Posts Tagged ‘risk vs reward’

We seem to live in an era when words are more like bullets—a way to injure and defeat others, to get one’s own way—than a way to communicate in a genuine manner, seeking understanding, insight, and mutual respect.

As I write this, the Paris climate summit is underway. We have just about all the countries in the world represented and we’re told this is the “last chance” to “save the planet.” Last chance. Really? Save the planet? I would think the planet doesn’t need us to “save” it. But, like the gospel inspired song said of That Lucky Old Sun, the earth will surely go on rolling around heaven all day. We may be in danger of disrupting our habitat or of damaging it beyond repair (that remains to be seen), such that we, as a species might be endangered. However, a cursory review of earth’s evolution over geological eons will show that it’s been through much worse before and life has gone on.

The zeal with which enviro-enthusiasts (or should I say fascists?) are claiming that it’s our last chance to keep the planet’s temperature from rising by more than 2 degrees is more religious than scientific. The same can be said of the attempts to claim a scientific consensus, as if scientists all agree with everything that’s claimed about environmentalists.

There may be a scientific consensus about the law of gravity, or evolution through natural selection, because the empirical evidence is overwhelming in favour of those theories. I doubt there is even close to the same level of agreement within the climatological community, which is really the only one that counts scientifically. And yet we keep hearing that 95 % of scientists, or whatever the figure is, believe that global warming is a reality. That may be the case, but being a scientist doesn’t automatically qualify someone to judge the validity of scientific theories outside their field of expertise. Just talk to medical doctors with different specialties to see how divergent the knowledge, skills, and judgment are on any particular illness or condition to realize how important these specialized competencies are to coming to a proper diagnosis and prognosis, much less the best treatment plan.

I’m not necessarily a skeptic about climate change and human-caused warming. However, there has been too much environmental change over the eons on earth to claim any kind of stasis in the matter. After all, what caused the end of the most recent ice age 10 or 12 thousand years ago? Perhaps the woolly mammoths and giant ground sloths were expelling too much methane as they chewed their cud. And what caused the planet to plunge into a deep freeze 130 thousand years ago when the current ice age started?

On the other hand, I am a skeptic when it comes to claims that “the science is settled.” Moreover, I find the current climate (pun intended) against questioning this so called common sense consensus to be a dangerous trend. It’s also very convenient for those with a statist centralizing agenda who wish to restrain economic growth and capitalism, because they claim they are the cause of global warming, at least indirectly. How convenient that there be a such an apocalyptic menace for our collective well-being. Nothing less than total war is needed to combat impending doom. And in war, all manner of propaganda and control mechanisms are warranted to defeat the common enemy. Many of the poorest countries in the world are already clamoring for a transfer of wealth from the wealthy countries to pay for African wind farms and human scale solar power units. After all, nothing should be excluded in order to “save the planet,” because this is our “last best chance.” Once again, I’m not arguing against such a wealth transfer (although there are good arguments against one). But I don’t think that haranguing people into feeling guilty is the correct way to go about it.

The use of language as a weapon and words as bullets is just as pernicious in other areas. Activists—or should I say bullies—at the University of Ottawa have gotten management to discontinue free yoga lessons for handicapped people on the grounds that yoga is “cultural appropriation.” In other words, they claim that you can’t use any idea or activity that comes from another culture if that culture was at one time subjugated by another. Presumably, the reference is to British imperialism in India. Is it okay to have Indian cuisine, or Chinese food? Can we Zumba, or do the limbo? After all, they come from Latin America and the Caribbean, originally all slave societies.

Just to be egalitarian, I don’t think war mongers come off any better. The Islamist inspired attacks in Paris, the Middle East and anywhere else are horrible and the Jihadist threat must be met militarily and politically with appropriate means and strategy. But I don’t think we’re in a “war on terror” any more than we’re engaged in wars on inequality, cultural appropriation, climate change, or global capitalism.

Language and words should help us understand and think better, not separate us into sloganeering tribes with faith-based creeds and intolerant beliefs. After all, words aren’t bullets.

