Kallokain

Viva la Pasta! - Spaghetti Management

2011-12-01T23:54:00.001+01:00

Bo Hagström is a well known chef, and hosts Sun Food (Swedish: Solens Mat), a Swedish TV show. I met Bo when he signed books in a bookstore. His latest book, Viva la Pasta! is about, you guessed it, pasta!

Bo is on a mission: He wants to teach Swedes about pasta. As it turned out, with good reason. I got a short but interesting lesson.

Bo handed me two strands of pasta and asked me to feel them. One strand was very straight, and felt completely smooth. The other strand was different, slightly crooked. The surface felt slightly rough.

The straight, smooth strand is bad pasta, Bo told me. It is low on nutrients. It does not taste very good either. Because of the smooth surface, it does not absorb flavors from other ingredients.

The slightly crooked strand with the rough surface is great pasta. Much more nutritious. Because it is porous, it can absorb flavors from sauce and other ingredients.

The two kinds of pasta cost the same in the store. The bad pasta outsells the good pasta many times over. Pasta buyers lack the knowledge they need to distinguish between good and bad pasta.

"The cost isn't important," Bo said. "What is important, is the value you get."

I couldn't help laughing, because I realized it's exactly the same thing in my job. In your line of work to, I'm sure.

Imagine that you are a pasta-consultant. You want to teach manufacturers how to make really good pasta, and buyers how to choose the best kind. How would you do it? How would you convince manufacturers to make better pasta when the consumers don't know the difference between good and bad? When the consumers have never tasted good pasta, don't even know there is good pasta.

We can distinguish good from bad only when we have different things to compare with each other. With pasta, you can taste and feel the difference. And, it is no big deal if you buy a package of some brand you haven't tried before, and discover you don't like it.

It is much more difficult to try something new if it is expensive, if the stakes are high, and if it is difficult to assess the result. Picking the right ideas about leadership, management, and process design would fall into that category.

What I learned from Bo, besides choosing pasta, was this: I need to show potential customers something simple, like two strands of spaghetti. It must be something that can be felt, so the difference can be experienced.

Something to think about.

Of course I bought a copy of Bo's book. Pasta experiments await!

Oh, there is one thing more:

Suppose you have a pasta factory, and you want to make the very best pasta. For this, of course, you must have the very best process, so you start a Six Sigma program.

Will that Six Sigma program give you straight, smooth pasta, or crooked, rough to the touch pasta?

Beyond Budgeting - Fixing the Budget Mess

2011-11-11T10:30:00.001+01:00

The audience at LESS 2011 conference was fantastic. Interested, educated, bright, and enthusiastic. Great people to meet and speak with.

The chief cause of problems is solutions.
–Eric Sevareid

At the LESS 2011 conference an entire track was dedicated to solving the problems caused by the annual budgeting systems most organizations use.

Yes, caused! We have used annual budgeting for a long time. This means annual budgeting was created to solve problems in a world quite different from ours: The world moved slower, in more predictable cycles.

Today, the world changes very quickly, and is a lot more unpredictable. This is not a bad thing per se. You can turn it to your advantage (which is what I talked about at the conference), but doing that while hanging on to an antiquated economic model is very difficult, to say the least.

Does this sound familiar:

"Great idea, but we can't do it right now. Let's wait for next year's budget." The great idea will be delayed, which means your company will lose the money it could have earned during that delay. Even worse, delaying implementation means someone else may get there first, and take your market away. Or, the great idea may simply be forgotten. The employee who had the idea may get tired of waiting and move on to another company, or start up a business of her own.
"To ensure that we get the budget we need next year, we need to spend the money we have budgeted this year." Utter insanity from the point-of-view of the whole organization. And yet it makes sense from the point-of-view of a department or a project.
"Unfortunately cross-the-board budget cuts forced us to close down X. Without X, so much revenue was lost that we had to cut Y. We lost the company in the end, but there was really nothing else we could do." To put it very frankly: Bull! Truly hopeless situations are rare. Most of the time, the real problem is that the way we solve problems isn't very good. At the LESS conference, I demonstrated a Chinese problem solving method with the cut-the-budget method common here, and showed how the Chinese method can generate solutions simply not available to a person with a focus on the budget. (We also used the Chinese method, very informally, at a breakfast meeting to generate some nifty strategic moves for next year's LESS conference. That was fun!)

There are of course upsides to budgeting, primarily the feeling that you are in control. If you control the numbers, you control the organization, right?

No, you do not! Controlling the numbers is actually a very weak form of control. Look at this model of leverage points you can use to lead an organization (or change any system):

The picture shows Donella Meadows model for changing organizations and other systems. This model has been used for many years now. Unlike budgeting systems, it has stood the test of time.

Note that setting constants, parameters, and numbers, and setting buffer sizes, are the two weakest forms of controlling a system. In other words, relying on making a prognosis and setting a budget is like bringing a couple of knives to a gunfight. Moving Beyond Budgeting frees you to use more powerful means to lead the organization.

The weakness inherent in how most organizations are managed and lead shows up in the statistics. I find this little piece of information more than a little worrying:

The slide above is from my own presentation at LESS 2011: In 1937, an S&P Fortune 500 company had a life expectancy of 75 years. Today, the life expectancy is 15 years, and still dropping.

If you just sit and wait, you will join the growing casualty list. Moving from a budget based system to a more flexible Beyond budgeting system is not the only thing you will have to do, but it is an essential part of it.

When you do that, you will suddenly be able to deal with many other problems concerning organization, employee motivation (, and your own motivation, I might add. You'll be a lot happier.), strategy, customer satisfaction, profitability, innovation,... the pieces will begin to fit. This immensely increases your chances to survive and thrive.

They are moving Beyond Budgeting right now!

Many organizations have moved beyond budgeting, or are doing it right now.

Bjarte Bogsnes, a keynote speaker at LESS 2011, is heading the Beyond Budgeting project at Statoil. He has also implemented Beyond Budgeting at Borealis. In his presentation he mentioned more than thirty companies using or currently moving to Beyond budgeting. These companies include:

Statoil
Borealis
Handelsbanken (a very successful Swedish bank)
Google
Telenor
COOP
Arla
Southwest Airlines
Gore & Associates (makers of Gore-TEX)
Kongsberg Automotive
American Express
Sparebank
Jernia
Ahlsell

...and the list goes on.

You too can move Beyond budgeting!

Leaders in these companies are facing reality, and have determined to break the bad habit of budgeting. After all, budgeting is not a necessity. There are proven alternatives. Budgeting is a bad habit, like smoking. Changing bad habits is difficult, but it can be done. Survivors do it all the time.

The first step: Find out more!

Start by finding out a bit more about Beyond Budgeting:

Beyond Budgeting Round Table is a web site dedicated to Beyond Budgeting. There you will find more information, and links to books.

Implementing Beyond Budgeting (link to Kindle edition) by Bjarte Bogsnes is a very good book on Beyond Budgeting. Bjarte heads the Beyond Budgeting project at Statoil. He also implemented Beyond Budgeting at Borealis.

Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap (link to Kindle Edition), by Jeremy Hope and Robin Fraser is also a good book.

Survival – The Reason I am going to LESS 2011

2011-10-27T18:16:00.001+02:00

There are plenty of good reasons to go to the LESS 2011 management conference. Most of them have to do with fun–not clowning around fun (which has its merits)–but with the doing-meaningful-work and living a life of purpose kind of fun.

However, there is another reason: Survival!

According to John Hagell III, in 1937 the average life expectancy of a Standards & Poor Fortune 500 company was 75 years. Today, it is about 15 years. Let's be a little bit simplistic about this, and draw a straight line between the two data points. Then let's be a bit adventurous, and extrapolate into the future.

If this simple projection holds, by 2030, there won't be any S&P Fortune 500 companies.

I am sure you can see the flaws in this simple model as well as I can:

There are only two data points. It is very easy to draw the wrong conclusions when using to few data points. (Though many companies are perfectly happy to use a single data point, which enables them to interpret it anyway they want. But I digress.)
The model is linear. Reality is rarely linear.
It'll never happen because something else will happen that changes the game.

All true. Nevertheless, this simple projection does indicate that we are heading for some serious change, one way or another.

The change may be good or bad, but it will happen. Shift happens!

If you are in the water, and a great wave comes along, two things can happen: You are crushed by it, or you surf on it.

Which would you rather do?

I am going to LESS 2011 to meet with a gang of surfers, to talk about surfing the waves of change, and to have a blast while doing it.

If you want to be a surfer to, join in at LESS 2011. If you can't be there, why not check out the people speaking there, and ask a couple of them to visit you and share what they know. About surfing the wave of change. About survival. About having fun and meaningful work.

See you there!

Tim Morrison at the Halmstad City Library

2011-10-04T23:19:00.000+02:00

Tim Morrison at the Halmstad City Library

Tim Morrison played at the Halmstad City Library tonight. I had been sitting there working, most of the day. Luckily, I decided to stay a bit later than usual.

I have no idea how to write about music, so I won't. Instead, I'll suggest you check out Tim's band, The Manglers. You'll find some sample songs at The Mangler MySpace page.

Tim and I talked a bit after the gig. I bought a CD, which I am listening to as I write this. When Tim talked about writing lyrics, I recognized what I experience when writing a book or working on a presentation. It never ceases to amaze me how things that are very different on the surface, can be very similar on a deeper level.

Some people can't help horsing around...

As you can see above, there were other things happening at the event. In all, a very enjoyable evening.

The Gothenburg Book Fair (A brief guide to mingling, Part 2)

2011-09-23T09:08:00.000+02:00

This post continues the networking story from A brief guide to mingling. I strongly recommend you read that post first, because in it, I describe why I network. Having that perspective is important. If you read A brief guide to mingling, I think you will agree.

I went to the Gothenburg Book Fair today. The book fair is a yearly event. I go to look for interesting books, and to meet interesting people. Let's dive right in and see what happened:

Erik Lundh, a friend of mine, and I had agreed beforehand to meet at the fair. Anna Sigvardsson, the photographer I met at the mingle last week and I had also decided to meet and have a cup of coffee at the fair.

When I arrived, I had plenty of time before meeting either Erik or Anna, so I did what everyone else at the fair does: I went looking for anything interesting that might catch my eye.

Kersti Ingeborn works at the Mediapool's School Library Service

Pretty soon I found myself talking to Kersti Ingeborn at the Mediapool School Library Service. We found we had some interests in common. In addition to working at the School Library Service, Kersti is also engaged in health care. After talking briefly, I promised to email her a link to this blog post, and moved on.

Stefan Olsson at Universe Imagine is an author, so we did what authors do when they meet: We swapped books.

One of the nice thing with the book fair is that it is an opportunity for me, as a writer, to meet and speak with other writers. Thus, when I saw Stefan Olsson at Universe Imagine, I went over and talked to him.

Stefan and I swapped writing and publishing experiences for a couple of minutes. Then Stefan suggested that we should swap books, so we did.

It is not fair to hog the time of someone working at the fair, so I told Stefan I would email him a link to this blog post, and moved on.

Astute readers may notice a pattern developing here. I follow up the connections I make, and I offer a reason to continue with some sort of contact. I only do this when I believe there really is some reason to keep in touch. The decision to continue the contact, or not rests entirely with the other person.

As I wrote in A brief guide to mingling, the purpose is not to sell or advertise anything, but to find and connect with interesting people.

Anna Sigvardsson is a photographer. I wrote about meeting her in A brief guide to mingling.

Of course, if you have agreed to meet two people at a book fair that lasts all day, they will arrive within a few seconds of each other. Erik beat Anna by about 30 seconds. Erik and I needed to talk about a few work related matters, so we did. Then I went to have a cup of coffee with Anna.

You wouldn't believe the size and weight of the backpack I had lugged around all morning. Putting it down, having a cup of coffee, and talking photography and books was a relief you cannot imagine. Unless you to carry around a similar backpack, of course... Thanks Anna!

After meeting with Anna, I hooked up with Eric again. Eric mentioned he wants to meet with a photographer, so I fired off an SMS to Anna to see if she would be interested in meeting Eric. She was, so I helped Eric and Anna set up a meeting. The cellular phone network was a bit overloaded, so we did everything by SMS. SMS wasn't altogether reliable either at the fair, but it worked out OK.

Erik Lundh is a co-author of The System Anatomy, and Jens Fredholm at Studentlitteratur is the publisher.

Eric had a meeting with Jens Fredholm at Studentlitteratur. Eric is a co-author of a recently published book, The System Anatomy. Jens is one of Eric's main contacts. Eric invited me to an after-the-fair for-people-in-the-publishing-business mingle, and off we went to see Jens.

I have met Jens once before, but that was briefly a year ago, so Eric re-introduced us.

It was nice meeting Jens again. Eric, Jens and I had an interesting talk. We decided to go and eat something, and that is when I suddenly saw Alf Fyhrlund and his wife Saga.

From left: Alf Fyhrlund, Saga Fyhrlund, Jens Fredholm, and Erik Lundh.

Alf is the statistician I wrote about in A brief guide to mingling. Introductions were made all around, and business cards were exchanged. (Just so you know: Alf and I will go to a BNI meeting together on Tuesday.)

After that, the only new connection I made the rest of the evening was with a humungous shrimp sandwich. (Thank you Jens.)

Let's update the network diagram from A brief guide to mingling:

There are new connections, and some old ones have been maintained (Jens and me). One thing I like about having a diagram like this, is that the people in the diagram are likely to read this post and see it. That increases the probability that they will discover a reason to connect.

If one is steeped in Command & Control culture, it is easy to believe that one should somehow be in control, or "own the network". That does not work. Nobody owns the network. I belong to the network. So does everyone else in the diagram.

Thus, I am not at the center of the network, even though it may look like that in the diagram. It is just that the diagram is drawn from my perspective, and contains the connections I know about.

Draw diagrams from the perspectives of Eric, Jens, or Anna, and they will look quite different, but they will be just as valid. (Try drawing a complete diagram, and you will end up with a mess and go bonkers in the process.)

The network will change today, like it changed yesterday. I know Alf and Olle are likely to talk to each other, and I know Anna and Erik will too. I will ask them how it went, because these are people I like, and I have an interest in their connections working out for the best. Other things will happen too, lots of connections will be made I don't know about, and never will know about. That is as it should be.

What is of interest to mingle event goers is that many of the things I described here, happened because of the mingle event, Göteborgsminglet, but they did not happen at the event. Mingle events are powerful because they generate sparks that may ignite something larger and longer lasting.

Oh, perhaps I should mention: The fair itself was fun too. Lots of interesting books.

A Brief Guide to Mingling

2011-09-22T00:53:00.001+02:00

Anna Sigvardsson is a photographer. Martin Richards is an English language coach. Martin I know from before. He brought me to my first BNI business meeting a couple of years ago. Anna I met for the first time at the mingle, but we have both been BNI members, and have acquaintances in common.

I was at a mingling event, Göteborgsminglet a couple of days ago. Such events have become an increasingly important way of meeting people and developing business relationships.

I left the event with one solid lead and more than half a dozen meetings booked. This is a marked difference from the first mingling event I went to about two years ago. When I left that first mingle, I had an enormous stack of business cards, but didn't really know what to do with them. Last Thursday, I had a much smaller stack of cards, but I knew what to do.

What is the difference between now and then? Mainly, me: My own expectations, my understanding of what an event like this is, and its purpose, have changed. A lot!

The first time I went to an event like this, I went to do business. In other words, I went there to sell my services.

Of course that didn't work! There were no buyers. There were two main categories of people there: One category were greenhorns like me, who tried to sell stuff, or advertise stuff. The other category were networkers.

Mingling events are not about selling or buying, they are about meeting interesting people. You don't sell them stuff, you talk to them. If they are interesting, and if they feel the same way about you, you set up a meeting.

"Ok, and at that meeting, I get to sell!" No! You don't! You go to the meeting to figure out a few things:

Is this a person I want to spend time with? For example, if we go out and have lunch ten times, will we have more or less to talk about the tenth time than the first time? Will I enjoy listening to this person on a more or less regular basis?

Can I be of value to this person? One thing you can do, is to connect them with other people in your network. That is good, but don't rush it. Get to know the person first. You do have a responsibility to weed out the kooks (or make connections to compatible kooks). You can do other things. For example, if you meet me, and recommend a particularly interesting book about management, systems thinking, photography, or a good Fantasy book, you are of value to me. One of my favorite clients put me on to the Obiter Dictum podcasts. I walk two hours every day, and I often listen to Obiter Dictum while doing it. Now that is value... (When do I get to sell? When do I get to sell? Not yet!)

Does this person want to be of value to me? Not can, want. Does this person have a desire to play by the networking rules? If they do, they'll figure out how to help you with something, sometime. In the unlikely event they don't, they will still figure out how to help someone else. If you build connections with people like that, you will eventually end up with plenty of good business leads.

Some people are just naturally good at this. I am not. I have to study and practice. There are lots of places where you can do that, but Business Network International is my favorite. It's ordinary people helping each other out in ordinary ways. They just happen to be very good at it.

At the meeting last Thursday, I set two goals for myself:

Have good, interesting conversations with people. One would be enough. Not too long conversations though, because people have limited time to spend on a single conversation at these events. I got lucky and met several people I wanted to listen to.
Have dinner with someone well worth listening to after the mingle. I almost made it: I had a cup of coffee with someone very interesting to speak with and listen to. Very enjoyable.

In the beginning of this post, I told you I got one very solid lead. Here is a key point:

I got the lead from someone I have known for the better part of two years. We met through Business Network International (BNI), we became friends, and we have dinner together on an irregular but fairly frequent basis. This person has a lot of integrity, and he is very careful about recommending people. He is a highly valued friend of mine.

Most of the meetings I booked during the mingle were with people I have met before. Some are friends. Some are acquaintances. Only two were with people I haven't met before, and one of them know people I know.

Good networkers often say networking is like gardening. Now you know why: It does take time, patience, and genuine interest. Some relationships grow, others wither.

Alf Fyhrlund is a statistician.

Speaking of growing relationships: Meet Alf Fyhrlund. I met Alf for the first time at the mingle. We had a brief chat, and I gave him my business card. Alf is a statistician. He does research, and he is also a consultant. I happen to know something most people don't: Statisticians can be very useful to companies and other organizations. Also, statisticians are well aware that the mere thought of statistics make most people's eyes glaze over. Thus, they are searching for, and developing, ways of making what they do easier to understand, more interesting, and easier to apply in practice.

Alf and I decided to have a cup of coffee together. We did, and I had a very interesting afternoon. Alf and I connected on Twitter and Facebook.

Another acquaintance of mine, Olle Ebbinghaus, posted a message on Facebook, saying that he wanted to talk to a statistician.

I talked to both Olle and Alf to see if they would like me to connect them. I usually don't connect people like this unless everyone has said it is OK. Both said yes. In a couple of days, I will follow up by asking them how their meeting went.

At the mingle I also talked with Anna Sigurdsson and Martin Richards, whom you can see in the first picture in this post. Martin invited me to a networking event, and I invited Anna to meet a Mystery Friend of mine. (A mystery to you, that is. Anna knows whom she is meeting, but I haven't obtained my friend's permission to use her name and picture in this post.) Anna, in return, offered to connect me with some people she knows.

Let's look at a diagram. If you follow this blog, you know there will, sooner or later, be diagrams:

During the mingle, our social networks began to reconfigure. That is, we made new acquaintances.

Before the mingle, we had several disconnected networks, like this:

This is the network before the mingle. The people in green circles attended the mingle. The people in blue circles did not attend the mingle, but their social connections are affected by it. Note that there are three disconnected network islands.

During the mingle, the social networks we have begin to connect, but the really interesting stuff happens after the mingle itself. After couple of days, with some follow up work, the network looks like this:

After the mingle, and a bit of follow-up, we have a new set of connections, and a world of new possibilities.

Good networkers follow up. I have spent more time following up the mingle than I spent going to the mingle itself. So did Alf, Anna and Martin.

For simplicity's sake I have left out a bunch of stuff. For example, I didn't mention how, when I checked out Alf on the Internet, quite a few recommendations popped up. Same thing with Anna. Plenty of recommendations.

I haven't mentioned the other people I met either. A complete diagram describing the changes in my social network would take longer to draw than the two hours the event itself took. The changes are ongoing. At the time I am writing this, I haven't had all the follow-up meetings yet. I have some interesting people to meet next week.

I have described only a part of how my social connections changed because of the mingle. Imagine the total number of new connections created or old ones strengthening during the event.

There is a huge amount of change going on. Most of it is short-lived, to be sure, but some of it isn't. Some of the change will be permanent. Some of the change will open up great new opportunities.

Here is a thing you might find interesting: There is an organization that organizes the mingle, sets the date, determine rules for the mingle (like: wear A4 size papers naming yourself, your company and describing your goal for the mingle), handles catering, etc.

Within that framework, the mingle is self-organizing. Nobody tells people whom to speak to, what to say, or what to do. People figure it out, it works, and it is fun.

Self-organization is interesting, because it may be the key, well, one of the keys, to building better business organizations in the future. Thus, mingling like this has an important social function that may not be obvious: It makes people more used to self-organization, which is a key to building competitive organizations today and in the future.

When people who learn to mingle like this, take what they learn, and apply it to their own work, and their own private lives, that is when the really interesting stuff will happen.

Happy mingling!

There is a follow-up to this article, connecting what happened at the mingle event with things that happened at the Gothenburg Book Fair a week later.

I promise to do LESS in 2011!

2011-09-06T00:58:00.001+02:00

The LESS 2011 conference in Stockholm, October 30th to November 2nd, looks set to be a lot of fun. A highly inspirational and useful kind of fun.

If you go, you get to see and listen to keynote speakers like Steve Denning, former director of knowledge management at the World Bank, and Bjarte Bogsnaes who head's Statoils Beyond Budgeting project. You can hear systems thinker Peter Middleton, and Shingo Prize winner James Sutton.

LESS has four tracks: Beyond Budgeting, Complexity and Systems Thinking, Lean and Agile Product Development, and Transforming Organizations.

