Reinventing Business
Discovering Your Best Organizational Structure

Monday, October 6, 2014

Deterministic vs. Probabilistic

Along with The Management MythThe Halo Effect should be required reading for anyone considering a business management program, whether undergraduate or graduate. The first thing you should know about such a program is how bad the science really is, and this book gives you a face full, in particular debunking the most popularly successful bestsellers like In Search of Excellence and Good to Great. The worst thing about books of that ilk is that they pretend to do even more research than the previous bestseller, but all the research is either based on previous bad research, or sometimes creates new bad research, and the conclusions drawn by such books are equally bad.

The Halo Effect refers to the idea that, if the company is financially successful, people tend to ascribe all kinds of other good things to the company. If the company is financially unsuccessful, those identical activities are given negative connotations. Basically, you can't rely on people within a company to give unbiased feedback about the company. Unfortunately, popular business books do exactly that when gathering their so-called data: they survey people within the company, asking subjective questions about how good or bad the company is doing such vague things as "establishing a good corporate culture." It turns out to be a lot easier to do such "research."

The author, Phil Rosenzweig, points out that the reason some business books are so successful is that they tell a good story -- a story that people in management want to believe, which is usually some form of the "rags to riches" fable wherein the hero is able to control his or her own destiny. "You too," these books say, "can make your company successful if you just follow our formula!"

The Wikipedia Article and this analysis and this one review the book fairly well and I don't need to try to better them. There is, however, a portion of the book where I feel Rosenzweig lost his focus a bit. The last of his Nine Delusions is "The Delusion of Organizational Physics," wherein business-book authors claim that everything is deterministic and if you pull the right levers (following the formulas described in their books) you will absolutely get your desired results, every time, as reliable as dropping an object in a gravitational field.

This is straight from Frederick Winslow Taylor, who decided he was "the father of scientific management," for some alternate universe where "science" means "making up data to support whatever you want to at the moment." Taylor was "successful" because people paid him money for his stories, so others followed his lead. And managers really liked the story that they had complete control over their own destiny, which was Taylor's gift: the belief in deterministic management.

Rosenzweig debunks this but only replaces it with "strategy and execution," which is on the same level as saying "a company must make a profit to stay in business." Yes, you have to plan things, and you also have to do things. But can't we know something a bit more than that, something that will at least slightly tip things in our favor?

Rosenzweig points out that there are far too many variables to be able to either measure or control the actual effect of changes. And he also notes that running a business is significantly affected by chance, but he doesn't quite shift over to the thinking found in The Black Swan: that being in a world containing risk and unpredictability doesn't mean you're helpless. Taleb says on page 368 of The Black Swan:
"... people do not realize that success consists mainly in avoiding losses, not in trying to derive profits. ... Positive advice is usually the province of the charlatan. ... Linked to this need for positive advice is the preference we have to do something rather than nothing, even in cases when doing something is harmful. ... in many instances it was better -- and wiser -- to have no models than to have the mathematical acrobatics we had."
Such a world is certainly not as comfortable as the imaginary one where everything is deterministic, but it doesn't mean we can't do anything about it. The change in perspective is significant, and might be too big for most (many people seem determined to remain in fantasyland) and doesn't promise absolute power over everything -- but at least the results are real.

In his RSA presentation for his follow-up to The Black SwanAntifragile, Taleb lays out this strategy, which I've paraphrased here:

  1. There's no guarantee of success, so treat everything as an experiment.
  2. Assume most experiments will fail.
  3. Assess the risks on each experiment, and make sure that if that experiment fails, it won't take the whole enterprise down with it.
  4. Realize that even if an experiment is successful, environmental (market) conditions might not favor it.
  5. Sometimes you will experience "luck," when an experiment succeeds and positive market conditions produce a popular product.
  6. Thus: Look for experiments that have a very positive upside with a non-disastrous downside.
  7. Do as many of these experiments as you can manage.
There you go. "Seven habits" that actually work (for some definition of "work"). Note that this shares ideas with Eric Ries Lean Startup approach.