Richard Martin is The Force Multiplier. He brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.

© 2015 Richard Martin. Reproduction and quotes are permitted with proper attribution.

When I was a young cadet on basic infantry officer training the instructors would give us leadership challenges so we could practise our skills and they could evaluate us. One time I was put in charge of navigation for the platoon. We were on a night patrol and had to advance through relatively open terrain until we came a to a wood line. At that point, I had planned our route to take a different heading toward our objective.

As we walked in single file through the darkness, I could see the wood line approaching ahead. The only problem was that we weren’t supposed to be that close to the wood according to our pace counting, which is how we measured the distance covered (back in the days of map and compass, before GPS). I got more and more anxious as we got closer to the wood line. Finally, I halted the march and told the cadet platoon commander that it looked like I had made a navigation error.

We huddled under an opaque tarp with the flashlight—so as not to signal our presence to the “enemy”—and examined the map closely. No matter how I turned it and recalculated our route, I couldn’t square the fact of seeing the wood line so close with my verified calculations showing we were still at least one kilometer from the wood. I nonetheless concluded that the pace-counters and I had made an error and that we were in fact very close to the wood. I dutifully told this to the platoon commander. He asked me if I was sure and I assured him that we were very close to the wood line. At this point, the NCO who was evaluating me came up and asked what was happening, why we had stopped. I explained my reasoning, he looked at the wood line, and shrugged, saying we should hurry up and not stay out in open terrain without moving.

So the platoon resumed its march toward the wood, which I was sure by now was only 40 or 50 meters away. A few seconds later, we entered a low shrub bush. It was only a few tens of meters deep, and once we were through, there was no wood or wood line. In fact, I could now clearly see in the limited moonlight that the wood line was were it was supposed to be, about 800 or 900 meters distant.

I immediately realized that my error wasn’t in navigation, but rather in perspective. I couldn’t have been more embarrassed if someone had shone a spotlight on me. I felt my face flush and a knot in my stomach. I had mistaken the shrubs a few meters in front the platoon for the wood line one kilometer away. I felt foolish, because I had discounted my calculations and the questioning of the pace-counters and platoon commander in favour of my own faulty impressions, no doubt caused by fatigue, self-doubts about my navigation skills, and anxiety at being responsible for finding our way to the objective. In this particular instant of my young military career, I had detected an obstacle that wasn’t there. To paraphrase the Pogo cartoon of the 1950s, “I had met the enemy, and he was me.”

You’d think that I would have learned a major lesson at that point, but I guess I was too young to generalize it to other areas of my personal and professional life before going through similar processes several more times. How many times did I have to learn that I was often discovering obstacles—enemies even—that simply weren’t there? Over time I realized that most obstacles and enemies in my path were completely illusory.

As I’ve developed my consulting practice over the last eight years I’ve come to the realization that this “enemy is us” phenomenon applies to just about everyone, in at least some areas of their professional and personal lives. When we set out to reach a goal, we often create illusory enemies or obstacles. I’m constantly surprised at how my suggestions for improvement or to try something new are rebuffed with declarations such as: that would never work for me; I’ve tried that once (17 years ago) and it didn’t work; so-and-so try that and it didn’t work; that’s too hard for me; I couldn’t never do that; and, my personal favourite, what if I fail?

I had breakfast with a highly successful businesswoman a few days ago. She was wondering why she could accomplish so much in such a short period of time and get results no matter what happens, while others constantly struggle. I realize now what the “secret of her success” is. She doesn’t doubt herself, or second-guess her approach to reaching her objectives. She just goes out and does it without worrying about trying, or failing, or not doing it the right way. To quote Yoda, that master of enigmatic wisdom, “Do, or do not. There is no try.”

What are the imaginary obstacles you put in your personal and professional path? Are there bogeymen that you need to extirpate from your imagination? What enemies lurk in ambush in your mind? What shrubs and bushes are masquerading as trees and woods in your perspective?

