On the Efficiencies of Business

So, I’ve been going to therapy for a few months now to deal with depression. One of thing that has come up is how I don’t really release a lot of the emotions that I am feeling and one of them is anger. I typically swallow that to stay diplomatic and deal with whatever situation as well as I can. I think that I’ve been stewing about this for a while and mentioning it to my friends periodically. I don’t feel that business leaders respect my career path and don’t understand how to actually make their businesses more efficient.

Excluding the past two years, the majority of my career has been focused on Lean, Six Sigma, or Lean Six Sigma (yes all of them are different in terms of how you approach continuous improvement). I have run projects, developed courses, facilitated strategic planning events for companies like AMD, but the entire time, I never truly felt secure in my role. At Samsung, we had lay-offs and last some employees, at AMD, we definitely lost some and my Director actually decided to be let go to save a number of my coworkers. This is in spite of the fact that our group had saved the company measurably millions of dollars over the 1.5 years I worked at AMD. We were always on the chopping block. Then while working at Cambia (Regence Blue Cross Blue Shield) I was laid off, even though the result of my training program included winning a national Blues award and saved the company a lot of time and money. My team easily paid for itself more than once over while we were there (my team was me and my employee Phil).

As we all know Insurance companies are always raising premiums. The underlying assumption is that these businesses are actually working to continually drive down their financial overhead, but those damn regulations keep getting in the way to drive up cost. This is just flat out wrong. These businesses don’t actually know how to drive improvement in their organizations. The only way they can even imaging improving their business is to hire an organization like McKinsey or BCG which costs millions and gets little to no result. The results they do provide are typically brought about by recommendations internally to the organization that leadership is unwilling to implement unless told about them by an expensive consulting group.

This is problematic because it doesn’t actually change the culture of the organization to drive continual improvement and innovation. As I’ve written in the past Innovation and Improvement are positively correlated. Furthermore, these training classes help expand people’s networks, which also significantly improve innovation as well.

So, first of all, I’m pissed off at corporate leaderships for not understanding the value of continuous improvement. Second, I’m pissed off that it’s just accepted that businesses always figure out ways to be more efficient. This isn’t true. If it was true there wouldn’t be a large number of people in their mid-50’s looking for work after a very successful career in continuous improvement. If these businesses didn’t think that the best way to improve efficiencies was to cut costs and then have someone else do two people’s work, this wouldn’t be a problem.

You can reduce headcount and drive up efficiencies, but only if you provide your people with the right tools and the requires true investment in the business. Although, all continuous improvement efforts pay for themselves if you aren’t just looking at how much a few people cost that are part of the team. You need to weight that against the positive gains they are making for the organization.

I’m pissed off about this because I feel like Michael Bolton from Office Space “I shouldn’t have to change, he’s the one who sucks.” I have had to completely change my career, which I was really passionate about because I don’t trust corporate leaders to try invest and buy in to continuous improvement. Maybe this is short sighted and I just need to find the right company. But I’ve looked I’ve been at a number of them and I’ve heard stories from other people that have been laid off (while i was interviewing for the position Phil filled) for exactly what I’m talking about here. So as a response I’ve tried to protect myself from that by avoiding applying for those jobs.

I loved doing that work because I knew at the end of each day and each project, I made someone’s work life better. Which is awesome. You listen to their problems, which helps them, but then you provide them with the tools to make change and to fix their current situation. When they look at how that aspect of their job is going to work after you finish the project, you can just see how much happier they are. You can see that it allows them to focus on the thing they were hired to do, not deal with some bullshit that was there because it’s always been there.

Businesses need more of this. The culture needs to change from top to bottom. It’s the role of the Lean Manager to change the culture so that people want to do continuous improvement. It’s the role of the business leader to provide the right incentives to do this as well.

Values in an Agile/Lean/Innovative company

This is part of my Lean Disruption Series where I’m looking at Lean, Agile, Innovation, and Lean Startup.

