Synaptus

Last month Dennis Stevens, the President at Synaptus, presented to the GSU EMBA Alumni Society luncheon. Dennis addressed the concepts covered in the the June 2008 Harvard Business Review article regarding a capability-based view of the business model. He discusses how to apply these concepts to your business in a difficult economy to focus and align all aspects of the organization on key operating objectives and strategic outcomes. The presentation is shown in its entirity on the GSU EMBA Alumni Society website at http://hollywood.gsu.edu/dba/wwwrcb/emba/10.24.08.html.

It is about 45 minutes in length and includes the entire PowerPoint. We will be posting some extracts from it on the website in the next month.

Many companies are working on their 2008 budgets. In many of those cases, economic forecasts point to a need to cut costs. The mandate that we have seen in this circumstances may be that a 4% cost cut is required across the board. So each department sets off to identify 4% cut in spending. This cost cutting activity may result in the financial savings desired, but it probably isn’t the best way to approach this effort. This approach is common for a few reasons. It is fair – because everyone should participate in any cut backs. It achieves the desired result and we lack a more effective way to solve this problem.

The problem is that costs are often cut too deeply in some aspects of the business and not deeply enough in others. The overall equation balances, but it doesn’t optimize investment across the firm in the interests of achieving the business strategy and creating value for the customer.

Rather than cut costs across departments, look at the business as an interdependent network of value creating and enabling capabilities. Value creating capabilities are those that directly contribute to creating value for your customers. All the rest of the capabilities are enabling. Not all capabilities contribute equally to the success of the firm – and investment is not optimized at every capability.

Some capabilities already have over investment either due to inefficiencies or an excess of capacity. Some capabilities may actually already be constraining the performance of the business and actually need additional investment.

Change the mindset from where do I cut, to how do I focus my investment to optimize the performance of the business.

1. Articulate the most important outcomes of the business.

2. Identify the capabilities in the business and determine how important they are to the outcomes of the business.

3. Dig deep enough in the enabling capabilities to see where performance will be negatively impacted by cost cutting – for example, make appropriate investments in technology to support the high priority outcomes.

4. Identify the capabilities where you currently have excess performance and inefficient investment.

5. Now focus the overall investment into the business, starting with the most important business outcomes and working down the list until you reach your limits.

Our experience is that by analyzing the level of legacy spending, misalignment between departments, local optimizations, and gross inefficiencies you will find significant savings. In fact, this exercise often results in higher organizational performance at a reduced spend.

This might come from the Swiss Army Survival Guide. "When lost in the woods, if the map doesn’t agree with the terrain, in all cases believe the terrain."

A project plan, an executive’s vision, and the team members’ perspective all tend to be based on how things ought to be or were supposed to be. That’s the map. The terrain is what is important to the success of the project. You can’t manage from the map. You have to get grounded and manage from the terrain. That means deeply understanding: your objectives and obstacles, what has really been accomplished and what needs to be done (whether the project plan reflects it or not), the performer’s motivations, the organization’s values, and what we personally are capable of and interested in achieving. Why spend a lot of energy pretending that a map is valid when we know that it isn’t?

As innovators in management we need to look for the realities of the people, the organization, the work, and ourselves to be successful. When the map becomes more important than the terrain, we aren’t helping anyone.

Once again, Tom Peters provides inspiration for what we are trying to do at Synaptus. In his post yesterday Now Don’t You Worry Your Little Self…,  he raises the alarm about 40 million jobs moving out of the US in the next 10 years.

40 million jobs, is that a lot? According to the Bureau of Labor Statistics there are about 150 million Americans in the work force. 40 million jobs moving overseas is over 25% of the jobs in the US. What could cause this to happen?

China has 798 million people in their labor force. India has 509 million workers available in their labor force. Their real wages are far below the US and Europoe. As education rises in these countries and communication technology improves, businesses will move work to where it can be performed well-enough at the best cost.

Stop and think about what this means. The way companies do work is going to change.  We are just entering the knowledge-based, or project-based, or information-based world. My kids will be entering the job force as this world becomes predominant. It took 50-100 years to get really good at managing industrial based organizations. The businesses and individuals that figure out how to thrive in this new world of work are the ones that will survive and grow.

Aligning a dynamic organization with strategy, understanding and improving processes across your business (regardless of your organizations boundaries), productive collaboration, talent management, and project management become key skills to build and manage organizations that will thrive now and survive in future.

The ability to gain competive advantage from these shifts, both for you and your organization, is there today. On the other hand, 10 years is a long way away. You can wait for someone else to figure out how to run businesses profitably and manage the new workforce. I chose not to wait. What will you be doing in 10 years?

Shu Ha Ri is a martial arts concept that describes the stages of learning to master something. Shu is about learning fundamentals, and techniques. Ha is about learning all of the exceptions to the fundamentals, the special cases that you have to overcome to perform the fundamentals in the real world. Ri is about being able to do something perfectly and without effort.  It is a progression that you have to go through to master anything.

Have you ever tried to dribble a basketball between your legs or behind your back? Have you ever tried to pitch from a pitchers mound? Have you every tried to throw a karate kick? When you first do these things, they are very hard. You will look awkward and feel foolish. If you are determined to learn, you can practice them until you feel you can do it. This is Shu - learning the fundamentals. The first time you are actually dribbling through traffic in a game, or pitching to a big guy with a bat, or trying to fight an opponent, these techniques are suddenly very hard again. You feel that they won’t work. You have to learn them all over again under the nuances of a real life situation. This is Ha - learning to perform the fundamentals in real life. Ri is when you can apply these techniques correctly without even thinking. And the gap between the people who are great at these things, who have reached Ri, and those who haven’t is really big.

I took Shotokan for a number of years. Shotokan is a strict martial art. There aren’t a lot of fancy moves and there isn’t a lot of improvisation in the forms. I found this restricting at first and I asked my master, Mister Takashina, why we couldn’t improvise new moves like other maritial arts did. I can’t demonstrate his unique Japaneese/John Wayne accent so I won’t even try.

"Dennis, William Shakespeare had 26 letters, just like you. He perfected the use of those letters. Giving you more letters may impress some people, but it won’t make you like William Shakespeare. Your challenge is to focus on perfecting the application of what you already know."

I see this as one of the fundamental challenges of organizational learning. The techniques that work in the classroom or in a book, don’t work the first time given the challenges and exceptions that aris in real life. So, people either "go by the book" even when it doesn’t make any sense. Or, they go about doing whatever doesn’t get them fired. You see this when people are enforcing policies that clearly are destructive to the people around them. You also see this when people are just going through the motions and not trying to do any better than what is expected.

We don’t strive to transcend to Ri in business. There are many techniques and opportunties for unbelievable improvements in performance. They require the desire, effort, and practice to get them through Ha to Ri. Ri is not performing without intention. It is being able to perform something in the real world perfectly and without effort.  Watching Dwayne Wade play basketball, Roger Clemens pitch, or Chuck Liddell fight are examples of Ri. Have you seen examples of Shu Ha and Ri in your organization? Where have you let Ha stop you from improving performance? Where do you need to strive for Ri?