Book review: Thinking beyond lean (Cusumano & Nobeoka)

I originally read Thinking Beyond Lean (1998) over four years ago, it was good at the time and its still good. A few weeks ago I picked up the book to check something and decided it was worth a re-read. Four years ago I didn’t know as much as I do now about lean production and lean product development so I thought it would be worth another look.

The book is a study of how car companies develop their products, and specifically, how they reuse the designs to product additional products, e.g. the Ford Mondeo in Europe is the Ford Contura in America and a Jaguar something in both places. Of course, as you might guess from the title Toyota is the pace setter in this field as in so much else.

I did write about the book after my first reading and still agree with what I said then, there is good advice here we can apply to software development.

The book is interesting for two reasons. First it is an interesting insight into product development at some very companies. Second it looks at the subject of reuse in a context of multi-project management.

Make no mistake, the car industry has problems reusing its designs. Reuse is difficult. The overriding lesson is: reuse doesn’t just happen, you have to arrange for it to happen.

Cusumano and Nokeoka do identify four models of reuse, or rather four models of design, three of which are reuse and I think its worth naming them here:

• New build: design something new from the start, even if you could reuse something there are good reasons why you might do this.
  
• Concurrent: two or more projects running concurrently developing new products, usually one is the lead project
  
• Sequential: design something new, leave it alone for a while then try to reuse it for a new product.
  
• Design modification: design something new, leave it alone for a bit then come back and tweak the design for a new version.
  

Four years ago I thought these models were useful in describing software development and I still do. However, the software industry doesn’t think like that. We have four models of our own:

• Framework: we create a project that has no objective but to create a platform for others to reuse. Usually these projects are expensive and often they fail.
  
• Reuse will just happen: made famous by the OO movement, the idea is that if programmers write “objects” (later components, now SOA components) then somehow they will be usable by others.
  
• Cut-and-paste: probably the most widely used; our own version of design modification.
  
• Packaged: we buy something someone else has written and work with it through an API.
  

I think only the last of these can really be claim to be a success.

There are lots of reasons why a reuse attempt can fail but mostly they boil down to organization. So, to make reuse happen you need to get the organization right - we’re back to Conway’s Law!

But there are other reasons, e.g. accounting. If project B is six months behind A and reuses their designs then who pays the bill, A or B?

And reuse may not always be a good thing. If you are competing on innovation then continually reusing your existing products may stop you creating innovations. It may also stop you from producing distinctive products - one of the problems Volkswagen had when it got very aggressive about platform sharing.

Yet another problem, not mentioned in the book, is your product life cycle: if all your products use they same platform then they will all age at the same pace and will all need replacing at the same time. So, just when your cash flow is low (because all your products are old) you will need to spend a lot replacing them.

I think the main difference in reading the book four years ago and today is my own scepticism about reuse. Four years ago I still believed we in the software industry could do it, all we needed was the right approach. Now I’m not sure. I think the level of complexity in software is so great trying to product something for reuse isn’t worth the effort in most cases.

That said, if the software industry is to make any headway here we need to take on the issues and lessons described in Thinking Beyond Lean .

Skills shortage in India

Anyone who believes that all IT and technology jobs in Europe and America are doomed to move to India and China should make sure they read today’s FT. According to this report India may graduate 3 million engineers a year but only 25% are suitable for the IT industry and then only 10% are employable. Staff churn is high and good staff are able to command high salaries - so eroding the price advantage.

Meanwhile, China has a shortage of managers and has to import people from abroad.

I’ve mentioned this point before, in December last year and I still stand by it. I really want to see India (and China) develop, and I don’t have much time for the doom merchants who think IT in the west is doomed, just, I don’t think the hype matches the facts.

On the other hand, the UK could be its own worst enemy on this. According to a recent report the UK is not training enough IT people. And part of the problem is the “all our jobs are going to India" hype!

