Invented here

Times are hard. And when times are hard, every firm has four choices:

• Stop Doing Something Completely
• Continue to Do Something, Just Less of It
• Start Doing Something New
• Do Something Differently

Stopping doing something completely is hard. Each firm is made up of values and relationships, habits and processes, people and culture, all built around their specific products and services and territories and markets. Firms that are global in scale and reach tend to operate shared-service models and matrix structures; it becomes considerably difficult to work out the precise impact of exiting a product or service or territory or market.

Accounting and related decision support systems tend to be built around jurisdictions and territories, using regional conventions or, at best, regional interpretations of global conventions; employee regulations and rights also follow fault-lines that are regional; the healthy contention envisaged in the matrix turns into open conflict. Presentations and spreadsheets circulate like snake-oil, accompanied by the requisite snake-oil salesmen.

In such an environment, good information is hard to come by, and as a result good decisions are hard to make. A few do get made. But for the most part, companies tend not to exit products, services, territories and markets in entirety. The things that do get stopped tend to fall into the category Yesterday’s-Necessities-Just-Became-Today’s-Luxuries, things that can be stopped despite the escalation of matrix war.

As a result, instead of Stopping Doing Something, many firms go for the Continue to Do Something, Just Less of It Option. Because Doing Less of Something is Easy. Targets get handed out, “haircuts” are cascaded down, and Death by A Thousand Cuts becomes the norm.

My sense is that the haircut is a losing strategy, it is just a way of improving the optics while staving off the inevitable for a short period. Haircuts are intrinsically the lazy man’s response, management-by-spreadsheet. There tends to be no real management involved (and even less leadership). Why do I say this? Reducing budgets and targets and tolerances is a reasonable thing to do, provided there is no cascade of the reduction. For it is in the cascade that a dereliction of duty occurs, an abdication of responsibility. Cuts are fine, haircuts are not. Adjusted targets need to be held at the highest practicable level in the organisation, and every attempt to cascade should be met with severe resistance.

Having said that, cutbacks are reasonable things to do, especially in environments where payroll and SG&A are the two biggest discretionary expense categories. Travel and entertainment are the traditional early targets, and this is a good thing. What is less good is the tendency to cut back on training and on graduate hiring, these can be short-sighted.

It was John Maynard Keynes who said:

For the Engine which drives Enterprise is not Thrift but Profit

So if you have to resort to cutbacks, try and remember Keynes’ words. Otherwise you may land up saving a lot of “cost” but, in the process, losing the firm.

Starting Doing Something New is also hard to do. In most firms, there is some concept of capacity planning, however rudimentary or makeshift. And firms tend to operate at perceived full employment. So in order to do something new, you have to stop doing something old. The immune system of the firm tends to be at the enterprise equivalent of DEFCON Five by this time, making it hard to stop things “organically”. As discussed earlier, making strategic decisions to stop doing something is also hard.

Having a separate focus on invention and creativity can solve this problem, but that too is hard to do. There are alienation, isolation and ivory-tower-thinking risks.

Which brings me on to Doing Things Differently. Covering a multitude of options, ranging from outsourcing and offshoring to the introduction of real innovation within the firm. Which leads to the Immune System response of Not Invented Here. I am reminded of an article written by Joel Spolsky maybe seven years ago, headlined In Defense of Not-Invented-Here Syndrome. It’s well worth reading. As is, coincidentally, Jeff Atwood’s recent take on the same issue, which can be found here.

Both Joel and Jeff make the point that whatever you believe your core business function to be, you should do it yourself. Deciding what is core and what is non-core is a hard thing to do, especially in an organisation with shared-service models. One man’s meat is another man’s poison, one man’s ceiling is another man’s floor. And one man’s core is another man’s non-core.

I would rather paraphrase what Spolsky and Atwood said: Figure out what you’re good at. Check that there is a market for what you’re good at, that people want to pay you for doing it. Then make sure you do it. From your perspective, everything else should be non-core. So get others to do the rest, focus very hard on what you’re good at.

Which brings me back to my old opensource rule-of-thumb:

• If the problem is universal, look to the opensource community for a solution
• If the problem is domain-specific, look to the “commercial” community
• If the problem is unique to your firm, look to your own resources

I think that every CIO should be looking hard at the tools being used to solve universal problems, and to make sure that opensource components are used aggressively. There is no better time.

Remember, the objective is to reduce costs, not heads. Given the option, what would you rather do? Fire people or increase your use of opensource? Think about it.