Robert F. Kennedy said on the presidential campaign trail in 1968, “Our gross national product…counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl….Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play”.

Per the latest article in HBR, GDP can’t distinguish between economic activities that create increase a nation’s wealth and ones that eat into its natural endowments (cutting redwoods), result in sickness and future cleanup costs (pollution), or merely ameliorate disasters whose costs are never accounted for (ambulances). Measuring the sustainability (environmental or otherwise) of economic growth requires making estimates, of course.

This brings me to measurement that has been around since 1990’s – Human Development Index (HDI), which according to economist, Amartya Sen, better represents capabilities versus commodities (GDP). The HDI is a combination of three indicators – Life expectancy, educational attainment, and income. United States’ HDI is 0.910, which is a rank of 4 out of 187 countries with comparable data. The HDI of OECD as a region increased from 0.749 in 1980 to 0.873 today, placing United States above the regional average.

• US is #10 on Legatum Institute’s Prosperity Index

• US is 7.1 on Transparency International’s Corruption Perception Index

• US is #10 on Heritage Foundation’s Index of Economic Freedom

If US is 0.910 on Human Development Index (HDI), #10 on Legatum Institute’s Prosperity Index, #10 on Heritage Foundation’s Index of Economic Freedom, and 7.1 (very clean is between 9.0-10.0) on Transparency International’s Corruption Perception Index; why is it #31 on Poverty Index? Housing, Income, Jobs, Community, Education, Environment, Governance, Health, Life Satisfaction, Safety, and Work-Life Balance are 11 topics that OECD has identified as essential, in the areas of material living condition and quality of life.

The HDI trends tell an important story both at the national and regional level and highlight the very large gaps in well-being and life chances that continue to divide our interconnected world.

The Organization for Economic Co-operation and Development (OECD) publishes statistics from Agriculture to Youth Unemployment for many countries in the world. One indicator that got my attention today while watching Fareed Zakarias’ Global Public Square show on CNN is Poverty, Infant Mortality rate, and implications of Child Poverty on long-term Income distribution. Evan Esar, American Humorist (1899-1995), wrote that Statistics is the only science that enables different experts using the same figures to draw different conclusions. In the case of poverty, the context in which Fareed used the figures is important i.e. whether we can do anything about the Poverty in the United States, and whether a smart kid who is poor can succeed and excel in this world? I know there are lots of stories of poor working hard to succeed but I know those are far and few in between when you look at Poverty objectively.

For me personally, it led me to ask questions like, since resources are never unlimited, where would I make the first $1 investment – Food or education? Why is US #31 on the chart below? And why is US at the bottom 4 along with Chile, Israel, and Mexico? What is the trend, and is it getting better? I think framing right questions within the context helps draw on facts and real-life experience. There is lot of useful data out on the internet to help give businesses and individuals a great start to develop a problem statement, develop a story behind a story, present options, and make a judgment call. And no recommendation (judgment call) is useful until it is acted on through long-term focus on execution of Programs, and keeping the story alive through active campaigns. Statistics are reversible. 

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.