The part I find most worrying is not the idea that big British firms won’t be able to find IT staff, I think they will. Big existing firms will be able to train their own people, import staff or send work overseas. But, more and more innovation has an IT (specifically software) element and if we don’t have the software engineers available these innovations aren’t going to go anywhere.

In the short run this is probably good new for me and others in the IT industry today. Jobs will remain plentiful. In the longer run, if it remains difficult to hire staff firms will just give up and find other ways of accomplishing their objectives without using any IT staff in the UK.

LinkedIn: good thing? Bad thing?

I’ve got an account on LinkedIn, and I’ve got a whole bunch of connections. If you don’t know LinkedIn it is a social network site with a work focus - believe the hype and you’ll find your next job through it. Once you’ve signed up you can add your “connections” and see who links to who, kind of. (I'm also on OpenBC but I've not spent so much time developing my profile and connections there.)

Based on the old theory that you find jobs and opportunities through who-you-know and who-knows-you then this should be a great success. In reality I don’t think it is ever going to substitute for real networking - and real networking is something I should do more of but is so time consuming.

Yes I’ve had a couple of enquiries through LinkedIn, more often to do with whether I can help someone else rather than if they can help me. There are jobs listed but as usual they are mostly fronted by recruiters/agents so they are as useless as any others.

If your interested here is my link


So, why do I play with it? Why do I keep adding contacts? In part, despite my rational above I still imagine it could put me in contact with someone useful.

Part of it is also slightly narcissistic - my network is bigger than your network.

Some of it is also to do with tracking people, although I suppose I should use Plaxo for that. It is supposed to be an online address book but allowing you to update people’s contacts books automatically when you change address. Plaxo’s never really grabbed my interest, and for a while it was Microsoft centric so it wouldn’t interface to my Thunderbird mail.

Also, I don't know if LinkedIn (and similar) will change our world but they might. I would like to understand how this stuff works and the consequences so I think its worth using . Just the same reason as I blog, to understand this stuff it helps to be involved with it.

But I think most of my LinkedIn interest is down right curiosity: Who connects with who? Who else is out there? What are these people doing?

What’s interesting is that something has changed recently. Not with LinkedIn but in people’s perception of this site. I don’t use it much but every so often I invite a bunch of people to connect. People who are already on LinkedIn usually say “Yes” quickly, those who aren’t might join but most just let it pass, I respect that and don’t bug them.

But, last time I sent out some invites, two months ago I think, people started to say: “Why are you asking me?” One friend at Microsoft told me it’s against company policy. Other people queried the nature of the system. I’ve just done another round of invites and I’ve got one or two similar responses. Is this some kind of mock-friendship? Asking people you don’t know that well to “connect” to you?

Could it be that LinkedIn is maxed out? Those who will join have joined, those who haven’t won’t. Are people fed up with social-networking? Or just more protective of their privacy?

Where is the line between people you know and will recommend to others and people you won’t? LinkedIn allows you to “endorse” other people but what happens when you don’t feel you can endorse someone? You risk upsetting them, a new and novel way to loose friends.

So far LinkedIn has been a bit of fun but it raising more and more questions for me.

Maybe thats just the engineer in me, engineers don't like networking; asking someone for a job is embarrassing, little do they know this is how the rest of the business world works.

Post EuroPLoP

I was at EuroPLoP in Bavaria most of last week. I returned mentally fired up with lots of ideas and new thoughts but physically shattered - too many late nights and beer. That makes it sound unhealthy but EuroPLoP is kind of healthy for me because I go lake swimming and take lots of saunas.

My paper, Patters for Technology Companies was reviewed in a workshop were I got a lot of very positive comments. The main thing is I need to split this one paper into two, one with the pattern theory and one patterns. I knew I should do this before hand but for some reason I didn’t....

I’ve been thinking that this would draw a line under my business patterns but right now I’m not sure. Part of me feels I’ve taken it about as far as I can, other people need to continue the work but there are still a couple of loose ends, a few requests for more patterns and theory from the workshop. Then this morning I spotted another pattern in the FT....