© Alcera Consulting Inc. 2014. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

The best time to prevent or mitigate a crisis is, not surprisingly, before it occurs. Most crises are smouldering, which means that they develop slowly but become apparent suddenly, just like a slow-burning fire that erupts into a conflagration seemingly out of nowhere. Here are principles to guide in leadership before a crisis occurs:

  1. Mobilize your team by anticipating and identifying potential crises before they strike.
  2. Implement rational risk management measures.
  3. Establish priorities for prevention and preparation on an ongoing basis.
  4. Create robust contingency plans to deal with the most likely and most dangerous situations you can envisage.
  5. Implement sound policies and procedures for the most likely crisis situations and events.
  6. Prepare yourself, your team, and your team through diligent practice and training.
  7. Employ trusted advisors and associates and ensure they are well qualified and working as a team.
  8. Build as flexible and resilient an organization as possible within the constraints of time and resources.
  9. Work on becoming more self-aware as a leader and seek to acquire the competencies to lead in a crisis.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2014 Richard Martin. Reproduction and quotes are permitted with proper attribution.

The economist Joseph Schumpeter is famous for saying that capitalism is a process of creative destruction. Actually I think the concept goes back to Karl Marx. The point is essentially that in a free society, human ingenuity will lead to new products, services, and ideas. Many, if not most, of these novelties will die, but many won’t, and eventually they overtake the products, services, and ideas of existing companies and organizations.

Just last week, Publicis and Omnicom, two of the largest advertising firms in the world, decided to merge in order to fight off the aggressive inroads of Google, Facebook, and other tech companies that provide highly variegated yet precision information to advertisers. The ability to gather detailed data on the habits and preferences of individuals can be transformed into precision-strike ads for their screens. The same process is occurring in digital cameras. According to the Wall Street Journal, sales of low-end point-and-click digital cameras by Japanese manufacturers are down about 45% in the last year. This is obviously due to the inclusion of still and video camera capabilities in smart phones, along with the ability to upload and transfer the images immediately.

But it’s not just new products and services that can be disruptive to incumbents. One of my clients has been facing a downturn in purchasing in its industry for close to five years now, with little end in sight to the belt-tightening. An acquaintance of mine in a completely unrelated industry is facing lengthening timelines on payment, with very large clients squeezing their suppliers and forcing them to finance their cash flow. A former client is in the financial industry. She works for a very profitable and growing company that is cutting budgets in order to increase profits and hoard cash. Finally, several insurance executives have told me that continued low interest rates have a major impact on the profitability of their business. All of these phenomena impact on business just as much as new competitors, substitute products, or new technologies.

We have to be constantly ready to recreate and reinvent ourselves whether things are going well or going poorly. Obviously, it’s best to make our own products, processes, and services obsolete before others do, especially when we have the wherewithal to do so. But it’s all the more important when in difficulty. IBM is one of the most successful at this process of reinvention over the decades. Throughout this evolution, IBM always built on its existing businesses and expertise in order to transition to new capabilities and markets. Meanwhile, companies like Dell and HP, while making significant gains in IT services, are struggling with their large dependence on hardware, particularly desktop computers.

How does a company make the transition from current business to future business? This is not an easy process, but there are a few principles that can guide in the evolution:

•    Build on successes and strengths. This is what IBM has done well over the years. Google is also masterful at offering new products and services that build on dominance, for example, the Android operating system, which incorporates features and usability that exploit its dominance in search and precision-strike advertising.
•    Proceed by trial and error. Google exemplifies this principle, with its constant experimentation, innovation, and extension of existing concepts and services. Most of the company’s innovation is generated as a result of private initiatives that compete internally for investment and reinforcement.
•    Reward and reinforce individual initiative. Revolution and evolution from above rarely if ever work. They are inherently unpredictable and percolate from the bottom up.
•    Stop what isn’t working. Obviously, we have to be persistent when something doesn’t work at first, but there comes a time when we have to ask ourselves if further investment in time, energy, and money will lead to growth of the initiative. A rule of thumb I use is that an initiative has to show at least some level of success when it is first mooted. For instance, if I introduce a new service as a consultant and nothing happens, then that is a good indication that it won’t work, no matter how much energy and resources I pour into it. On the other hand, any interest, no matter how small, shows at least some potential that can be built upon.
•    Revive and resuscitate. The Newton was Apple’s first attempt at a handheld computer, but it never really took off. Despite that, the company learned a lot from the experience. When technology evolved to the point that the concept could be explored anew, it led eventually to the iPad.
•    Offer new products and services to existing customers. This may be obvious, but I find that companies often put themselves through agonies to develop completely new products for markets that they’ve never touched before. This is very risky, as there is not only the risk associated with new products and everything that can entail in terms of suppliers, operations, distribution channels, marketing and advertising, but then you have to enter a market that you have very little knowledge of. You’re doubling the risk but no necessarily the reward potential.

