Monday, March 18, 2013

Strategic Planning Analogy #493: The Blame Game

Recently, I was at a technology conference. One of the presenters wanted to demonstrate their technology on a large screen. Unfortunately, they could not get the technology up on the screen to demonstrate it.

At first, the presenters were panicking. Then they came to the conclusion that the problem was not with their technology, but with the technology used to get it up on the screen. So they told everyone that their inability to do the demonstration was the fault of someone else’s technology. Then they merrily continued their presentation without showing us the demonstration of their product.

My first reaction was “why are these presenters so happy?” Their ultimate goal was to try to sell me on the merits of their product. Yet, that attempt was seriously destroyed by the inability to demonstrate the product to me. 

Apparently, they had lost sight of that bigger picture. They were fixated on the smaller picture: As long as they or their product was not to blame, then the presenters were okay. And if they were okay, then everything was okay.

But everything was not okay. The audience was denied the most important part of the presentation and the technology company was denied the opportunity to fully sell their product.

Very few companies are fully self-sufficient. Instead, companies rely on many other partners to get their work done.  It could be depending on suppliers for parts. It could be depending on distributors for getting the product sold. And in today’s economy, it could also be outsourcing almost everything in-between, from payroll to call centers to manufacturing to key pieces of design and technology.

Look at how much of the Apple ecosystem is outsourced. Apple does not manufacture the hardware. Apple does not create most of the apps.  Apple does not create the music. Apple does not operate the cell towers which allow everything on the iPhone to actually work. The portion of the ecosystem actually produced by employees of Apple is quite small.

Everything from all the partners needs to work in order to accomplish the strategy. If one of the partners really messes up on their part of the grand design then the whole grand design is at risk.  Just ask the folks at Boeing about how their grand design for the Dreamliner is faring as a result of the problems with an outsourced battery.  All the planes are grounded.

In the story, the presenters were happy because they could blame their problems on someone else.  Since they did not feel “at fault” then they felt satisfied.  However, I don’t think that the audience or the technology company was happy.  The purpose of the presentation had failed.

What if the executives at Boeing had been like those presenters and said, “Nothing Boeing did in-house on the Dreamliner is at fault.  Therefore, we should all be happy and just move on.” Nobody would have accepted that behavior. Boeing is being held accountable and the planes were not allowed to fly.

You should not accept that behavior, either.  In the big picture, if the grand design doesn’t work, then you have failed. And blaming a strategic partner doesn’t make the failure go away.

The principle here is that just because you can blame someone else for a problem does not make the problem go away. Your customers really don’t care all that much which of your strategic partners is at fault. All they know is that something is wrong. They are angry and they want YOU to fix the problem.

There is no room for smugness is the fact that none of your own people were directly at fault.  Everyone is in this thing together. As the old saying goes, a chain is only as strong as its weakest link.  It doesn’t matter if your link is strong when the link of your partner is weak. The whole chain will fail.

Since modern business models seem to be adding ever more outside links to the strategic chain, the potential for outsiders to mess up the chain for everyone increases. And to compound the situation, consumers are being ever more demanding about the social consciousness of the companies they do business with. So even if your outside partner produces its link in the chain well, it could still create a failure if the WAY they produce their link violates the societal and ethical demands of your customers.

And thirdly, the social network exposes more disappointments, more quickly, to more people than ever before. This make mistakes harder to hide and more damaging when discovered.

As a result, the potential for strategic disaster in this area is increasing exponentially. Partnership management can no longer be tangential to strategy. It needs to be integral to strategy.

So what can one do to minimize partner problems? Here are some suggestions.

1. Choose Your Partners Well
The best way to fix a problem is usually by preventing the problem from occurring in the first place.  And one way to prevent partner problems is by choosing the right partner. And what makes a partner “right” has to be more than just “can they get the job done cheaply.” 

