Failures and breakthroughs – exposed, reflected, considered

Stark Lessons From The Costa Concordia Disaster

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This is a guest blog by Eve Baxton.

Nowadays, cruise ships are widely regarded to be one of the safest forms of travel, more so than both airplanes and automobiles. Like with all forms of travel however, when an unfortunate disaster does strike, it usually provides stark lessons for the future – prompting new safety procedures, policies and changes in law to avoid the same ever happening again.

Perhaps the most profound maritime example of this was in 1912 with the sinking of the RMS Titanic. Since the disaster, which claimed the lives of over 1,500 people, swift changes were made within Maritime law in regards to passenger safety; namely, providing enough lifeboats for all on-board. An obvious safety precaution it would seem, but human error can still find a way – as the sinking of the Costa Concordia earlier this year also demonstrated.

Around 9:45, on the evening of the 13th of January, the Costa Concordia struck a rock just off the eastern shore of Islo Del Giglio, on the western coast of Italy, tearing a 50 metre gash on the left side of the hull. Parts of the engine room immediately began to flood and having lost power, the ship drifted back towards the shore of Giglio, where it grounded and began to sink on its starboard (right) side (otherwise known as ‘listing’) – eventually rendering the lifeboats on that side unusable. Instead of being evacuated within 30 minutes of the abandon ship announcement (as Maritime Law dictates) it took over six hours for all surviving passengers to make it off the ship, despite the close proximity to shore and calm sea. The disaster resulted in the deaths of thirty people, with another two missing and presumed dead.

Both the captain, Francesco Schettino, and Costa Cruises received heavy criticism for the disaster and loss of life which could’ve been avoided had multiple safety violations not been made and protocol been better adhered to. Like the Titanic, and other more recent maritime disasters (such as the MV Le Joola in 2002 and the MS al-Salam Boccaccio 98 in 2006, killing over 4000 and 900 people respectively) the sinking of the Concordia has prompted multiple changes in maritime law.

The Cause

The sinking was a direct result of the Concordia moving off its designated route, to within 150 metres close of the shore, in a manoeuver known as a ‘salute’ or ‘showboating’, a sail-by for promotional purposes. Most if not all cruise liners perform these manoeuvers, which by their nature have the potential to be dangerous, but are safe if they’re properly navigated. This one however was instead scheduled to take place a few days previous, but was cancelled due to bad weather. It was claimed by crew members that Schettino, deviated from a GPS navigated route past the shore in order to make this salute; which ultimately led to the Concordia’s collision.

Abandoning Ship

With too many of the hull compartments breached with water to keep the ship afloat (in such a way that mirrored the fate of the Titanic) and its sinking inevitable, fatalities still could’ve been avoided. After the initial impact and power had been lost, frightened passengers were told that there had been a power failure and not to worry. Once the extent of the situation was established, passengers were eventually told to get put on their life jackets and to go to their muster stations. However, illustrating the lack of direction and communication amongst the Concordia’s crew, a crew member was filmed telling passengers that all was well and to go back to their cabins, just 30 minutes before the abandon ship announcement was made. When it eventually was, the crew were reluctant to lower lifeboats, almost an hour before the ship began to list making them impossible to deploy thereafter. Consequently many passengers were left stranded on the ship, whilst some made it to shore on lifeboats, others being helped by locals, and others attempting to swim to shore. The captain broke protocol by leaving the ship whilst his passengers were still on-board. The evacuation efforts went on until 4:46 am.

The Changes in Law

Perhaps the most prominent change in maritime law prompted by the Costa Concordia is that all cruise liners must now hold safety drills for passengers before the ship even leaves the dock. Previously, it had to be held within the first 24 hours of setting sail. In the Costa Concordia’s case, this drill was held within the first 24 hours for new passengers, but of the 4,252 passengers, 696 people who boarded the ship at Civitavecchia had not been briefed on safety procedures, with the drill scheduled for the next day. This naturally caused a lot of confusion and panic when passengers were called to the muster stations.

Other procedures under review include the way in which crew take the muster. Amidst panic during an actual disaster, or during a routine drill which holidaying passengers may not take seriously (or pay attention to) the accuracy of calling out names and ticking off lists comes into question – especially on large cruise liners with thousands of passengers. Royal Caribbean Cruises have adopted a more effective method on two of their cruise ships. Both Oasis and Allure of the Seas (two of the largest cruise liners in the world) have a far more accurate method in which the crew scan passenger’s key cards, allowing them to determine who is present in a much swifter, less chaotic fashion. Another possible change is the addition of more life jackets in public areas. With the power cut on the Costa Concordia, dark conditions made it difficult for passengers to go back to their cabins to retrieve their life jackets, more so for recently boarded passengers unfamiliar with the ships layout. Royal Caribbean Cruises again have been quite innovative with their solutions, handing out lifejackets at the muster stations instead.

