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Reflecting on crony capitalism

August 29, 2010 Leave a comment

http://theburningplatform.com/blog/2010/08/29/the-age-of-mammon-featured-article/

a very important read about crony capitalism by an acquaintance; i think the co-opting of politicians by business interests is a stain on our former republic.  Finance has joined what was once an exclusive club of the military indutrial complex, which was joined by energy consortiums, exemplified by halliburton which was a combination of the 2.

Financiers have always been part of the mix, but at least in the era of JP Morgan had the decency to be reasonable in their appetites and one can point to their productive impact on industry and society. The naked greed and lack of respect for decency lately is sinful.

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A thought experiment in military logistics and visualization

August 29, 2010 4 comments

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I am an instructor of logistics and resource operations,  and a curriculum designer at the US Army Command & General Staff College at Ft Leavenworth. My 25 yrs of service were as an infantryman and a practitioner of brute force military logistics.

having retired, I am trying to add rigor to my own teaching, our curriculum and our field grade officer students by introducing and demonstrating the cumulative effects of uncertainty in large transportation networks in a theater of operations. I am a fan of your work and have reasonable practical excel skills.

I need to model the following “story problem” and provide a visual tool that allows students to make assumptions about the nature of the complex movement, to turn those assumptions into a visual distribution, and then monte carlo the results to see the performance of the transportation network contained within the set of their assumptions. The next step would be for them to vary their assumptions to see the effects, in order to reveal which of their assumptions are important and sensitive, so they can make decisions about where to deploy units in order to affect the plan.

For example:

1. should we employ the Military Police brigade forward to guard an assembly area at the end of the network and thereby accept risk along the lines of communication, or should we guard the roads and accept risk forward near the battle area?

2. What are the Intelligence officers estimate of how many days out of 100 that the weather will degrade road movements by 1 of perhaps 5 categories (0 -.2)(.2 -.4)(.4 -.6)(.6 -.8)(.8 -1.) or to pick a distribution from among a set of choices that represents their estimate.

3. If we move a civilian population away from the battle pre-emptively, what will that do to our performance (ie no displaced civilians around to clog the roads in the heat of combat) vs waiting until the last minute

4. etc

The transportation challenge in our scenario: sitting on the ground at 2 seaports waiting to be moved forward are 750 Army units, and 100,000 short tons of cargo, with “x” number of trucks, over poor roads, a distance of 600km and about 2000km of total road network, , with an uncertain enemy, an uncertain civlian population, with a variable degree of road march discipline among the 750 units, and a choice of parameters about how fast and how densely we may organize our movements, mission to be completed in less than 100 days.  The commander needs our estimate of how soon we’ll be done. we need to express that reasonably and with proper confidence, and give him choices

there are so many variables and combinations, that we cannot rely on our intuitions to describe our capabilities and expected performance in a meaningful way to a commander. we cant describe the impact of the choices he has

My problem: the military ORSA community at TRAC (TRADOC Research and Analysis Center) are interested but without much funding, I cannot jump to the head of the line; I believe either XLsim 3 or Risk Solver will do everything I need, but i’d appreciate your insight into which platform is sufficient. I ‘ve found a student (no modelling skills) here with an interest in exploring this in his thesis next year at the school for advanced military studies (SAMS) the “Jedi Knights” and i may have another, who is an Excel wizard who I might convince to play along too.

The potential of this model is enormous, as the curriculum I write will be taught to EVERY major in the US Army (active and reserve) and many Navy, Air force, Marine offices, and several hundred international officers. This is about 5000 officers a year

I am hoping that this visualization and simple model will do for their appreciation and respect for risk and modelling what your book has done for mine.

