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It’s effectiveness, and not ideas or execution, which is the strongest determinant for success

2011/06/20 in Business-Technology | 1 comment

We’re told that execution is everything. While a good idea might be useful, execution is seen as the factor that will determine the success or failure of our business venture. Many people find this comforting as good ideas are rare, seemingly springing from nowhere, and few of us hold little hope of having a really good idea in our lifetime. (One definition of “genius” is someone who manages to have more than one good idea before they die.) Execution, however, is something we can control. We can practice, improving our skill, making us more likely to succeed.

Our focus first on ideas and then execution distracts us – possibly intentionally so – from the real driver for success in business: luck. Brilliant ideas – ideas who’s time has come – are obviously rare. And then there’s our natural proclivity to overestimate our own abilities. (Such as the vast majority of drivers who think they are better than average drivers. Some of them must be wrong). While we don’t like to admit it, finding ourselves at the right place at the right time with a good enough solution is more important than any other single factor.

Google is a case in point. We can admire skill of Larry Page and Serge Brin, and the search algorithm they developed was obviously better than what came before, but neither of these is sufficient to explain the success that is Google today. Something else was required; luck had a large part to play in their success. If they hadn’t been turned down when they tried for sell a young Google for something like one million dollars, if the didn’t have access to the venture capital community on Sand Hill Road, if they …

We don’t like to talk about needing luck, as allowing luck into the equation implies that something is outside our control, that a success was not the result of our skills alone. If we rolled the Google dice again, from a starting position where the world was slightly different, would Google float to the top? Or would someone else find themselves at the right place at the right time with a good enough idea?

Many business leaders have penned biographies which highlight how their skill – and their skill alone – drove their organisations ever higher. A few are brave enough to admit that they were lucky, and that they were smart enough to to make the most of luck when it flowed their way.

Business is a numbers game. While each throw of the dice might be random, across a number of rolls we can can identify trends which we can use to tip the odds into our favour. An effective player realises this and works to exploit the trends they see and increase their luck. Or as one smart and lucky golfer was heard to say:

The more I practice, the luckier I get.

— Gary Player

The large innovative move from an established company, or the disruptive startup that become a billion dollar company at the founders first attempt, is the exception. There is no silver bullet, a single thing they did and which we can replicate.

Most of us need to play a longer game if we want to see success. Each time we roll the dice we need to ensure that the odds move a little further into our favour by:

  • being frugal with our resources
  • moving to a position where we have a better chance of success
  • make the most of the opportunities that are presented to us
  • learning from our previous mistakes

It’s not ideas or execution that determine our success. Both are important but neither is sufficient. It’s our ability to increasingly become more effective with each action we take – our ability to learn from our mistakes, rather than our ability to improve our skills – increasing our luck to the point that one day it overflows and we find ourselves with a success.

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On the process of writing

2011/06/17 in Enterprise 2.0 | No comments

I happen to have set that sentence down in the old, slow way by hand. If I had used a computer, I might have got it down in a third, a quarter of the time. But like a good many writers, even this far into the twenty-first century, I find that the pace at which I work in longhand – at which my arm, my hand moves in the act of writing – has what is for me a “natural” relationship to the speed at which my mind works and I do not to let go of a relationship that seems peculiarly mine. Writing by hand slows the thought process, allowing thinking to think again, mid-through, and leaving open the possibility of second thoughts. It has an effect too on syntax, on the way a sentence gets shaped.

—David Malouf, The Happy Life, Quarterly Essay QE41

Selling into the new whitespaces

2011/06/14 in Business-Technology | No comments

Organic growth is a distant memory for many companies. Markets in the first world are mature and the whitespace they contain has already been claimed. The only new business many companies can expect to find is the business they steal from someone else. This trend has driven many organisations to turn to the relatively undeveloped emerging markets – the BRIC[1] nations in particular – or acquisition for the majority of their growth. The problem, however, isn’t the lack of white space; with markets constantly evolving, driven by technology and fashion, new white spaces are constantly bubbling in and out of existence. The problem is that our current, monolithic business models, cannot fit into these new white spaces,

Business growth comes from one of two directions: either organic growth, or by acquisition. You can buy a plot in the mother land, or you head out into the undiscovered countries to find a plot for your own. Much has been written about both of these approaches.

Competitive business strategy – the art of stealing someone else’s plot – has been refined to a fine art. With our five forces[2] strategy maps[3] and scenario planning[4], we have a range of tools at our disposal with which we can map out the opportunity, determine our strengths, measure the weaknesses of our competitors, and plan our attack. Competition has become quite bloody, with the major players in each industry and market evenly matched. For all their efforts, most businesses can only tweak their share of the market a few points either way, while their year-on-year performance dominated by the performance of industry as a whole.

The last gasp of this approach was the idea of blue oceans[5]. If the ocean where you’re paddling is red with the blood of your competitors, then perhaps its time to find a patch of clear blue ocean where you can paddle unmolested on your own. This is an approach that Nintendo used to great effect. Nintendo decided not to compete directly with Sony and Microsoft in the battle for the home gaming console. The market was dominated by Sony and Microsoft, each investing heavily to try and improve the graphics of their next generation console to give a more realistic (and violent) experience. Instead, Nintendo chose to focus on casual games (first needing to invent the concept of casual games) which had a wider appeal than the core gamer market. These are game that are easy to pick up and put down, games which much broader appeal than the first-person shooters which dominated the market at the time, and game which the core gaming market derided as simple and uninteresting. Casual games made Nintendo the most profitable company per employee in the world (beating even Goldman Saches at their peak) for a brief period of time.

Since Nintendo and the Wii, the pace of business has accelerated (again), driven by globalisation and cloud computing. Nintendo took several years to develop one market defining product, and is now struggling with it’s next move and the market for casual games is leaving it behind. Younger companies like Zinga swooping in with lower cost, online games to steal much of the market for casual games. The opportunity to move sideways and find new blue oceans is becoming rarer, as the rapid pace of business means that you often find that the patch of blue ocean that you were paddling for is as red as the patch you left, as many of your competitors saw the same opportunity. The whitespace is – in effect – drying up.

With organic growth into the white space a distant memory the first work, many companies are turning to the developing work – the BRIC nations in particular – to try and grown their revenues. Find a country further back on the development curve and peddle you weres there, where the is no (or, at least, little) sophisticated competition. There are some hurdles to overcome, such as the fact that we need to package our toothpaste and mouthwash in sachets, rather than large tubes and containers, but the white space seems to be there for the taking.

Globalisation is a double edged sword though. Not only does it allow you to sell your goods in every nook and cranny around the planet, to also allows the local companies, the companies in those nooks and crannies, to leverage the best expertise and suppliers from around the world to service their local market. While the world might be flat, it is also spiky and local knowledge counts. Western companies are finding that they are increasingly beaten to the punch by a more agile and knowledgeable local. The developing world is developing a lot faster than many of us expected.

The white space, however, is not completely filled: the circle that is the market has a well-defined centre but no discernible circumference, and new opportunities are constantly popping in and out of existence around it’s edge. Rapidly evolving circumstances and changing fashions are creating new market opportunities, new white space, as customers realise that they have an unfulfilled need. The problem is that our existing businesses can rarely fit into the holes these opportunities provide. Conceived as vast machines, our businesses are built around powerful engines, with each piece turned to provide optimal performance. While this might provide our businesses with power, it also makes them cumbersome. They’re the muscle car from the seventies: fast in straight line, but corner like the titanic. We’re usually still madly tugging on the tiller trying to turn the ship when the opportunity evaporates back into the ether it came from.

The challenge is to change the way our businesses behave – how they use assets and people, their processes and governance – so that they can fit into these new white spaces. Delta Motorsport[6], for example, approached the process of designing a new car from an unconventional direction. Locating themselves near Silverstone in the U.K., among the various Formula 1 teams and (more importantly) the community of contract manufacturers that surround these teams – Delta was able to design the E-4 Coupe, a 150mph (241kph) electric sports car, for the tiny budget of £750,000 and with just ten employees. They expect that they can move the car into production for an additional £4.5 million, a fraction of the $1 billion, and in a fraction of the time or more required via a more conventional approach.

