Thinking Faster

The Government we deserve

Here on the eve of the 4th of July it is fitting to reflect on what the 4th of July should mean to us.  Over 200 years ago a number of brave men set out their declarations to the king of England, demanding certain rights.  By signing the document they committed high treason, and if captured in the ensuing conflict most of not all of them would have been beheaded for their crimes.  Think about the personal risks and fortunes they put at stake to make these declarations, at a time when public sentiment was mixed.  In 1776 there were still a significant portion of settlers in the colonies that were Loyalist. 

Over time our democratic form of government has withstood a number of internal and external conflicts.  Some of those wars we chose (war with Mexico, war with Spain, war with Iraq) and some of those wars were thrust upon us (WW1, WW2).  We've been divided by a terrible, bloody Civil War that over 100 years later still shadows us.  Our government has been tested by a wide range of issues - women's rights, minority rights, taxation, regulation and many other issues and challenges.  We've managed to make it through the Great Depression and the wild swings in the economy due to the dot com boom and bust.  Here we stand, still the best nation on earth in terms of quality of life, freedom of expression, and opportunity for any individual.

Yet, many of our freedoms are taken for granted, and our population is less involved and less enthusiastic about its governance than ever before.  Far too few people are aware of the impending legislation in their state and federal congresses, and are far too removed from the day to day governing.  We as a people have allowed a permanent political class to evolve that dictates what we do, how we live and how we interact.  In the US Senate, the majority of the senators have served in the senate for over 20 years, several of them for over 40 years.  Isn't it time for fresh perspectives and fresh insights?  Yet we return the same people with the same ideas time and time again.  It is becoming harder and harder for outsiders or people with different perspectives to even campaign for office, given the rights and protections of incumbents, and the gerrymandering of congressional districts.  As districts become "safe", there is no need to campaign across political ideologies, so the right and the left become less likely to negotiate and bargain, locked in a zero sum game.

Need examples?  Look no further than the completely dysfunctional New York Senate, where currently the "Republican" senate refuses to recognize the "Democratic" senate and vice versa.  Absolutely nothing is getting done at a time when New York is floundering.  New Yorkers are getting the government they deserve, since they have been willing to allow these politicians to lock into extreme positions and guarantee themselves re-election.  Or, perhaps we should look at California?

In California, the state budget has risen faster than the growth in households or inflation.  The people have been happy to vote into office representatives who repaid their votes by voting for more and more benefits, dramatically raising the cost of government.  In good times, it was a precarious position as the state barely managed to close the budget loopholes.  In bad times, as we face now, there are simply no other sources of revenue.  Either Californians must dramatically increase taxes or dramatically reduce services.  This should not be a surprise to anyone, especially the political leaders, but no one seems to want to step forward and fix the problems.

We, all of us, are getting the government we deserve.  We have rights and obligations as citizens to step forward and communicate our desires, wants and beliefs to our elected officials, and to vote them out of office when they fail us, which I think many of them have done for years.  We have the right to petition our government and demand accountability.  We the people have the right to determine who represents us, and should more actively consider who our representatives are, and what their intentions are when governing.  We should act to eliminate gerrymandering and force the states and localities to assign voting districts that intentionally cross geographic lines, neighborhoods of different ethnicities to create districts where individuals have to win votes from a range of voting perspectives, rather than districts that are safe for one party or the other.  We should pass referenda in the states that demand that our representatives balance budgets each year and present a fully balanced budget on the day the budget year starts, otherwise the representatives lose any compensation that their office provides until the budget is finalized.

There are too many of us simply accepting what the Republicans and Democrats collectively are doing to damage our governance.  It is time to stand up and demand change - not from political parties but from our total governance.  If the Republicans and Democrats can't figure out that we need to do things differently, then let's have another Declaration of Independence - independence from parties and a revolution in the way we are governed.

Intense Ambiguity

I heard a new phrase on a conference call with a client this morning.  The client claimed they were suffering from intense ambiguity.  I knew immediately I had a post in those two words.

What the client meant was that there was significant pressure from the management team to do something - especially new and interesting things.  However, there isn't necessarily a corresponding amount of clarity about what those things should be.  So, there's a lot of pressure to get things done, just no one is really sure what kinds of things should be done.

This is known, my friends, as a failure to communicate.  There are only three possibilities here:

1. The management team wants new and interesting products and services delivered, but hasn't communicated the strategic goals of the company.  Either they don't have clarity around that themselves or they are waiting for a couple of really bright people to present them with a strategy that works.
2. The management team has no ability to generate a strategic vision and is hoping and praying that someone in the organization has a compelling vision that they'll present, so the management team can champion.
3. The management team has communicated a vision that was so tissue thin and unimpressive that everyone missed it and is still waiting for the "real" vision.

So, here's the dilemma:  Would you rather be led by a madman with a very clear strategic vision that may not be correct but is well formed, or would you rather be "led" by a group of senior managers who cannot or will not provide a clear strategic vision?  In the first case you know specifically where you are going, you may not agree but it isn't hard to align vision and resources to those goals.  In the second case, there's a significant amount of pressure to do something, but no one is clear what that "something" is, and so a number of different teams acquire different interpretations and work at cross purposes, or nobody does anything, waiting for clarity.

As for me, hoist the Jolly Roger any day.  I'd rather work to a clearly flawed but clearly articulated goal than an ambiguous plan with no clear strategy any day.

How's that intense ambiguity working for you?

