Have we only ourselves to blame for ‘The Bug?’

Have we only ourselves to blame for ‘The Bug?’

We have a political situation of our own making.

It is very hard to convince people to invest against the possibility of something that may happen at some time in the future. The cost of the investment is immediate and measurable, the benefit unknown, and perhaps some time in the future.

In a democracy it is very hard to get people to vote for something they cannot see and feel, immediately. We moan, and I am a chief moaner, about the lack of foresight and planning evident, that has enabled the bug to run riot through our economies, but do we only have ourselves to blame?

There are three types of actions that can be taken by any organisation, public or otherwise.

  1. Reactive. These are decisions and actions taken after an event.
  2. Responsive. Actions and decisions taken as events are unfolding
  3. Pre-emptive. Actions and decisions taken in anticipation of an event designed to mitigate the impact.

If we were to categorise the performance of our various governments over the past 12 months, I would say that in relation to the fires that started in September last year, they were reactive, and even that is being very kind. The floods, now almost forgotten in February, the response was again reactionary, and sadly lacking substance. In relation to the Corona bug, they seem to have done better and been responsive, taking decisive action as events unfolded, and being prepared to adjust the response as more data becomes available.

Coming out of this, I would like to see some sort of pre-emptive actions taken to mitigate the impacts of the next catastrophe, whether it be another bug, fire, flood, or financial meltdown. As a country we have to build our operational resilience, meaning the ability to invest so that the impacts do not drown us.

Do this, and we will be a much stronger nation. Alas, in a democracy this is really hard, as it requires a collective desire to invest now without any idea of the outcome or payback, and electorates are not good at this.

This difference neatly explains the quick and substantial reaction to the current Corona crisis, but our almost total of lack planning and investment to mitigate the impact of climate change.

The current idea of a location app on our phones is a great example of the dilemma we face.

It makes absolute sense that we are able to track the movements of people in the face of a highly infectious disease, to see with whom they interact, even by chance, so that we can throw a ring fence around the bug. Most would probably agree,  but the downside is that we do not trust the politicians and ‘forces of evil’ to turn the thing off, and leave it off, when the crisis is over, thereby impinging on our rights to privacy.

In a democracy, like , this will probably mean a very good idea is thrown away. However, I bet that in a different system, it would be embraced, as public sentiment would not matter, and is kept private anyway as a means to stay out of the spotlight, which can be a dangerous place to be.

 

Header cartoon: courtesy David Rowe, AFR.

 

 

How do you lead effectively in a crisis?

How do you lead effectively in a crisis?

 

By definition, a crisis is something that has to be managed weekly, if not daily. There is no time for long winded discussions about strategy, competitive reviews, investments in technology transformations, the newest shiny idea someone has. While these are profoundly important they are the framework against which to measure the daily and weekly performance to the plan that will, if implemented, deliver commercial life. If you do not have such a framework, you will be in far greater trouble than you may otherwise have been. However, ensuring that at least the day to day decisions you now make are consistent with each other, and lead to a simple, single objective will be a good start.

 

The leadership style in this case of a crisis is different from the  strategic leadership necessary to position for the long term. Churchill failed as a leader in every situation other than the crisis in which Britain found itself in 1939, in which he excelled. He communicated the objective, to beat the Nazis, nothing else mattered, and everything was measured against that single objective.

 

There are many examples from more recent times. Steve Jobs taking over Apple a few weeks from bankruptcy, and turning it around into the cash powerhouse it is today. Jeff Bezos buying the Washington Post as a personal investment (as distinct from one Amazon made) as the corpse was about to be lowered into the ground, and remaking it as a journalistic powerhouse.  Alan Mulally doing the double act, leading  Boeing  through the tragedy of 9/11, then repeating the dose by saving a dead man walking Ford, during a time further made challenging by the 2008 financial crash. You might even add Kevin Rudd to the list, ensuring Australia escaped that 2008 crash relatively unscathed.

So, how do you do it?

Simple to say, hard to do: 2 rules only:

  • Have a plan with a simple, single objective
  • Work the plan relentlessly. This means daily, weekly, monthly review and rework of the plan at every level of implementation and accountability.

