Category: Organization in the Collaborative Age

How Having Great Customers is Essential for Product Development

One of the benefits of the ‘lean startup’ approach is to seek customers very early on the basis of a ‘Minimum Viable Product’.

customer perception is your realityHaving first customers for a startup provides feedback on two levels:

  • customers are ready to buy the product: the product is bankable!
  • get real-life feedback from the usage of the product by the customer

The second type of feedback is essential as well and it is important to make the effort to collect it. It is also why the quality of the customers is essential: great customers will provide great feedback which will greatly, in turn, improve the product!

“A great customer wants you to be world class, and is willing to help you get there. Learn to spot them early, and then treat them like gold. Enough said.” – Gapingvoid

From the experience of developing a product in our new startup, I cannot agree more with this statement.

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Commodity Projects: Why it’s Not About Risk Transfer, but about Sustainable Lower Cost

In the current days of low commodity prices, operators and contractors are suffering – be it in Oil & Gas, mining, and energy in general. I hear a lot about the need to redefine the contractual setup, and the wish for operators to transfer more risk to the contractors.

plant constructionLet’s be clear. Risk transfer is tactical. It’s not a sustainable solution. You can transfer more risk to the other party, but if that’s systematic and if it’s not priced in, this solution will sooner or later lead to the disappearance of that party.

Transferring risks sustainably to another party only makes sense if the other party is better geared to manage that risk, in terms of competencies or capability.

What operators in the commodity markets need right now:

  • projects that cost less,
  • and which outcome is more reliable in terms of cost and schedule.

Lowering excessive specifications and being more clever in terms of standardization to seek gains from series effects are key for the first point. More effective project execution practices and less complexity in execution are the levers for the second point – and there is a lot of knowledge now in the industry to make it successful, because project governance and management practices are still sometimes poor.

The contractual setup between operator and contractor is essential, but on the long term it should be geared towards these two objectives rather on the short term tactical risk transfer. This also means that operators need to have an industrial policy where they develop contractors that can meet their expectations in terms of capabilities and develop long term relationships that allow to fully deploy series effects over several large projects.

Risk transfer is short term and tactical. Lowering the cost by developing a proper contracting landscape is the sustainable solution to commodity projects’ woes.

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How Improving Risk Management in Infrastructure Projects is Not Enough

Delivering infrastructure projects in a way that delivers the expected benefits is essential for the good utilization of public and private resources. Still, many infrastructure projects do fail, sometimes miserably and publicly, like for example the new Berlin Brandenburg airport. Causes are almost always the same – poor governance, poor management of changes during the project, and poor coordination of contractors and their interfaces.

The new Berlin Brandenburg airport, still empty
The new Berlin Brandenburg airport, still empty 4 years after construction finished

An interesting paper by McKinsey proposes as a solution to these failures that the risk management framework around large infrastructure projects should be deeply reviewed. In typical McKinsey style they state “In our view, most overruns are foreseeable and avoidable. Many of the problems we observe are due to a lack of professional, forward-looking risk management“. The paper goes on with good recommendations on how to implement a comprehensive and consistent risk management process throughout the entire project lifecycle.

But is that sufficient? In my view, process-based solutions are only effective if there is no basic governance breakdown. And more often than not, this is the issue, with situations such as:

  • over-inflated usage expectations, to justify the investment, based on other motivations (political, status within the company, etc.),
  • under-estimated costs and duration to make the investment more palatable to investors,
  • under-estimated effort to coordinate the project and poor contractual approaches with contractors
  • etc.

It happens too often that we are called as consultants to sort out an issue in the mechanistic project execution only to find out that it is the entire project governance that is rotten to the core.

No amount of process will deal with this issue if the system is not ready for candor and self-examination. It is often necessary to take a broader view and address the complexity of decision-making to deal with problems. It’s often tough and we feel like pulling teeth, but that is what needs to be done when things go awry in infrastructure projects.

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Why We Need to Restore Productivity Through Collaboration

Productivity is the basis of wealth. Yet after decades of sustained growth in the Industrial Age, its growth has been progressively slowing down since the 1970s, and is almost plateauing today. This causes economic stagnation.

In a very interesting TED talk, Yves Morieux explains how this crisis is due to a change in the concept of efficiency – because value has shifted, due to the Fourth Revolution.

Yves Morieux explains that the traditional tenets of the corporation (clarity, measurement, accountability) are obsolete and have to be replaced by collaboration. “To cooperate is not a super effort, it is how you allocate your effort. It is to take a risk, because you sacrifice the ultimate protection granted by objectively measurable individual performance. It is to make a super difference in the performance of others, with whom we are compared”.

