Category Archives: Blogologue

Dead Company II: If You’re Hoarding Cash …

Like my fellow bloggers, I talk to a lot of companies in the run of a week, and many more in the run of a month, and one thing I’ve been hearing too much of lately is “we’ve cut back on X” — where X is marketing, development, or outside consulting — “because we have to conserve cash to get through the current crisis” — where the crisis is the current recession, downturn, etc. And it saddens me because the truth of the situation is thus: If You’re Hoarding Cash, You’re Not Going To Last … you’re just prolonging a slow, agonizing death!

As I’ve reminded you many times before, great companies are born in recessions … especially in Spend Management! This is a spend management company’s best time to shine … and the time you are most likely to get the undivided attention of senior management who dismissed you as unnecessary when times were good and the stream of cash was overflowing. Plus, it’s an opportunistic perfect storm like none you’ve ever seen: companies are desperate for savings, prices have nose-dived in many commodity markets which had been climbing steadily for years, and many types of spend management technology — including sourcing, procurement, analysis, optimization, supplier information management, and trade management — are now mature low-risk technologies in the eyes of even the most conservative techno-phobes. Plus, SaaS has hit mainstream and advances in cloud infrastructures allow you to keep your costs, and prices, low enough to make your solutions, and the returns they offer, within the budgets of even the lower end of the mid-market. In other words, everyone needs it, everyone can benefit from it, and everyone can afford it — especially if you can offer SaaS and they don’t have to come up with a large amount of cash up front, before they see savings.

But you’re not going to see a single sale if:

  • they don’t know you’re there
    and they won’t if you don’t keep your brand out there where they can find it
  • you’re not keeping your technology up-to-date
    because even the most technology illiterate procurement professionals know that advantages are fleeting and the only real value will come from solutions that are continually being improved and updated
  • you’re not innovating ahead of your competitors
    because it is always a buyer’s market and customers are going to buy the best solution … and you’re not going to know what that is if you don’t bring in some expert help once in a while to help you do a competitive analysis and chart the right roadmap

Now, I’m not saying that you should go out and spend 50K to 100K on a trade-show and staff your booth with magicians, super models, and sports stars just to get attention; that you should double your development team and see how much you can pump out in the next year; or that you should go out and hire a McKinsey or A.T. Kearney to do a complete end-to-end analysis of your software and service offerings — just that you need to conduct business as usual against a thought-out growth strategy. Otherwise, you might as well pack it in and go home, because odds are that you have no future.

However, I am saying that you need to maintain visibility where it counts, and especially on-line as some recent studies have found that appropriately designed on-line campaigns can easily be three times as effective as print campaigns; that you need to continue to enhance your current offering and continue to develop one or more new offerings with a high ROI potential, and that you need to continue to validate your offerings and directions with an external expert. And if you’re smart, you can stretch smaller marketing, development, and consulting budgets and get a big bang for your buck.

Because if you decide to hoard your cash, here’s what happens.

  • You cut your marketing budget and fade from memory because no one remembers you exist in the face of constant marketing from your smarter peers; as a result, you don’t get invited to the table when new opportunities arise and your pipeline shrinks until there’s no one left to sell to.
  • You cut your development budget and your solutions get stale, and even when you do get invited to the table, you lose because your competition not only has more functionality, but has new features and functions that streamline processes, improve analysis, and identify more savings.
  • You cut your consulting budget and you lose touch with your target market, going down tangents that your CEO thinks are important but that, in reality, are only valuable to one or two companies with obscure processes and, as a result, what you thought was a great new feature that would put you ahead of your competition actually scares potential customers away.

And even if you manage to make it through the recession to the next boom, you’ll be one to two years behind your competition, who will likely grow by leaps and bounds and decimate you on all fronts when you emerge from your cocoon. So, unless you’re sitting on at least three to four year’s worth of cash in the bank, which I know is not the case for over 99% of companies in this space, remember this: those who hoard cash don’t last. Another shake-out is coming … and it is the predators, and not the prey, that are going to win this round. The question is, which are you?

Lies, Damn Lies, and Statistics

Hopefully you caught The Brain’s much needed lesson in statistics back in January, as it was very informative. (If you didn’t, you can still go back and read it. Heck, even if you did, it probably wouldn’t be a bad idea to go back and read it again.)

