Archives for posts with tag: Corporate Strategies

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Image: Courtesy of Coralie Bickford-Smith

I took this journey of 13 blog posts to better define the model of Human Business Design. It was necessary to walk through the ideas of systemic thinking, introduce various systems, introduce the idea of interactive management, planning for the apocalypse, pie in the sky models, gap and assets, how to develop a community enterprise based on market principles, design a multidimensional organization, stay away from quick fixes and develop leadership for organizational evolution.

The model of Human Business Design is based on above foundation and rooted in the belief that all human interactions inside and outside of your organization matter now. They way human beings are motivated to connect and realize value has fundamentally changed. We’re seeing a fundamental reset in the nature of work due to drastic changes all of us are experiencing in how people communicate, coordinate and collaborate. And the Enterprise 2.0 “movement” tries to capture this changed behavior by applying Web 2.0 principles to the “command-and-control” needs of the enterprise. In addition, we see a mere obsession with tools for tools sake without much understanding of the socio-business context. The old problem of throwing software solutions at organizational problems is just being re-invented in the social networking arena.

Instead, we need to focus our attention on the shifting nature of work itself and how enterprises need to evolve in a rapidly changing world, Organizations need to dig deeper, define new principles around which work itself can be reworked. Forward thinking companies will develop their own constitution, a bill of rights and a social contract for all stakeholders to have a common purpose everybody involved can rally around. In short: enterprises need to socialize their business.

Technology is the critical enable to implement Human Business Design within your organization but technology is not a sufficient agent for change. We have to focus our work on humans, the limitations of extrinsic motivators (external reward or punishment) and the need for intrinsic motivators (finding meaning in work):

– Developing a foundation of trust
– Motivating and educating the stakeholders to become more active participants
– Providing access to stakeholder knowledge and skills
– Facilitating individual freedom and control
– Encouraging emotional/aspirational co-creativity and participation.

    Successful evolution of the organization to a Human Business Design Enterprise requires them to find the appropriate locus of learning, between both market and non-market sources of ideas and knowledge. Most established firms are still trying to access these autonomous idea pools using industrial age logic and rational economic arguments, and, in most cases, tired and outdated marketing efforts where the emphasis is on surface-level tinkering of the customer engagement model, not a complete realignment and reorientation.

    Enterprises have to understand that each business, with money and investment in structures, is no more than its people within and its people outside (all stakeholders). Enterprises need to rely more on people and bridge their left-brain thinking demands with the desires of people to focus more on their right-brain capabilities.

    More than 10 years ago, the Cluetrain Manifesto exclaimed “Business is fundamentally human”. We need to stop treating stakeholders as “resources” and regard each stakeholders as clients with their own interests, desires and drivers.

    If you want to learn more about Human Business Design and how we can help you implementing these principles into your organization, feel free to contact me at uwe@bateshook.com

    And, all previous installments for this series, can be found here:

    Part 1Part 2Part 3Part 4Part 5Part 6Part 7Part 8Part 9Part 10Part 11Part 12

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    Development is not something that is done to an individual or group; it is something they do to themselves. It is an increase in the ability and desire to satisfy one’s needs and legitimate desires and those of others. It is a matter of learning, not earning. No one can learn for another, but one can encourage and facilitate the learning of another. Development is not a matter of how much one has, but how much one can do with whatever one has and what resources can create out of what is available.

    Organizational development requires leadership, which is primarily an aesthetic activity. One who leads development must inspire pursuit of a vision in whose production the leader had a hand. A vision is a picture of a state more desirable than the one that the organization currently is in. Leadership must also faciliate development of the strategy, tactics, and operations by whose means the vision can be pursued. Since the vision is often one of an ideal that can never be attained, though it may be approached continuously, leadership must see to it that the pursuit itself is satisfying, that it is fun as well as meaningful and valuable. Effective pursuit of an ideal requires the leader to extract the best possible effort from those who follow. In a corporation, this requires providing nothing less than a very high quality of work life.

    Part of leadership is an appropriate ethical-moral judgement process. The ideal process would encourage leaders to make decisions only by consensus of all stakeholders. And the final decision should never deprive another of the ability or opportunity to develop unless the one affected by the decision would otherwise deprive others of this ability or opportunity.

    However, the number of stakeholders of some corporate decisions runs into the millions, and there is just no way of involving all of them in every decision that affects them. For that reason, multi-national enterprises have to use representatives of various stakeholder groups. In a perfect world, any organization would designate individuals who will be responsible for identifying and evaluating the effects, if any, of current decisions on future generations’ choices and the ability and desire to make them.

    A vision that involves a radical change in the way an organization is conceptualized is a transforming vision. One who leads the pursuit of such a vision is a transformational leader. Transformations are primarily qualitative, rather than quantitative, and are large discontinuities, not merely reform or incremental improvements.

