Platt Perspective on Business and Technology

Technology as the tide that raises all boats 12 – but often unevenly 9

This is my 12th installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-11, and Part 1 of that in particular as the foundational urtext for this narrative.)

I began discussing economic friction as a basic approach to understanding economic systems, and its more micro-level expression: business systems friction in Part 11, as tools for more fully understanding a global playing field perspective that innovation arises in and spreads through, when and as it does. And I focused there on two specific aspects of this phenomenon, as it plays out in the marketplace:

• How friction can limit the flow of information that would be required in order to make best possible business and economic decisions, by impacting upon and shaping how market participants perceive and respond to, in this case innovation, and
• How the levels and sources of friction vary for market participants depending on where they would position themselves along a standard innovation acceptance curve, running from pioneer and early adaptors on through late and last adaptors.

My goal for this posting is to continue that narrative, here addressing the issues of “cultural and socioeconomic impact, as innovative change and the opportunity for it advances all around us.” And I focus in that on the dichotomy of open and closed societies, and on how they variously allow or limit the acceptance of change and innovation, and the flow of information that would be needed for that to be possible. The forces that arise there, can ultimately override the impact of the aspects to this topic that I have addressed up to here in this series and certainly as addressed in Part 11.

I have at least briefly discussed the issues of open and closed societies per se in this blog, for the impact that more generally closed societies and what might be deemed more “selectively open” ones can have in creating wrinkles and barriers in the global flattening that Thomas Friedman writes of in his books. (See, for example:

• Friedman, T.L. (2007 edition) The World Is Flat. Picador/Farrar, Straus and Giroux. New York. (The first edition of this initially came out in 2005 but I cite here its revised and updated edition.)
• Friedman, T.L. (2008) Hot, Flat and Crowded: why we need a green revolution – and how it can renew America. Farrar, Straus and Giroux. New York. (Available through this link as a free full text PDF download.)
• Friedman, T.L. (2016) Thank You for Being Late: an optimist’s guide to thriving in the age of accelerations. Farrar, Straus and Giroux. New York.)

I address this complex of issues in this posting from the perspective of communications and information sharing across traditional boundaries and the friction that barriers to this can create, reinforcing those boundaries. But perhaps more importantly, I address this set of issues here from a more finely grained perspective than that of entire societies, at least as more traditionally envisioned too. Ultimately, to pursue the message implicit in the first half of the title to this posting, technology can only serve as a tide that can raise all boats, if all boats are floating, and all are equally unencumbered in being able to respond change and innovation and to its potential. And ultimately, that calls for a free and open exchange of information: wide-ranging fact and opinion and all that fits between them as holding elements of both of them.

Where are we now for this, as of this writing, as individuals and collectively? Where are we societally and as members of networking and otherwise connected groups? Is the world currently more actively opening up and both for information sharing from us, and for our open receipt of information that is at least potentially open to us? Right now, and certainly for the foreseeable future as I write this, I would have to answer these questions with more negative answers. And I this regard, I cite a posting that I have offered here in this blog that I based on a talk that I gave during the candidate nominations race in the United States leading up to the 2016 presidential elections:

Thinking Through the Words We Use in Our Political Monologs.

I wrote there of how we have come to speak past each other, and less with each other and most certainly in political arenas and across differences of opinion. I did not explicitly write of epistemic bubbles there as a within-group and outsider to that defining understanding of this phenomenon: echo chamber barriers that we increasingly enter into, within which we only hear what we are already inclined to believe, and opinion and information: true or not that would support it. But I have used that term and I have discussed its issues for their sociopolitical and societal impact in subsequent postings to a series that I have developed from that posting. My point here is that we increasingly live in a world of communities that are splintered by the communications barriers that divide us. And this impacts on politics and trade and everything else. And ultimately, our reliance on those bubbles for our news and opinion sourcing and for our networking and direct communicating, and our increasing existence essentially entirely within them leads to a reduced ability to respond to and live in a wider world. Think of this as an emerging new source of wrinkles and of overt barriers too, in any participation in the larger communities that ubiquitous online connectivity and communications resources should be making possible and for all of us. This series is about innovation and change and this partitioning affects what we see of that too, and how we see the specific changes that do come to our attention.

We are currently living in a decidedly and I have to add increasingly “but often unevenly” world, to cite the second half of the title of this posting. And ironically, this phenomenon is most pronounced in at least some of the most online connected nations on this planet, and certainly in nations like the United States, as those who would battle for openness and connectedness in them confront those who would turn away from all that might differ from them and threaten their beliefs and opinions by offering alternatives to them.

I am going to end writing to this series at least for now, with that note, though I might very well return to it again and certainly as the era of the Trump presidency ends and his vision and his “nationalistic” closing off excesses come into wider and more dispassionate review and analysis.

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. I also include this in Outsourcing and Globalization – and see that directory for related material. And I include a link to this posting as a supplemental addition to Section VII: Reexamining Business School Fundamentals (reconsidered), of Reexamining the Fundamentals too.

Technology as the tide that raises all boats 11 – but often unevenly 8

Posted in outsourcing and globalization, reexamining the fundamentals, strategy and planning by Timothy Platt on October 7, 2017

This is my 11th installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-10, and Part 1 of that in particular as the foundational urtext for this narrative.)

The at-times conflicting dynamics of innovation’s entry into, and acceptance in the marketplace are crucially important to the narrative that I have been developing here in this series. So I explicitly addressed two of the more overtly significant aspects of that in Part 9 and Part 10:

• Availability and accessibility of New in the marketplace (at all, and at an affordable cost there),
• And consumers’ levels of comfort with, and willingness to adapt New and how soon after it first appears as a marketplace possibility.

My goal for this installment is to address something of the underlying mechanisms of these dynamics, and certainly in an increasingly ubiquitously connected context, with a focus here on friction in these systems. And in the course of discussing and analyzing that, I will explicitly consider how both cultural and socioeconomic forces impact upon and help to shape innovative change and the opportunity for it as it advances forward all around us.

