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|In: Industry Commentary|Last Updated:

Oh, what the heck. Best Buy isn’t going to bring me in as a consultant anyway — not after last week’s column about the retention bribes it paid to execs whose names are all over its steady decline.

So now, a few words on why its headlined 2004 IT outsource to Accenture (followed by its covert 2011 re-insource from Accenture) should have failed. Not, I have to add, why it failed. Best Buy hasn’t even formally admitted that the outsource was a bad idea, let alone explained in non-ManagementSpeak terms what led it to reconstruct its internal IT organization.

But a key reason it should have failed, and in fact why Best Buy should never have considered it in the first place, was right there in the press release:

Accenture advocates taking “packaged vanilla solutions and weaving them together in as simple a fashion as possible” and changing business processes, rather than heavily customizing software, as the most cost-effective approach for retailers, [Angela] Selden [Best Buy’s spokesperson] said.

Selden said she recognizes that the approach would represent a dramatic change for the legions of retailers that claim they had to heavily customize systems because of the unique needs of their businesses. But she said they must change the way they do business in order to be nimble enough to “absorb innovation quickly.”

What’s wrong with this picture?

Had Accenture’s pitch been that it had the expertise to help Best Buy leverage its bricks-and-mortar retail strength so as to beat Amazon.com at its own game, there might have been some sense in this arrangement. But that wasn’t the supposed logic. Understanding how flawed that was could help your company avoid a number of common mistakes. Here goes:

In 2004, Best Buy was at the top of the consumer-electronics heap, growing while its largest retail competitor, Circuit City, was in a state of steady decline.

Let’s pretend, just for a moment, that its success wasn’t entirely accidental. If that was the case … if Best Buy’s success was due to actual business competence … then its business processes were a source of competitive advantage, even if they did need heavily customized software to support them.

Which means Accenture’s sales pitch, rephrased for honesty, went something like this: “In exchange for hefty fees, we’ll rip out your sources of competitive advantage and replace them with generic alternatives.”

Accenture, that is, claimed it had more expertise in Best Buy’s business than Best Buy had … a sales pitch that might have made sense had Accenture pitched it to Circuit City. But to Best Buy? Seriously?

Even if Accenture did know more about retailing than Best Buy, its assertion that changing business processes is more cost-effective than customizing software strongly suggests that Accenture knew nothing about what it takes to change a business process. Changing a business process takes more than drawing the new one on a swim-lane diagram and teaching it to the employees who will have to live with the new way of doing business.

Because when the trainers have all finished, those employees will have to become practiced at the new process. That takes time, during which the whole company is less effective than it used to be.

But wait! It’s even worse than that! You see, the effort needed to customize software is a one-time investment. The inefficiencies that are the inevitable consequence of tailoring business processes to deal with the software’s limitations are costs the business has to absorb every day.

Which is why the whole plain-vanilla vs customized-software argument is the wrong conversation to have.

Best Buy fell for it. It’s no longer competitive. Draw your own conclusion about cause and effect, but please, don’t allow anyone in your company to debate the merits of plain-vanilla vs customization, because no matter which side wins the debate, the company will only follow the optimal course of action by accident.

Understand, I’m a theory-of-constraints guy. ToC says that for every business function, right after ranking the six dimensions of optimization (fixed costs, incremental costs, cycle time, throughput, quality, and excellence) in order of importance, the next step is identifying the most serious barrier to improving the top-ranked dimension, doing what’s necessary to remove it or reduce it until it’s no longer the most serious barrier. If that means customizing the supporting software, so be it.

Repeat ad infinitum.

It’s straightforward. It works.

Even better, you won’t need to renegotiate terms after the thrill of an outsourcing deal is gone.

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|In: Career Management|Last Updated:

Why does the world of business persist in trying to make concepts work after they’ve repeatedly failed?

As pointed out last week, this seems to be a pattern. Whether the repeatedly failed idea is incentive pay, recruiting, performance appraisals, outsourcing, or waterfall software development, plausibility appears to trump the evidence, over and over again.

We need to know why. Otherwise we’ll just do it all over again with the next idea. There isn’t just one reason the world of business throws lots of good money after bad, either — there are quite a few. To get you started:

The Edison Ratio

Last week’s column mentioned this: One reason businesses persist in trying to make failed concepts work is that they should. As Edison pointed out, genius is one percent inspiration and ninety-nine percent perspiration, so the odds that failures are the result of flawed execution are high.

Also, few ideas are either purely good or purely bad, and in fact, you’d do yourself a service by eliminating “good” and “bad” from your business vocabulary altogether. Some ideas are better than others; that’s about all you can say about such things. It’s a very rare idea that’s so good it will survive hapless execution. Almost as rare are ideas so bad that they’re doomed to fail even when executed with immense skill.

The close but no stogie syndrome

The first automobiles weren’t practical forms of transportation — they were for hobbyists and tinkerers, but were in all respects inferior to the horse when you wanted to get around, even when the driver had paved roads available.

The first personal computers weren’t useful for very much, either — they were also for hobbyists and tinkerers. They needed lots of improvements before they were ready for prime time.

The take-home lesson: Many ideas that fail can, with the right refinements, become spectacular successes.

It worked once, in limited circumstances

“What do you mean, incentive pay has never worked? Companies have paid commissions since time began, and it seems to motivate the sales force pretty well.”

Yup. Commissions do motivate sales representatives — so much so that the profession has gained something of an unsavory reputation for doing anything … anything … to close a deal.

Commissions work to motivate sales professionals so long as all that matters is making a sale. As companies start to care about customer retention and long-term customer relationships, commission structures either become more complex or start to actively interfere with the company’s strategic goals.

Lots of ideas work in specific circumstances. Mathematicians haven’t invented numbers small enough to describe how many work in all circumstances. Which is why very often, the right answer isn’t to either stay with an idea or to give it up. It’s to figure out where it fits and where it doesn’t.

Flock mentality

Ever hear a flock of parrots wake up in the jungle? The way it works is that one wakes up and squawks. That wakes up some more parrots, who repeat the squawk, waking up others until they’re all squawking.

That doesn’t make the original squawk a blinding insight that must be true. You’re just hearing a bunch of parrots, repeating what each other are saying.

Sometimes, in business, all that’s happened is that someone said (or wrote) something with a lot of confidence — enough so that someone else decided to repeat it. Pretty soon, enough companies are outsourcing IT to India and manufacturing to China (with whoever is promoting the idea publishing lots of books and articles explaining how great it’s going to be) that all the rest figure they’re missing the boat and start making their own plans, too.

This is especially likely when the idea being promoted creates a pleasing narrative — a story that reinforces a decision-maker’s biases.

IT outsourcing, for example, fits right into a commonplace executive bias that IT is a pain in the neck to oversee; outsource it and it becomes Someone Else’s Problem. That this doesn’t hold up to any scrutiny at all doesn’t matter, because very few people scrutinize ideas that fit into narratives that please them.

The best part of this is that when whatever-it-is doesn’t work the problem has to be with the execution. All the CEO has to do is fire someone (sorry, “hold someone accountable”) and the board of directors will be happy as can be.

Now comes the hard part: Everything you just read is about you. And me. It’s about them, too, but they don’t matter. You and I are completely vulnerable to all of the above. Which leads to this uncomfortable question:

What are you going to do about it?

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