Hiltmon

On walkabout in life and technology

Hiltmonism - Lead the Business

There exists a common situation in business where management wants to take the business in a certain direction, but the technical and operations staff declare that it cannot be done. They then bring out a litany of reasons which boil down to two: the current systems cannot do it and current processes cannot support it. Therefore, management cannot make the change. And if management cannot make the changes, may the business cannot compete, cannot be successful and cannot continue.

Cannot needs to be removed from the vocabulary. Systems should lead the business, not follow it or hold it back.

If the current systems cannot do it, then you should know what systems can do it and either get or build them. If the current processes cannot do it, design and implement new processes.

Business itself is not static. Products change, customers change, technology changes, competitors change, regulations change. In order to remain relevant, never mind compete, never mind succeed, businesses need to change too. Those that are nimble, and can adapt quickly, survive the darwinian process we call competition. The rest stagnate and die.

If the management team of a business decides to be “fuddy duddy” and not adapt, that’s their choice, and the best thing to do is jump ship now. But if they do wish to compete and be successful, then the business systems and processes should never be a drag upon business growth and change.

Yet they commonly are.

There are a lot of reasons for this:

  • Sunk costs: You have spent so much time and money getting the current systems and processes in place, and they are working for the current business, so you’re afraid of breaking it.
  • Fiefdoms: Business change means that some people get more power and others lose power. Instead of embracing the change, people fill the moat, man the bastions and fight to protect their fiefdoms.
  • Surprise: A lot of folks are so focused on what they do that they do not keep an eye on the big picture. So when the business changes, they usually pay no attention, until the change affects them. If one is surprised by a change, one cannot be prepared for that change.
  • Fear: Change brings about massive amounts of fear in folks. They fear that they may lose their jobs, they fear that they may not have a place in the change, that they may not be able to do their jobs in a change, that they may not adapt. Fear of change leads to resistance to change.
  • Differing agendas: A common area where change is very slow in business is in the operations or support groups. Their work is to record what happens in the business and get ready for the audit and reporting seasons. That is not the agenda of the business. If the agenda of the business changes, the question is whether the support agenda gets affected. And if they cannot figure it out, then the business cannot change. One cannot do new business unless the supporting departments can support it.

Lets look at two scenarios that I have experienced, in a finance firm and in a retailer.

In a finance company that trades securities called Listed Options, the systems and processes all depend on getting the security information, trades and prices from an exchange (that’s why they are called “listed”). However there is another, less common, kind of option called an OTC (“Over the Counter”) Option. This security is not listed on an exchange, it’s created on the fly when two traders agree to a trade. Most companies that trade options stick to Listed Options, because that’s all that their systems can handle. But most traders that trade options want to trade both listed and OTC options, because that’s the best way to make money. If the systems cannot handle OTC options, the traders cannot trade them and the business cannot profit from OTC option opportunities.

When I was working at my first Hedge Fund, they decided to start trading listed options. So I purchased some libraries and created the technology to do so. Several months later, they spotted a great opportunity in OTC Options, one that would go away unless they could trade it that day. Most CTO’s should have thrown their hands up and said “You Cannot”. But I follow the Hiltmonism that systems should lead the business, so when I implemented the Listed Options module, I was careful to be sure that we could easily support OTC options too. Sure, there was work to be done to get OTC pricing (there’s no exchange), but the systems of the business were ready for this. We enabled them to make the trade, we were able to get the systems updated in time to price the trade, and the company made its profits.

I learned about this “leading the business” idea from a retailer. They had many stores, and one of their biggest headaches was that all stock purchases went directly from supplier to store. It was costing them a lot of effort and money to get suppliers to drive their trucks all over the place to drop off stock at different stores. The management team decided they needed to find a better and more cost effective way to get stock into the stores. The CTO of this business sat in on these meetings. It did not take them long to decide that they needed a central warehouse to receive the goods and a few small trucks to deliver stock to each store.

But the systems that the retailer had in place related to store stock, and point of sale. There was no warehouse management system, and no process for scheduling deliveries and managing fleet of trucks.

Yet when the management team sat down to decide that they were going to buy a warehouse and a fleet, the CTO did not say “You Cannot”. Instead, the CTO told them which warehouse management system he’d chosen, which fleet management tools he’d evaluated, how much they would cost and how long it would take to implement. By sitting in on the strategy sessions, the CTO realized that management wanted to make a change, and so the CTO prepared for that change by reviewing the necessary systems and getting ready for the change.

In this case, the warehouse purchase took three months. On day one of the warehouse opening, the warehouse management system was up and running, the delivery fleet assembled and ready to go and all suppliers knew to drop off at one single location. The CTO knew what the business needed to do, was prepared when the decision was made, and was ready when the the change happened.

But knowing the business and being prepared is not good enough. Your systems also need to lead the business, to enable the business to take new directions that management has not yet thought about. A great CTO will sit in strategy meetings and actually recommend strategies, strategies enabled by the systems in place, strategies that will save money or increase output. Great systems can do more than the business needs right now, and evolve ahead of market trends.

It’s these lessons that taught me that it’s easy to make systems that lead the business. It’s easy when the CTO knows and is involved in the business strategy (as in the case of the warehouse), and it’s easy when the technical staff understand the business (in the case of Options trading).

If you follow this Hiltmonism, your systems will help the business be even more nimble, flexible, competitive and successful. You can!

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