Monday, August 4, 2014

Turn the Ship Around

What makes this book unique is that the author, former nuclear sub commander David Marquet, describes how to change the workings of a hierarchy, without changing the hierarchy. He had no choice, because it's the Navy and they weren't about to change the command structure to perform an experiment. So instead he changed the relationships within the structure.

The essence of his approach is to change our existing hierarchical relationships, which he calls leader-follower, where the leader gives the command and the follower executes it, like a machine. This is dehumanizing and disempowering for the follower. Taken to the extreme, you get the nuclear sub Santa Fe before Marquet took over, with a disengaged crew that were just going through the motions.

Step-by-step, Marquet converted the Santa Fe to what he calls leader-leader. Although he didn't put it quite this way, my interpretation (colored from my experience in the Holacracy training) is that the subordinates don't wait to be told what to do; instead they announce what they intend to do and only if there is a legitimate objection (that's the Holacracy part) are they prevented. This retains the chain of command while giving the subordinates maximum independence. The results seem phenomenal -- when things need to happen, they just start happening by themselves. The higher ranking officers are simply monitoring what's occurring (to ensure something undesirable doesn't happen) rather than initiating all actions. The result is that the speed of operation is much faster, which is contrary to what we've been trained to think ("if someone doesn't have central control, then everything will grind to a halt").

This didn't happen seamlessly. Marquet explains an earlier experiment that failed, and also describes his mistakes and missteps during the process of converting the Santa Fe. This is particularly valuable because it shows that you shouldn't expect instant results or a smooth conversion process. Everyone has to learn during the transition. But it also shows how to adapt and overcome the problems.

Ultimately I'm seeking an organizational structure (or, as with Holacracy, a way to discover your particular structure) that produces the best experience for the worker-stakeholders. A hierarchical power structure will always be vulnerable to changes in management. However, it's very inspiring to see what can be done within an existing hierarchy, and many lessons can be learned from this book for people who want to make the transition to a flat structure, or even to incorporate people who come with a hierarchical mindset. In addition, you might not be in a situation where you can change the organizational structure, and Marquet's approach is a way to produce big improvements within the old structure.

Finally, kudos to Marquet for all the work he did creating a book that's easy to read. The structure and narrative compel you through the book. Too many authors lose sight of how important readability is, and their message is lost among prose that is unclear or often just too much.

Thursday, July 24, 2014

Joel Spolky's Spinoff

I'm not arguing prescience here, but it's certainly interesting that I wrote about spinoffs right before Joel announced Trello as a spinoff. For people who were wondering what I was talking about, that's an example.

There is one thing I'd watch out for, however. Trello sounds like a great place to work, but the reason it is great is because all the good things in this system flow from management. This means it is vulnerable to changes in management. A benevolent dictatorship only lasts while the dictator is in power.

I think I'm becoming a process-and-mechanism guy. This probably comes from reading too many hand-waving business books that say "things should be this way" without describing how they get that way, and how they steer that particular boat. Even if you do have process and mechanisms, I'm going to ask about stability -- can the change of one person change the company? I'm absolutely not arguing for consensus, but rather a system where the people who are affected by the decisions are somehow in the middle of making those decisions (Holacracy is an example of such a process). Otherwise you're taking a huge risk if you invest your time in that company, by putting all the power in a hierarchy that can be hijacked.

I know Joel, although our last interaction was when I gave a presentation at the Stackoverflow launch in Virginia. The next time I'm in New York I'll make it a point to go visit Trello and find out in person how he intends to maintain that "business operating system."

The Logical Fallacy of Magical Thinking

“Whether you think you can, or you think you can't, you're right.” -- Henry Ford
Not exactly. If you think you can't do something, that is a necessary and sufficient condition to prevent you from doing that thing. "Necessary and sufficient" means "you need it, and if you only have it, it's enough."

The converse of the previous paragraph is "if you think you can do something, then you can do it," a form of magical thinking. Taken to the extreme, we hear "all you have to do is think it, and it will (somehow, magically) happen."