The market is fragmenting as companies such as Delta Motersport, Megabus[7] and Kogan[8] create business models which enable them to fit into these new white spaces. In some instances these white spaces sit beside existing market, providing new products and services to customers who were previously left unsatisfied. At other times the bubbly edge drains away soft centre, as the white space provides new products and services for customers who used to settle for something else.

Colonising the new white spaces requires us to approach our businesses from a different direction. Rather than think about our business as a statically configured and optimised machines – Henry Ford’s production line writ large – we need to consider our business as more flexible, dynamically optimised vehicles. Optimising internal systems and processes no longer provide us with a competitive advantage. We need to reorient out teams externally, intent on understanding the environment that is unfolding around us and driving the business forward. We need to streamline the controls, the accountabilities and processes we use to operate the business, ensuring that it is easy to enact any decision once it is made.

The challenge today is to understand where to find these new white spaces, and to build up a playbook of tactics which informs us on how to leverage the plethora of on-demand capabilities (BPO, cloud, SaaS, globalisation …) available to us today to reshape parts of our business to fit into the tightest white space.


References


1. BRIC: Brazil, Russia, India, China↑
2. Michael E. Porter’s five forces discussed @ Wikipedia↑
3. Strategy maps discussed @ Wikipedia↑
4. Scenario planning discussed @ Wikipedia↑
5. W. Chan Kim and Renee Mauborgne (2005), Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, Harvard Business Press ↑
6. Viknesh Vijayenthiran (May 2011), Move Over Tesla, Delta Motorsport Launches 150 MPH E-4 Electric Coupe, Motor Authority↑
7. Ben Austen (April 2011), The Megabus Effect, Businessweek↑
8. Kogan Electronics↑

How should we measure out people?

2011/05/19 in Enterprise 2.0, Knowledge Worker of the Future | 1 comment

We all know the old adage:

What get’s measured is what get’s done.

However, if you constrain your measurement of your employees’ performance to counting the goals they score, then you’re doing most of your team a disservice. While their hand might not have been the last to touch the ball before it landed in the goal, supporting players often make vital contributions. If there was no one there to pass the ball to the player in front of the goal, then there would never have been a goal.

Most sports take this into account and include “assists” (passes that help another player score) in the statistics they collect. This broader approach allows us to measure individuals based on their main roll on the playing field: number of goals scored for a shooter, number of assists for those on the wing, number of deflected shots for a defender, and so on. Unfortunately, this too has it’s own problems.

What is the best option for someone playing on the wing, someone who finds themselves in possession of the ball, in front of the opposition’s goal, and with none of the opposing team anywhere near them? Should they take a shot at goal? Or should they wait for a shooter to catch up, potentially along with players from the opposing team, and pass the ball to the shooter? Intuition tell us they should do the former: take the easy shot and score the goal. A bird in the hand is better than one in bush. Logic, however, tells the wing to wait for the shooter: pass the ball and count the assist. While taking the shot might have a higher chance of scoring a goal (and potential winning the game), in the longer term the wing is thinking about their career, and their future as a wing is determined by their ability to collect assists, not goals. Sometimes the metrics we put in place encourage undesirable behaviours.

Simple, single dimensional measures are attractive as they seem to allow us to quantify the world, and our team’s performance. The problem is that the world isn’t quite so simple. Our measures often set individual interests against those of the team. Rather than forming a team which is working together toward a common goal, we’ve created created a group of individuals who’s personal goals can often be in conflict with the team’s best interests.

What we really want to measure is how effective each team member’s contribution was. Given the opportunities presented to them, did they make the best, most effective, use of them? Was waiting for the shooter and then taking the assist the most effective thing they could do for the team? This depends on the context of the assist. If the shooter – a more accurate player – was only a couple of steps behind, with the competition still somewhere at the other end of the court, then yes, it probably was. The shooter has a better chance of scoring and the opposition was is not a factor. If shooter arrives with the opposition or, even worse, after them, then no, the wing should take the shoot. Even though the shooter is more accurate, the confusion caused by the opposing team means that the shooter will have a lower chance of success when surrounded by the opposition, than the would wing standing there on their own.

Business works the same way. One of the dirty secrets of performance reviews is that they often reward the employees who manage to attach themselves to the most successful project or department, not the ones who make the best use of the opportunities presented to the business. For example, if you managed to work your way into SAP supply chain projects in the mid to late nineties, you could expect a nice pay rise and promotion at each performance review. The market was booming and each project you moved to would be bigger and better than the last, allowing you to consistently deliver over your performance targets. It’s not that you were performing better than any of your peers in other areas, it’s just that your domain grew more than theirs. We see a similar thing in the share market, where many companies like to pat themselves on the back for a good year, when in reality they didn’t do that well compared to the rest of the market.

What we’re looking for is not the player with the highest statistics, the player with the most goals or assists. We want the most effective player, the one who can create the greatest advantage of the opportunities presented too them, using their own skills and those of the people around them. Rather than promote the people who float up with a rising market, we need to find those people who are more effective than their peers, and put them in a position where they can lift the performance of the entire business. The people who can deliver outlier performance.

Problems and the people who solve them

2011/05/12 in Enterprise 2.0, Knowledge Worker of the Future | No comments

Note: This is the sixth and final part of a longer series on how social media is affecting management. You can find the earlier posts – The future of (knowledge) work, Knowledge Workers in the British Raj, The north-south divide, Working in Hollywood and World of Warcraft in the workplace – elsewhere on this blog.

What impact will Social Media have on your business? Is it evolution, revolution, or a non-event? It’s hard to deny that Social Media is changing how we understand the role of government, and how we interact on the social commons. But what is its impact on the private sphere: the gated communities which are our businesses and organizations? Some folk claim that we’ll see a similar shift in the private sphere as we’re seeing in the public one. A revolution in the workplace as the workers realize that they really do control production, downing tools in search of a better deal and conditions.

This point of view ignores two key facts. First, that private spaces are, by their nature, more flexible than public as we are free to define who can inhabit them. Revolution is unlikely. Business owners still need someone to hold accountable for the performance and behavior of their businesses, just as regulators and governments want to ensure that someone in the organisation is on the hook for meeting their demands. Management will continue to manage, and to be held accountable, no matter how empowered the workforce becomes[1]. Second, that the technologies we’re deploying don’t just change how we carry out the tasks our businesses needs, as they also change what tasks we need to carry out. There is no reason for tomorrow’s organizations to operate within the same framework that yesterday’s ones did.

The nature of work is changing, and the shift in work practices looks like it will be comparable to the shift we saw during the Industrial Revolution – between the 18th and 19th centuries – when almost every aspect of daily life was influenced in some way. Before the Industrial Revolution people worked from their homes, farming or blacksmithing as the need arose, and the concept of work-life balance hadn’t found its way into the dictionary. After the revolution most people worked in vast bureaucracies, leaving home every morning to travel to work (or, early on, living in vast company owned dormitories next to their work) and fit themselves to into the tasks demanded of them.

The Industrial Revolution gave us Taylorism, a view of business which equates the organization to a vast programmable machine. Businesses were inward looking, intent on improving their internal operations. Optimizing business was the challenge of defining the perfect sequence of tasks, each carefully sculpted to deliver maximum value at minimum cost, and then selecting and shaping employees to fit the tasks.

The environment business operates in today has changed dramatically since Frederick Taylor created scientific management. The world used to be fairly stable; you wore the same clothing styles (more or less) as your parents before you, as would your children following after. Today, however, the environment changes significantly every year, if not every month or week. Nowhere is this more evident than with the creation of fast fashion, with Zara flipping the company’s supply chain on it head to optimise time from runway to shelf rather than cost, swapping the seasonal fashion collection for a constant stream of new products and driving new customer behaviours in the process.

The stability business used to rely on has given way to a more uncertain environment; the predictable progression of the business seasons in a temperate climate exchanged for the unexpected and often unpredictable storms and hurricanes of a more tropical clime[2]. Our success used to rely on the quality of our toolkits – the business processes and assets at the heart of our business – as it is these toolkits that enabled us to survive the steady progression of the seasons. Today our success relies on our skill – our ability to leverage the on-demand services and capabilities we find around us – as it is our ability to adapt these tools we find around us to the unexpected threat or opportunity, that now determines our success.