“Clarity, accountability, measurement were OK when the world was simpler. But business has become much more complex”. And thus the processes and effort around clarity, measurement and accountability and the innumerable processes around these issues have become a liability instead of an advantage.

Collaboration is the key to effectiveness in a complex world. Remove the rules around individual measurement and focus on getting the maximum out of collaboration!

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Why are we working the more the higher in the organization? The work-time paradox

Today, the higher people are in organizations, and the higher paid they are, the more they are expected to work. That is very much the opposite of the situation one century ago: it was rather the lower classes that had to work long hours to gain a meager living while the upper classes took advantage of a life of leisure. And in the meantime, productivity gains should have rather diminished the average work time, while automation should have reduced human effort.

overworked
Overworked in the bureaucracy?

Why this paradox? Is it representative of a societal shift? Where will it stop (when one hears for example about young interns in banks dying from overwork !?)?

The New-Yorker published an interesting column on this topic ‘You Really Don’t Need To Work So Much‘ following some recent controversies about work conditions in Collaborative Age companies such as Amazon.

The column I find does not give convincing explanations of the paradox. Some arguments are probably valid (such as ‘If you’re busy you seem important’ and the fact that the modern large organization does create a lot of occupation that diminishes dramatically the efficiency, not to mention the effectiveness). One can think also about the fact that the current organizational structures are not designed to tackle the increasing complexity of the world, and this creates huge work to try to catch up the increasing gap. And yes, it is probably possible to be as effective and putting less hours at work, removing some bureaucracy.

It seems to me that the fact that the higher one is in an organization, the more he/she has to work is a remnant of the pyramidal organization of the industrial age. This should disappear progressively with the Collaborative Age. However the increase of inequality counteracts this movement as many people have to work more to earn what they expect. And freelance people end up working more than employees in general, because they also need to do marketing and administration tasks they can’t easily delegate.

Please comment if you have a good explanation for this paradox and your views on its evolution!

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How Most Violence is Attributable to Young Males

“The one great universal in the study of violence is that most of it is committed by fifteen-to-thirty-year-old men” writes Steven Pinker in the book ‘The Better Angels of Our Nature‘.

crime by ageAccording to him, “not only are males the more competitive sex in most mammalian species, but with Homo sapiens a man’s position in the pecking order is secured by reputation, an investment with a lifelong payout that must be started early in adulthood”.

We can probably argue with this explanation, it is still a constant observation in the news and the statistics that this is true. Just referring to the typical profile of jihadists (in particular foreign jihadists) is totally correlated to this observation. There is something in young males’ hormones that promotes violence between those ages.

I was not aware that the differences in violence were so sharply driven by age and gender. That is certainly something to take into account as part of management and building organizations!

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Why Computer Hardware Investment Leads to Significant Business Improvement

“For every dollar of investment in computer hardware, companies need to invest up to another nine dollars in software, training, and business process redesign” – according to a study by Erik Brynjolfsson and Andrew McAfee quoted in ‘The Second Machine Age‘.

computer hardwareThis looks first as a warning to budget adequately when buying computer hardware! In reality, it is a measure of the leverage into business improvement that is provided by computer capabilities.

And it is true that investment in new hardware or software always leads to business and process investment, and eventually to business improvement (which is required to justify the investment in the first place). Even if process improvements are not immediate due to change management considerations, it will happen eventually when the organization’s contributors will realize the capabilities that are now available to them. I believe it is typical in professional business software implementation to see professional fees to be up to 3 or 4 times the license investment; and obviously the leverage ratio is even higher on hardware investment.

Investment in computing capabilities always leads, sooner or later, to business improvement. It is one of the main driving forces of today’s productivity improvements that will make the Collaborative Age much more efficient.

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How Power Utilities need to Overcome the Power Revolution

In the wake of the energy revolution that unfolds quietly (see our post on solar power), power utilities face tough decisions. Their model is generally an industrial-age model where efficiency is gain by ever bigger power stations that benefit from scale effects to produce cheap power.

power_station
How long will be centralized power generation model survive?

The drawback is of course, the size of these stations and the related need for a very extensive distribution network, and also that to be profitable, investments need to be used for a large number of decades. Nuclear Power Plants for example, are now typically designed to last 60 years or more to amortize the investment cost.

Today, those utilities face a double threat:

  • the development of competitive distributed generation, which diminishes consumption from centralized stations and creates distribution network instability,
  • the increasing cost and lack of proper control on large power stations investments, for a variety of factors.
solar-panel-houses
A new urban landscape we need to get used to!

Centralized production capability will remain needed for a long time, in particular due to large industrial consumers and the need to have the capability to support power networks in case of extreme conditions. Yet it is will become increasingly difficult to justify the huge investments with the uncertainties of the market over the next decades. A major factor will be to be much more reliable in predicting the actual cost and schedule of construction projects. Some effort is needed in that respect in the power industry.

