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Posts Tagged ‘reality’

old-man

In the new normal, data has become the Holy Grail for making business decisions.  Everywhere you look the importance of data comes to the surface.  Marketing programs, websites, hiring practices, social media, finance, sourcing, and manufacturing, to name just a few, all rely heavily on data as a feedstock for decision-making.  Throw this data in to a computer and ‘presto,’ you have your answer.

As the world moves to the age of data scientists, data engineers, data analysts and data architects, I reflect on something I experienced many years ago that I believe remains true today.

I took a course at Massachusetts Institute of Technology in computer simulation of business strategies.  Part of the course was a three-day forecasting competition using the data of a real business.  We set up four groups.  Each group developed their own business strategies and entered the data into the computer system each night.  The next day we reviewed the results and decided on new input for the next run.  It was a financial simulation model that involved using random number generators and distribution functions that mirrored historic company data and performance.  At that time, this type of simulation modeling was very sophisticated.  It was like the data analytics of today.

One group who corralled at the back end of the class room, included an older gentleman (old man).  He didn’t say much but when he did, his questions and comments were measured and well thought-out.  On the final day, when we were comparing our results, he spoke up.  Out of the back of the room came, “It won’t work.”  What?  “Your models won’t work.  I just cut off your raw material supply.”  Silence.  Game over.  Using his 40 plus years of business experience, intuition, and knowledge of the industry, he made a human decision that trumped our models.  It didn’t matter what the data was saying.  I never forgot this experience.

I have built many financial simulation models in my business career and realize that in every fancy algorithm, there is an old man.  I believe he also exists in today’s data analytics.  –  Beware of the old man.

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Math 2

Recently, I was having a conversation with a young manager about what the future would look like fifty years from now.  I was surprised by the “certainty” of his perspective.  He delved into everything from computer technology, medicine, manufacturing, education and communication.  Each of his projections was based off of what is happening today.  They were logical and made sense.  Why wouldn’t you expect these things to happen?  It made me think of ‘numbers.’

Over forty years ago, my first math course in college was called Modern Math.  The course was about binary mathematics and set theory.  Pretty cool stuff, huh.  Yeah, that is what I also thought.  But, who would ever use this crazy stuff?

For those of you who are a little rusty on your math, binary mathematics is the world of 0’s and 1’s.  Ah, you are getting the picture.  In today’s digital world, 0’s and 1’s rule.  Simply put, we would not have computers today without binary math.  In my wildest dreams back in that class, I could have never imagined the impact binary math would have on our society fifty years later.  Neither can this young manager project with confidence what the world will be like in fifty years.

Let me put this into perspective.  Back in my class we were doing binary math problems by hand.  Next, in the late 1970’s, I started using the ‘new’ personal computers, which seemed like magic at the time.  Now, Intel (Visit their website: “Guide to the Internet of Things”), estimates by 2020, over 200 billion devices will be connected through the Internet creating in excess of 500 trillion gigabytes of data each year.  Think about it; a gigabyte = 1 billion bytes, a byte = 8 bits, and a bit is either a 0 or 1. They are saying over 500 trillion ‘gigabytes’ of data. – That is a lot of 0’s and 1’s.

Trying to imagine a future world fifty years out is fun, but unrealistic.  What is important is to be keenly aware of the technological advances taking place today, and thinking about where they might be headed a few years out.  While you may be right sometimes, most often you will be surprised at what surfaces.  Most important, however, is that you will start to see patterns; which are the early images of things to come.

I will leave you with one of the projections I made about five years ago.  Nano technology → Medicine → med-bots, or robots → in my blood stream → my “in-house” doctor.  I think the holdup is that they can’t figure out how to bill me.

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Reinventive Thinking  (R) Bus Card

Over the past thirty plus years, I have had the opportunity to work with hundreds of business owners ranging from mom-and-pop stores to multi-million dollar international companies.  Regardless of the industry or size of the business, the one common issue CEO’s and owners are concerned with is effective decision-making.  In effective decisions are very costly to a business, so any improvement in this competency vastly improves the performance of their company.  The following is a very brief discussion about my ReINVENTive Thinking®, The Art of Decision-making process.

Peter Drucker once said, “…. the root cause of many of today’s business crises is not that things are being done poorly, or even that the wrong things are being done.  In most cases, the right things are being done – but fruitlessly.  The problem; the assumptions on which the business has been built and being run no longer fit reality.”  Peter Drucker said this in a 1994 Harvard Business Review article, The Theory of the Business, and it is still a big issue for businesses today.

