I consult, write, and speak on running better technology businesses (tech firms and IT captives) and the things that make it possible: good governance behaviors (activist investing in IT), what matters most (results, not effort), how we organize (restructure from the technologically abstract to the business concrete), how we execute and manage (replacing industrial with professional), how we plan (debunking the myth of control), and how we pay the bills (capital-intensive financing and budgeting in an agile world). I am increasingly interested in robustness over optimization.

I work for ThoughtWorks, the global leader in software delivery and consulting.

Friday, July 31, 2015

Capital Structures and Organizational Pathologies: Tech Investments in Debt-Fuelled Capital Intensive Companies

Portrait of a growing company: a corporate parent with two-thirds of its enterprise value in debt, running two separate but interdependent divisions: a capital intensive asset heavy business, and a cash generative consumer-focused operating firm.

If you're the CFO, your primary concern is the debt capital that's financing your growth. You want to keep your credit rating strong to minimize the cost of rolling over debt (to finance existing assets) and the cost of raising new debt (to fund expansion). Every extra dollar paid to service the debt is a dollar less yield the business generates for its own use.

The CFO keeps the credit rating strong by having consistently strong cash flow from operations.  Even if it doesn't generate enough cash flow to cover investing activities, strong and consistent cash flows show financial discipline in running the business, and potential for financial reward at greater scale; this encourages more investment and suggests only modest risk.

The two divisions have decidedly different cash needs.  The asset-heavy business consumes capital, while the asset-light operating company generates it.  There isn't much you can do to squeeze operating cash flow efficiency from the asset-heavy business, aside from minimizing overhead costs associated with investing activity.  But you can squeeze the operating company for efficiencies, reducing total labor costs with things such as customer self-service.  The more cash hungry the asset-heavy business is for investment, the more ruthless the operating business will be squeezed for efficiencies.

The P&L is also a source of trouble for the CFO. The expanding asset-heavy division will have more expenses than income.  It isn't a problem for a growing business to post losses, but the volatility of investing activity in the asset-heavy side of the business will put downward pressure on the credit rating.  That will lead the CFO to be creative with the income statement, through things like capitalization.

What does all of this have to do with software?  The asset-heavy division isn't going to be very software intensive.  The operating company is, though.  Suppose that the operating company is in a firefight for market share, where the primary weapons are customer-facing technology (as is happening in retail, entertainment, and, to a lesser extent, airlines - all of which have capital intensive asset-cos side-by-side with cash generative op-cos.).  With labor demand outpacing supply in tech, engineers and designers are expensive. They have to be compensated in cash, since the capital structure makes it difficult to compensate them in equity.  Plus, not being an engineering firm, the company will be slugging it out to find and retain qualified engineers.  From the CFO's point of view, software development - just some part of the operating company - has a spiraling cost of labor, and it's high-maintenance (e.g., requires a lot of care and attention to get and keep people) to boot.

This is where the "we have a software company within" myth starts to fall apart.

The economics of running a competive software business don't matter a damn to a CFO who is trying to sweat every penny out of an operating company.  True, having the patina of a tech business could juice the valuation, but only in terms of the equity, not the debt - primarily because tech firms just aren't financed with debt.  If you're going to debt markets, you need financial operating cred more than you need to show tech characteristics.  Plus, the growth that mollifies the credit raters enough to turn a blind eye to the saggy P&L will have been priced into the equity; in an asset-heavy business, tech will be priced in as a necessary cost of the operating company, not as an option call on the potential for explosive growth.

Another way to look at it is, any increase in the equity value that results from the appearance of being a budding tech business is a nice-to-have for management (who have equity & options). Otherwise, with such a large debt overhang, any tech patina isn't likely to have any real economic value, e.g., the creation of an inflated currency (the company's own stock) with which it can favorably engage as an acquirer of other companies.

The opco may need tech to be competitive, but that won't be the first priority.  No matter how important tech may be, financing the debt will always trump it.  For the CFO, the priority is cost discipline.  In execution, the CFO will keep tech leadership on a short budgetary leash, forcing it to choose between hiring a lot of people but not paying competitive wages / contractor costs (and, on average, have a lower skilled engineering staff), or hiring / contracting at market rates but not being able to hire nearly the number of engineers it needs.  Either way, software development is starved for investment, crowded out by the demands of debt finance.

