My Favourite Course

I’m still thinking about what to do with democracy. Somehow, the main problem is that the concept of a country has become outdated. It is far too small an entity for some modern challenges, yet far too big for others. We have a vote, but only within this out-of-date bounadry. Keep the votes, but change the structure. More to follow.

In the meantime, I was gratified to read an article in this week’s Economist about Harvard’s MBA. They want to change the basis of syllabus and teaching away from one based on case studies towards more direct field experience. Hooray, I say.

The article brought back happy memories of a course I did at Shell in the mid 1990’s. That course has stayed with me, as the most fun and the most beneficial I ever did. I still use the lessons today.

The whole basis of the course was that we were split into teams of about four, and sent out as consultants to a small business for two weeks. The time spent with the small business was interspersed with some classroom content. At the climax of the course we had to present our ideas for our small business – to our teachers and the managers of the small business itself.

This was a neat idea. Once a year Shell took out an advert in a trade magazine looking for volunteer small businesses to accept raw consultants. It was potentially a good deal for them, as they got some fresh insights and at least some cheap labour for a couple of weeks, for free.

I was blessed in the business I was assigned to. My team worked with a Jewish butcher from the east end of London. They had a processing factory near Smithfield incorporating a tiny office, and a shop in Golders Green. The employed maybe twenty staff, and, like most small businesses, most of the leaders came from the same family.

We had such a laugh. The family really welcomed us. Their own relationships and business practices were bizarre and funny. The boss was constantly doing deals on his mobile phone (a new gadget at the time) and played a passing impression of Topol from Fiddler on the Roof. It was an insight into a totally unfamiliar world for us, and a privilege to be included. I will always remember doing a price survey and market research among the Jewish housewives of the Golders Green road.

I recall that one challenge the business faced was about the weekly cycle. Smithfield only had its best value meat on Friday, in time for weekend shoppers. During the winter, the firm had to buy meat, get it blessed by a Rabbi, process it and distribute it to stores, all before sundown, when Jews have to stop working. You don’t get that sort of challenge in MBA text books – yet it mirrors something very realistic for many businesses.

In the end, I think we gave the family something of value, though I have doubts whether they implemented any of it, such was the impulsive nature of the boss. But the gain for our team was immense. And the reason we gained so much was because the course directors sent us into the field and did not get in the way.

A case study is almost always from the point of view of the CEO, with defined parameters. Field studies expose a broad canvas of human actors with human issues. Just like real business.

A case study can be solved at leisure, in the time of the students. A field study has to respond to the tempo and distractions of the client. Just like real business.

A case study is constrained by a classroom. Field studies show the squalor and primitive conditions most real businesses operate in. For a load of pampered Shell kids, that was perhaps the biggest realisation of all. Real business is not usually like Shell business.

A case study has a financial and a strategic element. Only a field study can show up conditions where the cash needed to pay the wages the next week is the dominant consideration, yet somehow the business has to drive forward in that environment. Just like real business.

In a case study students have to convince learned professors of their ideas. In a field study, students have to gain credibility and influence among real decision makers, often with very different world views. Just like in real business.

Altogether, a field study offers potential a case study can only scratch at. So why has it taken so long to move from case studies? Well, the professors mainly. The former approach allowed them to show off their brilliance in the classroom. It allowed them to re-use material time after time. There was little risk of students coming up with angles and challenges that other students had not brought up before.

In a field approach, the professor cedes control. In a way, the professor becomes like another student, trying to understand the subject company and fit its challenges to familiar models. Hard work, that. And perhaps beyond the skills of most of the cosseted professors out there.

So well done Harvard, I applaud you, and I look forward to the day when a field based approach is standard practice and MBA students can emerge so much better qualified as a consequence. It doesn’t surprise me that Harvard professors required convincing before accepting this new experimental approach, and no doubt they will find other reasons to slow it down. But my guess is that this is the start of a whole new way of teaching MBA’s. And not before time. After all, some trainer at Shell thought of it twenty years ago.

Keep it Simple Stupid

On Saturday, I visited a Vodaphone shop to try to my a mobile phone and a contract. This was because of the sad demise of my previous mobile phone, a wonderful Siemens device I had bought for 15 Euros.

The mobile phone died in a very Dutch way. Last Wednesday evening, I had a concert and a party to go to, on either side of a small forest in The Hague. I had often walked in this area, so I decided to get from one engagement to the other on foot, even though it was dark.