    The transformation to systemic thinking has brought with it a growing awareness of the fact that the effectiveness with which any of our daily activities (work, play, learning, inspiration) can be carried out depends on the extent to which they are integrated. Making it very apparent that a transformational leader must be able to integrate the various aspects of life in order to effectively pursue development. The transformational leader is one who can create an organization that reunifies life, who integrates work, play, learning, and inspiration.

    The transformation of an enterprise from one conceptualized as an animate system to a social system is only one kind of transformation that is possible. However, in our current environment – one characterized by an increasing rate of change; increasing complexity; and an increasing rate of production of understanding, knowledge, and information – there is no other type of transformation that can bring about the necessary focus on employees, customers, and the other corporate stakeholders. A corporation that continues to focus more on shareholder value and less on stakeholders will ultimately fail.

    In our last installment of the “Transform your business” series, we’ll talk about Human Business Design.

    Previous installations can be found here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7, Part 8, Part 9, Part 10, Part 11.

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    There are no simple solutions to complex problems. In an enterprise, problems are interdependent; their solutions should be, too. Interdependent problems are systems of problems and their solutions must form a system. A system of solutions is a plan and all plans are complicated, almost never simple.

    The reason why most management cure-alls and quick fixes fail is their neglect of the whole system and just focusing on one part of the system. These fixes part the whole system, treating it as an aggregation of independent parts. These manipulations typically fail because the performance of a system is not the equal to the sum of the performances of its essential parts taken separately, but the products of their interactions. For that reason, improvement of the essential parts of a system taken separately often does not improve and may reduce the performance of the whole. Another common deficiency is the failure of some quick fixes to take into account a social system’s developmental responsibilities to its stakeholders and the larger systems of which it is a part.

    Let’s have a closer look at some of these fixes.

    Downsizing

    Downsizing fails more often than it succeeds. Within a short period of time after is implementation, costs tend to rise and serious morale problems usually emerge. Since many enterprise focus on shareholder value, the enthusiastic response of stock analysts often convinces the C-suite that they have made the right decision. I would argue, downsizing treats symptoms not the disease, thereby attacking effects, not causes. How come enterprises can lay off more than 10,000 employees and never realized in the months before the actual event that they employed more people than they need?

    Enterprises are social organizations that are responsible for creating productive employment. Downsizing is a clear failure of living up to that promise. The principal source of excess personnel are bureaucratic monopolies within the firm. There are no economic indicators of the performance of bureaucratic monopolies. Neither the value of of their outputs nor their costs are generally known. Because their importance is judged by the size of their monopolies, they tend to grow as much as the subsidizer will allow. When it becomes apparent that a company is not as effective financially and competitively as it should be and is overemploying, downsizing is usually the first way out. But once it takes place, the bureaucratic monopolies continue to make work out of fear and grow as much as the system permits. And the vicious cycle continues.

    And internal market economy is the most effective way is the most effective way of preventing or eliminating internal bureaucracies. An internal unit that has to compete against external resources must stay lean; it must eliminate or minimize excess personnel if it is to keep costs down to compete effectively.

    Total Quality Management/Six Sigma

    “Quality” as applied to products or services has come to be accepted as meaning “meeting or exceeding the expectations of customers.” “Total” quality should apply to all those who are affected by what an organization does: all its stakeholders. The objective of any system needs to focus on a quality organization, not only on quality products and services.

    Enterprises can gain huge competitive advantages by focusing more on quality of work life and less on quality of products or services. Most employees/stakeholders regard Total Quality Management and Six Sigma as another path to exploit them, squeezing more out of them. On the other hand, when organizations strive to to improve the quality of work life, stakeholders will find new and innovative ways showing their appreciation. Quantity and quality of output will improve, even more when they are partners in quality improvement programs. Implementing quality improvement programs should be done from the bottom up, not directed by executives. It empowers all stakeholders and provides a feeling of ownership.

    The biggest problem with Total Quality Management and Six Sigma is the failure to distinguish between efficiency and effectiveness. Meaning, it does not incorporate ethical or aesthetic evaluations of the products and services whose quality it attempts to improve .

    Last but not least, continuous improvement involves relatively small incremental changes made close together in time. This precludes creative quantum leaps. Creative acts produce discontinuities, qualitative changes. Creative but discontinuous improvements are usually worth much more than a string of small but continuous improvements. More often than not, creativity is often discouraged in organizations because it so frequently is destabilizing and disruptive. Creative discontinuities are required to take the lead; continuous improvement is at best a way of getting closer to the leader. One cannot pass a leader by imitation.

    In our next installment, we’ll talk about leadership and how to transform it.

    Previous installations can be found here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7, Part 8, Part 9, Part 10.

    tumblr_ky7r79jz2W1qzhdtio1_500Image: Courtesy of 25.media.tumblr

    Enterprises change at a breathtaking pace, reorganizing too often. Wasting a lot of time, energy, money and morale in the process. in the middle of a market tornado, enterprises try to reach a “stable state”. We would argue, enterprises should strive to reach a dynamic state. A state where adaption doesn’t equal reorganization. Such an organizational design is already being utilized.