Three Failures of Management

I was talking to a colleague, who works as a consultant to management in a field different than mine.  Interestingly, he seems the same issues related to decision making as people in my organization often see.  When we boil down the reasons why managers fail to do what should be obvious to do, or when they "need" consultants to do what they ought to do or ought to decide, the reasons come down to three things:

1. Lack of vision.  Either there's no clear strategy or mandate from on high, so that excuses them from making a decision or they are unwilling to advocate for a new strategic direction, so they continue on in the gray areas, doing the regular daily business without any strategic insights.
2. Lack of time and bandwidth.  They are too focused on attending meetings and getting done the daily regular work that they neglect to take time, or simply don't believe they have the time, to do the big picture stuff, which goes lacking.
3. Fear of failure.  In this environment, everyone believes they are on the tightrope, and one false step or decision could be a career killer, so no one wants to make a mistake.

For all three of these failures, a consultant - for better or worse - can fill the gap.  A consultant can claim to have more vision or better insight, and therefore can recommend a course of action.  A consultant can bring more people to bear and more bandwidth - after all, people and bandwidth are a consultants stock in trade.  And a consultant can bear the blame of a possibly incorrect decision - after all, we just took the advice of consultant X.

As a person who makes his living as a consultant, I understand these things, yet it galls me that so often mid and senior level managers will not take the course of action that makes sense for their teams, their people and their company.  Almost inevitably the rationales boil down to one or more of these three failures.

OK - if they are consistent failures, what could managers do?

1. Ask for a clear strategic direction from the senior executives, and failing that, develop a clear strategy for your product line or group that details your intentions, and your efforts to meet those goals unless instructed otherwise.  Rather than work in the dim gray areas of strategic intent, why not create one small bright light for your team to follow?
2. Delegate whenever possible, refuse to attend meetings unless they are absolutely necessary and budget time for the important, not the urgent stuff.  Next company I go into I'm taking in fire helmets, since the most consistent excuse for failing to get things done is "fighting fires".  If we are so good as managers, why are we constantly fighting fires?
3. Make the tough decision and live with the results.  If we want to do things differently, and better, then we need to take decisions that will on occasion be new or different from what everyone else does.  A good manager shouldn't fear for their job if they have a good rationale for making an interesting decision.  If so, then let's just hire robots to make the decisions.

Thankfully, I think few individuals will adopt these principles, keeping us consultants in business.

Taxing or Demanding?

I'll diverge from my normal productivity and managerial discussions to address something as a libertarian I find disconcerting - the discussions in our local, state and federal governments about changing the behavior of individuals and corporations.  Just yesterday there were several announcements on this topic that seem on the surface to be reasonable but their implications could carry severe consequences.

Item One:  The US Federal government seems interested in defining appropriate levels of compensation for executives, not just within the financial services industry, but in any industry.  What would cause the government to believe it should provide dictates, or even guidelines, to a private industry (at least those that did not take federal support money?)  And why should we be surprised when the government, having given money to firms, now believes that it can dictate management practices and principles?  From an organization that is hopeless about managing its budget comes dictates on private industry?  The next shoe to drop will be overall compensation for any employee - including salary and - wait for it - health care.  If the government can dictate salary guidelines, then it can soften the blow by offering better or more extensive health care benefits as a tradeoff.  Or so it will seem.

Item Two:  San Francisco now requires citizens to sort trash by type:  food waste to be composted, recyclables and "trash".  The collection firms have been assured that they will not be required to be "garbage" police, but there are fines on the books if you place a pizza box (compostable) in the recycling or trash bin.  Now, this is not a lot of work necessarily for the individual, but an entire infrastructure has to be created to manage the outcome.

In both instances it would be easier and simpler to create tax incentives to address these issues.  There would need to be less government and bureaucratic oversight and the outcomes could be achieved much more efficiently.  In the case of San Francisco, one could argue that addressing the packaging issues in many cases would be a more prudent approach, or creating taxes on individuals or firms with higher usage of the land fill.

Creating incentives and identifying the kinds of behavior desired by lowering or raising the cost of the activity has direct results.  Gasoline prices rise to $4 a gallon and people buy more hybrids.  Nothing changes in the environment and gas prices fall and hybrid sales drop.  Why do we insist on creating all of this oversight when we can achieve the same goals with less effort, less oversight and less bureaucracy?

Raise the cost of the activity and let the market decide how to address the issue.

Thanks for letting me get that off my chest.

Waiting for the ax to fall

In tough economic times, it seems, most businesses (and by extension most people) are uncomfortable making decisions, since the future is so murky.  I guess in some instances it makes sense to avoid making decisions when the future is unclear, but currently so many businesses (and people) are dithering on making decisions that two things are occurring simultaneously:

1. The organizations, businesses or people with the fortitude to make a decision are leaping ahead, not just moving slightly ahead.  Most of us won't be able to catch up with these very decisive firms and organizations.  Examples include the Federal Government in the case of the automotive firms. Who would have thought the government could move that quickly and decisively.  The decisions being made now will ripple through our economy for decades to come.  Other examples:  WellPoint and larger health insurance firms, who aren't waiting for the decisions from Congress on health care, but are getting out in front.  Those insurance firms not willing to make decisions now aren't simply losing ground, they've lost the ability to even negotiate the manner and timing of their demise. 
2. The organizations, businesses or people who are unwilling or unable to make decisions are rapidly reaching obsolescence.  There's really no strategy for simply standing still while the rest of the market goes through a wrenching change.  Whether you believe the recession is "V" shaped, "U" shaped or "L" shaped, or that we'll never come out of the recession again, you should be acting on those assumptions.  A complete failure to act is a failure to lead, or to take control of your own destiny.

Simply sitting around waiting for the ax to fall is not a strategy.  It is an abdication of any decision making.  Whether you are an individual contemplating your future in an organization, or an organization contemplating your future in a market, it's time to get out the crystal ball and make some decisions about what you believe the future holds, and then act on those decisions.  Believe the recession will be over by Christmas?  OK, then what should you be doing now?  Believe most auto production is going to transfer to hybrids and electric vehicles?  Then get training on building those vehicles, or more importantly, recycling the batteries of those vehicles when they are depleted.

