Category Archives: Miscellaneous

The (Board) Gamer’s Guide to Supply Management Part VI: Zombie Dice, Tsuro, and Get Bit!

I’m enraptured to continue this one-of-a-kind summer series that will help you whether you are just interested in finding out about this new and exciting career opportunity, or ready to take your Supply Management career to the next level. Not only is it significantly more fun than counting grains of sand for an hourglass, but when you can grasp a lot of the basic concepts by playing the right mix of strategic (and sometimes tactical) board games with your friends, it’s three blasts squared.

I know we still have to tackle the economic games, like Puerto Rico and Dominion, but we’re gong to continue to make use of the fact that, thanks to the unequaled generosity of Wil Wheaton (@wilw) and Geek & Sundry, we have yet another marvelous TableTop episode where Wil introduces us to yet another great game — or, in this case, three great games. Until the tap runs dry, we are going to collect every precious drop of water that Wil is directing our way.

Wil gives us a very succinct introduction to each of the three games covered in TableTop Episode 3, starting with

Zombie Dice

is a press-your-luck dice game. We are all zombies trying to fill our undead bellies with delicious, delicious brains. On every turn, we will draw three dice from the cup. Each die represents a human survivor or, as we call them, lunch. We roll the dice. We then keep all of the brains and all of the shots to the face. Now we have a choice to make. We can stop, and score the brains, or we can press our luck. There’s one special die. It’s this guy, he’s the runner. If we choose to roll again, we have to include him in the three dice total because we haven’t caught him yet. You keep rolling until you are shot in the face three times or you choose to stop and score all of the brains in front of you. The first player to score thirteen or more brains wins.

Zombie Dice is a great game because it helps you understand the Wall Street mentality which, inevitably, leads to financial market meltdowns when left unchecked — just like the subprime mortgage crisis, the dot-com bubble, the speculative currency crises in Asia, Mexico, and Europe in the 1990s, the savings and loans crisis, the oil crisis, the crash of 1929, the shanghai rubber stock market crisis, the rail road panic of 1893, the gurney crisis, the danish state bankruptcy, the south sea bubble and the mississippi bubble, and the tulip mania. While financial market meltdowns are not a new phenomenon, thanks to the internet and the interconnectedness of the global financial markets, they are occurring more and more and will continue to do so as long as the unlimited risk mentality of Wall Street goes unchecked.

It’s critical that you understand this mentality, and the risks associated with it, because the more you try to limit your risk by playing the currency markets, the hedge funds, or even asset-based investments (like gold), the more types of risk you are actually opening yourself up to. If you don’t know what you’re doing, you’ll end up rolling red die after red die, which triples your chance of getting shot in the face.

In addition, what makes Zombie Dice truly great is that it also teaches us about the unpredictability of risk. You never know when you are going to get shot in the face with a supply disruption due to a natural disaster, a civil disturbance, or a quickly enacted political trade barrier, or how much damage it’s going to do. Supply Management is full of risk, and every time you place an overseas order, you could be rolling the dice.

Tsuro

is a path finding, tile laying game. We are flying dragons. On every turn, we will play a tile on the board. Every dragon touching that tile has to follow the path it makes to completion. … If you fly off the board, you are eliminated. If you crash into another dragon, you are eliminated.

This is a cool game because it forces you to think strategically, which is important in markets where demand exceeds supply and you have to outmaneuver your competition to insure that you always get what you need, and keep your organization on the board. It teaches you that you not only need to think about what you need, but if you are in a market where demand exceeds supply, what your competition needs so that you can lock up supply first.

Get Bit

is a bluffing game, designed by my friend Dave Chalker. We are all robots out for a leisurely swim in shark-infested waters. Each turn, to figure out which one of us is swimming the fastest, we will play a card from our hand, numbered one through five. The fastest number goes to the front of the line, and the slowest number will go to the back of the line. The robot who is closer to the shark gets bit. We each have four limbs. So if you are bitten four times, you become Anchor Bot 9000 and spend the rest of your days on the bottom of the sea.

This is a good companion game to Tsuro because, like Tsuro, it forces you to think strategically, but has the added advantage that it demonstrates what happens if your competition mirrors your movements — you both stand still while the other competitors in the market swim past you. You not only have to outmaneuver your competition in this space, you have to prevent them from blocking you.

