Rigidity
I’ll Take That Message Medium, Please
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?
Opportunity in Every Storm
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
I’m Shocked
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.
Steering and Branding
What’s in a name? How about the three R’s: recognition, reputation, and revenues? What’s the value of a brand? BRANDZ has just published their evaluations and valuations of global brands. It’s a measure of just how valuable the commercial brand is and supporting insight into the whys and wherefores. The shifts and changes in their rankings are a barometer of how our choices of who delivers value are manifested in our buying behavior. It’s not an opinion poll, but rather an evaluation that incorporates business results with analysis inclusive of some subjectivity. It’s free and easily downloaded. The big global headline is that Apple, with an 84% jump in score, has surpassed Google as the most valuable brand in the world. Technology, specifically technology that enables our multi-polarity and interconnectivity to flourish, rules the top of the list … the standard bearers of an increasingly untethered and disintermediated consumer and commercial world. That means that value propositions increasingly incorporate wireless connectivity without a middle man. Googling it, Tweeting, linking up on Facebook or LinkedIn, catching it on YouTube are fully integrated into our lexicon. Recently, repressive government regimes in the Middle East have learned just how powerful these untethered forces are.
There is surrealism to this, particularly for us Baby Boomers. Brands exist in a very Darwinian environment, with success belonging to the fittest. What being fit means has changed lots over the years. The shift years ago from industrial dominance was led by the services economy. In fact, one of the top 5 this year, IBM, now a consulting and technology services giant, was once a hardware maker selling typewriters and lots of computers, behemoths and little ones. The current kings of the hill are all technology firms, with the exception of McDonalds and some might argue that their value proposition and the stuff they sell are untethered, disintermediated, and high tech as well. To nail down the point, Amazon is now a more valuable retail brand than Wal-Mart.
Early losers in this sea change included stock brokers replaced by powerful web engines that enabled more effective, efficient transactional capabilities. Those that transitioned to become trusted advisors are still with us, but very few order takers remain. Be they Borders or Blockbuster, wireless and untethered trumped brick and mortar between customer and supplier.
Delivery of value has increasingly demanded convenience as the driver.
- How often do we measure our performance in delivering convenience?
- Are we ubiquitous in accessibility?
- How many hand-offs exist in between us and the customers’ actual securing the benefits they seek?
- How well are our electrons delivering value? Do we paper or pdf, snail mail or email, travel or teleconference, drive to the mall jungle or click to Amazon, carry cash or card it, keep knowledge in persons or in our systems and processes ……?
- How are our customers deciding where to shop and how will they decide with whom to buy?
- How quickly do we adapt and respond to changing requirements?
- Are our improvement efforts focused on where our customers are going or on getting better at where we are at today?
Getting the Point
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:
• Disruptions?
• 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?
Going Nuclear
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
Going to Pieces
It’s hard to miss the changes in the media world, specifically, the demise of the Blockbuster empire. I’m fascinated by Netflix, the Blockbuster busting competitor, implementing the very strategy that made Blockbuster king. Blockbuster was the brainchild of Wayne Huizenga. Huizenga’s strategy took businesses that were fragmented and integrated them, creating customer value. Interestingly, Netflix saw the Blockbuster blindness to its current fragmentation and jumped in.
I recall the early days of video rentals, comprising many small businesses, typically mom and pop entities, often nearby. Customers had memberships in several, or had to wait or hunt about for specific video titles. If the corner store did not have it, you got into their cue or drove to another store. These small stores could not afford levels of inventory for high demand titles, creating unavailability, customer disappointment, and frustration. Summing the collective inventory of 4 or 5 of these small stores, the likelihood of unavailability of a title on any given day would shrink by orders of magnitude. Fragmentation created opportunity for the integrator, Blockbuster. The one stop shop created customer value delivering with more convenience and reduced waste. Netflix took video content another step, they integrated home delivery with web access and eliminated the need to drive to stores. No stops to do all the shopping meant more convenience and less waste. Lower inventories; no brick and mortar, large payrolls and high overhead per rental, made the business more profitable, flexible, and attractive to investors.
