Richard Veryard

Managing Business Transformation

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Just putting together the material for my new workshop next week.

This is the third day of my Business Architecture series. The first two days cover the six business architecture viewpoints. The idea is that people can tale these separately or together.

Day One – Modelling Business Operations 
Exploring process quality issues using the Activity Viewpoint, Knowledge (Information) Viewpoint and Motivation (Purpose) Viewpoint.

Day Two – Modelling Business Organization 
Exploring business relationships and strategy, using the Capability Viewpoint, Responsibility (Organizational) Viewpoint and Cybernetic Viewpoint.

Day Three – Managing Business Transformation 
Process guidelines and roadmap for business architects to analyse and manage structural change in large complex organizations.

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The Price of Fish

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Michael Mainelli and Ian Harris have written a wide-ranging survey of economics, choice theory (game theory, psychology and ethics), systems theory, chaos theory, global warming and evolution. So what’s all that got to do with the price of fish?

One of the themes running through the book is that the price of fish bears no relation to the value of fish, especially if we are concerned about long-term value and the sustainability of fish stocks.

Oscar Wilde famously defined a cynic as one who knows the price of everything and the value of nothing. This definition has also been applied to accountants and economists. Michael and Ian are leaders of the Long Finance initiative, a movement within the City of London that aims to overcome this kind of short-term financial cynicism.

Michael and Ian describe the price of fish as a wicked problem – a problem that lacks easy definition as well as easy answers.  “Sustaining the supply of edible fish is a wicked problem that presents global risks.” (p 301) And yet they suggest that the system might possibly sort itself out. “As fish run out and have to be sustainably fished, the historic underpricing of fish ceases.” (293)

But this is no time for naive optimism, and the system will undoubtedly need some intervention. “When the price is the same as the value, there are opportunities for sustainable financing. So far, price has not equaled value for fish. This is the biggest, wicked decision-making problem of all: knowing how to set a price that equals the value.” (p 295)

In other words, the problem is not just the alarming dwindling of fish stocks but the collective cynicism that not only led to this problem but also amplifies it and resists dealing with it effectively. The key word in the problem statement is the word “set” – even if a few clever people can agree what the right price of fish should be, the real challenge is to set this price into global trading and consumption systems.

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The Price of Fish

by

Michael Mainelli and Ian Harris have written a wide-ranging survey of economics, choice theory (game theory, psychology and ethics), systems theory, chaos theory, global warming and evolution. So what’s all that got to do with the price of fish?

One of the themes running through the book is that the price of fish bears no relation to the value of fish, especially if we are concerned about long-term value and the sustainability of fish stocks.

Oscar Wilde famously defined a cynic as one who knows the price of everything and the value of nothing. This definition has also been applied to accountants and economists. Michael and Ian are leaders of the Long Finance initiative, a movement within the City of London that aims to overcome this kind of short-term financial cynicism.

Michael and Ian describe the price of fish as a wicked problem – a problem that lacks easy definition as well as easy answers.  “Sustaining the supply of edible fish is a wicked problem that presents global risks.” (p 301) And yet they suggest that the system might possibly sort itself out. “As fish run out and have to be sustainably fished, the historic underpricing of fish ceases.” (293)

But this is no time for naive optimism, and the system will undoubtedly need some intervention. “When the price is the same as the value, there are opportunities for sustainable financing. So far, price has not equaled value for fish. This is the biggest, wicked decision-making problem of all: knowing how to set a price that equals the value.” (p 295)

In other words, the problem is not just the alarming dwindling of fish stocks but the collective cynicism that not only led to this problem but also amplifies it and resists dealing with it effectively. The key word in the problem statement is the word “set” – even if a few clever people can agree what the right price of fish should be, the real challenge is to set this price into global trading and consumption systems.

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On Readiness

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In his presentation on Enterprise Agility at the SCiO meeting yesterday, Patrick Hoverstadt introduced the concept of Yarak.

In falconry, the word Yarak describes a trained hawk that is fit and in a proper condition for hunting. According to the Oxford Dictionary, the word entered the English language in the 19th century, perhaps from Persian yārakī ‘strength, ability’ or from Turkish yaraǧ ‘readiness’.

