Behavioural Economics and Organizational Intelligence

@cbcurran and @mkrigsman link behavioral economics and project failure. Michael calls this the IT failure domino effect : bias leads to poor decision-making and culminates in failed projects.

They talk about three behavioural factors that may affect project failure.

• Decision shortcuts
• Irrational value assessment
• Emotional and social impacts

Behavioural economics challenges the conventional notion of economic rationality. So where does organizational intelligence fit into this debate? Does intelligence entail rationality? Let's look at each of these factors in turn.

Decision shortcuts

Chris lists three common short-cuts.

• Using the cost of something else similar for comparison instead of knowing the actual value of something
• Using “default” option as the best option
• Using rules of thumb rather than understanding actual need

But using these short-cuts is perfectly compatible with intelligence. Indeed, in some complex situations, it may be impossible to reach a rational conclusion without taking any short-cuts, in which case the only intelligent course of action may be to jump to conclusions. (The passage of time from "Time for Understanding" to "Moment to Conclude" is not amenable to rational logic - see my presentation on Mastering Time.)

As I see it, the problem is not the short-cuts themselves, but the uncritical over-reliance on these short-cuts, and in some cases an apparent lack of awareness that a short-cut is being taken at all. Intelligent use of short-cuts calls for feedback and experimentation and learning, so that a set of effective and context-appropriate short-cuts are refined over time.

Irrational value assessment

Behavioural economics points out that people value things differently according to the way the choice is framed. For example, people may be unduly impressed by "free" offers, or may have an asymmetrical preference for avoiding loss, in situations that mathematical economists perceive as equivalent. Choices are often driven by a highly subjective notion of risk and reward.

In an intelligent organization, these effects may be moderated by an ability to articulate and share notions of risk and reward between multiple decision-makers, not relying purely on dry economic measures but understanding how these measures apply to real practical issues.

Emotional and social impacts

One form of emotional influence explored by behavioural economists is the so-called ego trap, which includes over-attachment to past decisions as well as over-confidence. When a situation becomes adverse (whether an investment or a project), it is psychologically easier to hope that the situation will sort itself out (for example, the markets turn positive, or the project gets back on track) than to reverse the original decision.

In organizational settings, there is a high transaction cost in changing your mind, and people who abandon previous commitments too quickly tend to be distrusted as fickle and unreliable. Furthermore, most projects experience difficulties at some stage, and if people didn't have some ego investment to carry them through these difficulties, no projects would ever be completed. So it is often better to work through difficulties than to cancel a project at the first sign of trouble. On the other hand, there are always going to be some decisions that made sense at the time, but are no longer viable under the changed circumstances.

Sticking to some decisions and changing others - this is incredibly hard, and is a test of character as well as intelligence. An intelligent organization doesn't have to suppress ego, but it needs to have a way of dealing appropriately and authentically with these kinds of issue, not only so that the right decisions can be reached more often, but also so that ventures into the unknown can be taken with the confidence that the downside risk can be contained.

See also: From Organizational Stupidity to IT Disaster

Wilensky on Organizational Intelligence 3

Post partly based on Chapter 8 of Organizational Intelligence by Harold Wilensky, published in 1967, in which he summarizes his conclusions on organizational intelligence.

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Intelligence failures are built into complex organizations

"On the one hand, the most readily accomplished revamping of structure turns out to be mere organizational tinkering."

Wilensky points out that reorganization often merely gives official recognition to practices that had already evolved informally - for example, an interdepartmental committee that institutionalizes information sharing and collaboration, or a public affirmation of fixed departmental positions. But that doesn't mean organizational innovation can always be dismissed as tinkering, merely that there is often a time-lag between the development of an innovation in the real organization and its being captured in the formal organization.

"On the other hand, even when the reorganization of formal structure is pushed to its limit, the basic sources of distortion remain in some degree."

Wilensky expresses scepticism about any singleminded approach to administrative reforms that facilitate the flow of accurate information, for the following reasons.

• the proper mastery of the task calls for specialization
• the need to motivate and control personnel necessitates hierarchy
• coordination demands centralization
• the exigencies of decision seem to require direct answers, if not short-run predictions of the future
• internal security and outside competition necessitate security - to the extent that other organizational interests must be protected

I agree with his conclusion that a singleminded approach is inappropriate, but I don't agree with all the reasons he cites. For example, although the book contains many criticisms of hierarchy and its constraints, he still expected organizations to be largely hierarchical in structure, and he could not have foreseen the radical alternatives to hierarchy that have emerged since this book was published.

"Many sources of intelligence failures are natural to the state of the organization's development and are therefore substantially beyond its control."

If we focus (as Wilensky does) on the formal organization, the fact that some individuals may bypass the regular machinery and construct informal intelligence mechanisms on their own initiative can be seen as an organizational intelligence failure. However, if we focus on the informal (de facto) organization, the ability of the organization to accommodate this kind of initiative is a positive indicator.

But reliance on heroes taking personal initiatives is not enough for real organizational intelligence. Wilensky's book contains many examples of organizations that have been led astray by false certainties, narrow thinking, and insufficiently rigorous and critical debate. His final paragraph (which it is not hard to project onto more recent events) is as follows.

"To read the history of modern intelligence failures is to get the nagging feeling that men at the top are often out of touch, that good intelligence is difficult to come by and enormously difficult to listen to; that big decisions are very delicate but not necessarily deliberative; that sustained good judgement is rare. Bemoaning the decline of meaningful action, T.S. Eliot once spoke of a world that ends 'not with a bang but a whimper'. What we have to fear is that the bang will come, preceded by the contemporary equivalent of the whimper - a faint rustle of paper as some self-convinced chief of state, reviewing a secret memo full of comfortable rationalizations just repeated at the final conference, fails to muster the necessary intelligence and wit and miscalculates the power and intent of his adversaries."

VPEC-T and pluralism

#vpect is a deceptively simple systems thinking lens developed by a couple of friends of mine (Carl Bate and Nigel Green), and described in their book Lost in Translation. The letters stand for Values, Policies, Events, Content and Trust. For a good brief description, see VPEC-T the 5D lens by @RoyGrubb.

