Tuesday, 25 November 2008

Earth 3.0 - Scientific American

This model celebrates the launch of Earth 3.0, a new high quality publication from Scientific American. (www.sciamearth3.com). The model describes what is said in the editor's letter.

Note the use of a separation by Time to describe the three epochs described in the SciAm article. Focus (yellow), Goal (block green) and Risk (block red) have also been used to good effect. Note the use of an 'insufficient counteraction' (dotted crossed line) to denote that early argiculture produced only local impacts, not global harm. Note the use of the 'overloaded' (doubled line) effect to show the industrial consumption. Note the use of 'oppose' (double headed jagged effect) between the concerns about the environment, and the necessary third world development. Note also the use of 'required' (solid circle at source end of effect lines) to signify the necessary actions to bring about the potential (dotted line box) for economic and environmental progress.

Being more productive with Southbeach

This Southbeach model shows the potential harmful consequences of an unstructured approach combined with a lack of discipline and planning. It's a common picture. Let's break it down: Many people feel forced into this situation by the amount of work they receive and the amount of support from others they don't receive. This increasing work leads to increasing urgency which leads ultimately to dropping the ball (or less and less sleep, stress, less collaborative; more insular behaviour)... It has the further consequences that there is no time for planning, and no time for prioritising activities, leading to a reactive behaviour that becomes more random with time.

The Southbeach approach can be used to re-establish the discipline necessary to deal with complex situations and high workloads. It is a structured approach that enables you to break your problems down into manageable chunks that can be shared with others. Structuring thought, planning, design, work, and collaboration in this way can create more reuse in everything you do and can reduce the workload for others, giving them more time to help reduce the workload for you.

Another benefit of this collaborative approach is the wealth of experience and different ideas and approaches that can be brought to bear. More information, with more techniques for combining it enables better decision making to enable you and others to focus on what is important to get results and achieve your goals.

Sunday, 23 November 2008

Managing Enabling Technology

This Southbeach model shows an impact analysis for using Technology in business. Reading from bottom left (Technology) to top right (Increasing Profit), we can see a chain of useful and harmful effects as the intended results of automation and combining information in new ways to create new capabilities and business oportunities have their shadow harmful consequences of loss of control, information overload, and increasing cost and complexity resulting in risk of technology outages.

There is a significant management overhead for all enabling technologies. Additional risk management erodes away profits still further, whilst the use of technologies like Business Intelligence to find correlations in market indicators through data mining and provision of multi-level active drill-down reports for management to make sense of the increasing information overload permits evidence based decision making at the highest level in the organisation.

New business opportunities are identified and this often results in yet more technology to overcome the limitations of previous IT systems, and restore control to the business so that opportunities can be properly exploited.

This represents an interlocking of two evolutionary systems in an organisation; the business, and the Information Technology. They enable each other. The boundaries become blurred with time, and the politics of deciding which side of the fence to pitch your tent increase as the cycle of improvement on one side amplifies the other, and technology and business change fall out of sync resulting in solutions that were intended for one purpose being used for another, or investment being targetted at exploitation of existing technology beyond its capacity to support the growth in demand from the business.

Managing enabling technology requires a thorough understanding of both the business and the Technology, and a foot in both camps. In today's world, neither can exist without the other; Building value with business-led inovation requires a supporting culture in the people and a collaboration rooted in relationships built on trust.

Building Value with Business led Innovation

In his article Would you kiss this Pig? on his blog, Innovating to Win, James Todhunter describes a situation that is all too common in Industry. This relates directly back to my example from October on Holistic Problem Solving, describing a more evidence-based approach to strategic planning rather than focussing on short-term tactics that end up wasting company resources and people's time by investing in projects that are ultimately doomed to failure, or worse, result in missing the real opportunity that is just around the corner. In holistic problem solving, I presented the risk that if those diverted by such misguided short-termism represent a stronger force than those seeking to understand the bigger picture and obtain alignment to move forward from a sound strategic basis, then a downward spiral will result.

This Southbeach model explores the same problem from another angle; how to apply the process of innovation to building value in organisations. We see from this diagram how the perspective of innovation as "building new stuff" from a technology perspective often leads to failure to deliver the desired impact whilst understanding the business opportunity leads to building new stuff with a pre-destined purpose (as opposed to a theoretical purpose).