The reason I’m pointing it out again is that I just noticed that Knowledge and Wharton put out a great summary of some of the key points in their article on “The Use — and Misuse — of Statistics: How and Why Numbers Are So Easily Manipulated”. Even though they had to go and use, what is in my view, the waste-of-time, waste-of-print, and waste-of-breath story on Roger Clemens and his alleged (ab)use of steroids as a background, they still made some great points regarding statistics, which need to be reiterated every now and again (because it seems that the vast majority of people who like to do statistical studies and quote statistical results still don’t understand what statistics is really all about).

  • Correlation is not Causation!
    As the article notes, a chain of retail stores may analyze its operations for a set period and find that those times when it reduced its sales prices coincided with times that overall sales fell. The chain might conclude that low prices reduce sales volume when, in fact, it could be the case that stores run semi-annual sales during known down periods. In other words, low sales are causing price declines and not the other way around.
  • It’s much easier to isolate and exclude extraneous data when you have experimental or hard-sciences data.
    In post-activity analysis in a business setting, it’s much more difficult to isolate the effects of a variety of other influences — and any attempt to simplify will most likely lead to incorrect results.
  • Comparing your situation only to those that produced positive effects is selection bias — and it’s wrong! Samples must be random.
    The example the authors use is that the Clemens report tried to prove he didn’t do steroids by noting that there are other examples of professional baseball players, like Nolan Ryan, Randy Johnson, and Curt Schilling, that also enjoyed great success in their 40s. However, that’s atypical behavior. The vast majority of players, and pitchers in particular, steadily improve in their early careers, peak at about 30, and then slowly decline. Clemens started declining in his late 20’s and then rebounded and improved in his 40s.
  • A single, short-term study on a small population is not conclusive! Especially if the population is not representative of the population at large!
    The example given here is a lawsuit filed against the Coca-Cola Company’s marketing for Enviga, it’s caffeinated green-tea drink, that states it actually burns more calories than it provides, resulting in ‘negative calories’. The claim is based on a clinical study of a small group of individuals with an average BMI (Body Mass Index) of 22. However, the majority of the American population has a BMI of 25 or more. Thus, its not statistically reasonable to say that the study would be representative of the population at large.
  • An accounting of the entire testing process is required for proper perspective in interpretation.
    So you found a statistically significant effect, correlation, or difference between some set of variables. If you don’t report the twenty-one insignificant tests you did before you found that one significant result, how do you know it wasn’t a fluke and that the test should probably be repeated?
  • Data-driven studies can’t always tell you the right answer.
    All they can tell you is which answers to eliminate because the data does not support them. The true value of a statistical analysis is that it helps users to properly characterize uncertainty as opposed to a “best guess”, to realize what outcomes are statistically significant, and to answer specific hypotheses.
  • You have to understand what the drivers behind the variables are if you are to have any hope of making a correct interpretation!
    Consider the example of major league baseball outfielders. A hypothesis going into such a study might be that outfielders have a harder time catching balls hit behind them, which forces them to run backwards. You’ll likely find that the opposite was true – that outfielders tend to catch more balls running backwards, even though this seems counter-intuitive at first. However, when you consider the hang-time of the ball, and the fact that balls hit farther are in the air longer, which gives the outfielder more time to catch them, it starts to make sense.
  • The validity of a statistical analysis is only as good as it’s individual components.
    And if even one component is invalid, the whole work is invalid.

Stop the Presses! Sourcing is its own Profession!

Who would have thunk it! Even though purchasing was recognized as an independent function by many railroad organizations in the 1800’s, apparently it wasn’t a legitimate profession until this year! At least according to the IAOP (the International Association of Outsourcing Professionals) and a recent article in Global Services.

And you know what else? Apparently, sourcing professionals play the key role in making sourcing engagements work and the management of an outsourcing relationship is also getting more strategic. And we do more than just manage people … we manage outcomes! Wow! I never knew! And yes, I’m being sarcastic as all get out!

I must say, as great as it is to see the profession recognized outside of the small select group of publications dedicated to the space and a handful of blogs, it’s very discouraging to see what’s probably the world’s third oldest profession (and I’ll let you guess the first two) consistently getting the shaft, which is what happens every time sourcing / supply management / spend management is introduced as a brand new function or one that only now can have a tremendous effect on the bottom line.

And do we really have to be introduced again and again? Every business that sells also has to buy. Even if you produce raw materials, you have to buy finished tools and machines to create those raw materials. You have to buy office supplies and computers to create the bills of sale and track your receivables and cash. Business have needed to buy since they started selling.

