Category Archives: Data

Looking a Little Farther Ahead

I almost got hit by a truck the other day driving home from golf. Now a lot of you may be wondering what that kind of statement has to do with the nominal topics of business management and sales that I usually deal with here. I’ll get to that in a minute. For those of you that live here in Texas, you know that the word “truck” can cover a lot of territory. Everything from a go-kart with a toy wagon bed welded on, to a Peterbilt cab-over semi tractor-trailer. In this case I’m pretty sure that it was a Dodge Ram 2500 Crew Cab since the badging was at eye height as I looked out the window at it. In Texas, this qualifies as a “standard” sized truck. Anything smaller and you’re considered either a poser or a city-boy. Still, it outweighed my full-sized car by close to a ton.

Driving on the freeways in Dallas can usually best be described as a cross between bumper cars and playing a game of “chicken” at seventy miles an hour. As long as everybody abides by the same rules and speed, traffic seems to flow along reasonably, bumper to bumper at seventy miles an hour with a minimum of bad language and hand gestures.

However, occasionally there are those that appear to be unfamiliar with the freeway rules of the road, and opt for what I am sure they feel is a little more intelligently safer speed when changing lanes or taking exit ramps, and other such things. They also usually use their turn signals when performing these maneuvers, and equally importantly, turn off their turn signals when they are done. These people are easy to identify in that they usually have a very long line of impatient drivers behind them.

In this case, I was the then last car in such a line of several cars behind one of these drivers, as we all were taking an off-ramp which connected one high-speed freeway to another.

This position is the most feared position in all of Texas driving. You are going slower than everyone behind you, with little to no options of avoidance in front of, or to the side of you. You have a tendency to watch your rear-view mirror rather closely in such situations.

The SUV immediately behind me was a little slow on the recognition of the situation, but was still able to slow down and pull over to the left side of the ramp, but remained behind me. This maneuver on their part took them out of harm’s way and still left me fully exposed. The truck in question behind them however, did not seem to be as alert to the situation.

Did you know that even though they do not cause the loud, wailing skids that we are all accustomed to on television, you can still hear anti-lock brakes as they try to stop a large truck coming toward you? It’s sort of a staccato noise as the brakes bite and release as they avoid the skid. It is not something you really want to hear as it gets louder or closer.

At the last moment before hitting me, the driver of the truck swerved up over the curb on the ramp to the right of me. His truck came to a stop alongside my car, where as I noted earlier, I could very clearly see its name and size outside my passenger side window.

As traffic started to resume speed, I went ahead and let him pass me on the right. This is not usual protocol for Texas driving, but in light of the circumstances, I felt an exception might be in order. After a moment’s hesitation, the truck drove off and my journey home resumed.

So, here is where the business lesson for this event comes into play.

Most of the time we are all focused on what we are doing at that particular time. We are minding our own business. We are focused on our deliverables. We are paying attention to our deadlines. We have our own worries.

Occasionally we look up to see what the next step is. We have a process. We are preparing for what we must do next. We are looking ahead, but only at what comes next. We are aware that there are other factors that are coming into play. We are in effect checking the car in front of us.

For the most part, this approach will keep you out of most of the trouble that is out there. However, there will come a time when the expected events will not occur. The situation will present itself with alarming speed.

In other words, you could find yourself driving along in your big Texas truck, minding your own business, when suddenly the car directly in front of you dodges out of the way and you find yourself presented with the opportunity to smash into me from behind.

It’s not enough to only be aware of what you are doing and what those immediately around you are doing. On occasion, you need to be looking up and checking the horizon. What is coming into view? What are the competitors doing? Are they adding or deleting resources? What are the customers doing? Are they buying and spending, or are they delaying purchases? What are the analysts saying about the market in general and the company in particular?

Are there multiple cars up ahead with their brake lights on, and should you be prepared to, or possibly already be in the process of slowing down?

The combination of the increased reliance on process, along with the seemingly continuous growth in the reverence for the corporate fire fighter when the process fails, does not seem to mesh with this anticipatory approach to things. Processes have been implemented for the most part to reduce the reliance on this kind of judgement. It almost seems that the corporate fire fighter has been integrated into the process for those times when the process breaks down.

Sort of a “In case of Fire, Break Glass” kind of thing.

The lanes in business continue to be further refined by process. Dotted lines become solid lines, become multiple solid lines, become fixed dividers. If you don’t believe this to be the case, just look at any inter-organizational process flow chart.

It is very easy to focus solely on what you are doing. To perform your function in the process. The organizational structure and incentives now focus on that type of professional behavior. And for the most part, things can and do go relatively smoothly. Until they don’t.

Inevitably someone will miss a step, or improperly hand-off an incomplete work project, and things will unexpectedly slow down. Customers may decide to postpone their next purchase and wait for the next generation of product. Competitors may introduce new technology ahead of when it was expected. Foreign competitors may decide to instigate a new competitive approach based on price.

Processes are resistant to change, and will take time to adapt. They don’t come with anti-lock brakes. They have an inherent amount of momentum associated with them. Just like a speeding full sized, crew cab Texas truck. It’s not enough to be performing your operational duties in a vacuum. You need to be looking forward at the traffic and events in front of you.

Markets don’t provide plenty of warning when they are going to change. Customers rarely tell you when they are going to slow down or stop buying altogether. Companies usually don’t give you a pre-notice when they are going to have to react to the changes in customer and market status.

Looking out, looking forward, anticipating the changes in the business environment are still key to navigating in business. Processes are helpful in simplifying the immediate and making it somewhat more predictable, but it is still your responsibility to be anticipating those future needs and directions that the business environment will present you.

Now if I could just get the people in those large trucks when they following me to do that a little better.

Forecasts

Forecast meetings are interesting animals. They are basically meetings where you compare what you think the numbers are going to be, with what you want the numbers to be. Over time I have had the opportunity to attend many different types of forecast meetings. Sales, Revenue, Cost, Delivery, all types of forecast meetings. I have found that there are basically two types of forces competing for supremacy at a forecast meeting: The volumetric force, which is the force working to drive the numbers toward what they are wanted to be, and the accuracy force, which is the force driving the numbers toward what they have a higher probability of being.

The volumetric force is the desire by business leadership to see forecasted numbers that are either meeting or exceeding the business plans for that particular aspect of the business, regardless of whether they are or not. This means that for example, if it is a sales forecast in question, the desire is to see the annual sales target for business to be divided by twelve (coincidentally the number of months in a year) and to see the sales forecast incremented upwards by one twelfth the annual sales target each month, which is coincidentally the usual frequency of the sales forecasting meeting.

The accuracy force is the desire by business leadership to see forecasted numbers that are relatively reliable, and have a relatively high probability of actually becoming reality. An example here would be if the average interval between order and revenue was six weeks, and the orders target was achieved with eight weeks remaining in the quarter, there is a reasonably high expectation that the revenue forecast should also be reliably achieved.

Sometimes these forces work in concert. This is where the volume of the forecast and the accuracy of the forecast are both close to, or ahead of the desired targets. This can mean that sales are above target, or costs are below target, or both. This is also where there is a very high probability of the business sales or cost performance coming in at or very close to the forecasted numbers.

In business vernacular, times when the volume and the accuracy of the forecasts are both on target are usually known as “rarefied air”. They don’t align this way very often. When they do it seems to be a foregone conclusion that either the volume or accuracy targets for the next forecast will be changed significantly.

