Finding Strategic Opportunities - A Tempo! Supplement

I have published a new Tempo! supplement on Scribd. This one is about the virtues of using multiple paradigms and strategic patterns when solving business problems and developing business strategies. I hope you enjoy it.
Finding Strategic Opportunities

Topsy-Turvy World: Reflections on the EIU Organizational Agility report

Awhile ago the Economist Intelligence Unit published a report named Organizational agility: How business can survive and thrive in turbulent times. Here is a quote from the preface, just so you know what the report was all about:

In December 2008 and January 2009, the Economist Intelligence Unit conducted a survey of 349 executives around the world on the benefits, challenges and risks associated with creating a more agile organisation. The Economist Intelligence Unit wrote and executed the survey, conducted the analysis and produced the report. To supplement the findings of the survey, the Economist Intelligence Unit also conducted in-depth interviews with a number of business executives from leading companies.

The results are interesting. For example 40% of the respondents considered agility to be extremely important, a core business differentiator. (And I agree with them.) Another 48% considered agility to be somewhat important, a contributing factor to success.

So far, so good, but when asked what the most important business challenge will be, about 50% of respondents answered "to drive down operating costs".

This sets up a conflict, because agility requires redundancy. Redundancy costs money. In other words, companies must spend money in order to be agile enough to make money in turbulent times.

We can express the conflict using an Evaporating Cloud (conflict resolution diagram), like this:

There is of course no answer to this dilemma that is always correct. In some situations, driving down operating costs is the only thing you can do, in other situations, being more agile will open up a world of possibilities. Sometimes you can do both, like Steve Jobs did when he got back at the helm of Apple. (He killed several projects that were going nowhere, which saved money, but also gave the organization focus, and enabled it to be more agile.)

In most cases, the best solution is to go for agility. Cutting costs is a defensive measure, and you won't win a fight by defense alone. Driving down costs is a viable strategy only if the money saved can be used to take the initiative and go on the offensive. It is reckless to cut cost without first exploring alternatives and exploring possible negative consequences of cost cutting, like reducing capacity at a constraint, or creating a new constraint. (Don't forget that employee morale easily can become the constraint limiting the performance of your organization.)

Despite this most companies go for cutting costs without really considering alternatives. This is partly because it is easier. (Even if it doesn't work, it is still easy.) Partly it is because of a psychological phenomenon: loss aversion. Loss aversion means that our emotional reaction to a loss is much stronger than our emotional reaction to a corresponding gain.

The agility side of the Evaporating Cloud above is about working very hard in order to make a gain. The cost cutting side is about an easy way to avoid losing net profit.

There is only one thing, really, that can induce us to take the more difficult path: Passion. Managers and executives need passion driving them to challenge themselves. Passion for what? Doesn't matter really, as long as it is a passion they can infuse in the rest of the organization. Steve Jobs has made good use of his passion for design. Richard Branson is passionate about doing and learning new things, and having fun.

Without passion, only extrinsic rewards beckon, the work of leading the organization is merely an obstacle in the way of obtaining the reward, and the preferred route to the reward is a shortcut.

For example, try to make sense of this: Every manager wants their organization to improve, but according to the survey only 17% were interested in having an improvement process. I must admit, the Evaporating cloud has me stymied:

What can possibly be gained by not having an improvement process? Well, there is one thing: All serious improvement processes come with tools for doing root cause analysis. When you do a root cause analysis of a problem, you often end up identifying a policy decision as the root cause of the problem. That creates work for managers: They must fix the problem. Even worse, they must learn how to deal with the problems, for example by studying and practicing Lean, TOC, SPC, Systems Thinking, etc.

If you do not have passion, and your work is just an obstacle you must overcome in order to get your paycheck and bonus, why on Earth would you want to create more work for yourself? Of course you wouldn't.

On the other hand, if you are one of the many competent and passionate managers that do exist, if you do get serious about improvement processes, you will be the nail that sticks out. We all know what happens to that one. It is my experience that good managers often make improvements in secret, to avoid having their efforts squashed by superiors. It's a topsy turvy world:

In our world where topsy-turvy is the norm
Where we’re taught the only way is to conform
Where nothing is quite sane
Where peace can never reign
So long as topsy-turvy is the norm
–Stanley Cooper

John Boyd pointed out that most of us have the goal to "survive on our own terms". Bearing this in mind, the cloud can be redrawn like this:

This version is a bit more cynical. I can't say I like it, but I suspect it is fairly close to the truth. If managers believe not having a process of continuous improvement will increase their personal comfort, it explains a lot.

It is of course possible to systematically break these clouds, and resolve the conflicts, but I'll save that for a future posting. For now, thinking about the conflicting desires is itself a good start.

If Companies Were Football Teams...