But what really stings is the fact that no one outside of purchasing seems to realize how hard it is to buy well versus how easy it is to sell. To sell, all you have to do is part some fool from his money. But to buy, you have to get what you need while still retaining enough cash on hand to cover all of your other expenses. And if you want to stay in business, you have to find a way to get more value than the other guy – when the seller only has to do one thing: part you from as much money as he possibly can.

So, although we need to thank each and every publication that gives the profession the nod, at some point we have to say hey, give us a break! Stop overplaying the fact that we’re still under-recognized and jump right to the part about how much of an impact we can have on the bottom line. Then you’ll really be doing us a favor!

Get Smarter – Part II

In my last post, I covered the recent Wired article that talked about how you might Get Smarter with “12 Hacks That Will Amp Up Your Brainpower”. Today, I’m going to cover the companion article – “6 Intelligence Myths Exposed” — which is even better. Not everything makes you smarter. And when you get right down to it, relatively speaking, very little does.

  • Playing Brain Age
    Even though regular players routinely see their “brain age” plummet from a sluggish 60 to a taut 30, there is no evidence that in-game gains translate to a real world intelligence gain. Besides, there’s a much more rational explanation of why brain age scores improve with time. Many users start with little gaming experience. Therefore, in a phenomenon known as the practice effect, it’s not surprising that their scores improve with more experience. After all, if preparation can help you do better on an IQ test, shouldn’t it also help you do better on a game? It doesn’t mean that the effort made you smarter, it just means you learned how to score higher on a test with a fixed, known, scoring system.
  • Doing Crosswords
    Now, mad-cow Denny Crane may have swore by them, as will those who do them daily, but there’s no evidence that they actually slow down cognitive decline, as the puzzlers claim. Remember The Brain’s lesson: correlation IS NOT causation. Chances are the people doing these puzzles are those into intellectual pursuits who increase their brain power, or at least decrease the rate of intellectual decline, through other methods.
  • Eating Fish
    Now it is true that oily fish are rich in docosahexaenoic acid (DHA), an omega-3 fatty acid that accounts for 40% of the makeup of brain cell membranes, and true that more could improve neurotransmission, but despite the fact that a handful of studies have linked fish-heavy diets with reduced risk of mental decline in old age, laboratory tests on mice have found that omega-3 rich diets have no impact on cognitive function. Moreover, cold-water fish high in omega-3’s are also likely to have elevated levels of methylmercury and PCBs – neurotoxins! So, they might help, but chances are just as good that those neurotoxins will do more harm than good.
  • Chewing Gum
    The rationale behind this doozy is that chewing increases blood flow to the motor cortex and can trick the brain into expecting a meal. This triggers an increase in insulin production that could boost cerebral glucose levels – and maybe even smarts. Too bad that a 2004 study found gum chewers to be less attentive than a control group!
  • Listening to Music
    Music can certainly expand your mind, but can it really improve focus and memory? Although companies like iMusic and the Monroe Institute that produce binaural recordings (that they charge a significant sum for) claim that it can, a recent study at Oregon Health & Science University that subjected test subjects to a binaural pulse in the theta band (that is linked to working memory) showed no change in brain wave activity on the EEG. What’s more, they became depressed and forgetful! (And if that’s what you want, a $5 used Celine Dion CD will induce the same effect!)
  • Taking Supplements
    The supplements industry claims its products can boost your intelligence – but let’s hope those claims aren’t enough to convince you not to check out their foundations, because they don’t work. In summary:

    • B Vitamins might help stave off Alzheimer’s, or for those of us in the middle (prime) of life, amnestic MCI, but that’s it
    • Ginkgo Biloba might help reduce the effects of dementia in your sunset years, but no more
    • Gingseng might regulate glucose, which might improve mental condition, but that’s a whole lotta maybe
    • Gotu Kola reduces anxiety in rats, so, if you’re an anxious rat …
    • Huperzine A showed a small memory improvement in one isolated study … but it’s almost always possible to find one study (on two test subjects) that appears to support an outrageous claim

Get Smarter

Sure, you can waste the summer away and Get Smart (hey, it can’t be worse than Southland Tales – what the h*ck happened there? The Rundown was great!), or you can attempt to Get Smarter!