Check out the speaker lists and the topics, and you will understand why this is an event I do not want to miss. There is a long list of interesting speakers. I'll mention only a few, and I'll not even try to be unbiased about it. Instead, I'll pick those with whom I have had some contact, via social networks or otherwise, over the years:

Jurgen Appelo has a talk titled Complexity Thinking? Or Systems
Thinking++ ? Jurgen will talk about similarities and differences between Systems Thinking and Complexity Thinking, and he aims to connect them with Agile software Development, and the real world of business. Jurgen wrote the book Management 3.0: Leading Agile Developers, Developing Agile Leaders, and he is a very popular speaker.

Ola Ellnestam will talk about Real Options. Ola is the CEO of Agical. I met Ola about half a year ago when I made a presentation at an Agical Geek Night. He is going to talk about how to keep options open in a project until the last responsible moment, without crossing the line and turning the project into a game of chicken.

Torbjörn Gyllebring, is one of the most interesting people I have met on Twitter. Sharp, accurate, concise observations about software development and developers. His talk is titled Kanban is not your process (let me tell you why).

Bob Marshall's talk is titled Keep it Light-Hearted. Bob is experienced, courageous, and has boundless energy. He is going to talk about Rightshifting and the Marshall model. I don't know much about what Bob will say, and I hope he doesn't tell me, because I want to hear it for the first time when I listen to his session.

There are plenty of other speakers, and because my sample was 100% biased in favor of social connections and friendship, you can be assured there are many interesting speakers among the ones I did not mention too.

Oh, perhaps I should tell you, I got a submission accepted too. You can read about it if you go to the Transforming Organizations page and scroll down a bit. I won't tell you about it in this post, because I would like you to scoot over to the LESS website.

Fugue for Norepinephrine, Dopamine, and Oxytocin

2011-07-27T12:43:00.000+02:00

I have written before about two very different ideas of management, Theory X and Theory Y, and how they engender different organisational structures, and very different working environments.

Most of what I, and others, have written about Theory X/Y, uses the model as a basis for exploring outwards, from the individual to the organization.

I believe it is just as important to explore in the other direction, going inwards. There are several paths open to inwards exploration: psychology, philosophy, religion, ethics, but in this article, I’ll take a short but brisk walk along the path of neuroscience.

Let's recap Theory X and Y very briefly:

Theory X and Y represent endpoints on a spectrum of attitudes managers may have towards the people who work for them. Theory X says people are basically lazy and motivated by self-interest and external rewards only. According to Theory X, people will always seek to maximize the monetary rewards they get, and minimize the work they put in.

As a consequence, workers must be told what to do and how to do it. They must be monitored closely to ensure that they don’t shirk their work.

Theory Y, on the other hand, says people can be highly motivated, that they are both able to, and desire to, act responsibly.

As a consequence, workers can, when the circumstances are right, be self-directed. They are able to self-organise and can and want to take responsibility. They are also able to figure out how to do their own work.

As you can imagine, a Theory X manager will create a very different work environment from a Theory Y manager.

Theory X leaders and managers create tightly controlled, hierarchical organisations. Authority is delegated as little as possible. Mistakes are strongly discouraged. Punishment as a means of control is common.

Theory Y leaders delegate authority and responsibility. Since they believe people are usually doing their best, they are more inclined to look for systemic root causes of problems than Theory X managers are. Theory Y managers build decentralised organisations. They are much more likely to build network organisations than Theory X managers.

Good examples of Theory Y organizations would be Gore & Associates, the Virgin Group, Zappos, Business Network International, and Semco. A bit surprisingly, unless you are a strategy and organization buff, some military organizations exhibit strong Theory Y characteristics.

Theory Y companies are more pleasant to work for than Theory X companies. No surprise there.

There is plenty of research showing that Theory Y companies are also more profitable than Theory X companies. Theory Y companies also have a lot more survival potential in times of rapid change or hardship.

However, there is a very big problem with this picture of X and Y organisations:

Why, if Theory Y companies are so superior, do most companies lean towards the X end of the spectrum? Why don’t we see more, many, many more, Theory Y organisations?

Here are the reasons offered most often:

People starting new organizations copy the organizational models they know. Since Theory X organizations are dominant, they remain dominant.
Theory X is self-fulfilling, so once an organization is started on the X side of the spectrum, it is very likely to remain there.

I believe both of those reasons are valid, but I also believe there is a piece missing in the puzzle.

What might that missing piece be?

Here is my hypothesis, and I do want to stress the word hypothesis:

Norepinephrine and Dopamine – The Fear Cocktail

We do know from neuroscientific research that when people first meet, the default response of the human brain is a threat response. If there are no indications that the person we meet is friendly, a tiny dose of norepinephrine (noradrenaline), is released into the brain, making us ready for flight, or a fight.

Under normal circumstances, we are barely aware of our own threat response, and it is quite easy to reduce the norepinephrine level to normal: A smile, a handshake, a bit of small talk to find common some interest (the weather will often do) is often enough.

When we see that smile, shake that hand, and find a bit of common ground, the brain does more than reduce the norepinephrine level. Perhaps most importantly, it releases another chemical, oxytocin. Oxytocin makes us feel friendly, and increases trust. We’ll get back to oxytocin.

Our brains release norepinephrine in situations where the brain judges fear to be an appropriate driver of behavior, for example if you are stalked by a lion, or a looming project deadline.

There is another chemical that is also released when you encounter something stressful or dangerous, dopamine. Norepinephrine increases your stress level, and dopamine makes you interested.

The norepinephrine-dopamine cocktail isn’t necessarily bad. Without it you would not get out of bed in the morning. Nor would you run from a charging lion, or try to fight it. There is actually a kind of healthy stress, called eustress, which is caused by the right mix of norepinephrine and dopamine.

The problem is that our brains have a tendency to overdo the dosage in many situations. The reason for that has to do with our evolution: Being easily scared had a lot more survival value 100,000 years ago than it has today.

Projects used to be fairly short, with clear goals: Hunt the mammoth, kill the mammoth, eat the mammoth. That is what the brain’s drug dispensing system has evolved to cope with.

Today, projects are longer and goals harder to define: Spend a year building a software thingy that makes the customer happy.

Often, there is no discernible goal, just do the same thing today that you did yesterday. Repeat until retired, fired, or just too tired.

In these situations, the brain continues to produce norepinephrine and dopamine at elevated levels for long periods of time. This is not healthy.

The point here is that too much epinephrine and dopamine creates fear and distrust. Fear and distrust are the fundament Theory X is built on.

Consider an entrepreneur trying to build a new company, or a manager dealing with problems in a department. These are very demanding activities with uncertain outcomes. Scary!

Picture in your mind how norepinephrine and dopamine permeat through the brain...

There is no wonder that most people opt for a Theory X approach in this situation.

The Norephrine-Dopamine-Oxytocin Fugue

If you describe a Theory X organisation and a Theory Y organisation, and ask people which kind they would like to work for, most people will pick the Theory Y alternative.

Thus, it is of interest to understand a bit more about the chemical makeup of a Theory Y entrepreneur or manager.

We are shooting for a high degree of motivation, which means we do need to hit the optimal, eustress, levels of norepinephrine and dopamine.

We also need a friendly atmosphere, so lets add a good dose of oxytocin to the mix. (In the book Your Brain at Work, David Rock writes about a scientific experiment where researchers found they could increase the level of trust in a room by spraying oxytocin in the air. Let’s not go quite that far.)

There it is: The norephrine-dopamine-oxytocin fugue. Hit the right levels, and people will fear less and trust more. Thus, we have the emotional foundation of a Theory Y organization.

Even more interesting, there are plenty of things we can do to influence the levels of norepinephrine, dopamine, and oxytocin in ourselves, and in other people.

More about that in a near-future article.

myLife with iPad

2011-06-03T02:07:00.000+02:00

I bought an iPad 2 awhile ago. I am still working on figuring out why. Don't get me wrong, I had several reasons for buying it:

I travel a lot while working. Before the iPad, I always had 4-6 books with me. I wanted to reduce the weight of my luggage, and bring more books. I read a lot, but I also want to bring my favorite reference books with me wherever I go.
I want to use my time effectively, for example by reading email while on the go. I can do that on my phone, but I wanted a bit more convenience.
My next book will be published as an eBook. I want to understand, I mean really grok, eBooks. I want to take full advantage of the medium.
I was, and still am, curious. I wanted to know more about what an iPad is good for.

Here is what I have found so far. I do read a lot of email, and browse the web, with my iPad, but I'll skip writing about that. Instead, I will focus on the other things that has made my working life easier the past few weeks.

I've bought quite a few books the past few weeks. Mostly new ones, but I am also adding some books I already own as paper books to my eBook reference library.

First of all, I do use the iPad for reading, a lot. Reading a book on the iPad works surprisingly well. However, the reading experience varies depending on which eBook reader you use. So far, my favorite readers are Apple's iBook and the Amazon's Kindle.

There are two things about reading eBooks on the iPad that I do not like.

The first is that because iPad apps own the data they use, books are not shared between readers. If I buy a book from Amazon, I have to use the Kindle reader, whether I like it or not. Yes, there are workarounds, but there should not have to be. Which reader to use should be my choice, regardless of from where I downloaded the book.

The second thing is that it is impossible to organize the books I buy. In my bookshelf books are organized according to topic, but the eBook readers I have do not allow me to do that. For example, with the Kindle reader, I can organize books alphabetically by author or title, or by most recently read, but that is it. I cannot group my strategy books together, nor separate my management books from the children's books I buy for my son.

Apparently, Amazon expects me to buy only a few books from them. Unless they come up with a more convenient way for me to organize the books, they will be right. And of course, as I mentioned, grouping my books depending on where I bought them is absolutely ridiculous. Apple has got to fix it. Preferably very soon.

Here is one important thing I learned about eBooks: Pictures are fairly low resolution bitmaps. Some of the illustrations in my business books are more or less unreadable. This is disappointing. Still, it is a good thing to know. It is something I will need to work around in my next book. (Tempo! does not have that particular problem. The eBook version is in PDF format. It works pretty well if you read it in iBook. Slight drawback though: The book is available in Swedish only.)

So far, the advantages of eBooks outweigh the disadvantages.

I should mention a special kind of eBook though: Some eBooks, like Al Gore's Our Choice, come in the form of apps. Our Choice is beautiful: There are interactive animations, video, folding images... However, book-apps carry a significant penalty: It is large. I doubt I will ever have very many books like this one. Glad I bought Our Choice though.

When I read a particularly interesting book, I like to take notes. On the iPad, I have found that iThoughtsHD, a mindmapping program, works very well for this. Part of the reason I like iThoughtsHD is that it can import and export files in a variety of formats, including FreeMind and FreePlane, my favorite mindmapping programs on my computer.

Speaking of compatibility, DropBox has proven invaluable for transferring files between the iPad and my computer. iThoughtsHD can send files to DropBox, and so can many other apps. Unfortunately, because the iPad lacks a proper file system, there are plenty of programs that cannot save files to DropBox. Select your apps with care.

It is worth noting that you can get similar functionality by using other services. For example, many apps support Apple's MobileMe.

It is worth noting that I use services like DropBox and MobileMe for my personal files only. My clients generally don't allow them for security reasons. (No, this does not imply that these services have poor security, just that they have not been formally cleared for use by my clients.) If you use your iPad for work, you should consider what security restrictions may be in effect before using any cloud services.

I draw a lot of diagrams, and my favorite program for doing that on the Mac is OmniGraffle. There is a version of OmniGraffle for the iPad, and I tried it out as soon as I could. The iPad version is good, but I do prefer drawing on the Mac. The diagram above was drawn on my Mac and exported to the iPad via iTunes.

The key to drawing on the iPad is keeping it simple. Fortunately, that is generally pretty good advice. The picture above shows a simple Venn diagram. Now, all I need to do is to write a couple of books that fit the intersecting area. Oh, well, maybe I should finish some of my other writing projects first...

Is the iPad any good for presentations? Depends on what you want to do. I bought Keynote for iPad, but I will probably stick to developing presentations on my Mac. However, in some situations, like when making short presentations for one or two people, Keynote on the iPad may come in handy.

When you travel a lot, keeping in touch with the people close to you becomes incredibly important. Skype is a sanity saver. Strangely, there is no iPad version of the Skype app. Fortunately, the iPhone version works very well on the iPad.

Of course I have Skype on my computer, but using Skype on the iPad is a lot more convenient. I'd really like to have a version designed for the iPad though.

In the evenings, I like to relax with a TED talk or two. The TED application can download TED talks so I can view them offline. Viewing a TED talk make traveling by train or plane a lot more fun than it would otherwise be.

I have tried a couple of different RSS readers on the iPad. At the moment, I prefer Byline. Byline downloads articles from Google Reader, so I need a Reader account to use it.

Sometimes, I just want to relax and have a laugh. The Swedish television player SVT Play has several episodes of Shaun the Sheep available. One of my evening projects over the next few weeks is watching them all.

My son Tim drew this picture of Stitch (the alien from the movie Lilo and Stitch) using Glow Paint

My son likes Glow Paint a simple drawing application. He is 5 years old, and learned to use the iPad in less than a minute. Granted, he already knew how to use my iPhone, but learning that didn't take long either. You know how you always throw away or just misplace your children's drawings? Well, when my son draws on the iPad, the drawing is never lost. years from now, provided that he is still interested in drawing, he and I will be able to follow how his style has developed over the years.

That is myLife with the iPad. What's yourLife like?

Talking Tempo! at McNeil

2011-04-05T20:53:00.000+02:00

I had an opportunity to hold my Tempo!–Vision to Reality presentation at McNeil AB, makers of the Nicorette line of nicotine replacement therapy products.

In short: Great audience, I got some very good questions, and there was an interesting discussion afterwards.

A great day!

Talking Tempo! at FRR

2011-02-26T20:00:00.001+01:00

I used help from my audience to illustrate how changing the way we work can improve productivity while simultaneously reducing risk. Photo by Susanne Dahl.

I held a Tempo! talk again. This time at Framgångsrika Relationer, FRR, a business network.

This was (supposed to be) a short presentation so I focused on a single key topic: organizational design. You'd think that is a pretty dry topic, but it isn't. When you dive into why our companies are designed the way they are, it turns out that there is quite a bit of adventure involved: train crashes, dogfights between fighter pilots...

Judging from the mail I get following these presentations, people like it. Everyone has their own experience of organizational inertia. It is a relief to get to know what causes it, that it is possible to get rid of much of it, and be happier in the process.

Speaking of happiness: After each presentation, I get queries about where to buy Tempo! the book. Each time that happens, I know I have succeeded in sparking or fanning the flame of curiosity a bit. That's happiness!

Mingling with people from the audience is great fun. Also great feedback, so you can make the presentation even better the next time. Photo by Susanne Dahl.

Seth Godin came up with two really good criteria for business books that stand out. The same criteria hold for presentations:

Does this change the way I think? Will it make me act differently tomorrow?
Do I desperately want to share this?

Systems thinking, and I use the term very broadly here, is about a different way of thinking. The point of using systems thinking is that it enables us to do things we could not otherwise do. We can, for example, use systems thinking to save the world, create organizations that are both robust and delightful to work in, or make books and presentations that induce laughter, spark thinking and impel action.

I do believe we systems thinkers ought to do a lot more of those. Because we can!

Talking Tempo! at the University of Gothenburg School of Business, Economics, and Law Alumni Network

2011-02-18T04:02:00.000+01:00

We had lunch before the presentation. It was a great opportunity to speak with some of the alumni members.

I've been talking Tempo! again. This time at the University of Gothenburg School of Business, Economics, and Law Alumni Network. It was great fun. The alumni network meets up two to four times a month at the university. They have lunch, and follow up with a guest presenter.

Feeding the audience before a presentation is an excellent idea. As an added bonus, the presenter gets fed too, something I was in a position to appreciate very much.

Bo Ribbenholt

Presentations like these are often arranged through networks. A friend of mine, Joakim Olinder, whom I met through BNI, also knows Bo Ribbenholt of the alumni network. Joakim knew I look for opportunities to present, and he heard me talk about Tempo! at BNI World Trade Center in January. He contacted Bo and Bo contacted me.

I won't spill the beans about the content of the presentation. If you read Swedish, you can check out the CHV blog. Bo is writing an article about it. (I'll update the link to point directly to the article when it is published.)

I will write a bit about my approach to making presentations though:

I mentioned in an earlier post that I customize my presentations to suit my audience. I knew the audience this time would consist of experienced professionals with a strong background in economy. The presentation would be about 30 minutes.

My previous Tempo! presentation was at an Agical geek night, for a group of software developers with a strong interest in Agile software development. That presentation was more than two hours long.

Cutting a two hour presentation to 30 minutes while switching focus from software development to economy, while keeping it coherent and fun for the audience, is difficult. So I didn't.

Instead, I rebuilt the presentation from the ground up. I went back to the planning stage, and worked in FreeMind, my favorite mindmapping program. This allowed me to figure out what would be most interesting to my audience, and focus on that. I used my old presentations for source material, added some new stuff, and built the presentation slide by slide.

This approach made it a lot easier to design an entertaining presentation. It allowed me to tie in to some events that recently made the news here in Sweden, and it made it a lot easier to stick to the 30 minute time limit. I designed the presentation to be slightly more than 20 minutes. That way, I get a bit of margin, and ensure there is time enough for questions.

The most important part of a presentation: the audience.

The most important part of a presentation is the audience. A presenter is there for the audience, not the other way around.

People want to hear you because they want to learn something new and because they want to be entertained. (Scott Berkun has a more complete list in Confessions of a Public Speaker. If you are interested in presenting, I recommend you read it.)

They want you to succeed in teaching and entertaining them, so you usually have the audience on your side from the beginning. What you need to do, is to take the best care of them you can. If you sincerely do your best, and let your passion show, you are off to a great start.

Tempo! presentation at Agical on Monday 31st of January!

2011-01-30T14:01:00.001+01:00

I will hold my Tempo! presentation at Agical in Stockholm on Monday. The presentation begins at 18.00 hours (6.00 PM). The purpose of the presentation is to inspire people to think about the way we do knowledge work, and to provide a few laughs along the way.

This is a very fun presentation to do. I get to talk about the wild side of management. Yes, there is a wild side, and it has been very influential in how we build organizations and organize work.

I also use volunteers from the audience to illustrate different ways of working, and to show how the way we usually do things is not necessarily very effective.

The story I tell involves train crashes, the world's best fighter pilot, a mad economist that became a brilliant psychologist, a record company owner that decided to build spaceships, and of course VISA. And a few other things.

I always customize my presentations so that they fit my audience. This time most of the audience members will be involved with Agile software development. Next time, I'll speak to a group of economists. The time after that, to the general public, so each time I need to adapt the presentation a bit. Each time I do this, I need to look at the topic from a different perspective. I always learn something valuable.

I have held the full Tempo! presentation twice, and a short version once. If you are interested, you can check my event calendar, or just ask me to come and speak at your company or organization.

New website focusing on John Boyd and IOHAI

2011-01-20T14:55:00.000+01:00

Peter Hermann contacted me to let me know about the new www.iohai.com web site. The site is in early development, but it looks interesting. You can download some of Boyd's original presentations from it, and more is coming. I am going to keep a close watch on it.

Just in case you haven't heard of Col. John Boyd:

Boyd is a leadership and strategy icon. He was one of the best U.S. fighter pilots ever, developed Energy Maneuverability Theory, fought corruption in the Pentagon, played an important role in the design of the the F-16.

His greatest accomplishment was the development of Maneuver Conflict, a strategic framework that has been highly influential. Boyd's decision loop model, the OODA loop, is famous, but he has much more to offer. IOHAI is Boyd's leadership model.

The U.S. Marine Corps, in particular, is known to use many of Boyd's ideas. Boyd's ideas can be directly translated to the world of business. In particular, they are important to value-driven organizations.

There is good reason to watch www.iohai.com.

TEDx talk: Alexander Kjerulf on Happiness at work

2011-01-18T14:44:00.000+01:00

This is a good talk about Happiness at work. Here is the original page.

IDEO Founder David Kelley on Creative Confidence, Innovation, and the Power of a Child’s Mind

2011-01-17T12:26:00.000+01:00

I was poking around on the web a bit and found an interesting Swedish management blog. They have a blog post with a video where David Kelly speaks about Design Thinking. Here is the video. It is worth watching:

Here is the original page where the videocast was published.

Design Thinking is very close to Systems Thinking. My view is that Design Thinking is an excellent method, fitting right in with the Systems Thinking method package, or methodology. (A methodology is a set of methods based on common ideas.)

Design Thinking is both fun and powerful. Well worth studying, learning, and, not the least, enjoying!

Organizational Behavior course at NECB will use my three videos on change management.

2011-01-03T02:25:00.002+01:00

The New England College of Business and Finance, NECB, will use my three videos on change management in its new course Organizational Behavior.

The Organizational Behavior course will begin on January 10th. It is completely online and was designed by Instructional Designer and Adjunct Professor Jean Marrapodi.

If your company has meaning, write it down!

2010-12-26T17:44:00.001+01:00

At first glance it may look as if most organizations do very well without having their values written down. However, this is only a surface impression, because all organizations are based on values. The most important concern how the organization views its customers and subcontractors – and how it treats its members.
– From Kolindkuren, by Lars Kolind (English version)

Lars Kolind was CEO of Oticon, a formerly successful manufacturer of hearing aids. The company eventually became a victim of its own success, and went into a seemingly unstoppable downwards spiral. Lars Kolind reorganized the company radically, turning traditional views about how a company should work on its head. His book, Kolindkuren, is a great example of a corporate guide: It is about meaning and values, yet contains a lot of practical advice useful to everyone.

The ability to care and play nice is becoming an increasingly important success factor for business organizations. The reason is simple: The Internet has enabled customers to communicate.

Twenty years ago, dissatisfied customers rarely could or did get in touch with each other. Today, it’s easy. If a customer is dissatisfied, she may tweet or blog, or just look for other dissatisfied customers, and connecting is easy.

Of course, other groups can connect just as easily, for example employees, ex-employees, and sub-contractors. And all these groups will cross-connect, and share information with each other.

For a traditional we-are-all-about-short-term-profits-for-our-shareholders company the environment looks more and more like a PR mine-field. When these organizations attempt to take control over the situation, they almost inevitably make it worse.