I also ran a focus group at EuroPLoP on the “Social Economic forces effecting software architecture”. This was a follow up to Conway’s Law group I ran last year - also with Lise Hvatum. This group wasn’t as deep as the previous one but I still got some insights and I’ll write them up before too long.

Finally at EuroPLoP I did face-to-face, one-on-one shepherding for a paper. This is the best type of shepherding. Practicalities mean that most shepherding is done over e-mail but when you get to do it face-to-face it is great. Its also were I see the greatest similarities to business coaching. Trouble is, you just don’t have enough time.

I had some really great conversations at EuroPLoP too. Particularly with James Noble (who an interesting take on Extreme Programming and problems with customer role, and his theories on PostModern Programing.).

The big surprise at the conference was the news from Indian. Some people from the patterns community have been out there and have been talking to Indian academics and practitioners about creating an Indian patterns conference. It seems likely that this will happen next year. To start with it won’t be a PLoP conference because a) it sounds like there are too many people and b) we first need to seed pattern writing.

That, in a nutshell, was EuroPLoP. Already I can’t wait till next year!

The last thing your people need is your strategy

Shortly after taking over IBM Lou Gerstner famously said “The last thing this company needs is a vision.” In an era when businesses men often seem to compete with each other for “vision” this was a brave thing to say – particularly for a technical company. I’ve been thinking about that comment for the last week.

Some years ago I was a developer at a small software company in South London. A few months after I joined they hired a Software Development Manager and charged him with sorting out developement. One of the games I’ve played with myself over the years since then is to ask myself: “In his position what would I do?” – in other words, what would my vision, my strategy be.

Last week two people I know were in the position of taking over a existing group, and my advice to them, well, the last thing you need for your new team is a vision. Sure you need your own strategy for taking over the team but beyond that I don’t think you should have a strategy.

I’d better explain myself...

If I come in with a fully formed vision for my new team, particularly if I spell it out in PowerPoint slides then it is my vision. This might be great if I’m trying to persuade investors to put money into my company, or trying to find like minded people to join me on the quest but when the people are in place it does nothing to get their buy in or address the real problem.

When you take over an existing team there are existing problems, organizational issues and a lot of history. If you come in with a vision you don’t take any of these into account. Sure, being new is a great position to be in, you have a fresh pair of eyes, you can see what others can’t because your not mired in the thick of it. But, your going to need these people to deliver something.

So, you walk into your new team, give them your PowerPoint, and talk them through what you are going to do. Your communicating your vision, your strategy, not theirs. Your task, as you have defined it, is to get your people to execute your strategy. You have to explain the strategy, they will interpret it, they may not have exactly the same interpretation as you, will you ask them to play it back? Or will you assume they got it? And if they don’t quite get it? Will you explain it again, and again until they do, or will you listen to their comments and change?

And once they do understand it your going to have to ensure they do it. You now have a policing action on your hands – make sure they do what you want. (Fortunately management have tool for this, its called MBO – Management By Objective.)

So I don’t think this is a good idea. I do have an alternative, I’ll outline it here, I’ve done most of it although, to be honest, I’ve never done it in the kind of systematic way I’m laying it out here – but then I’ve never laid it out like this before.

First don’t do anything. Listen, watch, learn. Look around you. See what people are doing, specifically see what your team are doing.

Second, expand this into a longer investigation phase. Talk to the team, talk to them one-on-one, talk to their customers, their suppliers and any other interested stakeholders. Find what all these people think of the team, what they should be doing, what they are doing, and how they are performing.

Do you observations for a while, at least a month but maybe as long as three months.

Next get the team together. Find out what they problems they see collectively. Find out what they see as their overall goal. Now this could be tricky, hopefully what they are doing and what they think they are doing matches up with what the other stakeholders think. If they don’t your going to have to correct that, but I think in the broadest sense there will be something everyone can agree on.

