John Akerson's Thoughts

Business, technology and life

Higher Bars and Changing Times Require Changing Metrics

I originally called this “Higher bars, Changing Times, and how BusinessWeek misses the point of the Big Shift.”  I still think that BusinessWeek misses the point but I think the requirement for changing metrics is more important.

John Hagel III, John Seely Brown and Lang Davison wrote a wonderful paper: The Big Shift: Why it Matters.  You can read it here.  I highly recommend it. It is insightful analysis and clear original thought. That is too rare.

Late last night I read a brief description of the Big Shift paper on page 10 of the November 23, 2009 BusinessWeek. (although I could not find the article on BW’s site)  I was struck by the conclusions drawn from the “Return on Assets” chart, which BusinessWeek pulled and perhaps distorted slightly from page 12 of the 24 page “bigshiftwhyitmatters.pdf”   BusinessWeek suggested that the report, and in particular the findings on Return on Assets (ROA)      “provides fodder for those, like BusinessWeek’s Michael Mandel, who argue that the woes of the US Economy extend(s) beyond the financial sector and began showing up well before the housing bubble”

 That small chart is such a minor part of the report. (I reproduced it here from and with credit to their paper) – The paper is delightfully brilliant, but I immediately thought that the pessimistic BusinessWeek conclusion that I quoted above was mistaken, perhaps even backwards. I think that changing

Chart from "The Big Shift"

Chart from "The Big Shift"

times, and inflation, when combined with the paper’s ROA chart, suggest that our economy is very strong – amazingly strong, and extraordinarily robust and resilient.

My three points:

 1)     The rate of inflation is not trivial given a chart that goes back to 1965, and economy of scale has fundamentally shifted due to technology, and the rest of our ever-changing world.

 Adjusting for the rate of inflation wouldn’t necessarily make the Return on Assets chart look more flat – but considering an actual company, its asset value and returns, AND its changing requirements might lead to a different conclusion. 

 The Bureau of Labor Statistics’ inflation calculator: http://www.bls.gov/data/inflation_calculator.htm shows that over the time of that$1000 in 1965 = $6835.02 in 2008 chart, $1000 of 1965 dollars equates to something like $6835.02 of 2008 dollars.  Excluding the recessionary pops in the tech bubble in 01-02 and the pop in the housing bubble in 08-09… ROA looks like it is gone from just under 5% to about 2%.  Regardless of the consumer price index or the perhaps more appropriate producer price index, a percentage is a percentage – but consider a fictitious company that is making 5% ROA in 1965 with $1,000,000,000 of assets. Thats a return of $50,000,000. Adjusting for inflation using the consumer price index suggests a  company with $6,835,020,000 in assets in 2008. That company would have a return of $341,751,000 with a 5% ROA – but only a return of $136,700,400.  Is that a decline from 5% ROA? Is it a decline from $50m to $136m? (when adjusted for inflation) 

 2)     Given the advances and changes in regulations and particularly in technology – which are CLEARLY covered in the Big Shift paper – the bar is simply set higher, everywhere. Any company has higher requirements to earn sales – to get returns – to exist.  Enormous Seismic changes in business have emerged and been adopted across the entire economy. These changes initially provide competitive advantages to companies, but many are now essentially baseline requirements for doing business. These changes don’t happen without extraordinary increases in total assets.

 Take any company from 1965 – say a bank. In 1965, a bank had costs for buildings, technology, people, marketing, and processes. All of those fixed costs are now an enormous order of magnitude larger than they would have been in 1965. That bank has to be equipped, staffed, and technologically able to meet customer’s expectations in 1965 and today, but those expectations and regulatory requirements and competitive forces are orders of magnitude both greater and more complex.  In 1965, for example, checks written on the account of one bank, cashed at another bank might ordinarily take 5- 10 days to clear.  Today the float is almost always less than 24 hours, and in some cases, can be only seconds. In 1965, there were no ATM’s, online banking, online bill payment, online monthly statements. There was no Sarbanes Oxley. There were very different legal and practical considerations for interstate and truly national banks. A bank with $6b in assets, today, has vastly different requirements – and it must staff to meet those requirements.  So – if you look at that bank today, and say that it only has a 2% return on assets, that suggests a return of $136,700,400, in a world in which they have legal requirements that may include, say, keeping 7 years of electronic statements that can be accessed online instantly by their customers – and customer expectations that require them to have a thousand ATM’s, an online banking platform that is secure, scalable, and approaches or exceeds 99.99% availability. 