Positive thinking is a "helpful condition" to be able to accomplish something (that is, it's possible to accomplish things while practicing negative thinking, but that's an uphill battle and way less fun). There are activities for which it is even sufficient. For example, positive thinking will improve your state of mind, and will probably even make you physically healthier. Things that are hardwired to the brain will probably be affected by the activities of the brain. Positive thinking might even have a positive influence on other people's brains (I've heard of some mass-meditation experiments that seemed to have positive effects, but we have to treat those as hearsay for now).

We have no repeatable evidence showing that positive thinking will allow you to walk unaided on water or "attract" money or love (although a positive person is certainly far more attractive for doing business with or falling in love). Or start a business and create a product based on antigravity. Such a business will probably need a lot of positive thinking, but that won't be sufficient. We'll also need to know enough about the laws of physics to figure out some way to actually produce antigravity. And once you figure that out, a grumpy company could still make a go of it (but again, less fun).

By all means, think positive. It has overwhelming benefits. The only downside is when you believe that thinking positive is all you need, which puts you on the slippery slope to magical thinking. Think positive, but maintain a healthy skepticism.

Tuesday, July 22, 2014

Spinoff Machine

Reading this article and comments about Microsoft's new CEO and his sketchy-sounding recent positioning memo made me observe:

  • The industrial-age corporation desires power, and sees acquisitions as a path to power.
  • Most acquisitions (80%?) are considered failures.
  • Acquisitions add to the number of products controlled by a company. 
Or, do the products control the company? When you have a product, you have a thing you must manage and maintain, and most importantly, you have a thing that incentivizes you not to rock the boat. Add to that the goal of the organizational hierarchy: to do the same thing over and over. These, and I'm sure other forces that I haven't considered here, make it nearly impossible to innovate.

What if a company reversed its goal? Instead of trying to get bigger, it intentionally stays small. After it creates a product, it spins off a company for that product. The spinner gets money back from the spinoff, perhaps diminishing over time, and the spinner can go back to creating new products, unencumbered by the spinoff and its product. The spinner stays small, agile and innovative.

Wednesday, July 16, 2014

The Star Trek Conjecture

All predictions are wrong. Some are useful. Science fiction writers are particularly prone to bad predictions because they are primarily driven by the need for conflict. This is why there is such a predominance of dystopian science fiction -- conflict is easiest when everything is going wrong. It's harder to come up with drama when everything in the world isn't stacked against you.

Sci Fi writers also ignore the obvious. Every single fighting machine story I've read or watched seems to require that the human be right in the path of risk, inside the machine that everyone is shooting at (or the machine is controlled by artificial intelligence (AI); there's no in-between). The actual soldier, however, is highly motivated to be as far as possible from that danger. We have remotely-piloted drones now; how long before we have remotely-piloted ground-fighting units? I predict soon -- there are already robots that can run over complex terrain. Sure, AI might eventually come along, but we have the ability to use human intelligence to control vehicles right now. I wonder whether there could be some interesting consequences of this: if a human isn't in actual danger, might they become less trigger-happy and more patient, leading to more peaceful results sooner? Currently, if you trust and you're wrong, it could lead to serious bodily injury or death -- very high stakes. But if you're remotely piloting a fighting unit you can afford to trust. If you're attacked, you lose the unit and find out for sure that someone is hostile, but if not you can eliminate a lot of misunderstandings that lead to bad outcomes and degrade relationships.

The Federation of Star Trek has effectively no robots, except for the one super-advanced intelligent android that was created under special circumstances. Star Trek is supposed to be our future, and even now the impact of robots is huge -- they are responsible for the dramatic loss of manufacturing jobs while the US remains the #1 manufacturer in the world. But not a peep in the Star Trek world of why they don't have lots of robots doing lots of dangerous/messy work (there are explanations/apologetics in this post, but I don't buy it -- humans are tool creating/using creatures). Or even why it takes so many people to run the ship. In (the new) Battlestar Galactica they had a very good reason for retro-flying-aircraft-carrier mode: anything that had the slightest bit of clever electronics could be hacked by the Cylons.

