In the Chapter 1 of Book 1 of An Inquiry into the Nature and Causes of the Wealth of Nations
(commonly called The Wealth of Nations
Adam Smith discussed the concept of the”Division of Labour”. This chapter is the most important chapter of his book and the concept of the Division of Labor is the most important concept; far more important than “the invisible hand” concept or any of the others. It is because this concept of a process made from discrete functions is the basis for all of the manufacturing transformation of the Industrial Revolution. Prior to this, the division of labor was an immature and informal concept; after, many cottage industrialists adopted the concept or were put out of business by those that did.
Adam Smith did this by using a very simple example, the making of straight pins. In this example he demonstrated that eight men each serving in a specialized function could make more than 10 times the number of pins in a day when compared with each of the men performing all the functions. He called it the division of labor; we call it “functional specialization“.
Functional specialization of skills and tooling permeates Western Culture and has led to greater wealth production than any prior concept that has been created. Consequently, as Western Civilization accreted knowledge, the researchers, engineering, and skilled workers became more expert in their specialized function and increasingly less aware of the rest of the process.
Currently, most organizations are structured by function, HR, accounting, contracts, finance, marketing or business development, and so on. In manufacturing there are designers (detailed design engineers), engineers (analysts of the design), manufacturing engineers and other Subject Matter Experts (SMEs). Each of these functions vie with one another for funding to better optimize their particular function. And most organizations allocate funding to these functions (or sometimes groups of functions) for the type of optimization.
Unfortunately, allocating funds by function is a very poor way to allocate funds. There is a principle in Systems Engineering that, “Optimizing the sub-systems, sub-optimizes the system“. J.B. Quinn, in “Managing Innovation: Controlled Chaos”, (Harvard Business Review, May-June 1985), demonstrated this principle, as shown in Figure 1.
Figure 1–Function vs Process Funding
As shown in Figure 1, at the bottom where you cannot really see it, for every unit of money invested in a function, the organization will get, at best, one unit of money improvement in the total process. However, if the investment effects more than one function would yield 2(N-1)-1 in total improvement in the process. So focusing on investing in the process will yield much better results and focusing on the function. This is the role of the Enterprise Architect, and the organization’s process and systems engineer using the Mission Alignment process. While this point was intuitively understood by manufacturing (e.g., assembly line manufacturing engineering) for well over 150 years, and was demonstrated in 1985, somehow Functional Management is not willing to give up their investment decision perquisite.
Product vs System
Influenced by the Wealth of Nations, from about 1800 on, industries, first in Britain, then across the Western world, and finally globally, used Adam Smith’s concept of a process as an assembly line of functions to create more real value than humankind had ever produced before. But this value was in the form of products–things. Developing new “things” is a linear process. It starts with an idea, an invention, or an innovation. Continues with product development to initial production and marketing. Finally, if successful, there is a ramp up of production, which continues until superseded by a new product. This is the Waterfall Process Model.
The organization that manufactured the product had only the obligation to ensure that the product would meet the specifications the organization advertised at the time the customer purchased the product, and in a very few cases, early in the product’s life cycle. Generally, these specifications were so general, so non-specific, and so opaque that the manufacturing company could not be held responsible. In fact, a good many companies that are over 100 years old, exist only because they actually supported their product and its specifications. Their customers turned into their advertising agency.
This model is good for development (what some call product realization) and transformation projects, but the model has two fatal flaws, long term. The first (as I discuss in my post Systems Engineering, Product/System/Service Implementing, and Program Management) is that the waterfall process is based on the assumption that “All of the requirements have been identified up front“; a heroic assumption to say the least (and generally completely invalid). The second has equal impact and was caused by the transportation and communications systems of the 1700s to the 1950s. This flaw is that “Once the product leaves of the factory it is no longer the concern of the manufacturer.”
This second flaw in historical/straight line/waterfall thinking effects both the customer and the supplier. The customer had and has a hard time keeping the product maintained. For example, most automobile companies in the 1890s did not have dealerships with service departments; in fact they did not have dealerships, as such. Instead, most automobiles were purchased by going to the factory or ordering by mail. And even today, most automobile manufacturers don’t fully consider the implications of disposal when design a vehicle. So they are thinking of an automobile as a product not a system or system of systems (which would include the road system and the fuel production and distribution systems. The flavor of this for the United States is in its disposable economic thinking; in everything from diapers to houses (yes, houses…many times people are purchasing houses in the US housing slump, knocking them down, to build larger much more expensive housing…at least in some major metropolitan areas). Consequently, nothing is built to last, but is a consumable product.
