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If the Shoe Fits: How Much Profit is Too Much?

Friday, October 3rd, 2014

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mDecades ago computer manufactures, such as IBM and DEC, created closed systems that wouldn’t/couldn’t talk to each other.

Apple chose to keep a closed system for years.

While closed systems seemed to enhance profitability, in the long-run the strategy failed to protect the companies from competition.

What closed systems did do was cost customers millions when, for business reasons, they had to be made to communicate.

Closed systems are back again only this time forcing compatibility is costing billions.

And it is you and I who will end up footing the cost.

Why?

Because this time the incompatibility is in the proprietary electronic medical records (EMR) systems that are mandated under the Affordable Care Act and, far more importantly, are an imperative for the health of the entire population.

The money in play is substantial; privately held Epic is one of the largest suppliers and its founder, Judith R. Faulkner, is supposed to be worth around $2.3 billion.

When you’re making that kind of money who worries about lives ruined or lost because of EMR incompatibility?

While the companies building incompatible systems are doing just fine, those who have to buy the systems aren’t—although size does make a difference.

The University of California Davis Health System has 22 specialists installing the technology so that doctors can share patient data between its Epic system and other internal systems, like the hemodynamic monitors in its critical care unit, or with some non-Epic systems outside the hospital. “We’re a huge organization, so we can absorb those costs,” said Michael Minear, the chief information officer at the U.C. Davis Health System. “Small clinics and physician offices are going to have a harder time.” (…) “The systems can’t communicate, and that becomes my problem because I cannot send what is required and I’m going to have a 1 percent penalty from Medicare,” Dr. Raghuvir B. Gelot said. “They’re asking me to do something I can’t control.”

What about regulators?

Regulators responded that interoperability was a “top priority” and that they recently set out a 10-year vision and agenda to achieve it, in an emailed statement from the Office of the National Coordinator for Health Information Technology. The office’s spokesman added that achieving interoperability “requires stakeholders to come together and agree on policy-related issues like who can access information and for what purpose.”

So much for regulators.

Perhaps Congress… No; that’s a really stupid thought.

I guess the only sure things in all this is that the entrepreneurs who created the incompatible systems will increase their net worth, US medical costs will continue to skyrocket and you and I will pay the bills.

Image credit: HikingArtist

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If the Shoe Fits: Does the Description Fit Your Startup?

Friday, August 1st, 2014

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mI’ve been working with entrepreneurs since the 1980s.

Sadly, the mindset has changed significantly—and not for the better.

I’m not the only one who feels that way.

German designer Hartmut Esslinger, who met Steve Jobs in 1982 and told him “Apple’s products were incredibly ugly and wasteful in production,” puts it this way.

“There is a bubble where greed meets hype and fake: Too many want to get rich instead of doing something meaningful for mankind, something for progress, to improve life.”

“Greed meets hype and fake;” what a perfect description of so many apps with billion-plus valuations.

The question you need to ask yourself is, “does it fit mine?”

Image credit: HikingArtist

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A Case for Lawyers

Monday, July 28th, 2014

cchmc_logoI doubt that a week goes by that I don’t think of the line from one of Shakespeare’s least memorable characters, Dick the butcher in Henry VI (Part 2).

It was Dick who said, “The first thing we do, let’s kill all the lawyers.”

While this rarely happens, it’s nice to see when legal greed gets its comeuppance as it did recently when a patent troll not only lost their case, but the judge shifted the cost to the plaintiff.

Lawyers can do a lot of good, too, especially when used creatively, the way Cincinnati Children’s Hospital Medical Center does.

In 2008, the hospital and the Legal Aid Society of Greater Cincinnati set up a medical-legal partnership, the Cincinnati Child Health-Law Partnership or Child HeLP.

In 2008 the hospital identified NY Group, a landlord that owned 18 buildings and consistently refused to fix issues that were health problems.

That’s where the lawyers come in because penny-pinching landlords don’t listen to “do-gooders” like social workers.

