Back in the old days, taps used to come in pairs, one hot, one cold, and they used to have washers inside that would wear out every few years, so you’d have to go down to the hardware store, buy a new washer for about 10 cents, and replace it. This was a real drag.

Now we have gleaming chrome mixer taps, designed in Europe, and the boring old washer has been replaced with a ‘braking unit’ that comes as a sealed unit that’s guaranteed for 15 years.

When the braking unit breaks, and your tap starts dripping, you have to order a new unit from the supplier in the Eastern States, who wants a proof of purchase for your 14 year old tap.

More than a week later the part arrives and you follow the instructions to remove the old unit, which is so solidly wedged in place, with a rubber ‘o’-ring, the unit snaps in half, leaving a big chunk of ceramic and plastic stuck in your tap.

You use pliers, monkey grips, bent coat hangers and wire to try to get it out. Nothing works. Eventually you drive screws into the plastic, so you can get a grip with the pliers, and finally you pull it out like a crumbly cork from an old wine bottle.

Then you finish fixing the tap.

And that’s called ‘progress’.

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The only six businesses in the world?

In the ongoing search to understand business and help organisations be more effective, I’m currently researching a framework to describe the fundamental nature of all businesses in the smallest logical number of categories. I’m thinking of this as the ‘periodic table’ of business. If we break all businesses down to their essential, atomic particles, how many different atoms are there? So far I’ve managed to come up with five:

  1. Primary production (agriculture, forestry, fishing, mining)
  2. Secondary production (manufacturing, software development, art, entertainment)
  3. Recruitment (moving people around to put the right people in the right place at the right time to make things happen)
  4. Logistics (moving things around from where they are now to where they are needed)
  5. Arbitrage (taking advantage of perceived differences in value between markets to buy and sell things with a margin for profit)
  6. Economic rent (if you control access to a resource, such as real estate, intellectual property, a factory, money, and you charge someone else to use that resource).

If you know of any similar existing research along these lines, or you can think of any businesses that don’t fit into one of those five categories, please post a comment below or email me.

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Social capital and young people – new research

Social capital and young people

Social capital and young people

Longitudinal Surveys of Australian Youth (LSAY) has released a research report today, 5 October 2011, looking at measurement of social capital in young people. This may be relevant to anyone working to help youth overcome an inheritance of socio-economic disadvantage.

Some key points:

“High levels of social capital in young people are found to enhance engagement, achievement and participation in education over and above the influences of family background, school type and geographical location, demonstrating that social capital has the potential to counteract the effects of disadvantage to some extent” (page 1).

“LSAY research suggests that young people’s networks have an impact on school transitions. School networks are shown to influence students’ levels of engagement, which in turn are strongly influenced by their connectedness to their schools, the relationships they have with their teachers, and the opportunities the school provides. This translates into elevated aspirations, better academic performance and increased school retention” (page 10).

 The report can be downloaded here:
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Risk management: Part 3

Look back at earlier posts on risk management: [Part 1] [Part 2] Part 3

Risk management vs risk avoidance

In some circles, especially in non-commercial sectors, ‘risk management’ is commonly confused with ‘risk avoidance’. And you don’t have to be a genius to realise avoidance and management are not same thing. In fact, avoidance is pretty much the opposite of management.

Why is this a problem?

In these situations, any sort of risk is seen as a valid reason to slow an activity down or stop it completely. Of course all activities involve some level of risk, so organisations that allow this sort of behaviour don’t tend to do much.

What to do about it

If you hear someone using ‘risk management’ as a reason to sit on their hands and avoid taking any action, why not throw in a management buzzword of your own: ‘opportunity cost’.

Opportunity cost is the risk associated with not doing something. It’s the risk of missing the boat. It is the sound of the train leaving the station, and you’re not on it.

This is a great way to separate the genuinely risk averse from the just plain lazy.

Look back at earlier posts on risk management: [Part 1] [Part 2] Part 3
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Risk management: Part 2

More on risk management: [Part 1] Part 2 [Part 3]

Risk management plan

One common approach to risk management is to create a risk management plan. The process of creating such a plan can be fun, as a whole bunch of subject matter experts meet together in a room for several hours and continuously ask themselves the question ‘what can go wrong?’

The next step is to categorise the risks, commonly in terms to the likelihood of such an event occurring and the magnitude of the consequences.

After the meeting, someone types up the results in a ‘risk register’. Fantastic, we now have a list of risks. Sometimes someone might take this a step further, and write up some details about how these various risks might be mitigated, and this is likely to be referred to as the ‘risk management plan’.

Why is this a problem?

There are at least two reasons this process tends to deliver sub-optimal results.

Consigned to the planning graveyard

Ahh, yes, file the ‘risk management plan’ right next to the ‘strategic plan’ from three years ago, that no one’s looked at since, and get them both out and repeat the process in another couple of years. That’s bound to work.