Systems Thinking and The Wheel of Progress
Since the 1960s, there has been a very slow, but growing trend toward cyclic thinking with organizations. Some of this is due to the impact of the environmental movement, and ecosystems models. More of this change in thinking is due to the realization that there really is a “wheel of progress”. Like a wheel on a cart, the wheel of progress goes through cycles to move forward.
The “cycle” of the “wheel of progress” is the OODA Loop Process, that is, Observe, Orient, Decide, Act (OODA) loop. The actual development or transformation of a system occurs during the “Act” function. This can be either a straight-line, “waterfall-like” process or a short-cycle “RAD-like” process. However, only when the customer observes the of the transformed system in operation, orients the results of the observation of the system in operation to the organization’s Vision and Mission to determine if it is being effective and cost efficient, then deciding to act or not during the rest of the cycle. The key difference between product and systems thinking is that each “Act” function is followed by an “Observe” function. In other words, there is a feedback loop to ensure that the output from the process creates the benefits required and that any defects in the final product are caught and rectified in the next cycle before the defect causes harm. For example, Ford treated is Bronco SUV as a product rather than a system. “Suddenly”, tire blowouts on the SUV contributed to accidents, in some of which the passengers were killed. If Ford had treated the Bronco as a system, rather than a product, and kept metrics on problems that the dealers found, then they might have caught the problem much earlier. Again, last year, Toyota, also treating their cars as products rather than systems, found a whole series of problems.
OODA Loop velocity
USAF Col. John Boyd, creator of the OODA Loop felt that the key to success in both aerial duels and on the battlefield is that the velocity through the OODA Loop cycle was faster than your opponent’s. Others have found that this works with businesses and other organizations as well. This is the seminal reason to go to short cycle development and transformation. Short cycle in this case would be 1 to 3 months, rather than the “yearly planning cycle” of most organizations. Consequently, all observations, orientation and deciding should be good enough, not develop for the optimal, there isn’t one. [this follows the military axiom that Grant, Lee, Jackson, and even Patton followed “Doing something now is always better than doing the right thing later”.] Expect change because not all of the requirements are known, and even if they are known, the technological and organizational (business) environment will change within one to three months. But remember the organization’s Mission, and especially its Vision, change little over time; therefore the performance the metrics, the metrics that measure how optimal the current systems and proposed changes are, will change little. So these metrics are the guides in this environment of continuous change. Plan and implement for upgrade and change, not stability–this is the essence of an agile systems.
This is true of hardware systems as well as software. For example, in 1954, Haworth Office Furniture started building movable wall partitions to create offices. Steel Case and Herman Miller followed suit in the early 1960s. At that point, businesses and other organizations could lease all or part of a floor of an office building. As the needs of the organization changed these partitions could be reconfigured. This made for agile office space, or office systems (and the bane of most office workers, the cubicle), but allows the organization to make most effective and cost efficient use of the space it has available.
The Role of the Systems Engineering Disciplines
There are significant consequences for the structure of an organization that is attempting to be highly responsive to the challenges and opportunities presented to it, while in its process for achieving its Mission and Vision in a continuously changing operational and technical environment. It has to operate and transform itself in an environment that is much more like basketball (continuous play) than American football (discrete plays from the scrimmage line with its downs)–apologies to any international readers for this analogy. This requires continuous cyclic transformation (system transformation) as opposed to straight line transformation (product development).
Treating Process in Product Thinking Terms
Starting in the 1980s, after the publication of Quality is Free, by Phil Crosby in 1979, the quality movement and quality circles, the concept of Integrated Product Teams (IPTs, which some changed to Integrated Product and Process Teams, IPPTs) organizations have been attempts to move from a focus on product thinking toward a focus on system thinking). Part of this was in response to the Japanese lean process methods, stemming in part from the work of Edward Deming and others. First international attempt to is ISO 9000 quality Product Thinking (starting in 2002), though in transition to Systems thinking, since it is a one time straight-through (Six Sigma) methodology, starting with identifying a process or functional problem and ending with a change in the process, function, or supporting system.
Other attempts at systems thinking were an outgrowth of this emphasis on producing quality products (product thinking). For example, the Balanced Scorecard (BSC) approach, conceptualized in 1987. The BSC was attempting to look at all dimensions of an organization by measuring multiple dimensions. It uses four dimensions to measure the performance of an organization and its management instead of measure the performance of an organization on more than the financial dimension. The Software Engineering Institute (SEI) built layer four, measurement, into the Capability Maturity Model for the same purpose.