I am hoping that this model will help them learn to operationalize the implications of their assumptions, and demonstrate a way to manage, appreciate and explore complexity beyond the limits of their intuition

I am envisioning a model of the network which defines a complex of nodes and pipes, each of whose performance would be modeled in a standard way with the variables above, and which would permit insight into how variable performance oalong each node serves to degrade performance more than a simple avergage of all their performances in the time period

I’ve designed a small world simulation that we are already using to let students sample these ideas simply thru game play in a small way, but we need more depth toctake it to the next level

I say all that to simply say: is XLSim3 sufficiently robust to explore this model, or would you recommend Risk Solver? In a perfect world I’d have something that I could deploy in January 2011, and I am prepared to spend my own money on this if I cant convince our leadership to provide some money, because i believe this is crucial to our profession.

I’d be grateful for your thoughts. I’d be even more grateful if you had a spare ORSA grad student with an inquiring mind and some modelling chops 😛

my work email, if you’d like to comment to me directly is long-kenneth@conus.army.mil

A reflection on Panasonic’s annual plan for 2010

August 29, 2010 5 comments

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Ken’s notes on Panasonic:

http://panasonic.net/vision/amp/ is the link to Panasonic’s Anil annual management plan (AMP)

Panasonic’s annual vision and strategy plan notes:

the new Panasonic group is sorting out how to incorporate Sanyo electric Company into their business while maintaining their current management philosophy of “contributing to the progress and development of society and enriching people’s lives through manufacturing”

Panasonic focusing on products connected to people’s lives, Sanyo has been a key player in solar cells rechargeable batteries and industrial components. The addition of Sanyo has broadened the depth and scope of the group’s business and Panasonic is looking to leverage group synergies

they hope to gain from the wisdom of both companies and become leaders in the fields of environment and energy, looking for bold strategies to lead to growth. They hope to eliminate duplication and conduct rapid restructuring as necessary to make a single ideal company.

Looking forward to 2018, they want to emphasize green life innovation and green business innovation, which combines customers and their own business practice. They are looking to leverage global networks and improve the many to one relationship to individuals to maximize lifetime customer value. They want their subordinate businesses to collaborate spontaneously and autonomously in diverse fields to achieve flexible dynamism and consistent collaboration through autonomous management.

Note to self: the image of spontaneous combustion came to mind.

They plan to measure performance using the following indexes: global excellence index and green index. Global excellence index values having multiple key products that hold top market share in the world, achieving ¥10 trillion in annual sales and 10% or more of operating profit and return on equity. Green index aims to reduce CO2 emissions by 50% in manufacturing internally and by improved performance in their customer appliances

implementation framework: this plan represents a new focus with a goal of becoming the number one green innovation company in the electronics industry by 2018. They will examine growth and the environment together. They will shift from Japan oriented to global oriented products and services. They believe this growth will return them to profit.

Four businesses at their center: appliances, black boxes, automobiles, digital AV networks.

Six business areas for growth: energy, HVAC, network AV, security, healthcare and LED. They believe they have unique solutions for homes and buildings that are unrivaled in the industry and that this uniqueness gives them their competitive advantage.

The next section of their report itemizes initiatives within each of the six business areas and they examined the connection between Panasonic and Sanyo. They incorporate sales and profit projections and positioning objectives within their industry. Of special note are initiatives in energy, healthcare and appliances.

They have identified overarching strategic themes: manufacturing and management reform: they are aligning their regional production with regional demand to create regional centers of excellence. They intend to use communications to tie together these regional operating sites, tied together with online search and social networking services which links internal operations with customers. They think social network services affords them insights into lifetime customer management. Their merging various group management offices into a single innovation division. The environmental innovation subcommittee will look at initiatives that cross product and business area boundaries.

