All Aboard the Innovation Band Wagon?

Bandwagon

 

It seems like everyone wants to be an innovator nowadays. Being “digital” is in – never mind what it means, you’ve just got to be “digital”. Being innovative, however, is more than being buzzword-compliant. Being innovative, particularly in a digital sense, means solving problems (for customers, not yourself) in a new way with technology. Being innovative means meeting a need in a sustainable way (eventually you have to make money). Being innovative means understanding your strategy, not just following the latest thing.

Casimir Artmann published a post this week, “Digital is not enough”, outlining Kodak’s failures in the digital photography space. As digital cameras entered the market, Kodak introduced ways to turn film into digital images. Kodak’s move into digital photography (which, ironically, they invented in 1975), coincided with the rise of camera phones. By concentrating more on perpetuating their film product line than their customers’ needs, Kodak wound up chasing the trend and losing out.

Customers’ cash follow products that meet customer needs (even needs that they didn’t know they had).

Sometimes a product or service can meet a need and still fail. A Business Insider article yesterday morning discussed the weakness of the peer-to-peer foreign exchange business model, saying it only works in “fair weather”. In the article, Richard Kimber, CEO of the foreign exchange company OFX Group, observes:

When you’ve got currency moving dramatically one way or the other, what you can have happen is it encourages asymmetric activity. As we saw in Brexit, you had lots and lots of sellers and very few buyers. That can lead to an inability to transact because you simply have all these sellers lined up and no buyers. That’s one of the reasons why the peer-to-peer players opted out of their model during this period of volatility because it wouldn’t have been sustainable.

While Brexit might be the latest event to expose the weakness of the peer-to-peer model, it’s not the first. The Business Insider article referenced another article from January on The Memo that made the same point. Small wonder, the concept of a market maker is a well established component of financial markets.

Disintermediation, cutting out the “middleman”, is only innovative when the “middleman” is, or can be made, superfluous.

Blindly following a trend can be another innovation anti-pattern. In an article for the Wharton Business School, “Rethinking Retail: When Location Is a Liability”, the authors discussed the pressures on brick and mortar retailers and the need to be “Digital-first”. The following was recommended:

  1. Identify some of your common habits and perspectives about how the retail sector should function, including guiding principles, time and capital allocation patterns, primary skills and capabilities, and the key metrics and outcomes that you track.
  2. Uncover the core beliefs about retailing that motivate your behaviors, and are the priorities of your firm and board. This step usually takes some ongoing reflection and added perspective from your peers. Industry best practices likely influence your thinking greatly.
  3. Invert your core beliefs about retailing and consider the implications for your firm and board. There are many possible inversions in each instance. For example, all retailers should ask themselves, ‘Is digital our first priority? How about our customer network — do we put them in front of merchandise and do we have an entire department dedicated to mobilizing them?’
  4. Extrapolate what implications these new core beliefs, and the various ripple effects, would have for your organization and board. Observe what is happening in your industry and, more broadly, how different core beliefs might help you get ahead of digital disruption by companies like Amazon.
  5. Act on your new retail core beliefs (preferably with digital as the center) by sharing them broadly with your customers, employees, suppliers and investors. Purposely changing your business actions, particularly when it comes to time and capital allocation, is an important part of the process and helps reinforce the changes in mental models you are trying to achieve.

Note the generous usage of “your” (retailer) instead of “their” (customer). Sharing “…your new retail core beliefs (preferably with digital as the center)…” with your customers will only be fruitful if those new beliefs align with those the customer has or can be convinced to adopt. Retail is a very broad segment and a very large part of it needs to be digital. That being said, over-focusing on it carries risk as well. Convenience stores, for example, catering to a “we’re out and need it now” market, is unlikely to benefit from a digital-first strategy in the same way big-box retailers might. Not having a one-size-fits-all strategy is why Amazon is opening physical stores.

We don’t drive customer behavior. We provide opportunities that hopefully makes it more like for them to choose us.

