New Leader Focus Area — Costs and Pricing

Per an earlier post (here), I’ve been thinking a lot about what goes into taking over a new organization.  Considering the economy these days, this may happen to more of us!   

Anyway, the principle that costs and prices almost always decline over time is a reasonable foundation for looking at one’s competitive and operations health.   Below are six questions from the HBR New Leader article I originally referenced which help to focus the analysis:

  • How does your cost slope compare with your competitors? In other words, are your costs lowering or rising more or less quickly than your competitors?
  • What is the slope of price change in your industry right now, and how does your cost curve compare?
  • What are your costs compared with competitors?  I’d also look at prices as well… competitors with prices eroding faster/slower than me should tell me something about the sweet spots in the value chain, offerings most valued by the market, etc.
  • Who is most efficient and effective in priority areas?  A pretty generic suggestion.  Looking at relative pricing and what that tells you about the market should give hints about “priority areas.”
  • Where can you improve most, relative to others?  Look hard at the capabilities you actually have or could build quickly.  Avoid immediate focus on topics that you can’t change.
  • Which of your products or services are making money (or not) and why?  Don’t automatically trust the received wisdom on who makes and loses money.  Invest some time and money is getting REAL numbers and answers.

PMO effectiveness: survey results and tips

NOTE: updated title to reflect the post is about results, not a survey itself.

Elizabeth at the Girl’s Guide links to a survey on PMO effectiveness (here) that provides some interesting, if not wholly unexpected,  insights into the attributes of a strong PMO tick.  The only false note was what the study apparently represents as the main objective of the PMO:

to provide a group dedicated to supporting and integrating operations across organizational boundaries.  This is accomplished by providing services that either mitigate or directly address the root cause of the challenges being faced.

Does such an objective and approach make sense to you?   Maybe it’s out of context — I haven’t downloaded the entire study — but does that objective and approach correspond to how your PMO sees its main objective?  I guess that IMO and in our case, the role of a PMO is simple: make strategy happen.

PM Standards are not Holy Writ

Andrew Meyer at Inquiries into Alignment provides a useful corrective to the faith that we project management types put in our industry standards and frameworks (post here).   He hits on a lot of topics that are only alluded to in our project management “bibles”:

[P]rojects often pull people from different departments together to work on a project. While that is what the project requires to be successful, what does that mean for the people pulled from the different departments? Is the project of primary importance to them or is what’s happening in their department of primary importance?

Now, I believe Andrew that has set up a bit of a straw man here.  I’m not sure that it is the responsibility of the PMBOK Guide or PRINCE2 to elaborate some of these topics fully (I’ll leave Agile aside for the moment).  At least in the case of the PMBOK Guide, it is only a guide to the project management body of knowledge.  While a guide should reference the need to ensure business alignment, only so much content “meat” can be expected from such a guide.

My take is that firms should not count on generic standards to cover some of these topics —  one’s firm-specific methodology should elaborate the questions Andrew suggests (and more):

What is the business environment your company is working in?
How is that environment changing?
What is happening inside the business?
What is the state of the project?
Where does it need to go?
What needs to happen to get it there?  

More on the McDonald’s Revival

The New York Times yesterday had an excellent feature on the revival of McDonald’s over the past five years (here).  I don’t quite buy this characterization of the change by Bob Goldin at Technomics, however.

[T]he McDonald’s rebound had been singular because of its simplicity: “execute the basics, flawlessly.” He described the McDonald’s strategy as “three yards and a cloud of dust,” adding that “it’s not revolution stuff.”

I’m not sure what revolution looks like… a new format, new menu items, new hours, etc.?  My guess is that commentators are looking for a visible manifestation of wrenching change.  But perhaps the revolution at McDonald’s is in the way it can implement change.  From a franchisor, Ken Hullings:

It seemed like every other month I was putting something on the menu or taking something off, he says. We were looking for that magic bullet, that magic pill. And I think what we realized that it wasn’t just one thing.

I think that there’s a better football analogy for this business approach — the West Coast offense (especially Bill Walsh’s version).  This approach is in many ways conservative and disciplined, yet enables diversity and unpredictability in one’s play calling.  It also values players who can react in real-time to the unfolding competitive enviroment (i.e., the defense).  In fact, it sounds an awful lot like what the IBM Global Survey (here) envisioned as:

The Enterprise of the Future [which] embraces unpredictability as the new routine…

“Change gap” from 2008 Global CEO Survey

This result from the 2008 IBM Global CEO survey (intro here) illustrates the suddenly yawning gap between what executives see as their needs/expectations for change and their firms’ demonstrated ability to do so.

change_gap_ibm2008globalceosurvey

Two thoughts came to mind once I saw these numbers:

Sorry, but in this case... two out of three is bad

Sorry... two out of three IS bad

  1. The success rate for “change” could suggests a perceived success rate for initiatives (e.g, projects and program).  While ~60 percent is better than other numbers published re: project success rates, it is sad that even this optimistic figure wouldn’t merit a “D” in school.
  2. How quickly we’ve gone from complacency to urgency.  IMO, much organizational wankery that was tolerated — and even rewarded — a few years ago isn’t likely to survive.   At least not in its current form…

Example of saying “yes, but” to customers…

Per some recent comments and posts (here and here) on discussing responsiveness to customers, Henning Kagermann related a story on a call that I had completely forgotten about.  I’m certain that it has been told publicly before, but I’ve disguised it a bit just in case…

In the early 1990’s, SAP was approached by a delegation of firms w/r/t industry-specific improvements to R/2.  They had a list of demands that they wanted to see implemented in R/2.  Fair enough.  That industry was perhaps the core of SAP’s success to that time, so why not do it?  Except that SAP was in the midst of developing its next generation product, R/3.  We also wanted to expand our footprint to other industries and markets.  There was no way we could do R/3 and satisfy much of that list of demands in the current product.