Patrick explained that Yarak involves a balance between two forces – motivation and strength. The falcon has to be hungry enough to want to hunt, and strong enough to hunt effectively. So the falconer has to get the balance right: too little food and the creature cannot hunt, too much food and it can’t be bothered.

When I talk to people about building organizational intelligence in their own organizations, I hear two forms of resistance. One is that the organization has so little inherent intelligence at present that the task is daunting; the other is that the bosses wouldn’t want it.

When I take examples from glamorous high-tech companies like Microsoft and Google, this can provoke a somewhat fatalist reaction. People say: This kind of intelligence may be all very well for these hi-tech birds of prey, but ordinary companies like us simply don’t have the resources or capability to do any of this stuff. 

So it’s important to see examples from ordinary companies as well as from the glamorous ones. Every company has some intelligence, although it may be patchy, fragmented and inconsistent. So we need to find ways of linking and leveraging this intelligence to create a positive spiral of improvement.

As for the question of motivation, there will still be many organizations where the senior management team, perhaps lacking confidence in its own intelligence, will lack enthusiasm for developing intelligence across the rest of the organization. This may be a generation thing – the younger generation of management may be much more comfortable with new styles of management (such as “Theory Y”) as well as with social networking and other technologies.

Does this mean we have to wait for a generation, until the current bosses have shuffled off to the golf course or the Caribbean cruise? Not if the organization can start to develop intelligence in a bottom-up piecemeal fashion. In which case, what matters is the motivation and strength of the people and groups across the organization, and not just the motivation and strength of the bosses. Can we achieve some useful results without top-down support?

On Readiness

by

In his presentation on Enterprise Agility at the SCiO meeting yesterday, Patrick Hoverstadt introduced the concept of Yarak.

In falconry, the word Yarak describes a trained hawk that is fit and in a proper condition for hunting. According to the Oxford Dictionary, the word entered the English language in the 19th century, perhaps from Persian yārakī ‘strength, ability’ or from Turkish yaraǧ ‘readiness’.

Patrick explained that Yarak involves a balance between two forces – motivation and strength. The falcon has to be hungry enough to want to hunt, and strong enough to hunt effectively. So the falconer has to get the balance right: too little food and the creature cannot hunt, too much food and it can’t be bothered.

When I talk to people about building organizational intelligence in their own organizations, I hear two forms of resistance. One is that the organization has so little inherent intelligence at present that the task is daunting; the other is that the bosses wouldn’t want it.

When I take examples from glamorous high-tech companies like Microsoft and Google, this can provoke a somewhat fatalist reaction. People say: This kind of intelligence may be all very well for these hi-tech birds of prey, but ordinary companies like us simply don’t have the resources or capability to do any of this stuff. 

So it’s important to see examples from ordinary companies as well as from the glamorous ones. Every company has some intelligence, although it may be patchy, fragmented and inconsistent. So we need to find ways of linking and leveraging this intelligence to create a positive spiral of improvement.

As for the question of motivation, there will still be many organizations where the senior management team, perhaps lacking confidence in its own intelligence, will lack enthusiasm for developing intelligence across the rest of the organization. This may be a generation thing – the younger generation of management may be much more comfortable with new styles of management (such as “Theory Y”) as well as with social networking and other technologies.

Does this mean we have to wait for a generation, until the current bosses have shuffled off to the golf course or the Caribbean cruise? Not if the organization can start to develop intelligence in a bottom-up piecemeal fashion. In which case, what matters is the motivation and strength of the people and groups across the organization, and not just the motivation and strength of the bosses. Can we achieve some useful results without top-down support?

How to make change happen in government

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Steve Hilton, David Cameron’s one-time policy adviser currently on mid-term sabbatical in California, has given Stanford students some frank insights into the workings of Government.

  • The Prime Minister sometimes opposes the measures his own ministers put forward. He often finds out about these policies from the radio or newspapers.
  • Only 30 per cent of what the government is doing is actually delivering what we are supposed to be doing.
  • It’s a brilliant system for paper-shuffling people to be in control.  The bureaucracy masters the politicians.

I just wanted to make a few comments about collective intelligence and the role of the policy adviser.

