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, June 30, 2017

The Value Myth

When we think about value, we think in terms of hard measures like increasing revenue or decreasing cost, or soft measures like increasing customer satisfaction or reducing customer friction. This all sounds great, but we know in practice that value is not as concrete as we would like to believe: projections are conjecture, there are multiple forces at work that determine the result we get, and counterfactuals can't be proven to know for fact whether we'd have been better off doing something different or nothing at all given how circumstances played out. Good as it might be that value allows people to relate their actions to hoped-for outcomes, it is naive to think that the outcomes will result from the sum of the actions that we take. Business is far more complex and far more messy.

Saying otherwise is disingenuous, because it gives business a theoretical tidiness that it simply does not possess. Perhaps this is inevitable when non-business people like program managers (coordinator-administrators) and developers (engineer-nerds) traffic in business concepts (finance). Whatever the reason, it isn't helpful if tech wants to be taken seriously by the professionals - particularly the finance professionals - who run the business. Showing a direct line-of-sight from tech or process to business outcome sets up tech to get played and manipulated. Going from tech to business value in one step is a short-cut to being relegated by the board; it is not a path to business relevancy.

In this series of posts, I've taken a different tack, focusing on value and worth as behavioral rather than economic concepts. It stands to reason that if value and worth are in the eye of the beholder, their definitions will be heavily influenced by individual biases. Success of any business initiative comes down to behaviors, so the better we understand those the better we understand the complexity of what value really is in a complex business context.

Value is different things to different people for vastly different reasons. Consider insurance claims. During a storm, high winds blow a tree down and onto a house, collapsing a section of the roof. Insurance adjusters don't care about the aesthetics of different colored roof shingles used in the repair. The adjuster only cares that the roof is repaired and the house won't be taking on ballast the next time it rains. The insurance adjuster is under orders to repair the house with minimum impact to the insurance company's cash flow, and is therefore focused on the utility (which is easy to quantify), not the aesthetics (which are not). That the first thing any prospective buyer will point out is that those green roof shingles clash with the existing gray roof shingles appears nowhere in the adjusters "cost of repair" spreadsheet: whether green or gray or fluorescent pink, those shingles will keep out the rain and the snow and the critters. For the insurance company, the asset they insure was repaired with minimum impact on their cash flow.

The same applies to tech. An engineer infatuated with the tech stack supporting a hopelessly implemented feature set. A user clinging to an interface backed by an impenetrable monolith of code. The CFO who is tone deaf to responsiveness and excessive defects, solely because of the price. Try as we like to frame "business value" as an absolute, in practice it is a relative concept, interpreted and reconciled to the motivations and desires of each individual in the value chain. What gets measured is what gets managed, so "business value" becomes the means through which individual value is realized: we need this over-hyped cutting-edge tech stack because it will help us deliver it faster; how conveniently coincident that experience with that over-hyped cutting-edge technology flatters the resumes of the people working on it.

This creates cascading re-interpretations and re-assertions that smother value, ironically justified by the pursuit of value. A firm I audited years ago had, some months prior, formed a cross-functional committee of tech, business and finance to choose a mobile development toolkit. Business believed it needed a mobile solution, tech aspired to create one, but the board didn't share in the enthusiasm. In the end, finance won out, choosing the tool that cost the least but that tech found unstable and yielded software solutions the business didn't much care for. The tool was never used. Instead, developers rolled their own frameworks and infrastructure, below the radar of the CFO and with a wink-and-a-nod agreement with their business partner that they would do so. The purchased framework had negative value to its intended constituents, to a point that tech believed there was more value (and with the complicity of business in the decision, to the business as well) in creating proprietary development infrastructure. Whether spending twice for infrastructure was tech rescuing the "value" jeopardized by a crap product, or tech being intransigent and subversive to the board's agenda, all depends on your definition of value under the circumstances.

We don't win the triple crown of value all that often. Marketing doesn't appreciate losing the pricey boutique firm they could talk to each and every day, but tech looks like stars to the CFO for sending the work to a cheap offshore supplier. The CIO doesn't like being held hostage by employees who used an obscure tech stack in the name of getting something done "faster", only to be making it debilitatingly expensive as they exit the firm and go into private practice. Eliyahu Goldratt pointed out the tradeoff of local optimization for systemic optimization a long, long time ago. Local optimization infiltrates every value calculation, in temporal ways that defy models of value.

We want to believe that "value" is an absolute measure of something that improves the condition of the enterprise: In unitate es virtus. But we know that people have different interpretations and goals that materially impact the business outcome, so value is a weighted sum of disparate, unexposed agendas. The larger the enterprise, the more complex the calculus.

Value is money, and where there is money, there is politics. With that in mind, value is perhaps best understood as something Mike Royko taught us about the fundamentals of politics many years ago: Ubi est mea?

"Where's mine?"