Platt Perspective on Business and Technology

Building a business for resilience 21 – open systems, closed systems and selectively porous ones 13

Posted in strategy and planning by Timothy Platt on June 3, 2017

This is my 21st installment to a series on building flexibility and resiliency into a business in its routine day-to-day decisions and follow-through, so it can more adaptively anticipate and respond to an ongoing low-level but with time, significant flow of change and its cumulative consequences, that every business faces in its normal course of operation (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 542 and loosely following for Parts 1-20.)

I began working my way through a set of to-address points in Part 20 that I repeat here for continuity of discussion purposes:

1. Thinking through a business’ own proprietary information and all else that it has to keep secure that it holds.
2. While reducing avoidable friction where there can be trade-offs between work performance efficiency, and due diligence and risk remediation requirements from how information access is managed. This, in anticipation of discussion to come, means consideration of both short-term and long-term value created and received, as well as short-term and long-term costs.
3. And this means thinking through the issues of who gathers and organizes what of this information flow, who accesses it and who uses it – and in ways that might explicitly go beyond their specific work tasks at hand.
4. What processes are this information legitimately used in, and who does that work? With the immediately preceding point in mind, what other, larger picture considerations have to be taken into account here too?
5. And who legitimately sees and uses the results of this information as it is processed and used and with what safeguards for the sensitive raw data and the sensitive processed knowledge that are involved, where different groups of people might have legitimate need to see different sets of this overall information pool?
6. Think in terms of business process cycles here, and of who does and does not enter into them.

I primarily focused on Point 1 of this list in Part 20, just briefly touching on Point 2 there too. And my primary goal for this series installment is to more fully examine and consider that second point and its issues and complexities. In anticipation of this, I noted at the end of Part 20 that not all friction in a business is created equally – and even barring consideration of need to sequester confidential or proprietary information per se, on a realistic need to know basis. Business systems friction can have its trade-offs, where locally increased friction can reasonably be considered acceptable and even as a preferred cost – as a means of reducing overall, system-wide friction and risk that might become more open ended in nature. But that positive side to this only arises when what might be considered selectively intended friction is thought through and planned out, for how it is permitted and even encouraged. I added at the end of Part 20, and with that point of observation in mind, that I would address Point 2 from the above repeated to-address list, at least in part in differential cost/benefits terms of the type that friction: planned for and unplanned for, raise.

I am in fact going to address that complex of issues in what follows, by way of a case study example as drawn from the printing industry. Alphatext Design, here renamed for purposes of inclusion in this posting, is a business-to-business provider of custom designed and printed customer branded marketing and sales materials, including hand-outs and larger display items among other offerings (e.g. fliers that would be handed to individual customers or mailed to them, and sales banners that would be displayed on sales floor walls and as signs and more.) For purposes of this discussion, this business can be viewed as having started out on a planned out growth and expansion campaign when it had five sales accounts managers – hands-on personnel who each manage a separate and distinct portfolio of client businesses from the sales perspective, and who hold their titles because it was decided that their clients would appreciate their business being handled by managers, and at a “higher level” at Alphatext than could be provided by sales clerks. This fit into Alphatext’s marketed image of offering premium service to all of its premium clients – and with all of its clients considered to be premium in importance and value there.

Let’s start with those sales accounts managers and how they fit into Alphatext’s systems. These in-practice hands-on staff members report to a supervisory sales manager – usually more simply referred to as their sales supervisor, who in turn reports to a sales director who holds wider overall responsibilities for that entire functional area of the business as a whole. And then Alphatext Design began to really take off in sales in its overall volume of business achieved and both for its already established client businesses and for the overall number of clients that it works with. Their products offered have real customer appeal for the customers that their client businesses serve, and this has prompted their client businesses to use more types of printed products that Alphatext can provide. And that success, and viral marketing that it has led to have in turn prompted more client businesses to buy their printed marketing materials from Alphatext Design too.

From a Point 1 perspective, and with the discussion of Part 20 of this series in mind, I note that this means a significant scaling up of the numbers of these hands-on sales accounts managers and a fracturing in who knows and holds what specific client business information and of all types as overall workload responsibilities become divided and in multiple directions. One consequence of this sudden and even somewhat dramatic growth, that exactly parallels the situation noted in my Part 20 example, is that the individual areas of responsibility of these sales-oriented accounts managers become narrower and more focused so they see less of the overall picture of what they do as a team in their own day-to-day work experience. And coordinately with that, they find themselves less and less connected as a group with their same-work area colleagues, and particularly as they no longer all work out of the same office location together.

I was in fact writing about this same business without naming it in Part 20, when I wrote of the counterparts to these sales accounts managers in Accounting, and how scaling up the business as a whole impacted upon them (e.g. Alphatext Design’s hands-on accounts receivable managers and their supervising managers who manage those same accounts from the payment received, accounting side.) Before this business expansion, the smaller numbers of both groups of client-facing employees could and did know and talk with each other and daily, and both within and between these two functional area teams. They all worked in the same building and they all shared the same break room where they would gather for lunch, or to chat over coffee or tea. Now the business they work for begins to really scale up and for headcount as much as for anything else, and complexities enter into this picture, and communication becomes more strained and even disconnected.