On the other hand, a company that shows genuine care, and behaves responsibly towards not just customers, but towards everyone it interacts with, has got the same factor, easy communications, working for them. When people like what you do, they will talk about it, and the word will spread.

People will like what you do, if what you do has meaning. Assuming that you are a high level executive, ideally a CEO or equivalent, and you want your organization to stand for something, what do you do? I am going to assume that you belong to the select group of high level executives who are prepared to do battle for their beliefs.

Ricardo Semler's Semco is arguably the world leader in management and leadership innovation. Semler is a great writer, but for the purpose of this article, one of the appendices is the most interesting part of the book. It contains a corporate guide written in the form of a comic strip. Easy to understand, and the focus is on practical behaviors.

You do need to spread your beliefs and values throughout the organization. An important part of this is direct interaction: You must behave in a manner consistent with your values and principles in your daily work.

Unfortunately, if your organization is larger than just a handful of people, you can't spend as much time with everyone in your company as you need. Still, there are lots of things you can do. For example, you can make sure that the people you do meet frequently do share the organizations goal and values. That is important, but it is probably not enough. You need something that allows you to communicate more directly with the people in your organization.

For starters, I’d suggest that you write the meaning, values, principles, and desired behaviors down!

Writing your ideas down is one of the best ways to share them. You do not need to write a best-seller like Sir Richard Branson, or Ricardo Semler, but you should create something that will inspire the members of your organization.

Most corporate manuals are abominable: Command & Control style do-this and don’t-do-that lists. They are boring, and, all to often, insulting to the people who are supposed to read them (but usually don’t). They do of course tell the few people who actually read them about company principles and values. It is usually not the story top management intended to tell.

Givers Gain by Dr. Ivan Meisner explains the basic philosophy of Business Network International, BNI, and tells entertaining stories about how BNI evolved to be the world's largest business referral network. Every new BNI member gets a copy of the book.

Good corporate guides are quite different. They speak about the meaning of the company, the difference it wants to do in the world. They speak about the values of the organization, and how to apply them. In particular, they tell stories about how to apply the organizational values in difficult situations. Such a guide says: this is what we believe, and this is how we live up to it when the going gets tough!

Here is a simple test for a corporate guide: Is the guide something that you yourself want to go back and read now and then? If it isn’t, throw it out! Why inflict something on other people that you do not like to read yourself?

Dave Stewart and Mark Simmons wrote The Business Playground partially to inspire other business people to dare be more creative, and partially to show off their company Weapons of Mass Entertainment, and the creative abilities that power it.

A guide that uses real life examples can be particularly powerful: When Anna found herself in [a particularly difficult situation] she did [solution consistent with organizational values].

In order to do that you need to:

Find stories that are applicable and true, preferably in your own organization. However, if you are faced with a dearth of engaging stories, it is better to go for true stories from outside your organization than to invent stories about people in the organization. Writing fiction, as fiction, is OK, but trying to pass fiction off as something that really happened is a no-no. First of all, it is dishonest. Second, you’ll get caught. The first reason ought to be enough.
Write the stuff down! I am using write a bit loosely. You could make a set of videocasts, or presentations. (No bullet points! 99% of corporate presentations are c**p. If you present about this, make sure you are in the remaining 1%. Your audience deserves it.) If you write a book, make it available in both print and eBook formats. Print-On-Demand makes it really cheap to print good quality books. Make eBooks for the convenience of the reader, not because you are cheap. Believe me, readers can tell the difference!

The Virgin Group is a very large business organization. Sir Richard Branson writes to ensure that the company values remain strong throughout the organization. And he does it well, in a very entertaining manner.

Here is an important bit: If you bring in a consultant, like me, to create a corporate guide, make sure the project is still by people in your organization, for people in your organization. When the project is done, there must be people in your organization who can say, with pride: We made this!

If you happen to be a CEO, you might think “Great idea, but I can’t write a book to save my life, and I can barely videotape my children’s birthdays.” This may be true, but so what? You can still collaborate with with a writer/editor, and a videocast director.

If you have something to contribute, do it! I wrote Tempo! to be the guide I wish I had read before starting my own business seventeen years ago. It was a lot of work, but seeing Tempo! in print made it well worth the effort. Now, of course, I want to write more...

The only reason for not writing down the reason for a company to exist is if there is no reason for the company to exist!

Otherwise, in one way or another, you should make sure everyone knows what makes your organization special. It is well worth the effort.

How Shahin Khoshnood made great leadership easy

2010-12-09T10:48:00.000+01:00

Shahin Khoshnood is a remarkable manager and leader. She was recently promoted to a higher position, but for the past few years, as area manager, she has transformed eldercare in Linnéstaden, a district in Gothenburg.

To give you a small taste: Personnel turnover is in Shahin’s district is 0%. Her unit has always managed to keep within budget. When there was not enough money for a training budget, Shahin and her people turned the problem into an opportunity, and began packaging and selling courses to raise more money.

I met with Shahin last Friday to interview her for my next book. (Please do not hold your breath while waiting for it. It is a long time project.) A friend of mine, Per Dosenius, had recommended that I should talk to her. I am very glad I did.

When I arrived, Shahin showed me to her office. The office is quite spartan. Shahin has developed a very cost conscious organization, and she leads by example.

The secret to Shahin’s success isn’t very secret. She has put the essentials on the walls of her room: Four sheets of paper that expresses her management philosophy very concisely.

The first sheet of paper is the one you see above. The text reads Never give up.

The picture struck a chord. If you have a goal worth striving for, I mean really worth striving for, you will get into difficult situations. It will happen not just once, but over and over again. If you fight back, you will, like the frog, always have hope.

I’ll save describing the other three illustrations for the book, but I’ll tell you a little bit about Shahin’s recipe for success:

At the core is an unshakable faith in people. Since the beginning, Shahin has worked to encourage her people to take initiative and responsibility for their situation. She encourages them to think and to act, and lets them know that she is there to support them if they need it.

Shahin works by setting clear goals, and by working out intermediate objectives. That way, she says, when circumstances change, adapting plans is fairly easy.

Shahin views power as a means to an end, not a goal in itself. She makes a clear distinction between power and control. To achieve her goals, she delegates. Control over detail is traded in for power to achieve important objectives.

Shahin used to be responsible for about 50 people. There were no intermediate managers between her and people in her area. This is possible because the people who work for her know what the objectives are, and they have the skills, authority and confidence necessary to solve most problems for themselves.

With her recent promotion, the number of people working for her has doubled. Starting the 1st of January, she will have two or three unit managers. Shahin was careful to stress that they must be willing and able to work the same way she does.

As Shahin points out, when things are set up so that people are encouraged to take initiative and solve problems, managing and leading is much easier than you’d think. It is not easy in the sense that all problems disappear, far from it. But, her management style allows Shahin to focus on the things that are really important, instead of getting caught up in firefighting.

Shahin has the brainpower of her entire organization working on solving problems that would otherwise land on her table. Having goals aligned with moral convictions is also a source of tremendous strength for her, and for the entire organization.

As I listened to Shahin, I noticed the strong similarities with the philosophies of people like Ricardo Semler, Tony Hseih and Richard Branson. What they all have in common is a deep rooted faith in people and the courage to follow through on their convictions.

It was easy to understand the effect Shahin has had on her people, because when I left, I could feel it myself: A lot of energy and a desire to get going with the really important stuff.

Which is why I’ll end this blog post here. I have lots of fun things to do.

Be seeing you!

Five Day Jonah Workshop with Bill Dettmer

2010-11-10T23:48:00.000+01:00

Bill Dettmer will be in Linz again to hold a workshop on The Logical Thinking Process. The workshop will be held March 9-15 in Linz, Austria.

The embarrassing thing is that Christoph Steindl of Catalysts emailed me about it months ago, and I forgot to blog about it. A Do-Not-Forget-note surfaced yesterday when I made a long-overdue clean-up of a list of Interesting Stuff.

How values drive HiQ

2010-11-01T17:54:00.000+01:00

I saw an interesting presentation about how to build and manage a value-driven organization last Friday. The presentation was a collaboration between HiQ, a Swedish IT-consultancy, and Kevin Ryan, owner of the management consultancy Thread.

The evening started off with, Jerker Lindsten, CEO of HiQ Gothenburg, doing a Guitar Hero performance.

I am definitely no Guitar Hero. I sometimes whistle a little bit, but that’s it! As you can see in the picture above, the performance was greatly appreciated the rest of the audience.

When the audience was warmed up, Kevin Ryan took the podium. Kevin has worked closely with Lars Stugemo, CEO of HiQ International and one of the original founders, to articulate the company values and instill them in the HiQ organization.

Kevin began by talking about the conceptual differences between a traditional maximize-the-profit business and a value-driven business. Kevin built the explanation up in stages and I believe the audience got it.

When I talk about value-driven organizations (whether presenting, writing or just ranting) I often talk about how a value-driven organization can bring costs down in ways a traditional business organization cannot do. Kevin did something smarter, he talked about how the cost of evil is going up.

He is right of course. Thanks to the Internet a single dissatisfied customer can easily tell the entire world exactly why she/he is dissatisfied. Companies that get this have a strong incentive to be on their very best behavior. Those that don’t get it will eventually be forced out of business. Their customers will just walk away to somewhere where they feel welcome and appreciated.

Thus, the cost of indifference and evil is way up from what it used to be, and as customers become used to their new power, will rise even more in the near future.

Building organizations that truly care requires a different kind of leadership from what we are used to seeing. Kevin used George Bush and Barrack Obama as examples.

Obama is an empowering leader, and proved himself a very good systems thinker during his presidential campaign. Kevin did point out that Obama may have done just one too many deals with the devil in order to get the health insurance bill through. Nevertheless, the idea stands: Empowering leadership a la Obama is way more effective in our highly interconnected world than the Command & Control style represented by Bush in Kevin’s presentation.

I think the last slide in Kevin’s presentation sums up the profit-driven and the value-driven views very well.

Lars Stugemo, one of the founders of HiQ took over, and talked about how the focus on values affect HiQ.

Lars mentioned that the core values of the company haven’t changed much since 1995, although the way of expressing them has evolved.

In 2009 HiQ put their core values right on the front of their annual report. I think the move was an excellent one, and I do hope it inspires leaders of other companies to think seriously about their own values, and about how to use their business organizations to express and promote them.

Kevin and Lars did provide a very good high altitude fly-by. I think it was the right amount of information for the audience to absorb. It left me hungry for more though.

The expressed values of an organization are effective when they affect every day behavior of the people belonging to or interacting with the organization. Figuring out the link between a value and a behavior can be very difficult though.

What Lars did not talk about is the systemic changes necessary to make the behaviors stick, and how difficult it can be to connect the dots. That would have been overkill for the evening.

Since it is in my area of interest, I’ll give you an example anyway. Note that it is my own example. Neither Kevin, nor Lars went into details, so I have no idea how HiQ encourages developers to write simple code. There are usually several different but valid solutions for how to achieve simplicity in any particular situation:

For a programmer, valuing simplicity may be interpreted (a bit oversimplified) as “take care to refactor code”. Pair-programming is a practice that can reinforce refactoring behavior, so a company that wants to produce simple code might promote pair-programming as a way to do it.

On the other hand, MS Project, because of the Critical Path algorithm it uses to calculate task buffers, can easily discourage refactoring, so a company striving for simple code might either elect not to use MS Project, or complement it with some product like CCPM+, that replaces the Critical Path algorithm with a better one. Or, they may elect to take the hit from the Critical Path algorithm, and compensate in some other way.

I will skip the details about how a commonly used task scheduling algorithm can drive behavior that reduces the quality of work, not just for programming tasks, but also for other types of work. It is beside the point here. The point is that translating values into behavior will require systemic changes that may be far from obvious. (Besides, I have written about the shortcomings of the Critical Path algorithm elsewhere. No use kicking an algorithm that is already down.)

Also worth noting: Simplicity from the point of view of a customer is very different from simplicity from the point-of-view of a programmer, which is different from simplicity from the point-of-view of a project manager, and so on.

Going for simplicity involves achieving the optimum balance. Usually the balance should be weighted heavily in favor of the customer, but most organizations are designed to assign greater weight to internal considerations. That means you must consider large scale organizational design, rules for promotion, Key Performance Indicators, leadership training, and a host of other things, just to achieve simplicity.

Figuring things like these out requires both a lot of work, and the courage to experiment. Both Kevin and Lars touched on the enormous amount of work necessary, but they, very wisely I think, chose to preserve the sanity of their audience by omitting the gory details.

I cornered them both right after the presentation and asked a few questions. Though we spoke very briefly, I got the impression that they both have put not only a lot of effort, but also a lot of thought into what they are doing. I have no doubt they could tell a lot of stories about how counter-intuitive and challenging designing a value-driven organization can be.

Even though more and more organizations strive to become value-driven, and a new generation of value-driven organizations is cropping up, going value-driven still requires a lot of trail-blazing.

In a way, running a value-driven company will always require a lot of exploration and a spirit of adventure. Business leaders cannot just copy & paste values from some successful organization and expect this to work in their own. (Though I am certain many will try.)

In other ways though, having examples to draw from is incredibly useful, just like climbing Mount Everest became easier once Sir Edmund Hillary and Tenzing Norgay had done it in 1953.

Today, there are plenty of examples of value-driven organizations to draw from, like Gore & Associates who have been value-driven since the sixties, Semco who is renowned for pushing its principles well into places where no business has ventured before, Whole Foods, BNI, Branson’s Virgin Group, and many others.

Unfortunately the link between the success of these companies and their focus on core values is poorly understood outside the companies themselves. It is as if if Sir Edmund and Tenzing came back from their Mount Everest expedition, told the world about it, and everyone was too busy falling off cliffs to listen to their story.

For every company that goes seriously value-driven, the link between core values and long-term success as an organization will be understood a little bit better. And, truth to tell, even though we have a reputation for empowerment and employee participation in decision making in Sweden, I think we are in great danger of lagging behind. Therefore, I do hope Kevin and Lars will keep telling the HiQ story.

Anatomy-Based Planning workshop with Erik Lundh

2010-10-26T11:45:00.002+02:00

Erik Lundh of Compelcon held a workshop on Anatomy-Based planning. Erik was kind enough to invite me. I jumped on an early morning train from Gothenburg, just barely made it off the train at the station in Lund, and found my way to the Lund Institute of Technology where the workshop was held.

The workshop was well worth getting up early for. Anatomy-based planning offers a neat way of coordinating large projects involving several agile teams. The method is designed to get all stakeholders onboard with an overall plan before going into detailed iteration planning.

It is a very fast planning method. All stakeholders are brought together, write the desired capabilities, or "money-making features" on Post-It notes, and build a network diagram showing "in order to have Y, we must first have X" type dependencies between the features.

Anatomies are an implementation of the Blackboard Strategy pattern, an approach to collaborative problem solving. Because it is a very fast planning method, it fits with agile software development very well.

Anatomy-based planning was originally developed by Jack Järkvik at Ericsson in the 1980s. Jack was understandably annoyed with large projects that fell to pieces due to a lack of coordination between stakeholders and because features were introduced in not-so-logical order, making the systems both expensive and fragile.

One of the projects that prompted an early version of Anatomy-Based Planning was the development of a weapons system for a corvette class warship. The system often crashed when the power was turned on. If it survived the startup procedure, it crashed whenever anyone touched a trackball...

I won't go into detail about how to create anatomies (but do ask Erik). I will mention a feature that I particularly like: Anatomies have expiration dates!

In all its simplicity, this is a brilliant feature. Plans tend to go stale, and it is easy to skip updating a plan. By putting an expiration date on an anatomy, you ensure that the stakeholders must meet again to update it. At the same time, the simplicity, speed, and not to forget, the fun, of the planning process, makes this one kind of meeting people can actually look forward too. Just make sure someone brings snacks.

I am very glad I went to the workshop. I learned something new, met some great people, and had a thoroughly enjoyable day.

Erik and I keep in touch, so expect more articles on Anatomy-based planning in the near future.

Callisto on creativity

2010-10-18T15:40:00.000+02:00

Callisto Utriainen

I was at a very interesting talk last Thursday. Callisto Utriainen, a creativity coach, talked about creativity, how it works, and how to find creative solutions to irksome problems.

Callisto started off by talking about a great creativity killer: Too deeply rooted habits.

Habits are not bad per sé. Habits free brain capacity up to do new things, like finding creative solutions to problems, but there is a flip side. When we get too deeply entrenched in following the same patterns every day, we may lose the most important habit of all, the habit of thinking and doing new things.

When we get creative, we physically change the brain by creating new connections between neurons.

Callisto also talked about what habits look like from a neurological perspective: Pathways in the brain where synapses (junctions between neurons) have grown strong because they are used a lot.

She talked about how we can induce the brain to create new pathways by deliberately exposing ourselves to a state of confusion, like when someone tells us a joke. First, when you hear a joke, you get confused, then, when you get it, you laugh. Do a lot of this, and the brain will create new synapses, and you will actually get smarter and more creative. (Even if you don't, you'll have a happier and more interesting life.)

Solve problems by deliberately looking for bad solutions, then figure out the opposite.

It is a good thing to get the audience involved when you do a talk. Callisto took us through a problem solving exercise where we began by trying to find the worst possible solution to a problem. As I am sure you have noticed, finding solutions that suck is pretty easy. Usually it is the first solution that comes to mind...

What most people miss is the next step Callisto took us through, that of finding the opposites of the solutions we just came up with. That is where the good solutions are. There are several ways to do this.

The method Callisto showed us is very useful both when solving problems alone and in groups. Business design thinking company XPlane uses a similar exercise they call Anti-Problem to get people unstuck during creative dry spells. Similar techniques are used in other problem solving methods, like the Thinking Process that I work with.

I like the simplicity of the method Callisto used, so I'll include it in my own repertoire of problem solving techniques. If you follow this blog, you know that I work a lot with The Logical Thinking Process, which is rather left-brainish. It is very useful to mix that with more right-brain oriented techniques. Keeps my brain from getting too lopsided. (My brain may already be irrevocably "loopsided" due to my preoccupation with iterative processes.)

The talk was a success. It was also fairly short. Afterwards I heard people speaking about how they wished it had been a bit longer. From a speaker perspective, I think that is great: Leave the audience hungry for more, and they will turn up again.

I had the opportunity to talk a bit with Callisto before her presentation, and it was very interesting. She is a dancer and an avowed right-brainer. I am a management consultant with a strong left-brain bias in how I think. She is interested in creativity in individuals. I am interested in building creative and innovative organizations.

In other words, Callisto's approach is a bit different from mine, and that made her talk all the more interesting. It got both halves of my brain going. As Callisto pointed out, it is important to deliberately break habits and seek new perspectives.

The audience was quite small, about ten people. That did not matter to us who were there to listen, but it does mean a lot of people missed out on an interesting and thought-provoking evening.

The talk was arranged by a business relation network, Framgångsrika Relationer (Successful Relations), and held at First Hotel G in central Gothenburg.

As for me, I intend to spend the rest of the day doing something creative.

Be seeing you!

30 presentations in 90 minutes: A visit to BNI Gamla Ullevi

2010-09-30T09:34:00.002+02:00

I visited a BNI team, BNI Gamla Ullevi on Wednesday the 29th. I was invited by Per Johansson of the Skooter advertising agency. Gamla Ullevi (Old Ullevi - there is also a New Ullevi) is a sports arena in central Gothenburg.

BNI Gamla Ullevi has 27 members. The team meets for lunch every Wednesday. If you visit on a day when all members are there, you'll hear 27 one minute presentations and two six minute presentations from team members. In addition, guests, like me, get 30 seconds to present themselves and their company. I did not count the exact number, but I think I heard about 30 business presentations at the meeting.

This may sound like a lot, but BNI teams are very well organized. (Self-organized, I might add, in case you are interested in Agile software development or management.) Meetings take 90 minutes. It is a tight schedule, but I have never seen a BNI meeting that feels hurried. The trick is to keep everything flowing smoothly.

If you observe carefully, practice, and experiment a bit, a BNI team is not just a place to get business referrals, it is also a great place to hone your presentation skills.

There is more happening at a BNI meeting than business presentations. However, I'll focus on the presentations this time around. BNI Gamla Ullevi does have some good presenters.

Jakob Ståhle is a professional magician and entertainer.

All armies prefer high ground to low and sunny places to dark.

-The Art of War, Sun Tzu

Jakob Ståhle, a professional magician and entertainer, made his 60 seconds memorable. It looked like Jakob had taken Sun Tzu to heart. He literally gained the high ground by stepping up on a chair, showed a folder with pictures taken during performances, and read aloud from a very favorable review. High ground and sunny all the way through.

There are several key points worth noting: Jakob showed examples of his work, he provided independent verification saying that he is very good at it, he made the presentation memorable by being a bit different.

A key feature of 60 second presentations at BNI is searching. The presenter tells the team about a person he is interested in getting a business referral to, and why that person might be interested in talking to the presenter. Obviously, good searches require a bit of preparation. I won't go into that in this post. I'll save it for a post on the BNI World Trade Center web site instead. The BNI WTC site is under development, but it will be up and running in a week or two.

Fiorenzo Bertolozzi brought a massage chair and showed how it works.

BNI Lilla Ullevi, like my own BNI team, BNI World Trade Center, has two six minute presentations at each meeting. Fiorenzo Bertolozzi from Lilla Hälsobutiken put those minutes to good use. He had brought a prop: a massage chair. With a bit of help from a friend in the team, he demonstrated how it works, and talked about massage.

Fiorenzo did use presentation slides, but it was his very engaged presentation style and use of props that caught my attention.

I talked a bit with Fiorenzo afterwards, and he told me he had spent a lot of time rehearsing. This is an important point. Rehearsal is necessary. A good presenter must know the material well enough to make it seem effortless and natural to talk about it.

Jan Berndtsson from Trust Security did the other 6 minute presentation. Jan did not use slides at all, but it was an effective presentation. Jan talked about burglar alarms, and he focused on three features that are important to users.

The first was simplicity. As you may have experienced, switching alarms on or off can be a bit more complicated than necessary. Jan talked about how the procedure can be simplified, and how his company's product does just that.

