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Posts Tagged ‘Michael Porter’

The Creation Of A New Class

December 7, 2013 Leave a comment

In the context of complex decisions with uncertain outcomes and no obvious right answer, the managerial mind inevitably longs for some handrails to grasp amid the smoke and flames. Strategic planning offers that consolation— or illusion— of a sure path to the future – Stewart, Matthew

In “The Management Myth“, Matthew Stewart researches how the business of “Business Strategy” got started and how it evolved over the decades. He (dis)credits Igor Ansoff with starting the phantom fad founded on “nonfalsifiable tautologies, generic reminders, and pompous maxims“. Mr. Stewart also credits mainstream strategy guru Michael Porter with growing the beast in the nineties into the mega-business it is today.

Perhaps the most interesting outcome from the rise of the business of strategy was the stratification of “management” into two classes, top management and middle management:

Top management takes responsibility for deciding on the mix of businesses a corporation ought to pursue and for judging the performance of business unit managers. Middle management is said to be responsible for the execution of activities within specific lines of business. This division within management has created a new and problematic social reality. In earlier times, there was one management and there was one labor, and telling the two apart was a fairly simple matter of looking at the clothes they wore. The rise of middle management has resulted in the emergence of a large group of individuals who technically count as managers and sartorially look the part but nonetheless live very far down the elevator shaft from the people who actually have power  – Stewart, Matthew

I always wondered how the delineation between “top” and “middle” management came about. Now I know why.

top and middle

Value And Effectiveness

April 14, 2012 4 comments

A few weeks ago, my friend Charlie Alfred challenged me to take a break from railing against the dysfunctional behaviors that “emerge” from the vertical command and control nature of hierarchies. He suggested that I go “horizontal“. Well, I haven’t answered his challenge, but Charlie came through with this wonderful guest post on that very subject. I hope you enjoy reading Charlie’s insights on the horizontal communication gaps that appear between specialized silos as a result of corpo growth. Please stop by his blog when you get a chance.

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In “Profound Shift in Focus“, BD00 discusses the evolution of value-focused startups into cost-focused borgs.  There’s ample evidence for this, but one wonders what lies at the root?

One clue is Russell Ackoff’s writings on analysis and synthesis.  Analysis starts with a system and takes it apart, in the pursuit of understanding how it works.  Synthesis, starts with a system, identifies the systems which contain it, and studies the role of the original system within its containing systems in the pursuit of understanding why it must work that way.

Analytical thinking is the engine that powered the Industrial Revolution and many of the most important scientific advances of the 21st century.  Understanding how things work is essential to making them work better (also known as efficiency).  Today, we have better automobiles, airplanes, computers, phones, and TV’s than our parents.  And we owe much of this to analytical thinking.

But one of the side effects of analytical thinking is specialization.  As understanding deepens, the volume of subject matter knowledge explodes.  This leads to the old joke.

Q:   What’s the difference between an engineer and an executive?

A:     Every day engineers learn more and more about less and less, until one day they know everything about nothing, while executives learns less and less about more and more, until one day they know nothing about everything.

But all joking aside, this is a serious concern.  The vast majority of organizations today are organized functionally: sales, marketing, finance, engineering,  manufacturing, HR, IT, etc.  And withing these organizations, there are even more specializations.  Marketing has specialists in advertising, public relations, research, distribution channels, and product management.  Engineering has chemical, mechanical, electrical, firmware, and software engineers.  Even in software development, you have specialists in user interfaces, networking, databases. realtime embedded and project management.

One of the critical problems is that most people working in each of these areas become overspecialized.  They spend so much time accumulating and applying specialized knowledge, that they can only communicate with people in their own specialty.  If you don’t believe me, observe a two hour meeting involving somebody from sales, market research, product management, mechanical engineering, electrical engineering, finance, and purchasing.

In Mythical Man Month, Frederick Brooks retells the Tower of Babel as a project management story.  It fits perfectly, because the root cause of the Tower of Babel failure was overspecialization and a failure to communicate.   Today, instead of talking Hebrew, Arabic, Persian and Greek, we talk gross margin, differentiation, segmentation, tensile strength, electromagnetic interference, and virtual inheritance.

And our communication has another quality.  Solution focus.  We routinely argue the flaws and merits of solutions with only the foggiest understanding of what the problem is.  And we use the vast levels of specialized knowledge from our respective disciplines to shout down the cretans who disagree with us.

Cost reduction and efficiency live in the same neighborhood as specialization and analytical thinking:

  • If we replace these two steps with this one, the process will be faster.
  • If we replace this part with this other part, the unit cost will be reduced by 2%.
  • If we consolidate these three models into one, we can reduce inventory by 20%.

If efficiency is “doing things the right way”, then effectiveness is “doing the right things the right way.”  Value lives next door to effectiveness and both live in the same neighborhood as synthesis.  Value, like beauty, is in the  eye of the beholder.  Products and services can deliver benefits, but only the buyers and users can apply these benefits to realize value.  Consider smartphones.  Some people only use their phones for mobile calls, others for text messaging, some to read books on the train.

So in the end, there are a couple of reasons that startups are inherently focused on value.  First, because they are small, specialization is a liability.  Most people in startups do several jobs (well), by necessity.  Second, because they are not yet profitable and self-sustaining, their survival is highly dependent on their surroundings (e.g. customers, competitors, economic conditions).  This requires more synthesis than analysis.

As they grow, their strategy shifts to cost.  Michael Porter writes about this in Competitive Advantage.  And guess what, every one of us bargain-hunting, coupon-clipping, “buy one get one free” consumers is the root cause of this.  Why mention this?  Because synthetic thinkers love systems with feedback loops!

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