Once the volume and accuracy targets for the forecast have been modified to the point where one or both of the variables are now in question, the business process can now be considered back in normal state equilibrium, or more accurately in the normal state of disequilibrium.

One of the primary topics of forecasts are the numbers. It is usually a good rule of thumb that if there is anything but numbers in a forecast meeting, then somebody is trying to distract somebody else’s attention from the numbers. Given the opportunity, there is a reasonably high probability that those responsible for presenting the forecast will try to add in extraneous information of some type, if their forecasted numbers do not meet or exceed their assigned targets.

Both a strength and a weakness of the forecasting process is the periodicity with which it occurs. Regular forecasts enable the business to prepare for and adapt to the forecasted changes and values that are projected. If forecasting meetings are held too often, there is not enough time for new events to occur and the forecast to change. This results in wasted effort and repeated information.

On the other hand, if they are held too infrequently, it can mean that events have occurred during the forecast interval that must now be responded to in a far shorter time. It can also mean that the results of the last forecasting meeting can be forgotten or obscured. This can result in a loss of directionality as to how the forecast is either progressing or regressing. One of the main benefits of the forecasting process is to get an understanding of which direction the specific piece of the business is moving.

This results in the potential need for at least some incremental information to be included in the forecast. Again, think numbers. The most useful of which is the comparison of the current forecast to the desired target numbers. That provides a snapshot of what the predicted versus the desired performance will be. The next useful piece of information will be the comparison of the last forecast to the current forecast. This information provides a directionality to the snapshot. Is the forecast getting better, worse or staying the same with respect to the targets?

Adding much information beyond the targets and the previous forecast can cause the information in the forecast to become somewhat garbled or confusing. I have seen forecasts where the information was compared to multiple previous forecasts, or the forecast from the same period a year earlier. This one I am not sure I understand, unless you are looking for some sort of a longer-range piece of information regarding how things have changed, or not, over a year.

To me the salient point is always to know how things are progressing towards this year’s targets. Knowing what last year’s forecast was for the same time period can be a little bit like knowing what the weather was forecasted to be for the same day, a year ago. It might be interesting to know, but it has little to do with whether or not you will need an umbrella or not tomorrow.

The purpose of forecasts is to alert you to the state of the business with as much lead warning as is possible. Do those presenting the forecast indicate that things are getting better? Are they getting worse? It takes time for changes to produce the desired effects in a business. The more time that you have to make them, the greater the effect that they can have. Does the forecast indicate that any changes are required at all?

This is where the volumetric forecasting force can work against the business. As stated, this force is the desire to forecast increasing performance, that is at or near the desired targets. But what happens if either the market conditions, or business performance are such that the actual forecast is indicating that the numbers are moving away from the desired targets?

If you actually forecast this type of event, the known decline of performance and missing of a target, you are inviting what is known as “management assistance”. This type of assistance usually comes in the form of even more forecasting meetings where the opportunity to explain what is going on is made available, that is until the forecasts improve in line with desired results.

So, what happens?

A general rule of thumb is that once a forecast is created, it cannot get worse. They can either improve, or stay the same, but having a forecast that is moving away from the target will cause much consternation. As we all know, business is a continually changing environment and set of events. Very little in business can or should stay the same. Accurate forecasts should reflect the constantly changing environment.

If you see a forecast, of any type, that is not changing with time, then you know it is getting worse.

The advantage to this situation is that management is not being directly told that things are getting worse, so they have plausible deniability to their senior management, and the business performers are not having to spend incremental time explaining what has occurred, and what they are doing to correct it. They can just get on with correcting the performance and trying to improve the forecast.

However, this approach will only work for a while. Eventually even management will have to recognize that they are being shown the same information over a prolonged period of time and they will be forced to question it. Once this type of questioning on the relative believability of the forecast begins, there is little that can be done to stop it. This is where plausible deniability ends.

As process has continued to expand its role within business, forecasting has also become the forecasting process. This usually means that instead of just having the person or team closest to, or responsible for the specific set of numbers for that specific period enter them into the forecast, they must now put them on a form where they are then routed to many other people and teams who are either only tangentially or wholly unrelated to the numbers, can then approve them before they are actually entered into what will become the forecast.

Forecasting is a critical aspect of a successful business. The ability to accurately predict present and future performance enables business groups and disciplines to take the most effective actions to benefit the business. Understanding how forecasts are put together, and being able to accurately interpret the numbers they contain are key capabilities for the business leader to learn.

It is also critical for the business leader to be able to interpret the information that the forecast contains that may not be specifically numeric in nature.

Solutions, Costs and Confirmation Bias

It is said that beauty is in the eye of the beholder. I guess it can also be said that the best solution is also in the eye of the beholder. It probably also depends on who you ask. The problem is that the best solution depends on the relative criteria associated with the issue that requires a solution. It also depends on the lens that each individual looks through when they are trying to craft a solution.

Abraham Maslow was an American psychologist who was most notably remembered for his ideas on the hierarchy of human needs. That in and of itself is pretty cool in my book, but that is not why I am citing him here. He also said:

“if all you have is a hammer, everything looks like a nail”

and variants thereof, which is from Maslow’s The Psychology of Science, published in 1966.

And here-in lies the issue.

What seems to occur is that if you are trained as a lawyer, you are taught to view every issue from a legal standpoint. If you are a marketer, you view every issue from a marketing point of view. If you are in finance it is always about money. The view you have of business influences the view you have of issues and their respective best solutions. And so on.

This is absolutely the case for engineers. It seems that if you are an engineer, everything is an engineering problem, and therefore an elegant engineering solution is probably not only possible, it is highly desirable. For engineers, it doesn’t seem to matter what the specific issue criteria are. Topics such as cost and time required take a back seat when it comes to engineers. It always comes back to engineering the best engineering solution.

For those of you (like me) who are not engineers, and who have argued with engineers in the past, you will probably very clearly understand the following. For those of you who have not yet had the opportunity to argue with an engineer, be patient. I am sure that you will get your opportunity to argue with one in the near future.

There is an old saying regarding arguing with engineers. It is so old that no matter how I researched it (two or three variants of searches on Google) I could not find any direct attribution as to the original author. The saying goes:

“Arguing with an engineer is a lot like wrestling with a pig in the mud. After a while you realize that the pig is enjoying it.”

But I have digressed enough. With the possible exception of noting that engineers are usually much more associated with costs than sales. I’ll get to that in a moment.

The point that I am trying to make here in my own clumsy way, is to point out that regardless of what the defined criteria may be regarding an issue’s potential solutions, we all have a bias as to how we would go about creating our best solution. This type of bias has a specific psychological name: confirmation bias.

Between my earlier discussions regarding Maslow, and now confirmation bias, I seem to have taken on quite a psychological bent here.

Shahram Heshmat (Ph.D.) in his blog states confirmation bias occurs when we have formed a view on a topic, we embrace information that confirms that view while ignoring, or rejecting, information that casts doubt on it. Confirmation bias suggests that we don’t perceive circumstances objectively. We pick out those bits of data that make us feel good because they confirm our prejudices. Thus, we may become prisoners of our assumptions. (https://www.psychologytoday.com/blog/science-choice/201504/what-is-confirmation-bias).