The second key feature was reliability. The alarm can communicate over the mobile phone network if the phone lines are cut.

The third feature he talked about was fast response time. The main benefit of having an alarm is that it may deter burglars from breaking in in the first place, but if they do, fast response is of course important.

Note how the main points of Jan's presentation stuck in my, usually teflon-coated, memory? If Jan had used presentation slides with bullet lists describing every feature of every product and service his company provides, I would not have remembered a thing. By keeping it simple, focusing on one product and three features important to customers, Jan made his message stick.

Jakob, Fiorenzo and Jan used different styles of presentation, but they all got their messages across very effectively. All three kept the audience focused on what they were saying, they kept their messages simple, and they talked about things the audience can relate to.

This picture was taken at BNI WTC while I held the 60 second version of the presentation I held at BNI Gamla Ullevi. I did not use a prop at Gamla Ullevi though.

As I mentioned, guests get 30 seconds to present themselves. What can you do in 30 seconds? My presentation went something like this:

Hello! My name is Henrik Mårtensson, I am a management consultant, writer, and presenter. For example, I talk about business, and how a train accident back in 1848 had consequences that contributed to companies crashing during the financial crisis of 2008. And, about how the worlds best fighter pilot, ever, had an idea that is important to how BNI does business today.

So, I picked a topic I know my audience and I have in common. All BNI members hold presentations. I created a bit of tension by describing the end points of a 160 year old chain of events, and nothing in between. I also related an interesting, highly romanticized topic, fighter pilots, with BNI. What is the simplest way to resolve the tension? To invite me to hold a talk.

Of course, when you claim there are links between things that are very separate in nature, or in time, like I do in my 60 and 30 second teaser presentations, you must be prepared to back it up with strong evidence in the main presentation. At the end of the main presentation, the tension must be resolved. Ideally, in such a way that the audience is still hungry for more.

I invited a couple of people to visit BNI World Trade Center. I am going to write more about that over at the BNI WTC web site as soon as it is officially up and running.

Passionate about presentations

2010-09-28T15:23:00.000+02:00

From a presentation teaser I held this morning. Note the absence of presentation software. I showed an example of long term effects of cause-and-effect chains: A train crash in 1848 has had repercussions that made companies unnecessarily vulnerable to the financial crisis and recession in 2008. I show the complete cause and effect chain in the full talk.

I am going into the presentation business. (Just so you know: I am not leaving the management consultant business, just adding a related and much needed service.) I hold at least one presentation every week, and I hear at least 16-18 presentations per week, sometimes twice that.

Some of the presentations I see are very good, but many are not. The ability to make a good business presentation is important. I have seen companies with superior sales offers getting blown out of the competition because of poor presentations. I have seen strategy presentations which could not be understood by anyone, including the presenter.

In one survey, fear of presenting ranked higher than fear of dying. (Please don't hold me to the accuracy of this. I can't remember the source at the moment.) I do hope this is an exaggeration, but judging from reactions I see, it might not be.

And yet, Garr Reynolds, one of the worlds best presenters, hit it right on the nail when he said that most people can present. Everyone is interesting to someone. Think about it: You have friends. You may have a significant other. To get either, you must be able to present yourself, one way or another. It usually does not involve PowerPointless, but that is beside the, err, point.

You are the presenter. The presentation software is just the support. At least, it is supposed to be the support. Far too often, the presentation software is a big part of what is keeping you from presenting well.

I am running a bit short of time. Got to go and present myself, so, no presentation advice this time around, but there will be. See you soon!

Visiting the Gothenburg Book Fair with Erik Lundh

2010-09-28T13:41:00.002+02:00

Erik Lundh at the Gothenburg Book Fair 2010.

I visited the 2010 Gothenburg Book Fair last Sunday. It was partly because of the books. I really, really, like books.

Mostly, it was to meet Erik Lundh. Erik is a well known agile coach. When Erik told me he, his family, and a friend of his were coming to the fair, it tipped the scale in favor of a visit.

While Erik and I were talking, which we did a lot of, I mentioned a problem I had with finding a good hook for a presentation I am working on. Erik offered to help. I accepted, and he dug into my brains to see if there was usable story in there somewhere.

There was, though we had to do a lot of hands on sifting to find it. Afterwards I scooped up the wrangled remains of my brains from the table, put it back where it belongs and screwed the lid back on.

The funny thing is that once my writer's block, well, presenter's block, had been removed, several other ideas that had been fluttering about in my head, searching for a context to live in, suddenly found a home.

I think the presentation will work out very well. Too early to give you any details, but watch this blog for more.

Oh, yes, Erik asked me if I could autograph his copy of my business strategy book Tempo!, which I of course did. It was a close call, because it nearly brought back my writer's block. I felt very un-authorlike. I even tried to weasel out by claiming my handwriting is so poor it would reduce the value of the book. As you can see, I finally did pull myself together and write.

I wonder if any other authors find it as difficult to write dedications and autographs as I do. The problem is that I want to do it just right. I want to hit the right feeling with just a sentence or very short paragraph, and that is difficult.

I think the autograph writing business went well in the end. I probably didn't devalue the book too much.

Stephen Kovacs on understanding the nature of Agile

2010-09-02T22:21:00.000+02:00

I got a very thoughtful email from Stephen Kovacs on how to develop a deep understanding of Agile and Lean. I asked him if he would allow me to publish it. He did, so here it is:

This may just be throwing a half baked idea out. That said.... I was looking around on the net for some discussion of "lean", since people seemed to be talking about it as an alternative to Agile, and my sense of Lean was not an alternative. Perhaps a less structured version of Agile? (it seems to me Agile has become an umbrella under which Lean and others congregate).

I looked at a link to Wiki about Lean development, and from there to several links down into underlying theories (psychology, etc etc).. I keep coming up with the same thing: that Agile is an effort to pull together more humanistic theories of motivation and, perhaps, communication, into a working model.

And I keep coming to the same conclusion. The more effort put into creating the model (the rules?) , the more explicit the working model, the further away people seem to get from understanding and using the concepts.

This circles back to your description of systems. I wonder though if it also points to a weakness in a straight systems approach. Ie, is describing a system technically also another way to provide more detail about the model, where you lose understanding buried in the details?

For example. If you look at theories of motivation (intrinsic vs extrinsic)..... there a decent (I think) summary of those in wiki here http://en.wikipedia.org/wiki/Motivation . If as you read through these you start highlighting elements that seem obvious within Agile.... I think there's an aha moment in the effort. There's clearly a strong leaning (pun intended) towards a Maslow, even Rogers, approach. Maybe combined with some social interaction theory.

If you look at Measurements.... for example here http://en.wikipedia.org/wiki/Measurements and scroll down to Definitions and Theories.... the concept of story points etc., seem to be based, to a high degree, on "Representational Theory"... perhaps using representational theory to get to Information theory (??). Ie, accept the uncertainty of measurements, use ranges and relativity in what you're measuring, to evolve a more accurate measurement (estimate)

Imperfect, not fully refined, examples. But in my mind these are the things that Agile, Lean, etc all seem to scream out. But people dont seem to "get" that?

I dont see how people can implement Agile successfully until they understand that. Going through the motions of the detail will always run into problems. Perhaps will always fail ?? because no two projects, no two companies, no two teams of people, will be exactly the same. The variables in the differences will respond to the underlying theories, but not necessarily implementation "rules".

Ie how can so many people spend so much time talking about specific rules, or practice, without understanding those underlying theories. Or, at least at some point, going "aha, all this "stuff" we've been talking about all relates to these theories"..... then issues like arguing for months and years over "face to face" become true Waste (in the Lean terminology)... as an example.

I have to wonder if the weakness in applying Agile, in many instances, is the result of the mind set of the people trying to implement it. That is, the developer's, or the technicians, mind set ? If many of these discussions, even books about different methodologies, are 1) missing the point entirely because the people writing them have the same mind set or 2) trying to describe the concepts in a way that mind set hears it , rather than shifting that mind set so it can understand the concepts.

#2 is not ideally said but I'm thinking back to simplistic psychotherapy concepts like : dont just look at what the world does to you, look at how you cause the world to do things to you. Ie, change, or add, to your perspective.

So maybe looking at systems helps people suspend their specific mind set to see another perspective. hmm.... interesting, if I run with the ideas, I keep ending up with a conflict between what I think of as a technical, vs humanistic, approach to things. Hard science vs intuition. Pavlov vs Rogers/Maslow. Quant vs Chaos theory. (holding head)

I agree with Stephen. Focusing too much on the details of Agile, the practices, can easily make us loose sight of the purpose of those practices. We can also loose the connection with the underlying attitudes that are fundamental to Agile. This has happened before, with TQM, with Lean, with SPC, and many other methodologies. The practices get separated from their paradigm, and retrofitted into the old paradigm. It may work, after a fashion, but most of the benefits are lost.

What about you? Do you agree? If not, why? If you do, is there a way out? What can we do to educe an understanding of the Agile paradigm?

Re-Imagining Agile part 2: Designing from the outside in

2010-08-07T23:00:00.000+02:00

A business that makes nothing but money is a poor business.

– Henry Ford

In the first part of the Re-Imagining Agile series I wrote about some of the ideas Agile is based on. The most basic one is a theory about human behavior and motivation, Theory Y.

I wrote that most business organizations are designed based on a different set of assumptions, Theory X. Moving to Agile therefore represents a paradigm shift, a change in how we think.

Fig 10: The paradigm shift.

Figure 10 illustrates the shift in paradigms. As you can see, the shift is much more extensive than switching from Theory X to Theory Y. You might wish to compare this figure with the reading map in Figure 1 (in Part 1 of this series).

While it is difficult to make the transition, it is quite possible. One organization that has made this shift is the U.S. Marine Corps. They did something really sneaky: They kept the name Command & Control, but they changed the definition of the word control!

...decentralized control works from the bottom up. Command is the exercise of authority and guidance, and control is felt as feedback about the effects of the action taken because thinking is required at all levels.

Tactics, MDCP 1-3 - The U.S. Marine Corps manual on Tactics

It is my belief that what has enabled the Marines to make the paradigm shift was that they had pretty strong Theory Y leanings even before.

For now, I am going to leave the question of how to make an organization, even a large organization, make the basic paradigm shift. Instead, I will focus on what we want to achieve. As Dee Hock, who created VISA, put it, we must imagine what ought to be!

Decisions - the Power of the OODA Loop

We began by defining the paradigm, the system of thought, we need to re-imagine Agile. What is the next layer? We know that we want to build a system based on Theory Y. We know we want to design from the perspective of the customer, but it is not quite that easy. A business organization must make some pretty complicated decisions, like who the customers are, and what particular needs the company should satisfy, the nature of their relationship with customers, how to organize to utilize their resources as well as possible...

Decisions, decisions! Everyone in a business organization must make a lot of decisions, every day. What if we could have a common framework for all decisions throughout the organization? What if the CEO, a software developer, an accountant, and sales person, everyone in the company, including the people who empty the waste baskets, all had a common framework for making decisions?

The purpose of such a framework would be to improve the quality of decisions throughout the organization. Thus, the framework must make it easy to make good decisions, and make them quickly.

As it turns out, there is such a framework. It was developed by U.S Air Force Colonel John Boyd. Originally it was used to describe the decision processes of fighter pilots, but it soon gained traction as a generic model for decision making. The model is called the OODA Loop, and it is at the core of John Boyd's strategy meta-framework, Maneuver Conflict.

Fig. 11: The OODA Loop - An effective decision model

Figure 11 reveals the OODA Loop in all its gory glory. When I first saw it I thought, "What the #%&@ is that?" so don't be taken aback if it looks a bit complex at first.

I will not go into details about how to use the OODA Loop, but I will mention that an important facet is the ability to change speed and direction very quickly. In other words, to be Agile!

Few companies have strategy cycles shorter than a year. Using the Strategic Navigation framework, a business implementation of Maneuver Conflict, strategic cycles for large companies can be as short as a week.

Just like Agile methodologies allow development teams to use short iterations and short delivery cycles, so can business strategists compress strategy cycles with Strategic Navigation.

Just to illustrate the advantages fast strategy cycles can bring:

One company that is very good at compressing their strategy cycles is Apple. First they launched the iPod, then they used the popularity of the iPod to launch iTunes. iTunes, with the addition of the AppStore, became major incentive for customers to buy the iPhone. iTunes and the AppStore, with the addition of the new Bookstore greatly enhance the attractiveness of the iPad. Concurrently, they use Mac computers to increase the value of iPod/iPhone/iPad/iTunes, and iPod/iPhone/iPad/iTunes to increase the value of Mac computers. For example, the video capabilities of iPhone 4 fits neatly with the iMovie program included with all Macs. Most of the competition is far behind, trying to copy the iPhone/iTunes combination, while Apple continuously shapes and reshapes the market.

Since we have a spiffy new paradigm at our disposal, let's use it. We switch from Maneuver Conflict, where we found the OODA Loop, to Queueing Theory, where we find Little's Law:

t = I/T

Where:

t is lead time
I is the number of items in a process
T is the rate at which items are completed

As you probably know, Little's Law is fundamental to Agile software development. It is a natural law, and if Little's Law didn't work, Agile wouldn't work either. (Suggested reading: Lean Software Development and Implementing Lean Software Development by Tom and Mary Poppendieck; Product Development Flow by Donald Reinertsen.)

When I became interested in Maneuver Conflict, and saw the OODA Loop , something went BANG!!! in my head, and the lights turned on.

I suddenly realized that Little's Law is vitally important to the OODA Loop too. The arrows in the OODA Loop diagram show how information flows when we make decisions. The Post-It notes on a kanban board also show how information flows. They are both governed by the same basic law, Little's Law!

We need to make good decisions fast. Little's Law gives us an idea about how to accomplish that: We can either reduce I, or increase T. How do we do that?

We can reduce I in top levels of an organization by making as many decisions as possible at lower levels of the organization. At the same time we engage more people in thinking, and thus increase T.

Quick switch to our Systems Thinking hat: When we decentralize decision-making we shorten information feedback loops, which shortens delay in the loops, which increases the effect and reliability of the feedback. If you look at Figure 4 in Part 1, you can see that we can improve two high impact leverage points, the information flow structure, and the system structure, in one fell swoop.

Looks like Maneuver Conflict, Queueing Theory, and Systems Thinking all lead to the same conclusion. Great!

Here is one implication: If the CEO of your company understands the OODA Loop, and you, a software developer, understand the OODA Loop, you know have a common frame of reference.

Because everyone in the organization can use the OODA Loop as a frame of reference for how they make decisions, everyone in the organization has a shared frame of reference for understanding each other.

Once again, when I write "the OODA Loop", I do not mean just the diagram. I mean the whole package that goes with it.

We now have a starting point for developing an organization designed to take full advantage not just of of Agile software development, but also of modern ideas about how to organize, modern economic ideas, modern ideas about product development...

Figure 9 (in Part 1) showed some of the implications of Theory Y:

Workers must be encouraged to communicate vertically and laterally. (No organizational silos.)
There is no need for elaborate hierarchies of control and authority
Workers should have a say in decisions that affect them.
Failures that result in learning should be rewarded. (No fear culture! For brevity's sake, I will not go into this point any further.)

We can use the OODA Loop, Little's Law, and the list above to begin designing an agile organization.

We need to design the organization so that it consists of small, autonomous units. That way, the organization can grow without overloading the OODA Loops of top management. At the same time, the organization can quickly reconfigure itself when it needs to do so.

We need to weigh economy of scale against economy of speed. When we are the slightest bit uncertain, we'll choose speed. Speed is very important when the environment changes quickly. And we want to do more than to be able to respond quickly, we want to actually shape the environment. That requires the ability to go fast, and to change speed and direction very quickly for the whole organization!

Judging from our sample companies in Figure 1, we want to keep the main organizational units no larger than 100-200 people. Beyond that, we will loose to much agility. Of course, this is a very general guideline. For example, if your company is an industrial company, you may need to have some very large main units, like a large factory. Still, the principle holds, and even within a large factory, we can strive to make value streams interfere with each other as little as possible. (This is what Lean does with takt time. When variability in demand is high, as in software development, it can be better to separate the value streams as much as possible.)

What would this look like? Well, there is no absolutely fixed structure. You can't have a fixed organization chart, because the structure keeps changing. (I am not joking. For example, Semco, one of the model organizations in Figure 1, does not have organization charts for precisely this reason.) But you can show the basic principle.

Fig 12: Simplified network structure

Figure 12 shows the principle. Keep two things in mind: The figure shows a snapshot in time, and it is highly simplified.

We are designing from the outside in, so let's begin at the point where the business organization has contact with the customer. I am going to assume that the organization builds custom software of some kind. The particulars are different for other kinds of organizations, but the principles of designing from the outside in and designing against demand, i.e. from the need of the customer, remain the same.

I am also going to push the principles of Theory Y, pull and self-organization to the max here. Remember, we are designing what ought to be, not trying to make minor improvements to what already is. Agile is not faster waterfall, so why limit ourselves when we are designing an organization ideal for taking advantage of Agile?

Teams are built around value streams

The modern industrial organization is a vast complex of interdependent relationships, up, down, across, and even "diagonally." In fact, the system is so complex that only collaborative team efforts can make the system work effectively. It is probable that one day we shall begin to draw organization charts as a series of linked groups rather than as a hierarchical structure of individual "reporting" relationships.

The Human Side of Enterprise by Douglas McGregor

Let's assume initial contact is between the customer and a sales-person. The sales-person would be trained in a sales method compatible with Agile software development, for example the Prime Process. The Prime Process has roots in Systems Thinking, and just as important, it is an explicitly ethical sales method with focus on delivering business value to the customer. (See Mastering the Complex Sale by Jeff Thull.)

If you are an Agilist, you and a Prime Process sales person do have a lot in common: shared goals, and shared assumptions about how to achieve them.

The sales person posts the status of negotiations with the customer. Skills needed for a sales team will also be publicly posted. This will most likely include people with design skill and technical skills. People interested in the job can sign up to work on the sales team.

Because people sign up, instead of having someone assign them, we reduce management work. We also eliminate the need for costly systems to track which people are available. Sales people must know whether people are available to do work, so the company will probably have a kanban-like system to ensure that sales people don't over-commit.

Signing up might be as easy as moving a kanban card representing you, the developer, from a resource pool area on a whiteboard, to a project team area on a different board. Put the boards in the cafeteria, and everyone will be able to track what everyone else is doing at all times.

If the sales team does not make the sale, everyone just moves their cards back to the pool. If a sale is made, the team continues to work with the customer. The sales person may remove himself from the team in order to continue selling, but some of the people will remain, which provides continuity for the customer, and for the team itself. If more diverse skills, or more manpower, is needed, a message about the open positions are posted on the board.

You might ask what happens if people don't want to sign up. That, I am afraid, is a Theory X question. Ask instead: Given that people want to work, and want to do good work, what could prevent them from signing up? If you come up with a real obstacle, fix it. If something is preventing you from fixing it, fix that first!

What if there isn't enough people, or anyone with the right skills, available within the company? Post the job openings to a computerized version of the board that is available to the entire business organization. The team can also contact other companies in the same organization directly, or through Power Groups. (A bit more about those later.)

Note that the team does not necessarily have to bring people from other parts of the organization in. If it is advantageous to do so, the team can temporarily move itself to another company for the duration of the project. Profit sharing schemes for handling this are pre-arranged, so no complicated negotiations between business units are necessary.

By this time you probably think I am off my rocker, but there are real organizations that exhibit precisely this kind of flexibility. A couple of examples:

A U.S. Marine Corps team can decide to move from one chain of command to another if it makes it easier for the team to accomplish its mission.

I am a member of Business Network International (BNI), a business referral network. BNI has about 125,000 members. I belong to a team named Gothia Towers. Today, I had lunch with two BNI members from a different team. They invited me to visit their BNI team next Friday, when they have their weekly business meeting. I accepted. In effect, we took a lateral contact, and even temporarily rearranged the team structures.

If you had suggested to the team members who invited me that they should check with the team management first, they would look at you as if you were a bit funny in the head. They would be right. Their team leaders would be justifiably annoyed if they did. (So I am very glad the thought never crossed your mind.)

If the right people cannot be found within the organization, the team can decide to hire people temporarily. They can do this because:

They have an economic model to guide them (See Product Development Flow by Donald Reinertsen)
They are not constrained by a pre-determined budget (See Beyond Budgeting by Jeremy hope and Robin Fraser)
They are self-organizing

A team pulls resources if and when it needs them. If the team grows too large, it restructures itself into sub-teams.

Fig 13: Linked team structure and communications pathways

As figure 13 shows, each person with leadership responsibilities is a member of two teams. This is different from managers in a hierarchical organization having meetings together. The leaders in Figure 13 work together, ensure that the teams they lead collaborate effectively, and make trade-offs where necessary.

As I have already mentioned, anyone in a team is free to contact any other team without going through a vertical hierarchy. There is a strong emphasis on lateral communication.

A third thing that is different, and once again borrowed from the U.S. Marine Corps, is the idea of the Directed Telescope, or pull communications.

In a hierarchical structure, information is usually pushed upwards, through standardized reporting procedures. A network structure will have similar procedures for pushing information inwards. (Though the type of information, and the amount of information, is very different because the paradigm governing what is considered important information is different.)

There is another way to get information: Pulling it. That means someone at the center actively goes out and looks at the situation in order to understand it. This is sometimes known as Management-by-Walking-Around. Lean folks call it genchi genbutsu, “actual place, actual thing”, to go and observe in order to fully grasp a situation. ("Grokking", if you have read Robert Heinlein's Stranger In A Strange Land.)

One reason why pull communications are under-used in hierarchical organizations is that managers are already swamped by information pushed at them. In the network structure we are designing, we do not push nearly as much information to managers. We also present information in different ways, for example by using process behavior charts or TLTP diagrams. This makes it easier for centrally located managers to pull information when needed.

Note that the structure in Figure 13 allows both independent action and close collaboration. The same linked team structure is used throughout the entire organization.

Depending on what they do, some teams last only a short time, other teams may be very long-lived. For example, a team responsible for the grocery section in a supermarket would never disband, even though membership would change over time. (Remember, we are talking about a general structure for business organizations, not just a structure for software development teams.)

