibility be positively compared with Alexander the Great. However there they are, swinging away with their metaphorical swords on television.

I think we have all see the business equivalents of these would be world beaters and problem solvers. They are the ones that have the “simple” answers to declining sales (‘just sell more”) or low margins (“just spend less”), or any other intractable long term problem that the business may be facing.

Unfortunately with all that is plaguing leaders in business today it is easy to see how they may fall victim to the siren song of the “simple solution” providers.

Please do not misunderstand me. I truly believe the basic premises of business are pretty simple. I have said this many times in the past. It is usually the business itself that adds complexity to its organization and operations in search of ever better and more eloquent was of completing the simple tasks required for it to run.

If a simple process adequately handles eighty percent of the situations then with only a little tweaking it might handle close to eighty five percent of the situations. A little more tweaking might get it to ninety percent. Still more might enable it to be implemented globally instead of specifically for the region in which is currently working. Still more might enable the creation and publishing of fancy metrics charts detailing various aspects of the process and the state of its implementation.

Eventually a process is created that works everywhere in all situations, but takes more effort and resource from the business to work for the entire business than the original eighty-twenty rule process that was the starting point.

It can be argued that the “getting better” approach to business could in fact be responsible for the evolution of both business and process into the complex systems that they are today. This would be akin to the example of taking several small logical steps one after the other to eventually arrive at an illogical conclusion or solution.

I think part of the issue we see in situations like this is the lack of rigor that is applied to defining the problem, setting a baseline and then measuring against the improvement on the baseline. If we all know that we need to improve then we just accept the premise. If we state that the plan is to take the solution global then why would we need to measure if there is in fact a global improvement? The goal is no longer improvement of the business but instead is now the global dispersion of the solution.

Getting better does not mean making breakthrough advancements, although these are always exciting and welcome. Rather it means actually trying to use the primary building blocks of the Continuous Improvement Process that J. Edwards Deming envisioned where Feedback drove Efficiency drove Evolution which in turn drove further feedback, and so on.

The key step in this cycle that seems to be missing in both politics and business today is the Efficiency review. Efficiency by its very nature requires the identification, reduction or elimination of sub-optimal structures and behaviors. The definition of efficiency is:

1. The ability to accomplish something with the least waste of time and effort; competency in performance.
2. The ratio of the work done or energy developed …. to the energy supplied…

Many thanks again to Webster’s Dictionary. One of my favorite books.

The idea of efficiency, and getting better means that we need to continuously look at what we are getting out of systems, processes and businesses as compared to the work that we are putting into them. Efficiency is not just the output, but the output as compared to the input required to get it. Too many times it seems that it is taken for granted that just because there is some new way of doing things, or a new process is being implemented that it is better (read more efficient) than what currently exists.

Almost everything that I read these days in books and periodicals regarding business performance seems to bemoan the loss of speed in business, or the lack or loss of decision making abilities in business, or the complexity that is now being faced in business. These seem to be issues that are now inherent in the business system. The simple command to “sell more” or “spend less” won’t solve them.

I guess the same goes for politics in that the system seems to have evolved to reward those that “sound” the best but in reality only kick the problem down the road for the next generation to deal with. Their simple solutions fit nicely into the thirteen second sound bites provided by the media for public consumption. Perhaps that is why it seems that in this iteration of the political campaigning those that are viewed as being outside the normal political process seem to be preferred more than the established politicians by the general populace.

At its most basic getting better, as well as efficiency means doing more business with less resource. That means that being efficient requires the removal of some functions, effort and work from the business as compared to the set baseline while still accomplishing the set goals. It doesn’t need to be a lot. It just has to be measurable in some fundamental way.

Getting better means making sure that attaining your goals actually, measurably improves the business. The simplest definition of getting better that I can think of is showing some measureable improvement in efficiency. If you can’t directly relate and measure the business activity to somehow improving the business efficiency (mathematically identifying work being done to work being saved or improved), then there is probably a pretty good chance that it is not associated with the business getting better.

Analysis, Decisions, Efficiency, Metrics, Self Analysis

The Perfect Metrics

I think we as a species inherently love to measure things. I take that back. We love to measure everything. I am not a baseball fan, but I find it humorously entertaining the number of statistics that are available for seemingly any situation in baseball. I think it is possible to find the batting average for any player in late innings, with runners in scoring position, for away games with left hander pitchers on the mound. Really? I guess there must be someone interested in all that, but I can’t think of who it might be.

I am a hockey fan and there are a whole new generation of metrics created which I am not sure I entirely understand yet, but are supposed to give a much better measurement of the quality of the hockey players on the ice today. It seems that you can now get statistics for third line shots generated or allowed, for defensive players on offensive zone draws in the third period. Okay. I understand what all that means, but I am not sure if I care. Just drop the puck and skate.

I am not quite sure but it seems that some people are trying to make hockey appear to be more like baseball through the use of more and more arcane and detailed metrics. Unless they allow baseball players to carry their bats with them out into the field when they play, (stealing bases would get a whole lot more interesting) instead of just when that are at bat, or figure out a way to make hockey a whole lot slower and more boring, this would not seem to be a plausible goal.

