Venturesome Consumption

Chris Potts pointed me to the work of Amar Bhidé, which raises some interesting and important questions for innovation and organization change in general, and for EA in particular.

Venturesome Consumption, Innovation and Globalization (pdf)
Paper for a Joint Conference of CESifo and the Center on Capitalism and Society
“Perspectives on the Performance of the Continent’s Economies”
Venice, 21 - 22 July 2006
by Amar Bhidé

1. Absorptive capacity. I think this concept is important both for inter-enterprise innovation (adoption of new business models, practices and technologies by the enterprise as a whole) and intra-enterprise innovation (diffusion of new systems and processes across the organization). Within Lenscraft, this is covered by the Adoption Engineering lens.

2. Productivity and competitive advantage. There is an important question about how innovation generates value, and for whom. If all players in a competitive industry adopt (are forced to adopt) the same innovation, then none of them may gain any net value, but all of them may avoid losing value. Arguably the customers are the beneficiaries, but this is not a straightforward calculation. For example, customers benefit more than banks from the ubiquity of ATMs, although this is hard to quantify, and with other technologies it may be difficult to demonstrate any customer benefit at all. On a Marxian argument, although technology can produce a short-term improvement in profit in an industry, the longer-term effect on profit is downwards, in which case it would be puzzling why monopolies would ever bother. (Indeed, in some utilities, the pressure for technological innovation seems to come largely from the regulators.) The Marxian argument about the falling rate of profit isn't universally applicable, but it behoves champions of innovation within organizations to understand where it does and doesn't apply.

3. ROI. The first two points are not addressed in the bog-standard business case, and the ROI is often grossly over-estimated, based on extremely naive assumptions. A proper joined-up systems analysis would expose the weaknesses here. This relates to what Bhidé calls Knightian uncertainty.

4. Resourceful problem solving. The users have an active role in producing what I have called the "technology-in-use". This also links to the work of Erik von Hippel.
http://www.users.globalnet.co.uk/~rxv/orgmgt/ob8.pdf

5. Barriers to innovation and diffusion. Bhidé is interested in national borders; some of us may be more interested in organizational boundaries (both external and internal). But the word "barriers" is an inadequate metaphor - in reality there is a landscape with uphill and downhill contours, making some paths easier and quicker than others, but few paths are completely impassable.

6. One of the consequences of this analysis is that we should be modelling the internal and external flows of knowledge and ideas, as a critical element of a business model. To some extent this is already done in industries like pharma, but these flows largely focus on product development knowledge and don't provide a more general picture.

7. Overall, an important plea for the demand side of innovation to be taken as seriously as the supply side. I completely agree with this.

Public Confidence in Healthcare

BBC medical correspondent Fergus Walsh advises How not to run an immunisation campaign.

It seems that there has been a failure of planning by the German government. As a result of different government departments making their purchases without coordinating - an innocent planning error, according to a government spokesman - two different vaccines are being distributed. Government officials and the armed forces are getting Celvapan, while the general public will receive Pandemrix.

People have a tendency to read deeper meaning into such differences, especially in the absence of trust. (Indeed, even random differences can cause suspicion, which in turn can undermine trust.) In this case, the difference in vaccines has led to complaints of a two-tier health service. Some politicians (including Angela Merkel) have announced their intention to have Pandemrix instead of Celvapan, just like they were ordinary German citizens.

Fergus sums up as follows:

'The row in Germany is a reminder of how easy it is to undermine public confidence in healthcare. Ministers and officials need to ask themselves, "what might people think?" with any decision they make.'

This example reinforces my belief in the importance of paying attention to Meaning.

A Better Instrument?

A poor workman blames his tools. Sometimes an amateur musician imagines that he would produce a better sound with a more expensive instrument. Sometimes an amateur photographer imagines that she would produce better pictures with a more expensive camera.

The trouble is that most violinists would be unable to make much difference in sound between a cheap violin and a Stradivarius. The finest violin is not worth much in the hands of an average violinist, or (for that matter) in a room with poor acoustics.

A violin student needs a reasonably good violin, but cannot take advantage of a fantastically good violin. My mother, who is a violin teacher, often sees students (or their parents) wasting their money on expensive instruments. Far better to concentrate on practice, improving technique rather than seeking excuses.

Conversely, an excellent musician can often make a great sound from an average instrument. When I was younger, I had a cello that I played very badly. One day, a friend who was a top student at the Royal Academy of Music played something on my cello. It sounded fantastic. For a few days later, I thought I could still hear her sound resonating in the instrument when I tried to play.

It is certainly the case that some instruments are better than others, but the relationship between the instrument and the sound produced depends on a lot of other factors - the musician, the music played, the acoustics.

