Category: Personal (Page 2 of 3)

Breaking down innovation accountabilities

I’m attending an ‘innovation workshop’ today.  I’m looking forward to it but it also feels a little bit dirty.  Innovation is important – but I’m not sure it can be managed directly.  Management of anything politicises it; but with vague notions like ‘innovation’ it’s hard to establish the accountability required to balance the politics.

The session today will interesting.  I’m sure we will have the inevitable ‘what is innovation?’  discussion.  But I’m sure the normal process of people wondering how this might help their career will interfere with that.  Also, participants come from multiple vendor and client organisations so this will limit the sorts of ideas that can be discussed.

I’m not lamenting this dynamic –  it’s a natural part of work life.  But the trick will be to quickly convert this forum into a set of processes that ensure value is directed towards the sponsoring organisation.  I believe breaking up ‘innovation’ into a number of separate processes for which accountabilities can be established is the answer to this.

My first cut of the breakdown is as follows:

  1. Idea management process (capture, rate, sponsor, formally reject, and reward/recognition)
  2. Scanning (internal and external scanning of practices, technologies, and trends)
  3. A formal approach to analysing the organisation
  4. Initiative delivery process (to manage sponsored initiatives)
  5. Slack for brainstorming and black-market idea generation

Some of these, such as scanning, may have separate accountabilities for each organisation (to create competitive tension).  The idea management process may be owned by the sponsoring organisation (to ensure transparency to the sponsoring organisation).  Items 3 and 4 are likely to be tendered.  Item 5 may be measured by the innovation forum but be considered an accountability of business units.

Confessions of an aeroholic

“Airlines are notoriously cyclical because revenue is very sensitive to changes in demand. Profits are greatest when strong demand results in full planes (‘‘load’’) and high prices (‘‘yield’’), but they can disappear quickly when demand falls because costs are relatively fixed and flights can’t easily be cancelled.”

via Confessions of an aeroholic.

I’m currently working on the very edges of the airline industry (via IT outsourcing).  I can relate to the ‘aeroholic’ tag.  It’s a very compelling industry and while I don’t invest money in it I certainly invest time in it.

So, somebody important let me under his umbrella this morning.  I spoke briefly to him and it got me thinking about Boston Consulting Group (from where he had worked as an adviser to Qantas for 10 years).

I think the airline industry’s highs and lows have been managed through sophisticated financial devices (fuel hedging, for example, or deferred losses).  This is by necessity, but I think this process might have had it’s own unintended consequences.

I’m currently focusing on what those unintended consequences might have been… because that is where I will be able to have the greatest impact.  There are some non-optimal behaviors and outcomes I have noticed.  I think if I understand them in terms of the necessities above things will make sense …

Technocracy and Politicisation

I’ve mentioned one of my theories before:

I have a theory that whenever a single specialisation becomes the dominate or controlling specialisation it turns the coordination into a technocracy.  I might be using technocracy in the wrong sense but I’m using it to mean that a single specialisation (i.e. a single branch of technical knowledge) becomes dominate.

It is in this sense that I believe organisations are largely technocratic if they are run by technical specialists called ‘managers’.  In another example, I think this is part of the process that has occured to create the current ‘crisis’ in the financial services industry:

In this case, rather than financial knowledge acting as just one input into decision making, and as just one service available to individuals, financial knowledge became the single dominate knowledge used in decision making.  This in itself was a problem because it interfered with true and proper determination of ‘value’.  But it would also have the effect or corrupting the body of knowledge itself (perhaps not in the textbooks, but ‘in use’).

Eventually, the knowledge of finance not only supersedes all other knowledge, but the finance knowledge actually disappears as it is replaced with what is convenient or beneficial to those in finance.  This process could be a simple as people entering financial jobs even though they have no passion or knowledge of such things because that is where the money is (literally in this case, but it doesn’t have to be that way).

There are two sides to this coin that should be understood.  The fact that control by specialists is the dominant coordinating mechanism in a society (or an organisation) is bad for the society itself. This is basic technocracy.  On the other side of the coin – this control by a particular specialisation is bad for the specialisation.

It’s not that the people who are part of the elite and elevated specialisation don’t have any power.  They do have power, and they can have certain privledges.  However, the actual specialisation itself is hurt.  The knowledge in that specialisation is corrupted.

