Blog posts on business

Posts selected fromManagement Blog - Engineering Blog - Investing Blog and other blogs

• The 70 Percent Solution

  Google CEO Eric Schmidt:

  We spend 70 percent of our time on core search and ads. We spend 20 percent on adjacent businesses, ones related to the core businesses in some interesting way. Examples of that would be Google News, Google Earth, and Google Local. And then 10 percent of our time should be on things that are truly new. An example there would be the Wi-Fi initiative.

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• Workplace Management by Taiichi Ohno

  Ohno focused a great deal on the faulty perceptions derived from cost accounting thinking. He discussed the importance of not letting your understanding be clouded by thinking with the accounting mindset.

  If you insist on blindly calculating individual costs and waste time insisting that this is profitable of that is not profitable, you will just increase the cost of your low volume products. For this reason there are many cases in this world where companies will discontinue car models that are actually profitable, but are money losers according to their calculations. Likewise, there are cases where companies sell a lot of model that they think is profitable but in fact are only increasing their loses.

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• Should GM be Removed from the DJIA? (2005)

  I agree removing GM makes sense, though I see no reason to wait. Whether to replace it with Toyota (market cap: $167 billion), DaimlerChrysler or something else is an interesting question. Of course the whole idea of the Dow Jones Industrial Average pretty much outlived its usefulness decades ago. The S&P 500 has long been far better measure of the stock market...

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• Visible Data

  Take the time to find the important measures and then don’t keep data hidden in some drawer or computer file out of people’s view and therefore out of mind. Post the important data for everyone to see. Review the data as changes are made and see that the changes had the desired result. 

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• Innovation at Toyota in Developing the Prius

  By the end of 1993 the development team had determined that higher oil prices and a growing middle class around the world would require the new car to be both roomy and fuel-efficient. Other than that, they were given no guidance. “I was trying to come up with the future direction of the company,” says Watanabe, who headed corporate planning at the time. “I didn’t have a very specific idea about the vehicle.”

  Investing in innovation is risky. If successful, the benefits can build a competitive advantage that is difficult for others to eliminate. However, others will try and if you fail to execute as well in the future those benefits can disappear quickly. Toyota shows few signs of letting others catch up though.

   

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• People: Team Members or Costs

  Both Toyota and GM seek to use technology to improve but Toyota sees the technology as useful to help people to be more efficient, eliminate menial repetitive tasks, eliminate tasks that cause injury… and it seems to me GM saw technology as a way to eliminate people. The action showed a company that viewed people as a cost to be eliminated. GM did not act as though people were their “most important assets” as we so often hear, but see so little evidence of in the action of companies.

  
  Toyota does try to reduce overall costs (including labor costs) by continually improving and making cars more and more efficiently (so they can produce cars using fewer hours of labor in the future than they need today). Trying to become more efficient by engaging everyone in the effort is a part of the system of management at Toyota. The current Toyota employees are an important part of the system and are not viewed as a cost to eliminate. 

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• A Company’s Purpose is to be Useful to Society

  (Toyota President, Katsuaki Watanabe) eschews the normal management mantra of shareholder value above all. A company’s purpose, Watanabe insists, is to be useful to society.

  Which, of course, echoes W. Edwards Deming's words on the purpose of a business.

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• Problems with Bonuses

  Commission pay and bonus often set up a conflict between what is in the interest of the company and the employee. They lead to bunching of orders around quarterly quotas, deadlines and competitions. They lead salespeople to think their job is to sell whatever pays them the most not to assist the customer.

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• Dell, Reddit and Customer Focus (2006)

  I think most of Dell's users do not notice what Dell is doing, exactly. Reddit readers, however, by and large, do, which is one thing that makes reading Reddit fun. I find Reddit's users can point out, not just problems, but the systemic causes of those problems (so they vote up the links that do exactly this).

  Most customers might not see the chain leading to their frustration but the do know they don't like that the computer is slow and they have to wade through all sorts of software (much of which they don't need or want). I think the author was exactly right that the source of the problem is Dell's monetary incentive is to get paid to add more and more stuff not to give the users what they need.

  ...

  Mainly I think these critical looks at practices are fun reading, but there is also a management issue to understand.  There are many smart people who know how to voice their opinion (and the internet can connect that voice to large numbers of people).   In this day and age, if you think your imperial halo with protect you from the masses you had better hope none of these people get a look at what you offer.  If you are figuratively naked, they will see, and they will shout that fact from the mountain top.

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• Quality and Costs

  Deming explained that increasing quality decreases costs. Page 3 of Out of the Crisis: Improve Quality –> Costs decrease because of less rework, fewer mistakes, fewer delays…

  Like most models this does not explain everything. Achieving some quality desires does cost more. And the article examines how to look at the issue of cost reduction in health care, where the view that higher quality costs more persists to a larger extent than elsewhere. There is significant room in health care for adopting improvement that will improve quality and reduce costs because the systems are so poorly designed they are both increasing costs and decreasing quality over what could be achieved.

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• Dell Falls Short

  Don’t give management a free pass just because they cave in to short term thinking. Management should know better and has a responsibility to do better. It is predictable that if management fails to setup an effective management system that they will fall victim to short term thinking. Still that doesn’t mean they are not responsible for making decisions. They are the managers of the company not some analyst on Wall Street.

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• Brainstorming Under Attack

  Brainstorming is about creating an opportunity to bring new ideas the forefront.

  There are other useful tools such as the affinity diagram which can serve as another option (or can serve as a tool to work with the results of brainstorming).

  And Edward DeBono has excellent creativity tools, like his 6 thinking hats. Brainstorming is a useful tool when applied properly but it is only one tool and other tools should be used also.

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• Lean National Health System

  This is an example of focusing on improving the system which will then result in improved measures (cost savings for example). This systems approach contrasts with cutting costs by cutting every budget by 5% across the board which often fails. Without improvements in the system reducing budgets just reduces capability.

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• Management: Geeks and Deming

  Several of Deming’s 14 obligation of management and 7 deadly diseases are noted in this quote, including: “Remove barriers that rob people of joy in their work” and the disease – “Emphasis on short term profits.” Deming was a physicist so that may explain the similarity of this ideas to geek management culture.

  • “Geeks seek knowledge for it’s own sake” – Deming’s point 13 “Institute a vigorous program of education and self-improvement.” Deming encouraged organizations supporting education of employees – even when unrelated to work in any direct way.
  • “Geeks like to experiment” – many of Deming’s ideas focus on this point, most obviously is the emphasis on PDSA
  • “Geeks openly debate the merits of technical ideas”

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• The Customer Knows Best?

  Some management ideas are pretty easy and straight forward. But many management practices require knowledge and judgment to apply them successfully. Easy solutions may be desired, but, often you must choose between easy and effective (hint, I suggest effective is the better target).

  Listening to customers is important but it is not sufficient.

  ...

  People could assume the numbers at Enron proved what Enron was doing was correct. But it did not prove that. Until we start to evaluate data more accurately we will continue to mistakenly see proof where it does not exist.

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