Market-Based Management®

Dirty Jobs --- create value

There is a show on Discovery Channel called Dirty Jobs. This article on entrepreneur.com (no subscription required) profiles some of these businesses and their owners who do the dirty work.

One business, RTK Environmental Group, tests for mold, lead, asbestos and indoor air quality. The owner, Robert Weitz recalls

going to a very affluent abode, where the owner promptly gave him a suit to protect his clothing. "I knew I was in trouble at that point," recalls Weitz, who wound up in an 18-inch-high crawl space leading from the closet, where he not only checked out a mold problem but found himself crawling in the dirt, inching past mice corpses, and moving across mole droppings and shards of broken light bulbs.

Despite the dirty work, Robert says he enjoys his work. Why? As you read the whole article it becomes clear that these owners see their jobs not as dirty work, but as valuable to others. They seem to understand how they can create value while earning a very 'healthy' living. Again from the article

Weitz happily admits, "I love what I do. I hear so many people say, 'I hate going to work,' and I think, 'How can you do that?'"  Part of the appeal, says Weitz, is knowing that he can help owners with children who have asthma or families that are being exposed to radon, a cancer-causing gas. He also gets to meet a wide spectrum of people, from wealthy CEOs and movie stars to impoverished children in filthy apartments. The latter is tough, but when Weitz is on an assignment like testing for lead in a low-income neighborhood and sees holes in the wallboard from rats in a child's bedroom, he at least knows he's doing something positive for them.

If the role of business in society is to create value - and it is - employees who understand and contribute to that value creation are going to be happier than those who simply see their work as drudgery or even a dirty job.

Zimbabwe's "Invisible" Entrepreneurs

We spend a lot of time talking about the failures of planned economies, but do you ever wonder how they seem to manage to limp along for so long? While authoritarian governments will go to great lengths to control (and subsequently destroy their economies), they have a hard time completely stamping out all market or entrepreneurial activity. Markets are like weeds, and they will find a crack to sprout no matter how thick and oppressive the pavement. This spread of pictures from the BBC chronicles the hard work and many challenges faced by the thousands of small entrepreneurs who shuttle back and forth between Zimbabwe and neighboring countries. Not only do these hardy souls earn a living for themselves, but they provide many of the essential goods that would have otherwise long since disappeared from Zimbabwe. The small entrepreneur is probably the only thing standing between the Zimbabwean economy and total failure. While we should bemoan the conditions in Zimbabwe, we can take heart that no institution – be it a tyrannical government or inept management – can completely extinguish the entrepreneurial spirit. However, while the entrepreneur can still wiggle under the heel of an iron boot, he or she can accomplish much, much more when allowed to roam free.

Long Live the King?

Roger Ehrenberg has an interesting post about the newly crowned king of the auto world, Toyota. Ehrenberg evokes Schumpeter's creative destruction model to suggest that even a successful company like Toyota faces the danger of being made obsolescent by its competitors. In fact, maybe Toyota faces even greater danger than other companies, Ehrenberg suggests, because of its size and success. We forget that in the past, companies now viewed as dinosaurs (or at least stumbling giants) -- Montgomery Ward, Sears, Kmart -- were feared to be unstoppable juggernauts who would crush all competitors.

If a company's very success can be its undoing (a thesis advanced more recently in Clayton Christensen's The Innovator's Dilemma, among other places), then is there any hope of surviving creative destruction? Only by internalizing a creative destruction mindset, so that we continually view all of our activities, processes, systems, and products with the eyes of the hungry competitor, the demanding customer, and the unsentimental investor. Making onself obsolete, as Drucker noted, is far cheaper than waiting for the competition to do it.

So will Toyota be able to continually renew itself from within? That's the question its customers, owners, and employees are hoping it will get right. It certainly seems to focus rigorously on cultivating the creative destruction mindset within. We'll see if it's enough to overcome size and success.

