All Posts by Bob Lewis

|In: Leadership|Last Updated:

It was another travel week, with no time to write a fresh column. So I’m asking your indulgence – what follows originally ran 10 years ago today.

I think you’ll find it just as relevant this week as it was 520 weeks ago.

And, … plot spoiler alert! … the business in question did fail as predicted.

– Bob

As we speak, a business is about to fail.

I’m not talking statistics. I’m talking about a specific business, one that experienced years of rapid, profitable growth. It’s about to fail, its management has no idea it’s about to fail, and the reason it’s about to fail speaks volumes about both the nature of business process, and its limits.

As a result of Hammer and Champy’s publication of Reengineering the Corporation in 1994, Jack Welch’s highly publicized adoption of Six Sigma at General Electric in 1996, and Toyota’s development of Lean Manufacturing, publicly codified in the 1990s, a perspective has coalesced among business leaders and thought leaders that corporations are collections of processes. Optimize processes, the thinking goes, and companies will decrease costs, improve quality, and increase throughput, all while reducing their dependence on individual employees.

As is so often the case when it comes to business thinking, the search for silver-bullet solutions blinded the searchers to the difference between validity and completeness. Yes, businesses are collections of processes (more accurately, they’re collections of business functions — a term we use in my consulting practice that includes process, practice, and all points between).

But that’s not all they are. Businesses are also composed of:

  • Individual, self-interested human beings,
  • Interpersonal relationships,
  • Communities,
  • Knowledge … subject-matter expertise,
  • Contests for power and influence,

… to list just a few of the most important perspectives.

And while legally “the corporation” might have hard, clear, well-defined boundaries, operationally the boundary separating inside from outside is both fuzzy and permeable.

The most obvious example is outsourcing. When a company takes a business function handled by staff and puts it in the hands of another company, it’s still that company’s business function.

Supply chain management and the use of independent distributors are also outsources: Whatever components a company purchases from outside suppliers are components the company could also choose to produce internally; likewise, whatever an independent distributor does is something a company could do with its own warehouses, trucks and so on.

Customer relationships are another fuzzy boundary. While customers are outside the corporate wall, customer relationships lie partially inside the company.

Which brings us to the about-to-fail company. Like many other companies, it relies on Asian sources for its components. Also following a familiar pattern, it employed a local representative to deal with its suppliers on a day-to-day basis while establishing formal processes for managing the supply chain.

Regrettably, the company followed another familiar pattern. Its founders mistook their success for their being the sole cause of success. As a direct result, they lost both their on-shore supply chain managers and their local representative in the course of just a few months. The on-shore managers’ departures were caused by the poisonous atmosphere engendered by the company’s founders. Without the on-shore managers to provide insulation, the local representative was exposed to the same atmosphere, and left as well.

What does this have to do with process, practice, and the company’s impending failure?

Everything. Because it isn’t just true that companies are collections of interpersonal relationships as well as business functions. They’re collections of interpersonal relationships before they’re collections of business functions.

And the smaller the companies involved, the more this is true — smaller firms are qualitatively different from bigger ones. The relationship between Apple and Foxconn might depend on nothing more than a negotiated contract and regular flow of controlling documents and management reports. I doubt it, but it’s possible.

The flow of components (or finished goods if the company fully outsources production) to a company with 250 employees that designs, manufactures, and sells, say, specialty shoes, or designer purses, or high-end baseball gloves, or any other product produced in quantities counted in thousands rather than millions … the flow to a company like this from its offshore suppliers of similar size depends on the relationship between the people who own and run its suppliers and the company’s local representative, and to a lesser extent to their relationship with the company’s on-shore supply chain management team.

Lose both and when the time comes to introduce new products that depend on new components, the negotiation will be between strangers, not between trusted partners.

This doesn’t make the situation irretrievable. Employees do move on to other opportunities, after all, and if they were able to build effective working relationships, their replacements can, too.

Whatever it is that a company needs to run effectively, whether it’s a critical piece of machinery or interpersonal relationships, when the people who run a company don’t value it they won’t invest in it. And if a company doesn’t invest in what it needs, it won’t get what it needs.

