Taylor Tomasini

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Why are corporate projects fragile?

A corporate project goes something like this: someone realizes the organization can save money if it improves a process or becomes more electronic or changes the way it does something. Once the realization is made a project team is formed, consultants are hired, and an ROI is computed. The group gets to work.

They plan, they create dependencies, simplify the complexity and create a waterfall deployment strategy. But why? That seems fragile. Dependencies are inevitably understated, complexities were inevitably too simplified, and things begin to break down. Timelines are missed and ROIs turned out to be ambitious.

Why? Why is this the norm? Why do we even plan? Our bodies don’t plan, the ecology around us doesn’t plan? And yet they survive. Our companies plan and seek efficiency and take projects as means toward improvement, but they fail. They don’t survive. Is there something we can learn from biology that can inform the way we improve our organizations?

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    Jan 29 2013: Taylor, I have only had three jobs Military, Industry, and civil service and retired from each. I have seen many programs / project introduced and most ended in failure. The military level is somewhat easier the reason being ..."I told you so .. now do it." Both civil and industry service have handicaps .. unions. However civil service is again a by order type of implementation. Which leaves us with industry. It was my experience that industry is totally dependent upon the management level. Decisions are made at the supervisory / executive level with minimum management input. This is the big disconnect. Executives appoint a committee with the plan, time, and cost constraints ... not much wiggle room there ... as executives they expect this order to be implemented as outlined usually as a tommarrow life as you know it will change to (the plan). Good managers implemental changes over a period of time that would not be in conflect with operations.

    Nature and good managers analyze their resources, adjust, adapt, and overcome. Executives make demands .... to hell with consequences and damn the torpedeos.

    I have returned several times as a consultant and always have a problem explaining this to top management.

    I am sure that you are alread aware of this disconnect and the comparison to nature is a red herring.

    Although I agree we can learn from all sources.

    I wish you well. Bob.
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      Jan 29 2013: Bob, thanks for the response! It definitely rings true.
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    Gail .

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    Jan 28 2013: I think we can learn from human biology.

    Take a human and feed feed it the right amount of food to survive, grow, prosper, decline, and then die.
    Take a corporation and allow it to live a natural lifespan. It grows in accordance with demand, and dies when the demand is gone because of new inventions.

    Now take a corporation and invent money into existence to keep it growing, eating, consuming, surviving, growing, prospering, and legally protecting it from a natural death.
    Then take a human population and feed it enough to keep it growing, eating, consuming, surviving, prospering, and protecting it from death.

    what do you now have? You have a population boom to the point where the earth's resources can no longer sustain our population of well over 7 billion. You have obesity epidemics in one place while starvation grows in another. You have people becoming complacent and intellectually lazy. They become dependent on the political systems that are supposed to protect them from death (an impossibility). They stop making good decisions. They become extinct.Their corporations die with them because, contrary to current political belief, they are not human. They are legally protected ideas.

    What we can learn from biology is that everything in the physical world dies. There is no escaping it.
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    Jan 28 2013: because the alternatives are worse.

    there is a reason why corporations have the size they have. inside a corporation, there is top-down coordination, protocols and hierarchy. there is limited feedback on individual processes. costs are hard to allocate to divisions and activities. on the other hand, many processes are optimized for speed and low cost. you don't have to constantly look for services on the market that the corporation itself internally provides, and the associated risk is lower.

    outside the corporation, there is the market. the market is characterized by being non-hierarchic, lack of intelligent agent control, diversity. the major selective force on the market is trial and error, profit and loss. this is a very effective, dynamic, immediate feedback mechanism. on the other hand, intercorporation transactions are volatile and costly.

    the extreme on the corporation side would be socialism with a central planning board making economy-wide decisions. in such a world, everything can be decided, and massive rearrangement of production methods would be possible as a conscious decision. but the system would be highly bureaucratic, rigid and lacking in feedback mechanisms to the level of economic disaster and collapse.

    the extreme on the market side would be one-person "corporations" doing everything on per-case contract base, constantly looking for alternatives to the current cooperative partners. such a "corporation" would be very "aerodynamic", but the cost of cooperation is preventively high.

    the current state of technology results in a middle ground between the two extremes. corporations getting too large becoming efficient at what they do, but slow to change. corporations too small getting buried under heaps of extra cost and volatility of the market.

    as of now, due to many circumstances, relatively huge and rigid corporations survive best.
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      Jan 28 2013: Is there no better way? I think of Ricardo Semler's book The Seven-Day Weekend in which he describes how his organization is breaking all of the rules of corporate structure. What if a company didn't need to hierarchy, but also didn't need the centralized planning? What if you could construct an organization that was dynamic like a market is?
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        Jan 28 2013: we can never be so sure. what we can be sure of is the fact that there are millions of corporations all over the world, and they try many things every day. successful things are kept and they spread. unsuccessful things are abandoned. if this semco model is any more successful than other models, why we don't see it spread? why nobody seems to copy that? one might conclude that it is not in fact any better. we don't know, but the case for it is strong.
  • Jan 28 2013: Planning is necessary, to coordinate the activities of groups of people. But people invariably overestimate their own abilities to plan and keep to the plan, while underestimating the chaos of real life that inevitably disrupts the plan.