Everyone working with client data and in any way, is required to safeguard any sensitive information that they see, and that is presented to everyone there as a workplace requirement that cannot be violated. But this new business expansion, has created a splintering of what had been effective, and I add meaningfully important if informal communications and information sharing channels, impacting on what would be allowed and even encouraged information sharing as well. And ultimately this negatively impacts on what information and particularly processed knowledge is held by this business as a whole too, as opportunities are lost to connect the dots between what different people know, who are working on the same and similar clients and on their same and similar issues. As an example of this, when everyone in these two still-closely connected groups could and did freely communicate, they could compare notes on specific clients that might be experiencing one-off problems or issues, as for example with product delivery. And as a result of this they would be in a good position to spot any emerging trends there, that others in the business might need to know about and as quickly as possible. When impending sales event signs ordered don’t arrive on time, the first people to hear of that will be in sales and billing. So any drop-off in communications there, would have real impact on the business as a whole.

At least some avoidable complexities entered into this overall system from simply linearly scaling up this part of the business up, where for example expansion of client numbers and personnel for managing their accounts might no longer mean one accounts receivable specialist managing a same portfolio of accounts as a single sales manager does – and with this shift creating more complications for all involved, where effective communications would be needed. Quite simply, the supervising managers involved in this two functional area, business sub-system, make their own accounts assignment decisions separately for their own teams. And they do so without coordinating between their respective functional areas with their same-level managerial counterparts on matters of who on their own teams are going to be responsible for what accounts.

• Viewed from the higher level perspective offered here, that decision making consequence looks like an invitation for emerging problems to step in and for all involved. Why? Complexity.

When Alphatext Design was first founded, they had one sales accounts manager and one accounts receivable manager so they of necessity worked on the same accounts for the same list of clients. When the company began to expand out this congruence was maintained at least at first. Then when the business began to more rapidly grow past the five sales account manager level that this narrative started at, this congruence began to break down, as it was not taken into account as an explicitly considered functionally significant element of the business growth model in place.

When employees who have individually been able to work with one counterpart staff member in a functionally connected service on issues related to all of the clients that they work with, suddenly have to find and reach out to what might potentially be a different one for each and every client that they work with, and to fellow employees who they do not know or even ever see at work as they work out of different physical offices, that creates inefficiencies and friction for everyone involved. But viewed from the perspective of these two supervising managers, who “own” and run their own services, it is to be expected that they would each individually and separately want to make their own task assignment decisions in managing their own staff – and even if the consequence that I write of here is a possible outcome of that. And this brings me directly and specifically to the issues and challenges of Point 2 of the above list.

Scalability and its execution in realized business growth was entered into as a strategic decision when Alphatext Design began to significantly increase its headcount to match its increase in revenue generating business carried out. Simpler linear scaling was at least attempted as an easiest and at least seemingly most cost-effective and risk-reducing due diligence solution. The systems and organizational patterns in place have always worked in their historical past, and in fact successfully enough so as to make this business expansion both possible and desirable. But the hard reality is that linear scaling on its own can only go so far, successfully and in any real-world system. Ultimately at least some nonlinear, and disruptively new operational and I add strategic systems and structures will usually have to be developed and included in any really significant business growth too.

• Some of this stems from not considering what in retrospect have always been significant factors or conditions and from what has simply been taken for granted – such as the congruence of how a smaller Alphatext Design had their client accounts divided up with groups of them consistently serviced by some single individual sales manager, and with those same accounts handled by one accounts receivable manager who they knew and well, and who they directly communicated with.
• Some of the disruption that can emerge from linearly scaling up a business past a point where that can effectively work, stems from the emergence of new factors or conditions that were not relevant before and certainly not in any systematic matter, but that have become so with a real increase in business scale.

Consider the challenge of making sure that a same set of clients is managed on the sales and accounting sides by single sales and accounting managers in order to streamline communications between these functional areas of the business. Sales and Accounting fit into different lines on the table of organization that do not connect in most cases until near the top of the chart and in the senior executive team – or even with the Chief Executive Officer. But the people – or person working at that higher level of a business are not generally going to be directly hands-on involved with managing lower level decisions such as task allocation for hands-on non-managerial employees. So no real coordination here is likely to take place, at least without a more disruptive change.

That type of situation as I have been discussing it here, and I add a variety of others that I have seen play out in businesses like this one, are why larger businesses at least, often bring in Chief Strategy Officers – executives tasked with helping to shape strategy in its nuts and bolts implementation level details, but who also hold responsibility for making sure that processes and practices in place throughout the business actually connect into and support the overall strategy and business plan in place too, and the goals and priorities that they are supposed to lead the business towards fulfilling.

• In practice, this can become a new executive level position in a business,
• Or these functional responsibilities can be added to the list of responsibilities of an already established executive position, such as that of the Chief Operating Officer, where they would now be expected to look and reach lower down on the table of organization than they had been doing in their until-now more routine work.
• But adding new responsibilities into their task portfolios would probably require shifting at least some of what they have been responsible for into the hands of others so they can still have a manageable workload,
• Or require a staff expansion for them with new types of managers hired who would report to them,
• Or both.

Setting aside these and similar more table of organization level considerations as to how a business might change as it scales up, let’s more directly consider the issues of communications and information sharing here, and as changes in the patterns of what is done and by whom and in what is allowed and by whom, might increase or ameliorate friction in these systems. I am going to turn to that aspect of this discussion in a next series installment. And then after delving into that set of issues, I will turn to consider Point 3 of the to-address list offered at the top of this posting.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory.

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