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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 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.

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