***

What are the lessons of this for any kind of systems innovation? If we think of a system innovation as an instrument (in other words, a means to an end), then it is clear that the outcome is not solely dependent on the technical quality of the instrument, but depends mostly on how the instrument is used by an individual or organization. A fool with a tool is still a fool. Calculating the "business case" for acquiring a better instrument depends on predicting how effectively and expertly the instrument is going to be used. See my paper Reasoning about systems and their properties.

Sometimes the adoption of a new instrument by an organization involves expert consultants, who are the first users of the instrument within the organization. This may produce short-term results, and their use may "resonate" for a while, but this effect may not endure, unless the organization practices conscientiously.

Do you have any examples of this? Please contribute comments.

Loyalty and Trust 2

@peterbregman has just posted a recommendation to Diversify Yourself (via @RSessions) prompted by the same topic as was my recent post on Loyalty and Trust, namely the alarming level of suicides at France Telecom.

Peter points out the danger of investing all your identity in your job. When a woman kills herself because she can't take the new reorganization, that sounds like a dreadful lack of work-life balance.

There is an apparent paradox here. In some organization cultures, loyalty and trust is understood to entail total commitment to the firm, which takes precedence over all other concerns. There is a sexist view that women cannot be expected to devote everything to the firm - not just the belief that women are more likely than men to take time off work at short notice because a child is sick, but the belief that women may be less willing to take the firm's agenda seriously. In such cultures, some women may feel the need to prove themselves all the more, either as individuals ("I'm not like other women") or collectively ("we women are not as men imagine"), and attempt to outdo the men in the loyalty and trust stakes.

And yet this kind of loyalty and trust is a brittle one. There is nothing loyal or trustworthy about jumping out of a window, or about stabbing oneself in the middle of a meeting. Authentic trust depends on a stable character, which depends on proper social and psychological foundations. 

When meeting new people at work, we often like to share some personal information, just enough to show that there is some life outside work. Part of the motivation for this sharing is because a more rounded and multi-faceted picture of a person generally makes it easier for us to trust them. Thus diversification of your identity makes you (among other things) more trustworthy.

Putting your life in someone else's hands

On Aug. 27, Danielle Chiesi told an unnamed co-conspirator: "I’m dead if this leaks. I really am and my career is over." Hedge Fund Chief Is Charged With Fraud (New York Times, 16 October 2009) via @mikojava

Obviously "this" leaked, together with this statement. I'm not a lawyer, but this looks to me like a pretty clear admission of guilt. In retrospect, perhaps not such a good thing to have said.

So why would someone say something like this at all? Ms Chiesi knew there was a risk that this would leak, presumably thought that drawing attention to this risk would amplify the importance of secrecy, and trusted her co-conspirator in a given environment with this dangerous admission. Her trust was betrayed, either by the co-conspirator or by the environment (eavesdropping).

Under conditions of danger and stress, Ms Chiesi wrongly trusted someone or something. Are there any general lessons we can draw from this?

***

In the context of an attempted fraud, however, maybe Ms Chiesi's admission of guilt isn't such a bad thing after all. When we are engaged in things we feel uncomfortable about, our unconscious sometimes gives us away, and we may blurt out stuff when it might have been safer to bite the old tongue. (This is related to authenticity.) Ms Chiesi sees to have been insufficiently crooked to carry out this kind of fraud without giving herself away at some point. Or perhaps she had a career deathwish. (Can you trust your unconscious not to betray you? If you are being authentic, then there should be nothing worth betraying.)

Loyalty and Trust

@tetradian and @kvistgaard pick up an interesting statistic from the Economist.

"A survey by the Centre for Work-Life Policy, an American consultancy, found that between June 2007 and December 2008 the proportion of employees who professed loyalty to their employers slumped from 95% to 39%; the number voicing trust in them fell from 79% to 22%." [Hating what you do, Economist 8 Oct 2009]

So the figure for trust is much lower than the figure for professed loyalty. Perhaps this is not altogether surprising. You'd probably find a similar disparity if you asked married people if they were loyal to their husbands/wives, and if they trusted them. Clearly professed loyalty is not the same as actual loyalty.

I found another related statistic in the same edition of the Economist.

"According to a survey last month by TNS Sofres, a polling agency, the French have less confidence in their employers (32%) than do either Germans (47%) or Americans (54%)." [Suicide in France, Economist 8 Oct 2009]

Comparing the US figures from these two surveys, I find it curious that the figure for "confidence" is more than double the figure for "trust". Has the mood in America shifted radically in a few months - Obama's election perhaps? Have large numbers of distrustful and non-confident employees lost their jobs, therefore not being included in the later survey? Or is it simply that the two surveys were asking different questions in different ways?

A more serious aspect of the story is the alarming number of suicides in French companies, most recently in France Telecom.

In the bad old days (known as Theory X) employers didn't expect loyalty or trust, they simply demanded hard work. Employees didn't love the work, they only performed when closely supervised, monitored and measured. Trade unions were formed to represent the collective interests of the workers, and got into regular disputes with management about pay and working conditions.