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VPEC-T is based on a profoundly radical philosophy of plurality. Instead of a single centralized value system (as found in top-down command-and-control organizations), we expect to find a range of different (overlapping, conflicting) value systems. Instead of a single coherent set of policies, we expect to find complex interaction between different kinds of policies (commercial, security, safety, corporate responsibility, and so on). Instead of a simple set of routine events, the post-modern organization is faced with a dynamic set of emerging events. Instead of a rigid set of database records, systems content is rich and evolving. And finally, the whole human activity system is underpinned by a complex set of trust relationships between people and organizations.

If you’ve spent any time working and thinking in business and systems, these statements will probably seem like common sense. However, many twentieth century systems methodologies were based on simplistic assumptions – for example, that there should be a single ordered set of goals and objectives, completely and consistently driving all system activity; that there should be a single ordered set of policies, rationally decided by management according to best-practice strategic principles, and so on.

And in our working lives and elsewhere we are surrounded by systems that have been designed according to these simplifying assumptions – systems that are inflexible, that serve a narrow set of stakeholders and to hell with everyone else. Not just software systems (for example, badly designed websites) but all sorts of human activity systems. Think of the hours of passenger time that are wasted because airline and airport procedures are designed for the convenience of their own operations rather than for the passengers. Think of the huge inefficiency of healthcare and other public services. Think of organizations whose attention is almost exclusively focused on internal squabbling rather than building external relationships, and which only survive because their competitors are no better. Think of counter-productive targets and expensive white elephants and all the other trappings of bureaucracy. These are the products of a certain way of thinking about business organizations and systems, which VPEC-T regards as obsolete and obscene.

So VPEC-T starts from the opposite assumption and expects trouble – there will be tension, there will be contradictions, and so on. Some people might think this is a pessimistic position. After all, wouldn’t it be wonderful if the world was as consistent and orderly and predictable as the 20th century methodologies assumed?

Actually I don’t think so – I think that kind of mechanical uniformity takes us towards the utopian nightmare described by countless science fiction writers. The plurality and richness which I find in VPEC-T is not only more realistic but also more human.

VPEC-T is not just a tool for making sense of complex human activity systems, but also a tool for communicating and telling stories about these systems. This is important for three reasons

• Firstly, because any single view of a complex system is necessarily unreliable and incomplete. We need multiple lenses and multiple voices to give us greater coverage of the issues, and greater confidence in the analysis.

• Secondly, because the philosophy of plurality makes it necessary for us to work collaboratively with other people, not only with different perspectives but with different value systems. So we need a language for collaboration.

• And thirdly, because of the reflexive nature of trust, which requires transparency of the models and assumptions on which the system is based. Ultimately, VPEC-T cannot be a private matter for a closed elite group of system designers without compromising trust principles.

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See also POSIWID should be plural

Enemies of Intelligence

Post partly based on Chapter 3 of Organizational Intelligence by Harold Wilensky, published in 1967, in which he identifies a number of factors that can impair organizational intelligence.

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Hierarchy and status

• Hierarchy encourages concealment and misrepresentation (for example, hiding bad news).

• Low status knowledge and insight is undervalued. For example, the warning signs of Pearl Harbour were seen and understood by subordinate officers, but this intelligence did not reach Army and Navy chiefs.

• Emphasis on loyalty and conformity - stifles new ideas and critical questions.

• Steep promotion ladder creates divide between those focused on personal career advancement and those focused on personal survival.

Wilensky identifies three possible remedies.

• Flatter hierarchies
• Single issue task forces (IBM identified as an early practitioner of this approach)
• Alternative communication channels

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Specialization and rivalry

• Fragmentation of knowledge and insight - nobody has the "big picture".

• Fragmentation of responsibility - nobody willing to tackle the difficult issues. For example, in 1950, nobody had the courage to tell Truman and McArthur that they might be mistaken about China's strategy for Korea. (This also links to the status question, see above.)

• A more recent example is the rivalry between the CIA and the FBI, said to be a contributory factor in the intelligence failures prior to September 2001.

Wilensky argues that if there is an organizational structure and leadership that can contain the rivalry and construct the big picture, then healthy competition can have a positive effect on intelligence. He cites Franklin Delano Roosevelt, who appears to have managed this reasonably well. However, successes of this kind are probably the exception rather than the rule.

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Centralization and concentration

Intelligence (sense-making, decision-making, learning) too remote from What-Is-Going-On (WIGO). (Note that Wilensky's appreciation of the limitations of central intelligence predates by several decades the Power-to-the-Edge doctrine.)

Centralized intelligence can create a false illusion of reliability (Wilensky's example is the CIA's misreading of the Bay of Pigs episode), and therefore a single point of failure.

However, Wilensky does advocate some degree of centralization and concentration, arguing that distribution of intelligence (especially geographical distribution) risks spreading the intelligence too thinly. While we may agree that some clustering and communication is still valuable, we no longer have to assume this means geographical proximity. We may also note that Wilensky was writing at a time when only a minority of the workforce would have had a college education, and despite his concerns about status quoted above, he does sometimes talk as if he expected the main contribution to organizational intelligence to come from the educated members of the workforce. Nowadays, we should want organizational intelligence to be more rigorously inclusive.

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Secrecy

A lot of intelligence activity places undue emphasis on secret sources and secret deliberations, not just in the military sphere but also in the commercial sphere. Wilensky argues that this emphasis can have a distorting effect, and points out that some extremely successful intelligence activities during the Second World War were based on detailed analysis of public sources.