Clearly Technology led Innovation is an enabler for Business Innovation, and certainly for tecnology companies it is often directly applicable to building value, creating differentiators, and growing their market share. For non-technology businesses, however, Technology is almost always no more than an enabler, a means to an end, some say a necessary evil. For sure there are plenty of harmful side effects of technology; the cost, the complexity, the dependency, but it is predominantly useful as it allows us to make massive leaps in our capability through automation and combining information in new ways that can lead us to identify and exploit the new business opportunities in our markets. Managing enabling technology effectively is key.

Marketing applied to ill-conceived concepts that result in poor value propositions do not get very far, and to reuse again the colourful metaphor on which James based his article, this is no better than putting lipstick on a pig... no one is going to buy it, and if they do, they may soon regret it, as may you.

Focussing on understanding the business opportunity, or business need, to determine where to invest in enabling technology results in "the right new stuff"; stuff that has an application, and if communicated effectively by marketing, will sell, and grow your market share, and create success for your organisation and its customers.

The same concept of perspectives is used in this Southbeach model as in the one on Holistic Problem solving; there are two behaviours in the world, and they often coexist in the same organisation - these behaviours are in oppostion to each other. Those that look for ways of spending their budget on innovation or new things are putting the cart before the horse, jumping the gun, doing things the wrong way around, and they will create an increasing cost base that has no corresponding ROI; they will effectively be counteracting the work done by those that are spending the time understanding the business need to determine where to invest their budget in creating new value. Laying these two behaviours side by side like this demonstrates how they are working against each other throughout their evolution.

Companies often combine techniques of pay for performance to influence the individuals towards behaviour that is better for the business (rather than the individual), however, the annual reward cycles for individuals, and reporting cycles for companies encourages short-termism. A more effective way to create behaviour that builds long term value is to build culture; see my previous post on Drucker's Spirit of an Organisation.

Friday, 21 November 2008

Assessing Conflicting Design Requirements (Car Example)

This Southbeach Model shows one of the key principles from TRIZ, namely that everything is both useful and harmful, and its just a matter of perspective as to whether something is considered to be predomantly useful or harmful.

Consider the Car, useful, as it provides Travel; however, it consumes fuel and creates pollution, which counteracts the Environment. People still drive cars despite this, hence the car is considered predominantly useful despite its harmful side effects. Furthermore, "The need for speed", or the need to accelerate to higher speeds more quickly, results in many cars also having turbo chargers. These typically are designed to improve performance and this is often at the cost of creating even more pollution.

Southbeach can be used to understand root causes and perform impact analysis. Also, it is useful for functional decomposition of systems. Consider the following extension to the above diagram:

Here we have extrapolated that pollution contributes to Global Warming, which in turn is actually destroying the Environment, and in a much stronger way than pollution alone. The model recognises that there are also other factors contributing to Global Warming, and that these may be worth exploring. What you explore depends on who you are and what you are trying to do. An environmentalist may explore this avenue. A car manufacturer may explore the pollution avenue in more detail. There are examples of car manufacturers who have taken that extra step and recognised that the car could potentially clean the environment - having an overall positive effect. There are actually cars that clean the air now.

This model additionally shows how further design considerations result in systems becoming more complex over time. Here the need to improve cost effectiveness and reduce pollution has resulted in this car being upgraded to include an economy mode (or "green" mode). This reduces the fuel consumption. However, for comfort this car has also been upgraded to include air conditioning to improve comfort, a desirable feature of the car. This counteracts the economy, hence increasing the fuel consumption and increasing the pollution.

The system is now considerably more complex, and as a consequence contains many more tensions as parts of the system are working in opposition to each other. This results in another iteration of the design process, where further parts are added to compensate for the conflicting effects of the existing parts. The result will be an even more complex system, but by design, this will reduce waste by resolving some of these technical contradictions between the components. There are other ways to improve systems, and some designers are exploring how instead of adding more and more parts (increasing the weight, incidentally, and thereby increasing fuel consumption further), they are looking for ways of improving component design and simplifying the overall design to increase the harmony of the system. This involves taking a holistic approach to the design goals. We will talk more about this in future.