I begin addressing all of that by posting a basic and even fundamental question, that I have in fact answered at least in part, a number of times in the course of developing and writing postings and series to this blog:

• What is friction in this context?
• I start with a well established approach to answering that: with friction as that term is used in economic theory and as a general organizing principle there. Economic friction is resistance to systems efficiency as that arises from a lack of essential information, clearly stated and available when and as needed. Friction is the consequence of having to make economic and financial decisions absent even crucially necessary information at the time of decision making, that would be required in order to knowingly make a best decision then. Think of this as sand thrown in the gear box of Adam Smith’s invisible hand, where marketplace and economic system participants cannot make what would be the best decisions for themselves or for others (who for example, they might hold fiduciary responsibility toward), as they lack the information and insight that would be required for that. Economic friction is a measure of the consequence of faulty and limited information and its communication and it shapes the overall systems that it arises in, and the outcomes and consequences of decisions made in them.
• I adapt that basic term and its definition to the organizational level of the individual business with a matching term: business systems friction. And I apply that term at the level of the overall business or organization as a whole, and at the level of functional and other supposedly tightly connected functional subsystems that arise within the complete organization (e.g. as separate and distinct lines on a table of organization under single lines of leadership there, or as separate and distinct offices or facilities that formally belong within the business but that also function at least somewhat autonomously within it.) Looking outward and in the other direction for organizational scale, I also apply this term in the context of supply chain and related value chain systems, with the functionally interconnected and interacting businesses that enter into them, all collectively brought under direct consideration here.
• And here and in this context, I continue expanding the range of organizational levels that I would apply the basic term “friction” to, to consider individuals and social network and marketplace connected groups of them. Yes, the basic issues that I would encapsulate in what I will say here and in this context, have their counterparts within businesses and in groups of employees, and I would tend to include that context within the general rubric of business systems friction too. Here, I will focus on what I will categorically carve out as a more consumer and marketplace manifestation of friction. (Yes, this could reasonably be folded into the general economic friction definition, but I separate it out to consider this set of phenomena from an explicitly more micro-level.)

Consumers and marketplace participants in general, make their decisions to purchase or not to purchase on the basis of limited information, and in the face of faulty and at times even significantly limited and even contradictory communications. This is obvious when considering rapidly changing industries and their products, where consumers do not for example necessarily know when a newer and better next technology updated product will come out as they make their next purchasing decisions now. It also applies to the questions of quality and reliability, ease of use, and value of the features offered, in what they have to consider for purchase and even when they know that a new purchasing option is available to them. That is why crowd sourced and other (presumably) consumer product reviews are considered to be so valuable as an increasing common due diligence resource, and for so many. But even then, how can you tell if a negative review is the legitimate expression of opinion of a real product user, or just a troll attack fraud and perhaps one posted in subversive support for a competitor? How can you tell if a glowingly positive review is legitimate, or a fraud too, and even one directly posted by the product manufacturer or provider, or posted for-fee on their behalf? Information is always going to be incomplete and imperfect. And it can be difficult and even impossible to know precisely what to make of the marketplace information and perceived knowledge that is visible and available, that could be applied to purchasing decisions.

But this tells only one half of the story that I would make note of here. For purposes of this narrative, the second half might be even more important: the asymmetry in both the information available to, and the levels and types of information accessed by individuals in the overall marketplace, depending on where they most comfortably fit into a relevant innovation acceptance diffusion curve.

I admit that I am offering a more stereotyped assessment here, but add in its defense that in this case that simply means accepting the basic functional definitions of terms like pioneer and early adaptor on one end of the scale, and late and last adaptors on the other.

• When a new product, and particularly a disruptively novel one first arrives in the marketplace, the first people to see it are often published new product reviewers who tend themselves to be early and even pioneer adaptors. And they focus on all of the new details and their strengths and weaknesses, but from a New accepting and even New-embracing perspective. Pioneer and early adaptors who are drawn to the New and Different, tend to be drawn to these reviews and to make their own reviews and assessments of the product details offered too, through online social media. So their decisions to buy in or not, tend to be granular and detailed and on a specific New product level. And they tend to be shared through like-minded communities.
• Late and last adaptors do not generally read these types of reviews – ever. And they do not in general post or share their specific reviews or opinions either, and certainly not online in the manner that early adaptors do. They start out with a presumptive, more categorical bias against New and Different per se, at least until value has been proven in others’ hands as safe and reliable enough to meet their due diligence requirements and on a “once new” by “once new” basis. So their approach here is essentially by definition anything but fine grained and granular in nature and it does not enter into widely shared review and evaluation conversations. Outside sourced information that they would seek out and accept in this, is in large part evaluated in terms of how it does or does not support their basic a priori conclusion-based due diligence approach which is more risk aversive than benefit accepting in nature.
• And mid-stage adaptors fit in the middle there, looking both outward for details of the specific products that have come out to see how they might work for them, and both outward and inward for threat assessment driven risk management decision making. They also want to see at least some prior user experience as necessary input for their risk and benefits evaluation, but they are not entirely driven by that in their purchasing and usage decisions.
• That raises an important point. Both early and earliest, and late and last adaptors carry out risk and benefits assessments (and so do middle ground adaptors.) It is just that early end of the spectrum adaptors tend to weigh possible benefits more heavily than they do risks and late and last adaptors tend to reverse that. For a very real world, clarifying example there, consider government agencies such as the United States FBI and particularly when they seek to upgrade their computer network and file and data management systems. They do in fact look into the technical details and in more detail than essentially any early adaptors would or could. It is just that by the time they have finished their multi-stage vetting process for that, what began as new and cutting edge can have become old and even obsolete. This is not a fictionalized example; I am in fact briefly recalling a specific failed attempt at a massive, information systems upgrade in the FBI that collapsed around the time I first began writing to this blog. Possible risk was viewed as so outweighing possible benefit that nothing positive was, or could be achieved from that upgrade attempt, that ended up costing the US government well over a third of a billion dollars and with nothing to show from it in the way of new technology in place and in actual use.

There are a number of salient conclusions that could be drawn from this comparison between early end and late end adaptors as considered from an innovation diffusion and acceptance curve perspective. One that I would point to here is that most late adaptors seek out much less outside information and much less new product-specific information than do early adaptors ( my FBI example notwithstanding, as a perhaps rule-clarifying exception.) And this difference in the levels and range of sources of information sought out, and of the range of conversation flows entered into, means fundamental differences in the types and sources of friction faced when making these purchasing decisions, and when determining the timing of those decisions, for those two groups.

I said towards the top of this posting that I will consider “both cultural and socioeconomic impact as innovative change and the opportunity for it advances all around us.” I will more explicitly delve into those issues and into the issues of early and late adapting communities in my next series installment. I simply add here and in anticipation of that, that this set of issues becomes definingly important in a ubiquitously connected, social media driven context that we now live in. (I will question that assertion in my next installment too, as part of its discussion.)

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. I also include this in Outsourcing and Globalization – and see that directory for related material. And I include a link to this posting as a supplemental addition to Section VII: Reexamining Business School Fundamentals (reconsidered), of Reexamining the Fundamentals too.

Technology as the tide that raises all boats 10 – but often unevenly 7

Posted in outsourcing and globalization, reexamining the fundamentals, strategy and planning by Timothy Platt on August 28, 2017

This is my 10th installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-9, and Part 1 of that in particular as the foundational urtext for this narrative.)

I focused in Part 9 of this, on the impact of globalization on innovation, as inexpensive and readily available ubiquitously connecting anywhere-to-anywhere communications and information sharing have broken down so many of the barriers between what were once separate marketplaces and buyer communities.