 

The plan has to be articulated at the macro level, and progressively broken down into the micro, so that the role of every person, and element of the plan, plays in the achievement of the objective is transparent.

I call it a ‘nested plan,’ best visualised by the typical organisation structure diagram. It replaces the names in the pyramid with objectives, and the cascading individual plans and personnel accountabilities required to achieve the cascading objectives, culminating in the overall objective at the top.

 

Every plan review meeting, from the shop floor to the executive suite should follow a consistent format, which enables single minded focus on the single objective. That format should be something like:

  • Department plan
  • Plan status
  • Forecast
  • Opportunities and risks
  • Period over period summary, qualitative as well as quantitative
  • Status of any items requiring attention from outside the power or capability of the meeting group.

Best practice for meetings of this type is well documented, following well understood principals of psychology and accountability, but in summary:

  • The above format, or your version of it, acts as the agenda
  • The plan status is delivered by the responsible person, or multiple persons.
  • The review is not a forum for resolving problems, just articulating them. Resolution is outside the meetings, but reported back.
  • There is a consistent format to individual presentations, again following the format above.
  • Never shoot the messenger of bad news, allocate a priority to defining the problem and accountability for suggesting solutions, to be reported in the subsequent meetings.
  • Concise questions that serve to clarify and quantify are encouraged from all participants.
    Meetings are open to any from outside the specific group who may have a valuable or even different perspective to offer.
  • Meetings are absolutely transparent to all.

There will be resistance to the implementation, people are not generally used to the levels of accountability and transparency a system of this type delivers. However, once you get it rolling, it builds a momentum of its own, as people take responsibility for their part in delivering the objective.

 

The header photo is of the priorities set by Alan Mulally on taking the reins at Ford. For the whole of his tenure, the process above was relentless implemented, and Ford came though the 2008 crash not requiring any government assistance, and went on to regain its significant and profitable position in the auto industry.

Hind-sighting the Corona-demic.

Hind-sighting the Corona-demic.

 

In 6 months time, when things have sorted themselves out, and we are moving into a post corona world, what will have changed?

 

It is very hard to imagine, but discounting the potential for some sort of apocalypse, there will be a new normal at some point, but that will look very different to the ‘normal’ of just a few months ago.

 

Following are a few thoughts, what can you add?

 

Digital transformation has accelerated.

 

Necessity is the mother of invention, and a massive catalyst for change. The communication tools that were available but widely resisted have suddenly become the status quo, and we wonder why we were so reluctant.

 

Items like corporate travel, fancy offices, position in an organisation structure, will all become less important, as they will be seen as a reflection of ego rather than  necessity, an ego swept away by corona, as working from anywhere other than a central office becomes more the norm. This transformation in digital communication will act as a catalyst for other changes enabled by new technology.

 

The role of deep expertise.

 

Suddenly, the people we trust are those with deep expertise, who do not apparently have a dog in the fight. Scientists have been telling policy makers, and the public for 25 years that climate change is happening, is a huge threat to our way of life, and needs to be addressed. They have been largely ignored. No climate change scientist has been listened to outside their scientific circles sufficiently to drive significant change.

 

The ‘Bug’ has brought into stark relief the complexity of our world. Interconnected economically, socially, and by a myriad of communication channels, it is not a simple place. We humans like simplicity, and in the face of complexity, revert to existing beliefs as a substitute for consuming the cognitive energy to understand and form new ones. This human tendency has led to the increasing polarisation and emotion of positions taken on a range of public questions, the opposed sides yelling at each other.

 

Just as suddenly, we have The Chief Health Officer, Professor Brendan Murphy front and centre, providing the scientific expertise to the government to make more general decisions about how to deal with the crisis. I doubt Professor Murphy would offer too many deep economic analyses, he leaves that to others (who may or may not know what they are talking about). However, we trust Professor Murphy, measured, consistent, offering what is obviously deep expertise in a narrow field. You could make similar observations about ABC spokesperson, Dr  Norman Swann, probably better known than professor Murphy or his deputy, Professor Kelly. My pinup boy in this regard is American Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases (NIAID) with his deep expertise has been able to correct Trumpian exhortations on the spot, publicly, and keep his job. (perhaps there is hope after all)

 

Hopefully this new found respect for expertise lasts after the Corona cloud has moved on.