I brought this idea up to an engineering friend of mine. He said every problem should be viewed as an engineering problem, and started arguing with me again. Having just cleaned the mud off from the last time, I didn’t engage.

Confirmation bias is an interesting topic when it comes to management, leadership, and issues. This is especially true when it comes to looking at two very important aspects of any business: sales and costs. I will hedge my comments here with the qualifier “for the most part” in that there are definitely exceptions to every generalization. But for argument’s sake, I will go ahead and generalize a little.

When it comes to setting sales targets, who sets the goals?

Those of you that said sales are wrong.

Management usually sets the sales goals. They ask for bottoms up forecasts and expectations from the sales teams, which they will usually review and find lacking in that they do not meet the financial and or growth expectations for the company. They will then ratchet up the targets to be more in line with the company’s needs and requirements, and issue them to the sales team to achieve.

The confirmation bias here is that management believes and expects that sales will provide them with a lower set of sales forecast targets because it provides the sales team a higher probability of achieving those targets. When sale provides a forecast, regardless of its veracity, that is lower than management expectations, this bias is confirmed.

I really don’t think I have ever been part of an organization where the sales team ever provided a sales forecast which was greater than management expectations. Perhaps my own confirmation bias is that management sales expectations will always exceed the sales team’s expectations, regardless of the market conditions.

On the other side of the spectrum lie costs. When it comes to setting costs, it is usually engineers that set them. While there is usually a similar process of setting up costs and budgets associated with products and services (I am not going to look at specific disciplines or functional groups here, just the costs associated with deliverable products and services) where the cost groups (usually containing at least some engineers) are consulted regarding their input into the costing model.

Herein is where the processes begin to diverge. Management has the ability and bias to step in and alter or impose their sales demands on the sales experts, but does not have nearly the same inclination to alter or impose their wills on the cost experts and groups.

Their confirmation bias is that the cost groups are doing their very best to keep costs low, even though the cost group has the same rationale as the sales group when it comes to setting targets. Higher cost targets for the cost group are obviously much easier to achieve than lower cost targets.

The resulting higher costs drive higher prices and a sales team that is invariably told to “sell value, not price”.

This may have been an acceptable mantra when there was discernable value (and price) differences associated with products and services. In some instances, there still may be, but the race to the bottom regarding minimally acceptable product quality and service levels at the lowest compliant price seems to have mitigated all but the basic pricing and functionality topics as differentiators.

Customers do not particularly care what a supplier of products or services costs are. They care about the supplier’s price. And quality. In that order.

A colleague of mine mentioned that the incentives and commissions associated with sales incite the striving behaviors associated with good sales teams, while there is no similar incentive plan in place to incite a similar striving approach to reducing cost budgets for the cost groups. Sales teams make at least partial commissions, proportional to their sales target achievement, even if they don’t fully meet their sales objectives.

Perhaps it is time to rethink the compensation plans associated with the cost teams so that they more accurately reflect the need for continued cost budget reduction instead of the current cost budget achievement structure.

Nominally the market sets the price for a good or service. The market is made up of customers. Even Apple with its ubiquitous iPhone faces market challenges from the likes of Samsung, LG and other smartphone producers. If Apple raises its price too high they risk losing share, and profitability to competitors.

Apple is immensely profitable. They are also a veritable tyrannosaur when it comes to working and controlling their costs. If you don’t believe me, try becoming one of their suppliers and selling them something. I have been a part of organizations that have done this. It can be a challenge, to put it politely.

It would seem that Apple’s culture may have evolved out beyond the confirmation bias dichotomy associated with sales and costs to the point where they continue to challenge themselves with respect to their cost structures, and engineering solutions. They seem to have created a market cache, expectation and demand that may have enabled them to restructure their cost model focus in order to maximize their profits.

That is truly speculation on my part, but it is a theory that would seem to be supported by the empirical observations of them in the market.

Companies that are looking to maximize their profit potential probably need to do a little internal analysis to understand their own costing processes and capabilities. There are many that are still looking at them from a bottom up, confirmation bias based point of view. Apple has recognized that their costs and their product price really have very little relationship and should be treated as almost totally unrelated items.

This approach would allow product and service providers to focus on their sales strategies and their costs strategies in separate, but similar ways. It would seem that the best solution has proven to be to engineer your products and services, not your costs, and instead to treat your costs with the same type of aggressive objective setting that you treat your sales.

Off-Shoring

One of the hottest debates going on in business these days is the debate regarding what work, if any, will stay in the supposedly high cost country and what work will be sent to the supposedly low cost country. This is the function that is usually referred to as off-shoring. There are many factors that seem to be taken into account with this decision, but there are also several factors that don’t seem to be included. It appears that the only major factor that companies really consider in the off-shoring decision is the relative wage differential of the existent workforce versus the prospective workforce. Having gone through, worked with and reviewed some of these types of working environments, it has made me wonder if there are other factors that should be reviewed before these decisions get made.

The bottom line in all of these out-sourcing or off-shoring decisions seems to be doing what is perceived as best for the organization’s bottom line. This is also somewhat subjective depending on which of the shores you find yourself. The idea is to save money. All other factors will be dealt with or considered in due course. And one of the best ways to save money is to try and reduce the cost of your labor associated with the function in question. Are there other people in other places in the world that can and will be paid less per person to do the work in question?

On the surface the answer to this question is almost always “yes”.

If the only factor to be considered is the wage rate paid to the resources doing the work, then the decision is always an easy one.

But things are usually never that easy.

The first jobs to experience this sort of movement were the production and manufacturing jobs. Production lines and repetitive functions were sent elsewhere. Business cases were built containing the incremental cost of building a new factory as well as the reduced cost associated with the low-cost labor to staff it. Questions were answered about how long the pay-back was on the needed off-shoring investment and decisions were made. Factories and production lines were built in these low-cost countries. The production of simple and basic products was then moved.

I am not going to continue too far down this line of thinking because we all know where it goes. More and more, and more production functions have been off-shored. These are finite directed positions that perform repetitive processes at a fixed rate, to create large numbers of similar products.

Let’s now fast forward a few decades.

Almost every business function is now subject to the discussions associated with which shore it should be on. One of the biggest issues associated with any proposed move now, is that the work being considered is usually more variable than the production work of the past, and it is more subjective in its execution.

While a production line will move along at a fixed rate enabling all participants in the production line to work at the same rate, the same cannot, and should not be said about knowledge based disciplines. Do all people who write software code, or design hardware do it at the same speed? Are they all equally proficient at their respective disciplines? Are all accountants or financial managers at the same competency level?

On an even more basic level, do all locations have the same financial drives, work culture, language fluency and associated work styles when it comes to delivering the required work products? Remember now we are discussing complex or service oriented work products, not physical products such as consumer electronics or other real goods.

It is no longer just a question of the difference in the hourly wage rates, or salaries of the teams involved. The question now moves into the somewhat murkier areas of work force effectiveness and work force efficiency.

Efficiency and effectiveness refers to how many resources it takes in each relative location to accomplish the desired work, and how long it takes them to do it. Too many times it is assumed that one workforce is as proficient as another. This might have been the case on the fixed speed production line (after appropriate training and time to come up to speed), but is it correct to apply these same principles to non-production line types of work and service products?

