Following a recent post I’d written on Agile, David Tebbutt (who’s on my blogroll and an occasional commenter) raised the following point:

One thing bothers me and that is that huge numbers of people, evangelists if you like, have enthusiasms for things like ’social computing.’ Their enthusiasm isn’t for particular products, more for improving the communication experience, but they have no clear destination in mind. Not one that makes any sense to the sponsors they’re seeking anyway (e.g. the board).

Around the same time, Dennis Howlett (like David, on my blogroll and an occasional commenter) had these things to say as a comment on Charlene Li’s blog:

You can’t realistically apply accounting type measures to blogs because they don’t fit. Instead you need a blend of measures that reflect the blog’s purpose so in other words you need to seek measures that cross departmental boundaries.

….

Early attempts at this are not going to be easy. How for instance do you define a measure for ‘idea generation?’ What are the value measures needed? Do we have the historical data that allows us to develop assumptions about value created from great ideas and even if we do, how well might that relate to today’s situation?

….

I absolutely don’t accept it’s not do-able. The problem as I see it is we have no historical framework of the kind we’d usually apply and HCM metrics are a relatively new and as yet not fully baked science. Which means we’re inevitably faced with a loss of precision. We can overcome that by applying degrees of confidence variables so we can say there is a range of possible ROIs.

Charlene’s written an interesting post on Calculating The ROI of Blogging, worth a read, and, if you can, do look at the comments as well.

I think the nature of the debate is indicative of the challenges we face when we seek to implement social software in enterprises. I have carefully kept away from the specific subject of the ROI of social software for some time now, choosing to concentrate instead on the organisation’s immune system responses. Now, with the happenstance of the comments and posts above, I feel it’s time to break my silence.

So here goes.

Nearly ten years ago, in an article headlined Strategy Under Uncertainty in Harvard Business Review, November/December 1997, the authors said a few things that greatly influenced how I think about ROI. Here’s the summary from archives.gov (my apologies, that’s the best I could find on the web, and my hardcopy is now packed away in storage):

It is important not to underestimate uncertainty when shaping strategy, according to the authors, who present a framework for determining the level of uncertainty surrounding strategic decisions and for tailoring strategy to that level of uncertainty. In practice, they have found that the uncertainty facing most strategic-decision makers falls into four broad levels: a clear-enough future, alternate futures, a range of futures, and true ambiguity wherein it is virtually impossible to predict. The authors introduce a basic vocabulary for talking about strategies: three strategic postures including shaping, adapting, or reserving the right to play; and three types of actions to implement strategy: big bets, options, and no-regrets moves. The choice of a strategic posture and accompanying actions can be highly dependent on the level of uncertainty facing the organization. This article offers scenarios illustrating the range of strategic challenges.

That’s the background. So here’s what I think:

1. ROI is not the only game in town, you have portfolio analysis and option pricing models as well

If we restrict ourselves to measuring investments by ROI alone, we run the risk of weakening our capacity to survive, much less thrive, in an age of strategic uncertainty. Big Bets are like early stage investments, you have to work out what percentage of your investment portfolio you want to expose to those risks and returns; that percentage could be zero, but you then give away the right to receive hockey-stick returns. Big Bets are measured like early-stage VC portfolios. Options are just options, the price you pay for a place at the table, and you decide which tables you need to sit at. Options need option pricing and suffer time decay. No-Regrets Moves, in contrast, are all about ROI. You have to do something, now all you’re working out is the best something. Build Or Buy. Which Build. Or Which Buy. And there’s probably no better tool than ROI to work this out.

2. You have to be able to value human capital before you can value social software. Social is about human.

We talk a lot about valuing human capital. I’m not planning to venture into the esoteric and nascent science of measuring it right now, this is neither the time nor the place for it. But there are some leading indicators that suggest we don’t value human capital. We send people on training courses, apparently paying to add to their innate talent, acquired institutional domain knowledge and relationships, and nurtured abilities . But we never seek to measure that value added, or try to “land” that value on a balance sheet. So, no surprise, when the going gets tough, the training budget bids goodbye. We “plan for attrition”. Wow. We work out replacement costs for assets but never really for humans, our most precious assets. Read Peter Drucker at random if you want to find out more. He knew more about management and knowledge than anyone else I have had the pleasure of reading.

3. The plumbing for social software is not expensive, that’s just a lie.

Even if I’m completely wrong about the first two points, this one stops the show. Somehow we are allowing ourselves to fight the social software fight on infrastructure grounds. Unit costs for implementing social software are trivial, almost negligible. It’s just a classic immune system response. Moore and Metcalfe and Gilder have seen to it by now, the cost of tin and wire is not what it used to be. And you have every flavour you want: FLOSS software, commercial adaptations of opensource, fully featured COTS applications. You can start small and cheap, and segue into large and cheap. It’s not about the plumbing. No point figuring out the ROI of angels dancing on the heads of pins.