Countless other regulations, precautions and procedures are also being reviewed, with staff training also being reassessed. The nature of disasters such as the sinking of the Costa Concordia, or even the Titanic, are so often made up of one initial incident, mistake or otherwise, which doesn’t necessarily have to pose a threat to human life. What does pose a threat however is when the correct procedures are not adhered to, or are ineffective, causing more mistakes to be made and turning something preventable into a disaster. Maritime law has continued to push for the highest standards to protect everyone who goes on a cruise, with each (albeit statistically rare) disaster over the years shedding light on areas that need improvement; having a large impact on the safety regulations, precautions and procedures of today. These all serve to protect passengers, whatever the situation. And perhaps it’s because we learn so much from the past that a cruise ship still remains one of the safest ways to travel.

Written by Hayk

November 10, 2012 at 10:22 am

Don’t Fail Your Business – Avoid the Most Obvious Traps

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This is a guest blog by Eve Baxton.

Owning a professional business is a huge responsibility. It involves all the potential risks and traps that are imaginable. According to a survey in 2009 by PrinceWaterHouseCoopers more than half of the enterprises suffered from the economical crimes. In most of the cases, small sized enterprises are the best prey to fall for potential traps around.

These dangers include employees or managers misrepresenting or manipulating the financial information, customers misusing the enterprise’s borrowing in criminal activities and contractors producing false bills. Along with that, other elements exist that perpetrate fraud against the enterprise by electronic means. This includes hacking, manipulating the telephone service and robbing customer’s confidential data, such as credit card numbers or usernames and passwords.

The ultimate quest that should be taken care of as soon as possible, to protect your business is identifying the sources of potential fails. That is not an easy task to take on, for a less experienced businessman. By just considering some basic and yet important things, the enterprise can be easily protected from potential frauds, however.

According to the statistics, the most common reasons for falling into these traps are the lack of experience, commitment, and, most significantly, management. Let’s take a look at the potential traps that most of the enterprises, no matter big or small, fall for.

 

  • The Innocent Employee Trap
    According to the facts, most of the time insiders; employees, managers, or company’s officials, are the main reason for an enterprise to fall and fail. These employees “innocently” steal the assets of the company, and commit accounting frauds. Detecting such actions is vital; it requires a lot of methodologies and commitment to be employed, however.
  • The Clever Customer Trap
    Another hazardous trap that most of the enterprises fall for is the clever customer trap. It has been found that many customers are using fake identities, stolen credit cards, or are filling out fake liability and injury claims to perpetrate the company. All these actions by “the sweet customers” only results in the enterprise’s money being taken away.
  • The Fake Return Scheme Trap
    The most common victims of this type of frauds are retailers. It is the best scam for the clever customer to perpetrate against any enterprise. Most of the times, the customer brings back used merchandise that has not been bought from the same place and tries to return it and get new merchandise under the shelter of the fake return schemes.
  • The Greedy Contractor Trap
    Most companies rely on outside service providers for its survival. Therefore, many of the enterprises fall for the greedy contractor trap. It is not uncommon for the contractor to bill more than the task he has done is worth, and more often even asks for the billing of a task that has not yet been completed. Strong policy, terms, and conditions should be presented to the contractors, before entrusting them with any task, to avoid these attempts, and leaving no room for the contractor to commit such frauds.

 

Protecting Your Professional Businesses

After viewing the potential traps, let’s take a look on the precautionary measures that an enterprise can take to avoid unnecessary fails; these important methodologies can fraudproof your business against its very own employees.

  1. The Method of Anonymous Employee Reporting

Utilizing this method is one of the best methods for detecting the potential dishonesties that can occur within your business; compared to scheduled employee reporting, the violators’ opportunities to destroys any vital fraud traces are severely limited.

  1.  The Method Of Surprise Auditing

Along with the regular, scheduled internal audits, surprise auditing should also be performed in the enterprise, as it significantly increases the chances of detecting potential irregularities, thus making your company more protected.

  1. The Method of External Auditing

Along with the above mentioned methods, this is also a significant tool to determine a potential fraud; it should be held at regular intervals.

 

Business Insurance – The Ultimate Protection

Along with all the above methodologies, the most important step in stabilizing an enterprise is business insurance. It plays an important role in the art of preventing the failures related to undetected frauds. Professional business insurance protects the business from many unexpected frauds, and it enables a recovery from what may seem as a catastrophic loss. Even when insuring your business, you should consider several key factors, however; for your business insurance to be viable for you, it needs to offer an equal protection for any business, regardless of its size, and to provide protection from all sources of frauds and failures. First thing that comes to mind is protection from theft. Theft is the most common and uncontrolled source of assets loss that occurs in most enterprises internally and externally, making insurance without theft protection almost useless. Protection from litigation is another important aspect; while unfounded law suits from wealthier competition are likely to turn out in your favor, the costs before you prove your innocence can cause your business to fail, so proper insurance has that covered. Protection from unwanted liabilities provides you with protection, when the assets, coming from your company, are used for any illegal activities, which is not a rare occasion with internal frauds and thefts.