Overcoming fragmentation improves capability to meet demand. Fragmentation may be the most ubiquitous problem across enterprises, public or private, local, national, or global. Fragmentation of information between agencies contributed to the horrors of 9-11-2001. Fragmentation impacts supply chains, manufacturing, services, responsiveness, growth, quality, cost, timeliness, decision making, cultures, overhead costs, waste creation, market share loss … countless calamities. Performance improvement programs invariably run into fragmentation issues as big obstacles to implementing improvements or as big root causes of variability and waste (that accounts for Six Sigma and Lean). Fragmentation has always been a tough nut to crack, often because of increasing growth and complexity. There are a multitude of sources for fragmentation; org charts, functions, budgets and accounting processes, legacy and competing systems, data, risk management, fear, control mechanisms, geography, growth … ad infinitum.
I would suggest that fragmentation is a result of being bigger in size within organizations, or more dispersed across organizations. Being both bigger and highly dispersed makes it all the harder. The way variation is quantified and analyzed typically examines variation within an entity and variation between entities.
Basically:
• The bigger we get, the harder it is to be bigger.
• The more places we’re at, that much harder it is to be at more places.
There is no question that the business and governance marketplace is bigger and more globally distributed, increasing with an astounding velocity. Boeing knows the problems all too well with the perennially delayed Dreamliner. Toyota was challenged last year, their size complexity, diversity, and global presence surfacing a vulnerable underbelly. Military organizations will confess to the same challenges. There are solutions for some of today’s fragmentation problems, as there were in the past. Roads, railways, telegraphs, telephones, networks, systems and models … many of those solutions created the root causes of today’s fragmentation.
Thoughts?
Roads, Forks, and Prongs
The term robber baron is said to have originated as a medieval name attributed to those that controlled passage on the Rhine River and charged exorbitant tolls. They recognized the power they held, as constrainers or enablers of commerce. The term lived on and thereafter was attached in 19th century America to the magnates that built and operated the railroads. Their power, the same as their predecessors, came as they became the harvesters of the power that came to gatekeepers to commercial traffic. The big and exciting commercial wars in the mid to late 1800’s were about control of the rails. The magnates who built the rails, steamship lines, and the routes of commerce did much to shape the course of history and how we operate today. We may not recognize names like Gould, Crocker, Flagler (outside of Florida), Harriman or Vanderbilt, but their tribe of visionaries and shapers continues on.
Modern technology has changed the methods of how commerce traffics, but little has changed insofar as the value and leverage these channels have. Getting from “here to there” matters much to commerce, buyers or sellers. Giants such as FedEx and UPS understood this well and filled the vacuums that public postal systems created. Be ye pirate or magnate, control over the lanes is real leverage.
Commercial choice is a function of degrees of freedom. The fewer degrees of freedom one party has, the lesser commercial power they can exercise. Loss of degrees of freedom in commerce fuels a range of responses as brutal as wars and as exciting as innovation, the best kind, the kind that solves problems, and the kind that is pulled by a sense of urgency. Often, history teaches that imbalanced growth of innovation creates the commercial imbalances that visionaries can see and leverage while we bask in the fun of the new solutions.
The current commercial wars are even more fascinating. These wars are about the virtual electronic waterways, invisible, infinitely networked, changing daily and ever more far reaching. The sea lanes and railways run on the net. The magnates who reshape winning and losing, acquire, rise, and fall can’t be measured by fleet size, or number of gates at physical hubs, or the endless trappings of game makers. They are creatures of our making. They are measured by our democratic behaviors, our choices, and have grown sufficiently to determine how democratic the future roadways will remain.
In our enterprises, we make daily choices about enterprise systems, business channels, email systems, network configurations, CRM applications and innovations to give us more transparency, build capabilities, and achieve leverage of resources and investments.
• How will our choices give up degrees of freedom that construct future system constraints?
• Do our strategic decisions create more choices and preserve flexibility?
• Do we “hard wire” ourselves onto roadways with visionary gatekeepers that will shape our futures?
• Have yesterday’s solutions become today’s constraints?
• How do we currently preserve or give away degrees of freedom in our strategic choices?
“Concentrated power has always been the enemy of liberty.” Ronald Reagan
The Winter of Our Discontent
The yearly onset of winter has been a critical milestone in our history, life for that matter, on this planet. It triggered severe constraints in access to food, travel, safety and the quality of life overall. Travellers who needed to get across mountain ranges had to make tough choices, and often make winter quarters and postpone travel until the thaws. Even in war, some armies huddled in winter and fought from early spring to late fall. Today, winter continues to constrain and often reminds us that our advancement and technology can be humbled by severe weather. Those in the tropics see a different face of nature, the tropical cyclones and monsoons.
