Thursday, December 1, 2011

Vikings, Mayans and Miners

We can learn from vanished communities. Corporations can disappear in years or decades while a civilization or a community goes extinct after a few hundred years, but the reasons could be similar.

On a long drive recently, I listened to Jared Diamond's book, Collapse: How Societies Choose to Fail or Succeed. He describes the growth and demise of several communities and the reasons, which are not always how we think they collapsed. In comparison, he explores societies that faced similar challenges and yet thrived. He also talks about some of our current situations. His point is that we have a choice to be think long-term and be bold in our actions now, or wait and see what happens. What struck me is that there are some business lessons here.

The Norse Vikings landed in Greenland during a climatic warm spell that made the land appear to be more hospitable than it really was for agriculture. However, in order to get iron for tools and other things, the Norse settled for 1% iron in the ore they used while most other Europeans wouldn't have settled for less than 30% iron content. Thus, they processed far more ore than usual in order to make one sword or hammer. In order to process this low percentage iron ore, they needed excessive amounts of charcoal made from wood and consumed the Greenland forests faster than they could be regrown. This set up subsequent conditions that made Greenland even more uninhabitable for the Norse lifestyle. They didn't adapt to the conditions. So in business, do we pursue low margin sales while consuming disproportional resources to get those low margin sales? I've seen a lot of marketing and sales effort expended to get just any growth in the top line. When the orders come in, extra technical support is needed.  Perhaps more collections effort occurs, while engineering tries to figure out how to make special modifications for these new customers. When we do have an opportunity to capture profitable sales, we can't hire and educate the new tech support and engineers and sales people fast enough and the open door gets slammed shut when the customer goes to the competition. Our business suffers in the long run as we're stuck, desperately surviving on the low margin business.

The Mayans thrived and grew. When their community expanded, they built more up on the mountain sides of the main valley of their civilization. As the population expanded, this put more pressure on the agricultural production in the valley floor. Eventually, they collapsed because the mountain-to-valley ratio was too high. In manufacturing, we talk about overhead-to-direct-labor ratios, hoping to keep the ratio at something less than 1:1 (e.g. 1:1.5+). The US Army talks about tooth-to-tail ratios knowing that it takes many people to support the one front-line soldier. In business, we can't afford a lot of overhead. How can you improve your tooth-to-tail ratio, providing the right support to the people making the product or delivering the service without overburdening the financials?

In the Industrial Age, hard rock (metal) mining seems pretty cutthroat. Thinking that they couldn't afford to put some clean-up operations in place, because of the low margins, they extracted the metals from the ore leaving slag and acid behind. They destroyed the very communities of their workforce. When the ore was consumed, they moved on or went out of business. In what ways are we consuming our resources without any replacement or leaving a trail of waste behind? Are we sucking our people dry without replenishing them through education and development? Do we help them find ways to reduce stress and anxiety, or do we let them fend for themselves and their deteriorating health? What about the by-products of what we do--the debts our organization carry, our customers carry to get our products and services, or our employees incur to make ends meet? Isn't a pile of debt and stress just the waste product of extracting sales and work? We probably waste billions in expediting supplies because of faulty planning assumptions like requiring all of the parts to be delivered on the first of the month when they won't be used until later in the month. (Sorry, UPS and FedEx, I know these systemic issues keep you in business.) What else can you think of?

Are we sowing the seeds of our organization's eventual destruction through our current success? What hints do you have that the current level is not sustainable? What bold actions can you choose to take that will ensure the long-term success of your company? Easter Island was suddenly deforested in one year by the effort to raise those magnificent stone figures. It was a gradual loss of the large trees they used to move the statues. After a hundred or so years, all that was left was a few puny, spindly trees not worth anything except to be burned, and then they had no trees. This year, you won't suffer the effects of poor choices and sticking with policies and values that will lead to a demise. In five years though, you might see the significant effects and it might be too late because what's left is too puny or spindly, or we can't let go of that last low margin customer without closing our doors now.

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