Now work back. Get the team to collectively agree on what they should be doing to solve the problems. Don’t tackle all the problems, if possible throw some of them away, i.e. just don’t do them if you don’t have to. Remember people can only focus on so many things so don’t pick too many.

Once the group is in agreement it will probably help to work with everyone one-on-one to find out how they see the team, the aims and their responsibilities.

At no stage should you attempt to tell them a vision or a strategy. Let them work it out. These are bright people – if they aren’t why are they working for you? They are going to be far more motivated when they create the strategy and vision then when you tell them it.

Don’t worry that what they come up with isn’t what you expected, what others want or were the company is heading. You can correct this over time if you find a problem, the trick is to expose your team to the wider picture, make them aware of what the corporate strategy is, give them examples of were it is working and then help your team work back to change what they do.

I honestly believe that when bright people know where everyone is heading and are allowed to work things out for themselves they will a) get it right, b) be very motivated to do it, c) you’ll get a better answer because you used more brains and got collective action.

This may mean eating some humble pie and you don’t get to play with PowerPoint. The point is: it is not your ideas that are important, it is the team’s ideas. It is not important for you to have a big idea, it is important for you to help the team, and the people in it have big ideas.

Do it right and you will get a strategy and vision, and it will be a truely shared vision.

Blog slow down

Since returning from holiday I’ve been blogging less - some might argue this is a good thing. I’ve always tried to aim for about one blog entry a week, I think so far this year my average has been closer to two, so yes, I probably should slow down.

So, don’t worry, I’m still here, I still intend to keep blogging but I’m happy to do it at a slower pace - hopefully less quantity more quality.

Several forces are conspiring here to slow me down. First is EuroPLoP is just a couple of weeks away. At EuroPLoP we review writers papers, we tell writers what we think of their work. This means that you have to read a lot of papers before you get to the conference - I’ve read two, I’ve got another four to go.

Again this year I’m running a focus group with Lise Hvatum. This will build on last years successful focus group on Conway's Law and will discuss how social forces effect software architecture.

And just for fun, I’m the Focus Group chair at EuroPLoP this year, so a little more work there too.

The second force that is at play is my book. Regular readers will have heard occasional mention of this from time to time, well, I’ve decided to go for it and attempt to write a book. Actually, this book has been in development to some degree for the last two or three years. With the publication of Pattern Languages of Program Design 5 (yes, the physical copies arrived, hurray! I can hold it in my hands!) I’ve been enthused some more to finish this project.

I actually gave a friend some of the more recently written, unedited, chapters and got some really good feedback so that has given me more impetuses. And finally, when I look at all the material I have I can see that I’m damn close!

I’ve already approached one publisher and I’m waiting for my feedback, I’m trying to see rejection as a good thing, it will help me focus what I do next - but I’m hoping for acceptance!

As if this weren’t enough I’ve got a bunch of other things going on in my life just now which I won’t discuss in a blog.

So, dear reader, I hope you don’t mind if I slow down my blogging just a little bit.

Book review: The Search (Battelle)

While I was in Russia I got to do a lot of reading, in fact, I started The Search (John Battelle, 2005) on the plan to Moscow and finished it a week later on the flight back to London.

This is one of those books that got a lot of publicity last year, silly thing is, the anti-hype person inside of me tends to automatically avoid books that get a lot of hype. So, it wasn’t until one of my colleagues at work, Julian, suggested I read this book that I actually bought a copy, then it took me a couple of months to actually find time to read it. Now I have I’m glad I did and I need to say thank-you to Julian - perhaps in future I shouldn’t avoid books because they get a lot of hype.

The book has two themes, the first is the history, creation and growth of Google, in that it is a book in the mould of Start-up (Jerry Kaplan, 1994) - although its not the insiders view Kaplan gives and which makes that book worth reading.

Second it is a history of internet search, which is itself the history of one part of the internet story from 1995 through to 2005. Here the book is more like Robert Cringley’s Accidental Empires (1992) - another book worth reading.