And in the course of discussing that perspective, I at least briefly made note of how this has contributed to a speeding up of innovation and its emergence in the marketplace as new product and service offerings arise and can find viable niche markets. And I added in that context that a speeding up of the pace of innovation and of what is now becoming available, is pressuring everyone to shift towards more rapid acceptance of change, foreshortening the innovation acceptance diffusion curve and challenging and even threatening those who would normally fit towards the late and last adaptor end of the curve. Quite simply, late and last adaptor now means falling further behind the more median acceptance rate norm than it used to, and even much further behind for the extreme late end of the new technology diffusion acceptance curve.

As a point of perspective, even if an imperfect one, I would compare this emerging trend to the still-wide digital divide that separates new and emerging technology have and have-not communities. But the divide that I write of here, is not one where new and next are access-restricted and regardless of desire to actively participate in and use new and emerging technologies with the empowerment that they could bring. This divide is one where new and next are increasingly, seemingly forced on everyone and whether they are prepared for it or not.

I cite the digital divide here, as usually depicted in an international, have and have-not nation context, for a reason. In practice, have-not communities and left-behind ones can be found in even the more technologically advanced have-oriented, developed nations and certainly when you consider communities that were built up around what have become obsolete technologies and that have suffered economically as a result. Consider the so called rust belt communities of the United States and the old coal mining communities in states such as West Virginia. The two divides that I write of here, can and do go hand in hand in many places, where a combination of lack of access, and fear of further change can create a truly toxic synergy.

To put that more general observation, in the specific perspective of a still in-the-news context that is playing out in the United States as I write this:

• How much of the “conservative” and “ultra-conservative” versus “liberal” and “progressive” debate, and even conflict that we now see, actually reflects a division in how different demographics can or cannot readily accommodate change, and a steady barrage of it and from seemingly all directions, all the time? Remember how one of the clarion calls of disaffection of Donald Trump’s followers is their yearning to return to simpler times and to the way things used to be – when the world was more familiar and less disruptively changing.

I wrote in Part 9 of the pressures of rapid innovative change in what is offered in the marketplace, and the pressures that this places on consumers to accept and adapt and to change too, and both as individuals and as members of communities. I counter that here with a matching discussion of pushback and even overt resistance to that demand for change, that can be in part shaped by availability of New but that is even more driven by resistance to being changed, and certainly where that would be viewed as being coerced.

I wrote Part 9 in terms of balances between competing forces and drives, and I continue that same basic narrative approach here. The marketplace and its participants always face competing pressures and demands, and competing needs. This means they are always facing dynamic balances of competing forces and both around them and within them as they make their purchasing and usage decisions. And this brings me to a fundamental point that underlies much if not all of this series and its progression of discussion and analysis: the phenomenon of friction in all of this, as it shapes both the rate and direction in which these dynamic balances of forces play out.

I will discuss friction as I use that term here, in my next series installment, where I will consider both cultural and socioeconomic impact as innovative change and the opportunity for it advances all around us. 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. I also include this in Outsourcing and Globalization – and see that directory for related material. And I include a link to this posting as a supplemental addition to Section VII: Reexamining Business School Fundamentals (reconsidered), of Reexamining the Fundamentals too.

Technology as the tide that raises all boats 9 – but often unevenly 6

This is my 9th installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-8, and Part 1 of that in particular as the foundational urtext for this narrative.)

I focused in Part 8 of this, on the pace and scale of change and of innovation, considering two related but nevertheless categorically distinct arenas where innovation can take place:

1. Innovation within the business and in how it is structured and organized and in how it functions, operationally, and
2. Innovation in what that business brings to market as products and services offered.

My primary area of focus there was a continued discussion of the relative potential pace of change and of innovative change in particular and in both of these contexts. Then at the end of Part 8, I said that I would continue from it here, with explicit consideration of:

• Globalization and the scale of the marketplace, and its capacity to create and support progressively finer-scale niche markets even as it drives global conformity too, and
• The realities of the technology diffusion and acceptance curve, and of push-back pressures from the marketplace as they would serve to limit and shape the pace of accelerating innovation acceptance and of innovation occurrence as well, where technological factors alone might dictate faster and faster.

I begin this posting and its line of discussion with the first point and by acknowledging what should be obvious to essentially everyone, and everywhere now: a combination of ubiquitous, anywhere to anywhere communications and computer-supported connectivity and information sharing, has effectively limited the barriers that have traditionally divided us, and removed them entirely for many purposes.

• Since the advent of wireless telephony, and certainly since the advent of inexpensive, computationally powerful, readily available smart phones, globalization has meant all of us and everywhere at least significantly starting to come together as a single overall globally connected community.

China has its great firewall: its Golden Shield Project to try to limit and control the global conversation at least as far as it would include their own citizens. And at least some other nations actively seek to control their people, for their being able to join this conversation flow too. As an extreme case in point example of that, consider North Korea where all phone conversations are monitored, no average citizen has access to computers or the internet, and cell phones do not exist – except for a small and carefully monitored minority.

The more restricted the access to this globalization that the citizens of a country are, the more forcefully that country and its citizens are pushed into being de facto late and last adaptors to change taking place around them. The more openly connected a people are, the more visible and the more accessible the change taking place around them can be for them, and the more pressingly intrusive it can become too as new keeps rushing in to supplant current with next and with a still newer next after that. And this can serve to pressure people towards the faster adaptor end of the innovation acceptance diffusion curve.

I am going to return to that set of issues a bit later in this series. But let’s step back from it, at least for the moment to consider a key element to the first of the two topics bullet points offered above: scale in globalization. I wrote of two at least apparently conflicting drives in that bullet point that are emergent to globalization per se, and certainly in a ubiquitously connected context: its capacity to create and support progressively finer-scale niche markets and its drive to create global conformity too (as the dynamics behind the Pareto principle weed out perhaps many possible alternatives, leaving single “best” or at least most accepted alternatives predominating, and wherever change leads to possible diversity.)

When anyone and seemingly everyone who would potentially fit into and support a niche market can do so, it becomes possible to achieve a sufficient available consumer base for it, to make it feasible for businesses to produce and sell to it, in meeting its niche defined needs. And it becomes practical and feasible for businesses to actively pursue and meet the needs, and profitably so, for more finely, narrowly defined niche markets too. This in and of itself means support for diversity and for several and even many alternative product or service possibilities and all at once, each achieving real market success. But the forces behind that empirically observable diversity winnowing mechanism: the Pareto principle, keeps cutting back on at least widely available choice, at the same time with the emergence of market dominating winners too.