4. Current accounting processes are not precise either, but at least they don’t lie. They just reflect one of many possible conventional representations of truths.

I have seen far too many sausage machines in my time. Cost centres till the cows come home. Allocation cycles built in Byzantium. Allocation keys that could be used to run the National Lottery. Inconsistent application of conventions and philosophies. Arguments about what a person is, what a man-year is, what software is, what maintenance is, what anything is. Roundings and smoothings and straightenings and what-have-you. It’s not anyone’s fault; I think that traditional accounting theory, as implemented in software, did not allow for the pace of change inherent in organisational structures and strategies. And rather than accept that and change how we view things, we continue to work on past-predicts-the-future models and 15th century practices, somehow finding ways to shoehorn today’s realities into them. Different ways. Different even within a single enterprise.

5. We will be able to place value on social software, but we’re not there yet. The destination is clear, though.

I have a passion for social software. [You’ve noticed? Great :-) ]. And while trying to do something about it, I’ve been accused of many things. Being a VC darling. A wannabe A-lister. An A-list groupie. A time-waster. A moron. A rootless academic. Many things.

So why do I do it? Because I believe we have a real problem to solve. A War for Talent. Because I believe we have a real solution to that problem. One that provides transparent communication and thereby creates trust. One that leverages the wisdom of crowds and thereby reduces process cycle time and improves customer satisfaction. One that embeds strategy in process and helps us understand our value drivers and levers and how to use them. One that reduces attrition and increases stickiness, be it staff or customer or partner. One that simplifies workflow. One that minimises rework by reducing the opportunity for misinterpretation or mishearing. One that enfranchises everyone. One that reduces the time to train. One that simplifies the process of education. One that helps people learn how to do their jobs, and get better at doing their jobs.
But all that is hot air, when I can’t prove it on a balance sheet. Because the tools to prove it aren’t here yet. In the meantime, we need to keep looking at proxies. Proxies such as customer satisfaction metrics. Retention rates. Process cycle time reductions. Time to market improvements. Error reduction and consequent rework minimisation. Avoidance of duplication and its related wastage. Consistency in global processes. The list is long.

The trouble is, these things are hard to measure as well. Every investment made in an organisation has sponsors seeking to attach credit to their decision, and I have seen too many “value turf wars”. Unseemly attempts to hoover up any improvement in anything.

Until I find a static organisation with a stable structure and zero money for investments, I probably won’t have a decent test case. If there was such an organisation, then we could have the Petri dish for social software, and watch all the proxies move in the right direction as if by magic. And nothing to point to as the reason. Except social software.

So I have to live in hope. Continue with my passion. Because I believe.

I think it was Howard Schneiderman at Monsanto who said, many years ago, something along these lines:

When you turn down a request for funding an R&D project, you are right 90% of the time. That’s a far higher rate of decision accuracy than you get anywhere else, so you do it.

And that’s fine. Except for the 10% of the time you’re wrong. When you’re wrong, you lose the company. 

My apologies if I haven’t paraphrased him with precision, but the tone and essence is for sure what he said. Call it an acceptable conventional representation of the truth, if you will.

There is a destination. One that values human capital and relationships and institutional knowledge. And we will get there. So I will continue to track the conversations on the blogosphere looking for signposts that will make it easier to get to the destination.

[This is for David and Hugh]

I’ve just come back from an intriguing experiment, having watched an unfinished version of David Mackenzie’s Hallam Foe, in the company of a small and relatively random bunch of bloggers. Everybody knew someone else there, and we all knew Hugh, who, in all probability, pretty much constructed the experiment and convinced David to do it. If you’re interested, you can find out more at the Hallam Foe Blog.
Before I describe the experiment and share my thoughts on it, I think I should provide some context. So here goes.

In that still-only-partially-discovered space where the blogosphere meets “marketing”, the jury is still out. There are many people who believe that the web must remain pure and unsullied by anything as unseemly as “marketing”, who therefore object to anyone and anything that seeks to bring the two together. Successes like Sandi Thom and Arctic Monkeys and Diane Setterfield draw groans from many, claiming that the system is being gamed. Events like Lonelygirl15 only served to fan their flames. On the flipside, phenomena like Snakes On a Plane and The Sony Bravia Ad help douse some of those flames, even if Jose Gonzalez probably built a career via the bouncing balls. [An aside. Unless I went to Wikipedia I’d never have guessed that Jose Gonzalez was Swedish, just goes to show…]

If markets are conversations between people in a trust relationship, then, as has been debated for a while, “marketing” in a web world is now all about recommendations. Preferably unsolicited, independent, no-axe-to-grind, “trusted” recommendations.

