Follow the Money

The Power of Diversity

Medical science recognizes the importance of diversity to the health of all living things.  Reduce the amount of diversity by any one of a number of factors and over time organisms become weaker in their ability to face new threats.

The same is true for social organisms, whether with friends or business.  Yet many social organizations appear to ignore this fact.  We as individuals seem to purposely look for situations where we are among those whom are most like us.  The exact opposite of what nature tells us we should be doing.

Much of the conflict I see in U.S. based business is caused by people with different backgrounds, experiences, and personalities.  Any surprise here?  Yet somehow this is viewed as negative.  Rather than embracing diversity of backgrounds, skills, or opinions as the secret to success it is, U.S. businesses seem to strive to eliminate it. 

A new year a new beginning.  Make it a New Years resolution to personally thank all of the people whom have at one time or another last year gave you grief, or otherwise represented a diverse view.  Then encourage them to join you in fostering diversity as the means for maintaining a strong and vibrant business community.

Is Operational Excellence Dead?

Traditionally companies have chosen to compete in one of three ways: Customer Intimacy, Product Innovation, and Operational Excellence. But for the last few years it appears that all of the corporate focus has been on customer intimacy or product innovation. Operations has been the target of one round of cost cutting after another. Is operational excellence dead as a competitive differentiator?

All of the emphasis on outsourcing to low labor cost countries seems to imply that organizations no longer consider their operations strategic. The widespread adoption of generic off-the-shelf enterprise resource management, customer relationship management, and other operational information systems also contribute to commodity business practices.

Does all this mean that operational excellence is dead… or does it mean there is an entire competitive segment that has been neglected and is open for the taking? Could companies with generic and neglected operational capabilities be vulnerable to a competitor who emphasizes speed and agility? Aren’t there still markets for products or services with greater flexibility, produced in less time, with higher quality?

It sure seems like it. If all of the other competitors in an industry have their product/service supply chains stretched around the world, use the same information systems, have the same generic business processes, and starve out every penny of cost, it sure seems that if someone did the contrary to all of the above, they’d be a cheetah among the antelopes. 

Wireless Cities

Under the category of they-said-it-couldn’t-be-done, a number of cities around the world are painting their metropolitan areas with wi-fi. A recent article in the October 15, 20004 edition of Time highlighted Spokane Washington’s success at creating a free hot-zone of 100 square city bocks. Now there's a disruptive technology.

Ubiquitous free wi-fi has the potential to create a lot of winners and losers. The potential winners will be the citizens and government employees who will be able to get voice and data information they need, when and where they need it. The potential losers will be the commercial communications carriers of both voice and data.

Whether you measure it in terms of money or personal productivity, the stakes of this game are huge. There is no question that the always on everywhere Internet is just a technology step away. The only question is who is going to provide it. One scenario has government entities building out a wi-fi infrastructure just like they build roads, airports, and harbors. The Internet is becoming as important to the wheels of commerce as any of these traditional transports.

But what would that do to the muti-trillion dollar telecommunications industry? What happens when an irresistible force meets an immovable object? Lots of sparks. It’s important that with all of this sparking that we as citizens do not allow governments and telecommunications lobbyists to strike a deal to slow down or kill ubiquitous free wi-fi. Anything less than free always on everywhere Internet will place our society at a distinct innovation and economic disadvantage to the haves.

International Processes

I recently had the opportunity to review the processes of an international organization with offices in three countries – France, England, and the US. It was interesting to note the similarities each office’s approach to process management, as well as some differences.

Each office had performed similar work and had certified their processes under ISO 9000:2000 guidelines. Although there were differences in the processes, those differences were more due to historical ways of doing business rather than true differences in approach.

The number, details, and level of process documentation were roughly the same at each office. The level of compliance to the processes also seemed to be about the same. People that had success with process improvement programs, or were in quality assurance roles were more likely to follow processes. Those that felt processes were forced on them by others had less favorable views.

