Thinking Faster

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.