Accounting treatment of the software will also have its effect.  Its penchant for large capital investments on the asset-heavy side of the house will lead the company to make large capital investments in software.  Because the CFO capitalizes software development costs, the company can't afford for those investments to fail, because a failure requires the entire cost to be written off in the current accounting period, which puts a dent in the P&L.  This means that the company isn't predisposed to R&D through software (making a lot of little, experimental investments); it's predisposed to making large, debt-fueled asset acquisitions and making good on the convenants that go along with them.  In practice, the company will inject more capital into distressed software projects rather than let them fail.

The portrait of a growing, debt-fueled, capital intensive business is the antithesis of a modern software company.  Software companies are high-risk businesses: investors wager that the people in the firm can not only create interesting technologies, but can find users for them, and ways to monetize them.  The predictability and stability demanded by debt service obligations don't give rise to innovation and disruption; they create stagnation and sclerosis.  That puts paid to any suggestion that a debt-fueled, capital intensive business is really a software company in disguise.

Next month, we'll look at other operating pathologies driven by the capital structure.

Tuesday, June 30, 2015

Without the Right Capital Structure, There is no Software Company Within

Is every company destined to be a software company? From a production perspective, there's reason to believe so: relatively minor things that were once the domain of hardware (configuration set by switches on a circuit board), operations (merchandise re-ordering based on sales and quantities) or subscription (license fees paid for usage) have become things that are now the domain of software (configuration is set through a browser interacting with Java code running in a Linux variant deployed on a hardware device; algorithms that automatically re-order merchandise based on seasonal, demand & promotional variables; advertising-sponsored or use-metered interaction). Virtual data centers, real-time algorithmic pricing, and new media are simply larger versions of that same phenomenon.

Production isn't what it used to be. A century ago, production was king: demand outstripped supply in economies with emerging consumer classes, which gave power to producers. That has long since changed. Today, production has few sustainable advantages: it is over-built (e.g., automakers have far more capacity than demand), highly flexible (lower labor intensity and cheap capital means production can shift quickly in response to economic or political demands, but by extension means there is no intrinsic strength derived from a "highly skilled labor force"), and subject to constant innovation in inputs (look at the progress in materials science in the last two decades). Producers can only counteract deflationary forces at their core with ruthless cost control and brand allure. A producer does this with a combination of efficiency (squeeze every penny from raw materials sourcing to distribution) and by appealing to or outright fueling user vanity (engender customer identity in every facet of its business).

Software is the means through which both of these things are done: we can use software to gather data, analyze performance and adjust operations in near real-time; we can also use software to reinforce identity, influence attitudes and drive behavior of consumers. No software, no chance.

So producers have to become software companies. But what does that mean exactly?

To somebody running a business, it means realigning internal operations. We have to look at skills and capabilities: we're not going to be much of a software company if we don't employ any software engineers. There are process and cultural considerations, too: an "optimized" business might squeeze more performance out of operations through software, but is less likely to be capable of capitalizing on external data that allows it to "re-invent" its industry through software.

But skills, capabilities, processes and culture all wilt in the face of an overbearing capital structure. A company financed to produce long-term stable cash flows from operations isn't a company that is prepared to respond to threat of competitive innovation via software or anything else, let alone one that will be a source of competitive disruption. It might consume a lot of software. It might even create a lot of that software. But software intensity in what we do doesn't make us a software company, any differently than walking for miles every day makes us athletic. Operations and execution matter to the bottom line, but ultimately dance to the tune called by finance.

Next month, we'll look at the organizational pathologies created by different capital structures and how those make a firm that innovates and competes through software as opposed to a firm that ingests and consumes software.

Sunday, May 31, 2015

Would Uber be so intriguing if we thought of it as the next American Airlines?

Suppose for a minute that self-driving cars become commercially available. Obviously, a lot has to happen before we get to that point, but suppose that it does. What happens to the economics of ground transportation?

Today, cars are owned or leased by individuals (households) or fleet operators (delivery firms or rental car companies). Auto manufacturers sell to dealers, who sell to individuals and firms; finance companies from universal banks to specialist lenders finance the trade. The buyer trades cash for utility (you have the car that suits your lifestyle), convenience (you have the car that you want any time you want it), and vanity (your car is a projection of who you want people to think you are). The rise in popularity of leasing hasn't changed things all that much because lessees make payments in exchange for possession that guarantees the same utility, convenience and vanity enjoyed by an owner-operator. Because there are millions of owners (and lessees), ownership is fragmented. Fleet operators have some buying power, but large fleets don't represent a very big portion of the total auto market.