In some business organizations, like Semco and W.L. Gore & Associates, team leaders are elected by their teams. It might be a good idea to require elected leaders to take advanced training in the leadership skills mandated by the basic paradigm. Of course, everyone in the organization should have basic training, and plenty of opportunity to learn on their own if they so choose. It might look like Figure 14.

Fig 14: Mandatory training of elected leaders

Companies

For the purpose of the model, I have assumed that the organization is fairly large, and that the basic business unit is an independent company. A structure like this provides economic protection. If one company fails, other companies will be affected as little as possible.

It is also possible to have other companies absorb people from the failed companies, or use the freed manpower to start new businesses. This is a strategy that the Virgin Group has used successfully for many years. (See Business Stripped Bare, by Sir Richard Branson.)

A company is responsible for one or more value streams. Figure 15 shows the principle.

Fig 15: A company is a linked team structure with the responsibility for managing one or more value streams

I mentioned a size limit on companies. Keeping companies small keeps information loads under control. The exact size limit depends on what business the company is in.

When a company grows to its limit, part of it is split off to form a new company. The Virgin Group employs a strategy where the new company must find a market for itself that is different from the markets of all other companies in the network. That is why Virgin is so diversified: Music, hotels, spaceflight, soft drinks, etc. This prevents different companies in the network from competing with each other.

Traditional enterprises also divide themselves into companies, but they do it in a different manner. It is quite common for an enterprise to start a new company for the purpose of executing one step in a process. The result is a chain of tightly interdependent companies. If one company fails, so does the process, and the other companies in the chain can't get the revenue they need to survive. This makes all companies in the chain very vulnerable. To make it worse, the companies usually use Cost Accounting practices, which means they all strive to be as profitable as possible, which means they have to fight each other.

It is very important to avoid this trap, and set companies up so that they really are built around end-to-end value streams.

Power Groups

As I showed in the section about teams, it is quite likely that these companies have opportunities to collaborate now and then.

Sometimes team level collaboration is not enough. For example, companies might share information on a continuous basis, or work together to execute major operations.

When a company believes it can benefit from formal collaboration with one or more other companies, it can attach itself to a Power Group. Power Groups share information, and may help each other in other ways, as they see fit. Note that a company decides for itself which power group, or groups, it wishes to apply to. The power group then decides whether to accept the application. A power group may of course elect to invite a company.

The Core

There is no "up" in a network organization of this type, and thus no "top management". However, at the center, there is a core, and a core team. The core team is responsible for the system as a whole. Following the same structural pattern as before, most members of the core team will also be leaders of companies, service units, or power groups.

The core team ensures that the organization moves towards the overall system goal. Depending on the organization, they may be the people setting the systemic goal, or not. For example, at the Virgin Group, this is the people ensuring that the brand values are adhered to throughout the organization. Using Maneuver Conflict terminology, they are responsible for the organization's Noble Vision.

The Noble Vision is an idea that unites not only the people within the organization, but also the organization and its customers. Think about Apple brand loyalty, a football team and its fans, and you'll get the basic idea. There is also a moral dimension to the Noble Vision concept, but I will not go into detail here. Suffice to say that the Noble Vision must be something that you and your team mates believe is worth striving for.

One very important service that should be handled by the core in most organizations is basic management training. Every leader in the organization, whether a Scrum Master or the CEO, must have the same basic training. Look at the Orientation step in Figure 11. There must be a shared base here, or it will be impossible to develop the trust and understanding necessary for decentralized command.

A related service that might benefit from centralization is management consulting. For example, the Virgin Group has an internal management consultant organization for the purpose of helping to solve thorny management problems.

A basic rule is to centralize services that benefit from economy of scale, and decentralize services that benefit from economy of speed.

IOHAI

I have mentioned the need for leadership training a couple of times in this article series. When John Boyd developed Maneuver Conflict and the idea of a Noble Vision, he also conceived a leadership model, IOHAI. The IOHAI model is a framework for training leaders that can help move an organization towards a Noble Vision.

Boyd considered IOHAI to be the key to enabling vitality and growth. It is certainly not the only management or leadership framework that can be used, but it is a very useful one. It incorporates ideas of paradigm transcendence and continuous learning.

Fig 16: IOHAI - Theme for vitality and growth

I wrote my book Tempo! so that it can be used as an IOHAI training manual for leaders at all levels in a business organization. Once again, I will not go into details here, but when you dig down into IOHAI, it becomes very practical and action oriented.

Design notes and useful Intermediate Objective Maps

We can summarize our design goal for the organization, and the necessary conditions that must be satisfied in order to achieve the goal. Figure 17 shows what that might look like.

Fig 17: A generic organizational IO Map

Though I did not write about it, I used Self-Determination Theory (SDT) as a guide when developing the organizational structure. Figure 18 shows how, according to SDT, intrinsic motivation can be stimulated.

Fig 18: Self-Determination Theory - The building blocks of intrinsic motivation

As it turns out, most processes have a lot in common. We don't need a template specifically for how to construct software development methodologies. We can construct a generic template for process design, and use that to design every process in the organization. Figure 19 shows what such a template might look like.

Fig 19: An IO Map for process development

Using the same basic ideas for designing all processes is very important. If you have a mismatch in design philosophy, the processes will not match each other very well, which will lead to a lot of waste of effort and time, and reduce the quality of the end result.

Agile principles re-imagined

This article series was inspired about a discussion in a LinkedIn forum about Agile principles. Given what has been done so far, what about the current Agile principles? Will they stand as is, or can they be improved upon? Yes, I believe they can. (As you may recall from part 1, I answered the question "should they be changed?" with "No!". But I answered "can they be changed?" with "Yes!")

Let's begin by defining the word "principle". It was clear from the LinkedIn forum that the word means different things to different people. I will go with the definition in my dictionary:

principle - a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of reasoning

There are 12 Agile principles, which I think is a bit much. The principles themselves are not simple. In addition to being too many, several are unnecessarily wordy.

Ironically, principle 10 is:

Simplicity--the art of maximizing the amount of work not done--is essential.

Some of the principles are best described as opinion, plausible on the surface, but unsubstantiated:

The most efficient and effective method of conveying information to and within a development team is face-to-face conversation.

The above sparked a lot of conversation in the LinkedIn thread. It is clear that it leaves many considerations out of the picture, and that face-to-face conversation is not always the best alternative. For example, if the information conveyed is very complex, it may be necessary to write it down in addition to talking about it. In many situations, face-to-face conversation is not possible.

Finally, some things are just wrong:

At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly.

Why not reflect and fix immediately when a problem crops up? I am for regular introspections, but I believe it should complement immediate stop-and-fix, not replace it. Lean companies have andon and kaizen, not one or the other.

Here is my attempt at Re-imagining the Agile principles:

Study and apply the paradigm!
Be curious!
Be tenacious!
Design from the outside in!
Design from demand!

As you can see, a bit different from the original list. Still a bit long for my taste. The last two could, and perhaps should, be subsumed into the first. On the other hand, they are pretty important in their own right.

The re-imagined principles have important implications for methodology development. Here is a small collection of things that might become different if Agile was re-imagined using the principles above:

More focus on building the right thing. Most Agile methods today, with the notable exception of Crystal, are primarily focused on building things the right way. User interaction design would become more important with this the re-imagined version of the principles. Systems Thinking would play an important role in designing solutions for customers.
Studying and training would become more important. In some organizations it would become a regular part of the working life.
Systems Thinking would be applied to software methodology design to a higher degree than it is right now.
The idea that there are practices who are "best practices" regardless of context would be abandoned.
Studying, measuring, and experimenting with work methods would become more common.
Team structure and composition would change. We would probably move towards "solution development teams" rather than "software development teams".
It is likely that software frameworks would become less popular, and reusable software modules and libraries would gain in popularity. If this trend is strong, it might affect which programming languages that are used.
Widespread education in Systems Thinking might lead to an increased interest in functional programming languages.
Many network organizations would have Intranet-based social networks. This would increase lateral interactions in the organizations.
Some organizations would have software library repositories similar to CPAN and RubyForge. Though probably for other languages...
Some organizations might go for Wikipedia style knowledge repositories. These would contain information about everything of interest to the business organization.

Or, something entirely different might happen...

Whether you agree with the ideas I have presented here or not, by reading this far, you have certainly exhibited a great deal of curiosity and tenacity.

Thank you!

Re-imagining Agile part 1: Why it shouldn't be done, and how to do it

2010-08-03T16:17:00.000+02:00

There is a long running thread at LinkedIn, well over 200 posts now, about the principles of Agile software development. The issue is whether the principles can be improved, whether they should be improved, and how that might be done. I have written about the thread before, but there are still a couple of things mulling about in my head.

I got into a real writing fit this time, so I have split the article into parts. This is the first. More will follow.

I wrote in the thread that, technically speaking, I do believe the Agile principles can be improved upon. I also wrote that I believe it is a bad idea to try:

I do not know anyone who has the mandate to change the basic principles of Agile. The original signatories might, but I doubt they want to.
There is an existing body of work based on the current version of the principles. That body of work will not be redesigned just because someone releases The Principles of Agile 2.0. Scrum won't change, Extreme Programming won't change, the enterprise organizations that keep misunderstanding Agile won't change.

To put it bluntly: The declaration of principles are not, at this time, an effective leverage point. Changing them will not accomplish much. (At the time the Manifesto and the principles were written, they managed to accomplish a lot - more than I would have believed to be possible back in 2002 when I first began using Extreme Programming.)

On the other hand, re-imagining Agile is an interesting exercise. I like to tinker with systems, so let's do it for the fun of it, just to see where we end up.

If I were to design a framework for developing hyper-effective software development methods, where would I start?

I am a systems thinker, so I want to design from the outside in. What is the outermost layer of interest? The paradigm! Our paradigms, our worldviews, shape the systems we build. Paradigms are the tools we use to make sense of the world around us.

(If you are an Agile toolhead and like it that way, you can save yourself some trouble by not reading the rest of this. You will be confused, upset, and lose faith in what you are currently doing. Trust me, I went through it myself many years ago.)

Why should we begin with paradigms? There are three important reasons:

All paradigms are models, and all models have limitations. If we understand the models we use, we can consciously select the thought model best suited to deal with a particular problem.
If we understand our own paradigms we are in a position to detect when they fail us. This is a prerequisite for improving them, or switching to better ones.
The currently dominant paradigm is seriously out of touch with reality. I'll write more about this.

First, let's look at some of the sources that influence the paradigm I want to use. Click on the picture to see a larger, readable, version.

Fig 1: Sources of the new paradigm

This is a simplified figure of course. It covers only literary sources, omits many important works, and does not show the relationships between them. Nevertheless, it does serve as a high level map of the ideas shaping the basic worldview I intend to use.

This is important: You can check the map! You can read up on the ideas and test their validity yourself! Thus, you can find flaws, or alternatives that suit you better, and improve on it. (Please tell me when you do - helps me improve my own paradigms.) There is nothing stopping you from developing many different maps, and pick the one most appropriate to the situation at hand. Technically, it is a paradigm transcendent meta-framework. I call it Strategic Navigation, because it was to a large intent inspired by Bill Dettmer's book Strategic Navigation.

Scientific Management, the currently dominant paradigm, asks you to take its ideas on faith. It claims to be the best, regardless of circumstances. And, despite the name, it isn't very scientific at all. Scientific Management used to be more scientific than it is today, but unfortunately, the initial curiosity that begat Scientific Management solidified into dogma very quickly. (Unfortunately, the same thing is happening with Agile today. This death of curiosity is often called "maturity".)

For brevity's sake, I will assume that you know the basics even if you haven't read the same sources. You need to know a little bit about Systems Thinking, TPS/Lean, Theory Of Constraints (TOC), Maneuver Conflict and Theory X/Y. I'll introduce you to some of it in this article, but do not expect a softly cushioned introduction. I'd need to write another book for that, or perhaps make a movie.

Given the paradigm in Figure 1, we can determine that the system we want to design Agile for consists of the following entities:

Customers - This is usually a group of many different customers. Quite often, it is possible to divide this entity in several different sub-types with different properties.
The business organization
The subsystem in the business organization responsible for delivering value to a customer or type of customers.

I will deliberately refrain from describing the system in more detail than this just yet. We will look at a couple of different system designs later on.

Why do we need new ideas?

We don't need new ideas unless there is something wrong with the ones we already have. In the LinkedIn thread that inspired this article I suggested that it is better to redesign the enterprises to fit reality, than to redesign Agile to fit dysfunctional enterprises. The response was that if you have a Successful Large Enterprise, there is no need to change it.

That is of course true, but it does raise a few questions:

Successful on whose terms? The owner's? (All of the owner's? Which owner groups?) The people who are members of the organization? (All of them? Only particular groups?) The customers of the organization? Depending on the situation, and the paradigms of the people involved, you may be able to satisfy all (win-win, perspective of bounty), or only a few, perhaps only one (win-lose, perspective of scarcity).
What is success? Making as much money as possible? Hardly. Money is a tool. Having more money means "having a more powerful tool". If you have a lot of money but don't know what to do with it, you are pitiful, not successful.

Nor is growth a measure of success. Organizations grow in order to achieve their purpose better, and to enhance their chance of survival, but growth for its own sake is cancer, not success.

Death to the successful - How successful growth can turn into corporate cancer

Most business organizations do not survive long, even if they grow very large. The life-span for a large organization is about the same as for a human. While the average life-span of humans is growing longer, the average life-span of business organizations isn't.

It is difficult for an enterprise to be successful in the long term if it is pre-destined to have a short life-span.

There are plenty of life-cycle models that show the life-cycle of organizations. It usually goes something like this:

Start-up
Growth
Maturity
Decline
Death (or, with a few lucky ones, Reinvention)

These models often go into details of the characteristics of each stage, but they rarely provide insight into how this cycle can be prolonged, or even stopped entirely.

When you look a bit closer at the life-span of organizations, some things stand out:

Some organizations last a lot longer than the norm. (Religious organizations, countries...)
The short-lived organizations are functional hierarchies with Command & Control cultures
The long-lived organizations have network structures, are purposeful organizations, or combine both features

Given the paradigm in Figure 1, this is not surprising. While an organization can croak for a variety of reasons, we can easily explain why hierarchical Command & Control organizations have a poor survival record.

This illustration shows how information flows in a hierarchical structure:

Fig 2: Hierarchical structures are prone to information overload

Because important decisions are taken at high levels in the organization, managers need to deal with more and more information the higher in the structure they are. This causes serious information overload, which gets progressively worse the larger the organization is.

Fig 3: Organizational complexity leads to paralysis

As Figure 3 shows, when the organization tries to defend itself against the information overload caused by its own growth, it actually makes the problem worse. Eventually, it grows so paralyzed it cannot adapt to changing external conditions, and kills itself off.

There are more problems related to information overload. For example, managers try to defend themselves against information overload by dealing with aggregated information. However, when you aggregate information, important signals will disappear in the random noise generated from other sources. For example, you can have a project portfolio that does very well even if one of the projects in it is in deep trouble. A manager that looks only at portfolio information will miss this.

A very serious problem pertains to how managers try to control their organizations in functional C&C hierarchies. Look at Figure 4. It shows various types of measures managers can take in order to change an organization.

Fig 4: Leverage points for intervening in an organization

Most managers don't even know this range of options exist. They focus on setting targets, the weakest intervention point. The result is bad management.

Fig 5: Managing by setting targets is bad management

You might wonder why setting targets is bad. Well, the assumption behind setting targets is that the people responsible for achieving the target are also the people who are in control of the results. This is not true. There are many factors, controlled by many different entities, that influence the results.

First of all, there are factors outside the organization itself. For example, you can deliver the same product or service to two different customers who have the same problem, and one customer will love you, the other will hate you, because the customers have different expectations. (Remember the brouhaha over the iPhone 4 antenna trouble just a short while ago. To most people it isn't a problem at all, to others it was the end of the world, or at least a sign of the impending doom of Apple.)

Of course, an organization that outsources a lot of work becomes more vulnerable to variation. This is rarely taken into account when outsourcing deals are made, but it is important to the performance of the organization outsourcing the work.

Second, there are internal factors. If the organization is a functional hierarchy there are many such factors (because of all the functional sub-divisions) and they are often in different control structures (different legs in the organization chart).

Fig 6: Most causes of results are outside the control of the responsible party

You get something like figure 6. You may be responsible for achieving a target, but you have very limited control over the factors influencing the results.

As a result, you get into a completely ridiculous situation. Mapping target levels to process behavior using a Process Behavior Chart, you get something like figure 7.

Fig 7: Targets drive dumb behavior no matter how you set them.

To make it worse, reward and punishment systems are often set up so that they are triggered by random variation in results, not by how well people have actually done the work. Random rewards and punishments are a great way to drive people a bit nutty, and make them do crazy things.

Add to this that scientific research shows extrinsic rewards, like money, has a tendency to short-circuit the brain. The scientific community has known about this since the sixties. Thanks to modern neuroscience we know a bit about why this happens: Extrinsic rewards trigger the pleasure center in the brain and deactivates the center responsible for socially well adjusted behavior. Pretty much the same effect cocaine has. (Read up on it: Drive by Daniel Pink, Punished by Rewards by Alfie Kohn.)

I won't write much about performance evaluations here, but you might want to check out this link. Suffice it to say, most performance evaluation systems in use today tend to do more harm than good to the companies that use them.

If you have read this far, you might start to think people are terminally stupid. Not true! However, people adapt to the systems they are part of. If the system is built based on the assumption that people are selfish and stupid, then you will get selfish and stupid behavior.

Theory X - The root of all evil

As I have mentioned, most business organizations are based on Scientific Management. Scientific Management was created by Frederick Taylor. Taylor believed workers are lazy, stupid, and motivated only by money. (Don't take my word for it. Read The Principles of Scientific Management.) He created a management paradigm designed to force lazy, stupid, disinterested people to work.

Theory X, formulated by Douglas McGregor, is a theory of human motivation that encapsulates the views of Taylor and many, many, more people. As it turns out, people who have Theory X mindsets will design organizations a certain way. See Figure 8.

Fig 8: Theory X affects how organizations are designed.

When you have an organization based on Theory X, the members of that organization will fear being punished for failure. However, only failures of commission (you do something and fail) are punished. Failures of omission (you didn't do something you ought to have done) are usually not punished. The result is that you get very risk averse organizations. People in them will consistently miss opportunities, and fail to correct systemic problems. (Edwards Deming estimated 94% of all problems in businesses to be systemic. I believe his estimate was too low.)

People will also be tightly controlled, which makes life excruciatingly painful. Eventually the pain goes away, but only because people get numb and institutionalized.

Theory X is self-fulfilling: Scare people and control their every action, and they will lose their motivation, they will behave stupidly, and the only thing motivating them to work will be the pay-check.

At this point you might wonder: What about the Successful Large Enterprise? How can a company grow to giant size and make tons of money if it is a wreck by design and run by zombies?

First of all, if you look at the situation right now, most companies are built on the same ideas and operated in the same manner. Therefore they perform about equally well.

Second, if you look at how business organizations have developed over the past 150 years or so, they could have developed very differently. For example, Henry Ford had two different plants operated in slightly different ways. He used one of the plants as a template for how to develop manufacturing at Ford. The plants were visited by a group of Japanese engineers and business people in the late forties. They were more interested in how the other plant worked, went back home, and built Toyota. (The full story is in Lean Cost Management: Accounting for Lean by Establishing Flow by James Huntzinger.)

The way Ford chose to operate was a success for customers and shareholders, but not for the people working in his factories:

Despite higher wages Ford's new system suffered from stupendous labour turnover. Newly hired workers lasted an average of only three months. Many walked off the job without any formal notification, and were presumed to have quit after missing five days of work: the notion of the 'five-day man' was born and accounted for 70 percent of the workers leaving Ford. Mass production systems were and are monotonous, demoralizing places to work. Trade unions grew out of the 20th century systems of mass production; current-management union practices serve to maintain the dysfunctional relationship. The relationship won't change until the system - the way work is designed and managed - changes too.

Systems Thinking in the Public Sector, by John Seddon

John seddon is right. Here is a personal experience:

After the financial crisis in 2008 about 10,000 people lost their jobs in the region of Sweden were I live. Many of those who lost their jobs did so quite unnecessarily. To put it bluntly, it is easier to fire people than it is to figure out how to be profitable in a recession. Still, for many companies it is quite doable to move forward in a recession because the competition slows down and miss even more opportunities than usual. I contacted a representative of the union I am a member of, and asked if they were interested in trying to prevent some of this. I proposed that the union should collaborate with management in order to figure out how to minimize the damage from the recession, or even take advantage of it.

I shouldn't have bothered. The response was what you would expect:

"We don't do that! We are not interested in doing anything until after our members are laid off."

This is exactly the dysfunctional behavior John Seddon writes about.

Sometimes I wonder what would have happened if Henry Ford had been more interested in that other plant.

Why management often looks like a train wreck

In 1841 there was a train crash in the United States. To prevent similar crashes from occurring a system for controlling operations by dividing responsibilities and authority, and by having a system of reporting and checks. This was the origin of the hierarchical organization chart. (Systems Thinking in the Public Sector, p. 48, by John Seddon)

What if that train crash had not happened? What if people had realized that a system designed to prevent low probability high impact events like train wrecks, are not very good for running normal high probability, low impact business operations? What if people had realized that a system designed to prevent one kind of problem often causes other kinds of problems?

The secret of enterprise success: Path dependency

Small events can cause very large effects in a certain type of systems: Systems dominated by reinforcing feedback loops. Expanding markets are dominated by reinforcing feedback loops, and it was in this type of environment the large enterprises we have today were born.

It is not always the best system that wins in this type of environment: The QWERTY keyboard is designed to slow typists down (because early typewriter mechanisms could not keep up with the speed of typists), VHS beat Betamax, and a crackpot system for business organization and management beat better systems.

The phenomenon is known as path dependency. It explains how past events affect the future. For example, Java was designed to appeal to C++ programmers. C++ was designed to appeal to C programmers. Thus, the design of C and C++ have influenced Java. Java has had a lot of impact on the design of C#. That does not mean Java and C# are the best language designs possible. People use it because other people use it.