This winter’s snow storms have rolled in with a frightening frequency, size, and impact. For travellers, their effects have been far reaching. Our highly networked transportation systems suffered from and precipitated aftershocks, stranded trains, planes, automobiles, pedestrians, and passengers, … , felt well outside the snowed in airports, streets and terminals. For airlines, this winter has caused the most flight cancellations on record. With steep fines brought on by regulatory “bill of rights” constraints, risking “maybe” flights have far too much downside risk making flight cancellations the less costly alternative. The broad brush of regulation brings on predictable rigidity for the many in order to control the few. Airline losses from storm cancellations exceed $600 million with plenty of winter still left.
The impacts on businesses and enterprises are incalculable, but many economists believe that the adversity this winter has wrought will be felt by many for years to come. The fragility brought on by the forces of nature affects some enterprises more than others. If a business requires travel, face to face transactions, or physical accessibility, the consequences are more severe than those that don’t. Brick, mortar, asphalt and place bring unavoidable rigidity. While technology has increased the effectiveness and efficiency alike, value does not arise until customers derive the benefits they seek. Discussions about lean and waste eventually come to what adds value and what are currently unavoidable costs.
I like to use the story of two business partners, one in New York and the other in London. The year is 1711, and the partners must meet twice a year to review contracts, strategies and business direction. They will alternate venues. The meetings run about six hours. So, one partner travels for eight weeks on a galleon through whatever the seas bring to get to the meeting. Two hundred years later, their descendants repeat the process, but now travel eight days by steamship and 100 years later the subsequent pair makes the trip in eight hours by air. Improvement in travel reduced wasted time, but it was still wasted. One could argue that all of the time in the six hour meetings added value, but that is arguable by anyone who endures six hour meetings. Video conferencing changed the game, no travel with all meeting. The web changed the world and how we look at it.
Blockbuster is in bankruptcy, the iTunes world has replaced music cd media, streaming has replaced the rest, Microsoft has replaced boxed software executives with those who can reach the cloud, AOL has purchased Huffington in order to re-enter the way we access information and content.
Looking back on this winter, what would we have done differently if we knew then that it was coming? Would we have been stranded or connected?
My Way or the Highway
American Airlines war with the web is a fascinating series of events. Nobody can argue that the web is the neural and circulatory network for the preponderance of businesses. Unavailability and inaccessibility are likely to be two deathly symptoms of a commercial entity headed for life challenging times. Now, when I hear about accessibility issues, I tend to associate them with technical or network failures. Something broke, or glitches or evildoers are driving the calamity. Not so in this case. This war has to do with how accessibility is managed. American has made a decision that they will set the rules of how customers can access them.
These days we can book travel through agents or travel departments, call the airlines directly, go online to their websites, or go with a web broker that enables comparisons across multiple providers. The last group, the brokers, enables a platform that increases customer choice by creating a dynamic virtual marketplace where carriers can go head to head for available seats. Here is where technical and commercial complexity is made invisible to the customer, but requires important choices and decisions between the carriers and the brokers. American has their proprietary ticket sales platform, “Direct Connect,” and has decided that brokers must use that engine if they want to sell American seats. It is pretty much a “my way or the highway policy.” Two giants of the online travel world have opted for the highway. Travelocity and Expedia no longer display American flights as an option to their shoppers, they have made the carrier non-existing. American is working with Priceline to team up.
I’m reminded that many years ago Pizza Hut had a “no delivery” policy. If you want our pizza, you come to our restaurant and pick it up. A family owned pizza shop in the Detroit area saw great opportunity in that “my way or the highway” approach to the marketplace and created what became the delivery giant, Dominos. If you call Pizza Hut today, they will gladly deliver.
Convenience is cool to customers. Choice is cool to customers. Time is cool to customers. Many will agree that Pizza Hut had the better pizza …. So what? Airline seats are not pizzas, nor is American alone in accessibility. Southwest ticketing is only available on their website and through agents, but not web brokers. Constraints to accessibility always have effects. Whether Blackberry in Europe or the Middle East, or Apple versus the world …. They have effects, often costly ones.
• How convenient are we to customers?
• Is having the better or only mousetrap enough?
• In a world where choice and options are increasing exponentially, will customers find what they want and need “on the highway”?
“Freedom is not being a slave to any circumstance, to any constraint, to any chance; it means compelling Fortune to enter the lists on equal terms.” Seneca (Roman philosopher, mid-1st century AD)
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