Tag Archives: purpose

Your Purpose Must Be About You

Guest post by Jurgen Appelo

I’m a writer. It’s the one thing that I intend to do for the rest of my life. That means, when I focus on writing, I cannot focus on knitting. Somebody else will have to do the knitting, so I can focus on the writing. And maybe later, I can trade my wonderful book for someone’s beautiful sweater. This concept applies to all other professionals too. Everyone is entangled in a web of economic dependencies, and therefore, the purpose you choose for yourself should somehow generate value for the others around you. Or else nobody will give you a knitted sweater.

This all makes perfect sense to complexity scientists, who have known for a while that complex adaptive systems find a global optimum through local optimizations and interdependencies. (At Home in the Universe by Stuart Kauffman) The parts in a complex system all try to optimize performance for themselves, but their efforts depend on the dependencies imposed on them by the parts around them. With a mix of competition and collaboration, the parts interact with each other without any focus on a global purpose. Nevertheless, the end result is often an optimized system. Biologists call it an ecosystem. Economists call it an economy. I call it common sense.

Putting the “Why” in Your Mission Statement

Most management scholars and experts have ignored the insights from the complexity sciences (or are unaware of them) and some have suggested goals for teams, and purposes for businesses, that are too narrow. There are many corporate mission statements in the world expressing ideas such as, “Make money for shareholders”, “Put customers first”, and “Achieve superior financial results” (The Leader’s Guide to Radical Management by Stephen Denning). In each of these cases, the purpose of the organization is (too) narrowly defined as providing value to one type of client or stakeholder.

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Ackoff: Corporations Are Not Led By Those Seeking to Maximize Shareholder Value

If I had to limit myself to a handful of management experts, Russel Ackoff would definitely be in that group. Thankfully there is no such limit. Ackoff once again provides great insight, with great wit, in the above clip.

A corporation says that its principle value is maximizing shareholder value. That’s non-sense. If that were the case executives wouldn’t fly around on private jets and have Philippine mahogany lined offices and the rest of it. The principle function to those executives is to provide those executives with the quality of work life that they like. And profit is merely a means which guarantees their ability to do it.
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If we are going to talk about values, we got to talk about what the values are in action, not in proclamation.

The Customer is the Purpose of Our Work

Quote from Gandhi on customer focus at the Chakra restaurant

A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so.

Mahatma Gandhi [his authorship of the quote is disputed, and likely it isn’t a quote by him, see comments]

A snapped this photo at the Chakra restaurant in Johor Bahru, Malaysia. Ironically the food is great but the service isn’t what I would like. But I will gladly go back many times. I’d like a bit more attentive service but I love the food and that is more important to me.

I think service at restaurants is one of the tricker things to do well: different customers have different desires. I basically want great food, my water to be filled up and my bill to be given to me before I finish so I don’t have to wait around to pay. But lots of people will find it annoying to get a bill early, feeling that they are being rushed out the door.

Still there is a certain standard I share with lots of people for things like not having to wait around for a long time to get the bill after I am done. Getting water filled up as needed, pleasant decor, etc..

In Johor Bahru there are a fair number of Japanese restaurants (the food is very good and the service is also good). Several of these restaurants have buzzers on your table to press when you want service. I love Indian food. I must say I like the Japanese service (it did take me a bit to warm up the buzzer idea – it is very practical). It do believe some of the things I would see as weaknesses in customer service are partially a cultural difference (it is interesting to see the different customer service experiences at the different restaurants here).

The quote from Gandhi is great. “He is the purpose of it” is something we would all benefit from taking to heart. To do so, I think we are wise look at how we can better meet customer desires every day.

Frugal Innovation

First break all the rules

The device is a masterpiece of simplification. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by one of those tiny gadgets used in portable ticket machines. The whole thing is small enough to fit into a small backpack and can run on batteries as well as on the mains. This miracle of compression sells for $800, instead of $2,000 for a conventional ECG
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Frugal products need to be tough and easy to use. Nokia’s cheapest mobile handsets come equipped with flashlights (because of frequent power cuts), multiple phone books (because they often have several different users), rubberised key pads and menus in several different languages. Frugal does not mean second-rate.