The old, highly specialized and highly entailed experts we used to rely on are rapidly becoming a liability, and we’re incrementally replacing specialized skills with solutions, frameworks and on-demand services. From IBM’s first election toting machines built with repurposed punchcard readers from knitting mills, through early departmental computers (such a L.E.O., the Lyon’s Electronic Office) to the birth of enterprise IT (and client-server along with it) and more recent web technologies, the history of technology in business has been a story of slowly reifying layers of expertise in tools, enabling this expertise to be distributed and leveraged. Social Media is just the latest step in this evolution, the key difference being that it automates and streamlines the communication and collaboration between individuals, rather than tasks that these individuals work on.

Our companies are being hollowed out, their middle layers of management replaced by software and solutions. Rather than empowering middle management, Enterprise 2.0 and Social Business Design is eliminating them. Social Media is empowering the team at the front line and the executive to connect directly with each other, bypassing the many layers of middle management most organizations contain. They’re externally focused – the front line intent on tending our customers and delivering product, the executive focused on understanding the waves in the market and charting the business’s path forward – where middle management was internally focused, concerned with keeping the bureaucracy functioning, a bureaucracy that many organizations are in the process of dismantling. Similar to the rural Indian civil service in the British Raj[3], we’re moving to flat, or even super-flat, organizational structures which swap the command-and-control of the past for clear objectives and the devolution of responsibility for decisions to the front line.

Tomorrow’s business, after it has adopted Social Media, will not just be a new command-and control paradigm (bottom-up rather than top-down, distributed rather than centralized) retrofitted to our existing bureaucracies. Tomorrow’s business will be something different, smaller and much leaner, built from dynamically forming coalitions focused on achieving a common goal. The highly skilled specialists concerned with building the complex toolkits will become a thing of the past.

The transformation from large bureaucratic organizations to more fluid coalitions will result in a similar shift in work practices as we saw during the Industrial Revolution. We can already this the beginnings of this with companies starting to understand that their knowledge workers prefer to supply their own tools (such as mobile phones and laptops), as well as the current trend for organisations to restructure their contracts with suppliers, focusing on the outcome they want delivered rather than quality and cost. Smaller workforces holding more general skills will integrate themselves with a community of partners, suppliers and high value free agents, with the company functioning in a similar way to the studios in modern Hollywood[4]. The company sets the agenda by determining what problems it wants to focus on, while providing its staff and the broader community swirling around them with a platform to dynamically form teams around specific challenges and goals, World of Warcraft style[5]. Rather than defining the perfect task and then fitting the employee to the task, we need to define our goal and then assemble the perfect team to achieve that goal.

The most significant shift for our businesses is the transition from being knowledge using organizations, to knowledge creating organizations. While the world might be flat (as Thomas Friedman showed us[6]), with globalization and the Internet providing on-demand access to low cost products and services from around the globe, the world is also spikey (as Richard Florida claims[7]) as the need for localized and personalised services drive demand for unique and creative solutions which fit into a local context. The winners in this race will be the businesses that can marry the two.

Which brings us back to the impact of social media on your organization. It’s not a revolution that will remove the need for the C-level; someone still needs to sign the books and be held accountable to shareholders. Social media might tip the balance a little toward a more collective form of management, but it will not rewrite the rules overnight. Nor is it little more than better and more efficient groupware. Creating a social business is not simply rearranging the people (and power dynamics) or your existing business; it demands smaller, more dynamic teams with more potent and focused team members who might not be on your payroll full time.

What Social Media is doing is driving organizations to complete the shift started in the last few decades, moving from manufacturing centric enterprises to knowledge creating organisations.

The basic economic resource – ”the means of production,” to use the economist’s term – is no longer capital, nor natural resources (the economist’s “land”), nor “labor.” It is and will be knowledge. The central wealth-creating activities will be neither the allocation of capital to productive uses, nor “labor” – the two poles of nineteenth- and twentieth-century economic theory, whether classical, Marxist, Keynesian, or neo-classical. Value is now created by “productivity” and “innovation,” both applications of knowledge to work.

— Peter Drucker, The Post-Capitalist Society[8]

Historically companies have provided a locus to gather the capital, resources and skills required to provide the scale needed to manufacture products cheaply and efficiently. Today problems, the problems of our clients and customers, are increasingly becoming the focus of our organizations, as capital, resources and skills are commoditized, caught between globalization and the Internet. The strongest determinant of success in business today is the ability to solve problems that other people (and organizations) care about. Companies are transitioning from an internal focus to an external focus, intent on gathering the skilled craftsmen required to deliver the projects needed to solve the problems that the company concerns itself with. Companies are becoming the focal point for a network for skilled craftsmen and service providers who are required to solve the problems that the organisation is interested in.

Business is increasingly becoming a question of forming the right team, at the right time, in the right place, with the right tools to provide the best possible outcome. We’re also trying to achieve this in an environment where it is no longer feasible to own all the resources and people we need. Consequentially, success now depends on our ability to mobilize the resources and skills we need from across a broader network that includes not only our (few) employees, but our contractors, partners and even customers. Social media and social business are the tools that allow us to tweak our operating models to do this.

So the impact of social media on our businesses is to strip them back to their cores and (re)focus their energies on what really matters in a rapidly changing and unpredictable environment: problems and the people who solve them.


References


1. The future of (knowledge) work @ PEG↑
2. The North-South divide @ PEG↑
3. Knowledge workers in the British Raj @ PEG↑
4. Working in Hollywood @ PEG↑
5. World of Warcraft in the workplace @ PEG↑
6. Thomas L. Friedman (2005), The World if Flat, Farrar, Straus & Giroux ↑
7. Richard Florida (2005), The World is Spikey, The Atlantic [PDF]↑
8. Peter Drucker (1993), The Post-Capitalist Society, HarperCollins↑

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World of Warcraft in the workplace

2011/04/20 in Enterprise 2.0, Knowledge Worker of the Future | 2 comments

Note: This is the fifth part of a longer series on how social media is affecting management. You can find the earlier posts – The future of (knowledge) work, Knowledge Workers in the British Raj, The north-south divide and Working in Hollywood – and the final issue – Problems and the people who solve them – elsewhere on this blog.

What does our organization look like when the middle layers are removed? How does a team form and establish it’s goals in a world where there is no middle management to do it for them?

Companies find themselves caught between the conflicting needs of working smarter while keeping costs down. Creating a competitive edge means finding the high-value skills required to out think the competition, and they’re willing to pay a premium for the privilege. At the same time, an increasingly competitive market is pushing revenues down, creating a financial void that will most likely consume the margins and mid level management of many organization.

A new business dynamic is emerging, one which is much more fluid as it’s based on networks of organizations and high-value individuals – much like the industry model Hollywood stumbled on during the transition to television in the fifties. Companies in industries as diverse as automotive, banking, retail, and real estate are responding to the new recession mentality by focusing on their core competencies and value- add, driving these organizations to consolidate, rationalize and externalize supporting functions, as they rely on a growing ecosystem of partners to deliver everything from their go- to-market strategies through product development to manufacturing and fulfillment.

Slaying dragons

In 2010 something in the order of eleven and a half million people, broken into two factions, completed over sixteen million tasks every day without the aid of a bureaucracy, spending an average of twenty two hours a week dynamically forming teams and solving problems. How did they do it?

With a population greater than that of New York City, World of Warcraft provides us with an interesting case study of how to motivate and mobilize large groups of people. Management experts, such as Tom Peters, consider the ideal size of an organization to be around one hundred and fifty people, as beyond this size, knowing everybody in person becomes impossible. Above one hundred and fifty people intermediate layers of power and delegation begin to develop and companies enter the realm of complication. World of Warcraft seems to indicate that this doesn’t necessarily need to be the case.

Many organizations are struggling to successfully knit focused and effective teams from the incoherent mass of individuals both in and outside their organizations. Entire industries are migrating to an operating model which has more in common with the fluid and dynamic film industry in Hollywood, than they do with the 1800s railway companies from which they are derived. Companies are beginning to function like movie studios; externalizing supporting functions such as production and distribution to allow them to focus on identifying worthy stories in their genre of interest, or the problems they choose to focus on; and then blending internal management and guidance with external capabilities to create vehicles to exploit the opportunities they have identified, with highly skill free agents, producers and actors or knowledge workers and subject matter experts, bringing their unique world view which will draw together the threads of an engagement, taking it from the mundane and making it into something special.

