Saying what needs to be said

Innovation Governance at Spark the Change

At Spark the Change I facilitated a World Cafe with my compadres from Energized Work, Yoav Aviram and Gus Power exploring Innovation Governance and focusing on 3 components needed for successful product innovation:

  • Investments.
  • Risk and uncertainty.
  • Impact and measurement.

Innovation Governance from Energized Work

Historically there has been tension between governance and delivery. Governance folk are concerned with product teams running riot to the detriment of the company. Remember that 17% of innovation projects go so badly that they can threaten the very existence of a company (source: Calleam Consulting). Product teams, on the other hand, often view governance activities as restrictive, unnecessary and burdensome, making things slow, expensive and occasionally acting as total blocks.

We looked at how we bring these seemingly irreconcilable requirements together and what governance would look like in an ideal world for us to build great products and services, with minimum risk and maximum impact.

When the pressure is on, try doing less

When a project isn’t going well the tendency is to throw more people at it. Then the problem somehow gets bigger. Who’d have thought?

Adding manpower to a late software project makes it later.
Brook’s Law

Then the project is given more time. More people, more time, more money. When you start slipping deadlines and increasing budget you’re never going to be done. It’s a slippery slope where more leads to more, and more again.

In this situation, do less. By doing less you’re forcing the tough decisions to be made to prioritise what truly matters. These are the decisions someone has been avoiding from the start.

Business is tech and tech is business

People in the business tell the techies what to build then the techies go build what they think is right. That’s the way the world goes around. That’s the way things go wrong.

What makes the business people so sure? Why would the techies know better? Aha! Extensive market research. Detailed upfront analysis. But neither fully define the problem or opportunity. And neither express the requirements (feature descriptions are not real requirements) and the desired outcomes unambiguously. People are happier leaping to the solution and making a big bet with the budget without validating their assumptions along on the way by delivering early and often.

Gnome business planning and Field of Dreams thinking

“It’s gonna be big business,” we hear. Phase 1: Collect underpants. Phase 2: ? Phrase 3: Profit. Alas, expensive fail is what happens when “build-it-and-they-will-come” business thinking meets a ‘we-know-best’ tech attitude. What do we see? Solutions overcomplicated by too many features and inappropriate use of technology. Disappointing outcomes. Unimpressed stakeholders. Dissatisfied users.

Two peas not in a pod

Business people like the techies to be over there – out of the way. And the techies like being over there – aloof, talking jargon, jumping on bandwagons, and complaining about unrealistic deadlines while spewing copious code. Separated, not exactly collaborating, and speaking different languages – it’s easy for everyone to be blinkered and set in their ways. Every exchange between the two plays out the perennial parent-child relationshipThrow in the folks from finance and you have a Mexican Standoff. Finance is vital stuff. Sadly financial control policies require business people and the techies to predict the future. In working to prevent money being pissed away, pretending uncertainty doesn’t exist ensures money is pissed away.

I want to see business, technology and financial thinking converge on a profound understanding of what it actually means to deliver software effectively and produce meaningful results that have positive impact.

– Energized Work, No Bull

A side dish of IT

IT is too slow and too expensive, it’s not transparent, it’s out of touch and it inhibits business. That’s the boardroom consensus, apparently. Techies like to say “no” – a lot. But consider this, the techies rarely have input to business strategy. Detached from day-to-day business operations the techies are lucky if they have any sense of business purpose. Is it any wonder their aspirations lack business context? In a tech vacuum innovation lacks business relevance; it’s just self-gratification. To the business, IT must feel a bit like Quasimodo’s hump yet both parties maintain the status quo even though it doesn’t work well for either.

Tech at the heart of business

Increasingly, business is tech and tech is business. Frontline innovation is to be found in the business models and the biggest enabler is the tech capabilities. Wherever tech sits in an organization dictates what they will care about. Placed right at the heart of a business operation tech will focus on doing business, care more about the customer experiences, and will be better placed to drive profit.

Develop capability, not artefacts and institutions

Once upon a time a sales office of a large company decided to run their business along the principles of stewardship. One of the strategies the vice president was pursuing was to give sales and support people more ownership for the business. They were moving into a new office, so the decision was made to have responsibility for designing the new space rest with those who would be using it. Teams of sales people, support people, and supervisors met with interior designers and office suppliers to explore what kind of office would balance their needs for workspace, meetings, privacy, social contact, community, and storage. 

The office design they built with worked well. The space was functional. The cost of the new office was about 20% less than usual for that number of people in that location. The environment also supported creating a community among the different functions and made a strong statement in support of partnership. The office soon began to attract some positive publicity. It was touted as the office of the future. It even won an award for innovation in office design.