 

Existential crises become accepted challenges.

 

Few recognised the potential for this crisis, despite many warnings in the form of SARS, Mars, Swine flu, Ebola, just to name a few on the last decade. The obvious exception is Bill Gates, who predicted exactly what has happened in a TED talk in 2015. However, now it is clear that we have reached a stage where something must be done, the too hard basket has overflowed. Climate change, equality of opportunity, universal health, mass migrations resulting from fundamentalism, and the concentration of economic and military power, will all be back on the economic and political agenda. We will start demanding some action rather than flowery words, and kicking the can down the road for the next lot to deal with. As noted above, we need to listen to the experts.

 

Dunbar’s number

 

We will recognise that the 10,000 friends we have on Facebook are as useless as an umbrella in a cyclone, but those few close to us, with whom we have a human relationship of real depth are priceless. The theories of British anthropologist Robin Dunbar will become widely known and understood, as we revert to smaller genuine communities. Perhaps I am a silly optimist, thinking the malignant part of Facebook et al will be restrained, but you can only hope.

 

Economics and politics

 

This could be a very long list. Our economic and political systems have been changed forever, there is no going back to PCD (Pre Corona Days), I hope.

 

While the economy has tanked, and there are dire predictions about how the bill will be paid by our children, and grandchildren, we are still alive, mostly working productively, and things are getting better.

 

We might even be seeing some advantages as the politics becomes more respectful, both of people and facts, and actually indulging in some forward planning, an element absolutely missing from our body politic since, well, perhaps since the days of Keating and Hawke.

 

New jobs have been created by small pieces of manufacturing coming back to domesticity, although the unemployment rate is still a number that seemed unimaginable a year ago. We might also have a real number, instead of the nonsense of the definition of ‘Employed’ being an hour of paid work a week, the bureau of Stats taking advantage of the cover offered by the crisis to update the definition.

 

People my age will have had their superannuation reserves diminished by both the withdrawals necessary to pay the bills, and the tanking of the share market, as well as there being a whole new wave of over 50 unemployed looking for a way to pay the bills. This all means we will be working longer, and there will be a rash of over 50’s entrepreneurial activity, where those previously hide bound corporate types, now unemployed,  try  their hand at something new.

 

The government, now saddled with a range of new costs that will become part of the status quo very quickly, will be desperately looking for ways to wind them back. For example, free child care, and a ‘living wage’ will be major topics of political conversation, as they are high on the list of must haves for the political left, but are ‘socialist evil’ in the eyes of the political right. It is always easy to give stuff away, particularly in a crisis as we will have just passed, but extremely challenging to remove that stuff from voters in the lead up to an election, which will by then be on the horizon.

 

As a community we are now demanding changes to the buck passing that goes on between the states and Feds in relation to who is responsible for what. We are working under a constitution that has served us well,  but sensible change that reflects the entirely different environment we are now in, is firmly in the too hard basket. If the Christmas fires did not highlight this enough to force changes, the lunacy of the Ruby Princess, and the subsequent finger pointing should have. It was more than just the everyday political incompetence we have come to expect, it was a gross failure of  the governance processes of the nation.

 

As an additional treat, there is toilet paper and pasta back on supermarket shelves available for purchase whenever we venture out.

 

Commercial intervention by governments.

 

The political decisions taken to address the cries for assistance from many large corporate enterprises, will have significant ramifications across the economy as the smoke from the bug clears. The obvious current example is Virgin, currently holding out their hand for a public bailout. However, they will be one of many that are in trouble, and likely to bring all the pressure they can to bear on the public purse, to which many have contributed little over the years, repatriating any profits to tax havens. Beyond all considerations that relate to a particular set of circumstances surrounding an individual enterprise, I think there needs to be a consistent application of policy based on a foundation that articulates a philosophy that reflects the national will and character.

