Tag Archives: financial crisis

How Quality Makes You Recession-Proof

A couple days ago, Sonia Simone presented an article entitled “Four Old-School Reasons Why You Can Thrive in this Recession”. The general philosophy of her insights is straightforward:

It’s impossible to really see massive change when we’re still in the middle of it. But there are a handful of things you can bank on. One of them is that human nature doesn’t fundamentally change, even though the environment can change radically… So it might be time to think about the ancient traits that have helped entrepreneurs since the dawn of history, and how they relate to the emerging 21st-century economy.

americangothicShe presents four notions: self-reliance, great ideas, “the village is your customer”, and “it’s in your DNA”. The one I want to focus on is #3 (if you want to read about the others, please visit the full article). When the village is your customer, Simone notes, quality becomes the focal element of the production and customer service processes. Hundreds of years ago, and into the early decades of the 20th century, people knew their neighbors in the community who made the products and provided the services. Personal relationships would form between you and your baker, your pharmacist, your doctor, your grocer, and so on. If your grocer sold you rotten food, for example, he would violate a trust relationship that you had established over a long period of time. Not only would breaking this trust hurt his business, but it might hurt his feelings too if you shared your discontent with your neighbors or gave him a dirty look while walking down the street.

But times changed remarkably. By the late 20th century, production, consumption and service had all become anonymous – the guy who services your car is probably not someone you know personally, nor is your mailman a personal friend. As a result, less personal impetus to provide high quality translated into an organizational imperative to deliver high quality. Without the driving force from within to provide excellent products and services, the company would naturally become the enforcer of high quality. (And without this enforcement, well, it would be a roll of the dice whether you got high quality products and services or not.)

Now fast forward to 2009 and the Web 2.0 world:

the village is back. If we blow it, customers publicly rap on our window (with social media, blogs or Twitter) and give us a piece of their mind.

Once again, our reputation and our products are one and the same. What we create doesn’t have to be perfect, but it does have to show that we give a damn.

The inconvenient part is that the village isn’t stuck with you. If your baguette isn’t great, your customer can FedEx something from an artisanal bakery in Napa or Madison or Boca Raton.

The cool part, though, is that if you make something handmade (even if it’s delivered in pixels), personal, and/or magnificently useful, your village can and will find you. Whether you make homespun yarn or an interactive course on how to start a dog-walking business, your product can find its own profitable village of happy customers.

On a related note, my next door neighbor is a dentist. She’s been trying to get me to sign up as a patient at her office for a while, but I’m nervous (not because I don’t like or trust her,which I do, but because she’s a dentist). Every time she asks me when I’m going to make an appointment, and I nervously shirk, her response is usually pretty consistent: “Do you really think I’m going to hurt you, knowing that I have to look at you every day across the yard?”

The personal relationship is a driver for providing high quality. How can we make personal relationships a component of a quality-driven strategy?

Sociotechnology, Public Policy and the Global Economic Crisis

scalesToday’s Washington Post includes an article on “How We Can Restore Confidence” in our economy. Confidence, after all, is one of the energetic drivers of the economy – without it, spending grinds to a halt, and the delicate equilibrium of economic flow is jeopardized. The author, Charles T. Munger, reflects on the reasons for the meltdown:

Many contributors to our over-the-top boom, which led to the gross bust, are known. They include insufficient controls over morality and prudence in banks and investment banks; undesirable conduct among investment banks; greatly expanded financial leverage, aided by direct or implied use of government credit; and extreme excess, sometimes amounting to fraud, in the promotion of consumer credit. Unsound accounting was widespread.

How did we, as a society, collectively allow these things to happen? Because many people were motivated by the huge profit potentials associated with real estate speculation, new financial instruments, and expanded financial leverage. This motivation towards self-interest, according to sociotechnical researcher Brian Whitworth of Massey University in New Zealand, tends to destabilize society by breaking down institutions and other systems intended to promote social order.In “A Social Environment Model of Socio-Technical Performance” he explains why [with my annotations in brackets]:

“While traditional technology like word processing supports individual competence, socio-technical systems support some sort of community synergy and have defenses against anti-social defection” [that is, acting against the interests of the group in a detrimental way (e.g. violation of human dignity, theft, cheating)]. “The social environment model suggests that people in society recognize both [social good and self-interest], and [tend to]combine them by anchoring one and applying the other. Anchoring social good then applying self-interest explains the highly profitable market trade systems of the last century, where individuals seek profit under social good laws. However contented individuals could anchor individual good, and then seek community benefit [through their positive, pro-social, individual contributions; Whitworth suggests that systems like online troubleshooting boards exemplify this approach because individuals have no incentive other than “good citizenship” to help others]. The latter is proposed to underlie the surprising successes of socio-technical systems.

“Anchoring social good” is an intended outcome of public policy, which seeks to curb acts against society by instituting punishments. “Anchoring individual good” and seeking to apply one’s personal motivations for the greater good is a defining characteristic of successful socio-technical systems (like Amazon and eBay). The latter is aided by effective community policing where people take it upon themselves to enforce the rules of “good citizenship”.

This leads me to ask: what’s the socio-technically inspired public policy equivalent that might help us rectify the global financial crisis? I don’t have any good answers, but I think this research provides an interesting backdrop to analyze the situation against.