Some Prime Ministers and Presidents have had an extraordinary ability to get through large quantities of paperwork and master the critical points. Cameron has many strengths as a leader, but this doesn’t seem to be one of them. As a consequence of this, he is effectively leaving journalists to perform a filtering function – thus he pays attention to an issue only when it is drawn to his attention by the media, and of course, this delayed attention may cause some irritation or embarrassment sometimes. Perhaps a more diligent policy adviser should have picked up some of these issues earlier?

In the system we may infer from Hilton’s description, journalists are not only performing a filtering function but also a sensemaking function. There is clearly a difference between the way a policy looks in some bundle of government papers and how it looks when it appears in the media. Again, we might have expected a diligent policy adviser to have anticipated how policies would appear to the public.

But it seems that the politicians and their advisers don’t control the volume of paperwork they are given to wade through. In his seminar, Hilton dramatically produced a pile of paper one foot high (representing four days committee output), prompting gasps from students. “The idea that a couple of political advisers read through all this and spot things that are bad, things that are contradictory, is just inconceivable”, pleads Hilton.

Of course it is, say members of the previous government including Damian McBride, Gordon Brown’s former political press secretary. Which is why the previous government had a greater number of political advisers, and a coordination process (known as the “grid”) allocating a manageable number of pages to each. McBride acknowledges that the grid sometimes resulted in leaks to journalists, and suggests that Hilton may have downgraded the grid in order to reduce these leaks, but argues that the grid was a key mechanism for effective government and that the problems Hilton complains about are an inevitable consequence of abandoning this mechanism.

It may also be a consequence of regarding the civil service as a malignant force, trying to pull the wool over the politicians’ eyes. (This was a great theme in the original “Yes Minister” series, but has turned into a tired joke in the 2013 series.) Edward Pearce stands up for the independence of the civil service, and complains that it is Hilton who is unrepresentative and unelected.

When Hilton talks about “delivering what we are supposed to be doing”, this presumably refers to some kind of top-down strategic plan, formulated before the election and presented in the manifesto. But this raises some important questions about the relationship between strategy and execution, and the possibility for strategies to emerge and evolve during execution.

Which in turn raises some questions about government as a learning system. Recent governments (including Blair’s New Labour) have had a focus on delivery, which emphasizes single-loop learning – getting better at achieving a fixed set of goals. However, this has to be balanced against double-loop learning – changing the goals to fit changing circumstances.

In an earlier analysis of New Labour and Delivery, two MORI analysts argued that delivery and achievement was at least partially subjective and rhetorical.

  • “Delivery” is not keeping your promises, it is convincing the public that you have kept your promises.
  • What matters is not what you promise, but what the public understands by those promises, and what expectations they arouse.

Hilton clearly agrees about the importance of external communication. He encourages his students to think about how policies can be “branded”, and suggests that policies often fail not because they weren’t very good policies in the first place but because they are poorly presented. That might be true, but it is also a common excuse: politicians genererally find it easier to admit to errors in presentation than to errors in policy.

Which part of this ecosytem has the longest memory?  Presumably the civil servants. And which part has the shortest memory? With some honourable exceptions, probably the media. According to one theory of change, when there are several subsystems operating on different timescales, it is the slowest system that controls the whole. And the Purpose Of the System Is What It Does.

Roger Mortimore and Mark Gill, New Labour and Delivery (IPSOS MORI May 2004)

PM’s aide exposes No 10’s lack of control (Sunday Times, 13 January 2013) (subscription)

John Harlow and Eric Kiefer, Shoes off, feet up, the dude lifts lid on No 10 (Sunday Times, 13 January 2013)

Patrick Hennessy, David Cameron finds out about policies from the newspapers, reveals Steve Hilton (The Telegraph 13 January 2013)

Damien McBride, Whither the Grid? (13 January 2013) Why did the Grid Wither? (14 January 2013)

Edward Pearce, The Unelected (LRB 25 January 2013)

James Tapsfield, Prime Minister often finds out about policies from the radio or newspapers, says former advisor Hilton (The Independent 13 January 2013)

Richard Veryard (ed), Fragile Strategy or Fragile Execution (Storify, December 2012)

Nicholas Watt, David Cameron’s ex-policy guru Steve Hilton criticised over policy remarks (Guardian, 13 January 2013)

updated 25 January 2013

How to make change happen in government

by

Steve Hilton, David Cameron’s one-time policy adviser currently on mid-term sabbatical in California, has given Stanford students some frank insights into the workings of Government.

