Software -- A Product or Enabler?

Good software design and sales begin with a thorough understanding of the underlying business process the software is to enable. Layering software on a misunderstood and broken business process only exasperates operational issues and masks root causes.. Software should GREATLY impact the overall performance of any process, not hinder.

I have spent some time in the software business as a product manager, several years running a tech investment firm and now run a health care services company. My first love has always been solving problems using process engineering, cost accounting and total quality initiatives as they relate to business operations. Most recently, I have jumped into a health care practice with the eye of improving the operations. The first thing I noticed was how broken the process was and how poorly designed and implemented technology (software) simply confused and compounded the issues and almost never met the stated goals and expectations. Some of this failure fell squarely on our shoulders – we simply did not have a good grasp on the process. But, the companies selling into this space NEVER ask any process questions and in fact the notion of “work flow” is completely foreign to them. They did what most software comes do, sell features and functionality and promised new and exciting technologies to come.

The first thing we did was go BACK to paper and document the process. But first, we sat and watched the people work and kept our mouths closed. Spend a week just sitting and watching — hard to do, but you will learn much more. Interestingly enough, if you ask someone how they do something, they will give you a detailed set of steps, but if you sit and watch you will see things they missed or little go-arounds they failed to mention.

So, this brings me to the notion that software is a product, or more accurately, my thought that it is NOT a product, but merely an enabling technological component of the process. What we need is a software sales person that is a process/workflow consultant that can fix our process and then apply their technology; I guarantee that any sales person who uses this skill will KILL their quota. The opposite is usually true — sales guy promises nirvana, operator is desperate and buys the hype, software is installed, process is worse, more complicated and takes a PhD to fix. That sucks, pure and simple.

My advice to early stage software companies is to invest in process (lean) expertise and go WATCH how your customers MAKE MONEY. Then document how your enabling technology will make them MORE MONEY. Stop with quotas, calls, etc. Put the customer’s process first and the rest will follow.

Dear MBA Leaders,

I have an MBA. I have worked for and started technology and medical startups. I have read a ton on entrepreneurship. MBA programs need an overhaul, especially given our recent economic meltdown.

Traditional MBA programs are best suited for corporate talent development with a few teaching "entrepreneurship." One can debate whether you can actually teach entrepreneurship or not, but I suggest that graduate level programs need to seriously rethink the model.

It is impossible to simulate or teach what it is like to be in the pressure cooker of serving customers, making payroll all the while keeping the business out of the ditch. You can sit right next to the person making these decisions, work with them and discuss the details of the decisions, but there is no way to actually get that experience until you DO IT. Intellectual knowledge helps, understanding cash flow, reading financial statements, building pricing models, writing good positioning documents, etc. But all of that is for not if you cannot handle the pressure of making it all work -- AND being the last person paid!

So, my recommendation for MBA programs is to keep one year of technical training, focused on the basics -- accounting, finance, marketing and strategy. The second year should be focused on running a real business, but with some skin in the game. Maybe a team of students could run a business and if they make a profit they could earn back their tuition, but if they didn't, then they had to pay for it. Make them sign on bank loan (real student loans) and make them make payroll. Deal with REAL finicky customers and all the unpredictability of having employees. Maybe this type of program exists, it has been a long time since I got my MBA. If my children want to go to business school, I am going to "loan" them the money and have them buy a franchise, run it for two years and then tell me what they have learned. There is no substitute for being on the hook. In like the hog!

SiCKO -- Watch it Even if You Hate It

Just finished watching SiCKO and think everyone should watch it. I am not sure of Moore's facts, specifically those related to the costs of the alternatives he cites to US health care, but the underlying premise is bang on. Capitalism and health care have diverging goals; making profits and caring for people are diametrically opposed.

Having spent 4 years in health care, I can testify to the fact that insurance providers will do just about anything NOT to pay and will justify denial at almost any cost. Having just negotiated new health benefits for our small company, I can tell you that 3 of top providers place incredible limits on certain services, rendering care in those areas impractical. Because we are an orthotic and prosthetic company we pay attention to coverage for our employees (we occasionally will recruit a practitioner who is an amputee) and all of the three providers we received quotes from limited prosthetic services to $4000 per year (this was the best case). Now an average "leg" costs something like $12,000 and the high tech version, which should be the standard of care due to its incredible patient outcomes, costs well over $60,000. Effectively, this limits new prosthesis to only the highest income bracket. Typically, prosthetic patients are Medicare recipients and not in the highest income bracket. Viola, savings for providers and more profits resulting in higher bonuses and pay packages. If you want to get sick, go do the research on United Health Care executive compensation. Sounds like Wall Street, oh, about 3 years ago?

