Attacking Culture to Address Problems - British Petroleum

I weighed in late on the Gulf Coast disaster - and my impressions of British Petroleum.  I wanted to be thoughtful, as the ramifications of this will be with us for decades.  Compared to the hurricane that wrecked New Orleans this situation is far worse.  Many more businesses are being shut down, the ecological disaster is far worse, and the clean-up will take much longer - even though New Orleans is far from a full recovery from hurricane Katrina.  And there was lots (lots) of finger-pointing going around.  It is going to take a lot of money and energy to deal with this mess - and lots of blame-laying (lawsuits) are inevitable

But I'm always the guy looking forward, and that's why my Forbes article, "BP's Only Hope for Its Future," focused on what BP needs to do now to recapture the more than $100B of lost value its investors have suffered - not to mention out-of-pocket cash costs still rolling up.  

There is a raging debate about what investors can expect, as typified by the SeekingAlpha.com article "Where is BP Headed:  $70 or $0?" Unfortunately, most of these articles focus on 2 factors: (a) what are the estimates of cash out to fix the mess and legal battles compared to historical cash inflows from revenues, and (b) contrarians typically think no situation is ever as bad as it initially looks so surely BP is worth more than it's currently depressed value.

Addressing the latter first, I'd recommend investors look at GM, Chrysler, Lehman Brothers and Circuit City.  Things definitely can get worse.  Problems created across years of sticking to an outdated Success Formula, remaining Locked-in to following historical best practices, wiped out their investors.  Things can definitely get worse for BP.  It will not be acceptable for the company to remain focused on "business as usual" hoping to "weather the storm" and allow "things to get back to normal."  That scenario is a death sentence.  We haven't yet seen what new regulations, taxes and restrictions - nor the eventual cost of 20 years of dead seas charged to BP and its industry brethren - will cost.  BP has to make changes if it wants to regain growth - and most likely if it wants to survive.  

And this leads to item (a).  Nobody knows the long-term costs chargeable to BP.  Nor do we know what the future cash inflows will look like.  We don't  know the brand impact.  Nor do we know how changes in regulations or industry practices will hurt cash flowing in the door.  It's the inability of the past to predict the future that makes efforts at cash flow planning mute.  Lots of number crunching isn't the answer - it's understanding that the assumptions could well be seriously changing. There are more unknown variables than known right now.  Which makes it all the more important BP realize it must change it's Success Formula to make sure it not only avoids another disaster, but finds a way to profitably grow in the aftermath of this event and its changes on the industry.

Many are calling for firing the CEO, as 24x7 Wall Street does in "BP Can Deny CEO Departure Story; But Fate Already Set."  I call this the hero and goat syndrome.  Americans like to think that the CEO should be lionized as a hero when results are good, and blamed as a goat when results are bad.  Unfortunately companies rely on lots more than CEOs (despite their pay) for results.  The problems at BP are with the Success Formula - now some 100 years old - and the inability of the total management team to attack old Lock-ins in order to develop something new.  As my last blog pointed out, even HBR doubted there was any reality in the "Beyond Petroleum" headline.

BP must attack its historical ways of doing business.  This isn't just a short-term crisis.  The Gulf disaster is the result of pushing an old Success Formula too far.  Of going into deeper and deeper water, at greater and greater risk, for less and less yield in order to keep finding oil.  Unfortunately BP seems to be viewing this not as an example of what happens when marginal economics keeps you doing the same thing, over and over, even as returns decline.  Too bad, because this is the kind of event that highlights a serious change is needed in BP's future direction.

I was impressed with a Harvard Business School Working Knowledge survey result in "How Do You Weigh Strategy, Execution and Culture in An Organization's Success?"  Respondents overwhelming voted that success requires managing "culture."  And that is largely what BP now needs to do.  The Beyond Petroleum strategy was clearly enunciated, but execution remained focused on the old direction because the culture did not change.  And that's what attacking Lock-ins and implementing White Space is designed to do - move an organization's culture forward by addressing behaviors, decision-making structures and old cost models.

When I was a boy I'd see a tree show foliage problems and my father would say "we might as well cut it down, that tree is dead."  I'd be shocked, the tree looked fine.  But my father, a farmer, knew that the roots had been damaged.  We were just seeing the slow process of death, that might take a year or two.  Fortunately, BP isn't a tree. And although its Success Formula roots are in trouble, unlike a tree they can be changed.  Let's hope the Board takes action to make changes quickly so BP's future doesn't remain completely imperiled.

For more on using Disruptions to address problems listen to my radio Interview "Disrupt to Win." Or listen to a short podcast on how to "Drive Innovation by Disrupting the Status Quo." Or read my CIOMagazine column on how to "Use Disruptions to Move Beyond Legacy" in thinking and planning.

Defend & Extend Disaster - British Petroleum (BP)

Leadership

BP's Only Hope For Its Future

It must throw out its formula for success.

"Beyond Petroleum?" BP looks anything but that now. How could a company that spent so much money trying to make us think it was something else remain so tied to, and now so damaged by, that product? Was it just trying to fool us with those ads? Or is there something more fundamentally wrong here? Perhaps something wrong in the management system used not only by BP but by almost all companies today?

That's the first paragraph in my latest column on Forbes.com (Read BP's Only Hope For Its Future here).  British Petroleum's situation was avoidable - if the company hadn't simply remained so dedicated to "Defend & Extend Management" - the practice of doing more of the same because it's what the company does best.  Unfortunately too many companies follow this "best practice," sticking to their "core," and don't use White Space to find new opportunities for growth.  All the way into disaster!

