Charting Your Course: A Lesson From The Titanic

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The world recently commemorated the 100th anniversary of the sinking of the Titanic, one of the worst and certainly the most familiar maritime disasters of all time. The conclusions of the investigation into the sinking provide a valuable lesson for professional services leaders.

The sinking of the RMS Titanic is one of the most infamous tragedies in modern history, not only because the ship was considered in its day to be “unsinkable”, but more importantly because most experts today believe that its sinking was completely avoidable.  The Senate investigation into the Titanic1 concluded that one of the primary causes of the sinking and resultant loss of life was excessive speed.  The ship was going too fast, considering the iceberg warnings that had been issued in the area.

But why was the ship going so fast?  The 1997 blockbuster movie “Titanic” (currently re-released in 3D) includes a dialog between J. Bruce Ismay, the chair of the White Star Line to which the Titanic belonged and ship’s captain, Captain Edward John Smith2:

Ismay: So you’ve not yet lit the last four boilers?
Smith: No, I don’t see the need. We are making excellent time.
Ismay: The press knows the size of Titanic. Now I want them to marvel at her speed. We must give them something new to print! This maiden voyage of Titanic must make headlines!
Smith: Mr. Ismay, I would prefer not to push the engines until they’ve been properly run in.
Ismay: Of course, I’m just a passenger. I leave it to your good offices to decide what’s best. But what a glorious end to your final crossing if we were to get to New York on Tuesday night and surprise them all! Make the morning papers. Retire with a bang, eh E.J.?
Ismay: [Smith nods reluctantly] Good man.

There is no historic evidence that this conversation ever took place, but the question remains…why was Captain Smith pushing the Titanic so hard?  Perhaps he had been pressured to hasten the ship’s arrival into the port of New York, as the dialog above suggests.  Perhaps the iceberg warnings were ignored from overconfidence, because the ship was considered to be unsinkable. Or perhaps it was out of sheer negligence.  Whatever the reason, I believe that he would never have been moving at such speed had he understood the purpose of the Titanic and used that purpose to guide his decisions.

According to RMS Titanic, Inc., curators of the relics retrieved from the Titanic, one of the stated purposes of the Titanic was “To carry first-class passengers in great luxury, second-class passengers in great comfort and third-class passengers with great economy.”  The purpose was to provide an adventure in luxury for the passengers (in particular those in first class) far beyond anything they would have experienced on any other sailing vessel of their time.  The purpose was to be found in the journey, not in reaching the destination.  Any other trans-Atlantic steamer could have gotten them there — but none like the Titanic.  If Captain Smith had understood this, he likely would have gone slower, not faster!3

Charting Your Course as a Professional Services Organization

In the article “Who Do You Think You Are?”, I stress that service organizations within product-based companies must define their purpose in light of the objectives of that larger product-based business.  In “Defining the PS Charter”, professional services veteran Thomas Lah advocates the creation of a charter graph4 to help document this purpose.

To properly create a charter graph, agreement must be reached among key stakeholders on the importance of the following services objectives in helping to achieve corporate goals (somewhat paraphrased from Lah’s article):

  1. Services revenue
  2. Margin from services
  3. Customer satisfaction
  4. Driving company market share

I have found that the best way to gain consensus is to host a focus session.  The session should include the CEO (or GM/division VP, depending on the scope of the services organization) and leaders from various departments within the company such as sales, marketing, and product management.  The outcome of the session should be a forced ranking of these objectives according their importance in driving corporate performance.

Once this ranking has been done, a charter graph can be created.  The charter graph to the right is the work product from an actual session that I championed a few years back. While our focus group insisted on a slightly different rating system than Lah advocates (hence a scale from 0-5 instead of 1-4), the net effect is essentially the same.  The graph shows that the most important objective of our services organization was overall customer satisfaction, followed by driving market share.  Services revenue came in a distant third and margin from services ranked lowest.

This ranking is quite typical of a solution provider, that is, a services organization whose services are primarily offered in support of the underlying product (in our case enterprise software).  I would say this is typical of most services organizations within a product business.  Some notable exceptions are companies like IBM, whose services organizations (e.g., IBM Life Sciences, for instance) offer services to any prospective customer regardless of whether or not they are using IBM products.  IBM Life Sciences would in this context function more as a pure services business.5

So while it may be interesting to understand who we are as a services organization within a product-based company, what do we do with this new revelation?  The purpose of the charter graph is to help us to make better decisions.  Based on the charter graph above, we may decide to sacrifice some revenue (i.e., give away services) if we believe this would result in a referenceable customer for the product.  During annual planning, we may choose to set lower margin targets for services to give room for strategic use of services to help grow market share.  In a pure services business, these decisions would be made differently.

So the charter has been defined and documented through the charter graph, and decisions may now be made based on this charter.  The next step is to use it.  David Maister points out in his book “Strategy and the Fat Smoker” what he calls the “Knowing-Doing Gap”.  There is a gap between what we know we need to do and what we actually do. We may even know why we should do it and how to do it, yet we still struggle to do what we know we should do.  The “Knowing-Doing Gap” is a real danger for the charter graph as well.  We cannot create a charter graph, feel good that we’ve created it, and then file it away. What is critical at this point is that we integrate the charter graph into everyday decision-making.

To aid in this, we developed a charter statement — an elevator pitch, if you will — that was consistent with what our charter graph told us.  Ours went as follows:

“The charter for the services organization is to ensure that our existing customers are satisfied with our products (software, support, services) and to introduce new and existing customers to the capabilities of our product portfolio by offering solutions that meet their needs. The services function will be profitable, but not at the expense of customer satisfaction.”