None of these methodologies can be adopted for free. They require a great deal of firm introspection. Understanding how processes interaction with people and values is vital to adopting any of these approaches let alone a combination of these approaches.

Metrics are one of the best examples of how there can be conflicts between stated values, values in making decisions, how resources are handled and how processes are structured. The famous saying “You manage what you measure” is right in a lot of ways. Many companies claim that they value customer satisfaction, however many of these companies do not actually do anything with the satisfaction surveys they do get. Comcast is the most obvious example of this. Comcast doesn’t really value customer satisfaction because they measure their customer support on how much they can upsell to the customer anytime they are on the phone. This changes the processes their customer support must use, rather than designing processes to enable single call resolution, their processes are designed to enable selling more products. Their employees, the resources, are rated based on this and if they don’t meet those goals they are unlikely to do well. Considering the Verge’s Comcast Confessions series most of the resources at Comcast do not feel valued. This all points to the true values for Comcast being retention at all costs and more revenue per user measured in Churn and ARPU (Average Revenue per User) respectfully.

Agile Manifesto from ITIL’s blog

For a company to adopt an Agile approach to developing software, the paradigm of what the organization values must radically change to align to the Agile Manifesto. In most software development the concepts on the right are what are valued through a Project Management Office. The concepts on the left are typically considered only at the beginning or the end of the project or not at all. Working product is the goal of a project, while customer collaboration inclusive only in the beginning getting requirements.

Switching from the right to the left creates massive cultural upheaval at an organization, where power is shifted down and out. It is shifted down to the team level, where managers in the past made all the important decisions Product Owners, Scrum Masters, and developers make the decision now with the customers. Power is shifted out through increased collaboration with the customer. Customer centricity forces the company to understand what the customer really wants and more quickly respond to changes in their understanding of their needs. This does mean that the “requirements” change, however, in many cases due to the uncertainty in a technology, interface, or some other aspect it was impossible to properly articulate the actual need until there was an example in front of the customer.

With these value changes there must be process changes to that properly reflect the change in the way the values require work to be completed. In the case where Single Call resolution is the most important metric reflecting the value of true customer satisfaction, processes must be built to enable that – such as training, information repositories, and authority to truly address customer needs at a single point of contact. In software development rapid iteration with continual feedback is a process that must be built to enable that.

This changes are not free and require true commitment from leaders across the organization. Without their commitment any adoption of these frameworks is doomed to failure.

Agile and the Lean Startup

This is part of my ongoing series devoted to understanding the connection between Disruption Theory, Lean Startup, Lean product development, and Agile software development.

The Lean Startup is most likely the best example of how to translate Lean into software development directly. This set of management tools uses nearly all the Lean tools identified in the famous texts of Lean, such as Toyota Way, Lean Thinking, and Toyota Production System. In fact there are so many similarities between the two people have accused the author of basically writing a book about Lean and not adding anything to the topic. I, personally, don’t agree with this as the portions about pivoting is definitely not part of the Lean framework and is novel capability he introduced.

Furthermore, he’s had to translate a great deal of the language from manufacturing or office settings into a development setting. While there are similarities there are differences between a piece of finished goods and a completed piece of code. This difference is that the code can be pushed to “production” servers and active for users, while the finished good has to be purchased by a customer, which still may take weeks to occur (if the production system is linked to purchase orders and directly to customers). To that end Reis pushed to make as many changes to production as quickly as possible – not without testing of course, but as soon as testing was completed the change went live. This is an extreme case of single piece flow. One change goes through testing and pushed live.

Pushing in the “Continuous Deployment” model of course causes a lot of issues if you don’t have robust testing. You need the testing to be fast but comprehensive. It’s impossible to do this from the beginning so over time the team has to develop more and more sophisticated tests based on how the team breaks the existing piece of software as they deploy changes. This is where Root Cause analysis plays a key role. Do a 5 Why’s analysis (ask why 5 times until you come to an underlying root cause) fix that problem so it never happens again. In the case where you cannot prevent the issue then you need to be automatically testing for the issue to fix it before you publish the change.

