Half full – optimism or complacency?

Change is relentless and the impact of change has no pity for those who are its victims. It has always been so and history is full of the miseries of those caught up in periods of significant social, political or economic transformation. We appear to suffer collectively from an innate urge to improve our lot on the one hand and a paradoxical attachment to the status quo on the other. One of the illogical consequences of this inner tension is a strange and often unsupportable belief that ‘things’ were better in the past.

Given the many strands of change that appear to be weaving themselves into our destiny, is this generation heading unerringly for victimhood? These strands of change include globalisation, urbanisation, technological development, de-industrialisation of the developed world, industrialisation of the developing world, climate change, greater competition for natural resources, shifts of political and economic power. Will they provide the means for emerging power hubs to dominate and control the world population at large? Possibly but not necessarily so. While recognising that there are too many places in the world where the cost of change is still paid in blood and destruction, there are enough signs of creative stamina and resilience to persist in hope. We must grab hold of those aspects of the strands of change that liberate, inspire and enable individuals to participate fully in the societies and economies within which they live, pulling them into place as a global web of mutual interdependence. OK, so that is just some high-flown rhetoric but it is also possible to do …… only not in a blog.

This is not to say that writing does not help. The work of science fiction writers and futurologists has been invaluable in stimulating our thinking by framing possible futures; individuals such as Ray Bradbury, Isaac Asimov, Terry Pratchett, Raymond Kurzweil and Peter Schwartz come to mind as leaders in this regard and no doubt there are many others whose names should be added to this list. I expect that I will come back to this mishmash of a subject area and try to make more sense of it for myself.

The glass is half full; I am an optimist and enjoy the bounty with which I have been blessed but I am also aware that a glass supped from will in time be empty and that it is already time to give some thought to replenishment.

Command, control and complexity

IBM’s 2010 CEO study has just been released. I discovered this on reading Irving Wladawsky-Berger’s blog (here), a reliable source of information, interest and insight. Irving Wladawsky-Berger provides a concise summary of the report which can be downloaded in a number of languages from this IBM site (here). The central message of the study is that CEO’s regard complexity as the primary issue facing them at the moment and identify three key behaviours that will enable them to ‘standout’ in a complex world: embodying creative leadership, reinventing customer relationships and building operational dexterity. The choice of words provides an easy target for those of us outside the corporate hothouse environment; however, to cavil at them would be a mistake. While the words may appear tired and uninspiring, the study provides interesting data on the thinking of many in leadership positions around the world. The study is more a survey of current attitudes and thinking than a synthesis of solutions but it is none the less useful for that. It shouldn’t take long to scan through it …, so do have a look.

What is surprising is that the proponents of complexity science have not been more vocal. Many have been labouring in this field for the past 20 years or more, so why are they not expounding on the relevance of their scholarship? A quick visit to the web sites of a few centres of complexity research reveal lots of interesting activity as you will see if you visit the sites representing groups at Oxford University (here), the Santa Fe Institute (here) and the London School of Economics (here). Perhaps it is not surprising that the focus of this work is quite academic; a follow up scan of what some consultants are doing in the ‘complexity space’ reveals a blend of the well packaged and the abstract. The well packaged stuff is very specific but is easily dismissed by those (almost inevitably the great majority) to whom it is not relevant; the more abstract treatment is generic but appears often to be so diffuse as to be hard for anyone to apply.

There appears to be a gap for which I hope a number of practitioners are heading. If so, there will soon be a wealth of interesting and stimulating material to challenge the thinking of leaders in industry, commerce and all the other areas of public and private enterprise.

Let us hope that they look into one concept from earlier days of the complexity community which goes by the description of ‘simple rules’ and is very attractive to anyone who takes comfort in an established relationship between cause and effect. Then if trying to establish a reliable relationship between cause and effect at the macro scale is doomed to failure, perhaps such a relationship can be established at the micro scale. All that then remains is to agglomerate all the predictable micro effects into a macro effect (or more likely, one of a number of possible macro effects) and the basis for making a decision re-emerges. Well, perhaps not every time but starting with simple rules that can be tested is arguably a better way of managing risk for most of us than ‘taking a punt’ on complexity at the macro level.