There are a couple of slides I'd like to share. They are from one of the two presentations I held at the DokumentInfo Technical Documentation Conference in Gothenburg (November 10-11). The presentation was mainly about producing technical documentation, but there were a few slides related to strategy. The statistical information is from Stephen Covey's The 8th Habit.

According to a poll of 23,000 American workers, only 37% knew the strategic goals of the company they worked for. Only 20% were enthusiastic about them.

Only 20% of the people asked knew what their mission was. That is, only one person in five knows what they are supposed to do in order to achieve the company's objectives.

Only 13% of the people asked described their environment as highly cooperative.

In his book, Covey brought the statistics alive by comparing companies with soccer team. Let's do something similar using a photo from stock.xchng.

There are 18 football players in this photo. If companies were football teams, only seven of the players in the picture would know which goal was theirs, and which belonged to the other team.

Only four of the players would care which goal was theirs.

Only four of the players would know which position they are playing in, and what they are supposed to do when playing that position.

Sixteen of the players would compete with their own team members in some way, rather than focusing exclusively on competing with the other teams.

Think about it: This is the "highly competitive" environment you and your company is facing. Can you spell opportunity? If you can align the forces in your company, make them move towards the same goal, you will be a winner.

Doing this takes some specialized knowledge, which you can get by studying and experimenting, or by hiring a consultant like me. It also takes perseverance and courage, which you will have to supply yourself. But do think of the payoff: A great company, with great people, and a great future. And fun, I can promise you that. It won't be an easy journey, but it will be the most fun, exhilarating challenge you have ever had. An accomplishment to be truly proud of, pride you can share with every member of your organization.

Why not begin building a better company first thing when you get to work tomorrow? If you decide to do that, let me know how it works out.

Systems Archetype: Accidental Adversaries (The Road to Hell...)

There are many ways a relationship can go wrong, in business, and for individuals. The Accidental Adversaries systems archetype describes a common pattern, where a relationship begins with the best of intentions on both sides, but deteriorates over time. The pattern is quite complex, which makes it insidious and sometimes difficult to recognize. It looks like this:

What happens is that two parties, A and B, enter a relationship for mutual benefit. In the beginning, everything looks rosy, but then A takes some action that looks perfectly reasonable from A's perspective, but creates unintended difficulties for B. B then does something to recover from the consequences, and this affects A.

Often neither A nor B understands the effects their actions have on the other side. A sees only the undesired effects B's actions have on A. B sees only the undesired effects A's actions have on B. Pretty soon A and B begin to think of each other as stupid or evil. The downward spiral (The Eroding relationship loop in the figure above) can escalate until the relationship is dissolved, or turn former allies into bitter enemies.

One of our greatest assets work against us when we are caught in an Accidental Adversary pattern. Our brains are formidable pattern recognition engines. A human brain is also very adept at filling in unknown areas in patterns. Unless a conscious effort is made, the brain will go for the simplest explanation possible, from its own perspective. It is very easy to jump to the conclusion that the other side has some nefarious motive, when, in reality, both sides are guilty of the same thing: having a local point of view and limited range of vision and insight.

Once an unfavorable opinion (attribution error) of the other party has been formed, it can easily be cemented by confirmation bias, our tendency to interpret new data so that it confirms our current opinion. Our opinions do of course affect our behavior. If we no longer trust our ally, we are likely to take preventive measures in order to protect ourselves. The other side is then likely to interpret our actions as nefarious, which prompts them to protect themselves, turning our original attribution error into a self-fulfilling prophecy.

Halting the Downward Spiral

One way of resolving the conflict is to just let it run its course until the relationship dissolves. This is common in marriage, about one third end in divorce (in Sweden). It is also common in business. This has the advantage of not requiring anyone to make any mental effort. All people have to do is let their reptile brains take charge and react to the "evil" actions by the other side.

Emotionally satisfying as this may be, it has a couple of drawbacks. One is that it may weaken both sides, leaving them vulnerable to other dangers. Another, in my opinion the greatest, is that no one learns anything, and is liable to repeat the same mistakes in the future, with different allies.

On the other hand, if we choose to learn, choose to take positive action, and break the unfolding pattern, we will gain experience. This experience will be valuable not just because it saves the stressed relationship, but because it will help us recognize, prevent, and counter similar situations in the future.

