It has been a year since I blogged on this site. The essence of this site which is about “Getting off the drawing board” is still relevant though I moved into a new role professionally. The organization of ideas, execution with bias for action, crowd sourcing, building organization capabilities & strong network are important to building Operating Models, and that they are as important as they were a year ago. As I evaluated how to get started with blogging again, I wanted to scale out my concepts & ideas through a blogging/re-blogging platform that provided ease of  use, and quick access to other like-minded bloggers. Towards that end, I am going to slowly move my old content to Tumblr, and keep the same domain name. Thank you for all those who have been following me.

Today’s post is at – http://getoffthedrawingboard.tumblr.com/post/7264364632/making-ideas-happen-to-get-off-the-drawing-board

Over the last 2 months, I have been having conversations about playbooks, and best practices for many subject areas that are important for day-to-day running of the business. This was the result of running a small crowd sourcing project to generate outside the box thinking for the whitespace opportunities. In my view, the ideas that float to the top based on voting, ranking, and quality of comments is great for problem solving exercise but not the best to gather best practices for running of business. The reason is customer best practices have context and relevancy based on the size of the customer, industry, culture of an organization, and multiple other factors including the person managing the relationship. These cannot be codified. The unpredictability requires informal mechanisms, most of which can be clearly identified and consciously influenced, and that link very closely with other cultural elements.

A good definition of culture per Merriam-Webster’s collegiate dictionary is – “the set of shared attitudes, values, goals, practices that characterizes (human behaviors in) a company or corporation”. This definition puts human behaviors at the center of culture, and human behaviors always involve both rational and emotional dimensions, as well as formal and information components.

According to authors, Jon R. Katzenback & Zia Khan of the book, Leading outside the lines, “the formal is best used for predictable and repeatable work that needs to be done efficiently and with little variance. The predictability and repeatability of the work warrants the effort to develop the infrastructure of the formal organization, which can be documented and constantly improved upon to improve efficiency and remove variation. Conversely, the informal is best applied for issues that arise outside the scope of the formal organization, the surprises that need to be sensed and solved. Increasingly, people who need to do the solving need to be motivated outside the reward system, collaborate across organizational boundaries, and make decisions with little guidance from formal strategies”.

This is my area of passion which is balancing the formal via Management by Objectives (MBO) to drive business forward, with influencing the cultural elements through people engagement and participation. Again, per Jon & Zia – “the ‘best practice’ is a means of improving performance in various functions, departments, and levels of management. To go beyond best practice requires a level of insight, risk taking, and trial-and-error responsiveness that demands understanding and harnessing of the informal. This separates ‘best performance’ from ‘best practice’”.

This is the time of the year, every year, that I spend understanding the formal and informal. I would like to hear from the readers of this blog how you have able to drive change and better results – formal and/or informal.

One of the things that I have been thinking about is whether I am adding any value to the blog for others. Yes, most of my content is around Operating Models, occasional leadership stuff, and links to quality videos on TED.com. My goal has always been about Getting off the Drawing board and start doing something even if it is not fully planned. There is a cliché that “Failure to Plan is a Plan for Failure” but the length of a plan, and thorough analysis of every data point also does not lead to success. The more I link to others content on Operating & Business Models; I have begun to understand that the context in which decisions are being made is as important. The end result i.e. Operating Model the company has chosen, or the business model that the organization has decided to run with, is based on many hours if not thousands of hours of effort. So what was on the drawing board? Did parameters, factors and variables include Cost, Profits, Capabilities of the organization, risks of execution, and politics?

Is the easy access to data on the internet making our brains shallow? Do we have any new insights to assist the organizations to move them to next level of performance? This is the struggle. We make investments make on Green Field. We look at White Space Opportunities, Long Tails, and Blue Oceans. It is fascinating to see so many colors – Blue, White and Green, but what about GREY? Is there a perfect color that is so obvious, that we all knew would lead us to success?

I am ranting here. Leadership, developing a culture of curiosity, asking tough questions, quick gut & pulse check, making mistakes and quickly learning from them are as important as factual data based analysis. What is individual’s mental capacity (EQ) in making that final GO-NO GO decision? How do you balance and Formal business drivers with informal cultural aspects that motivates the teams to push the business into new frontiers? I am curious to understand how you are getting stuff off our drawing boards. I have read lots of books that share authors’ perspectives and in most cases the books are darn good read. But does it help you get off the inertia and actually do something….

I consider John Wooden and Warren Buffett as two great teachers. Their main attribute is that they are great teachers of fundamentals whether it is finance or coaching. John Wooden is no more. He passed away on June 4^th, 2010 at the age of 99, but his wisdom lives on.

