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Derek shares examples of how Essential Dynamics has applied in his business career, with stops at PwC, Micralyne, and Edmonton Economic Development.
Join Derek Hudson as he explores Essential Dynamics, a framework for approaching the challenges facing people and organizations. Consider your Quest!
Hello, and welcome to Essential Dynamics, the show where we discuss the principles of leadership and business through the through the prism of living your life. Welcome. I'm Reed McColm, your very good looking host. And I'd like to once again introduce the reason we're here, and that's mister Derek Hudson. Derek, how are you?
Derek:Reed, I'm fantastic. And now I'm thinking about prisms and the rainbows and diffraction and all kinds of stuff. So thanks for putting that in my head.
Reed:What are we talking about? Yeah. That's right. Well, what we're talking about today, Derek, is I would like to hear a few examples of how Essential Dynamics worked in your life, specifically in business. Can you give us a a few anecdotes perhaps of how essential dynamics applies to business principles?
Derek:Reid, that's a fantastic question. No pressure. So I have had no time to prepare for this other than the time I've spent my whole life preparing for it. But I I think it's you know, I've been in business one way or for another for thirty six years, and I've had the basic ideas of essential dynamics to play with for you know, in its current form for about six months. But as I've as I've stated, this is a process of discovery for me.
Reed:Okay.
Derek:I've set this framework. I've, you know, discovered this framework, then I just apply it to different experiences I've had in my life or things that I see. And, the framework's holding up. I I haven't always used all the pieces of it in the way I've solved problems in the past. So I think, one way to approach this because I'm, you know, doing it on the fly here is I'm gonna pick, a time in my business career and describe it.
Derek:And while I describe it, I'm going to think about the application of essential dynamics and tell you that at the end because I don't I don't know that I have anything right now. So gonna start and I I think I actually may have mentioned a little bit about this. We're gonna start about, my my first job after university, which was with Pricewaterhouse. Right. Pricewaterhouse is now PwC.
Derek:And at the time, it was this is the mid eighties. It was a very prestigious accounting firm. And so here's the connection between your world and my world. What was Pricewaterhouse famous for in the eighties?
Reed:You tell me.
Derek:The Oscars.
Reed:Yes. They were. They were the they were the ones to we went to during the boring part of part of the program.
Derek:And and the envelope, please. And somehow, the dude with Price from Pricewaterhouse in the suitcase handcuffed his wrist or whatever
Reed:Yeah.
Derek:Had had the, you know, the the winners. Right. So Pricewaterhouse was, you know, is a audit and assurance and accounting firm. And so their their main product at the time was looking at other people's financial statements based on all the rules of accounting and auditing and saying these are a fair presentation of what's happened in this company. The process for doing that in 1984 when I started was not particularly computerized.
Derek:In fact, not at all. Yeah. Not at
Reed:all. Uh-huh.
Derek:So, you know, we would be introduced to a big file room or a filing clerk or a payables clerk, and we would get a printout of the ledgers. And then we would select transactions where we wanted to get the backup for them. So we we would dig through these file folders and find the invoice and then see who signed off and where it was coded to and was it a legitimate expense, you know, things like that. So mind numbingly boring. And Yeah.
Derek:Besides mental health issues, which we didn't talk about back then, but I'm sure were experienced, the biggest occupational hazard was paper cuts. And you get a paper cut from a piece of, you know, photocopy paper, that's one thing. You get a paper cut from the file folder, like a new fresh out of the box file folder?
Reed:Oh, those are thick.
Derek:Woah. Yeah. Anyway so so the reason that I bring this up though is that without Essential Dynamics in front of me, I was on a quest.
Reed:Sure.
Derek:Sure. And my quest was that I had a university degree, and I realized that I actually didn't know that much about anything. And second, that nobody cared even what I did know.
Reed:Yeah. Yeah.
Derek:And so
Reed:what I true of more than just your job? I think I think most of us start out in a menial, tedious position.
Derek:Well well, you know, it's interesting because there are some professions where they, you know, they come out of the gate, you know, billable, functional, like a dentist. You know, a new dentist does dentistry.
Reed:Mhmm.
Derek:But a new accountant does not sign off on financial statements and does not provide, you know, you know, advice to a board of directors. So you gotta start somewhere for sure. But I was on this quest to, I think, maybe do two things. And one was to get the opportunity to to be in a room where my ideas would be heard.