Fixing the problem hinges on making both parties aware what is happening. If both parties agree to deal with the real problem you have a good chance of succeeding in dissolving the problem. Here is one way to do it:

1. Raise your own awareness of the problem. Study the archetype and use it to figure out how your own actions have contributed to the deteriorating relationship. Make a conscious effort to understand how your actions have been interpreted by the other side.
2. Open talks with the other side. Tell them that you want to restore the good relationship. Go back to the original reasons for having the relationship. Tell them up front about the archetype, and that you are trying to figure out how to fix your own end of the system. Ask the other side to help you with this by providing information about the problems you have caused. It is likely the other side will reciprocate by making a similar offer. It may take some time though, until they trust you to be serious. (If they do not, well, not all relationships are worth saving...)
3. Build a map of the relationship, both benefits and undesired effects. You can use a Current Reality Tree  (CRT) or Causal Loop Diagram to do this. I prefer the CRT, because it fits neatly with a complete toolkit for solving these kinds of problems, The Logical Thinking Process (TLTP). Pay particular attention to negative branch analysis when developing the CRT. (This means you must identify and include undesired effects, not just focus on what you want to happen.)
4. Develop a map of overarching goals that unite the parties. I recommend you use an Intermediate Objective Map (IO Map) to do this. IO Maps, like CRTs, are part of the TLTP toolkit.
5. Establish metrics (Key Performance Indicators, KPI) to monitor your collaborative behavior. Use the IO Map to figure out what metrics to use. Pay attention to finding KPIs that are leading indicators of problems. You may need to create low level IO Maps (process level) to do this.
6. Establish communications protocols that ensure both sides get advance warning of what the other side is about to do.
7. Build a high level road map for rebuilding the relationship. The road map must be developed jointly, and must include actions by both sides. A Future Reality Tree (FRT) is great for this. (You guessed it, FRTs are part of the TLTP toolkit.) The FRT will contain injections, very high level descriptions of intermediate objectives that must be achieved to restore and/or develop the relationship.
8. If necessary, build more detailed work breakdown structures showing how to achieve the injections in the FRT. A Prerequisite Tree (PRT) is my preferred tool for this. You can use whatever method you or your company uses to create project plans. The idea is to create a plan containing concrete actions.
9. Execute the plan you and your ally have made. 

Be prepared for a bit of stumbling on the way. You do have a good chance of succeeding though.

Of course, you can substitute whatever problem solving and project planning tools you or your organization uses. If you don't like fancy diagrams, try just talking things over with your accidental adversary. In order to succeed, you must first try.

Dr. Russel Ackoff has Passed Away

Dr. Russel Ackoff, one of the greatest Systems Thinkers ever, has
passed away recently.

http://ackoffcenter.blogs.com/ackoff_center_weblog/2009/10/russell-l-ackoff-management-consultant-systems-thinker-90.html

What does the logo mean?

You may wonder if the logo on my web site and on my articles at Scribd carries some meaning beyond "my sister got all the art genes" or "to cheap to hire a logo designer".

It does.

The image symbolizes interacting systems. I sometimes label the nodes (the orange balls):

• We
• Customers
• Allies
• Competitors
• Environment (Society and resources)

Thus, the image can be viewed as a map of the strategic landscape business organizations must deal with. This map reminds me that there is a world full of possibilities. There are often many routes to any given objective.

If you are a regular reader of this blog, you may have noticed that the logo resembles part of this diagram:

This is John Boyd's decision loop model, the OODA loop. The focus point of the OODA loop is the Orientation phase, where we interpret the data we observe and try to make sense of it. In the OODA loop model, there are five factors that influence how we orient ourselves:

• Genetic heritage
• Cultural traditions
• Analysis & synthesis
• Previous experience
• New information

These five factors interact, not just to shape our decisions, but also to influence, shape, and reshape, each other.

The OODA model is equally applicable to individual and group decision making. It has been used when training fighter pilots, and when creating business strategy.

So, the logo has multiple meanings to me. The theme is interaction, but what the interacting subsystems are, varies depending on the interpretation of the logo. Both viewpoints are equally valid, and there may be other, equally valid, points of view that just haven't been discovered yet.

This leads to the idea of paradigm transcendence, the ability to choose between co-existing thought models, which is fundamental to Boyd's orientation concept. Thus, the logo does take on a third meaning, symbolizing the most powerful concept known to mankind.

Consciously shifting paradigms requires a great deal of self-awareness. I recently expressed my vision of a world of self-aware people as:

A world where everyone can achieve their full potential

That is pretty much it, except for one thing:

What's with the color?

I chose orange for a reason. Maybe I'll write about it some other time.

www.henrikmartensson.org is up and running

My web site has been down. Got it up and running again. I took the
opportunity to remove a broken Google gadget, fix a link to the best
push process demo ever (http://kallokain.blogspot.com/2007/07/lucy-in-chocolate-factory.html
), and to add links to my articles on Scribd.

I have been working too much to even tweet lately. Lots of backlogged
material though.

Sent from my iPhone

Mark Levison's Learning the Best Approaches for Your Brain

Another note to myself about books to read:

Mark Levison's blog post Learning: the Best Approaches for Your Brain

Mark and I follow each other on Twitter. Lot's of cool stuff on his blog.

Lenscraft's List of Flavors of Systems Thinking

Sometimes I use this blog as a kind of notepad, when I want to make a note of something I believe my readers might be interested in. This is one of those occasions.

There is a nice overview of different branches of Systems thinking here:

http://lenscraft.wikispaces.com/systems+thinking

Even better, there is a nice list of books too.