Thinking Faster

More transparency please

I wrote in my last post about three facets of competition that I think are becoming more important - speed, collaboration and transparency.  The first two are relatively obvious.  We need to move faster, make faster decisions and deliver products and services more quickly to a world that has moved from 33 1/3 to 78.  If you don't know the reference, ask your grandpa.  He will.

Collaboration is a given as well.  If none of us is as smart as all of us, then eventually we'll only get work done in distributed teams, some of whom are my employees and some of whom are contractors or just trusted partners.  We can see the need and desire for collaboration growing in front of us, namely social media.

However, the concept of transparency threw a few people for a loop.  I tossed out these three competitive facets in a discussion with a conference organizer and she said:  speed, yep.  Collaboration, yes.  Transparency.  What's that?

Simply put, transparency is the notion that how you do what you do is as important as what you do.  Transparency builds engagement and trust, not something you can buy.  Today, more than ever before, consumers want to understand the rules that govern the relationships.  They want those rules to be clearly spelled out, simple to understand and in their face, not easy to ignore.  Don't believe it?  The US House of Representatives just pulled a provision out of the bill that will dictate how financial firms are managed that would have mandated a plain, simple, english language document to accompany all financial products, rather than the gobbledygook we get now.  If the US Congress came within a hair of mandating transparency on banking, traditionally one of the most opaque industries around, what demands do you think consumers are placing on other industries?

Collaboration via Facebook is nice, but when firms have Facebook pages we begin to get a glimpse inside the organization.  Shortly I believe that many firms will have ombudsmen, just as the major newspapers do, to explain their successes and shortcomings to consumers in the way a newspaper ombudsman will take his or her newspaper to task for failing to cover a story.  But beyond mere interpreters of organizations we as consumers need to be able to peer in and understand what's happening.  One of the biggest complaints about the financial institution meltdown was that consumers could not get straight answers, or find anyone to give them answers, about how decisions were being made.  The financial meltdown will cause us all to flee not necessarily to quality, but to transparency.  If someone is going to lose my money, at least I better be able to understand how they plan to use it.

With the increase in educational levels and access to professional insight through bloggers and analysts, we can understand the interactions and decisions of most businesses now.  I may not fully understand a CDO, but I can find someone who will dissect it for me inexpensively or for free.  It may as well be the firm that is trying to use the tool.  At least in that case they can make the case as to the tool's usefulness and the rationale behind it.

People have less trust in most institutions than ever.  One reason that trust runs so low for the US Congress is that the representatives and senators appear unwilling to allow us to watch how the laws are made, and to read and understand the legislation before rushing to take a vote.  If the old "back room" days are over, then prove it.  Make this the most open and transparent administration and Congress.  Otherwise, prepare to lose even more respect and trust.

In life, in business and in government, we need, and are ready for, more transparency.  At a time when traditional media (newspapers, television) is failing to give us the insights we need, these organizations can choose to become more transparent, or they can lose us by blocking our vision about how they do what they do.  The more transparent, the more trust.  The more trust, the more risks you can take.  Right now, our government and most businesses fail to understand this.

The New Iron Triangle - cheap, fast and reliable

As an engineer by training (I got out as quickly as I could, to the more esoteric world of marketing) I learned the engineering iron triangle.  There are always three demands on any product - make it:

• Cheap
• Fast
• Reliable

And the real kicker, the real sidesplitter that engineers really enjoy, is that they add you can choose any two of these, and the third one is dictated to you.  In other words, you can have something fast and cheap, but probably not reliable, or something cheap and reliable, but not quickly.  This thinking was implanted in our brains and formed the tradeoffs when creating a new product, or project.

I'd like to suggest that there's a new iron triangle - the focus on how we need to work today.  The great thing about the new triangle is that all three legs are valid, all the time, and the more we rely on each leg, the more value is generated.  Sort of a virtuous cycle, as far as triangles are concerned.

My new triangle is composed of three attributes or features that dictate how we ought to work:

• Speed
• Transparency
• Collaboration

Note that many of you will say, "well, the old rule of pick any two still applies".  Can you have speed and transparency, without sacrificing collaboration?  Can you have rapid collaboration and transparency?  I believe the answer is that all three are important, and when taken together, create a completely new way of working.

Let's look at each in turn.  Why do we need "speed"?  Given the pace of change in our products, services and general environment, speed is of the essence.  Even fast followers have to be fast when product lifecycles and market trends get shorter all the time.  Taking a slow and methodical approach is fine if you have a clear market leadership position and a significant lead over your competitors.  Otherwise, get faster.  Learn how to make decisions under less than ideal conditions.  Don't wait for information, seek it out or have it seek you.