I suppose Battelle could have written two books, one for each subject and just referenced the other. In parts you do get the feeling you are reading alternating chapters of two books but on the whole this approach works. You can’t really talk about Google without talking about Alta-Vista, Gopher, Yahoo and such, and neither can you talk about search without talking about Google so on balance I’m glad he put the two together.

Battelle thinks search is important, and he thinks search will (is) change the world. His argument runs like this: there is a mass of information on the internet, but if you can’t find it is fairly pointless. Therefore, search is key to leveraging all this information. This puts search, and search companies, in a key position to control the internet.

Although the book doesn’t specifically talk of Web 2.0 it does talk about a key part of Web 2.0 and therefore makes you think a lot about how the web is changing and were it might be going. For this reason alone its a good read and I recommend it. And by telling the Google story alongside this the book is a compelling read.

One of the thing the book has made me think about is the Quaero project. For the first time I understand why the European Union is getting involved in search. OK, I understand why, I understand we might consider search a public good, we might want to avoid the control Google, Yahoo or MSN could hold but as of yet I’m yet to see why we should spend public money on a problem the private sector is actively solving.

One footnote of reservation. Battelle almost exclusively talks about internet search, and his arguments are based on internet search. Unfortunately this does miss a big part of the search story and future, that of Internal search, search within the corporation. So there is no discussion of Autonomy, Verity or FAST. This is market that is important and is going to change in the near future, Oracle have just entered and Microsoft have stated an intention to enter. It would have been nice to see a chapter on this but the book still works without it.

So, in conclusion, The Search is worth reading, whether you are interested in technology, business or just the web in general.

Making sense of Russia

One of the things I try and do in this blog is make sense of the world around me. In fact, I think most of what most of do in life is to try to make sense of the world around us. Making sense of the world is a driver to learning and change.

I spent all of last week in Russia - I won’t go into why, those who know me know why, those who don’t, well....

A couple of days in Moscow then on to Siberia, Novosibirsk and Akademgorodok to be exact. And before you ask, no it wasn’t cold, it was hot actually, 30C a lot of the time.

So, I spent the week trying to make sense of Russia. It is tempting to try and understand Russia as America. Two old adversaries have a lot in common, the vastness of the countries being the most obvious but Russia is not another America and it doesn’t make sense to try and understand it as such.

Its also tempting to compare Russia with European like France, Germany, Britain. Indeed, Russia is a European country, and it shares a common history with Europe, it was Russia that defeated Germany and before that France - on both occasions allied to Britain. True, many Russians, maybe most, consider themselves Europeans but Russia is also different from other European countries - no other European country has a Pacific coast.

Russia has always been different to European and American nations. And in the twentieth century it cut itself off from many developments there. While the forces of markets and standardisation mean that Germany, France and Britain increasing look alike, an in turn look like America, Russia was cut off from this. Consequently it is different.

And as an outside it is always tempting to view a country as “wrong” or broken. Supposedly one of the signs of culture shock is thinking things are broken. Each country has its own forces and priorities. Russia may be different but sometimes these are for the better.

Take for example airport screening. Same metal detectors, same procedure, but there are two baskets for your belongings. This confused me but is actually better. One is just for shoes. After all, shoes are dirty things, why put them in the same basket as a coat?

From a technology point of view Russia is really interesting. It industrialised later and then cut itself off from development and created its own versions of technology o we have Tupolev instead of Boeings. That makes it interesting; some technology is better, some not so good.

It is only 15 short years since Russia re-engaged but in places it looks very, well Western. I think it was William Gibson who said “The future has arrived, its just unevenly spread around.” You could say something similar of Russia. Some places, some shops, restaurants, houses wouldn’t look out of place in London, New York or Paris. But its not consistent, elsewhere you find stark evidence of old-Russia. I think Russia will always look different to western eyes, if only because they use a different alphabet.

