Defining the problem statement is really half the problem solved. How profound and how so easily not followed?

Some years ago, I was attending as a participant in a workshop for new managers. One of the sessions was a case driven one where a group of us were asked to work on a business problem and come out with solutions. The case was about a firm that was the market leader in mattresses and which has been losing market share rather heavily over the past couple of years and was looking for solutions to arrest the trend. There were a number of items mentioned in the 10 page case study including market information, financials, product variants etc., Our group was a diverse one with folks primarily from a technology background. We had a 1 hour slot to come out with some options. 

Barely had we started reading the case, when one of the guys who was the oldest in the group and who had been a Siebel CRM consultant started out

Siebel Consultant: “Guys, this is a ridiculous waste of time. The solution is to implement Siebel CRM and move on. That should just help them get market share. I have done 7 Siebel implementations and every time the market share of the firms increased.“

“Hold on” came a rather harsh voice. It was a close acquaintance of mine who at that point in time had been asked to build a SAP Practice.

SAP Consultant: “SAP has just launched some cool features that will help their call center executives get upto date order information as it seamlessly integrates with the SAP SD and FICO modules”

I was furiously running through the pages to see if I saw the word “SAP” anywhere as I wanted to see where my SAP mate had got this rather interesting information. Another thing that intrigued me was the issue around call center executives for a firm which sells mattresses. Well stranger things have happened and I just listened to the group continue. It was now the turn of the Open Source guy, a Java expert to talk out

Java Expert:”Come on folks. The future is all about open source technology. While the packaged tools have their advantages, you need Java folks to build the interfaces to the legacy applications to ensure smooth flow of data”

The last part of the straw was the data warehousing expert who was skilled in a rather rare skill at that time (Ab Initio).

Ab Initio Expert: “Remember all these implementations are useless unless the management can have robust reports. Make sure that you include that as part of your solution”

Within a few minutes, what was mooted as a business problem became a technical architecture piece as each of the guys started talking about different ways to implement the system. 

The meek “generalist” in me was overwhelmed with all this technical know-how and watched the drama unfold. One of the guys was actually polite enough to ask me about what I felt. I started out by saying “Should we probably look at the case to help define the problem”. This was met with a startled “You moron” looks and the group returned to their animated conversation.

When it was time to present, the CRM Expert proudly went to the board and announced “Our group has discussed the case and we think that Siebel is the way to go. We should implement a Siebel solution which will interface through Java interfaces with the SAP modules and support it with a strong reporting system in Ab Initio to provide management with the necessary reports to take the right decisions.” He then went on to describe how this can be implemented in a rather accelerated fashion using some assets (that his team has developed).  He finished it with a rather arrogant flourish which seemed to indicate “This is just too simple for my level”

Our arbitrator who was a management consultant took a few minutes to digest the information and then started out what was actually a profound response.

“Team, excellent solution. But can somebody just tell me as to what problem is this solution intended to solve? If you had bothered to look at this case properly, you would have noticed that it is about a mattress company that is losing market share. It is also rather intuitive that Mattress firms don’t sell their products through a call center. A little bit of analysis on their financials and product portfolio would have told you that. And you are telling me that you want to implement a Siebel-Java-SAP-Ab-initio solution which will generate reports that will very likely tell me the info that I already have today?”

While this may appear rather intuitive, this kind of behavior is increasingly becoming the norm today. People are ever so eager to apply their skills on problems that they don’t bother to define the problem in the first place. As my boss once said “This is akin to a doctor who performs a heart surgery on a patient (because he is a surgeon) only to realize that the patient actually came to him for a common cold”

A close pal of mine who is looking for the next big job opportunity thinks that getting his resume updated by an expert will probably help him get that coveted job. Again a great solution but what is the problem that he is trying to solve? Does he have evidence that his existing resume is sub-standard? Not really but somebody mentioned it as a solution which has got his thinking going.

Problem definition is the first and the most important step in any problem solving exercise. It is very important to hold on to solution finding till we have probably defined the problem. But any good problem definition requires the participants to analyze the landscape fully and come out with the right facts that would help put the jigsaw of the problem in perspective. Many a times, people come to the table with half-done analysis and then try to define the problem in a haphazard manner which further confounds the problem solving. A common mistake is to identify a symptom and conclude that it is the problem. A headache is rarely a problem but is a symptom. The problem for this symptom could be as drastic as a brain tumor or as simple as not having had adequate breakfast. To identify which is the problem, the physician has to systematically go through the diagnosis including analyzing various medical reports. Only then is a solution recommended.

A systematic approach to problem definition will go a long way in finding the right solutions to the problems. It will take effort but it will be well worth it as very often than not, solutions turn out to be very simple once the problem has been properly defined.

Too big to fail? Is that a healthy place to be in?