A further elaboration of this model might observe that Car's only produce polution when they are travelling - and it is actually the act of consuming fuel that is the primary cause of that pollution. This model below shows the pollution being created by the act of fuel consumption, and breaks that pollution down into different types using the 'is-a' construct. This elaborated model also includes blue boxes indicating the actions that could be considered to improve the situation.

Thursday, 20 November 2008

Getting to where you want to be with Southbeach

There are many applications of Southbeach. Here is one...

Southbeach is a way of thinking. If your current approach is insufficient to get you to where you want to be, perhaps because there are constraints that are keeping you where you are, perhaps because there are blockers in the way of moving forward, you can use Southbeach to remove or protect against the contraints, destroy or overcome the blockers, create enablers and find a path forward.

Wednesday, 12 November 2008

Climbing the Wall of Worry

"Wall of Worry" is a phrase used to describe a bullish market trend occurring in the face of negative uncertainties. Risks that have been realised in the market lead to investors thinking that things can only get better - it creates a buying opportunity that through prices rising leads to profit. However, once the risks are resolved, this destroys the wall of worry, causing prices to fall back to their natural level.

This tension between rising and falling prices is explored in more detail in the following model (click to enlarge).

The above Southbeach model shows the tension between rational and emotional behaviour in the investment markets along with their causes and effects. This is a complex situation involving multiple feedback loops that essentially creates a self sustaining system that oscillates between stability and instability as rationality and experience struggle to win out over greed, fear, and emotional behaviour.

Central to this model is a self-sustaining feedback loop of irrational investing resulting in volatility in the market that produces negative feedback causing further irrational, or short term, investing. In the centre of this triumvirate of effects is greed and fear, which perpetuate the situation by creating more emotional behaviour that creates even more volatility in the market, and destroying rational behaviour, which is insufficiently counteracting the negative feedback loop that is creating a "vortex of misery" in the market. This vortex of misery is characterised by the interplay between speculators that are in adulation at the profits they are making on their short sells and the rational investors with their more conventional practice of going long, who become excluded by those seeking to perpetuate the bubble. Eventually this vortex creates a tipping point (the point at which the bubble bursts). As this MarketWatch article explains, 'For those trying to take the pulse of the market, the size of the proverbial "wall of worry" can mean the difference between a correction and a change in trend'. As Charles Mackay, in his 'Memoirs of Extraordinary Popular Delusions and the Madness of Crowds' wrote almost 200 years ago, 'men go mad in crowds but come to their senses slowly, and one by one'; The change in trend is a tipping point in the market, which in this model creates a return to sanity that removes the speculators and emotional behaviour from the game, restoring rational behaviour and adding to experience that in turn hones instinct to return the market to a positive investing cycle based on an understanding of the emotional factors that led to the original volatility and downward spiral.

At the root of this repeating cycle in the market is a causal chain shown below. In this Southbeach model, the same chain of causes and effects is shown from two perspectives. In both cases, complacency leads to emotional distortion which leads to a market bubble that increases the emotional distortion further, increasing the size of the market bubble... and so on, until the tipping point is reached and the inevitable market collapse ensues. As the market is collapsing, this leads to realisations that further feed the collapse, finally once the market has returned to 'normal', complacency sets in once again and the cycle repeats. In the model on the left, the Speculators perspective, this market bubble is seen as a good thing as it creates an opportunity to create wealth through short selling, the market collapse being harmful to them both due to the stocks they purchased at inflated prices, and due to the lost ability to short-sell and make short term profits. The rational investor, on the other hand, has exactly the opposite perspective - the reality is the same; the causes and effects play out in exactly the same way, they simply see the bubble as harmful as it destabilises the market and the collapse as useful as it marks a return to normality.

This series of Southbeach models was created by Jason McIntosh, a sales trader at Nomura and Mark Burnett, a management consultant at BearingPoint.

Saturday, 8 November 2008

Drucker - Spirit of an Organisation

This Southbeach model shows a perspective of Peter F. Drucker; "the man who invented management". The column on the left represents qualities of the people in an organisation, and on the right, we have the activities of the organisation itself. These two systems are inextricably interlocked and require each other in order to succeed.