    The Multidimensional (MD) Design

    The Multidimensional Design was originally developed at Dow Corning. It eliminates the need to reorganize when faced with a significant internal or external change.

    The need to organize comes from the need to divide labor. To organize is to divide labor among different individuals or groups and to coordinate their activities in such a ways as to obtain a desired output. The more divided the labor, the more coordination is required. There are only three ways of dividing labor, meaning only three types of organizational unit:

    a)    Functionally defined units (Purchasing, R&D, Industrial Relations, etc.)

    b)   Product- or service-oriented output units (the magazines of a publishing company, the coffee of Starbucks)

    c)    Market- or user-defined units (units defined by the geographic areas they sell in)

    Most enterprises have all three types of units. Their importance is often ordered in the structure of most organizations. If product uniqueness is most important, then product-defined units dominate. If costs are the primary concern, functionally defined units rise to the top. All reorganizations involve changing the relative importance of the three criteria used in dividing labor, that is, changing the organizational levels at which units of the three types appear.

    If units of all three types are established at a particular level of an organization, as their relative importance changes all that is required at that level is a reallocation of resources among them. Their reorganization is not required. Therefore, if the three types of unit are established at every level of an organization, the need to reorganize at any time is completely eliminated. Units of any of the three types can be added or subtracted without requiring reorganization; the organization’s structure remains the same.

    Conventional representations of organizational structures do not indicate the interactions of the units. Three-dimensional representation of an organization makes it possible to show explicitly the interactions that should or do take place between units.

    Product- or Service-Define Output Units

    In a multidimensional organization, product- and service-defined (output) units consists of a management and only a small supporting staff, but no other personnel, and no facilities other than what is required to house this small staff of people. They are responsible for providing or arranging for all the activities required to make their products and services available to customers. These units obtain income from sale of their products and services. If they require more capital than they generate or accumulate, they can apply for it from a higher level of the organization. They are expected to treat such funds as loans or investments. They must pay for their use, one way or another.

    Function-Defined Input Units

    Units whose outputs are consumed primarily by other internal units are functionally defined , or input units. Functional units are often divided into two types, one defined as “operations” and the other as “service”. Operation units are ones that have a direct effect on the output (operations) of the organization, for example, manufacturing, maintenance, and purchasing. Service units have no such effect; they affect the nonoperational behavior of other units; they affect the nonoperational behavior of other units. Functional units are free to both purchase whatever they need and to sell whatever they produce or provide, either internally or externally. Their purchasing and selling decisions are subject to intervention from above and to compensation for such intervention when appropriate. They receive the income that their sales generate, and they pay the cost of whatever they purchase.

    Market- or User-Defined Units

    Market units – units that are defined by the users by the users they serve – have two complementary functions. First, they sell the outputs of any other unit in the organization that wants to use their services, as well as selling outputs externally. Second, market units also serve as advocates of the users in the markets for which they are responsible. They should not only represent the company in the market, but also the market in the company.

    Market units evaluate the activities and outputs of other internal units from the point of view of potential and actual users of the organization’s outputs, who are outside of the organization and are affected by these outputs. For that reason, market units operate as consultants to the executive office and other unit heads.

    Performance measures

    A uniform, explicit, and operationally unambiguous measure of performance – which incorporates some function of the amount of profit generated, for example, return on capital employed – can be applied to units at every level, including the executive office. This makes possible comparison of the performances of units at all levels and discourages make-work and bureaucracy. However, profit is by no means the only important performance characteristic. Recall that in socially-systematically conceived organization, development of the organization, its stakeholders, and its containing system are its overriding objectives. Although profit is necessary for corporate development, it is not sufficient.

    In our next installation, we discuss a plan being a system of solutions.

    Previous installations can be found here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7, Part 8, Part 9.

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    Image: Courtesy of waxinandmilkin

    For the sake of scaling, enterprises tend to create internal service divisions that are bureaucratic and monopolistic: Accounting, Procurement, R&D, Human Resources are usually run as subsidized monopolies. The pool that pays for their services is covered by an overhead charge imposed on the units served.

    In general, subsidized monopolies are generally insensitive and unresponsive to the users of their services, but they are sensitive and responsive to those who subsidize them. Subsidizers are often not users of the service, hence less aware of the services’ deficiencies from the users’ point of view. In addition, bureaucracies try to ensure their survival by becoming as large as possible; they operate on the (not unreasonable) assumption that the larger they are, the more important they are and the more difficult they are to eliminate.

    Centrally controlled corporations stimulate the increases in costs of internally provided products and services because the supplying units do not need to compare their costs and prices with those of external suppliers. How can you value a subsidized internal unit? It’s impossible. In a market controlled enterprise, users, not subsidizers, evaluate suppliers and express their evaluation in a way that counts – by their purchases.

    As organizations of any kind become larger and more complex, the ability of centralized controllers to know all they need to know to manage their organizations effectively diminishes. Thats’s why an enterprise based on market economy works better in large systems: it disperses economic control among many enterprises that must compete with others in order to survive. And survival requires meeting or exceeding the expectations of customers and consumers.

