When the author, Marshall McLuhan wrote the phrase “The medium is the message” he was articulating the powerful interrelationships that exist between the two. It’s a good illustration of the Yin-Yang symbiosis across our world. The Gutenberg Bible broke the constraints of the intellectual slavery the early church imposed on members who could have no access, redefining the nature of the message and its impact by creating an accessible medium. The medium and message play critical roles in world-changing history. In 490 BC, during the first Greco-Persian Wars, a runner (the medium) ran from Marathon to Athens to warn the fellow Greeks that they had won the battle and to resist the Persian fleet (we might be speaking Farsi today if he had failed). In 1862 a package containing Gen Robert E. Lee’s orders to his generals was discovered in a field by a Union soldier, something that would have likely reshaped the direction of the war (with perhaps two governments incapable of managing their spending).
Today, the conquest of electronic medium over physical medium is far-reaching. Borders Bookstores are gone, Kodak is facing bankruptcy, Netflix angers the world over media strategies, Blockbuster was rescued by a streaming company, the US Postal Service will likely change or die from diminishing relevance. How the world communicates, entertains, manages, and fights wars is on the shoulders of digital media. Cyber-attacks are often scarier than hostile takeovers. Business today is often at the speed of light, fraught with wonderful benefits and horrible risks and calamities.
Medium is really not the message. Medium, true to its Latin origins, is what is in the middle; it’s what is between us and the message. Electrons are really good at that role. More today than ever, disintermediation, getting rid of what’s in the middle (the medium) is transforming our world. The Arab Spring flowing over the Twitter Falls, our instant access to Google and streaming, email and video conferencing have made connectivity a commodity and global access common.
That is, for our customers. Their expectations have transformed and are demanding the convenience of disintermediation. What others and competitors do cannot now be obscured by the strength of our relationships alone. We are flying toward increasing transparency across all sectors and that begs a hard rethink of our business processes and models. Today, the medium is becoming ubiquitous and globally accessible, making the message the differentiator for the accessible ones.
Do our processes match the message? Are we agile throughout and within our systems? Do we use the good old fashion way of getting it done with meetings, reports, approval signatures, and internal snail mail? Is our business within in-sync with the requirements of the customer without, or have we gotten to the without customer part?
This week’s story about the US Department of Justice’s fiasco over the cost of muffins and coffee at conferences made headlines over most newsfeeds. More fascinating was the outrage of congressmen about the costs and the call for heads to roll in order for the issue to be resolved. OK, so maybe they were expensive, but they are a miniscule bump on the back of an ant when measured against the levels of imbedded waste in our Federal spends. To continue debates about debt limits and keeping government moving resemble the chest pounding of gorillas on the opposite side of the river … lots of noise, but nobody’s going to actually get wet. I, for one, have lost much confidence that the folks accountable for spending on my behalf are capable of changing the game and reducing waste.
There are many reasons, many, creating two symptoms, institutional blindness and organizational gravity.
- Institutional Blindness. Looking at the performance and behavior of government, or business for that matter, through a budget lens will blind the viewer to the inherent waste. The fundamental reason is that the waste resides in the processes, not in the bank accounts.
- Organizational Gravity. The greater the mass, the greater the forces against changing, resulting in enormous pull against whatever is trying to leave. When size of budget is a measure of importance … well you can figure out what happens.
Mike George, founder of Strong America Now, brings an alternative, one that he has brought to business leaders and has transformed how performance effectiveness and efficiency are achieved, Lean Six Sigma. Lean Six Sigma has the capability of recapturing over $5 trillion that is embedded in the life-ending process obesity in our public service world. We have good people dedicated to serving us the taxpayer fighting a system that is designed to and, therefore, operate wastefully. I can only point you to < http://strongamericanow.org/>. I suggest that we skip the muffin and digest how we can change the game.
My motto for Lean Six Sigma is: Fitness Precedes Performance.
Five years ago this last Monday, Katrina struck along the Gulf Coast. Its aftermath still lives with us, the 9th Ward in New Orleans still devastated with diminishing hope. The Katrina experience was transformative along many dimensions. It graphically illustrated the execution rigidity born of planning and responsiveness that comes from leadership gained through cronyism and political machines. Lives were lost and value was destroyed in an experience that put light on our soft underbelly. In fact, 1836 people died and 135 were missing and financial losses exceeded $108 billion. The aftereffects from looting, violence, and losses to the economies would fill scores of books. It reshaped the local economy, created a diaspora of resources and cast doubts globally about our values.