Child HeLP lawyers went after NY Group, even suing on behalf of one disabled child, forcing the repairs to be done quickly.

But their efforts didn’t stop there.

At the same time, NY Group was walking away from the buildings — Fannie Mae foreclosed on all 19 by the end of July. Legal Aid helped tenants to organize and have a voice in the foreclosure process — among other things, they wanted to make sure that the buildings remain subsidized housing.

Ultimately that pressure resulted in widespread repairs, and helped persuade Fannie Mae to sell the buildings to Community Builders, a Boston-based nonprofit that develops and operates good low-income housing (which is maintaining the subsidies). Reconstruction is about to start.

And because the approach works so well it is spreading across the country.

Perhaps it’s time to modify Shakespeare’s words to “First, let’s kill most of the lawyers.”

Hat tip to KG Charles-Harris for alerting me to the troll story.

Image credit: Cincinnati Children’s Hospital Medical Center

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Ducks in a Row: When Trust is not Enough

Tuesday, January 28th, 2014

http://www.flickr.com/photos/19936622@N00/468264/

How would you respond if you were head of a global professional company with more than 1,400 partners, 18,500 employees and a culture built on values, trust and honor when the values were ignored, trust was broken and the organization dishonored by someone at the highest level?

That was the challenge that Dominic Barton faced shortly after he became head of consulting firm McKinsey.

The values that Marvin Bower, its longtime managing director, instilled included putting the clients’ interests above the firm’s, providing independent advice and keeping confidences. These ideas were imparted from one generation to the next, mentor to apprentice. But after Anil Kumar’s arrest [he pleaded guilty] in late 2009, Mr. Barton, who had been elected to head the firm just months earlier, decided that the honor-driven, values-based system was not enough. What the firm needed was some rules.

Powerful people do not take kindly to rules and nobody takes kindly to rules that result from someone else’s actions—especially when they impact one’s income.

Ethical people like to believe that defining values and modeling them across the organization from the top down is enough.

It’s not.

An exceptional CEO I worked with who detested politics believed it was enough that his senior staff couldn’t use politics to get ahead with him. What he refused to recognize was that even though the political games didn’t work on him they wreaked havoc on those below the game-players.

This is especially true in the current world where greed, whether for wealth and/or power, is epidemic and “enough” no longer has any meaning.

But to work, the rules must apply evenly to everybody, at all levels, including the rule maker.

Flickr image credit: Andrew Scott

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From Whom do We Learn?

Wednesday, November 13th, 2013

http://www.flickr.com/photos/jepoirrier/6531621843/

In a Halloween discussion With KG Charles-Harris (you should read it if you haven’t already) we talked about the possibilities of robots becoming self-willed. I said that might be an improvement over humans, but KG had a different take and it’s been stuck in my mind.

“True, but unfortunately children often absorb some of the worst traits of their parents…”

What bothers me is I don’t think that it’s true anymore for several reasons.

  • Children absorb traits and values from their parents/family, but they are just as likely to absorb them from the media and even more likely these days to draw them from their peers.
  • Kids may parrot their parents when young, but tend to move in their own direction more and more as they age and grow.

Although I know what KG means when he says “worst,” it is still a word with fluid meaning that is often dependent on one’s own values and beliefs.

This fluidity is particularly noticeable when looking at highly charged subjects, such as politics or religion, where one person’s theme is another’s anathema.

I’m also don’t really agree with Chris’ comment that the worst human trait is greed; another word whose meaning is not always what as expected.

Perhaps I’m too much of an optimist, but if (when?) robots do gain sentience I don’t see them moving in lockstep or necessarily following in our footsteps.

That hasn’t happened even with human generations, e.g., I doubt the Silent Generation saw their values reflected in the Boomers.

Actually, I think sentience, i.e, self-awareness, is a guarantee that there will be no more uniformity in a race of robots than there is in the human race.