What’s in a story

I am struggling and at the same time I am reading “More time to think“, a book written by Nancy Kline and published last year. What am I struggling with? Well, I am struggling with the idea that I would like to write a story about the service I am trying to develop and to offer to the business world ‘out there’. Nancy Kline suggests that I need a thinking partner but the cat is asleep so I will have to play both parts in this dialogue, thinker and partner alternately. This dialogue takes the form of question and answer and I think that I have answered the first question; what I want to think about is writing a story about the service that I am offering  to the business world.

The next question is, “What am I assuming that is stopping me from writing that story?” That is a good question. Perhaps the answer is that I am assuming that I do not really have a story to tell. I am assuming that I cannot pull together a coherent and valuable analysis of the experience that I have accumulated over many years working in a number of industrial and academic environments. I am assuming that as an engineer I am not qualified to advise on ideas or working practices that are more in the strategic domain. I am assuming that what I have to say has been said before. Oops, hold on there one minute.  There are several assumptions here; which is the critical one? I think it is that my lack of qualifications will result in my producing a half baked story which will be neither interesting nor convincing to its readers. Even that assumption has another assumption underlying it: that economics and behaviour  are key disciplines in understanding the business environment, in neither of which I have any formal education.

What is the validity of these assumptions? What happens if I assume something different? Is it true that I have no formal education in economics and behaviour? Yes. Is it true that these disciplines are central to understanding the business environment? I think so and there is certainly a case for arguing so. Do my lack of formal qualifications bar me from making a useful contribution to the discussion on strategy and working practice? No, of course not. Whether anyone will listen will depend on how I write and what I write. Let me assume that if I approach the task with a clear focus on delivering value to the reader there is a fair chance I will deliver it.

So how do I free myself to contribute? By recognising, acknowledging and celebrating my background; by engaging with individuals who are debating these issues, becoming a conduit to creative thinking, critical analysis and innovation. And by revelling in the process.

I hope that I have not short changed Nancy Kline in this short exercise. I know it would have worked so much better with a genuine thinking partner but, honestly folks, the germ of a new idea has come to me during the past hour or so. To find out more about thinking environments, go to ‘Time to Think‘.

Sweet and sour

One thing that stands out for me in all the coverage of the Kraft takeover of Cadbury is what I see as the startling lack of ambition of the Cadbury senior leadership. Admittedly my view is UK centric, being largely informed by reports from the BBC and Financial Times. The FT is neutral in its reporting of this acquisition and yesterday’s (20th January 2010) leader is broadly supportive of the “… the UK’s openness to overseas bidders.” I am in agreement with that sentiment. On the other hand the FT’s front page headline, “Cadbury defends sell-out” is not without questioning overtones and it sits above an image of Kraft’s chief executive, Irene Rosenfeld who is smiling broadly, which suggests that Kraft are pleased with what they have achieved.

There is a section on the FT website devoted to this takeover; it includes a video interview with Roger Carr, the Cadbury chairman in which he defends the deal, and as with the headline, those words used to describe the interview are interesting in themselves. Perhaps I am reading too much into them. The interview is revealing as much for what is not said. While there is reference to achieving shareholder value, to the derisory nature of the initial offer and to the viability of an independent Cadbury, there was no indication that the senior leadership team had the stomach for continuing to lead an independent Cadbury and achieve better value for all their stakeholders than they eventually negotiated with Kraft. That is a depressing admission and calls into question whether an eventual sale was always the objective once Cadbury’s former drinks business had been split off, an option that has been the subject of press comment for some time.

In general I don’t have too many hang-ups about business ownership but I do think that something of value will be lost in this transaction. For one thing, the intangible experience of working for a company called Cadbury will soon be a thing of the past and that may matter to a significant number of people. It is an irony that many of them may well have ‘gone the extra mile’ in helping Cadbury achieve the good trading figures that sustained the company’s defence during the takeover bid. Also the confectionery world will almost inevitably become a less diverse place. No doubt the brands will remain but I will be surprised if the character of the products does not become less distinctive over time.

So why has this happened? It would seem that £8.50 per share was a more potent representation of the Cadbury leadership’s vision than a viable, global, independent confectionery business. At least in Cambridge (U.K.) we have Hotel Chocolat to fall back on for local consolation.