• Think of the balance of diversity and its supportive pressures, and of conformity in the form of Pareto principle winners,
• As representing the creative destruction dynamic, that is sometimes offered as a working definition of disruptive change per se. Old is swept away by change, and so are many and even most emerging change options too. And it is not always going to be apparent, and certainly not up-front, which particular new will thrive, or even which new possibilities will even survive as the flow of change advances.

And this brings me to the second of the above two topics bullet points, which I have in fact already begun to address when discussing and analyzing the issues of the first of them:

• The realities of the technology diffusion and acceptance curve, and the pressures of the marketplace that would limit and shape the pace of accelerating innovation acceptance and of innovation occurrence as well.

I am going to more fully discuss this and its implications in a next series installment. 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. I also include this in Outsourcing and Globalization – and see that directory for related material. And I include a link to this posting as a supplemental addition to Section VII: Reexamining Business School Fundamentals (reconsidered), of Reexamining the Fundamentals too.

Technology as the tide that raises all boats 8 – but often unevenly 5

This is my 8th installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-7, and Part 1 of that in particular as the foundational urtext for this narrative.)

I have been at least touching upon a succession of issues in this series, that address the question of what qualifies as true innovation, and certainly in a changing product or service development context, and a change-demanding marketplace context. And that progression of postings has led me back to this series’ Part 1 and its issues, and to the puzzle of economy of scale in enabling innovation.

Business scalability and the processes and complications of actually pursuing that course have provided a recurring thread of discussion that has run through much of this blog. And in that regard, I cite a relatively lengthy series that I first started posting to this blog on July 8, 2012: Moving Past Early Stage and the Challenge of Scalability (see Startups and Early Stage Businesses, postings 96 and loosely following for its Parts 1-35.)

I decided to put that series in a directory devoted primarily to discussion of startups and early stage businesses, knowing from the beginning that I would address issues in it that would only arise well after any early stages in a business’ growth and development. And I chose to do that because I see scalability and the systematic growth and development of a business as a fundamentally strategically driven ongoing process – and as one that would best be planned for and prepared for from the beginning, and from the initial formally developed business plan in place.

I make note of that essentially-editorial decision here, in order to stress how strategically positioned the issues that I have been addressing in this series are, and to emphasize that point in particular here in this installment to it. And with that noted, I turn here to focus on one particular aspect of the complex change-driving process of scaling up a business:

• Innovation and the ongoing effort to innovate in order to keep a business as competitively strong and efficient as possible while growing it in overall scale.

For purposes of this series, I parse innovation here into two separate but nevertheless connected and interacting domains:

1. Innovation within the business and in how it is structured and organized and in how it functions, operationally, and
2. Innovation in what that business brings to market as products and services offered.

Part 1 of this series focused essentially entirely on the second of these visions of innovation, and on how the scale of change in what is brought to market changes over time, requiring larger and larger incremental increases in market-perceived value for any given change to be seen as a genuine innovation by purchasing consumers and end users. I begin this posting’s discussion by noting that the more competitively efficient and effective the businesses in an industry become on average and as a general rule, the more difficult it becomes to find and institute a new and novel next-step business process improvement in any of them that would rise to a level of significance so as to qualify as being truly game-changing and innovative too. Simple evolutionary change in what is already more routinely being done is very unlikely to qualify as truly innovative in this context and certainly in a fast-paced and competitive industry or sector – and even if essentially any change that offers increased value to a business would qualify as being truly innovative in a more settled and moribund one.

Setting aside consideration of older and more static industries and of markets that show no real change except perhaps shrinkage, and focusing on actively developing industries and their markets here:

• The more and the more rapidly the businesses in those industries change in order to keep up and push ahead, the larger and more pronounced a new next step change has to be for them, if it is to stand out as representing a new source of genuinely innovative value.

I briefly touched upon this concluding point in Part 7 and expand upon it here, with some organizing explanatory detail added, as this is an important consideration in understanding business innovation per se. I write fairly extensively about innovation here in this blog, and this has been a very important point of focus in my own professional life. I explicitly note here, how

• Next-step and next-step after that innovation becomes more and more challenging and particularly in rapidly changing markets with change-demanding target audiences and consumer bases, and for any businesses that seek to service their needs.

I add that it can and usually does become more expensive and more resource demanding to innovate over time too. And real innovative change comes more and more from disruptive change with anything less than that: anything seen as merely evolutionary and incremental in nature, simply seen as being more cosmetic in nature.

That stated, let’s reconsider the two numbered points as offered above, starting with the first of them. Point 1 is very generally stated, and could only be addressed in general terms in a much more extensive discussion than I am developing in this series as a whole, so I focus on one particularly relevant aspect of that line of enquiry here, restating that in the particular, more-limited context of this series:

• I am writing here, at least in the within-business context of innovation, about developing new capabilities and resiliencies into a business that would enable it to offer to market, the same or better products and/or services, or a larger and more comprehensive array of them or all of the above, at lower and more competitive price points than the competition can match.

Ultimately, a business survives let alone thrives on the basis of its being able to produce and bring to market something that consumers will want, and want enough to pay for. This leads to the revenue streams that pay their bills and that allow for and support all else. Competitive strength and capacity to retain and even expand market share, and retain and even grow incoming revenue and profitability depend essentially entirely on that business’ capacity to produce and ship out and sell. And impact upon this, net of costs of implementation and of any new risk incurred, is where the value of any business process or other internal-to-the-business, change and innovation would be measured.

What have I been writing about in this series? As new forms and channels of communications and connectivity arise and as markets become more and more globally reaching and immediately so, the rate of change in those markets and pressure to innovate and improve in businesses facing them increases and increases and increases.

• And the timing and pace demanded for new and next in product development cycles keeps shortening too,
• And for all but the most dead-end, moribund industries that are essentially entirely driven by legacy technologies – until they are disruptively challenged by unexpected disruptive innovation too or until they simply disappear.
• And this speeding up of change and innovation in advancing industries,
• And this speeding up of how pressure arises, that compels that change, and of the forces that drive it, serve to create what might be considered a pace-slowing back-pressure through demands that any next incremental innovative change has to be that much larger in scale to even qualify as representing true innovation at all.
• Some might see this as a source of friction, and of information development and availability issues. And challenges of the type that lead to economic friction, and more locally to business process friction do enter into this. But friction per se and its consideration, only address part of this phenomenon so I use a different term here.

And this brings me to a commonly cited technology development scenario that has been proposed by many now in various forms when predicting where change and innovation and its recurrence are bringing us: the concept of the technology development singularity. For a now somewhat dated but still interesting and informative benchmark document on this conceptual understanding and on what it means, see

• Kurzweil, R. (2005) The Singularity Is Near: when humans transcend biology. Penguin Books.

More recent variations on the approaching singularity concept have focused on the emergence and realization of specific technology development benchmarks such as the development of true, generalized artificial intelligence that matches and then advances to exceed average human intelligence – and then presumably any realized level of intelligence that any person might display and even as true genius. This would presumably mean technology in effect coming to take over its own development and at paces that humans could not achieve let alone maintain on their own.

