Effectiveness, Inefficiency and Redundancy

Good Morning from EMC Operations,

The Pareto principle effectively states that 80% of results are achieved with 20% of actions taken.

From this, many assume that the same is true vice versa: 20% of results are achieved by 80% of actions taken. We don't believe that this is true, as there is a distinction to be made between inefficiency and redundancy. The former would claim that action exceeds results (10% of results caused by 15% of action,) yet in practice, this isn't always entirely negative. It is inefficient, but may be necessary. The majority of firms are not plagued by inefficiency, but redundancy (or inefficiency that is indistinguishable from redundancy.)?

Within consultancy, the majority of consultants aim at fixing inefficiency, not eliminating the redundancy that often feeds into inefficient systems within the strata of firm organisational operations. EMC Operations considers their model to be backwards.

In this week's entry we will talk about changes to make a 20% action even more effective, an inefficient action more efficient, and the elimination of a redundant action. We are of the opinion that consultancy shouldn't be so narrow sighted.

EMC Operations founder, Ethan M Clarke talks about it a little bit here:?https://youtu.be/KQh9HDlrjOo

1.?Boosting the productivity of action:?The prospect of productive action is something that all firms aim towards, but within the defence industry, because there is such a hefty presence of automation in the industry, often there is metronoming back and forth between choosing automation as a means by which to create economies of scale, and choosing people as a means by which to promote creative problem solving. Generally, the industry is fairly good at creating good systems of physical and often financial capital, but rarely any other types (especially human.)

We don't think that it really matters which side one picks in the long term (more human based or more automated,) rather, which one can make more efficient and functional (as a corporate system) in the long term. Good systems are about consistency and efficiency, not finding the current operational 'meta.'

The action we have chosen to talk about today is broader, but has the most direct impact on firm cashflow, revenue and ultimately, profit for firms in the defence sector. It is operation on the DSP.

For those who are unaware, in the UK, the government lists tenders on a platform called the 'Defence Sourcing Portal' (DSP.) This DSP lists all auctions (either low to high if the MOD is selling, or high to low if the MOD is buying) carried out in the national defence market, as well as ITTs (Invitation To Tender,) and PQQs (Pre-Qualification Questionnaires.)?

The former of these functions allows the MOD to sell equipment at the profit maximising level, or to buy supplies, services, works etc at the lowest price (for the highest value for money.)

Let's talk about ITTs:

?Automation:?Some firms choose to automate their DSP processes. There are a number of softwares, some even suggested by the DSP itself that allow one to auto-fill certain answers in response to the ITT (beyond having standardised documentation that requires minimal change for contract differential.) This is the automation route that firms may choose to take, allowing them to answer ITTs faster, and thus answer more (maximising the results from their time.) Initially, we should say that this is an option, as many firms do continue to do a lot of the process manually. This is quite a simple way to cut out bureaucracy, and for the low (or free) prices for the software installed, it can be worth it to take the automation route for the ITT process. Most firms do not, however, optimise their automation. Automation only works if it doesn't require human interaction. Most firms allow the machine to create inputs, and then go through the entire document and review (for a lot of ITTs en masse, this become expensive through opportunity cost of employees working on review.) Rather, firms should optimise desired responses and learn how to properly interact and inform the software of preferences and auto-generated systems. This means that review isn't necessary and automation is correct. These automated services can be used as systems rather than aid so long as the time is taken to properly inform the algorithms.?

The Lack Thereof:?Automation, as we have said, has key perks in the management of ITTs, particularly if one responds to a large number of lower complexity (generally supplies based) contracts. These contracts are generally lower value, which works for the majority of firms, but it should be said that at some point, for the expansion of firms, automated systems will likely have to change. Defence and security firms cannot come to rely on automated software. There is potential for this automation to reinforce behavior. That is to say automation may develop contractual stagnation: firms that automate fall into systemic habits that mean they do not expand beyond lower contract values because of the automation processes at work (that they don't wish to lose.) Firms that do not fall into this trap then generally make the mistake of assuming that the software can handle larger contracts. It may be able to, but it shouldn't. The increased complexity of contracts means human ingenuity is more of an important role if one is to beat the (increased) competition that comes from a higher contract value. This manifests as both being more creative about finding lower cost solutions, but more importantly, being more careful about the demonstration of value to the authority.?

