The central idea of the Rethink book is the ‘how’ trap, that people get so caught up in ‘how” they do something that sometimes a really simple alternative is just impossible for them to see.  The ‘why are we going this way’ conversation in driving to a favorite destination ((it rarely matters which route you take, ‘how” you get there as long as “what” you are doing, getting to the restaurant on time, is accomplished) is a good example of this totally human condition that spills into so many areas of our work and personal lives.  Generally people aren’t in these ‘how” traps because of stupidity or ill will, it’s simply that they have gotten so used to their ways, or so close to it, they don’t stop and ask “why can’t we do it some other way?”

So when I saw this article in the paper today paper today, talking about the risk of $186 billion in credit card losses among banks because of increased unemployment and the fact that credit card loss rate, which used to correlate to unemployment rates, is now growing faster than unemployment, I started to scratch my head and think banks are in a big “how” trap in looking at this debt.

After realizing just how numb I have become to banking numbers these days, thinking that $186 billion is just a fraction of the $800 billion that has been set aside for banks already, the part that left me scratching my head is why they are even talking about card losses right now? Why rush to write off the debt?

I know lots of people who went to college and graduate school that received financial aid to pay the tuition, and from time to time I will hear someone say that they are still paying off their college or medical school, or law school loans.  I am 43, and most of these people are around my age, which means some of these debts were incurred over 20 years ago.   I know several of my friends have gone for long periods of time without work, and they have simply worked it out with their schools to pay off the debt when they can.

Credit card debt is like school debt in that it already happened.  It’s not like it’s an asset like a house or a car that is appreciating or depreciating, or that occupies some land or something like that, it’s just a debt that has some sort of interest rate and payment terms hooked to it.  So why do the credit card companies not just work with the card holders and work it out with people like schools do for education debt.  If they change “how” they go about managing the debt, yes, it will take them longer to get the $186 billion, but they still should get most of it.  Most of these people will get jobs again and they should have to pay for the food, clothing, restaurant bills, gasoline, and running shoes, and so on that make up that credit card debt.

Please, rethink managing credit card debt, so taxpayers don’t have to pick up this tab.

-Ric

Treasury Secretary Geithner’s op-ed piece in The New York Times today, “How We Tested the Big Banks” fell far short of what was needed to explain where we are.  Add that to the billions in TARP funds he has approved with not enough strings attached (strike one), and I am on the verge of losing all trust and confidence in him.

First of all, his explanation of sending “hundreds of supervisors to spend 45 days rigorously reviewing the banks’ detailed loan data.”  Really?!  Just what have the bank people been doing all this time, if not that?  We have been hearing about seven and eight figure retention bonuses for “key” executives at these banks and then we send in hundreds of “supervisors” in to run some basic spreadsheets and risk analysis?

But before I get too far into beating up “how” Mr. Geithner is going about this work, let’s back up and take a closer look and “what” he is trying to do, specifically his measures of success.  Give him, well credit, for addressing the need to stabilize the banks and their reserves and their ability to lend.  That’s banking 101 and we now know a lot more about how mortgage backed securities and other crazy high risk businesses blew up the financial markets including a lot of the banks.  What this is really about is getting a handle on debt risk.  That is the measure.

That “what” is in plain view and lots of people are talking about it.  I don’t know why it’s taking so long to get transparency on that, I think everyone has Excel, right?

The “what” part that I am not hearing as much about, which is also one of the bigger variables in this equation is displaced families, homeless people.  Homeless people are not new, and while that is in some ways a very complex topic in its own right, there is a “new” addition to that homeless community and that’s people who are losing their homes because of foreclosures – a big part of this current crisis.

Someone in the administration needs to provide some tolerance thresholds for how much additional risk a bank can take before foreclosing on a house, and that has to tie to some logical articulation of how much extra leeway homeowners will get before getting the boot.  There are car ads saying that if you buy a car and can’t make payments, you can just bring it back, we need something like that for housing, but also have some clear and specific messages about secondary housing options when friends and family are not an option.  The government needs to be specific about its role here, and how much it will help, and what’s the federal and state role here, and then also be very specific about how much more lenient banks can and cannot be.  Without that, there are still too many variables, and “how” we go about it is most assuredly going to fail.

OK Tim, last chance – let’s see what you can do.  We need you to hit one out of the park.

-Ric

Match.com, LinkedIn, and Twitter are among the long list of companies I hear people saying that Facebook will either crush or merge with as we continue to weave Facebook more tightly, and centrally, into the fabric of our internet lives.  But in the midst of FedExing  a bunch of copies of the Rethink book this week to press and other people, two things became very clear to me:

1) Trying to figure out the street address of some well known businesses is much harder than I expected in this day and age.  Not fun.

2) Reaching out to someone in e-mail, someone you have never met, has never been easier, because of Facebook.  In many cases I sent the person a message in Facebook explaining that I wanted to send them a copy of the book, and if they would supply an address, I would send it, and that worked really well.

