Archive for August, 2009

Handicapping Cap and Trade

August 28th

The politics in Washington over the energy and environmental policy choices that are contained in the cap and trade bill may be fierce, but the public is less decisive and still generally supportive.  A new poll (8/17/09) by Washington Post /ABC News that has just been released shows that President Obama would seem to have stronger support for his general energy policy direction (57%-29%) than for his handling of the economy (52%) or health care (46%).  As has been widely reported his approval rating has fallen since February (68% down to 57%).

What’s more on the core tracking poll where the question is asked, “would you say that things are generally on the right track or are they headed in the wrong direction” (now summarized in it had appeared this summer that the President was likely to reverse the “wrong direction” majority. But even that trend seems to be reversing itself and the negative forces seem to be gaining ground again.

So in the context of sliding support, the idea that energy policy has 20 points more support than George Bush in 2005 must seem to be a positive sign.  A plurality (41%) believe that the energy policy will add jobs in their state (the poll was taken before Toyota announced the closure of the plant in Freemont, California in site of the cash for clunkers program).  A majority (52%) believes that the energy policy will help with global warming.

A majority continues to support the “cap and trade” bill although the support is slipping now that there is some understanding of cap and trade as a public policy issue.  And the public is willing to support cap and trade even if it increases the cost of electricity, although the majority seems to evaporate when the increase in monthly bills goes from $10 to $25.

All in all, the news seems to support the assessments of researchers such as Oxford Analytica  reported in Forbes that cap and trade is only a little better than 50/50 to pass the Senate.  The fall’s run up to Copenhagen will increase the drum beat (and the need for the President to have credibility internationally.  In spite of other pressing priorities, the cap and trade bill may assume even greater significance.)  Say tuned.

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The Sustainable Innovation Model, First Thoughts

August 27th

When I published “When a Turnaround Stalls” in the Harvard Business Review, (February, 2002) I found that I had never had an experience that offered quite as powerful a megaphone.  Telling my story of being recruited to start Internet businesses for the postal service, as some would later say, the Dinosaur of the Information Age, brought with it a long tail of lessons.

Perhaps best selling authors get to title their own articles, but in my case the phrase “when a turnaround stalls” had been a suggestion from the editor.  I had readily agreed because of the insight that it conveyed.  What had been stunning about my experience in the postal service was the speed with which we went from feeling as though we were on the top of our game to recognizing that we were in a financial crisis.  The GAO put postal transformation on the high risk watch list in 2001 and the Chairman of the Senate Governmental Reform Committee, Senator Fred Thompson, commented that he could see that “the Ox is in the Ditch, Big Time.”

Lesson 1 was that many people don’t read past the title, insightful or not.  Thoughtful observers who I would have anticipated would have given the article a more careful reading, interpreted the use of the word “stalls” as a slam.  In fact, probably the reverse was the case.  I may have gone a little overboard in writing about my respect for the postal management team.

I still think that its extraordinary that the organization can move nearly a half a billion pieces of paper a night.  In spite of modern automation technologies the network sometimes seems to be held together by the heroic actions of individuals.  And the leadership challenge that is entailed in guiding 650,00 people in this operational task is daunting.

The Harvard Business Review was a little less in awe.  When I objected to a particularly interesting anecdote about the Postmaster General using the example of Lance Armstrong and his coach as a model for talking about management, my story ended up on the cutting room floor in spite of my protest.

Lesson 2 was that even the most careful, interested readers have trouble connecting the dots when the subject is four abstract thoughts.  I was called by a consultant in Austria who wanted me to join him in working for the Austrian post.  A friend in New Zealand was called by a colleague in Japan and told he should read the article.  The Denmark Post (which is now a part of Sweden Post) used the article as a case study with their management team.   CEOs in the US told me that they were particularly interested in the Four transformation Truths that concluded the article.  I could see that the four transformation truths had resonance.  But in talking with people who thought that they offered value, I could see that they came as four independent data points.

The truths had emerged from the pressure that the Internet Tsunami inflicted on the USPS.  I felt at the time that there had been a mystical alchemy to the way that these insights about management had been created.

  • “Don’t Miss Your Moment” involved the critical element of timing, of understanding the urgency of the need for change.
  • “Connect Change Initiatives to Your Core Business” contained insights about the dynamics of innovation in a traditional enterprise.
  • “Don’t Mistake Incremental Improvement for Strategic Transformation” seems almost too simple today even though it might have been the most important insight of all
  • “Be realistic about your limits and the pace of change” captured the essence of collaboration and the modesty that has to become the foundation of sustainable change

These four points – timing, innovation, strategy and collaboration – are today the elements that form the essence of Transformation Strategy.  My friend who spent his career at Bain Consulting asked me whether I thought the “truths” were insight or anecdote.   Years later I still enjoy thinking about the speed with which he got to the core of the matter.  Knowing the difference is the refined substance that’s the feedstock of excellent strategy counsel.  When it grows thin you feel as though you are just telling anecdotes and listening to yourself talk.  When you can translate insight into an integrated story that has moving parts that illustrate the dynamics of the problem then indeed you can talk about “truths.”

