Feel free to forward this note to your team members.
 

Preventing Systemic Failure
(Things to look out for)

Over the last 7 years one of the nice things about doing this occasional newsletter, The Art of Corporate Warfare, are the conversations I've had with smart, influential people (most of them here in the States but also in the EU and a growing number in the Pac Rim and China). Occasionally they will send along books or papers or links to interviews they've done (apparently being on The Daily Show isn't as much fun as you might think...).

You will find attached a paper by longtime CorpWar reader Bob Prieto. He was the chairman of Parsons Brinkerhoff (think Bechtel). Bob, a nuclear engineer by training, is one of those people you meet and realize, very quickly, you may not be the smartest person in the room. He is now an SVP of Fluor Corporation and was part of the Fluor pitch group working on widening the Panama Canal. That's the scale of Bob's world. Pretty big. Actually pretty huge.

I called Bob for some advice on ScreeningInterviews.com and the conversation turned to the condition of our economy and how we got here. His take was fascinating. After the call he sent me the attached paper (if the PDF didn't arrive with this e-mail just Reply to this and put "Send the Paper" on the Subject line--I'll send it along). Basically the paper uses the construction industry as an analogue to the economy (and vice versa). It's intriguing, especially since it was written last March. It makes you realize nothing really happens in a vacuum and not much is truly invisible before it becomes a huge, grotesque mess. 

If you take the time to read the short paper it will likely make you think in terms of cause and effect in your own industry and business. When one thing happens, all potential outcomes are somehow effected and possibly remapped entirely. I find particularly useful the paper's framework of the analogue (understanding one thing to understand another). Executives that use ScreeningInterviews.com have admitted to me they find the tool very useful because as they quickly listen to the recorded interviews of short list candidates they naturally find themselves comparing the candidates to people the executive has worked with, and found effective (or not). It's hard to see this in a resume, even a good one. The interview gets circulated, along with opinions, and this helps the hiring team decide who they would like to see brought in for an interview. So the shared interview becomes increasingly valuable as a 'predictor' due to the social power of the staff's collaborative input. This saves time and reduces unpleasant surprises (and yes, that's an understatement).

Bob's paper, which at only 6 pages is very tightly written, addresses several categories of vulnerabilities inherent in highly engineered systems. But the thinking is remarkably portable to systems I guarantee you have, in some form, in your business as well (or your house for that matter).

For example, Bob discusses the vulnerability of tightly coupled systems that go unidentified as such by management. This is very scary because what may look like RANDOM EVENTS can actually be highly coupled. He provides a simple example of a fire in a small building outside of Chicago that disrupted telephone service for much of the country. Why? Because [to quote the paper] "It seems that most transcontinental land-lines passed through that single building and they were destroyed in the fire." Excuse me? How could somebody not know, or know and not do something about, that vulnerability? He gives another example of why the price of anti-freeze went up 300% a while back. Turns out ethylene glycol was made in only two places here in the States and one of them, a small plant in Idaho, burned down with the obvious result. 

Bob also discusses the risk of failing to KISS (Keep It Simple Stupid), inadequate core capacity (and lack of key redundancy), the danger of positive feedback loops (aka progressive failures--which, as an effective recruiter, I was often paid to induce at target companies) and other strikingly relevant concepts. So read the paper. It's short and punchy and can help you ask questions that could potentially save your company, your shareholders and you.

Bob has graciously given me permission to "spread the paper around" so feel free to forward it. I guarantee it will lead to some interesting and likely useful conversations. I have also put it online here: www.SuperHub.com/PrietoPaper.pdf.