Not only is the knowledge in the specialisation corrupted, but the group of specialists is itself politicised.  I don’t just mean it becomes a ‘hot topic’ but that it becomes focused on power relationships.  Now I’m not saying anything new if I’m just say that management is political.  Everybody knows this.  But there are deeper, but related impacts of this politicisation process.

In addition to the corruption of knowledge, the politicisation of a group effects the way the group is entered or exited, the amount of diversity tolerated in the group, and ultimately the ability to make non-incremental impovements in performance.

If you understand that open systems (i.e. low political / legal barriers to entry and exit) are good over time, and that diversity is good (again, over time), and that operational innovation is good (if you can even tell when it’s occuring!) then you can see that politicisation is bad for the group and the organisation it supports.

Example from software testing

To use an example that not simply about general management – let’s look at testing.  I’ve spent some time over the years setting up testing capabilities – either for individual projects or across organisations.  I’ve also watched others do the same.  One of the mistakes that is often made during this process is to not hold the testing team to the same standards as developers.

As background, a testing capability provides an independant verification of the software that has been developed, often also ensuring it works with other software developed by other groups.  The purpose of this process is to find issues with the software, but more fundamentally to manage the completeness of the project.

Fundamentally, test management isn’t so-much about finding defects as it is about continuously asking ‘Are we finished?’ and then ‘If we don’t know if we’re finished how can we find out?’ and then ‘Are we finished finding out?’ and then ‘Are we finished?’…

In order control this process there are a number of rules the testing organisation needs to place on developers.  These rules ensure the software doesn’t change in an uncontrolled manner while it’s being tested.  For example:

  • developers should check their own software first, then we’ll check it
  • once the testing team is checking your code, you can’t change it
  • the testing team will tell you if you have to change your code, and we’ll say it was a defect
  • once you fix the defect, you have to check your code again before we check it

These are good rules.  And they work together to provide an element of control and governenace over the software development process.  They provide a gatekeeping mechanism at the end of a project that, if used effectively, will reduce issues with live production systems.  Though the process itself is very expensive (but that’s a different issue).

The problem occurs when the testing team doesn’t hold itself to the same rules.  Examples of this include the case where a defect is raised in error because the test being perform was itself incorrect. This is still a defect – in this case a defect in the test itself – but the testing team doesn’t like to see it that way.

A more subtle version of this is that the defect is never raised but rather the test is changed without a defect being raised.  In this more subtle example the testing team is not holding themselves to the same stardards they hold the development team because they are changing something without a defect.

The testing team sees these decision as ‘saving time’.  But the governance issue is that the testing team are not being ‘tested’.  These means that the testing team have no objective criteria for performance management. They have been elevated above the rules.

By elevating the testing team such that they have special privledges – i.e. that they don’t have to follow the rules – the group becomes politicised.  People who want the special prevlidges enter the group, the knowledge of testing becomes corrupted, and operational innovation is restricted as the group uses its power to focus on changing others and not themselves.

All of these ‘problems’ are not problems if you are in the group.  However, the testing group will be different group then had it not be politicised, the performance of the group may not be as it would have been, and the overall performance of the organisation that the group is a part of may also suffer.

This is melodramatic in many ways.  Because these things will only occur over time, and only if all others things are equal.  In reality other groups and specialisations will compete for power and the dance continues…

Comical Economics

If you want to understand economics, the current state of the finance industry, and some of the corruption caused by bizarre inflationary money systems, it’s worth reading How an Economy Grows and Why It Doesn’t.

It’s a comic – which is kinda cool – and it was published in 1985 – which makes the parallels with the current financial [industry] meltdown kinda eerie.  (Even the web site is old!  It proudly declares ‘best viewed in Netscape’!)

The comic was written by Irwin Schiff, who is the father of Peter Schiff.  Peter Schiff has been getting a lot of airtime at the moment as the (a) ‘Dr. Doom’ who predicted the crisis.  He actually thinks things are going to get worse (for America) as the situation turns into a currency crisis (for America).

(On a side note – I like how America seems to be calling for a ‘unified approach’ to dealing with the global financial crisis.  Well of course they are!  If you are going to inflate your money supply you need every other country to do the same thing so that your country isn’t disadvantaged relative to other countries!  Sheesh!)