If you were to graph the pace of innovation development over time, these conceptual models would start out with innovation developing and the curve representing that, rising slowly and even very slowly and over generations per innovative step. But the pace of change keeps speeding up and even if slowly at first, and certainly until the first industrial revolution. Then the pace speeds up even more and until an inflection point is reached as the pace of advancement finally reaches a turning point. Such a graph is commonly depicted as taking the form of one arm of a hyperbolic curve. And we have in fact reached such a turning point with the pace of innovative change much steeper now than it has ever been historically. What I am writing of here is a breaking force, or back-pressure to repeat a metaphorical term already employed here that would prevent that curve from ever too closely approaching the vertical of essentially infinitely fast change – which I would expect any futurologist: Kurzweil included would see as a cartoon description anyway.

I am going to continue this discussion in a next series installment with at least two areas of discussion still to address in it:

• Globalization and the scale of the marketplace, and its capacity to create and support progressively finer-scale niche markets even as it drives global conformity too, and
• The realities of the technology diffusion and acceptance curve, and the pressures of the marketplace that would limit and shape the pace of accelerating innovation acceptance and of innovation occurrence as well.

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. I also include this in Outsourcing and Globalization – and see that directory for related material. And I include a link to this posting as a supplemental addition to Section VII: Reexamining Business School Fundamentals (reconsidered), of Reexamining the Fundamentals too.

Technology as the tide that raises all boats 7 – but often unevenly 4

Posted in outsourcing and globalization, strategy and planning by Timothy Platt on April 8, 2017

This is my seventh installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-6, and Part 1 of that in particular as the foundational urtext for this narrative.)

I began systematically discussing three bullet point issues in Part 5 of this series that I repeat here, as my goal for this posting is to continue that topic-point by topic-point narrative:

1. The level versus uneven playing field considerations of restricted trade, open trade and free trade,
2. And of regulatory oversight as it arises and plays out nationally and internationally.
3. And to reconsider the closing notes to my April 2012 Part 1 posting on this, I also plan on addressing all of these issues at least in part in terms of economy of scale differences, where capacity for economy of scale efficiencies, in and of themselves are innovation driven and certainly in how competing businesses function and are run.

I addressed the first of these points in Part 5 itself and in Part 6 , where I also at least began addressing the above Point 2 and immediately relevant regulatory issues as well. My goal here is to complete at least for now, my discussion of that set of issues and to at least begin addressing Point 3 as well – returning as noted in it to my original Part 1 and its starting discussion of the role of scalability in this context, there.

I focused in Part 6, at least when addressing regulatory oversight and control, on how effectively drafted and enforced regulatory mechanisms can serve to level playing fields and create equality of opportunity through that. The goal of this type of leveling of opportunity is to in effect reward businesses that compete fairly, and through their own efforts – and without market manipulation or use of other related non-competitive advantage that does not arise from their own capacity to perform and meet market and consumer needs, per se. I noted in Part 6 as to how outside participants such as governmental and political forces can create non-competitive and I add specifically anti-competitive pressures favoring individual businesses and groups of them, in that context. And I framed that opening point of discussion in terms of two conceptually distinct economic models, that I initially proposed in Part 5 and which I repeat here for smoother continuity of narrative:

• The tightly correlated economic model: this is predicated on an assumption that overall business and economic actions would only be carried out in accordance with specific highly correlated strategic decision making processes in place in a business, and that all performance results would derive from the efficacy of its own effort.
• And the loosely correlated economic model: this is predicated on an assumption of outside supporting or hindering influence, as for example from government policy and its implementation – and particularly where that is intended to create bias in the marketplace and to skew the playing field that businesses operate in to favor a specific favored few.

To at least briefly put this into a wider perspective of a type that I have more fully addressed in more specifically regulatory system and process-oriented series, I do not include in this series’ discussion, consideration of business performance or market skewing factors such as the development of monopoly power by a business, where that can create its own market governing and even market dominating context and with essentially the same results as would be expected from more strictly outside governmental or other agency intervention. Actually, the two: outside governmental intervention and more strictly from-within the business monopolistic power can be all but impossible to separate from each other in actual practice. One of the key drivers of monopolistic advantage is in fact the development and cultivation of outside skewing support, and both to allow and to enable the maintenance of this type of market-facing primacy of place.

The dichotomy that I raise here between tightly and loosely correlated systems, is primarily offered to address the types of questions and issues that I raised in Part 5 when I briefly made note of the increasingly well known example of how the government of the People’s Republic of China imposes skewing regulatory oversight and restrictions and on both its own domestic business concerns, and on foreign businesses that would seek to operate there and specifically to skew the playing field that they would all operate in – and with governmental protectors and their local within-country businesses joined as closely as any Siamese twins in this.

With that, I explicitly note and acknowledge the potential for both good regulatory oversight and control, and bad and even toxically bad regulatory control – and certainly when such a qualification of value and significance would be determined through the prism of a tightly or loosely correlated economic model distinction.

I recently completed a series of postings that addresses change, and in businesses and in their global context, and within local economies and more significantly across the overall global economy: see Reexamining Business School Fundamentals (Reconsidered), as can be found as Section VII of the directory Reexamining the Fundamentals. I offered that as a seventh year reprise of and response to one of my early series to this blog, available at that same directory page as its Section II: Reexamining Business School Fundamentals. The major organizational thrust of the more recent of those two series was that of change, as occurred between 2010 and the context that I wrote my Section II series in, and 2017 when I write and offered its seventh year timeline successor. Change and in both its slow and cumulative evolutionary forms and in its more disruptively sudden forms enter very significantly into this discussion too and into this series. Here and certainly in this posting, I focus on an economic and a business model distinction, that depending on how followed, shapes the type and nature of this change as it cumulatively takes place.

I am going to continue this overall flow of discussion in a next series installment where I will explicitly address scale and economy of scale issues. I have in effect already begun doing so here, when touching upon the issues of monopolies and their behavior, and I will have more to say about that type of business model there too. But I will also and I add primarily discuss scale of business issues from a more general perspective and for more openly competitive businesses. 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. And I also include this in Outsourcing and Globalization – and see that for related material too.

Technology as the tide that raises all boats 6 – but often unevenly 3

Posted in outsourcing and globalization, strategy and planning by Timothy Platt on January 20, 2017

This is my sixth installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-5, and Part 1 of that in particular as the foundational urtext for this narrative.)