I could go on with this list, but the point is to be willing to explore new possibilities. This entails accepting that your best successes and strengths of the past and present may not continue on into the future. We should all be constantly questioning our assumptions. This is something that I learned in my 26-year military career, and as a student of military and business history. All successes eventually become the source of a downfall, unless they are used as a springboard to continuous evolution and revolution.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© Alcera Consulting Inc. 2013. We encourage the sharing of this information and forwarding of this email with attribution. All other rights reserved.

Brilliant Manoeuvre
We learn best by doing, making mistakes and gaining minor wins in the heat of battle. Theoretical learning is necessary, but it only provides a framework to build practical experience.

Discussion
One of the things I learned in the army is that the best way to develop good officers is to ensure that they’ve gained a minimum level of experience and competence as followers and junior leaders before letting them command and lead at higher levels. For instance, you don’t necessarily need an officer to command a platoon, but it is essential to have been a platoon commander early in your career to be a good officer later on. Platoon leadership is the best school because it puts the young officer on the front lines leading soldiers and non commissioned officers directly, without the constant intervention of more experienced officers. The young lieutenant has to learn to fend for him or herself by building on the scaffolding taught in officer candidate training. The theoretical lessons therefore become practical experience by doing, correcting, and improving, rather than by rote learning alone. These become valuable lessons learned for the rest of one’s career.

Unfortunately, this is often lost on financial analysts and journalists in the business press, people who, more often than not, have never tried to do what they are counselling business leaders to do. They tell executives how they should manage their companies, sometimes advocating corporate breakups, acquisitions, and other risky manoeuvres simply to improve stock market valuations. Need I say that the valuations are driven by numerous factors, some of which are mostly random? MBAs and other professional qualifications are only the start of the learning process. They must be honed through practical management and leadership before they should lead to giving advice to others.

Tip
The most powerful means of influence is not reward and punishment, but rather to show that it is in the follower’s best interests, intellectually, materially, emotionally, and socially to follow the leader.

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2013 Richard Martin. Reproduction and quotes are permitted with proper attribution.

The rail disaster in Lac Mégantic, Quebec is a terrible tragedy, but no sooner had it occurred that there were calls for everything from banning railways from passing through small towns, to preventing the shipping of oil by rail. Proponents of increased oil production and pipelines were quick to point out (correctly) that pipelines are safer than rail. Environmentalists hastened to jump on their own hobby horse, that this disaster highlights our (evil) dependence on oil. When I took command of my company sector in Bosnia, my predecessor gave me words of wisdom which guided me throughout my mission there: First information is usually (always) wrong, and don’t overreact. This wisdom applies to peacekeeping, and certainly also applies in the management of complex situations such as the Lac Mégantic accident.

Even if we decided right now to ship oil only by pipeline in order to move all the new North American production, it would take years to build. In the meantime, the oil has to go somewhere. Barring a return to pre-industrial civilization, there is no way that moderns wish to end their dependence on oil as a highly concentrated, efficient, and effective fuel source. By the same token, acting like a lynch mob and trying to pin the blame on an easy target such as the locomotive engineer or the brash and abrasive CEO of the operator, Rail World, only serve to fuel the flames of retribution. The last thing we need is a hasty decision taken in time of high emotionality and sadness. The head of the Canadian Transportation Safety Board said it best last week: (paraphrasing) It’s tempting to pin the blame on a single person, but these accidents are ALWAYS the result of a complex mix of events and conditions. There are no single solutions and what we need is to learn as much as possible and add the incremental knowledge to the future weighing of risk and opportunity.