The corporate mind in the regional office rightfully raised the question of how to bring the success to other parts of the business. The regional management team defined their role as bringing leadership, consistency, and control to the company’s regional operations. Through their eyes the innovation that mattered was in the office design itself, not in the way it was created.  The office design got the award, costs were lower, flexibility was higher, performance equal or better, so their strategy was to export the design to other locations. They began a process of copying the design to other offices, acting as if the value was the design of the office, instead of the redistribution of power and privilege it symbolised.

The original vice president had consciously chosen to place power and privilege in the hands of those closest to the customer and the work. The redesign of the office was to him only one means for expressing his intention to redesign the governance strategy for the business. His bosses though, saw his success as a triumph of office design, choosing not recognise the more radical process of reformed governance. What they saw fit to roll out was a program for redesigning offices. They set standards and requirements for the new office plans. They wanted timetables and the reassurance that this innovative office design would be the standard within a certain time frame. The demand to institute the new design got compliance in some places, resistance in others, and rarely delivered the outcomes of the original site. In time the idea reached corporate headquarters. It was then sold on the basis that the shared, open space would not only save money, but would force salespeople out of the office and into the field. 

What had begun as an act to give people more control over their own jobs was warped into a coercive strategy to standardise offices, save money, and exert more control over salespeople, force them out into the field. The office of the future became the office of the past. Partnership was co-opted by patriarchy. Patriarchy won. The business lost.

So far I’ve watched this tale play out every time I’ve encountered an Agile Transformation – all about roles, org charts, and process to inflict behaviour change; nothing about autonomy, trust, clarity of purpose and desired outcomes, self-organisation and management working in service to those doing the work.

The intention to move a whole company at one time, toward one culture, by one means, is destined to evoke compliance, not commitment. It becomes high coercion and not high performance. The question is, does a company genuinely seek only compliance or does it want more?

(The story is taken from Peter Block’s book, Stewardship: Choosing Service Over Self-Interest.)

Dare to succeed. Reap the rewards from wise risk-taking

The word “entrepreneur” comes from a French word meaning “to undertake”. It’s the basis for the word “enterprise”. The word “risk” derives from an Italian word meaning “to dare”. This implies a choice exists. Fate plays no part.

There are 5 responses to risk:

  1. Avoid it
  2. Reduce it
  3. Transfer it
  4. Accept it, and
  5. Increase it.

Risk avoidance is the antithesis to a successful enterprise. To eliminate risk would be to eliminate profits. A business must take calculated risks and must choose those risks wisely.

Companies mostly operate to not lose. There’s a difference between playing to win and playing not to lose. Think football (or soccer). Brazil’s attacking football, constantly driving forward to create inordinate opportunities for shots on goal, is playing to win. Italy’s defensive style football punctuated with swift and precise counter attacks is geared more to ensuring they at least don’t lose.

In the belief that certainty is possible, the thinking, and consequently the approach is to play it safe. Except in reality that’s bogus. Software development is inherently an uncertain sport. Attempting to avoid risk and uncertainty by apparently playing it safe doesn’t improve the odds and likely increases the risk. For example, making a big upfront investment in specification and design is essentially placing a big bet on getting it correct from the very beginning, on paper. All this does is lock in the ignorance we have at the start and lock out what we learn on the way. And then betting the whole budget on one big bang release – that’s like betting the farm on hitting a hole-in-one. With that approach the chance of delivering what customers truly need are bloody slim. Drucker said: “A business always saws off the limb on which it sits; it makes existing risks riskier or creates new ones.”

Moreover, attempting to avoid risk can be costly in terms of lost opportunities. Sophisticated methods exist to measure the benefits and costs of risks, but only once they’ve been taken. Risk occurs before the event, and the risk can’t be measured accurately until after the event has occurred. The question is how to measure the cost of not taking a risk? Because it’s these losses that cost businesses the most.

The goal should be to maximize the opportunities to create wealth rather than minimize the risks.

Drucker classified 3 categories of risk:

  1. The risk a business can afford to take. If it succeeds it wouldn’t achieve jaw-dropping results. On the other hand, if it fails no great damage would be done.
  2. The risk a business cannot afford to take, e.g. because it doesn’t have the knowledge or skills. In which case some other businesses will take this risk and possibly one or more will reap the rewards of doing so.
  3. The risk a business can’t afford not to take. Not doing so means there will be no business.

Too often companies view any kind of risk taking as reckless. Yet that last class of risk is compulsory. Taking the compulsory risks creates the catalysts for moving toward greater effectiveness and profitability. Complacency isn’t an option.

Knowledge shared is knowledge doubled

Intellectual capital – just another buzzword in fashion today? No. Intellectual capital is bastard important.