I recognized that to tell such an integrated story about the Transformation Strategy that I had been given the privilege to see would require a picture.  In reaching for a picture that would illustrate the dynamics of the four truths and show how they related to one another, I had multiple influences – a speech that was once given by the postal service’s largest customer in which he talked about the “sinusoidal curve” and the need to invest in the future when times were good.  At the Institute for the Future I had met Ian Morrison who had talked about his “second curve strategy.”  But above all I was influenced by Jack Welch’s book “Jack, Sraight from the Gut

“In December of 2000, I was probably the only 65-year-old guy still drawing business charts for analyst presentations. I’ve always thought that chart-making clarified my thinking better than anything else.  Reducing a complex problem to a chart excited the hell out of me.  For every analyst I’d sit for hours with my finance and investor relations teams sketching out and tearing up chart after chart. (p. 396)”

Or “The vision [of the No. 1 and No. 2 Strategy] was simple, but I was still having a helluva time communicating it across GE’s 42 strategic business units.  I had been thinking about how to do it better for a long time.  Oddly enough, I found an answer on a cocktail napkin…I often drive people crazy by sketching my thoughts out on paper anytime, anyplace.”  And on page is the graphic that the drew with a black felt tip pen on a cocktail napkin to illustrate the vision that GE would be 1 or 2 in a market or they would fix, sell or close the business.

What lay beneath this simple picture of three circles outlining the Services, High Technology and Core Businesses was far more complex.  Being #1 or #2 implied the pricing leadership that came from having dominant market share and it held implications for operations, finance, human capital and strategy.

Most businesses and public institutions have problems that don’t look anything like GE’s world.  But the picture of the head of one of the largest most profitable corporations in the world drawing pictures to show the dynamics of his story and making up his own charts to illustrate it stayed with me.   The art in communicating a strategic vision across a complex enterprise was to find a way to convey insight with a picture that was simple and elegant.

The picture that represented the sustainable transformation model, a way of integrating the four truths, didn’t come for several more years.  That took a high alpine pass above Murren, Switzeland and the outline of the Eiger, the Monk and the Jungfrau, the mountain picture that appears on the blog.  Elements of the Brand (PDF)

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The Stone Age Didn’t End Because the World Ran Out of Stones

August 25th

In an article on the Saudi reaction to President Obama’s call for Energy Independence Jad Mouawad of the New York Times “Green Inc.” notes the ever-present dynamics of the geopolitics of oil.  (“Saudi Blasts American Energy Policy.”)

The Saudis are as sensitive to the cross currents of energy policy change as anyone.  In “In a short and strongly-worded essay in Foreign Policy magazine, Prince Turki al-Faisal, a former ambassador to the United States and a nephew to King Abdullah” critiques the broad statements of the Obama Administration.  His point recalls Sheik Yamani’s famous line about the stone age.

What this thought points to is the question of how soon green technology is going to replace the oil economy.  While it makes the stream of articles on China’s development of solar panels and electric vehicles all the more interesting, it does recognize that no one can imagine a technology that is going to radically shift the energy balance in the next five years.

In the meantime, OPEC looks quite different today than it did in 1973.  The difference is not in the names of the countries that are the sources of oil but in their leadership and their relationship to the U.S.  Iran, Iraq, Venezuela and Nigeria could not be more different today than they were in 1973 when Henry Kissinger and Richard Nixon first launched the policy of “energy independence.”

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The Hardest Prediction of All, Seeing the Future

August 24th

Predicting the future makes most people so nervous that they often make the same joke about Yogi Berra’s insight that the future is the hardest thing to forecast.   But in spite of the normal anxiety, we can anticipate that there are going to be a boatload of stories about the future now that it begins to appear that the financial crisis is passing.

Today brought two new contributions.  First, Deutsche Post has just published a study of the future entitled “Delivering Tomorrow: Customer Needs in 2020 and Beyond, a Global Delphi Study.”  The study draws conclusions from an intensive examination of expert perspectives on a number of critical issues that will define our future:  what will happen to the price of oil?  what will the progress of climate change mean?  how will global interactivity evolve?

Perhaps the cultural differences in perspective offer theses about the future that move beyond traditional boundaries.  Or, possibly its just going to be more interesting to think about these long term issues now that we are on this side of the financial crisis than on the old, optimistic one with which we are familiar.  But the 2020 study offers numerous startling theses.  What will a world look like when China is the undisputed winner of global economic competition?  What will global transportation be like when polar routes have been opened up by polar melting.

The McKinsey Quarterly then wrote about one of its classic articles, the next revolution in interaction,  Like Deutsche Post, McKinsey found that the progression of interactive technologies will continue to evolve and to shape the future.   The point of the 2004 article from McKinsey was to encourage a focus on trends that will enable companies to attain sustainable competitive advantage.