What influences our decisions?

What influences our decisions

To the decision-maker all of these influences can be perceived as reality.

I have said for years that “Most people make decisions based on the first-order consequence of the decision.”  Do you know the second, third or possibly the fourth-order consequence of your decision?  Do you need to?  In life there is almost always a second and third-order consequence to a decision.  Coupling this with not recognizing the reality of your situation, can be very costly to the decision-maker.  So, how do you make more effective decisions?

An effective decision process consists of three unique components that are dynamic, and interdependent.

The decision process

The following schematic shows how the decision process works.

The decision process mechanics

The triangle represents three components of a decision-maker, Decision-making (leadership), Knowledge (competencies) and Action (capabilities).

In this case let’s assume that the schematic represents “how” a business makes decisions.  As outside issues impact a business, the business must be ‘programmed’ to effectively assess the issue.  Is it something that can negatively impact the business?  Is it an opportunity?  Is it meaningless?  To determine this, an organization:

  • Must be receptive to identifying issues that can impact the business. (Blue cloud)
  • Next they must test (through knowledge) the potential impact of the issue. (1)
  • Then they must identify, or design, a reaction/response to the issue. (2)
  • Next, they must test that reaction to the issue. (3)
  • Finally, they must monitor the reaction of the issue. (4)  Adjustments to the response may, or may not, have to be made.

It is important to note that the triangle does not represent an organizational structure.  It is a mindset, and competency, that is automatically applied throughout an organization.  The process can be lightning fast or applied over time.  It all depends on the complexity of the outside issue.  For example, a disruptive product entering the marketplace would require a more intense process than a routine sourcing issue for a product component.  Recognize that the decision-process is not just about operating issues, it’s about all important decisions.  For example, the blue cloud issue could represent an ownership situation that has the potential to change control of the business.

Going back to Peter Drucker’s comment on reality, let’s see how the decision process applies.

The decision process perspective

The blue circles in at the bottom represent the components of the business’s changing environment.  The circles move around, change size, disappear and new circles form.  It is the dynamic external environment within which the business operates.  You have to develop and apply knowledge to your decision process from this perspective.  It is your reality.

The following schematic shows how a business stays connected to the reality of their environment.

The decision process changing environment

The triangles at the right and center indicate that “the assumptions upon which the business has been built and being run no longer fit reality.”  Reality has moved to the left.  Doing the right things (you think) when your reality has shifted, is fruitless.

What do you do now?

There are several critical steps to get you started.

  1. Establish a sound understanding of decision-making responsibility within the organization.
    1. The focus is on the process of decision-making. It answers my favorite question, “tell me the process you used to make the decision.”
  2. Formalize your management process for distributing responsibility by providing direction.
    1. Provide a clear description of the direction, how it is connected to the strategic objectives of the organization, and the expected results.
      • Time frames are important.
    2. As a decision-maker, make clear distinctions between direction for knowledge development and direction for implementation, and manage each accordingly.
    3. Make the decision-making process dynamic, real-time, and on-going.
      1. Make it systemic to the organization. No matter what issue you are dealing with, you have an efficient way to manage it.

Why is effective decision-making so important?

  • About 70% of family businesses fail or are sold before the second generation can assume control.
  • Only 10% of the family businesses make it to the third generation.
  • Most family, and private, businesses are managed by the same ownership control, individual(s), for many years.
  • A major cause for failing is the inability to adapt to a changing environment.
    • A business must be as dynamic as their environment.
    • Assumptions about your business must fit reality. – Drucker
    • In times of drastic change, it is the learners who will inherit the future. – Eric Hoffer

So again, “Tell me the process you used to make the decision.”

 

 

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Capital Dome

…Governments are instituted among Men, deriving their just Powers from the Consent of the Governed, that whenever any Form of Government becomes destructive of these Ends, it the Right of the People to alter or to abolish it, and to institute new Government… it is their Right, it is their Duty, to throw off such Government, and to provide new Guards for their future Security.

Thomas Jefferson, The Declaration of Independence.

Over the past several decades I have come to realize the emergence of two realities.  –  The reality of what really is, i.e. the real world, and the reality of the distorted perspective of a group of powerful individuals, i.e. their view of the world.

The focal point of my concern is with our elected officials; specifically our House and Senate leaders as a group.  This is not about Democrats, Republicans, Independents or specific ideologies; it is about governance.  The reality of this group is out-of-whack with the reality of what the citizens expect from our elected officials.  Our citizens expect our elected officials to govern this country on behalf of its citizens; all citizens.  They expect its leaders to do what is in the best interest of our ‘society.’  They expect honesty of purpose, integrity, informed judgment, and the courage to do what is right.  It is that simple.  What I am observing in our elected officials is bizarre.