Secrecy has the following pitfalls

• secret information is more difficult to verify
• unverified secret information is often given more weight than verified non-secret information
• secret information is restricted to a small circle of people with appropriate security clearance
• people with alternative opinions don't get security clearance, so the system perpetuates a narrow viewpoint
• lack of critical appraisal, intolerance of alternative views

One of the examples Wilensky quotes in his book is the extraordinary deception played by the British against German intelligence during the Second World War, in an episode known as Operation Mincemeat. Malcolm Gladwell (who has also been reading Wikensky's book) has just published an account of this story in the New Yorker, under the title Pandora's Briefcase (May 2010). As Gladwell comments, "the proprietary kind of information that spies purvey is so much riskier than the products of rational analysis. Rational inferences can be debated openly and widely. Secrets belong to a small assortment of individuals, and inevitably become hostage to private agendas". Quite so.

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Doctrine

Besides an obsession with security, Wilensky identifies two other unhelpful doctrines that may be embedded in the organizational culture.

• An obsession with facts (naive empiricism). The notion that intelligence should be based on simple facts, uncontaminated by interpretation or agenda. Wilensky attributes this notion to a kind of anti-intellectualism, an antagonism towards ideology or theory, and an exaggerated belief in practical experience.

• An obsession with prediction and probability. The notion that intelligence is trying to establish some degree of certainty about the future, and therefore an emphasis on closed questions (Will China attack Korea? Does Iraq possess WMD?) rather than open questions (What factors may influence China's policy in the region?) Because intelligence analysts can't provide Yes/No answers to these closed questions, they end up being forced to assign probabilities to future events, although these probabilities are fairly meaningless and unhelpful.

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So these are among the factors we'll be looking at when assessing an organization for intelligence. Please contact me if you want to carry out an assessment for your organization.

Wilensky on Organizational Intelligence 1

Have finally got hold of a library copy of the original book on Organizational Intelligence by Harold Wilensky, published in 1967. Some of Wilensky's assumptions look a little dated now, but there's a wealth of great ideas and examples.

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One of the problems talking about intelligence is that people may use the word to refer to a number of different concepts.

• Signals and their content - intelligence as raw material for sense-making and decision making
  

• Expertise - intelligence as the individual and collective ability to reason efficiently about significant questions - Wilensky discusses several different types of expertise, which may be mobilized in an intelligent organization

• Function - a set of processes for acquiring and deploying intelligence as required across the organization, typically operated by a specialist organization unit
  

• Strategic capability - intelligence as a property of an organization, enabling it to operate effectively in volatile environments

Wilensky himself defines intelligence as "information - questions, insights, hypotheses, evidence - relevant to policy" (p viii), and mostly uses the word to refer to the content rather than the process or capability. But the book is largely about the intelligence function, and how this function is supported by relevant skills, capabilities, doctrines and organizational structures.

Value of intelligence

In Chapter Two, Wilensky argues that an intelligence function has particular value and relevance for large organizations in complex environments. He identifies three key specialist roles, contributing to his notion of organizational intelligence, and identifies three factors creating particular need for these three roles.

Contact men, responsible for liaison and communication with the external environment, This role is similar to the "Resource Investigator" team role identified by Belbin.	Especially needed when an organization is in conflict with its social environment or depends on it for the achievement of its central goals (p10).
Internal communications specialist, responsible for liaison and coordination inside the organization.	Especially needed when an organization depends on the unity and support of persons, groups, factions or parties within its membership for the achievement of its central goals (p13).
Facts and figures men. These are responsible for building and deploying analytic models and methods. More recently known as quants or wonks.	Especially needed when an organization sees its external environment and internal operations as rationalized - that is, as subject to discernible, predictable uniformities in relationships among significant objects (p14).

Wilensky's argument now looks dated, not only because of his assumption that these roles would be filled by men, but also because of his trust in rational and predictable analytical models, which would now be seen as unrealistic and simplistic. However, it seems like a good historical starting point for starting to think about a division of labour / expertise within the intelligence function and beyond.


...  to be continued

Where is the fear?

@hnauheimer recommended a discussion in the Linked-In Organizational Change Practitioners group. Rauf Aslam Butt had asked why people FEAR to change, and this prompted a number of responses about resistance to change being caused by anxiety, ego, dislike of effort, fear of the unknown, and so on.

I thought it was interesting that we often describe other people as fearful, anxious, reactive, and so on, but never ourselves. WE are rational and THEY are emotional.

Sometimes resistance to change is a perfectly rational response to a flawed or ill-conceived initiative, as my friend Linda Levine pointed out many years ago. Many change programmes in large organizations are not properly thought through, and many large organizations are trying to run several incompatible change programmes at the same time. As Christina Buchanan said in the discussion, we should all fear badly-planned change.

The second good reason to fear change is that the change may get half-way through and then run out of money or trust. (People losing faith when the change gets to that inevitable dip in the middle.) Or there'll suddenly be a new person at the top with a different agenda.

People learn to be apprehensive about change because of accurate observation of what has happened in their organizations and elsewhere. Art Kleiner suggests that "resistance to change occurs not because people fear change, but because they fear the consequences of contradicting the perceived priorities of the core group" (Strategy+Business, April 2010). Rather than complain about "fear", maybe change practitioners should look at addressing the causes of fear. (Perhaps this was the purpose of Rauf's original question.)

When change agents perceive ordinary busy people as fearful or ego-driven, simply because they don't leap with enthusiasm and energy for every half-baked scheme that is put to them, or because they ask awkward questions, maybe there's a certain amount of projection involved. (Psychologists call this transference.) It might seem that the people who are really most anxious about this change and its immediate prospects are the change agents themselves? But that's not the whole truth either.

Following my post Where is the intelligence?, we might ask a similar question about the true location of the fear. Even if the change agents authentically acknowledge their own feelings about the change, and deal with these feelings in a healthy and mature manner, we might wonder if the change agents really owned these feelings, or whether they were sensitively picking up the anxiety embedded in the organization itself. (Psychologists call this counter-transference.)

Unless we are completely emotionally cut off, our feelings inside organizations are strongly connected to the emotional state of the organization as a whole. This applies to feelings such as motivation as well as anxiety, and applies whether we are change agents ourselves or the recipients of change led by other people - often we may be both at the same time.