This is neither a case for or against the off-shoring and cost reduction push. These are tidal type forces that will continue until some sort of economic equilibrium is reached. This is more a question of identifying, accepting and analyzing the total costs associated with each proposed workforce location decision.

Just because it takes ten highly motivated, well educated, relatively expensive resources in one global location to deliver a satisfactory work product, does not mean that it will take the same number of similarly motivated, similarly educated relatively inexpensive resources in another global location to deliver the same work product in the same amount of time.

Research has shown that it usually takes more people, and more time for the lower waged (and supposedly lower cost) locations to accomplish the same tasks and deliver the same work products. (https://cs.stanford.edu/people/eroberts/cs181/projects/offshoring/failures.html)

What this means is that it is not just the relative cost of each hour of work that must be examined in the off-shoring decision. It is also the relative number of hours of work that are required at each location that must be included in the equation. That means that the relative number of people (spending hours on the work) and the length of time that they spend (how many hours) should also be taken into account.

If it takes five people one month to do the work at a higher cost location, and it takes eight people two months to do the work at lower cost location, the resulting total cost of work delivery may yield a very different work location decision that just the straight hourly wage comparison that has been so popular in the past.

On the other hand, it should be noted that if the relative wage differential is great enough, even these types of labor inefficiencies can be overcome.

I try to focus on real and definable costs. The relative number of hours used and the relative wage rates at each location in question are either known or can be estimated with some relative amount of accuracy. These are usually real numbers that deliver real relative costs. As always there are other factors that can be associated with the off-shoring question. I’ll list a few of them, but as they are less quantifiable in their effect, it will be difficult assign an actual value to them.

Are there incremental but hard to quantify costs associated with the increased complexity of the operations, IT, infrastructure and security associated with an off-shoring. In today’s hacker infested world one would think that adding facilities and resources in other global locations would have an effect on these types of costs. However, it is hard to add them into any comparative costing discussion.

There are considerations that should be observed regarding the relative quality of the work product generated in each location. Are there bugs in the software? Are there differences in the way customer support is provided that affect customer satisfaction? These are difficult issues to quantify, at least prior to having to try and resolve them.

Communications will also become more difficult. What was once a real-time conversation may now become a series of emails, depending on the relative time zones associated with the differing locations, potentially across multiple days. The overall speed at which things are accomplished, or issues resolved can become problematic.

The cost of management should also be expected to increase as well. At least initially, expatriate management will need to be present at the off-shore site to setup the new functions and oversee them. Depending on how things progress, their presence could extend over a significant period.

For those of you not familiar with the expatriate role, these people are expensive. They are normally paid at the “high cost” location salary rate, and their expenses for staying in the low-cost location are usually also covered by the company. They are in effect paid close to twice for the inconvenience of living in one location and working in another.

The final “soft” cost that I will address is the public perception of moving jobs out of their current location and to another, as well as the potential exposure associated with future governmental regulations associated with this activity. Market movements associated with drives to “Buy Local” and legislation designed to increase the expense associated with off-shoring are gaining traction in multiple locations.

It is easy to see why low wage rates in other parts of the world may be attractive. As companies continue to become more virtual in their natures’ Virtual Office can mean an office anywhere on the globe. The initial success and savings generated by moving the simple and repetitive off-shore has given rise to the desire to move more and more complex and unique functions as well. This complexity and uniqueness affects the efficiency and effectiveness of the model.

While the relative wage differential will continue to be an important factor in the off-shoring equation, other factors will continue to increase in importance as the off-shoring drive continues to move up the business complexity curve.

Strategery

I think the time has come to coin a new business term. It needs to sound vaguely familiar and reasonably important, otherwise it won’t be very useful. It has to resonate with an ongoing application in business. It must identify a function that almost everyone is aware of on some level of consciousness. It needs to be a term that we can all get behind and utilize to its fullest potential. Based on these requirements, I hereby submit the new business word: Strategery.

The last person to attempt to coin a new word with any amount of success, was Stephen Colbert during his first edition of The Colbert Report on television in 2005. While I do not claim to have even a small percentage of his ability to identify trends and needs in the lexicon, I will soldier on even in the face of these personal shortcomings. He was so successful that his new word has even made it to Wikipedia. If that isn’t a measure of success, then I don’t know what is.

Colbert coined the word “Truthiness”. And the Wikipedia definition of Truthiness (as supplied by Colbert) is:

“truthiness refers to the quality of preferring concepts or facts one wishes or believes to be true, rather than concepts or facts known to be true. I don’t trust books.”

Of course the public seized on truthiness as truth.

The definition was then further refined and was officially in the mainstream media when in 2006 Dick Meyers of CBS news stated:

“Truthiness is a quality characterizing a “truth” that a person making an argument or assertion claims to know intuitively “from the gut” or because it “feels right” without regard to evidence, logic, intellectual examination, or facts.”

From inception to mainstream media acceptance in one year. Think about just how far ahead of the curve Mr. Colbert was with truthiness. Today I believe the support for an individual’s concept of truthiness comes in the form of what are now called “alternative facts”. From truth to truthiness and from facts to alternative facts. He was correct. It just feels right.

Now back to my turn at the plate.

The word “Strategery” was initially was coined for a Saturday Night Live sketch, written by James Downey, airing October 7, 2000, which satirized the then presidential candidate George W. Bush. It actually became a term that was used during the Bush presidential years, but as those years have receded from memory, unfortunately, so has its usage.

But not anymore.

I think in every business discipline, and in every economic realm, there are those shaman like individuals and groups that every organization has, that purport to be able to divine the next industry fundamental shift that is currently residing just beyond the visibility of the event horizon and is destined to be the next game changing event. They claim to be the Visioneers who sound as though they are able to see beyond the future, and who seem to have no discernable role other than that of forming opinions, and possibly writing industry papers about what is out past the most distant of 3 and 5 year business plans and lies in the darkness beyond. These are the people who practice the art of “Strategery”.

The art of Strategery is to purport to look so far out into the future as to be almost useless, but to be able to make it sound as if it is most important.

In this case the word “Visioneers” comes from the 2008 movie of the same name. The movie is set in a dystopian near-future where a Corporation is driving out a culture of independent thought and intimacy. The corporation claims success is achieved by its strict philosophy of mindless productivity and teaches that productivity equals happiness, and the business logo (a middle finger) is the standard greeting in society. Credits again to Wikipedia.

The true art of Strategery is that the Visioneers that practice it can never be wrong. By continually keeping their focus on items that are out beyond the event horizon, and the next industry shift, they can never be directly tied to the current industry events and business performance as they actually occur.

A very good example of this “can’t be wrong” sort of Strategery can be seen in any of the various stock market prognosticators. During any sort of an extended stock market run, either up or down, there will be those that are espousing a “contrarian” point of view. They are the ones that say during a Bull market that a Bear market is coming, and vice-versa.

And they are usually correct. The markets do move in cycles. That’s why they have the names Bull and Bear Markets, and they usually do follow each other. They would only be of value if they could truly predict the point where the market will turn. Most of the time they can’t and will only be able to claim success once the event is long in the rear-view mirror, and they are on to the next pre-event horizon prediction.