    Market Enterprise

    A few requirements are important for an internal market economy to work within an enterprise:

    • Every unit within the enterprise has to be either a profit center or a cost center that is part of a profit center that is responsible for the cost center’s performance. Profit Centers are not always expected profitable but they have to be accountable.
    • Profit Centers have the freedom to buy any service or product they want from whatever source they want, and to sell their outputs to whomever they want at whatever price they want or are are willing to accept.
    • A corporate unit that reduces the value of the corporation shouldn’t be part of it no matter how profitable it is when looked at separately. For that reason, the enterprise has the ability to intervene in a unit’s purchases and sales bot only when it benefits an organization as a whole.
    • If there any executive reasons to buy services from internal resources even though outside suppliers are cheaper, the executive can force the unit to buy from within but has to pay the difference out of his own unit’s budget. This means that a selling unit will never have to sell its output at a price lower than it wants to and can.
    • A manager doesn’t tell his or her subordinate units what to buy and sell unless a negative effect on other parts of the corporation or the corporation as a whole can be perceived.
    • The executive units receives income from two sources: a) it charges for the operating and investment capital it supplies to subordinate units b) it imposes a tax on the profitability of each unit.
    • Each profit center can accumulate profit up to a certain level that all stakeholders agreed on. Profits in excess of the specified amount will be passed up to the corporate level for its use.

    Why a market enterprise?

    Every enterprise unit operating within an internal market economy becomes a profit center. Therefore, for each unit the same success metrics can be applied. It allows managers to hone their skills better since they have a lot of autonomy and it gives each stakeholder an opportunity shine. Managers will be more concerned to get all the information they need to run a profitable unit and offering that information to other units to improve interactions.

    The biggest challenge in implementing this system is the tendency of managers to withhold information. They fail to see that empowering all stakeholders might decrease their stranglehold on information and power but, at the same time, empowers all stakeholders to run a much more profitable organization. And an organization everybody is invested in. It is often recommended to remove managers that are more concerned with their own power base and not the overall health of the organization.

    These managers often form connections with units that are unable to compete effectively or are no longer needed in the enterprise. While dealing with these challenges, the enterprise should never forget that without converting to a market enterprise, the whole organization might become extinct.

    In the next installment, we will talk about organizational structures.

    Previous installations can be found here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7, Part 8.

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    Image: Courtesy of 3.media.tumblr

    Most organizations refer to asset planning as resource planning. We don’t like the term, especially when it comes to humans. Human beings are assets, not resources. The essential difference between assets and resources is that resources have no value outside the business process they are used in, whereas assets have an intrinsic and potential value. Managed as resources people do what resources do: they become depleted or absent – they burn out or move to another company. Managed as assets they flourish, growing in value for themselves and from there – engaged in heart and soul – add value to the companies (and all other communities) they are part of.

    What companies need more than anything in these challenging times are people who are for and are involved in their work with their hearts and souls. That level of involvement and caring is therefore the core issue and determiner of sustainable corporate success in today’s market environment. People engaged with their heart and soul are the most valuable asset any company can have.

    Many companies are aware of this and try integrating “human-oriented thinking” into their corporate strategy; some even realize that appreciating people as the asset they are goes much further than being “nice” to them as a motivational incentive; it adheres to a scientific understanding of businesses as complex adaptive systems.

    Types of Assets

    In asset planning, these types of assets are usually involved:

    1. Money
    2. Capital Goods
    3. People
    4. Consumables
    5. Data, Information, Knowledge, Wisdom

    It’s clear that the required amount and the available amount of each type of asset will not be equal. Because the requirements and supply of any asset are seldom, if ever, in perfect balance, asset planning usually creates the requirement for continuous planning.

    Financial Planning

    Making a profit was once thought to be the only legitimate objective of an enterprise. But times have changed. More and more enterprise consider profit now as a basic pillar, not the ultimate goal. For that reason, enterprises need to determine the financial conditions required to survive and implement the new plan. This requires financial modeling, measuring financial performance measures under a variety of assumed conditions and decisions to use assets.

    Capital Expenditures

    Given its planned pursuit of an approximation to its pie in the sky design, what new facilities and equipment will a company need? Usually, the needs are treated individually and justification to deploy assets based on estimated returns on the investment. Enterprises need to consider the fact that some investments might look poorly on a plan when considered individually but contribute to the bottom line when integrated into the overall system.

    People as assets

    People are e the most valuable asset a company can have. Nevertheless, they are generally used less efficiently than any other type of asset. The waste of employees’ time and competence is huge. The quality and competence of employees had increased significantly during the last decades. However, the way people are being managed and the organization of human capital has not. More often than not, humans are seen as extensions or replacements of machines.

    The trend of increasing the number of people as much as possible (no matter the output required) when times are good and downsizing (no matter the output) in bad times shows how unsophisticated our approach to human asset planning is. In later parts we will offer a solution to that problem by implementing a market economy within the enterprise.