It’s your responsibility to implement a fraud proof protection method, that suits best to your enterprise’s needs, properly. All it requires is some commitment and dedication towards the business; no matter how malicious the fraudster’s aims are, you can stop your company’s fail before it’s to late!

Written by Hayk

October 30, 2012 at 6:29 pm

Personal (almost-fail) story: what climbing can teach about life and business

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Let me start by stating the obvious: humans are irrational.

Let me give just one illustration of our irrationality. Climbing. Why do we climb? Some mountains have picturesque and pleasant landscapes, forests or flowery fields. Some happen to have spectacular views from top when weather conditions allow. Apart from those few – and they are in relative minority – serious mountain climbing (anything above 4,000m and even many lesser ones) implies significant effort and investment; rewards, i.e. the usual goals of reaching the top and view from the top, are usually less than what we expect.

How do I know? I climbed a number of peaks in European Alps including the highest one in mainland Europe, Mont-Blanc. And only few weeks ago, I came back from Tanzania, where I climbed Kilimanjaro.

Kilimanjaro, consisting of three volcanic cones, is the highest mountain in Africa and the tallest freestanding mountain in the world, rising 4,600 meters from base to summit. Of three volcanic cones, Kibo is active and can erupt again any time (most recent volcanic activity registered 200 years ago). Kibo’s peak, Uhuru (“freedom“ in Swahili), is the highest (5,895m) peak of Kilimanjaro. Climbing Kilimanjaro is easy and requires no technical climbing or mountaineering experience, the biggest challenge being body’s ability to acclimatize to its high altitude. Unsurprisingly, most fatalities are caused from improper acclimatization and altitude sickness rather than falls. Only an average of 70% of climbers ever make it to the top.

Many who climbed Kilimanjaro will tell you one thing if you ask them about the experience: the last day ascent to the peak is rough (by any of the routes) but quite unrewarding in terms of view as once you reach around 5,600m height, it almost flattens (at least via Coca-Cola route). For the remaining 300m or so, it feels like walking in a field with occasional boulders on the way. The only way you know you reached Uhuru is when you see a green plate that says you reached the top of Africa.

My guide Loi (who has nine years of experience climbing in Africa) and I started off almost the last ones from the Kibo base camp. Sunrise was still far off, and I didn’t feel much delight or happiness. I felt cold (temperature hovered between  -15C and -20C), exhausted (our cook forgot to put with us food) but nonetheless satisfied.

So, why do we climb? To me – and to the alpinism greats such as Reinhold Messnerclimbing is a way to create oneself, explore one’s boundaries and uncover ones hidden characteristics. This claim is not only valid for individuals but also companies (especially startups), as their activities and vision can easily be paralleled with a climb towards their own “peak.”

That last leg from the Kibo base camp (about 4,800m) to Uhuru peak (5,895m) is the most testing part of the trip for anyone. The ascent usually starts at midnight. Many don’t even make it out of the Kibo base camp as altitude sickness, nausea and headaches sent many aspiring climbers to toilettes and kept them huddled inside their sleeping bags. Once started, climbers face a steep (450) slope of slippery pebbles and sand. Guides impose a snail-pace on climbers because of steepness of the slope, high altitude, low (between -5C and -10C at Kibo the base camp) temperature and whipping winds. The normal speed on that slope is about 500m/h (distance covered by walking up, not altitude). Trying to go faster usually results in panting, nausea and exhaustion, as 5000m is the altitude at which the density of oxygen is twice as less as at level 0, and it is impossible to breathe only with nose as the inhaled amount of oxygen is insufficient (either you breathe both with your mouth and nose or you can take tablets of Diamox which increase oxygen intake and circulation in bloodstream).

Despite the adapted snail-pace, Loi and I started overtaking many small groups. Normal practice was of walking for 15-20mins and taking a short break, allowing the body to acclimatize and rest. During the first three hours, we took only two short breaks, one when I had to take off a pullover which was making me sweat, and second when Loi needed to take a piss. We “raced,“ as one English climber described while he and his guide tried to keep up with us.

From the beginning, I was being drained of energy fast, not least because I was burning lot of energy breathing with my mouth and nose. Realizing I was loosing much energy, I tried to minimize all distractions that could result in further energy lose. Many climbers were constantly looking up or down, checking out how others were doing and spying for any potentially nice view, although it was dark and thus nothing much to see. One could also hear climbers talk to each other, as they were tightly lined up one behind another and walking up slowly. While talking wasn’t in itself a bad thing, it consumed energy. Loi and I neither looked around nor talked much before reaching the first milestone, Gelman’s point (about 5,600m).