Innovation doesn’t come from a recipe. Digital isn’t the magic secret sauce for everything. Change occurs, but at different speeds in different areas. The future is not evenly distributed. As Joanna Young observed in “Obsolescence: Take With Grain Of Salt”:

I recall clearly in the mid-1990s hearing an executive say “by the year 2000, we will be paperless.” I signed, with a pen, four approval forms just today. Has technology failed us? No. The technology exists to make mailboxes obsolete and signatures purely ceremonial. However the willingness to change behavior and ergo retire old methods is up to humans, not technology.

Innovation is significant positive change, an improvement in our customers’ lives, not a recipe.

Learning Organizations – Shooting the Messenger All the Way to the Fuhrerbunker

Unless you’re living under a rock, it’s a near certainty that you’ve seen at least one Downfall parody video (although I hadn’t realized just how long these had been around until I started working on this post…time flies!). There’s a reason why they’ve managed to hang on as a meme as long as they have. The “shoot the messenger” style of management, in spite of all the weight of evidence against it, is still alive and well.

When Tom Cagley and I were recording the Form Follows Function segment for SPaMCast 407, one of Tom’s questions brought to mind the image of Hitler’s delusional ranting in the bunker made famous by these parodies. The subject of the segment was my post “Learning to Deal with the Inevitable”, which deals with the need for a culture of learning to be able to deal effectively with the change that has become a constant in our world. Tom keyed in on one point (taken from a talk I’d attended put on by Professor Edward Hess): ‘candor, facing the “brutal facts” is essential to a learning culture’. Although his leadership failures pale in significance to the atrocities that he was responsible for, the Hitler portrayed in these clips demonstrates that point vividly.

It should be unnecessary to point out that flying into a rage when given bad news does nothing to change the nature of those events. It is particularly destructive when the bearer of the news is attacked even when blameless for what they’re reporting. Far from helping anything, the temper tantrum ensures that negative information is only delivered when it can no longer be hidden, hampering the ability to react in a timely and effective manner. A vicious circle builds up where delay, spin, and outright deception replace candor.

Delusional, drug-addled dictators can be expected to operate in this manner (thank heavens). The rest of us should aim for better.

It can be inconvenient to have to deal with crises; it’s more inconvenient to find out about them when the situation is unsalvageable. Maturity, humility, and perspective can be difficult character traits to develop, but not as difficult as finding yourself under siege from a world of enemies with only the pathetic dregs of your minions for company.

Form Follows Function on SPaMCast 407

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This week’s episode of Tom Cagley’s Software Process and Measurement (SPaMCast) podcast, number 407, features Tom’s essay on Test Driven Development, Kim Pries on what makes software “good”, Steve Tendon on TameFlow, and a Form Follows Function installment based on my post “Learning to Deal with the Inevitable”.

Change is inevitable, dealing with it effectively is not. It takes learn, a cohesive whole-enterprise culture of intentional, effective sense-making and decision-making (learning) to make effective moves in a dynamic world.

You can find all my SPaMCast episodes using under the SPAMCast Appearances category on this blog. Enjoy!

Organizations as Systems – “Uneasy Lies the Head that Wears the Crown”

Bavarian Crown and Regalia, Royal Treasury Munich

 

One of the benefits of having a (very) wide range of interests is that every so often a flash of insight gets dropped into my lap. In this case, it was a matter of “We must recognise that single events have multiple causes” showing up as a suggested read from Aeon on the same day that Thomas Power retweeted this:

The image in the tweet is an excerpt from an interview with Rory Stewart, Conservative Member of Parliament for Penrith in the UK. The collision of themes between the two articles struck me.

“You get there and you pull the lever, and nothing happens.”

The behavior of a system is determined not by the structure of the components of that system, but by the relationships and interactions between those components. Moreover, those relationships and interactions are dynamic and complex, even when that’s contrary to the designer’s intent. In fact, the gap between the behavior as intended and as experienced introduces a tension. I would argue that it’s less a matter of nothing happening when the “lever” is pulled and more that something different from what’s expected happens. Rather than simple cause and effect, “if this, then that”, multiple factors are in play.

In mechanical systems, parts wear, subtly changing the physics of the mechanism. Foreign objects invading the system can impose change in a more dramatic fashion. Context, both that of the system’s internals and its environment, influences its operation.

