Category: management

  • You can’t get there from here

    You can’t get there from here

    I swore – mainly for my own sanity – that I wouldn’t discuss Australia’s National Broadband Network on this site anymore, today though the topic raised an interesting point about business leadership and project management that can’t be ignored.

    Australian Communications Minister Malcolm Turnbull today released the Broadband Availability and Quality Report (PDF) along with the accompanying My Broadband website that identifies the nation’s telecommunications blackspots.

    Extraordinary failure

    “It is extraordinary that in six years of Labor talking about Australians having inadequate broadband they never bothered to do the work of actually identifying where services were good, bad or indifferent,” said the minister at the announcement.

    Turnbull’s comments are correct, although the criticism is just as valid of previous Liberal and Labor governments who’ve all made incredibly poor decisions in the telecommunications portfolio without considering what was actually happening outside the ministers’ offices.

    A bigger lesson though is that before commissioning a project the size of the NBN – estimates have put its cost anywhere between twenty and eighty billion US dollars – it’s a good idea to know where you are are and where you want to go.

    Big Hairy Audacious Goals

    To put the comments that follow into perspective, I was a supporter of the NBN concept although I thought it was a Big Hairy Audacious Goal.

    In the shadow of the Global Financial Crisis the NBN project ticked all the boxes; it put cash into the economy, it employed an army of workers and upgraded Australia’s telecommunications network that had been neglected by thirty years of incompetent government policies mixed with incumbent telco greed.

    Australia could have afforded ten NBNs during the mining boom of the 2000s; it was an opportunity to rebuild the nation’s ports, roads, railways, schools and tax system that all needed reinvestment and reinvention to meet the needs of the 21st Century.

    Building a middle class welfare nanny state

    Rather than reform the economy or build modern infrastructure, the Howard Liberal government decided to spend the mining boom’s proceeds on building a middle class welfare state.

    Keen students of Australian politics crack a wry smile that the recently elected Abbott Liberal government, of which Turnbull is a member, proposes a paid parental scheme that will complete John Howard’s grand vision of a Middle Class Welfare Nanny State.

    One of the tragedies of the populist and cowardly Gillard and Rudd Labor governments that succeeded Howard was neither had the courage to dismantle the Liberal party’s middle class welfare state.

    At least though both Rudd and Gillard were prepared to make some big infrastructure investments, even if they weren’t fully thought through and chronically underfunded.

    Failing to think through the needs, scope and costs of the project meant the National Broadband Network project quickly collapsed into a managerial mess exacerbated by the dribbling incompetence of the company’s executives, government officials and contractors, which bought us to Turnbull’s announcement today.

    A project in search of a scope

    The project’s failure is a worrying commentary on the abilities of Australia’s management elites in both the private and public sector, however the lesson for the entire world is understanding both where you are and where you want to go to is essential for a project’s success.

    Spending on well planned and necessary infrastructure is good, but to avoid disasters like Australia’s NBN it’s good to start with understanding the problems you want to fix and a project scope that clearly identifies the work that needs to be done.

    Unfortunately too many governments and businesses don’t know where they are or where their plans will take them.

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  • An era of exponential innovation

    An era of exponential innovation

    “How do we move to an exponential approach to innovation” asks John Hagel, Director of Deloitte’s Centre for the Edge in the latest Decoding the New Economy video.

    The Centre For The Edge is Deloitte’s Silicon Valley based think tank that identifies and explores emerging opportunities related to big shifts that are not yet on the senior management agenda.

    John tells us how the cycles of change and innovation have varied over the last thirty years in the industry; “the biggest thing for me is that nothing is stabilising. I often go back into history and look at things like electricity, the steam engine and the telephone – all hugely disruptive to business practices.”

    “But the interesting pattern is they all had a burst of innovation and then a levelling off,” says John . “You could stabilise and figure out how to use all this technology.”

    “With digital technology there is no stabilisation.”

    That lack of stabilisation leads to what John has termed ‘exponential innovation‘ where he sees business and education being rapidly transformed as technology upends established practices and methods.

    Healthcare, financial services and “any industry that has a high degree of information content ” are the sectors currently facing the greatest challenges in John’s view.

    John sees the solution for businesses and managers in looking at the current era not as a time of technology innovation but of institutional innovation. That institutions, like companies, have to reinvent how they are organised.

    Reinventing well established companies or centuries old bureaucracies is a massive challenge, but if John Hagel’s view is right then that radical change to institutions is what is going to be needed to face a rapidly changing society.

    Bank image by Ben Earwicker, Garrison Photography of Boise, ID through sxc.hu

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  • Winning the three-legged race

    Winning the three-legged race

    Does tying together two lame men give you an Olympic sprinter?

    It’s quite common in the business world to see two second rate companies merging in the hope that their combined market share will give them enough momentum to overcoming the market leader.

    The tactic rarely works as the businesses running third, fourth or fifth in a market are usually doing so because they have ordinary products or indifferent management rather than any inherited size disadvantage.

    Merging two second-rate companies usually results with a pair of competing silos of mediocrity where the former workforce and management of the original business squabble over power in the new entity.

    Far from being more competitive, the merged company is even more distracted with internal politics and power plays.

    The story that Australian department store Myer proposed a merger with its rival David Jones is a very good example of this as two poorly run companies whose managements that have abjectly failed to adapt to the modern times, try to paper over their chronic problems by merging.