  • The Prime Minister sometimes opposes the measures his own ministers put forward. He often finds out about these policies from the radio or newspapers.
  • Only 30 per cent of what the government is doing is actually delivering what we are supposed to be doing.
  • It’s a brilliant system for paper-shuffling people to be in control.  The bureaucracy masters the politicians.

I just wanted to make a few comments about collective intelligence and the role of the policy adviser.

Some Prime Ministers and Presidents have had an extraordinary ability to get through large quantities of paperwork and master the critical points. Cameron has many strengths as a leader, but this doesn’t seem to be one of them. As a consequence of this, he is effectively leaving journalists to perform a filtering function – thus he pays attention to an issue only when it is drawn to his attention by the media, and of course, this delayed attention may cause some irritation or embarrassment sometimes. Perhaps a more diligent policy adviser should have picked up some of these issues earlier?

In the system we may infer from Hilton’s description, journalists are not only performing a filtering function but also a sensemaking function. There is clearly a difference between the way a policy looks in some bundle of government papers and how it looks when it appears in the media. Again, we might have expected a diligent policy adviser to have anticipated how policies would appear to the public.

But it seems that the politicians and their advisers don’t control the volume of paperwork they are given to wade through. In his seminar, Hilton dramatically produced a pile of paper one foot high (representing four days committee output), prompting gasps from students. “The idea that a couple of political advisers read through all this and spot things that are bad, things that are contradictory, is just inconceivable”, pleads Hilton.

Of course it is, say members of the previous government including Damian McBride, Gordon Brown’s former political press secretary. Which is why the previous government had a greater number of political advisers, and a coordination process (known as the “grid”) allocating a manageable number of pages to each. McBride acknowledges that the grid sometimes resulted in leaks to journalists, and suggests that Hilton may have downgraded the grid in order to reduce these leaks, but argues that the grid was a key mechanism for effective government and that the problems Hilton complains about are an inevitable consequence of abandoning this mechanism.

It may also be a consequence of regarding the civil service as a malignant force, trying to pull the wool over the politicians’ eyes. (This was a great theme in the original “Yes Minister” series, but has turned into a tired joke in the 2013 series.) Edward Pearce stands up for the independence of the civil service, and complains that it is Hilton who is unrepresentative and unelected.

When Hilton talks about “delivering what we are supposed to be doing”, this presumably refers to some kind of top-down strategic plan, formulated before the election and presented in the manifesto. But this raises some important questions about the relationship between strategy and execution, and the possibility for strategies to emerge and evolve during execution.

Which in turn raises some questions about government as a learning system. Recent governments (including Blair’s New Labour) have had a focus on delivery, which emphasizes single-loop learning – getting better at achieving a fixed set of goals. However, this has to be balanced against double-loop learning – changing the goals to fit changing circumstances.

In an earlier analysis of New Labour and Delivery, two MORI analysts argued that delivery and achievement was at least partially subjective and rhetorical.

  • “Delivery” is not keeping your promises, it is convincing the public that you have kept your promises.
  • What matters is not what you promise, but what the public understands by those promises, and what expectations they arouse.

Hilton clearly agrees about the importance of external communication. He encourages his students to think about how policies can be “branded”, and suggests that policies often fail not because they weren’t very good policies in the first place but because they are poorly presented. That might be true, but it is also a common excuse: politicians genererally find it easier to admit to errors in presentation than to errors in policy.

Which part of this ecosytem has the longest memory?  Presumably the civil servants. And which part has the shortest memory? With some honourable exceptions, probably the media. According to one theory of change, when there are several subsystems operating on different timescales, it is the slowest system that controls the whole. And the Purpose Of the System Is What It Does.

