Four big ways to avoid "Excusable failure"

How many times have you seen this?  A big group initiative kicks off and there are two paths:

< Insert Frost quote here, if you really feel the need >

One path is more likely to succeed, but everybody on the team is culpable if it fails.  It will take a lot of work and dedication, but if everybody pulls together success is almost certain.  If it the project fails, there's no mistaking why.

The other path appears solid, but is really more likely to fail because nobody on the team is culpable if it does fail.  Responsibility is diffuse.  Significant aspects of the project rely on people outside the project team (maybe even external vendors or consultants) who may be perceived as experts, but collect a check no matter what happens.  If the project fails, it's possible to point fingers and claim "we did everything we could".  Sometimes the participants even move on to bigger and better projects half-way through and leave the mess for their replacements.

I have seen this many, many times.  Enough where I started calling out "excusable failure" as decision factor.  Like many agency problems, excusable failure is the situation when the people who are most responsible for the success of the project are not held responsible in the event of its failure.

How can you beat it?

Make and keep meaningful commitments

This is a motto for all aspects of life, but especially matters when kicking off a new project.  Start up front with a set of valuable contributions your project will deliver, an achievable timeline for delivery and then put yourself in the critical path.

Don't substitute an explanation for an accomplishment

Every project should start out with identifying the various possible ways it will fail.  Pre-mortems, FMEA, etc. are all great tools.  Once you have a good list of possible failure mechanisms DON'T ACCEPT THEM.  The project is starting because you want to accomplish something.  Set the standard up front that only the projects goals will be acceptable--if any of those risks go wrong, we need to understand why, but we can't give ourselves a participation award, we FAILED.

Don't substitute an excuse for an explanation

There is a big difference between an excuse ("this thing happened, so you have to forgive me") and an explanation ("this thing happened, and therefore we can make sure it doesn't happen again").  Know which one you're searching for--always try to figure out what you could have done differently (there is always something you could have done differently).  If you find yourself starting to think about why things are going wrong, you had better also be thinking about how to stop that from happening.

Keep skin in the game

We have probably all seen a leader/manager "doodle jump" themselves away from their commitments to a new role before their failures caught up with them.  It works in the short run, but it leaves a trail of destruction behind and seems to always catch up at some point.  Don't do it. Keep your skin in the game and see things through to completion.

Allocations and Decisions

I frequently run into an issue with allocations.  Specifically, an issue with confusing accounting allocations for something that is useful in decision-making.  In accounting, allocations is:

the process of shifting overhead costs to cost objects, using a rational basis of allotment. Allocations are most commonly used to assign costs to produced goods, which then appear in the financial statements of a business in either the cost of goods sold or the inventory asset.

As an example, imagine this classic situation in engineering.  BigCo is developing a new product line.  My kid is 4 and obsessed with potty words, so we'll call it "Product Booger".  Product Booger will cost about $1,000 of RND spending to get ready for market, and once it goes to market, BigCo expects it will sell around 500 units at $20 each.  Each unit will cost $10 to manufacture.  Should BigCo do this project?

Here is the super-basic analysis

If BigCo has the $1000 to invest and doesn't have other investments with a better efficiency ratio, they should do this project.

Now imagine that a super-eager young person comes along with an idea for a product extension based on BigCo product Booger.  Product NoseGoblin is a derivative product that will cost $100 of additional RnD and should sell around 200 units at $16 each.  Each unit will cost $14 to manufacture.  It is safe to assume that NoseGoblin won't cannibalize any of Booger's sales or anything like that. Should BigCo do this project?

Here is this super-basic analysis:

So this NoseGoblin isn't as good as Booger, but it still has a positive return and recommends itself for investment if BigCo's alternatives don't have a better efficiency ratio than 1.0.

Then the accountants catch wind of NoseGoblin.  They decide that it needs to carry a portion of the shared investment from Booger.  Doing a classic revenue basis allocation--allocating the RND spending according to proportional revenue-- Nosegoblin picks up an extra allocation of $242 (at the same time, Booger looks $242 cheaper).  A few months later, a new financial analysis is performed and NoseGoblin's financials look like this:

It is now a negative financial return.  Kill it fast!  Super-eager person's heart is broken.

this what a GIS for "sad super eager person" finds for me

This is not a made up situation.  I have seen this happen.  It gets even crazier when BigCo decides that everybody needs to carry a share of overhead allocations in financial analyses, too.  Suddenly you see stuff like this:

Even though this project doesn't drive any additional SGnA, IT activities, shared technology development, new building construction, etc., GAAP rules require that these allocations get managed in the PNL so they tend to find their way into the financial analysis, too.  Load in things like depreciation, taxes (which are usually so convoluted that trying to estimate the real tax impact of a new product is fool-hardy) and you're ready to start shooting down loads of good projects that fail to meet a corporate hurdle that completely misses the point.

