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Symbiotic strategic thinking – combining aquaculture and hydroponics

October 4, 2010 By cicpartners Leave a Comment

New businesses often come from simple ideas, and after the fact we wonder why we didn’t think of that earlier. the 28 September International Herald Tribune has an excellent example of this in Fish Farms, with a Side of Greens.

It explains how aquaculture and hydroponics can combine to make more than 1+1=2. As they explain, “Aquaponics — a combination of aquaculture, or fish cultivation, and hydroponics, or water-based planting — utilizes a symbiotic relationship between fish and plants. Fish waste provides nutrients for the plants, which in turn filter the water in which the fish live. Cuttings from plant are composted to create food for worms, which provide food for the fish, completing the cycle.”

This caught my eye because it shows incredibly simple solutions that are ingenius. This one is especially valuable because of the scarcity of water in many countries. I guess the analogy is the sea reef but with the added benefit that the “reef” (the vegetables/greens growing on the surface) as well as the fish can easily be converted into food.

We must ask ourselves how many times in business we have identified the aquaculture solution or the hydroponics answer, but not the interdependency/benefit of the two together. At Faculty Partnership we try to use what we call generative thinking to test out all ideas and think of other ones that we can’t think of ourselves. It means having a range of people with different ideas and interests thinking together and using some techniques to get folks thinking laterally and vertically.

Hopefully the results from work on more basic issues can gain inspiration from what is occurring here with aquaponics.

Filed Under: Intelligent strategic thinking, Securing the benefits

Challenging conventional budgeting wisdom – UK Policing

September 7, 2010 By cicpartners Leave a Comment

I recently delved into a report on UK policing to see what others are doing regarding identifying “Best Value”. This report comes HM Inspectorate of Constabulary (HMIC) and can be found at HMIC Value for Money Inspections. A summary of the report is as follows: “HMIC’s report, ‘Valuing the Police’ shows that only 11% of the police are visibly available to the public, despite year-on-year increases to budgets for the last 40 years. HMIC warns that with looming budget cuts, the availability of the police to the public will be even further reduced, unless there is a total redesign of the police.”

Thus conventional wisdom says a cut equals a reduction in front-line service (the 11% referred to above). With the incredible baseline of data that is available in this report (a mere 2,600 pages) I’m guessing there is a way to redesign the work such that the 89% is readjusted rather than the 11%. Hats off to someone for doing the groundwork that let’s someone challenge conventional wisdom if they choose to do so.

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Musings from a private sector guy doing public sector work (tax policy)

September 7, 2010 By cicpartners Leave a Comment

I do a fair amount of work now in both the Private Sector and the Public Sector. The mantra of private sector work is to fix things that need changing. With the Public Sector, it is sometimes difficult to figure out what needs fixing. Everyone has an opinion – more of this, less of that. Politics is always front and center, but this is at the expense of our economic health. Deep in our gut we all know that tax policy needs fixing.

What we might consider is stepping back and starting over. Ross Douhat in the New York Times said that “The problem is not that we tax high-rollers too lightly, it’s that we subsidize their irresponsibility”. How true this is. We have a system where we use tax policy to encourage behavior but this has side effects. A few examples:

- Deductibility of mortgage interest in the US encourages people to buy more house than they can our should

- Farm subsidies – why are grain crops heavily subsidized and beef isn’t

- Tax preference for debt versus equity based on tax deductibility of loan interest

- Investment tax credits, once started, never go away and encourage continued development of what eventually become sunset industries

I could go on, but my point is that a truly efficient market can help us make these allocations. The best example of this is with income and tax. Currently the most highly taxed income is salaries and wages. Why is that work more highly taxed than that which comes from dividends and interest or capital gains?

Having the same tax regime for all types of income and expense will encourage earners, savings, investors, and manufacturers and so forth to make decisions based on the merits of the case. This can be a progressive system, e.g., the progressive flat tax (say 10%, 25% and 35%), but it will be one that is based on good economics rather than good tax strategy.

It would certainly be interesting if debt didn’t have such an attraction from tax deductibility that it encourages folks to leverage themselves to their maximum and often beyond.

There are probably many flaws in this logic, but we do need to remind ourselves that the current system doesn’t work and if something doesn’t work, we owe it to try something new. Do we really have the courage to let the markets work to the greater benefit of us all?