It seems as if Washington, D.C. has become disconnected from the rest of the country.  They stand for and represent either nebulous constituencies or powerful political action committees (PAC).  As I look around my community and talk to others, I don’t see a manifestation of these nebulous constituencies. or the standard-bearers of the PAC’s.  It is like trying to grasp fog; you can’t get your arms around it.  When I question my elected officials, I usually get a canned and non-committal response from an aide that leaves me more at a loss.  Consequently, I believe that a critical mass of our elected politicians do not have the substance to govern.

The problem is that this pervasive misalignment of reality in Washington, D.C. is having an increasingly negative impact on society in general and business in particular, whereas, it appears the Washington, D.C. group remains unscathed.  Let me give you a comparison.  If business owners ran their companies the same way as Washington, D.C., they would go out of business.  Let me say that again, they would go out of business.  Business owners focus on what is in the best interest of their company and its stakeholders, which includes the community, and perform accordingly.  They either succeed or they fail.

As I watch the theatrical performance of the cast of characters running for our next President, I ask myself; are we at the point Thomas Jefferson was talking about in the Declaration of Independence.  Remember, society is always perfectly positioned to get the government it deserves.  If you leave government unattended, this is what you get.  We have left it unattended for too long.

Let me close by saying that I truly believe that our country has a great future.  The substance of our ‘citizens’ is incredible.  All you have to do is observe the selfless generosity and courage of people in times of crises, the millions of the small business owners who put their personal capital at risk to drive our economy and employ two-thirds of the workforce, the hordes of volunteers who serve our communities, and the bravery of our military community who stand their post in harm’s way so we can enjoy the benefits of this great country.  Our substance is in place, now we need to change Washington, D.C. so they see the real world.

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The Porch

It is funny how we can look back on life and remember things that had a significant influence on where we are today. When you ask people about things that ‘shaped’ them during their developmental years you almost always get the name of a family member, teacher, coach, or perhaps a professor. Rightfully so, no one could argue that role models, or people we admire and respect, can have a significant influence on our development.

Interestingly when I go down this memory lane I eventually come back to what happened to me when I was around 12 or 13 years old. What makes this interesting is that it is out of the ordinary and could have easily passed by me without me ever noticing. My event? The porch!

During the spring and summer months as a young boy, I would walk the surrounding neighborhoods looking for houses that needed their grass cut; with my push mower! I would carefully watch yards to see when it would be an opportune time to ask the owner if they would like their yard cut. Actually, it was a lot of walking with little grass cutting; but I did earn some money and became very comfortable in approaching adults.

About a block from my house lived a friend whose father was having a difficult time finding work. Day after day I would see Mr. W sitting in his rocker on his porch. I would wave as I walked by and he would occasionally say something like, “Find any yards lately?” I would also see Mr. W in church on Sundays with his large family thinking how he must have been praying for some luck in his life.

Spring turned to summer, summer to fall and fall to winter; when I switched from cutting grass to shoveling walks. Seasons changed but the porch remained. One day as I walked by Mr. W’s house on a cold snowy day, I saw the empty rocker sitting on the porch; obviously too cold for Mr. W to be sitting outside. And then it hit me like a ton of bricks.

The Discovery

I really don’t know why this hit me; all I know is that it had a significant impact on me.  During all of the months that I had observed this unfortunate situation, I didn’t connect the significance of what I was observing. I don’t really know if my perception of Mr. W’s situation was accurate, but my perception was reality to me. The revelation was simple: you have to get off of the porch. What a simple concept! No one is going to come into my yard, walk up on my porch and offer me grass cutting and snow removal jobs. I have to take responsibility for accomplishing what is important to me, and it will not happen by just sitting on the porch.

Opportunities/solutions do not come to you sitting in a rocker on a porch; you have to wander the streets in search of your desired outcome. Over the past thirty plus years I have been amazed at the number of business owners that I have met that have been sitting on the porch expressing concern about some ‘big’ issue that they weren’t actively addressing – for many different reasons. These were significant issues that could have an impact on the future success of their business. Think about the businesses in the recent recession that took on a ‘bunker mentality’ and were trying to hold out until things got better; waiting on the porch. I wonder if their competition was sitting on their porch.

