Thursday, December 31, 2009

A Management Challenge

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.

Wednesday, December 30, 2009

Tuesday, December 29, 2009

Monday, December 28, 2009

Building Better Offices

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! (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.

Wednesday, December 16, 2009

Leverage Points - Where to Intervene in an Organization or Other System

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.

Tuesday, December 15, 2009

The Logical Thinking Process Workshop with Bill Dettmer

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.)

Tuesday, December 08, 2009

Certain To Win

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 ;-)
@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.

Monday, December 07, 2009

Solve your own darn problems!

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.

Saturday, December 05, 2009

Motivation - How Business Runs on Folklore, not Science

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:

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.

Monday, November 30, 2009

Tic-Tac-Toe and Business Strategy

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

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?

Tuesday, November 24, 2009

TED Talks: Living with Data

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?

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.

Sunday, November 22, 2009

Sweet ReTweet

I have had a Twitter account for some time now. Like many other Twitter users, I am interested in what impact, if any, I have with my tweets. (A tweet is a Twitter message, a text string no longer than 140 characters.)

Just for fun, I decided to map the travel paths of some recent messages that had been picked up and retweeted by other Twitter users. The (very simple) map looks like this: 
As you can see, having a message retweeted means a lot for how much it spreads. Usually, after one of my tweets has been retweeted, I have also picked up a couple of new followers. (Which I usually begin to follow in return.)

If you follow me on Twitter, you may have noticed I retweet other people's tweets a lot. I follow a lot of people who are smart, fun, and willing to share their knowledge of Systems Thinking and related subjects. I want these ideas to spread, so I retweet the best tweets I read. Quite often, these tweets link to some blog post. Here is a map of some recent retweets I made:

Sometimes I get a chance to be helpful. Notice the orange arrows in the picture? Tom Kealey started tweeting recently, so he only has 25 followers. When I picked up one of his tweets and retweeted it, my 222 followers could read it. One of those followers is Bob Marshal (@flowchainsensei). When he retweeted my retweet, his 1,216 followers saw Tom Kealey's message.

I follow 263 people. Obviously they can come up with many more good tweets than I can do alone, so retweeting isn't just a way to be helpful, it requires a lot less effort than coming up with good tweets oneself. I can't be brilliant everyday, but the 263 people I follow can.

There are plenty of sites that analyze Twitter activity. The best I have seen so far is Twitalyzer. Twitalyzer can give you a plaintext summary:
@Kallokain's average influence in Twitter is 1.2 out of 100 and has been unchanged recently.  Their most recent influence was rated 1.2 out of 100 which we believe is slowly developing.
Twitalyzer uses five factors in its analysis. You can get a plain text explanation of each:

Mine is 1.2%. Quite low. Influence is a composite of several other factors. Obviously, with 222 followers, I won't have much impact on the twittersphere as a whole.

Signal-to-Noise Ratio
97.7% is quite good. As Twitalyzer puts it:
...the distribution of components in your signal-to-noise ratio (see below) which, based on the Twitalyzer's analysis is best described as "astonishingly high" in your most recent analysis based on 43 of your last 44 updates being counted as "having signal".
68.2% leaves room for improvement, but according to Twitalyzer it's quite good:

...your relative generosity (see below) which, based on the Twitalyzer's analysis is best described as "very high" based on your retweeting other people 15 times in the last seven days. While retweeting other people may or may not be part of your general approach towards Twitter, this behavior is a component of the Twitalyzer's measure of influence.
5.9% means I tweet much less than I should, at least if I want to grow my follower-ship very fast. On the other hand I want a life outside Twitter. My velocity probably won't improve much, unless I hire people to tweet for me, like Guy Kawasaki. Twitalyzer says:
...your relative velocity (see below) which, based on the Twitalyzer's analysis is best described as "very low" based on your publishing 44 updates in the last seven days. While contributing a lot may or may not be part of your general approach towards Twitter, this behavior is a component of the Twitalyzer's measure of influence.
1.6% is pathetic. I won't change the world anytime soon, unless I do some radical improvements. Here is what Twitalyzer says:
...your relative clout (see below) which, based on the Twitalyzer's analysis is best described as "very, very low" based on your being cited 24 times in the last seven days. While getting other people to reference you may or may not be part of your general approach towards Twitter, this behavior is a component of the Twitalyzer's measure of influence.
Twitalyzer can also tell me the stats of people talking to me on Twitter. This is useful. Even if my own influence is low, I may have friends in high places. My most influential connections on Twitter look like this:

— Average —

So, collectively, we may have a little influence on Twitter. Whether Twitter influences politicians, educators, and C-level executives is another matter. Of course we are not a homogenous group. And we are a group only in the sense that we communicate on Twitter. We have different perspectives, different purposes, and therefore different agendas. On the other hand, judging from what we do on Twitter, we also have interests in common.

It should be possible for a group of systems thinkers to figure out how to leverage the influence we have on Twitter in order to get more influence.

It will be interesting to go back to this post in a year or so, to se what, if anything, has changed.