In 1990, Michael Hammer began to create the discipline of Business Process Reengineering (BPR), followed by others like Tom Peters and Peter Drucker. This discipline treats the process as a process rather than as a series of functions. It is more like the Manufacturing Engineering discipline that seeks to optimize the processes with respect to cost efficiency per unit produced. For example, Michael Hammer would say that no matter size of an organization, it’s books can closed at the end of each day, not by spending two weeks at the end of the business or fiscal year “closing the books”. Or in another example, you can tell if an organization is focused on functions or processes by its budgeting model; either a process budgeting model or a functional budgeting model.
Like the Lean concept, and to some degree, ISO 9000, ITIL,and other standards, BPR does little to link to the organization’s Vision and Mission, as Jim Collins discusses in Built to Last (2002); or as he puts the BHAG, BIG HARRY AUDACIOUS GOALS. Instead, it focuses on cost efficiency (cost reduction through reducing both waste and organizational friction, one type of waste) within the business processes.
System Architecture Thinking and the Enterprise Architect
In 1999, work started on the Federal Enterprise Architecture Framework (FEAF) with a very traditional four layer architecture, business process, application, data, and technology. In 2001, a new version was released that included a fifth layer, the Performance Reference Model. For the first time the FEAF links all of the organization’s processes and enabling and supporting technology to its Vision and Mission. Further, if properly implemented, it can do this in a measurable manner (see my post Transformation Benefits Measurement, the Political and Technical Hard Part of Mission Alignment and Enterprise Architecture). This enables the Enterprise Architect to perform in the role that I have discussed in several of my posts and in comments in some of the groups in the LinkedIn site. These are decision support for investment decision-making processes and support for the governance and policy management processes (additionally, I see the Enterprise Architect as responsible for the Technology Change Management process for reasons that I discuss in Technology Change Management: An Activity of the Enterprise Architect). Further, successful organizations will use a Short Cycle investment decision-making (Mission Alignment) and implementing (Mission Implementation) process, for reasons discussed above. [Sidebar: there may be a limited number of successful project that need multiple years to complete. For example, large buildings, new designs for an airframe of aircraft, large ships–all very large construction effort, while some like construction or reconstruction of highways can be short cycle efforts–much to the joy of the motoring public.] The Enterprise Architect (EA), using the OODA Loop pattern, has continuous measured feedback as the change operates. Given that there will be a learning curve for all changes in operation; still, the Enterprise Architect is in the best position to provide guidance as to what worked and what other changes are needed to further optimize the organization’s processes and tooling to support its Mission and Vision. Additionally, because the EA is accountable for the Enterprise Architecture, he or she has the perspective of entire organization’s processes and tooling, rather than just a portion and is in the position to make recommendations on investments and governance.
System Architecture Thinking and the Systems Engineer and System Architect
One consequence of the short-cycle processes is that all short-cycle efforts are “level of effort” based. Level of Effort is a development or transformation effort is executed using a given a set level of resources over the entire period of the effort. Whereas in a waterfall-like “Big Bang” process scheduling the resources to support the effort is a key responsibility of the effort (and the PM), with the short-cycle the work must fit into the cycles. With the waterfall, the PM could schedule all of the work by adding resources or lengthened the time required to design, develop, implement and verify; now the work must fit into a given time and level of resource. Now, the PM can’t do either because they are held constant.
If, in order to make an agile process, we use axiom that “Not all of the requirements are known at the start of the effort”, rather than the other way around, then any scheduling of work beyond the current cycle is an exercise in futility because as the number of known requirements increases, some of the previously unknown requirements will be of higher priority for the customer than any of the known requirements. Since a Mission of a supplier is to satisfy the needs of the customer, each cycle will work on the highest priority requirements, which means that some or many of the known requirements will be “below the line” on each cycle. The final consequence of this is that some of the originally known requirements will not be met by the final product. Instead, the customer will get the organization’s highest priority requirements fulfilled. I have found that when this is the case, the customer is more delighted with the product, takes greater ownership of the product, and finds resources to continue with the lower priority requirements.
On the other hand, not fulfilling all on the initially known requirements (some of which were not real requirements, some of which contradicted other requirements) gives PMs, the contracts department, accountants, lawyers, and other finance engineers the pip! Culturally,generally they are incapable of dealing in this manner; their functions are not built to handle it when the process is introduced. Fundamentally making the assumption that “Not all the requirements are known up front” makes the short-cycle development process Systems Requirements-based instead of Programmatic Requirements-based. This is the major stumbling block to the introduction of this type of process because it emphasizes the roles of the Systems Engineer and System Architect and de-emphasizes the role of the PM.
The customer too, must become accustomed to the concept, though in my experience on many efforts, the once the customer unders the customer’s role in this process, the customer becomes delighted. I had one very high-level customer that said after the second iteration through one project, “I would never do any IT effort again that does not use this process.”