Category: Four pillars

…that’s what gets results…….. Sy Oliver, 1939

Two of my favourite academics, Andrew McAfee and Erik Brynjolfsson, recently collaborated to publish a fascinating article on Carr’s Disease. For those who haven’t come across it, Carr’s Disease is a relatively rare condition, cycling the patient through intermittent bouts of selective blindness and 20:20 vision.

Andy and Erik set out to test some intriguing formal theories they had developed, focused on the market share concentration and sales turbulence associated with industries that had a high IT intensity and associated investment. If the data supported the theories, they would have formal evidence of the difference in the competitive dynamics between low-, medium- and high-IT-intensity firms, thereby proving the psychosomatic nature of Carr’s Disease.

I quote from the article:

The link between IT and competition surprises many researchers and executives for two reasons. First, most companies buy technology to gain control over their environments, not lose it. Enterprise systems help companies create consistency and reduce randomness, so it’s ironic that a high level of such investment would be associated with a more frenzied competitive environment.

Second, some observers have argued that information technology is so pervasive that it no longer offers companies any big advantage. If many businesses in the same industry bought the same type of large-scale commercial-enterprise software, there is reason to believe they would subsequently become more similar, and the competitive field would level. Instead, something close to the opposite has taken place.

Fascinating. Read the article for yourself, and do follow the dialogue at Andy’s blog. Here’s an excerpt:

We reasoned that since IT spending increased substantially beginning in the mid 1990s, and since not all industries spend equally on technology, one good way to assess IT’s competitive impact would be to see if there was a difference in differences: if industries that spent a lot on IT (‘high IT’ industries) experienced different competitive dynamics after the mid 1990s than they did before, and if there was a difference in this respect between high and low IT industries. If both these differences existed, it would be a strong indication that IT mattered —  that it was a driving force behind the observed changes in competition.

But how to measure competition?  One common metric is concentration: the extent to which market share is held by a few big firms, rather than many small ones. We also looked at turbulence, or the extent to which firms in an industry jump around in rank order from year to year (If the #5 firm in sales one year is #10 the following year, this is a pretty turbulent industry).

The results of our analyses were clear. High IT industries experienced significantly greater turbulence and concentration growth after the mid 1990s than they did before, and these differences were not as pronounced in low IT industries. The Business Insight article contains graphs that show these differences, and I’ll post and discuss more results here later .  For now I just want to point readers to the article (a paper written for an academic audience that discusses the research design and results in more formal terms is available here) and solicit their reactions.

These dialogues are important, so could I encourage you to participate?

My personal take on it is quite simple. First, the concentration growth. Any industry sector facing increased commoditisation and consequent margin pressure should display the concentration growth characteristics found in the study, as participants strive to hold on to the vanilla while seeking to grow the higher-margin complex; there is always a shake-out and a consolidation. I think this happens in low-, medium- and high-IT-intensity sectors; the difference is that the process is accelerated by IT and therefore more pronounced in the high-IT-intensity sectors.

The sales turbulence is far more interesting. My guess is that it shows how poor we really are in sustaining the value generated by IT investments. This happens for a variety of reasons: suboptimal prioritisation processes; an unwillingness to make the requisite people-process-technology lockstep changes that will crystallise the value; a lack of understanding of the sheer speed of change in the high-intensity competitive environment; inconsistent approaches to IT investments within different divisions of the same firm, creating artificial and unnecessary variances in performance; a cyclical tug-of-war between product and service innovation champions as executives revert to type; the list is endless.

One way of looking at it is that we need process innovation in order to sustain the value generated by IT investment; I think that the greater the IT-intensity of a sector, the more radical the process innovation has to be. For most of us, this is uncharted territory: we haven’t quite grasped the “Don’t Automate, Obliterate” mantras that Hammer was espousing in the late 1980s; instead, we still have this tendency to “pave the cowpaths”, as he termed it. I think this is caused, at least in part, by the battle between professions that Andrew Abbott writes about, as we move gently towards a Wilsonian consilience.

In essence, I believe that the market share concentration growth is a phenomenon that manifests itself in all industry sectors facing commoditisation, and that this phenomenon is accelerated in high-IT intensity industries, an “environmental” effect. On the other hand, I believe that the sales turbulence increase is a self-inflicted wound, showing our relative immaturity in sustaining the value we create. This is not surprising given our ambivalent attitude to such investments, itself a reaction to irrational markets and, sadly, also a response to Carr.