 This comparison extends across industries – I picked banking because I know it more intimately. (disclaimer: Since leaving Deloitte in 1999 as the Corporate Internet Technology Manager I’ve worked on Internet, Intranet and online banking elements for 3 banks via merger and acquisition.) Pick any other industry or business concern – and change has been enormous. In medicine, for example, in 1965, there was no HIPAA, no mail order pharmacies, no HMO’s, no outsourcing, no offshoring, etc. Hollywood didn’t have digital piracy, digital movie transmission, Redbox, and a cluster of cable companies waiting to first run their movies. The music industry had payola but no MP3′s or internet. Every industry has global competitive forces, global competition for talent and complete shifts. Pick almost any industry, and there are simply higher bars and different bars that companies must clear to succeed. Those higher requirements have resulted in larger asset requirements, but meeting those requirements, to me doesn’t really equate to lower efficiency.  It is a maintenance of Return on Assets regardless of changes.

 That’s critically important.

 Rather than the gloomy BusinessWeek (Michael Mandel) type-suggestion that your chart reflects underlying woes that exist in our economy – I would argue that given the changes in the economy, in customer expectations, and in government regulations, it is amazing that companies manage to meet those expectations and requirements and yet have only declined from 5% ROA to 2%. From the other perspective – the 2% ROA is delivered while meeting significantly larger competitive, organizational, regulatory requirements in essentially every business that still exists.

 3)     Companies have invested in knowledge assets that cannot be tracked on balance sheets. This is nothing new, but knowledge assets are a larger percentage of total

Growing Knowledge Assets

Growing Knowledge Assets

assets – and perhaps that means that ultimately ROA percentages have dropped even more than suggested.  The Big Shift addresses this knowledge requirement (see chart) but more importantly than mentioning it is – how can we quantify it?

 Those steeper requirements – higher bars – greater requirements – are not a symptom of an economy in woes – they are merely a reflection of changing times.  Across the economy, companies meet those requirements, grow, expand, and produce, and continue to return on assets…amazingly. Distilling it to Return on Assets can be justified, but conclusions from that distillation can’t assume “other things being equal” because the current return is based on the higher bars that changing times require.

 To quote The Big Shift

“The answer is not to find ways to squeeze creative talent and customers in a zero sum battle to capture more of the existing pie, but rather, as we will see, to discover new ways of organizing and operating to more effectively create and capture new value.”

 Michael Mandel writes in  BusinessWeek (link here)  that he “told Hagel that he didn’t want to write about his “big shift” until (he) saw industry data, so (he) could understand which industries were driving the corporate performance decline”

 Does Mr. Mandel start with the premise that there is a corporate performance decline – wanting only evidence to support that premise? I can’t tell. If declining ROA equates to declining corporate performance, he is right. I think the world has changed too much since 1965

Perhaps the big shift is also a big shift in the way that we should evaluate corporate performance metrics, and in how we define success. Should we have more capable methods for tracking knowledge assets? That will be frightening for some executives because it might entail that a company that has significantly outsourced and offshored has significantly less assets (essentially that it has lost significant assets) when compared with a similar company that has outsourced less or not at all…

What metrics could be developed to track the value of knowledge assets? should those assets be monitored, and valued in ways similar to other business assets?

To me, it is obvious that there are higher bars and changing times.  The Big Shift that John Seely Brown, Lang Davison, and John Hagel III write about – is a shift that may require changing metrics – at the very least. This Big Shift brings Big Questions…  and I believe the answers will be essential because the shift reflects a clear paradigm shift. 

What do you think? Am I right? Am I missing the point?

November 18th, 2009 Posted by | Business, Competitive Advantage, Continuous Improvement, People, Technology | no comments

The Biggest Offshoring Myth

Eweek has an interesting article – “Outsourcing Myths have no Grounds, Says Deloitte CIO”

Deloitte’s CIO does his best to debunk various offshoring myths.  The first myth that he debunks is that “Offshoring… has not been successful.”  his response is:

“That’s absolutely not true,” Quinlan said. “We’re seeing significant upticking in global offshoring activity.” With the maturation of the offshoring market, there has been an accompanying decrease in the hype and media attention devoted to the process; but nonetheless offshore continues to grow in scale and complexity.

So – what does “success” mean?  If defining “success” means that there has been growth in terms of increased usage – then Offshoring has absolutely been successful. Mr. Quinlan doesn’t say that it produces results, improvements, increased efficiencies. He doesnt say that offshoring lowers costs for equivalent results, or increases results for a like cost…  If success is to be defined as using offshoring to accomplish something at a lower cost, then there’s not any evidence that offshoring has ever been a success.

Another myth that Deloitte’s CIO debunks is that: Titanic Offshoring Myth

“Outsourcing is Bad for the U.S. Economy”

“There are different points of view on this,” Quinlan conceded about the outsourcing debate’s traditional third rail. “Like many religious arguments, perhaps, the issue is really about what’s going to happen; and we see the trend of regional centers and global centers really continue.” By citing the opening of outsourcing centers in the U.S. as well as places such as India and China, Quinlan seemed to suggest that companies would avoid any political fallout from their outsourcing policies by distributing the work within the U.S. in addition to overseas.”