Then I took a wrong turning. I could go back to get on the right route, but, hey, I knew this forest, so I ploughed on. Up ahead was a path I knew well. My mum phoned so I was a bit distracted, as I jumped down onto the path.

Only the path wasn’t a path at all, it was a canal. The call to mum was the phone’s swansong. Mum says she heard some strange noises, probably me screaming. I wish someone had been nearby, it would have made a great video, grown man in concert clothes walking straight into a canal.

Walking into a canal is not something I recommend. There is a lot of gunk in Dutch canals. They are quite deep, very cold, muddy and slimy. It was very easy to walk in, but quite hard to climb out. Lesson learned – walking in forests after dark is a silly thing to do.

So that is how I ended up in the Vodaphone shop. And what a beautiful shop it was too, with sexy lighting, fancy equipment and tasteful marketing everywhere. I got the feeling that the store in The Hague was replicated in cities around Europe, or even the world. That company has a powerful brand department and plenty of money to invest.

But the senior managers and brand managers have plainly never been in any of these shops. For the customer, it was horrible. They could afford lots of equipment, but not enough staff. Of the staff that were there, half of them were wearing blue shirts, which seemingly disqualified them from actually dealing with customers. A blue shirt met us, listened to our needs, and told us that we would have to wait for a red shirt to be free, although he could offer us coffee while we waited. So half the staff were actually waiters, while the other half were overloaded.

When we finally reached the front of the red queue, we came to realise why we had to wait so long. It seemed to be impossible to conclude a transaction in less than twenty minutes. By the time we had explained our needs, listened to the array of contracts on offer, and linked these to physical phones, we were more confused than enlightened. Even when we were able to make a decision, there was still the long process of contracts and validations, and the simple expedient of keeping the same phone number added further complication.

The red team guy was excellent – perhaps surprisingly so, since he is probably paid a meagre wage and had to deal with many interruptions. Even the blue team guys seemed very willing and motivated, even if their only roles were greeter and waiter. Yet, as a customer, I came very close to just walking out and abandoning the whole process more than once. I felt frustrated, intimidated, and un-served. Are these the emotions that the Vodaphone brand managers aim for in their customers? Probably not.

The nearest equivalent retail experience I could link this to was the old fashioned way we all used to book holidays. The tour operator shop still exists, though most of us rarely set foot in them these days. It used to be the same, with long, long, transaction times and waiting times, staff of mixed motivation, and more often than not frustrating outcomes.

I find it ironic that the travel industry has reinvented itself through the internet. Most of us now do everything online and have better service and outcome as a result. The industry itself has not always reaped the benefits, as poor old Thomas Cook demonstrate. Yet the customer has won, and well-managed providers are still in business. But here we have a modern industry, mobile communications, invented around the same time as the internet, which has the most old-fashioned customer interface.

Surely someone should do an Easyjet or an Ikea on mobile telecommunications? There must be a way to reinvent things around the customer. Please let me know when it happens. I hope at least that occurs before the next time I walk into a canal.

Other modern industries have similar problems. Computer interfaces are still created by geeks. Surely those older people who only want to use google and e-mail could be served by now by a simple device with one large button advertising each, together with a keyboard of large letters, big buttons and no symbols? It would sell so well, even my dear mum could be a customer.

And what about other electronic devices? Philips, a fine Dutch company, is onto a winner with its slogan emphasising simplicity. Spot on. Yet my alarm clock cum CD still resembles the potted face of a teenager. No-one else can use mine, and I can’t use anyone else’s. That is not simplicity, my friends from Eindhoven, that is the result of too many application-loving geeks. No doubt some customers love the applications, but many customers would value something simpler.

Then there are banks. Ah yes, banks. But I want to be happy today, so I won’t dwell on banks.

I think part of the problem is often the distance between departments in large companies. The designers and the marketers live in different worlds from the shopkeepers. This is especially true for business models relying on in-store experience, like mobile phones. McDonalds and Starbucks and others have shown it can be solved. None of the petrol companies have. Nor has Vodaphone. Or banks. Sorry, I wasn’t going to dwell on banks.

When it goes wrong, the marketers emphasise standardisation, often internationally. That usually leads to stores where the staff have little discretion, and customer experiences with little regard to local needs. The most important management choice is often where in the chain to place the power and discretion. McDonalds has it right, each store feels like a motivated and tailored business. Same for Ikea. But many brands have forgotten the importance of the local interface.