Change agents should also acknowledge their own contribution to the sum total of fear and anxiety in an organization. One common tactic for change is to create something called a compelling event - a story that attaches fear to the status quo, prodding the organization reluctantly into the future like a herd of cattle. As a consequence of this tactic, many organizations are almost paralysed by the accumulation of would-be compelling events.

But in my opinion, one of the biggest errors of a change agent is to focus attention on the people who are most vocal in expressing anxiety about a given initiative - treating them as if they were the instigators of these feelings rather than merely witnesses to them, sometimes even trying to exclude or avoid them as if this will cause the bad feelings to disappear. But anyone who brings their concerns out into the open is doing you a favour, because these concerns can then be addressed, and the change programme will be better for it. It is the silent ones you really have to worry about.


Linda Levine, An Ecology of Resistance. In Tom McMaster et al, Facilitating Technology Transfer through Partnership (Springer 1997) pp 163-174

 

Related posts: Passive Adoption (December 2009), Why new systems don't work (December 2009), The Role of the Sceptic (April 2010)

How Doctors Think

@nybooks I've been looking at the work of Jerome Groopman, author of How Doctors Think, as well as a number of recent articles in the New York Review of Books.

• February 11, 2010: Health Care: Who Knows 'Best'?
• December 17, 2009: Dilemmas for Doctors
• November 5, 2009: Diagnosis: What Doctors Are Missing 

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Errors of judgement

Groopman discusses the seminal work of psychologists Amos Tversky and Daniel Kahneman, who challenged the prevailing notion that the economic decisions we make are rational. (This field of study is  known as behavioural economics.) We are, they wrote, prone to incorrectly weigh initial numbers, draw conclusions from single cases rather than a wide range of data, and integrate irrelevant information into our analysis. Such biases can lead us astray.

It seems doctors are not immune to such cognitive errors.

Some 10 to 15 percent of all patients either suffer from a delay in making the correct diagnosis or die before the correct diagnosis is made. Misdiagnosis, it turns out, is rarely related to the doctor being misled by technical errors, like a laboratory worker mixing up a blood sample and reporting a result on the wrong patient; rather, the failure to diagnose reflects the unsuspected errors made while trying to understand a patient's condition.

Groopman quotes an associate, a senior cardiologist, who made fatal errors by relying too heavily on logic.

"Impeccable logic doesn't always suffice. My mistake was that I reasoned from first principles when there was no prior experience. I turned out to be wrong because there are variables that you can't factor in until you actually do it. And you make the wrong recommendation, and the patient doesn't survive. I didn't leave enough room for what seems [sic] like minor effects."

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Best Practice

As a way of improving diagnosis, there is growing reliance on "clinical guidelines", the algorithms crafted by expert committees that are intended to implement uniform "best practices".

Behavioural economics provides a justification for the proliferation and dissemination of "best practices" to healthcare professionals. If doctors are prone to systematic errors, then best practices will protect them and their patients from the consequences of these errors. Medical best practices are encouraged from President Obama downwards.

But there are some big problems with this approach, as Groopman explains.

Over the past decade, federal "choice architects"—i.e., doctors and other experts acting for the government and making use of research on comparative effectiveness—have repeatedly identified "best practices," only to have them shown to be ineffective or even deleterious.

What may account for the repeated failures of expert panels to identify and validate "best practices"? In large part, the panels made a conceptual error. They did not distinguish between medical practices that can be standardized and not significantly altered by the condition of the individual patient, and those that must be adapted to a particular person. For instance, inserting an intravenous catheter into a blood vessel involves essentially the same set of procedures for everyone in order to assure that the catheter does not cause infection. Here is an example of how studies of comparative effectiveness can readily prove the value of an approach by which "one size fits all." Moreover, there is no violation of autonomy in adopting "aggressive" measures of this kind to assure patient safety.

But once we depart from such mechanical procedures and impose a single "best practice" on a complex malady, our treatment is too often inadequate. Ironically, the failure of experts to recognize when they overreach can be explained by insights from behavioral economics.

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Next Practice Tools

How Doctors Think has an epilogue with advice for patients. Groopman gives the following tools that patients can use to help reduce or rectify cognitive errors:

• Ask What else could it be?, combating satisfaction of search bias and leading the doctor to consider a broader range of possibilities.
• Ask Is there anything that doesn't fit?, combatting confirmation bias and again leading the doctor to think broadly.
• Ask Is it possible I have more than one problem?, because multiple simultaneous disorders do exist and frequently cause confusing symptoms.
• Tell what you are most worried about, opening discussion and leading either to reassurance (if the worry is unlikely) or careful analysis (if the worry is plausible).
• Retell the story from the beginning. Details that were omitted in the initial telling may be recalled, or different wording or the different context may make clues more salient. (This is most appropriate when the condition has not responded to treatment or there is other reason to believe that a misdiagnosis is possible.)

[source: Wikipedia]

Plenty of good advice there, not just for healthcare professionals but for anyone dealing with complex system problems.

Notes on the Value of Culture

Following my previous post Meeting of Minds, about the cost of meetings and of the "meeting culture", @j4ngis asked "Would you also consider value of meeting culture?"

There is a more general discussion of culture to be had here. Culture is often blamed when things don't go according to a rational managerial ethos. As Oscar Berg blogged yesterday, Did you ever hear anyone shout "culture failure!"?

But an organization without culture - well, it just wouldn't be an organization at all. Culture is what gives an organization its identity - it is a kind of deeper structure that protects the organization from incoherence, instability and inconsequentiality. Culture tells us how an abstract business model is embodied in a particular organization.

Arjo Klamer identifies several ways of talking about the value of culture. In an anthropological sense,

"‘culture’ ... refers to the shared values, stories and aspirations that distinguish one group of people from another (think of a community, an organization, an ethnic group, a nation or a continent). The economic value of culture would be the economic contribution that those shared values make. As the sociologist Max Weber famously argued, the culture of Calvinism may have contributed to the rise of capitalism and the economic growth that came with it. A particular culture may improve economic performance or hinder it. A culture of distrust can seriously hamper the market process. A culture of consensus, such as exists in Japan and the Netherlands, can stifle entrepreneurship but may also be responsible for stability in the event of crisis." [Value of Culture (pdf)]

Edgar Schein identifies three levels of organizational culture - behaviour and artefacts, values, and assumptions and beliefs. [See Wikipedia. See also notes by Ted Nellen.] We can use the VPEC-T lens to unpack and identify these different elements.


