Tuesday, 13 February 2018

In 2018, consider the cost of doing nothing





Depending on your outlook, my column last month would either have exhilarated or terrified you. And whether you are champing at the bit, wanting to embrace the new, digital future of your business or terrified at the thought of robots taking all our jobs, you will need to start making some pretty significant decisions this year. These will need to move your organisation forward, but also give you space to be nimble in the face of future seismic shifts, and finally, should avoid painting you into a digital corner you can’t reverse out of. (Betamax video, anyone?)

It’s a decision minefield, and, my suggestion, which I hinted at previously, is don’t avoid the cost of doing nothing jobs. Those are the maintenance, upgrade and incremental innovation projects that don’t deliver an immediate ROI, but are essential for saving you money and ensuring your survival in the longer term. 

Counter-intuitively, cost of doing nothing jobs probably won’t deliver you an immediate return on investment. What they will do is maintain and optimise systems and processes, and also help you take the incremental steps that make up innovation to take your company into the future. Yes, they divert time and resources away from other activities today, but they avoid catastrophic failures, future-proof your business, and will save you money in the long-run. 

For instance, on a trip last year, soon after I landed in New Zealand, the Auckland Airport was shut down thanks to a fuel line being damaged. As a result, hundreds of planes were delayed at a critical regional hub, and time and money was spent trucking in fuel until the pipeline was repaired 10 days later. A spokesperson explained that the cost of an additional pipeline hadn’t been justified as it would seldom be used. Wait a minute, surely this exactly how you define a backup system?  

Unfortunately, it is hard to quantify the cost of not doing these jobs at the outset. You only know the real price tag if disaster strikes, as Auckland Airport found out. This means it is easy to let these jobs slide to the bottom of the priority list.  

Let’s look at things from another perspective though, and consider the future-proofing role of cost of doing nothing jobs. These projects that can shift the paradigm for your organisation for innovation, growth and success in the future. Hence the danger of not doing them today. For instance, if you are not thinking about or embarking on a project to move your operations into the cloud, you may find yourself left behind tomorrow when your competitors are offering cloud-enabled services and innovations, and you simply can’t. 

Apart from a fixation on short term ROI concerns, there are a number of reasons organisations neglect the cost of doing nothing jobs. In today’s fast-paced world, where we're all running to stand still, it might seem like there is no time to optimise or review your course. Keep your head down and roll with the digital punches. Unfortunately the pace is only going to speed up, so rather consider these projects now.  

Some companies are simply risk averse and would prefer to defer a decision and stick with what they know. Indeed, playing it safe is often rewarded in these organisations as short term improvement in the bottom line tends to focus the eye. Unfortunately, in the 1980s it might have been the case that “nobody ever gets fired for choosing IBM”, but today, this thinking could result in your company not being around tomorrow.  

Finally, many organisations lack the skills and experience to navigate this new, digital industrial era. Today, you need to hire people that have the skills to adapt, and thrive at doing things that automation can’t, and also have the ability to work with robots. An example is accountants being freed up from crunching data, and instead using their abilities to spot patterns, analyse the data and think strategically about how this informs business decisions and then providing strategic counsel for their clients.  

So now what? Firstly, start quantifying the high cost of maintaining the status quo by putting the cost of doing nothing on the agenda. Then, move away from waterfall thinking and learn from agile philosophies and their continuous iteration. This takes the pressure away from being sure you are making the right decision at the outset, to making the decision right for you, through constant improvements and vigilance. Finally, simply decide. Choose a lighthouse project, you may fail but then fail fast, learn and improve.


As published on Accountingweb - January 2018 
https://www.accountingweb.co.uk/community/blogs/kevin-philips/in-2018-consider-the-cost-of-doing-nothing 


Wednesday, 24 January 2018

A Heavy Price Tag on Doing Nothing – Part 2





Today, doing nothing is going to cost you in the long run. Fight inertia by learning its tell-tale signs and what to do about them

‘The cost of being wrong is less than the cost of doing nothing’   – Seth Godin
Last month I looked at the impact that ignoring cost of doing nothing jobs can have on a business. The type of hunkering down that resulted in the Auckland Airport having its single aircraft fuel line fail, grounding aeroplanes and costing money. But I also acknowledged there were some understandable, if rapidly expiring, reasons for this baked-in resistance to change.

