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Sunday, May 27, 2007
Secret of the Blue Binder - II
The curious Rahil approached CEO afterwards and asked him about the blue binder. CEO smiled and told him that during his school days, one of his teacher helped him develop some basic skills. All students had been focusing on homework completion, notebook organization, and planning for long-term assignments. Students who sometimes struggle in school may have difficulties in these areas. For example, a student may be forgetting to write down assignments in class or a student may complete homework but not put it in his or her school bag before going to school.
Binder organization and planning had helped him a lot. One thing that worked for him was color coding of the binders. He told he learned essentially then was taking larger projects and long-term assignments and breaking them down into more easily doable chunks. This also helped in estimating time for completion, sticking to completion schedules, adjusting completion schedules and benchmarking. When report card came out that year, his teacher asked him to reflect on what he did well and what areas needed to target for improvement. CEO told Rahil that being specific, building on successes and backing it up with the structure supported him to keep moving in the right direction towards greater academic success.
Then with a serious voice he told Rahil that do you know How Standardization Affects Competition and Innovation. He told that there is a success story behind the use of blue binder in his organization. The success of his blue binder is similar to other stories of standardization: the evolution of the personal computer industry, local area networking and the Internet revolution.
Then he told Rahil, the story of IBM Personal Computers. Microcomputers existed prior to the release of the IBM PC. So what was it about the initial IBM PC that made it become a de facto standard that served as the basis for the WINTEL (Microsoft Windows running on an Intel or Intel compatible microprocessor) standard still in use today?
There was nothing spectacular about the IBM PC. It was priced higher than other products from Apple and the various manufactures of Z-80 based CP/M computers. Although sporting a "16 bit" microprocessor, the first versions were slower in processing than the 8-bit Z-80 computers. The operating system provided with the IBM PC was a hastily assembled and feature-lacking operating system known as DOS developed by Microsoft.
One clear reason for the success of the IBM PC was that IBM developed it. IBM was the largest computer company in the world at that time. IBM's introduction overnight legitimized a market trend.
The other reason usually discussed was the fact that IBM chose to fully publish the specifications to the hardware and the firmware of the PC. The blue colored binder that contained the IBM Technical Specification became the blue print for a multitude of small startup companies and traditional competitors of IBM. IBM created the first open source product, the IBM PC. Further fueling this openness was the wily negotiating done by Bill Gates and Microsoft. Microsoft convinced IBM to permit them to sell a version of the PC-DOS operating system to other manufacturers, thus creating an overnight de facto standard operating system.
The last reason was market timing. IBM saw the threat caused by the microprocessor and enabling applications, such as word processing and spreadsheets and reacted by embracing the marketplace instead of trying to fight it.
CEO told Rahil that he cannot tell other specific issues and incident about his own organization but he told Rahil to draw an analogy from the story to understand why he was so particular about the blue binder.
Rahil, an entrepreneurial risk consultant recounts a perplexing assignment where he was the third risk consultant brought in to conduct an organisational review and process improvement assignment. As he wanted to know the cause of dissatisfaction for the client on previous occasions, he approached the preceding two consulting firms where he knew a few consultants.
After discussing the client issues with them, he first decided to decline the assignment but then he thought, he also need to know the reasons from the leadership of the company who wanted his services. He asked CEO of the Company as to what are his expectations and how he wanted him to deliver it. The CEO explained that he wanted a detailed report in a blue binder with eight tabs.
He thought, by letting the client to select the type and color of the binder and the template of deliverable, is neither going to challenge his professional approach nor his standards of delivery. So, he accepted the assignment and conducted his own analysis and produced a report in a blue binder. The CEO not only praised the report, but also implemented the recommendations. When customers are not ignored, underestimated and denied, they respond.
What was so special about the blue binder? What was the secret? The curious Rahil approached CEO afterwards and asked him about the blue binder.
CEO of a large electronic products company received an email from his colleague seeking his ratification for some exceptions which were said to be related to some routine activities. CEO, who was not aware of existence of such activities, instead of ratifying, asked for the purpose of carrying such activities in first place and how these were relevant to the business?
On further inquiry, it was occurred to CEO that these activities were not adding any economical value to the business but consuming a lot of time of the company resources. Then he called Internal Auditor of his company who replied that although his role has been enlarged to improve processes but it is impossible for him to know details of each activity carried out in the organization. Not satisfied with his answer, CEO approached CFO to seek his views on current risk management efforts and responsibilities of identifying and plugging such problems.
When CEO came with his query, CFO was talking to his friend, a risk consultant, who had come to his office to meet him. Soon thereafter all three started talking on the subject. The risk consultant recited how a company has implemented activity based responsibility management, the methodology that provided the internal auditor with the ability to identify and eliminate activities that do not contribute economic value to a business. The management techniques have resulted in flatter organizational structures, the elimination of hierarchies, and fewer internal controls. Managers have taken on a new role as facilitators and coaches instead of supervisors. The old, rigid hierarchical structures have little place in the era of innovation and process improvement.
Advocates of process improvement cannot be allowed to arbitrarily dismiss the concept of extensive checks and controls. The new methodology champions audit trails, clear activity definitions, appropriate separation of duties, and well-defined performance measures. New internal controls take the form of information sharing and trust instead of internal controls inherently based on mistrust.
The approach enables management to actively participate in the process of systematically describing activities, decisions that have to be accomplished, and to clarify the responsibility that each plays in relation to those activities and decisions.