Agile has similar concepts in that they there are short cycles of development called “sprints” these sprints can last anywhere from a week to a month. At the end of each sprint the goal is to have a series of features that are deploy-able (including testing) that a customer would be willing to pay for. These pieces of work are broken down into something called a “minimum viable feature” which is smaller than a product but not so small that it wouldn’t completely work. For example, an MVF of WordPress would be the “publish button” initially it would need to convert all the text in the text editor and turn everything into a viewable website and create the URL associated with that article. Over time new features can be added like the auto-tweeting capability that exist now.

One common theme between both approaches is the concept of minimum viable product, which is a set of features that makes up the product. The difference between the two approaches in developing the MVP is that the Product owner does this in Agile, while the MVP is determined through a great deal of customer interaction in Lean Startup (Ideally the Product Owner is doing a similar activity for the customer but typically acts as a proxy).

There hasn’t been a lot of authors that have looked into combining these two approaches. There are a lot of similarities as they both emerged from the Lean philosophy, which means they should be fairly easy to combine into a larger framework. The only book I’m aware of that has even attempted to tackle this is the “Lean Mindset” by Tom and Mary Poppendieck. Even in this book though, they have decided to go with a 4 step approach that has more phases than what the Lean Startup recommends. They propose the stage gate to help determine minimum levels of details. I believe that this is because of the typical levels of bureaucracies in organizations, where a Project Management Organization will require adhering to some sort of phased gate approach. The Lean Startup uses Pivots as a way to manage projects that are failing, but not with the same level of rigor or structure as the approach the Poppendiek’s recommend. Instead, the Lean Startup approach recommends setting goals and targets for metrics (non-vanity like number of views) determining when to pivot. The timeline has to be long enough to get a clear view of what your customers actually want.

Adoption of Agile compared to Lean

This is part of my ongoing series devoted to understanding the connection between Disruption Theory, Lean Startup, Lean product development, and Agile software development.

In many organizations the adoption of Agile software development techniques have been adopted rather quickly. For those unfamiliar with Agile software development, the point is to focus on user experience through developing software that is created through user stories (there’s a lot more to it obviously). Agile grew out of an understanding of Lean practices, where there is a strong focus on learning, daily standups, and understanding where and why things went wrong. This includes the use of the 5Whys which was highlighted in the Lean Startup. In away the company becomes a learning organization as there is a set meeting every sprint to reflect on the last few weeks of work. Agile was initially conceived around the turn of the century and has seen steady adoption over the past 15 or so years.

Many of these ideas came from Lean. While retrospective isn’t specifically called out in Lean, it happens consistently through a Plan Do Check Act cycle. Furthermore it happens through Root Cause analysis which happens on nearly a daily basis whenever issues arise. Much of the most ardent Lean practitioners are found in manufacturing, however it is making headway in other areas of the organization over time. Lean was Popularized in the early 90’s by the book “The Machine that Changed the World” but is much older than that and had been adopted by Toyota competitors as early as the 70’s.

So, then why, when Lean is the inspiration for Agile (as well as the Lean Startup), has Agile been heavily adopted while Lean has not? I do not mean to say that Lean isn’t used; it’s used a lot of places. However, it’s not used in the bulk of companies around the world or used uniformly throughout an organization. Agile has been adopted as a methodology across many industries and within many different types of companies. It is also not possible to say that one works while the other doesn’t. Both have been shown to improve processes and drive cultural change within an organization. I think that Agile has been more quickly adopted in broader corporate America than Lean because, similarly to Lean, it was made by and for the people that use it the most; Corporate IT. IT/Software development has owned the deployment of Agile practices which has made them much more successful at adopting them than those same corporations adopting Lean practices.

Agile has had the luxury of being successful in many organizations in a very public manner. Which has lead to a lot of top down support and required adoption of the methodology. This makes adopting specific methods for project management significantly easier for adoption of any given methodology. In fact, Lean and Six Sigma deployments are only successful whenever those deployments are attached to specific strategic initiatives. With IT any project that is funded for development is by definition strategic resulting in clear alignment between the Agile deployment and the execution of the project. Lean typically does not have this luxury.