Reed:Right.
Derek:And another would be to have have good ideas
Reed:Yes.
Derek:To to deliver.
Reed:And Even even those first early years, were you even in a room where you could hear other people's ideas?
Derek:So, you know, it was limited at first, but the cool thing about auditing is you do get the financial picture of the organization, and you get to ask people questions.
Reed:Man, I learn something new every day, and you just said a phrase that I've never heard before, and that's the cool part about auditing.
Derek:Well and it was all in my mind, which which is the power of the quest. Okay. Right? Which, you know, I and for I was fortunate, you know, that I came up to this on my own. I didn't have a framework, but it's I think that chartered accountant training will make me an interesting problem solver.
Derek:And so I'm willing to do the, the menial work and the and the coursework and the exams to get me there because I know that no one cares what I think right now. So let me let me fast forward a little bit. This is funnier than I thought it would be, Reed, but we'll see how it holds up. Let me fast forward a little bit. So I move it to consulting.
Derek:So now in consulting, you're actually giving people advice. You're trying to solve their problems.
Reed:That's what you do for a living.
Derek:And, that's what I do now. But as a junior consultant back in the day, sometimes the the data analysis wasn't that different from auditing, and someone else was, you know, pulling it together and advising the client. Maybe the big difference is the client has to have auditors, but they invite consultants in on particular issues. So we were at least, you know, kind of invited into the room. So after a particular meeting, one of the, members from the client side told the partner that I worked with, they said, you know, we really like Derek.
Derek:We just wish he had a little bit more gray hair.
Reed:Oh, more experience.
Derek:We're we're here in Zoom so you can see
Reed:Yeah.
Derek:That in the thirty years since that, I've I've added my fair share of gray hair, both on my head and with the experience that I've had. So I was building that, you know, that experience and that credibility all through that time, and that was something that gave meaning to that quest. Okay. You know, it didn't pay very well. The hours were terrible.
Derek:The work was, you know, challenging, sometimes stressful. But I did I was on a quest, and I knew I was on a quest. I didn't necessarily have the language of essential dynamics to explain it. So so that would be a a story about essential dynamics from my Pricewaterhouse days.
Reed:Okay.
Derek:Okay. The
Reed:start of your quest.
Derek:So then if we go to my MicroLine days, you know, and I mentioned in an earlier episode that shortly after I started, someone gave us the book, The Goal by, Eli Goldratt and one of our customers, and they expected us to figure out the theory of constraints. One of the principles of steer theory of constraints that's really interesting is you shouldn't do needless work. And you've probably both Reid and Bren, our engineer here, have probably heard the term just in time inventory. And and the idea there is that inventory if you think about car manufacturing where it came from, you know, it's pretty expensive to have, you know, brakes and motors sitting in boxes waiting to be added to a car.
Reed:Yeah. Yeah.
Derek:It takes a tremendous amount of cash, takes up space. You run the risk of making a bunch of engines and then finding out that they don't work when you install them in cars, and now you've got, you know, this obsolete inventory and stuff like that. Right? So inventory is a is a significant cost in a system. And so one of the principles that we learned from work at MicroLine is this idea that sometimes termed choke the release, which means
Reed:Oh my.
Derek:Which isn't violent at all. Okay? What it what it means is I'm not gonna release a a new assembly into the system until I know it's needed down the line. K. So so the semiconductor industry is really interesting in a lot of ways.
Derek:It's almost unfathomable how integrated circuits are are made on silicon chips. And we've you know, we're sitting here on Zoom. Bryn's got a soundboard. There are actually microchips in the charging cables in your like, that you put plug your phone like, there's these chips everywhere now, and it's insane what they can what they can do. But it's all done by taking a silicon wafer and only doing three things as I understand it.
Derek:One is patterning. So you use a photographic process, kind of the opposite of an enlarger. So you it's kinda like printing microfilm.
Reed:Okay.
Derek:Right? So you get these really fine features And then deposition where you add material on, and etching where you take material off. And so based on those three steps, you can make these really because you can add metal. So now you have a conductor, you can add an insulator, and you can basically carve these tiny little devices. And you do it on these increasingly bigger and bigger wafers with increasingly more density on the wafer.