Wired recently ran an article on “Get Smarter: 12 Hacks That Will Amp Up Your Brainpower” that’s definitely worth a read. While some of the advice is out there, some of the tips are valid (and do work). The tips were:

  1. Distract Yourself
    A 2007 UCLA study found that students distracted by closely related material after being asked to perform a memorization exercise performed better on subsequent recall tests. Distraction in the form of slightly different information forces your brain to engage in information processing in an effort to permanently store the original information.
    But be careful, the information needs to be related. You can’t go from reading about ethno-biology to nano-technology and expect the trick to work.
  2. Caffeinate with Care
    Caffeine may jump-start the body and sharpen the mind, but small doses at regular tea breaks, as favored in the UK, are more effective than the 20-ouncers many North Americans like to suck down at Starbucks or Tims in lieu of a healthy breakfast.
    As the article notes, your brain fills up with adenosine, a chemical correlated with mental fatigue, throughout the day. Caffeine blocks the adenosine-receptors, and has been found to reduce mental fatigue in many individuals who take their caffeine in frequent small doses (instead of mega-doses in the morning).
    Furthermore, the kick is improved when glucose is added to the mix. So, add a small amount of sugar, eat a (chocolate chip) cookie, or a carbohydrate-rich snack for an extra jolt.
  3. Impressionistic Information
    Make sure the material contains a reasonable amount of information that is relatively easy for you to learn. Facts, figures, or other information that your brain is good at absorbing.
  4. Think Positive
    Learning new things strengthens your brain — especially when you believe you can learn new things. In other words, if you want unlimited potential, you have to believe you have it.
  5. Do the Right Drugs!
    Recent studies indicate that drugs like aniracetam and vasopressin may improve memory. At this point I wouldn’t advocate the use of any of the drugs listed, given that the potential side-effects appear to outweigh the potential benefits, but it probably won’t be long before we have drugs that can enhance learning potential without the side effects of drugs like methylphenidate (that’s found in ADHD drugs like Ritalin and Focalin).
  6. Juice Your IQ Score
    The article correctly notes (since there is no such thing as a true intelligence test, for reasons far beyond what a single post can elaborate), you can (significantly) boost your score by prepping for the verbal, numerical, and spatial problems on a typical psychometric test. Most of the questions fall into set categories, and by familiarizing yourself with a number of standard problems in those categories, and taking practice tests (found in numerous preparation books at your local bookstore), you can not only do much better on these tests than if you took them without preparation, but do them faster too (leaving you more time to focus on the harder problems).
  7. Pick Apart Your Brain
    Another tip I don’t quite get. I’m not sure how learning about the various parts of the brain (the cortex, thalamus, hypothalamus, hippocampus, amygdala, temporal lobe, pons, medulla oblongata, etc) and what they do (memory, input translation, metabolic regulation, spatial navigation, emotions, speech, dreaming, autonomic functions, etc.) is going to help the average person increase her brain power.
  8. Don’t Panic
    While a little nervousness can boost cognitive performance, periods of intense stress essentially turn us into Neanderthals. Douglas Adams understood this. Do you think he wrote The HitchHiker’s Guide to the Galaxy just for our amusement?
  9. Embrace Chaos
    According to Robert Bjork, Chair of Psychology at UCLA and a recognized leading expert in memory and learning, superior recall results when information is learned in randomly ordered chunks.
    I have to assume here that the chunks make sense on their own.
  10. Get Visual
    Break up large images or chunks of information into manageable groups. Learn the 47 nations of Africa by learning the countries in the North, East, West, South, and Central regions of Africa in related groups. That’s how most of us remember telephone numbers, in groups of 3, 3, and 4, or our credit card numbers, in 4 groups of 4 (unless you’re talking about insolent American Express with their unique 4 3-3 5 grouping).
  11. Choose Your Exercise Wisely
    Studies have found that more aerobically fit grade-schoolers also perform better on cognitive tests. Yoga and certain forms of Tai Chi, Chi Gong / Qi Gong, and Aikido are also believed to improve intelligence. (However, martial arts training that focuses on excessive exertion and / or strength training, like weight lifting, has no effect, except to tire you out).
  12. Slooooow Dooown
    According to Wired, It should take you two and a half seconds to read this sentence. Any faster and you won’t absorb its meaning. While I disagree with the timing estimate, as it varies slightly for each individual, there is a limit as to how fast you can absorb information, even if you are a speed reader.