    Consumables

    Each organization consumes assets it uses: material, energy, services – just to name a few. These assets are supplied by either an internal or external source; most enterprises focus on supplying itself with any consumable asset to avoid interdependency. However, in this networked and globalized economy, it has become almost impossible for many companies to obtain and retain the competencies required to provide many of these assets in an economic manner, threatening their ability to compete.

    Let’s just look at the media agency world: When enterprises bring advertising in-house, they often have problems attracting superior talent. As a talent, would you want to work for a huge media agency with good opportunities to advance, or would you work for an enterprise with no chances of real advancement since the rest of the enterprise is devoted to anything else but media? Specialized enterprises are able to provide specific assets at a lower cost and higher quality than most in-house divisions.

    However, the relationship between suppliers and enterprises are often negotiated so as to guarantee behavior not supporting (or even fighting against) the interest of the enterprise. Let’s continue with the example of the media agency: If the enterprise reimburses the agency based on a percentage of company’s media spend, the agency will do anything to increase the media budget. No matter the effect, no matter the outcome. A whole industry of research institutes and consumer behavior studies survive because agencies need data to convince enterprises to spend more money on media. Has there ever been a real study that shows the effect of advertising on sales? In many cases, agencies are better selling to enterprises than to sell the product of the enterprise to customers. As a result, agencies become lobbyists for media, not for their customers they’re supposed to sell to. To break this vicious cycle, agencies should be compensated for increases in sales without increasing media spend and for decrease in media spend without loss of sales.

    This would serve customers much better. Currently, media agencies increase their profit often at a cost to customers. (Time, Annoyance, etc.) Once enterprises preach the gospel of media spend cost reduction by sharing the benefits with all suppliers, a paradigm shift will occur.

    Information

    There’s a frequent misconception that implementing a KMS (Knowledge Management System) can provide all the support decision makers require. Research has shown that most KMS’ miss; they fail to fulfill the promises that were used to justify their development. For that reason, we need new assumptions about information.

    Managers need less irrelevant information

    All of us experience it each and every day: Information overload. Email bankruptcy. Social Media fatigue. Once we have to deal with too much information, we tend to use less information to make decisions. And we have a natural drive to know more and more about less and less. This might be the perfect approach for boutique firms but large corporations need less specialists and more generalists – T-Shaped people. For them to be successful, enterprises need KMS’ to help them filter out irrelevant information and condense relevant information appropriately.

    Managers shouldn’t be burdened with knowing what information they need

    The complexity of systems requires executives to manage effectively without understanding the system well. A system that can be comprehended fully doesn’t need a good manager. In return, a manager that requires each and every detail is scared and will play it safe, not advancing the system appropriately. Executives earn their pay when they possess the skill to make a decision based on enough facts not on all facts.

    The information that managers need is whatever information enables them to do better with it than without it.

    A Knowledge Management System shouldn’t be static, it needs to be embedded within the organization and management system as an infinite learning loop, capable of constant improvement. This  will enable executives to learn what they need or they will be stuck in the “always-asking-for-more-information-loop”.

    Less communication between certain stakeholders is better

    The Information Age has one gospel: More information is better. When all stakeholders are aware of what the other stakeholders are doing, this should enable stakeholders to coordinate their activities better and improve performance, correct?

    No.

    Various stakeholders often have different measures of performance and those are often in conflict with the various divisions. Increased communication between stakeholders might actually hurt the overall performance of the enterprise. Before opening up the flood gates of communication, the enterprise, it structure and performance measures need to be aligned with all stakeholders. Once implemented, each stakeholder communication should be evaluated and communication levels adjusted accordingly.

    Managers have to understand their KMS

    A Knowledge Management System has one objective: to support the enterprise and improve performance. Executives need to control the system, they need to ensure not to be controlled by the system. This requires a deep understanding of the system, its capabilities and limitations.

    In summary, asset planning’s objective is to deliver useful inputs to decision making and the ability to identify and learn from mistakes to ensure improvements of pie in the sky and gap planning. This will help implementing a system that improves decision making and allows for rapid learning and adaption.

    Let’s talk about that in the next part.

    Previous installments can be found here: Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6.

    dsc_0299__1Image: Courtesy of Emil Kozak

    Organizational design produces the vision of an organization and a desired behavior. The gaps between what the organization is and now is doing, and where it wants to be and to be doing, expresses the challenge to be tackled by gap analysis and gap planning.

    Gap Planning determines how the gaps are to be closed or reduced. It is the preparation of the design’s “initial  drawings” which provide the instructions required to close or reduce the gaps. Gaps can be filled by adding things, eliminating unnecessary things or by changing things.

