Unless you lived on the moon, you realize the global economy is struggling because most corporations are not constructed to produce any real value. They are designed to maximize shareholder value while stakeholders are getting squeezed to improve the bottom line and introduce as many efficiencies as possible. Add to that corporate welfare, Fed and Treasury policies, regulations (or lack thereof) and you end up with a toxic mess of an ongoing banking crisis, mind-numbing landscapes of mini malls, toxicity in assets, the environment and the overall capitalistic world we are living in. And, while people are crowding the bargain bins, corporations continue to develop cheaper ways to satisfy the need for the bargain. Interestingly, when you produce a mediocre product/service (create thin value, as Umair Haque calls it), the price is all what matters. When you create real value/thick value, price becomes a tertiary consideration. Call it awesomeness, call it being amazing, call it being a linchpin.

With a few, rare exceptions, advertising has focused on creating thin value. Rather than inspiring people with marketing for products that add value, most of marketing/advertising is focused on brainwashing people into buying stuff that makes no difference. Just another item I can use and throw away/forget about effortlessly without considering the implications for the rest of the world. (Labor Conditions, Environment, Export/Import Structures)

Now, let’s look at the advertising/marketing industry. It’s not a dying industry but an industry in deep trouble. We are not considered partners, we’re just another vendor that sells questionable value. Media Buying has become a commodity, media planning to follow soon. The people we market to are busy tuning us out because they don’t feel marketing creates any real value. While we continue to communicate to people as they were still consumers, they are busy producing, communicating and building networks. We have commoditized our industry to death, starting to hop on a dangerous death spiral. Just like the whole economic system.

Advertising is just one pillar of the economic system we’re living in. Advertising can’t change the world or make it a better place. But, as part of a new economic system, advertising can be an inspiration, an artistic expression of the paradigm change. As an industry, we need to focus on the drastic changes the economic system is going through. We can safely say, the end of creating slim/thin value for profit is fast approaching. No matter how good your strategies/tactics/ideas are, unless you create real value for society with your products and services, you will fail in the long run.

My headline “Why advertising professionals need to be economic professionals” didn’t imply you need to watch Bloomberg all day, read each article in the WSJ or get a degree in economics. Most of what you read or see there is just an expression of times almost passed. All of us need to understand that our whole economic system is transforming and changing into something much more substantial, sustainable and human. Advertising is just another expression of this change. Please work, create, add value accordingly.

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Most organizations refer to asset planning as resource planning. We don’t like the term, especially when it comes to humans. Human beings are assets, not resources. The essential difference between assets and resources is that resources have no value outside the business process they are used in, whereas assets have an intrinsic and potential value. Managed as resources people do what resources do: they become depleted or absent – they burn out or move to another company. Managed as assets they flourish, growing in value for themselves and from there – engaged in heart and soul – add value to the companies (and all other communities) they are part of.

What companies need more than anything in these challenging times are people who are for and are involved in their work with their hearts and souls. That level of involvement and caring is therefore the core issue and determiner of sustainable corporate success in today’s market environment. People engaged with their heart and soul are the most valuable asset any company can have.

Many companies are aware of this and try integrating “human-oriented thinking” into their corporate strategy; some even realize that appreciating people as the asset they are goes much further than being “nice” to them as a motivational incentive; it adheres to a scientific understanding of businesses as complex adaptive systems.

Types of Assets

In asset planning, these types of assets are usually involved:

1. Money
2. Capital Goods
3. People
4. Consumables
5. Data, Information, Knowledge, Wisdom

It’s clear that the required amount and the available amount of each type of asset will not be equal. Because the requirements and supply of any asset are seldom, if ever, in perfect balance, asset planning usually creates the requirement for continuous planning.

Financial Planning

Making a profit was once thought to be the only legitimate objective of an enterprise. But times have changed. More and more enterprise consider profit now as a basic pillar, not the ultimate goal. For that reason, enterprises need to determine the financial conditions required to survive and implement the new plan. This requires financial modeling, measuring financial performance measures under a variety of assumed conditions and decisions to use assets.

Capital Expenditures

Given its planned pursuit of an approximation to its pie in the sky design, what new facilities and equipment will a company need? Usually, the needs are treated individually and justification to deploy assets based on estimated returns on the investment. Enterprises need to consider the fact that some investments might look poorly on a plan when considered individually but contribute to the bottom line when integrated into the overall system.