World of Warcraft provides gamers with a platform that enables them to solve this problem, dynamically forming teams for a population of individuals. Leadership emerges organically, an attribute of the environments and context in which the people are acting, and lasts only as long as the task at hand before the team dissolves and the individuals find their way to new opportunities. World of Warcraft also provides the individuals with a career framework independent of any particular engagement or organization, empowering them to manage their own progression from defenseless cannon fodder to all powerful wizard (or warrior).

The concept of using elements of game play mechanics outside a formal game — known as gamification – is growing support outside the narrow confines of the game industry, this interest is, however, typically focused on the consumer space, and seen as a tool to encourage people to adopt applications or as a useful talent management tool to help develop leadership skills. Massively-multiplayer online role playing games[1] (MMORPG) seem to provide a grander opportunity by enabling us to create fluid and adaptable frameworks which allow both organizations and individuals to work together toward shared goals in the short term, whilst also providing them with the room to grow their skills in the longer term.

The concepts behind World of Warcraft’s success have a long heritage, with roots reaching back to 1974 when Dungeons & Dragons (D&D) was first released. Originally designed by Gary Gygax and Dave Arneson, D&D was derived from miniature wargames and is widely regarded as the beginning of modern role-playing games and the role-playing game industry.

Young geeks engaged in a D&D like role playing game in a scene from Steven Spielburg’s 1982 film, E.T.

Young geeks engaged in a D&D like role playing game in a scene from Steven Spielburg’s 1982 film, E.T.

D&D provided gamers with a framework to go on an adventure together by allowing them to create characters, virtual personas, . The game defined a set of professions (a Cleric, the Fighting man, and a Magic-User, in the first edition of the rules) and races (human, elf, dwarf, halfling[2] and gnome), established the mechanics of determining if a character was successful in their actions, and provided a system for individuals to measure the experience their character had accumulated, making them more skillful. Players could also tune their characters by tweaking the character’s physical attributes – strength, dexterity, constitution, intelligence, wisdom and charisma – as well as by acquiring virtual equipment and tools.

Playing D&D is a multi-week, or multi-month, journey where a party of friends would work together to explore a land, engage in quests, solve puzzles, crawl through dungeons and slay dragons (and other mythological monsters). Over time the rules developed by adding new professions, new races and by building more sophisticated experience models, become more complex in the process. (Too complex for some though, who prefer the original, simpler, rules)

The D&D character sheet for Sam Wisewhiskers, a mouse thief created by Tony Diterlizzi.

The D&D character sheet for Sam Wisewhiskers, a mouse thief created by Tony Diterlizzi.

World of Warcraft used Dungeons and Dragons as a starting point, addressing on of the major challenges in playing the game: forming a party of suitable friends to go exploring. Blizzard Entertainment (the company which develops and supports the game) created an online environment – an entire virtual world – where individual can login, create a character and start to explore. Players can start out as individuals, but to advance rapidly to higher levels they soon find that they must participate in teams, called guilds, and embark on increasingly challenging quests. The game changes with the players’ actions and game developers add new levels of quests as players become more proficient. There are also no set rules for winning the game or for forming a guild.

World of Warcraft as seen from the outside world.

World of Warcraft as seen from the outside world.

Forming, storming, norming and performing

The quest teams in World of Warcraft form organically around the goal, with an initial few reaching out into their (social) network to find the individuals they need, the individuals focused on solving the types of problems they team expects to find on their journey. It’s not enough to identify a fighter or thief or supply chain expect, for example, as the characters skills need to be match to the expected challenges and the teams ways of working. The final team will pull in a diverse range of characters and skills: some are priests, some are warriors, others are magis, some have different skill levels, different expertise, different potions, and different abilities. The planning processes is spread across in-game forums, as well as a plethora of Internet forums and wikis outside the game. Leadership emerges organically, reflecting the group consensus of whom has the best chance of leading them to success. And finally, the players need to work together, in real time, to conduct the mission and achieve their goal.

The team formation processes deal with a number of significant challenges which also exist in the offline world. How to pick team members, weeding out the incompetent and fostering relationships with the competent. The games forces the team to determine – as a group – what additional skill sets are needed and available at any given time, as well as understanding how different people (with different personalities and styles) will work together. Planing a large raid or quest is also not a task that comes together easily, and leaders must identify the people willing to word toward the goal whilst providing members with enough notice of the team’s activities to enable them to fit the game into their schedule. For the team to reach its gaol, every team member needs to play their role while working together to adapt to changing circumstances.

If the team does fail to reach its goal, when the team must take a step back, reevaluate its plan and team structure, and come up with a strategy to avoid the problem next time round. Leadership also needs to deal with the reality of under performers. Sometimes they’re just bad players. Other times they want to do better but don’t know how, and need a little guidance. And when everything doesn’t go to plan it’s important to determine what when wrong, as well as highlighting what went right.

As in life, investing time in the team will result in the team improving. People also have lives outside of the game, just as they have lives outside of work, and balancing the conflicting demands of life, game and work means that situations arise when people can’t always be where they said they would be (while there should always be consequences for people who rarely live up to their commitments). The world that is World of Warcraft is also constant changing, forcing players to rely on each other and invent new tactics and techniques to succeed in the rapidly changing environment, forcing guild members into a mode of constant collaboration and invention.

World of Warcraft shows us the outline of a new approach to to forming, storming, norming and performing[3]. Clearly defined goals provide a nucleus which the team can form around, acting as a yardstick to measure the skills required as well as helping to establish what success looks like (including how each team member’s contribution will be measured). The skills that the character model articulates provides team leaders with a way of understanding each potential members strengths and weaknesses, their interest in the endeavor and the problems they solve. The challenge for organizations is to develop a game framework for themselves: a set of policies and rules which allow individuals to articulate the skills they have and the problems they’re interested in solving, and which enable experience to be apportioned after the engagement.

Different ways of working

In our increasingly diverse environment, we must often construct our teams with people who solve problems in different ways, and who have a range of different ways of learning and working. Differences in working styles between cohorts are even used to explain while one cohort should be more creative, innovative, productive or reliable than another.

Traditionalists
(64 – 84)		Boomer
(64 – 84)		Gen X
(26 – 44)		Millennials
(18 – 25)
TrainingThe hard wayToo much and I'll leaveRequired to keep meContinuous and expected
Learning styleClassroomFacilitatedIndependentCollaborative and networked
Communication styleTop-downGuardedHub and spokeCollaborative
Problem solvingHierarchicalHorizontalIndependentCollaborative
Decision makingSeeks approvalTeam informedTeam includedTeam decided
Leadership styleCommand and controlGet out of the wayCoachPartner
FeedbackNo news is good newsOnce per yearWeekly/dailyOn demand
Technology useUncomfortableUnsureUnable to work without itUnfathomable if not provided
Job changingUnwiseSets me backNecessaryPart of my daily routine
[4]

Organizations struggle with incompatible working styles, with Gen Y’s desire for constant feedback and a Traditionalist’s favor of top-down command and control, with entire books being written on the topic.

Rather than a boat anchor, diverse teams – pulling in people from a broad range of backgrounds and age groups – can actually produce some of the most effective solutions, as Scott E. Page, author of The Difference[5], found. Just as age is a poor indicator of an individuals ability to adapt to the changing environment, ago is also a poor factor in determining the working style an individual might favor or their ability to work with others who have a different style. In their book A New Culture of Learning[6], Douglas Thomas and John Seely Brown describe two “hard-core gamers.” “Ambitious and risk-taking” Nick has “fast reflexes” when playing. Yet he enjoys working with his guild mate Becky who “relies on patience, careful strategy, and knowledge of the game.” What makes this even more fascinating is that Becky is Nick’s mother.

This is not the first time that personality has been seen as a factor in determining working styles. The nineties brought us tools such as Myers-Briggs[7] and FIRO[8] which enable us to measure our personalities and those of our employees. The hope was that a better understanding of interpersonal dynamics would promote a smoother and more productive work environment.

The Myers-Briggs types and their distribution across the population.

The Myers-Briggs types and their estimated frequency across the population. As you can see, the data suggest that those who prefer Sensing are more frequent in the population than those who prefer Intuition. Source: The Myers & Briggs Foundation.