The Harvard Business Review web site describes the mismatch between BP's claim of heading in a new direction versus company reality in "The BP Brand's Avoidable Fall."  British Petroleum's campaign is now a decade old, trying to convince everyone they weren't just an oil company.  Looking back HBR recalls that authors then claimed about BP's campaign "this [strategy] seems to be at variance with organizational reality and the [firm's] actual identity....[BP's] stated corporate aim of being green-oriented...is an aspiration which to us bears arguably questionable resemblance to near-term reality. At the time, environmentalists estimated that only one percent of BP's activities came from sustainable sources...Now, the stark contrast between BP's image and reality has substantially weakened its reputation." 

BP simply couldn't quit drilling for oil - because it was so dedicated to Defending & Extending the BP legacy.  So it kept moving into more difficult fields, at higher cost, with lower yields.  Now all those billions of dollars in advertising are lost, along with all the money for the clean up.  Costs it will take shareholders years to recover.  Even while leadership knew it had to move in a different direction - and advertised the need!

The spill costs of course move well beyond BP.  For example, the network of small businesspeople that run BP refilling stations have been hurt as Crain's Chicago Business reported, "Chicago Gas Station Owners Hit By BP Spillover." Miles, and billions of dollars, removed from BP headquarters decisions, thousands of independent small businesspeople are losing revenue, due to the brand destruction created by BP taking greater and greater risks to Defend & Extend their oil business.  Customers have a choice, and when a reputation is sullied many often change suppliers.  Remember how Toyota car sales tanked as reports of their safety mishandling became available?

Despite the problems of Defending & Extending a business, leaders don't give up easily.  The Daily Caller reports "Experts Say Obama's Drilling Plan Could Cause Another Disaster."  Amidst this huge clean-up effort, there are many who want to maintain drilling activity - because short-term they want the jobs and economic benefits such drilling creates.  Just the sort of marginal, Locked-in decision-making that is now hurting BP.  The region is already losing fisherman, tourists and other businesses from this disaster.  When will the Gulf Coast identify other ways to grow besides the economically and ecologically risky deep-water drilling activity? 

BP, and the states affected by this disaster, desperately need to move "Beyond Petroleum."  But doing so will require extensive use of White Space for finding and cultivating new businesses.  It can be done.  Yet so far, despite the horror of this disaster, there is more effort being expended to find ways to continue on the same route than disrupt old behaviors and find new sources of revenue.  Not even a disaster of this magnitude disrupts those really dedicated to Defend & Extend their locked-in success formula.

As the article says, once you succumb to a Locked-in Defend & Extend strategy - like British Petroleum - management just can't help itself but to do "more of the same."  Dedicated to Defend & Extend Management, no company could move "Beyond Petroleum."  Are all (or most of) your resources dedicated to Defending & Extending your legacy business? Do you have White Space in your organization to move beyond your legacy?  Or will it take a disaster to demonstrate how risky your strategy has become?

It's the One You Don't See That'll Kill You - BP, Tribune Corp., GM, Lehman Brothers, Sun, SGI

How widely do you plan for a different future?  Do you think British Petroleaum's (BP's) engineers and managers knew there was a chance of a major problem coming from deep water drilling?  It seems illogical to think they didn't know the chance existed.  Yet, they seemed pretty ill-prepared for the problem.  As did the federal government agencies and responders - as well as all the businesses that make a living out of cleaning up water-based oil spills.  Critical-Thinking.com sums up the issue pretty succinctly in the article "What is Your Company's Deepwater Horizon?" According to the article, the problem at BP is one that lots of companies have; most businesses simply don't put enough effort into planning for worst case scenarios.

Actually, the problem is worse than that.  Most companies only plan for one scenario - more of the same.  Planning processes rarely do more than extend past performance.  In today's fast paced, global, highly competitive world it would seem that is about the least likeliest scenario.  But it's the one that dominates how businesses plan.  That so many businesses have been turning for the worse, or failing, is testament to how smart people are let down by planning processes that simply don't consider alternatives strongly enough.  Look at the old AT&T, Tribune Corp., GM, Sears, Lehman Brothers, Silicon Graphics, Sun Microsystems, NCR, RCA, Unisys, Zenith, International Harvester, Brach's Candy.....

But planning problems are even worse than this!  The first order problem is simply thinking about the potential scenarios and planning for them.  Like the military does before a campaign.  Even though nobody knows what will happen, by planning for a range of contingencies any business can be far better prepared.  But what about the contingencies - the outcomes - you don't think about? What about scenarios you don't want to think about? 

According to the New York Times there's "The Anosognosic's Dilemma:  Something's Wrong but You Don't Know What It Is."  Have you ever been in a meeting and someone, usually from the outside - like a vendor - said "but what about this _______" and they describe something going really, really, wrong -- completely not as anticipated?  And then somebody, usually somebody that's been around the company a long time and has both stature and influence says "well, if that happens then we're all dead.  All bets are off."  And with that, the conversation ends.  It was a scenario, regardless of probability, that he simply didn't want to consider.  His position was basically "hey youngster, that's crazy talk so let's not honor it with discussion."

Now we have a whole different scenario planning problem.  One where we know, and will admit there are things that could happen, but we don't know what they are.  Where we are so locked-in to our existing thinking that we don't even see these scenarios.  We don't know what we don't know, and we're not asking what we don't know.  We can't visualize an outcome that is possibly very different.

This is called the Dunning-Krueger effect, for the two psychologists who discovered it (David Dunning and Justin Krueger of Cornell.)  Basically, it says we ignore options.  We lose the spark to explore options that don't seem obvious.  We lock-in on the way we think about the problem so strongly that potential solutions which are on a different vector - come from a different source - are simply not even considered.  As if they could never exist.