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Putting the share back into Shared Services

September 7, 2010 By cicpartners Leave a Comment

Synopsis

There are multiple methods for assessing the current position of one’s business entity. We have written separately on FAST Benchmarking, the external perspective on current position. In this case study, we review the internal perspective through the eyes of our work with a luxury goods manufacturer and retailer.

Despite the fact that our client was already quite streamlined, the systematic approach we took to understanding cost drivers and identifying solutions led to an 8.8% cost improvement on a £3.4m cost base over the 10-week duration of the project. The client’s conclusion was that “lean and mean” can become “leaner and meaner” but it took an outside pair of eyes to know where to go to get there.

Background

Competition today may be tougher than it has ever been – it may be the economy, deflationary expectations, desperate competitors, market leaders. Each can put extraordinary pressure on a company’s cost base. In today’s climate, they all are.

As business managers we know it should be a last resort to reduce growth-oriented investment – those things that generate revenues and pay the bills. Advertising and marketing, calling on our clients or customers, investing in our product are all the lifeblood of achieving top-line growth. For complex organizations (those spread over multiple sites and possibly multiple countries), tackling the cost base is the more immediate path to take. In this piece, we speak about “shared services costs” and whether we are really maximizing the sharing opportunity in these areas?

We worked with an international luxury goods company that had multiple locations in a single country – the focus of our shared-service cost review. Margins and growth were both healthy and the CEO and CFO always ran the company like a small business. By all definitions this company was already lean and mean. Thus, it is an interesting study to see how big the benefit can be by sharing services in the following areas we studied – temporary labour, delivery services, cleaning, utilities, telephones, stationery and maintenance.

Does “lean and mean” equate to absolute lowest cost? The answer was no in this example, as we found and implemented savings of almost 10% – a total of over £300,000 – over the 10-week duration of this work.

Chart 1 shows what the status quo looked like at the beginning of this project. This was a case of the extreme of “thinking global and acting local”. These six subsidiaries all do roughly the same thing – retail and wholesale luxury goods around the globe, but when it came to working together on a local level, they didn’t.

Chart 1

Shared Services suppliers and spend by subsidiary


Step 1 was to assess where they were at that moment in time. Our hypotheses were as follows:

- Some subsidiaries followed best practices that could be emulated by others

- Sometimes suppliers gave preferential treatment based on greater volume or activity and possibly 2+2 could equal 5

- There were probably some “nice to have” activities thrown in with “must haves” and management should revisit which ones they really need

Here we share three examples from the work and how they relate to these hypotheses. The three examples are electric usage (Chart 2), overnight delivery (Chart 3) and cleaning services (Chart 4). The electric example is a clear case of rate differentials that had little to do with volume. Also we were able to achieve further rate reductions based on combined volume. The savings achieved in this area was 19.8% of current spend.

Chart 2

Chart 3 on overnight delivery costs (e.g., FedEx, UPS, DHL, etc.) is another example of the insights from a relatively simple analysis. There were three suppliers with quite different cost structures. Volume played a factor in these relationships but wasn’t the only factor, and we were able to shed 5% from total annual invoices of almost £750,000.

Chart 3

Our final example, cleaning services, was slightly more nuanced. In this situation, “quality” was a cost driver. Corporate headquarters or a retail location had a higher cleaning standard than a regional sales office. Knowing this, we normalized for this required quality difference and calculated what a normal cost line might be. As with almost all other areas of shared services cost, there is quite a lot of unnecessary variation around the norm, and a common contract would help save 21.2% of this cost. Chart 4 shows how the situation looked and how it might improve.

Chart 4


All told as shown in Chart 5 savings added up to 8.8% of over £3.4m of expense. The satisfying part of the work was that our “lean and mean” client was amazed at the opportunities that surfaced that went behind what they were able to find on their own.

Chart 5


Summary of savings by shared-service cost area

Conclusion

As this client did, it pays to never assume you are optimized. A relatively small investment in seeing where you stand may realize savings that you hadn’t thought of or unearthed before. In this case it was worth over £300,000, not a bad return on 10 weeks work.

This shared services analytic approach is an internal methodology for addressing the issue of improving things now. It is a nice complement to our external approach – FAST Benchmarking, which takes an outward looking approach to finding out where you stand in the world.