What was interesting is that it seemed process was considered for different reasons at each office. What motivated people concerning processes in one office, did not seem to apply to another. The French seemed to be more accepting of the need for process, but were also more accepting of the need to sometimes ignore it. The English appeared to have a natural dislike for process and viewed it as a necessary evil to be followed, unless they came up with a good excuse. The Americans believed that process was good as long as it was their process and they felt bad when they didn’t follow it, but they never attempted to figure out why they didn’t follow it.

What's in a Name?

Continuous performance improvement programs can increase productivity measurements such as revenue per employee by 5 to 10 % year-after-year. This is easy money. Enterprises can choose to drop this money to the bottom line or reinvest it for growth.

It is also easy money to find. The way most enterprises add new business processes, technologies, and organizational structures is literally with bailing wire and bubble gum. With the right focus and the right expertise, the low hanging fruit of performance improvement is easy to pick off. Then as the organization gains in expertise, ways are discovered to continuously squeeze out another 5 to 10% next year. But if it’s so easy, why aren’t more organizations successfully achieving these results?

The biggest danger to the success of a continuous performance improvement program is not the lack of opportunities, or the lack of expertise. It is a lack of focus. If there isn’t a continuous improvement program, there’s an obvious lack of focus. But the existence of a performance improvement program does not mean the focus is correct.

Ask the participants of your continuous performance improvement program to state its objectives. What would they say? Would they talk about cutting costs? Or would they say the objective of a process improvement program is to improve business processes? Would they mention increased customer satisfaction? Or would they say the objective of a six sigma program is to reduce process variation to a six sigma level?

In many improvement programs the focus turns away from the program’s objectives to the program itself. The villain behind this is usually the name of the program. Continuous performance programs start out with the right objectives; the launch slides contain all the right words: increase revenue, or margins, or employee or customer satisfaction. But soon everyone starts referring to the process improvement program or the six sigma program.

With time the original presentation slides are forgotten. The focus shifts away from the program’s stated objectives to the objective implied by its name. The program becomes its own reason for being. There is a simple solution to this problem. Name the program after the primary objective. Then while continuously improving performance, don’t forget to continually improve the name.

Who is the Customer?

How do you know a customer when you see one? We all hear: listen to your customers; customer service is everyone’s job; and without customers there is no business. These sayings are often repeated, and often believed - but who is this customer?

Customer is defined by most dictionaries as someone who purchases a product or service. Therefore the easiest way to identify a customer is if they give you money in return for a product/service. But what if a parent gives a merchant money for a product that a child uses? Aren’t they are both customers in this case? The parent is a direct customer of the merchant and the child is an indirect customer.

So the dictionaries are not fully accurate in their definitions. To better address the parent/child example, the customer definition should be expanded to: A customer is someone who accepts a product or service provided by the efforts of others, under mutually beneficial conditions.

In the example above, the merchant, parent, and child all established mutually beneficial conditions; with the parent accepting the product from the merchant, and the child accepting it from the parent. Under the expanded definition, the parent and child are customers of the merchant, and the child is a customer of the parent.

Consider a supply chain that consists of multiple companies. Using the new definition, each link in the chain is a customer to all the prior suppliers. Suppliers that understand the needs of their customers, their customers’ customers, and their customer’s customers’ customers, etc., will be able to provide increased benefits and greater value to each level of customer.

Now consider a single company. Supply chains exist within companies as well - since each individual in a company that accepts a product or service from another, under mutually beneficial conditions, is a customer.

This definition treats a lot of people as customers. Excellent customer service generates the same benefits from them as from any customer. Companies managing their internal supply chains as their external ones: reduce costs, increase throughput, lower cycle times, and improve overall quality.

Why IT Projects Fail

Studies show that over 70% of all Information Technology projects fail. Who is the perpetrator of these crimes? A little detective work identifies three possible suspects: technology, people, and processes. Which one is the culprit?