Why do we need transparency?  In today's market, anyone and everyone is an analyst and a critic.  Firms that close themselves up and don't engage the market are held in suspicion, while firms that embrace their customers and prospects are held in high regard.  The more transparent your processes, intents and methods, and the more easily understood, the better.  We all may be smarter, and have more information available, but that doesn't mean it's easily understood and digested.  Complexity is out, transparency is in.

Collaboration is the final point, and it is the recognition that there are many more smart people in your customer base and your partner base than in your firm alone.  Anyone still "going it alone" anymore is banking on the fact that their organization is smarter than the competition, and also the customer base, the partner base and the potential entrants.  If P&G does not believe it can create all of its products and services in house, and turns to customers and partners for advice, what makes you think you can "go it alone"? 

Now, the thinking is that collaboration may enhance transparency but diminish speed.  That's true only if there's no trust involved.  If, beyond mere collaboration there's trust established, the speed of the work can be increased as well. 

To my way of thinking, these concepts - speed, transparency, collaboration - are the key building blocks for successful work in the future, building on what the market expects and changing radically from constraint based thinking (choose any two), and opening up to a completely integrated and engaged community.

Comparing Health Insurance to Auto Insurance

I've heard recently the President and members of Congress compare Health Insurance to Auto insurance.  After all, most states require that a driver carry auto insurance, and if we can require insurance for drivers, why can't we require health insurance for individuals.  There's a couple of fallacies in this argument, it seems to me.

First, driving is a privilege not a right.  Your rights to drive can be suspended or revoked.  I guess one could say that life is a privilege and not a right, but once you are here, at least in the US, you are guaranteed Life, Liberty and the Pursuit of Happiness.  No mention of a right to health care, or the right to drive a car.  So, for those who desire to create a new mandate or moral obligation for health care, comparing that to driving or auto insurance is a specious argument.  Everyone has a right to live, but not everyone has the right to drive.  I think a "moral" case can be made that everyone should have reasonable access to decent health care, but that's not a corollary to auto insurance.

Even more so, the reason people carry insurance and that the states require it is to protect the other guy.  Most auto insurance protects the second party, not the primary holder.  The states are stepping in to ensure that everyone has some level of coverage, but most of any individual's coverage applies to the second and third parties, not the individual themselves.  Additionally, since most cars are purchased with loans, insurance is required by a bank to protect the asset which was used to secure the loan, namely, the car.  Therefore there is a vested interest from an organization providing funds to an individual to purchase a car to ensure that the payments on the loan can be completed even if the vehicle is totaled. No such actively involved third party exists for most adults, unless the government is going to become more like a parent.

As individuals, we receive a corollary to this kind of insurance from our parents, until we reach the age of majority.  Our parents (or more specifically their employers) provide health insurance for children.  Parents have a vested interest in their kids and their healthy upbringing, until the children become adults in their own right (similar to the point you complete payments on your auto loan).  At that point (the completion of the auto loan or the age of majority), things change dramatically.  Kids are responsible for their own insurance, and you can radically change your auto insurance.  No legal actor has a financial investment in you, or your car, at this point.

Finally, there's no concept of community rating or guaranteed issue in auto insurance.  A person who has had a number of accidents or drunk driving offenses will find it difficult to get auto insurance, and will pay a lot for it, much more than a careful driver.  Auto insurance firms rate drivers on a number of factors, as any person who pays for the insurance for a teenaged male driver can attest.  The same corollary holds today for health insurance.  People who are healthier tend to demand fewer services and cost less, so their insurance costs are lower.  There's been no push by Congress to demand that auto insurers bill everyone at the same rate, and, if they tried to do that, all the "good" drivers would demand a discount for their safe driving.  Additionally, auto insurance firms don't have to accept a potential customer.  If they believe the prospective driver is dangerous, they will simply reject them.  According to legislation working through Congress, the health insurers may not have the ability to reject someone who has poor habits or poor eating habits or does not exercise.  There's simply got to be consideration of personal responsibility, both in health care and in driving.

The comparison between auto insurance and health insurance is a notable one in the only area the proponents don't want it to be:  when it comes to those who avoid insurance.  In health care, usually only the young and very healthy actively avoid insurance, since they believe they won't need it.  Unfortunately, these are the folks who would subsidize sick people if the healthy ones acquired insurance.  Conversely, the folks who avoid auto insurance are usually the scofflaws who cannot afford insurance or who cannot obtain insurance due to poor driving habits.  These folks drive up liability insurance costs for everyone, and would do so with insurance or without.  People actively avoid insurance even when it is required, as evidenced by auto insurance.  The same would be true under a personal mandate for health insurance.

Whoever dreamed up the concept of comparing auto insurance (since it is required) with health insurance didn't really think it through.  There are so many differences that trying to compare the two concepts is like comparing vegetables and auto parts.  Non sequitur, totally.