In the brave new world (known as Theory Y) we are all expected to love the work and treat our co-workers as a second family. Trade unions have lost much of their former power, and the individual employee is "empowered" to "go the extra mile" to serve the interests of the company and its customers in a fulfilling and career-enhancing manner.

The trouble is that most companies send mixed messages to their employees - some Theory X, some Theory Y. In some cases, these mixed messages amount to a double bind, obliging workers to adopt an irrational position, and putting them under sometimes intolerable psychological stress.

A few paragraphs ago, I suggested the hypothesis that large numbers of distrustful employees might have lost their jobs. We might think that workers who lost their jobs had been right to distrust their employers, if it wasn't for the cruel fact that distrusting your employer may be a contributory causal factor to losing your job. If you want to keep your job, you must suppress all hostile thoughts towards your employer, including distrust or disloyalty. That's the kind of double bind that can send people over the edge.

Lean versus Complex

Some interesting discussion contrasting Lean with Complex Adaptive Systems (CAS).

The Danger of Complex Adaptive Systems (Alan Shalloway)
The Danger of Lean - Ignoring Social Complexity (Jurgen Appelo)


Alan has a nice example of a school of mullet being consumed by a gang of dolphins. The mullet (species) has evolved a stratagem of swimming together to protect against predators. The dolphins (species) have evolved a higher intelligence, which enables them (specific individuals) to exploit the stratagem for their own advantage.

Which is the complex adaptive system here? Alan thinks it is the mullet system, and questions the value of CAS for protecting the mullet against risk. It is true that the mullet system has a degree of complexity: the dolphin cannot predict the path of a single fish, and can only nudge the system rather than control it exactly. But the mullet system is up against a much more intelligent adaptive system - that of the dolphins, whose tactics are learned rather than inherited.

Inherited behaviour, however complex it may seem, represents an adaptation to past challenges. Sometimes the same can be true of learned behaviour - the habits of management and problem-solving that have worked in the past. But in a dynamic competitive environment, the advantage of learned behaviour is that it can be changed. We regard dolphins as more intelligent than mullet because they are able to learn new behaviours, both by themselves and from one another.

Jurgen explains the problem of Lean and the advantage of CAS in terms of Cynefin. Appealing to a simplistic distinction drawn by Dave Snowden between "systems thinking" and "social complexity", he labels Lean as "systems thinking", argues that Lean fails to handle social complexity, and dismisses (that school of) systems thinking as outdated.

I prefer to explain the problem of Lean using ideas borrowed from Bateson. Lean is an adaptation that makes predictable systems more efficient. But highly adapted systems typically lack future adaptability. The mullet strategy is vulnerable to the dolphin intelligence. Indeed, the dolphin intelligence has evolved, among other things, in order to overcome the mullet strategy. So which system is the more complex, which system is the more adaptive?


Update

Alan has withdrawn his post rather than continue the argument with Jurgen. There is an archive version of the post on the Wayback Machine, complete with an interesting discussion thread. http://web.archive.org/web/20091101113550/http://www.netobjectives.com/blogs/the-dangers-of-complex-adaptive-systems


Updated 2 December 2016

Mapping Leverage Points to VPEC-T

Over twenty years ago, Donella Meadows published some thoughts on intervention into complex systems [PDF of original paper]. A version of this paper is included in her book Thinking in Systems, which has just been published, several years after her death.

After discussion with Nigel Green, one of the authors of VPEC-T, I have done a mapping between the five elements of VPEC-T and the twelve generic leverage points identified by Donella Meadows. There seems to be a surprisingly good fit.

Donella Meadows makes two important points.

• “Although people deeply involved in a system often know intuitively where to find leverage points, more often than not they push the change in the wrong direction.”
  

• “Complex systems are, well, complex. It’s dangerous to generalize about them. What you read here is still a work in progress; it’s not a recipe for finding leverage points. Rather, it’s an invitation to think more broadly about system change.”

So, with that warning, here they are, in ascending order of leverage ...

Places to intervene in a system (Donella Meadows)	VPEC-T
12 - Numbers – constants and parameters such as subsidies, taxes, standards	Content
11 - Buffers – the sizes of stabilizing stocks relative to their flows	Content
10 - Stock-and-Flow Structures – Physical systems and their nodes of intersection	Content
9 - Delays – the lengths of time relative to the rates of system changes	Events
8 - Balancing feedback loops – the strength of the feedbacks relative to the impacts they are trying to correct	Events
7 - Reinforcing feedback loops – the strength of the gain of driving loops	Events
6 - Information flows – the structure of who does and who does not have access to information	Policy
5 - Rules – incentives, punishments, constraints	Policy
4 - Self-organization – the power to add, change or evolve system structure	Policy
3 - Goals – the purpose or function of the system	Values
2 - Paradigms – the mind-set out of which the system – its goals, structure, rules, delays, parameters - arises	Values
1 - Transcending paradigms	Trust