Quinlan presented a list of “lessons learned” about the steps needed to successfully outsource a company’s operations:

    *      Focus on gaining leadership support
    *      Create a blueprint
    *      Make off-shoring someone’s full-time responsibility
    *      Combat the change management challenge and communicate
    *      Create an employer-of-choice destination
    *      Don’t underestimate the complexities
    *      Learn from others
    *      Invest in process excellence
    *      Focus on quality
    *      Have fun

Interestingly – these things are missing from his list:

    *      Create a baseline of processes & services
    *      Ensure offshored/outsourced processes & services are measured
    *      Document and evaluate any improvements
    *      Document and evaulate any declines

Companies that care about things, measure them. Companies that don’t care, don’t measure. My point is that without an objective, base-lined measurement of offshoring in terms of successes and failures, there can be no way to determine if offshoring is ever really successful. If Mr. Quinlan says that any increase in offshoring equates to success – well, he has sort of defined success as almost ANYTHING.

Is that success? Really? Does that merit any leadership, management, executive or boardroom buy-in? Is it success that merits any reproduction? Is it anything beyond an organized drain on resources and talent?

 I’d submit that the biggest Offshoring Myth is the one that wasn’t debunked.

The biggest Offshoring Myth is that Offshoring “Works.”

  Considering Mr. Quinlan’s approach – perhaps that is a myth that other people will need to debunk.  

So – how can that be debunked? Is it a myth? I would be amazed if any company could

People measure things that are important...

People measure things that are important...

really debunk that. I don’t think it is a myth. I think Offshoring fails because offshored processes, deliverables and costs are almost never measured objectively. I think Offshoring fails because offshoring projects define success as “the expansion of offshoring” rather than as the “delivery of improved services, products, projects, or results for the same or less cost.”  I think offshoring fails because the jobs lost to offshoring result in incredible losses for our country, our future, our tax base, and for things that are much harder to quantify. 

Many current CIOs’ careers started with work on help-desks, as developers, engineers, architects, project managers, administrators, and ground-level technologists. Offshoring success is a myth because offshoring positions like the one’s that current CIOs they once filled will mean that the pipeline of future leadership will evaporate, replaced by a pipeline of leaders who define success without regard to results and deliverables.

Could you debunk the biggest Offshoring Myth? What do you think?

November 16th, 2009 Posted by | Business, Competitive Advantage, Continuous Improvement, Life, Technology | one comment

Surfing Nicaragua, Ice-fishing Iraq and the Greatest Living American

Surfing Nicaragua? Ice-Fishing Iraq?

Yesterday I was discussing Surfing in Nicaragua with a good friend.  He was a bit perplexed. His client, Two Brothers Surf Resort in Nicaragua would like better results online – and the consensus is that getting the results that they want will require their website undergo some search engine optimization.  That shouldn’t be hard… I’ve swum the Chagres river in Panama and dived the barrier reef in Belize, but to me the idea of surfing in Nicaragua seems pretty unique. Well – EXTREMELY unique.  

From a search engine perspective, It should be fairly easy to do some good work for Two Brothers Surf Resort.  I would think the same thing about, say, Ice-fishing in Iraq.   Look at it this way, if you wanted to build a website to sell ice-fishing  tours of Iraq, how difficult would it be to optimize that for search engines?  Your competition would be nearly zero, so it should be a matter of common ice-fishing-Iraqsense.   In that same regard, I had never heard of surfing Nicaragua, so I thought, offhand, that it couldn’t be terribly difficult. In search engine terms, the darker the room is, the easier it will be to see a single candle.

Search Engine Optimization is not a dark art, it is common sense. It is using the principles that the websites use to ensure your site is ranked appropriately.  Search Engines WANT to work for people who do searches. The better they work, the more valuable their results are. But search engine’s don’t hire people to visit the businesses and bloggers behind the websites that they rank, the only evidence of the website’s relevance to a person searching for a particular keyword comes from the objective information that comes from two places. One place is on the website. This information includes domain name, keywords, titles, headings, alt tags, and text and the features of the site. The other place is off the website. This includes domain registration, inbound link quality, representation on and links from other sites like Twitter, Facebook, LinkedIn, etc.

I started by looking at the site.  The pictures of surfing Nicaragua are awesome… but I wanted toSurf Nicaragua - Two Brothers Surf examine their site from a search engine perspective. There’s an automated tool for that, Website Grader. I highly recommend it.  Two Brothers Surf Resort’s website scored a 37. (on a scale of 1 to 100)  That’s not good… it reflects real opportunity for improvement.

