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Bombardier, Strategy & the Missing Big Picture

Posted: 01/09/11 12:02

The recent furore surrounding the awarding of the Thameslink contract to Siemens ahead of Bombardier and its resultant negative impact on the East Midlands' economy (in particular that of Derby) has raised many questions of Government's handling of the issue.

Most of these questions have centred on single issues ranging from the limitations of EU law on the procurement process to the loss of jobs at Bombardier and even the value (or otherwise) of government not losing face.

But what no one has asked, or not that we have seen, is what might have been the effect of a good strategist taking a look at the issue before it became an issue...

It's a complex issue, one I admit to having simplified for the purpose of demonstration and of keeping this blog relatively brief. Complex or not, it is an issue that should never have arisen.

I can imagine the non-strategists way of approaching the design of the tender brief for the Thameslink contract; "what we need is the company that offers best value against the published criteria."

It sounds sensible. I mean, why on earth would you say; "let's award the contract to a bid which will cost us more"?

Yet, by failing to consider the bigger picture in the way a good strategist would, that is exactly what the government has done. The word 'value' has been applied very narrowly and so when the Department for Transport stated; "The evaluation concluded that the Siemens bid offered best value for the taxpayer and for passengers," what they really meant was that in terms of the cost of the project it offered the best value.

But what should 'value' mean to the taxpayer? What are the possible negative effects of awarding the contract to Siemens?

The one that has made the biggest headlines is the shedding of jobs by Bombardier in Derby. Overlooked though has been Siemens statement that winning the contract will mean they will be creating new jobs. Will one cancel the other out?

Not even closely. Siemens own estimate is that winning the contract will lead to the creation of 300 new jobs in the UK. Meanwhile, as a result of losing the tender, Bombardier has already issued 1400 staff with redundancy notices.

That hardly balances the books and, big picture; it's a lot worse than that. Estimates suggest that suppliers and related companies will shed, conservatively, at least the same number of jobs as a result of lost business. That is 2800 jobs lost to 300 gained. Value?

But that isn't the big picture. We still need to factor in the loss to the local economy of 2800 people (and their families) tightening their belts and spending less (at a time the government wants us to spend more to boost the weak economy). We also need to factor in the increase in benefit payments that will be made from the public purse to those affected.

And we still haven't arrived at the big picture a good strategist would have looked at from the outset. Depressed areas often struggle with social issues, children from depressed areas have been shown to struggle more educationally, health and well-being are generally poorer in depressed areas and without outside stimulus such areas often struggle to regenerate. All of these have cost implications for the taxpayer.

Not taking the big picture into account from the outset will leave families struggling, local economies nose diving and the taxpayer forking out far more than will be saved by the awarding of the contract to Siemens. Value?

Even ignoring the high cost of those social aspects, it is likely the axed jobs at Bombardier alone will result in at least £20 million in lost tax revenue and added benefits (Manchester University).

The more you consider the 'issue' of awarding a contract for the Thameslink programme, the more you realise it is far more than that single issue. As with almost everything consideration must be (or should have been) given to cause and effect, to the big picture. It is simply not possible to divorce single issues and hope they can be dealt with in isolation. Good strategists know this.

Of course, it is easy for me to be critical; I have the benefit of hindsight. But honestly, look at everything covered above and ask yourself; "were these issues really that difficult to predict?"

Now we are where we are. A mistake has been made. What does the good strategist do when recognising a mistake was made in the planning process (because mistakes do get made)? The strategist looks again at the issue and asks, "how do we put this right, how do we address the big picture so that we have our project back on track?"

You might think (as would I) the sensible thing to do would be to take a step back and put the awarding of the contract for Thameslink on hold. You might think (as would I) that now the bigger picture is clear for all to see a reappraisal would be very high on the government's list of priorities.

Sadly not; strategic thinking remains conspicuous by its absence. Transport Secretary Philip Hammond claims that the process cannot now be reversed. Yet top legal minds such as European business law expert Chris Bovis (Hull University) say this is not so. Bovis says; "'in theory, and in practice, the ¬Government can abort the contract at any stage. The consequences could be serious or less serious depending how much contractually it is committed. The Government would be liable to compensate the firm for abortive costs, such as money incurred during bidding."

Perhaps the real reason for not reconsidering was that stated by Business Secretary Vince Cable when he said such a move would "cause significant damage to the Government's reputation."

However, there is the hint of a small light at the end of this (railway) tunnel with the government's announcement that it is to delay the awarding of contracts on the Crossrail programme by six months, a move that will allow a review of the its public procurement process to be taken into account.

But what of the strategy? What of planning to cover the big picture? There was and is little sign of (good) strategic leadership in addressing the Thameslink fiasco and although we can hope for better on the Crossrail project, with the same people considering the matter, with the same single issue mentality unlikely to be replaced by strategic, big picture thinking, we should not hold our breath while waiting.

And what of you and your business; what is the lesson you can take from this?

It is simply this, in business as in politics there is rarely, if ever, a challenge which is wholly single issue. Remember that once you apply some common sense, big picture strategic thinking the implications of your actions (cause and effect) can usually be predicted and should therefore be planned for properly from the outset.

Plan properly now or take the pain later.


© Jim Cowan, Cowan Global Limited, August 2011

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