One particularly interesting evolution that happens in the world of the Federation is the disappearance of money (we become a post-scarcity society). In several places in The Next Generation there are statements to the effect that "we stopped using money long ago" as if it were a quaint anachronism. Everyone, apparently, is able to get by comfortably and their lives do not revolve around the pursuit of wealth. Instead, they seem to seek meaningful ways to add value to their lives, their team and the world/galaxy.

I've struggled with this idea. It's difficult because we are so entrenched in the idea that money is a real thing that you have to get in order to survive. But money is a relationship; it's trust and other ethereal things. We have to believe in money in order to accept it, and to do things in exchange for it.

Right now, we have a small group of people who don't have to work, because, often by accident, they happen to have a lot of money. Despite strident declarations that they are "job creators," they aren't -- only small businesses create jobs. At the other end of the spectrum, there's the example of a local high-school student volunteering at a disadvantaged elementary school in Denver. She tells me that the school can't have tests on Mondays because many of the students don't get enough food on the weekends and are mentally impacted because of this. They rely on school meals for basic nutrition. It's that bad.

If the small percentage of wealthy folks earn more money, they effectively add nothing to the world (with isolated dramatic differences like the Gates Foundation). But if people who are disadvantaged get a little more, they can eat better, which has a large impact. The brain burns a big percentage of our fuel, so they can think better. Perhaps eventually discover special interests that they can develop, and make contributions to the world. The pursuit of more wealth at the top end adds very little, whereas bringing up the bottom end can be huge.

The industrialist world view is that if people aren't afraid of not having enough, they won't work. This appears to be borne out in our culture where money is the only important pursuit: children of the wealthy are often rudderless and unproductive. What if this comes from the culture? If money is the important thing, and you have enough from your parents, what motivates you?

I keep encountering both writings and live people for whom the answer is "to create meaningful value." Money-focused parents seem to discourage pursuits that are meaningful for the child but not to them, which might account for a confused and drifting child.

One man I know retired early, sometime in his mid- to late-fifties, and went through a crisis while figuring out who he was. An essential part of his life arc was the need to make meaningful contributions to the world, and that was strongly tied to his working life. As many do when discovering this, he began to volunteer for various causes. I think he missed his work, but there was no way he could continue his old job in a partial way.

My friend Dick has also encountered this. He's a rare programmer, self-motivated, self-managing and very productive. However, just like me, he has discovered he's only really productive for part of the day and it's a waste of time for him to try to work a so-called "standard 8-hour day." So he's begun trying to find a job where he can mostly work from home, and work part time. Because of the "people are lazy and stupid" mantra that is ingrained in management schools and practices, he's encountered a great deal of resistance to this -- companies tell him they can only hire him if he commutes in and works an 8-hour day, and so they lose out on an exceptional programmer. Their company could be a lot better by hiring him, but "there are rules," and the company must be the one in power, not the individual. Dick wants to create meaningful value, but cannot because of meaningless rules.

My own example argues against the idea that people who have enough to get by will just become mindless consumers and not contributors (indeed, I suspect people like Chuck Blakeman would argue that one of the core goals of the industrial age was to produce mindless consumers). I have enough resources to get by for awhile AND I've managed to convince myself that it's OK not to just pursue the most financially lucrative goal. Instead, I've become highly motivated to reach for the next level of meaning and contribution, even though it's far more difficult than just writing more computer programming books (which I might also do, just to have a more concrete anchor to balance out the uncertainty of Reinventing Business).

So try to imagine this: what if everyone had enough? What if people didn't have to strive and struggle just for the basics -- and try to evade a knee-jerk reaction of "why would anyone work if they don't have to?" Imagine what you would do if you had enough ... and more importantly, what would your children do if raised in such a world, with the idea that "meaningful contribution" is how they find fulfillment?

Monday, July 14, 2014

The Mind is a Muscle

There's a very interesting idea moving through the educational world. It seems that we are unconsciously trained to think that if you aren't immediately good at something, then you have no talent for it and should give up and move on. This is so deeply rooted that we don't think about it. It's an unquestioned part of our core mindset.