Elected leadership made bad decisions. “Good decisions come from experience. Experience comes from making bad decisions.” - Mark Twain (1835 – 1910),
On the flip side, Entergy, the electric utility, distinguished itself with an exceptional response and record setting electrical system restoration. They were ready, willing, and able. This last weekend Isabel struck the East Coast, but this time, with very different consequences. We learned and many alive today can give thanks for that. Elected and appointed officials were ready, willing, and able. The final count is not in, but fewer (40+) have perished and early estimates of costs hover around $10 billion. It brought with it the still growing calamities from flooding, yet to be assessed.
While both storms destroyed property and economic value, some irrecoverable, those in charge with preparation and execution during Irene saved scores of lives. Why? While arguably we may have some better elected and appointed officials, the gene pool of the planners and responders did not change. What did change was the process, specifically, the process capability. The game changed from disaster response to disaster prevention. The process learned from the consequences of managing downstream from the storm, to well upstream of the storm. Change comes and storms are unavoidable, and they are both opportunities to be harvested. Luck is when preparation meets opportunity and there is opportunity in every storm.
Our business environment is well into a violent and unstable economic and geopolitical hurricane season. Do our planning and response processes reflect that? Do we hunker down, hold our cash in a safe box and wait for the storms to end, or harvest the opportunities each storm creates? Are managing with “detect and correct” or with “predict and prevent”?
“A ship is safe in harbor, but that’s not what ships are for.” Salt in My Attic by William Shedd
The 9.0 earthquake that devastated northern Japan continues to have severe aftershocks. They are shocks in what clever physicist would ascribe to a type of space-time. It’s not about Star Trek stuff, or the time travel that fantasies love to use, but rather how one type of event starts a whole series of other events along a different type of path, affecting a different space at a different time, but connected. These types of other events are very real “butterfly effects” where a small change in one place can cause a whole bunch of changes downstream. Believe it or not, that earthquake has changed our lives, our businesses, and our collective futures. Toyota, the world’s largest automaker is expecting a 35% drop in profits, primarily from supply chain disruptions. Maybe that’s a no brainer, but it’s also driving severe supply chain effects globally and very real adverse economic and employment pain here in the US. From automakers and their suppliers, to many of the stuff we buy including our beloved electro-gadgetry … it’s still hurting.
How many of our business plans had “the earthquake” included as a scenario? Not very likely … Our nuclear industry was in the early days of a beautiful renaissance, one with a promise that would be a large driver of untethering us from our OPEC masters … but it too has been severely damaged by an aftershock … but one with no Richter scale. Disruptive events aren’t what they used to be. Historically, disruptive events were contained to the extent of our technological and logistical isolation …. We weren’t all networked. Globalization has changed that … we’re one big interdependent and interconnected family. The apparent and marketed successes of globalized supply chains and very sensitive “just in time” systems had a big Black Swan lurking … behind our chosen lines of sight.
Today, complexity has become a global behemoth, creating new rules of business and generating many more choices and opportunities for innovation and value creation. I certainly love my Android phone more than the beeper I had 30 years ago. For businesses, that complexity requires a severe filtering of what is included in planning and consequently what we chose to be blind to. Planning in business love the optimists and sometimes ostracize the pessimists … the ones who ask the unnerving questions.
Given Japan’s location, how likely are earthquakes? I heard an unfortunate comment from a nuclear industry spokesperson … unfortunate because it is an industry I love and believe in … that “the damage at the Fukishima plant was not from earthquake damage … but rather from the tsunami, it performed as designed.” Aren’t earthquakes and tsunamis connected?
Today’s world is much less dominated by trends and easy predictions … how many surprises have we had to respond to in our enterprises? My bet is that we’ve had more of them more frequently … in some multiple of our increasing interconnected interdependency. Take a look back and count them … what would we have done if we had known or prepared ahead of time? As we look ahead and build our planning and business models for the coming year … are we asking the right questions? How many levels of “what if” along our interconnectivity are we exploring? Have the aftershocks created more timidity in decision making? How much time do we invest in complexity driven failure modes versus “win” and “capture” plans. Do our business continuity plans address the really scary stuff?
There is opportunity in every storm, after all, “Luck is when preparation meets opportunity.” Seneca, Roman philosopher, mid first century AD.