 

This philosophical foundation has been sadly absent for many years, usurped by short term political expediency, and the resulting disengagement of voters from rational public discourse.

 

Section 51 of the constitution gives the power to acquire property on just terms from any state or person, over whom the parliament has the power to make laws. Somewhere in there lies a solution, enabling the parliament to acquire the business of such enterprises, but not the company. This would prevent the obvious outcome of a corporate bailout, which in effect subsidises profits by removing part of the risk for which shareholders are paid, while socialising the risk of losses.

 

Instinctively we may not like the government owning businesses, but it seems to be a better solution than putting money in the pockets of billionaires living in the Bahamas, oil rich potentates and in some cases, dictatorial governments.

 

Healthcare.

 

Notwithstanding the comment above relating to public and private responsibilities, the health Minister popped up last Tuesday (March 31) and in effect, and temporarily, renationalised hospitals. Health and its increasing costs has been a thorn in the side and budgets of every government since Bob Hawke’s in the eighties, and getting worse. The  financially motivated parties in the health system jockey for a place at the huge and deep trough to the detriment of the community.

 

Meaningful reform and modernisation has been on the ‘way too bloody hard’ list for 20 years. Now, suddenly when we consider the welfare of sick people, before the dogfight over money, reform becomes easier. Let’s hope some of it has stuck after the smoke cleared.

 

Unions and government talking constructively.

 

Who would have seen this coming? Just over a year ago, the current Canberra incumbents won an election by warning us of a socialist apocalypse should Mr Shorten take residence in the Lodge in Canberra, and for weekends, Kirribilli House in Sydney.  I can hear Mr Shortens teeth grinding from here, but hopefully the dialogue has continued.

 

Social distancing.

 

We have become used to a larger space being ‘ours’ and others will reflexively give it to us to a greater extent than before. There may even be some level of civility re-emerge, and incidents of things like road rage will have reduced.

 

1st world indulgences

 

Many of us have what we sometimes laughingly call first world problems, such as not having a choice of three varieties of condiment at the supermarket, or the failure of the nail salon to open before 8.30 am. They have been swept away, and we will recognise them for what they are, indulgences of a privileged society, and they may become less important. In short, simple things will have become more important.

 

We will all be wiser

 

The fear and panic that gripped us for those few months of March, April and into May, will be seen as an embarrassing over reaction driven by emotions we are not used to having on general display. We will all assure ourselves that next time should there be one, and we will largely accept that there will be, we will all act more sensibly.

 

I will look back over the next Christmas break and review these observations, and give my self a mark. As an optimist, I hope a few of them are on the money.

 

 

 

 

Never have we needed to understand the OODA loop more!

Never have we needed to understand the OODA loop more!

 

Observe, Orient, Decision, Action, or ‘OODA Loop’ is a thought process articulated by John Boyd, the maverick American fighter pilot, engineer, and scientist, who revolutionised the practise of aerial warfare’. His nickname in the Airforce was ’40 second Boyd,’ reflecting his bet, that he could beat any other pilot in a dogfight in under 40 seconds. It is said, nobody ever collected from him.

Boyd’s OODA loop is a framework for creating tactical advantage. As he put it, ‘To enable you to operate inside the oppositions ability to respond’. 

The ability to respond is driven by the speed with which you are able to collect and analyse information, to come up with a tactical response given that it is almost always ambiguous and incomplete information, make the decision, and implement. This is done continuously, creating a ‘loop’ that increasingly becomes quicker than the competition can respond, leading to success.

We are in such a position now.

The ‘Bug’ has turned the way we thought things were on its head, there will be a new normal at some point. Those who survive until then, will be those who are more agile, faster to actively respond in an entirely ambiguous environment, in a manner that learns continuously.

If you apply this sort of thinking to the current situation, you might go through the following process.

Observe.

External assessment.