It's being questioned now, by Carol Dweck in her book Mindset: The New Psychology of Success. The process, as I understand it from listening to lectures, is simply to first make students aware of the "fixed mindset" that we've been trained into, and then to go through a series of exercises designed to change to the "growth mindset." In the growth mindset, you learn not to concern yourself with how "good" or "bad" or "talented" you are in a particular pursuit. Instead, you focus on the amount of effort you put in, with the idea that you're exercising your brain and it will get stronger in your chosen topic. The results seem to be dramatic: there is no longer any consideration -- in the mind of the teacher, and more importantly, in the mind of the student -- of whether you happen to be good at something. Effort is the only thing that counts. Effort is the only thing that makes you good at something, by developing the muscle that is your mind.

The fixed mindset effectively cripples the learning process, and it's as subtle as saying "oh, you're so good at that" (fixed) vs. "oh, look at how much work you did" (growth).

The fixed mindset, they say, also strongly affects the business world:
"...people with the fixed mindset do not admit and correct their deficiencies. And a company that cannot self-correct cannot survive."
"When bosses become controlling and abusive, they put everyone into a fixed mindset. This means that instead of learning, growing, and moving the company forward, everyone starts worrying about being judged. It starts with the bosses’ worry about being judged, but it winds up being everybody’s fear about being judged. It’s hard for courage and innovation to survive a company-wide fixed mindset."
This is one of the things I've been searching for: what is the water that we swim through, unaware that it's there? Things that are so ingrained by our culture that we never think to question them, but instead quietly, unconsciously repeat them to ourselves over and over again. Each time our creative self tries to open a door, these unconscious traps close it again.

In Why Employees are Always a Bad Idea (and Other Business Diseases of the Industrial Age), Chuck Blakeman makes the point that Frederick Winslow Taylor created a mental mindset within corporations that says "People are Lazy and Stupid." Basically, managers unconsciously repeat this mantra to themselves every time they make a decision, and you can see the trail of congruent choices ever since.

What if we make a similar mental shift by coming up with a different mantra for us to repeat when making decisions, something like, "People are Smart and Motivated?" This seems like it could be a fruitful workshop exercise: present a set of decisions, and make them first with the old mantra, then the new.

Thursday, July 10, 2014

Transparent Salaries

This Planet Money episode explores experiments where everyone knows everyone else's salaries. We've been trained so strongly against this that even in the case where the company was started from scratch with transparent salaries, some people initially had trouble with the idea.

The guy who created the startup using open salaries made two observations that really stuck out for me:

  1. It's a lot easier to have transparent salaries: you stop spending time keeping them secret and negotiating them, and more time doing the work of the company. Also there's no drama when someone accidentally finds out someone else's pay.
  2. It eliminates a lot of bad behavior because you can't hide it. For example, you can't pay a woman less than a man for the same work because everyone could see that.
I wonder if transparent salaries also create more of a "we're all in this together" feel. People have a hardwired sense of fairness, and this seems well-served when things aren't secret. Also, discrepancies can be quickly remedied rather than waiting for the next "review cycle." The review cycle itself might change or even go away with transparent salaries, being replaced with more open and dynamic evaluations.

I've also heard of experiments where pay is set by (in effect) the wisdom of crowds, so your peers set your salary. This has a number of effects, but a huge one seems like it would be your perspective of who you serve. In the traditional hierarchy, you serve your boss who sets your salary, and so you are effectively discouraged from being a team player. But when your teammates set your salary, you have a special interest in ensuring they are happy with your work.


This person had a negative experience with coworking and decided to change to a conventional space.

The first coworking space I visited was in Manhattan and it was particularly uninteresting: some tables in a room. Manhattan coworking is at a decided disadvantage because just finding ANY space there is difficult, so the marketplace can be around space rather than the finer points of the experience.

The fact that the coworking space she went to was only open table space makes it different than all the other spaces I've visited. Virtually every other space has three options: the low-cost open table space where you come in and grab what's available, the dedicated desk, and the dedicated office. It sounds like what her team really needed was a dedicated office, but she seemed unaware that this was an option with coworking spaces -- perhaps those options simply haven't appeared in New York for some reason.