Which is why I expect it to fail.

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|In: Industry Commentary|Last Updated:

Dear Dr. Yeahbut …

I’m a CIO. I’ve been reading your stuff long enough to remember when you introduced us all to the idea of “Digital,” even though you didn’t call it that. Now I need your advice.

Like a lot of companies that are going Digital we’re wrapping IT-based value around our company’s core products and services. Now, more and more of our sales representatives are asking IT for custom services they want to give away.

This was fine when the requests were for our largest clients and prospects. But no good deed goes unpunished, and our sales reps have been going steadily down-market with these requests, pointing out that our company culture emphasizes fantastic customer service.

I’ve tried explaining that it costs us almost as much to provide custom services for our smallest clients as it does for our biggest ones. But I’m having a hard time holding the line without creating the perception that I don’t have a “customer service attitude.”

Any thoughts on how I can keep IT from drowning in requests for freebies?

Dr. Yeahbut says …

I don’t know what you’ve already tried. Here are some thoughts, ideas, and notions that might be useful to you.

Free sometimes makes sense. You’re right to figure offering free stuff to your company’s biggest clients might make more sense than offering similar stuff for smaller ones. But (I am, after all, Dr. Yeahbut), they can also make sense with some smaller clients, namely, those with potential to grow to become a major ones.

The business model for providing fantastic customer service is that it leads to increased retention and “walletshare” – the fraction of the client’s total spending for what your company provides that you get instead of your competitors.

But even if that is the goal, if your company isn’t going to recoup the cost of providing the custom whatever-it-is, then logically the cost should come out of Marketing’s budget, not IT’s.

Establish an ABC cost structure for IT’s Digital services. In a Digital world, the potential IT “surround” for the company’s core non-Digital (would that be Analog?) products and services is, if not infinite, unbounded. To rationalize pricing, not to mention the self-defense advantages, consider dividing your suite of IT Digital Surround services into three buckets:

A services are core, standard services. You provide them at no additional charge.

B services are premium services. You provide them at a reasonable additional cost. You manage that cost by parameterizing the services to make them configurable.

C services are tailored services, the ones I imagine are eating you alive. Do everything you can to provide tailored services on a time-and-materials basis.

Unless, that is, you can satisfy the client’s underlying need with a B service.

Apply the Not-Yes/Not-No rule. This is the rule that says the two wrong responses to any request are “Yes” and “No.” The right response to any request is “I’d love to do this for you. Here’s what it will take.” Then explain what it will take, which includes advice on how to run the request through the established governance practices your company uses to set IT’s priorities.

It’s recursion time. If your company hasn’t already established governance practices to set IT’s priorities then a top IT priority is establishing governance practices for setting IT’s priorities.

Requests for free IT stuff should be added to the rest of the requests for IT-related services that are already sitting in the IT enhancements queue or appropriate backlog. There’s no reason a sales rep should be in a position to make requests for IT that don’t go through the same evaluation process as everyone else’s requests.

They might get favored treatment, but that’s a different matter.

Enforce TNSTAAITP. That’s “there’s no such thing as an IT project,” and in this context it means that the governance practices in question aren’t really practices for governing IT’s priorities. They’re practices for governing priorities, period.

Bob’s last word: Somewhere in all of this, someone will offer up as justification for the request that “the client wants this.” Please, and I can’t emphasize this enough, resist the temptation to reply, “And I want a pony. And a Robot Commando. And an Easy Bake Oven.”

Especially in business settings, sarcasm needs to be its own reward because all of the other rewards you’re likely to get won’t make you happy.

Bob’s sales pitch: Launching a project with a novice project manager? Give them Bob’s best-selling book written specifically for people who are smart and motivated, but who haven’t managed projects before, Bare Bones Project Management. Reviewers say:

“Hard to Find More Value per Page.”

“One of my ‘Top Ten’ Management Books”

“Bare Bones PM is awesome!”

“The author is fantastic; don’t let this be the only book you read by him.”

“I was a novice to project management and this book was a godsend.”

“Arrived on time; delivered at the correct address.”

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