    Assessment

    Before any assessment can take place, each stakeholder needs to understand and agree on the new direction of the organization:

    • Communicate widely the vision, mission and pie in sky design
    • Design the data-gathering process and explain to all stakeholders that an enterprise-wide gap analysis will take place
    • Discuss with each stakeholder the benefits and difficulties involved in the transformation process
    • Establish the initial design and data-gathering lead teams
    • Determine the stakeholder task force
    • Establish expectations for ongoing communication, and communicate the philosophy for staffing the organization

    Using a combination of survey and group interview techniques, gather information on the effectiveness of the current organization. Data gathered should include: core processes and their effectiveness, additional customer data, critical tasks or key activities, work load, roles and responsibilities, decision-making authority, qualitative data on management practices, and internal issues and suggestions for improvement. Enterprises need to consider the current culture, how change has been implemented in the past, and how is has been received by employees at all levels.

    Gap Analysis

    In planning the analysis, it is essential to clarify what information is most relevant. This involves specifying intended outcomes and possible unintended outcomes. It also involves plans for assessing how well processes have been implemented and where improvements are needed.

    We use the example of a luxury car dealership to illustrate the gaps. In this example, there are several gaps that are important to measure. From a service quality, these include (1) service quality gap; (2) management understanding gap; (3) service design gap; (4) service delivery gap; and (5) communication gap.

    Service Quality Gap

    Indicates the difference between the service expected by customers and the service they actually receive. For example, customers may expect to wait less than 10 minutes for their loaner car but reality is an average waiting time of 20 minutes. Most cars are being dropped off early am and 10 minutes before work are more valuable to people than after 5pm.

    Management Understanding Gap

    Represents the difference between the quality level expected by customers and the perception of those expectations by management. For example, in a car dealership customers might expect expediency on their repair but management focuses more on excellence than expediency (for many legal reasons).

    Service Design Gap

    This is the gap between management’s perception of customer expectations and the development of this perception into delivery standards. For example, management might perceive that customers expect someone to answer their telephone calls timely. Customers might think “timely” is less than twenty seconds and management defines “timely” as less than 40 seconds, thereby creating a service design gap.

    Service Delivery Gap

    Represents the gap between the established delivery standards and actual service delivered. Now, management might establish a new standard of answering each call in less than 20 seconds but average time of answering is 27 seconds, creating a service delivery gap.

    Communication Gap

    This is the gap between what is communicated to consumers and what is actually delivered. This happens frequently when dealerships offer low-price oil changes and then charge customer for questionable labor.

    Gap Fillers

    The most important criteria used in evaluating the gap plan is whether it will the enterprise to push in the right direction, avoiding a chaotic transition and helping the organization to utilize opportunities. It’s extremely important to refer back to the mission statement, and understand if the gap plan will help to fulfill promises made in the statement.

    When an individual or a group is confronted with a gap between where they are and where they most want to be, they can respond in four different ways: absolution, resolution, solution, and dissolution. Learning and creativity are enhanced more by design (dissolution) than by research (solution), more by research than trial and error (resolution), and more by trial and error than by doing nothing (absolution). The goal is to design an organization that considers dissolution as their main goal. Dissolution of boxes,  paradigm, linear thinking. Through organizational design, all stakeholders will contribute to the creation of a world they are envisioning to live in.

    The efficiency and effectiveness of the gap fillers selected in gap planning are not only matters of selection one of a set of available gap fillers, but are also a matter of creating gap fillers not previously available. Organizational business design unleashes creativity in developing a vision to be pursued by an enterprise. But creativity also has an important role in selecting the gap fillers by which to pursue it. Therefore, the selection of gap fillers can also be more a matter of design than research or common sense.

    Last but not least, the gaps treated as challenges in gap planning are almost never independent of each other.  Therefore, their solutions interact systematically. The selection of solutions to close the gaps should take into account these interactions, especially their joint efforts on the enterprises’s overall performance.

    Tomorrow we will discuss asset planning.

    For your reference, you can find the previous chapters here: Part 1, Part 2, Part 3, Part 4, Part 5

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    Image: Courtesy of Minddesign

    “Vision is the art of seeing what is invisible to others.” – Jonathan Swift

    Every enterprise needs to set Big Hairy Audacious Goals. These Big Hairy Audacious Goals are your limit. It’s an idealized goal that might never be attained, it’s your Moon Landing. We will talk later how to reduce the gap between enterprise reality and pie in the sky ideal. But, forget about limits for a while. This is about expansive thinking: no borders, no limits, no boxes.

    Planning for Pie in the Sky includes:

    • A clear vision of your enterprise
    • A mission statement, expressing the Big, Hairy, Audacious Goals
    • Specific features the enterprise needs to have to achieve the goals
    • A pie in the sky design of the organization

    A clear vision of the enterprise

    Corporate visions are usually developed by executives, not involving all stakeholders. While developing the vision by few might be more efficient, the vision needs to be shared by all stakeholders in order to be pursued effectively. Most visions define what executives want the enterprise to be in 10 years or so, often forgetting what these executives want the enterprise to be right now. I would argue, it’s imperative to develop a vision that communicates the ideal design of the organization for the here and now, assuming the organizational design will be able to handle changes (and there will be many) without actually forecasting the future. Instead, organizational designs have to incorporate contingency planning.