And that's why all organizations need outsiders.  And not just customers - who are heavily biased toward a better, faster, cheaper status quo.  The Dunning-Krueger effect means that all organizations need boards, lawyers, consultants, advisors, friends that don't have their lock-in.  People that can come up with scenarios that don't have their lock-in.  People that can come up with scenarios that your own organization would simply never consider.  Like a drilling rig blowing up in deep water and leaving a spewing hole of crude oil that has to somehow be capped ---- that could shut down drilling in a major oil producing area, fishing, and all sorts of other businesses.  Possibly wreck part of the ecology for decades.  And wipe out the company dividend and customer goodwill while looking for a solution.

Moving Beyond Your Success Formula – beyond Customers and Partners – Dell, Microsoft, Google

According to Reuters news service "Dell in Talks with Google over Chrome O/S."  I would like to think this is a big deal for Dell, and positive, but I'm doubtful.

Eight months ago I wrote (10/20/09 - Keep an Eye on Dell - Good Things Happening) that Dell's efforts to bring a smart phone to market showed real promise for the company.  Michael Dell seemed committed to shaking things up in order to launch new products.  And in February I wrote (2/22/10 Looking for Winners - Dell) not to be too worried about Dell's small desktop market share losses because Dell needed to be heading into new markets - like Smart phones - seeking growth rather than over-investing in its old desktop business.

But I've since turned much more negative.  The Reuter's article points out that Dell still hasn't gotten the smart phone to market in the USA.  A phone was released in China last year, but sales have been minimal.  There is a vague promise (no date) to release a new product in China - but none in the USA.  And a potential tablet (competitor to iPad) is considered by end of 2010, but the company stresses no firm date.

Dell is moving far too slowly, and is far too uncommitted, to new businesses.  The company is listening to the analysts who have traditionally followed them - the large customers who have bought Microsoft products and are still doing so - and large vendors who want to maintain the status quo.  All of these folks are as locked-in as Dell.

Meanwhile Apple and Google keep selling thousands of units into these rapidly expanding new markets, growing share as well as sales at substantial profit.

This effort by Google is certainly good for its Chrome O/S.  Even if Dell moves slowly, having Chrome adopted into any part of the historically monopolistic Microsoft community is a good thing.  And the announcement itself shows the fragility of Microsoft in its historical market as growth slows and large distributors look to new solutions for "cloud computing" from new vendors.   So this is good for Google, and another dart into the wounds of Microsoft.

The market keeps shifting toward new technology and the vendors supporting it – making the re-invention gap bigger and bigger at Dell.  I don’t think Dell’s management is up to the market challenges.  They had a shot at real change, but by not giving the growth projects (then or now) real permission to do what it takes to succeed, including moving much faster to market, nor sufficient resources to meet market needs, Dell is hastening its own demise.  With its outdated, and now low-return, success formula firmly locked in, Dell looks likely to follow Wang, Lanier, Burroughs, DEC, Silicon Graphics and Sun Microsystems into the history books.

Journalism in 2020 - YouTube, Google

Will YouTube be the USAToday or Wall Street Journal or New York Times of 2015 or 2020?  According to Mediapost.com "YouTubes Secret Citizen Journalism Plot Exposed."  Referring to a SFWeekly article by Eve Batey "YouTube Explains Top Secret 'News Experiment' to Local Media, But Doesn't Really" the reporting is that YouTube plans to hire groups of citizens in major cities, starting in San Francisco, to report news events via YouTube.  Could this replace the local newspaper?  Or maybe even the local evening news?

Americans are so used to freedom of speech that it's easy to forget what the concept launched in the USA.  200 years ago anybody who could access a printing press, of any size, could produce a newspaper.  That as revolutionary.  "Citizen journalism" was the norm, and there were literally thousands of newspapers.  That situation remained very true well into the 1900s.  Eventually acquisitions led to consolidation and a dramatic reduction in the number of newspapers. 

The decline in the number of newspapers was aided by consumer journalism preferences shifting, in part, to radio and television.  As radio and television journalism was born the limitation was "bandwidth" and therefore access.  Thus, from the beginning there was government control over the number of stations. That scenario very different from the founding of newspapers, as there were limited channels from the beginning.  But that didn't mean that the desire for video journalism was lower.

What will journalism be in 2020?  We know that most major city newspapers are on the brink of failure, with bankruptcies (such as Tribune Corporation, owner of The Chicago Tribune and The Los Angeles Tkimes as well as others) not uncommon.  As newspaper pages have shrunk, the internet has allowed the return of "citizen journalism" as bloggers and reporters have emerged able to tell a story, and with very low cost access to potential readers.  Having internet access is possibly cheaper, and certainly easier, than operating a printing press in the era of Benjamin Franklin, or even a local newspaper of 1900.  By numbers there is no doubt many more "citizen journalists" than "professional journalists" working at American newspapers today.

So why couldn't YouTube take advantage of a preference for video, and link together the armies of independent "journalists?"

I can't help but recall the television program Max Headroom from 20 years ago - where it was perceived that real-time information on practically all topics would be reported on millions of televisions everywhere - televisions which could not be turned off by law.  Wasn't Max simply an avatar, running around what we could now consider the web, popping up on computer - rather than television - screens?  Today I can create my own Max Headroom avatar to search the web for real-time content - mostly text.  Why couldn't YouTube give me a tool to do the same thing with video?