Dr. Sneer-Quotes

We’re all familiar with sneer-quoting, surrounding a claim or term we find dubious with quotation marks.  To wit: Homeopathic “Medicine”; New Age “Music”; the “Democratic” “People’s” “Republic” of Korea.  Very often, sneer-quoting is a snarky way of casting aspersions on a person or idea without making an actual argument.  It’s a way of translating sarcasm from verbal into written form.  But I propose that we can make good and rigorous use of sneer-quotes in at least one way: distinguishing between meaningful terminal degrees and terminal degrees that are either acquired for vanity, or confer no advantage in a given context.  People who hold the former should be referred to as doctors, while those who hold the latter deserve no better than “doctor.”

It’s easy to get riled at people whose degrees aren’t worth the paper they’re printed on.  (A 2005 piece in Reason gives a tragicomic example in the federal government’s Labor Department.). More insidious are degrees that come from an accredited institution but are irrelevant to one’s vocation.  “Dr.” Laura Schlessinger – the angry lady who doles out moral advice on AM radio – does indeed hold an Ivy League PhD . . . in physiology.  So why do we have to call her doctor when she’s haranguing incestuous deadbeats?

A few months back I happened upon the Deion Sanders of “doctors” while screening a DVD from a religious organization.  The format of the series is a mock classroom, in which the main narrator, to whom we shall pseudonymously refer as Dr. Hack Olson*, addresses a group of students on philosophy, science, economics, ethics, etc.  Dr. Olson is a talented speaker with a marvelous voice.  But as the lecture wore on, I noticed something about his style:  he didn’t make a single serious argument.  There was no rigor, no attempt at complexity.  There was nothing to persuade the skeptic, only reassuring clichés for the converted.  And that’s when it hit me: this man is no doctor; he is, at best, a “doctor.”

Five minutes’ research on Google confirmed my suspicions.  Hack Olson’s bio reveals that his title is derived from holding a DM (a degree with which I was unfamiliar), from a university you’ve never heard of.  It turns out that the DM is a Doctor of (Business) Management, and of the 96 hours of study required for the degree, 36 are in classes titled Research & Writing. In fairness, “Dr.” Olson did have to take a five-hour class in Science, Values & Ethics, which I suspect was less invigorating than the one in “Futuring and Innovation.”  Other than those five hours, what in this program of study entitles Hack Olson to the title of doctor when he waxes philosophic on absolute truth, proper interpretation of the Bible, or the existence of God?

The answer, of course, is nothing.  “Dr.” Olson’s title comes from a spare-time degree earned from a little known university in a field that has nothing to do with what he gets paid to talk about.  His degree is actually a double-dipping “doctorate”: it is a vanity degree of dubious worth and is irrelevant to his vocation.

At this point you are probably wondering why I’m debunking people’s credentials when this is supposed to be a blog on MBM, so I’ll come to the point.  The real tragedy about “doctors” is not that a few wags get to live off the fat of the land on useless credentials.  The tragedy is the fact that the rest of us hear the word “doctor” and assign instant credibility to their words.  But knowledge in one realm does not necessarily translate to knowledge in another.  I happen to hold a PhD in economics, so if I say something about supply and demand or marginal cost, you might want to take note.  But if I’m consulting for your business to cut waste or improve productivity, you’d be well advised to challenge me on my assertions, because there are a million details about your business that I know nothing about, any one of which might render my advice useless or even counterproductive.

This is why a rigorous challenge process is essential in any organization, and is a key component of MBM.  Employees should never have to cave to “doctors,” “managers,” or even “CEOs.” Titles don’t prove that ideas are good; strong arguments do.

* To anybody out there actually named Hack Olson, my apologies for any hassles this post might cause you.  And my condolences on your name.  What were your parents thinking?

Sure you're smart, but remember others can and should contribute

Interesting article in Entrepreneur Magazine (no subscription required) discussing the level of control a CEO/entrepreneur really has in their business. The future is unknown and any leader must realize what they can and can not influence.  The article states "[you] can't control external factors, but [you] should be in control of the general direction of the company, what it focuses on and who it hires early on."

