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Occasional thoughts and, sometimes, useful ideas.

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Health Reform or military coup?

Monday, 18 October 2010 21:41

Health reform or military coup - the Solomon Islands in 2000

I found myself in the middle of a military coup in Honiara, capital of the Solomon Islands back in 2000. It was the real thing, gunshots through the roof of the Honiara supermarket around 3 pm, and a lockdown at the training centre where I was trying to teach strategy development to a group of senior public servants. The chain-wire fence did not inspire confidence for its bullet stopping power as we cowered in the masonry toilet block.

One outcome of my visit was one of the most remarkable strategy documents I have ever seen. A plan to transform the provision of health services for the nation was produced by the Deputy Director of Health during the chaos of a military coup.

Two days after I escaped on one of the last planes to leave Honiara, the Malaitan Eagle Force captured the police gunboat and the Prime Minister, using the gunboat to shell bunkers occupied by the opposition Isitaba Freedom Movement guerillas near Henderson Field. Just a week earlier, I had walked into one of the bunkers left behind after WW2, as a tourist. Looking down at the airfield as the Qantas plane took off I felt a huge sense of relief. Just 6 hours earlier, sipping whisky on the deck before dinner with the Head of the Solomons Public Service and the retired Catholic Bishop of the Solomons, I had been worried about the gunfire just over the ridge.

"Don't worry" I was told "They won't shoot at us."

"How do you know?"

"Because I'm a Malaitan and my wife is a local woman." my host assured me.

I did not feel reassured, but another sip of duty free scotch helped settle my nerves.

But what has all this drama to do with a Public Health transformation strategy?

How did I come to be there in the first place?

I was working, taking time out from my consulting practice in New Zealand, to spend 2 weeks in Honiara for Massey University, teaching public sector planning to senior public servants. This was an international aid program that the Massey team had been providing in Pacific Islands for the previous 3 years. It had taken me to Samoa, Tonga and the Cook Islands already. Now I was teaching in the Government Training Centre just above the Parliament House in Honiara. The visit was funded by the Asia Development Bank.

The teaching program required students to prepare and submit a strategic plan and implementation plan to resolve an issue of national importance as their final assignment. Over the years I have seen some outstanding work done by Pacific Island officials, as they set out to rethink government strategy to improve the welfare of their citizens.

The Public Health Strategy

A month later I received a bulky document from the student, George, and browsed the Executive Summary. I was astonished by the imagination and scope of the proposal. It was revolutionary.

The strategy proposed nothing less than a complete reversal of funding priorities for the whole health system. Funding would be shifted from the island capital city (township) hospital, run by doctors, and put into local village health centres run by trained nurses.

George predicted a major political upheaval from the all powerful medical professionals, and set out a strategy to win the hearts and minds of the people, taking advantage of the political chaos unfolding through the nation.

His analytical support for the idea was comprehensive, demonstrating the mismatch between spending on expensive hospitals and the lack of funds for public health for small village communities dispersed on small islands. The inability of hospital-based service to reach the majority of the population was clear. The costing of the new service was thorough and I was persuaded that the plan to achieve the change was feasible.

I marked the assignment A+ and George finished the course with distinction grades.

Did anything happen?

The Asia Development Bank asked Massey University whether there were any strategies proposed by students that should be implemented, and of course funded. My recommendation that they should consider funding the Health Transformation Strategy was a no-brainer.

Massey was asked to submit a proposal for implementation support, which we developed and costed. It looked as if it was going to happen.

Then ADB were forced to abandon the project by the increasing bloodshed on the island of Guadalcanal, and the political chaos. The Solomons' public service had virtually collapsed, and Honiara was marginally controlled by Australian and New Zealand peace keeping troops and police in 2001.

As I sat down to write this account, I researched more recent information from the Solomon Islands, mainly in the form of international aid agencies reports on funding of projects in the Solomons public health sector.

The 2004-5 Health Plan showed a major shift in the allocation of funds between the provinces and the hospital system when compared with the 2000 Plan

"Allocation: National Versus Provinces:

There is commitment to increase level of health activities in the provinces. Fifty-seven percent (56%) of the 2004 HBE is allocated to the provincial health services, whilst 44% is to maintain, sustain and strengthen the national health functions in support to the provincial health services. (Health Plan 2004-5, S6.3.2, Ministry of Health, Solomons Islands.)"

This seems to be lukewarm, incremental approach and not the full-blooded revolution suggested by George. The quality of the analysis supporting the shift bears a marked resemblance to what I was reading in 2000.

I do not find it surprising that this transpired. After all Solomon islanders were grappling with a completed economic and social meltdown, and survival issues were paramount as the national tried to recover.

The final lessons

In all our work on strategy, we learn over and over again that "timing is everything."