This week I reached out to someone in The White House, a famous author, a famous book critic, and others and it took almost no effort even though I only knew how to spell their names and a I knew at least little something about where they work and what kinds of friends they have.  Searching for a name of Facebook, you will usually get several names in the result set, but if you can’t tell from the photo alone (which I can about 50% of the time), just looking at their friends is usually enough to figure out if it’s the person you are after.  From there, I usually send the person a message (instead of a friend request if I don’t actually know them), and nine times out of ten they turn around and send me a friend request.

I spend my days trying to help people get out of their various “how” traps, where the need to rethink “how” they do “what” they do, usually with dramatic results.  With e-mail, the “what” is pretty basic Communicate Message or something along those lines, and “how” it’s done today, whether through hotmail, gmail, our Outlook, we start out either by looking up the e-mail address of the person, or if they are already in our address book, just start typing their name and it resolves.  But I meet a lot of new people every week and I can’t help but think that the following things are going to be impacted by Facebook:

1) “How” we exchange information. Business cards become a big waste of money for a lot of people, even people who meet a lot of new people every day, if you can simply look up a name and connect and learn a lot.

2) “How” we search for someone. Why search for someone on Google, Live, or Yahoo if you can search for them, and verify it’s them, and message them in the same interface?  This is a huge advantage for Facebook now that they so deep in so many social networks.

3) “How” we choose which account to use.  I have four e-mail addresses, and I know some people who use several.  If you know the person is a regular on Facebook, they will keep their Facebook account connected to the account they want it in, so just send the message via Facebook and no more wondering which account to use.  I have been doing a lot more of that.

I would say that >50% of my social e-mail has been going through Facebook lately, and I have almost stopped using hotmail and gmail.  I have too many attachments and confidentiality issues to stop using Outlook for work, but while I would be very concerned if I were some of the companies named at the top of this post, but I wonder if the bigger impact is on how people search and message.

That will be a gigantic change if it continues.

-Ric

http://www.nytimes.com/2009/05/02/your-money/estate-planning/02wealth.html?pagewanted=2&sq=donations&st=cse&scp=1

This article in Saturday’s paper talked about the importance of making flexible donations to schools, adding a comment that if a donation 100 years ago was to pay for typewriters at a school, they still need to honor that specific purpose of the donation even though no one then could have anticipated how useless typewriters would be today (given the radical difference in “how” kids do their schoolwork).

Today we should be at least smart enough to know how much things can change.  Which is why this other article that appeared Sunday seemed like such a great insight into how to get the right education to the next generation.

http://www.nytimes.com/2009/05/03/fashion/03sexed.html?_r=1&scp=1&sq=Birds%20and%20bees&st=cse

As people talk more about how differently different age groups communicate and take in information despite using the same tools from cell phone text messages, to e-mail, to Facebook, Twitter, and others, many people have come to the realization that the teenagers of today will be our office co-workers before we know it, and their ideas of normal and acceptable communication styles will probably be very different from what we know today.

We have already seen shifts in office behavior.  Most of us used to use our office phones every day.  Now, other than conference calls, an inbound call to my desk phone has become a novelty because e-mail is the primary means of communication where I work.

So backing that up to how these kids will learn, since many of them already have a totally different way of communicating and taking in information, that implies that “how” we teach them will also need to change pretty profoundly if we want the outcome of educated people prepared to enter the workforce (or whatever they want to do).  It’s a good bet Amazon’s Kindle is a step in the future direction of textbooks (sorry backpack manufacturers).

That’s why this article caught my attention.  The piece “When the Cellphone Teaches Sex Education” about how the Adolescent Pregnancy Prevention Program of North Carolina set up the Birds and Bees Text Line to help kids answer questions about sex and sexuality.   I expect not a lot about the content of sex education has changed since I was a kid, but my guess is a lot of kids still aren’t crazy talking about every detail with their folks, this is a great solution to educate kids on this topic since it’s in a familiar format and in this case it’s fairly private.  Admittedly it’s a rapidly moving target, but educators need to start paying close attention to how kids take in information and start adapting their teaching methods accordingly.   I realize timeliness can be a key part of sex education and that’s a big plus with text messaging, teaching European Civilization or Calculus may not have as much time sensitivity, I think we are starting to see a new world of education and how people learn. Rethinking education isn’t going to happen overnight, but there’s a lot of opportunity out there right now.

-Ric

Trusted, yes.  Loved, not so much.  jumpstart.com, part of Knowledge Adventure, Inc.  makes fantastic products that my almost eight year-old son loves and has loved for years.  Their grade-specific products combine games with learning, with ideas of community and friendship, and they are just cool.  But when I mention jumpstart to friends, I always do so with a strong warning.  The way they make you pay for their products is a disaster, which is why I love to hate them.