On the shadow of a reflection

I have reached an age where a number of my contemporaries have died; some have been friends, close friends and others have been members of my extended family. Though my parents are both dead, as yet no other member of my immediate family has died. A number of people whom I hold dear are at this moment in the latter stages of disease.  I am slightly surprised by my reaction though perhaps I should not be; this exposure to death over the past few years has normalised death for me.  I recently realised that I don’t fear death any more, at least not the fact of death. I am not so sanguine about the process of dying as I don’t think I cope with pain very well and having watched my father’s progressive deterioration with Alzheimer’s, that is not an experience into which I would like to lead my family.

What has brought me to this place? Though I still regard myself as young-ish and there are still a few years to go before I reach three score years and ten, no longer would my death be untimely.  Though I know there is more I can offer,  I recognise that I have already had a pretty ‘…good crack of the whip’.  This is not the case for everyone; there are untimely deaths where cruel disease or circumstance takes away a young life before its promise can be fulfilled. There is also the wanton death caused by disaster, poverty or warfare. Such deaths do not fit neatly into a tidy model of the human life cycle; we should fear and resist them lest we become immune to the fragility of our common human heritage. For some people, far too many people, the normality of death is horrific but for me, the normality of death has brought acceptance and I count myself exceeding lucky.

Perhaps the fact that  I don’t think that death is the end also has a part to play. But death is the end for earthly relationships and bereavement is hard to take at any age. I don’t want people to be sad when I die but I know some people will be. Inevitably, they will lose something; they will lose what I am to them, what I represent to them; an ear, a shoulder, a hand, someone who keeps the other side of the bed warm, chases them round trees, drinks with them in a pub, the grandparent of their child to be. So we cannot entirely draw the teeth of death. Perhaps one trite answer to anticipating bereavement is to give everything of yourself to your circle of significant others so that, by the time you die there is nothing left to give  and nothing left to miss.  Trite, trivial, unrealisable but not entirely without truth.

Part of me is driven to apologise for sharing these morbid thoughts. They have been buzzing round my head for some time now and I have written them down because they encourage me and I hope they will encourage others.

Bring back hanging out

This is written on the back of the longest recreational break I have had since I left school in the 1960’s. It all began with a week on a canal boat, which was followed by a friend’s 60^th birthday party, then two weddings on the Pacific coast of North America a fortnight apart and, after a further week, a cousin’s 40^th wedding anniversary. There was even a sort of symmetry about it all – two celebrations for oldies flanking two celebrations for the up and coming generation with a subconscious subtext that relates to passing on a baton of some sort. We, of the post war, baby boomer generation may not have resolved the political, economic and social issues of our times but we have been able to watch our children emerge into a social network of family and friends. In a sense they seem to be better at it than we were, certainly more active as this particular community of cousins has established a lively ‘in your Facebook’ relationship.

Why is this important? Here follows a digression rather than a direct answer. Though each of these celebrations involved an event on a particular day, they were each the focus of concerted involvement of family and friends for days before and after the event. Circumstances, principally being on holiday, allowed us to be involved in these pre- and after-shock happenings which ranged from a visit to the manicurist (for some reason blokes didn’t get to do this) through meals, cycle rides, walks to simply hanging out together.

Now hanging out is a term that I associate with teenagers with nothing better to do, so the experience of ‘whole family hanging out’, as conceptualised by American friends was a novelty to me. It needed to be approached with all sorts of British caution and reserve -‘we don’t want to intrude’, ‘they will need family time’ and so on. We were a little slow to allow our friends to know their own minds and to accept their invitation as an invitation.

Why was the experience something of a revelation to me? Perhaps because in recent years I have been far more willing and able to allocate time to a purpose than purpose to a time. By that I mean that the purposes I espoused were largely limited and specific, with some measurable outcome in prospect. This is not to say that I am not aware of the larger purposes in life and that I do not pay lip service to them; however, my behaviour strongly suggests that I prioritise the specific: reading a book, cutting the grass, even writing a blog. This is strange when the outcome I count as most rewarding is that each of our children not only has an established network of friends but that they are firmly established in their community of cousins.