Cars are underutilized: the average car sits unused about 95% of the time. This creates an opportunity to squeeze more efficiency out of the fleet. Enter firms such as Uber and Lyft: an idle person can take their idle car and give someone a ride. Of course, it isn't the car that's being shared, it's the labor: an UberX customer rents the driver, not the car. Uber brings new sources of labor into the market for personal transportation (competing against car ownership, car rental, taxi, limo, etc.), makes it conveniently accessible to passengers, and algorithmically optimizes pricing (the financially lucrative if socially unpalatable "surge pricing"). In a labor-intensive market prone to chronic shortages at the point of consumption (there never is a taxi when you need one in Manhattan...), this gives Uber and Lyft a price advantage over incumbents and attractive growth potential.

Enter the self-driving car. Suppose that we get autonomous self-driving cars that don't require a human operator backup. A self-driving car could deliver itself to a consumer and return itself to a vehicle pool. A vehicle that arrives when it's needed, and disappears when it isn't, changes vehicle consumption into an on-demand, short duration rental transaction. Companies that operate fleets of cars will initially compete on algorithms that maximize fleet utilization, plus inventory management that optimizes the mix of vehicles available in specific geographies at specific times (fuel efficient sedans for trips from home to the airport on weekdays, and light trucks for weekend DIY projects). The more efficient the dispatch and the more comprehensive the fleet, the easier it is for an on-demand service to satisfy an individual's need for utility, convenience and vanity in their choice of transportation.

In a world of self-driving cars, however, the service operator isn't optimizing labor, it's optimizing asset utilization. The economics of ground transportation will change to reflect this. A self driving car changes the current owner-operator (that is, the individual driver) into an on-demand renter-passenger. Rental transactions become simple debit or credit transactions between an individual and a fleet operator.

In this world, the users aren't the owners, but neither are the operators. Auto transportation will come to resemble the air travel business, where there are companies that own fleets of airplanes and rent them to companies that operate them to deliver passengers and packages. The fleet owners - firms like International Lease Finance - are asset-heavy companies that buy and insure aircraft from manufacturers (Boeing, Bombardier, Airbus) and lease them to airlines who operate them to deliver people and parcels. Being large buyers and large suppliers, the lessors concentrate ownership of the assets, which gives them negotiating power with both manufacturers and lessees. They are finance firms that throw off fixed-income-like returns to their investors.

The fleet operators are asset-light, leasing the aircraft (an operating expense) and slugging it out with one another for consumer market share. They throw off equity-like returns because they follow the ups and downs of the consumer economic cycle, facing the simple economic threats of substitution (videoconferencing has culled some demand for in-person meetings) and competition from start-ups siphoning off revenue of the most profitable routes (it isn't hard to start an airline, but it is hard to make money at it for any sustainable period of time, as the list of defunct carriers attests. It will be no less difficult to start an auto operating business).

The auto fleet operator - now an "asset sharing" company of assets it doesn't own, but rents - cannot compete for long solely on efficient dispatching and high asset utilization. Being operating companies of utility services, they compete on price, so they need to be merciless about increasing operating revenues and decreasing operating costs. They will develop complex pricing structures, just as airlines have done to charge premiums for better seats and extra bags. They will segment their market into a small premium segment that rents luxury vehicles and a mass segment that rents more humble rides. They will develop loyalty programs that rewards individuals for transaction volume and revenue contribution. And although it's tempting to think about fuel consumption as an individual responsibility as it is in the owner-operator model, the fleet operator will quickly realize that energy is a major cost component, and will hedge fuel costs as a way to lower their operating cost - or be able to offer lower operating prices vis-a-vis competitors.

We have cars that can drive themselves today. But a lot has to change before a significant number of the cars on the road drive themselves - and not just because of the equipment, infrastructure and policy needed to make it happen. Cars are vanity purchases. Suburban transportation and lifestyles are bound to automobiles. The convenience factor, particularly in periods of high demand, will compel many to continue to own or lease. The individual ownership or lessee model won't change any time soon, so this future is still a long way out.

Still, it suggests that the future of the dial-a-car business will be an exciting one, but for a different set of reasons than anybody is projecting today: intense competition, race-to-the-bottom pricing, volatile earnings, and the occasional trip through bankruptcy. Not exactly the kind of future that captures the imagination.

Thursday, April 30, 2015

Matrix IT Organizations, Part II: The Inmates Are Running the Asylum

A few months ago, we took a look at the pathologies of matrixed organizations: no focus, amateur management, and people waging turf wars to secure power that they can exercise without consequence. The result is stationary organizational inertia, the portrait of a seized-up business.