They even have a management slogan for 2010, which has Deming rolling over in his grave, entitled “unite our efforts – drive eco-innovation”

note: this visioning document is not to be confused with the 2009 major restructuring Panasonic undertook which affected their home appliance, automotive motor and industrial motor businesses. http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=6479:JP&sid=abp_RkElyrco

analysis:

  1. the Panasonic group falls into the area of global industries identified in figure 15.1 on page 372 of our text since their lines of operations feature high levels of international trade and high levels of foreign direct investment. You can notice their intent to shift from a Japan centric to global centric focus as recognition of the increasingly important global trade in energy and healthcare. This implies greater competitive pressures and reduced profit margins and so their 10% ROE is reflective of that intense competition.
  2. The grouping of healthcare, home appliances, energy, automotive instruments, and industrial products exposes them to a wide variety of specialized competition. It’s not clear to me that they have a natural alliance and synergy possible among those six lines of operation.
  3. There’s a lot of jargon in their management vision statement about finding the synergy spontaneously into diverse companies and rapidly reorganizing to eliminate duplication. The fact that both are Japanese oriented gives them a leg up on solving cultural differences but we know that that kind of merger is nontrivial.
  4. Applying Porter’s national diamond framework does not suggest that Japan has a natural advantage in the areas of energy and healthcare although they have advantages in AV and electronics and automotive to exploit. You would think that Japan would have more of an advantage in healthcare with their aging population and commitment to social support networks. This section in the text begs the question of how Porter’s national diamond framework really applies in the world of multinational and transnational corporations.
  5. The annual strategy document from Panasonic does not address the ideas of national resource availability and tradability as determinants of geographical location except where they note that by maintaining a regional focus on production and sales they hope to take advantage of local conditions. This is essentially the same idea that Brenda and I used in the BSG with our Africa first idea.
  6. I was interested to note the discussion of the shoemaker Ecco’s value chain since I am a long-term customer and will only buy Ecco shoes and noticed that many of their value chain decisions are similar to the ones we used in BSG.
  7. Table 15 four suggests that Panasonic is going to be challenged in their idea of locating production completely within a region when you look at the dispersion of Hewlett-Packard‘s laptop components production.
  8. It’s not clear from the vision document how they see the alliance and joint venture of Sanyo and Panasonic will bring synergies. It doesn’t look like they had that much overlap except in areas where they were already strong in the manufacturing of electronic components.
  9. The itemized list of benefits of a global strategy on pages 386 and 87 are all prominent in Panasonic’s vision document: cost benefits of scale, global orientation, exploiting national strengths, mutual learning, strategic competition by joining forces.
  10. Figure 15 sevens image of Japanese centralized hubs looks very much like the end state Panasonic proposes to achieve with their merger with Sanyo with centralized innovation pushing ideas to separate business areas and lines of operation.
  11. Chapter 16’s discussion of diversification decisions: it’s not clear how Panasonic hopes to achieve a competitive advantage within healthcare unless it’s in medical devices, but that’s not made explicit in their strategy document.
  12. The text on page 405 discusses turbulence and transaction costs and the strategy document suggest that those are trivial.
  13. Motives for diversification: Panasonic mentions both growth and risk reduction and they hope to achieve these through shared knowledge and leveraging strengths. There was no discussion of how to leverage the goodwill and intangible resources associated with Sanyo brand and how that carries over into a single Panasonic group.
  14. The amount of diversification and specialization in this merger seems to be slight to me and that the basic lines of operation between Sanyo and Panasonic sufficiently overlap to minimize the effect of disparate lines of operations. That’s not necessarily automatic as we know from the difficulties in merging Compaq and Hewlett-Packard.
  15. Concerning the M form:
  • dispersed decision-making: this could be possible if Panasonic truly empowers their regional production and sales centers to adapt to local conditions
  • allocation of decision making: the idea of centralized innovative centers that push strategies to the different lines of business works against the idea of local autonomy although it does seem to try to consolidate research and development in a centralized location for efficiency
  • minimizing coordination costs: to the extent that they rapidly reorganize after examining the overlap of Sanyo and Panasonic culture and operations suggests that Panasonic is aware of the cost of protracted analysis and is looking to get the low hanging fruit through rapid reorganization.
  • Avoiding goal conflict: they’ve settled on two primary goals of performance and eco-culture and have tied it both to internal operations and external products in this narrow focus bodes well for their strategy. There are few competing demands.
  • Resolution of agency problems: there was no discussion of how to empower local decision-makers in the regional centers to benefit from their initiatives. It still sounded very Japanese in that central offices would benefit as a whole from local initiatives.
  • Mintzberg’s cautions on two key rigidities of multi divisional structures:
    • constraints on decentralization: it’s not clear how corporate top level production goals will be allocated to local regional centers in Mintzberg would caution that this should be explicit in order to not prematurely stifle local performance and initiative
    • standardization of divisional management: Mintzberg advises that it’s normal to see an attempt to standardize control systems and management styles and he would observe that Japanese centric managerial practice may not be suitable for this expanded global focus in the new vision document. Anecdotally, I know this is a concern as my brother relates stories of what it’s like working for Japanese managers transplanted to America and auto manufacturing plants.