Perhaps this is also the answer to the conundrum I asked myself last time, about democracy. WE should think first about the best level to make each decision. Currently, individuals have too much say about climate policy and fiscal policy, but not enough about their local schools. Democracy is mainly conducted at national level, with a few morsels left to a local level. This suits national politicians, but leads to weak outcomes.

So now we have a partial answer to the question: how is the euro crisis like Vodaphone? I’ll explore this further, so long as I can also answer the question about how to stay out of canals.

The End Game for Democracy?

What a mess Europe is in politically. Last week two governments fell, as a direct consequence of the Euro crisis. This sort of thing usually only happens during wars or in the run up to wars. And the impotence of the political leaders is stunning. They can all see where they are heading. Most of them can see how to escape. But collectively they are unable to stem the tide.

How did we get here? One thing that caught my attention was the Greek prime minister’s call for a referendum. The poor chap had his career finished over this call, and, to be fair, his timing could be questioned. But wasn’t this one of the few honest acts in the whole charade? He had a democratic mandate from two years ago. He had used it to its limit, trying to find ways out of an inherited mess and to do deals with creditors and partners. It was clear to him that his mandate was expiring, since the packages he came up with were not accepted on the streets and were leading to slow paralysis of the state.

So he called a referendum, in an attempt to shore up his mandate. He had a good question to ask, since he had just negotiated a landmark deal. He had something to gain, since a yes vote would have enabled him to face down the protesters and start reform properly. And the people should have been able to see the consequence of their choice.

So he took a brave step. And was immediately vilified by his so called democratic partners, with a stunning hypocrisy. The British press call for European referenda all the time, about the most ill- defined issues, yet someone else calling a referendum was not acceptable. In the end the elites completed a coup, and followed it up with a second coup in Italy later in the week. In both cases, the new leaders are bankers. Ah, bankers. The very people who got us in the mess in the first place.

In the short term we will all probably muddle through. Pundits and politicians lazily refer to the abyss, or meltdown, or some other term for a disastrous endpoint from which there is no return. Yet no one really tries to describe what such an abyss would feel like. Argentina had such an abyss ten years ago. Anyone with savings got badly burned, and for a while it was hard to find a job. Then the country started to recover, and now is arguably better off than it would have been if it had muddled through. I am not sure that such a thing as an abyss exists, and one of the reasons the Greeks were not allowed to have their referendum was that they knew it.

In the longer term, the casualty may well be democracy. It was also struck by an Economist quote this week, where it was made clear that there was never any democratic intent behind the EU, even when it started as a small trading block. “Ordinary Europeans see Brussels as remote and elitist. As it happens, the European project was like that from the very beginning”. What a statement that is. The article defends the project as inspired statehood, a way to defend the people from themselves and to avoid a third spiral into war. Fair enough, but let’s not call it democracy, then.

And the long term consequence may be the very spiral it was trying to avoid. Look at the anti-elite parties all over Europe now. Surely these will all grow as a direct result of the crisis. Look at the protesters on our streets. They will surely find a voice in anti-elite parties eventually. This is not a movement of some thugs any more, it is people like us, the 99%.

Yet the politicians continue to lie, and to make no attempt to win over their citizens with any logic. Virtually every elite party in Europe queues up to blame Brussels, at the same time as knowingly ceding power. They have their cake, and they eat it. But in the end there will be no cake left for anyone. They consistently champion democracy, while eschewing it.

Is the US any better? Arguably, it is worse. Their economic fundamentals are even worse than ours, only hidden away by the elites because an abyss for them (at least the elite them) would even be more unthinkable than an abyss for us. Their social fundamentals are clearly worse than ours. And their politics is even more cynical and even more dysfunctional, dominated only by money and media access. And the cheerleaders for freedom invade others at will, and have intelligence agents undermining societies globally. At least they have to answer for their wars in their sham elections every so often, the clandestine stuff is wholly unanswerable. Should we be pleased or scared by the Americans managing to stymie the Iranian computer systems? I am not sure.

So our system is dead, while our leaders still champion it. I am not promoting other systems of national governance, since they all seem to fail too. There is still wisdom in Churchill’s quote that democracy is the worst form of government except for all those others that have been tried. But let us at least start being honest about it. There are alternatives, and soon we will need them.

