Archive for December, 2018

Betting the Company

Sunday, December 16th, 2018

On my way to PowerGen International two weeks ago, I read Fred Herzner‘s excellent book What Did We Know? What Did We Do?: Making Decisions in Large Organizations.  

Mr. Herzner, formerly the Chief Engineer for General Electric’s Aircraft Engines, takes us through a series of Doomsday Events, catastrophic incidents with loss of life and tremendous financial and reputational consequences for the companies and individuals involved.  He begins with his own involvement in the fatal crash of United Airlines Flight 232 in  Sioux City in 1989, and then describes the decision-making principals he formulated in response.

The book continues with discussion of several other catastrophes, notably BP’s Deepwater Horizon and the systematic failure of BP and its key suppliers in recognizing and taking responsibility for the many risks (all known) that compounded to kill dozens, pollute the Gulf of Mexico, with billions in direct costs and untold environmental and other costs.

Having been involved myself with major engineering and commercial decisions, I found the stories riveting and his analysis compelling.  I highly recommend his book and endorse his principles for decision making:

  • Clearly communicate values
  • Nurture the right culture
  • Have clear roles and responsibilities
  • Get diverse input
  • Trust but verify
  • Top executives make the decision

Mr. Herzner emphasizes the final principle, writing that ‘the logo makes the decision’ because it is the company’s survival — financially, legally and reputationally — that is at stake. 

I have some experience making decisions in large organizations, although the bulk of my career has been in innovation within startups, which don’t have the resources or capabilities of a GE.   Even so, the doomsday event — going out of business — is just as likely to be the result of flawed decision making. 

Herzner’s book got me thinking about my own experiences and observations of  decision-making in startups.  In my view, startups fail primarily because of the unknowns that arise from pushing boundaries, so I came up with these guidelines aimed at mitigating the risk of the unknown.

The Truth Shall Set You Free, is a fundamental principle in my view, and encompasses Herzner’s values and culture.  I have seen startup cultures where bad news is unacceptable to founders or executives, and companies continue on the road to failure, rather than face the truth and pivot to a viable alternative.  

Time is More Valuable than Money because it is limited and cannot be replenished — especially in a venture-backed startup.  As clever as we think we are, it’s very likely that there are smarter people working on the same innovation, so the startup’s success depends on time to market. 

Prove it won’t break forms the principle for engineering test and is the opposite of Zuckerberg’s ‘Move Fast and Break Things.’  Because testing is costly in money and time, we need thorough analysis of the system and the test setup in order to be sure that the system under test will work.  Failures then teach us something about our assumptions, our analysis, our fabrication, or testing process and may lead to serendipitous discovery and competitive advantage.

Gray Matters — we need  wisdom and experience to complement the enthusiasm and creative spark that is essential to successful innovation.  When gray-haired practitioners can be incorporated into the startup culture, we can leverage the lessons of the past and bring diversity of input to decision making a la Herzner.