It is the same thing with management paradigms. Theory X reinforces itself, so once it became dominant, the ball just kept rolling. It does not mean Theory X is a correct description of human nature. Nor does it make Theory X suitable as a foundation for building business organization.

All it means is that shit happens. (Path dependency is thoroughly explained in Business Dynamics by John Sterman.)

Good things happen too: Theory Y and Agile

Fortunately, good things happen too. So far, I haven't really covered anything new. I haven't even covered all the bases. For example, Cost Accounting was developed based on ideas stemming from Scientific Management. Cost Accounting is one of the main drivers of poor decision making in organizations. I won't go into the reasons, but you can check it out yourself. The references are in Figure 1.

The ideas I have written about here, Systems Thinking, variation, etc., are ideas that prompted Agile. (If you don't recognize them, I suggest you read a few books by Kent Beck, Jim Highsmith, Allistair Cockburn and other people who created Agile. Pay attention to the reference lists at the end of the books.)

There is another idea that is fundamental to the development of Agile. It is called Theory Y. Theory Y was developed by Douglas McGregor, who also formulated Theory X. Like Theory X, Theory Y is self-fulfilling (it becomes true if you act as if it is true), and it is self-reinforcing. However, the basic assumptions about human nature are the opposite of Theory X. If you believe in Theory Y, you will develop organizational structures and management methods that are completely different from the structures in Theory X companies. Figure 9 shows Theory Y

Fig 9: Theory Y - The foundation of Agile and the next generation of business organizations

Note how the job of managers change. Their job is now to create the right conditions for people to enjoy and excel at their work. To do this, they need to understand how to use, and not to use, all the levers shown in Figure 4.

It is a completely different way to manage, and you know what: A lot of people are to set in their ways to make the change! If you are a lord in a feudal society, a shift to democracy would rob you of your position and power. In a similar way, if you are a manager in a Theory X organization, you are quite likely to lose position and power if the organization transforms to Theory Y.

In some Theory Y organizations, like Ricardo Semler's Semco and W. L. Gore & Associates, members (they don't have employees in the traditional sense), elect their own bosses. (Terri Kelly, the CEO of W. L. Gore & Associates was elected to her position.) How many bosses do you know that would be elected to their position, if the people voting were the people working for them?

There are Theory Y organizations that are not quite so democratized, for example Richard Branson's Virgin Group. Still, it is a bit of a stretch imagining a C-level executive from GM doing very well at Virgin. GM managers and Virgin managers make people laugh, but for entirely different reasons.

Agile is designed to work in Theory Y organizations. It is designed to enable Theory Y organizations to vastly outperform Theory X organizations!

Theory X and Theory Y are fundamentally incompatible. Going back to the LinkedIn thread for a moment: The change that must be made make Agile more easily adopted by large enterprise organizations is to replace Theory Y with Theory X. Of course, if you do that, Agile won't be Agile anymore. We'll be back to old waterfall methods, or worse.

Agile's big mistake

When I became interested in Agile in 2002, I became enamored by the possibilities. Like early evangelists, I believed Agile would be like an asphalt flower: The roots would spread, cracking the asphalt, opening ways to transform companies in all areas: organizational structure, management practices, strategy, economic models, sales and marketing. Even back then, I dimly grasped that for a major change in software development methodology to work, other parts of the organization must change too.

Like the early evangelists I believed the proof would be in the pudding: Agile produced results, great results, so of course management would be delighted.

In retrospect, a pretty naive idea. Agile was, and is, a misfit with most companies. For awhile, that was difficult to accept. Given the current system, managers trying to adopt Agile methods take great risks. Agile methods tend to expose the problems proliferating in other parts of the company, so a manager supporting Agile can easily make a lot of enemies. (This is the same problem managers have when they try to adopt Lean, TOC, and other systems that can improve the performance of their companies.)

However, I have changed my own perspective a bit: Agile won't be successful by being adopted by dysfunctional dinosaurs. Agile will be successful by being adopted by the new breed of companies that will replace them.

Agile's big mistake was designing from the inside out: trying to improve a part of a system that just isn't designed for that kind of improvement.

So, if we want to improve Agile, we need to design from the outside in. We need to improve the fit with the next generation of business organizations. What will that next generation look like?

Watch out for Part 2!

Going agile the wrong way - How enterprise adaptation hurts agile software development

2010-06-16T19:08:00.001+02:00

The topic of how to make agile and enterprise organizations fit together better has garnered some interest. No matter what your position on the issue, if you blog about it, and tell me, I will list a link to your post here. I do believe this is an important issue:

Pascal Pinck wrote some thoughtful comments on his blog Hanzatsu.

Now on to my post:

There is a rather active thread in the Agile Alliance forum on LinkedIn regarding the Agile Manifesto and whether it is in need of an overhaul. The premise is that enterprise organizations have been slow to adopt agile methodologies, and therefore basic agile principles should be revised in order to make adoption easier.

I disagree strongly. While I can see ways in which the principles behind the Agile Manifesto can be improved, I believe increased enterprise compatibility is the wrong goal to set.

Here is one of my posts in the thread:

@Alan - I liked the blog post. (Alan Shalloway's blog post is here.)

@Everyone - I looked through the reference sections of two of my oldest books about agile this morning: Beck's eXtreme Programming and Highsmith's Agile Software Development Ecologies.

Both Beck and Highsmith were inspired by Systems Thinking. (The 2nd ed. of eXtreme Programming explicitly mentions TOC as a source of inspiration.)

That was a good start, but somehow it never caught on. Instead, the focus turned inwards, to the team. Interaction between the team and its super-system has received very little attention.

Highsmith made the observation that while agile can fit a broad range of organizational cultures, there is one type that does not fit very well at all: Command & Control culture. Highsmith was correct. Agile and C&C culture fit very poorly. This is partly because of different mind-sets, but also for structural reasons.

C&C structures are hierarchical. Hierarchical structures cannot accommodate self-organization and mission orientation very well. Agile teams are supposed to self-organize. They are also supposed to be mission oriented. (C&C hierarchies and mission oriented organizations have incompatible command structures - commands flow in different directions during missions/projects.)

Thus, Agile teams make a good fit with Three Ring organizations (Semco), Lattice organizations (Gore & Associates) and Boydian networks (BNI is the closest I can think of in the business world at the moment), but a lousy fit with traditional C&C hierarchical organizations.

There are also, as Alan pointed out in his blog post, issues with flow. Agile teams are (supposed to be) geared to global optimization of flow. C&C hierarchies are intended to achieve local optimization of resource utilization. (Interestingly, this means Agile projects must execute within the context of portfolio management, something many enterprises do very badly. There are some brilliant exceptions, of course.)

C&C hierarchies have worked well for many years, but ultimately they are a dead end. When the complexity of the environment and the rate of change in the environment increases, C&C hierarchies find it more and more difficult to cope. No big surprise, because C&C hierarchies are designed for relatively static environments. A bit simplified, they are built to sacrifice economy of speed for economy of scale.

Today economy of speed is gaining in importance. Economy of scale is losing importance. (Toyota vs. most other car companies, print-on-demand vs. traditional publishing, fashion industry...)

Trying to adapt agile to fit C&C hierarchies will inevitably rob agile of the properties that make agile competitive in the super-system outside the enterprise. Most (but not all) enterprises are a poor fit with agile and with their own super-system.

Agile is supposed to be adaptive to customer demand. That does not mean agile should be adaptive to enterprises that are themselves not very adaptive to customer demand.

Trying to do both will lead to a failure to achieve either.

BTW, there are two things I would have liked to see in the Agile Manifesto: Explicit commitments to continuous learning and Systems Thinking.

Here is a follow-up to the first post:

It is worth noting that the Agile Manifesto is not a declaration of agile principles per sé. The principles are here: http://agilemanifesto.org/principles.html (Until this point, no-one in the thread had made the distinction between the text in the manifesto and the principles the text is based upon.)

If you look at the principles you can easily see there is a problem with fitting agile to C&C, for example:

Build projects around motivated individuals. Give them the environment and support they need, and trust them to get the job done.

C&C ideas about motivation are Tayloristic. This is reflected in companies in various ways, for example by various kind of monetary reward programs. Today many of these ideas have been disproved by scientific research. For example we know today that when you offer monetary rewards to knowledge workers (CEOs as well as software developers) you stimulate a brain center, Nucleus Accumbens, the pleasure center. And we know that when N. Accumbens gets stimulated, the ability to solve complicated problems drops. A lot. (Some books that touches on the subject: Sway, Predictably Irrational, Brain Rules, Punished by Rewards. I haven't read Daniel Pink's latest yet, but it looks promising.)

About "trust" in the second sentence: In addition to achieving economy of scale an important reason for using C&C hierarchies is to impose narrow spans of control for individuals, and enable extensive control mechanisms. You do this because you do not trust subordinates.

The problem is that this environment is not only engendered to replace trust with control, it also actively reduces trust in various ways. The division of labor model, as well as authority flow and information flow structures make it difficult to build trust among people in C&C hierarchies.

For example, compare a department in an enterprise with a BNI team. (BNI is a large business referral network, about 125,000 people. I am a member.):

In a BNI team leadership rotates. All members take turns leading the team. We have a shared common goal, designed so that each team member benefits from helping other members. We are evaluated on how much we support other members. Team members do active trust building exercises, and actively seek opportunities to get to know each other outside of team activities.

We do these things because we need to trust each other to be effective. Compare this to, say, the forced ranking systems used in many enterprises. See http://kallokain.blogspot.com/2009/06/performance-evaluations-business.html

Which type of environment do you believe to be more conducive to effective knowledge work and close collaboration? Which environment do you believe is most effective in motivating members of the organization?

The agile principles can be improved upon. The problem is that if you improve them to be more in line with science (physics, queueing theory, statistics, neuroscience, psychology, systems thinking), you make agile _less_ compatible with most enterprises.

If you improve the principles for the purpose of increasing compatibility with enterprises, you will have to remove a significant portion of the scientific basis. You will also make agile less responsive to customer's needs and desires.

The solution, I believe, is to redesign the enterprises. Most enterprises are built on old paradigms. Those paradigms have become obsolete. They are no longer compatible with the environments in which the enterprises exist.

First Steps: Starting up a book writing project

2010-06-07T19:16:00.002+02:00

I have recently begun working on my new management book project. Translating Tempo! into English is my top priority, but the new book will be based on interviews to a large extent, and I do not want to pass up good opportunities when I get them. I expect to do several interviews in parallel with working on the Tempo! translation.

I won't go into the topic of the new book, but you might find it interesting how I go about working on it.

When I began thinking about a new book I started with the question:

"Who am I writing for?"

Once I had an answer to that, I followed up with:

"What is the most useful topic I could write about, considering my audience?"

In this particular case, once I had the answer to the first question, the answer to the second question was pretty much a given.

When I wrote Tempo! I discovered first-hand that writing a book is an excellent way to get in touch with people, especially if you are a bit reclusive, like me. If you write about something people care about, they will be interested, and they will help. I decided to build on that: Ask a number of managers how they have dealt with the topic I wish to cover. Write their stories. Tie back to the tools and techniques in Tempo! if and when it is useful to the reader.

With Tempo! I wrote an outline very early. This project is a bit different: I began by putting together a series of interview questions. I will go to Oslo in a couple of days, partly to discuss an outline with a friend, but I do expect that the answers I get while doing the interviews will determine the structure of the book to a large extent. Therefore I want to keep the structure at least somewhat fluid for now.

On the other hand, I want to keep the structure of the interviews the same throughout the project in order to get comparable answers from the interviewees.

I began working on the interview questions in FreeMind. FreeMind is great for jotting down ideas and structuring them. I intend to use FreeMind for the outline too. I used TextMate and Lout to write and format Tempo!, and I might stick to that combination. (I am looking for alternatives, because I want a work flow that enables me to publish ebooks in ePub format, i.e. for the iPad, with a minimum of extra work. I haven't found a good solution yet, unless I decide to bite the bullet and set up an XML authoring/publishing system.)

Thanks to a BNI referral I got a chance to make an interview with an interesting C-level executive last week. I started off by showing him all of my questions. The intent was to minimize the element of surprise. Surprises are good for birthdays, not so good when you want someone to relax and open up.

The last question I had prepared was about anonymity: May I publish the name of the interviewee? A picture? The name of the organization?

My interviewee gave me a preliminary permission to use his name, the company name, and to use a picture of him in the book. Once I have written the section about him in the book, I will mail it too him and, I hope, get a final permission.

I was careful to make the point that I would respect a desire to be anonymous. Sometimes when people are interviewed they tell a little bit more than they want the world to know. It is important to make sure people can feel safe talking to me.

I used my iPhone to record the interview. I write rather slowly, and recording the interview allows me to focus on the person I interview without worrying about missing anything important.

During the interview I tried to steer as little as possible. I asked the person I interviewed to expand on some subjects, and once or twice I made comparisons with my own experience, or some reference to a book. This worked very well. My interviewee spoke freely, and stayed on track.

Being able to stay on track is pretty important to successful C-level executives, so while i am glad it worked so well, I am not surprised.

After the interview I promised to keep in touch, and I will.

On the way back to my writing den, a café in central Gothenburg, I listened to the interview on the iPhone. Everything had worked like a charm. I had tested using the iPhone as a recorder before the interview, but it was nice to hear that I had a usable recording of the interview.

The photos I took went straight into iPhoto. I do like the facial recognition capabilities and the ability to organize photos by faces. Tempo! had over a hundred illustrations. I expect the new book to have plenty of illustrations too.

I made a write-up containing a brief biography of my interviewee, a brief list of interesting topics covered, and a summary of the interview itself. The summary has time stamps so I will be able to find the right spot in the recording easily.

I made the write-up in Pages. I normally do not want to use word processors for anything related to writing books, but in this case it might prove convenient: I intend to buy an iPad when it is released in Sweden, and use that during the interviews. I'll try to use Pages on the iPad to make the initial interview write-ups. It will be interesting to see how that works out.

In case you are wondering (though I realize you probably do not): I prefer document processors, like FrameMaker, XMetaL, and other heavy-duty tools, for writing books. I haven't found a good document processor that runs natively on my Mac though. InDesign and QuarkXpress don't cut it: No citation support. Quark does not even have ePub support yet.

In all, I couldn't have gotten a better start with the interview: I met an interesting interviewee, and I got material I believe will be very useful to the book. Better yet, I will be able to link some of it back to topics discussed and tools described in Tempo!

Next step: I have a short list of people I want to interview. I need to expand the list a bit. Some of the people I want to interview I know. There is a short list of people I want to interview because I have heard they are very good at what they do. Mostly, I will find interviewees by asking people I know whether they know a really good manager that might be interested in being interviewed. (Unless you happen to be Sir Richard Branson, Ricardo Semler, or maybe Steve Jobs, please do not tell me I ought to interview you. I want to interview leaders and managers that other people, especially people working for them, consider to be great.)

I want the book to appeal to an English-speaking audience, so I have decided to interview as many people as I can from English-speaking countries. This means I will either have to interview people via Skype (or similar), or do a lot of traveling.

Once I have enough material I will begin to organize it using tools I describe in Tempo!: Crawford Slip indexing techniques, a Current Reality Tree, and a Future Reality Tree. This will form the basis for writing the rest of the book.

I will write more about this project. If you are interested, stay tuned.

John Seddon talks about seminal moments in the development of the Vanguard method

2010-06-01T00:03:00.000+02:00

Professor John Seddon: Seminal moments that informed the evolution of his systems thinking method from The Systems Thinking Review on Vimeo.

This is an excellent video. Hannu Kokko tweeted about it.

Agile is a Great Answer to an Important Question Never Asked

2010-05-31T20:14:00.001+02:00

Sometimes I think agile software development is a really good answer to a question that has never been asked.

There are plenty of good reasons for bottom-up agile initiatives in companies. If implemented correctly, agile is great for software developers. If software development is a company bottleneck, a bottom up agile initiative can be great for the company too.

You may feel there is a "but" coming, and there is:

But in the long run, agile initiatives are unlikely to succeed unless managers at all levels buy into it. That is unlikely to happen with a bottom-up initiative, because agile methods are practical implementations of a management paradigm that is very different from what most companies have. Bottom up agile initiatives have to fight the system. In most cases the system will win.

Agile has a much better chance of succeeding when going agile is the response to a management initiative. Top-down initiatives make agile a natural part of a new system. It is still difficult to win, but the agile effort can have support from many other similar initiatives all over the organization.

What are the questions from management that could prompt software developers to reply "we could use [insert favorite agile method]."

Let's begin by listing a few problems management might have, that an agile method might help solve:

Software development takes too long
Software maintenance costs too much
There are too many defects in the software
The software we build does not excite the users.
We do not see any revenue until at the end of the projects
Staff turnover is too high
Departmental silos make it difficult to work together
Our business strategy and what the IT department delivers don't match
Our budget planning is killing us. We want to switch to a budgetless financial system. (You may have to think about that one a bit.)
We want to democratize the company (Like Gore & Associates, or Semco)
We want to redesign the company into a network structure (Like Gore & Associates, Semco, BNI, VISA or Virgin.)
We need to reduce strategic cycle time and need to shorten software development cycles to match
We need to improve the quality of strategic and tactical decision making throughout the company

All are valid objectives. (Technically, they are intermediate objectives, not end goals. I'll let you reverse engineer suitable end goals yourself.) The last four are the real winners, and of course they are linked together with each other, and with the other questions. I haven't heard about a company where management has asked one of those questions though. (If you have, please tell me about it.)

The problem with agile is that agile offers excellent solutions to problems that managers should ask, but don't. Today there is plenty of hard evidence that:

Democratized companies are more innovative than others. Companies like Gore and Semco have a history of leaving their competitors their wake.
Network organizations are faster, more innovative and more resilient than hierarchical organizations.
Cycle time is a key differentiator in strategic planning. Having the same strategic cycle time as your competitors because nobody thought about it is downright embarrassing.
Decentralized organizations can make better decisions faster than hierarchical command & control organizations.

If you use Systems Thinking (in one form or another) to design a company that does software development, agile (in one form or another) will almost inevitably pop out as the solution to several common problems, except perhaps the most common problem of all: Lack of interest in solving systemic problems.

Winners Never Quit

2010-05-31T17:31:00.000+02:00

My son, Tim, is four years old. We sometimes play a little game where we try to spot cars of certain colors: blue, red and yellow. (Trains and buses also count, and there is a special rule about large green cranes.)

Tim is very observant, and pretty fast. When he rides on my shoulders he is a difficult opponent to beat. He is not above twisting my head the wrong way or putting his hands over my eyes. A budding master strategist, I am sure. (It is not quite as dangerous as it sounds. We play when walking on sidewalks. Where we live these are well separated from the road. Nevertheless, I am trying to teach him less dangerous stratagems.)

Recently I managed to get the upper hand, 6-3. "Ha," I told him,"I'm leading for the first time. This time I'll win."

Tim was unruffled. "No daddy," he said, "You are leading for the last time."

A few moments later we got within view of a parking lot and he trounced me thoroughly.

The morale of the story is of course that you should never quit just because you happen to be behind on points. This applies to business and life in general.

The Process - Wish I was this funny (YouTube video)

2010-05-28T00:58:00.000+02:00

This video illustrates how design processes go awry. It is pretty funny.

I have seen real life projects like this, for example a project with three different product design groups, working with three different methods. What really boggles my mind is that in some organizations this is considered "the way we do things here", and no one finds it the least bit strange.

The YouTube page is here. I got the link from a blog post by Bob Sutton.

Dan Pink on Human Motivation (Videocast)

2010-05-19T11:41:00.000+02:00

This is a great video. Worth watching for anyone who is a boss, or has a boss. Here is a link to the original page on YouTube.

Thanks to Julian Harris and Bob Marshall on Twitter for tweeting about this.

Stone Fish - About the Importance of Storytelling

2010-04-25T10:59:00.000+02:00

My son, Tim, is four years old. The daycare center where he spends his days are only a couple of minutes walk from where we live. (Tim, he wrote his own name here, says Hello! He is sitting beside me as I write this.)

Walking home is different, it often takes more than an hour. We go for walks, stop to play, investigate things... One day a couple of weeks ago we went past the sculptures you can see here, and Tim wanted to take a closer look:

As we got closer, I began asking Tim questions about the sculptures: "What does this one look like?"

"It's a bear holding a fish," Tim said. We often play little games together, rhyming games, we weave stories, play scenes from favorite movies, sing songs. Since Tim was interested in the sculptures I decided to take the opportunity:

"OK, what is this then?"

"Fish."

"And where are they?"

"The sea."

"OK, the sea, or maybe a river." I think I made a misstep there. Shouldn't have corrected him.

I then asked him about the other bears that you can see in the first picture. Tim said they were a mummy bear and two baby bears. I asked him what they were doing. Waiting for Daddy bear to catch fish for them, he said.

I then asked him what the bears had been doing before they came to the river to catch fish. Together we wove a story about a bear family that woke up from their long winter sleep. They were hungry and went to catch some fish.

We continued on our way, still talking about the bears. Right outside our home there is a small rocky hill with some trees. We went up to see if we could find anything interesting. If nothing else, we can get a good view of where we live from up there.

It didn't take Tim long to find something interesting. "Look, a fish," he said and pointed to this:

Yep, unmistakably fish shaped.

The point of the story is that the story Tim and I created together had primed us both to think about bears and fish. When Tim saw something even vaguely fish shaped, he recognized it.

Stories do the same thing for us in all walks of life: when we work, when we are with our families and friends, when we pursue our interests.

Stories create patterns in our minds. We then use pattern recognition to identify other things that fit the same pattern. We can use this to identify problems, and to figure out solutions. Patterns are also an excellent way of communicating with other people. If we can recognize and use the same patterns, we have a basis for understanding each other.

As a management consultant I am obviously interested in the power of patterns, for example: Systems Archetypes from Systems Thinking, or strategy patterns like the Chinese 36 Stratagems. Lean and TOC do of course also have patterns for identifying and solving problems.

One of the book ideas I have is a pattern book. It might not be the next one I write, but I will write it. Until then, I'll write about some useful patterns in this blog, and maybe in the Tempo! newsletter.