The roundabout introduction here is that to generate all of these baseball statistics, someone had to measure and record all of these actions and variables. They had to create the metrics. And once they created these metrics it became a challenge to create the perfect metrics to more perfectly measure and reflect the game. After over one hundred years they are still trying. This should convince everyone from the onset that there are no perfect metrics. There are only good metrics, and other measurements.

I have had the opportunity in the past to be involved with many metrics projects, programs and functions during my time in business. It has been both an enlightening and useful process to me. It has helped me on several levels when it comes to the successful leadership of a business. In business as in sports, metrics are in part how we keep score.

Metrics are interesting in that they are indicators of performance. Hockey players with good performance metrics tend to be on good teams. Good teams tend to win more games. Winning is usually thought of as being a good thing. The new, complex metrics associated with Hockey seem to go a long way toward providing supporting evidence for how good and accurate the older simpler metrics associated with Hockey actually are. Interesting how that works.

It also seems to go that if a few metrics provide a reasonable indication of individual or business performance, then as we have noted in baseball, a very large number of metrics should provide a significantly more specific and detailed indication of individual or business performance. This thought process is along the lines of the old adage “If a little is good, a lot must be better.”

To extend the baseball analogy that is like saying if a beer or two is good while watching a game then two cases of beer should be excellent. You can find yourself at the game in a state of unconsciousness, immobility or alcoholism.

Similarly you can find yourself in business with so many metrics and indicators that they will begin to provide too much, or even conflicting indicators to the point that you end up in an immobile situation. Hence the phrase “Paralysis by Analysis”. I think I may prefer to refer to this situation as “metricoholism”, or the over dependence on and addiction to metrics to the point of being dysfunctional.

Metricoholism is the inability to have just one, or even a few meaningful metrics. It’s more along the lines of once you get started measuring things, you can’t stop. Eventually you will have measured everything, but will then have no idea what to do about all that you have measured.

I have found that the value of metrics lies in the talent of the people that are interpreting them. Metrics in and of themselves need to be the indicators of where additional human interaction with the business processes may be required in order to understand the possible underlying issues associated with the numeric measurement anomaly (metric). Good metrics identify the leverage points where analysis and performance modification can have the greatest effect on the business. Good metrics simply point to where the leader must look to understand what is affecting their business’ performance indicator.

There was a recent movie about the use of metrics in sports. It was called “Moneyball”. It was nominally a baseball movie, which meant for me that I would wait for it to be on television before I would watch it. I usually don’t pay money to watch a live baseball game because it is as I said a rather boring game to me. Why would I pay money to watch a movie about a rather boring game?

Just as an aside not all baseball based movies fall into this category. I thought “Field of Dreams” and “Bull Durham” were very entertaining movies, in spite of their baseball based premises. However “The Natural”, not so much.

In any event, Moneyball was the story of how a specific baseball team changed the way the business of the sport was conducted. By changing the way that the humongous amount of data associated with baseball and the baseball players was interpreted, they changed the way players and teams were viewed, built and paid for.

That bears repeating. By changing the way that the standard data (that was available to everyone) about the game and each of players was interpreted, one team changed the way an entire century old sports institution looked at how teams were built and how they should best perform.

The value was not in the data. Everyone had the same data. The value was in how the data was interpreted.

While interpretation of the data is going to be the key to success when it comes to metrics, it is also best to remember what Robert McNamara (one of the original automotive industry “whiz kids” of the 1960’s) said. He said:

“First thing: Get the data.”

The point is that there is a lot of data available. Which data do you go get. If you were a Metricoholic you would end up trying to get all of the data, since partial data would not be satisfactory. Also as previously noted, this would be a mistake. It takes far too much time, money and effort to do this and what are you going to do different with one hundred percent of the data that you wouldn’t do with eighty percent of the data.

That was an oblique reference to the old eighty – twenty rule where you can get eighty percent of the data in twenty percent of the time. If you can get eighty percent of the data reasonably quickly, you can make excellent business decisions from that data, and move on.

Good metrics for a business need to be relatively simple and straight forward. They need to deal with the basic functions and core values of the business, not the ancillary capabilities. Revenue, costs and profitability are good examples of simple metrics that all businesses use. I think there is probably a good reason for that. Performance levels and adherence to service levels are good metrics for service related industries. There are certainly others and they can be customized by business type and industry.

The key and the value to good metrics lie in their simplicity and their interpretation. Complex metrics just provide you complex data that is difficult to interpret. Exhaustive numbers of metrics generate exhaustive amounts of data that requires exhaustive interpretation. No amount of metrics, or process for that matter, can replace the need for talented people who can interpret the data, then decide where and what to act on.

The idea of good metrics should be to create a few indicators that measure the specific core leverage points of a business or organization. They should provide both a historical trend (are they getting better or worse) and a specific snap shot of performance. They should indicate where the interpreter of the information should go look for issues, if they are indicating issues. They should not be expected to indicate what the cause of the problem is, and certainly not what the solution to any particular issue will be.

Almost every business in existence already has some sort of metrics. Some are probably good metrics and some are probably just measuring something. There will also probably be those in the organization that are clamoring for more metrics as a way to improve performance.

However, I have found that good metrics are usually like bitter medicine. They are best and most effective when delivered in small doses, and usually best prescribed by someone outside the organization that does not have a stake hold to protect.

Just like healing oneself, measuring oneself is sometimes a difficult thing to accurately and honestly do as well.