Probably one of the first and most famous Visioneers to practice Strategery was Nostradamus. He cataloged all of his divinations and future predictions in a book, purporting to span across hundreds of years, and did it in such a way that no one could tell which event he was foretelling until long after the event in question had actually occurred. In short no one knew what he was talking about, and still don’t until well after the fact. To this date, almost 500 years later, he has not been wrong, but the usefulness of his predictions is generally thought to be non-existent as they have not been recognizable until well after the predicted event has occurred.

A good example of this is that Nostradamus is usually credited with accurately predicting World War II, but the accuracy of his prediction was not generally recognized until several decades after World War II occurred, at which time its usefulness does become questionable.

Technology based organizations are not immune to Strategery either, and in fact they can be a hot bed of such a questionably valued activity. It is easy to spot the Visioneers within these organizations as they will be the ones utilizing the phases such as cloudification, virtualization and Internet of Things amongst others when describing whatever they feel is the next big thing that they will be at the forefront of the charge on.

If you hear:
“The Internet of Things will utilize Big Data to push Virtualization to the Edge.”
There is a very good chance that you are in the presence of a Visioneer practicing the art of Strategery.

How could you prove that statement wrong? How could you prove that statement right? When could you prove anything of value even remotely associated with that statement? Who would actually say something like that?

It appears that value is truly in the eye of the beholder.

However, a true practitioner of the art of Strategery would have probably uttered that statement years ago when those phrases were first coined, not now when there is the potential for some substance and measurability behind them. Today’s master of Strategery would more like be talking about the future next big things, which will include phrases such as robots and machine learning, not so much a virtualized system but virtual reality, and the objectification of experience. (As provided by Pocket-lint: http://www.pocket-lint.com/news/132555-what-comes-next-after-we-re-done-with-the-internet-of-things-intel-gives-us-some-clues)

I understand some of the value that Visioneers and Strategery bring to businesses. I am a little concerned that as the speed with which change is occurring in business increases, so seems to increase the number of people who purport to see Nostradamus like into the future to tell us what will come after whatever is next. And while it may be interesting to speculate on whatever comes after whatever is next, it seems that the commitment of ever larger amounts of precious resources to visioning it creates an increasing risk to the business environment.

The problem for me seems to be that when we have so many people who claim to be so focused on what is so far out in the future, we run the risk of falling into the “Chasing the next shiny thing” syndrome. We tend to devalue whatever we are doing today, or what we plan to do tomorrow because it doesn’t sound as cool as what we think we will be doing in a couple of weeks.

I understand the risk of not having Strategery and that is not what I am advocating. In the past all societies and organizations that had shamans, seers and Visioneers had a very limited number of them. That was part of the mystique associated with them and what made them interesting. Today we seem to be generating entire organizations and processes around them.

Now it seems that we are well on our way to the justification of another overhead group which by its very nature does not lend itself well to any utility or value measurements. If we are going to do it, we might as well have a new name for it: Strategery.

Little Things

Usually I start off one of these articles with a specific idea in mind. I try to examine a topic or a specific facet of business that I find interesting and provide my take on it. I end up trying to make a point or infer a position, and I also try to make it a little entertaining, at least to myself. I have been told on multiple occasions that it is not uncommon for me to miss that entertaining objective for others. Today I am thinking I might change things up and try a little different approach to things.

None of the topics running through my mind really seem worthy of their own entire article. However there doesn’t seem to be a way to banish them from my thought process in favor of a perceptibly higher priority topic. They continue to pop up and present themselves in various forms, apparently clamoring for my attention. It appears that the only solution is to run through them all and let them be sorted out on their own.

Fridays

Is it just me or does anyone else notice a perceptible drop in attendance at the office on Fridays? I understand all that has been written about the benefits of flexible hours and virtual offices and the like. If that was truly the cause of this phenomenon I would expect a little more even distribution of lower office attendance days across the rest of the work week.

I have seen the new television commercial where the “boss” proclaims much to everyone’s amusement that “Wednesday is the new Thursday”. That’s fine, but I definitely must have missed the memo where Friday has become the new Saturday.

On a related topic, I don’t seem to have much sympathy either for those who are ever more frequently complaining about having to attend calls or meetings on Friday afternoons. The last time I checked Friday was still part of what has been so quaintly and colloquially referred to as the “work week”. You know, that eight to five, Monday through Friday thing?

This is especially interesting to me since the latest information from Gallup.com is that the average work week is no longer forty hours, but closer to forty seven hours. That would mean that instead of just working eight to five Monday through Friday people are on average also working eight to four on Saturdays.

So I guess the conundrum to solve here is that people are working more hours and the business offices have lower attendance on Fridays. With all the additional hours being worked I am not so sure that more is actually being accomplished. Interesting. Maybe this one does deserve more thought and research. I’ll have to think about it.

Spam

I passed a milestone a little while ago. I am now averaging more than two hundred spam emails a day on my corporate email account. That is correct. Across a typical eight hour day I am now receiving a spam email every two and a half minutes. I must really be popular with the spammers. I don’t know why. I never respond regardless of how tempting they tell me their offer is.

What is a little more than disconcerting to me is that both my email system and my computer recognize that the junk emails are spam, and regardless of what setting I use to try and stem the ever increasing flow, nothing seems to work.

Now my system lets me know that they are spam, as it continues to present them to me:

picture3

If the system knows that they are spam emails, why doesn’t it just get rid of them, or better yet, block them from even being presented. This number does not include the approximately fifteen other emails that did go directly to my junk email folder because I had already individually blocked the sender of previous spam emails.

As an aside I went out to www.todayifoundout.com and looked up the origin of the term “spam” as it relates to emails. This is what they had to say:

“The real origin of the term comes from a 1970 Monty Python’s Flying Circus skit. In this skit, all the restaurant’s menu items devolve into SPAM. When the waitress repeats the word SPAM, a group of Vikings in the corner sing “SPAM, SPAM, SPAM, SPAM, SPAM, SPAM, SPAM, SPAM, lovely SPAM! Wonderful SPAM!” drowning out other conversation, until they are finally told to shut it.
Exactly where this first translated to internet messages of varying type, such as chat messages, newsgroups, etc, isn’t entirely known as it sort of happened all over the place in a very short span of years, in terms of the name being applied to these messages. It is, however, well documented that the users in each of these first instances chose the word “spam” referring to the 1970 Monty Python sketch where SPAM singing was drowning out conversation and SPAM itself was unwanted and popping up all over the menu.”

“Drowning out all other conversation…” That sounds about right.

Spam Calls

As if spam emails are not enough, it seems I am now getting more and more spam phone calls as well. They are coming in on both my personal as well as business phones. These calls seem to have also spiked in frequency most recently.

I initially tried to be polite when I told them that I wasn’t interested in whatever it was that they were sure that I wanted to talk about. They just kept going on with their spiel. I would then be forced to hang up anyway. I then tried being a little more “forceful” in communicating my desire that they should never contemplate calling me again. Despite my directly questioning their intellects and species orientation, this didn’t seem to work either.

I have settled on what I think is a good solution to this particular business problem. When I receive a spam call, I simply answer the call, lay the receiver down and go on doing whatever it was that I was doing when the call interrupted me. The auto dialing system then connects the call to a person on the other end and I can eventually hear someone start speaking, and then realize that no one is listening. Eventually they hang up and go away.

