Friday, December 11, 2009

Golden Ponies, the Peter Principle and AOL. Don’t let a successful blog lead to failure due to poor goal setting.

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Are you having success in your business because of social media? You may be riding a Golden Pony and your success may not last. You may scale up your usage and start to find out that your performance is faltering as you try to juggle all the types of tasks from your new focus on social media.

Business problems are not technology problems and can't be solved with the right algorithm. Business problems sometimes resist improvement. After a business problem is thought out in analysis, detailed out in design and then put to the test in implementation (or transition if you're an ITIL imam), the results may provide side effects and unintended results that mingle with the expected results.

The Golden Pony and the Peter Principle

Failure can find you in the midst of an IT project from the large to the small, after the initial success leads to increasing the scope of the project. This is dubbed The Golden Pony and attributed to Nelson P. Repenning of the MIT Sloan School of Management in the ITIL Service Strategy volume.

This is more than just a scope creep effect during the implementation of a project or a capacity planning issue. This is a management effect that removes the captain of the ship and replaces him with a robotic system as the need to carry more cargo increases. The one that knows the ship the best should be continuing to sail the ship. But instead of building a new ship with a new captain to carry the extra load, the Peter Principle is invoked once again only to see that the project, and not the manager as in the Principle, is the one to take on new responsibilities until it reaches the level of incompetency.

America Online case study

America Online (AOL) certainly qualifies as a project that increased in size until it became a walled garden within the web itself. In the 80’s and 90’s, AOL was an entertainment service with email games, D&D games, chat room games, chat environments, interactive fiction, and more. Steve Case set the course of a business goal as internet entertainment leader for the common folk since most web sites were by geeks about geek stuff. That goal paid off well.

Then in 2001, Case invoked the Peter Principle. He merged AOL with Time Warner and the focus changed as well as the value and subscribers. The business goals changed to be a content provider similar to the fading Yahoo! The focus on hooking up the common man to the internet was discarded. Subscribers peaked in 2002 at around 27 million and are currently diving down into the five million can’t-figure-out-how-to-unsubscribe zone. Price went up, competitive pricing forced free access to email, and operations took a massive cut.

Steve Case stayed on until 2003 as CEO after being a part of AOL since 1985 and several other CEOs have followed from the Time Warner pack. Was it the dot-com bust that did him in? In 2005 he remarked that AOL should not have merged with Time Warner. Steve didn’t know about his Golden Pony. Now AOL has gone public, created a new look, and so is again separate from Time Warner. Stock analysts for AOL are once again optimistic.

America Online rides off on a Golden Pony

In the Golden Pony scenario a project increases scope to keep innovations coming. Without a clear vision, the project starts to do things it wasn't designed to do and effectiveness declines. The more AOL tried to become the content rich web site for everyone, the more resources it took to manage. As these ponies grow, their visibility grows and the need grows for a more senior manager or VP to take charge of the project. The quality of the decision making starts to dwindle as the people become more and more removed from the original idea. The pony gets more stuff to carry weighing it down, the rider doesn't know where to go, and they both wander off until they die according to Repenning.

In AOL’s situation, management sold out to higher management. But in a smaller business, investment capital can be acquired to "go to the next level" which also means adding another layer of ownership/management on top in most cases. That is why many venture capitalists who really want a company to succeed want the startup to be operating on a shoestring budget. The Y Combinator software boot camp for startups led by Paul Graham have a geek culture around headache inducing work schedules and cheap family style dinners.  They train them to stay focused on profitability without too much interference.

You can find your own Golden Pony

You can scale down the Golden Pony effect to an individual level with you as the only employee or maybe including a marketing assistant/office manager or two. Your customers are the readers of your blog and are the consumers of your knowledge service. Because of an initial success, adding new tasks to your personal social media effort may mean such things as
  • writing that extra blog post a week
  • sending a few extra tweets every day by learning how to use your new iPhone
  • reading twenty or thirty new blogs or news feeds by RSS
  • staying on top of the latest viral videos
The results of your new management initiative due to an increase in scope can turn your business in the same direction as AOL especially if they aren’t focused on your initial goals of why you started blogging or being an entrepreneur of any kind in the first place. The symptoms of adding more activities with new goals can be:
  • You find yourself having less time for the things you used to have. Quality of your normal work falls. You lose more sleep.
  • Budget cuts pressure your extra efforts to gain social media ground. Less money means less demand for what you produce. Less demand means more budget cuts.
  • More demand means you have to hire someone else or even outsource. Poorly trained staff increases. Experienced staff stays the same. Less time is available to help mentor new staff, quality suffers, demand slows, morale tanks, ROI dives, and new staff is laid off bringing stasis back.

Set and follow clear business goals

What can you do to keep the Golden Pony from taking you on a ride? Step back from your activities and make sure they all map to business goals. This is what businesses do with process reengineering when they model their activities and clarify which ones support which corporate goals. Make clear decisions about what business goals you have and then make sure that the large activities that you take on support that business goal.

Since all of the social media activities are supported by an IT infrastructure of the web and other web sites, you can also say that you have to align your IT activities with your business. You are the CIO of your organization if you choose to start a Twitter account or if you choose to start an SAP environment. And it’s the CIO’s responsibility to take the power of technology to fully unleash the power of the business. You will find that ITIL will be a source of guidance for you and your knowledge service if you want to understand the relationship between you, IT, and your business.

Image via Wikipedia

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