Derek:That's why these things devices are so cheap because there's no fingers involved in cranking out the accelerometer that tells you if your phone your your phone if you're holding a portrait or landscape. Just it's amazing stuff. And I know I'm rambling a bit here, but it's absolutely amazing. But in the early stages, you start a wafer and it's got maybe a thousand devices on it, they're not all gonna work. Right.
Derek:There's gonna be
Reed:Let's just
Derek:there's gonna be a dust speck. There's gonna be a a dip in the deposition of the metal somewhere, and so that device doesn't work. And so you might get you know, in early stages of production, you might get 5% or 10% of the devices are any good. And if think about when you have multiple steps, if everyone has a little bit of a loss, you multiply that up. It's it's, incredible when when you would get really high yield on a whole wafer after a hundred processing steps.
Derek:Anyway, the point of this is that semiconductor factories sometimes measure their their volume by wafer starts. So I started 10 wafers today, so that's how much production I'm doing. And we're talking about the oil and gas industry at our last episode. They always talk about barrels per day. Right?
Derek:Barrels of production. So Yes. The the dollars go up and down, so that's not as easy to compare, but, you know, we're making so many barrels a day. Well, the nice thing about that is it's coming out of the ground. Wafer starts is earlier in the process, so it's not necessarily, the best measure.
Derek:And so here's the situation with, talk about choke the release. We had a customer that needed us to produce these new devices very quickly. They needed a lot of them.
Reed:K.
Derek:We had other customers, and so we're trying to allocate capacity in our factory between what they want and what our other customers want. And, of course, they're a big customer, and they want all our attention.
Reed:Right. So they want it exclusive.
Derek:They want it exclusive, but we can't bet our whole company on them. And they understand that. So what they did at one point in one of our contracts is they mandated the number of wafer starts.
Reed:Wow.
Derek:But but that doesn't say anything about how many you produce the other end. Right? So you just keep
Reed:doesn't say wafer finishes.
Derek:Stuff stuffs things in the pipeline expecting it to be faster coming out the other end. You know, we talk we talk in the theory of constraints about, any improvement you make outside the constraint doesn't flow through to the end. And so if if I keep pushing stuff in in the top of the pipeline and I don't I don't deal with the bottleneck, I'm not gonna get any more out. But what I am gonna do is I'm gonna spend money. Spend a lot of I'm gonna spend a lot of money not producing more product.
Derek:So, anyway, I learned that lesson from MicroLine.
Reed:Okay. So what was the solution? You had a lot of wafers to make for a particular client, whereas you had other clients who had maybe less demanding orders, but nonetheless, a lot of other clients. What's the solution?
Derek:So so the solution didn't wasn't arrived at in this case. Oh. You know? And I'll I'll tell you the sad story. You know, we continued on this path for actually even a few years where we were, from their point of view, kind of holding them back, you know.
Derek:So MicroLine was the bottleneck
Reed:Ah.
Derek:In creating a bigger product. But in, the February, Folks came to Edmonton for a meeting and they said, like, we need another line started. Like, you gotta make us more. You're killing us. And, so we made a bunch of promises about what we do to, you know, get more production out.
Derek:And then about three weeks later, had another meeting. Now they didn't come to see us this time. They just got on the phone.
Reed:Okay.
Derek:And their phone phone call was, well, we've been looking at the forecasts, and we don't need you to ship for at least six months.
Reed:Oh my goodness.
Derek:This is when the whole telecommunications bus went on at 02/2008, '2 thousand '9 recession. And their forecast was a calculation, which is based on a bunch of assumptions. They reset the assumptions and saw, like, oh, we have more than we need. So stop. Stop everything.
Derek:Shut it down. We'll call you in
Reed:the fall. That's those are a lot of working parts there, Derek. There's a lot there's now let's let's break them down and bring them into Essential Dynamics because there may have been a solution that essential dynamics points us to. Is that right?
Derek:You know, sure there is. So, you know, for the company itself, having really being really solid on where what purpose x and purpose y are, you know, might have given us a little bit more perspective in dealing with the demanding client. Like, they we made a lot of money off of them. Mhmm. But we took on a lot of risk, then played out when they, you know, stopped their orders.