Since these auto dialing spam phone call shops are predicated on the efficiency of the system, this method disrupts their entire process. I think that they then put me on some sort of a “do not call” list as the number of repeat offender calls from these places seems to be reducing. The only problem is that there seem to be so many new ones popping up to take their places.

I don’t want this to seem like some sort of scree or disconnected rant today. Business is obviously changing. How people work, where they work and what they do has changed. I have noted in the past that I am not so sure in many instances if these changes have been for the better. Working more hours from a virtual office, does not in itself indicate any sort of an improvement to me. It does however seem to be instrumental in generating what is now a forty seven hour work week.

I am not sure what the business benefit of generating spam is. I guess it can be considered the electronic replacement for Direct Mail Direct Response (DMDR) marketing and since there is now no cost for postage it seems to be running amok. I don’t think I have ever seen or heard of anyone responding to that stuff although a DMDR response of one to two percent was the expected target. I guess the logic is that if the volume of junk mail is increase by an order of magnitude then the response will increase proportionately as well.

Still, sending me ten requests for the thing I didn’t want once isn’t going to improve things.

Generating spam of any kind should be a punishable offense, at least in my opinion. Living in Texas the idea of dragging spammers through cactus or horse whipping immediately comes to mind as a suitable punishment. No need to get too medieval on them, at least for the initial offense.

I think that’s enough disparate business topics for this session. I’m sure I’ll have more to discuss in the future.

Work and Effort

Wow, was it just me or did the last year and a fair chunk of the first month of this year just fly by? According to Einstein time is supposed to slow down the faster you go, but that doesn’t seem to be the case in business. It seems that the faster I try to go the faster time tries to go too. It’s interesting how in just about any race with time, time has a tendency to win. Go figure.

I think I may have touched on this topic in the past, but since we are at the relative start of a new year, I think I’ll spend a little more time on it. As we start out on a new year with new opportunities, new goals and new hope, we cannot forget that we must also reflect on the past year. This reflection is normally referred to as an annual review. Depending on how you did last year this reflection can either be a pleasant or unpleasant experience. I think most of mine for the most part have been reasonably pleasant experiences. I think that is because a learned early on the difference between work and effort.

I have mentioned in the past that I have an affinity for physics. This seems to serve me in good stead when my son brings home his high school physics assignments such as building a bridge out of paper or trying to construct a capability to disperse the force of a mass rolling down an incline plane. It’s kind of cool to be a go-to guy for your son. I just hope I got the equations right.

I also find that sometimes it relates directly to business as well. To a physicist work is done when a force that is applied to an object which moves that object. The work is calculated by multiplying the force by the amount of movement of an object (W = F x d).

In this example “Work” would equate to the goal that was set for the individual or business at the beginning of the year, “Force” is the equivalent effort that someone expends in the pursuit of that goal and “d”, the movement is the equivalent of an almost unknown item which I’ll call an efficiency or “success rate”. So for business the equation for work would be Work = Effort x Success Rate, or W = E x SR.

What this means is that the effort expended and the achievement of the goal may or may not be positively linked. This would explain why some goals would seem to be easily attained with apparently little effort and some goals may be unobtainable regardless of the amount of effort expended.

This is something of a roundabout way of saying that just because you worked hard last year; it doesn’t mean you are entitled to a good year end review.

Everybody works hard these days. The exception might be “Wally” in the Dilbert comic strip (by Scott Adams), but by and large everyone puts forth the effort. Even Wally puts forth an effort in his quest to avoid work. Effort is good, but it is at this point table stakes.

“Work” as it is defined in the annual review is the measurement of the achievement that they effort generated. If you are in sales and you have a quota that means you have a numerical target, such as orders. You can put forth a great deal of effort but unless you actually get some orders, according to your compensation plan (and probably your sales manager) you didn’t really accomplish anything. So by these measurement criteria you in fact did no work.

Catch the difference here? Lots of effort does not mean you did any work.

I purposely try to create primarily quantitative objectives and goals for my teams. There will always be a certain amount of qualitative acknowledgement associated with them, but for the most part I want them to be numerical, and measurable in nature. By doing this you remove a great deal of the effort versus work type of discussion.

In business we keep score via the financial numbers. If you can’t create objectives and goals for any of the business functions that you may have, that somehow relate to or distill down to these types of financial numbers, then I might suggest that a review of the necessity of the function being measured might be in order. Again to simplify things: If you can’t create a viable metric for a function that relates to the achievement of one of the financial goals, you had better look at the viability of the function, goal and metric.

Numbers are finite. We all seemed to get a working knowledge of numbers dating back to approximately the second grade. We all know when one number is either larger or smaller than another number. It is usually not open to much interpretation. This concept usually leads to readily acknowledgeable annual reviews, regardless of the performance level.

Too many times we create “soft” goals that are somewhat open to management as well as staff interpretation. Any time there is an open interpretation of an objective you can be reasonably assured that there will be different interpretations of the achievement of the objective. This is the essence of the effort versus work example.

Non-quantifiable goals invite an effort based annual review. Quantifiable goals invite a work based review. Effort based reviews can lead to a basic inequality of reviews across an entire team. Instead of measuring progress and achievement you are instead measuring activity. Activity and progress are as different as effort and work. It is as different as splashing around in a pool (activity), and actually swimming across it (progress).

We all know that is possible to appear busy without actually accomplishing anything.

In looking back at the last year, and at last year’s goals it may be difficult to implement a quantifiable measurement scale, if the goals were not originally established with such a scale in mind. However, the other aspect of the early part of the year is that in addition to reviewing last year’s performance, it is the time and opportunity to set the goals and objectives for the coming year.

The beginning of the year provides leaders with the opportunity to modify the goals and objectives as well as the measurement scales and criteria so that they can be quantitatively based. By doing so the leader enables the team to focus on progress and achievement as opposed to activity, and work as opposed to effort. It enables the team to understand and make the distinction associated with knowing if they are doing something that will ultimately contribute to achieving an objective or if they are doing something that just keeps them busy.

The key point here is that when it comes time to review this year’s performance at the beginning of next year it would be to the benefit of all members of the team to have defined quantifiably goals, and a known scale by which they will be measured. It makes this time of the year a little easier for everyone involved.

Forecasting

No discussion of forecasting would be complete without some back handed comparisons to those people who actually make their living by forecasting, namely weather forecasters. There are others that also can be said to make their livings this way. People who are in the stock or commodity markets are in effect forecasting the upward or downward movements of prices in the markets based on whether they buy or sell at any specific time. But when it comes to forecasters, it is the weatherman that everyone immediately thinks of. Believe it or not this idea fits into my general business and sales approach to topics. I think it is pretty apparent that if you forecast in business as accurately as weather-people (need to be politically correct here) forecast the weather, you won’t be in business very long.

I heard a great weather-person related joke the other day. It goes:

When I die I want the television weather-person to be the one that lowers my casket into the grave. That way they can let me down one last time.

To be honest it has been a challenging period for weather forecasters here in Texas. Probably not so much in the other parts of the country. Elsewhere in the country it seems that any forecast that contains the words “cold” and “snow” has at least a reasonable chance of being correct. Here in the last week we have had sunny warm spring like days, rain, sleet, ice (yes ice, they immediately shut the entire state down when anyone anywhere in the state gets ice) and snow. Sometimes we have had multiple selections on the same day. We have had almost fifty degree temperature swings between the sunny warm highs and the snowy cold lows in just two days. Still, you would think that based on either the officially certified coin flipping or dart throwing weather predicting process that appears to be used, that the laws of probability and statistics would have to take over at some point and they would get at least one forecast right.