Furthermore, Lean is not well regarded in many leadership circles as it is not typically taught in high level MBA courses. Agile on the other hand has made it into Masters programs for both IT and Computer Science. Meaning that the leaders responsible for owning processes and project results learned about how to deploy Agile in their education and it was a highly stressed practice. On the other hand Lean is part of Industrial/Manufacturing Engineering and to specific business niches. Which means that there’s a clear misunderstanding of Lean and the management practices that accompany the tools.

Coming to Agile from the Lean perspective, I believe that Lean practitioners have a lot to learn from the Agile community around adoption. Much of the actual practices are extremely similar and anyone with a strong Lean background will be able to transition into an Agile environment easily. The transition the other direction will be only slightly harder, mostly because of the broader range of performance metrics associated with Lean compared to a handful with Agile.

Diversity, Vital but Difficult

Increasing diversity at work is extremely difficult. There are all sorts of unconscious biases in the work place, including the words we use to describe jobs. Language that appeals to mostly guys could be a serious turn off to females. Calling people “Hackers” like in the Fast Company linked above, not only turns off females, it turns of men too. It has a connotation of a specific type of work ethos that doesn’t necessarily mesh with the type of environment a lot of people want to work in. While it’s awesome for fresh out of college graduates, for many experienced employees it sends the wrong message.

Diversity is a worthy goal, but it also needs to be tied to performance improvements in the organization. Not because you want to make a decision to turn it off or not, but because you need to know how successful it is and how it’s impacting the organization. If you’re hiring more women, how do you think that’s going to impact your company? Is it going to increase the number of releases, the number of novel features, make the product more appealing to women in general? The answers to these questions are incredibly important because the results should shape where your organization is going over time. Diversity isn’t going to just impact the team, it’s going to move the company. As a leader you should expect a similar result from the African-American and Latino communities as well.

Sociology research has indicated that diversity in backgrounds, even something like living abroad or knowing another language, dramatically increases the number of good ideas that come out of a group. Developing a clear plan with metrics will help leaders, that may not have bought into the plan, to understand the true value.

Unfortunately, this means that there is a group of workers that are going to either actually be negatively impacted or will feel like they are being unfairly called out. Scott Adams of Dilbert wrote about this just a few days ago as it has actually impacted his career. He had to leave two careers over diversity pushes, but he knew as a white male engineer that he’d be able to find work in other industries because he was a white male engineer. Other groups do not have that luxury. The Scott Adams of this world aren’t the problem, it is the people that feel that this is the wrong thing to do are being attacked by these initiatives. This is something that needs to be addressed immediately as it can seriously poison the culture of the company. It will make the diversity hires feel like they were only hired because they were a diversity candidates not because they bring something to the table. My wife has told me she has directly been told that before, which is unfair to her because she’s an amazingly brilliant woman.

There are a few ways to deal with recalcitrant people. One is the help them leave through a comfortable severance package. Obviously this would need to be handled carefully to avoid any potential lawsuits. Secondly, it needs to be clear that there is a place in the organization for white males in some fashion. Help them help with the diversification of the organization. For the highly experienced have them mentor some of the candidates so they can support those new employee’s career growth, they know the organization best and know where it needs help the most. Enable talent to move to the best places for them in the organization through mentoring. Provide mentoring to this cohort of employee by both minorities and others that have already bought into increasing diversity.

Increasing diversity is difficult because it’s painful. It means a great deal of change for everyone involved. The incumbent employees will have to adapt to a new work culture, while the diversity candidates might feel aggression towards them. It’s important for leaders to create the right type of environment where everyone can succeed and grow.