This month I want to look at the forms this corporate inertia can take and some ways you can inoculate yourself against this, and by doing so ensure your organisation’s survival and success in the future.

Let’s start with how doing nothing manifests in an organisation.

Neglecting to optimise
In his book 7 Habits of Highly Effective People Steven Covey says continuous improvement, ‘sharpening the axe’, is the essential habit that allows you to effectively carry out the other six. He illustrates this with the story of a master woodcutter, who starts to fell fewer and fewer trees. When asked when last he sharpened his axe, he says he doesn’t have time for that, he’s too busy trying to chop down as many trees as he used to be able to. Steven’s book may date back a while now, but many of the messages are still relevant today, especially this one. In fact, this advice has probably grown in relevance and continues to grow week by week.
This lesson applies as much to creating highly effective businesses as it does to people. Too many businesses are needing to run just to stand still. And this perceived ‘busyness’ provides a convenient smokescreen for not taking the time to sharpen the axe by throwing out old, tired and inappropriate processes, activities and technology and replacing them with something more future-ready. Or even challenging existing systems that are currently working and looking for ways to improve them.

Short-termism
Understandably, during tough economic times, finance’s focus shifts to surviving the next quarter, and then the one after that. This is a sound policy, but not when the world is changing so fast that you won’t recognise it in a year’s time, and will be entirely unprepared for what your customers want. In the past one thought of short term as this year, medium term as the next three, and long term as five years and beyond. Today I would suggest this has shortened dramatically: short term is almost tomorrow, the medium term is next quarter, and long term is by year-end. Perhaps a slight exaggeration, but not too far from the truth. And for some industries even that is too long!

Business needs to balance being adaptive and responsive when direction needs to be changed with avoiding making short-term decisions that paint them into a corner in the future.

Risk aversion
In the 1980s, it might have been the case that nobody ever got fired for choosing IBM, but today playing it safe could result in your company not being around tomorrow. Unfortunately we still run the risk of clinging to this thinking and rewarding play-ing it safe. What’s more, too often we also fall into the trap of questioning cost, but if you can’t afford to do it right you best make sure you have the resources to fix it! And this applies to not doing anything at all, as well.

Lack of the right skills and experience to navigate the digital future
If all you have is a hammer, it stands to reason that all your solutions are going to involve hammering, whether it’s effective or not. This is the challenge businesses face today. They can’t solve new challenges with old skillsets.
Back in the day, succession planning meant having a pipeline of skills in the wings ready to take over when people moved up and eventually out. Today, though, this is not enough, and is yet another form that corporate inertia can take. Without new skillsets, businesses are going to keep using old ways of thinking and problem-solving, resulting in old solutions for new problems.
So, succession planning today is about hiring people that have the skills to adapt, and, crucially, thrive at doing things that automation can’t, while having the ability to work with robots. An example is accountants being freed up from crunching data rather using their abilities to spot patterns, analyse the data and think strategically about how this informs business decisions.

There are other ways that corporate inertia plays out. Look around your company and think about whether things make sense, or are simply done that way because that is how they have always been done.
So how do you go about inoculating yourself and your organisation against falling into the trap of doing nothing, especially at this crucial moment in time in the history of business?
Here are my three top tips:
·         Quantify the high cost of maintaining the status quo. Turn quantifying the cost of doing nothing into a habit. It won’t be a perfect calculation, but it should be on the agenda and front of mind during the decision-making process.
·         Iterate. Shift away from waterfall thinking where everything is planned, built and delivered sequentially and rather learn from agile software developers and their continuous feedback loop. This takes the pressure away from being sure you are making the right decision at the outset, to making the decision right for you, through constant improvements and vigilance. Or, failing fast and learning from the experience.
·         Check your ROI mindset. This is an example that is close to home for us. One of the challenges any new technology or process which changes the status quo needs to surmount has nothing to do with the ability of the solution but, in many cases the need to convince the powers that be that shifting to a better way to do something is worth the initial effort. This resistance to change and inability to calculate the cost of doing nothing today results in a real risk of missing out on long-term ROI. Don’t let your company fall into this trap.