Many people are bemoaning the decline of traditional journalism.  But is this a bad thing?  Given all the screaming about today's "media bias" it would seem that citizen journalism could become a great equalizer.  If YouTube and Google can help give me the tools to search for what's interesting to me that would seem to be a very good thing.  And if in the process they sell some ads so that the content can grow, that doesn't seem like a bad thing either.

In the movie Network, made some 30 years ago, the thesis was put forward that news would become entertainment - and less "news".  With the growth of Fox News, MSNBC News and the number of broadcast minutes given to television news magazines like Nightline, one could reasonably claim that the movie was surprisingly foretelling.  Today, getting up to the minute news is even hard on a channel like CNN.  It's not at all unclear that providing a platform for citizen journalists, via YouTube and Google searches of the web, is a bad thing at all. 

Are you prepared?  Are you learning how to use these new tools?  Are you prepared to change your learning behavior?  Your advertising programs? Could you be a citizen journalist?   It certainly looks clearer every year that journalism in 2020 will look substantially different than it does in 2010.

Don't Depend on Past Success - Microsoft, Apple and Google

"Google Bans Use of Microsoft Company-Wide" is the headline on HuffingtonPost.com.  The reason given is that Microsoft had too many security issues.  This could be easily dismissed as a competitive trick.  Except for a couple of facts:

1. Microsoft does have a number of security issues.  It's not just Google that's worried about the problems encountered when relying on Microsoft products.  While Microsoft is the gorilla, it does have problems.
2. Today their are very reasonable alternatives.  Fifteen years ago Scott McNeely at Sun Microsystems tried to enforce the same discipline as Google. Only there ware no good alternatives to Windows and Office.  That has now changed. Significantly.

As Microsoft has lost share in all its products, it is worth noting that a leading-edge tech company is able to enforce, successfully, a ban on their products.  Aided by the fact that they can offer alternatives which are easy to use and better meet many user requirements today.  This is not good news for investors, employees, suppliers and customers of Microsoft.  A serious shift to alternative solutions has emerged, and Microsoft has given no indication it is participating in the shift.

The impact is amplified by SeekingAlpha.com's article "Apple's Growing Corporate Market Share." Like many businesses in a leading market share position, Microsoft has simply accepted that customers will keep buying their products.  But their near-monopoly is increasingly threatened as organizations realize there are very real alternatives.  Not just from Google, but from Apple as well as others.  As companies recognize that PCs are failing faster, and as managers are displeased by Microsoft requirements that they upgrade software with new purchases, corporate customers are looking for alternatives.  This can be easily dismissed as the behavior of a few "odd-balls."  But increasingly such behavior is becoming mainstream.  While Microsoft is busy forcing customers to upgrade, many companies are looking for greater stability and satisfaction with their information technology suppliers - including Microsoft replacements.

While Microsoft keeps struggling to maintain its customers, sales and share in its old business, Apple keeps moving forward.  This week SeekingAlpha.com also reports "Apple Hits 10,000 iPad Apps, Doubling in the Past Six Weeks."  Again, this might be easy to ignore for Microsoft (or status quo) fans.  But as the app library keeps building Apple keeps building a bigger advantage over everyone - including Microsoft.  What do we think the future holds - a world full of laptops (as we know it today) or a lot more tablets and similar smart devices?  Increasingly, Microsoft is Defending its past position in the face of a tsunami of innovation for new solutions gaining adoption, and growing, very, very rapidly.

When you're the market leader it is easy to ignore competitors.  To dismiss them as "fringe" with "small share" and "not important."  But that is very risky.  Markets can shift really fast.  New competitors offer new solutions, and they allow customers to do new things.  They give customers new choices, and often customers who are less than thrilled with current solutions will switch.  As competitors make it easy to do new things, the customers switch even faster.  Before long the unexpected can happen, and leadership can switch very quickly.  Like Apple's market share in mobile devices exceeding that of Microsoft's - or Apple's cash hoard exceeding the market value of Dell (a supply chain partner of Microsoft). 

Microsoft is offering a real-time lesson to business leaders.  Planning your future based upon your past strengths is dangerous.  Smart competitors can offer alternatives faster than you think - and create market shifts that leave you in the lurch quickly.  It's a high-risk strategy to think you can succeed by Defending you past position when alternatives are on the horizon.

PS - ChannelInsider.com today published "Spotlight: 10 Things Tablet Computer Makers Must Do To Take On iPad." Item 5 is "Windows Won't Make Much Sense" Item 4 is "Chrome O/S Does Make Sense" Item 3 is "Give Android O/S Consideration".  For Microsoft this is a set of recommendations that cannot sit well. The market for laptops is predicted to peak and begin declining as users shift to smaller, easier products like tablets. The market pundits, as they recommend new products, are moving away from Microsoft products.  How long can Microsoft continue its focus on Defending Windows and Office? 

Looking for votes, or looking for jobs - Chicago, Minneapolis, Madison

There's always controversy around a politician.  Some like the person, some hate the person.  And that is true for Mayor Richard M. Daley in Chicago.  Crain's Chicago Business decided to do an analysis of the mayor's last 20 years in office in "Mayor Daley Runs Up Big Debts Building His Global City; What About the Rest of Chicago?"  

(As I write this, please keep in mind I live in Chicagoland and have done so for 20 consecutive years.  This is my second time in Chicago, having first in 1982 - almost 30 years ago.  It is my home, and I obviously like the area.  But that doesn't mean (a) some criticisms and concerns aren't warranted and (b) that other cities and/or states aren't in equal, or worse, condition and should learn something from a look at Chicago.)