We don’t run companies by democracy. We don’t run Churches by democracy. We don’t run families by democracy. Those institutions have lasted as long as most countries. We now have such powerful technology available, and education is so widespread, that models that were previously infeasible become interesting. We could probably take the best from the models used by each of those institutions and create something strong.

Perhaps this is what the 99% are saying, much derided by the elite for being directionless and without coherent solutions. They (we?) might simply be declaring the imminent end of the current Western system, called democracy, but in practice rule by an elite and high finance. I get annoyed when multinational corporations get blamed for everything, for they are usually quite honest in their methods and their goals. But finance as an industry is another thing. Banks and bankers have not come through this era well. Nor have politicians.

A friend last week told me to stop observing and stop moaning about this crisis, but to come up with some ideas. Now that is a tough ask. But I’ll have a go, next blog. As long as there is time, before we all fall into the abyss. All ideas are welcome.

I know what you are thinking

Technology continues to make breakthroughs to change our lives. I like the cover of the fiftieth anniversary of Private Eye. The shields at the top show what has changed between 1961 and 2011. Mainly it is communication. A typewriter and telephone have become a mobile and printer. Everything is much faster now, and many things are more reliable. This is generally good, though the blackberry 24/7 addicts choose to become slaves to progress.

A leader in this week’s Economist suggested what might be coming next. Seemingly, mind reading technology is getting closer. We might soon be able to look inside each other’s brains and be able to tell what we are thinking. No doubt the facility is many years away from being generally available, but fifty years ago we couldn’t really imagine the internet or wi-fi.

Just imagine the changes this technology would have on the way we lived. Start with relationships. The whole vocabulary would be thrown open. We could no longer quietly leer at someone we fancied without being exposed. Our professed loyalties would be called into question. Our small lies in the interest of harmony would no longer work. Many bums would suddenly look big in many outfits, and have nowhere to hide. A man is supposed to have a sexual thought every eight seconds or so. Imagine if such thoughts were transparent to all.

Things would change, but no doubt we would adapt. Adapting is what humans are very good at. And would it be worse? Initially, it would be very difficult for everyone, but, once things had settled down, perhaps things would be easier. How many women really believe the harmony lies anyway, or believe their man is the only one immune from the eight second urge? The worst thing in any relationship is a lack of trust, and the technology would have the potential to banish that completely. Most of us are more anxious about the fear or what someone is thinking about us than the sure knowledge of what those thoughts are – and most of us are thinking better thoughts of most of our acquaintances than they think we are anyway. We would adapt. The game would change. I sense things would be better.

Then look at illness. The earliest application of the technology would be to improve the lives of the disabled. People with the inability to communicate would suddenly be able to, and lives would be improved immeasurably. Maybe there are other creative brains like Stephen Hawking out there that could be liberated. I also suspect the technology would be decisive in breakthroughs against diseases primarily of the mind, such as addictions. All the junk in our minds could be freed. In most cases, I suspect that could be decisive in helping people to move onto better lives. True, counsellors would lose their capacity for professional dishonesty, but again the advantages would be enormous.

Now take politics. Again, things would change, and change a lot. But for the better or the worse? Many of the more intractable problems in the world start with casual misleading of people. The EU, a good thing, was set up by the elite without really explaining the truth to the public, who were deemed too dumb to understand. Ditto the euro. Such lies are coming apart right now. Cameron doesn’t really want a referendum, just votes. Such lazy lies are coming back to haunt him. The true reasons for the US invasion of Iraq are either justifiable – so we should hear them – or not – and the invasion might have been avoided. Discrimination would be out into the open, and perhaps eliminated by a rare dose of honesty, or at least cast to the outer reaches of society.

The same with firms. When the CEO makes his Christmas speech about his staff being his most important asset he might find himself the turkey, and quite right. Effort would be moved from the dark arts of misleading marketing and lobbying, and invested in innovation to create genuine customer benefits. No more fraud. No more tax avoidance. No more value-destroying confidentiality. I have no problem with any of this.

What surprised me was the tone of the Economist leader, which feared the change. Generally, this magazine embraces technology and innovation, and especially likes things which eliminate inefficiencies. Well, here is a chance to eliminate perhaps the greatest inefficiency of all, and how do they react? They worry about their eight second urges, predict problems with adaptation, and fear misuse by the governments. The internet had all these problems too. Should we have resisted it? I expect better from my favourite magazine.