    I have all the plastic in the world but I still carry a few bills with me all the time. I don’t forecast a cyberattack on the banking system, I don’t forecast a massive quake in LA that won’t allow me to access my account for weeks. But all these things and other scenarios are possible. And I would like to be prepared for it.

    A Mission Statement, expressing the Big, Hairy, Audacious Goals

    Most mission statements are borefests: platitudes of epic proportions. A real mission statement should answer the following questions:

    • Why does this enterprise exist?
    • What are the aspirations of the enterprise?
    • What does the enterprise do to succeed?
    • How will the enterprise pursue its Big, Hairy, Audacious Goals?
    • How will the enterprise serve each stakeholder?
    • What makes the enterprise unique?

    While formulating the mission statement, stay away from empty sentences/words, corporate speak and anything your best friend outside of your expertise doesn’t understand.

    Specific features the enterprise needs to have to achieve the goals

    Whenever we develop a website, the first step is to sit down with all stakeholders to go through their wishlist: What features does each stake holder would like to have? Enterprises have to go through this exercise as well to design their ideal organization.

    This can be a laundry list of thousands of items or just a minimal document that describes the structure of the enterprise, corporate culture, management style, employee expectations, high-level ideals of products/services, etc. Each ideal enterprise design is different and the features list will reflect its uniqueness.

    A pie in the sky design of the organization

    Imagine, your enterprise stopped to exist last night. Nothing else has changed: Technology, laws, regulations, taxes, etc. The environment and systems that surrounded the old enterprise still exist and they haven’t changed. Just your enterprise is extinct. Start designing your new enterprise.

    What kind of enterprise would you design if you could start from scratch? How would you design it so the enterprise is capable of being improved continuously from within? We’re not asking you to create Utopia, a perfect enterprise. Instead, your pie in the sky design should incorporate what you want to the organization to be right now. While you discuss these ideas with stakeholders, many new ideas will evolve and creativity will flow freely. This process of collaboration is often the most important product of this step to transform your business. Enterprises need to make sure that during this step self-imposed constraints are kept to a minimum. Stakeholders should not be concerned with feasibility, budgets or implementability. Reminding them that the enterprise was destroyed last night might help limiting those constraints. Keep dreaming.

    Next, we will discuss gap analysis and gap planning.

    For your reference, the first parts can be found here: Part 1, Part 2, Part 3 and Part 4.



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    Image: Courtesty of 24.media.tumblr.com

    “It turns out that an eerie type of chaos can lurk just behind a facade of order – and yet, deep inside the chaos lurks an even eerier type of order.” – Douglas Hofstadter

    One of the fundamental characteristics of today’s enterprise environment is change. Today’s rate of change can often be experienced as chaos. All of us are grappling with the implications of technology, demographic changes and the impact of the human race on the planet. And we have an armada of experts that tell us how it will affect us physically, psychologically, socially, and organizationally. The fact and necessity of change needs to be a major consideration in the management of any enterprise. In addition, it is imperative for executives to be competent in introducing, responding to, or coping with fluctuations in the environment.

    Before an enterprise can deal effectively with chaos and the always-present change, it needs to craft a situational analysis. It provides a comprehensive view of the system they manage. It also helps with determining its projected future, where it will be if it continues on the current path and be prepared for situation where the unexpected happens. These projections are imperative to understand how the enterprise will be affected unless it changes.

    Situational Analysis Content

    The situational analysis needs to contain at minimum:

    • Flow of business transactions from initial order to final delivery
    • Information flow required by underlying business transactions
    • Flow of financial resources
    • Culture of the enterprise. Differentiating between real culture and externally communicated culture (Policies)
    • Conflicts within the enterprise and between the enterprise and other stakeholders
    • External Trends and implications to the performance of the enterprise

    This situational analyis is a much more in-depth look at the overall health of the enterprise compared to the typical SWOT analysis. In addition, we do recommend enterprises developing an ultimate apocalypse scenario.

    Ultimate Apocalypse Scenario

    The goal of the ultimate apocalypse scenario is to understand when and how the organizational system will break down if there are no adjustments. We all know that enterprises will eventually intervene and adjust. (Often too late or not early enough.) To be clear, this scenario is very unlikely to happen. But it helps enterprises to understand when and how the system will break down if no changes are implemented.

    Fact is, the majority of organizations will not change their course unless they are in a state of crisis. Let’s just have a look at the current state of the U.S. government: For how many years have we heard we need to change fiscal direction? For how many years have we listened to politicians talking about the crisis of entitlements? Only after we stepped away from the brink of the financial abyss, we started to have an intelligent discussion about fiscal policy. Projections about our impending bankruptcy revealed the crisis of of our fiscal policy unless we change our behavior.