People as assets

People are e the most valuable asset a company can have. Nevertheless, they are generally used less efficiently than any other type of asset. The waste of employees’ time and competence is huge. The quality and competence of employees had increased significantly during the last decades. However, the way people are being managed and the organization of human capital has not. More often than not, humans are seen as extensions or replacements of machines.

The trend of increasing the number of people as much as possible (no matter the output required) when times are good and downsizing (no matter the output) in bad times shows how unsophisticated our approach to human asset planning is. In later parts we will offer a solution to that problem by implementing a market economy within the enterprise.

Consumables

Each organization consumes assets it uses: material, energy, services – just to name a few. These assets are supplied by either an internal or external source; most enterprises focus on supplying itself with any consumable asset to avoid interdependency. However, in this networked and globalized economy, it has become almost impossible for many companies to obtain and retain the competencies required to provide many of these assets in an economic manner, threatening their ability to compete.

Let’s just look at the media agency world: When enterprises bring advertising in-house, they often have problems attracting superior talent. As a talent, would you want to work for a huge media agency with good opportunities to advance, or would you work for an enterprise with no chances of real advancement since the rest of the enterprise is devoted to anything else but media? Specialized enterprises are able to provide specific assets at a lower cost and higher quality than most in-house divisions.

However, the relationship between suppliers and enterprises are often negotiated so as to guarantee behavior not supporting (or even fighting against) the interest of the enterprise. Let’s continue with the example of the media agency: If the enterprise reimburses the agency based on a percentage of company’s media spend, the agency will do anything to increase the media budget. No matter the effect, no matter the outcome. A whole industry of research institutes and consumer behavior studies survive because agencies need data to convince enterprises to spend more money on media. Has there ever been a real study that shows the effect of advertising on sales? In many cases, agencies are better selling to enterprises than to sell the product of the enterprise to customers. As a result, agencies become lobbyists for media, not for their customers they’re supposed to sell to. To break this vicious cycle, agencies should be compensated for increases in sales without increasing media spend and for decrease in media spend without loss of sales.

This would serve customers much better. Currently, media agencies increase their profit often at a cost to customers. (Time, Annoyance, etc.) Once enterprises preach the gospel of media spend cost reduction by sharing the benefits with all suppliers, a paradigm shift will occur.

Information

There’s a frequent misconception that implementing a KMS (Knowledge Management System) can provide all the support decision makers require. Research has shown that most KMS’ miss; they fail to fulfill the promises that were used to justify their development. For that reason, we need new assumptions about information.

Managers need less irrelevant information

All of us experience it each and every day: Information overload. Email bankruptcy. Social Media fatigue. Once we have to deal with too much information, we tend to use less information to make decisions. And we have a natural drive to know more and more about less and less. This might be the perfect approach for boutique firms but large corporations need less specialists and more generalists – T-Shaped people. For them to be successful, enterprises need KMS’ to help them filter out irrelevant information and condense relevant information appropriately.

Managers shouldn’t be burdened with knowing what information they need

The complexity of systems requires executives to manage effectively without understanding the system well. A system that can be comprehended fully doesn’t need a good manager. In return, a manager that requires each and every detail is scared and will play it safe, not advancing the system appropriately. Executives earn their pay when they possess the skill to make a decision based on enough facts not on all facts.

The information that managers need is whatever information enables them to do better with it than without it.

A Knowledge Management System shouldn’t be static, it needs to be embedded within the organization and management system as an infinite learning loop, capable of constant improvement. This  will enable executives to learn what they need or they will be stuck in the “always-asking-for-more-information-loop”.

Less communication between certain stakeholders is better

The Information Age has one gospel: More information is better. When all stakeholders are aware of what the other stakeholders are doing, this should enable stakeholders to coordinate their activities better and improve performance, correct?

No.

Various stakeholders often have different measures of performance and those are often in conflict with the various divisions. Increased communication between stakeholders might actually hurt the overall performance of the enterprise. Before opening up the flood gates of communication, the enterprise, it structure and performance measures need to be aligned with all stakeholders. Once implemented, each stakeholder communication should be evaluated and communication levels adjusted accordingly.