That relatively short slot of slope between 4,800m and 5,600m was the most trying for me (and I guess for others as well).  As I had too many layers of clothes on me from the start, I started sweating profusely barely 15mins into the ascent. Our first stop was when I had to take out a layer of clothing, already wet. The feeling of cold from inside never vanished, while I was struggling with my bleeding nose and dry mouth, inhaling as much air as possible. My eyes were set on the feet of Loi who was few centimeters ahead of me. Without realizing it, we overtook all other groups and our longest break – 10 minutes – was shortly before the Gelman’s point. I was utterly exhausted, and at this point had to have some hot water and energy food (cooks usually put Snickers, pieces of chocolate, peanuts or any other energy source and a thermos with hot water). Realizing that our cook forgot to put any provisions with us, Loi dug up four small cookies from his pocket. I had two. Exhaustion didn’t diminish because cookies didn’t help. Once we reached Gelman’s point, we realized we didn’t have much time before both of us became inexorably exhausted. We marched on. Our ascent became increasingly difficult as the temperature dropped even further, and winds became even stronger.

We had to stop every 10mins for a breath. When we reached the second milestone, Stella’s point (about 5,700m), I sat on a piece of rock and was ready to lay down there and then. By then, I stopped feeling cold – all I wanted was to put myself in a horizontal position and close my eyes. Loi realized that we had to move on, otherwise we would freeze to death on that altitude. With an enormous effort of will, we continued to march on. The whole ascent was turning into a rough test of my physical and mental stamina. I became so drained of energy that 15mins before we reached the summit, I dropped onto a piece of rock and was unable to move. Loi, realizing how difficult it became for me to continue moving, try to give me psychological boost, promising we had only 15mins to reach the summit.  I had to force myself to stand up and walk. Last few hundred meters, to give myself more confidence, I started loudly saying to myself “Hayk you can make it; focus on breathing and putting one foot in front of the other and you will make it.“

About 15mins later, upon seeing a green plate a few dozen meters ahead, I asked Loi what it was. At that point I was already having hard time uttering words. Loi turned to me and responded, “we still have another 5mins.“ Luckily, he was joking – to me didn’t seem funny at all at that moment. He came up  and hugged me congratulating and saying we did it. I slumped onto the pedestal on which the green plate was planted, claiming we were on top of Africa. I sat down with my back to it. Loi asked for my camera, which was in the pocket of one of my pants. I refused. He insisted – I again refused. I told him if I as much as unzipped my pants, exposing even a tiny bit of my body, I would freeze to death. He took my two hands in his hands, only realizing they were almost limp. He didn’t insist any further.

We promptly started the descent, without taking any pictures or getting a good view from the highest point in Africa. It was cold (between -15C  and -20C) and dark (5am – sunrise came about 6am), and we had to make our way back despite a perceived impossibility of walking further. Shortly after we launched ourselves back to the base, I realized something. There was no one at the peak when we arrived. This meant that we were the first to arrive to the peak. This thought had a much-needed psychological effect on me. Although we started out late and didn’t revitalize our energy stock due to absence of food and hot water, we made it to the top and did so faster than anyone. This thought gave me much-needed force for the way down.

It was only after we passed Gelman’s point and found ourselves on the steep slope that Loi got me to take out my camera and take a shot of the two of us, still in darkness, dead-tired but happy. He was no less exhausted, but having climbed Kilimanjaro extensively during the last nine years, he was bearing it better than me, my last significant ascent (with some funny adventures on the way down) being 11 years ago on Mont-Blanc.

We made it safely back to the Kibo base, and I had a serious talk with our cook whom I told we almost didn’t make it because of his negligence. As we continued our descent from the Kibo base, we met many climbers on their way up who would ask for advise and tips. We invariably warned them about the last leg and necessity of having energy food and hot water.

Now back to companies. Their ”climb“ is interesting and usually more challenging at the beginning of their existence, or in what we call a “startup“ stage. It is at this stage that many companies create or find their core around which the later growth cristalizes. It is at this stage where many of startups stumble, fall and never recover. Startup stage of a company is thus essential, and it is important to understand how to ”climb” it in order to attain the stated goals and vision.

By an interesting coincidence, I happen to work with a visionary and ambitious startup called Jornal @Verdade. Founded in 2008 by a budding entrepreneur Erik Charas with a grand vision of changing the way information is created and shared and ultimate goal of changing the hearts and minds of Mozambicans, this news agency focuses on grassroots aspects of social and economic development. By having its main target group of readers amongst the most underprivileged and dispossessed, @Verdade offers information, education and aspiration to those who would otherwise go without.

Drawing parallels, equally applicable to individuals and startups, below is what I learnt – and advise others to apply – from both climbing and being exposed to startups in Africa:

  1. When setting up for a journey or a goal, it is important to have an objective which is far and high but attainable;
  2. Once the goal is set, break it into stages (and corresponding mini-objectives in each stage) and stay focused on mini-objectives in each stage;
  3. After reaching each mini-objective, acclimatize yourself or, in other words, get used, to it before moving on – moving on too quickly might become harmful and counter-productive;
  4. When setting up for a goal, know what to have (skills, equipment, etc.) and take with you for each specific part of the trip and leave behind what is NOT necessary;
  5. Ask advise from those you meet along the way, and especially value advise from those who have already “made it“ (to the peak or reached a goal);
  6. The ascent’s objective is its final destination or goal, but having fun and benefiting from the ascent itself (by attaining and rejoicing each mini-objective) is as, if not more, important at each stage than reaching the final destination.

