Over the last 30 years or so, all sorts of management strategies, methodologies and practices have evolved and some are actually quite effective.  It can be a bit intimidating to the uninitiated and this creates a problem that I think (with my process guy hat on) needs to be addressed.  This might surprise you coming from a technology guy, but I really do believe the simplest ideas often turn out to be the best ideas.   Consider Apple’s iPod.  Do you know anyone who doesn’t own one?  As an early adopter of many things technical, I really appreciate its simplicity because I owned another early MP3 player.   The other aspect that is also not lost on me is the interoperability with the rest of my life that makes it an indispensible device for me.  I’ve managed to consolidate my extensive collection of CDs into a device the size of my mobile phone, I’ve got headphones for my trips, a built-in adaptor for my car/boat and my iTunes library is accessible in my home theater setup where it scrolls through my rather large photo album in high definition on the big screen.  Not bad for such a small device.   I feel the same way about agile development practices (Agile), lean management practices (Lean), SCOR and Time-Driven Activity-Based Costing (TDABC). 

Imagery is a powerful thing and I’m counting on it to work for me here.  You’ve probably seen (or at least heard) about the movie Titanic.  It had a star studded cast and a mega-million dollar budget.  At the time it was being made, it was projected to be one of the most expensive movies ever produced.  The movie has lots of drama and this makes it easy to forget about the real story line of a ship called Titanic.  A variety of factors contributed to the sinking of the Titanic, including failure to recognize that weather conditions made it difficult to identify icebergs, an insufficient number of lifeboats, inappropriate use of construction materials and the reluctance of many passengers to actually board the lifeboats.  In many ways, these factors are similar to the factors that many businesses faced during the current economic downturn.

Over the past few months I’ve written a lot about some of the benefits of a first-class Time-Driven Activity-Based Costing (TDABC).  There’s even an assessment analysisthat allows you to determine your capabilities as it relates to your priorities so you know where you stand and where to start.  It’ll also give you an idea how such a system can benefit a variety of critical business management functions.  So, what’s the big deal?  How is it really different from the ABC methodology that originated back in the mid-80s?

I was speaking with one of my colleagues the other day and he referenced an analogy about the difference between using a crayon vs. a mechanical pencil.  What I liked about the analogy was the powerful visual I started thinking about.  When you think about crayons, your mind probably wanders back to grade school and your box of Crayola crayons that were in every child’s desk in grade school.  Crayons were used primarily for drawing and served as an easy-to-use tool for learning how to draw. However, most would attribute any drawing done with crayon to a child and immediately lower their expectations. 

Have you ever found yourself in a meeting, whose primary purpose was to make some key decisions about your business, and yet you find yourself in a heated debate about what numbers to use to make the decisions?  Believe it or not, it happens more than you might think.  Over the past couple of weeks you might have seen my posts on pricing.  A meeting about pricing strategy is usually, if you’re doing it the way you’re supposed to, a meeting where you will have participants from sales, marketing, finance and operations…so pretty much the key members of your leadership team.   Why?  It’s mainly because pricing requires input (read numbers) from all of those organizations to provide a complete picture from which you can make an intelligent decision, especially if you’re using it as a competitive weapon.

Last time I wrote about one of the risks associated with price strategy, specifically on an internal analysis that aligns customers with your sweet spot with respect to margins.   It may seem obvious that pricing decisions factor in a deep understanding of how you make money, but as our founder Steve Anderson likes to say, the devil is always in the details.  In this case, it’s the variability cost-to-serve that presents opportunities to drive more revenue from existing relationships (using higher prices) to improve your bottom line.  This is great news times like these where finding new sources of revenue seems all but impossible.  However, that’s not the only thing you should be worried about. What about external pressures?

In my last post, I wrote about the CFO as a Value Integrator and the need for CFOs to start thinking about how they can help their peers in other parts of the organization by focusing on helping them solve problems by mapping their own unique expertise to the challenges these other business executives face.  Earlier, while doing some other research on Risk Management I ran across a rather interesting Corporate Executive Board (CEB) blog post on the Six Myths of Risk Management and, as you might suspect, one of these myths crossed my mind as I was writing the Value Integrator post.

The Open Compliance and Ethics Group (OCEG) presented its GRC Achievement Awards to six leading companies last week.   Among the winners was Carnival Corporation, which was highlighted in Eric Krell's case study Inside Carnival Corp: A GRC Case Study last year for Business Finance Magazine.  Carnival's approach is worth considering because they have clearly integrated governance, risk and compliance (GRC) into their overall performance management framework.   Like the company I referred to in my blog post, How Well Do You Manage Your Risk?, Carnival has applied GRC management at every applicable level within the organization, essentially making risk "everyone's job."  There are a lot of similarities between leading companies' approaches to performance management and GRC management.  Let's take a look at how Carnival tackled the problem.

Or, more important, do you even know your risk exposure?  After reading Michael Lewis' book, The Big Short, it's clear to me that relying on others to evaluate your risk as the bond rating companies did is a bad idea, especially if you're being asked to risk assess their offerings.  It's as if you were to go to the bank, ask for a loan telling them they have nothing to worry about because you're going to tell them how credit worthy you are and the unthinkable, that is you not being able to pay it back, could never happen.  Yet, this is the position many companies find themselves in when they try to assess their exposure to changing market conditions.  They generally have a Plan A, the budget, which is effectively their best guess at some point back in time.  So what happens when things change?  Is there a Plan B and, more important, how well will Plan B work?  Is anyone even asking the question, what is the worst that can happen and what do intend to do then (Plan C)?