After due responsibility charting, issues are required to be addressed as follows:
Can or need the individual(s) stay on the top of so much? Can the decision/activity be broken into smaller or more manageable functions?
Does Individual(s) need to be involved in so many activities? Are they a gatekeeper or could management by exception principle be used?
Should this functional role or activities be eliminated? Have processes changed to point out where resources should be re-utilized?
Does proper segregation of duties exist? Should other group be accountable to ensure proper checks & balances?
Does the type & degree of participation fit the qualification of this role?
After risk consultant stopped talking, CEO smiled and with a pause invited both of them to join him for dinner as it was already 8:30 PM in the evening.
Mr. Kolah, who is working as a Finance Manager, has taken initiative to bring change through innovation in his organisation. Although his bosses have approved the project to be taken up which is real beneficial for the organization, their attitude is not conductive for the proposed project and change management. They instructed him to hire a renowned consulting company whereas Mr. Kolah thinks that the new consulting projects need more energetic, entrepreneurial and innovative consultants. He has tried hard to convince them but failed to change their attitudes.
Attitudes are a collection of value and beliefs around certain subject. Most people try to change other person's attitude without any success. Attitude cannot be changed without changing incorrect values and beliefs first. Unfortunately, we normally have little success in changing attitude. Telling some one to change his attitude never works. Never. Let us consider this specific values and how beliefs create an attitude.
The bosses of Mr. Kolah are biased towards new consulting company as an agent to innovation and change management. Such a resistance is an attitude.
Value: Security and Ego
Belief A: When consultants of know brand are around, I am secured. Belief B: Young consultants have no knowledge of business. Belief C: People other than big consulting are not trust worthy and lack infrastructure. Belief D: How young people are supposed to teach us on how to do business?
Attitude: People of a new consulting company might be OK, but they will not add value as I am not comfortable hiring them.
Solution is to target all incorrect beliefs first while dealing with attitude. Beliefs are sometime build on wrong values, premises and understanding. This is very true also with more experienced higher level management people.
In today's time when information and knowledge is growing at an incredible speed, the gray hair and experience might not be the major drivers for success and innovation. You need to pump in new blood in the process and increase the velocity to escape the gravity of orthodox thinking. Incorrect reasoning, attitude and state of mind of a person should not be a barrier for successful creation of better organizations of the coming times.
I was discussing innovation with CEO of a fortune 500 company recently in an informal meeting. As we were discussing, he mentioned that they have hired a named consulting company recently for implementing enterprise wide risk management system in their organization using latest control frameworks. He mentioned that there is no Rocket Science involved and consultants are just creating some kind of laundry list of risks, controls, activities and tasks and then plotting them in various fashions. It was apparent that he was not happy with the consulting project going on in his company but was not sure what was lacking.
I mentioned to him that as per recent survey by IBM on innovation , many of CEOs' top obstacles are within their own control. It is apparent that the majority of issues reside somewhere inside their own organizations. Culture, budget, people, process and technology were cited as some of the most significant hurdles. For CEOs, this is a classic case of good news as well as bad news. Because the issues are internal, CEOs have more control over them. However, these hurdles compound the challenges CEOs face.
Leading organizations to be more innovative is becoming more and more difficult. As massive change bears down on CEOs' organizations, their employees, stockholders and Boards are growing increasingly impatient for results. And when those results are not forthcoming, consequences can be severe. And, these are reflected in high turnover of CEOs in past few years.
He told that he might leave the job by the year end and may start his own entrepreneurial business. We debated on the issue for some time and then we started talking about business and technology integration which we both thought is of great importance. He told me there are lots of gaps in integration which are frustrating and he wanted to improve, but didn't know how to do it and found the task too complicated.
For adding humor to this serious discussion, I said you now need to employ something which involves Rocket Science. What is Rocket Science? With a spark in his eyes he said let us create a background to explain the term within the business context. When your mission is to reach other part of the continent in few hours, you faced with a force called turbulence approaching the speed of sound. Solution is to understand the science of aerodynamics and streamlining. Using the same principle, the business world has streamlined its business processes. When your mission is moon or mars, you are faced with powerful centrifugal force called gravity of the Earth. You need to escape this force and to achieve an escaping velocity you need to know the Rocket Science.
Innovation is not just about challenging the existing but beyond. What if you mission is to reach other galaxies within different time space and dimensions and you need to approach the speed of light or tachyon. This is even beyond the Rocket Science.
Globalization and technology advances are lifting competition to new heights, while creating unprecedented opportunities to differentiate. Financial markets are demanding ever-faster growth. Growth and perhaps even survival depends on innovation. Similar to implementing a corporate strategy, becoming more innovative means making deliberate choices filtering the plethora of options you have as a CEO and concentrating on those few actions that can truly make a difference.
That day in evening, I was again reading the final paragraphs of the survey by IBM on innovation :
Has your innovation agenda expanded beyond products/services/markets innovation and operational improvement to encompass your business model, the emerging basis for competition? How much of your innovation is bold versus routine? How would your business model be different if you started with a clean sheet of paper? What would you do if you were getting into your current business as a start-up? What capabilities do you have that might fundamentally change the value chain in another industry? Do you continuously explore new technologies that could change your business? Is technological change an input to your strategy development process?
I wanted to add one more question: Can you think of something which involves Rocket Science and beyond?