Managers have to understand their KMS

A Knowledge Management System has one objective: to support the enterprise and improve performance. Executives need to control the system, they need to ensure not to be controlled by the system. This requires a deep understanding of the system, its capabilities and limitations.

In summary, asset planning’s objective is to deliver useful inputs to decision making and the ability to identify and learn from mistakes to ensure improvements of pie in the sky and gap planning. This will help implementing a system that improves decision making and allows for rapid learning and adaption.

Let’s talk about that in the next part.

Previous installments can be found here: Part 1, Part 2, Part 3, Part 4, Part 5 and Part 6.

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“Vision is the art of seeing what is invisible to others.” – Jonathan Swift

Every enterprise needs to set Big Hairy Audacious Goals. These Big Hairy Audacious Goals are your limit. It’s an idealized goal that might never be attained, it’s your Moon Landing. We will talk later how to reduce the gap between enterprise reality and pie in the sky ideal. But, forget about limits for a while. This is about expansive thinking: no borders, no limits, no boxes.

Planning for Pie in the Sky includes:

• A clear vision of your enterprise
• A mission statement, expressing the Big, Hairy, Audacious Goals
• Specific features the enterprise needs to have to achieve the goals
• A pie in the sky design of the organization

A clear vision of the enterprise

Corporate visions are usually developed by executives, not involving all stakeholders. While developing the vision by few might be more efficient, the vision needs to be shared by all stakeholders in order to be pursued effectively. Most visions define what executives want the enterprise to be in 10 years or so, often forgetting what these executives want the enterprise to be right now. I would argue, it’s imperative to develop a vision that communicates the ideal design of the organization for the here and now, assuming the organizational design will be able to handle changes (and there will be many) without actually forecasting the future. Instead, organizational designs have to incorporate contingency planning.

I have all the plastic in the world but I still carry a few bills with me all the time. I don’t forecast a cyberattack on the banking system, I don’t forecast a massive quake in LA that won’t allow me to access my account for weeks. But all these things and other scenarios are possible. And I would like to be prepared for it.

A Mission Statement, expressing the Big, Hairy, Audacious Goals

Most mission statements are borefests: platitudes of epic proportions. A real mission statement should answer the following questions:

• Why does this enterprise exist?
• What are the aspirations of the enterprise?
• What does the enterprise do to succeed?
• How will the enterprise pursue its Big, Hairy, Audacious Goals?
• How will the enterprise serve each stakeholder?
• What makes the enterprise unique?

While formulating the mission statement, stay away from empty sentences/words, corporate speak and anything your best friend outside of your expertise doesn’t understand.

Specific features the enterprise needs to have to achieve the goals

Whenever we develop a website, the first step is to sit down with all stakeholders to go through their wishlist: What features does each stake holder would like to have? Enterprises have to go through this exercise as well to design their ideal organization.

This can be a laundry list of thousands of items or just a minimal document that describes the structure of the enterprise, corporate culture, management style, employee expectations, high-level ideals of products/services, etc. Each ideal enterprise design is different and the features list will reflect its uniqueness.

A pie in the sky design of the organization

Imagine, your enterprise stopped to exist last night. Nothing else has changed: Technology, laws, regulations, taxes, etc. The environment and systems that surrounded the old enterprise still exist and they haven’t changed. Just your enterprise is extinct. Start designing your new enterprise.

What kind of enterprise would you design if you could start from scratch? How would you design it so the enterprise is capable of being improved continuously from within? We’re not asking you to create Utopia, a perfect enterprise. Instead, your pie in the sky design should incorporate what you want to the organization to be right now. While you discuss these ideas with stakeholders, many new ideas will evolve and creativity will flow freely. This process of collaboration is often the most important product of this step to transform your business. Enterprises need to make sure that during this step self-imposed constraints are kept to a minimum. Stakeholders should not be concerned with feasibility, budgets or implementability. Reminding them that the enterprise was destroyed last night might help limiting those constraints. Keep dreaming.

Next, we will discuss gap analysis and gap planning.

For your reference, the first parts can be found here: Part 1, Part 2, Part 3 and Part 4.

