Category Archives: Sense-making

Accountants live in the Past

A family milestone was recently achieved when my nephew received his CA designation. Great to see when a lot of sweat and effort ultimately leads to a personal and professional goal.

Chris Cairns CA

The blog heading is not meant to be derogatory; it’s just what accountants primarily do. Their job is to record company history in financial terms, according to GAAP (generally accepted accounting principles). According to Wikipedia, the rules and procedures for reporting under GAAP are complex and have developed over a long period of time. Currently there are more than 150 “pronouncements” as to how to account for different types of transactions. GAAP is slowly being phased out in favour of the International Financial Reporting Standards (IFRS).

Not all CAs stay in the accounting field. In many cases it’s a foundational step that will lead to a successful business, management, IT career.

IMO, the biggest contribution a CA just starting out can make is busting through the “yellow bubble.”  That means not being trapped by existing paradigms but challenging them. The world needs CAs in leadership roles to enable new perspectives and ways of thinking emerge and flourish. Obviously the disruption must be respectful and tactful to avoid ticking off senior CAs who may not realize they have become professionals trapped in their own expertise. In the following video, Dave Snowden explains the phenomenon.

What are some of these accounting paradigms we should challenge?

One of the oldest and most durable (resistive?) paradigms in an organization is the financial system that runs on a fiscal year. It is so strong that other systems such as HR, Planning, Marketing, and Supply Chain align their activities to fiscal quarters. If the fiscal year ends on 31 March, a phenomenon called “March madness” takes place. Cautious for the preceding 11 months, a manager will madly spend to minimize year-end budget variance or in fear of having next year’s budget allotment reduced. To avoid this annual ritual, managers are directed to curve budgets; that is, guess when they expect expenses to be charged.

Anyone who has managed a project extending over one year has encountered accrual accounting. It’s spending time guesstimating what your expenditures will be on a particular date. Think about the times you wanted to proceed but we’re told you had to defer due to budgetary reasons. Alternatively, you were surprised and told to spend money now as there were surplus funds. However, you couldn’t pull it off due to lead time issues.

Why is the 12-month fiscal year a sacred cow? Consider the annual employee appraisal. Does it make sense to reward or punish employees according to some fiscal time schedule? Agile companies don’t; they formally recognize performance immediately.

In companies that have installed an IT ERP Financial systems, the Control of Information paradigm is significantly reinforced. Many CAs and CIOs struggle with the advent of social media software, products of the Complexity/Sense-Making S-curve. It will be fascinating to observe those who try to control information and those to choose to unleash the power of networks. Professor Robert Plant in his HBR article “IT Has Finally Cracked the C-Suite” wrote about a new leadership title Chief Business Technology Officer (CBTO). It’s a paradigm shift for technology leaders who still refer to themselves in terms of “working with the business” rather than using technology to drive business strategy.  “You can tell the ones who will thrive and survive and the ones who won’t,” he says. “It may be a year, it may be four, but many are not going to make it because they are so focused on old-school stuff that their competitors will focus on differentiating them and beat them eventually.”

How might one improve business agility? Small ideas include removing the accruals burden on the project manager and putting the onus on the accountants to estimate the dollars spent. A bigger shift is to dispense with a fiscal year operation and run the total business on a Gantt chart. Adam Laskinsky in his book Inside Apple revealed that the Apple culture has only one budget held by the CFO. Managers are not encumbered by dollar watching and focus full attention on getting their projects done.

The future belongs to companies, to organizations,  and to governments who recognize the need for strategic agility. And there’s a strong possibility they will be led by smart CAs.

Cynefin Simple domain renamed Obvious domain

The Cynefin Framework is a sufficient but always partial view of reality. As additional information arrives and new insights emerge, adjustments are made to reflect the real world.

Recent thinking recognizes that in all 4 domains a few,  simple rules seem to guide behaviour. By “simple”, we mean an action that can be easily carried out.  Examples are applying a rule-of-thumb heuristic, following a straight-forward process, or performing an entrained habit.