It’s extremely rare for a computer to make a mistake. Given the same inputs and state, a computer always generates the same outputs. So the fault doesn’t seem to lie in the hardware. Software is not as reliable as hardware. The definition of a trivial software program is one that has no bugs. This said it is usually not the software that causes projects to fail. Software is a flexible medium and easy to change. If a bug is severe enough it can usually be trapped and killed, or a workaround discovered.

People make as many or more mistakes as software. But people have been around long before computers. Before computers most projects seem to complete successfully. It turns out people are pretty flexible too; they are good at adapting to any situation. Given a problem, a group of people can almost always come up with a creative way to solve it.

That leaves process as our last remaining suspect. Process is pretty hard to put the finger on. Usually process is invisible, inflexible, unstructured, and undocumented. Process is such a shifty character it must be the villain. As it turns out process usually is the cause of most project failures because: 1) complex processes interact with each other in complex ways, 2) when performing analysis, design, development, and implementation, rarely is the impact of process considered, 3) an error in process is nearly impossible to detect, and 4) processes are difficult to change.

To reduce the odds of failure, IT projects should do two things. 1) Accurately document both the current-state and proposed future-state business processes impacted by the project, and 2) Implement change management with all of the rigor of project managment, enabling process transformation to keep up with the technical transformation.

Lean and Mean?

There are times when people think "lean" should also be called "mean." It is easier to use the savings from lean to cut staff, than it is to look for new and innovative ways to add greater customer value for the same labor cost.

This is one of the reasons for advocating the simultaneous adoption of both agile and lean methods. Agile provides a continuous lifecycle between strategy, delivery, and results. Results then form the basis for new strategies and new delivery capabilities, driving new results, etc. Agile, used as a continuous process, helps to discover new strategic investments for the savings resulting from going lean. Investments that payoff in increased revenues and profits - as opposed to just a bottom line impact of cutting staff.

Why Agile and Lean?

Lean methods allow service-based operations to 1) increase throughput, 2) be more deterministic, 3) reduce cycle times, and 4) adopt a culture of continuous change. Service businesses that have used lean have seen 30% increases in throughput for the same amount of labor, 40% improvement in quality, and 70% reductions in response times.

These are great results in themselves, but are only part of the story. As a result some of the barriers reducing an organization's agility are removed. They are more flexible and accepting of the change necessary to be agile. There is less work in the pipeline so changes can be more easily made. And management has the visibility within operations to understand which levers to pull when change is necessary, and to better understand in advance the impact of those lever changes.

With the barriers removed, becoming agile is about taking a system-wide view of the direct relationships between strategy, delivery, and results. And establishing a continuous lifecycle where each is updated in turn.

A company that is both Agile and Lean consistently delivers better quality products and services at less cost that more accurately meet the changing needs of their customers.

Quality has the wrong name

In many ways it is too bad that no one has come up with a new name for quality. The name quality as we know it has its roots in quality control. Quality police tried to make sure that products did not ship with serious defects. No one really liked the quality police, in spite their good intentions. Quality was like a fruitcake, everyone said good things about it, but no one actually ate it.

Soon the quality police realized that checking for defects at the end of the process was not slowing the number of defects found. So they started working their way upstream. The idea was to stop the defects by going to their source.

It has taken many years, but just like mapping the headwaters of the Nile, by starting at the end of the river and working upstream, the quality police found the source of their quality defects. And just like the Nile, it turns out there is not one source but many. What the quality police discovered is that every activity within a company is directly related to the final quality of their product and service. The quality police have even discovered ways to define all of these activities so that quality is automatically built into them. This is the stuff of legends.

But no one outside of the quality police knows of these discoveries. Why? Because quality has the wrong name! If someone today made a fruitcake that actually tasted great no one would ever know. Quality is still associated with the quality police. No one else will touch it. Total quality management, along with policy deployment, six sigma, lean, and other quality initiatives can transform any company into a global powerhouse. But no one knows this because it is called quality. It’s time to give quality another name.