I’m only up to page 70 of the comic (so may words, man!) – but it appears that’s also where the world is up too, or a least the public reporting of it.  So I’m excited about reading what happens next!

Interestingly, while Peter Schiff is doing well his father Irwin, who developed the comic, appears to be currently in jail.  He is some sort of tax denier who doesn’t only dislike tax but thinks it’s ‘voluntary’ – and has argued as such in court.

From what I’ve read his argument is wishful thinking – he seems to be finding the word ‘voluntary’ in various documents relating to the American federal tax system and reading into it that people don’t have to pay if they don’t want to.  But I think what these documents are actually saying is that the tax system relies on voluntary compliance with the law as opposed to knocking on millions of doors and asking for tax (i.e. mandatory compliance).

Sure, if everybody stopped paying tax then the IRS wouldn’t have the resources to move to ‘mandatory’ compliance – but that doesn’t mean everybody wouldn’t be breaking the law.  However, that wouldn’t mean everybody would be prosecuted either – it would mean a revolution, maybe blood would be spilt.  I don’t want blood – let’s just continue to pay our taxes and complain.

Sorry Irwin – I could have saved you 12 years.  That said – I like your style and agree there is something a little fishy (ah, get it?  Fishy! – read the comic) about paying people so they can buy votes.  But, as I said, always pay your taxes.  If a mugger with a knife wants your wallet you give it to them right?

What would a healthy banker say about the the economic crisis?

After my last few vague ramblings on the economy I wanted to hear what somebody who actually knew what they were talking about thought.

I found the ideal candidate: John Allison, former CEO of BT&T Bank (which hasn’t gone broke), speaking for the Ayn Rand Institute.  Now don’t get me wrong, the folks at the Ayn Rand Institute can be a bunch of crazy mofos!  But this guy was facinating and makes a lot of sense.

It’s a dense presentation (as in, there is a lot of content squeased into it) so follow the related slides and pause it often – as I did.


The talk and accomanying slides can be found here.

The financial system vs. financial institutions


… what struck me most was Geithner’s repeated conflation of our “financial system” and our “institutions”. Mr. Geither’s unspoken assumption is the fixing our financial system implies ensuring that incumbent troubled financial institutions are “strong”. But that’s not right. Our financial system is composed, in part, of financial institutions, but it is supposed to be larger and more robust than any specific firm. Three years ago, Mr. Geithner would have readily conceded that financial institutions are supposed to come and go, rise and fall, succeed and fail as a matter of market discipline, and that our system is made stronger by that flow of creation and destruction than it would be if some state-manged cadre of crucial banks were at its core. Of course, we all knew three years ago that some institutions had become “too big/complex/interlinked to fail”, but we viewed that as unfortunate, and would have foreseen that if any of those banks got badly into trouble, the goverment would be forced to intervene and resolve the bank at some taxpayer cost, as it had in the case of earlier TBTF banks. Three years ago, no one would have suggested that the strength of our financial system and the strength of Citibank are inseparable.

– from Interfluidity

Economics still isn’t a formula

Everybody is citing the article in Wired on the Gaussian copula function.  Apparently, everybody had been applying some clever maths to finance decisions so they thought they had a mathematically valid way of making accurate predictions while eliminating most variables.  It probably was mathematically valid.  But was it ever economically valid?

The Austrian economics folks at the Mises Institute are basically saying that it’s difficult to imagine an Austrian economist, a reader of Human Action: A Treatise on Economics, to fall for the idea that a simple formula can predict the future.  Boingboing, similarly, has suggested that the moral of the story is ‘STOP MATHS NOW!’  Which isn’t to say maths is bad – it’s just that it’s not really economics.

My take is that the Misians are right (again) and this is a failure in the understanding of economics, not a failure in maths or the creator of the formula.  But I don’t have to make any comments on this because ‘Andrew’ has already said all I want to say in his comment on Boingboing:

#7 posted by Andrew, February 24, 2009 1:19 AM

Economics is not formulas. Economics is not higher math. Economics is not experimental science. Economics is not even quantitative. Economics is logic applied to the choices that people, and business, make constantly. The logic of marginal value, opportunity cost, uncertainty, and all the rest is as good as it’s ever been — it’s universal as long as time and resources are finite. It’s when you start to say that the demand elasticity of natural gas times the velocity of money, minus the consumer price index, is correlated to the relative humidity in china with r^2=.83, that you’ve fucked up irrevocably.