The world is changing faster than ever and our skill sets have a shorter and shorter shelf life. In this environment the highly entailed, and highly trained specialist will find that their carefully guarded skills and ways of working will rapidly change from advantage to problem unless they are willing to adapt to the environment around them. Strategies which resist a constantly changing world are insufficient to keep up, and organizations need to embrace the diverse and organically formed teams that can enable them – as it does the guilds in World of Warcraft – to succeed in a rapidly changing environment.

Continued in Problems and the people who solve them.


References


1. Massively multiplayer online role-playing game (MMORPG) is a genre of role-playing video games in which a very large number of players interact with one another within a virtual game world.↑
2. Hobbits in all but name.↑
3. Forming, storming, norming and performing is a model of group development developed by Bruce Tuckman in 1965, who maintained that these phases are all necessary and inevitable in order for the team to grow, to face up to challenges, to tackle problems, to find solutions, to plan work, and to deliver results.↑
4. Adapted from IBM report : “Driving Workforce Productivity by Enabling Social Connection “ (June 2009)↑
5. Scott E. Page (2007), The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools and Societies, Princeton University Press.↑
6. Douglas Thomas and John Seely Brown (2011), A New Culture of Learning: Cultivating the Imagination for a World of Constant Change, CreateSpace.↑
7. Myers-Briggs Type Indicator (MBTI) is a psychometric questionnaire designed to measure psychological preferences in how people perceive the world and make decisions, which Myers and Briggs extrapolated from Jung’s writings in his book Psychological Types.↑
8. Fundamental Interpersonal Relations Orientation (FIRO) is a theory of interpersonal relations, introduced by William Schutz in 1958.↑

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Apologies for the lack of updates

2011/04/07 in Business-Technology | No comments

I’ve been quite tardy lately with updates, which I apologise for. A couple of mates convinced me to write a book which I’m in the process of writing, and it seems be consuming all my spare time. (The Future of (Knowledge) Work still has two more updates to come though, so there is some ideas in the pipe still.) Expect updates to be less frequent until I’m done with the book and can move on. Luckily I’m about 80% of the way though now, so there shouldn’t be too far to go.

Working in Hollywood

2011/03/17 in Enterprise 2.0, Knowledge Worker of the Future | 2 comments

Note: This is the fourth part of a longer series on how social media is affecting management. You can find the earlier posts – The future of (knowledge) work, Knowledge Workers in the British Raj and The north-south divide – and subsequent issues – World of Warcraft in the workplace and Problems and the people who solve them – elsewhere on this blog.

Whom do you work for? For many people it’s not the company who’s logo is on their uniform, nor is it the organization who’s brand adorns the building they work in. You might be a gate attendant, hired by a local contractor as the airline doesn’t have the time or resources to maintain a payroll in every port in which it operates. You might be a consultant working full time on an organization’s change program, destined to leave once the engagement if finished. Or you might be a free agent, working across multiple businesses at once (as I do), bringing a distinct and valuable skill set to the executives you work with as they solve some of the knottiest problems confronting their business. For many people, the organization they work for is no longer the same one which cuts their a paycheck.

Companies find themselves caught between the conflicting needs of working smarter while keeping costs down. Creating a competitive edge means finding the high-value skills required to out think the competition, and they’re willing to pay a premium for the privilege. At the same time, an increasingly competitive market is pushing revenues down, creating a financial void that will most likely consume the margins and mid level management of many organizations. The best solution to this problem, and possibly the only solution, is to set aside the goal of exclusively owning every skill the business needs, and instead focus on fractional or collective ownership pulled from a broader community of partners.

Deconstructing the studios after the golden age

During the golden years of Hollywood, from the late 1920s through to the 1950s, the film studios built huge, vertically integrated empires that controlled every facet of production. Everything from actors, sound stages and camera operators through marketing, distribution and the cinemas themselves were under the same tent. However, this high degree of control didn’t ensure success, and the years after then second world war saw increased competition from foreign films, the decline of cinema audiences, and attacks on the studio structure by government agencies, all which contributed to dropping revenues. By the early 1960s the studios were half what they had been during the glory days, thousands of formerly flourishing theaters had closed forever, and the industry was forced to find a new industry model.

In 1925 Warner Brothers, then a second-tier studio working out of Hollywood’s poverty row, acquired Vitagraph (including the backlot shown above), a leading production company from the silent era which had fallen victim to the rise of the monopolistic studio system. Another gamble in 1927, this time on sound in the Jazz Singer, catapulted Warner Brothers into the first-tier.

In 1925 Warner Brothers, then a second-tier studio working out of Hollywood’s poverty row, acquired Vitagraph (including the backlot shown above), a leading production company from the silent era which had fallen victim to the rise of the monopolistic studio system. Another gamble in 1927, this time on sound in the Jazz Singer, catapulted Warner Brothers into the first-tier.

The first blow came in 1948 after a long antitrust investigation when, in what became known as the Paramount decision, the U.S. court ruled for the divorce of production and exhibition, and the elimination of unfair booking practices. In a single stroke the studios were forced to divest themselves of roughly 1,400 cinemas and split their companies in two; one division handling production and distribution, the other grappling with the declining theatre business.

The antitrust investigation, however, was not the only problem the studios faced. Patronage had begun to decrease in the years after the second world war, a trend that was soon accelerating as suburbanization saw people cashing in their war bonds and buying homes in the suburbs. This changed the pattern of film demand, draining audiences from the first-run houses in town centers which showed high margin prestige pictures, as they were now too far from home for many people to bother with. Hollywood fought back, trying to tempt viewers first with color pictures, and later 3D and CinemaScope (though both of these proved too expensive to deploy at scale), until the industry finally settled on Panavision’s anamorphic color image as their tool of choice, but it was only in the late sixties when suburban malls and multi-screen multiplexes became common that the studios recovered some of their former audiences.

Throughout this transition period the studios had refused to sell their back catalogue to the television stations. The first feature film shown on U.S. television came from abroad, as U.K. studios such as Ealing and Rank, unable to break into the domestic U.S. theatrical exhibition market released their product to television stations desperate for longer format productions. It was only in 1954, when eccentric billionaire Howard Hughes sold RKO’s library to television, that film studios’ resolve buckled as the millions of dollars were made on the deal impressed even the most cynical boss. By 1955 the studios had plunged head long into producing films specifically for television.

Moving into television, however, was not enough to prop up the studios’ sagging finances. Their response was to shed their in-house production departments: the talent that had been kept on the books during the golden era had proved to be too expensive, and the studios began contracting independent producers as required to make features. Suddenly the grand marques of the golden age, such as MGM and Warner Brothers, found themselves competing on an equal footing with the smaller, theater-less studios, like Columbia or Universal.

The television age proved to be an era of transition; the old studio system was supplanted by a more flexible model build around independent production. The grand marques struggled to attract hit films from independent producers, their losses pushing balance sheets deeply into the red. The lack of a large, rigid, vertically integrated studio structure which had been disadvantageous to the smaller, theater-less studios such as Columbia in the 1930s, proved to be the way to make millions in the new Hollywood system. The more fluid business environment which emerged with the television age favored a more fluid style of business. The successful studios focused on their core business – finding successful stories – knitting together special purpose vehicles from a community of partners to support production and distribution as needed, and then populating these vehicles from a network of free agents and specialist service providers to carry out the real work of creating and delivering the film. This approach was confirmed by Universal, which had been only marginally profitable during the golden age of the, however the company’s success after it was sold in 1952 to Decca Records resulted in it being bought by MCA talent agency and becoming a Hollywood powerhouse of television production.

Responsible, Accountable, Consulted, Informed

Work has changed dramatically in the last few decades. Much like the studios in Hollywood, pressure on margins and timeframes is forcing companies to reevaluate which work they do themselves, and which they farm out to a growing ecosystem of suppliers and partners. Although it won’t be called outsourcing, companies in industries as diverse as automotive, banking, retail, and real estate are responding to the new recession mentality by focusing on their core competencies and value-add, driving them to consolidate, rationalize and externalize supporting functions to save money or free up management time, allowing them to focus on more pressing issues.

Capabilities close to the heart of business are increasingly being moved into the hands of external providers. A growing ecosystem of partners is delivering everything from go-to-market strategies through product development to manufacturing and fulfillment. WalMart, for example, recently handed responsibility for all of its in-store marketing programs to a third-party specialist. The monolithic businesses we previously worked for are starting to fragment, converting themselves into swarms of cooperating entities.