When non-executives enjoy power without responsibility, the corollary is that executives suffer responsibility without power. The organisation cannot pursue a consistent or coherent strategy, and may find it difficult to take any decisions at all.
-- John Kay, How a proud corporate history can lead to poor governance

Matrices empower petty bosses but disenfranchise organizational leaders. The owner of a product P&L doesn't "own" the people who produce it: executors report to managers in other parts of the organization, are shared with other teams, and may be so over-subscribed they have little time to devote to any one of them. Non-technical product leaders will struggle to navigate business goals to completion through the sea of technical tasks their teams force them to sail in. Knowing their skills and institutional knowledge are in short supply, individual executors and their supervisors get to pick and choose what they work on. The product leader ends up negotiating in all directions - with the people nominally on their team, those people's managers, and their peers struggling with the same organizational dynamic - to secure the time, attention and cooperation of labor. This isn't leadership, this is perpetual pleading, often just to complete the most marginal of tasks.

The chaotic process is vigorously defended by claims of democratic legitimacy, and by reference to the traditions and distinctive values of the organisation. But the democracy is a sham, and the values and traditions [...] encourage a tendency to self-congratulation immune to deficiencies in current performance.
-- Ibid.

Although power rests with people in execution, few will derive any joy from the situation. Whether they have power or not, executors are constantly pulled in multiple directions at the same time. In an organization over-run with demands, people will resort to coping mechanisms. One is process: if they can't control demand they can control the means by which people making demands interact with them, giving them some semblance of "control" over their universe. Another is denial: as Dr. Kay points out, they've lost the ability to recognize that the business context itself is idiotic, yet will take triumph at how well they cope. To wit: revenue is declining, infrastructure is decrepit, quality is poor and we can't make even the most simple of decisions, but my goodness we are so much better at communication since we adopted Scrum. High five!

This is organizational madness, and the inmates are running the asylum.

Companies don't set out to be organized as matrices. They resort to it when revenues fail to keep pace with the costs of doing business. When they do, it suggests that the business is trying to do too many things at the same time. It also suggests that many of the things the business is trying to do don't generate much revenue. Put more simply, the business is distracted by a lot of bad ideas. This isn't a problem of organization or of operations leadership, it's an executive leadership problem twined with weak corporate governance that has failed to keep that executive on a short leash.

I once worked with a private equity-backed firm that had a portfolio of four very different digital media products in different stages of maturity, with limited cross-product synergies. Two were past their peak and in unarrestable decline, one was ex-growth, one was growing. The technology organization - including software development - was shared across all products, with tech costs subsidized by the entire business. The company was unprofitable, dependent on life support from private equity injections. To justify those, the corporate headline was growth, although they tried to make the case that there was a profitability story in some of the lines.

We calculated product-specific P&Ls. These revealed that no product was operationally profitable if it had to carry the burden of its actual tech costs. This was due to product customizations given away by sales as a way of luring in new clients to replace lost ones. The slipshod software that resulted from those freebie customizations came with high running costs; company and customer alike got what was paid for in that unfunded customization.

We also did a revenue analysis. It revealed significant client churn across the lines, and that pricing of the growth business was so anemic that it would never achieve sufficient organic growth to provide the revenue the firm expected. Worse still, this sole growing market was maturing rapidly, creating downward price pressures they could do nothing to combat.

Operations and technology were as described in this and the prior blog: unable to focus, fiefdoms without responsibility, and so forth. Being unable to put a floor under the declining businesses' revenues plus a permanent pricing impairment on the "growth" business meant operations and technology would always be starved for cash. There is no wizardry that would turn this around; it was simply a collection of bad businesses.

The sane alternative was to simplify and focus: dispose of the declining and ex-growth businesses or run them for cash; sell the growth business or acquire competitors to consolidate the industry to achieve scale; and invest in organic development of a new media property. Unfortunately, the CEO saw a portfolio of properties that had thousands of visitors and just enough revenue that he could convince the board to keep the funding taps open, because there had to be a pony in there somewhere.

The options aren't all that great in this situation, which is why professionals aren't attracted to them in the first place. If you're brought in as Chief Executive or part of an executive team with an explicit mandate from the board to make sweeping change, you have a chance. But if you have a weak board overseeing a delusional CEO and a sales force for whom every dollar of revenue is the same, all producing initiatives that require tech and operations to compromise to compensate for a lack of revenue, you're wasting your time: you're in the asylum, and there's no one to hear you scream.