What’s this got to do with management?  In management terms, applying a formula is never the basis of a capability.  Like another great ‘Andrew’ said in a comment to my last post, the banks appear to have been saying ‘yes’ to anybody who asked for money – and now they are saying ‘no’.  This itself is the simplest of all formulas – and it doesn’t in itself give you that all important capability of being able to differentiate between good and bad risk.  And if you use a formula long enough you’ll loose the capability itself (if you ever had it).

I’m becoming convinced that the financial system is completely broken.  One of the reasons that managers didn’t put the breaks on use of the formula is sighted in the Wired article:

In hindsight, ignoring those warnings looks foolhardy. But at the time, it was easy. Banks dismissed them, partly because the managers empowered to apply the brakes didn’t understand the arguments between various arms of the quant universe. Besides, they were making too much money to stop.

(See also comment here)

Note that they were ‘making too much money to stop’ and yet you might ask the intelligent questions raised here:

And one question:
I’d like for the knowledgeable people here to tell me what would have the banks done with all the money they had to lend if they wouldn’t have gone for the bad risk? Isn’t everybody so loaded with debt right now that there is very little good risk left? Was this crisis even avoidable?

These raise an interesting point – what do you do with ‘too much’ money?  How, or why can there even be ‘too much’ money?  If you are expected to make a certain return, to create a certain level of growth in any market conditions, then you need to spend or lend your spare money.

This is the obsession with growth that I think must end.  We even define a recession in terms of a lack in growth – why does there always need to be growth?  Also, if the government is fiddling with interest rates and indirectly providing cheap loans how do you as a business deal with sort of price eroding competition?  Your forced to make dumb / risky decisions I guess – but perhaps you also start getting the wrong signals making it hard to make the right decisions.

The other point it raise is the different between earning money and creating value.  The money that was risked on risky loans is now gone.  Never mind the details but that value has been whipped from the economy.  But the destruction of value coincided with the making of money.  Again, something is wrong here.  In this sense people were being paid for taking risks.  This shouldn’t ever be the case – people should be paid for either creating value or because the risks they take paid off.

But there is more than one agent here.  There are the employees of the banks and the banks themselves.  Of course, you have to pay employees for turning up – even if they are risking money and eventually driving your business into the ground.  So it’s not the financial folks themselves that are taking the risks.  It’s the organisation.  It’s the bank itself.  It’s the process, structure, culture – in short, all the capabilities that make the organisation what it is – that by its very design choose the wrong people, had the wrong controls, gave incentives for the wrong behavior.

And yet – it’s the Banks that are getting bailout money!  I can’t understand this.  People don’t appear to realise that the institutional structure is temporary.  The exact nature of who owns banks, who runs banks, the boundaries between banks, and the intermediation of different agents (existing or potential) is all we have when it comes to a financial industry.  The only way a solution can possibly exist for any financial crisis is for the institutional structure that is overlaid over value to change.  The only process that will cause universal (or at least, on average) improvement is to change this institutional and agent structure so that it works more effectively and so that more capable ownership and control exists.

Bailouts to banks will effectively allow the current owners of banks to continue to own the assets -despite- the fact that they have proved they can’t managed them effectively.  This doesn’t stop at direct ownership – it also include the investors.  If people have invested in banks that are not managing value correctly they have failed to invest wisely.  A bailout helps them retain ownership -despite- making bad investment decisions.

If investors are investing in the wrong things, and if owners or corporations are managing assets ineffectively, or if risk is not being managed by a corporations capabilities the investment needs to not provide a return, the assets need to be moved (naturally, through sales) to somebody who can manage them, and different capabilities need to be engineered or given resources.

But – what is the magic formula for deciding all of this restrucing?  Well there isn’t one – it just has to be allowed to happen doesn’t it?

PS.  I’m not an economists so I don’t really know what I’m talking about.

Getting closer to Michael Costa

Some time ago I was trying to form my view on Michael Costa.  I never quite finished that train of thought – but I was definitely leaning towards liking him a lot.  

