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.

Sunday, April 30, 2017

Concrete Versus Abstract

Until a few years ago, enterprise software development was pretty easy to justify and execute because the income statement was the primary customer. Automating back office tasks, expanding market reach, creating customer self-service tools, even legacy technology replacements were all investments that could be explained in a straightforward manner as taking costs out or capturing revenue that would otherwise have been lost. Business cases weren't all that complex, and results were easy to direct.

The nature of enterprise tech investments has changed. We want consumer-facing tech that is less workflow-driven and more situationally adaptive. We want platforms on which we can quickly build complex applications, not a collection of solutions that we tie together with jumbled integration and overlapping data warehouses. These investments are justified not by cost or revenue, but by a future defined by new consumer behaviors and new services; it is a future we do not control and over which we cannot judge our influence, and by their emergent nature offers no baseline for measurement. As tech investments become more ambitious, their investment criteria become more nebulous and vague, their justification more speculation and hope, and their actual impact more difficult to trace and validate.

The landscape has become far more abstract, too. For one thing, the business threats have become less physical. A business had months to prepare for a rival building an outlet down the street, but can't immediately see (let alone know how to respond to) a purely digital competitor slowly siphoning away customers. For another, the tech is less tangible. Technology was easier to grasp when you could map software solutions to a handful of rack-mounted servers and desktop PCs; try explaining cloud-based AI architecture to non-tech buyers as anything other than a black box.

Yet enterprise execution remains rooted in the concrete. Companies achieve scale and efficiency through disciplined execution: develop patterns of operations, sweat the details, codify procedures, and spread through an ever growing network. The more cookie-cutter, the more predictable; the more efficient, the more cash flow from operations.

I've written before that this encourages heavy levels of debt finance, and that debt finance stifles investment by crowding it out: debt not only consumes cash that could otherwise be used for investment, it discourages high-risk investments with unknown returns. Debt finance binds a company to a tomorrow that is the same as today. Visions are equity plays, not debt ones.

Capital structures aside, there's another aspect to this: enterprise leadership that isn't equipped for the challenge. The enterprise leader must be capable of forming a considered opinion on tech and business matters to know whether someone is feeding them the level truth or blowing sunshine up their backside. That leader must be able to describe the world through the lens of a plausibly achievable future state, not something that comes across as improbable sci-fi, and more substantive than a how-things-have-always-been-only-faster state. That leader must be pragmatic enough to know how to walk the fine line between enabling knowledge workers to hold the future hostage to their subject matter expertise, and overwhelming those knowledge workers with change fatigue, maturing them into future operating leaders of the business.

This requires a leader with depth of knowledge in operational, technical and financial matters. It also requires an ability to think abstractly and translate abstraction into concrete action. He or she will have to articulate an integrated business & technology operating model, restructure finance from cost-driven to investment-driven, and change recruiting and retention and contracting practices. Plus, she or he must be able to explain why the current modus operandi is geared toward running the wrong kind of business (an efficient opco), and what is necessary for it to become the business it needs to be (an efficient opco ingesting the innovation generated by a biz&tech platformco).

This leader cannot over-emphasize one area - the transformation, the vision, the tech, the finance - above others. Doing so creates an imbalance that will lead to organ rejection by the established enterprise. Key enterprise constituencies don't react favorably to having their area of specialization demoted. It starts whispers that "this person leading our so-called replatforming just doesn't get the business" that undermine their leadership.

The hard-driving entrepreneur, the professional administrator, the technology futurist are the wrong leader archetypes. This calls for statesmanship, someone who can project from policy to practice in a complex corporate and competitive landscape, translate goals and changes into multiple business tongues (the executor, the developer, the middle manager), behave diplomatically while remaining above corporate politics, and be patient for new business principles to sprout within the enterprise.

Of course, people who fit this bill are as rare as hen's teeth. Operating companies don't incubate abstract thinkers, they incubate concrete thinkers because they reward concrete execution. Nor does it help that we've taken authority away from middle managers instead of developing them into the next generation leaders.

The firm that does recognize the scope of this leadership challenge but can't staff the role from within or without will resort to the multi-headed leadership team (at least one business and one tech, potentially more from across the corporation depending on the political landscape) and hope that the whole will be equal to the sum of the parts. Conway's Law guarantees that the outcome will be plagued with local optimizations that inhibit - and potentially impair - the hoped for outcomes.

Ambitious transformative tech investments may be viable, and even necessary for survival. They need vision and execution, cooperation and skills. But they're going absolutely nowhere without the right leaders and leadership.