Randall Stross just wrote this article for the New York Times, which essentially looks at the past 40 years of growth in spending in information technology.

Stross points out that retired software executive Thomas Siebel, whose greatest fortune was won at the eponymously named software company he founded, points out key segments of that 40 year timeline, namely 1980 to 2000 and then from 2000 forward as the key times.

In a great graph, that unfortunately misspells Tom’s name, twice, I think both Siebel and Stross have missed the key point.

Looking at spending patterns as a compound annual growth rate (the so-called CAGR) as Siebel does, or slicing at specific blocks of time misses a critical piece of this data, the fact that innovations in technology and the ability of businesses to realize the potential of those innovations are reflected in the numbers.

In chapter 2 of Rethink, I walk through a series of big ideas in business, times when a truly different unit of analysis has been created, from Adam Smith’s “task” in the 1700s, to the “process” mostly made popular by Michael Hammer and James Champy in the early 1990s (with others in between, and one more at the end – the “what”).

Why this matters is that Hammer and Champy’s process transformed the way businesses looked at interdepartmental work, and that was what broke the dam on the popularity of ERP software, and that is the cause of the lump in this graph that begins in the mid-1990s.  Then the internet took off, and crashed, but it left us with a flat world economy.

So there we were in a flat world economy, and then six years ago a technology architecture was introduced called Service Oriented Architecture (SOA) where technology could be built and managed like a series of lego building blocks.  But the promise of SOA remains unfulfilled because businesses kept looking at their businesses with these old units of analysis, such as process.  Even with that limitation, another lump emerged with a strong economy.

SOA has matured with the internet and the latest label is “cloud” computing, and there are internal clouds and external clouds and terms like “SaaS” for software-as-a-service, and “S+S” for software-plus-services (suggesting some software needs to remain on your desktop and some of it should be in the cloud, or at least, “a” cloud).

So what does this have to do with Tom Siebel and the graph in this article by Randall Stross?  Just as the process lens unleashed the ERP software wave in the mid-1990s, the “what” lens in the pages of Rethink has the ability to unlock the potential of cloud computing and we should expect to see another big lump on this graph as we move into the years to the right.

And I will bet you a dollar that I am right.

-Ric

I mean really.

In chapter one of Rethink, I explain how Bob Nardelli destroyed The Home Depot in his cost cutting efforts by flat out missing what was most valuable to his customers (one of the ways he lowered costs was lowering wages, so all of the best people left, and the knowledgeable people were what the customers valued, it wasn’t that they had better plywood).  Cutting costs was was was needed, but “how” he went about it was a mistake. One of the reasons that story got so much attention was because after the company did so poorly, and the stock dropped so far in value, Nardelli still got an exit package of about $250 million.

So when Nardelli was hired as the next CEO of Chrysler, I was not only shocked that someone with $250 million in the bank wanted to go back to work, but that someone from a totally different industry would hire someone who had failed so spectacularly and so publicly in his previous role.

So when I read this article by Louise Story in the New York Times today, it was a little stunning just how much of a deja vu it is.  As Story wrote:

“To reduce expenses, Mr. Nardelli cut excess factory capacity and billions of dollars in fixed costs. He improved the interiors of several models, which bolstered some of its approval ratings.

But there still wasn’t a strong demand for Chrysler’s product line, which was packed with large vehicles like minivans and S.U.V.’s at a time when skyrocketing gas prices were making consumers interested in more fuel efficient cars.”

Wow.  Once again Nardelli slashed costs without asking what his customers really wanted.  Chrysler was making cars people didn’t want, so why would people buy a cheaper version of something they don’t want in the first place?

I honestly blame Steve Feinberg of Cerberus, the private equity firm that hired Nardelli.  Nardelli did EXACTLY the same thing for Chrysler that he did for The Home Depot, so in that sense I don’t blame Bob this time around, he has proven to be a one trick pony.

Maybe the next job Nardelli needs is to cut government spending in areas where people have little choice but to pay for the services, like the post office which is $7 billion in the hole this year.  At least there it doesn’t matter what the customer values.  I am not acting like a headhunter for Nardelli, but if someone is thinking about hiring him again, it’s a pretty consistent track record.

Sheesh.

-Ric

Inexcusable.

