Tag Archives: shared value creation

Results-Based Development (Under the hood of Aligning Interests)

In many different contexts, we see examples of competition contributing to higher performance. For competition in business, we can draw and important distinction between “good competition” and “bad competition,” which is sometimes under emphasized. As I understand it, “good competition” creates an environment where everyone has to “up their game” to remain competitive. As evidence that “the market works,” we would see examples of customers benefiting from competition because organizations have to work harder and smarter to remain in business. Conversely, “bad competition” creates an environment that destroys long-term value in the name of “winning” or “surviving.” In such scenarios, organizations harm the sector and themselves in a “race to the bottom.” Such scenarios also have organizations engage in ethically questionable behaviour to “win at all costs.”

To start, let’s assume that “good competition” is indeed possible. Let’s further assume that for it to work, it requires that parties share an understanding of what “good” they are trying to accomplish.

For businesses, making money is “good,” but so are other forms of benefit: safer automobile travel (Toyota), or sustainable practices (Unilever). Governments are expected to think more about the greater “good,” and as a specific illustration, let me use community health-care in Ontario.  Let’s say that “good” in this context is “efficiency in delivering necessary services to patients,” or something that balances provision of necessary services within fiscal constraints. As is the current practice, the government-funded payment to service providers for some activities can be attached to a result or outcome:  a service provider is given a lump sum to achieve a specific outcome (e.g. heal a wound). If they can complete the task more efficiently, profit is theirs. If it happens to take longer or more resources, the provider spends those resources, but can’t come back to the funder for more money. If this works, tax-payers in Ontario get better bang for their collective buck, and patients get high quality care; wins all around.

This same type of arrangement could work in a non-governemnt context as long as the service provider is at least partially interested in the same definition of “good.” This creates “good competition, and efficient organizations that do good work will succeed.

Slide1The realm of “bad competition” can be peppered with “perverse incentives,” whereby, for example, a service provider could legitimately want a patient to stay sick, or at very least, err too much on the side of caution and so as to go wildly offside with a “fiscal responsibility” effort. This is the potentially very ugly underbelly of the public-sector contracting out to the private sector. In a consulting relationship, this can create, for example, an incentive to run-up the billable hours.

Slide2 again

 

Setting goals and objectives that promote shared accountability is extremely tricky. From my experience, the real trick is to align activity to a common purpose (e.g. the “good”), and I will go as far to say that without a shared interest, collaboration of this nature is impossible because the result will actually create “bad” competition.

 

Collaborating for Automobile Safety

It has been almost 3 years since Toyota embarked on a collaborative partnership to address automobile safety. The Collaborative Safety Research Center in Ann Arbour Michigan has grown to include dozens of academic and social sector organizations united to improve the world of automobile safety. In the rearview mirror this is a rich collaborative exercise pursuing a noble cause. A web search for “Toyota” and “safety” in March 2014 will provide very important context to the venture as you sift through accounts of the $1.2B admission of wrongdoing that resulted in human deaths and in harsh criticism of the automakers modus operandi.

Often revered for its dogged focus on quality, the culture at Toyota contributed greatly to the Total Quality Management (TQM) movement and to many quality principles used pervasively today, not just in manufacturing, but in a variety of disciplines. It appears that “safety” somehow got uncoupled from “quality” with devastating results. When external perceptions don’t match the internal realities, the company has a PR problem. When an internal flaw has been exposed because of dire consequences to customers, the problem is different and much deeper.

Steven Berlin Johnson starts off his book Future Perfect discussing how progress in airplane safety has far outstripped progress in any other aspect of air travel. Statistics routinely tout air travel as safer than driving, and this is no mean achievement. (Note: Presumably science and tech innovation could not have prevented the yet unclear result of Malaysia Air’s recent tragedy.) Similarly, the Engineering and Technical institutions involved in the work with Toyota will no doubt achieve great results in moving the needle on automobile safety. Even with this progress, at some level, all drivers appreciate the myriad of risks involved in heading out on any road in any vehicle.

For Toyota’s part in this, the bigger question is: “how was driver safely allowed to slip on the priority scale in so many aspects of the business?” The CSRC will no doubt get more attention in the aftermath of the recent US legal decision. Potentially these events will result in the world being a safer and better place with increased attention on vehicle safety. This will be consolation only to the most philosophical of those directly affected by the shortcomings. Practices at Toyota may indeed change so that “safety” plays a clearer role. If so, the claims in its vision statement won’t ring as hollow as they do today.