August 24, 2009

Economic Counsel from "Cheers'" Cliff and Norm

Economic experts have frequently indicated we should look to the ‘80s for guidance on dealing with current national economic issues. And after coming across a few “Cheers” reruns recently, I think I agree. 

The bar’s resident know-it-all, Cliff Clavin, is often credited with an urban legend called “The Buffalo Theory,” a supposed explanation to his drinking buddy Norm Peterson that included this logic: “A herd of buffalo can only move as fast as the slowest buffalo. And when the herd is hunted, it is the slowest and weakest ones at the back that are killed first. This natural selection is good for the herd as a whole, because the general speed and health of the whole group keeps improving by the regular killing of the weakest members.”

For businesses, relentless competition since the ‘80s has significantly thinned out the herd, and new species of carnivore continue to evolve and initiate pursuit. As a result, key components of survival within “The Buffalo Theory” -- speed, nimbleness and cunning -- are increasingly important to business sustainability. As our competitive environment grows more complex, the answer may be to simply run faster.

Perhaps Norm, who was always more direct and to the point than Cliffy, sums up our then-and-now competitive mentality best: “It’s a dog-eat-dog world out there and I’m wearin’ Milk Bone underwear.”

August 19, 2009

Of Rice and Business Acumen

In his book “Traffic: Why We Drive the Way We Do (and What It Says About Us),” author Tom Vanderbilt uses a rice-pouring experiment to explain the science behind traffic jams. The experiment measures how long it takes one liter of rice, poured two separate times, to flow through a funnel and into a beaker. The first time, the rice is poured all at once; the second time, it is deployed in a “smooth, controlled flow.” Notably, the second pouring is nearly 30 percent faster – just 27 seconds.

Vanderbilt’s point is that smooth, controlled movement gets rice particles, and ultimately cars, through a bottleneck faster, because inflow never exceeds the capacity of the targeted funnel, beaker, or highway lane opening; the traveling bodies aren’t slowed down by the dynamics of too-close interaction or surrounding friction.

The same “smooth, controlled” deployment strategy can prevent organizational logjams as the economy recovers and businesses make investments in future growth. An overly aggressive, “all at once” expenditure on any business resource -- talent, technology, inventory, marketing – can result in overload that muddles productivity. As we make these future investments, Vanderbilt’s 30-percent statistic quantifies the value of ensuring that significant links in the business process chain are prepared to handle the volume.

August 6, 2009

Playing Fluxx with the Economy

Fluxx, the card game with ever-changing rules, comes to mind as I reflect on the policies, initiatives and invasive tactics that have come out of Washington over the past few months. The general public can do little but play the powerless bystander as our elected and appointed officials (with lobbyist influence) proceed with changing the rules on everything from health care and employment to taxes and even purchasing a damn vehicle.

As the government, Treasury and Federal Reserve continue to intervene in the basic building blocks of the economy, it remains challenging to make predictions about the future. Previously, our insight was derived from client private equity funds and owner operators whose business activities served as primary indicators of the direction of our economy. Today, before we can gauge true macro-economic influences, we must wait for the outcome of the myriad rule changes afoot in Washington. For now, all I can say is, “What the Fluxx is going on here?”