Perhaps the leader writer, like me, has been spooked by his or her computer lately. I have seen a step change in the last six months at the ability of my computer to know everything about me, and find it scary. Do you feel the same? When I reflect on it though, I find this technology exciting. True, it can be misused, and I like to have a few secrets, even from my computer. But we will adapt, we will move on, and the benefits to society can be huge. Bring it on.

One last argument in favour of mind reading. I read a different article this week about Amanda Knox, in the Guardian weekly. Seemingly, most of us found her guilty because of her face. Her features make her look a bit foxy. We were a bit titillated by the stories of what may have gone on in Perugia, egged on by our tabloids, and jumped to conclusions about poor Amanda. According to the article, we do this sort of thing unconsciously all the time, making judgements about people based on how they look. I knew this before, and understood it as a reason for some discrimination and a need for caution against bias, for example in job interviews. But this article took it to a new level, for indeed a part of me had done exactly as the article suggested, and found Amanda guilty, despite any real evidence available to me.

Once we all have our personal mind readers as an app in our mobile phones, we won’t make such mistakes again. This will be scary. Probably it will be after my time, but at the rate things progress these days who can know that for sure? Personally, I hope the technology comes sooner rather than later. By then I’ll be so old that eight seconds will have become at least a minute anyway.

On reconciliation

Non-catholics may not realise that the sacrament of reconciliation is the modern name for what used to be called confession. It is not just the name that has changed. The emphasis on owning up and penance in a dark box in Church has largely been replaced by a quiet chat in a lounge with a priest who tries to help you come to terms with yourself.

In its new form, this is a powerful process. And it is no coincidence that reconciliation is emphasised in many other forms of self-help.

Take the AA 12 steps for example. Step one is about surrender - reconciling oneself to powerlessness. Steps five to seven are a sort of confession. And step nine, the last step before a recovery can enter a phase of stability, is about reconciling and making amends with all those we have wronged. Often the hardest thing to live with for an addict, or anyone else for that matter, is the guilt and shame. These steps face up to guilt and shame, and create the space to make it possible to move on.

A completely different example comes from business, and the Kotter model of change management. The first step in this model is about creating urgency, and it is the one where most change programmes fail. I would argue that this step is about helping those that need to change to feel reconciled with that fact. Before we accept this need we are stuck in the past, living a long-lost dream. Intellectually, we may see this, but it takes a human step of reconciliation to accept it and be ready to move on. The best implementations of Kotter do not emphasise leader speeches and compelling power points, but instead ask people to talk among each other. That way, nostalgia can be seen for what it is, individuals and teams can mourn their loss, and then face a different future. Leaders struggle with this because they do not usually have the need for reconciliation themselves, so are blind to it in others.

Mourning is another form or reconciliation. Nowadays, funerals attempt to be a celebration of life. Another catholic healing sacrament, anointing the sick (formerly last rites – how things have moved on!), seeks to reconcile people with their possible death and help others reconcile themselves to the loss they may face too. A wake tries to achieve the same. A strange ritual at first glance (especially to cold English people like me) it is powerful, and has parallels in most other religions and cultures. Just like in the two other examples above, the key element is encouraging people to talk openly to each other, to rid themselves of the baggage that would stop them moving forward.

So, reconciliation works. We should try it. Some of the happiest news stories of recent years involve reconciliation. Explicit in South Africa via the heroic truth and reconciliation commission, similar processes have been followed, arguably with less grace, in Northern Ireland and the former Yugoslavia. Only this week, ETA in Spain came closer to disbandment, following a long reconciliation effort. It is not easy, especially when memories and discrimination are long-standing and where everyone has a reason to hate and for suspicion. But facing the past, accepting it, and even forgiving it, is the only route out of the cycle of misery. You cannot move forward successfully unless you are at peace with the past.

I sense different sorts of reconciliation are the key steps in other situations. Tony Blair removed clause four, and somehow reconciled most of his party from a past that was no longer relevant. This week’s Economist has a hopeful article about Detroit. It seems that a key step in creating a positive future there has been to accept that the city must be different and smaller than before. The Norwegians were remarkable this summer in reconciling themselves to the massacre of its youth. In its attitude to the EU, the British are not really reconciled to a less powerful role than in the days of empire. Reconciliation is hard – often close to impossible. But its lack is more damning than anything.

Many muses on this and other blogs have some well-reasoned diagnosis, but then are unable to offer practical solutions. The wonderful thing about reconciliation is how much we can do about it ourselves. And we don’t even need priests!

We all have reasons to complain about others. We say stupid things to each other, hurt each other. To some extent, we can’t help it. What we can help is what happens next. We tend to make assumptions about how people think about us, about what they meant when they said something hurtful. We sulk. We are stubborn. Wow, how we are stubborn.

We could instead try another tactic. We could attempt to reconcile. We could make the first move, and apologise, even when we aren’t so sure it was our fault. Apologise, with no buts and no bitterness. We could make it easy for the other party to apologise. We could try to understand things from their point of view. We can try to create conditions where we can move on together.

What would this cost us? A bit of pride. Some feeling that the other party got away with something. Not much really. Whereas the rewards are huge. There are few better feelings in life than after unloading with an apology, receiving forgiveness, and feeling a friend become a friend again after a period of strain. We feel lighter. We feel happier.

So, where to start. Most of us have an opportunity with work colleagues, notably with our boss. Bosses can be so stubborn, as they have their position to maintain. Try disarming them by recognising their side and giving some ground. They won’t know what to do, but they won’t be able to stop themselves giving ground in return.

Then there are parents. Parents still treat us as though we are small children, so usually like to keep a bit of power and struggle to make the first move in apology. How sad. We only have two parents. Imagine if one of them died and we hadn’t made peace with them. It would haunt us for ever. Painful though it is, make the first move. Accept them as they are. No matter how many times they misbehave, never break off good relations. Most of us are lucky, and our parents have time to reconcile their affairs before dying, to set their relationships in order and say what needs to be said. But sometimes that cannot happen, and we have to be ready for that contingency. Follow the timeless advice to live each day as though it were your last.

Then there are other acquaintances, friends, and especially our partners. We can make a start today.

Sometimes we have a strained relationship and we don’t even know what lies behind it. In my experience, the most common cause is that the other party has some baggage to reconcile with you. I had a recent experience of this, and the thing the other party was carrying guilt over came out quite by accident one day. That was a true turning point, as both of us could immediately sense a new lightness, and start to go forward again. We have to be patient of course, as the other party has to move in their own time, but we can always do things to signal our readiness, to make it a bit easier rather than a bit harder. Life is so much happier if we stop seeing it as a point scoring exercise.

When I learned to drive, my instructor taught me some famous last words. Something like “it was my right of way”. If we are killed in a car accident, it is little consolation to know we were in the right. We are dead anyway. This same philosophy applies to our relationships.

In the end, our own peace comes less from seeing the pleasure of others, and more from the feeling of being reconciled with ourselves. That is the point in AA and in the sacrament, and a happy consequence in the business context. We don’t have to leave it until we are on our death beds.

I am one of the worst role models for my own advice that I know. I have relationships to reconcile in all the categories listed, and can be as stubborn as anyone. Wow, how I love to score points. Yet I feel I am getting better, and benefiting a lot from it.

Who will you start out to reconcile with today?

The 10,001 customer problem

The 10,001 customer problem is one of my favourite models of reality. There are two reasons I like it. One is that it seems to work and be instructive. The second is that, to the best of my knowledge, I invented it. A bit of vanity can’t be helped occasionally.

The idea is that most people or organisations are trying to manage a very large number of small relationships, and a very small number of big relationships. Imagine you are a petrol station manager. You have thousands of customers buying fuel, and you have to try to satisfy each of them, to make them buy a bit more or come back more often. And you have one fuel supplier, say Shell. Now where should you focus your energies? If you can persuade Shell to give you a bit of extra credit, or some support with discounting, or some improvement to the station, it can be worth thousands. The 10,000 can be worth thousands too, collectively. But to maximise bang for buck, the smart owner focuses on Shell.

There are examples everywhere. If you are a salesman, you can either try to sell to 10,000 customers, or alternatively you can try to convince your boss to reduce your target or give you a reward anyway because he likes you or thinks you are trying hard. As British Gas, you can either offer superior customer service, or secure some monopoly concession from the regulator. If you are Shell, you can either try to squeeze a bit more value out of 30,000 petrol stations, or alternatively secure one juicy exploration deal. As a Tesco store manager, you can display your milk beautifully, promote and advertise milk skilfully, price milk cleverly – or just squeeze another penny off milk from the buying department.