The old theories of efficiency, productivity, cost accounting aren’t relevant in knowledge working. Look at Google’s rise and it’s market capitalisation. Intellectual capital is the primary source of its wealth.

How intellectual capital helps generate wealth isn’t well understood by accountants and managers subscribed to bean-counter thinking. Generally accepted accounting principles (GAAP) suck at measuring and valuing intellectual capital. In fact, most of the cost of creating intellectual capital is treated as a period expense. Bonkers.

The term “human capital” was first coined in the 1960s. However, as far back as the late 18th century economists have argued that intellectual capital, as it’s now defined, has always been the primary driver of wealth. The wealth found in tangible assets such as precious metals or money, land or property is limited. The intellectual capital within people provides capability to create unlimited wealth.

In an age where business agility and true competitive edge lies in our ability to learn faster and generate deeper knowledge, the productivity mindset that just wants to extract 8 hours of work from people is a liability. Companies caught up in efficiency metrics and focusing on activities and costs rather than business outcomes and value are not investing in the growth of their core asset – the knowledge that exists in their company. Capitalisation drives utilisation.

Investing in intangibles contains higher risk and greater uncertainty than investing in tangible assets. If a software product fails, the costs are usually gone for good. Unless somehow the lessons learned and the knowledge gained can be leveraged into another attempt. (That’s why taking a small bets approach to investment in software is so critical.) On the other hand, a building purchased that doesn’t work out can at least be sold on and a proportion of the investment recovered.

Rigid adherence to old methods that prevent people from delivering greater value creates negative intellectual capital. Policies and structures setup in a business don’t just keep existing knowledge in, they keep new knowledge out. Companies want their staff to share knowledge. But the sharing is probably ad-hoc or on an as-needed basis. Information can be digitized but knowledge is intrinsic to people. Having a wiki or an intranet just doesn’t cut it.

Sharing knowledge must be systemized and organizational learning measured as part of the operational performance of a business. Commercial success requires leveraging the minds of all the people in the company all of the time. Learning needs to be constant, facilitated and celebrated.

Every improvement is a change but not every change is an improvement

Lost in Space
Lost in Space

Fundamentally, a transformation is a learning process – empirical and experiential. Making change upon change can get us lost in space, not knowing which way is up or down, left or right. Measurement is the only way to retain a handle on what’s real. Plan, do, check, act. Design a way to measure the impacts of change in terms of the desired results.

How can we know what to change?

Every company operates according to its policies. Those policies are encoded into the processes. Some policies are good – they make sense; some processes are effective and efficient enough. Some policies and processes are not so good. How can we know which ones to change? Do we go after the easiest ones? Or the cheapest ones? Or the ones people complain about the most? Perhaps we should just start again?

In knowledge working the constraints can be invisible. What we see is the tip of the iceberg. The bulk of the ‘berg, hidden beneath the surface, is really dictating what happens. It’s easy to assume, knowingly or not, that we work within an ordered system. “Danger Will Robinson!” Beware the retrospective coherence trap. For example, doing Scrum will not necessarily lead to the desired results. The world of software development and delivery is complex. How can we identify the weakest link in an invisible chain? Our approach to change needs to be scientific. Let’s collect hard data and analyze it, and verbalize our intuition and emotions as we rigorously test our assumptions. Then we can better understand the system and select where to intervene and make changes that will lead to improvements.

Change to what?

When we find a bonafide constraint what do we replace it with? What will the improved system look like? How will it feel? How will it behave? We’ve all experienced solutions that didn’t work, solutions looking for problems, and solutions that fixed the problem but also caused other problems. What does better look like? How will we know when we get there?

There’s a need to clearly show how the selected action leads to the elimination of the constraint; how the proposed solution solves the defined problem. Describe the desired future in a way that we can determine what we want, why we want it, and avoid unintended and undesired consequences that might result. And let’s measure the outcome (and impacts) of each change.

How to cause the change?

It’s easy to spend a lot of our time doing stuff. Then we get frustrated because we’re working so hard, doing so much, and improvement just isn’t happening. Our busy-ness isn’t taking care of business. We come up with solutions fast – arguably before we truly understand the problem. As Einstein said:

“If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”

Let’s take the time to work through why we think a specific action will lead to a specific result. Moreover, it seems like we rarely stop to define, in a quantifiable way, the outcome we’re trying to achieve. By unambiguously defining problems or constraints, and the desired outcomes, we can systematically design and execute the steps to overcome the obstacles in between and recognise when our plan should be altered.