Instead of strategies that focus on cost cutting, a short-term benefit that can ultimately be copied, both research sources encouraged their readers to focus on trends that would enable customized solutions.  Whether the discussion is of the evolution of the logistics business or the changing nature of enterprise in an information rich marketplace, trends that make it possible to individualize solutions will be dominant ones in shaping the future.  For those who become anxious with discussion of the future and its uncertainties, these studies point to the need to engineer organizations and infrastructures that facilitate agility and adaptability to changing customer requirements.

This may be hard to communicate.  Individualization?  Adaptability?  Most will say, but what will the future be like?  Talk of “open standards” and “plug and play” solutions seems to be a slide into software jargon.  Yet the idea of creating a framework that is the opposite of command and control seems to be captured by the iPhone ads.  Apple has communicated a framework.  Understanding that “there’s an ap for that” may turn out to be Steve Jobs biggest contribution of all.

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Transparency: The Game Is Afoot

August 22nd

The Washington Post (Ed O’Keefe) reported that the Obama Administration took another step to give reality to its transparency policy.  The Administration continues to spend the money (nearly a trillion dollars) that was authorized in the stimulus bill.  Officials publish press releases and hold events to announce that they are spending the money on worthy causes.  They know how to do this; everyone who has served in government knows the routine.

But at the same time that this has been going on, plans have been moving forward to create transparency about what the money buys.  This means that at the same time that people in Washington are announcing that they are spending money, the grant recipients are going to publish – through the new technology of our time – where the money is going.  As O’Keefe reports, “a government Web site began accepting the spending and jobs data from grant recipients that will provide the first fact-based progress report about the economic recovery efforts.”

By mid-October the plan is for the data that is now being reported is going to be public.  This was the President’s promise.  Citizens will be able to know where every dollar went and what happened after it was spent.  But will they?  The concept is easier to describe than to imagine exactly what will happen.  “This is a game changer”, said one of the professional’s in this field, Donald F. Kettl, Dean of the public policy school of the University of Maryland.  The concept is that anyone will be able to go to and look up what happened to a specific grant.

So this raises a question or two.  The technology now makes this concept very doable.  The technical part, based on registering at a web site, creating data feeds and syndicating data to be collected by others, this is all pretty routine.  But its not routine at all for those who are the recipients of grants to will have to report what they are doing, to assess the results, to report it publicly and to deal with what happens next.  Dean Kettl candidly acknowledges that no one knows what will happen.

Each of the stages will be a challenge.  Knowing that you have to report, learning how to report the data – that will be a challenge for some.  Then knowing whether the reporting is accurate and if it is, what it means will be the most interesting part of the process.  Are the things that are being purchased with the money producing results?  Are the results worthy ones?

One debate that will most certainly come will be over whether the stimulus spending created jobs.  But jobs are only one of the goals of many of the programs.  And even if jobs are created, some will no doubt point out that they weren’t green jobs.  This may be one of the most trying challenges of all.  Will the world be mature enough to examine the extraordinary new data sources that is going to generate by the Gigabyte without demagoguery?

There might have been some suspicion that in spite the novelty of this new reporting system where the public will see the inner workings of government spending for the first time, it could be dreadfully boring.  What if no one comes to the party?  At this point, given the range of new sites and sourcing of information that has already been created, just the reverse seems likely.  Stay tuned.  This could become interesting.

The O’Keefe article from the Washington Post 8 21 09

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Calling the Turn

August 20th

The financial crisis of 2008 raised the question of whether we are facing a turn, resetting to a new normal or pausing before the resumption of growth. Knowing where you are is critical. Those who bet on future growth that doesn’t materialize will lose the race and even bankrupt themselves. But those who bet on decline when they are only seeing a pause will stagnate and they too will lose.

What’s hard to see from the outside is the way that the stakeholders will work overtime to assert that the curves are heading up. Vested interest is so powerful that they will honestly believe that the Sun is the Moon.

Great leaders will have the courage to call the turn.

Listening to Jim Collins talk about his new book How the Mighty Fall, in which he traces the five stages of ascendancy and decline, you can see that this is is going to be one of the enduring questions of our time.

The experience of living through the worst financial decline in 80 years and not being sure of what you saw will be an framing memory that will structure our perceptions.  The fear of imminent decline will cast a long shadow into the future.s

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Department of Energy Announces New Auto Battery Initiative

August 11th

Obama’s Energy Initiatives put pedal to the metal:

Further accelerating the manufacturing and deployment of electric vehicles, batteries, and components here in America, and creating tens of thousands of new jobs, President Obama today announced 48 new advanced battery and electric drive projects that will receive $2.4 billion in funding under the American Recovery and Reinvestment Act. These projects, selected through a highly competitive process by the Department of Energy, will accelerate the development of U.S. manufacturing capacity for batteries and electric drive components as well as the deployment of electric drive vehicles, helping to establish American leadership in creating the next generation of advanced vehicles.

As opposed to Bush’s 2007 energy initiative, this one has some real meat on its bones. Korean journalists buried the story though, it’ll be interesting to see whether they can bring it back next week.

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