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Ovid (2709)

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Stuff with the Perl Foundation. A couple of patches in the Perl core. A few CPAN modules. That about sums it up.

Journal of Ovid (2709)

Tuesday March 17, 2009
03:39 AM

Why Businesses Fail

[ #38653 ]

Scott Adams, of Dilbert fame, once wrote (I can't find the original reference, sorry) about a large, expensive project he worked on to solve a particularly thorny software problem. After speaking to all the principals he noticed that everyone said this was a problem but was rather vague on the particulars. He eventually tracked down the customer whose complaint led to the project, only to find out that a solution had already been provided and the customer was quite happy. So was this expensive solution in search of a problem cancelled? Barring new information, that would likely be the rational approach, but anyone who's been in big business long enough knows better. Egos get involved and overseeing large budgets is a mark of power in business. It's nasty watching those with middling budgets try to swallow up other projects to make their "turf" bigger.

In the spirit of this, here are several anonymous tidbits about the insanity of business (you've probably heard me mention some before). If you want to succeed in business, follow these simple guidelines.

Issue "Requests For Ammunition"

One company which supports open-source software provides an award-winning package free of charge. They charge consultancy fees. They stopped answering RFPs (requests for proposals) because they discovered that even though they often had the lowest priced proposal and a ridiculously feature-rich product, companies issuing the RFPs would simply use this company's response to beat up their preferred vendor. The vendor was chosen beforehand ("nobody gets fired for choosing IBM") but the company rules required an RFP.

Gouge Your Customers and They Will Love You For It

Another open-source consultancy I know of started out charging modest rates because the owner knew he could make a decent living with his free product. No one was buying. In frustration, he jacked up all of his rates tremendously, changing nothing else (that I'm aware of), and now business is booming and he's hired a lot of staff. If he didn't "gouge" his customers, he would have gone out of business. On a related note, when I sold cars, I was told on day one that customers who pay the most money were the happiest. A year of selling cars confirmed this for me.

It's OK To Ignore Your Employees

One company I worked for hired a consultant to solve some thorny problems. This consultant was excellent and was well worth the money, but some developers were annoyed that management agreed to implement several things which we developers had been insisting on for a long time. I asked the consultant how he got management to agree and he said he had discovered a long time ago that management can take their employees for granted, but they have to justify the consultant's fees, so he just goes to the developers and asks them what they want. Management and developers are both happy and more money is wasted.

For Government Contracts, Overcharge Them or Lose Money

One gentlemen I met in Oregon told me of how much he hated doing construction bids for the government. On one bid, the various construction company reps were gathered together on the day the bid was to be awarded only to have an Air Force officer tell them that the excellent bids had to be rewritten because requirements had changed. Later, at a bar, he was complaining about how much work he put into the bid and the other reps asked him him if it was his first. He said "yes" and they explained that experienced reps toss out a bogus bid the first time because they can't afford to put too much work into a bid because the government always throws away the first bid. Later, they have to overcharge because when problems invariably arise, no one will take responsibility and workers sit idle while the the problem is kicked further up the chain of command until someone who won't take the blame finally makes a call.

For The US Military, Over-engineer Your Products

I met a lady at a pub in London. We got on well, had a few drinks, and then she explained that she was in the US military and was being shipped to Iraq to implement a particular software system (which I won't name, sorry). The product she was setting up cost $250,000 and was "hardened" to withstand gunfire and bombs. When a rep visited Iraq, she explained how she could build hundreds of these systems for the price of a $500 laptop and an Access database. Massive redundancy on the cheap. The rep called her a liar so she replicated the system, on the spot, on her $500 laptop and an Access database.

Use It Or Lose It

And, of course, the perennial favorite, trying to figure out why your department has spent ridiculous amounts of money on a useless piece of software that hinders productivity, only to realize that it's the end of the fiscal year and if you don't spend your budget, you lose it.

While these aren't the core issues with our current financial fiasco, they're certainly symptomatic. Laissez-faire falls in the face of the ego.

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  • is that they don't actually fail doing that. At least if by 'fail' you mean go out of business.
    • Yeah, this is curiously related to a discussion I had with a boss back in the US. He was a die-hard Republican (and a really nice guy -- I'm not slagging him off) and argued that the vacation time offered in Europe isn't competitive in the long run. However, this good idea succeeds, like the idiocies in my post, because since so many companies do it, it levels the playing field.

      Note that vacation time over here is typically a minimum of 20 days, but I'm getting 30 this year. I've no idea why people in th

  • It's always struck me as odd how a large company is like a small command economy inside the overall market system; that seems like a very inefficient way to run things. The only reason I can come up with for their success is the cost of regulatory compliance--the couple million dollars Sarbanes-Oxley costs is chump change to large companies but insurmountable to small ones.

    • Sarbanes-Oxley is hurting us on this side of the pond, too. British companies are really annoyed that they have to alter their local accounting practices to ensure they comply with US laws. It's quite a ripple effect.

      And I doubt seriously that the cost of regulatory compliance has anything to do with ego-driven management. Consider that the RFP process is often driven by private investors demanding that the company be more accountable. Sometimes there's just too much information to sift through to find

  • (to add to your list)

    People (including management) who don't have anything productive to do, or can't figure out what would be productive to do, will get busy doing something unproductive or counter-productive in order to justify their existence. I'm convinced that a lot of "productivity-enhancing" projects are really these kinds of things in disguise.

    -- dagolden

  • The size of companies is set by the tradeoff between the cost of constantly negotiating contracts, versus the cost of internal bureaucratic stupidity.

  • Thanks for the best post this week. No, this quarter!

  • It may take a while but they do go out of business eventually. It takes a long time to run a business of any size into the ground. My takeaway is, err on the high side for bidding on contract work.