Porch sitting is about making the choice not to do something when action is required, usually supported by an ill-conceived rationalization of a situation. Consider the following:

  • A sixty year-old family business owner saying, “I really don’t need to do succession planning now, I have plenty of time.”
  • “I know we really should have a strategic plan in place for the future of our business, but I just don’t have the time to do it, plus I don’t know where to begin.”
  • “Eighty percent of our business comes from one large company. One of these days, I’m going to have to find other customers so all of my eggs aren’t in one basket.”
  • “I could really use some help in developing better management skills to run my company, but I’m embarrassed to seek the help. I don’t want people to see me as weak.”

Unfortunately, porch sitters do not understand, or simply dismiss, the sense of urgency required for ‘Find any yards lately?’

Opportunities, or solutions, do not conjure up out of doing nothing; they appear as a result of ‘knocking’ on doors. It doesn’t matter if you are trying to grow your business, develop a strategic plan, establish a succession plan or put an outside board in place; you have to start taking some type of action to make these happen. Remember, in almost all situations where action is required but not taken, TIME will eventually make the decision for you. Unfortunately, it won’t be the caliber of action you would have taken earlier, or it wouldn’t even be your desired result. Oh, by the way, the sixty year-old business owner mentioned above just had a major heart attack without a succession plan in place. Where does that leave the family business?

Think about the strategic issues that need action in your business. What are you sitting on the porch waiting for?

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Reality Concept
Reality

”Nothing is more disruptive to the current state than a change in reality.”

George T. James

At what point in an organization is imminent danger of disruption, destabilization, collapse, etc. expected? – When denial loses its foothold and reality springs up and exposes its unsettling message.

To some, organizations are like organisms; living creatures. To others, they are like the physical universe; held together by known and unknown forces. Both portray an environment where ‘things just happen.’ In each case, you live within the context of a perspective that enables you to explain away, or deny, the reality of what you are experiencing. It’s not a cold, it is my sinuses. My competitor must be getting cheap components from China to be able to price at that level. Their products will never last. – Denial. Back to work!

I once read a quote that said, “If you don’t know its texture or complexity, you haven’t grasped reality.” Perspectives, without substance, are not reality. I need to watch this cold thing. Do I have a fever? Should I see my doctor? Or, how can my competitor price at that level? I need to find out more details and develop strategies to take advantage of the situation. Yes, I said advantage; reality provides opportunities if recognized in the early stages.

Unfortunately, unannounced reality is, at the very least, expensive to address. How long have you been coughing like this? A little over a week. You have pneumonia! – Two weeks lost. Or, the longshoremen are threatening to strike on the west coast where a lot of our products are delivered from Asia. Should we ramp up production in our local plant? No, they have too many businesses dependent upon the flow of goods to potentially destabilize the economy. How many ships are backed up? Hundreds; it could take several months to get our products off-loaded. – True stories.

On the positive side, a new reality is great if you are prepared to take advantage of it. Otherwise you are going to spend a lot of unplanned resources just to get into the game; or it may already be too late.

Are you denying a reality?

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game over Warner Bros.

Tyler is a young man in his late twenties on the move to nowhere. He has a great work ethic, is very smart, and is a good person. His lot in life is the result of his upbringing and his personal choices. His view of the future is dismal. Continuing down this road is a classic ‘game over’ journey. Wouldn’t it be great if he could see his future; sort of like The Ghost of Christmas Yet to Come, in Charles Dickens’s Christmas Carol? At some point he is going to realize that he has gotten himself into a ‘game over’ position. His future will be basically set; he has run out of time.

I have also seen businesses traveling down this highway waiting for something good to happen that will make things better. They gradually get to the point where they believe that there is nothing more that they can do, and/or it is just not worth fighting. It is like looking at the Grand Canyon through a straw and thinking that it is the best view you could imagine. It’s not!

Fortunately for Tyler there are many current examples of his bleak future. What it takes however is someone to take the time to help them see their destination, and simply asking them if this is where they want to end up. I can’t recall a situation where the answer was yes. This mental picture is worth a thousand discussions. It burns an indelible image of something they want to avoid, and can become the foundation for a new journey.

I introduced Tyler to what I believed was likely his future by exposing him to an environment where individuals twice his age were stuck in a quagmire where they were likely to end their careers. Will this exposure have a lasting impact on him? I hope so. But I do know that without a strong stimulus he was headed for “game over.”

If you can help a young person or a business owner going down this path get a picture of where they are headed you just might be the catalyst for change. It is a great feeling and it is worth the effort.

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