On the whole I’m hopeful for Russia. It has its problems - not least the current Government. To be fair, they have a difficult job to do, what worries me is not so much what this Government does but that it is laying foundations that a future administration could abuse.

Still I had a couple of positive experiences. Twice I encountered Russian officialdom. If you believe the press then bribes should have been exchanges. On one occasion the official was reasonable, played by the rules and the situation was resolved as well as it could be and now bribes were asked for or paid. On the second the person concerned stood up to an official who was over stepping the mark and who then backed down.

Perhaps Russia has turned a corner here, or perhaps the western press are just wrong.

Finally, nobody I was with and nobody I saw drank vodka. At least among the people I was with, young, successful - the new middle class - beer was the drink of choice.

I’ve made a little bit of progress in understanding Russia but like the country itself there is much more to explore and make sense of.

Some of my blogging rules (of thumb)

Its a year since I started blogging and I promise to reflect more fully on the positive and negative aspects of blogging. In the meantime, just before I go on holiday, I’ve had a go at codifying the rules of thumb I use when creating a blog entry

1. One blog entry one idea

Not always that simple but what I aim for.

2. Know what you are going to say before you start writing

Don’t ramble. Have a unified idea up front before you start writing. Sketch it out in your head, on paper or on the dictation machine - it helps if you can talk it through from start to end, that also helps keep it short.

Don’t ramble.

3. About individuals: If you can’t say something nice about someone then don’t say anything

Courtesy - an old idea I know, plus you don’t know when you’ll meet in future so don’t be horrid about someone unless they’ve asked for it.

Two exceptions: authors and politicians, they put their head up and expect to get shot at.

Fellow bloggers? I don’t know, Robert Scobie or Nick Carr, they are bloggers who I see as fair game - well, they both have books so maybe they are authors, but people like myself? Like my work colleagues who blog? No, these are ordinary folk, don’t be horrid to them.

4. Don’t change blogs after they are published– especially not the title

If I revised blog posts after the event I’d be here all day revising them. In some ways blog entries are a matter of record. Plus, knowing that you won’t change them helps you focus and think seriously about what you published.

I have changed a few entries within minutes of writing them, just to fix errors (spelling, grammar, logic, word missing) and I changed the title once but it really adds to the time it takes to write and entry so better to get it right before you publish.

5. Remember you next boss could be reading this blog

This cuts both ways: someone could read this blog and decide they want to hire me – unlikely but it could happen, I suppose. Then again I could be in line for a job and they decide to do some due diligence on me, wouldn’t be hard to find this blog, and I could wreck my chances of getting the job.

So, don’t give offence, don’t get too wacky, and if you do say something wacky then explain your self and give evidence.

6. Remember you current boss could be reading this blog

Try to be objective, don’t get hung up on events in the company; yes things that happen in work will inspire thoughts and ideas, try to generalise them and look for supporting evidence outside the company - otherwise it is just a comment on one company.

Don’t talk about the company directly, don’t disclose confidential information, don’t talk about current events in the company (comes from 3 above). Keeps life simple.

7. Remember you colleagues could be reading this

Blogging can be a great way to introduce new ideas to your colleagues but you are also responsible for being objective and not beating up on the company or for giving co-workers (too many) wacky ideas.

8. Don’t write in anger and haste

Yes blog entries are written quickly but I do try to read them through and correct them at least once before they are posted. Sometimes I get wound about something and want to blog it there and then - doing so is a good a relief valve. But, and it is a BIG BUT, don’t post it as soon as you’ve written it. Sit on it, if after a couple of days, when you’ve calmed down it still seems like a good then post it.

I have 2-3 blog entries that have never got posted because after a couple of days I realized they were written in anger and in hast, they weren’t as objective as they could be and they could give offence. Unusually these entries violate one of the rules above - and frequently ramble - so it is best to recognise the need to reflect before you post.