Perhaps I should have left it to Sy and Ella to explain what I think (or maybe Fun Boy Three and Bananarama for younger readers). Do let Andy know what you think, or comment here if you feel lazy, I’ll make sure he gets it.

Second Life has had its fair share of critics as well as a very generous dollop of media hype. It would not surprise me if you feel you’ve been overexposed to the topic. Nevertheless, you should take a look at GetAFirstLife. Nice to see that parody isn’t dead in either Life.

I was particularly pleased to see this response, ostensibly from Second Life:

This notice is provided on behalf of Linden Research, Inc. (“Linden Lab”), the owner of trademark, copyright and other intellectual property rights in and to the “Second Life” product and service offering, including the “eye-in-hand” logo for Second Life and the website maintained at http://secondlife.com/.

It has come to our attention that the website located at http://www.getafirstlife.com/ purports to appropriate certain trade dress and marks associated with Second Life and owned by Linden Lab. That website currently includes a link in the bottom right-hand corner for “Comments or cease and desist letters.”

As you must be aware, the Copyright Act (Title 17, U.S. Code) contains provisions regarding the doctrine of “fair use” of copyrighted materials (Section 107 of the Act). Although lesser known and lesser recognized by trademark owners, the Lanham Act (Title 15, Chapter 22, U.S. Code) protecting trademarks is also limited by a judicial doctrine of fair use of trademarks. Determining whether or not a particular use constitutes fair use typically involves a multi-factor analysis that is often highly complex and frustratingly indeterminate; however a use constituting parody can be a somewhat simpler analysis, even where such parody involves a fairly extensive use of the original work.

We do not believe that reasonable people would argue as to whether the website located at http://www.getafirstlife.com/ constitutes parody – it clearly is. Linden Lab is well known among its customers and in the general business community as a company with enlightened and well-informed views regarding intellectual property rights, including the fair use doctrine, open source licensing, and other principles that support creativity and self-expression. We know parody when we see it.

Moreover, Linden Lab objects to any implication that it would employ lawyers incapable of distinguishing such obvious parody. Indeed, any competent attorney is well aware that the outcome of sending a cease-and-desist letter regarding a parody is only to draw more attention to such parody, and to invite public scorn and ridicule of the humor-impaired legal counsel. Linden Lab is well-known for having strict hiring standards, including a requirement for having a sense of humor, from which our lawyers receive no exception.

In conclusion, your invitation to submit a cease-and-desist letter is hereby rejected.

Notwithstanding the foregoing, it is possible that your use of the modified eye-in-hand logo for Second Life, even as parody, requires license from Linden Lab, especially with respect to your sale of goods with the parody mark at http://www.cafepress.com/getafirstlife/. Linden Lab hereby grants you a nonexclusive, nontransferable, nonsublicenseable, revocable, limited license to use the modified eye-in-hand logo (as displayed on http://www.getafirstlife.com/ as of January 21, 2007) to identify only your goods and/or services that are sold at http://www.cafepress.com/getafirstlife/. This license may be modified, addended, or revoked at any time by Linden Lab in its sole discretion.

Best regards,

Linden Lab

There’s still hope for us after all. Whichever life we’re in. I find such things refreshing.

Go take a look at Dopplr. Stowe (who cut me in to the alpha trial) calls it a Ships-That-Pass-In-The-Night app, which describes it better than I can.

What does it do? It asks you where you intend to travel in the foreseeable future, letting you put in the dates and times and associated notes. It asks you to identify “fellow travellers” with whom you’re prepared to share your travel information. They too complete travel schedules similar to the ones you did. And then it puts it all together and feeds it back to you and your fellow travellers.

In a way you can think of it as a “buddy” system with two differences:

it’s in the future
it signals physical presence

I love it. And I think there’s a lot to learn from apps like Dopplr. For one thing, it’s a classic “exchange” application, the value is in the market liquidity and transparency. For a second, it could have been done before: travel agencies could have tried it, scheduling software companies could have tried it, airlines could have tried it. But for some reason they didn’t.