An organization has various mechanisms to prevent random changes to the way-we-do-things. Much of the time, these mechanisms are accepted uncritically as part of normal management control - like an immune system that prevents the organization being taken over by destructive memes. @AndreaMeyer calls these mechanisms corporate antibodies. However, when managers themselves want to change things, these mechanisms turn out to be inconvenient obstaces, whose aggregate effect is to suppress innovation.

Vincent Kenny and Philip Boxer describe culture as follows.

"Anyone who works in businesses will have encountered the notion of culture, and the incredible extent to which a culture lives on in a way which defies anyone's attempts to bring about change. It is not only a question of dealing with the issue of anxiety as an individual issue - the whole fabric of the organisation seems to be caught up in the conservation of identity however much change individuals may make." [Economy of Discourses, 1990]

Kenny and Boxer go on to talk about "the levels of extreme inflexibility and 'stuckness' which we witness in large companies" and ask "how can we explain the increasing degrees of rigidity and loss of power for self-transformation evident in the invariant identities and cultures of organisations?"

The reason why leaders struggle with culture is because there is a creative tension or asymmetry between culture and identity on the one hand, and viability (or effectiveness or survival) on the other hand. This is a critical element of the Asymmetric Design lens, which Philip Boxer describes in When is a stratification not a universal hierarchy? (See also the sociological distinction between structure and agency.) This provides a rigorous framework for reasoning about complex structural change.

Coming back to @j4ngis's question - what is the value of the meeting culture - I guess the key question here is what other cultures (more flexible, less bureaucratic, or whatever) we'd be comparing it with, in what context. What function does this culture serve in the context of this particular organization, and how does it affect the strategic outcomes and energy profile of the organization?



Related posts: Vaccination (September 2004), Meeting of Minds (January 2010), Easier Seddon Done (June 2008) 

Getting the Big Picture

A discussion about enterprise architecture on Twitter exposed an interesting difference of opinion about this topic. In response to the question whether people felt threatened by enterprise architecture, @pauljansen replied "yes and rightfully so. An EA often sees the bigger picture 'they' cannot."

Paul's comment raises several interesting questions.

1. What does "seeing the bigger picture" really mean?
2. What is the ability to "see the bigger picture" dependent on - is it inborn talent or something else?
3. What is (or should be) the relationship between people who "see the bigger picture" and those who don't (for whatever reason)?
   

Exactly the same questions arise for "systems thinking" (whatever that means), but since this particular debate was between enterprise architects, I shall stick to that specialism for the purposes of this post.

Firstly, let's acknowledge that enterprise architecture (as commonly practised) mandates a particular set of lenses for viewing the enterprise - based on a set of abstract structural models - and these lenses frame what enterprise architects mean by "seeing the bigger picture".


More generally, seeing the bigger picture entails an understanding of how things join up. EA models are supposed to document this understanding. For some people, "seeing the bigger picture" is equivalent to "strategic thinking", and the two terms were used interchangeably in the discussion.

Does "seeing the bigger picture" call for some special ability or mindset?

@jpmorgenthal said that "strategic is a skill that cannot be learned", adding "it's genetic", and in answer to @aleksb6, who asked "if all behaviors are both nature and nurture, why is strategic thinking unique in your opinion?", @jpmorgenthal answered "strategic thought is not a behavior, it's an attribute like eye color".

@pauljansen took the view that it was both nature and nurture. "Some had 'the right eye color' but never used / recognised / cultivated it." @pauljansen "Short: left brain versus whole brain; those in certain positions came there because their rational focus, by talent or nurtured."

This sounds like enterprise architects have some special power to understand complex problems, which distinguishes them from the rest of the management team. To my mind, the trouble with this belief is that it encourages a kind of them-and-us attitude, which perhaps reinforces the feelings of threat and frustration on both sides.

The idea that some people have a superior ability to see the bigger picture resembles an earlier belief that some people had a superior ability to take a long-term view. Elliott Jaques based his theory of requisite organization on the principle that each level in the management hierarchy should be associated with a different time horizon, and it was this that justified higher remuneration for people in senior management positions.

In contrast with this view, @aleksb6 thought that many people would be capable of seeing the bigger picture if they wanted to. "They can, but not incented to see!" In other words, not seeing the bigger picture is often a question of perspective and motivation, not intrinsic ability. I agree with this.

I also partially agree with @enectoux 's comment that "Not everyone is able to see the big picture. Take an expert in any area... Not the right mindset." as long as it is understood that mindset changes with perspective and motivation. If someone goes to work for a large software vendor, or a technical person moves into a sales role, she will need to adopt a mindset that is appropriate for the new role.

And it is not hard to see how the "bigger picture" mindset conflicts with the mindset needed for certain activities, as @pauljansen acknowledges. "Alas, for many clients it is a disability, be it 'unlearned' in favor of focus (convergence)."

Perspective and mindset, motivation and interest - these are all important factors that influence which pictures we see. I recently came across a great example of the importance of perspective. Here's a pretty rural cottage for sale ...




... and here's a bigger picture ...



Source: Daily Mail, 29 October 2009

The Daily Mail bills the second picture as "Reality" - but of course it is only one reality, and there are many other big pictures. If you take the photograph from the other side, you can see miles of uninhabited landscape surrounding the cottage [BBC News, 28 October 2009, Daily Telegraph, 29 October 2009]. How you take the picture depends on what outcome you want. Bigger isn't necessarily better, if you are standing in the wrong place.