As was noted in the Aeon article, agency adds to the complexity. In social systems, all of the “components” are individuals with agency, making those systems chaotic in at least the colloquial sense of the word. Using Tom Graves’ sense-making framework, SCAN, these interactions fall into the more uncertain quadrants, either “Ambiguous but Actionable” or “Not-known, None-of-the-above”. Attempting to deal with them as though they fell into the “Simple and Straightforward” quadrant increases the likelihood of getting unexpected results.

Learning/sense-making is critical to dealing with change, whether internal or external (or both). The manner in which change is appreciated and reacted to, affects the health of the system. Consider three boilers: one where pressure is continuously monitored and adjusted, one which is equipped with a pressure relief valve which will open prior to a catastrophic failure, and one where problems are signaled by an explosion. It’s a trivial exercise to come up with examples of social systems, from businesses all the way up to political systems, using the third method. It’s probably a more interesting exercise to consider why that’s the case for so many.

In a recent post, “Architecting the shadows”, Tom Graves discussed the phenomenon of ad hoc, unofficial “shadow” organizational interactions that arise in order to get work done:

In SCAN terms, we could summarise the generic positioning of all ‘shadow’ functions – shadow-IT, shadow-business-models, shadow-management and more – much as follows:

Scan Diagram: Official vs. Shadow

In other words, the ‘shadow’-world exists to deal with and resolve all the uncertainties and over-simplifications that overly-mechanistic management models tend to overlook. Even in more aware management-models, in which some exploration of the uncertain is officially sanctioned and allowed, the shadow-world will still always need to exist – particularly whenever the work gets closer towards real-time action:

Scan Diagram: Official vs. Shadow showing sanctioned Shadow Activity

In closing the post, Tom makes the following observation:

As the literal ‘the architecture of the enterprise’, a real enterprise-architecture must, by definition, cover every aspect of the enterprise – including all of the ‘shadow’-elements. And yet, also by definition, those ‘shadow’-elements cannot be brought ‘under control’ – not least because they deal with the themes and factors that are beyond the reach of conventional concepts of ‘control’.

The “conventional concepts of ‘control'”, the deluded belief that complex interactions can be managed as though they were simple, poses an immense risks to organizations. Even attempting to treat those interactions as merely complicated, rather than complex, introduces a gap between reality and perception, between “the way we do things” and the way things actually get done. When the concept and reality of the system’s interactions differ, it’s more likely that the components of the system will wind up working at cross-purposes.

In a comment on Tom’s post, I noted that where the shadow elements are a “French Resistance”, flouting the rules in order to actually get work done, that’s a red flag.

The most important thing to learn about management and governance is knowing when and how to manage or govern and more importantly, when not to. Knowing what can actually be controlled is an important first step.

“Distance…is the one true enemy…”

Gregory Brown tweeted a great series on the problem of distance last week:

It’s amazing how much information can be conveyed in nine tweets. It’s amazing how many aspects of a very complex socio-technical undertaking, software development, are affected by this concept of distance. I would argue that this concept of distance applies likewise to the social systems that software development belongs to as a component part.

Distance between action and result as well as distance between result and response are just as much a problem for social systems as software systems. This was one of the main themes of “The Ignorance of Management – Deep and Wide”, trying to manage too far down the hierarchy just doesn’t scale. There are too many decisions at too deep a level of detail across too many areas for this to be effective.

It’s a case of mismatched impedance, resulting in overload. Increased distance equals increased transmission time, meaning that remote decisions will either take longer (risking timeliness of the decision) or will have to be made with less consideration (risking the fitness of the decision). Likewise, the greater number of decisions being made due to an inappropriate distance will force the same set of trade-offs. Time spent on lower-level issues also reduces time available for issues that are appropriate to the decision-maker’s level. This places even more pressure on the decision-maker in terms of being either hasty or late.

Ironically, better control is likely to come from delegating decision-making to the appropriate level of the organization than attempting to micro-manage. The true test of leadership, in my opinion, is not how things run when a leader is present, but how things run when they’re not. Adding distance stacks the deck, and not in your favor.