Stop and think. Then do

In an age where agility has quickly become the key to competitiveness, the demand for a change blueprint wrapped up in what’s being called an Agile Transformation is about as bogus as it gets. Business agility and true competitive edge lie in our ability to learn faster and generate deeper knowledge and to use that knowledge to inform purposeful action – deliberate and designed actions that solve clearly defined problems and produce unambiguous and valuable business outcomes.

What can scientists teach the ‘suits’?


ATLAS is the world’s biggest microscope. It lives below ground at CERN and apparently generates more data each day than Twitter. More than 3,000 researchers from 175 institutes in 38 countries are involved in the experiment.

What could Big Science have to teach Big Business?

Big Science projects like companies have to innovate and make the most of limited resources and beat rivals to breakthroughs. Scientific experiments have clear goals, for example, find the Higgs boson, sequence the genome, reach Mars. But the method and means are uncertain. Markus Nordberg, who co-ordinates ATLAS finances, says deferring design decisions for as long as possible absorbs uncertainty, improving the odds of success. In contrast, companies try to reduce their uncertainty by selecting one solution and sticking to it.

In a science project, teams articulate their assumptions, exchange ideas, and justify their choices out in the open. I’ve not seen much sharing of assumptions in businesses. Apparently, one engineer who joined CERN from industry, who said a cooling system couldn’t be made any smaller, was bemused when his physicist colleagues had the temerity to ask, “Why?” The device was shrunk by one fifth.

Scientists are an inquisitive breed. Their natural inclination to challenge authority is given free rein because they’re accountable for their experiments. This explains why experiments have spokesmen, not managers.

Scientists are committed to a bigger purpose – to extend the frontiers of knowledge. Give them an interesting problem to solve and they’ll just get cracking. Few companies inspire such commitment; and no mission statement or desk massage will change that.

From Schumpeter: Titans of innovation, The Economist.

Sustainable pace gives you market stamina

You’re paddling in the Pacific at San Diego, facing inland. You’re embarking on a 3000-mile walk across country to the tip of Maine.

You march 20 miles on your first day, making it out of town. You march 20 miles on your second day. And again on your third day, heading into the heat of the desert. It’s hot and you want to rest in the cool. But you don’t. You get up and you march 20 miles. You keep the pace, 20 miles a day. Then the weather cools. You’re in comfortable conditions with the wind at your back, and you could go much farther. But you hold back, modulating your effort. You stick with your 20 miles. You reach the Colorado mountains and get hit by snow, wind, and temperatures below zero – and all you want to do is take shelter. But you get up. You march your 20 miles. You keep up the effort – 20 miles, 20 miles, 20 miles – then you cross into the plains, and it’s glorious springtime, and you can go 40 or 50 miles in a day. But you don’t. You sustain your pace, marching 20 miles.

Another person, who starts out on the same day in San Diego, gets all excited by the journey and logs 40 miles on his first day. Exhausted from his first big day, he wakes up to sweltering heat. He hangs out until the weather cools, thinking he can make it up when conditions improve. He maintains this pattern – big days with good conditions, whining and waiting on bad days – as he moves across the country. Just before the Colorado mountains, he gets a spate of great weather and goes all out, logging 40 to 50-mile days to make up lost ground. But then he hits a huge winter storm when utterly exhausted. It nearly kills him and he hunkers down, waiting for spring. When spring finally comes, he emerges, weakened, and stumbles off toward Maine.

By the time he enters Kansas City, you, with your relentless 20-mile march, have already reached the tip of Maine.

– Courtesy of Jim Collins.

Amundsen moved at a sustainable pace

On December 12, 1911, Amundsen was 45 miles from the South Pole. The weather had  cleared with perfect ski and sled conditions for the remainder of his journey. His team had journeyed more than 650 miles, climbing from sea level to over 10,000 feet. And now, he could reach his goal within 24 hours in one hard push. What did Amundsen do? He went 17 miles. Throughout the journey, he adhered to a regimen of consistent progress. He never went too far in good weather. He was careful to steer clear of exhaustion that could leave his team exposed. And he pressed steadily ahead in nasty weather to stay on pace. When a team member suggested they could go faster, Amundsen said no. They needed rest and sleep to continually replenish their energy.

In contrast, Scott sometimes drove his team to exhaustion on good days and then sat in his tent on bad days, complaining about the weather.

Amundsen clocked in at the South Pole having averaged 15.5 miles per day.

Speed kills – kills competitiveness

First to market? First to get it wrong – probably. And now, after the big push to release, you’re people are too fucked to keep going. Cue your competition learning from your mistakes. There’s a reason sprinters don’t run marathons – they can’t.

The market’s a marathon. The faster you go, the faster you get to the point when you’re too exhausted to get up and go again. Speed ultimately works against responsiveness.

Sustainable pace gives you market stamina and an unfair competitive advantage.

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