The Macedonian Phalanx was a battlefield formation developed by King Philip, father of Alexander the Great. It was the most effective military ground weapon to meet enemy forces head on, enabling attack by cavalry and other forces along the flanks. It utilized collapsible long spears and was virtually undefeatable for over 300 years. It combined the interlocking and cohesion of shields and the long reach of the spear. The units were well trained. It was a marvelous combination of strategy, technology, resources, process and, execution. Sounds like a phrase of a business book. The phalanx had worked so well, that it changed very little strategically until the Battle of Pydna in 186 BC when Roman Legions massacred the Macedonians. The Romans also combined strategy, technology, resources, process, and execution. There is one contrasting difference, the phalanx was a weapon built on rigidity, and these Roman legions applied agility against their enemy. The phalanx was vulnerable on uneven ground, the flanks and rear and was next to useless close up. The Roman gladius was the epitome of a close battle weapon, a breakthrough technology, one that moved from bronze and iron to forged steel.
The Macedonians experienced a disruption in their capability; they did not decay battle by battle. Content with the phalanx, they continued to make it better, each day, and becoming less likely to win against the Romans. They suddenly discovered and dearly paid the Cost of Unreadiness. Over the last few years evidence of the Cost of Unreadiness has been unavoidable. We saw it in the recession triggered by the meltdown, to the ravages of earthquakes and tsunamis, lagging or no capability in response to Katrina, incompetence with the oil spill; there are plenty to consider.
So, there is such a category of cost and it can be so high that it can be terminal, life ending, for humans or businesses. This cost is part of a family of costs we don’t measure, but we experience. We budget for them, but not explicitly, rather they are buried in our standards and estimates, processes, and plans. Traditionally, Lean has sought to reduce the costs of imbedded waste, Six Sigma attacking the costs from unwanted variation. In our current environment, full of complex systems, interdependencies, changing requirements, these other costs are likely to grow, perhaps with emphasis on the costs of unreadiness and rigidity.
Looking back at the last few years, how did your enterprise fare with:
• Reduced capability?
• Consequences from unplanned events?
• Costs from rigidity?
• Costs from unreadiness?
• Lessons learned?
• Changes in strategy, technology, resources, process and, execution?
Are we ready for the next surprise? Any thoughts?
Last fall I experienced a nuclear stress test. It had nothing to do with power plants or the stress that the operators in Japan are undergoing. Mine was conducted by my cardiologist and the isotope was a means to gain transparency into my system under different conditions, conditions that evaluated my behavior in a dynamic environment. Happily, it rendered good news that rewarded the hundreds of miles and several of my treasured New Balance athletic shoes.
Over that last couple of years, we’ve highlighted the evidence and perspectives that our business world is increasingly more dynamic, interdependent, highly networked, dangerously complex, and managed by tools and traditions built on much more stable process experience. Business models and algorithms, control systems, enterprise tools and performance improvement technologies derived significant power from the likelihood that behavior repeat sufficiently to enable the power of statistics to improve decision making. I many cases, that stability and value remains and I expect that that will go on beyond any horizon I can conjure. In fact, Dr. Deming encouraged us to look at the world through the lens of Plan, Do, Check, and Act, and his truism remains eternal.
• When and how do we subject our enterprises to that PDCA?
• What is the nature of our Check activities?
• Do we get beyond “according to plan or budget”?
• What type of stress tests are we employing? How would our business continuity plans hold up?
• Are we evaluating what we operate against the assumptions we made when we developed our plans, processes, and systems?
• Are the experiences of the last three years is sufficient to justify a fresh look at our Check phase?
• What causes and effects do we think about today that were insignificant a few years back?
• Have we learned anything new about assumptions, risks, and opportunities? Do our enterprise systems, business processes, strategies and objectives reflect that learning?
• Who is asking the discomforting questions within our enterprises? What questions do our trusted advisors ask of us? What answers do they provide to our questions?
• Are yesterday’s data building today’s processes to deal with tomorrow’s problems? What change do we anticipate?
• How well do we currently change our capability in the face of adversity or new requirements? How far upstream do we analyze?
• Where do we sit on the fragility to agility scale?
• Do our metrics come from an odometer or a telescope?
“Events will take their course, it is no good of being angry at them; he is happiest who wisely turns them to the best account.” Bellerophon by Euripides 480-406 BC
Best in Class! How often do we run into the term? I believe it’s a term that has lost much meaning. I suspect that overuse, or selective playing around with what “class” we pick, or the unreliability of rating organizations render it useless too often. In the world or process improvement it is applied to a goal setting step for evaluating how large a gap there is to close and subsequently chartering projects and resources to close that gap. There are some pitfalls to the approach:
• If the “class” we are selecting as a benchmark is a poorly performing one, we may be aiming at becoming the “best of the worst” or “the cream of the crap”.
• If becoming best in class for a unit within an organization does nothing to positively impact the performance of the total organization, we may be investing in meaningless improvement.
• The goal may become obsessive, a powerful distraction, directing attention and resources away from value adding opportunities.