Accounting allocations being used for decision purposes leads to bad decisions.  When we do portfolio analyses, we keep them separate and link the spending through relationships and work hard to identify incremental spending.  Only spending that is truly incremental is relevant in the analysis.

organization and confusion

A company is organized the way it is for many reasons:

• execution
• strategy
• marketing
• executive ambitions
• legacy
• etc.

It's all a trade-off, not necessarily built around effective choice architecture.  Each individual org may help drive bad decisions for the company, but that are good for individual decision makers.  e.g. empire building, or agency problems or local optimum instead of global

It's sort of textbook, but I see it all the time, especially in market modeling.  Specifically it is very common to see groups that model markets in a fashion that mirrors their own organization structure, rather than reflecting how customers make purchasing decisions.  They practice inside-out market definition.

Good market intelligence requires understanding the buying behaviors of your potential customers.  Market segmentation means grouping those customers into categories based on salient similarities with regards to your product offerings.  For example, you might segment your customers according to price sensitivity.  For example, you might segment them according to how much they value certain different features your product offers.

This is called outside-in market segmentation.  It helps you to understand how well your products will play in the market.  Coupled with projections about the size of those market segments you can start to put together a business model.  With time, smart companies reorganize themselves so that their corporate structure reflects the reality of customer segmentation in the world.

If you try to cram your customers into groups that fit how you run your business instead of trying to run your business so that it fits the needs of your customers...

Scrapping the code and starting over... and also the Trump budget proposal

If you've ever developed a software product that needs to live through multiple versions and over many years, you've probably experienced this situation.  For that matter, if you've ever used one, you have experienced it.  That includes everybody, since Windows is a good example.

Your software starts out with a purpose.  It has a crystal-clear goal in mind.  If you're any good, the software does that so well, that people want to do related things, too.  So the software starts to expand.  Also, bugs happen and so you start fixing those bugs.  Bug fixes and new features start piling up.  Eventually you start getting unintended consequences.  A new feature here causes a bunch of bugs over there.  A bug fix here disables a feature over there.  Was anybody using that feature?  Who knows, let's ask.  Did we ask the right people?  Whose opinions matter when it comes to the bugs we fix first?  Who should we ask which features to add next?  We have to start deprecating some stuff because the code base is too big and too messy and has turned into a hairball.  What do we deprecate?  We need version control and a change committee and and agile process and now we have people whose jobs are just to manage those things that often have no idea what the software is even supposed to do.  It spirals out of control until you have Windows 10.  Or until you have a typical Fortune 50 company (this is one of my favorite books on this topic), or you have the US Government.

With software, you eventually have to scrap the whole thing and start again from scratch.  This really works great if you have the same team in place and they can apply all the learnings and wisdom they have accumulated while putting together the previous version.  This is why we usually start with a quick, disposable prototype for any new idea.  We know that our first pass will need to be scrapped, so we just start out trying to test out the concept and the rough structures.  The goal for a first draft is never to create an enterprise-level software product that will withstand the ages.  The goal is to see if it's worth building an enterprise-level software product at all.

So what does this have to do with Trump's budget, you ask?

CNN Article
USA Today Article
Bloomberg article

The Bloomberg article has this great infographic:

In it we can see that many government agencies are getting serious cuts.  In a very real way, many programs are getting scrapped.  Now, I understand that the administration's purpose here is most likely not "those were prototypes, let's take the learnings we have accumulated and build a better system from scratch" but that may still be the outcome.  We can only hope that the next administration will recognize that these endeavors (feeding the elderly, protecting clean air and water, PBS and the arts, school lunch programs, science, space, housing, etc.) are meaningful and important enough to build new, better, v2.0 agencies in a few years.  Maybe they will all be sort of like win95 compared to win 3.0!  maybe?  right??

It's sort of curious that some of the agencies that Trump has been most vocal in deriding --namely the VA and the military-- are the biggest beneficiaries of this shift.  It's a shame that these two groups will not have the opportunity to experience as radical restructuring and tabula rasa sort of rearchitecture.  As somebody who has experienced both of these organizations first-hand, I think that the opportunities for waste reduction are legion...

A quick data visualization, fat with implications

I whipped this up last night.  I will refrain from comment, but please tell me what you think...