Unfortunately, the word “Simple” has been associated with one of the domains. Consequently, Dave Snowden decided to rename Simple domain to Obvious domain. When describing the Cynefin framework in terms of Cause & Effect relationships, “Obvious” carries the same meaning – clear, straight-forward.

 

Cynefin Cause & Effect

 

Existing graphics, diagrams, and videos will be updated over time.

Apple buying Beats might be a safe-to-fail experiment

The music industry is a complex adaptive system (CAS). The industry is full of autonomous agents who have good and bad relationships with each other. Behaviours and reactive consequences can build on each other.  Media writers and industry analysts are also agents who are  easily attracted to big events. Their comments and opinions add to the pile and fuel momentum. However the momentum is nonlinear. Interest in the  topic will eventually fall off  as pundits tire and move on or a feverish pitch continues. Alternatively a CAS phenomenon called tipping point occurs. The music industry then changes. It might be small or a huge paradigm shift. It can’t be predicted; it will just emerge . In complexity jargon, the the system doesn’t evolve but co-evolves.  It’s asymmetrical – in other words, there is no reset or UNDO button to go back prior to the event.

While I might have an opinion about Apple buying Beats, I’m more interested in observing music industry behaviour. Here’s one perspective. I’ll use complexity language and apply the Cynefin Framework.

1. Apple is applying Abductive thinking and playing a hunch.

“Let’s buy Beats because the deal might open up some cool serendipitous opportunities. We can also generate some free publicity and let others promote us, and have fun keeping people guessing.  Yeh, it may be a downer if they write we’re nuts. But on the upside they are helping us by driving the competition crazy.”

2. Apple is probing the music industry by conducting a safe-to-fail experiment.

“It’s only $3.2B so we can use some loose change in our pockets. Beats is pulling in $1B annual revenue so really it’s no big big risk.”

3. Apple will monitor agent behaviour and observe what emerges.

“Let’s see what the media guys say.
“Let’s read about researchers guessing what we’re doing.”
“Let’s watch the business analysts  tear their hair out trying to figure out a business case  with a positive NPV. Hah! If they only knew a business case is folly in the Complex domain since predictability is impossible. That’s why we’re playing a hunch which may or may not be another game changer for us.”

4. If the Apple/Beats deal starts going sour, dampen or shut down the experiment.

“Let’s have our people on alert to detect unintended negative consequences. We can dampen the impact by introducing new information and watch the response. If we feel it’s not worth saving, we’ll cut our losses. The benefits gained will be what we learn from the experiment.”

5. If the Apple/Beats deal takes off, accelerate and search for new behaviour patterns to exploit.

“The key agents in the CAS to watch are the consumers. Observing what they buy is easy.  What’s more important is monitoring what they don’t buy.  We want to discover where they are heading and what the is strange attractor. It might be how consumers like to stream music, how they like to listen to music (why only ears?), or simply cool headphones are fashion statements.”

6. Build product/service solutions that  exploit this new pattern opportunity.

“Once we discover and understand the new consumer want, be prepared to move quickly.  Let’s ensure our iTunes Radio people are in the loop as well as the AppleTV and iWatch gangs. Marketing should be ready to use the Freemium business model. We’ll offer the new music  service for free to create barriers of entry to block competitors  who can’t afford to play the new game. It will be similar to our free medical/safety alert service we’ll offer with the iWatch. Free for Basic and then hook ’em with the gotta-have Premium.”

7. Move from the Complex domain to the Complicated Domain to establish order and stability.

“As soon as we’re pretty certain our Betas are viable, we’ll put our engineering  and marketing teams on it to release Version 1. We’ll also start thinking about Version 2. As before, we’ll dispense with ineffective external consumer focus groups. We’ll give every employee the product/service and gather narrative (i.e., stories) about their experiences. After all, employees are consumers and if it’s not great for us, then it won’t be great for the public.