In merely four years, @Verdade became the most read and known newspaper in Mozambique. And while it continues plunging upwards, it has still a long way to go. Its ascent is steep and it has all the currents (political, economic and social) lined up against it. It continues to move on and, at times, like any other human being or startup, needs an encouragement and support as it stumbles and falls. @Verdade’s strength resides in a strong belief of its staff in the value of what @Verdade set out to do and its resolve to achieve every stage of the set goals. It is this relentless drive towards its goals coupled with immeasurable attention and consideration it gives to its target group that will eventually result in realization of its vision.

I believe in @Verdade’s vision and I hope soon all Mozambicans join us in our belief, turning this country into a place they would like their children and grandchildren to grow up and live in.

Failures, confusions and uncertainties pop-up around us at one point or another in all aspects of our lives. They push ourselves towards our limits. They make us discover and re-create ourselves, whether in professional or personal pursuits. They makes our lives worth living.

Written by Hayk

September 29, 2012 at 12:38 pm

Save Yourself From Auto-loan Frauds

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This is a guest blog by Eve Baxton.

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In December 2011, nineteen suspects were arrested in New York. These suspects were part of two fraud auto loan schemes. They used straw buyers, with good credits, to purchase luxury cars like Mercedes and Porsche under these schemes.  These cars were then rented out to criminals and were used for various crimes. The auto loan fraud, therefore, was found to be linked with serious crimes like the double homicide of two Nigerian nationals. The straw buyers were left with bad credit and were sued by various banks due to unpaid loans and parking tickets on cars, which only apparently belonged to them.

How Can You Avoid Such Scams?

If one wants to avoid an unfortunate fate, similar to that of the straw buyers above, while financing a car purchase, then one should undertake the necessary precautions. Opting for a credible car finance scheme is the most important precaution that must be taken. The reliable car finance scheme is simple and requires no deposit and no fees.  A personal finance advisor is also assigned to enhance efficiency and to avoid troubles. Moreover, cars can be bought from any dealer under this scheme. Such a scheme is bound to prevent auto car frauds due to its simplicity and reliability.

Five Car Buying Mistakes People Make:

Not all car salesmen are deceiving. However, one is likely to run into fraudulent salesmen if thorough research is not done. It is easy to be misled by the loan schemes and the convincing power of the salesperson’s reasoning. Five big mistakes that result in a disastrous car purchase, are listed below:

  1. Credit misinterpretation: Many car dealers classify their customers as ‘not eligible’ because of their poor credit score. The customers do not realize that this holds true only for those with unpaid bills or who make payments well after the due date and that their credit score is not that bad at all. The customers are, therefore, made to pay high interest rates which make car purchase greatly difficult and uneconomical.
  2. One transaction: Many dealers compile the three transactions involved into one in order to make money. The customers, therefore, pay more than what the car is actually worth, when not paying attention to this trick.
  3. Unending installments: Some car dealers attract customers by lowering the monthly installments. The customers do not realize that the dealer manages to stretch out the period of the installments by using such tricks. Rather than going with the price, they can pay for the car, customers make the big mistake of going with the payment they can make monthly. Such tricks lead to money making for the car dealers and great money loss for the buyers.
  4. Changing the deal: Some car dealers give the following news to their customers: the financing fell through. The car dealers skillfully use this trick to change the deal and make the customer opt for a more expensive car. Customers who do not have their financing in their hands fall easily into this trap.
  5. Additional funds applied to cars: Some car dealers are given cash incentives to sell certain car models. In some cases, the car dealer might apply such funds to the car. Customers who do not research such funding provided on the car they want to purchase, therefore, pay a higher price for the car.

Car dealers misrepresent information and are able to skillfully misguide uneducated buyers. Customers who are assertive are likely to find and identify the tricks involved. Everyone buying a car should know the car they want to buy and the financing alternatives they have. Not all car dealers are dishonest, but care must still be taken. Making mistakes like those stated above effectively lead to a big car financing failure.

Educated customers are those who perform a thorough research before heading out to the dealer. Make use of the extensive knowledge on the web and compile a list of car buying tips. This will certainly help.

Auto loan frauds have unfortunate consequences. They only lead to a never ending loan, a price which the car is not worth, and a high interest rate. One can do better by avoiding such fraudulent car financing schemes which only end in disaster, and opt for reliable and credible financing service, such as CarLoan4U.

Written by Hayk

September 29, 2012 at 12:18 pm

Failure parallels between Mao Tse-Tung and Facebook

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What do an alleged 70 million death of Chinese population in peacetime and an online social network boasting 955 million members have in common? While Mao’s life and work were considered inspirational at the time, so is modern phenomenon Facebook sweeping domains and redefining frontiers of science, culture and technology. And there are some parallels that can’t and shouldn’t be ignored.