It is against this publicly recognized futility in forecast accuracy that we need to look at forecasting within the business environment.

Successful business is predicated on properly setting expectations. If you set your customer’s expectations properly, and then meet them, they will be satisfied. We all know that a satisfied customer is a good thing. If you set the stock analysts’ and business press’ expectations about how the business will perform, and then meet them, the price of your stock will probably go up. We all know that an increasing stock price is also a good thing. If you set the expectation with management regarding the performance of your business, and then you meet it, you will probably get to keep your job and may even be asked to take on more responsibility. Keeping your job is also a pretty good thing.

Setting expectations is also known as forecasting. It leads to a thing called “predictability”. Predictability is usually a desirable thing in business.

Good business forecasting is all about breaking down the complex (in this instance, “the business”) into its component pieces (such as “revenue”, and “costs” and things like that) and working the individual forecast for each one. You can then combine these individual forecasts into the overall business forecasts.

It also provides you an excellent insight into which specific components may need to be looked at for potential adjustments should the total forecast not meet what may be considered acceptable levels of expectation by management.

Expectations are funny things. They can cut both ways. Businesses usually want to set expectations that are difficult but achievable with senior management. Senior management usually wants to set the expectation that it requires more from the business than the obviously easily obtainable expectations that they are currently being provided. Senior management will then in turn try to set expectations for the overall business performance with the analysts and market that are believable, and the analysts and market will decided whether or not they will believe them.

This all takes us back to forecasting. Expectations are set with management through the use of forecasts. There are forecasts for revenue. There are forecasts for costs. And then there are the resulting forecasts for margin or earnings. Hopefully there is a relationship between the revenue and the cost forecasts so that margin and earnings can in fact be realized.

As an example of forecasting, in Texas you know that in May it is going to start getting hot. By June it will be hot. It will probably stay hot until September and that by October it might start to not be so hot. This is known as “Climate”. In general you can expect this. You can look at historical averages and trends and see what the various highs, lows and precipitation were for specific days, but you don’t know what they will be this year. That specificity is known as the weather.

The closer you get to any specific date, the more accurate your forecast can and should be for that dates weather.

The same should apply for businesses. At the beginning of the year there is a general expectation of what the “climate” should be for any specific business. This is based on past performance and the desires for growth (or contraction) in the component markets and businesses. As data comes in and performance evolves the forecast for any specific piece of the business will begin to come more and more into better focus. Unexpected events and unforeseen issues can always occur and cause the accuracy of the forecast to change, but in general, the closer you get to a specific date, or target, the more accurate you should expect the forecast to be.

The key here is that the forecasts should always be based on the factual data. If it has been cold and snowy in the northeast for the last few weeks, and there are still several feet of snow on the ground, then no matter how badly senior management would like to see sunny, spring like temperatures it is probably best to stay with reality. Understanding the business equivalent of “in the summer it’s hot and in the winter its cold”, regardless of the specific day to day variations, is an important aspect of accurate forecasting.

Forecasts are designed to inform people of what they need to know and hear, not what they want to know and hear. They are keys to setting expectations of the business’ performance and targeting areas for attention when expected performance does not meet the business needs. When a forecast is missed it will have a ripple effect throughout the business.
When a weather forecaster misses a forecast there is a possibility that someone may get wet when they thought they would be dry, or they may be cold when they dressed for warmer weather. When a business misses a forecast the financial performance of the entire organization can be brought into doubt. This usually results in actions that must be taken to bring the financial performance back in line with expectations. These actions can usually be distilled down to one of two things: increasing revenue or decreasing costs.

The need for decreasing costs is never a fun forecast for the people in a business.

Statistics and Performance

I always thought that Mark Twain was purported to be the author of one of my favorite quotes:

“There are three kinds of lies: lies, damned lies and statistics.”

I have come to find out that in his own autobiography Twain attributed this quote to a nineteenth century British statesman and former Prime Minister Benjamin Disraeli. This fact perplexed me slightly so I continued my research a little further using those modern bastions of all knowledge, Google and Wikipedia. After an exhaustive five minute search I found that the general consensus is that no one knows for certain who the author of one of my favorite quotes is. This fact will make it reasonably difficult to give attribution in the future should the opportunity to use it come up again.

Be that as it may, it may be time for me to take the slightest exception with one of my favorite quotes. When you are looking at the performance of a business, the numbers don’t lie. Now the way the numbers are arranged can sometimes be confusing or even misleading, so the business leader needs to be aware and careful.

I don’t say this too loud or too often, but I think I may understand numbers reasonably well. Physics, Mathematics, Finance, I have studied them all. And believe it or not, to one extent or another they are all numbers based disciplines. In addition to this degreed book learning, I have had what could almost be called a moderately useful stint of practical numerical application in the business world.

I sometimes use this unbridled numerical capability and familiarity to complete the most difficult of Sudoku number puzzles in the USA Today newspaper, or various in flight airline magazines. Just to stay in practice and make sure that I still “have it”.

Since it appears that this is going to be a quote based discussion, I might as well continue in that vein. Hippocrates, the ancient Greek physician (hence the source of the physicians “Hippocratic Oath”) said:

“There are in fact two things, science and opinion; the former begets knowledge, the latter ignorance.”

I think the corollary here is that if it cannot be expressed in numbers in business it is not fact, it is opinion. I have written and spoken in the past about the need for leaders in the business world to become increasingly more familiar with “numbers” of business as they matriculate up the leadership ladder. There may have been past instances of corporate wizardry where a leader intuitively knew what needed to be done (maybe Steve Jobs, or Bill Gates fall into this category), but their moves were invariably backed up by the analysis (numbers) justifying their moves. For the rest of us, as Robert McNamara said:

“Get the data.”

While I am muddling along focusing on equating science, facts and numbers, I probably should pay at least some heed to the power of opinion. While the truth may be out there, it will be people’s opinion of it that drives its valuation. As John Maynard Keynes, a man who is credited with some of the very foundations of economic theory (think of the source of Keynesian Theory) said:

“A study of the history of opinion is a necessary preliminary to the emancipation of the mind.”

Okay, enough quotation roulette. I hope you get my point, whatever it was.

Now back to the topic; in the business world, the proper statistics, when properly presented and interpreted are invariably a good indicator of business performance. That is correct. Statistics, which are the indicators associated with past performance, are usually good indicators of future performance. I understand that Mark Twain, Benjamin Disraeli and whoever actually created one of my favorite quotes regarding statistics are all probably collectively grumbling, wherever they are, but this is the case.

This brings us to probably the most common and clichéd quote in this dialog:

“Past Performance is Not Necessarily Indicative of Future Results”

We have all probably seen it or read it on just about any investment prospectus ever written. Why is it there? To make sure that we all know that just because an investment that has done well in the past does not mean that it will continue to perform, or do as well in the future. Investment firms don’t want anyone to cry “foul” if they have not interpreted the statistics properly or if a statistical performance anomaly occurs in the market. So with this in mind I now ask the following question:

When we have the choice of making an investment, or are reviewing the continuation of an existing investment, which investment alternatives do we choose: those that have done well in the past, or those that have done poorly in the past?