How they combine:?We believe that there is a best of both worlds. It is best to have one's cake and to eat it too. As the company grows, the automation of smaller contracts should not be ignored, but rather should be sustained. Many growing firms reject the maintenance of a low value contract upkeep (simply because they think it isn't worth their time.) Automation of this means that there is minimal expense, and generally it requires minimal staff as well in order to keep up this system. Therefore, firms should maintain lower value contract systems through?micro-departments?(one or two people,) through which they can develop a key source of cashflow that can sustain a firm (generally above shut down levels) in the long term, even during a period of low win rates. Then, firms should use employees and innovative human capital to work on larger contracts and growth through higher valuation (more complex) solutions for MOD supply.?

In short, firms may maintain smaller valuation contracts on a more automated system with low cost skeleton staff in order to keep stable cashflow. We think it is better to keep one or two eggs in a more risk optimal and constant basket.?It sounds intuitive, but most firms simply don't do it.

2.?Reducing Inefficiency:

Inefficiency can be classed (as we said) as activity which doesn't equal or multiply action when converted into yield. We consider this definition to be only a half truth. Inefficiency is necessary in some part, as there are some key activities that are simply required, and are bound to be inefficient but are crucial to the overall efficiency of a firm on balance. EMC Operations believes most inefficiency can be solved, but wasting time and energy on necessarily inefficient tasks is inefficient in and of itself.?

What we talk about in this blog is generally elementary stuff that is simple to fix independently of EMC Operations getting involved, and this will be no different.?

So, here are some theories that state the obvious, for those that need the obvious.

The Peter Principle?states that those who remain stagnant tend to perform badly at their job. Those who perform well are promoted until the point that they reach relative incompetence. That is to say that the jobs people end up in (in the long term,) are often those they aren't well suited to, because they do not get promoted further.?

The way to prevent this is simply to properly observe how long people stay in positions relative to how long they are expected to. It should be a simple observation of middle and upper management of a firm when stagnation occurs. It doesn't require mountains of paperwork, or graphical presentations but rather knowledge of all people in the firm and properly established chains of command within.

Similar to this is the?Dilbert Principle?claiming that often, management moves unproductive workers to places of authority to get them out of the way of doing harm to productivity. In our eyes, the two are generally interlinked whereby management moves those that are excelling to a point where they do harm, at which point they are promoted to prevent loss of productivity, and thus fulfill the Peter Prophecy.?

Secondarily, David Graeber comes up with a brilliant concept which we won't name on this entry. It provides use with some key management theory, that we can aim to dismantle within a firm if it exists or prevent creation of if it doesn't yet.?

Graeber talks about 5 types of jobs that are unnecessary (we'll use different labeling to him here.) There are 4 that are particularly pertinent to inefficiency in defence and security:?

1.?Those that exist to create prestige.

Often in defence and security this could be an excess of doormen or receptionists, but even more likely, it is related to defence based events or exhibitions. It has become an industry standard that there are many people involved in exhibitions. This is seen as value adding, as the results of these small expenditures may be large contract which would more than pay for those who help to personally organise defence exhibition displays. We would posit that the way to make an impression isn't with swarms of staff and promoters, but rather through limitation. Particularly for technology, what has the largest impact in defence and security is what is only glimpsed. Full explanations of abilities and function leaves nothing to the imagination.?What is needed is intimate and personal interactions by those who are pertinent, and for said experience to be proper (only one or two people needed, not constant promotion.) Firms should seek to do more selling and less telling.?

2.?Those that fix problems in a reactionary manner.

3.?Those that have a role related to making systems look productive.

Many defence firms create intermediary systems managed by a reactionary problems solver whose role is simultaneously to make the system appear as though it is a well oiled machine, when said machine would fall apart if the kingpin has a bout of illness. The way to solve this is simply in creating well functioning systems in the first place and taking audits of when those systems change to ensure that they are functioning based upon business operations rather than the productivity perception problem solver. This is simply about firms taking note of the state of systems. It is not done as often as it should be. Short term changes become permanent unless change is observed and independent function is restored.?