Besides learning from ourselves, let’s use our Human Sensor network to cast  a wide net on emerging new technologies and ideas. Who knows, we might find another Beats out there we can buy to get Version 2 earlier to market.”

Fantasy? Fiction? The outcomes may be guesses but the Probe, Sense, Respond process in the Cynefin Complex Domain isn’t.

 

When a disaster happens, look for the positive

In last month’s blog I discussed Fast Recovery and Swarming as 2 strategies to exit the Chaotic Domain. These are appropriate when looking for a “fast answer”. A 3rd strategy is asking a “slow question.”

Resilience as Cynefin DynamicsWhile the process flow through the Cynefin Framework is similar to Swarming (Strategy B), the key difference is not looking for a quick solution but attempting to understand the behaviour of agents (humans, machines, events, ideas). The focus is on identifying something positive emerging from the disaster, a serendipitous opportunity worth exploiting.

By conducting safe-to-fail experiments, we can probe the system, monitor agent behaviour, and discover emerging patterns that may lead to improvements in culture, system, process, structure.

Occasions can arise when abductive thinking could yield a positive result. In this type of reasoning, we begin with some commonly well known facts that are already accepted and then works towards an explanation. The vernacular would be playing a hunch.

Snowstorm Repairs

In the electric utility business when the “lights go out”, a trouble crew  is mobilized and the emergency restoration process begins. Smart crews are also on the lookout for serendipitous opportunities. One case involved a winter windstorm causing  a tree branch to fall across the live wires. Upon restoration, the crew leader took it upon himself to contact customers affected by the outage to discuss removal of other potentially hazardous branches. The customers were very willing and approved the trimming. The serendipity arose because these very same customers vehemently resisted in the Fall to have their trees trimmed as part of the routine vegetation maintenance program.  The perception held then was that the trees were in full bloom and aesthetically pleasing; the clearance issues were of no concern. Being out of power for a period of time in the cold winter can shift paradigms.

Why Managers Haven’t Embraced Complexity

This is the title of an article written by Richard Straub in the Harvard Business Review HR Blog. The notion of applying Complexity science to management has been around for over 20 years. So why hasn’t it caught on? Why are managers and leaders reluctant to see the world as it is: non-linear, turbulent, ambiguous, unpredictable, and uncertain? Straub offers 3 reasons:

  1. Managers don’t want to give up control. 
    Today’s dominating business paradigm is Systems Thinking and the control of information. Before that it was Scientific Management and the control of processes. Imagine the resistance put up by those not willing to give up Taylorism and accept emerging ideas like socio-technical systems, learning organizations, etc. Now systems thinkers who once fought an uphill battle to introduce their ideas are being asked to give up their control of information and don’t resist/deny/block but embrace emerging ideas like complexity, networks, cognition. Reluctant managers will eventually change because they will discover that their old methods can’t resolve today’s problems. “Keep at it, try harder” no longer works and becomes a waste of time.
  2. Technology isn’t powerful enough.
    In engineering school I was taught “When in doubt, make a model”. I later realized that students in business and economics were also told the same thing. So we learned early that models were useful to proxy the real world. We didn’t have powerful computers (only slide rules) to perform detailed calculations; therefore, we learned from experienced craftsmen and professionals the “rules of thumb” they successfully deployed. Fast forward to today and consider the computer horsepower we have to create mathematical models to handle real world complexity. The internet, big data analytics, cloud computing, supercomputers et al are rapidly changing the IT landscape. We now know how human sensor networks can turn stories told by humans into data points that can be analyzed and support better decision-making.
  3. The prospect of non-human decision-making is too unnerving.
    If we had infinite computer processing power, would we be able to create a precise model of a complex system such as Health Care? Aviation? Public education? Electric power industry? Physicist Murray Gell-man says no: “The only valid model of a complex system is the system itself.”
    Machines are designed to perform “work-as-imagined.” Because human designers can’t imagine everything, machines are limited in what they can do. Humans are the best agents in a complex system to deal with unknown unknowns, unknowables, and the unimaginable.