All things being equal, and pursuing an intelligent risk diversification portfolio, understanding long term investment return and interest rates, blah, blah, blah…..we almost always pick the one that has done well in the past expecting (hoping) that all things being equal it will continue to exhibit the same performance traits going forward. We very rarely select the one that has been performing relatively poorly expecting (hoping) that it is going to turn around. Why do you suppose that is?

Welcome to the world of statistics. You have taken the data points associated with performance in the past, extrapolated the line or curve forward and made a choice and prediction about the future. Statistically speaking that is probably the correct choice. But this isn’t a discussion about investments. It is a discussion about business. And the same exact concepts apply.

Herein lies a rub. Statistics can only be misleading if you don’t understand the underlying numbers. Hence my predilection and continued haranguing regarding the necessity of leaders being numerically literate. Remember there is another quote that may also be incorrectly attributed to Mark Twain:

“Figures don’t lie, but liars do figure.”

The author of this quote also appears to be shrouded in the past as well, but like all the other good quotes of the period, it was attributed to Twain.

Let’s look at a simple statistical example to make my point. Let’s say that in the next measurement period (it doesn’t matter how long the period is) that a business sells one more product unit than it did the previous measurement period. This is good right?

Basically the answer is “yes” selling more, any more is usually always good, but how good? If it is your first measurement period in business, it’s hard to say how good without more data (statistics). If you only sold one unit the last period, and then you sell two units this period, that is sales growth, but it is still difficult to evaluate without more data. If you sold a thousand units last period, then one more this period might not be statistically important.

On the other hand all of those responses could be changed depending on the cost and value of the product being sold. If you are selling nuclear power plants as opposed to canned hams, a single unit growth in sales could be seen as spectacular, whereas the sale of a single additional canned ham might not be a cause for much celebration.

Statistically speaking selling one more than nothing is infinite sales growth but it is still only one unit. Selling one more than one is one hundred percent growth, but it is still only two units. Selling one more than one thousand is only one tenth of a percent growth. All represent the same one unit growth, but can be represented significantly differently in the statistical growth example. The wary leader needs to always be aware of how statistics are being used and the story that is trying to be portrayed.

Again, when using data and statistics unless a business can specifically quantify what changes it is going to make and how those changes are going to be translated into performance, like your investment decisions discussed earlier, you would expect the business to perform very much in the future as it is doing today. It is through this process that the market valuates companies, and it is through this process that companies provide their future forecasts of performance.

Leaders always need to be aware that statistics are extensions of the data. They are the way that the data is being presented and interpreted. The data is the fact. It is the consistency of the statistic, the interpretation of the data that is the key. Understanding the underlying numbers, and the analysis and statistics associated with them is required and essential for the successful leadership of the business. To not be able to do so is to be at the mercy of those that do.

Because as Mark Twain also (and finally) said (and this one is actually directly attributed to him):

“Facts are stubborn things, but statistics are pliable.”

You Don’t Know

Over time I have learned that I don’t know everything. I am going to pause for a minute here for several reasons. The first is for effect. The second is so that I can let the hysterical laughing and rampant applause in general die down. The third is so that I can go and pick my wife up off the floor. I believe that she was so convinced that I did in fact know everything that my admission that I didn’t has created such a shock to her system that she fainted. That must be it. I am sure of it. It is one of those things that I do know. Doesn’t every wife believe in the infallibility of their husband?

At least that is the interpretation of her response that I am choosing to believe.

The next thing you know I will be asking for directions when I am lost, or reading the instructions on how to put something together before I actually start to do it.

Nah…..

Now remember I said I didn’t know everything. I didn’t say that I didn’t know anything. (My wife is now looking at me out of the corner of her eyes again. This time I am not sure how to interpret her behavior.) I would like to hope that after all the experience that I have gotten (Randy Pausch, the author of “The Last Lecture” said “Experience is what you get when you don’t get what you wanted”, and there are so many things that I have wanted and not gotten that I could conceivably be considered one of the most experienced people around) and all the book learning that I have done in college and elsewhere, has enabled me to know a few things.

One of the things that I do know is that there is more information out there about every business topic, business issue and business opportunity than can ever taken into consideration when a decision is to be made an action taken. I didn’t let this fact stop me. I openly suggest that you don’t let it even slow you down. I do think that you need to be aware of it, and prepare for that rarest of rare days when one of your assumptions, decisions or actions turn out to be the wrong one. There is also one other thing that you need to be aware of when making decisions or taking actions in business.

Everyone is fighting a battle that you don’t know about.

I saw this line on a LinkedIn splash page of all places. Like so many other seemingly non-business related comments or topics, this got me to thinking about business, sales and how to lead.

I have stated in the past that business is all about the person to person interactions between people. All too often we have our decision made and our actions decided. All that is left is to align everyone else with our obviously well thought out and logical approach to things. It should be easy. We are already on to the next topic in our minds. Only the people who should see the obvious wisdom of our leadership, don’t seem to be catching on as quickly as we would like or expect. They seem to have their own views as to what should be done.

It’s hard to have a broad view of things in business when you don’t have a broad responsibility. You have to think in terms that are larger than the topics and areas that you can affect. Not everyone does this. That is an understatement. Very few people seem to do this. You have to understand something about the battles that other people are fighting. You have to do this while understanding and fighting the battles that are your own. It takes extra effort.

You have to understand the issues that external competitors are visiting upon sales opportunities as well as the unknown / political issues that the customers themselves are bringing to bear when arguing pricing or deal desirability with the sales team. Having been there, it should be understandable why so many sales teams seem to get more frustrated with their own companies than their competitors, when they focus solely on one internal metric instead of the broader customer requirement.

Conversely, the same can be said about the sales team that only looks at the sales volume and does not take the time to understand the company’s cash flow or profitability issues when they bring a customer opportunity to the table. Orders are always good, but it is the answers to the questions such as if and when the company will get paid that will keep the company in business. It may be hard to understand or even believe, but there is actually some business out there that is not worth having. The key is to be able to identify and differentiate it from the other more desirable types of business.

The point that I am so clumsily trying to make here is that we all are going to encounter resistance in the normal course of the execution of our business responsibilities. How we deal with that resistance will have a great deal of impact on how we are to be perceived as leaders. We all have a tendency to only examine issues from our own specific perspective or point of view. The leader will try to understand the larger issues, even if they are not responsible for them. The leader will try to understand what the unknown battle is that the other person is fighting.

The question that then arises is how does the leader know what they don’t know?

Despite the very Zen sound of this question, it is somewhat the basis of leadership. It is not enough to know that someone is providing resistance to a desired course of action. It is more so knowing why they are providing resistance and how to resolve, reduce or avoid it altogether.

Fortunately, there are few people who are so contrary in nature as to oppose our every idea solely on the basis of who made it. Those that do behave this way are normally referred to as “spouses”, and again fortunately, most of us do not work in business with our spouses.

What that means is that in general, there will probably be either a known or unknown battle that people are fighting that will be a cause for any perceived resistance to your plans and activities. Understanding what the external pressures and unknown battles are will enable the business leader to position their requirements in such a way as to avoid the conflicts associated with these unknown battles.

It’s not enough for the leader to say what they don’t know. They have to understand why they don’t know. Continue reading You Don’t Know