Many of us have been looking for something like Dopplr for a while, and it’s too early to tell whether it will become the category leader. What we can tell is that incumbents failed to take the opportunity….. it would have been simple for an airline’s frequent flier program to provide a dopplr-like service. But they didn’t. Why? Because airlines were unwilling to share the information. Information which we, the travellers, are prepared to share….our information. Not the airline’s information.

Segue to Doc and VRM. Or Sean and any type of exchange application.

I think it was sometime in 1983 when I first heard the term Quality First in a software context. Callow youth that I was then, I understood it and absorbed it in that narrow context; my view then could have been summarised as “An inspection culture encourages people to be slipshod, because they know someone else is there to trap the faults”.

Some years later, in 1988, I heard someone speak on the same subject, but from quite a different perspective. He ran the Fleet Air Arm‘s medal-winning team for the Field Gun Exercise at Earl’s Court. And what he said was interesting. The way he described quality first made it something holistic, comprehensive, 100%, built around teamwork and trust. When you’re moving a few tons of steel across a large field at high speed, you don’t have time to look around to see what someone else is doing. Not unless you want to be hit in the face by said tons of steel.

Ever since I heard that talk, I’ve had a different view about quality first. A view that goes beyond the arguments about the pros and cons of inspection cultures. What intrigued me about the whole thing was the speed element. First and foremost, the Field Gun Exercise is about speed, about getting a faster timing than other teams. And what this guy was saying (at least to me) was simple:

When your life depends on speed, you don’t waste time checking. You train to build the trust and fitness and strength and holistic view. You train and train and train. In order to avoid having to check. Because checking may mean death.

This concept has stayed with me during all my musings around Agile and around the Customer Experience. The Field Gun Exercise seemed particularly apt when I considered the reduction of Cycle Time or the improvement in Right First Time measures. Now these are things that we really concentrate on where I work, things that we know we have to improve, and improve dramatically.

So here’s where I think we are:

1. You go “live” when you pass all the test cases

A waterfall-model UAT wastes precious cycle time. The only reason we use waterfall tests is because we don’t trust the user stories, we don’t believe that they are comprehensive enough. We must concentrate on getting the user stories and test cases better, rather than fall back on waterfall processes.

We have to regard user stories as a means of reducing programme risk; as the quality of user stories goes up, the risk of delivery failure goes down. David Anderson, in Agile Management for Software Engineering, recommends the use of a 3×3 matrix for classifying stories. Risk is measured as Low, Medium or High, while Complexity is measured on a scale of 1-3. The nine possible combinations help us understand more about the nature and quality of the user stories upon which the test cases rest. David also believes that level-of-effort estimates will converge over time, for a given risk-complexity level in a given organisation. So estimation should also improve. The risk-complexity matrices also help in scheduling development of the stories, allowing the use of simple options theory in that process. More on this later.

2. You need increased user involvement in order to improve the test cases and user stories

Agile end-to-end testing in the context of improving the customer experience requires us to think differently, requires us to ask different questions of the customer, requires a different level of participation by the customer. We have to keep asking “tell us all the things you need in order to use this” ….. physical things, what needs to be acquired or moved and to where; skill-related things, what training and education and knowledge transfer needs to take place; emotional things, what will make the customer feel comfortable with the changes, with the new functionality, with the new way of doing things, what support will be required, how much of that support is face to face. And systems things, both “functional” as well as “non-functional”.

It is easy to say this, doing this is much harder. There is often an organisational inertia to change, particularly when that change encompasses processes and systems. So getting internal users committed to participating in that change is often like pulling teeth while walking blindfolded through a bed of treacle. When it comes to “external” users, the problem is somewhat larger.

So what’s the answer? In my opinion, it’s all about incentive alignment. If someone feels that they will be able to do their job quicker, better and more easily as a result of their participation, then they will participate. This is true for internal as well as external customers. We need to get better at telling people why. Why the effort is worthwhile, why the change is worthwhile. And guess what? Most people are actually interested in seeing cycle time reduced, in seeing right-first-time improved. What we have to do is make the payoffs really clear, then people will commit. The User Stories will get better, the Test Cases will get more comprehensive, standard deviation in the quality and size of user stories will reduce, estimation processes will get more accurate. Everyone wins.