The article has a host of ways to look at. evaluate, the mayor and the city.  Most of them compare one or the other to the Chicago suburbs, or to other big cities like New York, or to the situation in Chicago when he took office.  In other words, relative measures.  As a result, in many areas, it is possible to say Chicago is doing better than it was, or better than some comparable city.  And that's the problem with relative measures - you can always say things are somewhat different.  But, does it mean the city is in "good" shape, or that it is going to be prospering in 2020 - or 2050? 

However, what's important isn't how a governmental leader performs in comparison to others, but absolutely.  I don't care of I'm less starving than another person, I care that I'm not starving.  Nor does it matter how well the leader performs on a host (15 or 20 or 30) of measures, but rather how they perform on the critical, absolute measures.  I don't care how well I'm dressed, or coiffed, or energized if I'm starving. 

It's also important we avoid popularity polls as a way of determining "success."  The article points out that Mayor Daley is a favorite of business leaders.  According to the article largely because he thinks a lot like them, talks a lot like them and enjoys associating with them.  But just because he shares their personal Success Formulas, and he's a great "Happy Harry," to be around, and because he might be easier to talk to than his predecessors, or other city mayors, does not make Mayor Daley great, or the city great.  It just makes him popular.  Do you remember any popular students from your high school or college that simply didn't accomplish much?  They were probably even very popular with the faculty in many cases.  But did they make the school's reputation grow?  Or help improve the test scores of students rise, or improve the success of the athletic department?  Popularity is just that, but it doesn't create a long-term viable economic strategy.

That the mayor has brought a few corporate headquarters to Chicago, such as Boeing and Miller/Coors, is no doubt.  And retained United Airlines.  This shows the mayor is good at talking to CEOs.  And it has some "celebrity" and "symbolic" benefit.  Unfortunately, headquarters locations do not produce many jobs.

In the case of Chicago and mayor Daley, there are really 2 critical variables.  And they aren't how well he removes snow, or how many flights go through O'Hare airport.  Rather, it's debt and jobs. 

Debt can be used to help growth, otherwise it's bad.  If you can earn 7%, and borrow at 5%, then debt helps you grow.  But if you borrow at 5% and invest in something that has no growth, well then you're just losing money faster.  

Which gets us to jobs.  Debt incurred by a municipality should have the impact of creating growth.  It should create jobs.  But, looking at Crain's "Chicago Economic Indicators" we see that between 1989, Daley's first year in the job, and 2009 jobs shrunk by 150,000 (from 1.33million to 1.18million,) or negative 11.25%.  So the debt did not help Chicago grow - the only viable reason for incurring debt.  In the 20 years debt (including long-term capital leases), adjusted for inflation, grew 263%.  Fully 74% more than the property tax base.  Or, when compared to jobs, the inflation adjusted debt per job grew by 85% (almost doubled!) in the last 20 years!  What we can see is that those who are working now have one heck of a lot of debt to repay for the expenditures made by "city hall" the last 20 years!  Adjusted for inflation, twice what they had to pay back when I came to Chicago!

And this is AFTER the mayor sold off the city's parking meters and other sources of income!  He took one-time payments in order to keep the debt down, but gave up future income that used to be available to repay debt.  Throwing even more of the debt repayment load onto each job than existed when he took office.  And this hasn't factored in unfunded pension liabilities and anticipated escalating costs for infrastructure, education, public transit, etc.  which will require some form of tax - or economic growth.  

There is no doubt that even though he has detractors, Mayor Daley is a popular mayor.  From what I've heard, he's a charismatic individual.  He is obviously smart, and has great leadership skills.  And masterful political skills.  He also seems, from watching him on the news, to be a genuinely caring person who wants the best for all people in Chicago - and wants Chicago to be a great city for the next century.  But much of what's happened during his tenure has garnered him votes, while leaving Chicago with more debt and fewer jobs to pay for that debt.

If you live in Chicago, or any other major city, it is worth spending time not getting lost in the beauty.  Thirty years ago Detroit was full of glee about its investments in the Renaissance Center and other civic programs.  Didn't do any good when they couldn't keep jobs in the city - or region.  Pretty buildings surrounded by blight has been the result.  Civic leaders need to be paying attention to the debt per job - and realize that without growth - more jobs - its tough for any city to remain "a great place to live and work."

So what should mayor Daley do?  I'm offering up one idea, one article, from MedCityNews.com "I-Q Corridor is Stuff of Dreamers." This article discusses how some well placed funds, and not all that much given the overall budgets of the states and cities involved, could make a huge difference.  The notion is to invest in creating a "health care corridor" from Minneapolis, MN through Madison, WI and Milwaukee, WI into Chicago, IL.  This would bring together the resources of several of the top engineering and health care schools in the USA, with several of the premier facilities (nearby Minneapolis area Mayo Clinic, Marshfield Clinic in WI, and Rehabilitation Institute of Chicago just to name 3 of many).  This kind of investing is the kind of thing that could create a LOT of jobs in a growing industry.  And probably for less than the cost of the proposed O'Hare expansion. 

For 2 years I listened to the mayor trumpet the need for Chicago to seek being an Olympic venue.  He roused up many corporate leaders to support him.  And he spent millions of dollars.  Even though it was never clear that the Olympics could even break even.  And far less clear it would create even one job post-Olympics. So why not view the I-Q Corridor as a White Space project for Chicago?  Why not use it to Disrupt old Lock-ins about the "rust belt" of manufacturing, and figure out how to generate high job growth?  It is just one idea, but I can get a lot more excited about spending money on creating some sort of "corridor of job growth" than putting on the Olympics.

