All Posts in Organizational Effectiveness

|In: Cognitive Enterprise|Last Updated:

Tom Friedman discovered the Internet ten years ago (The World is Flat, 2007). I’m sure you were as pleased for him as I was.

But to be fair to Friedman, he’s a smart feller who sometimes does have useful insights, like, for example, about Digital stuff. Without using the term once — and good for him, especially for not using it as a noun — he recently provided as neat a synopsis of how we should all be using the Digital adjective as I’ve seen (“Folks, We’re Home Alone,” New York Times, 9/27/2017).

Here’s the exact text:

We’re moving into a world where computers and algorithms can analyze (reveal previously hidden patterns); optimize (tell a plane which altitude to fly each mile to get the best fuel efficiency); prophesize (tell you when your elevator will break or what your customer is likely to buy); customize (tailor any product or service for you alone); and digitize and automatize more and more products and services. Any company that doesn’t deploy all six elements will struggle, and this is changing every job and industry.

Let’s take a closer look:

Analyze: In Friedman’s view this means finding patterns, presumably through the use of multivariate statistical techniques, leading to the well-known logical fallacy of thinking correlation proves causation.

For businesses, though, the framework of causality that leads to a pattern often doesn’t matter. If the data reveal a pattern — say, that the presence of fire fighters correlates with the presence of fires — it really doesn’t matter if the fire fighters are setting the fires or putting them out. What matters is that this is a good place to put a lemonade stand, because the data also reveal the pattern that fire fighters who are near fires are often thirsty.

Optimize: I know the route to the airport. But I still use Google Maps to get me there. Why? Google will route me around traffic snarls to get me there faster.

More broadly, we’re leaving the age of fixed-flow linear processes in favor of processes that dynamically adapt to changing situations. Take, for example, the OODA loop we’ve discussed in this space from time to time (observe, orient, decide, act).

More and more data (observe) means you need to use Digital technologies to analyze it for meaning (orient), followed by self-learning AI choosing a course of action (decide) and learning from the results (back to observe). Humans might or might not be involved in implementing the decision (act), depending on whether the action takes place in the physical or virtual world.

Prophesize: Look at the figure. It shows white noise. Since business first started eons ago, the best strategic decision-makers have learned to ignore noise, searching for the signal within it.

But as algorithmic traders have figured out, if you can make decisions fast enough the noise can be the signal. You just have to be able to respond to each change of direction fast enough. Do this and it counts as prophesy: “For the next x units of time we should expect our markets to follow this very short-term trend.”

Customize: Here’s something I’ve been writing about for years. Especially with increasing wealth stratification, the ability to tailor and customize, driven by affluent customers’ desire for uniqueness, will be a critical competitive differentiator. Luxury is, after all, relative, not absolute, which is why even the snazziest-looking Timex watch that keeps perfect time is not a luxury, while a Rolex, which, having a mechanical movement, keeps nothing resembling perfect time, is a luxury for those few who can afford one.

Digitize and Automate: I don’t know what the difference is between “digitize” and “automate.” I’m pretty sure one, the other, or both mean “have the computer do it, not human beings.”

Either way, the idea is that businesses can reconfigure themselves more quickly when everything is done in software. And they can, assuming modern application architecture, modern integration architecture, and short-cycle-time techniques like the Agile/DevOps combination.

Collaborate: This is a big one, and Friedman missed it. Individuals can’t do everything all by themselves. That takes teams, and teams of teams. Not groups. Teams. The difference: Members of a team trust each other and collaborate. Members of a group trust nobody, and negotiate. This slows everything to a crawl.

Companies can’t do everything all by themselves either, so the teams and teams of teams in question often consist of employees from more than one company. If they can and do trust each other they can collaborate. If they can collaborate they can deliver terrific results together. If they can’t they probably can’t.

So let me ask you: How much is your company willing to invest in trust?