And it is in this context that I believe that the web can’t be gamed. You can game your Google PageRank, you can game your Technorati ranking, but that is all you’re gaming. The ranking. Not the market. Not the audience. Gaming the ranking is a bit like cheating at Solitaire….you’re only kidding yourself.

Now to the experiment.

So it was with all this in mind that I went to the raw screening of Hallam Foe.  A belief that there is a space for recommendation-based marketing on the web, and a willingness to be open about any experiments in that context.

There was something very blog-like about the experience. David and Hugh were in their own way pretty nervous; they had (and probably still have) no real idea how the 30 of us present would react. When you hand a brand over to the Man On The Clapham Omnibus you make yourself vulnerable. When you share something provisional and unfinished and creative in such a way, you make yourself very vulnerable.

This air of provisionality and vulnerability was tangible as we began to watch. Soon I felt at ease, transported to the stark yet haunting ambiance of Edinburgh, one of my favourite cities. Tortured youth, conflicted adolescence, a coming of age and a riveting close. And closure. Any more and I might as well tell you The Butler Did It, so I won’t. See it for yourself.

Jamie Bell put in a startling performance. Ciaran Hinds and Claire Forlani were rock-solid as well, and Sophia Myles entranced.

It’s a tough film with raw and punchy dialogue set in stark surroundings, dealing with uncomfortable subjects taken to extremes. Over dinner, James Governor said something which probably summed the film up for me, describing it as a series of unexpected punches to the thin membrane between “private” and “public”.

So there it is. A raw film, vulnerably exposed in a provisional state to untutored bloggers, part of an experiment in where-blogs-meet-marketing-through-recommendation. A film that dances between public and private in stark and unexpected ways. A film with some very strong performances, some brilliant performances, and a thoroughly satisfying ending.

David, Hugh, it was a brave thing to do. Sharing something creative in an incomplete state is not easy. But I don’t think you need to be nervous. I know nothing about being a film critic, wouldn’t even know where to begin.

But I know what I like. And I liked it. Thank you.

Malcolm and I were having a chat over coffee recently, and, spurred by his recent posts and those of Tom and Tim, we meandered into discussing Agile. We didn’t discuss methodologies or tools or techniques or processes (OK, OK, I heard the catcalls and sighs of relief), what we focused on was Agile as a mindset.

And thinking about what we’d discussed and what he’d said, I began to realise that much of what is written about Agile is “preaching to the converted” material, with its usual share of fans and flamers. So I thought I’d take a different tack and see what happens, see whether it helps the unconverted.
When you don’t know where you are, a map’s no use at all.

When you don’t know where you’re going, any road will do.

Agile is first and foremost a way of thinking, a mindset. It is more about destinations and journeys than about routes. Of course routes are important, but the destination is what’s really important.

Imagine you want to go somewhere. You have an idea of where you want to go, and you have a number of options as to how you can get there.

One way is by rail. You get on a train and it takes you from where you are to where you’ve decided you want to go. This is fine. You already have all the information you needed about your destination, you have a time and a price, with a little bit of luck and a following wind you even have a seat on the train. And for the sake of argument let us accept that the train’s not cancelled or delayed. You get to where you want to get to.

That’s fine. There was no need to adjust your route, so it didn’t matter that you couldn’t. There were no back-street doubles to take, no roadworks to manoeuvre around, no cyclists or little children to look out for. So you could afford to have a low-manoeuvrability vehicle and travel on fixed rails from point to point.

You didn’t need Agile. And so it is with software development, there are times when you don’t need Agile. Where the start and the destination are clearly known, where you have no need to discover information about route options or journey conditions, where you are consuming a commodity service on a standardised basis.

Now imagine you’re taking a car from the City of London to Heathrow Airport. You know where you want to get to, but you have a number of different ways of getting there. You’re comfortable with the route you plan to take, but you know that you may have to adjust your route as you discover and acquire more information about traffic and weather conditions. But you’re in the driving seat, you have the dashboard in front of you, and all is well.

This is also fine. You are Agile. You know precisely where you’re going, you’re in control of the vehicle, and you have the limited flexibility you need to deal with traffic conditions and other road users and the weather.
Take the metaphor a little further. You’re in a licensed London taxicab, you know roughly where you want to go, but you can’t be sure until you get close. The driver has done the Knowledge. He represents a brand, a set of values, some certified skills. You have a trust relationship with the driver. So what do you do? You tell him where you want to go, as accurately as you can, and let him know that you will only be able to improve on that when you get closer. You leave him to work out how to get to that point. And he does. Now it’s his problem to check on traffic and road and weather conditions.