Straub makes the point there has been a gradual change in mindset, pushed along by the increasingly evident damage of narrow, simplistic thinking. Here we are 10+ years into the 21st century and note the number of industrial age ideas still being widely used. The public education system continues run on a factory model. Health care remains using a craft model.

The movement from Safety-I to Safety-II hasn’t happened as quickly as we had hoped. In the latter case, perhaps by embracing complexity and applying ideas like the Cynefin framework and narrative inquiry, we will be able to accelerate the operationalizing of Safety-II.

Click here to read the Richard Straub article.

Thinking about Paradigms and Paradigm Shifts

I was initially introduced to the notion of paradigms and paradigm shift by Joel Barker. For me, he was able to take a science phenomenon into the world of business.

From Wikipedia: “The word [paradigm] has come to refer very often now to a thought pattern in any scientific discipline or other epistemological context.” …Since the 1960s, the term [paradigm shift} has also been used in numerous non-scientific contexts to describe a profound change in a fundamental model or perception of events, even though Kuhn himself restricted the use of the term to the hard sciences.”
I can relate to non-scientific contexts. As a FranklinCovey trainer, I introduce the concept of paradigms very early in a 7 Habits of Highly Effective People workshop. 7 Habits is all about changing human behaviour and it starts with the paradigms, the beliefs, the mindsets, we possess. In many cases, the paradigms that people hold dearly are not wrong or incorrect; they are insufficient. In addition, if you become highly skilled at using a hammer, you see every problem as a nail.

Insufficiency

I hold a Professional Engineer license. I enjoy analyzing problems, finding cause & effect relations, optimizing choices, and implementing solutions. Life is good. When I can make all the decisions, life is really good. However, when other people get involved (especially stakeholders who are not engineers) I get extremely frustrated. I also like to work in a very linear, sequential fashion. I dislike uncertainities, unknowns, unpredictable behaviours. What’s wrong with people? How can they disagree with me? Why can’t they see it my way? As a budding engineer, this was my attitude. Thankfully I quickly matured and discovered I had tunnel vision. I could only view things from my vantage point. The world was much broader and wider than that. In Cynefin framework terms, my early formative career years clearly put me in the Complicated Domain. In many instances I was able to argue that I was right. However, I was insufficient because I did not recognize the Unordered side where Complexity and Chaos resided. I had read some things about complexity thinking but still didn’t have a complete picture. That changed when I read Dave’s and Mary’s 2007 HBR article Leader’s Framework for Decision Making.

Too Good for your own Good

Whenever I took a course or attended a workshop, I discovered my return to my office was often filled with employee trepidation. “Uh oh! What has Gary learned now that he wants to try out on us?” In later years as a consultant, I would come equipped with tried and proven methods, tools, and templates. Yesterday’s posting about wanting to start an engagement with traditional interviewing is an example. Hey! Why not? It’s worked in the past and therefore, should work just as well again. As experts we need to ensure that we are using the right tools at the right time for the right reasons.
In Cynefin framework terms, it’s perfectly okay to recommend Simple Domain solutions such as Training 101 when a lack of basic skills is the problem. Here we’re dealing with known knowns. We must be aware, however, when we propose resolving a Complex Domain issue using a Complicated Domain approach. It’s that ability to use a hammer well inside us which wants to immediately jump in and start analyzing instead of patiently stepping back and probing the system. It’s getting the client to appreciate that a safety culture problem won’t go away if more rules are written, training is mandated for all, and documenting crew inspections is added to the supervisor’s already overloaded checklist.