1) Put appearance and rhetoric of doing things for public good while in reality following his/its own agenda

  • Mao: Mao got into the Long March in 1934 not due to any ideological reasons. He was sick and was going to be left behind by Communist forces under the pursuit of Nationalists because of his activities undermining communist goals and his disobedience to orders from the Soviet Union. A combination of putting an appearance of a patriot fighting for the communist cause and a trickery of positioning himself at the point where the Communist army was to exit from, he managed to get himself picked up by the army, soon passing through a bridge, which bore him into the history.
  • Facebook:  The most valuable asset on Internet is data. User data, to be more specific, as it can be used (in some cases sold) for conducting all kinds of research – it’s invaluable for any organization that has part or all of its customer base online. Facebook has been introducing number of usually unpopular privacy setting changes that, for most cases, used its member information for its own agenda. A telling sign is its recent change of replacing the word “privacy” with “data use.”

2) Decisions are taken unilaterally and without concern for those affected – and when it goes out of control, some measures are taken in guise of public appearances and apologies

  • Mao: Mao, in the framework of his “Great Leap Forward.” ordered the nation to make steel. He made a target of 10.7 million tons of steel (as the previous year’s output was 5.3 millon tons, Mao asked his metallurgy minister whether that could be doubled for current year. The “yes-man” obliged). Steel mills and related industries like coal mines were ordered to go flat out to speed up the production. Rules and common sense were cast aside. Equipment overworked to the point of breakdown. In first few months alone, 30,000 workers were killed in various accidents. Realizing, the existing mills wouldn’t be able to meet the target, Mao ordered the nation to build “backyard furnaces,” which some 90 million people were forced to build. To feed those furnaces, the nation was coerced into donating virtually every scrap of metal they had including farm tools and even kitchen utensils. By the end of 1958, the target of 10.7 million tons was reached, but only 40% of which was good steel (all produced by mills). Estimates put death toll of starvation and overwork during the Leap (which lasted 4 years) to about 38 million.
  • Facebook: Not only it has been playing with privacy settings of its members in order to gain and retain user information, Facebook has also been, rather quietly, granting access to all kinds of user information to 3rd party applications. As its business becomes more and more app-oriented – unsurprisingly so, as apps account for 30% of its revenues for the moment – Facebook has been making changes, that would grant a more seamless, easy access of user info to apps. Check this post for some details. With subtle design changes, it went, for example, from a two-button procedure of granting (or not) access to that of one-button. You click an invitation from a friend and, unbeknownst to you, end up giving access to the app to gain your information. Or that in old design Facebook explained what sort of information an app could use. No longer so. Facebook, considering much past opposition to measures less significant for usage of member information, unilaterally decided to introduce changes that would benefit its bottom line. And last but not least, “We’re going public for our employees and our investors,” as Zuckerberg wrote in his IPO letter. Translation: we don’t care about our customers/members – we go public so our employees get the share of our riches and our investors feel satisfied.

3) No care or thought about needs and aspirations of subjects/members

  • Mao: On Feb 27, 1957, Mao delivered a 4-hour speech to the rubber-stamp Supreme Council announcing that he was inviting criticism of the Communist Party. The Party, he said, needed to be accountable and ‘under supervision.’ He sounded reasonable criticizing Stalin for his ‘excessive’ purges, and giving the impression there wouldn’t be any of those in China. In this context he cited the adage, “Let the hundred flowers bloom.” Few guessed it was a trap setup to invite people to speak, so that he could use what they said as an excuse ti victimize them. His main target were intellectuals and educated, those mostly likely to speak out. Most of criticism never reached public. Instead, Mao drafted a secret circular in which he branded between 1% and 10% of ‘intellectuals’ (those who spoke out amounting to about 5 million) as ‘Rightists.’ Denunciations, labor camps and executions followed.
  • Facebook:  Among other unilateral and unsolicited changes, Facebook decided to not only introduce its own email system, but silently replace members’ emails with its own @facebook.com email (only noticed by bloggers during a weekend). The step could have been well accepted, it Facebook took care of showing consideration of its members’ opinion or warned in advance. Backlash followed. Or its previous changes to News Feed, which ushered in a plethora of groups/videos with a theme “Change Facebook Back to Normal.”  As an example, Facebook group and a video demonstrating how to change it to normal are still up.