That’s the first word that came to mind when I read this article by Ian Urbina in the paper this morning.  I hadn’t ever heard of Peggy Cooper Cafritz or her world class art collection or her 15,000 square foot house very near where I went to college in Washington DC, but the fact that it burned to the ground on July 29th, destroying the hundreds of irreplaceable works of art, not knowing many of the facts, I did wonder how the fire got started and why there weren’t better fire control systems in the house.

But the bigger issue around this fire, which was the focus of Urbina’s article, was that there wasn’t enough water pressure in the fire hydrants to put the fire out.  The strongest water pressure they had was 323 gallons per minute, which is less than 20% of the amount needed for a fire of this size (1,643), and of course when they went to the second floor, there was even less water pressure.  This is, for all practical purposes in the middle of Washington, the Potomac river is so close you could practically smell it from the porch of the house.

While this frustrates me at a micro level that so many great works of art were lost and a beautiful home was destroyed, this was totally avoidable.  More importantly, it’s somewhat amazing that insurance companies aren’t all over this issue.  Don’t get me wrong, the insurance industry behaves badly in many areas, especially health care.  But as I wrote about FM Global on an April 27th blog entry, smart insurance companies should be working harder to know their risk, and at the very least notify their customers about their specific risk profile, and charge them accordingly.

Where am I going with this?  As my good friend Lawrence, a volunteer firefighter in Westchester County, New York will tell you firsthand, fire departments need to regularly check the water pressure in fire hydrants, a lower skill, lower risk task often delegated to the volunteers.  Whether it’s fire departments or some other independent group, someone should have a database of water pressure at specific fire hydrants so that the risk can be assessed on a per block basis.

And at the risk of stating the obvious, the outcome that everyone would like is to have enough water pressure in hydrants, so firefighters can do their best to minimize fire damage.  “How” they go about it is what’s in question here.

This wouldn’t happen overnight, but from where I sit, it’s a relatively straightforward organizational task.  So when people go out to a site like zillow.com, for example, to find a home, zillow could add a fire risk overlay on a per block basis, partly as a warning to home buyers, partly to inform insurers, and also to help local governments prioritize where they need to improve water pressure most urgently.  Adding quality controls to the process would take some effort, but tougher problems have been solved.

And it would probably be a pretty good little side business for zillow, especially now when home sales are slow.

-Ric

When I read Damien Cave’s article in the paper today, I was  shocked to learn that until recently people in Florida haven’t been required to have a fishing license if they fish from the shore.  I have lived most of my life in the state of Washington and fishing licenses have been required here since I was little.  So just because Florida is different from Washington, why does that make it shocking?

Because in addition to many populations of fish being at risk, fish and wildlife budgets are getting cut, when more money is needed for enforcement and oversight or some of these populations will be unrecoverable.

In Washington, for a long time we have even had to buy catch record cards for key species such as salmon and Dungeness crab and be specific about what we caught, where we were, and the date.  Statistics like this are vital to the management of the overall ecosystem and it has to get funded by the people who participate. Sure fishing is a national past time, but too much is at risk to not have licenses and catch records if we have any hope of really knowing what’s going on in ecosystems in the water.

Two years ago there was a front page story on the New York Times about how the Northeastern lobster population was unexpectedly large and the fact that people were celebrating.   That’s all well and good if we know why it happened, but we don’t.  What that means is that there was a dramatic shift in food supply or threats to the lobster and that’s why it was such a strong year, but not knowing is very scary.

Here’s where it gets nasty.

Enforcement of these laws is really hard because of the sheer amount of places where people can fish.  In Washington, for a couple of years you needed to have something pinned to a hat or a shirt so someone could see from far away that you were licensed, but that was ineffective. Clearly people are not going to do this just because it’s the right thing to do, so I would love to hear suggestions of people for how we solve this problem.

-Ric

Talk about a great fit for rethinking!

In the Rethink book I talk through separating what you do from how you do it, so you can assess the value and perfomance of the “what” before embarking on a decision about whether it makes sense to focus on that particular area.  What turns out is that in most cases, it doesn’t matter “how” something gets done as long as it gets done as well or better than you expect.

Howcast has all sorts of “how” videos for people who either don’t know how to do something, like bake a certain something, or who aren’t doing as well at something as they would like, such as the clip here about how to look great in photographs.  I posted it on Facebook because I think it’s a perfect little video for users of that site.

So in most cases Howcast either gets you out of a “how” trap, in cases where you aren’t getting the results you want, or it prevents you from getting into one in those areas where you haven’t done something before.

Send me your favorite Howcast video links to ric at ricmerrifield dot com.  Thanks!

-Ric