To me, the real red flag was the "mandatory orientation session" where they were presented with a "raft of sponsors and their offerings." I've never seen this at any of the coworking spaces that I've visited, and it sounds like a way for the coworking space to make money more than a service for the coworkers.

She also seemed to expect that everyone there would be interested in forming companies, and was disappointed when not everyone was. In general it seems like there's a mix of folks -- some are independent and just want a space to work with like-minded people around. I hear that it's not uncommon for companies to actually form within a coworking space, but it's not an incubator.

The comments are worth reading; notably it looks like coworking spaces might be causing evolution in other kinds of workspaces as well. What other new ways can we imagine?

Wednesday, July 2, 2014

Why Women Still Aren't Thriving in the Workplace

One of the TEDx Denver talks sort of addressed this issue, and on the drive back I listened to two others that also touched on the issues, from TEDx Women. I found all of them frustrating because I feel like they missed the central issue.

If I were giving such a talk, I would start with the Einstein quote (apparently paraphrased):
We cannot solve our problems with the same thinking we used when we created them.
Men created the workplace. Just "allowing" women into that workplace isn't going to make it a place where women thrive, because it's still "the workplace designed by men." I understand this because it's the same workplace I don't want to participate in.

Our culture constrains us. When I was in graduate school, I heard stories from the (very few) women in engineering about how some of the professors would tell them, flat out, that women didn't belong in engineering. I'm sure those professors are retired by now, but that's the culture we're coming from.

Everyone must be participants in the actual design of the workplace, and that means it's going to look and feel very different. It may bear little resemblance to the "traditional" workplace. So far, all such attempts have been met with the fiercest of resistance, cries of un-businesslike and that-couldn't-possibly-work (defending a system that has produced up to 80% "disengagement"). But some will take hold, eventually, places that are designed both for and by everyone

So far the only system I've seen where everyone participates in organizational design is Holacracy (to clarify; I hope others exist but this the only one I've had any direct experience with, by taking the training). As impressed as I am with Holacracy, I do wonder whether there are subtle constraints that I am blind to that might be inappropriate. These might be preventing us from seeing a different way through (I don't know; I'm just describing my hyper-skeptical analysis process).

Saturday, June 21, 2014

"The Innovator's Dilemma" Debunked

It seems like the more popular and faddish a business book/movement is, the more likely it is that the ideas within are chock full of magical thinking. I've previously written about the fake science so predominant in the world of business books, but when lots of people are talking about the wonders of a particular set of ideas, I find myself pondering whether, this time, there might be something behind the enthusiasm (because, on rare occasions, there is).

A combination of happenstance and intuition has kept me away from "The Innovator's Dilemma," and this New Yorker article has now relieved me of any need to investigate it. The article debunks the idea that there might have been anything remotely approaching science behind that book -- it's yet another business book that posits an idea, then seeks anything to support that idea while studiously ignoring anything that might disagree, just as I describe in the fake science posting.

It's only disappointing that it's taken this long -- the book was published in 1997 -- to discredit it. It takes far less effort to generate BS than to debunk it. Apparently "Innovator's Dilemma" theory predicted that the iPhone would fail -- how, after such a monumental demonstration of the poor predictive ability of that theory, has it thrived for so long? (Answer, probably: we like what it says). After hunting a bit, I could only find a few pieces that I would qualify as critical analyses of parts of Christensen's book:

I'm sure there are parts of Christensen's theories that have use, but he falls down in enough places that figuring out what works and what doesn't is "left as an exercise for the reader." When you want me to do the work but you still keep getting the money, I categorize that as "not serving the customer."

That's one of the big challenges of this project. The business world is inundated with people claiming to have "the answer," and you basically can't trust any of them, so each one must be analyzed and picked apart, looking for the flawed thinking. It's a lot of work and the answer is almost always "nope, just more BS." With time, I might be getting slightly better at it but it always seems like a lot of effort and it's easy just to get angrier each time you discover that someone is -- intentionally or unintentionally -- presenting misinformation as fact.