    Both companies have failed internet strategies – Myer’s website managed to collapse during the Christmas sales season and no-one could be bothered fixing it for over week.

    Along with lousy internet strategies, both companies have underinvested in IT systems leaving their point of sales and logistics systems antiquated and incapable of meeting modern customers’ needs.

    Probably the greatest mistake that Myer and David Jones’ management made though was a focus on cutting costs through reducing sales staff.

    The resulting lousy and often pathetic service resulted in both brands being seriously tarnished and had the effect of driving high value customers away.

    Further damaging the stores reputation was the tactic of offering perpetual sales which trained the customers that would still shop with them into waiting for goods to be marked down rather than paying full price.

    Merging the two operations would have done little to resolve any of the long term management failings of the two businesses, although no doubt there would have been some fat advisors fees for some of the boards’ friends.

    Nothing fixes poor management better than getting rid of the poor managers, merging two poorly run business like Myer and David Jones does nothing.

    Retailers failing as their poor management struggles to deal with changing marketplaces is an international problem, as this story about US chain Sears illustrates. The Australian experience though is a classic case study of two poorly led organisations trying to pretend their failings can be fixed through mergers.

    Resolving the problems of troubled companies like Sears, David Jones and Myer involves having good management and smart investment, merging with a similarly troubled organisation solves little except perhaps putting off the day of reckoning.

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  • The Roadrunner Effect

    The Roadrunner Effect

    Fans of the roadrunner cartoon will remember how in almost every episode one of the characters, usually the coyote, would run over a cliff.

    A few seconds after running off the cliff they’d keep going and then, just as they realise their mistake, they’d plummet into the deep canyon.

    It’s similar for businesses – you can be a long way over the cliff’s edge before you realise you’re about to take a big fall.

    Yesterday’s post about Sensis and the squandering of ten billion dollars is a good example of the Roadrunner Effect in business.

    Sensis annual revenue and profit 1999-2013
    Sensis annual revenue and profit 1999-2013 (millions of dollars)

    While it was obvious from the early 2000s onwards that the Yellow Pages model of expensive small business advertising listing was doomed, Sensis boss Bruce Akhurst did an admirable job of keeping revenue flowing.

    Even more impressive is that the division managed to book close to a 50% gross profit most years during that period even when the revenues started to decline.

    A large part of Sensis’ success was in screwing more money out of its client base with enhanced ads, new categories and a better digital offering that tied into Google’s Adwords program.

    Unfortunately for Akhurst and his management team, economic gravity eventually claims even the luckiest or best run enterprise and Sensis was no different as small business started realising Yellow Pages advertising had become largely ineffective.

    In many respects Sensis is a good example of a once profitable business that fails in the face of technological change – the new technologies help it become more profitable at first, but eventually a changed marketplace kill the business.

    The question for those enterprises and industries is how long can the owners, managers and employees keep running before they realise the ground has dropped out from beneath them?

    It could even be entire countries that suffer from the Roadrunner Effect, it certainly appears that the game was up for the European PIIGS long before it became obvious to the governments and citizens. This may prove true for Australia as well.

    Either way, it’s worthwhile for business owners and managers to consider whether there’s a cliff face ahead even when revenues are accelerating.

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  • King Canute and Google: When the algorithm is wrong

    King Canute and Google: When the algorithm is wrong

    As society and business drown in big data we’re relying on algorithms and computer programs to helps us wade through a flood of information, could that reliance be a weakness?

    British Archeology site Digital Digging discusses how Google displays Manchester United winger Ryan Giggs in the results search for Cnut, the ancient king of Denmark better known in the English speaking world as King Canute.

    Apparently Giggs appears in the search results for Canute because of the footballer’s futile attempt to hold back a tide of information about his love life.

    While Google’s algorithm seems to have made a mistake, it’s only doing what it’s been programmed to do. A lot of trusted websites have used the term ‘Canute’ or ‘Cnut’ in relation to Giggs so the machine presents his picture as being relevant to the search.

    Confusing Ryan Giggs and King Canute is mildly amusing until we consider how critical algorithms like Google Search have become to decision making, there are no shortage of stories about people being wrongly billed, detained or even gaoled on the basis of bad information from computers.

    The stakes in making mistakes based on bad information are being raised all the time as processes become more automated, a chilling technology roadmap for the US military in Vice Magazine describes the future of ‘autonomous warfare’.

    By the end 2021, just eight years away, the Pentagon sees “autonomous missions worldwide” as being one of their objectives.

    Autonomous missions means local commanders and drones being able to make decisions to kill people or attack communities based on the what their computers tell them. The consequences of a bad result from a computer algorithm suddenly become very stark indeed.

    While most decisions based on algorithms may not have the life or death consequences that a computer ordered drone strike on a family picnic might have, mistakes could cost businesses money and individuals much inconvenience.

    So it’s worthwhile considering how we build the cultural and technological checks and balances into how we use big data and the algorithms necessary to analyze it so that we minimise mistakes.

    Contrary to legend, King Canute didn’t try to order the tide not to come in. He was trying to demonstrate to obsequious court that he was fallible and a subject to the laws of nature and god as any other man.

    Like the court of King Canute, we should be aware of the foibles and weaknesses of the technologies that increasingly guides us. The computer isn’t always right.

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