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28 September 2009 • 7:00 am As a mediocre writer and crossword puzzle addict, I am continually amazed at the richness of the English language, and yet surprised at the number of words serving double- or triple-duty; words carrying the weight of multiple meanings. One of my favorites examples is the word sanction, which can either mean a penalty for a violation of law, or explicit permission for some action. Homophonic antonyms, such as raise and raze (e.g. to put up or take down a building) are also especially amusing.
One such word I find myself using often in my writings here is deliberate. Both its verb and adjective meanings (which are sometimes pronounced differently) powerfully apply to our interest in strategy, change, and organizational leadership. Let’s take a closer look.
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27 September 2009 • 5:10 pm This Tuesday morning (at 11:00 a.m. EDT), I’ll be Heather Stagl‘s guest on her blogtalkradio show, talking about measuring the workforce.
On Wednesday and Thursday 7-8 October, I’ll be speaking at the American Strategic Management Institute’s Performance conference in Chicago.
For more details, please click here, or go to the Events link above.
24 September 2009 • 7:00 am 
Many years ago, there was a bit of a surge in the management buzzword stream of an idea called Management by Walking Around (MBWA). Although the idea is traced to early days at Hewlett Packard, where managers were encouraged to spend their time visiting employees, customers, and suppliers, the idea was popularized in an 1985 book by Tom Peters and Nancy Austin entitled “A Passion for Excellence.” Don’t feel bad if you haven’t heard of the book or MBWA; my sense is that the idea has been out of the mainstream for a while. Perhaps the walking around concept became obsolete around the time that telecommuting became possible and popular.
I think that walking around can be effectively applied in the arena of strategic management. Few executives that I’ve interviewed in the course of developing organizational strategy have disagreed with the prediction that I’d get many different answers if I were to separately ask managers and employees to describe their organization’s strategy. So walking around and asking the strategy question is a useful diagnostic; a way of creating a sense of urgency around formulating and communicating strategy across the enterprise.
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22 September 2009 • 7:00 am
Sir Andrew Likierman
An unusually practical article appears in the October issue of Harvard Business Review on the topic of performance measurement. I regret that I can’t share a link with you, because HBR content is not available online, except to subscribers of the magazine (perhaps the folks at Harvard haven’t yet read about the idea of Free). No matter. Though I can’t share the article itself with you, at least I can summarize it here.
Entitled The Five Traps of Performance Measurement, Andrew Likierman’s article is concise and valuable. Sir Andrew Likierman is no less than the Dean of the London Business School, a non-executive director of Barclay’s Bank, and Chairman of the UK’s National Audit Office. He knows of what he writes.
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21 September 2009 • 7:00 am  Amazon is shaking up retailers, both big rivals and small independent stores, as it speeds its way beyond books toward its goal of becoming a Web-sized general store. Jim Wilson/The New York Times Try to imagine the largest bookstore in the world. Aisle after aisle, floor after floor of books, maps, audio books, music, video, you name it (if you’ve ever had the unique and wonderful experience of visiting Powell’s Bookstore in Portland, Oregon, you’ve got a great visual image to begin with). But this bookstore isn’t limited by physical size, or shelf space or inventory cost; it carries nearly every title in print, and a huge back catalog of used and out-of-print books. And in the unusual case where they don’t have the book you want in stock, they can try to get it for you from other stores or the publisher. Every time you enter this store, you’re immediately recognized and greeted by name at the door, and your personal guide stands ready to recommend books and other goods you might be interested in. Of course, you don’t have to get in your car to visit this store, it is as near as your computer. Of course, the largest bookstore in the world is Amazon.com.
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18 September 2009 • 7:00 am At the center of the balanced scorecard concept is the observation that measures of organizational performance have traditionally been lagging indicators; measurement of actual performance after the fact. Management accounting is focused on describing performance during a time period that has ended – last quarter, last year, year-to-date, etc. And while there is nothing inherently wrong with lagging measures, they are of limited use to an organization’s leaders. All they do is tell what has already happened.
The ‘balance’ in balanced scorecard refers to the ideal of providing leaders with a balanced portfolio of lagging and leading performance indicators. Leading indicators are valuable because they help managers form an expectation of what will happen, and enable testing of the cause-and-effect hypotheses that are at the core of the strategic planning process. But identifying candidate leading indicators and selecting from among them requires careful consideration and a healthy skepticism of apparently easy answers.
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16 September 2009 • 7:00 am  A classic example of the Flaw of Averages involves the Statistician who drowned crossing a river that was on average 3 ft. deep. Desperately casting around for a topic to write about today, I was grateful to see a link to an interview in the San Jose Mercury News with Stanford professor Sam L. Savage about his book, The Flaw of Averages (great title!). I’ve not read the book yet, but the review has certainly piqued my interest:
How does General Motors, Sam L. Savage wonders, explain the pathetic performance of its crystal ball? When Americans started driving hybrids, GM was still pushing Hummers. Executives at the giant carmaker — fully aware of union contracts, presumably prepared for rising gasoline prices and economic uncertainty — drove straight into the ditch of bankruptcy.
“Probability management” is often mismanaged by business leaders, says Savage, a consulting professor of management science and engineering at Stanford University and a fellow at the Judge Business School at the University of Cambridge. Savage, who has performed probability studies for Royal Dutch Shell, set out to right statistical wrongs in his book “The Flaw of Averages.”