Returning to the question, why is this important? a couple of words that reflect past experience in the pharmaceutical industry come to mind: verification and validation. Verification confirms my identity, that I am who I am and verification has the greatest authority when it is provided by the family from which I come. As a parent it is reassuring to know that your children’s identity will be verified for them long after I am gone by as wide a community as is possible. Verification is important to us all but is often overlooked. Validation on the other hand is more immediately recognised as a need; it affirms our value and can come from any community of friends or family.

Communities are created by building relationships; relationships are built over time and it seems to me that hanging out is all about allocating the purpose of building relationships to a time, whether it be an hour or an afternoon or a week. If this is something we did in our teens, my message to myself is, “Bring back hanging out”.

Thoughts on ‘The Big Shift’

Have you heard of the ‘Big Shift’? If not. You could do worse than cast your eye over these blogs (The Big Shift and Irving Wladawsky-Berger) for an introduction. The Big Shift is a phrase coined by John Seely Brown, John Hagel III and Lang Davison to describe a transformation of the business environment which they assert is working out around us right now. The transformation they describe is from the Industrial Age to the Information Age and is driven along by technological development. I don’t think I can improve on Irving Wladawsky-Berger’s summary of the thinking behind the Big Shift so do follow the link above and read his review. I also agree wholeheartedly with his concluding paragraph which I reproduce here: “ The Big Shift is a very innovative, difficult and important project. I strongly urge you to look at the full report to learn more about their objectives, methodologies and conclusions. You may not agree with all the measures chosen by the Center for the Edge team, but that is to be expected. Like any complex initiative, getting going is what counts. The Big Shift project will undoubtedly keep getting better and sharpening its results over time, especially, as it practices the spirit of learning and collaboration that it so strongly advocates. (from Irving Wladawsky-Berger’s blog)”.

Seely Brown, Hagel and Lang identify three waves of change which they call foundational, flow and impact. The foundational wave reflects the development of information technology and the almost contagious nature of its penetration into all the nooks and crannies of our society and, in one form or another, into the majority of social groupings on the planet. The second wave of change reflects their perception of the temporal nature of value, particularly in the context of knowledge; they believe there is more value in the flow of knowledge than in the stock of knowledge which changes in the foundational wave are rapidly making obsolete. The flow wave can be quantified in terms of the flow of knowledge and the movement of talent – it is interesting that the former seems to spread and the latter to concentrate. Seely Brown, Hagel and Lang’s third wave describes the impact of the two preceding waves on performance in the context of firms, markets, consumers and creative talent. One telling statistic they quote is that the average return on assets for US companies is now 25% of what it was in 1965. Another interesting observation is that value seems to be migrating from corporations to individuals, in terms of better deals for individual consumers and better compensation for individual ‘creative’ talents.

The study was performed at the Deloitte Center for the Edge of which Seely Brown and Hagel are co-chairmen and Lang Davison is the Executive Director. Their work represents a substantial advance in our ability to describe and therefore to discuss the economic environment of today. It raises a number of questions in my mind, which I hope will contribute to the dialogue:

1. The authors appear to imply a correspondence between the three waves of change as measured by the Foundational Index, the Flow Index and the Impact Index; as far as I can see, there is no fundamental reason for any correspondence. Am I missing something?
2. The authors appear to expect the rate of foundational change as measured by the Foundational Index to moderate; this may well be the case but given the demands of achieving a sustainable post industrial economy I don’t see it happening any time soon. Do they have a timescale in mind?
3. The concept of consumer disloyalty seems to reflect a corporate-centric perspective. This almost implies that customer disloyalty is bad; I would rather start from the position that customer loyalty is something to be earned.  Is this project corporate centric in its approach or is it more generic?
4. The authors describe a transition from scalable efficiency to scalable learning. I am concerned that learning is not enough; it has to lead to action and for want of a better word, I can only come up with the idea of scalable adaptation. Does this make any sense to you or to the authors?

The authors have pitched a significant contribution into what was a void – I had begun to wonder why John Hagel’s blog was less active than it had been. Now I know  and what they have written is well worth the wait. Stimulating stuff – so many thanks for the brain food.

Does piece work have a future?

Octinver is a new business and in this early phase of its existence, I have been spending some time thinking about business models. I guess what I do is best described as independent consultancy though I am not entirely happy with that description. One very persuasive approach for the independent consultant, strongly advocated by Alan Weiss, is to use perceived value as the basis for establishing fees and to avoid like the plague using ‘day rates’. He highlights with this guidance the contrast between valuing input as measured by effort multiplied by time as opposed to valuing output directly. On reflection I am convinced that valuing output directly brings obvious benefits for the knowledge worker and for his or her clients; it involves a process of establishing value, a responsibility to provide value and a considerable degree of freedom in how the value is delivered.

It led me to consider how our current pattern of ‘9 to 5’ work has evolved as it appears to a classic example of the ‘effort multiplied by time’ formula. Apart from the obvious fact that the availability daylight probably had something to do with it but I suspect that organised labour began with slavery which then provided the model for patterns of industrial employment. No doubt there is extensive literature on this, ranging from the philosophical through the political to the biographical and one need look no further than Wikipedia to confirm this.

What managers like is control; slavery provided complete control over all aspects of life, wage employment provided pretty extensive control, sanctified through the concept of employment for life which for all its altruism is solidified around the belief that the employer knew best. If managers have control of input then they can manage their resources to generate the output they require.

Given that we have managed to survive and prosper in the developed world without slavery for nearly 200 years, is it possible to envisage a modern society that can flourish without deference to the ticking clock in most if not all instances of what is called work? Is it possible to imagine a more equal society, perhaps not in wealth but in the freedom to decide how to spend time and the confidence to negotiate a value on the output of labour. To keep managers happy the point of control would need to be transferred from input to output; this brings to mind the comparison between ‘push’ and ‘pull’ which is a subject that Hagel and Seely Brown have written about quite extensively. If I am not mistaken it also has something of the ‘kaizen’ approach about it so it is not totally out of sync with recent business thinking.

While it is possible to imagine at least partial manifestations of the ‘pull’ in manufacturing, it requires of me little more determination to see how the ‘pull’ model might work in some service areas of our economy – apart from consultancy that is. Consider for instance security (including the police and fire services), welfare, health care as well as commercial services such as banking. I guess that one of the best examples of a ‘pull’ service might be the lifeboat service in UK which is largely resourced by volunteers. What is also of interest is the increasing prevalence of ‘patient led care’ in the treatment provided by the UK National Health Service. There is experience, then, on which to call for reference when contemplating alternative models of work.

What is really interesting here is that once you get below the surface there is scope for quite radical redesign of working patterns that could be healthier for the individuals and corporations alike.

Is this a good time to talk about trust?

Am I delusional in thinking that the general mindset of the UK population is far more upbeat today than it has been in previous periods of economic difficulty that I can remember? How do you square such a relatively positive outlook with the experience of losing a job, losing savings or seeing the value of a pension plan evaporate in front of your eyes? I don’t really know. But I wonder whether after the genuine anger that follows loss has passed, more people are looking to themselves and to each other for help in working out the way forward rather than expecting the elusive ‘them’ to come up with a solution. This could point to a greater degree of self reliance and decreasing expectations of state support. Both of these developments are probably for the better though I hope that the corresponding reduction in reliance on the state and financial institutions does not lead to a loss of trust in the community.

Perhaps there is an opportunity to catch the mood by introducing a serious attempt to decentralise power; you never know. To quote a quote, Bagehot in the Economist reports that Gordon Brown has written in the Independent, “There is no option I will not consider if it redistributes power.” Bagehot (The Economist, 30th May 2009) goes on to suggest transferring power from the executive to Parliament though he does admit, “Boosting MP’s freedom and remit might seem another strange response to their misdemeanours . But it is necessary and overdue.” Perhaps giving MPs a bigger role in government will instill a greater sense of responsibility. And why stop with Parliament? What about having another look at devolving power to the regions as well as to Scotland, Wales and Northern Ireland? It might just be the right time for the national mood to respond to loosely coupled government and that a central government orchestrating (as opposed to managing) regional activities will see increasing levels of enterprise across the country.