I began exploring a three point to-address list of economics issues that are relevant to this series in Part 5, addressing the first of them with a real world example as taken from recent news: China and their iron and steel production and sales, policy and practice. That list of points, repeated here for smoother continuity of narrative, was:

1. The level versus uneven playing field considerations of restricted trade, open trade and free trade,
2. And of regulatory oversight as it arises and plays out nationally and internationally.
3. And to reconsider the closing notes to my April 2012 Part 1 posting on this, I also plan on addressing all of these issues at least in part in terms of economy of scale differences, where capacity for economy of scale efficiencies, in and of themselves are innovation driven and certainly in how competing businesses function and are run.

My goal for this posting is to at least briefly continue my Part 5 discussion of Point 1 and conclude it at least for immediate purposes here in this series. And more than that, my goal for here is to at least begin addressing the next two points of that list.

I begin where I left off in my discussion of China’s practice of dumping their iron and steel production output on international markets, below cost to them of production, as a means of propping up their society and limiting the possibility of unrest from massive layoffs and downsizings – and factory closures. As noted in Part 5, that and similar practices directly and systematically violate all of the basic assumptions that enter into what I refer to as the tightly correlated economic model, where businesses are all and essentially always presumed to at least actively seek to be profitable and to be competitive in their markets while doing so and on the basis of their own activities. And this led me to pose an alternative approach: the loosely correlated economic model, where as is the case of China and their government leadership, outside interests and considerations can dominate what would otherwise be more fiscally prudent considerations as carried out within involved businesses.

I posed Point 1, above, in what are essentially regulatory terms, and I reframe my above-continued China example in those terms too. And I begin that with the fundamentals:

• Completely open, free trade can only sustainably work, and as a long-term collectively equitable system, if all of the businesses participating in those systems pursue an actively tightly correlated economic model in their own operations and strategy,
• And without outside governmental or other pressures, exerted on those businesses in denial of that model.

The tightly correlated economic model is grounded in enlightened self-interest on the part of businesses involved here, where their shareholders and their managers and employees provide them greater and more sustainable value if they stably succeed on their own terms. And this in turn, and according to this model, benefits consumers and marketplaces too. Reaching back into the early history of economics, the tightly correlated economic model as depicted here is in its purest form, a representation of the dynamics of Adam Smith’s invisible hand.

China offers a perhaps extreme case example of how larger outside political and sociopolitical factors and forces can skew all of that. And that is where regulatory oversight enters this narrative.

• Ideally, at least, a best (minimalist) trade and economic regulatory framework would offset any perceived extra benefits that a cheater would gain from pursuing a more loosely correlated approach, governed by outside decision making processes, as an attempt to game the markets.

A problem arises in regulatory oversight when its restrictions, and its behavior-influencing and shaping interpretations and implementations, overshoot that goal, not simply forcing the leveling of the playing field, but skewing it in new ways instead.

And with this, I have also at least started addressing Point 2, as well as continuing my discussion of Point 1. I am going to continue addressing Point 2 in a next series installment, where I will reframe its issues in terms of innovation and pressures to maintain an innovative lead. And in anticipation of that discussion, I will also discuss the latency periods that can and do arise between the emergence of change pressures as faced by a business and the emergence of innovative change within businesses. This calls for discussion of businesses themselves and of their marketplaces and other context considerations. And this also calls for at least relevant discussion of matching evolutionary change in whatever regulatory controls are in place – challenging both those businesses as they seek to innovate and the regulatory systems in place as they seek to effectively function.

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. And I also include this in Outsourcing and Globalization – and see that for related material too.

Technology as the tide that raises all boats 5 – but often unevenly 2

Posted in outsourcing and globalization, strategy and planning by Timothy Platt on December 15, 2016

This is my fifth installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-4, and Part 1 of that in particular as the foundational urtext for this narrative.)

I wrote Parts 1-3 of this series and much of Part 4 from the perspective of the individual business and its immediate competitive context. And then towards the end of Part 4, I began to pivot this series and its narrative towards a wider context. More specifically, I offered a to-address list, that I repeat here and that I will at least begin working my way through in this posting:

1. The level versus uneven playing field considerations of restricted trade, open trade and free trade,
2. And of regulatory oversight as it arises and plays out nationally and internationally.
3. And to reconsider the closing notes to my April 2012 Part 1 posting on this, I also plan on addressing all of these issues at least in part in terms of economy of scale differences, where capacity for economy of scale efficiencies, in and of themselves are innovation driven and certainly in how competing businesses function and are run.

I begin this with Point 1 of that list and with a currently significant real-world example: China and their iron and steel industries.

• As a matter of basic principle, and as acknowledgment of a point that many take as an automatic given and an all but axiomatic assumption, the fewer and weaker the barriers, filters and restrictions there are to manufacturing and sales, the more effective all participating businesses involved, can be.
• And on a macro scale, this leads to more efficient and productive industries and even entire economies, as the overall benefits to manufacturers spreads out to benefit their suppliers and supply chain partners, wholesale and retail businesses that would carry their products and bring them to market, and end user consumers, who would presumably see reduced costs to themselves for what they buy as more efficient businesses at all levels in this, reduce their prices asked as they strive for greater market share and overall profitability.
• China and their production and sale of processed iron and steel, serves as a meaningful test of the underlying assumptions in all of this.

The above bullet pointed assumptions all serve to suggest that completely open, unregulated free trade is always going to be better than what might be obtained from a more regulated and restricted system – and certainly when considered across entire markets and economies where overall gains and benefits are measured net of any more localized, specific-case losses or break-evens. But:

• This is predicated on an assumption that overall business and economic actions would only be carried out in accordance with specific highly correlated strategic decision making underpinnings in place, that would directly and specifically support the manufacturing, distribution and sales cycles that are under consideration. Think of this as the tightly correlated economic model approach.
• Sometimes, however, underlying governing decision making processes and their priorities are more grounded in outside political, and less directly related economic considerations – where for example decisions to sell, and who to sell to and at what volumes and price points, are determined to meet larger outside perceived needs.

China’s overall economy is in what can best be seen as an ongoing crisis, and for a wide range of fundamental, structural reasons. I have been discussing this in detail for quite a while now, and both for how this crisis has emerged and for how it is playing out. See for example, my ongoing series: China and its Transition Imperatives (at Macroeconomics and Business and its Page 2 continuation, postings 154 and loosely.) China’s iron and steel production industries are tightly controlled by their government and in fact by their one allowed Communist Party. And it is Party and government policy makers who set production quotas, negotiate, or at least control negotiations for sales agreements, and who set prices and price points offered. The assumptions bullet points noted above would presume that China’s production and sale of iron and steel as commodities and as more finished products, would be based upon market pressures and demand and with a goal of achieving and maintaining profitability while offering prices per unit volume of sale that would keep them effectively competitive. But none of that actually applies here and in this situation.