9. Strive for objectivity but don’t get hung up on it

I’d love to be objective but it would take too long, but it would require lots of research... and actually I don’t think true objectivity exists, at some level there is always context and opinion. Still, try to be objective, don’t be too biased, think through your arguments.

Lessons from Germany’s Mittlestrad

Last weeks Economist contained an interesting piece on German exports (subscription required.) One of the things that caught my eye was some of the discussion about the problems in the Mittelstand sector. Not that long ago the Mittelstand was seen as a role-model for how British industry could do better, for example Will Hutton’s The State We're in based a lot of its economic argument on the comparison between British and German on regional industry.

Now things aren’t looking so rosy for the Mittelstand or for other parts of German industry. In fact, sometimes Germany seems to be having a hard time coming to grips with the modern world economy - not so long ago one German minister described private equity investors as “locust.”

There is still much to be admired in German industry and I’m not really looking to bash German industry - or cheerlead for British industry. I’m just interested in understanding and finding some lessons from the predicament of the Mittelstand.

One of the problems highlighted by the Economist last week was that of innovation. True, German companies can be very innovative but much of their innovation centres around incremental improvements to existing products - and in particular quality improvements. This is an engineers dream, reaching for the highest quality product possible but it also means there is less radical innovation and fewer completely new products.

Companies, and individuals, are not producing completely new products, instead they are stretching the existing products. Problem is, when the existing product more than satisfies 90% of consumers requirements does it make sense to continue improving it? There isn’t much more market to take but quality improvements may increase price.

Sometimes pushing on in one direction is the right thing to do. Other times its better to try a different direction.

Part of this problem is success. These companies have had great success with these products so not only do they expect continued success but they see little reason to change their ways.

One of our images of private business people is as risk takers, people who say “Heck, I’m fed up 9-5, I’m going my own way” and accept the risk of starting something from nothing. Its worth remembering for a moment that many of these firms were started in the decade after 1945, at that time there wasn’t much else. The risk for these German entrepreneurs was low, safe jobs in big corporations didn’t, on the whole, exists. Starting a new business was the low risk option.

And there in lies a lesson for many privately held businesses. Once the initial risk has been taken, once cash flow appears and the product has a modicum of success the appetite for risk can disappear. Boot-strapped businesses may come to value predictability, low investment, low risk developments because they place a high premium on being around tomorrow. Since there are none (or few) outside shareholders nobody is going to complain about the lack of growth.

Conversely a business that takes cash from outside investors early on has to meet their expectations, and these expectations are for growth. Since the business founders aren’t playing with their own money they have less to loose by taking a risk on a big new product development, somebody else is paying and they are taking the risk.

In effect there is a specialisation here. The entrepreneur specialises in founding the business, building the company and creating new products and the investor, be they Angle or Venture Capitalist, takes on the risk in return for the reward of profit.

Now, move forward 50 years, those who founded in their business in 1950’s are looking to retire. If they are lucky they have the management talent within their family and they can simply hand it over.

Unfortunately it doesn’t always work like that. Perhaps nobody in the family wants to be in the business, perhaps they aren’t particularly talented or maybe the most talented person is a manger in the business and not a family member. What happens next? How does the founder cash-out?

Again external investors come into play. They buy the business, giving the founder an exit, and they seek out the best person to run the business. And this is what is happening, this is why so many private equity houses are so active in Germany just now.

Unfortunately, this kind of changes the German way of doing things. Suddenly businesses aren’t owned and run by the family. Ownership and management are separated. The new owners have more appetite for risk and want to see some more growth, more innovation and reduced costs. Then, on top of this the investors probably plan to sell the business in 4-5 years.

There is nothing fundamentally wrong with this model, its been operating in the US, UK and elsewhere for a good while but it does come as a surprise to many in Germany, hence the recent debate about the role of shareholders in Germany and the social model over. (A debate I’m not going to comment on, I don’t know enough and it is German’s debate not mine.)

On the bright side, more external investors in German business may encourage more innovation in different directions. With a little luck everyone will end up better off.