Companies have always relied, to some extent, on others to do some of their work for them: Phoenician merchants bought their ships from Phoenician shipbuilders, the railroad robber-barons of the 1800s bought their steel from Bethlehem (among others), and even Henry Ford, who was so intent on vertical integration that he tried to found a self governing city (Fordlândia) to grow his own rubber, paid other firms to construct the buildings required to house his company’s factories. What is different today is that companies have moved from buying goods and services from others, to passing responsibility for core business activities to external organizations. Marketing, sales, manufacturing, even the management and operation of a company’s end-to-end business processes are now up for grabs.

But what are the limits of this drive to externalize? It can be educational to sit for a moment, and consider which day-to-day roles your business really needs to own, the people who must be on the payroll, rather than those folk you would like to have on the payroll. These are the roles where the person filling them needs to be held to account, and potentially end up in jail if they don’t meet their responsibilities, responsibilities which you cannot pass to an external party.

Take the CFO for example (or the finance director, or equivalent in your geography). A CFO is the one those interesting roles that most public companies cannot do without. There’s a range of government and market regulations – regulations with quite strict penalties – which typically fall under the responsibility of the CFO. Recent legislation in passed response to the Enron disaster and global financial crisis, such as the Sarbanes–Oxley Act[1] in the U.S.A., has dramatically increased the scope of these regulations, along with the penalties. A company executive needs to attest that the company has met these regulations, and there might be a term in jail if they are later found out to have been less than completely honest.

It’s hard to see how a part time or outsourced CFO could be made to work for a mid to large sized company. Government and market regulation often (if not always) requires that a natural person provide the attestation. There’s a simple reason behind this: they want to be able to seriously punish whomever provides the attestation if they try to mislead the government. Fines don’t work, as they’ll simply be factored into the price on the contact. (Some enterprising organization might even manage to ensure against such a fine, given half a chance.) What does work is throwing someone – the individual who signed on the dotted line – into jail. From the point of view of the individual, even if the regulation did allow for a part time employee or someone from outside the business to attest, it would be a brave person indeed who signed without balancing the associated risk with the trust and intimate knowledge that you can only get from working from inside as a full time employee.

Companies require a CFO (or equivalent) as they need someone who can be held accountable. A common piece of consultantware used to sort out organizational problems is a RACI matrix[2]: standing for Responsible, Accountable, Consulted and Informed. While many people many be responsible for carrying out the work required (or want to be consulted or informed on what will be done), in a smoothly running business or project there will only be one person held accountable for each deliverable or task required. If more than one person is held accountable then we open the door to finger pointing and excuses. The government understands this, which is why they require an individual, a natural person, to sign-off, and go to jail if they get it wrong.

A RACI matrix mapping the business roles in a process to the four RACI categories. While the outsourcers might be responsible for delivering some of the components, they don’t have a stake in the successful delivery of the finished aircraft.

A RACI matrix mapping the business roles in a process to the four RACI categories. While the outsourcers might be responsible for delivering some of the components, they don’t have a stake in the successful delivery of the finished aircraft.

These days if an outsourcing arrangement goes wrong, you will be held accountable by the business owners, regulators or the market itself, as it’s not just a bad batch of bottle tops that can be rejected, but one of your core business activities or assets will be missing in action, quite possibly bringing the entire enterprise to a halt. Boeing’s 787 Dreamliner, for example, is billions of dollars over budget and is already roughly three years late, with failed outsourcing arrangements taking much of the blame. Boeing was even forced during late 2009 to step in and take over the underperforming fuselage manufacturing plant of Vought Aircraft Industries, spending approximately one billion in cash and credit, after the plant and contributed to years of delays.

Boeing scurries to deliver the 787 on time after a number of delays, some of which were attributed to outsourcing production of nearly thirty percent of the 787‘s components.

Boeing scurries to deliver the 787 on time after a number of delays, some of which were attributed to outsourcing production of nearly thirty percent of the 787‘s components.

We can’t just pass off responsibility for a core business capability without some mechanism for holding suppliers accountable. Without the ability to throw an individual in jail, we’re reduced to crafting incentives and penalties (which is why Microsoft’s board cut Steve Ballmer’s bonus in half in 2010[3], in response to his inability to improve Microsoft’s position in the mobile phone industry), and this means aligning their incentives (and penalties) with our own, treating the hand-off as a delegation of authority rather than the procurement of a good or service.

Focusing externally

The shift from buying materials to delegating capabilities has opened up new possibilities for the organizations, the early adopters, who are willing to experiment with it. They’re reconfiguring their departments, much like the film studios, focusing on knitting together the capabilities, services and materials their business needs, ensuring clear lines of accountability from their own organization’s business drivers down into the incentives (and disincentives) reified in each supplier’s contract.

Rather than having a large team focused internally, intent on optimizing internal assets and processes, this new breed of company has flatter and smaller departments (sometimes with tiny teams, well down into the single digits) who are focused externally. They’re identifying the suppliers required and lining up accountabilities to suit, or they’re working directly with customers to solve their problems. The executives accountable for the organization’s performance look up and out, plotting where the next step should be, providing the team at the frontline with guidance, but otherwise leaving the team to their own devices when solving the problems confronting them. While around these new, leaner organizations a new community of suppliers is also evolving.

If we want to successfully delegate a capability to a supplier, then we need to ensure that are responsible and accountable for the performance of the capability

If we want to successfully delegate a capability to a supplier, then we need to ensure that are responsible and accountable for the performance of the capability

The old consultancies and outsourcers, organizations more concerned with operational flex and selling doomed transformation programs, are being forced to align their offerings with their customers’ business models[4], taking responsibility and accountability for one or more of the customer’s cost-driven business activities. This might range from in-store marketing (as with the WalMart example) or staffing the gates at an airport, through category management to supporting the business’s end-to-end business process. The capabilities they provide will, in turn, be organized in a similar fashion to their clients, with small, flat teams containing an executive holding accountability for delivery, while also leading a team focused on the work at the coal face.

And in the middle of this we find the free agents, the skilled knowledge workers, that neither the clients nor the suppliers can afford to have on staff full time[5]. Much like the more experienced and valuable staff in the movie industry – the independent producers, writers, directors and actors who create the blockbusters – they’ll migrate between engagements, often working with multiple clients at once, having grown out of a specific technical discipline to adopt a more general perspective on the industry, becoming sun-shaped people[6]. Their unique world view will draw together the threads of an engagement, taking it from the mundane and making it into something special.

This model creates lighter and more agile organizations, organizations which are not burdened by the huge payrolls or massive investments associated with vertically integrated organizations. The old bureaucracies will have been blown apart, their baroque structures replaced with a network of smaller and more dynamic units. Whom you work for will be less import that what you work on and how you approach this work, and your career will be in your own hands.

Continued in World of Warcraft in the workplace.


References


1. Sarbanes-Oxley Art described at Wikipedia.↑
2. We could use of the many variants of the approach, such as RASCI, RACI-VS, CAIRO, or DACI, but RACI will suffice in this instance.↑
3. Don Reisinger, (2010), Mobile woes slice Ballmer’s bonus in half, CNET↑
4. Consulting doesn’t work. We need to reinvent it. @ PEG↑
5. North-south divide @ PEG↑
6. The sun-shaped individual @ PEG↑

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Knowledge Workers in the British Raj

2011/03/08 in Enterprise 2.0, Knowledge Worker of the Future | 1 comment

Note: This is the second part of a longer series on how social media is affecting management. You can find the first post – The future of (knowledge) work – and subsequent posts – The north-south divide, Working in Hollywood, World of Warcraft in the workplace and Problems and the people who solve them – elsewhere on this blog.

Prior to the industrial revolution, most folk, apart from apprentices and other people in training, worked for themselves. Home wasn’t here and work wasn’t there: they were in the same place and tightly intertwined. For the last few decades though, we’ve all become used to working in the large bureaucracies that most modern companies use to manage their workforces. For many pundits the shift to a more social business – driven by Enterprise 2.0 and Social Business Design – is the chance to humanize these bureaucracies that we’ve created, bringing back some of the more personal experiences we used to enjoy. However, this ignores the fact that while we’ve used technology to change business, business has also evolved to the point that it’s changing how we think about and use technology.

