domingo, enero 18, 2009

Think Deming to Enable Much More than Just Freedom

Deming’s economics replaces the prevailing system of management with a system of profound knowledge to push economies onto a higher productivity plateau. With the new economics, EWPC will enable a superior solution path.

Think Deming to Enable Much More than Just Freedom

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on January 18th, 2009.

Copyright © 2009 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to to contact the author for any kind of engagement.

Upper classes are a nation’s past. The middle class is its future.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxAyn Rand

Fortunately, more and more people are beginning to sense that the mounting sustainability crises are interconnected–symptoms of a larger global system that is out of balance. As soon as people understand this, their view of the problems shifts. They start to see the extraordinary opportunities for innovation that can occur when we abandon fearful, reactive mentalities. They start to realize the deep problems we face today are not a result of bad luck or a greedy few. They are the result of a way of thinking whose time has passed.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx- Peter Senge

Since it is quite possible that we may not be writing on the same terms; with history, writer, analyst and politics on the side of Mr. Causey; and electricity and systemic thinking and a bit of leadership aim on mine, it is very rich indeed to mix our points of view. One potential end result might be to influence energy policy of the Obama administration.

Many years ago, Ayn Rand seems to have told us: those IOUs upper classes are the nation’s past; the middle class customer is its future. Peter Senge might be telling us in his recent Business Week interview that a discussion on whether IOUs management needs complete freedom from government or not could be a distraction. As we will see below, he seems to imply that the real issue is with their obsolete mental models, one of the four key elements that Deming selected for the transformation of the style of American management.

In the EWPC article “Forget Keynes, Think Deming,” it is very important to reflect on the article conclusion about the insight that emerged through me:

The insight is that Out of the Crisis is not the new labor theory of value (by the way the labor theory of value was replaced from economics), but the management theory of value or the transformation of the style of American management, that says that Deming is right in response to Mr. Causey’s article We'll see who was right, Keynes or Adam Smith & Milton Friedman. The transformation of the style of American (and global) management will enable new innovations to get capitalism out of the present depression. This is all about systemic thinking.”

Note the last sentence “This is all about systemic thinking,” as it is further explained why “Think Deming” can enable more than the freedom that my e-mail friend and vice president of the Energy Central Network, Mr. Warren Causey, asked in his interesting rebuttal attempt Forget Keynes, Deming, Marks, all of them: Think Freedom! With respect to that either/or thinking, I will develop a both/and thinking with Deming and Freedom.

President Obama, and all other presidents and prime ministers of the world, need to lead the transformation of the prevailing system of management to get the world to begin “pulling the whole group of core economies onto that higher productivity plateau,” as Carlota Pérez, describes in her book “Technological Revolutions and Financial Capital.” That is the way to get capitalism back to its roots, as the American forefathers wished.

The introduction to the revised edition of Peter Senge’s The Fifth Discipline (T5D) is entitled “The Prevailing System of Management.” In that introduction, Dr. Senge explains whom he selected “to write a comment for the [T5D] book jacket”:

As first time author… I realized that there was no one I would rather have write something than Dr. W. Edwards Deming… I knew of no one who had had a greater impact on management practice.

When Senge received a letter from Dr. Deming he had a great surprise that he tells in said introduction:

Reading the first sentence, I stopped to catch my breath. Somehow he had said in a sentence what I had struggled to put into four hundred pages. It is amazing, I though, how clear and direct you can be when you reach the end of your years (Deming was then almost 90). As I took in the totality of what he had written, I slowly started to realize he had unveiled a deeper layer of connections, and a bigger task, that I had previously understood.”
This was Dr. Deming’s the comment:

Our prevailing system of management has destroyed our people. People are born with intrinsic motivation, self-respect, dignity, curiosity to learn, joy in learning. The forces of destruction begin with toddlers – a prize for the best Halloween costume, grades in school, gold stars – and on up through the university. On the job, people, teams, and divisions are ranked, reward for the top, punishment for the bottom. Management by Objectives, quotas, incentive pay, business plans, put together separately, division by division, cause further loss, unknown and unknowable.
Senge continues [in the update within brackets I also added the 5 disciplines he had later on]:

… The real work, which he simply called “the transformation of the prevailing system of management,” lay beyond the aims of managers seeking only short term performance improvements. This transformation, he believed, required “profound knowledge” largely untapped in contemporary institutions. Only one element of this profound knowledge, “theory of variations” (statistical theory and methods), was associated with the common understanding of TQM [total quality management]. The other three elements, to my amazement, mapped almost directly onto the five disciplines: “understanding a system” [Understanding complexity: 1) System thinking], “the theory of knowledge” [Reflective conversation: 2) Mental models and 3) Dialogue] (the importance of mental models), and “psychology” [Aspiration: 4) Personal mastery and 5) Shared vision] especially “intrinsic motivation” (the importance of personal vision and genuine aspiration).
Deming manage to produce the book “The New Economics: for industry, government, education.” Deming argues:
If economists understood the theory of a system, and the role of cooperation in optimization, they would no longer teach and preach salvation through adversarial competition. They would, instead, lead us into the best plan for a system, in which everybody would come out ahead.” However, Deming explains that “[C]ompetition should be directed towards expansion of the market and to meet needs not yet served.

In the GMH post U.S Power Service is Regulated as a 3rd World Country, it becomes clear that “for every dollar spent on electricity, consumers are spending at least 50 cents on other goods and services to cover the costs of power failures.” It is that large market expansion to serve needs that the IOUs paradigm is no longer able to serve.

The EWPC paradigm has the right monopoly of physical transportation, while customers can select a service that fits their needs for quality, availability, security and reliability at the open market. The EWPC article Power Customers Begging Superior Solution Path helps envision the emerging whole market:

The vision to get third world societies out of unreliable service is now simple in the Digital Era after a lot of sweat: reduce complexity by dividing the complex power industry in two cohesive less complex systems that are loosely coupled among themselves. The separation between the regulated system and the open market system is made possible by the ultraquality imperative (i.e. high system reliability).

Expand the regulated transportation system at least costs to enable such maximum social welfare in the open market under the value chain generation, retail, pro-sumer.

Under such a system, the spot price of reliable electricity will be the result of true supply and demand. Such spot price will be the reference for all types of economic transactions. Every customer then can purchase the power they need and can afford without communist like perverse incentives of the regulated price control system that results in today's third world service.

This is what the technology neutral EWPC market architecture and design paradigm will bring: competition, just like in the electronic industry, among Retailers’ Enterprise Solutions enabling the needed business model innovations to supersede the obsolete monopoly price control business models.

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