Two weeks before the Malaitan Eagles' coup, "ethnic tension" (a polite term for a sporadic shooting war) prevailed but no-one predicted the chaos that followed. George's health strategy was overtaken by events, but there is evidence emerging that it is gradually being put in place, and has the support of influential people.

Good ideas rarely disappear; they often reappear in a different form when the timing is right.

Reform that benefits all the people in any country can take many forms. Armed conflict inevitably creates more damage to innocent civilian populations, and delays the slower changes to whole systems that internal government changes in policy and budgets can achieve. The benefit of a change to the health system of the Solomons will be lasting and will improve the welfare of all the people.

The effect of the chaos precipitated by the military coup has been to delay the process, and to increase the dependence of the people on external aid donors, because of the unintended effects of destroying the economy.

The story of the hare and the tortoise comes to mind. "Slow and steady wins the race."

I hope you enjoyed this slice of real life in far away places.

Lessons from Japan

Honda’s approach to developing managers.
by Michael Taplin

In 1978 my company was invited to create a management development programme for one of Honda’s overseas subsidiaries, so I set out to learn about the Honda culture. My job was to embed the core culture of Honda into a training and development programme that fitted into the local culture. I found it a fascinating learning experience.

I found I was working in a management structure totally different from anything I had previously experienced. The local Managing Director was an expatriate Japanese, presiding over a group of divisional managers who were all local staff. The divisions were essentially organized around product groups, a mirror image of the structure in Japan. Each division manager had a young Japanese assistant whose role was to provide the communication connection with Japan, and to facilitate access into the Japanese systems. These assistants were essentially high-flying management cadets on their first overseas assignments, and they had no executive roles.
The local Honda organization had a permanent queue of people who wanted to join Honda, and would take any job that became available. When they proved themselves capable and motivated to take on more responsibility, they would be promoted to a supervisor role.

Thursday, 09 July 2009 22:24

Do black swans influence marketing success?
Michael Taplin contemplates risk and return from a marketing perspective.

The purpose of a forecast is to help you manage your market risk; primarily, the risk that your sales will be lower than your budget. Few businesspeople worry about sales that exceed budget.

My bizlearn whitepaper on forecasting for product and service businesses included a discussion on discontinuities in trends. This newsletter takes that brief discussion to the next level.

I have recently read a fascinating book “The Black Swan” by Nassim Nicholas Taleb, and it prompted me to think more deeply about what are the real risks we take in marketing our businesses, and how we can manage them better. Taleb examines at length his idea that Black Swan events govern the operation of markets, and the opportunity for super profits or the flip side of the coin, disastrous losses. Black Swan events are the same as what I have called discontinuities.

For thousands of years, all swans were white, or so we thought. Then our forebears explored Australia, and their long-held belief was turned on its head. The present credit crunch is a similar phenomenon. A few economists predicted that overvaluation of global property markets would lead to a major economic correction, but the rest of the world believed that the good times would last forever. In 2008 the black swan flew into view and the collapse has been dramatic. The consequences affect everyone. The fact that it happened before, in 1929 and 1987 did not help us to avoid the disaster. Taleb makes the point that we are bad learners, and cannot predict black swan events,

Discontinuities are like earthquakes; they are unpredictable, and they change the landscape. Trend analysis and trend based forecasts give us no ability to predict the occurrence of an earthquake or black swan event. Living in New Zealand, aka “the shaky isles” we expect earthquakes to occur, when the idea floats to our conscious level, but we live our lives as if the inevitable earthquake will not happen where we live and work. Most of the time we are right, and we blithely ignore the consequences of being wrong.

We run our businesses the same way.

Unexpected events can also be beneficial in business. When a new product happens to coincide with a major shift in the collective consumer imagination, sales take off, unpredictably, and none of our conventional forecasting models help us to predict this.
Successful businesses are the ones that encounter or create more black swans.

Let us examine this proposition from a marketing perspective. Here is an example from my casebook of a black swan, and the story of how we found it.

A small designer and manufacturer of high-class knitwear grew steadily by extending its distribution network. Then the sales growth took off, and because it was not predicted, the business was unable to supply the demand. The next year sales declined back to the long-term trend line.
What happened? Is it possible to repeat this event?
Sales analysis revealed the cause. A single new style took off that year, and supply of raw yarn could not keep pace with demand, Something about the style captured the public imagination, and it became a hot seller. Once the stock sold out, it was a dead product, a dying swan. Demand had been satisfied. Could this have been predicted? The short answer is NO. This is the nature of fashion businesses. It was a black swan product. The benefit was huge, but short lived.
Fortunately the business’ future was not dependent on the black swan product. Sales for the standard product range continued to grow at a steady rate. The question was “How can we create a steady stream of hot selling lines?” “Can we change our product development process to generate at least one a year?”

I now realize that was the wrong question. The very nature of black swan products means that they cannot be predicted. A black swan for the marketer is a serendipitous event; something in the design happens to connect with some unexpected shift in consumer preference.