If you know anything about the history and success of SAP, you can guess the answer.  We chose to spend the preponderance of our efforts on R/3.  While some of the key demands were satisfied, most were deferred in favor of ensuring that R/3 got to market.

This example illustrates the challenge well.  Most of the time you should listen to your customers so you can satisfy and delight them.  But listening for too well for too long can mean that you wake up one day and find that you’ve become a no-growth “legacy” business.  Sometimes you need to say “yes, but.”

New Leader’s Guide to Business Diagnostics

I’ve had a stack of stuff that I’ve meant to comment on, but set aside, forgot, etc.  Here’s a link to a great HBR article from the February 2008 issue “The New Leader’s Guide to Diagnosing the Business“.  The authors put together a powerful and flexible template that can be applied to most business environments.

[I]t is built on four widely accepted principles that define any successful performance-improvement program. First, costs and prices almost always decline; second, your competitive position determines your options; third, customers and profit pools don’t stand still; and fourth, simplicity gets results. Along with each principle, we offer question sets and analytic tools to help you determine your position and future actions.

In particular, I like the emphasis on quick, but focused, action.  Maybe you can think of this article as the quick and dirty complement to  The New Leaders’ 100-Day Action Plan.

[G]ather a lot of data quickly, ideally within the first three or four months of your tenure. Ask your senior leaders to head up teams that take on as many questions relevant to their areas of responsibility as they can handle. Ask for short, focused presentations to facilitate discussions about the main threats and opportunities. That should enable you and your teams to make quick, accurate decisions about the few areas on which to concentrate your efforts.

Leo Apotheker interview on Charlie Rose

Leo recently gave an interview to Charlie Rose with Andrew McAfee of Harvard Business School (video here, transcript here at the bottom of the page).  I’ve live “replay” blogged the interview below.

  • Oops… Charlie both mangles Leo’s name and implies that SAP is based in Paris.
  • Leo’s description of IT as the “central nervous system” is useful.  In my mind, I think of configuring, coding, and implementing enterprise software as creating a virtual model of the enterprise.  Extending Leo’s metaphor would mean that such projects are “virtually wiring” an enterprise.
  • About 2 minutes in, Andrew McAfee gave about the best concise explanation I’ve heard of how IT can be used to differentiate competitively (and why it isn’t a commodity).
  • About 9 minutes in, there’s an interesting discussion about barriers to entry and how they have little to do with technology.  As Leo says, “sometimes there’s a spark”, but most often the technology becomes widely available and commoditized very quickly.  The differentiation is in the richness of the ecosystem and the melding of business and technological expertise.
  • About 13 minutes in, Leo spends sometime talking about business networks and their emerging role in innovation (Procter and Gamble as an example).  He also talks about the parallel role of process and human collaboration, which we tend to talk about separately.  This last point hits one of my pet projects — encouraging more tightly coupling process, project, and knowledge management.  Too often KM is divorced from the “way we work.”
  • Finally, Andrew McAfee alludes to the boundaries between “designed” and “emergent” processes/structures, but he never explores the topic in depth.  To me, the debate between design and emergence advocates isn’t that useful — too much either/or.  Exploring the boundaries and potential co-existence between these approaches is where I want to go.

P.S. — I think someone clarified SAP’s location for Charlie via his earpiece at the very end…

PM Quote of the Day — David Lloyd George

Don’t be afraid to take a big step if one is indicated; you can’t cross a chasm in two small jumps.”

The headline shows how big SAP has become

The other transition” is quite a headline for this piece on the pending accession of Léo Apotheker to the CEO role.  Pairing the SAP transition with the inauguration of Barack Obama says a lot about where SAP is today.  The piece itself is perceptive and worth a read, especially about how SAP has avoided concocting

a recipe for cloning the head of a corporation so the body can stay the same. But SAP, which has practised this type of “smooth” transition in different forms since it was founded in 1972, has so far avoided this pitfall. Each of its bosses has been quite different from the previous one, as the firm’s needs have changed. 

There are a few other points in the piece that warrant comment:

  1. At SAP, succession planning is done about as well as I’ve seen it anywhere.  While the succession role may not materialize per the original design, I’ve found the process useful in planning my career, as well as helping my team plan theirs.
  2. Léo is very keen on an “internationalist outlook.”  Global perspective and experience has become a prerequisite for SAP executives.
  3. Many of SAP’s current and pending organizational changes are all about executing against the goal highlighted in this line from the article: “[M]aking real money from all the new products it has developed.” 
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