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.

Saturday, March 31, 2018

Organizing for Innovation, Part I

Innovation happens through people, not assets. Assets can be an impediment to innovation: software that is brittle, monolithic, poorly encapsulated, or high-maintenance inhibits creative new uses of it. But assets don't innovate by themselves. Innovation happens through the people you have.

We saw last month that innovation is stifled where management's prevailing goal is control. If we want innovation borne of individual creativity, the reasonable thing to do is to look at organizational structures of autonomy and devolved decision-making. Unfortunately, as we saw two months ago, there are no formulas for devolving decision rights. We also saw there are few reference implementations, and no objective measures that show autonomous structures outperform command-and-control styles. Deciding to devolve requires unflinching conviction that it is the right thing to do, and the intestinal fortitude to muddle through what doesn't work to figure out what does. Because there are no half-measures of devolution, the stakes are high: by choosing to do this, you are betting your career and possibly the entire business on its success.

To better understand devolved decision making, it helps to understand the classes of decisions that define autonomy. According to Susman, there are three:

Scope Nature Environment Artifact Hierarchy
Institutional What should be done? Accommodate or defend against what it cannot understand or cope with Appreciations Board
Managerial What can be done? Decisions are uncertain and highly reactive Strategic plans Senior management
Technical How will it be done? "Supervisors of risk": decision making is fluid and creative Implementation plans Middle management

Source: Susman, Gerald. Autonomy at Work: A Sociotechnical Analysis of Participative Management

It is conceptually easy to understand how devolution works in small companies because the distance between decision makers and decision executors isn't very great. Start-ups don’t have large boards and employees take direction directly from the founder, who is less concerned with precision execution than finding things that drive usage and growth. Senior technology leaders who decide on the “how” are also the people who implement the “how”. There isn't much distance between the Chief Executive and the Chief Cook and Bottle Washer.

The larger the organization, the more polarized the control over each decision class. Appreciations - why should we do something - are the provenance of the board, who are few in number and very far removed from the insides of the company and the ecosystem in which it functions day-to-day. Questions of “what” are held tightly by management, providing a means of co-opting the board in assessing how well management executed, not necessarily on the success it achieved in exploiting the appreciations the board set forth. Held to performance targets from management, and saddled with lowest-common-denominator rented labor (thank you procurement departments everywhere for dehumanizing the secondary labor force for nearly two decades now), questions of “how” are similarly held tightly by technical managers.

The more disenfranchised the line - as in, the greater the extent to which individual employees are only permitted to do exactly what they're told to do - the harder it is for anyone to fathom a devolved model, let alone function within one.

The gulf between "stay in your lane" and "chart your own course" makes clear that there is much more to devolving authority than investing small teams with the responsibility of figuring out what they should do, can do, and will do. In part II, we'll look at the organizational characteristics of a self-directed team, one that functions in a genuinely autonomous manner. After that, we'll look at autonomy at scale: what needs to be in place for autonomous teams to function cohesively in a complex corporate ecosystem.

Wednesday, February 28, 2018

Innovation Versus Control

Firms in industries ranging from financial services to retail pharmacy to fast food aspire to be "platform companies." In the minds of their chief executives, the emergence of Amazon and the evident superiority of platform economics make this necessary for their continued survival. It is also a good story to tell Wall Street as it allows a firm to create the aura of being the technology leader in their space while trafficking in the success of companies like Amazon.

"Platform" is conceptually conveyed as a technological phenomenon. But it stands to reason that the defining characteristic of the platform organization is neither the technology assets that they produce (e.g., friction-free consumable primitives), nor how they produce them (e.g., lean and agile process). The benefits of a platform are only yielded if the creativity and imagination of the rank and file can be unleashed through those assets, to experiment, learn, and implement quickly. This means devolving decision rights far down into the organization, a.k.a. autonomous teams.

I've been brushing up on organizational behavior theory, and during my research I came across this paragraph. There is a lot of wisdom condensed into these two sentences:

In general, the longer the time period required for the consequences of strategic decisions to be realized and evaluated, the less flexible are resources for commitment to alternative objectives. Furthermore, (1) the longer the time period in which strategic decisions operate as constraints on the decisions made by technical-level personnel and (2) the lower the complexity of the tasks required to carry out operational plans, the more likely that operational planning will take place at a higher level.
-- Gerald I. Susman, Autonomy at Work

The first sentence neatly captures why things like Agile and Continuous Delivery and Lean Startup are so appealing. We reach critical mass of feedback on a strategic imperative - and therefore judgment on the wisdom of that imperative - more quickly with lots of frequent deliveries of small but business-valuable things than we do with infrequent, large deliveries of comprehensive business solutions. The sooner we reach the inflection point where a body of feedback confirms or contradicts a strategic decision, the more quickly we can move on to the next phase of our strategy, or change course. This separates the sclerotic laggards from the adaptive innovators. In addition, the presence of continuous market intelligence serves to separate the agile and adaptive from the strategic flailers.

