More management wisdom
The Wall Street Journal recently ran a remembrance piece on a management philosopher, Russell Ackoff. He was called an evangelist of the big picture… he tried to help his clients by “reimagining their challenges as opportunities to restructure.” Something many in the beer industry should take to heart… and no, that isn’t just some cheap pitch of my services ;-)… but it is a healthy mindset to keep in both our business and personal lives. The challenge is a fact; it cannot be changed since it is probably beyond our power to control… so why not think of it as an opportunity? Much healthier and might even turn out to help! And if it doesn’t, what was lost?
The piece notes he was an expert in conceptualizing problems and liked to say they came in three flavors: problems, messes, and puzzles, and each needed its own unique toolkit to fit. Here is one of his great quotes which I think applies to many of our business practices…
“All of our social problems arise out of doing the wrong thing righter. The more efficient you are at doing the wrong thing, the wronger you become. It is much better to do the right thing wronger than the wrong thing righter! If you do the right thing wrong and correct it, you get better!”
He was a legend as a management philosopher… but more importantly, he was a beer-guy! He worked with Anheuser-Busch for over 30 years, beginning in the 1960s. Sorry all you non-AB folks, but we’ve got to give him his due. At least the author of this remembrance credits him with helping A-B achieve national dominance. He helped A-B design a new expansion strategy that included building new breweries and warehouses based on computer modeling, a cutting edge approach at the time. He studied A-B’s marketing strategy and came to the conclusion that increasing advertising budgets had little effect on sales… neither did taste, which he found through blind taste tests… hang on all you craft beer lovers, this was in the 1960s and 70s… although it is difficult, I will fight the urge to make some sarcastic but spot-on comment about this time frame ;-)
Bill Finnie, a former director of strategic planning for A-B states, “This was incredibly valuable. It gave A-B the confidence to maintain its marketing budget flat from 1961 to 1976. We quadrupled sales”. According to Bill, reduced marketing costs were passed on to the consumer, making Budweiser inexpensive compared with local brands that had dominated the market through the 1950s.
Russell must have had some good ideas, in his 30 years of work with A-B their national market share went from 7% to 40%. There are plenty of beer folks out there today who where on the winning or losing side of that historic transformation.
But for our purposes, one of his more profound breaks with conventional thinking was his proposition that to improve a system (and your business is a system), you must analyze and address it as that, a system… not a collection of parts. Until that insight, most thought the way to address a problem (or improve an organization) was to break it down into its component parts, fix those parts, and then put the thing back together again. Think of your organization in these terms… using this type of thought, you first break your organization into its “parts”… sales, delivery, warehousing, admin, etc., fix or improve each of them and then put the thing back together again. Ackoff said this was folly. This quote captures the problem with this parts or mechanical approach…
“The characteristic way of management that we have taught in the Western world is [to] take a complex system, divide it into parts and then try to manage each part as well as possible. And if that’s done, the system as a whole will behave well. That’s absolutely false, because it’s possible to improve the performance of each part taken separately and destroy the system at the same time.” Edward Deming
I’ve encountered that situation many times… some policy or procedure works great for one department, but it absolutely destroys the workings of another. Put enough of these together and the entire organization will turn into circular firing squad.
Instead Ackoff developed systems thinking where improvements in an organization are driven by the design and workings of the entire system. Innovation and improvement comes from total system improvement, not just improving certain parts. I use this same reality in my operational consulting and perhaps surprisingly, in my brokerage activities as well. Since I am frequently asked, yes I do help sell and purchase distributors.
Ackoff describes what he is talking about
“…the development of synthetic thinking, which provides better understanding of complex systems than analytical thinking does. Synthetic thinking is a way of thinking about and designing a system that derives the properties and behavior of its parts from the functions required of the whole. The whole has properties that none of its parts have. Analysis of a system reveals how it works but synthetic thinking is required to explain why it works the way it does. Systems thinking integrates the two. Analysis breaks a system down into its parts, tries to explain the behavior of these parts, and then attempts to aggregate this understanding into an understanding of the whole. It cannot succeed because when a system is taken apart it loses all its essential characteristics and so do its parts. A disassembled automobile cannot transport people and a motor taken out of it cannot move anything, even itself. Analysis, applied to systems, and therefore corporations, can only yield knowledge of how the system works, but never an understanding of why it works the way it does.”
I’ve often had a soon-to-be client call and ask me to come in and help them improve their compensation system or warehouse operations or whatever… I always tell them that is not possible, we must first analyze the entire system, then we can begin to address the various integrated parts. I know more than a few thought I was just trying to sell them a bigger job, but they would soon reframe their thinking and view their organization as an integrated system, a “whole”… the first step to improvement.
With that, I leave you with two thoughtful quotes… the first from Edward Deming
“No one has to change. Survival is optional”
Think about that one over beers. You may not want to sell. You may not want to purchase. You may wish for all this change to go away… as Deming states, the choice is yours… your survival is most definitely optional. And choices you make today (or don’t make), will set the course of your future for years to come. I sometimes shake my head at people passing on acquisition opportunities… in many cases they are simply setting the stage for their exit from this industry sometime down the road… sadly, without even knowing they are doing so.
The second is from that management guru, Albert Einstein
"The specific problems we face cannot be solved using the same patterns of thought that were used to create them."
As you address the first quote, keep the second in mind.