  • The state of the economy, recognising the rapidly deteriorating organic demand, seemingly about to receive a public jolt by way of multibillion dollar injections by governments of all three levels.
  • Corporate failures that are the inevitable outcome of the drop in demand. 
  • Explosive increases in unemployment and resulting community and individual distress
  • Crumbling of the ability of health institutions to react in sufficient time given the  resource shortages.
  • The emergence of opportunities unavailable previously, such as domestic manufacture of health related consumables and equipment, software that delivers supply chain transparency and accountability, the recognition that remote working is not only  viable, but is a cost and productivity effective  strategy.
  • Expected time when economic activity can restart and recover into some sort of ‘new normal’

Internal assessment.

  • Operating numbers: cash flow, debtors and creditors and varying payment options and cycles, sales pipeline, discretionary spending programs, fixed costs.
  • Essential people, technologies, products and customer relationships upon which rebuilding can take place.
  • Sources of cash injections that may be available, including government programs, and the timing and obligations of cash that may be available. 

Orient.

 

Having collected this information, in effect, observed the environment, it needs to be synthesised into a cohesive plan, oriented for action. You might consider factors such as your business model, pricing structures, supply chain relationships, specific market niches, staff deployment,  key strategically important customers, and internal reorganisation of individual capabilities.

Decide.

Often, taking what are really challenging decisions, made with incomplete information, that impact the lives of people and the future of the organisation, are easy to put off. There is always another piece of vital information necessary to make a better decision. Unfortunately, in a crisis, you do  not have the time to wait, you must decide, be prepared to be wrong, accept the consequences of being wrong, and learn from them, but  you must decide.

 

Act.

Having taken the decisions, take the action  necessary. A decision not acted on, is not a decision to do anything other than make yourself feel better, or avoid the pain of implementation. Understandable,  but not acceptable.

 

Wait, your work is not done.

Go back and reassess each stage, apply the OODA loop again, and again, to identify and claim that competitive advantage. In this moment, fighting the ‘Bug’, that advantage might deliver survival, and as the economy improves post bug, prosperity.

 

 

Five essentials for SME’s to survive the Corona chaos.

Five essentials for SME’s to survive the Corona chaos.

It is too easy for those not at the front lines of a crisis to brush aside the practical difficulties of day to day survival, in favour of the fluffier, albeit no less important longer term questions and issues.

Currently there is a flurry of activity from political leaders, roused from their partisan politics by this virus, resulting in a raft of measures that is challenging for owners of SME’s to understand, and access. However, it is essential that your spend the time, in a rational way, to understand the measures that will impact your business, what the qualification guidelines are, and how the assistance is to be accessed.

Many businesses are fighting for survival in the face of that Black Corona Swan that flew in and crapped all over them.

The five things business owners should be doing today.

Cash flow forecast.

Cash is the oxygen of business, survival without it is impossible. Having a clear view of the cash coming in, and going out over the immediate future is vital to making informed decisions. I always favour a weekly rolling 13 week forecast in most circumstances, and certainly in this one. There are plenty of tools out there, but a simple spreadsheet, filled with the input of your debtors and creditors ledgers, along with the bank reconciliation and a sales forecast will give the answers you need.

Do it now!

Cash ‘runway’.

You need to know how long your cash reserves will last in the event that you are suddenly trading at a loss, which is broadly illegal. This calculation goes hand in hand with the cash flow forecast, but requires you to break costs up into fixed and variable components. Those who regularly review their Break Even will have this information to hand. The provisions in the Corporations Act that refer to the personal liability of Directors who allow trading at a loss to continue, will be altered to accommodate the Corona virus, according to the PM’s March 22 statement.  As yet I have seen no detail about this change, so be wary.

Communicate, communicate, communicate. Talk to major customers and those prospects that were about to be converted, to understand how their businesses are being impacted, and what you might be able to do to assist them. Talk to your staff, include them in the decisions around how best to preserve the business so that there is a job there when things recover.  Taking holiday leave, unpaid leave, long service, job sharing, all may play a role. When you as the boss are getting really tired of having the same conversation,  over and over, you might just be getting to the point where you are being heard.

Government assistance.