Employees, no matter where they are or what they do, must and should contribute. Leaders must continually assess and understand the contribution individuals can make and assign employees' decision rights accordingly (the freedom to make decisions consistent with the demonstrated results they have obtained in the past). Leaders become more productive when they hire and develop employees who contribute, share their knowledge, speak up and challenge the status quo.  Employees who constantly try to do these things grow their ability to make value-adding decisions. Sometimes this is misinterpreted as advocating complete decentralization of the organization. Rather, it is the value adding mix of both approaches. Centralizing or decentralizing consistent with what is best for the organization while also considering the ability of the employees to make value-adding decisions. The article includes this little gem:

today's leaders need enough confidence to act but enough humility to realize they don't know everything. They should let employees influence decisions and listen when they say the company is getting off course. "If you're going to make all the decisions, you might as well hire idiots," says Pfeffer. "They're cheaper."

I might qualify the last sentence - Idiots are only cheaper in the short run.

Eying the Prize!

Sir Richard Branson is my third favorite billionaire (easy guess who numbers one and two are).  I like him because the British have a tendency to view success as some sort of embarrassment, and he has done much to resurrect the acceptability of their entrepreneurial heritage.  Sir Richard recently took a page from Ye Olde English playbook, when he offered a $25 million prize for the development of an effective means of removing carbon-dioxide from the atmosphere. 

The use of prize money to spur innovation is often thought of as a daring new concept – consider the recent $10 million X Prize for a privately build spacecraft.  However, prize money was the original source of government sponsored research and development.  Long before governments could afford to fund labs and R&D bureaucracies, they sought answers to technical challenges by offering prizes.  The most famous of these was the British government’s 18th century Longitude Prize, which offered the then astronomical sum of £20,000 to whoever could develop a means for ships to calculate their longitudinal position (miscalculating positions and running into things was a major problem).  The prize resulted in the development of reliable sea clocks or chronometers, which have since saved the lives of thousands of seafarers and thousands more people through the extension of more reliable commerce.

The advantage of prizes is that they unleash the creativity of human beings.  Often when governments or businesses conduct research and development, they place bets on specific solutions or technologies.  This narrows the range of possible solutions.  Furthermore, when you pay people to research and develop, they do just that – research and develop.  If anyone ever actually develops anything, then they often lose their funding!  It is also common for the best connected political groups to gain government funding for their own particular solution, which leaves out the less connected and backyard tinkerer with the novel, effective solution.  Not only does the promise of a prize give heart to the little guy, but it creates an incentive for entrepreneurs to search him out and support him – for a cut of the prize of course. 

I cannot wait to see what comes out of Sir Richard’s contest.  If the prize is ever given, then I am sure the $25 million will have unleashed more creativity than ten times as much in government expenditure.  I myself, have my own entry.  It is a highly complex biomechanical hybrid constructed from advanced alloys.  Actually, it is a fern decorated with tinfoil in a titanium pot; but one has to start somewhere.

"Harebrained" Scheme to Save Communism

I'm sure it's only a matter of time before American politicians start warning us about the dreaded "bunny gap" between east and west, but apparently North Korean economic planners have come up with a novel solution to country's chronic food shortages -- giant German bunny rabbits. Judging by the dearth of giant bunny meat at my local grocery store, the market does not share this enthusiasm, but it could just be one of those "market failure" things that some economists talk about.  Unfortunately, the giant bunnies consume whole wheelbarrows of greens and rabbit food, so they produce less meat per kilo of food consumed than smaller breeds.  However, I am sure the North Koreans will be quick to remind us that they have the giant bunny and we do not.

Tragically, nations and businesses often pursue their own "big bunny" projects, which usually fail to meet the demands of markets or customers and are doomed to end in failure.   

Where are the posts?

My apologies for a lack of recent content lately. I am in the process of integrating this blog with the Market Based Management Institute (MBMI) - which means there will be more authors to contribute more interesting material on a more regular basis. Hope all is well with everyone - I do appreciate all the inquiries asking when I'll be posting next. Keep checking back!