About the author

Ted Leavitt has an eclectic background that in general management, marketing, strategy, entrepreneurial, and M&A spanning large corporations and management consulting to his own start-up company. The common theme is taking these enterprises in new directions via top-line or bottom-line changes whether in the Private or Public Sectors.

Filed Under: Linking organisations together, Looking at 'now', Looking to the future, Practical effective implementation, Securing the benefits, Thinking together Tagged With: ,

The layman’s view on pension reform

September 7, 2010 By cicpartners Leave a Comment

In thinking about best value for local government, pensions is a big deal. It is incumbent those working on this issue (i.e., John Hutton’s Public Sector Pensions Commission) to bring a clarity of argument to their conclusions so that the public can make informed judgments about what it supports and what it does not. One of the key issues seems to be an accurate comparison between public- and private-sector pensions. Here is some of the data and analysis that might help bring this clarity:

1) Defined contribution vs. defined benefit – I read today that only 11% of private-sector employers offer “defined benefit” while 94% of public-sector employees do this. We need to see an assessment of public vs. private for each type of plan.

2) Qualification criteria – age and length of service and the resulting payouts. Obviously a 60-yr-old retirement age vs. 65-year old equates to 5 extra years of payout, which makes a big difference

3) Employer and employee contributions – the typical private-sector formula now is that the employer will match contributions up to a certain point on a 1:1 basis (e.g., you invest 6% and we will match with an additional 6%)

Your view on likely Hutton Commission outcomes?
(polls)

By doing this simple benchmarking, one can more readily quantify the differences between plans. Here is an example.

This illustrative example shows the benefit of clarity of analysis and explanation in shedding light on what government might do to offer maximum value for money.

Writer’s note: in this post, I stay away from whether these future obligations are funded (required for the private sector) or unfunded (how public sector obligations are treated).

Filed Under: Intelligent strategic thinking, Looking at 'now', Looking to the future, Securing the benefits, Thinking together Tagged With:

7-step benchmarking methodology

September 7, 2010 By cicpartners Leave a Comment

Gaining benchmarking insights requires quality of effort, not quantity. Let us explain a simple 7-step approach we employ to provide best value for local government:

STEP 1: DECIDE WHAT AREAS TO BENCHMARK

Public Sector organizations are incredibly complex. As an example, a local authority directorate probably has 50-60 departments. Here are some guidelines for determining areas to benchmark:

1) Size and complexity – the big departments are where the money is but complex ones (like street enforcement, education, housing) are where you might find starker contrasts and probably more insights due to the diversity of approach

2) Statutory services – what is required, and are you clear on what is “must have” versus “nice to have”

3) Those that are a bit less conventional and don’t get benchmarked much. They tend to fall into “all other” and may never have been benchmarking. Now may be the time.

STEP 2: PICK A COMPARATIVE GROUP

Be systematic and use factors that relate to the areas that you are benchmarking. Socioeconomic factors may be important, density of housing, public vs. privates, etc. Starting off with facts is always a good jumping off point. Chart 5 gives you an example of one we used for regulatory services.

Chart 5

Comparative Groups for Benchmarking

STEP 3: SET AN INPUT GOAL

We have found that 3-5 peers generate a raft of interesting insights. Make sure to enlist them in the process by offering to share the findings. After all, it is the implementation of the strategy than separates average from great. We have found that the participation rate is over 80% by using this approach.

STEP 4: BEFORE SPEAKING TO OTHERS, TEST THE APPROACH ON YOURSELF

Understand your own financials and key activity drivers before you start. There is a tendency here for clients to go into too much detail. If it is too detailed to collect from everyone or subject to interpretation, leave it aside. You will run into doubters who say that you can’t make “apples to apples” comparisons, but you can if you stick to the basics. You will be amazed at the insights that come at that level.

STEP 5: IN-PERSON INTERVIEWS

Conduct your interviews ONLY in person. It is this hour and hour and a half when you capture the right data, understand context and find out other paths to explore. Your respondents will look forward to your outputs and may suggest interesting approaches or interpretations. After all, it only costs them this one session plus any follow-up you might get later in order to get the same insights you are gathering or paying someone else to do on your behalf

STEP 6: ANALYSE THE DATA IN ORDER TO IDENTIFY THE INSIGHTFUL NUGGETS

Take stock and analyse the data. Charts 1-4 from my previous posting are examples of those nuggets. Here’s where the insights come out. Develop implications.