In each case, the smart people choose the few important relationships over the many smaller ones. But look more carefully. In most cases, the enterprise would be better served if the focus was on the many small relationships. The few, big relationships are often internal, are often a zero-sum game, and rarely create value for the system. We want people to innovate and create customer value outwards, but their incentives usually drive them inwards instead.

There it is, the 10,001 customer problem. As with many problems, recognising it is the first step towards solving it. To solve it, make sure rewards for the 10,000 are as big as possible, and for the one as small as possible. In the first example above, Shell can make its supply contracts fair, transparent and demonstrably non-negotiable. The sales manager can make KPI’s for his sales force as objective as possible, and the review system as unbiased as possible. The Gas regulator can be truly independent and pro-competition. Shell can create a retail division with a role only to grow sales in stations. And Tesco can remove buying price from the KPI’s of the store managers.

In the latter two cases, Shell will still make sure its best people are doing deals in Qatar, and Tesco will have their best people as buyers, but the organisational division will at least ensure that the 10,000 are not ignored completely. For what good is oil from Qatar without any outlets to sell it? And what is the only true basis for Tesco to get better supply prices than the power from scale emanating from its selling excellence? This demonstrates the second weakness with focusing on large relationships – even when it is productive at first, it tends to be unsustainable.

In this week’s Economist, I read of a study with one of the best demonstrations of the 10,001 customer problem I have ever seen, in the finance and economics section, entitled Money and Politics, link http://www.economist.com/node/21531014. Someone has found a link between the amount of lobbying a firm does, relative to its size, and its share price performance. Believe it or not, the big lobbyers do better.

Isn’t this priceless? Firms indeed do better (in the short term) focusing on the one big relationship, in this case a regulator, than getting on with the boring business of caring for real customers. British Gas, keep up the crap service, you know the regulator is the real game in town. And, true to form, lobbying is internal and non-productive to the wider economy.

This study was from the US. It is no surprise the growth and innovation have slowed – companies are rewarded not for that, but instead for buying lunch for a congressman. I wonder if the correlation is as strong in Europe? My guess would be that is very high in Greece or Italy but lower in Holland or Sweden or Germany. Nellie Kroes as competition commissioner probably did more to foster European growth than any other individual – more power to her.

Russia and communist countries are built on the power of lobbying and patronage. This is arguably what ultimately makes the system uncompetitive and ultimately unsustainable. What about China? Once the demographic dividend has worked its way through, will the propensity for patronage kill their growth too?

Just like in a firm, a country can address the 10,001 customer problem too. Transparent, independent regulation. Keeping politicians out of the way. Tough anti-monopoly laws. Support for small businesses and plurality. Training in customer facing skills over political ones. Banning or heavily restricting lobbying, or pricing it out of the market? Taking the money out of politics.

This could be a winning business and industry policy. And, sorry Ed Miliband, it is the diametric opposite of what you were proposing last week, which would be a dream world for lobbyists. Wrong, wrong, wrong.

Kohr Blimey

The Guardian weekly had some excellent articles this week about the global crisis. My favourite one was by Paul Kingsnorth, extolling the philosophy of Leopold Kohr, who he called the most important economist we had never heard of. Well said Paul, I had indeed never heard of him.

Kohr was an Austrian Jew who formed most of his theories during the Spanish civil war and then the second world war, and then published “The Breakdown of Nations”. He later one a sort of secondary Nobel Prize and became the inspiration for “Small is Beautiful” and other seminal works. Not a bad CV.

His simple theory is that size destroys. As soon as things grow beyond human scale, they have a tendency to become inefficient and dangerous. In the end, the concentration of power creates destruction. Simple. And easy to see how a Jew living through the Hitler era might reach such a conclusion.

I find the theory attractive as well. I have long argued that in my work life I have seen far more examples of diseconomy of scale than of economy of scale. The bigger the enterprise, the less well motivated the employees, the more vanilla the direction, and the slower the response. There is also the problem of layers of bureaucracy in place to manage internal things rather than do anything of value to customers.

I saw one result of this when I visited Shell in Manila this summer (just as a tourist really) and read all the internal communications I could find. Nowadays, companies like Shell run most of their operations continent-wide or even globally. I was a victim of the early stages of this process in Europe, and always found it destructive of value. Well, now I saw the end game. For this business segment, there were clearly no leaders in a place as small as the Philippines (a mere 90 million people), merely supervisors relaying instructions from some remote centre. And since those instructions had to apply to every conceivable market circumstance, they were utterly devoid of content. If you have ever played Bullshit Bingo this was the ultimate example. The business was exhorted to be world-leading, customer-focused, best-in-class, innovative, to delight its customers, and much else besides, without any real description of what the people were actually supposed to do.