Tomorrow’s more social companies will not simply be our existing bureaucracies humanised. They’ll be something more compact and collaborative, extremely flat organisations where the executive is responsible for steering the boat while handing responsibility for operations over to the frontline. Rather than enabling a more human bureaucracy, one where the power structures are inverted or middle management empowered, Enterprise 2.0 is returning us to an earlier time, more akin to the British Raj in India, when the world was more uncertain and communication within a bureaucracy was slow (when compared to the pace of business). We’re returning to a time when self initiative, the ability to collaborate with your peers, and a focus on bringing whatever skills and tools you can to bear on the problem in front of you, is more important than deep specialisation and formal communication and career structures.

Our companies are not what they used to be

The template for our large, vertically integrated enterprises was stamped out for us by the likes of Cornelius Vanderbilt[1] during through the development of the transcontinental railroads in the U.S., and perfected by the conglomerates and multinationals in the sixties and seventies. Our organisations were seen as vast machines, machines staffed and operated by an army of people.

For a long time a company’s workforce was considered just one of three factors of production[2], and a fungible factor at that – homogeneous and easily interchangeable. Recently companies have taken a more humanistic approach, with many human-resources departments proclaiming “people are our organisation’s most important asset,” and driving companies to construct ever more complex career management, renumeration strategies, and recognition and reward schemes to make the most of each employee’s individual skills and foibles.

A factory in the industrial revolution, where the key to scaling a business was to employ more workers, and then employ an additional layer of management to manage the workers you hired in the first place

A factory in the industrial revolution, where the key to scaling a business was to employ more workers, and then employ an additional layer of management to manage the workers you hired in the first place

Our organisations, however, have been shrinking over the last couple of decades. Initially this was from automation on the factory shop floor, where repetitive tasks were replicated in technology, man replaced with machine. Overtime we’re used technology to chipped away at increasingly complex problems, working our way from simple manual tasks such as swinging a hammer on command, through to today’s modern, automated production line marvels.

At LEGO HQ in Billund, Denmark, where raw plastic is transformed into finished bricks (including stormtrooper helmets), and packaged into sets, with very little human intervention other than to fix machines when they breakdown.

At LEGO HQ in Billund, Denmark, where raw plastic is transformed into finished bricks (including stormtrooper helmets), and packaged into sets, with very little human intervention other than to fix machines when they breakdown.

A similar journey has occurred inside the office: computers (the teams of people computing ballistics tables and payrolls by hand) have been replace by computers (the electronic gizmos prone to bugs), the typing pool was phased out in favour of management using word processors to automate the creation their own documents, and a large chunk of the customer service team has been replaced by self-service kiosks and web sites which allow customers to attend to their own needs. Most recently, the midlevel management responsible for command and control – both between teams, and between teams and the C-suite – is being replaced by software[3] as social media tools automate the communication and information aggregation tasks that have traditionally been the domain of middle management.

Our vast, vertically integrated enterprises have been flattened and hollowed out, creating a new generation of organisations which have a large workforce at the coal face working under the direction of a with smaller and more focused team of executives. The frontline is interacting directly with customers and suppliers or managing production, responsible for the day-to-day operation of the business. The executive is looking into the future, responsible for placing bets on where to deploy the organisation’s resources most efficiently to meets tomorrows challenges.

The provincial civil service

The emerging organisational structure we see today is of a different nature to the monolithic institutions required to run the train networks in the 1800s or multinational conglomerates of the more recent past. The impact of the latest wave of automation – the move to social business – is not to simply take the existing organisation and applying a new style of command and control, one based on bottom-up empowerment and where middle management use these new media tools to streamline motivating and managing the teams under their guidance. It’s more akin to the extremely flat structures used by organisations such as the British civil service in India during the 1800s.

As a colonial power, Britain built an administrative centre in India (initially under the monopoly of the East India Company, but later under direct government rule[4]), staffed with highly competent expatriate civil servants who had signed on for a tour of duty. This tour of duty was usually seen as the route to wealth and influence, as it was easy to tap-off a little of the money – the vast sums of money – which flowed past these civil servants as it made its way back to the home country. (It wasn’t uncommon for senior members of the British Raj to return to Britain at the end of their tour with suspiciously large collections of expensive trinkets and locked boxes.) A complex bureaucracy developed, constructed around the Governor-General based in Calcutta, with Mandarins gathering staff and wealth as they fed their own feeling of self importance.

Managing the provinces, however, was a completely different problem. Covering a vast, populated area, and with little incentive for senior civil servants to get directly involved, the provincial civil service had to make do with a very flat organisational structure, one where every manager was responsible for roughly one hundred direct reports. Such a high management ratio naturally precluded many of the practices we take for granted into our large matrix-managed organisations. A manager couldn’t afford to spend more than a few minutes with each of their direct reports in the course of a month, and even those few minutes might not occur as transport and communication were much more expensive than they were today. The high-touch style of management we are familiar with in recent history wouldn’t work.

The expanse of the British empire in India in 1909

The expanse of the British empire in India in 1909

From demand-side to supply-side

The strategy which enabled the provincial civil service to function – and to function very effectively – was clear objectives. Field staff were engaged for their ability and interest in taking on responsibility for a problem on behalf of the management (usually this problem was the collection of the taxes, duties and excises required by the British crown in a specific province). A set of policies and procedures were put in place to ensure that they conducted themselves in a fit and proper manner, however, generally, the field staff were provided with a great deal of discretion in how they achieved their goals, collaborating with their peers were needed.

Behind this flat organisational structure was a hiring and training process designed to find candidates who were focused on solving the right class problem, rather than candidates who specialised in a discipline or process. All candidates had to sit an extensive test covering a broad range of topics, and were then trained in the skills and processes they might need in the field. Their induction was finished off with and apprenticeship under the guidance of an experienced worker. The civil service was looking for those individuals who had the kit bag of skills and the aptitude needed to find their way to their goal on their own. Those selected were then train in the business processes and policies they needed, and provided them with the time they needed to integrate into the community of front line workers. Much like today’s emerging workplaces, the team at the front line was empowered to collaborate as they worked toward their respective objectives, rather than micromanaged.

We like to think that we’re all hired for our unique skills and paid according to the value we bring to the business. Unfortunately this is not generally true. Our large company legacy means that most managers need to think in terms of roles, cogs in a machine that they need to assemble. Measuring each employee by their contribution is a complex and laborious task which does not scale well, so companies manage large populations of employees by defining standard roles tied to specific skill sets, and then measure each employee by their ability to fulfil the role. Hiring then becomes the easier supply side challenge of finding and evaluating people with the requisite skills.

As companies flatten it is becoming less important to assemble large teams with specialised skills. Teams have shrunk as technology has replaced specialists with potent technological tools: the skilled printer replaced by the printing press, the complex task of computing ballistics tables moved from people to machines, the distributed computing specialist made redundant by an open source framework, and your procurement specialist replaced by the on-demand SaaS fulfilment solution.

Our focus has shifted from the capabilities we need to the outcomes we need to deliver. We’re swapped from the supply side problem of finding enough people who have the specialist skills we need to staff our business, to the demand side problem of finding the people who we can delegate some of our problems to. One of the organising principles behind business is changing, driven, most recently by a shift to more social businesses.

The future of our business – post Enterprise 2.0 and Social Business Design – is not in applying a new human-resources paradigm to our existing workforce. Much like the British Raj in provincial India, our businesses need to adapt to an environment where we don’t have the time or resources to micromanage every task. The workforce which staffed our bureaucracy in the past is not the same workforce we need in the future. The future of our business is with a smaller, more dynamic workforce of self-starters, built around flat organisational structures and more general skills which devolve responsibility for operational problems to the front line and empower them to work together and solve these problems under their own direction, while freeing the executive team to focus on steering the organisation through the challenging environment we operate in today.

Continued in The north-south divide.