The most important thing to bear in mind from this part of the example is that you’re on the journey together. With a destination in mind, a destination you will be able to describe more accurately only when you get near it. And, because you trust him, you leave him to work out the route. And adjust that route in response to what he discovers.

Most probably he’s given you an indicative time and price for the journey. You may even have placed conditions or constraints on those aspects. Which means that, as and when he hits a problem, he consults with you. We can go this way, it’s more expensive but you will be on time. Or we can go this way, it’s the same price, but you could be late. And you make the call. Together.

In this example you have a rough idea of the destination and time and cost, but you iterate through options as you get better information, optimising as you go along.

Now you are Agile. It’s a bit difficult to do this with a train.

Let’s take the example one step further. You’re on a desert safari, a race, you and your co-driver. You’re all mapped up. You know where you want to get to, but all you can see is sand. Dunes and dunes and dunes. You have some idea of the direction you want to go in, you have some idea of how you will recognise it when you get to where you want to be, but the options you have are far more extensive. So you select a route, and keep adjusting it as you go along. Sometimes you track back to a specific landmark and carry on from there. You keep adjusting the route using your compass and your map and whatever landmarks you can find. You’re a little loose on the cost and time implications, but you know the basics within a reasonable level of tolerance. And you get there. And yes, maybe you got a little lost on the way, but you worked that out, retraced your steps and got there.
Now you’re really Agile. No trains, no lines, no roads, no traffic lights, no traffic. Just sand. Undulating as only sand can.
Jim Highsmith, one of the doyens of Agile, would refer to the declaration of destination as Envisioning; the selection of initial route as Speculation; the adjustments to the route in response to external stimuli and better information as Exploration, the finalisation of the route as Adaptation and reaching your destination as Closing.

[Incidentally, if you’re not one of the converted, but you’d like to know more, it’s worth reading the Agile Software Development Series edited by Alistair Cockburn and Jim Highsmith. Their web sites also give you some good pointers and information about other places to go to, other things to read.]

The journey and destination metaphor used above can be extended as needed. The type of car used, related to the terrain you will drive over, may represent facets of the team. The capacity of the car and its range has meaning as well, as also its manoeuvrability and size. The nature of the instrumentation required is also something to consider.

I shall spare you any further stretches of metaphor. What matters is this:

• Agile is about a journey and a destination
• It is meaningful when you have incomplete or inadequate information
• You’re together with someone else for the journey, in a trusted relationship
• You need the right instruments to capture the information as it is discovered or as it changes
• You work your way through options, altering route as you learn more and as you need to
• You have the flexibility and the manoeuvrability to optimise on time, distance and cost as you go along, within a previously accepted envelope
• You get to the destination more reliably as a result, in comparison with less flexible and optionless routes.

Agile is about a mindset; it works best when you have a broad idea of where you want to go, where you need a process that collects and improves your information base, and where you need the freedom and optionality to respond to changes in that information base.

The methodology and tools and techniques and processes are secondary. It’s all in the mind.

This post was sparked by something I read in Larry Lessig’s blog a week or so ago, on the economies of culture. In it, Larry discusses the challenges and issues involved in linking the “commercial” economy with the “sharing” economy, or what he terms the “second” economy. It’s worth a read; if you get the time, take a look at the comment stream as well.

Enterprise IT departments face this challenge of connecting two polarised extremes on a regular basis, whatever the terms du jour; be it open versus closed, proprietary versus opensource, hierarchical versus networked or even waterfall versus agile. Some months ago, Kathy Sierra had a great post on the difference between start-up and corporate mindsets, covering much the same thing, but from a different perspective.
When you speak to the extremists, the standard response is You Are Wrong I am Right, which gets us precisely nowhere. Which is why people resonated with what Tara had to say in Missing The Point a few months ago, where she spoke of the need to get the pendulum swinging right.

Debate can be polarised, but reality sticks firmly in the middle. And we need to learn how to live with that reality and create value from it.

I still think that it will all boil down to the Because Effect. Commercial economies are all about making money With. Gift or shared economies are all about making money Because Of. And the philosophical differences between the two will probably not converge. They are two different states in time. Enterprises will often have bits in both states. FLOSS is primarily about infrastructure, even if what we call infrastructure is crawling up the stack. FLOSS infrastructures will continue to live with proprietary applications further up the stack.
As exemplified in the Because Effect and Stewart Brand’s earlier writing, the real polarisation seems to be about something else. Scarcity versus abundance. People know how to make money out of scarcity, but are less comfortable with doing so with abundance. The problems we face with bad IPR and bad DRM and “unfair” vendor behaviours all seem to be connected with creating scarcity out of abundance.