Form Follows Function on SPaMCast 403

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This week’s episode of Tom Cagley’s Software Process and Measurement (SPaMCast) podcast, number 403, features Tom’s essay on Agile practices at scale, Kim Pries on transformations, and a Form Follows Function installment based on my post “NPM, Tay, and the Need for Design”.

Although the specific controversies have died down since we recorded the segment, the issues remain. Designs that fail to account for foreseeable issues are born vulnerable. Fixing problems after they “emerge” can be much more expensive than a little defensive design.

You can find all my SPaMCast episodes using under the SPAMCast Appearances category on this blog. Enjoy!

When Will We Learn?

Plato's Academy mosaic from Pompeii

We’ve all heard the sayings about history repeating. Did we pay attention? Did we actually hear what was said, or were we just in the room when it was mentioned? Did we learn anything?

Greger Wikstrand and I have been trading posts on innovation for more than seven months. His last post, “Black hat innovation”, touched on the dark side of innovation:

I think the following are good examples of black hat innovation in the digital space: credit card fraud, ransomware and identity theft. There are many other black hat innovations that does not rely on tech such as chain letters, counterfeit money and even weighted dice.

Greger noted “Sometimes, it might seem as if black hat innovation out paces white hat innovation.” Certainly, a black hat innovator faces fewer barriers to innovation. Following rules is less of a consideration when breaking rules. We also have to be aware of the advantage we give them when we fail to learn from the past. None of the abuse cases that Greger mentioned are black swans. They’re merely new ways to commit old crimes. Waiting to react to a foreseeable issue means we start from behind because we failed to learn.

Failure to learn can manifest in a variety of ways. In his post, “Enterprise challenges”, Peter Murchland noted:

All enterprises face challenges (of varying magnitude and complexity). These challenges are either problems to be solved or opportunities to be pursued. One way of considering these challenges is through the following three lenses – those arising due to:

  • external change
  • internal change
  • growth and development

Peter asserts that the health of an enterprise depends on integrating coherent responses to these challenges into its architecture. This is a position shared by Aaron Dignan in “How To Eliminate Organizational Debt”:

Organizational Debt: The interest companies pay when their structure and policies stay fixed and/or accumulate as the world changes.

Let’s unpack that. As time passes, companies create roles, structures, rules, policies, and other norms that become fixed, and often, difficult to change. This is by design. For example, a company’s travel budget may balloon one year, only to be restricted by a travel policy the next — a well intentioned control designed to reduce expense. If that policy starts costing more than it’s saving (e.g. by reducing commercial success due to a lack of face time, frustrating top talent, etc.), it becomes an unacknowledged debt. The “interest” comes in the form of reduced speed, capacity, engagement, flexibility, and innovation that ultimately undermine the macro objectives of the firm: to survive, thrive, and achieve its purpose.

In other words, failure to learn leads to failure to adapt to a changing context, internal and/or external. This mismatch between the enterprise and its context represents a destructive friction. Since an enterprise is a social system and the components of a social system are people, this means that the effects of this friction erodes morale. Disengaged, demotivated employees will hinder an organization’s ability to deliver effectively. The only question is how much of a hindrance it will be.

In my post “Learning to Deal with the Inevitable”, I talked about the value of a learning culture for an organization. Effective execution requires effective decision-making, which requires learning. If we haven’t learned from the past, then there’s no rational basis for our future actions. We’re winging it solely on the basis of hope.

An organization is unlikely to develop a learning culture by accident. Just as a tornado hitting an auto parts store is unlikely to spit out a sports car, it’s unlikely that a system of sensing and adjusting to an ever-changing environment will emerge without intentional action. The social system that is the enterprise has a design and requires design, much the way an automated system has a design and requires design. Part of that design should incorporate learning.

Different organizations will have different needs and different styles of learning. Getting groups of people together to play with technology (as described by Matt Ballantine in his post “The Art of Play”) may not work for every organization. However, it is shortsighted to make no provision for learning whatsoever. Even the British Army in World War I, a conservative institution with an aristocratic officer corps in a conflict that can be described as 19th century warfare with 20th century weapons, “…developed a number of different methods to disseminate knowledge, catering for a variety of different circumstances and needs”. With a hundred years’ worth of extra experience and technology, it would be hard to justify taking a less rigorous approach.