It is not that anyone seriously believes that local politicians as a group are any more honest than their national counterparts or even that the national politicians are particularly dishonest, in spite of the recent revelations of quite unseemly behaviour. The issue is for the state to trust its citizens more, giving them greater responsibility with the corresponding authority to manage local affairs for the betterment of local communities.

There is an interesting irony here because I think that Mrs Thatcher was instrumental in fostering this greater sense of self belief while, if I remember aright, she was also instrumental in centralising power away from regional authorities. Perhaps now is the time to build on the former change to reverse the latter.

Nice, forgiving, tough and clear – all at the same time

Imagine a situation  where two people are arrested on suspicion of a crime. They are interrogated separately so there is no communication between the prisoners who have two choices; to defect (that is,  inform on the other suspect) or to cooperate (with the other suspect, not the police) by saying nothing. I have seen various descriptions of the various outcomes; if they both remain silent, they both go free or suffer a minimal penalty, if they both defect, they both suffer a major punishment while if one defects and the other cooperates, the cooperator suffers the major punishment but the defector goes free and may even reap some reward. This scenario is called the Prisoner’s Dilemma and is, I think, well known in the ‘Game Theory’ world; I believe that it also received much interest in the ’60s and ’70s in the context of the Cold War arms race.  If the situation only arises once, the rational decision is to defect but if the situation arises repeatedly a different optimum emerges.

In the 1970s an academic at Michigan called Robert Axelrod set up a tournament  in which the entrants were required to submit  computer program to play the part of one of the prisoners. The programs were paired of against each other, in the way of a cup competition; each round consisted of 200 cycles of the scenario. The program that won was submitted by an academic from the University of Toronto called Anatoly Rapoport who adopted a very simple strategy called ‘TIT FOR TAT’. TIT FOR TAT cooperated in round one and  then chose to do exactly what the other prisoner had done in the previous round for every round thereafter. This outcome surprised Axelrod and he ran a second tournament sometime later where the challenge was to beat ‘TIT FOR TAT’; not one of 62 entrants succeeded.

‘TIT FOR TAT’ can be characterised as:

• ‘Nice’ in that it never defects first
• ‘Forgiving’ in that it rewards cooperative behaviour
• ‘Tough’ in that it punishes uncooperative behaviour
• ‘Clear’ in that opposing programs (the other prisoner) can work out the pattern pretty easily.

So what is the relevance to business? Perhaps it is in the pertinent questions that are raised about effective behaviours in competitive situations? Who are the prisoners and who the authority structure that can ‘reward’ or ‘punish’? Is business a prisoner in the competitive marketplace and when does cooperation become anti-competitive? Or are business colleagues all prisoners within the business world? What role does performance management have in encouraging or discouraging behaviours? Does it foster nice, forgiving, tough and clear behaviours if these are seen as desirable?

Since Axelrod’s competitions, I believe that there has been considerable development in modelling of the Prisoner’s Dilemma. Eric Beinhocker describes an evolution of ‘TIT FOR TAT’ embodied in a strategy called Fair. This addresses the situation where both prisoners adopt ‘TIT FOR TAT’ and there is the potential for ‘lock in’ to either mutual cooperation or mutual defecting. Axelrod began to look at strategies for situations where the game history suggested that the other prisoner could be bluffed. Lots of interesting stuff and good reading material for those who are so inclined. The Prisoner’s Dilemma is quite well covered in the literature and there is a good general description in a book called ‘The Origin of Wealth’ by Eric Beinhocker, already mentioned ( see pages 221 to 233) and in ‘Complexity’ by Mitchell Waldrop (pages 262 to 265).

The Prisoner’s Dilemma is an example of a ‘non zero sum’ phenomenon; the net loss of freedom if both cooperate is minimal while the net loss of freedom if one or other defects or if both defect is an order of magnitude greater.

Cooperation then gives the best overall outcome for two prisoners but it is unlikely that the majority of cooperations within business will operate on a one to one basis. Inevitably our cooperations are many to many and these can probably be represented usefully as a series of networks with multiple nodes. It is important for the business then to understand how networks operate in order to ensure that our knowledge and competency networks are cooperative, robust and resilient. There is quite a body of academic research in this area which is relevant at many levels within business and the research is important in order to extract  simple rules from complex phenomena (for instance, be nice, be forgiving, be tough, be clear).