The Black Swan

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

Black Swan events

Even a casual glance over recent history suggests human beings are good at making policies and laws and penalties to mitigate events that have already happened (especially in the very recent past), and bad at anticipating unknown risks that may occur in the future.

For example, we passed laws to tighten up control of customs checks, finance and oil wells immediately after September 11, the GFC, and the BP Gulf disaster. This is commonly known as ‘shutting the gate after the horse has bolted’.

The corollary to this is we did a very poor job of anticipating or taking any relevant action before these events occurred. So have all those laws prevented us from being blind-sided by another big, unexpected event?

This phenomenon is the subject of a fascinating book, called The Black Swan: the Impact of the Highly Improbable, by Nassim Nicholas Taleb, which will be the subject of another post, in due course.

What to do about it

Just because there will always be seemingly random, surprising, game-changing events lurking around the corner, this does not mean we can’t plan for the future. We just have to plan for the unexpected.

For example, when we plan our strategy, do we run ‘best case’, ‘worst case’, and ‘middle case’ scenarios? Make contingency plans. Adopt a strategy that’s flexible enough to work under a range of unexpected conditions. Or build more flexibility into the strategy.

Or, even better than trying to predict and plan for the future, why not be the future? Why not be the next black swan event? What better way to position yourself for the future than by redefining your business category?

Next instalment: Risk management vs risk avoidance

Read on for more on risk management: [Part 1] Part 2 [Part 3]
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Risk management: Part 1

Risk management and other buzzwords

‘Risk management’ has joined the growing lexicon of management terms being bandied around to make the speaker sound impressive and knowledgeable, while the original meaning has been steadily eroded.

When people start latching on to words or phrases and just throw them in sentences randomly to sound smart, if the practice gains enough momentum, the meanings of those words become warped by common usage, making real communication just that bit more difficult.

Read on to discover the two most popular ways to mangle the phrase ‘risk management,’ why they don’t work, and how to avoid them:

Read on for more on risk management: Part 1 [Part 2] [Part 3]
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Peppermint Grove drug dealer jailed – what’s the real story?

Peppermint Grove drug dealer jailed

The West Australian published this photo of Jessica Louise Reid, the 'Peppermint Grove drug dealer' on their website

‘Peppermint Grove Drug Dealer jailed’ was the headline, inset on the front page of The West Australian, Saturday, 26 March. The main story, inside, filled most of page 3, leading with this lurid paragraph:

“A young Peppermint Grove woman has been jailed for six years for drug offences in a case that detailed her devastating descent from a life of privilege to a world of drugs and crime”

Judging by its placement, The West considered this big news.

Which is odd, as WA Police statistics show 833 drug trafficking offences over the six months from July to December 2010. That’s nearly 139 offences per month, or about 4.5 offences per day.

Do you recall seeing that many on the front page of The West last year?

So what made this particular drug conviction so newsworthy? Is it the words ‘Peppermint Grove’? Surely The West and its readers can’t be so naive as to believe this is the only person selling drugs in Perth’s affluent western suburbs?

Would The West have us believe this conviction is special because the perpetrator, an attractive, ex-private schoolgirl in her mid-20s, does not fit its comfortable image of a ‘typical’ drug dealer?

Drugs do not discriminate

If so, The West is having a bit of a lend of its readers. Drugs do not discriminate.

Over the years I’ve seen a number of close friends become involved with drugs and/or alcohol, and some of those have, sadly, developed damaging addictions to heroin or amphetamines.

Some of them turned to prostitution and/or petty crime to feed their habits. Some of them are now dead.

I’ve never conducted a formal survey but, in my personal and limited experience, a large percentage of those people came from wealthy families in the western suburbs, and attended private schools.

Their families know all too well drugs are not excluded from ‘exclusive’ suburbs. In fact, it’s ironic we refer to those suburbs as ‘the golden triangle’.

Devastating descent…

And let’s just take a look at that “devastating descent from a life of privilege to a world of drugs and crime” described by The West. Apparently the lady in question still lived in her parents’ home in View Street, and her stash was found in a Bulgari box.

That doesn’t sound like she ‘descended’ very far. In fact, it sounds very much as though her ‘life of privilege’ and the ‘world of drugs and crime’ were cohabiting quite comfortably in Peppy Grove.

What’s the real story?

So, back to the original question: why was this remarkable enough to be on the front page?

Drug dealer convicted? No – that happens all the time. Drug dealer in Peppermint Grove? No – that happens all the time too, and is happening right now, as we read this.

So is it that a drug dealer in Peppermint Grove was actually convicted? Does a drug dealer in Peppermint Grove usually receive the same treatment in the legal system as a drug dealer from Gosnells?

If The West’s focus on this story helped alert parents in the top tax bracket about the risks of drugs, perhaps that’s a good thing. But, please, let’s not pretend this was a one-off occurrence. Please, let’s wake up to the reality: drugs can and do exist in every part of our society, especially when bored teenagers have access to disposable income.

It’s our job, as parents and as responsible members of society, to face that reality.

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