The faster we go, the tighter we cling

I don't know about you, but I've practically given up riding the lastest roller coasters.  Some of the new "amusement" rides at major theme parks seem more like astronaut training vehicles rather than my concept of "fun".  It seems the faster the rides go, and the more twists, turns and g-forces that are placed on my spine, the more tightly I cling to the safety bars.

I was thinking about this analogy and how well it aligns to modern management.  Every management theorist will tell you the pace of change is accelerating.  I had the opportunity to hear Gary Hamel speak recently, and he is always enlightening and entertaining.  He focuses much of his talks on the rate of change in our businesses, and how poorly suited the existing hierarchical management structure of most businesses are to rapid change.  I believe it's not only the organizational structures that resist change, it is also the individuals within the structure.  As the speed increases and the risks and uncertainties grow, I suspect we cling very tightly to the things we think we can control and assume are givens.  In fact, we probably overly emphasize structures and processes because so much else is changing.

Think about it - if your market, your customers and your competitors are changing - and changing quickly - then you really don't have much control over those factors of your business.  As humans we are comfortable when we have "control" over the situation and are uncomfortable when we don't.  Therefore, we often will work to control the things we think we can control, which leads to my "cling" theory.  Right now many businesses are clinging to things they think they can control, while many of the most important aspects of their business are changing rapidly.  All focus is placed on internal, process oriented programs that don't add value to the customer and his/her experience or value, while all opportunities to make changes that do benefit the customer are shunned because we can't or won't attempt to control them.

There's an element of safety, of comfort, of security in clinging and focusing on the things we know best.  We often joke about "arranging the deck chairs on the Titantic" but if that's all you could control in that situation, perhaps you'd be out there with the deck chairs as well.  We tend to turn away or ignore rapid change hoping that it will fail or pass us by unscathed.  Often, by the time we understand the implications of the change, it's too late to respond.  Perhaps we need to untether ourselves from our safety harnesses and rev up our organizations and our cultures to not merely meet the speed of change, but accelerate beyond the speed of change - to the point where everything else seems to move in slow motion. Or, we can cling tightly to our treasured norms and processes and hope that the change doesn't affect us.  Here's hoping!

The organization of the future

All good ideas spring from original thought or careful synthesis.  I say that because I think I have a good idea, but it is the result of synthesis not original thought by yours truly.  I've been thinking about the organization of the future, after reading and hearing Hamel and Dan Pink, and reading and listening to Seth Godin.  The material that informed the following discussion is based on The Future of Management, Pink's discussions at TED and Seth Godin's concepts on Tribes.

Here goes.  The characteristics of an organization of the future are:

• Nimbleness
• Adaptiveness
• Ability to partner
• Speed (in decision making and in action)
• Decisiveness
• Flexibility
• Clear definition of purpose
• Places value on human knowledge and capital
• Communication

Why are these factors important?

Nimbleness is important because of the pace of change, which is accelerating.  A long lived product today may last six to 12 months, whereas only a few years ago product lifecycles were several years or more.  Whole industries change, rise and are eliminated in a period of a decade now.  The same is true for adaptiveness.  Firms must understand and communicate what they do well, but must understand that as markets and demands change, they must adapt to the market.  Firms that fail to do that effectively (GM/Chrysler as examples) won't often be propped up by the government.

The ability to partner is critical going forward.  Few firms will be able to "go it alone".  They won't have access to new technologies, or markets, or knowledge.  Firms that understand how to partner and build communities (and platforms like the Apps for iPhone) will succeed.

Speed in decision making is important due to the pace of change and the increasing number of competitors and substitutes.  While you are pondering and thinking, and waiting for the decision to work its way up through 10 levels of management, the competition is testing alternatives and prototypes and is releasing its second or third version of a product or service.  Who wins?  The firms with the most insight, experience and knowledge.  You don't gain knowledge by waiting for decisions. 

Next let's consider purpose.  Hamel and Pink argue that people want to work where they are engaged and on topics where their passion lies.  A firm that has a clearly defined purpose and communicates that purpose effectively will attract people who have passion for their work.  In the future, human capital, intelligence, knowledge and the sheer desire to create new and interesting things will win over efficiency and process.  Note that we placed communication on the list - not just communication to customers, but to employees.  The firm that has the best communication about its strategies, goals and outcomes will attract and retain the best people, and has less work to do to attract customers and partners.  We don't need broadcast marketing anymore, social media will help us determine which firms are true to their goals and deliver the products and services we want and need.

If you are still with me, then which firms today have these attributes?  Few that I've seen, but I'd like to hear your thoughts.  It will take a tremendous amount of work to transition the existing firms to align to these goals and attributes, but they must start now or get left behind by the new entrants and disrupters that are gearing up and have these attributes as part of their DNA.