A "natural leader"

What is a "natural leader"?

I got to thinking about this the other day while considering my two older boys.  They are just kids, and like anybody they are complicated and multi-faceted individuals.  For the sake of this example, I'm going to just treat them as simple stereotypes.

Jack is my older son.  He is naturally charismatic and has a large group of acquaintances and friends.  He charms children and adults with his easy style and effusive character.  Other kids naturally follow his example, want to play games that he devises and generally look to him for leadership.  At the same time, Jack is not very concerned about others.  He is often dismissive of others' feelings.

Ethan is my middle son (I have another, even younger son).  Ethan is very empathetic and quickly identifies the needs and emotional wants of others.  He feels deeply and shows great concern for the development and well-being of other kids (including his brothers).  Ethan does not display the same sort of outward and obvious charm that Jack does, he has his own (very unusual) sense of style and in general is not a "popular" sort of kid.  Other kids don't naturally flock to him, and he has very few acquaintances and just a few close friendships.

So, in this either-or scenario, who is the "natural leader"?  Jack is the one that people naturally want to follow, but Ethan is the one who possesses the emotional intelligence and selfless concern that characterizes great leaders.

The easy answer is to say that neither is really a natural leader, and that a natural leader is someone who possesses both characteristics.  I think that answer is wrong, though.  There is a lot of literature on leadership that seems to indicate that really successful leaders are often not the big keynote, charm-the-audience types, but more of the help-develop-your-people-though-honest-methods types.  We all remember Steve Jobs, but who ever really wanted to work for him?

Update:
I see this thing from time to time and it gets me to thinking:

At first glance it's very heart-warming and embraces diversity and has a cute girl standing akimbo with a soft-focus field and really seems like a great idea!  Except this... "Bossy" is not a leadership skill.  "Bossy" is a completely unnatural leader--bossy is a person who wants others to do what she says to do.  Bossy doesn't imply that others want to follow.  Bossy doesn't imply that you care about what's best for others, or that you're qualified to lead at all.  Bossy just means that you want to lead.

Really makes me wonder about Sheryl Sandberg that she doesn't seem to know the difference.


What do you think?

The parable in Tsar Saltan... "Gvidon's Squirrel"

I like to tell my 3 year old stories that are loosely based on Russian Folk Stories that I found in this book.  I take down the gore as much as possible and generally try to shift the jobs that people do to be a little more appropriate for modern times (and make the animals more fit for the desert, where we live).

On story I love to tell is based on "The Tale of Tsar Saltan".  In this story, a young man (Gvidon) ends up distant and unknown to his father (Tsar Saltan).  He helps out a swan, who turns out to be a magic princess and who falls in love with him and does him all sorts of favors.  Every time Gvidon sneaks back to his father's castle in the form of a fly, he comes back with a request for some new and crazy thing that he heard about there.  One example is this one:

 "After he flew back to the island, Gvidon told the swan the story he heard about the remarkable squirrel. Then the prince walked into his courtyard and, lo and behold, there was the singing squirrel, sitting under a fir tree, cracking golden nuts! The prince rejoiced at this and ordered that a crystal house be built for the little animal. He placed a guard there to stand watch and ordered a scribe to record every shell. Profit for the prince, honor for the squirrel!"

Basically, he found himself in possession of a magic squirrel/tree combination.  The tree produced golden nuts (each of which held a ruby inside) and the singing squirrel would go up and collect them, take them down and crack them and stack the riches up in piles.

The part that I love about this story is that Gvidon doesn't just take the riches, he then builds a completely non-value-added organization around those riches.  He establishes a completely superfluous crystal house for the squirrel, he organizes and accounting department to keep score and establishes a management structure that watches the whole thing happen.  

When I tell the story, I keep going.  The guards need management, so an executive structure is organized.  The accounting department eventually branches out into strategy and financial analysis and grows headcount.  Eventually there are organizations built up around selling the rubies and the gold on international markets.  The organization continues to get bigger and bigger and bigger until eventually the tree and the squirrel are at the bottom of the hierarchy, getting bossed around by MBAs and seasoned executives who have been in this business for years.  By the end, Gvidon's entire income is consumed by the organization.

How many times does this happen in the real world?  A start-up comes out with a great business concept and develops a product that is worth buying.  People value the services or the experience and the company starts to take off.  The need to scale and they take on investors, who want to track progress.  Before you know it, it's "Gvidon's Squirrel."

(if you're interested in reading the whole story, I found an online copy here, which is where I found that picture, too.