Flickr image credit: jepoirrier

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A New Corporate Era?

Wednesday, September 25th, 2013

http://www.flickr.com/photos/68751915@N05/6551525739/

There is change afoot.

Workers today crave more from work than just a paycheck.

They want to work for, or start, companies that contribute to the greater social good, from encouragement and time to volunteer and sanctioned participation and support in various forms of fundraising to companies who (gasp) give up some profit in the name of “doing good by doing well.”

Candidates and customers flock to companies like Toms Shoes and Warby Parker that guarantee to donate an item for every item sold.

There was a time that companies seemed to give more of a damn about their communities and employees.

Yes it was more paternalistic and I’m not suggesting a return to that, but the enshrinement of greed in the name of profit goes deeper.

What happened?

Milton Friedman, his cronies and a media frenzy happened.

In 1970, Nobel Prize-winning economist Milton Friedman wrote an article in the New York Times Magazine in which he famously argued that the only “social responsibility of business is to increase its profits.”

And as that mantra took hold so did the attitude that the only stakeholders that mattered were shareholders.

The belief that shareholders come first is not codified by statute. Rather, it was introduced by a handful of free-market academics in the 1970s and then picked up by business leaders and the media until it became an oft-repeated mantra in the corporate world.

Which, in turn, entrenched Wall Street’s quarter-long, short-term thinking and gave rise to the Carl Icahns of the investing world.

Friedman’s statement gave tacit approval and wide latitude to corporate raiders, leveraged buy-out firms and others to do literally anything in the name of profit and investor returns.

Lynn Stout, a professor of corporate and business law at Cornell University Law School, said these legal theories appealed to the media — the idea that shareholders were king simplified the confusing debate over the purpose of a corporation.

And we, i.e., society, accepted that attitude for half a century.

The results can be seen every day and they aren’t pretty—unless you’re part of the so-called 1% (or even the top 25%).

While there is change afoot, it begs the question—is it too little too late?

Flickr image credit: 401(K) 2013

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If the Shoe Fits: Servant Leadership Wrap-up

Friday, June 7th, 2013

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mA couple of weeks ago we took a look at Jim Heskett’s HBS discussion about why servant leadership isn’t very prevalent, considering how effective it is; this week he sums those reasons up.

Servant leadership is experienced so rarely because of trends in the leadership environment, the scarcity of human qualities required, demands that the practice places on the practitioner, and the very nature of the practice itself.

It’s easy to spot the major traits that get in the way.

“Ego (that) makes it difficult to ‘want to serve’” (Randy Hoekstra), “greed” (Madeleine York), and “An unhealthy desire to control” (Judesther Marc).

There is more; ake a moment and read the summation, it’s short.

Next look at yourself in light of the expressed reasons preventing the spread of servant leadership.

Then look at your company’s culture and how well that culture fosters and recognizes those who practice servant leadership.

Now fix yourself, so you can become a model of servant leadership, and then fix whatever needs fixing in your culture so that that kind of leadership will naturally rise to the top of your organization.

A few thousand years ago a gentleman named Lao Tzu said it all quite elegantly in just 45 words.

As for the best leaders,
the people do not notice their existence.
The next best,
the people honor and praise.
The next, the people fear;
and the next, the people hate—
When the best leader’s work is done,
the people say, “We did it ourselves!”

I can’t think of a better mantra to build your management around.

Image credit: HikingArtist

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Taxes? Not for the Fortune 500

Monday, April 15th, 2013

http://www.flickr.com/photos/siwc/6345062666/Speaking of taxes…

“I can’t predict the next scandal, but I know that fraud is a growth industry, and so is greed.” 

So said Max W. Berger, a plaintiff’s lawyer who just won a $2.43 billion settlement from Bank of America.

The fraud, however, pales in comparison to the legal greed and games played by the platinum-plated corporate elite, such as Chevron, Apple and GE.