4) Everything can be and is sacrificed for achievement of set goals – no morality or etiquete or qualms

  • Mao: In 1953, Mao proposed a program to industrialize China. His obsession was to enter the league with Soviet Union and the US in economic terms. At that time, he was told that the program could be completed in 10-15 years. In 1957, celebrating the 40th anniversary of October, Khrushchev presented a target of surpassing the US in 15 tears. Mao was inspired and claimed China could surpass the UK in 15 years. And as China was already getting nuclear other cutting-edge technological help and knowhow from Soviets, Mao was told in 1958 that his industrialization program could be completed in 5 years instead. He fancied he could achieve this in one big leap, calling it “Great Leap Forward.” It boiled down to excessive food production and extraction from the people. Mao was squeezing his nation to produce fantastic amounts of food (grain, rice, pork, etc), which was exported in exchange for technology. Food was also used as a raw material for the nuclear program. Grain, for example, was turned into pure alcohol and used in missile tests, each of which consumed about 10 million kg of grain. Mao thought to industrialize form within by ordering construction of irrigation systems (dams, reservoirs, canals). Starting in 1958 for over 4 years, about 100 million people were coerced into such projects, and as he wanted instant results his slogan was “”Survey, Design and Execute Simultaneously.” Results are not hard to guess.
  • Facebook:  As Facebook moved ahead with its fresh design, it didn’t forget to, without asking opinions of members, make it easier to access the past activities with introduction of its Timeline. Timeline is conceived with ads, sponsored stories and marketing data gathering to be much easier, i.e. playing a hand for Facebook’s bottom line.  Launched in September 2011, Facebook’s Timeline claimed to be the online book of members’ lives showing events on a yearly bases. Initially, Timeline was an optional feature. But once accepted, there was no going back, which suggested the imminent (and permanent) nature of the change. By the end of January 2012, not content with the fact that many of its members still preferred the older design – Sophos’ polls showed about 52% worried about and only 8% liked Timeline – Facebook simply stated that in a week time everyone will have a Timeline. A flurry of petitions, anti-Timeline groups and a lawsuit ensued.

Let me be clear. I am not a hater of Facebook. I have a special admiration for Mark Zuckerberg and for Facebook. I can’t however discount all the above developments nor the logic of how Facebook advances towards its claimed goals and objectives.

I only wish that Facebook becomes more open, transparent and forthcoming, and what’s more important, more considerate towards its ever-increasing member base. If not, then, as the saying goes, “the higher you climb, the further you fall.

I bet many would hate to see Facebook fail/fall – as Mao fell.

What is traditional consultancy and why it mostly fails

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What is consultancy and is there a value in it?

The truth is that only a comparatively small number of consulting projects seem to be successful. Either consultant recommendations fail at implementation phase, or don’t even survive reality checks. In the worst of cases, these have disastrous consequences for the organization. As Ferdinand Piëch, the CEO of Volkswagen, famously said: “If you want to ruin a company, you only have to try fixing it with the help of external consultants.

Story of Bag, Borrow or Steal, one of the first online sites allowing rental of expensive items (from several days to months) comes to mind.  In securing venture capital, a consulting firm was brought in to take the company to next level. It recommended that, in order to attract a more high profile customer, the company change its name – the very name that, in addition to being instantly recognizable and very descriptive of the nature of the business, was also forever immortalized in the movie Sex and the City. The new (proposed) name was Avelle, thought by the consultants to sound more luxurious.

Following the consulting firm’s advice, the end result was lost sales as loyal customers became confused by the name change and the brand equity built into the original name was lost as people wondered who the heck was Avelle.  Top executives of BBS were fired and the company returned back to its original name.

BBS is far from being an exception, nor are consultancies only amateurs. Take McKinsey, one of the best of the breed. Its advice led GE to loose $1 billion in 2007 and Swissair to its bankruptcy.  The list of McKinsey screw-ups is long. And if that is the best of the best, it is easy to imagine what other consultancy firms are up to.

Some estimate that about  80% of all consulting projects fail.

Usually, the traditional consultancy firms are called upon for the following reasons:

  1. Political leverage: CEOs that want or need to make an unpopular decision often bring in a consulting firm to help.
  2. Pool knowledge across functions: In large companies, cross-functional problem-solving rarely happens. Just getting different functions in a room typically unlocks creative problem solving.
  3. Pool knowledge across levels: Consultants interview, watch, and tag along with people down the organizational structure, often starting with customers and moving through sales and up. Top management of a company rarely does this. There are tremendous insights to be had by doing this.
  4. Deep focus on one problem.
  5. Consulting firms have access to way more data.
  6. The ability to structure a problem and to approach the task of identifying a solution in a methodical manner.
  7. A totally unbiased opinion on the topic.

The few studies that one can find identify several reasons for failure, which fall into four groups: personal characteristics of consultants, technical shortcomings of proposed solutions, problematic client–consultant relationships, and socio-political aspects of the client organization.

The underlying reasoning of how consultancy works, is valorized and perceived in what Heinz von Foerster called “trivial machine model.“

A trivial machine model logic of traditional consultancy is that it happens between two parties, consultant and client brought together for working on a certain project, and that consultant possesses more experience/knowledge/expertise and can more or less clearly identify a problem and propose a solution.  The focus is on analyzing and bridging the gap between the consultant’s body of knowledge and skills and the requirements of the client.  Assumptions here are that client information (especially related to weaknesses, problems or any issue that requires an external consultant intervention) is readily available, comprehensive and understandable. It is also assumed that the consultant can freely and efficiently access this information, understand it and process it.

In reality, however, it’s impossible for the client or even the consultancy to arrive at an “authentic” problem description.