China and their Party and government have decided to operate at an ongoing fiscal loss for their iron and steel production, accepting all of the red ink in their accounting for those industries that this entails, and even long-term if they can meet other needs they see as holding higher value from that: keeping these factories and foundries open and fully staffed, and keeping all of these workers fully employed so as to limit if not entirely prevent the disruptions and dissent that closings and mass layoffs would threaten. China’s leaders see it as an acceptable price to pay to hemorrhage financially here if that is the cost they would have to accept for limiting any possibility of societal discord that could turn into challenge against their government and their political system that underlies it. So China has developed a long-standing policy of dumping processed iron, and basic construction use steel, among other products, on the international market, selling below their cost of production to keep production lines open and busy and fully staffed.

This also has a perhaps side benefit of helping to bring in a steady flow of badly needed foreign currency, when their own Renminbi is weak and uncertain, and when it is being propped up through spending from their national financial reserves. Think of their iron and steel production fiscal losses as limiting what would otherwise be even greater losses to their stability and to their national currency reliability. My point here is that this is a brief and selective but nevertheless quite accurately stated scenario, in which economic decisions and actions are taken that have widespread international impact – here in thwarting and challenging local iron and steel producers in the countries that they sell to, that do not have deep pocket government backing – but that make sense for larger picture reasons to China’s decision makers. And this is a real-world scenario that violates the underlying assumptions behind my above-stated tightly correlated economic model approach.

• Think of China, and certainly in this situation as following a loosely correlated economic model approach. To be more precise here, this approach is one in which options are identified and decisions are made on the basis of non-economic reasons, and on the basis of economic reasons for which it would be difficult to demonstrate direct causal connection to the manufacturing and sales systems under consideration.
• As a brief aside to connect these two approaches to other currently running and recent series in this blog, it might be noted that I implicitly assume effective availability of critical information in these decision making processes, in the above analysis. Economic friction on a macro scale, and business systems friction on a more microeconomic scale serve to blur the actionable, functional distinction between tightly correlated and loosely correlated economic model approaches here.
• In a noisy system, where static drowns out, or at least significantly attenuates and degrades communications signal and valid information availability, a business – or an economy shaping governing body might end up pursuing a loosely correlated approach even if they are in fact trying to follow a more tightly correlated one. This, however, does not apply in the case of China and their production and sale of iron and steel. China’s leadership does in fact know precisely what they are doing there.

I will continue this discussion in a next series installment where I will finish addressing the issues of Point 1 as listed above, at least for purposes of this series. And I will also at least begin to address that list’s Point 2 and regulatory oversight. And in the course of that I will at least briefly discuss multinational and regional free trade agreements.

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. And I also include this in Outsourcing and Globalization – and see that for related material too.

Technology as the tide that raises all boats 4 – but often unevenly 1

Posted in outsourcing and globalization, strategy and planning by Timothy Platt on October 30, 2016

Approximately four and a half years ago, I wrote and posted a brief essay to this blog titled: Technology as the Tide that Raises All Boats – and the narrowing of the competitive edge. I wrote there of the impact of proportionality in innovative change, and how the progressive development of new and better changes the fundamental nature of standard and routinely expected, as essentially all of the innovation that arises in an industry and its businesses diffuses out across and is taken up by essentially all businesses there and their consuming markets. What can routinely be done advances, and so does what is routinely expected – and even when discounting the demand for new and different per se that characterizes markets served by rapidly advancing innovation-driven businesses and industries. (Note: “new and different per se” can in also include demand for primarily cosmetic change too, which I do not specifically address here.)

I cited a multi-generational dairy farm as a working example in my earlier posting, and how its succeeding generations of owner managers have seen lower and lower real income coming from their effort, and even as their productivity and efficiency in running this business, and their effectiveness at producing very high quality product have continued to rise.

• I cited an arbitrary and intentionally artificial innovative scale there, by way of simplifying example, where for one generation of such a business, a score of business effectiveness and competitive value offered that was as high as 10 would represent an industry norm, and an innovative increase in value offered that brought a business’ rating up to 11 or 12 might be very significant and even game changing.
• But the progressive accumulation of effectively mainstreamed innovations in this industry, in time shifts its norm to a score of 100. Now a new innovation that is achieved by one of the competing businesses there, that would shift the needle up by 1 or 2 points is not going to even register as significant, as its impact is lost in the more random fluctuation of production and market performance that routinely occur as background noise in any production, marketing and sales systems (i.e. as those systems’ non-trending random change.)
• Now and when starting from this higher performance baseline, change or improvement might have to increase overall value creating efficiency and effectiveness achieved by any given business by a full 10 or even 20 points for that to actually arise above the level of the routinely offered and expected, and enough to qualify as a meaningful innovation per se at all.

And I wrote my above cited April, 2012 posting on this, and offered its case study example with a massively significant alternative dairy operation in mind, that I considered as an at least briefly discussed counter-example: New Zealand butter – sold in packets by the seemingly endless millions and in countries all over the world. I have been to quite a few countries where New Zealand butter is widely available and routinely consumed, and on several continents. New Zealand butter, and I add several other dairy products that come from there, seem to dominate local markets in many countries and their communities – raising the specter of this market presence squeezing out local producers who cannot compete for the price points that their markets have come to demand, and that these foreign producers can offer. I raised the complication of economy of scale there, as an at least situationally significant factor in rescaling the value creation (and cost per unit of value received) performance scale too, that businesses have to operate at just to be competitive, let alone innovative.

I am not returning to that posting to refute it; I am returning to it to reconsider it in light of some increasingly globally significant additional factors and forces that also enter in here. I am, in effect returning to the issues of that earlier posting to complicate it and hopefully make it more useful for its here-and-now relevance. And in this, I will consider the level versus uneven playing field considerations of restricted trade, open trade and free trade, and of regulatory oversight as it arises and plays out nationally and internationally. And to reconsider my closing notes to my April 2012 posting on this, I also plan on addressing all of these issues at least in part in terms of economy of scale differences, where capacity for economy of scale efficiencies, in and of themselves are innovation driven and certainly in how competing businesses function and are run.

As a side note in closing this posting, I cited my April 12, 2012 posting here as a first of a series posting, and identify this 2016 follow-up to it as that series’ Part 4. I have written and posted as intervening installments, Part 2: the challenge of securing an infrastructure technology advantage and Part 3: long term and short term value and sustainability. And I will come back to reconsider points made in them, that pursue a more internal to the business perspective in upcoming series postings here. But I have chosen to begin again from this series’ Part 1 as its de facto urtext for now, and I will continue in that vein in my upcoming Part 5.

I am going to begin addressing all of these issues in a next installment to this series. 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. And I also include this in Outsourcing and Globalization – and see that for related material too.