Restrictions Can Drive Innovation

As a Lean process improvement guy as well as someone that really loves reading about innovation I’ve always taught my students that regulations, limitations, and restrictions on processes, equipment, and activities offer us an opportunity to innovate around those rules. The way that I describe it is that rules place you in a box, but within that box you can move up and down and diagonal and develop some really interesting ideas because of what you can’t do. However, you don’t focus on what you can’t do as much as focusing on how you can avoid that and what you CAN do.

I saw a picture to a great discussion about how gluten free diets are forcing, at least one chef, to be more innovative in their cooking. I’d post it, but the image is so large it’d take up the entire post, so I linked it above. Essentially the chef had a dish with polenta on it and a base that was all glutenous flour, but he figured out a way to make it all polenta, which actually created a unique dining experience that he felt offered a superior taste.

Another area where regulation has been the root of many innovation is the financial sector. They complain the most about regulations because it’s “bad for the economy” or something like that. However, CDO’s and everything that caused the last collapse was in response TO regulations. They figured out how to work around the regulations and make even more money than before. In fact, many banks started to follow suit because they weren’t able to post as high of profits and were getting hit by Wall Street for under performing comparatively.

This is one of the reasons why I personally don’t see value in fighting regulation other than to shape it in one direction or the other. The companies that are able to exploit the regulation the best are going to end up being first to market or extremely fast followers. Meaning they will make a great deal of money and likely dominate the market. If you look at regulation as a “disruptor” and an opportunity to disrupt the regulation, you’re going to do really well as a business.

When Piracy is Easy, How Do You Compete?

Popcorn Time is something that I’ve been hearing about for a while now but I’ve never really looked into. Effectively it’s a tool that gives you an easy to use User Interface to find Torrents for your favorite TV shows and movies. Torrents, by the way are a type of file and download methodology. Effectively you get tiny bits and pieces from a large number of different users across the internet. This makes it harder to track the individual files, prevents it from easily being removed from the web, and helps manage internet usage across the multiple users. In the days of Kazaa, you directly downloaded from a single peer, now you’re downloading from multiple users, so if one goes offline or reduces the bandwidth they are sending the file to you it has minimal impact.

Torrents are what’s called “piracy” and are on the pirate bay and any number of other sites that share those files. Since they do not have to follow strict contracting like Netflix, Comcast, Hulu, HBO, and other streaming services you have access to the movies you want whenever you want them. For instance, Netflix recently lost access to the Avengers, probably because of the cost of keeping in their library and Disney trying to create artificial scarcity of the legal product. You can find extremely high quality torrents out there to watch it if you can’t get it for free. In fact I’m sure it’s on Popcorn Time right now.

Because of these difference and the historic complexity and risks of downloading a torrent, Netflix had positioned itself as a way to prevent piracy. Now this might not be the case, as Netflix is beginning to see Popcorn Time as a legitimate threat to their business model. I’m not surprised that Netflix sees risk here and I think that this is a good thing for Netflix. It means they are expecting their business to be disrupted and that they can take proactive steps to address it.

What can they do to keep their business afloat and continue to fight piracy? Well, since they are essentially seen as a cash cow on two fronts – ISPs and Content producers (MPAA and TV companies), they need to clearly articulate the amount of piracy that was reduced once the content was put onto Netflix and then show the increase in piracy after the content was pulled from Netflix for contractual reason. If Netflix can’t afford to keep it on their network, then with an easy to use app like Popcorn Time, the content will be pirated, which means that any revenue artificial scarcity was hoping to drive or to be extracted from Netflix at an elevated price goes out the window and the content will still be consumed.

In some cases piracy will happen regardless, but if the trend continues were people are switching back and forth between cord cutting and going back to cable because of rising costs of apps, then apps like Popcorn Time will become more popular because they can completely replace Hulu, Amazon Prime Videos, HBO Go, Netflix, etc.. You could be a cord cutter with this and pay for one app to get your live sports and be good to go. Content producers will begin to lose out again, because they are trying to squeeze the companies that provide easy, relatively cheap access to their content. I’d rather not go back to that, but if my costs keep rising because the companies I choose to support can’t afford the content that I want, then I’d have no choice.