3. You need to iterate, iterate, iterate.

Somewhere down the line, all this comes back to the Field Gun Exercise. We need to practise. Keep practising so that we’re fitter at what we do. Keep ironing out process weaknesses. Keep building trust, improving teamwork, raising customer satisfaction.

That’s why we need permanent places to meet, to train, to iterate, to build and to deploy. Where I work, we call them hothouses, but the terminology is less important than the principle.

You know what? When you look at the teams taking part in the Field Gun Exercise, one thing stands out. They make it clear that they really enjoy what they do. Let’s not forget that.

Everyone seems happy with the proposition that fixed costs should be kept as low as possible in a volatile business environment. That way, you can respond quickly if and when the market moves in an unexpected direction. Everyone also seems happy with the proposition that in the services sector, compensation for human endeavour overshadows any other type of cost. Services are fundamentally people businesses. Many of the arguments that support outsourcing and/or offshoring rely on some of these propositions, at least in part. It is normal to augment the propositions with other arguments, usually to do with comparative advantage, with core competences, with a need for focus, with location, skill and wage arbitrage, and so on.

This post is not about any of those arguments, or about offshoring or outsourcing. You have many places you can go to for those arguments. What this post is about is the little bit that stays behind. The people and processes and skills that are not outsourced or offshored or anything like that.

What intrigues me is how we manage this little bit. This little bit that’s made up of people spending time alone and together.

How does these people interact? Via something called diaries and schedules and organisers and what-have-you. What tends to happen? We have some strange form of negotiation that takes place between all these diaries in order to bring people together. As a result of many such negotiations, the diaries and schedules get filled up, and people then go about their Assembly Line lives. Move from meeting to meeting shuffling bits of stuff every now and then. Attending conference calls that could be audio or video or physical or some mix of the three.

Park that thought for a minute.

Now take a look at time. How long it takes for things to be done. Quite often, the biggest single delay in a process is the time required for getting the “right” people together. How do these people get together? Via the strange negotiation process I referred to earlier. As a result, the time taken to do something is often heavily influenced, if not altogether dictated, by the interactions between the diaries of groups of people.

In principle things like prioritisation and importance fall by the wayside, although organisational structures and status and hard-working PAs can do something to raise priority. Most of the time, it is the scheduling process that sets the priority. Which is strange in itself.

To make matters worse, particularly in large firms, there is some implied code whereby someone who wasn’t at a meeting is able to reopen debates about decisions taken in his absence. Now, since there’s always someone absent at every meeting, what it means in practice is that decision loops become infinite. And nothing gets done.

I have always tried to counter this tyranny of meetings and schedules by having a concept of fixed time versus variable time. I limit the number of meetings that I commit to more than 48 hours in advance. This way, there is a balance between things I commit to well in advance and things I commit to in the short term. I have this sense that what I do makes sense (otherwise I wouldn’t do it….), but I wondered how other people viewed this. I try and describe this attitude as “fixed time versus variable time”; fixed time refers to the meetings you fix more than 48 hours ahead, and variable time refers to the shorter term; call it what you like, I don’t care, as long as we speak about the same thing.

I was in Brussels recently, attending an Identity Open Space organised by The Liberty Alliance and Kaliya Hamlin et al… thanks to all who made the event happen. It was a good session, one where I met old and new friends: Doc, Adriana, Steve, Ben and Kaliya, amongst others. More later on thi.

Kaliya kicked off the second day by reminding everyone about the Principles of Open Space, shown below:

What intrigues me about all this is the following:

Owner-managed companies have no problem with schedule and meeting conflict, or about reopening decisions after they were taken. Why? Because what the boss says, happens.

Self-organising events also have no problem with all this, as the Open Spaces principles suggest. Open Spaces have been around for a long time…. Johnnie Moore, who introduced me to them, suggests that the concept was formed sometime in the 1980s by Harrison Owen, and has continued to evolve ever since. For those who are interested, here’s Johnnie on the subject: link.

At the two extremes, owner-managed and volunteer-self-organising, there is no problem. The problem is in that great space in between, particularly in large firms and public sector companies and governments. All bureaucracies.

Which makes me think. If you want to kill a bureaucracy you must kill the diary and schedule first. Views and comments welcome.