Tuesday, March 31, 2015

Activist Investing in Strategic Software Chapter 1 Excerpt - Why Governance Matters

I've published drafts of the introduction and first 4 chapters of my book, Activist Investing in Strategic Software. I still have some citations to finalize, several visuals to integrate and a lot of editing to do. But the foundation is there. A sample of the book (currently, just the introduction) is available on from the site.

Here's an excerpt from Chapter 1, Why Governance Matters.

* * *

That there are abundant examples of bad governance but few examples of good ones comes as no surprise. What passes for "good" in governance is not all that remarkable. Boards, being the representatives of investors, are expected to be independent, diligent, and uncorruptable. Independent members of corporate boards are assumed to be people of capability and integrity. People in governance roles are expected to discharge their duties competently; meeting expectation is not exceptional. Hence we have few examples of good governance but many examples of bad.

This doesn't help us understand why governance is important.

Poor governance, such as in the cases of Olympus, Hollinger, Madoff, or the United Nation's Oil for Food program, can lead to devastating outcomes that are plain as day after the fact. Yet as we established in the prior section, there are objective characteristics of good governance: set expectations, invest authority, and validate results. And there is research to suggest that the presence of these have a significant impact on bottom-line results.

In a study of 1,500 companies by Harvard professor Paul Gompers, well governed organizations outperformed poorly governed ones by 8.5% annually. “Well governed companies face the same kind of market and competitor risks as everybody else, but the chance of an implosion … by ineffective management is way less.”
-- Gavin Anderson, Chairman, Governance Metrics International

Good governance reduces risk of bad things happening, and there is reason to believe it is a contributing factor to superior performance

Just as a corporation is an investment of capital, so, too, is strategic software. What is true for a company at a macro level should be true at a micro level. The characteristics of good corporate governance should be present in IT governance: an independent board that sets expectations, chooses and changes leadership as necessary, and validates results reported by that leadership.

Saturday, February 28, 2015

Activist Investing in Strategic Software

A few years ago, I felt I had enough experience - and had put enough thought into the subject - to write a book on governance in software development. I had observed that most tech firms and captive IT organizations are largely left to self-govern, and both are pretty light touch about it. I had also observed that governance is widely misunderstood and the term is used in technology in a lot of different ways, almost universally incorrectly. With more ambitious investments being made in software and the success rate of large projects not getting all that much better, the need for better governance was there. Plus, it seemed to me that if IT didn't get its act together soon enough, the CFOs of the world were going to get IT's act together for it, so it also made sense to write it from a bit more of a financial rather than an operations perspective.

The timing was good, too, because the prior decade had given us some very well documented examples of egregiously bad corporate governance, ranging from isolated cases of accounting fraud (Worldcom and Parmalat) to the near-collapse of the banking industry that resulted from so many firms taking too much risk onto their balance sheets, their boards having absolutely no idea they had done so. There was some nascent research suggesting that good governance has a measurably positive impact on business outcomes, and also that "activist investors" - people who force their way onto the board of a company to agitate for change - were by and large net positive to a business. All together, we had great examples of how not to govern as well as behaviors we could use as a standard to define what governance really means - practiced or otherwise - in software development.

Within a couple of years, I had written enough material to compose a draft. Then I took a hiatus from it.

In the years since I wrote the first draft, a tension has developed between advocates of "innovation" and champions of "scale" in software development. In one corner are the enterprise development people who say control over operations yields predictable results. In the other are the lean startup people who say that discipline in execution twined with feedback loops is control enough, so just let people go on voyages of discovery and you'll have far better business results. The control camp claims that innovation is possible in their way because it embraces Agile (evidently, all you need are "innovation sprints"). The lean camp claims they can scale to the size of a large business (which may be true, but they're light on practical details). Both say they can revolutionize business itself.

But both camps take an execution (that is, operations) perspective. Execution is important, but if we're going to make organizational impact, we have to do it from a financial, not an operational, perspective. Operations are cost. Investments are value. To change the business of software, we have to speak the language and act the part of the latter. It doesn't matter how revolutionary or how beneficial a different way of delivering software can be to a company: nothing that comes out of either camp is going to cause the authors of Fundamental Accounting Principles to overhaul their text.

I am once again writing the book. I will publish it iteratively. It is still early days - no cover art, not much of a landing page.