Now, where to from here? What can you do today? Simply decide! Choose a lighthouse project that gives you a toe in the water, then learn and improve. The cost of doing nothing jobs are often also the small steps needed to innovate. Innovation is too often painted as a wide-ranging, paradigm-shifting, big bang event. But it includes the incremental improvements to products, services and processes.

So, this summer, once you have recharged your mind and body, why not take a look at recharging your organisation by fixing metaphorical dripping taps, automating manual tasks, overhauling legacy software that is chugging along, not broken, but not actually fixed either.
As published ASA Magazine - December 2017
https://www.accountancysa.org.za/thought-leadership-a-heavy-price-tag-on-doing-nothing-part-2/

Tuesday, 16 January 2018

End-of-year reviews: Pass me my crystal ball


Image result for end of year review
End-of-year reviews used to make sense. They are a bit of a chore, but ultimately useful, and, if things have gone well during the year, can be very encouraging. They’re a great way to take stock, see where your organisation has under- or overspent, as well as consider your wins (hopefully many) and losses (hopefully few and attached to valuable lessons). And finally, an end-of-year review forms a useful template for plotting your way forward into the next year.
Not any more unfortunately.
The year that was 2017 gave us just a taste of the seismic shifts that are coming our way. And has taught us that the fundamental assumptions we used to be able to take for granted can vanish overnight.
For instance, Brexit. What is that deal going to look like, and how is it going to play out for our businesses? And will Trump provoke a thermonuclear war with North Korea? The very fact that the man is president of the US is enough to tell us to expect the unthinkable. For me, closer to home, we saw the swift and peaceful end to Robert Mugabe’s 37-year rule of Zimbabwe arrive almost out of the blue. One week he was in power, the next week, he wasn’t. But is this really a fundamental change or just a change of face, and what is the impact going to be on business if any? And South Africa is poised to find out what happens when Jacob Zuma’s leadership comes to an end during the current succession planning in the run up to the 2019 elections. 
Even without politics, the world we live in is an interesting place. Technological changes, which have been slow, tectonic plate shifts for the last few decades, have suddenly sped up. How soon will it be before we are working alongside robots? And, in a way we already are, thanks to software automation bots. And blockchain and cryptocurrencies have gained hold on people’s imagination and wallets faster than many could have expected — a major supermarket in South Africa trialled bitcoin payments this year. These are just some of the changes coming our way.
So what to do? Abandon the end-of-year review and wing it? Absolutely not. But realise while you will still need to plan, using the best information available to you at the time, you will also need to bake extreme flexibility into your outlook. Hold the course, but also be prepared to shift, dramatically, if needed. If you don’t, you could find yourself being a Kodak in a world of digital cameras.
Things to do:
  • Still do a budget review and forecast, obviously. You need to continue to function in the world, motivate staff, negotiate bank financing and so on.
  • Stay flexible. Prepare for the fundamentals to change at a moment’s notice. Nothing is cast in concrete. Do your best with what you have at the time, and keep a beady eye on what is happening in the world, and especially with your customers.
  • Do factor in the cost of doing nothing projects. These are the maintenance, upgrade and incremental innovation projects that don’t deliver an immediate ROI, but are essential for saving you money and ensuring your survival in the longer term. A cloud computing migration strategy is one example.
  • Do consult with the coal face of your organisation. While you are being overwhelmed by macro-level issues, they hold the key to essential information on the ground. What marketing activities are most effective with their customers? What are competitors doing in their specific market? Looping in the coal face also ensures a more accurate budget, with ownership by the non-financial managers who actually spend the money.
​​Things not to do:
  • Don’t panic!
  • Don’t not plan!
  • But don’t think you can plan for every possible variable — both known and unknown. It’s impossible. Embrace the fact that major change is the new normal.
Good luck! Flexibility is the watchword going forward, and the key to unlocking the opportunities that will undoubtably still exist in our new normal.