References


1. Born the son of an impoverished farmer and boatman, Cornelius Vanderbilt (May 27, 1794 — January 4, 1877), died the wealthiest man in the United States and probably the greatest of the nineteenth century railroad barons. Starting with money he borrowed from his parents to buy a boat which he used to ferry passengers between Staten Island and New Your City, he became a American shipping and railroad magnate who acquired a personal fortune of more than $100,000,000.↑
2. The other factors of production are stocks (including land) and capital goods.↑
3. The future of knowledge work @ PEG↑
4. John W. Kaye (1853), The Administration of the East India Company, Richard Bentley↑

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The north-south divide

2011/02/09 in Enterprise 2.0, Knowledge Worker of the Future, Mailing List | No comments

Note: This is the third part of a longer series on how social media is affecting management. You can find the earlier posts – The future of (knowledge) work and Knowledge Workers in the British Raj – and subsequent posts – Working in Hollywood, World of Warcraft in the workplace and Problems and the people who solve them – elsewhere on this blog.

Developing and manufacturing a product, and delivering it to the waiting customer, has historically been a significant expedition. We would establish a series of camps – departments, containing the tools and skills needed – along the route from start to finish to support us as we ferried the materials we needed from their source to where they were required. However, the assumptions that drove this behaviour are no longer true. Where previously materials, skills and tools were all in short supply, today we can usually find what we need lying on the ground near where we stand. Developments such Strategic Sourcing[2], Business Process Outsourcing[3] (BPO), and Social Media have removed the need for us to carry what we need with us, and has been the trigger for us to start dismantling those departments that we no longer need.

The large bureaucracies companies have traditionally required are slowly being collapsed, hollowed out, as we find that we can achieve the same result more efficiently with smaller and more agile organisations. Companies are starting to use a more alpine style[4] of operation, leveraging a small carefully, chosen team with more flexible tooling, and relying their own wits to survive in a rapidly changing and uncertain environment. This shift is pushing us to rethink the nature and organisation of our businesses, setting aside many of the specialised departments and resources we relied on in the past to find a new organising principle. The impact will be both subtle and dramatic, with business continuing to do what business does (constrained, as it is, by government and market regulation) while the roles we all play as individuals change dramatically in response.

An interesting thought experiment is to compare the companies we work in to the societies we inhabit. After all, companies are really just small (and some not so small) societies, with all the dynamics and politics of a community of a similar size. The nature of both societies and companies is largely determined by the tools they use[5], as it is these tools that determine how the community functions. Agriculture, for example, requires a society to be stationary and drove the creation of property ownership, while the telegraph enabled the creation of new business models by separating, for the first time, the transmission of information from the carriage of goods, and gave the world Reuters[6]. The tools and technologies we use determine the nature of the societies and companies we inhabit.

Historically, societies can be broken into two rough technological groups: equatorial and seasonal. Equatorial societies exist somewhere near the equator, living in a climate that varies little throughout the year, other than in the amount of rainfall they receive. Seasonal societies live some distance from the equator in a more temperate climate, a climate that provides them with distinct seasons over the length of the year. The further north or south you go from the equator, the more seasonal the climate becomes.

The climate a society lives in has a strong influence on the type and nature of technologies that it uses. The orthodox strategy in a seasonal climate is to tailor specific toolkits to the challenges faced in each season of the yearly cycle; jackets in winter and shorts in summer. When it becomes extremely cold, it’s wise to bring along the sleds, snowshoes and heavy clothing. However, when it’s warm these the tools in this toolkit are somewhat less useful. Many tools fulfil a specific, and important need at one point in the seasonal cycle, but this also means that we have little use for the tool in the remainder of the year.

Societies in more tropical climates typically adopt a different strategy. Their focus is on creating a single toolkit that has a smaller number of simpler, but more flexible tools. They have little need for specialised tools, as the climate they live in is relatively stable over the year, which means that their success (or failure) depends on their ability to adapt to unanticipated disturbances or unexpected opportunities as they present themselves. While they are not concerned about stockpiling food to survive through a cold winter, they do need to be able to adapt to the sudden appearance of a cyclone. When a cyclone strikes you rarely have time to go and grab a cyclone proof shelter, and you need to be ready to pick up and use the fallen coconuts once the wind had passed. You must to make do with what you have.

In the former, seasonal societies, the emphasis is on the gear. If the gear fails then you do too, often with fatal consequences. This drives you to invest a significant amount of your time and effort into ensuring that the gear can’t fail, striving to add enough nines to the end of that reliability measure to ensure that you’re not left out in the cold. The technologies you develop are complex and highly entailed, addressing specific needs and requiring a long a sophisticated chain of skills, materials and tools to manufacture.

In the latter, equatorial societies, the emphasis is on skill. Your fate is determined by your ability to adapt the resources and tools found in the immediate vicinity to the problem at hand. The tools you need are simple and flexible, either lightweight and compact enough to carry with you or based on technologies which enable you to manufacture them from whatever materials you have at hand. These technologies are only lightly entailed, addressing general needs and requiring a relatively short chain of skills, materials and tools to manufacture.

Companies have traditionally been organised along similar lines to the seasonal societies. The pulse of business beat slowly, and our main concern was to address the specific challenges that existed in each season of this regular cycle. These challenges were also complex and highly entailed, requiring large toolboxes with specialised tools and skills that are highly interdependent. Success depended on the quality of our assets and processes, and our focus was on mobilising enough people and technology to create and staff the processes we needed.

Take, for example, LEO (the Lyons Electronic Office), which may well be the first business computer. Unable to buy a beige box from the local electronics shop, the team at Lyons had to build their computer from scratch, requiring a large team with a number of specific and specialised skills, and three years of effort. I wouldn’t be surprised if they were forced to blow their own vacuum tubes. The result was a machine that, in 1953, could calculate a person’s pay in 1.5 seconds, rather than the eight minutes taken by an experienced clerk. LEO was a long and highly entailed investment.

LEO, the Lyon's Electronic Office, in 1951

LEO, the Lyon's Electronic Office, in 1951

However, since then the pulse of business has increased dramatically. Over the last few decades we’ve gone from worrying about decades to years, and more recently to months and weeks. Soon we might even be worrying about days. The seasons in business are changing so quickly that we are finding it difficult to keep up[7]. Our business environment is, in fact, starting to look more like the environment the equatorial societies inhabit rather than the more temperate climes of old: a relatively stable progression over the year, but with a pressing need to adapt to the unexpected disturbances and opportunities as they present themselves.

At the same time, the nature of the environment our businesses function in has changed dramatically. Many of the skills and tools we fought hard to obtain can now be easily picked up where we stand. From global logistics providers and contract manufactures, through outsourcing, the various consultancies and software as a service, most of what we require can be easily picked off the ground when we need it. LEO doesn’t hold a candle to many of the bureau and SaaS payroll solutions that we can use on demand.

What we need is a more equatorial approach to organising our business, one more in line with reality of the business environment we operate in today. This means stocking our organisation with a small collection of flexible, but potent, people that can rapidly adapt to our changing needs, people who can use a small set of flexible tools to respond to the challenges and opportunities presented to us. It involves pulling down our highly entailed bureaucracies and connecting the C-level with the team at the front line. Overhead functions such as IT and HR will be torn down. (After all, if all our IT exists in the cloud and our company is hollowed out, removing the bulk of our bureaucracy, then we don’t need these departments anymore.) The old value producing functions (manufacturing and so on) will be externalised and bought as a service. More than anything, our success will depend on our ability to mobilise – both as an organisation and as individuals – and adapt the resources and tools in the immediate vicinity to the problem at hand.

This requires a huge shift in how we think about staffing our organisations. Deep specialisation is no longer the benefit it was in the past. While specialisation brings knowledge and insight, it also (typically) reduces flexibility and adaptability. Someone with a decade or more invested in being an IT architect, sales manager, change agent, human capital management expert, process wizard or (even a) social media guru, needs to protect that investment. Their value is in their specialisation; they will defend the status quo and resist being pulled away from what makes them valuable[8]. The people we need are sun-shaped[9]. They’re highly skilled (though not highly specialised), focused on solving a problem we have, and bring with them a diverse toolkit of simple but flexible tools.

Continued in Working in Hollywood.


References


2. Strategic Sourcing defined at Wikipedia↑
3. Business Process Outsourcing defined at Wikipedia↑
4. Alpine style climbing defined at Explore Himalaya↑
5. Timothy Taylor (2010), The Artificial Ape: How technology created humans, Palgrave Macmillan↑
6. The history of Thomson Reuters↑
7. Why we can’t keep up @ PEG↑
8. From doctrine to dogma @ PEG↑
9. The sun-shaped individual @ PEG↑

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