Remember the thoughts of astronaut Alan Shepard as he was flying through space: “It's a very sobering feeling to be up in space and realize that one's safety factor was determined by the lowest bidder on a government contract.”  Cost is important, but it isn’t the whole story.  Here are just a few of the other issues to consider:

a)      Will their practices upset the ethical and societal expectations of your customers?
b)      Are their practices consistent with the strategic intent of your business model?
c)      Can they scale at the rate needed for the grand design?
d)     If they are to achieve their strategic intent, will it make it difficult for them to provide what you are looking for?
e)      Will they protect company secrets?
f)       Which of you has more power/clout in the negotiation process?
g)      Will they have concerns or issues about being tied in with your other partners?
h)      How will working with this partner impact your competition?

When you tie up with a partner, you get more than just their output (if they are the provider) or their money (if they are the client). You get the personality, practices and principles of the partner. Is that something you or your customers want you to be associated with?

2. Set Up the Partnership With The Grand Design In Mind
If you want a partnership to work well, it needs to be structured in a way which increases the likelihood of that occurring.  Set up expectations in advance and get a sign-off.  Create incentives (positive and negative) which encourage strategic compliance. Think about the big picture (the grand design) when creating the small picture (individual partner arrangement) so that compliance with the small supports improving the big.

3. Monitor Your Partners
Don’t assume everything is fine once the deal is signed.  If you are going to be held responsible in the customer’s eyes for something the partner does, then make sure the partner does the right thing.  Have the right to monitor progress and principles.  Have systems in place to detect problems early, so they can be fixed with the minimal amount of down-side implications. Test output to see if it meets requirements.

In many ways, treat the partner as if they were your own employees that you were responsible for. After all, if they disappoint, they can hurt your reputation and business as much as if they were your own employees.  Don’t blindly assume compliance with a “hands off” approach. 

This is not to say you don’t trust your partner.  Rather, to quote Ronald Reagan, “Trust, but verify.”

4. Put Solving Ahead of Blaming
Finally, when problems do occur, put the main focus on finding the solution rather than finding the blame.  Yes, a problem cannot be solved until they source of the problem is discovered. And yes, the process of finding the source of the problem will touch a little on finding who and what is to blame.  So blame cannot be ignored. 

But the main focus cannot be put on assigning blame.  The main focus initially needs to be in solving the problem.  Full assessment of blame can come later, once the problem is solved.  The problem with too much focus initially on blame is that:

1) Those that work hard to “prove” they have no blame will be more reluctant to pitch in and help solve the problem.  Because they feel no obligation to the problem, they feel no obligation to the solution.  Unfortunately, the problem hurts everyone in the chain, regardless of blame, so everyone should be incented to help solve it. 

2) In addition, a lot of the problems do not clearly fall in one camp or another.  For example, problems can occur at the point when one partner hands off to another. Interpretations and assumptions can vary among partners.  So it is often not immediately clear where the blame lies.  Time spent sorting all of that out at the beginning is time spent not solving the problem.  And the longer the problem goes unfixed, the worse it can become.  How time was wasted, and how much oil leaked out into the Gulf of Mexico while BP argued with its partners over who was to blame for their massive oil leak? 

3) The blame game tends to increase the friction among partners rather than the goodwill needed to create stronger, more effective partnerships.  When trust is broken, the entire chain suffers.

Yes, I know people worry about the eventual lawsuits and that is why they are so concerned about blame. But if potential lawsuits are your primary worry, then get some of the ground rules written into the original partnership agreement.  That way, the general resolution is already in place before the problem happens.  And it gives you a chance to get a resolution which works best for everyone in the chain at getting problems resolved quickly.

In today’s economy, ever more of a company’s fate is in the hands of its partners, including its customers.  Therefore, the way those partnerships are formed and are operated increasingly impacts our strategic success.  And just because my firm is not directly at fault when problems occur does not mean that I do not suffer from the problem.  Therefore our strategies need to take these partnerships seriously and look for ways to a) prevent problems in the first place; and b) when problems occur, focus more on solving the problem than in assessing blame.

There’s an old saying that “Success has many fathers, but a failure is an orphan.”  This means that if you focus on finding who is the father of the problem, you may end up finding no one.  It is far more productive to focus more on just fixing the problem.

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