Finally: here is some real world news from currency markets that put the discussion of “ountry vs company” as the unit of analysis into perspective http://news.yahoo.com/s/ap/20100829/ap_on_bi_ge/as_japan_boj_meeting;_ylt=AvBfxNtxniyJsWRwQmHp7h1v24cA;_ylu=X3oDMTM5cWlmOGhtBGFzc2V0A2FwLzIwMTAwODI5L2FzX2phcGFuX2Jval9tZWV0aW5nBGNjb2RlA21vc3Rwb3B1bGFyBGNwb3MDNwRwb3MDNwRzZWMDeW5fdG9wX3N0b3JpZXMEc2xrA2JhbmtvZmphcGFudA–

Building a master Powerpoint file (or image dB) to support wide ranging discussions

August 25, 2010 2 comments

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a terrific discussion here on the idea of having a 2500 slide Powerpoint master file

my reflection:

I use this exact technique when teaching Army Change Management and Army Sustainment

i have over 500 slides that illustrate certain points, many of which are cleaned up versions of story-boarding explanations i have used to clarify various issues over the years. I save them all by group/theme in 1 large file, and Ican call them up as needed to help visualize etc. Many of the little speeches associated with them I have produced as short YouTube style narratives using the slide as the visual and make them available to students. It is very freeing; i can call up support slides immediately and i always have the complete resource for any  presentation, which lets the conversation go where it naturally wants to and i can act as a guide.

In my private business as an equity trader and educator for stock traders i use the same technique and i have several thousands concept and practice case study slides that are in my master deck or stored as image files with a file naming nomenclature that allows for instant retrieval: not 1 PPT file but the same concept

i can also build subsets for particular audiences/themes lessons from the master.

bottom line: i always have 1 master file that contains EVERY interesting slide i have ever made

Size: less of an issue with Terabyte HDs but my 500 slide deck comes in at 40M: judicious use of graphics and .png image format

Reflection on Mintzberg’s The Rise and fall of Strategic Planning (1994)

August 8, 2010 5 comments

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Highlights from Mintzberg ‘s The Rise and Fall of Strategic Planning

Ch 1: planning and strategy. Mintzberg offers definitions in this chapter. He asks “Is strategy making  simply a process of planning or is it simply an oxymoron? Should strategy always be planned, never be planned or sometimes be planned? What’s the relationship between strategy and planning?”

  1. Mintzberg begins by explaining planning: he reminds that planning is used so broadly and in so many different contexts that it almost cannot be defined. He says scholars have been failing to define planning since the mid-60s. He thinks this is because scholars have been more concerned with what planning might be than what it actually is. He has made a career of classifying approaches and methods, inputs and outputs, perspectives on planning. As an example he takes issue with the idea that “planning is future thinking” because it cannot be bounded. It’s a definition that’s too fuzzy. He also takes issue with the idea that planning is controlling the future because it too is unbounded. He disputes that planning is simply decision-making, because if it were you wouldn’t need a separate word. The Chapter 1 discussion really illustrates the challenge of trying to get a set of operationally defined concepts that are used with rigor in order to approach the subject systematically.
  2. He settles on the idea that planning “is a formalized procedure to produce an articulated results, in the form of an integrated system of decisions”. The emphasis here is on formalization and systematization of the phenomenon to which planning is meant to apply. This is an operationally feasible definition and identifies planning as one means among many of developing a strategy.
  3. justification for planning: he notes that organizations must coordinate their activities; account for the future; be rational in their approach; develop control plans. All of these lead us inevitably to planning.
  4. the difference between planning and strategy: he points out that just as there are many different definitions of planning so too are there many definitions of strategy. Various writers consider strategies to be plans, patterns, positions, perspectives or some combination of these. Mintzberg believes strategy is different than planning and that there is a difference between planning and strategy formation. In Chapter 6 for example he will describe strategy formation as an output of an ongoing dialogue between managers, leaders, operators with many feedback loops that seek to capitalize on rapid adaptation to changing environments, which is considerably different than the idea of strategy formation as the result of a rational forecasting process.

Chapter 2: introduces multiple models of planning. A masterful analytical treatment of the complicated human process that includes rationality, process control, perspectives, worldview and many distinct schools of thought regarding planning.

  1. the basic planning model comes from the design school and treats strategy as a bringing together of competing values, environmental considerations a process of evaluation and choice with a notion of implementation. He offers an alternative view with the Ansoff model which is as complicated as a wiring diagram of your motherboard. He shows the connection of Ansoff and Steiner’s models to what has become known as the PPBE ( planning, programming, budgeting, and execution) model within the Department of Defense. This is a cold war era relic of rational planning taken to the logical extreme.
  2. conventional strategic planning: he analyzes the various stages of conventional strategic planning, decomposing them into their components such as: objective setting, external and internal audits, strategy evaluation and implementation.
  3. He sorts out 4 hierarchies in typical strategic planning: objectives, budgets, strategies, programs and shows the linkages between these which are usually taught in management by objective courses.
  4. He concludes the chapter with a discussion of what he calls the great divide of planning which groups two sets of activities: performance control and action planning as separate and distinct groupings of actions
  5. finally he uses the 4 hierarchies to look at  3 different types of planning: conventional strategic planning, analytical planning, and capital budgeting

Chapter 3: evidence on planning

  1. anecdotal evidence: he acknowledges that there is an abundance of anecdotal evidence that supports the notion that planning pays off. He demonstrates convincingly the problems with anecdotal stories as a combination of survival bias, selection bias, confirmation bias, and a failure in the design of experiments
  2. literature review of systematic studies: he concludes that systematic studies do not support the efficacy of most planning regimes
  3. typical planners response to the literature: Mintzberg says these come in five different forms and are all acts of rationalization in some way
    1. denying the problem
    2. trusting that the process will work even if specific results the workout
    3. developing ever more complex modes of planning
    4. reverting back to simpler planning strategies
    5. believing that it’s different in their organization
    6. he  highlights Col. Harry Summers indictment of the Department of Defense’s supremely rational Planning, Programming, Budgeting and Execution (PPBE) system which was an attempt in the 60s to rationalize preparations for war in the conduct of war itself. Summer says “the rationalistic approach is characterized by the pretension to universality of its solutions, its intolerance of tradition and authority, quantification, simplification and lack of flexibility. It’s very efficiency prevents flexibility by eliminating what does not contribute to achieving the current objective so that alternative means are not available if the objective is changed”
    7. he concludes the chapter by observing that conventional strategic planning typically is a conservative process that undermines both creativity and strategic thinking. He thinks it’s inflexible and breeds resistance to major changes. He thinks it discourages creativity in favor of extrapolating from the status quo which emphasizes a focus on short-term rather than long-term

Chapter 4: pitfalls in planning. In this chapter Mintzberg describes the importance of commitment of an organization to its planning and strategy making process, it shows why this can be a problem. He has an extended discussion on the intersection between planning and change management. He doesn’t actually job of demonstrating why politics in organizations inevitably effect what is usually considered to be a rational process. He observes that in a session with control can prevent a strategic planner from containing a set of flexible options suitable for an emerging and dynamic environment.

Here are assumptions/tribal wisdom that Mintzberg (p195) calls into question about planning and commitment for example:

why do we assume that:

1. planning is committed to management?

2. Commitment to planning produces a commitment to strategy making, and a commitment to the results the strategy produces, and an effective implementation plan?

3. planning will produce loyalty and commitment from management?

as an example: consider the 5 goals that our board have for us: do you believe that these appropriate objectives and further, that they CAN be managed? and further, that having a 3 year strategic plan is the best way to achieve them (if we believe there can be a causal connection between our actions and those goals)

example: do you really think that “stock price” is an appropriate object of management by our company? and that we can actually affect stock price according to a plan?! this would be laughable if it weren’t so sad. Think of all the short term manipulations required to be able to influence analysts, brokers, the press etc in order to spin quarterly and annual earnings. Its pointless and counterproductive. In fact, an excessive concern with stock price is a clear indication of an unsuitability in your corporate management. There are many studies that show that between 75 and 90% of the variation in a company’s stock price is attributable to the sector and market dynamics, ie beyond a company’s control. The fact that BSG uses this as a measureable part of managerial performance raises serious questions to me about its suitability in educating young impressionable managers. (Ken’s opinion only)

Chapter 5: fundamental fallacies of strategic planning (see Brenda’s detailed notes below)

Chapter 6: a new framework for thinking about strategy and planning.  Mintzberg offers a behavioral framework for planning based on his belief that planning as it actually is conducted should inform our understanding of it as a process that can help us integrate our operations and visions. I’ve summarized the topics that he describes in Chapter 6 below in case you find these subjects interesting

  1. synthesizing analysis and intuition
  2. planning as strategic programming
  3. plans as a means of communication and control
  4. planners as finders of strategy
  5. planners as analysts
  6. planners as catalysts
  7. planners and strategists
  8. a short summary of planners in context

Ken’s  conclusion: a superb piece of scholarship that remains central to any understanding of the broad topics of planning and strategy. You may not agree with his recommendations are insights in Chapter 6, but you have to take his analysis of the state of planning and a deep theory of strategy making into account if you’re concerned about organizational strategy.

Deeper look at Chapter 5 and 2 discussion questions:

Within chapter five of our selected book, Mintzberg (1994) discusses scenarios instead of forecasts.  The discussion maintained that the future is unknown but with assumptions you can question what and when to make decisions by utilizing scenario building.  With the business strategy game, we are using this type of activity to make our strategic decisions because as we make our decisions those decisions build upon the future structure of our company.  Mintzberg explained scenarios as “focused less on predicting outcomes and more on understanding the forces that would eventually compel an outcome; less on figures and more on insight” (p. 248).  Team B’s focus is on letting our products speak for themselves as expressions of our inner quality and spirit and to use our business as a force for growing a sense of global community and interconnectedness.  This chapter focused directly on finding the “right fit” to how many scenarios to build.  The focus is on the vision.  The business strategy game provides for uncertain times but our company is not concerned with the bottom line but is concerned more with the people within our organization.

Mintzberg’s passion is not in the planning but in the collaborative effort of including all information into the decision making process to include others within the organization.

Question to consider:

  1. What have been your experiences when “planners” have made decisions without the consideration of others within the organization?

Mintzberg discussed strategic thinking is a reflective systematic activity where creativity must be used as you break down the vision of the organization into pieces to come to a final decision.  He explained it as an experimental activity where one might have to “think to act and act to think” (p. 293).

  1. How does strategic planning obstructed strategic thinking at your organizations?
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A self licking ice cream cone, funded by taxpayers

August 3, 2010 Leave a comment

It's the picture of Italian ice-cream in a sho...
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A classic example of self-licking ice cream cones and how you can convince yourself that bad ideas are good ideas as long as you can fund them with other peoples money

On Monday, District residents’ tax dollars went to pay Summer Youth Employment Program participants to attend a Council oversight session at which they lobbied for more funding for the program.

It’s just the latest outrage surrounding one of D.C.’s best-intentioned and worst-run programs.

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