How Not to Excel at Forecasting

Simply put, use Microsoft Excel. It’s appalling that a recent survey by ToolsGroup and the Global Market Development Centre (GDMC) found that even though two-thirds of companies in the consumer goods supply chain consider demand volatility and forecast accuracy a high businesses priority, half still rely on Excel spreadsheets for forecasting.

Relying on Excel for forecasting is like relying on:

  • a Longship to get you across the Atlantic
  • your first guess on Let’s Make a Deal to be the right one
  • a shareholder proxy getting on the ballot at a Fortune 500
  • Florida surviving a hurricane season without any major city suffering damage
  • the price of fuel going down and staying down for an upcoming series of spot buys
  • natural resource supply to be consistent and predictable year-over-year
  • a flip of a fair coin to come up heads seven times in a row

Now, it’s true that:

  • the Vikings did make it across the Atlantic in a Longship, but a single storm could sink it
  • the first door you pick, with one-in-three odds, could be the right one, but the odds are actually twice as good if you switch
  • an activist shareholder can sometimes get a proxy on the ballot if he or she has enough time and money, but as pointed out by John Gillespie and David Zweig in Money for Nothing (How the Failure of Corporate Boards is Ruining American Business and Costing Us Trillions), examples are few and far between
  • even though no storms made landfall in Florida in 2011, this is Not a common occurrence
  • gas prices did consistently drop in the USA between September 2008 and December 2008, but have been otherwise steadily rising for the last five years
  • in some years the rice, sugar, and corn crops are almost the same as in the previous year, but given the increase in hurricanes, tsunamis, droughts, and other natural disasters in recent years, this is not a common occurrence
  • yes, heads can come up seven times in a row when flipping a fair coin, but the chances of this happening are less than 1%

In other words, you can forecast with Microsoft Excel, but your chances of doing well, especially given that 90% of spreadsheets have non-trivial errors (and collectively cost enterprises billions, as Fidelity and Fannie Mae found out), are (vanishingly) small (as the complexity of the forecast increases). One has to remember that there’s no intelligence behind a spreadsheet and they are just a source of peril that can cost your organization millions without anyone noticing.

Pop Goes The Squirrel!

Hammy has been driving Verne crazy again over the hedge. Dark Verne is creeping back to the surface. And I bet this is what’s playing in his head right now …

RJ played guitar, Hammy played bass.
Name of the band is Over the Hedge.
Everybody tell me have you heard?
Pop goes the squirrel.

RJ played keyboard, Hammy played drums.
It drives Verne crazy and when the time comes.
Everybody tell me have you heard?
Pop Goes The squirrel.

It goes something like this: (p p p pop)

RJ and Hammy had a crazy dream.
See their pictures in a magazine.
Every wild critter needs a twirl.
Pop goes the squirrel.

RJ and Hammy getting smart (it seems).
Made more money on a movie screen.
Every little nest needs a bird.
Pop goes the squirrel.

One two three and four is five.
Dark Verne is plotting poor Hammy’s demise.
Mentos and coke and Microwave on high.
Pop goes the squirrel.

Six seven eight and nine is ten.
Make sure it works with nitroglycerin.
Say what planet are we on? The third!
Pop Goes The squirrel.

And Every time Verne wonders where the world went wrong,
Ends up lying on his face going ringy dingy ding dong.

And every time Verne wonders if the world is right,
Ends up across the cosmos in black arachnid’s night.

RJ played guitar, Hammy played bass.
Name of the band is Over the Hedge.
Everybody tell me have you heard?
Pop goes the squirrel.

RJ played keyboard, Hammy played drums.
At least until Verne with dynamite comes.
Everybody tell me have you heard?
Pop Goes The squirrel.

The Hubris Hypothesis is Alive and Well in Supply Management

It looks like we’re back to the merger and acquisition frenzy again in the space, which seems to begin anew at the start of every boom in the continual boom-bust cycle that Wall Street so favours. Big cash-rich giants are again gobbling up cash-poor gnomes in an effort to bolster either the breadth of their offerings or expand their (potential) customer base. This is a good thing and a bad thing. If you’re on the market for supply management technology, or a customer of one of the cash-rich giants, this can be a good thing. If you’re a shareholder of the cash-rich giant, or a customer of the cash-poor gnome, this can be a bad thing. If you’re anyone else, it probably doesn’t affect you.