(PS - I recently met the City of Chicago CIO at the CIOMagazine Perspectives event in Chicago.  He led a great panel with leading industry CIOs from the city.  It was a great conference, well attended, with a number of thoughtful people.  The event demonstrated what a great city Chicago is for business.  You can read a flattering review I've my presentation written by Steven Stern at SternData.com "Innovate - Don't get Locked-In." I'll be updating that presentation which you can register to attend at the CIO 100 Conference August 22-24 near Los Angeles, CA.)

Top 6 Reasons Projects Fail - 8 Steps to Avoid the Failures!

I was struck by a recent Baseline.com article that described the top 6 reasons IT projects fail in "What Dooms IT Projects."  Primarily because the reasons have nothing to do inherently with information technology, and thus are identical to why all projects fail - including new product launches, new market expansions, new manufacturing technology adoption, new financing forms and any other new projects companies start.  AND because these are the same reasons I've been reading for 20 years! 

1. Insufficient user (or customer) involvement. Inevitably someone says that if the team had just spent more time talking to users/customers everything would have worked out OK.  As if for some reason the team had no interest in the customers, and were so arrogant as to simply not care!  We all know that lots of time is spent capturing user/customer input.  The problem is that users/customers don't really know what they want!  Therefore, their recommendations are insufficient to describe what it would take to really make them happy with any change.
2. Unrealistic Timetable.  Why do people say they'll do a project in 3 months that everyone knows will take 9?  Simply, the team has no choice.  In today's world we have to achieve results quickly.  Long projects are never completed, because conditions keep changing (more on this in #4 below).  So the team is forced into very rapid deadlines.  Only, the deliverables are usually kept the same, making it impossible for the project to complete on time!
3. Poor Requirements.  As if there was no target? There are plenty of requirements, it's just that (back to #1 above) the customer doesn't really know what they want, so the requirements which look great at the beginning look insufficient (poor) after people are a lot more educated from the completed work!  The requirements look great until you get into the effort and start seeing how much more could be done, and how much of the value lies in going the next step (often in multiple places.)
4. Scope Creep.  During the project users/customers see early examples or interim deliverables.  Once that happens they say "Oh, now I have a LOT better idea what I really want.  So can't you just make this small change?  It will make all the difference imaginable in how I'll use this - or even whether I'll use this."  Given this interim input, there's almost no way to NOT add on to the project.
5. Lack Executive Support.  Of course no executive is going to say "I am four-square behind this project" once user/customer feedback starts coming back less than enthusiastic, timetables start slipping, the deliverable starts looking a lot bigger (and the work a lot more expensive) and finger-pointing has started about "why didn't we figure this all out before we started!"  Even when the entire management team yells "go" at the beginning, once a project is deemed problematic support evaporates faster than ethyl alcohol rubbed on hot stainless steel!
6. Poor Testing. Sure, blame the testers.  Given how many variables have shifted and turned since the project started, who remembers, or knows, what to test any longer?  Exactly what performance requirements will be the triggers that determine acceptability?  Which variables are most important?  And, if the project is now struggling with changed requirements, the timetable is blown, scope has been redefined more than once, users/customers have started griping about delays and the executives are saying "will this nightmare project ever end" exactly what tester is going to stand in front of the train and say "hey, let's stop this thing"?

Bad projects are expensive.  According to Baseline.com, just in American IT projects $63B is lost every year to failed IT projects.  About 25% of the time - really, 1 in 4 times - projects are considered complete failures.  Less than 1/3 of the time are projects considered successful.  Yet, there is nothing new in this list.  It's been the same list for at least 20 years!  Even though "project management" has now become an academic discipline - results are not improving.

The approach to project management since the 1960s has been the same.  Write down requirements, use some sort of "scientific management" effort - some kind of time/motion study - to estimate the time to complete, freeze the project, get agreement on project outcomes and funding, then "execute."  And project management has been all about how to improve this process by adding more, and more, and more, and more steps.  There are now checklists that are book after book of things to do in order to "nail down" each step.  And there are hundreds of articles written about the "discipline" of keeping to the plan, not changing things, and keeping "everyone on board to the original project" until it is complete.

But all of this simply adds up to do more of what we've always done, try to do it better, via automation try to do it faster and consider using consultants or offshore resources to do all of this extra work cheaper.  There's been no change to how we do project management, no change to the underlying premise.  Even though results are no better now - in fact they may well be worse - than 40 years ago!

So why don't we change the approach?

The problem is that shifts happen.  Customer needs change every day, based upon what happens not only in their work but in what their customers want and in what competitors do. As the world shifts, requirements change.  Customers that don't really know what they want, because they only know what they've done, are asked to do the impossible to define their requirements - and then asked to do the even more impossible task of not wanting more as things shift.  As demands on customers change, and as competitors change the environment, shifts demand changes in expectations.  And testing is all about "does the hurdler jump the bar" without any consideration, by design, as to whether he finishes the race (much less how fast he finishes.) And the incentives are for judges to lower the bar, so the darn race can just end.

The old approach was designed for a nice, slow-paced, static world.  Where everything is known, and that's impossible with market needs.  It can work if you're trying to build a bridge maybe, but when trying to design some solution for a complex system (like the modern market, or IT community, or logistics design, etc.) that has infinite moving parts?  And where the speed with which parts change can be amazingly fast?  Let's get real, traditional project management simply won't work in today's complex IT, marketing, finance, HR, operations, production, logistics, manufacturing, sales world!

So, instead, try a new approach.  We've used this for 10 years with all kinds of projects, and it works a whole lot better.  Undertake your project realizing that if it aligns with future needs it will add value - and that is what really matters.