Over the last few weeks, I have heard the audio book of Too Big To Fail by Andrew Ross Sorkin as well as watched the movie based on the same book, which outlines with some good insights on the 2008 credit crisis, the actions/intentions of the various key players involved and the catharsis which started with the fall of Bear Stearns and ended with the massive bailout of the financial industry by the US government through the TARP Plan. Towards the end of the movie, Cynthia Nixon (of Sex and the City fame) who essays the role of Michelle Davis(who was at that time, the Assistant Secretary of the Treasury, Public Relations) makes an interesting comment on the bankers resistance to participate in the TARP plan which kind of put things in perspective.

“These guys bring down the entire financial system. And we can’t impose any restrictions on the money that we give them to stabilize themselves because they won’t take it”

The comment is quite profound and quite bewildering to a normal observer but it comes as no surprise to those who have been through the “Too big to fail”(TBTF) phenomenon. Corporate as well as world history is littered with organizations (political/corporal/military) which also grew to a position of being TBTF and then came crashing down in spectacular fashion. The empire of Alexander, the Roman empire, Hitler’s 3rd Reich, the Soviet Union are quite a few that come to mind instantly. The corporate world especially over the last couple of decades is littered with Enron, Worldcom, Bear Sterns, Long Term Capital Management(LTCM), Lehman Brothers, AIG to name a few.

Looking at the rhetoric around “Too big to fail” makes me wonder if this exalted position is really something that an organization should aspire to achieve. Well, it does offer some compelling benefits

• Gives it unique arbitrage (read bullying) opportunities. Gives it additional leverage to arm twist competitors/suppliers/employees and even customers. (Does anybody remember Enron and California?)
• Gives it an opportunity to become a monopoly
• Aids it to influence government policies.
• Offers greater opportunities to gobble up (read M&A) smaller competitors.
• Offer additional/new pockets to hide losses/misappropriations as much as possible
• Sell the “success story” to an extent that the halo around tends to sound like the real truth.
• Does keep the shareholders happy. However bear in mind, the shareholders that matter to the corporate are only the institutional investors who buy in chunk and not the singular retail investors.

However the biggest learning from history is that almost all of these benefits are “short term pleasures” and the support structures that help create these benefits are extremely fragile.  A organization which is reaching the TBTF position also inherits the following pains which significantly dwarfs the short term pleasures specified above

• They become fat and sloppy (like some of who are fighting a losing battle against body weight). They lose the ability to be agile to market changes. Even if they are, getting the entire organization to turn rapidly around proves almost gargantuan
• The arrogance which comes naturally with the TBTF position leaves tons of bad taste/enmity in the entire ecosystem. The TBTF corporate inherits the maximum number of folks who actually want to see it fail.
• Leaves the corporate open to leaks all over the place. The sheer size means that the possibility of leaks increases almost exponentially. A significant amount of senior leadership effort goes away in handling the leaks as opposed to thinking about the future (The story about Westinghouse is a good example of this phenomenon)
• Ultimately leads the management to adopt a ponzi scheme. Whether it is Hitler’s policy to keep the war machinery going in the 1930s in Germany (and building the halo of a post-depression growth explosion) or Enron trading its energy products in the form of spurious derivatives or the complex mortgage based derivative instruments that created the credit crisis, all of the TBTFs have ultimately landed themselves in ponzi schemes

So who really benefited from the TBTF firms? It is probably the rich banking fraternity or the leadership of these firms which ripped the firm off during its heydays by getting dividends/fat salaries/bonuses or capital gains by buying at a low and selling at a high (by getting insider information). The rest of the ecosystem(The employees, customers, supplier, retail investors) has had to deal with the excreta left behind due to these excesses.

Interestingly another lesson that history teaches us is that this phenomenon never really goes away. As Gordon Gekko (played so adeptly by Michael Douglas in Wall Street) says “Greed is good”, the anger after the fall of a TBTF firm is invariably replaced by investment in another similar entity which then over the next decade attains the TBTF state and then the next disaster happens.

Research done in this area like the ones documented very articulately in the book “Built To Last” by Jim Collins and Jerry Porras does allude to the fact that the more successful or enduring firms have been the ones that have learnt from these mistakes and have learnt to stay agile even if it means that they don’t reach TBTF status. Wall Street is of course a strong exception to this rule. Another recent movie that I watched, “Margin Call” illustrates this very well. Towards the end of the movie, when the CEO of the fictional wall street firm, talks to his head of trading portrayed by Kevin Spacey, he talks about the different disasters (read crashes) that have enveloped Wall Street ever so often and how that the Wall street firms are helpless. They seem to have made a business of just creating products and services which lay the basis for the next crisis. The ones that survive the crashes are so greedy to make money from the opportunities that arise from the recovery that they achieve TBTF status very fast by indulging in a number of activities(many of which are beyond scruples) geared to make sufficient money to survive the next crisis.  However they may also be reaching their nadir as this time around, they needed Japanese/Middle East/Chinese financial institutions to actually bail them out this time.

So the key question for corporate leaders or governments is that whether they want to reach the TBTF status? How often do we say “How the mighty have fallen”?