• The customer, shareholder, or taxpayer does not benefit.
The last bullet is very important. Most organizations are not created with a primary purpose to have functions, departments, employees, IT systems, training centers, enterprise applications, procurement groups, or resources of any kind. That’s not why enterprises exist.
• If they are commercial organizations, they exist to deliver goods and services that financially profit so that they can earn the trust of their investors through returns. Yep, they are around to make money. The best ones do it legally, ethically, with respect to all stakeholders, no adverse externalities, and with a vision to create new value. They deliver value to customers and returns to investors.
• If they are a public service organization, they exist to fulfill a mission to deliver beneficial outcomes to their stakeholders (taxpayers and public at large). The best ones are effective, efficient, ethical, agile, focused on delivering benefits and positive societal outcomes, responsive to their public, and transparent. They spend public funds and deliver positive and beneficial outcomes.
• Purpose is fulfilled when value is delivered. There is a value stream that threads what delivers value and it provides the ruler with which to measure what is appropriate or lacking.
So, resources, systems, functions, departments, assets …, within the organization should exist and operate in order for the organization to thrive. That means that goals for units or entities within the organization have real value and legitimacy to the extent that they can verifiably contribute to the organization’s value proposition. Of course, this is unlikely since significant waste abounds and gaps in performance are forever with us.
The issue is not whether to improve or not. The question is how much, by whom, and to what ends. Where should we set the bar? How good is the good we should be? In a relay race, how would we decide where to focus our efforts? How do we create the appropriate focus, discipline and follow-through? Of course, most groups aspire to be the best at what they do, but unfortunately, it is overly focused on only what they do. It would be tragic, if not ridiculous, to claim success within a unit where the organization or enterprise is tanking. Our operation was successful, but the patient died.
“Could have, would have, and should have”, or, “if I knew then what I know now”, or, “hindsight is 100%.” This last weekend, through a very agile collaboration between governments, agencies, public and private sectors, an attempted act of cowardly terrorism was averted; a bomb did not take innocent lives. It hinged on a decision from a former terrorist to come forward and alert Saudi authorities of the despicable deed and the cascade of information and resource deployment worthy of commendation. Of course, the media chimed in and warned that all passenger flights may be in danger of carrying explosives in the baggage holds.
The “news” is nothing new, not even news, but sufficient to trigger the domino tumble of escalating the declaration of more inspection, perhaps escalating to 100% inspection of packages and mail on flights. Does anyone feel better and safer? Test after test conducted by the Government Accountability Office (GAO) indicate that the current 100% inspections of passengers and carry-on luggage let lots of nasty stuff get through. That’s the problem with inspection … 100% doesn’t yield zero defects … even 100% after 100 % does not get us to zero, and multiple studies confirm that. In fact, the responses that succeeded this last weekend were triggered way upstream of airplane loading and depended on state-of-the art tracking by a commercial entity, UPS.
This example is one where the consequences of failure are severe. Many organizations have a balance of two dimensions when making control decisions, fear and confidence. The levels of fear of the consequences of failure drive escalating and sequential levels of inspections and checks as a comforting barrier. This strategy does not always address the causes of the failure, but rather the containment of failures at given points in the process, often relying on the last line of defense. This is a “detect and correct strategy”. It is costly in resources, frequently wasteful, and seldom fail safe. It attempts to catch a defect, the bomb, in the system before it does damage. It requires some knowledge of where to look, and where the damage is likely to occur, or a blanketing “check it all” approach. In complex systems, this approach is very likely to fail. Many of our organizations operate within complex systems.
The alternative is to invest upstream in the process, much like the example this weekend. This alternative strategy is to develop the capability to “predict and prevent”. This strategy plays more to building confidence in the process by building knowledge of the drivers and causes of the defect and look for the culprits there. Yes, it requires spending more on the front end, but decades of data confirm that it is far more effective. Inspection is often destructive and prevention can be constructive as knowledge creates focus on what matters and away from what does not.
There is often great pressure to appear to be doing something about defects. Downstream inspections are visible and they do catch some defects. However, when they fail, our customers experience the consequences. Our instincts may tell us to do more checks check more things. As we move further downstream in our inspections the compounding pressures to deliver on time will overcome our capacity and degrees of freedom to detect and correct. Careers can die at deadlines. Ask any proposal writing team.
Healthy performance is not too different than healthy living; it is typically more effective when managed before you need to go to the hospital.