Perhaps the right question is “How can we increase the probability that we will trip over some more black swans?” or “How can we change our design process to create more opportunity to connect with the public imagination?”

This is what the best small fashion businesses do, and if successful, they become fashion leaders.

Another example, on a larger scale …..

Macintosh, iMac, iPod, iPhone. Steve Jobs.

Each of these words signify a black swan. Apple has lurched from slow decline to dramatic turn-around at regular intervals in its history. Every time it seemed doomed, Steve Jobs engineered the turn around in Apple’s fortunes. The man is a black swan.
But what has he really done. He has created a product development process that consistently, over the last 10 years, has captured the public imagination. You can analyse the elements as much as you like, but analysis will reveal only the ingredients of the recipe. You can buy the ingredients, but that does not reveal how to bake the cake. You cannot buy the creative, intuitive sense of the next big thing that Jobs personifies.

Apple consistently creates products that its loyal customers love, with a passion. Ask them about the ingredients and you will hear words like elegance, style, simplicity, personal productivity, ease of use. Ask people outside the Apple world and they will use words like power, speed, range, capacity, features and all the boring bits.

So, what can you do?

An ideal solution would be to secure the long-term future of the business with products or services that have a steady underlying demand. These are the boring things that customers cannot manage without, even in a recession.
Then you can build a culture in your organization of creativity and innovation, and reward experimentation and risk taking. You can put good ideas out there and hope to get lucky. It won’t happen often, but when it does the rewards are great. But don’t bet the business on the rare hope of finding a black swan. Don’t let the task of achieving your sales budget depend on a black swan. You need to balance the past and the future. The yin of your strategy requires reliable milking of the cash cows in your portfolio. The yang relies on generating a source of new ideas, then picking and backing the one (never two or three) that attracts some intangible element in the consumer psyche, and explodes.

Nassim Nicholas Taleb has applied this to his investment strategy. He recommends putting 85% into the safest, lower yielding securities, government bonds, and the balance into the high risk, high yield investments in the knowledge that wiping out 15% of your capital, in a black swan event, will not sink the business. This is a large yin and a small yang. The payoff for the small yang is so high that the low probability is acceptable. If you have no high risk, high profit investments, you cannot perform better than the conservative average. If you have only high risk, high profit investments the next black swan event will sink you like a small boat in a tsunami.

Is there a business that is good at this?

I suggest that you take a close look at 3M. It is a high performing business that earns most of its solid cash flows from long established products, and constantly backs new business ideas that emerge from an innovation culture that pervades the whole organization. One idea that pervades 3M is “never kill a new idea.”
The best description of this successful strategy I have read is in Jim Collins and Jerry Porras’ “Built To Last”, pp 152-155. I commend it to you.

In summary …..

The tricky bit is to apply this philosophy to a smaller business, with limited resources and people. To do it you need a few people whose heads can work in both spaces, without succumbing to bipolar disorder.

Most small businesses are started on the yang side of the ledger. High risk and high failure rates are the natural territory of the entrepreneur. As they balance the ledger by acquiring conservative yin they become more risk averse. To be high achievers they need a portfolio of internal investment in their future that maintains the 85:15 ratio, and puts them in the way of finding their next black swan product.

It can be done with a limited product range, but it requires conscious effort to build a product strategy that combines the yin and the yang. Without the yang you cannot expect that your black swan products will emerge. You have to have some “skin in the game” to stand a chance of winning.

I suggest you give some real thought to how you can create a product portfolio with the right mix of cash cows and a few prospective “black swans”. But don't bet the business on your yellow goslings!

A Community of Interest
Michael Taplin offers a lesson from his apprenticeship.

Shared interests bind people together to form a community. If we consider an organization as a community of interest we can transform our approach to management and governance of any organization. When we are considering any action we simply ask “How does this serve our community interest?”

An example from my apprenticeship years may help to illustrate the power of this approach. As a young man I was appointed to a directorship of a manufacturing company in Australia. The company employed 250 people mainly from diverse migrant backgrounds. We had people from Italy, Malta, Greece, Lebanon, Turkey, Cyprus and England with a sprinkling of others, even a few Australians. Most members of our workforce spoke limited English, but adopted English as our only shared means of communication. I have never worked in a more culturally diverse organization.

The amalgamation of three independent, purchased businesses and relocation to a new factory created real turmoil. All 250 of us had to learn to work together. Our small management team was focused on important issues like producing goods, looking after customers, and trying to turn a loss into a profit. In August of our first year, our factory manager was approached by an informal group of workers with a simple question “What are we doing for our Christmas Party?”

Our factory manager brought the question to us, and received a blank look. Our response was very simple, “Tell them they can do what they like and we’ll pay for it.” We had more important issues to occupy our minds. Only later did we realize we had written a blank cheque.