The article goes on to talk about several methods for how to profit from reducing costs which seem misguided. Frugal innovation is about thinking about meeting the needs of huge numbers of customers that can’t afford conventional solutions. By talking a new look at the situation and attempting to find solutions with significant price constraints new markets can be opened. Often this requires thinking similar to disruptive innovation (products that serve a similar need but less completely than current options).

It also requires the engineering principles of appropriate technology. I highlight this thinking in my Curious Cat Engineering blog and find it very worthwhile. For organizations that have a true mission to serve some purpose using such thinking allows a greatly expanded potential market in which to make a difference in the world.

There is a great quote from Jeff Bezos that captures one reason why organizations so often fail to address frugal innovation: “There are two kinds of companies, those that work to try to charge more and those that work to charge less.” Many organizations are focused on trying to charge more, not less. Another problem is that decision makers often have no life experience with cheap solutions – this doesn’t prevent frugal innovation but it does make them less likely to see the need and to decide to solve those customer needs.

Incentivizing Behavior Doesn’t Improve Results

In the webcast Dan Pink’s shares research results exploring human motivation and ideas on how to manage organization given the scientific research on motivation.

“once a task called for even rudimentary cognitive skill a larger reward led to poorer performance”
“Pay people enough to take the issue of money off the table. Pay people enough so they are not thinking about money they are thinking about the work.”
“3 factors lead to better performance: autonomy, mastery and purpose” [not additional cash rewards]
Open source software is created by highly skilled people contributing their time to collaborative projects that are then given away (such as Linux, Ruby, Apache). For large efforts their are often people paid by companies to contribute to the open source software but many people contribute 20-30, and more hours a week for free to such efforts, why? “Challenge, mastery and making a contribution”
“When the profit motive becomes unmoored from the purpose motive, bad thing happen. Bad things ethically sometimes, but also bad things like not good stuff, like crappy products, like lame services, like uninspiring places to work… People don’t do great things”
“If we start treating people like people… get past this ideology of idea of carrots and sticks and look at the science we can actually build organization and work life that make us better off, but I also think they have the promise to make our world a just a little bit better.”

The ideas presented emphasize respect for people, an understanding of psychology and validating beliefs with data. All of it fits very well with Deming’s ideas on management and the idea I try to explore in this blog. It isn’t easy to adjust your ideas. But the evidence continues to pile up against some outdated management practices. And good managers have to learn and adapt their practices to what is actually effective.

Akio Toyoda’s Message Shows Real Leadership

Speech by Akio Toyoda

Since the birth of Toyota, the company’s philosophy has always been to “contribute to society.”
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“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”
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Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles
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Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.
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Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.
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At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or gemba.” I believe that the essence of management lies in the gemba, and Toyota employees play a vital role there.

Once again Toyota shows they are the type of management I want to invest in. In my last post I discussed another: Jeff Bezos at Amazon. Google management is another management system I am glad to invest in. Toyota, Amazon and Google are 3 of my 12 stocks for 10 year portfolio.

Toyota continues to show they are an exceptional company that doesn’t waver due to short term pressures. They know the management system they have in place is excellent. They always try to improve. And they react to evidence that shows they have room to improve. They then access the situation and move forward.

via: Toyoda on Toyota: A New Regime, A New Future

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Corporations Do Not Exist Solely to Maximize the Bottom Line

Do corporations exist solely to maximize their bottom lines? We don’t think so., Forbes Magazine:

When Bill Gates suggested recently that corporations should sacrifice profits to the public welfare, practicing what he called “creative capitalism,” he wasn’t the first robber baron with the idea. Henry Ford made a similar proposal in 1916, but he was defeated in court by shareholders who preferred he simply issue dividends. The countervailing view, famously expounded by Milton Friedman, is that the only responsibility of business is to increase profits.
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Customers are also demanding products that show a commitment to the public welfare. About 10% of new product introductions are environmentally sensitive–green lightbulbs and cars, for example.
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Starbucks pays Ethiopian coffee farmers a 75% premium over market prices, believing this is better than passing out the equivalent in welfare. Pfizer is spending $570 million to develop and deliver treatment in the Third World for fungal infections caused by AIDS. This outlay won’t be recovered in product sales.