@pauljansen perspective is a nonrational rightbrain ability, and there4 it matters indeed @sboray perspective is a notion not logically deduced
@sboray what meets the eye and what meets the mind r different
@jpmorgenthal re: pictures, a strategic person would not look at each in isolation, but in relation to each other


In my next post Selling the Big Picture, I shall discuss (with further quotes from the Twitter debate) how pictures great and small, simple and complex, can be used to help or hinder the relationship between those who think they "get" the big picture, and those who apparently "don't get it".


For another example, see Big Picture Again (June 2011) See also Special Powers of the Architect - Getting The Big Picture (December 2010)

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.

Redesigning Sex

This post is about lenscraft - applying multiple lenses to a complex problem.

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Following my piece Sex and Design on the complicated behaviour and evolutionary purpose of the human sex organs, Anders Jangbrand challenged me to a redesign project.

Would be interesting to re-design that system. Not the organs-but the full "sex" system. How would re-design proc look like?

Interesting yes: the thought of redesigning sex raises a number of interesting and important questions about redesigning things generally. 

Firstly what would drive such a project? Who or what would be the beneficiaries of this redesign? What altered outcomes would be relevant? Are the current arrangements problematic, and if so for whom? 

Secondly scope. The system of interest is far more complex than the shape and function of a couple of body organs and their fluid interactions; it produces various biological and social and aesthetic and spiritual outcomes. 

Thirdly worldview or weltanschauung. Do we (whoever "we" is) want sex to be more rational? Or does the magic of sex and the richness of its literature come from its complete lack of rationality? Is sex even necessary? Some ants have abandoned sex altogether (BBC News, 15 April 2009).  

Fourthly variety. The biological variations of sexual practices among other species (see James Meek's piece in the London Review of Books, Sex is Best when you lose your head) must be more than matched by the social and psychological variation of human sexual behaviour. (Whether that variety is a good thing depends on your worldview - see above.) 

Radical design. It may not be enough to design one part of the system, leaving the rest of the system unchanged. If you leave the female parts unchanged, your scope for improving the male parts are quite limited and unoriginal and (if you believe all those junk emails) pretty well catered for already. 

Trust. The very absurdity and embarrassment and vulnerability of sex means that there is a trust gradient involved. One of the effects of sex is the release of oxytocin, which reinforces trust. So there is a trust subsystem, and this helps to explain a lot of the emotional issues associated with sex.

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There's a number of issues there. Is there a lens that would enable us to focus on all these issues? Probably not. 

Checkland's CATWOE covers a decent few (e.g. Selfish Gene as Customer, Sex Organ as Actor, Fertilization as Transformation, Rationality versus Passion as Worldview, Human Race as Owner, Society as Environment) 

Green & Bate's VPEC-T covers a few more (e.g. Passion as Value, Sexual Etiquette as Policy, Pleasure as Event, Fertilization as Content, Sexual Relationship as Trust) 

In each case, I've identified one possible way of applying the lens to the task. Each lens can be used to view the task in many different ways. And it would be interesting to explore how each lens, each alternative view through each lens, would lead to a different redesign strategy.

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If sex were a problem, it would be a wicked problem. But sex isn't a wicked problem - it is a wicked solution. And I mean wicked.

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and here's xkcd's take on the subject ...

See also Redesigning the Banana (July 2009)

Does Intelligence Entail Objectivity?

#orgintelligence @snowded

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While working up some new material around the pattern basis of human intelligence, Dave Snowden finds that we are not good at being objective. He lists some of the common effects that are know to prevent objectivity in humans.

• The contrast effect (sometimes known as the availability heuristic) ...
• The sunk cost effect ...
• Out group homogeneity ...
• Actor/observer contrasts ...
• Self confirmation and rationalization ...
• Confirmity (going with the flow) ...
• Overconfidence ...

All of these effects can be found in human groups and organizations as well as in individuals, so the list is clearly relevant to organizational intelligence as well as individual human intelligence. However, the remedies may be different.

Some of these effects are well-known as logical fallacies - for example confirmation bias - and we could perhaps train people and groups to be more aware of (and therefore more resistant to) these effects.

But there is a problem with intelligence that is too rarified and ungrounded, that fails to engage with the realities of a given position and perspective. Intelligence doesn't just have to be reasonably objective; active and engaged intelligence has to be subjective as well. Both/and.

Furthermore, some of these effects are inevitable consequences of operating in a social context. We have to be willing to agree with other people at least some of the time, and we have to have at least some confidence in our judgement. The intelligence here is judging just how much to agree/disagree, and how long to hesitate. It is critical points like these that differentiate effective groups and organizations from less effective ones. Not just intelligence but character.

Art and the Enterprise

Artistic Innovation

Sometimes artists produce amazing innovations, with painstaking labour. Subsequent technology makes this painstaking labour unnecessary. We can recognize two separate innovations - the product innovation (what the artist produces) and the process/production innovation (what the technology produces).

What is the linkage between these two innovations? To what extent has the artistic innovation stimulated the technological innovation, established a proof-of-concept which technologists can then implement. Great art changes the way we perceive the world, and this may include changing our understanding of the possible.

One example I have quoted a couple of times is Karlheinz Stockhausen and the synthesizer. In the 1950s, Stockhausen and other composers produced some innovative pieces of electronic music, for which every sound had to be hand-crafted. Once the synthesizer had been invented, similar music could be easily produced with a few quick knob-twiddles. As a result of the widespread use of synthesizers in popular music, as well as the many rock musicians (Beatles, Can, Zappa) who pay explicit tribute to Stockhausen, a piece like Kontakte sounds a lot less strange to the modern ear than it did to the contemporary ear.

On this point I disagree with Brian Eno, who once commented that "Stockhausen was an example of a charismatic theoretician who inspired a lot of people but whose own work is generally unlistenable." [source: MOJO April 1997, interview with Andy Gill]

Does this familiarity diminish the striking originality of Stockhausen's work? Or should we regard Stockhausen's achievement with greater respect, because of his lack of tools, and his (arguable) influence over later technology as well as (acknowledged and unacknowledged) influence over later music-making.