Reed:Sure. Right? I imagine sincerely and and perhaps, I don't know the end of the story, but perhaps catastrophically affected your business as well.
Derek:Yeah. It was it was challenging for for a long time, and we were on the path out of that when I left. And then they got into trickier problems down the road that I'm not as that I'm not as familiar with. So there's always those kind of challenges in business. The other one is on that idea of theory of constraints.
Derek:And so what what you'd want to do is to have more controlled processes where you are choking the release and feeding only the inventory in that you can process so that you're not creating this huge volume of parts that may not ever get finished, the specs might change. You've invested a lot of time and money in them. So so there's that. Now I have we have a little bit of time left, Reid, and you asked about stories about essential dynamics. So the other the other big part of my working life as an employee was with Edmonton Economic Development.
Reed:Mhmm.
Derek:And the one thing that we haven't touched yet, you know, is know, we talked about the purpose and the path. We haven't really talked talked about the people side.
Reed:Right.
Derek:And so I'm just I'm thinking on my feet here, but Edmonton Economic Development, I've mentioned this before. One of the really cool things about working that organization is that people who work there, were passionate about the the city of Edmonton, about our community. So for people listening from from far away, just got to tell you that Edmonton is the northernmost major city in Canada. And it's a really cool place because we've figured it out for ourselves. You know, one of like, we we create our own fun here, you know, and it's it's sometimes cold in the winter.
Derek:It's certainly dark through December and January. And, you know, we have people are just fantastic to be with and there there's lots of fun things to do where we spend a lot of time outside. We have access to the mountains. So and then we talked a little bit earlier about how Alberta companies are just, I think, really well run, and, and people are down to earth. And so, anyway, lots of lots of selling points for Edmonton.
Derek:So people join the organization because they like Edmonton, and they like the organization, and they wanna be part of So there's an alignment there of the company's purpose and the people. Now
Reed:The people are a major attraction. You're talking about Edmonton.
Derek:Well, so the people in the organization are buying to the purpose of the organization, which is to promote Edmonton and to and to talk about how great Edmonton is and attract business and and visitors and stuff. Sure.
Reed:I get it.
Derek:Yeah. So so there's that. But on the on the the dynamic part of people that we talk about is the individual and the group. You know, we get these highly creative people. Some of them really creative and conceptual, and then you put them in organization.
Derek:And sometimes you come down on them with, you know, this is the rigid program that we're doing and it cramps their style and you don't get the best out of them. And other times, I saw it the other way, which is, we need to hire that person because they're the kind of person we hire. They're super creative. They're super, excited about Edmonton. Let's just hire them and see what they can do.
Reed:Okay.
Derek:I saw that
Reed:take a chance.
Derek:Yeah. And I saw that sometimes not turn out that well because we didn't put enough boundaries or constraints on them from the organization, enough expectations for the organization that they could ever figure out what success looked
Reed:like. Okay. Yeah. That's that's a good one. I wanna I wanna come back to that sometime, what success looks like because that's got that, I think, is relevant to what we're talking about.
Derek:So so we had a few people who said, I'm passionate about Edmonton. I wanna work here. I have all these ideas where, you know, ultimately, it didn't work out and it didn't take that long to figure out because we didn't have a system for them to step in and contribute to in the area that they wanted to work in. And so that's that's interesting because, you know, one of the things about essential dynamics with these dynamic forces is there's never a right answer. There's never a cookie cutter approach.
Derek:You can't say this is how you motivate people. This is how you direct people.
Reed:Okay. Okay.
Derek:We need to, you know, let the individual express themselves their way to a point to get the most out of them, and we need to have them work in a system where that can be directed to some productive productive means.
Reed:Okay.
Derek:And so, anyway, those are some stories from my my various positions in life where I've I've seen these things play out.
Reed:Derek, I so appreciate your thoughts and your time and the time you've spent just really considering where you are and where you want to go. I find that inspiring. Where can they reach where can people reach you if they wanna know more?
Derek:It's easy to find me on the web at derek hudson dot c a, and I'd certainly be interested in people's suggestions and comments about things that we should be talking about.
Reed:I hope you I hope people will respond. For Bryn Griffiths, our engineer, for Derek Hudson, our thoughtful, leader, and myself, I'm Reed McCollum. Until next time. Consider your quest.