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24 August 2009 • 7:00 am Current events in the U.S. have reminded me of a rather challenging client I had several years ago. Although all of the names and some of the details here have been changed to protect the identity of the client organization and individuals involved, it is very much a real experience, and sadly, not all that unusual in the annals of balanced scorecard programs.
Our firm was approached by Karen, the energetic and charismatic head of strategy for WorldCo, a major division of a large U.S. corporation whose name would be instantly recognizable to anyone reading this case. Her mission was to implement balanced scorecard in WorldCo as the basis for a strategic management system, and as a tool to drive an overarching strategic change program. She had proposed the idea and earned the blessing of the division head Reggie, an executive who appeared every so often in favorable interviews about leadership in business periodicals.
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21 August 2009 • 7:00 am A running theme in these posts has been that of strategy as a hypothesis. I’ve often asserted that all organizations need to change in response to change in the environment; to realize new opportunity and to defend against threat. I’ve said that the organization that fails to change its value proposition will lose relevance, and ultimately become extinct. Most leaders understand intuitively that their job is not only to only to maximize short term results, but to ensure the long-term viability of the organization. Of course, desperate times may cause some leaders to focus excessively on the short-term at the expense of the long term. Balancing focus between the two is one of the great challenges of organizational leadership.
The normal view of strategy as a hypothesis is oriented to the organization itself; a set of assumptions about what the organization should do, and what will happen as a result. Leaders who are engaged in a strategic change program are properly concerned with monitoring those things that are (nominally) within their control; the actions of the enterprise and its constituent parts. Measurement systems, dashboards, and balanced scorecards convey in effective detail the intent of the strategy (through the selection of measures), and the extent to which the hypothesis is playing out (the actual value of the measures relative to established targets). This is all well and good. But it is a disturbingly short sighted view of strategy.
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20 August 2009 • 7:00 am  One of the most memorable books I was required to read in graduate school was Saul Alinky’s Rules for Radicals. The class, as I recall, was called “Power and Politics in Organizations,” and Alinsky’s slim yet compelling text stood out among the three or four books my classmates and I had to complete during the ten weeks of that valuable class.
Saul Alinsky was born and raised in Chicago, where he became known for his organizing of meatpackers and later, civil rights groups. He is generally regarded as the originator of the term “community organizer” which was front and center in the rhetoric of last year’s U.S. presidential campaign – Alinsky’s teachings and writings influenced Barack Obama’s community organizing work in Chicago. Alinsky has always been a polarizing figure, even 37 years after his death in 1972. In the opening lines of Rules for Radicals, Alinsky wrote,
“What follows is for those who want to change the world from what it is to what they believe it should be. The Prince was written by Machiavelli for the Haves on how to hold power. Rules for Radicals is written for the Have-Nots on how to take it away.”
Alinsky wasn’t subtle, nor was he deferential. In plain language, he expressed his passion for change, and generations have learned from his wisdom.
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19 August 2009 • 7:00 am With the voices in the debate over U.S. health care reform becoming even more shrill, and opponents decrying the prospective loss of free-market competition in the health care industry, I’ve been thinking a bit on the topic of monopolies.
In economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it, according to the late economist Milton Friedman. We generally think of monopolies as a bad thing; monopolists gain pricing power that enables exploitation of consumers. But the provision of goods and services in a capitalist economy is actually accomplished by a blend of free-market players and monopolies, as it must be. Some monopolies are necessary, and even good.
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18 August 2009 • 7:00 am Having returned from a very pleasant road trip with my family (we drove from Chicago to the Badlands area of South Dakota, and camped along the way), I was dismayed to see that the Tenacious Blog had not taken on a life of its own in my absence. No new posts had magically written themselves and queued themselves up for publication. The predictable ruse of posting a series of “Best of the Tortoise” items didn’t fool you, and traffic to the web site and blog is off a bit. Of course, it is August, and many of you are likely to be off on camping trips or other diversions of your own. But September will be upon us soon, and in my experience, the pace of life will pick up considerably after Labor Day (apologies to overseas readers for the occasional U.S. –specific references). With the expected surge of traffic, I feel the pressure to get back in the writing groove again.
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17 August 2009 • 12:18 pm What seems like many hundreds of years ago, I got my start in information technology working with mainframe computers. It was then that I first learned of a concept called ‘latent demand.’ As utilization of those giant computers (whose power back then was approximately equal to that of a modern cell phone) increased over time, companies would plan to upgrade to larger, faster machines. In the months and weeks leading up to the upgrade, demand for computer power would approach the theoretical capacity of the old machine, and processing would become painfully slow. But the surplus power provided by the upgrade would very quickly disappear – consumed by the pent-up demand for processing power that hadn’t been met before. And then the cycle of slowdown and upgrade would be repeated. The demand for more computing power in the enterprise is insatiable. But this phenomenon is not just seen in the realm of information technology – it applies to change in organizations as well.
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5 August 2009 • 7:00 am  (Copyright 2009 The New York Times Company) Those of you reading Monday’s post about the mystery industry whose distribution methods kept evolving and cannibalizing older versions can now view the rest of the story. As presented in an op-ed piece by columnist Charles M. Blow in last Saturday’s New York Times, the graphic shows the demise of the traditional recorded music industry in ‘graphic’ detail. It’s another example of the power of thoughtful graphic design.
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3 August 2009 • 7:00 am An recent op-ed piece in the New York Times graphically illustrated the impact of changing technology on an industry familiar to all of us. It reminded me a bit of my earlier riff on Netflix vs. Blockbuster, but it was the graphic that I found especially compelling. I’ve reproduced a portion of the graphic here, deliberately obscuring some of the detail and some of the data. The horizontal axis is time, and each of the vertical bars in the charts leading from left to right represents one year, from 1973 to 1999. Each of the patterns represents the emergence, growth, and demise of a particular distribution method for this industry’s product, and the height of each bar represents the constant current dollar value of goods shipped in each year (in billions). A black box is drawn around the peak year for each of the distribution methods.
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30 July 2009 • 7:00 am  Newborn gazelle hunkering down for safety, Serengeti, Tanzania (© Erika Bloom) Reading blogs, scanning headlines, and staying in touch with old friends, it seems to me that right now there is a lot of hunkering down going on. Hunkering down, like dodging bullets and any port in the storm are vivid metaphors for the actions of people when there is danger about. During a global recession, individuals naturally think about protecting themselves and their families from the risk of unemployment, investment failure, and other threatening stuff.
Organizational behavior is a ‘soft’ science that begins with the premise that organizations exhibit collective behaviors. This too is natural. Fish and birds move in unison. Bees, ants, and other insects live in highly-ordered societies that act in concert. Wolves hunt in packs. Evolutionary biologists explain these behaviors as adaptations not just for the survival of the group, but the survival of the species.
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29 July 2009 • 7:00 am  Netflix prize web page The Tortoise’s fascination with Netflix was enhanced with the news yesterday that Netflix’s public competition to improve the effectiveness of its recommendation system has drawn to a close with two teams essentially tied for the prize. But each of the two teams are actually consortia; teams comprised of other teams. Netflix has harnessed the power of competition and collaboration to solve a challenging business problem.
Subscribers to Netflix are asked to rate (on a scale from one to five stars) each movie they’ve rented, and are even able to rate movies seen in theatres or elsewhere. The data base of millions of individual ratings are used to predict and recommend movies to individual subscribers. The system works pretty well; around two thirds of all rental decisions made by Netflix subscribers are the result of a computer-generated recommendation.
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