The automated Website Grader reflected that there were no headings,  the Page Title was a simple “Two Brothers Surf Resort, Nicaragua “, there were 39 images on the main page with no ALT text 38 of them.  The domain was set to expire in less than 4 months, there’s no redirect from twobrotherssurf.com to www.twobrotherssurf.com, it was last crawled about a week ago, the Google Page Rank is a 3 – on a scale of 1-10! There is a great article about page rank here.)

And it gets worse and worse. There are no links for TwoBrothersSurf in either the DMOZ directory or the Yahoo Directory. There is no blog, no del.icio.us, no Digg, no RSS, no newsletters or conversion, no Twitter, no Facebook, no LinkedIn, and nothing on Wiki about TwoBrothers Surf.  (as a side note, HubSpot, the maker of Website Grader has a nice, free Internet Marketing Kit here. )

If Stephen Colbert can be ranked #1 by/in Google as the “Greatest Living American” through somewhat questionable and perhaps nefarious search engine optimization, then I think it should be reasonable for TwoBrothersSurf should be ranked in the top #5 as “Surf Nicaragua” and “Nicaragua Surfing”  in both Google and Bing.  They face stiff competition from the Popoyo Surf Lodge – owners of “surfnicaragua.com” a domain that scores a 60 on Website Grader.    Their competition is a moderately bright candle.

So – how can Two Brothers Surf improve their results? 

Here’s the beginning of a plan to improve their site

  • Select phrases and words that are relevant and important.
  • Note initial search engine results for those words and phrases as benchmarks
  • Begin an ongoing marketing campaign  that includes  *social media. (Blog, Facebook, Twitter, linkedin, de.licio.us, etc.) as well as *traditional media (prweb, prnewswire, marketwire, local press,etc)
  • Refine their website. (Headings, ALT tags, locally-hosted blog, newsletter, keywords, sitemap, robots.txt, etc)
  • Refine externally. (DMOZ, BOTW.org, Business.com, Yahoo Directory, Wiki, etc)
  • Write a brief guideline for web changes to ensure that their website retains quality.
  • Renew their domain for multiple years.
  • Consider buying NicaraguaSurf.com – which may be owned by a squatter willing to sell – and making another version of their site.

That is not a spammy search-engine blitz, it is time consuming basic work, but if they decide to do it, everything should be possible for TwoBrothersSurf.com in a few weeks, and should improve their results in dramatic fashion.  

Could it be harder for Surfing Nicaragua than for Ice-fishing Iraq?

What do you think?

November 11th, 2009 Posted by | Business, Competitive Advantage, Continuous Improvement | no comments

Be The Tree That Everyone Wants.

I was reading a great post on Jeff Bullas’s blog this morning.  His blog is HIGHLY recommended, he provides thoughtful, interesting, useful ideas and writing and is focused on a space that overlaps relationship marketing – permission marketing.  Jeff has an article titled 9 Questions To Ask Your Customers When Creating Content that lists some very relevant questions. I think it is important for any writer to consider these questions because considering the audience is a good way to ensure your writing has value for your audience.

When you write – consider your audience.

I agree completely, and I think that he is absolutely correct on one hand. Consider this paragraph, quoted from his blog:

  • When you are writing , sourcing and creating content for your blog, website and social media channels you need to ”walk a mile in your customers shoes” and provide solutions in your content for their problems that they face every day in their business. You need to talk their language and you need to have their segmentation in fine enough detail that when they encounter your web content they will then say…”they understand what my problems are and they can help me solve them”.  Be the tree

ON THE OTHER HAND – I think it is absolutely essential to maintain your voice as a writer.  Every writer needs some unique quality, style and VOICE. It is what makes the writing unique.  It is a necessary component for any sound to rise above the background noise.  Here’s an easy way to consider the importance of being unique. A good writer might say “87 years ago…” but Lincoln chose to start his Gettysburg Address with ”Four Score and Seven years ago.”  That’s memorable and unique. Call it voice, or call it personal branding, or call it style, but if there’s nothing unique beyond “they understand my problems and have solutions” then there is much less to be memorable. 

Anyone can be up a creek without a paddle, but Sheldon Cooper can mention “the appropriate metaphor here involves a river of excrement and a Native American water vessel without any means of propulsion” – and it is HIS voice, and it is memorable. I am not even going to go into “rock-paper-scissors-lizard-spock.” (I am a huge fan of that show, and of DailyWav!)

So – why be memorable? Why ensure that your writing features your own unique voice? If you are memorable, you aren’t merely seen as a solution to solve ONE problem – you are seen as a go-to resource, perhaps a preferred source to solve the next problem too…

Think about it this way: In a crowded room with loud conversation, it is good to be the person that everyone wants to hear.  The Internet is a forest.   Your success will come when you address your customers, of course, I think it is also important to strive to retain your own voice, your own unique creative approach.  In short: Be the tree that everyone wants.

November 6th, 2009 Posted by | Uncategorized | no comments