This is intuitively obvious, but seeing it in black and white serves as a means test for the fulfillment of business strategy: is a firm asserting, confirming, or just guessing at what the market will buy?

The second part of the paragraph helps us to better understand the organizational dynamics within a small and innovative company versus those within a large integrated program team or an enterprise.

The first part is simple enough: the longer it takes to realize a strategic imperative... Longer is bad, check; already established in the first sentence. The second part is where it becomes interesting: and, the simpler the tasks required to deliver that strategic imperative... This statement is an indictment of the labor carrying out those tasks and the management defining them.

All together, the second sentence tells us that a long-lived initiative expected to be fulfilled through simple tasks relegates executives to the role of supervisor.

This is a damning statement in a number of ways.

The moniker "executive" is highly relative, potentially to a point of meaninglessness. The greater the degree to which technical execution is decomposed into simple tasks, the higher up the responsibility for operational planning. The higher up the responsibility for operational planning, the less meaningful the title of the person doing that planning. C-levels engaged in day-to-day prioritization and resource allocation are not executives. They are mid-level managers who have benefited from title inflation. It also means that the scope of executive decision-making - strategy - is concentrated in just a few hands. This renders quite a few people executives in title only, and deprives a company of its next generation of leadership by stifling their formation.

Anyone touting the potential for innovation from a delivery team engaged in task execution is living in a world of make-believe. Innovation stems from the combination of autonomy and complexity: give a team the freedom to solve a complex problem any way they see fit, and they are likely to come up with something novel. A system based on completion of simple tasks deprives a team of any complexity to sink their teeth into. Additionally, a system of rudimentary task completion is inherently a control system, which has zero tolerance for independent thought or action that is off-plan. Innovation is scarce where control is the priority.

Enterprise-y Agile processes function as systems of control, not innovation. Any system that adjusts the work to suit the labor instead of adjusting the labor to suit the work will require a high degree of centralized control. Enterprise Agile processes tolerate, and even advocate, decomposing work into tasks and assigning them to specialist labor. This values the control of labor over the creativity of labor. Per the previous point, technical-level employees are systemically disenfranchised. A system based on control through tasks offers no leeway for devolved decision rights; the only right an individual has is to complete the tasks they've been told to complete. This makes enterprise Agile processes more prone to suppressing than unleashing innovation.

The dynamics of small teams in small companies are not directly transferable to small teams in large enterprises. Small teams in small companies have high degrees of overlapping responsibility, little tolerance for specialization, light processes, and engage in high-bandwidth, omni-directional communication. Large organizations codify things such as roles and responsibilities, career development, processes, and work (e.g., technology) guidelines, and engage in low-bandwidth, hierarchical communications. In small companies, trust is largely based on the expectation that everybody will do whatever it takes to achieve a common outcome; in large companies, trust is largely based on the expectation that specialized people respond to precise requests with precise responses. Team dynamics are functions of HR structures, organizational values and systems, communication patterns, and ingrained behavior patterns, all of which are highly resistant and even subersive to change when they have decades to develop within a company. The executive in a legacy enterprise who says they want to transform the company into a "start-up" betrays their naïveté of the magnitude - and unlikeliness - of that task.

The paragraph at the beginning of this post captures what many in the tech biz have experienced for decades. Since the 1990s, enterprise IT has been a story of scale. As it scaled, it became more prominent on the income statement, and was forced to place a premium on control. Occasionally, it basks in the reflected glory of innovative consumer technology firms, or gets elevated by a CEO as a source of untapped potential. Unfortunately, enterprise IT has never been able to reconcile an expectation for innovation with the fact an over-emphasis on control gives everybody in management a demotion, suppresses innovation, and stifles attempts at organizational renewal, all while holding a company back from fulfilling its strategic potential because it takes such a long time to get anything done.

The most interesting thing about that paragraph? It was first published in 1976. Industrial, not tech firms, were the prominent companies of the time. The lessons remain the same.

Wednesday, January 31, 2018

You say you want a devolution...

"This isn't to say that alternative approaches to management are dead, or that they have no future. It is to say that in the absence of serious upheaval - the destabilization / disruption of established organizations, or the formation of countervailing power to the trends above - the alternatives to the Freds will thrive only on the margins (in pockets within organizations) and in the emerging (e.g., equity-funded tech start-up firms)."