I should also mention the BBC Radiophonic Workshop here. The brilliant Delia Derbyshire produced the original theme music for Doctor Who using hand-made equipment - music that today still sounds utterly wild and futuristic. (Sadly, the BBC no longer uses this version, and now plays a tame remix recorded with modern equipment.)

Similar examples can be found in the visual arts before the invention of photography. Many artists developed styles of painting and perspective which predated the modern camera.

Enterprise Innovation

I think there are three important patterns here that may be relevant for enterprise innovation.

• Innovation before automation. Don't automate something until you have understood it, simplified it, improved it. (This principle is sometimes known by the slogan: Don't pave the cow-paths.)

• Retain the capability for further innovation. Automation should not eliminate the possibility of hands-on creativity. Lewis Mumford (in Technics and Civilization) argues that it is generally beneficial to retain some 'craft' production alongside automated 'factory' production, as a source of 'education, recreation and experiment' and 'as a means to further insight, discovery and invention'.

• Invent in order to innovate. A composer such as Thomas Dolby, who sets out to invent new tools for producing music (including building new hardware and software), may thereby be able to produce music that is different to what everyone else is producing.

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For further discussion of Stockhausen, see my posts on Thomas Dolby's keynote speech at the 2005 Rational Conference (May 2005), Lightweight Enterprise (March 2006), and Grandpa's SOA (Oct 2007).

Chloe Glover, Manchester honours the woman behind the pioneering music of Doctor Who (Guardian 10 Jan 2013)

Updated 12 Jan 2013 (Delia Derbyshire Day)
Updated 12 March 2015 (removed link to wrong Andy Gill)

Security Orientation

Adam Shostack identifies Three Views of Software Security, which he calls orientations. So I wondered whether these could be mapped onto the four types of trust and mistrust, and whether that reveals a fourth orientation. But the mappings turned out to be a little more complex.

Orientation	Focus	Typical assessment	Type of Trust
Government	Assurance of quality, reliability, safety, and appropriateness for use	Commercial security products aren't good enough to be used. We are losing the security war.	Authority+Network: We are not getting adequate assurances of security - neither from centralized guarantors, or from the emergent power of the network.
Hacking	Tools and techniques of exploration and exploitation at the micro and macro levels	Unwilling to confer a positive evaluation on any product or technology vendor (especially Microsoft).	Commodity+Authentic: We hackers can usually engage more deeply with the product than the vendors themselves.
Economic	People are behaving rationally, if only we can understand their motivations	Few people ask whether products are secure, so there is little explicit demand for security.	Commodity+Network: Security (or its lack) emerges from the combined behaviour of rational actors.

There are several other possible permutations, but the orientation I want to encourage is based on Network+Authentic - combining a deep engagement with the (focal) practices of technical security with a broad and dynamic social base (process-driven, community-driven). Next question: how can we foster this orientation?

Sudan 1

It's an ill wind that blows nobody any good. A large quantity of the carcinogenic Sudan 1 has got into the food chain, via some contaminated chilli powder, which was used to make a flavouring sauce, which was then used in a large number of manufactured foods.

The list of products being withdrawn from foodstores is still growing. In other words, the extent of the contamination is still emerging.

Here's the twist. On the radio, the word goes out that large supermarkets will be more efficient than small corner shops in removing the suspect foods from the shelves. Therefore we should trust large supermarkets more.

Er, excuse me? Let me guess, where did this advice come from anyway? Doubless when politicians and journalists want inside information about the food chain, there are PR departments in the large supermarket chains who are more than happy to help.

There has always been a tendency for people to trust in size and power. I know people who openly wonder about the honesty of the organic butcher in the village, whether his meat is always what he says it is. But it wouldn't occur to them to question the accuracy of the labels in a major supermarket. It is as if they believe that only handwritten labels lie, while computer-printed labels always tell the truth.

There is certainly a desire to trace and track food sources and additives through the manufacturing process. This is not just relevant for contamination, but also to control foods according to personal requirements of health or faith or values. (Nut allergies, vegan, kosher/halal, and so on.)

So there is a Faustian pact emerging between the food manufacturer, the major supermarket and the consumer. You can eat food that is totally inauthentic and unhealthy, but we can guarantee that all the ingredients are organic/kosher/nutfree. And if they aren't, we'll withdraw the products from the shelves immediately. And if we somehow fail to do this, we'll give you double your money back.

So an occasional food contamination scare helps to remind all of us who's really in charge of the nation's food. Life Support System, huh?

(In a previous post, John asked: When is an in-store bakery like a life-support machine? In my reply, I said that we may easily be persuaded to think of the supermarket as a life-support system as well. This is a dangerous belief - because if we stop supporting the small shopkeeper, the belief may become true.)

Jon Borresen makes two important points.

• Firstly the level of integration in our processed food network. A single source of chilli powder, sold to a single company to make a single product ends up contaminating over 350 supermarket products in every supermarket in Britain.
  
• Secondly, do you know what you are eating when you buy a ready meal? ... [Supermarket meals are] packed with things you would never add yourself if you were cooking dinner at home. Every supermarket meal is also stuffed with sugar salt and saturated fat.

Update February 23rd

Taste the Difference - a good article in today's Guardian by Joanna Blythman, author of Shopped - the Shocking Power of British Supermarkets.

"The current Sudan 1 episode ... cannot help but shake consumer's trust in supermarkets."

Well that's the rational response - but look at the clever tactics on the radio yesterday, which might well have the opposite effect.

"Supermarkets have fostered the notion that we have no time to cook. ... This is because supermarkets make far bigger profits from selling us value-added processed foods than they do from straightforward raw ingredients."

Agreed. This looks like John's life support system again. (Presumably the term "value-added" is sarcastic.)

"Unable or unwilling to give us the true variety that comes from using a large number of suppliers and manufacturers with geographically distinctive, often seasonal foods, produced with specialist expertise, supermarkets present us instead with a phoney choice of merchandised factory food in all its chameleon-like forms."

Trust and Contradiction

I have received an unusual email, which contains either an amazing bit of confidence trickery or a subtle piece of postmodern art.

