Saturday, February 25, 2006

Change Insight 4 of 3: 2007 Dodgers --
Long-term Planning Meets a Diseconomy of Scale  

Whatever Kills You Is What Made You Stronger --
Angus's Fourth Guideline of Change

The rate of change strongly correlates with the kinds of adaptations you come with to cope with them. That's just an essential truth. Soviet Five Year Plans usually failed because the systems they were setting targets for were evolving rapidly (in areas with slow rate of change, they acutally were able to hit their targets as often as anyone, but these are exceptions to the essence of the kind of Soviet Planning that big U.S. organizations do).

One of the many reasons smaller organizations kick serious axe of their bigger competitors is that it's cheaper for them to discard their adaptations/changes and replace them with others because the bigger the organization, the more intertwined complexity it takes. Baseball has a great example this week that illustrates this like a JumboTronic-rendered image.

The Los Angeles Dodgers's ownership/management decided earlier this year they wanted to make a trivial customer service upgrade. They decided to put players' names on their uniforms. This is an essential part of their re-positioning strategy I've discussed before: Whatever We Were in 2004-2005, We're Not That Now. As I mentioned before, this goes back to the real estate development cognate of the Dodger owners.

Well, they decided it. But they can't. Yet. Not until next year. Because when it comes to Change, what kills you is what made you stronger.

The Dodgers don't own the decision of when to change their uniforms' configuration. For the Bums, it isn't as easy as it was in the pre-1907 off season when they suddenly had a brain fark & decided to implement gingham road unis. The decision-owner is MLB, which has done a great job of figuring out how to make serious money out of logo-wear. They license the rights to use teams' logos and eye-dressing, and concentrate the necessary effort to protect license manufacturers' relative exclusivity by doing the legal scutwork required to protect their licensees' investments by challenging Red Chinese sweatshop-produced and other counterfeit habiliment. 

The very strength of the licensing program for MLB and high-margins paid by the licensees makes a gold goose no-one wants to cook.

The high price tag charged means only fairly big manufacturers can afford to play. And they, like most big organizations can't just re-tool their supply chain, from design to marketing collateral to inventory management, to whip out updated logowear on a dime. They need advance notice. So MLB regulates how teams change symbols and logos and uniform configurations. This is a pretty good thing. It protects fans from buying what's current in April and having it be passe composé by the All-Star Break. And that protects the big companies that are licensees. 

If baseball didn't have this licensing, if they yielded on the income, teams could be a lot more maneuverable. They could go gingham in April, 1970s Astro in June and Richard Gere Collection for the playoffs. As it is though, the teams need this complex structure to stabilize the market that feeds them.

Crude oil prices have been very stable for a long time. Gasoline prices are somewhat correlated to crude oil prices, but not anchored. In a smoothed way, they look like this. There's a lot of equilibrium in the model and every once a while it gets punctuated by a quick updraft with a new plateau that tend to stick for a while. So when automakers and their three+ year planning cycles they need to commit way in advance to features that affect mileage one way or the other. In 2003, most people who know about oil pricing knew the Second War on the Iraqis would raise the price of crude oil significantly, although I suspect most thought it would be transitory because they thought the occupying coalition would replay the successful end-game of the First War on the Iraqis.

So automakers had an opportunity in December of  2002 to tweak a little their manufacturing mix for the 2006 model year.

What they didn't do nor would they ever was plan for highly fluctuating gasoline prices. If they were convinced an  unprecedented flux in prices were to become a norm, they'd have designed cars that give the drive an ability to trade efficiency for power in a more mechanically-driven way. Drivers, of course, make this trade-off all the time, by accelerating gently or quickly or choosing a speed or (if they still use a real transmission) choosing a gear to be in. But it would be fairly routine to engineer this ability into a line of engines and put a control on the dashboard to control it.

When the Rate of Change is high, the need to build a flexible response is higher. Replacing a flawed Soviet Five Year Plan in the middle of its second year by replacing it with a "new improved" Soviet Five Year Plan guarantees movement towards moribund destinations. But the larger the organization, the less likely it can choose to re-tool quickly.

The 1907 Dodgers, as an indie, had the flex to foist gingham unis on the baseball fans of America, bless 'em. But as a part of a corporate combine, they yield that ability to adapt quickly to their organizational needs. NOTE: The solution, by the way, is not to kill long-term planning, which seems to be the natural response of most American organizations. The simple duality Soviet Five-Year Plan <---> Plan-Free Meandering is a artifact of inexperienced managers who fear one of the poles and institutionalize the other in the hopes of banishing their fear. I, for example, as a sole practicioner, the least afflicted model for Diseconomy of Scale, orignally planned three entries on this change riff, but this new Dodger story came on the heels of a Dodger entry, so rather than run it 4th, I just moved it up one slot. It's not Milspec, but it's highly functional.

Where is your organization on the size scale? And where is it on the ability-to-adapt in real-time scale? 

Exactly. Whatever kills you is what made you stronger.

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