But today, the first draft of the first chapters of my book, Activist Investing in Strategic Software, is available on Leanpub.

Saturday, January 31, 2015

Matrix IT Organizations, Part I: Turtles all the way Down

Multiple layers of authority overlap both horizontally (different people and committees engage with the same issue) and vertically (many decisions are liable to review by some other body). The lack of focus in decision making results in an absence of executive authority; while professional management is subject to random amateur interference. In consequence, able people are not easily attracted to management roles; and so the amateurs view the professionals with often justified and frequently reciprocated contempt.

-- John Kay, How a proud corporate history can lead to poor governance

A business has many sub-organizations. They may be functional (sales, accounting, etc.) or regional (EMEA, Americas, etc.), or specialized (e.g., product). A company may consist of all three: regional sales and marketing teams, working with multiple product teams, all of whom share corporate-level finance and legal. We want the organization structure to balance customer service with operating efficiency: completely autonomous divisions offer high customer service at a cost to our customers or to our profitability, while completely silo'd organizations squeeze every penny of efficiency at a cost to customer service. Competitive customer service at the lowest cost of execution lies somewhere in between these extremes.

Captive IT faces the same challenge as the rest of the business: organize to provide the greatest level of service while containing costs. IT generally organizes around technical roles: we have infrastructure people, database people, helpdesk people, software development people, and so forth. We also have specializations therein: we have ERP developers, who are not the same as our front-end developers, who are not the same as our legacy system developers. And none of them are quite the same as our QA people.

These sub-specializations are fairly well entrenched because career path is generally associated with role, and even specific technologies. For one thing, deeper expertise in a narrow set of technologies will command a higher salary than shallow expertise in a wide range of technologies. For another, a manager is unlikely to promote a promising member of the web development team to be tech lead of an ERP team because the technical knowledge is not transferable.

IT leaders structure their organizational hierarchy with this in mind. For utility functions, this works just fine: provisioning hardware and e-mail accounts is the same no matter who the user is. But in strategic software development, the business domain influences technical implementation, so IT needs tighter alignment with the business. The specialist IT structure is mapped to more granular business customers in a matrix: we form delivery teams to support a business line or a specific product owned by the business, but each team's tech lead reports to a VP of engineering within the tech organization.

Like everybody else, IT is under cost pressure. The greater the pressure, the more likely IT leadership is to make something into a shared service, which translates into fewer people owning multiple responsibilities for multiple teams. Quality assurance, project management, and techops, for example, can provide greater service when paired with a business partner, but become organizations unto themselves (with fewer staff) as a means of creating cost efficiencies.1

From an organizational perspective, this makes things somewhat untidy within IT because we have a matrix (shared services) within a matrix (development teams organized by business line, but reporting up to an engineering leader). If there is a shared service within a shared service, such as DBAs being part of techops, we have a matrix within a matrix within a matrix. It's turtles, all the way down.

Add to this the recent phenomenon of product organizations. A product hierarchy - common but by no means exclusive to tech firms - is chartered to elevate users (people who use the software) and customers (those who pay the bills for those who use the software) in ways that subject matter experts and software engineers are not able to. As the proxy for consumers and buyers, they influence priorities and packages of functionality. But product owners don't necessarily have strong footing in either the business domain or software development. In practice, they act as a referee between SMEs and engineers. At best they're an emerging function clawing at opportunity from a different perspective; at worst they're another level of intermediation in the decision making process.

And so we have the situation described above by John Kay: no small number of people being brought to bear on a problem, but a structural inability to get results.

With no defined power structure, the vacuum is filled by people who turn non-executive roles into a near full-time occupation. [...] Petty politicians enjoy the feeling of being at the centre and jostle for power; the power they seek is not the ability to get things done but the negative power that comes from “no decision without me”. Secrecy about matters of no significance bolsters their sense of self-importance.

-- Ibid.

Instead of better business alignment, we have fragmented ownership and competing priorities and agendas. Matrices create, rather than alleviate, impediments to getting things done.

In Part II, we'll look at executive disenfranchisement in the matrix organization.


1 It's worth noting that the decision to make something a shared service is frequently justified as a means of promoting "best practices". Functions like QA or devops that are fragmented into separate product teams will show inconsistent performance; consolidating them into a single function should, in theory, be a step toward making them more consistent (ignorant of technical, asset or personnel restrictions on that). The irony is that somehow, "best practices" - whatever that's supposed to mean - will compensate for the fact that a critical function is deliberately being starved of investment.