Leadership

• Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are
• Success comes from knowing that you did your best to become the best that you are capable of becoming
• Talent is God given. Be humble. Fame is man-given. Be grateful. Conceit is self-given. Be careful
• Ability may get you to the top, but it takes character to keep you there
• The main ingredient of stardom is the rest of the team
• It is what we learn after we know it all that really counts
• Things turn out best for people who make the best out of the way things turn out

Execution

• If you’re not making mistakes, then you’re not doing anything. I’m positive that a doer makes mistakes
• Don’t let what you cannot do interfere with what you can do
• It’s the little details that are vital. Little things make big things happen
• If you don’t have time to do it right, when will you have time to do it over?
• Never mistake activity for achievement
• It isn’t what you do, but how you do it

As my continuing effort to learn and share about Organizational and Operating Models, this week I pulled information about the Dell Operating Model. The content posted here is from the Dell Operating Model thesis that was submitted to the Sloan School of Management by Blaine Paxton in 2004. In 2008, Dell drove actions to enhance Competitiveness, and Optimize Operations to improve profitability and cash flow. Like every company that went through growth and revenue adjustments, and organizational realignments because of 2008 financial crisis, the changed conditions may have influenced the current Dell’s operating model as well. However, if we assume that the Operating Model is the foundation for execution of Strategies, the fundamentals of the Core Operating Model should sustain up and down of the market place. To that end, I believe the premise of the thesis around People, and Practices at Dell should still be relevant now in understanding the subject of Operating Models.

Dell’s operating model consists of four assumptions about how people should work:

• Being obsessed with producing results,
• Being flexible in the way work is done,
• Leveraging the value of personal relationships, and
• Encouraging leadership at all levels in the organizations

If Vertical integration is about owning and operating multiple steps in the value chain, then Virtual integration is about owning one step, but coordinating the actions of many steps. Dell and its supplier’s area uniquely configured network of alliances and partnerships i.e. Virtual Integration. One of the core competencies is strategic outsourcing.

Some general management practices at Dell:

• Expecting a high level of personal accountability
• Minimizing celebration / maintaining sense of urgency
• Management teamwork, especially “two-in-the-box” management
• Tightly managing the balance of revenue and growth
• Being able to kill losing projects quickly

One of the interesting methods I noted out of thesis is “Time pacing” which is creating new products or services, launching new businesses, or entering new markets according to the calendar. Time pacing according to Blaine Paxton’s thesis “can counteract the natural tendency for managers to wait too long, move too slowly, and lose momentum”. It also “create a relentless sense of urgency around meeting deadlines” while at the same time creating predictability by giving “people a sense of control in otherwise chaotic markets”.

Is your Operating Model still relevant? If not, what is driving those changes?

I am not here to promote the capabilities of Auburn University to respond to Deepwater Horizon Oil Spill. But their research paper highlighted areas of expertise that will be required in assessing and mitigating the impact of the disaster. Some of the capabilities required to respond post leak stoppage –

• Containment and Clean-up
• Environmental Assessments – Impact of the spill on Coastal wetlands. Coastal wetlands prove habitat for fauna and flora, hurricane mitigation, carbon sequestration, pullutant filtration, and in sustaining local to regional economies. Some of the impact on the wetlands will be seen years following this disaster.
• Remediation – Adding nutrients to Ocean water to increase microbial activity.
• Public Health – Managing health risks and communications.
• Hydrodynamic modeling of contaminated areas – Model the fate and transport of oil spills within estuaries and also in the rivers.
• Managing the impact on wildlife – handle and treat injured birds of prey, and in removing oil from birds & turtles.
• Managing the impact on Seafood – Process to monitor within the oil spill path marine bacteria in fish and shell fish that cause human illnesses in order to prevent human consumption of contaminated seafood.
• Ensuring Availability of Right Equipment – Gas Chromatographs fitted with various detectors to measure hydrocarbon, residues discharged, and partitioning characteristics of the non-aqueous phase (NAPL) oils.

This is few of the many capabilities that will have to be brought to bear to manage this disaster.

We have had many disasters over the decade – 9/11, Asian Tsunami, Haiti Earthquake, Gulf Oil Spill etc. The capability for first responders in managing every one of these crises is different.

• Haiti Earthquake – managing the immediate human death, disease control, and rebuilding of basic public infrastructure;
• Gulf Oil Spill – contain the spill, limiting the damage to the environment; and manage the immediate impact on wildlife & Seafood, and health.

Managing the crisis/disaster is different is from managing the risk of project. While one focuses on limiting the damage, the other focuses on prevention. The focuses of the firm on one or more of these functions depend on their own capabilities. Capability mapping – what capabilities should firms own and outsource others? BP America, Halliburton, and Transocean are three main companies that are working together on the Deepwater Horizon rig. What capabilities did these firms bring to the table and were they executed well? Risk Management (safety) is a big function – what processes were put in place to mitigate the risk?

Should we even be deep-water drilling? The answer to the issue may be as simple as expediting our investments in alternative energies. But understanding the capabilities of the new Energy companies firm is as important.

What are your thoughts?

Talking about theoretical models and frameworks, and practical applications of the same, I have been fascinated by Mechanism Design & Complex Event Processing.