4.?Those who manage the work of others unnecessarily.?

A simple middle management problem. We will talk about this next week.

Potentially, this can be helped by merging roles, if they are necessary. Those who are middle managers can also have a necessary compliance role if they need to inspect the goings on off the department. They may attend and operate at exhibitions so that their finger in the pulse allows them to be more impact in determining what will make a realistically marketable impact when working within their department.?

So, how does one go about ensuring that a firm doesn't conform to these rules. Well, primarily, problems are fixed before they begin so long as hiring systems are excellent. Beyond the obvious of 'good hiring and good management,' we consider that firms shouldn't micromanage (as this creates bureaucracy.) Rather, the responsibility lies in the employment of good middle management.?

Upper management ensures middle management doesn't meet the Peters Principle, and proper middle management ensures the corporate machine runs as it should (without inefficiency created by employees.)

It's really as simple as ensuring everyone (rightly) has purpose.

Purpose creates pride in work, which promotes better individual performance, leading to the productivity of departments and profit for the firm.

3.?Eliminating Redundancy:?We have chosen one of many for this, but at this juncture, it will have to be non-funnel R&D.?

The concept of funnel R&D is to focus upon very specific ends in the R&D short term (something resembling full development of prototype) that is a stepping stone towards a larger conceptual goal that tends to broaden as R&D occurs. This differs from the common model of broad R&D in initial stages in aim to refine a latter model to fit the conceptual end one aims for. Through using the more novel former model, firms may have significant cost savings and often a large number of viable products to put to market.

https://youtu.be/w29Ip3eZ6A4

This is what the majority of R&D processes look like. Splaying out and splitting at juncture, creating lines of efficiency where financial allocation appears to be most effective and has the highest potential for yield in reality.?

Unfortunately, we are not quite as efficient as the slime mould, rather, R&D should be done using the funnel method. Rather than funding splaying out in all directions towards the next viable product, it should not be applied to the next stage (and what is has the highest viability at the next stage,) but that which has the highest yield as an end.?

Many consider this counterintuitive, as development of 'inferior' stepping stones is seen as wasted cost that could be used for more important grasps at the final product. We would disagree, so long as the R&D is a cost effective process (as it generally is, dictated by the law of component agglomeration.) Additionally, such products due to their lower complexity make wonderful means by which to generate further profit (via the sale of simpler technology.) Through this some firms may even be able to make their money back on the R&D and potentially even contribute to the further financing of the final product. Again, we will hear those who claim that this isn't a clever move given that it allows other firms to develop technology at a similar pace to your firm. We disagree...with capital spent on marketing for the firm its sold to, as well as the costs that are associated with creating teams familiarity, time lag, the initial firm's sales criteria and the headstart you choose to give yourself, it means that by the time the latter firm has developed anything close, you have brought the more advanced product to market in a cost effective manner (paid for by the firm being sold to.)?

The majority of firms focus on finding a product, and developing it to a high degree at every stage of the R&D process. As certain projects advance more, others are typically put on hold to concentrate funding. We propose that this occurs from the very beginning. Hypothecation of funds towards a narrow focus funnel is often what is best. That is to say, a firm should focus on a very specific end technology or logistics pattern, and then (in the medium term,) only invest towards said end (per allocative portion as broken up by short term platform projects.) In the process, development of interim products should be invested into futher and treated as products in their own right. Funnel R&D is a reasonably new phenomena, but it is often ideal for more financial and risk conservative firms (thus defence firms are ideal due to a higher than average operational conservatism.)?

Our specific end should be conceptual, likely not technological (a common means by which firms restrict their ability to develop good products.)?

In short, utilise funnel based R&D strategy to eliminate redundant spending. This will simultaneously eliminate bureaucratic R&D links, reduce costs and lead to more efficient systems that are superior.

Look at the each means to the end as an end in and of itself...Kant would be proud.

These are some ridiculously basic points, but they go to show the basic nature of addressing these issues. While we can't explain our more signature strategies, and have far better and more extensive solutions than this, for the majority of firms, these simple to implement and easy to understand solutions will do! All it takes for a lot of firms are hobbled together basics in order to really improve operational bureaucracy.

Ever,

EMC