In Drucker's book, The Practice of Management, at the beginning of Chapter 13: The Spirit of an Organisation, he says:

"Two sayings sum up the 'spirit of an organisation'. One is the inscription on Andrew Carnegie's tombstone:

Here lies a man
who knew how to enlist in his service
better men than himself

The other is the slogan of the drive to find jobs for the physically handicapped:

It's the abilities,
not the disabilities,
that count.

Management by objectives tells a manager what they ought to do. The proper organisation of their job enables them to do it. But it is the spirit of an organisation that determines whether they will do it. It is the spirit that motivates, that calls upon a person's reserves of dedication and effort, that decides whether they will give their best or do just enough to get by."

Drucker believed that the key to excellence is focussing on people's strengths, and that recognising excellence, encouraging excellence, rewarding excellence, and providing full scope for individual excellence is what creates good spirit in individuals. Furthermore, it is this good spirit that provides the motivation that leads people to excel and do the best they can do rather than just enough to get by.

The excellence of the organisation then, is the result of making this excellence productive for others so that the overall strength of the organisation is amplified by the strengths of all the individuals within it, each of their weaknesses being counteracted by the strengths of those around them.

In the 1950s, Drucker was the first to say that people should be treated as assets, and not as liabilities to be eliminated, the first to argue that substance was more important than style and that good practice would always win out in the end over charismatic or cult leaders. Drucker originated the view of the corporation as a human community built on trust and respect for the worker and not just a profit-making machine.

Sustainable success for an organisation is a result of individual success at every level, and individual success is enabled and amplified by the organisation that focuses on its people and on building on their successes.

How can we create successful individuals?
How can an organisation make the most of its people assets?

Management must invest the effort in understanding what people have to offer in order that they can focus on their strengths to enable them to build on their abilities and create success. Building on people's abilities builds their spirit, as does individual success. This creates a company spirit that leads to the success of the organisation as a whole. Focusing on people's weaknesses on the other hand, and building on their disabilities, often results in failure and destroys the spirit of the individual. An organisation's spirit is a result of the spirit of its individuals. So take Peter Drucker's advice, and spend the time and effort to understand what people have to offer and build on their strengths.

Wednesday, 5 November 2008

President Obama

This Southbeach model shows some of the situation surrounding the recent historic rise of Barack Obama to the Presidency of the United States of America. Obama is a Democrat, McCain a Republican. Democrats and Republicans are in opposition. So, naturally, are Obama and McCain. Their opposition is greatly intensified, however, by their deeply opposing approaches to achieving the massive change demanded of the situation in the US, and the rising concerns of the people. This election campaign started out with the idea that "it's about the war"; the five and a half year war in Iraq being a hotly debated topic around the world. After time, the idea changed; the credit crunch has had significant global impact. The war has also had significant economic impact in the US. Soon people were saying "it's about the economy".

Obama and McCain had deeply opposing approaches in both these areas, Obama being against the war in Iraq, and promising to shift the tax burden towards the wealthy. Whereas McCain supported the war in Iraq and pledged to maintain the tax cuts in place under Bush for those earning over $250,000.

As well as these core electoral themes, Obama was a Civil Liberty and Rights activist and litigator whereas McCain had expressed concerns regarding affirmative action. The respective goals of these two men, whilst not being clearly useful or harmful from any general perspective - and hence divided the nation to create one of the biggest races in history, were clearly in opposition, representing fundamentally different approaches to how to achieve the Massive Change demanded of the American people.

All these factors, along with the fact that Obama was the first black candidate for President of the United States, resulted in a record turnout with over 135 million voters, including many who had never voted before.

Whilst the full confluence of influencing factors that created this reality cannot be fully expressed, debate and postulation as to the reasons for the success of Obama have and will continue to rage. One piece of research showed that there was actually a correlation between the DOW index and the McCain poll. As the DOW rose, so too did the McCain poll. When it fell, so did McCain's popularity. This was brought to a very public and critical head for McCain when, on the same day as he claimed "the economy is strong", Lehman Brothers went bust, dealing a severe blow to his credibility.

Ironically, the stock market experienced its biggest election day rally in 24 years on expectation of an Obama victory as the Dow Jones industrial averages surged 300 points, or 3%, to close at 9,625.28 points. The US TV networks, just after 11.00pm (ET:4.00 GMT), declared that Obama had won. Obama was now President of the United States.

The result of the election is clear. Now we just have to wait for results from the policies.