1. Don't ask users what they want.  Don't ask them for requirements.  They don't know.
2. Develop your scenario of what would be the PERFECT, ideal solution in 2 or 5 years.  Really.  Not just an improvement over today, what would be perfect!  Even if you have no idea how you would ever do it.  Write that down.  Then, say what those requirements are.  Design to those specs - which are probably 10 to 100 times beyond the current state.  Don't settle for some fractional design.  Don't start if you can't deliver what the market will want in the future when customers aren't bridled by what they don't know today.  Build for a future scenario that is way better than today - not just some initial requirements your Locked-in customer thought about.
3. If you don't know how to design it, study your competitors - including fringe competitors.  Look at everyone imaginable that is solving a similar problem and see how those you may never before considered are doing it.  See how people in China, Bangladesh, Hyderabad, San Paulo, Moscow, Taipei or Bangkok are doing it.  See how some 20 year old college kid and her buddies are trying to do it.  Look at how the upcoming competitor with .1% market share is doing it.  Don't just go for the well known solution approach.  Don't settle for "best practice" which is a 6 year old innovation that has little competitive value left.  Don't be afraid to do what can provide huge value improvement.
4. Write a long story, with detail, about how completing this project is going to really screw with your existing competitors.  Describe the huge pain they will feel.  How they will be in shock and awe of your performance once you are able to blow them away with this new capability.  Destroying the traditional competition is a great motivator.  Make them into the villain - after all, they are! (By the way, if you don't think the project will have a positive competitive impact - why are you doing it?)
5. Focus really, really, really hard on defining important early valuable deliverables.  Fast wins.  Don't just figure out what the end state will look like, it's critical to know what you can deliver successfully in 90 or 120 days! We can't wait forever for results, so throw out complex ROI analysis.  Instead ask the team to simply say how quickly they can start producing, rather than spending, money - and how quickly their project will pay back the investment.  Force them to prove that there are measurable wins in the first year, and payback in less than 3 -- on something!!  Don't worry about "scale."  Just the opposite, worry about how to demonstrate value quickly! Keep all timelines under a year, most under 4 months.
6. Tell everyone you are going to do something new.  You are prepared to be the innovator.  You can, and will, Disrupt the things you've done in order to give spectacular results.  You don't just want a 5% improvement, you want to win. It's not about how much better you were than before - it's about being competitively better than everyone else.  You simply want to win in the marketplace - and you'll do new things to accomplish this.  You care about results more than process.
7. Give the team permission to do whatever they have to do to succeed.  Don't give them a list of "rules" within which the project has to operate.  Give them the permission to really focus on success - that they can do what's needed to accomplish their goal.  Don't set up barriers.  Instead, tell them there are no barriers and you don't want them to talk about there being any barriers.
8. Make sure the team does not report to the Status Quo management.  Structure the project so that the team reports to someone who can focus on project success first, rather than abiding by old rules, or fears cannibalization, or has a vested interest in the success of the Status Quo.
9. Commit enough resources so the project can succeed.  Don't give it piecemeal funding that will require the team constantly battle to keep the project moving forward.  Don't expect success from part-time resources borrowed from other full-time work, or from a team assembled only to do this project then return to their old jobs.  Everyone has to be committed to the project, and its success, and the money should be there if they reach their goals (regardless of the route they took.)

This may not sound like a typical project management approach.  But hey, given how well the old approach has worked out don't you think it's time to give something new a chance?  Would medicine have ever advanced if we just kept on blood-letting?  When will we try something new if not now?

PS - Don't miss my newest column in CIOMagazine. "IT Strategy, Use Scenario Planning to Get Beyond Legacy Systems."  As IT has become one of our highest costs, it's more important than ever we change how we do IT planning and project management.

It's not about "execution" its about Results - Tribune Corp., LATimes, Chicago Tribune, Sara Lee, General Motors

If your boss told you that he enjoyed your hard work, but he wanted to cut your pay 50% I bet you would feel - well - violated.  Your hard work is just that; hard work.  If you received $100,000 (or $50,000 or $250,000) for that work last year it would be hard to accept receiving some fractionally lower amount for that same work next year.  Especially given that every year you are able to work smarter, better and faster at what you do.  Because your execution constantly improves you'd expect to receive more every year.

But in reality, it doesn't matter how hard we work.  What matters is the value of that work.  It's why nearly incoherent ball players and actors make millions while skillful engineers barely make 6 figures.  In other words, pay inevitably ends up being the result of not only the output - it's volume and quality - but what it is worth.  And that the compensation is a marketplace result - and not something we actually control - is hard for us to understand.

Every years many pundits decry "excessive" executive pay.  There is ample discussion about how an executive received a boat load of money, meanwhile the company sales or profits or customer performance was less than average, or possibly even declined.  Of course the executives don't think they are overpaid.  They say "I worked hard, did my job, did what I thought was best and was agreed to by my Board of Directors.  I did what most investors and my peers would have expected me to do.  Therefore, I deserve this money - regardless of the results.  I can't control markets or their many variables (like industry prices, costs of feedstock, international currency values, or the loss of a patent or other lawsuit, an industrial accident, or the development of a competitive breakthrough technology) so I can't control the results (like total revenues, or total profits or the stock prices).  Therefore I deserve to be compensated for my hard work, even if things didn't work out quite like investors, customers, employees or suppliers might have liked."

This answer is hard for the detractors to accept.  To them, if top management isn't responsible for results, who is?  Yet, shockingly, each time this happens investment fund managers that own large stock positions will be interviewed, and they will agree the executives are doing their jobs so they should get paid based up on their title and industry - regardless the results.