Comments

|In: Cognitive Enterprise|Last Updated:

Before there was Equifax there was British Petroleum. Before British Petroleum there was Enron.

All three were responsible for disasters. And, all three are evidence of something every who leader needs to embrace:

It’s always the culture.

Sure, skills and experience, tools and technologies, and processes and procedures matter too. For example: Just as you thought it couldn’t be any worse comes the revelation that in Equifax Argentina, an internal system that provided access to customer records had a backdoor, where both login ID and password were “admin.”

Proper security policies and procedures would have prevented this.

Just kidding.

For all I know Equifax Argentina’s security policies and procedures are just fine and dandy. If they’re out of step with the corporate culture they wouldn’t have made any difference. Culture wins every time.

Call it Lewis’s Law of Unnatural Disasters: When something goes terribly wrong you can bet there’s something about the organization’s culture that makes terribly wrong inevitable.

But in engineering your organization’s culture … and yes, culture is something to engineer … you need to consider your chosen solution’s ripple effects for the culture to be a positive force.

Let’s hypothesize that Equifax Argentina does have security P&Ps that specify what constitutes a suitably secure password — that the fault was a culture that resulted in nobody giving a damn. What cultural trait should its leadership be encouraging to prevent a recurrence?

The obvious one is a culture shaped so the employee handbook is law and everyone obeys it. That should do the trick.

It would. It would also create a culture where jailhouse lawyers are on a constant quest for loopholes that can only be closed by increasing the length of the P&Ps. Eventually, all your employees would need a year of study just to learn what’s in the handbook.

Beyond that, it would lead to a culture where checking off the boxes is what matters, not accomplishing the desired outcomes.

Worst of all it would result in a culture that combines blind obedience with a complete absence of risk-taking and initiative.

Compare that to a culture that focuses more on outcomes than obedience. Culture is loosely defined as “how we do things around here.” The cultural trait We don’t put people at risk” wouldn’t just eliminate the admin/admin login/password combo, whoever put it in place would suffer a fate worse than being fired.

They’d be shunned.

But there’s a complication in all of this that isn’t easily addressed.

Enron’s CEO and board chair, Jeffrey Skilling and Kenneth Lay pleaded the ignorance defense — yes, Enron the corporation was doing awful things, but they didn’t know about them. After Deepwater Horizon exploded, BP’s CEO Tony Hayward expressed a similar level of know nothing-ism.

Equifax’s executives haven’t yet pleaded ignorance, but it’s only a matter of time.

Which gets to the complication: They probably were ignorant, and in some important respects they should have been.

The best leaders don’t find ways to succeed. They build organizations that find ways to succeed. They can’t do this without delegating. They can’t do this unless the people they delegate to delegate.

In great organizations, employees at all levels have authority and take responsibility, to degrees that are surprising to those managers who consider any decision not made by themselves or someone higher up the chain of command to be an unacceptable risk.

Or as D. Michael Abrashoff, former Captain of the Benfold and author of “It’s Your Ship” put it, “I chose my line in the sand. Whenever the consequences of a decision had the potential to kill or injure someone, waste tax-payers’ money, or damage the ship, I had to be consulted. Sailors and more junior officers were encouraged to make decisions and take action so long as they stayed on the right side of that line.”

Sounds great. It is great. Only if someone on board the Benfold had done something reckless with Deepwater-Horizon-scale consequences, Captain Abrashoff very likely would have been ignorant, because that’s the whole point: The people in charge not making themselves decision bottlenecks.

Culture is certainly the first line of defense. But those pesky human beings being what they are, it isn’t a perfect, airtight solution.

Leaders also need metrics, controls, and governance mechanisms, to provide the guardrails that backstop culture’s lane markers.

But even with these, culture comes first because with the wrong culture, employees will find ways to jigger the metrics, fake out the controls, and game the governance.

What they won’t do without a culture that encourages it is take the risk of telling you something that should be happening isn’t, or that something that shouldn’t be happening is.

It’s always the culture.

Comments