    Most projects are acts of invention, but we act as though we can plan for creative thinking, as though creativity is just another service, like hiring a plumber.

    It is important for us to keep a positive outlook, while simultaneously avoiding overconfidence. This is a delicate balancing act. Realism is very difficult.

    Failure is the norm because projects are very difficult and humans are not as competent as we think we are.

    And yet, some projects result in fabulous success. That is the reason we keep trying.

    Your biological analogy does not hold up to close scrutiny. In nature, failure is the norm even more than in human projects. Consider all the millions of newborn organisms that are eaten before they are even one day old. When a predator eats an egg, the project never gets started.
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      Jan 28 2013: Organism don't plan and yet they've been around for thousands of years. Taleb attributes this to their ability what he calls antifragility. By becoming highly flexible to change and by overcompensating for stressors all kinds of species are able to survive despite not knowing what volatility they'll be subjected to.

      In contrast, planning -- which is our means of dealing with future volatility -- seems rather narrow and inadequate. What if we didn't need to see every risk coming down the road? What if we organized our projects in a way where are resilient to risks?
  • Jan 27 2013: Coroprate projects are mostly unique events, that is, projects that are only done once.
    The first 747 that was built missed all of its targets, but the 50th one built was spot on.
    It is a rare board of directors who understands the concept of risk correctly and that a project can be 1x, 2x, 3x or 4x (that is spot on to 4 times the estimated cost).
    Even worse is the abiltiy of middle management to plan in detail (to see hidden complexity), make realistic estimates of the amount of completed work they can get done in a time period (not overestimate their amazing ability to accomplish stuff) and not embellish the returns the fabulous project will provide for the company.
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      Jan 28 2013: It's true that the first attempt at a project is much less efficient than subsequent attempts. And I agree with what you're saying. I'm curious your thoughts on efficiency. Should companies aim to be efficient? Should efficiency be the driving factor for corporate change?
      • Jan 28 2013: There are only two reasons that I can think of that would inspire a company to take on a project. The first is efficiency and the second is competitive advantage.
        In my experience, all others are non starters.
        For example, I was once consulting at an engineering firm and the IT department wanted to do some project, the end result of which was that their jobs were much easier.
        The response from the president of the company was that it was not his job to make their jobs easier.
        I would be interested in hearing any other reasons you have come across for companies starting projects not based on these two reasons.
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          Jan 28 2013: I agree. The only reasons I've seen for companies starting corporate projects is efficiency and competitive advantage. So you're definitely right.

          Just recently I started reading John Mackey's book Conscious Capitalism and he very clearly suggests that profit maximization for our equity holders (which is the reason we want efficiency and competitive advantage) isn't the reason our companies should exist. He believes, instead, in maximizing value for employees, customers, debt holders, equity holders, suppliers, etc.

          With that in mind the focus isn't necessarily on profit maximization. He sees it more as a constraint -- a company must make money to survive. But the guiding principle is value for all stakeholders. So this might mean a desire to care for the environment since a stakeholder is the society in which the company is located, or the desire might be to provide whole foods because it's socially responsible, or to compassionately raise cattle because it's socially responsible.

          The point: He argues that our purpose should be a human one, and profit simply a constraint. From this perspective companies have a whole new range of options for what they choose to maximize.
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          Jan 28 2013: Gordon. I've been doing a little more thinking and something occurred to me just now. Seth Godin draws the distinction in his book The Icarus Deception between companies that are racing toward the bottom and companies that are providing a different kind of value.

          He argues that the first kind of company is operating according to and industrial model that requires that they make a standard product ever cheaper with ever higher quality. This necessitates efficiency.

          The second kind of company provides human connection and caring. It's focused on the finite resource of human attention; whereas the first kind of company is focused on the finite resource of the physical.

          The first company is in a race to zero (maximum efficiency with maximum quality); whereas, the second kind of company is in a race to make meaning.

          Examples? There are many of the first -- maybe, car manufacturers. There are fewer examples of the second -- maybe, Apple. I chose Apple because their products obviously drive a premium over the value of the thing being created. There's something else there.

          Just a thought.
      • Jan 28 2013: Before you can redefine what a company should be doing in terms of executing projects for different reasons and goals, you have to factor in the law.
        I live in Canada so I can only comment on Canadian law but the Supreme court has recently defined the fiduciary duty of a company’s directors or owners to be to the corporation and not to any particular creditor group.
        The court also defers to business judgements that the directors make at the time and does not demand perfection.
        This means that profit is not the sole reason for a corporation to exist and it is recognized that there are values beyond simple profit that the corporation brings to its environment, including the town in which is exists, the employees, any good will towards the company, etc.
        Social responsibility is definitely on the table here.
        With regard to your point about cost vs. value I recall a business case study where a manufacturer made wheel chairs. They standardized all the parts and assembly and tried to make the product as good as possible while being a cheap as possible as well. This was a race to the bottom.
        They subsequently turned around and decided to expand into new concepts and were one of the first companies to make sport wheel chairs. That is an example of adding value and looking to make your product line meaningful to more people.
        The second type of company will always have a loyal following while the first will have Wall Mart people.
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          Jan 28 2013: That's good input. Thanks for the great example.