Business Transformation: A Tale of Two Rules

Tuesday, February 21, 2012 | comments

Traditional hierarchical business structure & command control leadership style, and short-term shareholder profit focus business purpose might be based on:
Theory X: In this theory, which has been proven counter-effective in most modern practice, management assumes employees are inherently lazy and will avoid work if they can and that they inherently dislike work. As a result of this, management believes that workers need to be closely supervised and comprehensive systems of controls developed. A hierarchical structure is needed with narrow span of control at each and every level.

The Theory E: assumes economic value is dramatically and quickly enhanced through restructuring — tough, results-driven actions such as layoffs, closing facilities, and reshuffling the portfolio of businesses through spin-offs and acquisitions.

It maybe already proven ineffective since the average life span of Fortune 500 companies has reduced from 75 years to 15 years, and continue shorten to five years.

Here we brainstorm the next generation of business via the following famous business rules & theories. 

The Golden Rule:
  • (Positive form, called Golden Rule): One should treat others as one would like others to treat oneself.
  • Negative/prohibitive form, also called The Silver Rule): One should not treat others in ways that one would not like to be treated.

Modern business structure should be re-invented based on well mix of the golden rules and paradox of Theory Y&X, O&E:

Theory Y: In this theory, management assumes employees may be ambitious and self-motivated and exercise self-control. It is believed that employees enjoy their mental and physical work duties. According to Papa, to them work is as natural as play. They possess the ability for creative problem solving, but their talents are underused in most organizations.

Theory O:  the less common approach focused more on the long term, assumes that developing organization capabilities and culture will ultimately produce sustained high performance.

The perceived social business structure will advocate open leadership/communication, culture of innovation, enable cross-functional collaboration and knowledge sharing, to increase employees’ satisfaction and improve productivity; the next generation of business may also take outside-in approach, optimize business process to delight customers, takes the customers’ shoes on;  the business transformation need be based on golden rule, to unify three business purposes: economic value, social value and people value, via the latest social technology, analytics tools, and gamfication mechanism.

·        80/20 Rule:
Dr. Juran's observation of the "vital few and trivial many", the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto's Principle or the 80/20 Rule.

What It Means
The 80/20 Rule means that in anything a few (20 percent) are vital and many (80 percent) are trivial. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.

Observation on Management Discipline:            

  • Marketing:
20 percent of Customers generate 80% of business revenue.

  • Quality Assurance:
20 percent of the defects cause 80 percent of the problems.

  • Project Management:
Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of their time and resources.
  • Business Transformation is needed:
--IT Budget:
Reality: 80 percent of IT budget goes for “keep the light on” maintenance, only 20 percent of budget is invested in the project for business’s growth or innovation

Transformation: 80 percent of IT budget should be invested in the projects for business’s growth or innovation , only 20 percent of  budget goes to infrastructure maintenance

--Business Synergy:
Reality: At the average organization: 80 percent of share of energy that does not create external value, 20 percent of shares of energy is value-creating.

Transformation: 80 percent of energy is value-creating, 20 percent of energy is for internal support. .

How It Can Help:
The value of the 80/20 rule or Pareto Principle for a manager is that it reminds you to focus on the 20 percent of the things you do during your day, only 20 percent really matter.

Either golden rule or 80/20 rule, the rule of thumb is to delight customers, engage employees and embrace the culture of innovation via revitalizing business structure & change management; no matter it’s Theory X, Y, E& O, it’s better get out of ivory tower approach, blend best theories with next practice and great technologies, to retool business and society.

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