I once was asked in a 7 Habits workshop must a perspective change be earth shattering, tsunami-sized to be called a paradigm shift? My opinion was no. Humour, for instance, is a paradigm shift. Standup comedians like Bob Hope, Bill Crosby, Jerry Seinfeld knew how the play the brain to create laughter. Question: What is a paradigm worth? Answer: 20 cents If you aren’t smiling (or groaning), don’t feel bad. It’s just an indication of the patterns that have formed in your brain. I will be exploring how the brain works in a future posting. Plus provide an explanation if you didn’t get the joke.
I’d like to end today’s ramblings with story of a paradigm shift in my own home.

We were at the dinner table with my young daughter, Jennifer, sitting across from me. “Daddy! I can count to 10!’ she proudly exclaimed. “Great, Jen! Show me!” “Okay. 1,2,3,4,5,6,7,8,9,10. See! I did it!” “Good job! Way to go!”
Now being the father who enjoyed giving his kids a challenge, I then asked: “Now, can you count backwards?”
“Sure!” she smiled.
Jen proceeded to jump out of the chair, turn her back to me and confidently shouted: “1,2,3,4,5,6,7,8,9,10. See! I did it!”.
My wife and I hit the floor laughing. Yes, it was a .001 paradigm shift on the Richter scale but one that we will always remember fondly.

U.S. Public School: If it’s not working, just repeat the same mistakes

I recently read about the state of the U.S. public educational school system. What struck me was how powerful old school paradigms are and how people in power are unable to see what is happening. As expert analysts, they are in the Cynefin Framework’s Complicated Domain and suffer from perceptual blindness. Unfortunately they cannot see that existing methods and solutions (i.e., student testing) are not working. However, instead of finding another solution, the direction is to do more testing.

The article was written by Lisa Guisbond, a policy analyst for the National Center for Fair and Open Testing, known as FairTest, a Boston-based organization that aims to improve standardized testing practices and evaluations of students, teachers and schools. Excerpts from her article:

  • As children head back to school after a decade of No Child Left Behind (NCLB), will they benefit from lessons learned from this sweeping and expensive failure? Will schools do anything differently to avoid NCLB’s narrowed curriculum, teaching to the test and stagnant achievement? Sadly, instead of learning from the beastly NCLB, the Obama administration is doubling down on a failed policy.
  • NCLB’s mistakes and coming “reforms” will continue or intensify the damage, not correct it. One reform will increase time and other resources spent on testing instead of unleashing teachers’ and students’ creative potential.
  • NCLB demonstrated many ways that high-stakes standardized testing damages and corrupts education. In addition to narrowing curriculum and encouraging teaching to the test, the NCLB era has produced waves of cheating.
  • Struggling students have been pushed out of school to raise the test score bottom line, with far too many youth entering the prison pipeline. School climate has suffered as fear of failure is passed down from administrators to teachers to students. Many good teachers have chosen to leave rather than comply with drill-and-kill requirements and corrupt their students’ education.
  • Author and lecturer Sir Ken Robinson often speaks about the importance of making mistakes, to learn from them and try again. He says educational standardization and pressure for conformity stunt our children’s growth by teaching them to fear and avoid mistakes. “Conformity and standardization and sitting still and doing multiple-choice questions and being tested at the end — these features of education are inimical to the kind of original thinking and confident imaginations that underpin real innovation,” Robinson says. What we need, he adds, is not “reform” but “revolution.”
  • Olympic gold medalist Usain Bolt credited his teammate, Jamaican runner Yohan “The Beast,” Blake, with helping him improve by beating him in earlier races. The defeats forced Bolt to reflect on what he needed to do differently to improve. Bolt’s victory modeled a powerful lesson: Always try to learn from your mistakes, rather than repeat them.
  • To unleash our children’s potential, we need to unleash the full capacity of teachers and schools. That means acknowledging the mistakes of NCLB, learning from them and fundamentally changing course.

To read Lisa’s article in full, click here.

Intractable Problem: The Public School Factory

“The World has changed. The way we educate our children should too.”

That’s the opening page of BC’s Education plan.