An example of this behavior was reported by Crain's Chicago Business in "Tribune's $43M Bonus Plan Lambasted by Trustee."  Even though Tribune Corporation's leadership, under Sam Zell, took the company from profitable to bankruptcy, and even though they've been unable to "fix" Tribune sufficiently to appease bondholders and develop a plan to remain a going concern thus exiting bankruptcy, the management team thinks it should be paid a bonus.  Why?  Because they are working diligently, and hard.  So, even though there really are no acceptable results, they want to get paid a bonus.

We all have to realize that our company sales and profits are a result of the marketplace in which we compete, and the Success Formula we apply.  The combination can produce very good results sometimes; even for a prolonged period.  Newspapers had a good, long profitable run.  But markets shift.  When markets shift, we see that the old Success Formula must change because RESULTS deteriorate.  Slow (or no, or negative) growth in revenues and/or profits and/or cash flow is a clear sign of a market shift creating a problem with the Success Formula.  When this happens, rewarding EXECUTION (or hard work) is EXACTLY the WRONG thing to do!  Doing more of the same will only exacerbate bad results - not fix them

What's bad for the business, in revenues/profits/cash flow, must (of necessity) be bad for the employees.  Not because they are bad people.  Or lazy, or incompetent, or arrogant, or any of many other bad connotations.  But because the results are clearly saying that the value has eroded from the Success Formula .  Usually because of a market shift (like readers and advertisers going from newspapers/print to the internet).  What we MUST reward are the efforts to change the Success Formula, to get back to growing.  Not hard work.  As much as we'd like to say that hard work deserves money - we all know that money flows to the things we value regardless of  how hard we work.

I've long been a detractor of many executives - Brenda Barnes at Sara Lee has been a frequent victim of this blog.  Whitacre of GM another.  Steve Ballmer at Microsoft.  That the Boards of these companies compensate these leaders, and the teams they lead, is horrific.  It reinforces the notion that what matters is hard work, willingness to toe the line of the old Success Formula, willingness to remain Locked-in to industry or company traditions - rather than results.  Results which give independent feedback from the marketplace of the true value of the Success Formula.

Let's congratulate the Tribune Trustee.  For once, more attention is being paid to results than to "hard work" or "execution."  Tribune - like General Motors - needs a wholesale makeover.  An entirely new team of leaders willing to Disrupt old Lock-ins and use White Space to define a new Success Formula.  Willing to move the resources in these companies, including the employees, back into growth markets.  If more Boards acted like the Tribune Trustee we'd be a lot better off because more companies would grow and maybe we'd move forward out of this recession.

Why educators can't educate - College Lock-in

I so enjoyed the feedback from my article on Chicago and Illinois politicians I decided to take on another sacred cow - so let's talk about education.

According to Inside Higher Education's article "In Search of Innovators" there is a distinct lack of innovation in higher education.  They cite a number of studies that show colleges are much better at enrolling students than graduating them.  Especially private schools and junior colleges.  And, imagine this, professors and administrators are more interested in continuing their positions and jobs than what students learn ("learning outcomes" in the industry vernacular.) Seems that keeping things from changing is the highest interest for educators, rather than actually teaching anything students need to learn to compete today.

But, we all know this.  We've all seen colleges that have courses taught by only one or two professors, who only teach at odd hours, only allow a few students, refuse to keep office hours, or refuse to post previous exams.  We're all familiar with schools that limit the hours administration offices are open, and are intractable about the requirements for graduation - even if they were set 20 years ago. 

Quite simply, Lock-in drives most schools.  Programs like tenure which make it impossible to fire anyone help maintain Lock-in.  And professors would rather argue about what they don't want to do than try anything new and different.  For all of us who went to college, and especially for those of us with students in college, it's clear that students are a route to their money (or their parent's money) - sort of little money pumps - intended to allow the college to not change.  Many colleges even brag about how little they've changed over the last 20, 50 or even 100 years!  In a world where change is every present, and dealing with change is now one of the most important skills a young person needs!

According to The Chronicle of Higher Education "For Innovation to Occur, Colleges Need a Big Push, Scholars Say."  This journal cites program after program where a college tried to start up something new, only to have the program fail.  But of course, because there is no White Space in colleges.  White Space is where you give Permission to break all Lock-ins and do whatever it takes to be successful - and then provide the resources for success to occur.  This does NOT exist in a college, where none of the Lock-ins can be violated.  A professor can't even decide to change from teaching in class to using video instruction or on-line training because it's not allowed.  So how can something new really be tried?

Where we have seen growth in higher education has been in for-profit schools like Devry and Phoenix that have rapidly challenged tradition and moved into new education models.  Traditional schools decry these institutions, claiming the quality isn't acceptable.  Of course, the "quality" argument is what printers used to claim Xerox machines would never succeed.  It's what DEC said about AutoCad - before DEC went out of business.  It's what Kodak executives said would make digital photography a tiny market compared to film.  It's what executives at Sony said would keep music customers from buying MP3 devices/music before Apple launched the iPod.  Quality is the #1 excuse used by Locked-in organizations to justify why they shouldn't change.  

Forty years ago it was pretty clear that if you could afford college and grad school, it was worth it.  But as costs/prices have skyrocketed, and the relevancy of education in many institutions has declined, that argument has lost a lot of credibility.  Increasingly students are saying they want their education to be meaningful, practical and applicable.  The market has shifted.  They want to study on their schedules, without giving up their incomes or struggling with horrible commutes.  And increasingly, these customers are moving to the suppliers that meet their needs - rather than trying to Defend & Extend old practices.

It's ironic that in the one place where we should most be open to new models we have almost no innovation.  But it's impossible without a change in the structures and processes - and that requires a willingness to create a lot of White Space.  For most colleges, I'm not optimistic.