-- Me, September 2013

I wrote that nearly 5 years ago. That previous summer I cracked the spine on some management books I had last read a quarter of a century earlier. When I first read those books in the 1980s, there certainly did seem to be a management revolution afoot. In the late 1970s, large industrial firms in the US were plagued with quality and performance problems, a rank-and-file that was fully aware of but apathetic to them, and management that was clueless about what to do. The epitome of the industrialized era in western nations turned out to be a company that would systemically disappoint both customer and investor alike. The long dominant organization-as-machine model was commonly perceived to have matriculated to a state of intellectual bankruptcy. Out went command-and-control, in came employee empowerment and team autonomy. Meet the new boss!

Yet when I read these management books anew in the early 2010s, it was clear that the revolution had been stopped dead in its tracks somewhere along the way. Same as the old boss!

I have had reason to re-visit this recently, this time in the context of enterprise technology platforms. A company that develops recomposable, atomic components that can be consumed in a self-service manner by other developers can help to yield more coarsely-grained solutions more quickly. Making those coarsely grained solutions recomposable components as well should enable an organization to create with both greater ambition and speed.

The objective of a platform is not to build both big and small things more quickly or to build more efficiently, but to create more effectively. A platform should allow for a greater number of experiments and more comprehensive feedback. Employees closest to an opportunity - current and potential consumers, technology, competitors, people and capital - are the ones best positioned to pursue that opportunity through exploring, learning, and adjusting. In an emerging area of business or tech, a local team muddling through stands a better chance of success than a distant management imposing its will over a market. In practice, muddling through experiments and feedback requires some degree of authority devolved to the team level, so that a team can decide and act for themselves.

The notion of authority devolved to the team level brings up the question of the autonomous organization yet again. Plus ça change...

The same old idea comes with the same old questions. What does an organization of autonomous teams look like? Can it work? How does it scale?

Before we ask, "can an organization of autonomous teams work?", we have to ask, "what does autonomy at team level mean?" Does it mean the authority and responsibility for what they do and when they get it done? Does it include design and architecture? Can they act on things that are nominally the responsibility of other teams? Do they get to pick and choose the people on their team and the providers they source people from? Do they have to secure their own funding? Who do they answer to? How are they measured?

It may mean all of these things, or it may mean just a few. Autonomy is in the eye of the beholder. To some, just having operational autonomy - authority over what, when and how a team fulfills delivery goals - is sufficient. To others, operational autonomy without owning the P&L and balance sheet - everything from capital to compensation levels - is merely responsibility without authority under the guise of self-direction.

Every firm that has gone down this path has come face to face with the same questions and challenges. Every firm of any scale that has achieved any degree of success has ended up with some hybrid implementation: some things are decentralized, some things centralized; some for a short period of time, others for a longer period of time, and some permanently. For example, we want teams to be responsible for the production operations of their creations, but we must first incubate an ops capability; once we are comfortable that ops has completed its gestation period it will be broken up and absorbed into the line teams. However, to alleviate administrative burden and to avoid violating labor laws we will have a centralized HR function, but we do want ideas to compete for funding, so we will have utility and risk capital allocation processes.

One question, many different answers, and answers that change at different points in time as circumstances require or allow.

When there are many different answers to a single question, it is the wrong question to ask. Looking for specificity where there is none will only sow seeds of confusion and ultimately doubt. And, while there is plenty to be learned from the experiences of others, self-reported testimony must be taken with a grain of salt, and the success of others comes with no guarantee of portability.

A better question to ask is, how convinced are you that team autonomy is a solution to whatever challenges you face? You need to be overwhelmingly convinced that it is, because you need a high tolerance for the ambiguity, uncertainty, and constant adjustments and experiments you will have to run to find and maintain the right balance - that is, construct the right hybrid - for your set of circumstances. You also have to be comfortable without a lot of hard evidence that it solves whatever you had hoped that it would. Even had you not devolved a greater degree of decision-making to the team level, that product might have been a success, that innovation might have emerged, those employees might still have joined your firm. Can't prove the counterfactual.

If you are convinced, and decide to add your name to the list of those that have elected to crack this nut, the operationalizing questions are much different. The one that you will ask again and again and again is the obvious: how do we strike the balance: what do we think that hybrid should be today? what do we think it could possibly be? how do we go about figuring that out?

In addition, given the cyclical love-hate relationship with devolved authority, you must also ask: what makes it more likely, and what makes it less likely, that it will have staying power in your organization?