Archive for the ‘Business’ Category

More on Commoditization

Tuesday, April 11th, 2006


DSCN5295, originally uploaded by trekr.

I should have said more in my last post about how a skill may become a commodity.

Standards, tools, and for that matter, any advance in the art that constrains the allowable solutions such that the output of different practitioners is undifferentiated, leads to commoditization. For example, a hand saw requires more skill to use than a circular saw. However, anyone with reasonable competence can cut wood more than good enough with a circular saw. For most cuts it doesn’t matter that the handsaw is more precise in the hands of an expert.

There are many great photographers now that we have digital cameras. The technical aspects of film type, shutter speed, focus, lighting, are hidden from the user. However likely it is that a skilled photographer can do more with film, even the pros have switched to digital cameras for most of their photography.

Java programmers don’t need to master memory management or even know what a pointer is. Fundamental algorithms are now in libraries. Most programmers will never need to implement a sorting routine. Does Java constrain the expressiveness of the programmer? Certainly, but not in ways their customers care about.

In some sense all tools abstract and hide details. That is the power of the tool. One need not master the details to successfully use the tool to solve a problem. In order to hide, you must constrain yourself to a hiding place. If your hiding place is big enough, it’s good enough.

The process of commoditization is a net benefit for most of us. It is difficult when your skill becomes a commodity and you need to make a transition. Hopefully, these incomplete thoughts will give you some insight into how to see when its about to happen to you.

Are All Jobs Commodities ?

Wednesday, March 29th, 2006

The other day an IT professional in charge of staffing for his company said to me, "All labor is a commodity, including the CEO".  "Including the labor of doing your job?", I asked.  "Absolutely, of course", he said.  A lot of IT jobs have become commodities and work is moving offshore.  It got me thinking, what is a commodity in the labor market?  How do you avoid competing in a commodity market ?

A job is a commodity when enough people can do it good enough that employers choose the lowest cost laborer.   The key here is good enough.  Performing a job better than the competition doesn’t matter when better means more than good enough.  Are all jobs commodities ?  No, take the CEO as an example.  CEO pay keeps going up.  The worse CEO’s do, the faster their pay goes up (as a group).  Instead of complaining about CEO pay, assume it is rational and ask why are compensation committees willing to pay.  It is because the job is getting harder, and fewer are capable or willing to do it.  The lesson is clear.  Try to work on the hardest most consequential problems you can find.

Why Interviewing to find Talent is Difficult: A Demonstration using Bayes’ Theorem

Sunday, March 5th, 2006

Suppose you are a hiring manager with a goal to make sure that the person you hire has some special quality called IT. IT can be anything you like. You have developed an interview technique in which the chance of success for a candidate that has IT is 95% and the chance of success for a candidate who does not have IT is only 5%. Suppose that amongst the general population of qualified candidates, only 5% have IT. After all you only hire the top 5% like everyone else, right ? What is the probability that a candidate who does not have IT will be selected ? Surprisingly, 50%, the same chance as a candidate who has IT. For example, suppose it is possible for you to interview 100 candidates. Only 5 have it and you will correctly identify all 5 of them (I’m rounding up). Ninety-five do not have it, yet you will also identify 5 from this group as having IT.

Now suppose IT is really rare and only 1% of the qualified candidates have IT. However, you are better at testing for IT so you can identify those with IT 99% of the time and you can also identify those without IT 99% of the time. The end result is the same as the first example, the probability of selecting a candidate without IT is 50%, you pick 1 from each group. Put another way, the probability that any candidate has IT is 1% prior to the interview but the interpretation of the probability rises to 50% after the interview, regardless of whether they have IT or not.

In both cases, the probability of a false negative was high relative to the prior probability of having IT.  If however, we take the candidates identified as having IT from the first interviewer and a second interviewer with equal skill screens them, then the odds of correctly identifying a candidate with IT are greatly improved because we start with a 50% probability that the candidates have IT.

The next time you are tempted to brag about being a great interviewer capable of finding the very best, keep the thought at Bayes and employ a process of sequential, multiple interviews to improve your odds.

Keep your Peace

Monday, June 6th, 2005

A pair of owls has taken up residence in our neighborhood. I know the owls are here because every morning about 4 am they start calling to each other from the tall pines just outside my bedroom window. Its loud. It wakes me up. When the sun rises, the crows begin to protest the presence of the owls. The other day I watched three crows relentlessly dive on an owl perched near the top of a pine tree. The crows made a terrible racket, but there was not a sound from the owl. When the owl took flight, it quickly caught the wind and soared aloft. As the owl rose higher, the crows gave up. There is something to be learned from watching the conflict between owls and crows. When a crow comes after you, rise above him and keep peace in yourself.

The Pace of Change

Thursday, May 5th, 2005

I received some feedback the other day from a retained recruiter on my candidacy for a VP Engineering role at a company that wanted to change, but not too fast. The CEO and CFO felt that because of my military background, I might be too aggressive with the pace of the changes.  Most organizations that fail to change, fail because not everyone is on board.   In business, this is usually middle management.  I’d be more worried about hiring a passive aggressive manager then one that is mistakenly perceived to be too aggressive because of their military training.   I’ll post later about misconceptions of the military.

The pace of change is really about the process of making a decision and building consensus. It is not about the schedule for executing the change plan. To paraphrase Yoda, change or change not…there is no try, no fast or slow. Decisions are made or not. Decisions are accepted by others or not. The pace of change is fast or slow depending on how long the CEO allows for everyone to accept his decision, because the CEO enforces accountability for meeting the milestones in the change plan.  Or he does not.

A Healthy Attitude

Tuesday, May 3rd, 2005

“The nonchalance of boys who are sure of a dinner, and would disdain as much as a lord to do or say aught to conciliate one, is the healthy attitude of human nature. A boy is in the parlour what the pit is in the playhouse; independent, irresponsible, looking out from his corner on such people and facts as pass by, he tries and sentences them on their merits, in the swift, summary way of boys, as good, bad, interesting, silly, eloquent, troublesome. He cumbers himself never about consequences, about interests: he gives an independent, genuine verdict. You must court him: he does not court you. But the man is, as it were, clapped into jail by his consciousness. As soon as he has once acted or spoken with eclat, he is a committed person, watched by the sympathy or the hatred of hundreds, whose affections must now enter into his account. There is no Lethe for this. Ah, that he could pass again into his neutrality! Who can thus avoid all pledges, and having observed, observe again from the same unaffected, unbiased, unbribable, unaffrighted innocence, must always be formidable. He would utter opinions on all passing affairs, which being seen to be not private, but necessary, would sink like darts into the ear of men, and put them in fear.” Ralph Waldo Emerson, Self-Reliance

My six year old son reminded me of self-reliance. “Dad, did you get fired?” An independent, genuine verdict. It was easier and more honest to just answer yes rather than try to explain restructuring.

These pages will be a view looking out of my corner.


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