What risks are you facing? What uncertainties are there in your assumptions and knowledge of markets, clients, products, employees, and competitors? Do you have contingency plans and risk mitigation measures in place to attenuate the risks?

Richard Martin is a consultant, speaker, and executive coach. He brings his military and business leadership and management experience to bear for executives and organizations seeking to exploit change, maximize opportunity, and minimize risk.

© 2013 Richard Martin. Reproduction and quotes are permitted with proper attribution.

There is a tendency in human nature to see the present moment as worse than the past and that things are going steadily downhill. We seem to have an instinct for overemphasizing gloom and doom while downplaying the positive.

The ancient Greeks believed they lived in the Age of Iron, and that the Ages of Gold, Silver, and Bronze were in the past, never to be recovered. If you listen to the climate doomsayers, temperatures are heading up, up, up! A few years ago, we were running out of oil and gas, now the US is entering a period of fossil fuel self-sufficiency, and may even become a net exporter of energy by the end of the current decade.

There is supposedly an old Chinese saying, “May you live in interesting times.” Given my observations, it would appear that all times are trying, if not interesting. This is why it’s essential to look at our situation with a critical eye, to see the negative, but also the positive, the threats and risks, but also the opportunities and potential rewards. It is the only antidote to gloom and doom.

Luckily, there are books that show how fortunate we are to be living in the present moment, and that things, believe it or not, appear to be getting steadily better. The Rational Optimist, by Matt Ridley, shows how civilization and human learning have progressed—though in fits and starts—throughout history, and that we are currently living longer and better than ever before. Written in 2010, he devotes a whole chapter to the current ‘pessimisms,’ notably the situation of Africa.

What we are seeing in Africa however is that it is finally entering the modern age, though not without difficulties. One sign of this growth is the progress of business and education. As but one illustration, Bombardier Aerospace is planning to open a sales office in Johannesburg, because the company sees opportunity and fabulous growth where most see gloom and doom and endless misery. A further example of African development is that IQs have been growing by leaps and bounds for the last few decades, and are finally catching up to those in the developed world. This shows that education, improved nutrition, and health care are contributing to massive human development.

In Abundance, Peter Diamandis and Steven Kotler show that currently envisaged technologies and techniques will continue to make life better and longer into the foreseeable future. Of course, this depends on maintaining the current rates of discovery as well as political, economic, and social freedom. The one specter that everyone rightly fears is war and violence. After more than 10 years of the War on Terror, thousands of more people have died, and there seems to be no end in sight.

This may be the case, but as Steven Pinker argued in his masterful The Better Angels of Our Nature, the world is more peaceful and non violent now than it has ever been in history. To those who think that our ancestors lived in an idyllic past of peace and comfort, archeology, anthropology, ethnology, and history have shown that people were just as likely to die violently in the past as to die of so called natural causes. Pinker shows, with ample statistics, graphs, and other hard evidence, that the human species has been growing progressively more peaceful, tolerant, and perhaps even more intelligent.

All of these conditions represent more opportunities and lesser threats. The risks and rewards we face are increasingly non vital. In other words, our mistakes are less likely to lead to illness, physical injury, and death. Conversely, our rewards are more likely to be ‘philosophical’ and lead to self-fulfillment and self-actualization.

This is the business environment today. Yes, we have to be on the lookout for threats and risks of all kinds. But we live in an age when we have the time and wherewithal to identify and combat these with savvy risk management and contingency planning. But this kind of ‘negative’ planning can only protect us, and keep us in defensive mode. We must have an offensive mindset, looking for the opportunities for growth, investment, and development.

© Alcera Consulting Inc. 2013. We encourage the sharing of this information and forwarding of this article with attribution. All other rights reserved