    The ultimate apocalypse scenario should be communicated through a lively narrative. Humans react favorably to real stories, to vivid images. Just explaining the the federal deficit might reach 50% of GDP doesn’t evoke any emotions. A scenario where nobody will buy our debt and bond vigilantes will run the fiscal policy of the US evokes strong emotions.  The ultimate apocalypse scenario provides an enterprise with an opportunity to control and influence a significant part of its future. The goal of the enterprise is to influence the future and not be influenced by the interventions of others.

    In Part 5, we will discuss Pie in the Sky planning.

    And, in case you missed the first three parts, you can find them here: Part 1, Part 2 and Part 3.

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    Image: Courtesy of 24.media.tumblr

    “The conventional definition of management is getting work done through people, but real management is developing people through work.” – Agha Hasan Abedi

    Humans are a very diverse species. Each one of us is unique, we all have our strengths and flaws. Surprisingly there are not many variations of basic management categories: Reactive, inactive, proactive and interactive. Let’s briefly evaluate all four of them:

    Reactive Management

    Run, run, run. And then run more. The reactive approach to a problem is first to identify its cause or source, then try to remove or suppress it. Being reactive implies your action begins after the fact; acting in response to a stimulus or situation, as if simply poised waiting for something to happen. We know, this is never the case. Managers usually feel reactive when they are hit by something they didn’t anticipate.

    Organizations in which reactive management is dominant tend to use as their model the oldest and most stable form of organization known, the big family. Like most families, most reactive organizations function as autocratic hierarchies. Ironically, although reactive planning is authorized from the top down, the actual planning is carried out from the bottom up.

    Reactive planning is always focused on getting rid of what is not wanted. The problem with that paradigm is that when one gets rid of what one does not want, often one does not get what one wants but gets what one wants even less. However, effective management focuses on getting what one wants, not getting rid of what one does not want. Reactive organizations walk into the future, facing the past, backward.

    Inactive Management

    We all experienced it: A crisis is unfolding before us and we don’t do anything. We might have good intentions to solve the problem but another, more important crisis is taking all of our attention. A few days later, the initial crisis resolved itself. That’s Garden Eden of inactive management. Unlike the reactivist, who tries to eliminate the cause of a problem, the inactivist settles for suppressing the symptoms. The inactive manager is always in crisis management mode. Our increasingly complex world increases the numbers and severity of crisis. That keeps the inactive manager very busy trying to prevent change. His attention is occupied keeping people busy doing nothing.

    You’ll find inactive managers in organizations whose survival is independent of its performance. Many government agencies come to mind, subsidized and regulated organizations. They tend to change when somebody imposes their will on them.

    Proactive Management

    Proactive management implies that your response is preceding the action. Creating a solution before being requested to have one. Anticipating what is needed and having it ready. This seems like a great position to be in; however you need to know what to be ready for. You cannot anticipate everything. Proactive managers predict and prepare, that is, they attempt to predict the future, then establish the objectives they want to attain, and finally create a plan to get from where they are to where they want to be. Forecasting is a major preoccupation of proactive managers.

    The proactive manager believes there are a few problems that technology can’t solve, the reactive manager tends to think they can only be solved by a softer, human approach. Unfortunately for proactive managers, as the rate of change in the environment accelerates and the environment becomes more complex, their ability to forecast accurately deteriorates. Many proactive plans are never completely implemented because errors in the forecasts on which they are based become apparent, nullifying the plan. In addition, it is very apparent that the objective of planning should not be to prepare for a future that is largely out of our control, but to control that future as much as possible by developing mechanisms/products that have the most effect on our futures.

    Interactive Management

    The objective of management should be to create as much of the future as is possible. Implementing an interactive management style means managers get involved with people without there being a problem or a situation. They understand what’s happening around them. The more a manager knows about the whole organizational system, the goals of each person, the more successful the organization and the manager will be. Interactive management asks executives to very involved with the system environment, thereby giving them access to a myriad of insights and knowledge. It allows an organization to maximize their resource – they don’t have to wait for events, overplan for possibilities or jump the gun.

    Implementing an interactive management system doesn’t mean the organization will never be blindsided. However, when the unexpected happens, management will have a better sense of how urgent the matter is because they live and experience the priorities of the business. They will know who to deal with so the situation can be resolved with a minimum of resources and effort.

    There are three major characteristics of Interactive Planning and Management: a) Interactive Management plan backward from where they want to be to where they are. b) Interactive planning, management and execution is a continuous process. The process is the goal, not the final plan. Because there is no more final plan. c) Every stakeholder  is part of the collaborative planning process. This increases the chances of successful implementations dramatically since every stakeholder has a vested interest in success.

    Because the principal product of interactive management is engagement throughout the organization (Planning, Implementation and Optimization), and because it requires as many stakeholders as possible to participate, it requires a significant change in the role of management. They are no longer required to spend the majority of their time preparing plans. Instead, their role is to encourage and facilitate, educate and advise.

    In Part 4, we’ll be talking about the interactive planning process in detail.

    For reference, Part 1 (Systems Thinking) can be found here and Part 2 (Systems) here.