The Information Age has transformed statistics into a vital field of study, yet Savage says many habits and practices have been slow to change from the “steam era statistics” of the Industrial Age.
Written for a business audience, “The Flaw of Averages” leavens the math with levity, even the occasional cartoon.
Well alright then. Working with business executives and their measures for so many years, I continue to be amazed at how easily decisions are made on the basis of numbers with little consideration for the risks and consequences of those decisions. I’ve been meaning to write at some length about the need for the discipline of risk management in change programs, but before doing so, we all need to take a deep breath and consider the magnitude of our collective innumeracy.
The topic has been covered before. I just pulled Innumeracy: Mathematical Illiteracy and its Consequencesby John Allen Paulos from my bookshelf, and thumbing through it, I remember how much I appreciated the book, but that is wasn’t the easiest read. From the back cover description:
Why do even well-educated people understand so little about mathematics? And what are the costs of our innumeracy? John Allen Paulos, in his celebrated bestseller first published in 1988, argues that our inability to deal rationally with very large numbers and the probabilities associated with them results in misinformed governmental policies, confused personal decisions, and an increased susceptibility to pseudoscience of all kinds. Innumeracy lets us know what we’re missing, and how we can do something about it.
Sprinkling his discussion of numbers and probabilities with quirky stories and anecdotes, Paulos ranges freely over many aspects of modern life, from contested elections to sports stats, from stock scams and newspaper psychics to diet and medical claims, sex discrimination, insurance, lotteries, and drug testing. Readers of Innumeracy will be rewarded with scores of astonishing facts, a fistful of powerful ideas, and, most important, a clearer, more quantitative way of looking at their world.
SinceI found that Innumeracy was not especially accessible, I haven’t yet found occasion to use examples from it. Perhaps The Flaw of Averages will be better. It looks promising. From the interview with Savage:
Q. What are the most common ways people foolishly apply the law of averages? Is it the faith placed in “average returns” on retirement portfolio?
A. Plenty of people have been caught off base by the Flaw of Averages in investing, but here is an example that is closer to home. Imagine that both you and your wife are right on time for appointments, on average.
When you go somewhere together, however, you will be late, on average. Why? If we model being early or late for each of you by flipping a coin (heads is early, tails is late), then the only way you will not be late as a couple, is if neither of you is late. This is like flipping two heads in a row, or one chance in four. Now expand this to a big industrial project with thousands of tasks, and you can imagine the implications.
We don’t have to imagine the implications – we live with them every day. More to come (soon, I hope), on the topics of innumeracy and strategic risk management.
15 September 2009 • 7:00 am An important element of the strategic planning process is the management of the organization’s projects and initiatives in the context of strategic and operational objectives. Collectively, these discretionary activities account for only a small portion of labor expended in the organization, compared with that expended in the execution of normal business processes. But the discretionary allocation of labor and time is the necessary domain of management, yet management all too often doesn’t know what the workforce is actually doing.
A crucial step in driving alignment with strategy after the strategy itself has been established is to capture the activities (projects, initiatives, call them what you will) that are already underway. A matrix of the strategic initiatives against the strategic objectives almost always reveals opportunities to improve alignment; initiatives that don’t map well to objectives, objectives with no initiatives, and in some cases, objectives with too many initiatives.
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11 September 2009 • 7:00 am  A Redbox kiosk outside a Walgreens. Peter Wynn Thompson for the New York Times According to an article earlier this week in the New York Times, there will be 22,000 Redbox automated vending kiosks renting DVDs for a dollar a day by December. In the already crowded market for video rentals, Redbox and similar firms are occupying a niche between Blockbuster’s retails stores and Netflix’s rent-by-mail and nascent online streaming services.
With self-service machines, overhead is quite low. Not only do such retail stores as Walgreens, Wal-Mart, and McDonald’s welcome the foot traffic that the kiosks bring, but some are even subsidizing rentals – the article reports that Walgreens has discounts that essentially make the rentals free. So the business model combines the low overhead of Netflix (with no retail stores) with the convenience and spontaneity of any-time impulse rentals (sort of like Blockbuster). And Redbox supports the kiosks with a simple web site that enables its customers to locate machines, view the surprisingly extensive (yet limited) inventory of titles in each machine, and reserve movies online. Very low cost rentals, web-enabled browsing, same day rentals, convenient locations (movies can be returned at any kiosk, not just the one at which it was rented), in short, yet another new value proposition for video rentals.
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10 September 2009 • 7:00 am  U.S. President Barack Obama delivers his speech on healthcare. REUTERS/Jason Reed U.S. President Barack Obama gave his highly-anticipated speech on health care reform to a joint session of the U.S. Congress and a national TV audience yesterday evening. For those outside of the U.S., speeches to both houses of Congress are relatively rare (except for an annual ‘state of the union’ address), and this speech marked a crucial point in the intense health care reform debate that has been raging here for the past several months. I am sure that several other bloggers have already or will shortly provide their take on the speech itself, so I will spare you my own interpretation. But Obama used the ‘best practice’ term to describe a couple of U.S. regions in which per-capita health care costs are both significantly lower than average, while quality of care and outcomes are better than average (a theme in a New Yorker article I reviewed over the summer), in his desire to improve the cost and quality of health care across the country.
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