It’s probably a bad thing if you’re a shareholder of the cash-rich giant as 4 out of 5 mergers and acquisitions fail to deliver the expected value, and often fail to do so spectacularly. As Richard Roll notes in his classic paper on “The Hubris Hypothesis of Corporate Takeovers”, decision makers in acquiring firms pay too much for their targets on average. I believe this to be especially true in the enterprise software space where the value of a platform decrease at a rate that is in-line with the expected depreciation of a new car purchase. Every time a newer, better, piece of software hits the market, the value of all existing platforms drops. And since, in the enterprise software space, all acquisitions tend to do is freeze innovation on the platform of at least one party, if not both, until integration is achieved, value drops — and in this space, it’s rarely regained. While the value associated with software doesn’t disappear as fast as it does on Wall Street every time a newly created bubble finally bursts, it still disappears. And it’s not like we don’t have our own horror stories like the i2-Nike PR nightmare, the Hershey Foods WMS failure, or the ERP/MRP fiasco that brought down the multi-billion pharmaceutical Foxmeyer. And while none of these are directly related to M&A, they do demonstrate how any attempt to integrate even partially incompatible systems can wipe out hundreds of millions (or more) of value.

Similarly, if you’re a customer of the cash-poor gnome, it can also be a bad thing if your system is “locked down” until the features/functionality is integrated with the giant’s platform, that you will eventually be forced to implement (when the term of your original agreement runs out). Chances are that you bought the gnome platform because the giant platform wasn’t what you needed, was way more extensive than what you needed, or didn’t deliver enough value from the extra functionality relative to the cost.

But if you’re customer of the cash-rich giant, who, chances are, is no longer capable of innovating it’s way out of a wet paper bag, this can be a great thing. As soon as the initial integration headaches are solved, you’ll have access to new, innovative to you, functionality without having to find a new vendor, do custom integration, or even do extensive mods to the platform you have — especially if you’re using a hosted/SaaS service and it just gets enabled in the next release. And, if the giant is fair to you, as a loyal customer who had to wait, the additional cost won’t be that significant and will be drawfed by the new-found value your organization can generate.

But if you’re not a customer of the cash-rich giant or the cash-poor gnome (and not a shareholder of the cash-rich giant either), this is definitely a great thing. As we’ll delve into in more detail in a future post, when you’re on the market looking for a new supply management technology platform, you’re asking three questions (if you’re doing it right) before seriously considering a vendor: can the vendor support me, are they stable enough to support me, and are they still innovating. While it is often straight-forward to answer the first question, it’s hard to answer the second if the company is private and hard to answer the third if you’re not intimiately familiar with the space and the competition (as innovation can be relative). But if a vendor gets acquired, you know that it likely wasn’t stable enough as most companies that get acquired are cash-poor, have limited growth options on their own, or have a specific innovation or customer a cash-rich giant wants (and once a cash-rich giant sets their sights on a target, that target’s resources will be consumed with either friendly bids, or hostile bids, which would still limit its ability to support you). And if a vendor does the acquiring, then there is a good chance that it’s not innovating (at the rate it used to) or not capable of further growth without a fresh blood infusion (which would eventually limit innovation).

This means that every merger and acquisition identifies two more companies that, at the very least, should be given serious scrutiny before being added to your list of potential solution providers, if they should even make the list at all (at least until a succesful integration is completed — which, if one of the fish is really big, could take years) as a merger or acquisition usually signals a lack of innovation on one side and cash on the other. And, more importantly, it shines a light on those companies in the middle — stable, growing, and full of innovation ready and waiting to take your Supply Management practice to the next level.

A new wave of best-of-breed players is rising in the space. Since they haven’t yet been entangled by the hubris hypothesis, it might be time to give them a serious look.

Thirteen Years Later, And It’s Still All About the Pentiums

Rock on, Al Yankovic, Rock on!

Because It’s All About The Pentiums (Original Video!)

Al may have been Running with Scissor, but no one did a better job of predicting the future of the IT industry.

     
My new computer’s got the clocks, it rocks
But it was obsolete before I opened the box
You say you’ve had your desktop for over a week?
Throw that junk away, man, it’s an antique
Your laptop is a month old? Well that’s great
If you could use a nice, heavy paperweight

  It’s All About the Pentiums
    by “Weird Al” Yankovic (@alyankovic)