We then created laminated wallet-sized cards that had the charter graph on one side and the charter statement on the other.  These were distributed not only to professional services staff and leadership, but also to the key stakeholders who were involved in the creation of the charter graph, and to other people within the company who were involved in making decisions regarding services.  These cards then served as a reference when critical decisions were being made. It was used to validate decisions made that were consistent with the charter, and to defend against decisions made that were not aligned with the charter.

A Charter Graph Card for Captain Smith

Let’s return to our case study from 1912.  I can imagine a similar focus group being assembled at White Star Line to discuss and agree to the charter of the Titanic.  Maybe instead of revenue, margin, customer satisfaction and market share, the objectives to be ranked would have included passenger experience and time to destination (speed), among others.  I’m nearly certain that the charter graph would have listed heavily towards passenger experience. Perhaps had Captain Smith pulled that charter graph card out of his pocket and reflected on it a moment, he would not have made the decision to move full steam ahead. Rather, he would have cut back the engines to let his passengers savor the cold salty air of that serene, starlit night.

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If you are part of an embedded services organization within a product-based company, does your organization have a charter?  If so, are you more a solution provider or pure services business?  What are your priorities and how do they guide your daily decision making?  Leave a reply and join in the discussion!

 

  1. “Titanic Disaster Hearings: The Official Transcripts of the 1912 Senate Investigation”
  2. Internet Movie Database (IMDb)
  3. Some of its other stated purposes may have benefited from speed; still, traversing the Atlantic quickly was not a primary goal.  In fact, the ship was an Olympic class vessel that was built for size over speed.
  4. Also discussed in his 2005 book, “Mastering Professional Services”
  5. Of course, IBM Life Sciences offers solutions to their customers.  The point is that their purpose is not solely to offer solutions around IBM’s own products.

Who Do You Think You Are?

On the Friday nights when I am not working my way home from a week of business travel, my wife Julie and I like to watch NBC’s “Who Do You Think You Are?” (of course there’s always DVR for those Fridays when I’m not home).  I just so happen to be writing this blog during another new episode, tonight featuring Tom Hanks’ wife, actress Rita Wilson.  My wife became interested in her own family history a number of years ago, and it’s fun to watch these celebrities learn about their past with the extensive resources made available to them to travel the world researching their genealogies.

As human beings, it’s important to our sense of identity, to who we are as individuals, to understand where we come from.  In the same way, it’s important as a successful professional services organization that you are aware of your beginnings and from there how you got to where you are today.  This history is part of your personality; the decisions that were made in your past in many ways define who you are as an organization today.

But to be successful as a professional services organization, it’s not enough to know where you came from. To be successful, you also need to have to know your mission as a services organization and how you differentiate yourself from other firms.  These things must not only be understood by the leadership team in your firm, but they must also be communicated to and ingrained in the thinking and behavior of every member of your organization!

What is your mission?  It could be defined by the markets you serve, the technologies you employ, or the level of intimacy and customer satisfaction you would like to maintain with your client base.  Or it could be defined by a combination of all of these or something altogether different.  For service organizations within larger product-based companies, it is also important that your mission is defined in the context of whether you function primarily as a pure services business or more as a solution provider (more on this in a future article).  All strategic decisions and tactical plans that you make should align with this mission, so again it should be well understood and communicated within your organization.

Success today is an ever moving target, and change is a normal part of any business.  Long term planning has become less and less effective in guiding a business.  More important in today’s fast-moving world is identifying strategies for differentiating yourself from your competition.  Geoffrey Moore’s groundbreaking book on innovation “Dealing with Darwin: How Great Companies Innovate at Every Phase of Their Evolution” describes how established businesses can adapt to ever changing business conditions.  While the focus of the book is technology adoption, there are plenty of takeaways for services organizations.  Moore argues that a focus on innovation in all stages of a company’s maturity is the key to successfully staying ahead of your competitors.  Innovation, he argues, is the antidote to commoditization.  Commoditization results in the spiral to the bottom as firms compete with each other on price alone.  

This is an all-to-familiar phenomenon in the software consulting industry where I’ve spent my career.  Off-shoring accelerated that downward spiral, forcing even companies who had found ways to differentiate (what Moore calls “vectors of differentiation”) scrambling to adapt.  Off-shoring was a disrupter, but does not change the need to differentiate.  Large services organizations have now added off-shore operations, smaller organizations have partnered to compete.  The market has re-equilibrated, and this has now forced these same off-shoring firms to consider how they too can differentiate themselves from their global competitors.

What are your vectors of differentiation?  Differentiation should closely align with your mission.  Actually, your mission should closely align with the vectors of differentiation that you identify.  One of the vectors of differentiation that we identified when I was running global services at Applied Biosystems (now Life Technologies) was speed of implementation.  Our pharmaceutical manufacturing customers were weary of long, costly implementation projects.  What we were able to offer them was implementation in only one quarter the time of a traditional deployment and 90% reduction in total cost of implementation.  We did this by leveraging industry best practices, providing standard documentation for processes that don’t change from customer to customer, and an accelerated, repeatable implementation methodology.  The results were many highly satisfied customers and and a healthy, low risk revenue stream for our business.

So “Who Do You Think You Are?”  To know who you are, you need to understand your history.  You then need to have a clear mission and understand how you differentiate yourself from your competition.  And finally, you must constantly re-evaluate your mission and identify vectors of differentiation that allow you to adapt to rapidly changing business conditions to stay ahead of that competition.