Last Wednesday, October 14th, H.R. 946, or in plain English, the Plain Writing Act of 2010 was signed into law. It’s a refreshing intent to align the language of government with the language and understanding of the people governed. For centuries, our law has been written in codes that require specialists to interpret and often serve as combatants in a system wherein the consequences are typically borne by others. Granted, it does not address doublespeak in contracts and service agreements, but it is a good directional beginning. Specifically, “plain writing” in the new law is defined as writing that is “clear, concise, well-organized and follows other best practices.” Perhaps now the governance battle moves to decide what best practices are.
Best practices are an interesting term, particularly in the management of enterprises. It has taken on very different meanings, ranging from very good to disastrous. Best practices can mean:
• How the best in our organization get something done, or how well they are doing in relation to the rest. Often this is used as a means to get multiple groups within an entity to agree upon a methodology. This has become increasingly dangerous, particularly in poorly performing entities. The result could become the application of the best of the worst, or emulating the cream of the crap.
• How the best among organizations in the same industry or providing competing products or services execute. This broadening of the perspective improves the subsequent DNA of the resulting process or practice. However, if the gene pool for benchmarking is the same industry, like the subprime mortgage industry, the results may resemble sheep following blind shepherds over a cliff.
• How the best among organizations executing the same activity or process across all industries or organizations get it done. This approach increases the odds of identifying better methodologies. However, it gets us only so far, and that may not be enough if the best of the best are improving quicker than we can catch up.
But, alas, the government has recognized that language matters a lot, and it is an essential factor in the effectiveness (quality) and efficiency (time and cost) of the execution of communications. Within organizations, the same holds true. Unfortunately, many of our organizations have enough functions, job descriptions, organizational structures, technologies, and cultures to create a Tower of Babel. The languages of sales, engineering, customer service, accounting, technology, design, finance, … et al are very different and often unintelligible to other “tribes” within the shop. Add to that the added complexities of our multipolar world, and the odds for misunderstanding are very high. When we use narrative, spoken or written, as the means of communication, someone will get it wrong.
Universal as this challenge might be, there is a best practice that can go a long way to bridge the language chasms among us. It is no different than getting a good map for travelling from here to there. When travelling, we’ll use all kinds of maps; road maps, street maps, airport maps, seating charts, shopping mall maps, grocery store maps, piping and wiring diagrams, fire exit maps, lots of maps.
What happens when we don’t use maps? What happens when we take a wrong turn or get lost?
How about within our organizations?
Over the last two weeks, I’ve been going through a round of “safety checks” to evaluate my personal operating systems. Although the medical professionals may have more sophisticated terms, they are nonetheless evaluating my operating capabilities to see how much may have changed. These capability evaluations have paid off with rates of return that run off the charts. I am just like many business operating systems in that I’m subject to the risks of decay and disruption. Decay and disruption mean that some things gradually eat away at my capabilities while others can have a very big impact in a short period of time. I also run the risks of relying on the wrong data for decision making, just like a business might. I could, for example, believe that if something is wrong, my body would always let me know with pain, discomfort, fever, or other tangible nasty stuff. The big risk of using that kind of data is that I may find out way too late in the process and may not be able to recover. If I were a business behaving that way, I might wait for complaints, or rely on catching failures at the end of the process. If I were a business behaving that way, the consequences might be terrible since waiting on complaint data may tell me I’m already dead with certain customers before the complaints get my attention. Reality is a harsh teacher that ignorance is not bliss and complacency kills. Feeling good is not a reliable indicator of being good.
I combine this yearly set of assessments with quarterly check-ups so that my doctor can detect changes in my condition. Frequency of measurement is really important, particularly when systems are subject to wear and tear, or suppliers are changing, or requirements are changing, or the environment is presenting new constraints. It means that I need a frequency of measurement that can catch stuff in time to do something about it. Of course, having great measurement without the will or means to do something about what the data says is a waste of time and money. I have someone to hold accountable for the quality and interpretation of the data, but only I can be accountable for doing something with the data. Data is expensive, analysis is not so expensive, but both are worthless without decisions and actions when appropriate. In fact, data can have value if it improves the decision making process. Data is for what I am about to do … for decisions that need to be made, even if it is about what we had done before.
One unhealthy condition people can share with a business that will eventually kill any business is obesity; process and cultural obesity. It’s all the waste we carry around in our processes and decision making. We’ve all seen it; many of us have done it or caused it. It not only makes us slow, it also makes us expensive. In really good times, we can get by, but when times get tough, keeping up while carrying the useless load becomes challenging. I’ve always believed that fitness precedes performance. The things that I want to do may require a big investment into the things I need to do. Aspirations may require lots of perspiration.
This is the time when many of us are finalizing our goals, aspirations and planned expenditures for next year … it is all about what we want to do. Are our capabilities up to the task? When was our last check-up?
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