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“The conventional definition of management is getting work done through people, but real management is developing people through work.” – Agha Hasan Abedi

Humans are a very diverse species. Each one of us is unique, we all have our strengths and flaws. Surprisingly there are not many variations of basic management categories: Reactive, inactive, proactive and interactive. Let’s briefly evaluate all four of them:

Reactive Management

Run, run, run. And then run more. The reactive approach to a problem is first to identify its cause or source, then try to remove or suppress it. Being reactive implies your action begins after the fact; acting in response to a stimulus or situation, as if simply poised waiting for something to happen. We know, this is never the case. Managers usually feel reactive when they are hit by something they didn’t anticipate.

Organizations in which reactive management is dominant tend to use as their model the oldest and most stable form of organization known, the big family. Like most families, most reactive organizations function as autocratic hierarchies. Ironically, although reactive planning is authorized from the top down, the actual planning is carried out from the bottom up.

Reactive planning is always focused on getting rid of what is not wanted. The problem with that paradigm is that when one gets rid of what one does not want, often one does not get what one wants but gets what one wants even less. However, effective management focuses on getting what one wants, not getting rid of what one does not want. Reactive organizations walk into the future, facing the past, backward.

Inactive Management

We all experienced it: A crisis is unfolding before us and we don’t do anything. We might have good intentions to solve the problem but another, more important crisis is taking all of our attention. A few days later, the initial crisis resolved itself. That’s Garden Eden of inactive management. Unlike the reactivist, who tries to eliminate the cause of a problem, the inactivist settles for suppressing the symptoms. The inactive manager is always in crisis management mode. Our increasingly complex world increases the numbers and severity of crisis. That keeps the inactive manager very busy trying to prevent change. His attention is occupied keeping people busy doing nothing.

You’ll find inactive managers in organizations whose survival is independent of its performance. Many government agencies come to mind, subsidized and regulated organizations. They tend to change when somebody imposes their will on them.

Proactive Management

Proactive management implies that your response is preceding the action. Creating a solution before being requested to have one. Anticipating what is needed and having it ready. This seems like a great position to be in; however you need to know what to be ready for. You cannot anticipate everything. Proactive managers predict and prepare, that is, they attempt to predict the future, then establish the objectives they want to attain, and finally create a plan to get from where they are to where they want to be. Forecasting is a major preoccupation of proactive managers.

The proactive manager believes there are a few problems that technology can’t solve, the reactive manager tends to think they can only be solved by a softer, human approach. Unfortunately for proactive managers, as the rate of change in the environment accelerates and the environment becomes more complex, their ability to forecast accurately deteriorates. Many proactive plans are never completely implemented because errors in the forecasts on which they are based become apparent, nullifying the plan. In addition, it is very apparent that the objective of planning should not be to prepare for a future that is largely out of our control, but to control that future as much as possible by developing mechanisms/products that have the most effect on our futures.

Interactive Management

The objective of management should be to create as much of the future as is possible. Implementing an interactive management style means managers get involved with people without there being a problem or a situation. They understand what’s happening around them. The more a manager knows about the whole organizational system, the goals of each person, the more successful the organization and the manager will be. Interactive management asks executives to very involved with the system environment, thereby giving them access to a myriad of insights and knowledge. It allows an organization to maximize their resource – they don’t have to wait for events, overplan for possibilities or jump the gun.

Implementing an interactive management system doesn’t mean the organization will never be blindsided. However, when the unexpected happens, management will have a better sense of how urgent the matter is because they live and experience the priorities of the business. They will know who to deal with so the situation can be resolved with a minimum of resources and effort.

There are three major characteristics of Interactive Planning and Management: a) Interactive Management plan backward from where they want to be to where they are. b) Interactive planning, management and execution is a continuous process. The process is the goal, not the final plan. Because there is no more final plan. c) Every stakeholder  is part of the collaborative planning process. This increases the chances of successful implementations dramatically since every stakeholder has a vested interest in success.

Because the principal product of interactive management is engagement throughout the organization (Planning, Implementation and Optimization), and because it requires as many stakeholders as possible to participate, it requires a significant change in the role of management. They are no longer required to spend the majority of their time preparing plans. Instead, their role is to encourage and facilitate, educate and advise.

In Part 4, we’ll be talking about the interactive planning process in detail.

For reference, Part 1 (Systems Thinking) can be found here and Part 2 (Systems) here.