I talk to too many firms, and too many executives in those firms, that are simply pole-axed by the situation.  Rather than wait for the mist to clear, start by making some assumptions about the future and looking at the trends and demographic shifts taking place.  Certainly there are opportunities to be had, if one will only look for them.

When you wish upon a czar

Today we've learned that the administration plans to appoint yet another czar.  What's that make, four, five or six czars?  There's the Car Czar, the energy Czar, the education Czar.  Didn't we learn anything from the Russian revolution?

Seriously, let's think this thing through.  The notion of placing one person, one figure head to solve a thorny or intractable problem often makes a lot of sense.  In some instances a problem is difficult to solve because of a deadlock between interested parties and a person "in charge" of the problem can break a deadlock.  Other times a person assigned to solve a problem can bring fresh eyes or a new perspective to help solve a problem.  At other times a stern task master may be able to bring resolution to a problem by forcing the parties at play to get on with it already.  However, none of the Czars the administration has put into place faces the kind of problem that one figurehead can change, and most of them face problems that are highly distributed, with many different players, and that have a wide range of political interests and sacred turf at stake.  So, what we've most likely done is set these folks up to fail.

Let's take one at random.  Carol Browner was named as the Obama adminstration's energy Czar in January, nominally taking the role of Assistant to the President for Energy and Climate Change.  Now, the Obama adminstration also has a person in Stephen Chu who is the Energy Secretary.  One might wonder why there are two people with what seem to be clearly overlapping priorities.  Now let's also factor in Henry Waxman and Edward Markey, the two members of the US House of Representatives who are pushing the cap-and-trade bill forward.  All of these people, and many more, are involved in establishing the adminstration's stance on Energy and Climate Change.  Yet not long after Browner was appointed, she apparently disappeared from public view and comment.  Why?  Who knows, but perhaps the problem was so interesting and so politically challenging that EVERYONE in Washington DC and elsewhere has an opinion, and turf to defend or take from someone else.  Have we gotten our money from the Energy Czar?  In fairness, it's too early to tell.

However, looking at this from a management point of view, it doesn't make sense to add another level of bureaucracy to issues that are already well understood, especially since Browner doesn't control the levers of power (funding and appointments) that might help this problem get solved faster.  In fact, the problem of global warming is going to be "solved" by Congress with or without Carol Browner.

If we're going to have Czars, then let's either give them the authority they need to make the decisions that need to be made, or let's name them what they really are - figureheads.  Either allow Steve Rattner the ability to dictate to Government Motors what it should and shouldn't do, or don't call him a Czar.  This half-in/half-out model of management meddling is not good for the government and not good for the companies.  After all, even Czars need something to do with their time.

The adminstration seems to have learned its lesson with the "Pay Czar" although it is an easier problem to solve with fewer constituents and a group that is held in very low esteem.  Managing how much compensation firms that took federal dollars can pay is an obvious problem that can be easily solved and the results can be documented.  Now all we need is a Czar for the ports - hopefully called the quay Czar.

We need corporate jesters

Given the amount of information available to most executive teams, it is strangely surprising to discover how insular the thinking is inside most companies.  Even consulting firms, brought in for industry expertise and to identify new opportunities, rarely confront the limited thinking and organizational group think that happens in most firms.

Today David Brooks writes about GM and its problems.  He notes that two senior executives have written about the issues GM faces, most of which are caused by a corporate culture that rejects information from the outside.  While many of GM's financial issues are now behind us, are their corporate issues in terms of cultural arrogance and their ability to incorporate challenging and conflicting information in place?

If the management team can't or won't confront and synthesize what's happening in the "real world" and if management consultants and other advisors are only willing to advocate the party line, then who is going to inject a true third party or external perspective into the organization?  It's fairly clear that most consultants COULD do this but don't want to upset the lucrative financial agreements and projects that exist.  After all, they have a fiduciary responsibility to maintain the relationship with the client.  After Enron and Worldcom, we can't necessarily count on consultants or accountants to alert the world to malfeasance inside the organization, or for consultants and accountants to tell the executive teams that the emperor is not wearing any clothes.

The board of directors could do this, but there's too much clubby interaction and not enough true debate at most board levels.  This follows the "I scratch your back, you scratch my back" relationship of most board members.  While board members could bring this third party or market perspective, they often fail to do this as well.

Even industry analysts don't take a strong enough stand when they have the data they know can make a difference.  Gartner, Forrester, Yankee and a host of other firms too often couch their published material and tailor their private consulting findings to align to the expectations of the sponsor.

So, who should be the true third party voice and perspective?  Perhaps it's time we require a corporate jester - a person paid to tell the king (CEO and board) that they are naked.  Court jesters, while comics, were also the few people who could communicate to the king a different message than what he heard from his courtiers.  Perhaps we need to require a professional court jester for every company, to introduce what's really happening out in the market.  Bloggers and others can serve this function, but only if we can get the executives to listen.

In a world where I can buy products and services from anyone, at almost any time, through almost any channel, the firm with its finger on the pulse of what's happening in the market will thrive.  Contrary, firms that are insular and ignore or disdain what's happening in the market will fail.  Brooks argues that's one of GM's problems.  Given the fact that most GM executives were provided with free cars and in many cases free gasoline, is indicative that they did not understand the issues facing most car buyers.  Too many executives are too far removed from the reality of the market and don't get true, unadulterated facts about their products, their customers and their markets.  This has got to change for US businesses to be successful.

Twitter management

Somebody's got to do it, so it may as well be me.  One of the big questions we need to ask ourselves as we prepare to bring aboard a work force that is more accustomed to texting the person next to them rather than engaging in a conversation is - how do you manage a completely internetworked and constantly online population?

The point above, about texting someone just next to you - is both a real comment and somewhat tongue in cheek.  Yet, having watched my daughters text each other from across the couch, while listening to their iPods and reading/doing homework/watching TV, I am constantly amazed at the amount of information they can process and the filters that must exist in their heads to pick out what's important and what's vital.  And they do this often without reading too much into the dialog, written in a jumble of letters, numbers and emoticons that my wife finds similar to ancient greek.

Ignore for a moment whether or not these tools "should" be allowed in the organization - they are already there, whether you know it or not.  Instant messaging is almost as important in many organizations as email or the telephone, and soon concepts like Facebook Walls, tweets, discussion forums and a host of other social networking/social media and communication vehicles will increase in importance.  There are several reasons for this:

1. Social.  It's fun to be part of a group, and to share in what the group thinks is important.  I can be a member of several different groups, exchanging information and learning what other members of my group think is important.
2. Immediacy.  If someone is available, I can get a very quick yes/no answer using IM without creating the whole conversation necessary for a phone call.
3. Hip.  If everyone on my team is twittering and tweeting, and I'm not, then I'm not only unhip, but out of the loop on what might be important information.

So, just as we ask for all cell phones to be deposited in a basket each night for family time and to ensure they aren't being used when sleep is of the essence, so to might each leader or team need to set down some ground rules about how to communicate and which channels are appropriate.  What happens if somone on your team isn't a Tweeter?  How do you communicate if someone doesn't respond to text messages or doesn't have Facebook?  What are the appropriate communication vehicles and channels for your initiative, team or project, and what are the challenges if someone is left "out of the loop" because he or she doesn't want to use the messaging tools favored by the group?  When are these tools appropriate?  Should Twitter be used to make significant design decisions or to organize the weekly brown bag?  Do informal channels like Twitter and Facebook introduce informal communication like :>) or other emoticons or begin to blend the personal and the professional?  What information should be shared over these channels versus the corporate communication channels, especially in light of the fact that Facebook and Twitter, to identify two, happen in the open, rather than behind secure firewalls?

As a manager in a time of rapidly growing communication devices, you have two choices.  You can try to hold back the tide, or you can establish the appropriate uses of each tool and technology and align them to the working style and culture of your team.  By the way, the tide is already in, way in.

Aligning compensation and outcomes

What I've wondered for quite some time is why it is so difficult to align what we want people to do with how we evaluate (and, by extension) how we compensate them.  Increasingly, as companies hold the line on hiring, we are asking fewer and fewer people to accomplish more tasks, yet how we evaluate those individuals doesn't seem to change, and of course compensation models and metrics are either frozen in time or are so arcane that no one understands them.

Certainly with the computing power and focus on the individual that exists in society today we can structure programs that are tailored to individuals and what we need (want) them to do.  If half of my childrens' classmates have an individual education plan (IEP) which dictates a special course or study or testing or enhancement, then certainly we can structure individual evaluation and compensation models based on the work we urgently need to get done in most organizations.

Right now, of course, excessive compensation and compensation tied to options and stock are getting a close review due to stories in the media about executives pulling down millions in compensation.  In many of those cases one could easily argue that the boards and shareholders are doing a terrible job of evaluating the actual benefit created by the CEOs and executives.  Too often they seem to get bonuses or options regardless of the performance in the market.  While this is happening, many thousands of people within those same organizations are seeking clarity about what's important and what they are evaluated and compensated to do.  How this is possible given the systems and communication devices available is beyond me, but I routinely talk to mid level managers whose evaluation criteria are very unclear and don't match what they are asked to do, leaving them in a quandry.

If firms are really interested in getting the most out of their employees, then they'll address this yawning gap between how people are measured and evaluated, and what the management team actually wants them to do.  More closely aligning the evaluation and compensation with strategic corporate goals, at a group or individual level, will do more than any Six Sigma, Lean or other initiative.

Pay Attention!

I was walking through a client's hallways recently, getting a bit worn down by the sameness of the cubes, when I spotted a statement on a whiteboard that's stuck with me for a few days.  On the white board, in big, messy handwriting, was the statement:

A wealth of information leads to a poverty of attention.

Often we believe that we need more information.  In any circumstance we'll be presented with a list of options or decisions and demand more information to use to make a decision.  On top of this information is the amount of information that is flying by us every day, in many forms, written, oral and on the web.  As the number of information portals increases, and the range and types of information increase, we reach a tipping point where there's simply too much information, and instead of using information to make decisions we are seeking ways to identify the most important and relevant information.

However, at the same time, information about a host of other issues or circumstances is flowing our way.  Distinguishing between relevant and useless information in this stream of information is almost impossible, and many of us are reduced to snatching at information or narrowing our filters to receive and ignore information that may be helpful but just overwhelm.

The point of the statement is that what we are missing - what many of us lack in today's working environment - is not enough information, but enough attention to the important things.  We've migrated from decision makers who had to "go with their guts" and could focus their attention on important things, to those who simply cannot (and will not) get enough information and who are distracted by the search and analysis of information, rather than focusing the right amount of attention and effort on any particular problem.

The poverty of attention means that many important opportunities are bypassed simply because the search for information and the analysis of the information found seems more important.  Perhaps the right question to ask ourselves in any information gathering exercise is:  what the the minimum amount of information necessary to make this decision, and what opportunities are we willing to forego to gather that information and make the decision.  Or, perhaps we should ask what opportunities we miss due to a poverty of attention.

What should you outsource?

I've been consulting with a number of different firms over the years, and have come to the conclusion that outsourcing is right for all the wrong reasons.  Many firms focus on outsourcing to reduce or more effectively manage costs.  I'd suggest that they should outsource the functions they do poorly, to allow them to focus on the functions they do well.

Recently I was with a firm that has excellent operations.  They are tops in their industry in terms of cost per process, variations, error rates and so forth.  The challenge they have is that they are so lean, and so operationally focused, that they don't have the bandwidth or the mentality to think innovatively or create new products and services.  On the other hand, you have very creative firms - marketing agencies, PR firms, Apple, etc, which are very innovative but perhaps not as great at managing the operational stuff.

It would seem to make tremendous sense for the creative firms to outsource the mundane, so these really creative firms are freed up to do even more innovative and creative work, and are not forced to hire people to manage the transactional issues.  Of course there is some creative tension when these factors interact, but transactional and operational people never feel appreciated or valued in a creative firm - just ask any of the operational people in a marketing agency if anyone even follows their processes.  I think we'd all agree that a firm that wasn't the best at information technology might want to outsource to an Accenture or EDS.  Should a creative firm outsource the mundate to a business process outsourcer?  Probably.

What about the reverse, however?  Should a firm that is excellent at creating and managing to specific processes and is very lean decide that it should "own" the maintenance side of the business and outsource creativity and innovation to third parties?  To a great extent, this is already happening.  Many larger firms already rely (too heavily in my opinion) on strategic consulting firms to generate ideas about new products and services.  They abdicate the investigation of new customer needs and market opportunities to third party consultants, eager only to implement the ideas.  However, if we can argue that firms should outsource what they do poorly and focus on what they do well, then why can't we make the reverse argument - firms that are operationally excellent and very lean struggle to innovate.  So, why not create outsourcing capabilities to help create ideas, identify opportunities and offer new products and services to what is an operationally excellent firm?

Whether they are doing it intentionally or not, many large firms are already heading down this path.  The question will become whether or not these innovative skills are valuable inside the firm, or make more sense in the hands of a trusted third party.

Making the facts match the story

A recent commenter asked what I thought about the typical project definition process - that is, gather all the requirements and scope the project, then eliminate features and functions as the budget is finalized.  For some reason, this passes as a best practice in most organizations I've worked in.  What's even more astonishing is that most firms assume they'll get it right the first time, and don't build in additional design time or requests for significant changes downstream.  As if we never have any blinding insights into what is possible once the design is finished.

There are three interlinked attributes of a project - whether that is a software development project or building a new product.  First is the design.  Generally speaking, we overemphasize the functions and features necessary for most customers.  The guys at 37signals and other design shops will probably second this notion.  We have in our heads how important all the features are, without noticing the feature creep and addition of features that address needs only a few people have.  So the gathering of requirements becomes a project into and of itself.  Instead, this should be a stripped down exercise - what's the absolute minimum we can offer and still be reasonably compelling.  The second is the effort to build and deliver all of those functions.  This attribute is consistently underestimated.  Boeing is two YEARS late delivering the Dreamliner because they dramatically underestimated the effort to integrate all of their sub-contractors and the pieces and parts of the new airplane.  So, we overinflate the design and underestimate the effort.  Then, the third piece is almost always arbitrarily imposed - the budget.  In the case of the Dreamliner, and in their defense, some members of the management team decreed that the more complex, more forward thinking plane (Dreamliner) should cost 50% less to build than the 777, which had been through years of development and Boeing had been building for several years, driving out costs.  This was completely arbitrary, and the only way to achieve it was to push costs off to suppliers and increase the number of sub-contractors, and the rest is history.

OK, if this isn't the best way to run a railroad, what is?

I'm going to advocate working backward.  What's the expected benefit of the product or solution you are building, and what data do you use to justify that premise?  Then, if you can quantify the benefit, what's a reasonable "investment" in the development of that expected return?  That imposes the cost side first.  Then, given that almost any project is subject to overruns or unforseen problems, the budget that the team is handed is 80% of the expected number, to allow for mishaps and overruns.

Then, based on that available investment, the team should determine what minimum acceptible set of features and functions are that should be delivered to the customer.  Once that is done, it probably makes sense to slice off 20-30% of those features to force the team to strip the product down and focus on the most important needs of the customer or prospect.

Then, we can focus on the resources necessary to build the reduced product within the budget that we've established.  Of course this approach depends on having fairly flexible standards.  If you are building a software application and your IT team demands that the application be a Java application while you know you can build it more quickly and with the same functionality in Ruby, then you don't have much flexibility and will need to factor in the scope and conditions of your organization into your estimate.

I think in many cases we as product and service developers dream big and create products and services that are loaded with too many features and functions, so we overinflate the product or service with less regard to what the customer wants and needs, and with little regard to the constraints of development.  It's as if we say "Well, I know I won't get all of these features, so I'll include a bunch that seem interesting and hope some of them remain in" rather than taking the time to completely understand the needs and tailoring a very targeted solution for the customer need set.

Are you Experienced?

Jimi was on to something long before his time, and not just the heavy guitar sounds and the overt drug use.  No, Jimi understood the value of experience, and its about time we all did.  After all, we're rapidly moving into what I'll call the Experience Economy.

We, at least in well developed countries, have all that we need - all the food, shelter, clothing, medical care, etc.  Many of the items we use every day are throw away commodities, including our telephones, computers, cars and other physical items.  What distinguishes many of the products and services we use and admire is experience and authenticity.

I listened to a radio show recently where a proprietor talked about the value of his coffee and teas.  He visited the tea plantations, and knows the coffee growers.  When he sells coffee beans or tea leaves, he can tell you the story from the ground up.  He believes this adds authenticity to his products and creates a compelling experience for the consumer.  After all, when any grocery store carries a wide range of coffee brands in a host of flavors, we have all the "product" we need.  Now that level of Maslow's hierarchy is attained, we move into the next level, not simply satisfying physical needs but emotional and aspirational needs as well.

If this supposition is true, then it turns on its head the marketing, advertising and delivery of much of the product and service in the marketplace.  Delivering a good quality toothpaste at a good price isn't enough - it needs to deliver an experience and be authentic to its goals or purpose.  Firms like Harley-Davison understand this - the sound of a Harly is copyrighted!  There's more than simply acquiring and using the product - people align themselves and their thinking to the brand.  Apple has done this as well.  In the past, this has been the method for a firm to build a small but powerful group of advocates when the firm could only acquire a small niche in the customer base.  Increasingly, I believe people will seek products and services that deliver an experience and seem authentic to specific beliefs or purposes.

This presents an interesting challenge to a services firm like ours.  We advocate innovation and productivity.  How do we demonstrate these concepts in the methods we use to deliver value to our clients, and in a way that demonstrates our authenticity and that creates a lasting experience for our customers?  Clearly other services firms like Disney understand this, and I think other services firms like ours will need to adjust how we position ourselves in the market, and ultimately how we deliver our capabilities and services.  We'll know we've arrived at the right spot when people are requesting our shirts and wearing our logo as a testament to the experience we delivered.

A creature of the culture

The ax fell today for Rick Wagoner at GM.  The Obama administration has decided that he is not the right man to lead the change that GM needs in order to survive.  Wagoner was called, alternatively, the "sacrificial lamb" by the governor of Michigan, and a successful CEO by others in the automotive space.  But, we come neither to praise Wagoner or to bury Wagoner.  We come to talk about one other comment about Wagoner - this from Frank Langfit of NPR, who called Wagoner a "creature of the culture".

Langfit meant that Wagoner had become bound by the culture, and bound to the culture of GM, and unable to full rationalize the change necessary to GM for it to be successful.  In some ways this is an issue for any firm where the management team has such consistency across its ranks, and such longevity in its industry.  For the most part GM's management reflects the automotive industry and little else, and as such "grew up" in the industry and has little outside experience.  Recently we had word that most senior GM executive participated in a program that gave them a new car, at no cost, every 3 to 6 months and paid for their gasoline.  Having an industry myopia is bad enough - did GM executives get out and interact as regular consumers with their products?

So the question we have before us is - can a senior manager respect the culture, reinforce the culture but also recognize valuable aspects of management style or philosophy from outside the culture and bring those facets to bear?  Does leadership shape the culture or over time does the culture of an organization inform how senior leaders think?  One could easily argue that executives who have a long tenure in an industry understand the challenges of the industry and don't have to "learn" the industry.  However, one can also easily argue that longevity and success in an industry can blind any manager to changes in the market and disruptions or disruptors, and create a cocoon around those managers.

In most organizations, there is enough institutional arrogance to ignore a lot of news about an industry that is not what the organization believes or wants to hear.  If the management team reinforces that arrogance and distance from the customer, then the culture becomes one that doesn't listen or explains away problems, which is what the US automotive industry has been doing for twenty years.  The cultures of these organizations have become indoctrinated to believe their own clippings, and the management teams have constantly reassured the organizations that nothing is wrong, so there is no urgency for change.

I believe that ultimately any CEO can force change on a culture, but perhaps those CEOs need to come from outside the organization to be successful.  Mullaly at Ford and Nardelli at Chrysler will prove this out to some extent, and Mullaly already has to some level.  However, any management team willing to align itself to a dominant culture will happily put on the blinders and become creatures of the culture, spouting the corporate line rather than challenging the organization to change.

Wagoner wasn't fully a creature of the culture, but had so much investment in the culture that he could not challenge it effectively.  What GM needs is a CEO from the outside, ready to confront the culture and make change happen.

The End of FUD

As a young person entering the work world less than 20 years ago, I encountered a masterfully sinister plan to dominate an industry.  It was the marketing program of FUD - fear, uncertainty and doubt.   FUD was meant to create a sense of inevitability - either choose correctly or fail miserably.  It also suggested that there was only one right answer, and an individual making the wrong choice was doomed.

Note as well the underlying concept of information.  We have more information than you do, or we know more than you do, or there is a discontinuity of information that allows us to know more.  Therefore, since we have more knowledge, if you purchase anything else, you are at significant risk.

In the last few years especially, with the advent of the internet and near constant communication, FUD is being replaced, if not flipped on its head.  Fear is no longer a decisioning factor for most purchases - in fact by the time many people have purchased a product or service they may know as much as the sales person.  It's not apocryphal that many patients ask their doctors for medications that the physicians aren't aware of or familiar with.  Websites like Amazon allow anyone to investigate a wide array of products and services, compare similar products and get feedback from those who have purchased the product and have experience using it. 

The era of Fear, Uncertainty and Doubt is nearly over, and is probably over already for many products and services if the use or experience can be captured, reported on and rated by a wide variety of people.  There's one other aspect of change that affects FUD as well.  We are gradually becoming a group of USERS rather than a group of INVESTORS or PURCHASERS.  FUD was important when you were making one big decision that you'd have to live with for a long time.  Now, with many products we simply trade up or out relatively quickly, or sign up for one month or one year of usage in a rental or lease agreement.  So there are increasingly few products or services that we are locked in to with little recourse.  If you made a mistake, you'll make the vendor pay in the next re-up.

With all the information readily available, what's the new marketing mantra?  Well, rather than fear I think it is probably confidence or hope.  Rather than encourage people's darkest fears when purchasing, we probably need to play to their goals and the things they want to accomplish.  Rather than uncertainty, which has been all but eliminated anyway, we need to communicate the information and value they are seeking.  Let the customer find it from us, rather than some third party site.  This also means you can't hide your failures but must confront them honestly.  Finally, rather than doubt we need warranty or safety.  Look at what Hyundai is doing in the car market.  If you lose your job, we'll help you pay for your care or even take it back.  There's no reason to doubt!

So, rather than FUD we need Confidence, Clarity and Safety.  We need to interact from a marketing perspective in an entirely different way, since at least two significant factors about the customer/vendor relationship have changed.  The amount and availability of information about your product or service has changed dramatically.  Your customer or prospect knows almost as much about the product and its performance as you do.  And, given the short lifetimes of many products and the ability to lease or take on as a service, there are few long term irrevocable commitments left.  If that's the case, we need to communicate our value propositions much differently.

Pitchfork Nation

The late senator Russell Long summed up our feelings about taxation - Don't tax me, don't tax thee; tax that man behind the tree.  Now, today our noble Congress has decided to tax that person whose bonus they disagree with.  This is unAmerican, probably unconstitutional and should send a chill down your spine.

Whether you are ecstatic that the AIG Financial Products team got bonuses or you want to ensure they all end up in jail because they accepted the bonuses is really irrelevant.  Congress and the Obama administration missed a chance to control these bonuses when they provided the money for the bailouts - in fact they intentionally left in the bonuses and included a clause to keep them in. 

What is relevant is that there are agreements in place to pay people (a contract) that stipulates that these folks should receive a bonus.  When the Federal government starts dictating how much you can earn, and whether or not you "deserve" a contractually obligated bonus, should be reason to sit up and pay attention for all of us.  When the Congress passes confiscatory taxes aimed at a very small group of individuals to reclaim wages, earnings or bonuses that they disagree with but cannot prove were earned in a criminal maner, you should be outraged.

If Congress decides to tax the recipients of these bonuses, then what's to stop them from deciding to tax other people, activities or groups that they don't like?  Recall just a few days ago that the Obama adminstration was considering taxing the benefits of wounded soldiers.  Public outcry beat that idea down.  But at this point, Congress is seeking excuses to punish people who may have run a business badly but did nothing to deserve the directed tax schemes that are being developed.  What's next?  Increased taxes for businesses that pollute too much?  OK, what kind of pollution?  Sure smokestack emission is pollution, but isn't medical waste, or the use of too much paper?  This is a very slippery slope, the AIG bonus taxation, and removes a level of fairness, transparency and consistency that will not be quickly regained.

I hope the Obama adminstration has the insight, the decency and the cojones to say no to this legal travesty, and if not I hope just one of the AIG bonus babies will take them to court over it.

What's the amount of information we really need?

I was riding to lunch with a friend recently in his car.  We were going to a lunch spot (Thai) that we both enjoy.  We've both been there at least ten times and should know the way by heart.  Yet, as I got into his car he pulled up his GPS device and programmed in the name of the street we were going to.  Why?  I asked.  We both know where the restaurant is and how to get there.  He shrugged and said, I've got it I may as well use it.

The Garmin/Tom-Tom usage in this country is an interesting one and symbolic of a phenomenon that extends information often beyond reasonable utility.  Most of the GPS devices are used in cars that never travel more than 20-30 miles from their homes, so are used in areas where most people are already familiar with the directions and roads.  Yet we see more and more usage of devices that extend real time information that often isn't even necessary.

Think back say ten to fifteen years ago.  We were all traveling just about as much then, without the comfort of the GPS device, or even items like MapQuest and Google Maps.  It may have taken a bit more time to plan the route then.  You may have had to call someone and get directions, but for the most part we didn't suffer for traveling without the GPS or Google Maps.  With the advent of Google Maps, MapQuest and other location mapping programs on the internet, you can almost immediately receive extact instructions on getting from point A to point B in the US, and if those instructions aren't to your liking you can vary the route to your satisfaction.  You can now even drill down and see street views in Google Maps and Google Earth.  Three minutes of computer time before you start your journey can equip you with everything you need, at NO CHARGE other than an internet connection.

So what do we do?  We go out and buy a device that will provide step by step directions in real time, using the same maps and technologies that Google Maps does for our cars.  Is it the belief that real time information is more valuable or more precise?  Is it a tradeoff based on the time it would take to start the computer and get Google Map directions?  Is it a novelty that's just cool to use?  What drives us to use these devices to go places we already know how to get to, or to give us directions that we could have easily received from some other place.  Note that event the GPS device manufacturers recognize these points and sell them on the ability to re-route you in case your primary arteries are jammed with traffic.

It's also interesting to realize that all the technology you need for a GPS device is located in your cell phone.  The functionality that now sits in your car dashboard will probably one day soon be housed in your smartphone, which will be able to give you turn by turn directions and provide all of the other functionality as well.  So in the near future we'll be removing the GPS devices from our dashboards and using the "latest" technology in our smartphones as technology continues to consolidate functions.

The question still remains, what's the right level of information and technology we need, and when does technology become superflorous?  It would seem that in many cases, the GPS on the dashboard, used by individuals with internet access primarily in their own home towns is unnecessary, but that's just one man's opinion.  If we extend this thinking however, we have to examine each instance of technology implementation and understand the reasonable use of information technology and the return on that value.

Initiating change from the management suite

I read an interesting article in the Washington Post today - an editorial from Andy Grove that admonishes the Obama administration for taking on too many big initiatives at once.  Grove states that a management team should move through change in two stages:

first, a period of chaotic experimentation in which intense discussion is allowed, even encouraged, by those in charge. In time, when the chaos becomes unbearable, the leadership reins in chaos with a firm hand. The first phase serves to expose the needs and options, the potential and pitfalls. The organization and its leaders learn a lot going through this phase. But frustration also builds, and eventually the cry is heard: Make a decision -- any decision -- but make it now. The time comes for the leadership to end the chaos and commit to a path.

In some very innovative and "paranoid" organizations, this is how change happens.  Management requires, no demands, a big change, and a bunch of people run around with their hair on fire to find answers or discover new opportunities.  These competing interests collide and some are eventually discarded, then the management team decides it is time to make a decision.  It quickly and clearly delineates what's important, what it's goals are and then makes a decision.

For the rest of you, I recognize that Grove's assertion and my followup read more like a fairy tale than what actually happens.  In most large organizations, what actually happens is that everyone can see change is necessary, but so many people are busy defending their products or turf that little organized change can happen.  While the management team wants change, it is too worried about upsetting the existing order that it can't initiate change.  Additionally, the management team recognizes that requesting change would mean setting clear goals and expectations.  Given the recent news about how removed many CEOs and executive teams are from how their businesses actually work, it should come as no surprise that few of them want to upset the apple cart and provide clear strategic direction.  So rather than a bunch of folks working feverishly on a wide range of ideas, usually no one works on any new ideas even though everyone can see that change is necessary.  A corporate myopia exists, willing the team to ignore the elephant in the room.  Then, everyone pretends to be surprised when the disruption happens.  "Never saw that coming" - a senior executive who says this doesn't know his or her business.

In non-Grovian businesses, everybody knows there's a problem, but the executive team doesn't have the fortitude to request new ideas.  Even when that does happen on ocassion, the team provides few resources and a very limited scope to a small team who are tightly constrained.  In addition, everyone in the organization is hungry for clear strategic direction and focus, but many have written off the possibility long ago.

Grove's postulation is correct, however, his image of how businesses work is influenced by his management style and experience, which I'd have to say do not reflect many Fortune 500 organizations.

A virtuous cycle

I was thinking over the weekend about change - many people want change, some may resist change, but at some level change is inevitable.  Most organizational bureaucracies resist change, and may stand in the way of very necessary change in this economic environment.  And with the dramatic upheaval in this marketplace, those that don't change will certain find the going exceptionally rough, to say the least.

It will be difficult for many individuals to believe that their CEO or management team will ask for ideas, for sweeping change after so many years of "stay the course" or incremental improvements to what seems to be working.  After so many years of resisting change and innovation, will large Fortune 500 firms have what it takes to change efficiently and effectively, or will the turf wars, compensation models and risk factors arise to block needed change?  It was this topic that made me think over the weekend.

You see, in any system, the status quo is usually reinforced.  Stasis is reinforced with statis, and change begets more change (I really wanted to work in the word beget).  In other words, we get from the organization what we expect and reinforce.  If we resist change, an organization learns to resist new ideas, regardless of their impact or possibility.  If, on the other hand, we demonstrate a desire for change and innovation, and reinforce the best ideas, then the organization will seek out and bring new change to light.  Change begets change and can become a virtuous cycle if properly managed. 

Obviously, as scandals with Enron and the subprime mortgage mess indicate, these virtuous cycles can spin out of control if the change and innovation get too far ahead of the insight and regulation, or when compensation is disconnected from real results.  However, at this point the biggest challenge for many firms is simply to start listening and start changing.  There may be a risk down the road to linkages between change and compensation, but that's not the issue now.  We need to move fast, and unfortunately we've managed to eliminate the vast majority of people in any business who are able to think quickly and independently and challenge the established order.  Stasis reinforces stasis, deadlock reinforces deadlock. 

At a time when we need change desperately in many large organizations, we have no organizational structure or methods to do so, and few people left who are invested or have the willingness to create the change.  This is the equivalent of the coming of the industrial age - we have to organize our businesses for nimbleness, sponteneity and change, rather than long runs of the same mass production.  Introducing corporate nimbleness and the ability to adapt and adjust won't occur overnight, but it will be a critical skill going forward.

The inverse relationship between tools and problems

It struck me recently that there's probably another management truism we should bring to bear.  Basically it breaks down like this:  the more you comfort and knowledge your team has around its tools and methods, the more general the problem to be solved can be.  Conversely, the less the team knows about the methods and tools it is using to solve problems, the more specific the problem statement or opportunity statement needs to be.  Let's look at this from both perspectives.

If I have a very strong lean or Six Sigma team which is steeped in the tools and processes, I can basically turn them loose on a process and ask them to find and fix any problems they uncover.  The assignment can be general since they know their tools and methods and the kinds of "fixes" they can create and when a specific tool will add value.  On the other hand, if I have a team that is new to a set of skills (for example, innovation) and ask them to get involved and create a new product or service, I must give them much more clearly defined scope and objectives, for two reasons.  First, they don't understand the tools and methods well, so they can't determine which ones to apply.  Second, without scope and objectives, they are very likely to fall back on safe assumptions rather than push an idea beyond what seems "acceptable".  The more radical the thought process, the more the management team needs to provide scope and clear objectives.

Now, this last bit is completely at odds with the way things work in most organizations.  Generally what happens is that we ask people to "innovate" without training or tools, as if this is an innate skill, and we don't provide measurements or objectives for fear of constraining their thinking.  Well, without constraints any idea is a good idea, and a safe idea that resembles what we already do seems even better.  How can we think differently when we haven't been trained to do so and when we haven't been pushed to do so based on the objectives?

I think the more well known the problem is, and the greater the comfort is with the tools and processes, the less you need to define the potential outcome.  On the flip side, the less well known the problem or opportunity is, and the less comfortable the team is with the tools and processes, the more definition is necessary in order to achieve success.