Both state and federal governments are setting out, with it seems common dual objectives, for the measures put in place, which are still evolving.

  • Provide assistance to those whose employment dissolves. This includes a specific Corona income supplement, the ability to draw down on superannuation accounts, reduction of social security deeming rates, and direct payments to households.
  • Provide assistance to businesses to keep employees working.  This is the crucial one, as it is businesses that will provide the impetus for recovery. From April 28, the government is providing up to a maximum of $100,000 to be used to cover overheads, and keep staff. There is also included in the second package, a payment equal to the withholding tax on wages and salaries, of up to $50,000. The government has also put in place a specific Corona virus assistance scheme to assist access to working capital, by guaranteeing 50% of new loans by banks to eligible SME’s. To fund this measure, the Reserve bank has announced a lending facility to the financial institutions that will reduce the costs to those institutions of lending to SME’s.  The states and territories have all weighed in with measures that relate to businesses operating in their states. Ignoring the stupidity of the federated system that results in an inconsistent patchwork of regulations, resulting in complication and confusion, you should investigate the specifics, and understand how you will be effected. In NSW for example, the government has announced they will waive payroll tax, and will being forward planned reductions in that awful tax on employment.

Be of service.

These are tough times, that induce a sense of desperation, which too often ends up being seen by others as the ‘hard sell’. This is the wrong time to be seen that way. Instead, set out to be of service, to use your resources to help mitigate the impact on others. They will respond positively, and remember. This does not mean you do not sell, obviously, but it does mean you do so only with the best interests of the buyer at heart, not your own. And, for heavens sake, stop those silly brand managers sending out those patronising ‘Covid-19 measures for your safety’ emails to anyone and everyone whose email address they collected in some way over the last decade. We do  not want to hear from you, but will remember you clogged up our inboxes at a vital time when things get better.

It is a lot, on top of the day to day battle for survival, but spending your time wisely, on the things that will make a difference, is the best investment you could make at this time.

 

Header photo credit: David Brim,  davidbrim.com

 

 

 

A Corona, heavily disguised as a Black Swan

A Corona, heavily disguised as a Black Swan

 

There is a quote by Earnest Hemingway, when asked how he went bankrupt. His response was:  ‘Gradually, then suddenly’.

The same thing is happening to us now, as the Corona bug cuts a swathe through economies worldwide.

For the last 25 years we have become interconnected and interdependent, as individuals, businesses and economies.  This added to the stability of the system as a whole, and while all goes well, in the absence of some black swan event, we continue to slowly dig deeper into interconnectivity.

Along comes the black swan, and all that interconnectedness and interdependence pivots in an instant, from being a source of stability and certainty, to the catalyst that suddenly brings the whole system crashing down.

Imagine a group of climbers on a rock face. They are all roped together so that if one falls, the others are strong enough to hold him, and allow him to recover back onto the rock face. That is the case almost always, it is why climbers rope themselves together, as it reduces the risk to the individual. However, if the system fails, a vital piton pulls out, or a holding rope breaks, momentum builds almost instantly, and the whole group falls. The risk to the individual is lessened dramatically by the presence of the ropes, however, if the black swan flies in, the group falls.

It seems Corona is our black swan.

In Australia we have had consistent growth since late 1991, 28 and a bit years. In that time we have hollowed out manufacturing, sold off public and private assets, more often than not to international groups, embraced the ‘gig’ economy of casual and short term employment, and forgotten  how to think strategically and for the benefit of the group. In its place, we have lauded individuality, immediate gratification, and the expectation of something for  nothing.

It seems we are now about to pay a high price.

The rope has come loose from the rock face.

I wrote an article last weekend for an industry forum, expecting it to be published on Monday or Tuesday after the editor had a look at it and got organised. The pressure of  ‘The bug’ got in the way, and it was not published, but I just had a look at the draft, just 7 days later, and it is out of date.

7 days, and some of the observations and predictions I made have been passed by events, predictions just a few days old have become utterly redundant.

That is how quickly this thing is moving, and we are struggling to curb its momentum.

 

Header photo courtesy Simon Murray.