Utilities will soon face significant challenges to their traditional business model and they’d better take the issue upfront than become defensive. A major shift will happen, and as in all good things, a balanced approach that can be adaptable is always better than to bet too much on a single way of producing power. With some effort, thanks to our connectivity and processing capability, we will be able to manage the associated complexity of multiple sources of energy.

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How to Decide Whether to Hire Somebody – a Simple Collaborative Age Heuristic

Mark Zuckerberg says: “I’ve developed over time a simple rule. I will only hire someone to work directly for me if I would work for that person. And it’s a pretty good test”

interviewI find that it is an interesting heuristic which also says something about the leadership style of this particular leader (by the way, think that he hired Sheryl Sandberg for example who is currently reporting to him as COO and the consequence of this quote in that case).

Anyway, I clearly realize that this heuristic might seem strange in the most usual “industrial Age” working place settings, pyramidal hierarchies and leadership styles. In the context of the Collaborative Age though, it find that it is a thoughtful heuristic. One important aspect is that more and more, people that you meet in your professional life might report to you or become your boss depending on the project and the circumstances. So it is better to be able to work with them either way!

Quote from kk.org (Kevin Kelly).

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Why Bureaucratic Processes for Risk and Business Planning Are Suspect

“Bureaucracy was born out of the human desire for complete assurance before taking action” – Scott Belsky in Making Ideas Happen. And this assurance is a very natural desire in humans. As a result, bureaucracy creeps up everywhere and fast and finally prevents us to take action.

risk management process
A risk management process that has great chances to become a large bureaucratic exercise

This effect is very interesting to observe in particular in the field of Risk Management. It’s all about risk and uncertainty, reactivity and agility to unexpected events… and most risk management processes implemented in organizations are awfully slow and bureaucratic – at a point where the operative executive does not really use them beyond maybe some thoughts once a year when he must or at the start of a Project.

There are quite a few areas where we will never have a complete assurance whatever the effort we will spend, such as predicting the future, including future risks. Bureaucracy is the wrong answer to risk management and future prediction so that any method that implies some of it should be automatically suspiciously classified as an attempt to seek reassurance for ourselves.

Is your risk management process or your future business planning process excessively bureaucratic? You’d better review it immediately because it is most probably not fit for purpose!

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How Quick Bureaucracy Can Creep In… and How to Prevent It

I have had some experiences lately where I have seen bureaucracy creep in projects in a very significant and quick manner, creating a serious impediment to progress and success. Although I know that it is the fate of many organizations, I was astonished by the mere speed at which bureaucracy can be created and imposed, even in project organizations that had been newly set-up only weeks or months ago.

Bureaucracy is not the same as developing and implementing effective processes. Bureaucracy is about creating processes of little effectiveness (even if very efficient!).

bureaucracyIn the instances I observed, bureaucracy developed quickly in situations where the scope of work was not very well defined. Thus, significant initiative and cognitive work were required to move things forward. In this situation many contributors, maybe not keen to do the effort, will seek to look busy doing ‘stuff’. And this ‘stuff’ generally turns out to be the seed of bureaucracy. It is easy to look busy writing endless reports and participating to endless meetings!

So, one way to avoid this situation is to be extremely clear on the scope of work and on the tangible deliverables that need to be produced. It also explains why in phases of innovation, it is better to keep the team small, so as to avoid the temptation by those that might not be at the core of the creative process to develop bureaucracy (to look and keep busy).

Bureaucracy can truly stifle a project. Make sure it does not develop beyond the minimum necessary – in particular as in modern times the mechanical data management should be automatized.

For those interested, the best text on bureaucracy ever is from Parkinson in the Economist in 1955 and is accessible at this link: Parkinson’s law. (as known today, Parkinson’s law states that ‘work always expands to fit the time available‘).

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Why Team Commitment is Better than Any Plan

“The team’s commitment to the plan is key to the successful execution of the plan” writes Clinton Padgett in ‘The Project Success Method‘.

team workI’d like to go beyond this – a commitment team is better than any plan, because the plan will change during execution, of course.

How do we achieve this level of commitment in particular in projects? I have always defended the need to have a series of workshops at the beginning of a project, with the project core team. Not for just having a chat – working together to design an execution plan is the best teambuilding I know. As Clinton Padgett also mentions, “Teamwork builds the team. Fortunately, the processes of defining and planning the project, which take place in the earliest phase of The Project Success Method, are excellent vehicles for team building.” And I can’t agree more.

Do the plan, but do it together. That is more important than the plan itself!

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