Roots of this crisis
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There is a very special place in a human psyche for a “silver bullet”. The ability to distill enormously complex situations into a relatively simple combinations of cause and effect pairs is very valuable talent for those of us who are inclined and paid to act. The ability to embrace and interpret complexity without drawing any specific conclusion is very valuable tool for those of us who are inclined and paid for to observe and document. Of course we all have to make choices and act, regardless of our inclinations or employment, however we are not equally qualified to do so and hence the probability of making “good” choices or act consistently with the choice we made, are associated with our personality “types” and rewarded accordingly.
Tom Davenport, of Harvard Business School, suggests in his blog Is This an Analytics-Driven Financial Crisis?, that over use of mathematical models for financial decision making caused this economic meltdown. Being a fan of Mr. Davenport’s work, it makes me a little timid to disagree with his assessment.
Banks and mortgage companies use analytics to make automated or semi-automated decisions about mortgage loans. Various industry experts have told me that many firms continued to make subprime loans even though a close analysis of the data would have suggested that chargeoff rates were climbing for such loans. The companies simply didn’t monitor their analytical models closely enough.
In fairness to Tom, he actually suggests only “at least partial” causality of “poor use of analytical approaches and techniques”. To me this suggests the lack of knowledge rather than complicity or outright dishonesty of practitioners. The analytics is only a tool and as we know “guns don’t kill people”, unless you suggest to outlaw analytics.
In my opinion the roots of the latest crisis are in divorce of “Authority” from “Accountability” which corrupts moral fabric of the market place and destroys public confidence in the ability and desire of decision makers to improve the situation. Since the executives, who made poor or dishonest decisions, are paid egregious compensations (I don’t even know if “compensation” is an appropriate term under the circumstances) despite their failure to perform their fiduciary obligations, and politicians are re-elected, despite their failure to protect public interest, we cannot claim that something was learned and therefore can have an expectation of the system to work going forward. Just like there is no religion without sin and no capitalism without failure, there is no forgiveness without repentance.
There are many excellent blogs and other resources on the Internet which explore methodologies and Best Practices for business process re-engineering, project management, systems implementation, software engineering, and change management. However I could not find much help with unlocking value of integrated utilization of these disciplines to facilitate Organizational Transformation. In this blog I would like to focus on this subject. I would like to stress that this is not an academic inquiry, but a practitioner's desire to discuss and share practical business knowledge and Best Practices. Let's see how it evolves - "Every brilliant idea quickly degenerates into a lot of hard work" - Peter Drucker.