With that in mind I’m attend the following talk next Wednesday:

Michael Costa – What makes good or bad government?
Date: Wednesday 4 March 2009
Time: 6:30 for 7:00pm
Venue: Pazzo, 583 Crown Street, Surry Hills

Details are from Catallaxy.

Let me know if you are attending and I’ll see you there!

TRIZ as a pattern language for problem solving

After watching Merlin Mann talking about the idea of creativity patterns today, I started reading through volume 16 of Make magazine.  On page 57 there is a brief but interesting article about TRIZ.

TRIZ is an evolving set of patterns for problem solving which was first developed in 1946 by Russian Genrich Altshuller.  It doesn’t appear to be fully available on-line.  In fact, it doesn’t appear to be fully developed into a single definitive framework at all.  Nevertheless it appears to have some interesting things to say about problem solving.

From the Make magazine article:

…Altshuller observed that the same problem types appeared time and time again, and yielded to corresponding generic solutions…

This echos with what Merlin was saying about creativity patterns in his Macworld talk.  But how is this different to just knowledge?  It isn’t, I guess, but these sort of endeavors open up the scope of what we believe it is possible to have organised knowledge about. They also standardise how knowledge is organised.  Standardisation is important (in the sense that it allows efficient communication).

The essence of the TRIZ system appears to be utilising a number of patterns of interventions into a system in order to remove a constraint (or ‘Contradiction’) without compromising the system. To me this feels similar to the generative sequence approach of Christopher Alexander.

Alexander’s generative sequences unfold using a standard set of interventions into structure (which is system-like, I guess).  Also, when the intervention is made you effectively check for ‘compromise’ when you re-evaluate the degree of life / wholeness in the resulting structure before moving on.

This idea of removing ‘contradictions’ in TRIZ  also has echos of all that Ayn Rand ‘check your premises‘ talk.

Interestingly, I have always found the idea that contradictions don’t exist as very helpful in problem solving.  Basically, I see them as a signal to break something up into smaller and / or different parts.  I see disagreements between people as similar types of problems – and the breaking down of concepts into more elementary components usually means agreement can be found.

Of course, it doesn’t really matter if contradictions do or do not exist – the question is whether acting as-if they don’t exist is a useful problem solving tool.  And I think it is.

So, patterns can help problem solving.  And patterns are a ‘just‘ a way of organising knowledge.  And problem solving is about making system or structure interventions and then making sure you haven’t destroyed the integrity of the whole.

Management of knowledge work is a lot like problem solving.  So it’s likely to be pattern-based too.  MWT Collaboration Architectures are patterns…

More on Michael Costa, or Moron Michael Costa?

After my last post on Michael Costa, my wife accused me of having ‘a little man crush’ on Mr Costa.  To be honest I hadn’t yet decided what I thought of him due to lack of information.  This in turn being due to my generally underdeveloped interest in politics.  But I admitted to my wife that he had sparked my interest.  I wouldn’t say ‘man crush’, as such – it’s an intellectual, platonic thing.  Really it is.

In fact, up until last week – except for some vague notion that he had done something with the railway, and of course, that he was the NSW treasurer – all I really knew was that other politicians don’t like him.  I decided I needed to do a little research so that I could form my own opinion about him.  Because one thing I do know is that I’m not going to form my opinion of a politician based on what other politicians think about him!

I should note that I think trying to choose your favorite politician – or even one that you like – might well be like trying to choose your favorite episode of Friends.  In both cases they are essentially all the same.  In both cases, even if you do choose a favorite and decide to by the DVD, they come with a bunch of other episodes that you don’t like.

(I’m paraphrasing and otherwise bastardising a quote from a friend of mine in the above paragraph –  he said trying to remember your dreams was like trying to remember last weeks Friends episode)

I also know, or at least believe, the following:

  • being right doesn’t always make you popular
  • government might well be ineffective by design
  • it’s the person who is actually trying to fix the problem who gets the blame
  • sometimes everything is exactly the same as it always was but suddenly it’s your fault
  • some jobs are hard or damn near impossible and it takes balls just to try them
  • some of the way people behave can be explained by their context

Now, what I’ve learned about Michael Costa in my recent research is:

To be continued…

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