Another example was in a study in the Economist last week, with an American survey about how staff viewed their companies. Whereas most bosses thought their firms were inclusive and modern, staff overwhelmingly described them as command and control. Part of this must be a result of the distance created by scale. Dilbert is still a pretty fair reflection of business life.

The most compelling theoretical argument in favour of Kohr is the classical curve of the evolution of the firm. A firm starts bubbling along the bottom of the graph, as it creates its products and infrastructure. Then there is a growth spurt, with clear focus and strong management, and market impact of the firm’s distinctiveness. Then follows maturity, with little unit growth, as the internal processes of the larger firm clog up the works, and also when a single manager can no longer run the place effectively. In the end comes decline, as competitors overtake the slumbering giant.

There it is, in all the economics text books. And if it true for the firm, it is likely to be true for a country, an army, or even a Church, for the same basic factors are in play. When the bullshit bingo starts, you know the decline is on the way.

What the theory does not prescribe is how long each phase is or how big the firm is before it hits its plateau, as this will be decided by factors like context, skills and product of the firm. Some can fly very high before declining. Very occasionally, a new management team can engineer a rebirth, for example at IBM.

The pattern is obvious with empires through the ages, from the Greeks and Romans through the British. Another article in the same Guardian Weekly argued that when we look back on the current crisis we will see it as the decline of the age of American hegemony. Of course, most writers on the Guardian disparage the US, so this might be more wishful thinking then prescient analysis, but the may be some truth in the claim. Certainly, the poor education, dysfunctional politics, and even the rampant obesity do not auger well for a strong US future.

Then it will be China’s turn, and one lesson from Kohr is to recognise that even that era will have an end. We read about these wonderful Chinese companies – be careful not to invest too late, as what goes up must come down, in the end.

I suspect most of us would find that our personal experiences back up Kohr. When have you been most productive? In a corporate army, or within a small team with shared belief and autonomy?

There are social policy implications too. If the police is seen as a distant controlling body, we might try to outsmart it. If it is the guy in the village who drinks with Dad, we’ll find it a bit easier to understand and comply. If we feel part of a community, family or otherwise, we are more likely to have a mentality of service and support. An argument for the big society?

And while we are on British politics, Kohr would certainly find plenty of fault with Ed Miliband’s nascent industrial policy. What guff that was, somehow thinking the state could pick winners and punish those with the wrong motivation. Create conditions for innovation, then get out of the way, is surely a better plan.

We can take Kohr a bit further, and takes a global perspective. Is bigness not just destroying the US, but humanity? The EU responds to its crisis with more integration, creating more bigness and sowing the seeds of accelerated destruction? In the next era, might the successor to the UN even go the same way? Is climate change a classical Kohr symptom of diseconomy of scale? A fan of the EU, this certainly challenges some of my core assumptions. Then there is global finance. Is it possible that the real problem is that it has become too big, too integrated?

The theory is good, but perhaps we need a bit more to explain the world. Communications must help learning, yet communications needs scale to work. I for one am happy I have the internet. Is it possible to make good infrastructure advances while promoting smallness? I am not sure.

Of course, the big problem with Kohr is what to do about it. He was a sort of early hippie, advocating city sized states and autonomous communities within them. He was realistic enough to understand that there was no likelihood of this actually happening. Human nature looks for consolidation of power, for single repeatable solutions, for joining a winning team. Most firms in the decline phase respond my making acquisitions and managing ever more globally. You don’t see the Catholic Church devolving power from the Vatican. Not many US politicians or citizens advocate breaking the country up.

But what we can do is challenge our own assumptions, and consider giving more support to those who argue in a different way. The current UK coalition government started with an admirable intent to devolve decision making to local and regional bodies. It has lost its way, as so often is the case, swayed by the lazy “postcode lottery” brigade. In companies, some people do advocate genuine empowerment and even some internal competition, and I always tried to support them. I love the management concept of getting out of the way. The motive of the UK Eurosceptics may be unpalatable, but perhaps different logic could support some of their conclusions.

Thank you, Paul Kingsnorth, for bringing a valid alternative view to my attention.