Business & Economics
2012-03-01; The Right Thing
To follow up on the "stick to your knitting" homily, one issue which
has been written about in various forms in the business/management
world is the question of what
an organization is doing versus how it is doing it. The phrasing I've come up
with is "Doing the thing right, or doing the right thing." In other
words, should an organization accept its strategy, goals, markets,
and products, and focus on working those factors better to gain
competitive advantage, or should the organization focus on
identifying some completely different market, product, or customer?
In the consumer electronics industry, subjectively most failures
come from offering a product that doesn't offer some kind of
exceptional value to the buyer. In this case, all the efficiency in
the world probably won't fix the cost/value conflict that the buyers
perceive. On the other hand, if you are in the lumber business, your
customers pretty much need pine 2x4s. You can come up with all sorts
of creative wood products, but at the end of the day the majority of
your profit stream is going to come from the same pine 2x4s the
other manufacturers offer. In this case, doing the thing right will
be the difference between success and failure; maintaining cost
competitiveness, maintaining quality levels appropriate for the
application, ensuring that supply channels can meet varying demand,
etc.
2012-02-27; Random thoughts on culture, and its impact on
organizations
Since real money is involved, you might think that businesses always
make decisions based on some sort of critical thinking process. Use
of statistical analysis, mathematical forecasting, economic theory,
whatever; that's the sort of thing that we as employees and
investors sort of expect. But in reality, a lot of decisions are
driven by cultural forces. For example, the current Hot New Thing is
social networking. The vast majority of businesses, as well as
governmental agencies and non-profit/not-for-profit organizations,
have surely had staff meetings where the debate wasn't whether the
organization should
engage in social media, but how and when. There are thousands of articles out there
on the Web making the assertion that social networking is a
necessary condition for survival. But what hard evidence is there
for that assertion?
Its human nature, to a certain extent, to be herd-following. If
everyone else is doing it, whatever it is, it must be okay. Right?
Well, maybe not. Five years ago "everybody" was flipping houses.
Many people were getting rich, at least on paper. Following the herd
looked pretty smart at the time. Well, that herd ran right over the
cliff. In the business world, we've seen herd-following behavior
even in industries which are riddled with brilliant minds. Firms
which do boring, tedious, detail-oriented work have been spending
absurd amounts of money on stuff like name changes and designer
logos. An extreme example was the consulting firm Price Waterhouse
Cooper, which changed its name to PricewaterhouseCoopers.
Ironically, their new initialization of PwC is no different from
before, and conflicts with the initialization for Personal
WaterCraft (i.e. jetskis). For the money spent on the legalities,
website, letterhead, brochures, magazine and TV ad campaigns, etc.,
I believe they could have put several poor kids through college.
That brings me to a related topic, that of concept versus execution.
The world of professional management has a long history with
abstract and/or academic business models and philosophies, and an
equally long history of pitching current models and philosophies
into the dumpster to make way for the next wave of models and
philosophies. Like a voice in the wilderness, there are some folks
who recommend "sticking to your knitting" to use a phrase often used
in business school. People with university degrees and high IQs
usually want to do "smart stuff". Fair enough, but there can be a
vast gulf between intelligent and intellectual. To quote Thomas
Sowell, "Intelligence minus judgment equals intellect." A few years
ago, I stumbled across a book titled "Execution: The Discipline of
Getting Things Done" by Larry Bossidy and Ram Charan. This is an
excellent book for anyone in a managerial position. Its fairly light
reading, but pounds home the point that managers need to do more
than simply run projections and make promises; they need to develop
a plan with specifics on what will be changed and how much
quantitative improvement is targeted. In simple terms, instead of
next year's plan being "increase sales by 10%", it should be
"increase advertising expenditure by 5%, redirect sales staff to our
most profitable customers, develop at least two new products aimed
at market niches we don't currently serve, all with the intent of
increasing sales by 10%". And rather than simply rewarding success
and punishing failure, executives evaluating subordinates should use
judgment when evaluating managerial performance. A manager that
developed a good plan that is derailed because of externalities
(say, a hurricane) should not suffer, relative to a manager
who developed an illogical plan that succeeded due to luck.
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