So, how do you balance the need for care with capitalism? There is no doubt that no other economic system creates innovation and wealth, but at what cost?

Software Sales? Software is a Product?

I have spent some time in the software business, looking at tech commercialization and now in the health care field. My first love has always been process engineering, cost accounting and total quality initiatives as they relate to business operations. Most recently, I have jumped into a health care practice with the eye of improving the operations. The first thing I noticed was how broken the process was and how technology (software) simply confused and compounded the issues and never provided results as promised. The first thing we did was go BACK to paper and document the process. The very first thing was to watch the operations, literally sit and watch people work and ask naive questions. Spend a week just sitting and watching -- hard to do, but you will learn much more. Interestingly enough, if you ask someone how they do something, they will give you a detailed set of steps, but if you sit and watch you will see things they missed or little go-arounds they failed to mention.

So, this brings me to the notion that software is a product, or more accurately, my thought that it is NOT a product, but merely an enabling component of the process. What we need is a software sales person that is a process/workflow expert that can fix our process and then apply their technology. The opposite is usually true -- sales guy promises nirvana, operator is desperate and buys the hype, software is installed, process is worse, more complicated and takes a PhD to fix. That sucks.

My advice to early stage software companies is to invest in process (lean) expertise and go WATCH how your customers MAKE MONEY. Then document how your enabling technology will make them MORE MONEY. Stop with quotas, calls, etc. Put the customer's process first and the rest will follow.

2008 Latest Edition - Did You Know 3.0 - From Meeting in Rome this Year

Cost of a Bad Hire

How much does it cost to make a bad hiring decision? My guess is that for start up you will feel the ramifications of a bad hire for 12 to 18 months depending on how long the person stayed and the level of the position they filled.

Cost(length of stay, level of position)

It is very difficult to fund start ups and the tendency is to be cheap with hiring until you can afford it. Trust me, you cannot afford mistakes and it is either best to overpay for talent or do without. I am still seeing errors created with mid level employees that should have been terminated sooner. Of course, as the hiring manager, this is a tough pill to swallow as it reflects back on me and the executive team. Moreover, you are never sure when the cost will be fully paid, there are many mines buried out there and only through day to day operations can they be found.

Advice: pay for talent or put off the hiring until you can.

Overcoming Helicopter Management

What is helicopter management? It's another term for firefighting, where manager react to the problem of the day, fly in and fix it and leave. Typically, the fly-in includes a ton of collateral damage and counter productive activity which includes not really teaching anyone anything, setting up the inevitable future disaster along the same lines. This has many different names and flavors, but the "root cause" is lack of finding the root cause. We treat symptoms all the time because we need immediate results. Sometimes failure and the resultant learning is the BEST way to cure a problem, permanently. I am completely guilty of flying in, hosing down the enemy and leaving. Problem solved for the immediate term, but little lasting impact, and more than likely a beleaguered staff that will simply wait for my intervention when the next fire is spotted. Bottomline --> how do you create a critical thinking work force???

This is TQM 101, isn't it? Focus on the process and not the person? Put a well documented process in place and work with the team to become process minded so that they begin to refine and improve all processes? I think this is a start, but in astartup where capital is constrained and time is even more precious how do you balance the two? Pick critical processes and focus ONLY on them. Get them right first and then expand. In our business there are probably 3 processes that really matter. How supplies are ordered is not one of them (right now). Managing administrative paperwork and insurance approvals is certainly one of the top. Much of the time, we use people and personalities to solve problems (ie "assign John to ____, he is good at solving those kinds of problems); but people and personalities change from day to day and the underlying process is still broken or does not exist at all. The other compounding issue is to throw technology at it....that solves everything! All it really does is take a complicated problem and make it more complex. I have seen many small practices that are marginally profitable pursue technology as the holy grail, only to waste money and never get it fully implemented. Again treating symptoms....

This week I am going to go sit in the practice and document what they do. From many preliminary conversations about process it is evident that most folks think they have a standard way they do things but the reality is greatly different that what they think. One of my favorite tools is visual mapping. Try and visually map the process and then provide markers within the business to "see" it in action. This might include color coded bins (kan bans), whiteboards that track results, etc.

One of my personal challenges will be to avoid helicoptering in to solve the problem, rather trying to provide the environment for the team to see their issues and create solutions. My goal is to ask the executive team a couple of simple questions when an issue arises -- what is the process? Is it repeatable? Can you measure the outcome. Much of what we do at the executive level would fail these tests.....

More as we get into the "mapping".