They don’t mention the importance of other stakeholder (employees, customers, suppliers – other than the Starbucks example) but still it is nice to read some support for the principles Deming supported: the corporation seeking to benefit all stakeholders.

Communicating Change

Response to: Sales Compensation Plan Changes [the broken link has been removed]

I believe the best way to communicate such changes is to explain how they tie into the long term vision of the organization. This requires that such a vision actually exists (which is often not the case). Then all strategies are communicated based on how they support and integrate with that vision. In addition that communication strategy incorporates an understanding about what weaknesses with past practices are addressed by this new strategy. And how this strategy is based upon what we have learned in strategies we have attempted recently.

That is the communication plan shows how using the PDSA improvement cycle has driven the new strategy. This has at least 2 benefits. First it forces management (well ok not quite, it forces them to frame the decision with PDSA but it encourages them to) actually use the PDSA cycle to make decisions which will result in better decisions. Which will also mean, when possible they will have piloted the change on a small scale prior to adopting it widely (avoiding major mistakes and allowing for more rapid experimentation). And secondly it reinforces that everyone should be using PDSA for those changes they are responsible for.

Most often there is no continuity or rigorous examination of past attempts in communicating change. In such situations I see no reason to be surprised that most people just see random changes by whoever is in charge that just must be survived until the next random change.

Free, Perfect and Now is a great book by a CEO at Marshall Industries that eliminated sales commissions as an integrated strategy to improve the performance of the entire organization. I think it is a great book on this topic.

Maybe I should also say that this isn’t a particularly easy way to communicate change (having to actually examine evidence prior to making decisions, then explain how new strategies support…). But I am not looking for the easiest way to communicate change but the most effective way to continually improve. Communication change is important as a supporting process within the systemic goal of continuous improvement. The easiest communication strategy is not important. The most effective methods for the entire system are. That is sub optimize the ease of communication for the benefit of the whole. If you want an easy communication strategy just send an email that says this is how we will do things from now on.

A Company’s Purpose is to be Useful to Society

Toyota powers to the front [the broken link was removed]

(Toyota President, Katsuaki Watanabe) eschews the normal management mantra of shareholder value above all. A company’s purpose, Watanabe insists, is to be useful to society.

W. Edwards Deming described the purpose of an organization in New Economics, on page 51, as:

The aim proposed here for any organization is for everybody to gain – stockholders, employees, suppliers, customers, community, the environment – over the long term.

More from our previous post on the purpose of an organization

More lean thinking (Toyota Production System) articles.

The Power of Purpose

The Power of Purpose by Rebecca A. Morgan:

Constancy of purpose means that quality decisions are not situational. End of month quality is the same as beginning of month. It means that the long term benefit of the organization is not sacrificed to hit quarterly targets. It means having your eye on the competition, whether it is in your industry or coming from elsewhere, with plans to stay ahead. Constancy of purpose doesn’t require the threat of a customer leaving to implement corrective actions based on root cause. It means that while your team may argue about how best to accomplish it, no one is confused about the commitment to deliver reliable quality.

Deming’s Fourteen Points, point 1: Create constancy of purpose for the improvement of product and service. With the aim to become competitive, stay in business, and provided jobs.” source, Deming Institute [the broken link was removed].

More of Deming’s thoughts on Management
Deming Prize: 2005 Deming Prize winners – 2004 Deming Prize winners
Purpose of an Organization
2 minute webcast of Deming (and Robert Reich) on constancy of purpose [the broken link was removed]