Per Alex Tabarrok at reason.com, mechanism design is to markets what genetic algorithms are to life. He also writes that – “Mechanism design is a very general way of thinking about institutions. An institution or mechanism takes as input "messages" or "signals" from agents and it responds with an outcome. The idea of mechanism design is to create institutions that produce a desirable outcome while respecting the fact that agents have private information and are self-interested. It turns out that designing mechanisms that work well while respecting information and self-interest constraints is very difficult”.

While Mechanism Design is an economic theory, Complex Event Processing (CEP) is the use of technology to predict high-level events likely to result from specific sets of low-level factors.

A typical complex event processing use case can be found in automated stock trading using Financial Services algorithmic trading. Prior to the advent of complex event processing engines, stock traders often sat at a desk manually monitoring 5-8 screens to identify patterns in the market that indicated an opportune moment for a trade. Analytic information and patterns were often manually tracked in a spreadsheet. Today, this type of tracking can be entirely done in the complex event processing engine and a trade automatically triggered when the patterns are right. While the System is monitoring real-time market conditions, the traders gain time and mindshare to evaluate the performance of their algorithms and refine them for desirable outcomes (the premise of Mechanism Design)

Smart market (Auction) is one of the practical applications of Mechanism Design.

A complex event is what one infers from the simple events. Social Networks (a blog post, a tweet), Matching Systems (profile/preferences match), GPS Tracking and Monitoring – every single & simple event, can be combined through Complex Event Processing to drive larger more practical consumable applications that assist in desirable outcome.

Professors Øystein Fjeldstad and Charles Stabell have developed a framework of three generic types of business models –

• Solution Shops – Employ experienced intuitively trained experts whose job is to diagnose problems and recommend solutions. High-end consulting, law, advertising firms, R&D organizations, and specialist physicians’ diagnostic activities in hospitals are examples. The firms abilities to deliver value to customers are dependent on the people who work there; standardized processes are uncommon in solution shops.
• Value Chains – Manufacturing, retailing, and food service companies are examples. These companies bring inputs of materials into one end of their premises, transform them by adding value, and deliver higher-value products to their customers at the other end. The ability to deliver value is embedded in strong, standardized processes.
• Facilitated User Networks – Telecommunications, Insurance, and Banking are facilitated user networks. Participation in the network typically isn’t the primary profit engine for participants. Rather, the network is a supporting infrastructure that helps the buyers and sellers make money elsewhere. The company that makes money in a user network is the one that facilitates the network.

Pankaj Ghemawat in his book on the subject, Redefining Global Strategy, presents two strategic frameworks to help companies operate across borders. Two specific frameworks are – ADDING Value Scorecard and AAA.

The ADDING Value Scorecard is a framework to help companies assess whether a particular strategic move makes sense to add value to the business both locally and globally.

The acronym stands for –

• A – Adding volume, or growth;
• D – Decreasing costs;
• D – Differentiating or increasing willingness—to—pay;
• I – Improving industry attractiveness or bargaining power;
• N – Normalizing (or optimizing) risk;
• G – Generating and deploying knowledge (and other resources and capabilities).

One more framework to help companies deal with cross-border differences; it’s called the AAA triangle which stands for adaptation, aggregation and arbitrage.

• Adaptation strategies are designed to help companies adjust to differences across borders;
• Aggregation strategies are designed to help companies overcome some country differences by grouping them based on similarities;
• Arbitrage strategies seek to profit from some of these national differences rather than treating them as constraints.

Pankaj Ghemawat also has a blog, What in the World, on globalization. For my blog “Get off the drawing board”, the context of “learn-to-burn ratio” that he talks about in his blog entry  is topical.

• Recognize the value of options (alternatives) in an uncertain world. Strategy options often vary greatly in their "learn-to-burn" ratios – the rate at which they generate information about which scenario will come to pass versus the rate at which they commit resources to particular scenarios. Once you take this kind of option value into account, it opens the door to additional strategic possibilities: e.g., mixed supply chains (rather than complete offshoring or onshoring), toeholds as ways of exploring new markets and, more generally, sequenced strategies.

Business model can be best described through nine building blocks that show the logic of how a company intends to make money. The nine blocks cover the four main areas of a business: customers, offer, infrastructure, and financial viability. The business model is like a blueprint for a strategy to be implemented through organizational structures, process, and systems.

Per Business Model Generation Book, following are the 9 blocks –

• Customer Segments – An organization serves one or several customers.
• Value Propositions – It seeks to solve customer problems and satisfy customer needs with value propositions.
• Channels – Value Propositions are delivered to customers through communication, distribution, and sales Channels.
• Customer Relationships – Customer relationships are established and maintained with each customer segment.
• Revenue Streams – Revenue streams result from value propositions successfully offered to customers.
• Key Resources – Key resources are the assets to offer and deliver the previously described elements.
• Key Activities – Performing a number of key activities
• Key Partnerships – Some activities are outsourced and some resources are acquired outside of the enterprise.
• Cost Structure – The business model elements result in the cost structure.