“We need to make education more relevant to reflect the world students now live in, and the world of the future. One of the keys to do that is to personalize learning by putting students at the centre of learning so they can follow their own interests and passions within the topic matter. Teachers must be supported. And families must be involved.”
“Our challenge is clear. We need to make sure education in B.C. meets the needs of B.C. families today and in the future, keeping our young people achieving and thriving in a dynamic, rapidly evolving technological world.”

These are nice words to launch a plan. But as we know, Planning is easy; Execution is the tough part.

The school system is a perfect example of an intractable problem. We typically like to tinker on the surface by making changes to class sizes, budgets, teacher & staff compensation, breaks, and so on. Since the school system is political, much of the debate and noise is about getting votes from taxpayers. But if we really want to make significant improvements, we must go deeper and change the culture and the paradigms.

Some paradigms are so engrained – we don’t even know they are there. What are the Education paradigms we must challenge? For some time I thought I had a fairly good level of awareness. Then I was blown away and sent back to Square 1 by author and lecturer Sir Ken Robinson:

Wow. I never thought about the public school system being based on the Factory model. Now with this paradigm in mind, I can easily think of production line characteristics that apply to schools: date of manufacture, Monday to Friday schedule, testing, standards, extended breaks, for plant maintenance, failure and reject handling. I always wondered when the entire school met in the auditorium it was called “assembly”. Now I understand. I have a recurring dream (nightmare?) about a school bell ringing and being late for class. Now I understand. I was just being prepared for the working world.
One more characteristic to think about: the 9 to 5 working day. One would think if the goal is to be student-centric, we should be matching learning when the student peaks. That might be anytime, like 3 AM in the morning. It’s a belief that the Khan Academy holds by being available 24/7/365. But it’s not a view that is shared by all. As Coalition Avenir Quebec Leader Francois Legault says, having secondary schools operate on a 9-to-5 basis better reflects the schedule of today’s families.
In summary, here are 3 education paradigms and the shifts we need to make:

  1. Separate for efficiency –> End the myth of academic/vocational streaming
  2. Cheating is bad –> Most great learning happens in groups. Collaboration is the stuff of growth
  3. Treat students as products on a factory line –> Reshape the habits of education institutions and the habitats they occupy

My  friend and educator Paul Gagnon told me: “We are on the verge of a major change in the way in which we conceive of and deliver learning. Technology is maturing to the point that individual and customized learning is now a reality- with peak learning periods factored under the umbrella of self-directed, learning just in time and place a major feature. Truly and exciting time to be in education, I can tell you.”

I couldn’t agree with Paul more. Education like healthcare, electric utilities, and safety is undergoing a paradigm shift that technology has enabled. I enjoy reading about pioneers and innovators who have jumped to the new S-curve. I do feel sorry for the Education traditionalists who cling to the factory model not because they want to but because they don’t know they are.

The 2012 Twitter Olympics

Are you searching for more evidence of the Complexity/Sense-Making S-curve? Look no further than what transpired at the 2012 Twitter Olympics

It didn’t seem that long ago when TV stations and radio commanded the air waves and we waited for the newspaper printing presses to inform us of the details. But in 2012, the absolute control of information was not in the hands of the broadcasters. Look what the Twitterverse did to the BBC coverage of the cycling race. As TV viewers we were able make our voice heard about NBC’s delayed coverage.
We observed how athletes twittered and facebooked with family and fans. It’s terrific when an athlete with pure raw emotion tweets immediately after a big win. But it’s a two-way street ranging from Hope Solo’s mild rant to a Greek athlete making a racist comment and getting kicked off the team. The wise ones attempted to make sense of Rule 40 and what they were and were not allowed to do.
Would you like to know how the Olympics have grown? Check this Infographic.
How much bigger is social media in 2012 that it was in the 2008 Olympics? Three times? Ten times? How about 100 times? It’s fun imagining what it will be like 2 years from now at the Winter Olympics in Sochi.