The rules for kids computer games are pretty similar to what we expect from news, sports, and other internet content sites – there’s a lot that’s free, and then there’s a level at which you have to pay.  Some sites are more giving than others in that sense (Disney ToonTown and Pirates of the Caribbean are both great with free stuff, for example), but those are the rules.

So when I first saw Jumpstart at the toy store, I bought their “First Grade” program because my son was starting first grade and I thought some educational software would be great.  I honestly don’t remember exactly how much I paid for it, but it was more than ten and less than 20 dollars, which seemed like a decent deal for educational software, but not crazy cheap.  Then when we installed the software, almost immediately we realized the game wouldn’t work until we subscribed online and decided whether we wanted to pay the monthly fee or the annual fee.  So in  “buying” it at the toy store, what I really bought was the ability to pay more?!

Annoyed, I went ahead and subscribed and started to bark about it to some of my friends.  Then, if that weren’t enough I learned that “installing” the software on my laptop was only part of the bargain.  It won’t work unless the CD is in the machine AND the computer is connected to the internet.  Not only is this a drag, but since my son spends part of his time with his mother (not such a rarity), unless we each bought the software, the CD would have to go back and forth between us so he could keep playing it.

I am here to tell you, I think Knowledge Adventure Inc. would sell a lot more software if it solved these three problems:

1) Don’t make people pay for it twice.  No one else does that. Against the rules.

2) Don’t require the CD to be in the computer to play it.  No one else does that.  Against the rules.

3) Don’t require a persistent internet connection for a game that comes on a CD.  For internet only games like Disney’s ToonTown, I expect that, but one of the reasons I picked up the CD in the first place was so we could use it untethered.

My son loves your products, as do I, but these three things are annoying and the only organizations I can think of  that can annoy their customers and expect repeat business are government organizations like the Internal Revenue Service.

My work focuses on outcomes, “what” is being done, and in this case “what” we are doing is educating our kids.  At a time when education is in tough shape in this country, your products are so great for kids in helping them learn while learning computers, I ask you to please rethink “how” your billing and usage models are designed so more kids can learn using your great products.  When you do that, I am willing to bet that your Sell Products “what” will perform a lot better. . .

-Ric

Someone recently suggested that my work ignores quantitative analysis and relies solely on qualitative research, and that’s a mis-reading of the approach in the Rethink book.  I LOVE getting quantitative, but I have found two risks in starting there.

1) People will attach metrics and quantitative analysis to a block of work without any real knowledge or insight into the role of that work in the performance of the whole (which puts them at high risk of having the wrong measure)

2) Organizations simply look to industry benchmarks as their guide for quantitative analysis, which presumes the work is a commodity function that can just be compared to any other company in their industry.

I am not going to tell you that I am an expert in all industries, but manufacturing is one of the only industries I am aware of where you can just take industry benchmarks and apply them almost across the board to jump into the world of quantitative analysis, which is why the Six Sigma method is so fantastic for manufacturing companies.   For those not familiar with Six Sigma, in the simplest terms it eliminates variance in the performance of a specific piece of work. And to be sure there are parts of every organization where elimination of variance is a very helpful thing, but in my experience, in most other industries, starting with the assumption that you need to eliminate variance without first understanding the role of the work in the overall, is at least risky, and at worst potentially counterproductive.

I often compare the operating models of Costco and Sam’s Club.  Two companies in the same basic retail industry, and “what” they do is nearly identical, where “how” they do certain things is radically different because their brand and identity are different.  Sam’s Club cares a lot about whose products are on their shelves, and they work very hard to negotiate deals with those big name product companies so they can make enough profit when they sell them at great prices.  Costco  by contrast doesn’t care whose products are on their shelves, and they don’t make any money selling their products (by choice), they make their profits primarily from the membership dues that are required to be a member to shop there.  Because membership renewal is so key to them, they give away free food around most corners, the stores are well lighted, employees are very friendly.  So if I were to start with a quantitative approach and drive for standard retail industry metrics at Costco without first understanding what they value, I would literally destroy value.

So because most organizations are not as explicit as Costco about what they value at a high level, let alone at a more granular level, and because the risks are high that they already have the wrong metrics on a piece of work, I start with the heat maps that I do around value and performance to listen to what people think is most valuable (which I define in the book Rethink) and how they think it’s currently performing.  My heat maps always start with two colors per block of work, an outline or border color and an interior color (see the Key bel0w).  With these diagrams, we can be more explicit about where the high value and low value work is, and from there we start to get more quantitative and ask, what is the right metric, and which block or blocks of work will get us there, and once we have made those assertions, then we can get into the discussion of “how” we do it in terms of process re-engineerging, or Six Sigma, or Lean, or Agile, or some other method.

So yes I love the quantitative side, but it’s dangerous to start there unless you are sure that you are working with a commodity function that allows you to safely jump in with industry benchmarks.

-Ric