Roger Mortimore and Mark Gill, New Labour and Delivery (IPSOS MORI May 2004)

PM’s aide exposes No 10’s lack of control (Sunday Times, 13 January 2013) (subscription)

John Harlow and Eric Kiefer, Shoes off, feet up, the dude lifts lid on No 10 (Sunday Times, 13 January 2013)

Patrick Hennessy, David Cameron finds out about policies from the newspapers, reveals Steve Hilton (The Telegraph 13 January 2013)

Damien McBride, Whither the Grid? (13 January 2013) Why did the Grid Wither? (14 January 2013)

Edward Pearce, The Unelected (LRB 25 January 2013)

James Tapsfield, Prime Minister often finds out about policies from the radio or newspapers, says former advisor Hilton (The Independent 13 January 2013)

Richard Veryard (ed), Fragile Strategy or Fragile Execution (Storify, December 2012)

Nicholas Watt, David Cameron’s ex-policy guru Steve Hilton criticised over policy remarks (Guardian, 13 January 2013)

updated 25 January 2013

Business Network Optimization

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Some @ATKearney consultants have written an interesting article on Business Network Optimization

“Anyone thinking about rationalizing a network would naturally ask whether so many nodes are really necessary. Networks are a great deal more complicated than that, and managing them requires expansive strategic imagination.”

A simplistic accountancy view of a network looks at the direct contribution of each node. From this viewpoint, some nodes may not produce enough direct value to justify their continued existence, and there will be calls for these nodes to be closed or merged with their neighbours.

For example, there are several proposals currently under consideration within the UK National Health Service to rationalize Accident and Emergency provision by closing some hospital departments and relocating staff. These proposals are based on arguments about the optimal size of an Accident and Emergency unit, and on claims that smaller units are unlikely to deliver value for money or clinical  excellence.

Opponents of these closures point to the indirect effect of these closures, including the likely consequences on non-emergency healthcare services at those hospitals that will lack accident and emergency provision, as well as the wider social impact on the local community.

The example given in the A.T. Kearney article is the French postal service, and the authors assert the indirect value of the village post office, using an almost untranslatable French term l’animation du territoire, the “animation of the territory”.

The Kearney article identifies three types of business network, which it calls Production, Service and Distribution, and eight elements of network management which must be optimized together. It calls these KNOTs, which stands for Kearney Network Optimization Tools, and asks us not to think of them as merely a laundry list of best practices used to build an optimal network. 

The eight elements of network optimization (KNOTs)

The article illustrates the concept of indirect value in terms of the cross-over between physical and online retailing. If a customer views a product in a physical store and then orders it online, the physical store is providing some indirect value to the retail operation as a whole. It is therefore makes sense to optimize the entire online/offline network as a whole, rather than regarding them as two separate networks. See my post on Showrooming and Multi-sided Markets (December 2012).

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The Physical Environment and its Outcomes

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A dispute is currently raging between the UK Department for Education and the architecture profession. Famous architects such as Lord Rogers are demanding the right to design fancy schools, appealing to studies indicating that a well-designed environment can improve learning outcomes for schoolchildren. However, Michael Gove claims that school building costs can be reduced by 30% by reducing unnecessary space and eliminating “frills”. A spokesman for the Department for Education said: “There is no convincing evidence that spending enormous sums of money on school
buildings leads to increased attainment. An excellent curriculum, great
leadership and inspirational teaching are the keys to driving up
standards.”

I haven’t studied the detailed evidence myself, but I suspect the truth is somewhere between these two positions. The study identifies such factors as lighting, circulation, acoustics, individuality and colour. Politicians who spent their own childhood in stuffy or draughty classrooms with flickering flourescent lighting may imagine these factors to be character-building, but surely most people will think that children and teachers deserve a decent environment.

But surely a decent environment doesn’t need to cost an extra 40%. Is white paint so much cheaper than a nice colour? Does poor lighting and inefficient air conditioning really save money? Or does the 30% saving really come from cramming more pupils into less space?

And to what extent is Lord Rogers’s complaint really about these factors? Perhaps it is more about the architecture profession’s desire to create exciting and iconic buildings, with lots of curves. Can a curve be cost-justified in terms of educational attainment? Conversely, is the banning of curves merely a symbolic gesture on Gove’s part?

There are several problems with this kind of debate. Firstly, the people who have the greatest knowledge and expertise are seen as having a vested interest in expensive solutions. Secondly, other stakeholders sceptical that the expense can be justified (in terms of ROI) and tending to regard good architecture (whatever that means) as an expensive luxury. Thirdly, a tiny amount of genuine evidence gets stretched very thinly, through rival interpretations and extrapolations and opinions. And finally, the complex relationship between cost and benefit gets overlaid with politically motivated simplicities.

Well, that’s architecture for you.

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