Videocast - Primus Vicus Part 4: The Project Plan

2010-04-18T19:19:00.001+02:00

Here it is, the fourth and (probably) final episode of the Primus Vicus videocast series. The Primus Vicus videocasts show a brainstorming and planning session I led at a medieval society a couple of years ago.

This is the first videocast I have made in a year. However, I plan to do several more this year. If you look at the end of the Primus Vicus videocast, I am sure you can see why.

I hope you enjoy the videocast. If you haven't seen any of my management videocasts, you might want to check out the Kallokain channel at YouTube.

Grabbed by Grob - Great photographers think strategically

2010-04-11T15:06:00.001+02:00

Yesterday I heard Marco Grob talk about photography at a photography trade show. Marco is a great photographer. He works for fashion magazines and photographs film stars and other celebrities. Some of his photographs were exhibited at the show. Among them were photos of Barack Obama, Sarah Palin and Jeff Bridges.

I saw the photos he exhibited before I heard his talk. The photographic style reminded me of Garr Reynold's (the Presentation Zen author) presentation style.

Marco's talk reinforced the impression: He goes for simplicity. In his photography he uses few light sources, often a single reflector. Marco's preference is for silver reflectors over white. His presentation style was similar: Simple, clean, focus on what is important.

I found it very interesting that he goes for simple tools where he can, and holds nothing back where a tool can make a real difference. For example, lights and reflectors are usually hand held by assistants, because fancy equipment gets in the way and would slow his work down. On the other hand, he talked about his Hasselblad camera the way I talk about my MacBook and OmniGraffle.

I like that he uses his hands a lot when he talks. Makes him easy to photograph. Even a clod like me can take a passably interesting photograph of him.

His attention to detail stands out. It is more than paying attention to what is in the camera viewfinder. For example, photography at this level is a team effort. Marco has assistants. The color of an assistant's clothes affects the pictures. Marco mentioned white T-shirts being a bother, because they show up as reflections in the eyes of the person being photographed.

I'd wager that Marco's own preference for snappy, black clothes isn't just because he moves in high society, it is a way of reducing his own impact on the photographs he takes.

Some people equate attention to detail with micro-management. Marco does not! He and his assistants do not talk much while they work. Instead, the assistants take queues from Marco's actions. When Marco moves in closer, the assistants know what to do with lights and reflectors. They know exactly when he will take the picture from reading his body language. This does require training, and not just knowledge, but understanding. Impressive. It reminds me of the best managers and the best agile software development teams I have worked with.

Thinking photo shoots through, careful preparation, and attention to detail are what you would expect from any good photographer. (And from anyone who is good at anything.) Great photographers go further: They think strategically.

Marco talked about how he thinks through where he wants to be a couple of years into the future, and consistently works to get there.

One of his strategic goals was to break into Hollywood movie making, so he began looking for ways to do that. The opportunity came when he did a shoot for GQ Magazine. He did a photo series called Rain Over Naked City that told a very dramatic, action oriented story. The style was film noir inspired: urban setting, darkness, few lights, rain, black and white photographs. And yes, the rain was real water, not added during post production.

The pictures didn't just make GQ Magazine happy, they were also, by deliberate design, irresistible to Hollywood movie makers.

The pictures became a Noble Vision that attracted allies and customers. When Marco went to Hollywood, he got his first job on his first day there. (I am sure he did a few preparations he didn't mention in his talk.)

Of course, his strategy had to be matched by brilliant tactical execution, and it was. He showed several pictures from Hollywood during his talk. All great, but the one that impressed me most was a portrait of Jeff Bridges. It showed those all important twin traits very clearly: simplicity and attention to detail.

Marco did a lot of automotive and still life photography in his early career. Now he mostly does very high end portrait photography. No matter how good you are, deliberately shifting to a different field like this is an impressive feat: It requires changing other people's perception of one's talent.

Great inspiration for me. I am translating Tempo! my business strategy book to English right now. After seeing Marco's pictures I will pay extra attention to keeping it simple and be very, very, careful with the details. Next week, if all goes according to plan, I will make a new videocast. It has been a long while, but I know I am going to be extra careful with details there too. (Alas, I have no talent for photography and movie making, so I will have to substitute for talent with interesting content. I am seriously envious of people who can bring both to bear.)

For that little extra bit of inspiration, I owe both Marco Grob and Anna-Carin Mårtensson, whom I wrote about recently. Thanks!

No matter what you do, studying high quality work is a great way of finding the right mindset for achieving excellence. It does not have to be high quality work in your area of expertise, it just has to be recognizable as high quality work by you.

If you check out the photographs on Marco's web site, be sure to look closely at the least fashion magazine oriented stuff. I compared pictures from the exhibition and talk with pictures from his own and Hasselblad's web sites. I got the feeling that he showed and talked about the pictures he really likes, while the stuff on the web sites is more oriented to what sells in particular markets.

Next time I will write about stone fish. Be seeing you!

Time for Art

2010-04-06T23:59:00.000+02:00

My family and I took some time off to visit relatives during Easter. This included visiting my sister, Anna-Carin Mårtensson. Anna-Carin is a painter. She is about as obsessed with painting as I am with business strategy and organization. It is always fun to visit her and her family, but this time there was an extra treat:

During ten days, 2-11 April, 156 artists in southern Sweden exhibit their work. (Here is a map showing where all 156 artists are. Anna-Carin's exhibit is number 97 on the map.)

Anna-Carin had set up a large tent on the lawn of her house where she exhibited her paintings. She had also converted the living room in her house to an art gallery.

The exhibition has gone well so far. Anna-Carin's exhibition has had plenty of visitors.

Free is one of my favorites. I like the color composition. (Click the picture to see a larger version. Anna-Carin sometimes gets inspiration from her dreams. I haven't asked her if that is the case here.

This one makes me think of Arthur C. Clarke's Rendezvous With Rama. If you have read the book, I am sure you understand why.

Anna-Carin's taste runs to abstract painting. She is a bit of a "painter's painter". I have seen other painters jump up and down with excitement when they have studied her work. Sometimes though, she does something else entirely. This is a painting that I find very funny.

At the Foot of the Mountain is another favorite of mine. I like it as much as I like Free.

The visit was too short, but I'll go back soon. I can't draw at all, and I mostly write about business strategy and organization. And yet, when Anna-Carin paints, and I write, at some level we do it out of a similar need to explore possibilities and to express ourselves.

The exhibition lasts until the 11th of april, so there is still time to visit.

The First Tempo! Reader Comment

2010-04-01T01:00:00.000+02:00

I have been anxiously waiting for comments from Tempo! readers. A book is like a baby: A great investment of time, effort and emotion.

Torbjörn Gyllebring bought one of the first copies. He posted the following on Twitter:

@Kallokain I'm quite inclined to call Tempo! the "Slack" of Business Management that's a good thing :)

Joy!!! In case you haven't read it, Slack by Tom DeMarco is one of the best management books ever written. It is so good that it is actually useful. Slack was the book that got me interested in management.

Once I publish something I just want people to like it and find it useful.

I do not care greatly if Tempo! becomes a great seller. (Though it would be nice, of course.) I do care a great deal about whether readers enjoy the book and find it useful.

I care a great deal about who reads Tempo!. There are ideas in the book that I believe are very important, and worth spreading. If the ideas take root in the right minds, well, who knows what might happen...

It is not my intention to turn my blog into an advertising forum for a book. That would be boring for both you and me. However, I do hope you forgive me if I do go on a bit about Tempo! for the next month or so. Finally seeing the book in print gave me feelings I cannot describe. If I could describe them, I'd probably be a very successful fiction writer right now :-)

As always, my blog posts are few and far between when I am working long hours. I am heavily backlogged at the moment. I have promised to finish the Primus Vicus series of videocasts. I am working on an English translation of Tempo!. I am falling behind on blogging, tweeting, and participating in various forums. I have cut down on reading email, just skimming anything that does not require an answer. Of course, I want to write more books, and make more (and better) videocasts. I need to write one more issue of the Tempo! support newsletter soon. And, oh yes, I recently joined Business Network International (BNI).

Lot's of things to do. Lot's of things to write about. Right now though, I'll go to bed.

The First Tempo! Customer is...

2010-03-06T17:00:00.000+01:00

The first person to buy a copy of my business strategy book Tempo! (the Swedish edition) is Björn Wannebo.

Björn is vice-chairman at GLC ek.för. (Göteborgs Lastbilscentral), a major trucking company in Gothenburg. Björn is also chairman at TrainingLab and the owner and Managing director of BCM AB, a management consultancy company. He is also a member of Business Network International (BNI).

I met Björn recently. We talked about management, found we had a lot in common, and many similar experiences. Two things that stood out immediately is that Björn understands management, and that he has a great sense of humour. I showed him a copy of Tempo!, and Björn decided to buy immediately.

I do hope he enjoys the book, and finds it useful.

Björn and I will keep in touch. I want feedback from as many Tempo! readers as possible in order to find out how useful the book is to you. The feedback will be fed back into the strategy process I describe in Tempo!, in order to continuously improve both future books and my consultancy services.

If you read Tempo!, please do let me know what you think about it. I am also interested in knowing whether you like the free Tempo! newsletter that supports the book.

The Fun Theory

2010-02-15T12:12:00.000+01:00

Thanks to Mario López de Ávila Muñoz for posting about this in the cmsig group at Yahoo:

Here is a link to the original page.

There is a good point here: People will change their behavior if it is fun to do so. It is something to remember.

Traits of Agile Organizations

2010-02-12T08:08:00.001+01:00

I wrote the following list of traits of agile organizations in a discussion at LinkedIn. I decide to preserve it here until I figure out what to do with it.

Is there anything you think should be added or removed from the list? Are there any organizations beyond those mentioned in the list that you beleve are also agile? Comments are very welcome.

Likely to focus on core values instead of core business
Likely to be network structures
Likely to limit node size to 100-200 people (Virgin is an exception nowadays)
Likely to have nodes responsible for complete revenue flows
Likely to have decentralized command structures (in order to reduce response times and be more opportunistic)
Likely to emphasize self-organization
Somewhat likely to be democratic (W.L. Gore and Semco)
Unlikely to emphasize economics of scale (though they use it when appropriate)
Unlikely to standardise procedures across nodes. (Quite obvious why. Virgin Galactic, Virgin Trains and Virgin Balloon flights can hardly standardize their procedures. Semco does not standardize too much across manufacturing units because it would reduce resilience, even if it could bring them short term economic advantages.)

Sent from my iPhone

About Context

2010-02-11T00:30:00.000+01:00

I have been involved in a discussion about the importance of context when solving wicked problems in a LinkedIn group. (The thread didn't start out that way.)

Here is a little story for everyone who believes problems can be solved without understanding their context:

A small car company had great success with a car model, so great that they decided to build a factory in a country new to them and open up a new market. Because this particular model was such a great success, they decided it was the best car they could hope to build, and that their way was the best way to build it. Therefore, they decided that their new factory should be an exact replica of their existing factory, and that it should build cars exactly the same way.

Unfortunately, cars made in the new factory did not sell very well. Sales were abysmal. Worse, cars from the new factory were involved in several accidents. Cars from their old factory had excellent safety records.

Management decided to ship half a dozen cars from the new factory to the old one to let a team of engineers figure out what was wrong. The team examined the cars, but found nothing wrong. The cars from the new factory where identical with the cars from the old factory, and just as good.

The chief engineer decided he needed to go to the new factory and see for himself how the cars were put together. There had to be something wrong with the way it was done at the new factory.

When the chief engineer arrived at the airport he was picked up by a driver using a car from the new factory.

When the chief engineer arrived at the new factory he was greeted by the plant manager who looked very worried and told him: "I am very glad you are here. We have tried everything we can think of to make our cars just like yours. We are at our wits end. If you can't solve this, we have to close our entire operation down."

"Don't worry", the chief engineer said, "I figured it out on the way from the airport. Here is what you need to do to solve your problem..." Then he told the plant manager.

What did the chief engineer tell the plant manager?

To see the answer, select the white text here: The chief engineer told the plant manager to move the steering wheel and all pedals from the left side of the car to the right. The old plant was in a country with right hand traffic. The new factory was in a country left hand traffic.

The point of the silly little story is of course that best practices are always dependent of context. and yet, we forget again and again to define the context when we try to discuss best practices, or solve complex problems.

Leading by Omission - Ricardo Semler Videocast

2010-01-27T10:53:00.001+01:00

Ricardo Semler, CEO of Semco, is one of the most interesting leaders in business today. His company is not just extraordinarily successful, it is also a world class leader in workplace democracy. Ricardo Semler is one of the world's most innovative business leaders.

This videocast is from a lecture at MIT. It is 48 minutes long, but well worth watching. Semler is a very good speaker and he has a message worth listening to.

I strongly recommend that you read his book Maverick.

Here is a link to the original page where the videocast was published.

Exchanging Bricks for Jade at Business Network International

2010-01-24T14:02:00.000+01:00

Last Friday I visited the Business Network International (BNI) team Draken (The Dragon) in Gothenburg. I have made a couple of visits to other BNI teams before and it has always been interesting experiences.

BNI is a business reference network. A BNI team in the network consists of up to 40 people. The group meets once a week for the purpose of exchanging business references.

What makes the teams work is that each individual represents a different kind of business. A team may have only one car salesman, one hairdresser, one IT service provider, one accountant...

An IT service provider never has to worry about an accountant stealing her business, or vice versa. On the other hand, the accountant might have customers who need IT services. The IT service provider might know of a company that wants to lease cars, and so on.

BNI team members provide each other with information that is of little value to the sender, but of great value to the receiver.

This is of course a feature of all trade. If you buy a bar of chocolate, you buy it because the value of the chocolate bar is greater to you than the value of the money you must spend to get it.

As with all business transactions, the exchange of business references in a BNI team works better the greater the difference in perceived value by the team members.

This may seem way to obvious to be useful, but it is often the obvious things we miss. Finding something you have that is of low value to you, but of high value to someone else, so that you can trade it for something of value to you is a basic negotiating technique.

For example, the thing that brings new people to BNI is the promise of business references, but once you visit a team, you will discover that a considerable part of the value is the sense of community within the team. Of course, that sense of community also drives the sharing of business references.

BNI teams have a fixed meeting agenda they may not deviate from. The same agenda is used by BNI all over the world. Within the framework set by their meeting agenda, there is a lot of freedom. It is a great example of complex, intelligent behavior, that arises from a simple set of rules. You can see the same thing in an Agile (Scrum, XP, etc.) software development team that works well, or in some network based companies, like the famous Semco, W.L. Gore & Associates and Richard Branson's Virgin Group.

Managers and management consultants are like chess players: We look for patterns. When I first visited BNI I recognized the strategical set up as Exchanging Bricks for Jade, one of the Chinese 36 Stratagems. BNI calls the idea Givers Gain. One of the things givers gain in the BNI community is trust. Trust is valuable currency, because if people trust you, they will give you references.

Here is a diagram showing how it works:

Thus, the more you give, the more you gain. It is a nice reinforcing loop. I do like the setup. A lot. BNI does of course add a lot of tweaks to the basic process in order to strengthen the reinforcing loop above.

10 Rules for Better Management

2010-01-20T21:29:00.001+01:00

It is easy to get so caught up in managing messes that one loses sight of the basics. Here are 10 simple rules that I have found useful:

The Interaction/Isolation Principle: Strengthen interactions with allies (customers, employees, subcontractors, partners, etc.). Isolate opponents (from customers, their own employees, from partners, from subcontractors, etc.)
When you manage a unit (team, department, etc.), watch the queues!
When you manage several units (team members, collaborating departments, project portfolio, etc.), manage the interactions between the units, not the units themselves.
Both Theory X and Theory Y are self-fulfilling. Therefore:

When you manage people, use Theory Y!
When you design the organization (structure, rules, etc.), use Theory Y! (Read up on Gore & Associates, Semco, the Virgin Group, Whole Foods, Google, and somewhat surprisingly, the U.S. Marine Corps.)

People overestimate themselves and underestimate other people. It follows that:

You are not as smart as you think you are. Therefore, from time to time, you need help!
People around you are smarter than you think they are. Therefore they are more able to help you than you think they can. (Theory Y says they are also willing - you just need to ask politely.)

Read at least 4-6 serious management books each year.
Practice what you read.
Integrate theory and practice by reflecting on it.
Learn to read frickin' Process Control Charts! And why!!!
Learn Little's Law and it's implications!

The Cost of Coffee - How Built in Brain Rules Mislead Economic Decisions

2010-01-17T17:16:00.001+01:00

I had promised myself not to blog today (too busy working), but just a few minutes ago I saw a prime example of cost world thinking gone wrong:

I am sitting in a coffee shop, drinking coffee. Awhile ago, a family sat down at a table close to mine and began discussing a rather peculiar management policy in force at this shop: 30-60 minutes before closing, the shop won't brew more coffee if it runs out. This is to ensure that no coffee, and thus no money, is wasted.

If you run your business from a Cost Accounting perspective, a policy like this makes sense. Most companies have policies like these, policies designed to minimize cost. When the financial crisis struck in 2008, cost cutting was the method most companies used to balance the reduction in Net Profit. Stands to reason, right: Net Profit = Throughput – Operating Expense. Therefore, if Throughput drops, the only recourse is to reduce Operating Expenses.

This reasoning is simple, analytical, easy to understand, and totally daft!

I am sure you have figured it out already: The profit from selling a single cup of coffee will pay for making an entire pot. Even more important: Not selling a cup of coffee will annoy customers. They may go elsewhere.

Once lost, it may be difficult to gain a customer back. Think of the stores where you do not shop, the suppliers you no longer use, because somebody else provided better service. If one of those places improved, would you start using them again? Probably not. First of all, how would you know about their improvement? You no longer use their services. Second, even if someone you trust tells you about them, you have now built a relationship with someone else. That bond might be difficult for someone else to cut.

In the case of the coffee shop, just about everyone can figure out that their policy is a bad one except for the coffee shop owner. If she understood, she would change the policy.

What is it that makes the problem difficult to understand for the coffee shop owner? There are two likely contributing factors:

Cost focus by education and culture. Most people believe cost is always the most important factor to control. Even if they understand better, they have a deep rooted belief cost is the only factor they can control.
Loss aversion. The human brain has evolved to make very quick decisions about very simple things. To do that the brain uses simple decision rules. One of those rules is that it is better to hang on to what you have got, rather than risk it to get more.

Of course, Loss aversion, the decision rule in the brain, shapes and reinforces the cost focus in our economic models and in our culture.

Raising the amount of money involved does not necessarily make us more inclined to reason about the situation. Instead, it raises the amount of stress involved and makes us rely even more on our built in decision rules.

Once the decision has been made another of the brain's decision rules, Confirmation bias, sets in. Confirmation bias makes us look for evidence that confirms our decision, regardless of whether that decision was a good one.

So much for individual thinking, but it gets even more difficult to calculate the cost of a cup of coffee because of Groupthink. Humans are social animals. We are so social that belonging to a group is often more important to us than thinking critically about decisions.

Groupthink is a strong social force. It is the reason why people tend to stick with the same political affiliations as their relatives. It is one of the reasons why we got into the financial crisis of 2008. It is also the reason why it is unlikely that a coffee shop employee will suggest to the boss that she should change the policy about not brewing coffee the last hour before closing the coffee shop. An employee that did that would risk losing his boss's approval and jeopardize his standing within the group.

Note that the employee might feel this pressure even if the employer would be delighted to have input from the employee. It is one of the built-in brain rules.

There are plenty of techniques for reducing the pull of the decision rules that mislead us. The problem is that to get someone to be interested in learning to use these techniques, we need to appeal not to the part of the brain that reasons, but to the part of the brain that makes decisions using the very rules we want to teach them how to work around.

Then, and only then, can we help people figure out the true cost of a cup of coffee, or the true cost of more important business decisions.

Looking for Trouble!

2010-01-13T15:45:00.001+01:00

I am looking for trouble! That is, I am looking for clients that can present me with difficult, messy, horrible challenges.

Forget the easy stuff! I want to help solve the worst problems you have:

Is it just not fun to be the boss? Is your work draining the life out of you? I have met plenty of smart, very intelligent managers at all levels who are drowning in their work. Too many problems, not enough solutions, day after day. I've been there. I clawed myself out of the mess the hard way. Along the road, I found out how to make managing fun. I can show you how I did it, and help you find your own way. Let's be clear: It will not be an easy road. There will be plenty of challenges. I can promise you a lot of fun though, provided that you are willing to seriously try a couple of new things.

Do you have a great vision, but your organization just won't budge from its set course? I can help you find the pivot points you can push to make your organization turn. Part of my value proposition to you, is that I stay around and help you push. My job is done when you succeed.

Are the departments in your company at each other's throats instead of collaborating? They may be Accidental Adversaries. I can help you resolve the problems.

Did you lose some of your best people during the downturn? Now that the economy is looking up, you may be left behind, because you no longer have the key people you need. I can help. Even better, I can help you set things up so you your organization is a lot more resilient when the next recession hits.

Want to increase net profits, but you do not have the cash on hand to make heavy investments. I can help you. Most companies perform far below their potential. I can help you find the hidden capabilities and work with you to unleash them.

Are you providing what your customers say they want, but when you show it to them they turn around and buy from a competitor? Common problem, but it can be fixed. I can help you do it.

There are a few things you should know up front:

I screen clients. I do not take on a job unless both you and I believe I can add real value. That means you must be prepared to work with me, first on a preliminary diagnosis, then on determining the cost of the problem. The problem must cost something in terms of your objectives, so that it is worth solving for you.

If my talents and experience does not suit the problem, I will pass on the commission. If I know someone with experience better suited to solving your problem, I will refer you to them.

I always have clear objectives. That means you and I will construct a simple mission statement in the form of an Intermediate Objective Map. This is a simple thing to do. Often, it takes only a couple of minutes. However, it is very important for the quality of my work.

We will also set limits, that is, determine in broad terms what I am not allowed to do (at least not without talking to you first). For example, I have worked in situations where I cannot interview certain people, and where certain information must be confidential.

If we discover the objectives should change, no problem, but we do construct a new Intermediate Objective Map.