I don’t know what your tax rate is, but if you earn more than $36K it’s higher than most corporations are paying.

According to a recent analysis of nearly 300 Fortune 500 companies by the Citizens for Tax Justice, the average company was paying just 18.3 percent in taxes.

And the number that pay nothing is even more startling.

280 profitable Fortune 500 companies collectively paid an effective federal income tax rate of 18.5 percent, about half of the statutory 35 percent corporate tax rate, while receiving $223 billion in tax subsidies. These corporations include most of the Fortune 500 companies that were consistently profitable from 2008 through 2010. Collectively they paid $250.8 billion in federal income taxes on a total of $1,352.8 billion in U.S. profits. If they had paid the statutory 35 percent tax on their profits, they would have paid an extra $223 billion.

Stashing cash overseas is a legal ploy that as a shareholder you might be inclined to applaud, but is this form of tax avoidance really better for shareholders and the company, let alone the economy?

Business is vocal about the dangers of the deficit—as long as dealing with it doesn’t impinge on them.

But you have to admit, $223 billion a year would go a long way to paying it off.

Flickr image credit: Jagz Mario

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If the Shoe Fits: Speed Trap

Friday, February 1st, 2013

A Friday series exploring Startups and the people who make them go. Read allIf the Shoe Fits posts here

5726760809_bf0bf0f558_mTo many in the startup world speed is a holy grail—speed to market, speed to hiring and firing, speed to pivoting and speed to growth.

If you are one of them consider Frazier & Deeter.

It’s grown 25 percent a year for seven consecutive years to more than 250 employees in 2010 and named one of the best US firms to work for by Accounting Magazine.

…the firm is poised to go national but the guy who founded and ran the firm for eight years is no longer leading the charge. Was that his choice? It turns out it was not. David Deeter, the founder, got bounced down the organization chart.

While that may be the kind of growth investors salivate over, it often requires a “bet the company” mentality and matching action that’s not always appreciated by others.

Employees get scared, but you, the entrepreneur, keep their heads in the clouds and you keep thinking, boy, isn’t this great? Why? Because you are having the time of your life.

And therein lies the greatest danger for entrepreneurs who wants to stay at the helm.

Entrepreneurs start with a vision and do a pretty good job communicating it to the original team or they wouldn’t have bought in.

As time goes by and the organization grows founders get “busy” and start counting on those under them to communicate their vision to the new hires.

Sometimes the vision changes and the changes aren’t communicated, so the vision shared is no longer the current vision or, worst of all, the driving force mutates into one of growing just because you can.

The article author says,

Show them you can be both an entrepreneur and a chief executive. How? Let the employees see that you put the company’s interests ahead of your ego and your own personal interests. Otherwise, the real talent will leave — or boot you out…

but you have only to look at the corporate merger and acquisition debacles of the last few decades to know that too many corporations, both public and private, are driven by CEO ego and personal interest.

The best advice is to not only stay close to your people, but also to your mirror and remember you are not a god.

Image credit: HikingArtist

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Progress?

Wednesday, January 9th, 2013

http://www.flickr.com/photos/pagedooley/3191664147/Every place I turn is commentary of some kind focusing on new changes for the New Year, but looking around it’s hard to believe in them.

In a recent Rules post I shared something I sincerely believe, it’s about progress, not perfection, but I haven’t seen a lot of progress lately anywhere in the world.

  • 99% of politicians of all flavors rant on spouting their preferred ideology, with no real concern for the citizens of whatever country they represent.
  • As we learned, too many financial CEOs were made of ego and greed and the skill to mislead, but it seems that attitude is spreading to companies of all sizes, as well as individuals, in a trickle-down effect.
  • More and more people are willing to bend the rules and/or lie to achieve their ends.

While I accept that progress often involves several steps backwards to those taken forward, what’s happening is ridiculous.

Progress should mean a net positive after doing the math.

Or is that another of my out-of-date attitudes?

Flickr image credit: Kevin Dooley

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