You're Billing Information! Dear PayPal Member, It has come to our attention that your PayPal Billing Information records are out of date. That requires you to update the Billing Information. Failure to update your records will result in account termination. Please update your records within 24 hours. Once you have updated your account records, your PayPal session will not be interrupted and will continue as normal. Failure to update will result in cancellation of service, Terms of Service (TOS) violations or future billing problems. You must click the link below and enter your login information on the following page to confirm your Billing Information records. Click here to activate your account You can also confirm your Billing Information by logging into your PayPal account at https://www.paypal.com/us/. Thank you for using PayPal! The PayPal Team

Protect Your Account Info Make sure you never provide your password to fraudulent websites. To safely and securely access the PayPal website or your account, open a new web browser (e.g. Internet Explorer or Netscape) and type in the PayPal URL (https://www.paypal.com/us/) to be sure you are on the real PayPal site. PayPal will never ask you to enter your password in an email. For more information on protecting yourself from fraud, please review our Security Tips at https://www.paypal.com/us/securitytips Protect Your Password You should never give your PayPal password to anyone, including PayPal employees.

The email was sent to an address that I have not registered with PayPal. In addition to this, the left-hand side contained three strong indicators of a phishing attack:

1. Hot links to a web site that was not PayPal. (I have removed these links.)
2. Spelling mistakes
3. Aggressive threats (respond within 24 hours or else ...)

So what to make of the right-hand side, which appears to be a genuine message from PayPal, containing no hotlinks and effectively advising me to ignore the left-hand side?

Why would a phisher include such anti-phishing advice - except as a clever trick to persuade the reader that the email was not a phishing attack? Or perhaps when people are overloaded with contradictory information, they do irrational things. I'd love to know how many people actually fall for this trick.

The broader implications for trust are fascinating and important. People have always tried to play games to win trust - and have often succeeded. And there is an interesting relationship between trust and consistency.

Update (June 2008)

Robin Wilton had some unsolicited email purporting to be from a company called MoneyBookers. See my comment.

Cigarette Smuggling

John places Cigarette Smuggling in the context of Commodity Trust (December 15th).



A new twist - suggestions that smuggled cigarettes (being unregulated) may contain all sorts of poisonous chemicals, and might be dangerous. Ha!



This is a blatent attempt to encourage smokers to smoke legal fags, by provoking them to distrust the smuggled ones. But if smokers were able to rationally change their behaviour because of scare tactics by Government, they would have stopped smoking years ago.



In a situation like this, commodity trust easily overpowers authority trust.

Paul's gospel

originally posted by John

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Alarm bells started ringing as I listened today as Jack Straw and Geoff Hoon huffily dismissed the very idea that the Pentagon’s demand for UK troops to cover them while they flatten Falluja might have some political dimension. This is purely an operational matter, they huffed indignantly, and any suggestion that it might be connected with the upcoming US election and that Dubya might get some vote-mileage out of it is so ludicrous it’s inconceivable and it’s purely coincidental anyway.



Alarm bells? The apologist poodles were as fawningly awful as ever – so nothing there to trigger any alarms – the pair make Uriah Heep look like a star pupil in a self-assertiveness class. No, it was remembering Paul Krugman’s first rule of dealing with the Bush regime that set the bells ringing. This simply says: don’t expect things to make sense in terms of their stated goals.

New Product Development

A recent study by my old friend James MacFarlane of Evolved Thinking looks at innovation and new product development in the finance sector. Generally compares unfavourably with best practice in manufacturing industry. Here are some of his findings.

Typical Finance Company	Typical Manufacturing Company
Little accountability for the success of new products. No established criteria to measure success and failure of product launches, and no key performance indicators (KPIs) for individuals in the businesses of product development.	Direct accountability for success and failure. Key performance indicators (KPIs) for product development staff play a significant role in determining bonuses and pay awards for their staff.
No industry benchmark for internal product development processes in the industry.	Benchmarking is a crucial activity to improve process performance.
Little post-launch evaluation of commercial and operational performance, and no follow-up.	In most manufacturing businesses, following the performance of a product in the market is an integral part of TQM (Total Quality Management) process or Six Sigma programmes. It provides the product development groups with valuable lessons and improvements, which can be made to the launching process for future products.
Incentives and rewards for innovation are merely a token "thank-you" for commitment to the business, and are not linked to the outcome of the innovation.	Employee awards for innovation may involve a significant payout on success.
Little idea as to the net contribution new products provide to the overall business. Time spent by individuals working on the launch of new products not recorded. Therefore little capability to calculate the value of product development.	Established cost-accounting practices.
Minimal investment to support new product development. Market research often considered unnecessary, especially when copying competitors or complying with regulations. Unsophisticated use of technology to support product development.	Thorough market research. Good knowledge management. Sophisticated requirements planning and project planning tools, as appropriate.

"The best manufacturing businesses launch new products with an average probability of commercial success of 85%. Our Survey found that with a few exceptions businesses didn’t even keep a record to measure the commercial success or failure of a new product. It is our belief, that the level of commercial success in Financial Services for launching new products is less than 25%."

Full copy of the report available from Evolved Thinking at £95 UK pounds.

For advice on innovation and new product development, please contact us.

Trust as she is spoken

originally posted by Aidan

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On the front page of the FT the other day is a big article saying how pissed off the FS sector is with the FSA for changing its mind about risk management regulations it was introducing. There was a raft of new recommendation in the Prudential Sourcebook about how the players were supposed to manage their operational risk in particular. In the event the FSA said that the matter was being overtaken by EU regulation and they were dropping the matter. The industry said that they had already spent millions on compliance and that this was now wasted.


The FSA claims that it works with the industry to produce sensible regulation that is in the industry's interest to comply with. The industry in practice will only implement things that have official force in case their base costs get out of line with the competition. That is nobody will actually implement sensible measures for their own sake as part of responsible business management. I know this first hand as well.


Needless to say the FT article does not conclude that this shows that the whole process does not work and cannot work.