I have one boss. Companies are fraught with people who have conflicting agendas. I do not split my loyalty. We determine from the outset whom I work for, and I report to that person or entity (such as a board or steering group) only.

You must be prepared to participate in finding a solution. Depending on the problem, participation can range from reading weekly reports and having lunch once or twice a week, to participating in a hands on course, to leading a change team. There are three reasons:

There is a lot of useful knowledge inside your head. I will need access to that knowledge, and your insights, in order to fully understand the problem.
You run your organization. I merely help, and for a limited time at that. You must be involved in solving the problem, because sooner or later you must take ownership of the solution. The earlier you do that, the easier it will be.
You should not become overly dependent on consultants like me. My ultimate goal is to help you achieve your full potential. If you need me to solve the same kind of problem twice, I have failed. (Working with me again for the fun of it is a different matter.)

I work according to three simple rules:

Treat the customer as a highly valued friend. I will work for you to the best of my ability. I will keep your confidences. I will be honest with you, even if the things I have to tell you are difficult to hear. Part of my job is telling you the things no one else in your organization can, or dares.
Go for Win-Win Solutions. I operate on the premise that there are almost always win-win solutions.
Go and find out for myself. I will think for myself. It is part of who I am. It is also a major part of my value to you. I can offer you a different perspective because I am an outside observer of your business. If you want different results from what you have, a different perspective is what you need.

Make 2010 your year! Email me, or call +46 708 56 23 65.

The Cost of Queues

2010-01-05T11:18:00.001+01:00

Lean practitioners and scientists have known for many decades that cost effectiveness isn't all it is cranked up to be. Cost effectiveness is a measure of how much of the capacity of a resource is utilized. The resource may be a person, a computer, an aircraft, a machine in a workshop...

Most people believe that people should be as close to 100% cost effective when they work. That is, their capacity should be utilized 100%. And yet, for other kinds of work, it is well understood that utilizing a resource 100% is a bad idea.

Take your computer for example. If you run one application, the computer is responsive, you can work very fast. With one major application running, your computer uses only a fraction of its capacity. If you decide to run your computer in a more cost effective manner, and utilize its maximum capacity by running a large number of programs at the same time, you will find that the computer slows down and becomes unresponsive. At 100% capacity utilization the computer is frozen. Nothing happens, even though the processor runs full tilt, and the fan is straining to cool the system.

This effect is not specific to your computer. It is a result of how processes work. When capacity utilization of a resource increases, there will be a queue in front of that process. Due to variation in arrival times of new tasks, queues will begin to build long before capacity utilization reaches 100%. The same thing happens in processes where people do the work. (We actually treat machines better than people in many cases. For example, programmers know they should not overload a server, but their project manager often does not know how to protect the programmers from overloading. Nor do the programmers understand the consequences of overloading themselves.)

Queues will increase lead times because tasks will have to spend time waiting in them, rather than being processed by one of the resources in the process.

If you try to become more cost effective by reducing capacity, and thereby capacity cost, all will be well at first, from an economic point of view. (The people who are let go are usually of a different opinion.) The catch is that this will increase the queues in the system. This increases lead times. Consequently, cost associated with lead time will also increase. (In manufacturing there is also a considerable storage cost due to increased inventory, but we will ignore that for the purposes of this blog post.)

A diagram of the relationship looks something like this:

The diagram may of course vary in shape depending on several factors, including how much variation there is in the system. (There are several disciplines, like Six Sigma, that focus on optimizing processes by managing variation.)

What the diagram says is that beyond a certain point, pushing for more cost effectiveness increases total cost. In his book Flow, Donald Reinertsen reports that software developers are often loaded to about 98,5%, which means the increase in queueing cost is far greater than the savings in capacity cost.

Here is a Current Reality Tree showing how overloading people and other resources will affect Return On Investment of a process (Click the diagram to see a larger version):

Most managers have practical experience of projects that just do not get anywhere, or production lines where orders are often delayed. Yet, most do not stop to think about the cause of the problems, and how to fix it. This is a pity, but it is of course also an opportunity for those companies where managers, especially top executives, are seriously interested in solving the problems. If they do, they can leave competitors eating dust.

One would think that most companies already are very competitive, but the truth is that they are not. Many are choking themselves by being to cost effective. this causes more damage to them than their competitors ever will.

Another thing to consider is that large queues slow response times. Today, when the ability to respond quickly is becoming more and more important, not understanding the cost of queues can easily kill a company.

New Tempo! Supplement – Communications in Network Organizations

2010-01-04T17:07:00.000+01:00

I have published a new Tempo! supplement on Scribd. As usual, you can download a PDF version from the Scribd page.
Tempo! Communications in Network Organizations

Solution To the Management Challenge

2010-01-04T02:10:00.000+01:00

A couple of days ago I posted a management problem. Here is the solution:

The CEO brought you in to fix a sudden drop in sales. You got the following sales data:

and a time series graph based on the data table:

The key to solving the problem is being able to interpret the data correctly. The CEO told you there had been a rising trend in sales, followed by a disastrous drop, but is that really true?

You would not expect sales figures to be exactly the same each month. Sales figures are subject to random variation just like almost anything you measure in a business organization. The question here is whether the variation you are looking at is random or not.

You may be looking at the results of two systemic changes, one that is improving the system, and one that is making it deteriorate. On the other hand, what you see might also be random fluctuation. It is possible to figure out which by using a process control chart. (There are other tools that can do the same thing. I use process control charts in combination with EWMA charts to increase the reliability of the data analysis, but using only a process control chart suffices for this example.)

A process control chart has three parts:

A time series chart, similar to the one above, but with three important additions, lines showing the average, the upper and the lower process limits.
A moving range chart showing the change between consecutive data points. The chart has lines showing the average and upper range limit
A data table showing the source data. This is important, because it enables anyone to check the charts, and to construct other kinds of charts if necessary.

I won't repeat the table, but let's look at the other charts. First the time series:

OK, we are close too, and even slightly outside the process limits. With data points this close to the limits, it is difficult to be certain. Let's look at the moving range chart:

The moving range chart says we do not have a change in the system, just random variation.

At this point, we do not have a clear cut case, but the right thing to do is bet on random variation. The CEO told you there has been "the occasional hiccup" before, which may indicate that there was quite a bit of variation in sales the previous year too.

Of course, you can and should ask for the sales figures of the previous year to make sure.

Let's cut to the chase. Here is raw data for both the previous and the current year:

Here is the time series:

The current year does not look so special now. Let's look at the moving range chart to make sure:

Compared to the roller coaster ride last year, the current year was positively boring. There were no systemic changes though. (This in itself is a bit strange: No seasonal variations, no other fluctuations in the market. It could be that there is a very steady market for thingamajigs, or it could be that the data was generated using a very simple computer simulation of a sales department. You pick the most likely alternative;-)

The CEO was happy with the average sales figures. What you need to do is convince the CEO that the past three months sales figures are just a run of bad luck, like the five months before were just a run of good luck. No one has done anything exceptionally good or bad in either case. At least nothing that has had a significant effect on sales. (We assume that the market has not changed significantly.)

Problems similar to the one described here occur very often. Managers interpret random variation as a sign that a process has changed in some way, and demand action, mete out punishments, or, if the company has had a bit of luck, reward people for doing exactly the same thing they have always done. When such actions are taken they are more likely to harm than do good.

The opposite is also common, there is a significant change for the worse, but like a frog being boiled in slowly heated water, nobody notices the change until it is too late. Also, slow but consistent improvement is liable to go unnoticed.

The same kind of problem crops up very often when companies start using Key Performance Indicators of various kinds. KPIs are great, but there are two things you need to get right:

You need to pick the right ones.
You need to be able to interpret them correctly

Strategy Maps, or my favorite, Intermediate Objective Maps, can help you with the former. Process control charts and EWMA charts can help you with the latter. Unfortunately, most companies don't bother. Some outsource the whole KPI development process, paying consultants to measure the wrong things and present the data in confusing ways, like the original time series diagram in this little exercise.

A better way to do it is to hire a consultant to coach you and work with yourself and your people, so that you can develop a set of KPIs you understand and trust. (You can also do it yourself, read up on the techniques and practice a lot. Being a consultant, I would much prefer it if you contact me. It is your choice though.)

You might wonder what a top rate consultant would have done if there had been a significant change. This is what I would have done:

Get hold of all relevant quantitative data I can, and do the same kind of analysis. (Such data might be the number of sales calls per week, percentage of sales calls leading to closed deals, etc.)
Run a Crawford Slip brainstorming session get the qualitative data I need to figure out what the problem is, and engage the work force in solving the problem. I would start with the sales department, but it is quite likely that I would involve other parts of the organization before I am finished. (For example if thingamajig sales had dropped because thingamajig quality had dropped.)
Use The Logical Thinking Process (TLTP) to take the collected data and figure out the root causes of the problem, and how to deal with them. This process should involve company executives. Otherwise, it will be difficult to get the executives to trust the results.
Execute the project plans that are the result of the TLTP process.

I did not provide enough information to find specific root causes in the example, which was a tip-off that there were no root causes to be found, which in turn was a tip-off that the problem was the perception that there was a problem, not a problem with the sales process itself.

Oh, and just in case you enjoy solving management problems, here is a book full of them. (Though of course not the one I have described here.)

I intend to write more management challenges, so I'd would like your comments.

A Management Challenge

2009-12-31T02:38:00.000+01:00

Here is a little management challenge for you:

You are a world class management consultant. You have been brought in to fix a problem at Big Company, the world's premier Thingamajig producer. The BC CEO tells you that except for the occasional hiccup, Thingamajig sales have been good for the past two years. Sales have been climbing for some time, but now they have suddenly dropped dramatically. The CEO shows you a sales chart to drive the point home:

Some finicky person has provided a table with the raw sales data next to the chart:

The sales department has 12 people. Most are experienced sales persons. There are three junior sales persons with less than two years of experience. One of the more experienced sales people got married in June.

The CEO wants you to bring sales back to the original level, quickly.

What should you do? Assume that the CEO trusts your world class reputation as a management consultant, and will do whatever you tell her.

If you want to take up the challenge, comment this post directly, or tweet me: @Kallokain.

I will post the correct solution in a couple of days. I should warn you that the solution is probably not what you expect.

Barry Schwartz On Our Loss of Wisdom

2009-12-30T10:03:00.000+01:00

This is worth listening to:

This talk was originally published here.

Mybiz.com - Talk by Professor Richard Donovan

2009-12-29T00:03:00.000+01:00

View this videocast. It starts off a bit dry, but gets more interesting, and Donovan is fun to listen to.

Building Better Offices

2009-12-28T22:01:00.000+01:00

I am interested in working environments, particularly for knowledge workers. The following tweet was quite interesting:

RT @menloprez: Coolest offices in America ... we didn't see this one coming! http://tinyurl.com/yeu6n5r (Inspired by IDEO and Kent Beck).

By Ron Jeffries

I found the article quite inspirational, but all of the examples are high profile, and quite expensive, examples of building better workplaces. I'll show an example of a low cost, but at least as effective, way to improve a workplace in a (near) future blog post.

Leverage Points - Where to Intervene in an Organization or Other System

2009-12-16T00:52:00.003+01:00

I have mentioned Donella Meadows and her list of places to intervene in a system before in this blog. Meadows worked out the original nine item list when she was at a meeting about the North American Free Trade Agreement (NAFTA) and the World Trade Organization. Later, she expanded the list to twelve points.

The list is very, very useful for business executives because it provides insight into where to intervene to improve an organization. The list does not tell how to intervene. I'm glad it doesn't. Keeps life interesting and me in business :-)

Without going into detail, or the science supporting the list, here is a version that has been slightly simplified and adapted to business:

Figure 4 shows the intervention points in order of increasing leverage. Of course, there are other considerations than the power of a leverage point. Weaker leverage points are often easier to apply, but the results are not as good as when using a stronger leverage point.

In her paper Donella Meadows points out that people do find the right kind of leverage fairly often, but tend to push the wrong way. The reason is that many systems, including business organizations, are so complex they become counter-intuitive.

My personal experience is that business organizations often fall back on setting numerical targets, simply because it is easy to do. Working out how to optimize buffers of Work-In-Process (WIP) or Design-In-Process (DIP) is more difficult, especially if no one in the organization has prior experience, or even know why it is important to do so.

On the other hand, managers today have access to all the information they need to get started on improving their organizations. It is not that difficult to get going: learn a bit of theory, practice it, learn a bit more, practice a bit more...

If you do that, there will be a benefit that may seem a bit unlikely at first: Management will be fun.

The Logical Thinking Process Workshop with Bill Dettmer

2009-12-15T10:30:00.000+01:00

I rarely do announcements in this blog, but there are exceptions. Here is one. If you go, I think you will enjoy it:
Catalysts in Linz, Austria, are organizing a five day Jonah workshop about The Logical Thinking Process with Bill Dettmer.

Date: May 21st – 27th, 2010 (Wednesday – Friday, Monday – Tuesday)
Location: Park Inn Hotel, Linz

The fee is 3,200 EUR (+ VAT) with a rebate of 20% for groups of 2 or above (i.e. 5,120 EUR for 2 people).

You can get all the details by clicking on the link above.

Bill is a well known and very well respected management consultant. He has written several books about manufacturing processes, brainstorming techniques, and of course about The Logical Thinking Process. (Scroll down a bit and you can see my very enthusiastic video review of the book.)

Certain To Win

2009-12-08T20:53:00.000+01:00

Sinan Si Alhir (@SAlhir) and I discussed a very interesting book, Certain To Win by Chet Richards. Sinan tweeted:

@Kallokain I have a few copies that I have warn-out due to re-reading so many times ;-)

and

@Kallokain I also distribute Certain to Win to teams that I coach; it is simple & compelling; beautifully elegant...

Well, here is what my copy of Certain To Win looks like. I have put plastic markers at noteworthy passages.

In case you are wondering, there are 22 markers, but that number is likely to increase the next time I reread it.

Solve your own darn problems!

2009-12-07T01:11:00.000+01:00

Jamie Flinchbaugh has an excellent post on a very basic mistake most managers make. He describes how managers believe that the number of problems each report has add up, so that the manager's problems are the sum of the problems the reports have.

Why not just pop over to Jamie's site? You will find other valuable insights there too.

Motivation - How Business Runs on Folklore, not Science

2009-12-05T02:30:00.000+01:00

In this TED Videocast, Dan Pink talks about how extrinsic motivators reduce performance. Hard to swallow for business people, but well known in the scientific community.

If you are interested in looking closer at the scientific evidence, I recommend:

Punished by Rewards by Alfie Kohn
Sway by Ori and Rom Brafman

No amount of scientific evidence will convince people who have a reward system. Rewards are addictive. Facing up to facts requires breaking the addiction. On the other hand, if you consider starting a company, I suggest you look at the evidence before charging ahead and implement the same kind of extrinsic reward systems that are holding your competitors back.

The research showing the problems with extrinsic rewards goes back at least 50 years. Business people are ridiculously behind. So much so that management consulting giant McKinsey is speaking up about the problem. McKinsey must of course careful not to offend their clients, so they are softening the blow a bit in their article. I think it is great that they speak up, despite the risks inherent in going against prevalent management superstitions.

Tic-Tac-Toe and Business Strategy

2009-11-30T13:49:00.000+01:00

Business strategy is often likened to a game of chess: complex rules, practically infinite variations, many complex patterns, difficult to master... The complexity of chess can easily obscure the points about strategy, so let's use another game as a model for understanding the use of business strategy: Tic-Tac-Toe:

Business strategy is about moving swiftly and getting an advantageous position. In Tic-Tac-Toe, this is pretty straight forward: The first mover can choose the best position. In business, it is a bit more complicated. For example, a first mover may have to expend effort blazing a trail, selling a new concept to the market. A second mover can use the trail blazed by the first mover. when the time is right, the second mover can pounce, exploiting a weakness in the first mover's strategy.

Even if business strategy is more complex, the principle is the same: Move swiftly when the time comes, go for an advantageous position.

One important aspect that is often overlooked, is that this requires having both processes for strategy development, strategy deployment, and the training to use them.

I have written quite a lot about the advantage of speed. In a game of Tic-Tac-Toe, if you can make two moves while your opponent can make only one, you will win. Same thing in business.

There is no easy generic way to tell what the optimal length of a strategy cycle is, but you can easily determine the worst (except for not having a strategy cycle at all):

The worst possible strategy cycle length for your company is the same strategy cycle length your competitors use! This would be a year for most companies, because the strategy cycle is often tied to the budget cycle. (You might infer from that that a one year budget cycle is a bad thing. You would be right. from a strategic point of view, it is quite nutty.)

Usually, it is better to be faster than the competition, but not always. For example, Warren Buffet built his fortune by being slower than most of his competitors. Buffet spent his life identifying real signal in the stock market, while most people just react to random noise. There is an important lesson to be learned there.

All strategy games are games of interaction and isolation. You want your own forces to interact, while keeping opponent forces dispersed, unable to focus their power. In the game to the left, the X player has managed to focus his forces, while the O player did not.

In business, this means rallying your own forces with a unifying vision. It also means sowing discord among competitors, and competitors and their customers. It does not mean doing anything dishonorable or dishonest. You will need integrity and honesty in order to pursue your vision. Never compromise it.

In Tic-Tac-Toe, you can create situations where your opponent faces an impossible choice: Damned if you do, damned if you don't.

The same thing can be done in business. Business strategy literature is full of examples of how smart executives have put their competitors into situations like the one in the picture to the left.

However, there is another side to it: In business your own organization is so complicated that if you face a dilemma, it is very likely that your own organization created the problem, or at least contributed to creating it, in the first place.

We are so used to conflicts like these in business that one of our major problems is recognizing them as conflicts. We think of them just as the natural order of life. Consequently, even though most dilemmas can be solved, we don't. It does not even occur to us to try.

Personally, I like dilemmas. They are opportunities in disguise. Really! I rarely encounter business dilemmas that cannot be solved.

Here is one of my favorite approaches to strategy: Cheng/Ch'i (orthodox/unorthodox). Change the rules and play a different game than your competitors do. There are plenty of companies big and small who know how to do this. Most do it rarely, but some have incorporated it into their business models. Virgin Group and Apple are two of my favorite examples.

The idea is to start out with orthodox moves, enticing the competition to following a standard pattern, then use an unorthodox maneuver to hit from an unexpected direction. I provide several examples in Tempo!, my (work in progress) business strategy book.

Even a simple game like Tic-Tac-Toe has a strategy playbook: Go first if possible, get the center square first, occupy corners if you can. Business strategy is more complex, but the idea is the same: You can do a lot more if you know more about the rules governing the game. You can even change them.

Creativity Crow

2009-11-30T10:12:00.000+01:00

In his excellent book Brain Rules, neuroscientist John Medina tells a very touching story about his newborn son and himself. Medina noticed his son sometimes stuck his tongue out. Medina immediately stuck his tongue out back at his son, encouraging him to do it again. This helped Medina to build a relationship with his son right from the start. (There is more to the story, both from a human and a scientific perspective, and Medina is a great writer, so I suggest you read the book for yourself.)

I had reason to reflect on Medina's story recently during a dinner. A psychologist who has worked as an advisor to industrial leaders in Sweden was present. So were two children, about 4 years old. The children began sticking their tongues out at each other, just like Medina and his son did. (And triggering mirror neurons, which was one of the things Medina wrote about.)

The psychologist immediately applied the same expertise he uses to advice industrial leaders:

Stop that, or I'll tell a crow to fly by and shit on your tongues!

Which approach do you think is more likely to build a better tomorrow?

TED Talks: Living with Data

2009-11-24T01:29:00.000+01:00

This is the most amazing user interface demo I have ever seen:

Thanks to Hannu Kokko and Petri Aukia for tweeting about this.

Are Nash Equilibriums Killing Agile Initiatives?

2009-11-24T00:51:00.000+01:00

Over the past two years I have seen a lot of debate about the success of Agile software development. Agile methodologies can produce great results. This is well documented. Yet, in many companies, they don't.

This has lead many people to question Agile. Some reject it altogether. However, the root cause of the problem isn't in the Agile methodologies. The root cause that makes Agile fail is in the companies adopting Agile methodologies.

Let's look back about ten years, when Agile was beginning to gather momentum. It was believed that if a company was functionally organized, like this:

Introducing an Agile software development method in part of the organization like this:

would cause everyone in the organization to reevaluate their strategies, so that the organization could reorganize into a flow organization, like this:

It turned out not to be that simple. An important reason is that most business organizations are designed to be in a stable state. All major players know that if they change their strategy, and the other major players don't, they will loose. It looks a bit like this:

This is a simple example with three players: A, B, and C. If A goes Agile, A can win only if B and C reorganize their part of the organization too. If either B or C chooses not to reorganize, A will loose.

Suppose, for example, that A charges its internal customer B per hour for software development services. By introducing Agile, A might be able to develop software 5 times faster than before, and would thus make 80% less money than before, even though the company as a whole would benefit from reduced lead times and improved product quality. A can benefit from Agile only if A, B and C together change the internal economic system of the company. That is unlikely to happen.

It is worse than that. B and C might have to reorganize to the extent that they cease to exist in order for the company to reap the benefits of Agile. For example, a company may no longer need a Project Management Department, because though Agile teams have leaders, they don't necessarily have project managers. Of course, the Project Management Department will oppose such changes.

Game theorists have a name for such situations: Nash equilibriums. Wikipedia describes a Nash Equilibrium like this:

If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium.

A system may have many possible Nash equilibriums. There is no guarantee that a Nash equilibrium is optimal for the system as a whole. Most are not. However, it is often very difficult to move from one Nash equilibrium to another. To do it successfully, all players must be made aware that a better state is attainable and they must trust each other to change.

This is the crux of the matter: Successfully introducing Agile requires a paradigm shift for the entire organization. Most organizations are not prepared for that. Few Agile initiatives have top management support allowing them to change parts of the organization outside the software development department.

That is not to say change is impossible. It is not. It is merely very difficult. On the up side, the difficulties are to a large extent inherent in the organizational structure of most companies. Once a company goes Agile successfully, it will have a more adaptable organizational structure, which makes it the organization easier to change in the future.