James Drogan

Irving Wladowsky-Berger brings this post that prompts us to reconsider the manner in which we measure the well-being of the human species.

This may be a good supplement to The Context of Interest.

The following showed up in my mailbox last evening.  While it is a commercial advertisement (Criterion Capital LLC), it is also stimulates thinking about what should be important to an organization.  I repeat it here without further comment.

"This formula for success is certainly not new. It has been preached and practiced by business experts and industry leaders for decades. Why then, do companies fall short or struggle?

Perhaps they do not understand that the formula, by definition, has to have all the elements known and quantified for the equation to work. It is not sufficient to work on one variable and hope the others fall in line. They are all part of a complex and interconnected puzzle.

The real reason the formula fails is that most companies do not clearly understand the magnitude and implications of these variables and therefore fall short in implementing them. To clarify the variables let’s ask the following questions and see how your business stacks up?

Innovation:  Does leadership encourage questioning of current methods and support exploring potentially better ways of doings things? Do they foster innovation and consider it a competitive advantage? Does the workforce have “think time” or are they too consumed with executing the current processes? “Innovate or die” is a maxim that is vital, but often is just a plaque on a wall somewhere. We believe that a company must develop and implement active, measurable innovation and creativity processes that involve the entire organization for the company to thrive and be relevant.

Optimization:  Do you know how much it costs to process a purchase order? Do you really know how much it costs to produce and distribute a product?  Do you actively practice lean and six sigma methodologies? Are the communication chain and technology systems functioning in a smooth and seamless manner? Our experience shows that, in most companies, many processes are suboptimal at best and there are areas where minimal intervention can result in sizable benefits.

Capital: Do management and the workforce understand basic economics? What financial parameters does the company set for each member of its workforce?  Has the company optimized AR, AP and current debt obligations? What cash or debt is needed to grow the company? Where can it be gotten and at what cost?  Does the company have succession and exit plans in place? We know this area is often the least understood and companies often operate literally by the ‘seat of their pants’.

We believe that for a company to maximize its potential and be consistently relevant in a global economy it must actively manage all three areas simultaneously. Each of these three aspects must be clearly understood, measured and become an integral part of all strategic business plans and daily operations decisions."

SupplyChainBrain brings a brief report on the Boston Consulting Group Global Survey: Business Executives Expect Difficult Times to Continue in 2010.   The report concludes that business executives are failing to plan tough, defensive actions.  Many businesses are underestimating the enduring legacy of the great recession: a slow-growth economy. market leaders are looking ahead and taking dramatic steps to succeed, but most are focusing on the short term and skirting tough decisions.

What's missing here, at least in this abbreviated version, is a deeper look at why, in the opinion of BCG, these business executives are failing to do what BCG thinks needs to be done.  So, to those of you who are my students, give some thought to the question "Why?"

A second point I would make is that it is helpful to making decisions if one has a number of views of the situation.  BCG is a reputable organization and value ought to be attached to what they have to say.

From Conversations with Dave comes my comment

Third and last point.  There is considerable concern, rightly so, regarding unemployment.  The long term health of any society depends upon employment that generates income that can accumulate into wealth which is then invested, and so the wheel turns.  It seems to me that the general feeling is that we can stimulate our way out of this.  That may be true, but some of the ways in which this stimulus is being applied (see Senator McCain's current rants on this subject) are atrocious.  The stimulus needs to be applied to industries with true, long term potential value.  We need to recognize that David Ricardo's observations still ring true in many ways and what got us to here is not going to get us to there.  Protectionism and nationalism is not, regardless of what other countries may do, a long term fix.  Obama has advanced some good ideas on this and they need to be taken more seriously (J. Drogan, personal communications, December 13, 2009).

The December 21 & 28 edition of The New Yorker brings Green Giant describing China's aggressive movement into industries with true, long term potential value.  This causes me to suggest that overcommitment to ideaology and purity may have some associated risks that need to be fully understood.

America can't make things because managers all learn finance instead of production provides one more thread in the complexity and confusion of the American business model.  In attempt to find the engineers we need we turn to the H1B visa program which, of course, is under the domain of the Conlobs (congress plus lobbyists) in Washington.

I have blogged as well as posted articles of more substance on the importance of ethics and how it is a foundation stone upon which rests all else of what we do.

I refer you to "Climate Scientist Steps Down" in the December 2, 2009 edition of The Wall Street Journal for yet another example of the importance of ethical behavior.  I hold that without a strong ethical base not much else matters.

I also draw your attention to Drogan's Third Law: Never put things in an e-mail you would not like to hear read in court.  This is not a summons to hide evil, but rather to suggest that what you think may be innocuous (although the example given in the Journal article does not seem to fall into this class) can almost always be interpreted by others in ways that may not reflect yuour meaning.

In Back to School I discussed my decision to take up graduate school.  I just finished my first seminar on Theory and the International System (i.e.,  the theory of international relations).  It was well worth the time.  I read people I've never read before, received some interesting insights from my peers, improved my research and writing skills, met a dignitary from Singapore (who was very helpful on the practical application of theory), and now I am in the process of creating a new teaching module about how international relations affects the supply chain.

I've a bit of time off over Thanksgiving and will start the second seminar, Economic and the International System, on December 7.

To my students, prepare for a new and interesting point of view.

"It isn't what we don't know that gives us trouble, it's what we know that ain't so."  Will Rogers

I've come across a video and a podcast over the last several days that bear directly on critical thinking.  The  discussions below below concern accuracy, precision, assumptions, bias, and allowance for the unknown, all factors that tend to bedevil critical thinking.

In the first, the McKinsey Quarterly talks "with Kenneth Knight,  the national intelligence officer for warning for the United States. Knight shares lessons learned from a career spent analyzing and preparing for the unknown.  He spoke with the Quarterly in June 2009. We began our interview by asking if the task of understanding threats has become more complex."  The video of this, courtesy of The McKinsey Quarterly, can be found here.

The second podcast comes from Bloomberg. "Michael Mauboussin, chief investment strategist at Legg Mason Capital Management, talks with Bloomberg's Tom Keene about his book 'Think Twice: Harnessing the Power of Counterintuition.'''  The podcast of this, courtesy of Bloomberg, can be found here.

This item from Bob Sutton fits into the context of Ethics, Critical Thinking, and Communications.  You will also find a relationship with the second of Drogan's Laws.

I posit, and Bob seems to confirm, that

Intuition = f(Wisdom + Facts).

"As is stands right now, the trucking industry is not particularly green--just ask anyone who has been stuck in traffic behind a gas-guzzling, exhaust-belching 18-wheeler. But if the industry is to survive in the next decade, it will have to go through some major changes. According to IBM's "Truck 2020: Transcending Turbulence" report, it will, at least partially thanks to telematics."

The complete article is here.  Courtesy of Fast Company.