STEP 7: “DON’T DO NOTHING”

There is always the temptation to absorb the insights but not take the next step. Focus on the likeliest opportunities or the most interesting insights that also offer long-term value through further exploration. Some of the likely issues to be raised are:

- Do we have the right structure?

- Do we have the correct number and type of resource?

- If a ‘nice to have’, are we sure we need it?

- What does this tell me to help improve both efficiency and effectiveness – focus there?

It is only by taking action following this benchmarking that you can achieve best value in local government. The next step is rarely implementation. There is probably some further understanding of the competitive context or implications on your own operation, but don’t miss the opportunity to act.

And when you’ve done this last step, make sure to share with participants. They will thank you and set you up for a refresher when appropriate.

Conclusion

If you have been thinking about how to become more efficient and effective and are wondering if you’ve done everything you can to maximize the opportunity, consider if this “Best Value Benchmarking” approach might take you farther faster? What we know it will do is help to get this right the first time. Isn’t that worth the investment?

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A better approach to local government benchmarking

September 7, 2010 By cicpartners Leave a Comment

The traditional benchmarking approach is a large group with 30 or more members who meet quarterly for a half-day to go over issues in common and keep the data current. It is financially and data intensive, and despite all the inputs it often doesn’t generate insight. This is “benchmarking by committee”.

As an example one local authority we met asked for a benchmark review of Parks and Open Spaces because their benchmarking data didn’t appear to make sense. Two things were immediately obvious. This particular benchmarking group was concentrating on less than 40% of total costs, and it missed key insights from the other 60%. Second, they weren’t focused on key performance drivers. In this area, total spend was dependent on the combination of total size and average park size and had little to do with spend per head of population – the metric they were using.

Talking in person to a a small group of comparable local authorities (3 to 5 using objective criteria is a good sample), the insights can be enormous. Let’s take two examples from previous work, one relating to Adult Education and the other Street Enforcement.

In the Adult Education example in Charts 1 & 2, we first see that there are 3 quite different models of Adult Education – direct provider, outsourced and a partnership model that falls in the middle. What underlies these models; how are they different; and does it make sense to adopt some of part of a particular model are all relevant issues in determining best value for local government.

Chart 2 shows how the different models impact the curriculum staffing requirement. Being a direct provider seems to require disproportionately more staff. We also found that local authorities are more likely to have to incur expense beyond funding for a direct provider than an outsourced service. It makes the leadership ask, “What type of service do we want to be and to pay for?”

Chart 1

Adult Ed Model

Chart 2

Curriculum staff/1000 learners

Charts 3 & 4 walk through a similar story for Street Enforcement.

Again, the models are very different. Some are much more complicated than others. Is this complexity worth it? Chart 4 shows total Street Enforcement staff headcount, and we see that complexity again drives a disproportionate level of resource.

Chart 3

Street Enforcement orgs

Chart 4

Street Enforcement Staffing

The theme in these two examples is the issue of “must have” or “nice to have”. With some relatively efficient analysis we are getting at the underlying drivers of best value for local government.

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The case for benchmarking to achieve best value for local government

September 7, 2010 By cicpartners Leave a Comment

The UK’s Preliminary Budget plans a 25% reduction in local government spending over three years. 25% isn’t a figure that is easily or sensibly top-sliced. It requires a fundamental rethink of what activities are “nice to have” versus “must have”. Our experience suggests that there are new ways of benchmarking that can point out the roadmap of getting there from here and providing best value for local government.

The suggested economic model for England is Canada from 1994 to 1997. It is the proverbial benchmark we are shooting for. They used five tests to determine the utility of Public Sector activities:

1) Does the programme continue to serve a public interest?

2) Does government have a legitimate role at all?

3) Which level of government is the appropriate body?

4) What part of the programme could be transferred to the private and voluntary sectors?

5) Could it be more efficient?

Benchmarking helps address these “best value for local government” issues. The American President Thomas Jefferson coined the famous phrase in the “Declaration of Independence” that “All men are created equal”, but we have found with the UK Public Sector that “not all benchmarking is created equal”. Our work has found that a benchmarking investment of 7 days per Council department will drive key benchmarking insights in about half of areas reviewed. More importantly those insights help generate savings opportunities of £500,000 or more. Over my next few blogs, I am going to explain how we have been identifying these opportunities using benchmarking

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