The traditional consulting model is not only linear and simplistic but also not realistic, as social factors (social interconnection, interaction and environment in which the consultancy and the client operate) are largely ignored. These factors are essential – decisive in make-or-break of a project – to consider in what von Foerster described as “non-trivial machine model.“ A significant factor that must also be considered – this has to do with the “no one wants to rock the boat” psychology – is that consultants usually don’t feel comfortable telling (and thus don’t tell) to the top management of the client that some processes/structures are not optimized/performing; nor does the client’s top management feel good to have consultants come and tell that they are not doing well (in some cases consultants are dismissed/fired after having implied, in their recommendations, any wrongdoing or suboptimal performance/intention on part of the client’s top management).

Niklas Luhmann, German sociologist famous for his social systems theory, picked up and applied von Foerster’s theory (of trivial and non-trivial machines) to social systems. According to Luhmann, communication is the most important part of any society. All social relations are conceptualized as processes of communication – communications that connect to earlier communications and that call forth further communications. The crucial point is that this communication process takes place relatively independently of individual human beings involved. According to his theory, although communication cannot be effected without the involvement of human beings, the particular development of the communication process is beyond their control.

For example, the same word “yes” might be understood as signaling a confirmation, a doubt or even a rejection (if interpreted as irony). Thus, the meaning of a message, i.e. the concrete communication, is not produced by the speaker but by the listener.

Applying Luhmann’s theory to the social context of consultant-client, we need to differentiate three systems: consultant, client and communication media. The theory suggests that any intended consulting intervention becomes impossible right from its beginning. Following Luhmann, the only reason for the employment of external consultants is the possibility that the client’s systems (internal/external processes, operations, information flows, etc.) get perturbed/“irritated”. However, not all (consultancy) interventions cause such a perturbation, as this is only decided by the client system itself.

This model is more comprehensive, as it includes all considerations of the linear/traditional consultancy logic but also social factors. When determining whether to employ or not a consultancy, the only possibility for clients is to observe and decide which consulting firm has the most potential to perturb its systems. Finally, the stage of evaluation becomes redundant as there is no content or objective to evaluate, and nobody is able to evaluate the degree of perturbation.

All of the above is not to imply that consultancy practice is futile and needs to be discarded with. Even traditional consulting projects can and do sometimes have positive effects for clients, but usually in a different way than intended or planned. Rather than transfer some kind of knowledge, consultant firm should cause (via the communication system) perturbations in client systems that trigger positive changes in its processes and structures, which otherwise might not have been achieved.

The prevalent trend and common thinking (by clients and consultants) is to attribute any success of a consultancy intervention to a consulting firm. This, as it should be noted from above, is misleading and factually wrong. All change, as also for humans, needs to come from within, whether triggered from without (consultancy intervention) or within.

There already exist “systemic consultants,” unsurprisingly mostly in German-speaking world, including Königswieser & Network and OSB international.  As can be seen from client testimonies of the former and project descriptions of the latter, the following activities are commonly practiced by systemic consultancy firms:

  • organizational development and transformation
  • restructuring and change management
  • strategic assessment and revision
  • systems diagnosis and analysis
  • …etc..

Services above are not very different from what traditional consultancies offer. But, they shouldn’t be as an organization has a strategy and an objective, etc – nothing new under sun.

Three points that are different between traditional and systemic consultancy practices are:

  1. Mutual ownership of the client’s project: traditional consultancies position themselves as experts in terms of knowledge/experience and usually have a more “dictatorial” and outsider approach of “what needs to be done,” whereas systemic consultants come in as an unbiased party that co-owns the client project, trying to add value with their tools/methodologies.
  2. Social and psychological factors fully weighed: psychology of clients, their top management, framework of social interaction and cultural factors are all heavily considered; also subtleties related to message creation (by consultancy), communication and perception (by clients) are of paramount role as well as analysis of  (a perceived) problem and suggestion of possible solutions/improvements.
  3. Education, assistance and support: in most cases, systemic consultants act as educators – this is usually in the face of traditional consultants who think that educating a client might diminish a future chance of being employed by that client; as apparent from many client testimonies, systemic consultants offer assistance and support in vital issues such as drafting organizational strategies or HR incentive systems, etc; systemic consultants also educate their own teams in the client context.

apple and judiciary of cool

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It was perceivable that “to Google” became a verb synonymous with “to search;” but it might’ve been difficult to forecast a judiciary ruling on the concept of coolness.

This happened unsurprisingly in a judgment involving Apple, which brought the case alleging Samsung’s Galaxy Tab 10 infringed its iPad design. British Judge Birss disagreed saying Apple’s designs weren’t being infringed because Samsung’s product was not as “cool” as the iPad.

This can be watershed in jurisprudence.

Originally, in a 1997 article, Gladwell wrote about the group of people he called coolhunters who scoured American cities to find out what cool kids thought about sneakers.

Written by Hayk

July 14, 2012 at 8:45 pm

Posted in business, innovation, technology

Tagged with , , ,