When and if it might make sense to outsource Human Resources 8

Posted in HR and personnel, outsourcing and globalization by Timothy Platt on February 21, 2013

This is my eighth installment in a series in which I discuss issues and considerations that would go into determining whether Human Resources functions and processes should be retained in-house, or whether they should be outsourced to third party providers – and if so for which services (see HR and Personnel, postings 134 and loosely following for Parts 1-7.)

I ended Part 7 by noting that:

• Capacity to readily monitor systems and processes in place, and not just as a matter of written and intended policy but as they are carried out in practice is essential. And this is where the potential challenges of in-house versus outsourced enter this story, and within the in-house paradigm locally distributed versus distant and centralized in-house. And managing this as a due diligence matter means maintaining positive operational control based on a clear understanding of what is being done and how and for whom, everywhere in the business’ organizational systems and for all of its personnel. And this brings me to the second, closely connected set of issues that I proposed as topic for discussion at the top of this posting: monitoring and tracking HR performance itself as a due diligence and risk remediation exercise.

And I turn to that here, beginning with some basic observations:

• For most Human Resources processes and their applications, consistency and transparency are vital. Individual employee privacy and confidentiality have to be protected but there is an overriding need for employees to see themselves as being treated fairly and consistently with others in their workplace, and without possible grounds for claims of bias.
• Business operations and processes, and internal methods carried out through third party providers can often be hidden from the hiring company in their details with only input and direct output visible, and this applies to outsourced HR and Personnel processes and their implementation as much as it does for any other types of business processes.
• A lack of transparency and resulting inconsistencies can arise in-house too. But these issues are usually easier to identify and characterize when everything is being done in-house then when they are outsourced.
• This clearly has due diligence and risk remediation implications where both consistency and demonstrable consistency are desired goals, and where opacity in the What and How can foster discrepancies in process and outcomes and at the very least create perception of unfairness. And this brings me to the point I cited above as topic for today’s posting: seeing and evaluating HR systems, and course correcting and evolving processes and practices in place so as to systematically lessen the likelihood of this bias.

The points of this discussion become particularly important here because most businesses and their Human Resources services in fact systematically and widely violate the basic principles of consistency and transparency that I have been discussing up to here and for at least one core functional area and with a range of impact that spans essentially their entire personnel rosters. I intimated at this when I wrote Part 7 of this series and I present and discuss it here: specific employee by employee salary levels.

• Most every business with employees and a headcount that go beyond that of a single owner, has at least something of a list of defined employee positions that need to be filled. And each of them generally has at least a loosely defined set of employee qualification requirements and a list of responsibilities that would have to be fulfilled to meet at least minimal required performance standards for employment.
• And bringing this into focus for purposes of this posting and discussion, most every such defined position also carries with it a set allowed compensation range, and with minimum, maximum and average salary levels that employees in those positions would hold. An employee, according to this compensation model, would never be placed in a position with the business at a compensation level below that minimum as determined for the position, and if their compensation were to rise to and exceed the maximum set, they would have to be promoted in order to stay within range – assuming they stay with that company.
• The difference between lowest and highest can be fairly big, and this is important as it means an annual salary increase does not automatically and always have to mean a promotion due to pay exceeding a set maximum. And the salary ranges in place for all employees can be and generally are adjusted up periodically to account for inflation and salary increases that are provided simply to maintain at least the same real income levels received.
• This is where things get interesting. There is often some overlap between the compensation ranges available for one position and the next level up (e.g. with some programmers at least potentially being paid more than some senior programmers.) When a new employee is hired (say a new senior programmer) the business generally seeks to bring them in towards the low end of their position’s pay range so they will not have to be promoted for at least a few years. A more junior level programmer who has been with the company a while might actually be getting paid more than the more experienced and higher level senior programmer they report to. And of course there can be significant salary differences between same level and same position type employees – and in patterns that do not necessarily match up with current job performance review scores.
• What happens if someone with access to this information as to who is getting paid what, gets careless and leaves a printout of it in the photocopy room and employees involved get to see it?
• That, I add is a very explicitly real world example that I have seen played out, and a lot of people were very upset as a result of it. In this case the salary list covered the entire Information Technology department and the HR staff member who made copies of this listing for a meeting was in a hurry and left the original in the photocopier – and for convenience they had used an IT department photocopier as it was closer and not blocked from use by a long line of other waiting users. So this posting is about consistency and transparency where that is what is needed, but it is also about confidentiality and opacity where that in fact is seen as required too.
• There is a reason why individual salaries can and do differ in this way. Most businesses seek to negotiate the lowest compensation package they can when hiring a desired best fit job candidate, and negotiations can lead to different starting salaries from day one that can diverge father apart as raises are set as a percentage increase over current salary. 5% of $80,000 is a larger number than that same 5% level but of only $65,000, and annual increases cumulatively expand the differences – and even without additional exemplary performance based increases being added in.
• There is a reason why individual salaries received by a business’ employees constitute one of that business’ most closely guarded secrets – and this is not just to limit what competitors would know when trying to hire away best employees. This is also to limit conflict and ill-will as current employees compare notes and see how their compensation levels compare with those of their colleagues.

One of the core, foundational reasons why consistency and transparency are so important is that inconsistency and opacity do not work, long-term and people do find out. HR and business policy in general seek to preserve privacy and confidentiality over personal employee information and for a variety of reasons. That is required by law in most countries and legal jurisdictions and it is good business practice anyway. Salary and other compensation details are seen and rightly so as protectable in this way. Many and even most businesses conflate that with a strategy to keep their overall payroll expenses down and the result is this opaque and unbalanced policy and practice.

And with that as a pervasive if negative-example case in point, I turn back to the issues of in-house versus outsourced. The overall goal of HR managed and tracked processes might be transparency and consistency but this takes place in the context of need for individual confidentiality and privacy, and both to protect the individual employee and as this situation highlights, to protect the business too. Monitoring and tracking, and course correcting and adjusting as needed are important and even vital. Any outsourcing agreements with HR or related providers have to allow for and even actively support this.

If a business is to violate, and even systematically and pervasively violate the core principles of operational and process consistency and transparency it needs to have very specific reasons for doing so. And it needs to know where this is being done and where there is operational risk from discrepancies arising and certainly where any veil of opacity might be lifted, intentionally or otherwise. And where differences do of necessity arise as for example where employees based in different countries get different benefits such as health insurance coverage, it is important that this be understandable and that it seem reasonable – and that it not be just a source of potential unpleasant surprise if someone leaves the wrong papers in the Xerox machine room. Identifying possible friction points that can arise here through outsourcing and resulting loss of hands-on control and oversight need to be considered when contemplating any business process outsourcing, and that certainly applies here for Human Resources outsourcing.

I am going to finish this series here at least for now, though I fully expect to continue several lines of discussion that I have at least touched upon in these postings. Meanwhile, you can find this and related postings at HR and Personnel and also at Outsourcing and Globalization.

%d bloggers like this: