Category Archives: Strategy

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.

 

The Case against the Business Case

Business cases are developed typically for big projects that require a huge commitment of resources (time, people, money). Calculations are based on best-guess revenue forecasts and cost estimates. It is written from a “fail-safe” perspective – think of everything that could go wrong, devise mitigating action plans, and cover off uncertainties as assumptions. Not only is the task challenging and energy sucking, you never really know if you’ve missed something because “what you don’t know is what you don’t know.” So, you “time-box” the effort and proclaim “Oh well, good enough”.

In 2010, Dan Gardner in this book Future Babble took a critical look at expert predictions and the psychology that explains why people believe them even though they consistently fail.

“Seminal research by UC Berkeley professor Philip Tetlock proved that the average expert is no more accurate than a flipped coin.”

Gardner based his book on current research in cognitive psychology, political science, and behavioural economics. These are intangibles that a business case cannot dollarize and frequently end up being subjectively treated in a risk assessment section.

With respect to the Cynefin Framework, the Business Case tool resides in the Complicated Domain and works well in an ordered, linear, predictable environment. It will probably continue as the approval mechanism for cause & effect solutions. Sense, Analyze, and Respond.

Just be aware that the Business Case has very little value when dealing with a Complex Domain issue where uncertainty rules, predictions are fallible, and unknown unknowns abound. Here, we must Probe, Sense, and Respond by conducting “safe-to-fail” experiments.

When a disaster happens, will it be fast recovery or swarming?

Last month’s blog was about Act in the Cynefin Framework’s Chaotic domain.  Be aware you cannot remain in the Chaotic domain as long as you want. If you are not proactively trying to get out it, somebody or something else will be taking action as Asiana Airlines learned.

How you decide to Sense and Respond? We can show 2 proactive strategies:

Resilience as Cynefin DynamicsStrategy A is a fast recovery back to the Ordered side. It assumes you know what went wrong and have a solution documented in a disaster plan ready to be executed.

If it’s not clearly understand what caused the problem and/or you don’t have a ready-made solution in place,  then Strategy B is preferred. This is a “swarming” strategy perfected by Mother Nature’s little creatures, in particular, ants.

AntsIf the path to a food supply is unexpectedly blocked, ants don’t stop working and convene a meeting like humans do. There are no boss ants that command and control. Individual ants are empowered to immediately start probing to find a new path to the food target. Not just one ant, but many participate. Once a new path is found, communication is quickly passed along and a new route is established.

This is Resilience – the ability to bounce back after taking a hit. 

Manage things, Lead People

As a manager and later a consultant, I have been involved with helping people deal with change. My first formal exposure in change methodologies occurred when I was trained by ODR. Founded by Darryl Conner in 1974, ODR held licenses with the major consulting firms from the mid-80s to late 90s. His book Managing at the Speed of Change became a must read for ERP clients.

So that we have a common understanding, let’s use Wikipedia’s definition:

“Change management is a structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at helping employees to accept and embrace changes in their current business environment.”

There were many methods, templates, charts, diagrams, and forms endeavouring to cover all avenues one would encounter in change management. As a linear, sequential type person, I felt like I had hit the jackpot and won the prize at the end of the rainbow. I was taught the who, when, where, why and hows and became a SME – subject matter expert. FYI, in the consulting world, being a SME is no longer kosher; you are now called a SMS – subject matter specialist. Why? To avoid possibly being sued by a client if big-time projects go badly wrong. Thank you, legal beagles.

Does the preceding sound like the Complicated Domain to you? Change Management was viewed as complicated yet quite manageable. Sense what’s happening using assessments and surveys. Analyze the feedback. Respond with the appropriate packaged solution. Very Ordered side.

If employee backlash or unpredictable behaviour edging on chaos arose, just steer them back on track. One of the more interesting statements I heard was: “We first try to change the person. If that doesn’t work, then we change the person.” It’s a rather subtle way of saying if you don’t get onboard with the program you’re terminated.

What does this mean for CE practitioners who might find themselves involved in a change initiative? I have a couple of ideas to share.

Manage Things, Lead People 
I first heard this from Stephen Covey and it’s been a real favourite of mine. It recognizes that non-human objects (inanimate and living) adhere to logical cause & effect rules. Flip the switch; the light goes on. Press the button, the motor stops. Stimulus-response amoeba behaviour. Simple Domain stuff.

However, when dealing with humans, it’s an entirely different ball game. People have the ability to think, make choices, and choose to behave accordingly. Since we cannot manage/control people, that leaves leading them. Conceivably, they may choose not to listen and go their own way. As leaders, we hope to influence their choosing by giving them positive or negative consequences and acting as models of desired behaviour. Unpredictable behaviour, no understood link between cause and effect? Sounds like Complex Domain to me. Consider Probing as a Stimulus. Sense behaviour changing and patterns forming. Respond by accelerating or dampening stimulation. Rinse, and repeat (sorry about that…)

CE Leadership vs Management

Change Leadership
We have been playing around with the Cynefin framework by creating model variations and testing resonance with clients. One such variation advocates the Ordered side is Management and the Unordered side is all about Leadership. It’s having the desire to get “out of the box” and courage to declare “Enough is enough!” But it’s also having consideration and respect for others who are quite comfortable doing same old, same old. All the more reason why I feel small safe-fail experiments are much more tenable than massive change efforts.

We’re also putting out the notion that most of the time one wants to be on the Ordered Side where life is stable, predictable, easily fixable, and in steady state mode. When you finally come to grips you can’t solve today’s problems using present methods, you take the lead to venture to the Complex Domain As leader, you initiate a search and rally followers to find a new solution that will change the paradigm. 

Change Management
I’m not throwing Change Management out of my toolkit. I occasionally do project management work for clients when the subject of change management is discussed. In this case we are talking about modifying tasks, reallocating resources, issuing change orders. You know, things that don’t think but just get moved around on a spreadsheet or Gantt chart. But if I do hear some whining or screaming from project team members, it’s a signal to shift into a Change Leadership role.

Working with Front-line Managers and Supervisors

Front-line managers and supervisors practically spend their entire working day on the Ordered Side. When they are faced with a Complex Domain issue, unfortunately they struggle big time.

I guesstimate that the time split between the Complicated and Simple Domains is in the 20/80 range respectively. Everyday operational decisions primarily require Management by Intuition – relying on established habits and past experiences to get the job done. As we know, in the Complicated Domain an expert is called upon to sense, analyze, respond. The first-line manager can play the role of an expert, in particular, when he is a key player in a pilot project. Many years ago I was in that situation.SenseMakingA pilot project is a small trial or test of a change idea. It’s common practice to include a pilot in a large scale Business Case. The chief purpose is to locate the kinks and bugs before full implementation and rolling out to the masses. I was picked as one of the experts in the field since I was well positioned in the org hierarchy to generate data and hopefully provide useful feedback. In the beginning I objected (“Why me?”) since it affected my ability to get the Simple Domain work done. However, my resistance faded quickly when it was strongly suggested to “get with the program.”With edict in hand, I was prepared to do whatever was necessary to make the pilot work. The company had invested in training my brain to solve business problems. So the pilot was perceived by me as nothing more than another problem to tackle. In addition, as an up and coming manager, I had formed a plausible rationale: “Let’s see. Someone at a higher-level has created a business case. To get executive buy-in, the plan has proposed launching a pilot and testing the waters to reduce risk. They picked me to be involved in this pilot project for 3- 6 months. I don’t get to make a Go/No Go recommendation; my job is to collect data to help refine the business case. I can live with that. Hey, why risk a CLM (career limiting move) by blocking a change that my bosses want?”I already knew what the solution was; it was articulated in the business case that I read. So I did what Thomas Kuhn discovered and led to his coining the term Paradigm Shift. I fit the data to match the estimated costs and benefits. Plus ignored data that didn’t match or would screw up the business case. No big deal. This wasn’t much different from my days in the high school lab when my buddy and I cooked the data to prove the physics or chemistry law we were studying.

The business change initiative went ahead and did turn out to be a good one for the organization. My expert analysis I’m sure produced some distortion. But then again, I felt all along the project sponsors knew they had the green light from the get go . The pilot was just an exercise to say field personnel were involved. Such is life on the Ordered side.

What about working on the Unordered side? The first thing we do is put away our Sense/Analyze/Respond problem-solving tool bag. Instead we apply a Sense-Making approach and its Probe/Sense/Respond methodology. This calls for setting up Safe-Fail experiments to probe the system and sense the new attitudinal and behavioural patterns that emerge.

Safe-fail experiment

Working with front-line managers and supervisors on a Complex Domain issue is, to put it politely, a delightful challenge. Here are a few things to remember.

They have a really tough time working in the Complex Domain
Front-liners who spend most of their time on the Ordered side find unpredictability and uncertainty extremely discomforting. Problem solving is all about analyzing and finding cause & effect. When you as a facilitator say there is none, be prepared for stunned “how can that be?” faces.

Failure is OK

“Hey, didn’t you watch the Apollo 13 movie? Failure is not an option!”
Reminding them of the Cynefin framework helps to shift their heads from the Complicated to the Complex Domain.
We want failure to happen, as long as it’s tolerable and safe. We will carefully monitor and if things are getting too much out of control, shut down the experiment and stabilize.Probe, not Pilot
Coaching is required to focus their attention away from piloting to probing the system. At our client workshops we have small table groups design a safe-fail experiment. We learned they really struggle creating probes. We ask them to think about radical ideas that would provoke and spark strong reactions. We encourage suspending judgement when we hear murmuring such “Well, that won’t work. No way we can do that. The guys will think we’re nuts.”We should only observe, not measure in the Complex Domain
“Say what? This is a joke, right?”
They live by the Ordered side creed “what gets measured gets done”. Now we tell them the measures they are accustomed to may not be appropriate; the measures may belong to a paradigm we are escaping. So we can only observe behaviour and monitor accordingly.
Asking them to suspend their need to measure won’t be easy. Giving an analogy may offer some comfort: “We don’t want to be measuring velocity when, in the hindsight, we discover acceleration is the right measure. It’s conceivable we may have to invent a new measure.”Insanity is repeating something and expecting to get a different result
Umm, guess what. We can and are looking for different results in the Complex Domain. More incredulous looks. Maybe a few agitated smiles.In the Complex Domain, everything might be reset back to Ground Zero
“You got to be kidding me. You mean I can’t fall back on my vast knowledge accumulated over many years? Hey, that’s why they pay me the big bucks around here! My value will go down the toilet!”
This won’t be an isolated problem with front-line managers and supervisors. It will be a change leadership issue for everyone impacted.

You can Do More with Less
Front-liners who lead by empowering their people to come up with a solution get this really quickly. Front-liners who struggle with giving up control and feeling compelled to find a solution by themselves unfortunately practice Do Less with More.
At FranklinCovey, we use the Gardener vs. Mechanic analogy to point out the differences between leading and managing. A gardener knows he cannot command and control a seed to grow. His role is to nurture by providing water, soil, fertilizer and managing climate extremes.
On the other hand, Mechanics work with gears and pulleys on machines. Their job is to keep the machine running efficiently. If a gear breaks; throw it out and replace it with another.
In the Complex Domain we lead people and enable the system to solve the intractable problem.

Social Media vs. Knowledge Management

When this article Social Media vs. Knowledge Management: A Generational War was written by Venkatesh Rao back in 2008, it sparked a heated discussion ranging from totally right on to totally way off base. Much of the debate focused around his choosing to call it a generational war with Gen Xers being in the middle and neutral. 

I agree with many of his comments regarding Knowledge Management as being top-down driven, highly structured (i.e., idealistic). But as a Boomer myself, I choose not to buy the argument that our age bracket is responsible for this approach. I believe that our perceptions and therefore, how we see the world, are influenced and shaped more by our intellect and experiences. Nevertheless, it’s a stimulating read.

Mary Abraham was stimulated. Her response is posted here. She writes: “…it’s [KM] trying to transform itself from a purely archival discipline to a more dynamic and informal approach that puts people in direct touch with each other, without the obvious intermediation of a knowledge manager.” Sounds like the naturalistic approach to me.

Flipping the Classroom is a Safe-to-Fail Experiment

Teaching in a classroom is a complex issue. Some teachers try to maintain a stable, predictable environment – train by rote, test, retest, pass anyway to keep in the age category. Sir Ken Robinson calls this teaching using the factory model. What are the alternatives? One that’s catching on is Flipping the Classroom.

Pasted Graphic 2

As shown above, universities like Penn State are trying it out. More and more teachers at the high school level are giving it a go.

On YouTube, an 8th grade math and Algebra 1 teacher at a public school explains why she flipped her classroom in 2011.

Recently the Vancouver Sun newspaper carried the heading “Flipped classrooms create magic and controversy in schools.” Carolyn Durley “flipped” her Biology 12 class at Okanagan Mission secondary in Kelowna. On the other hand, David Wees, a math and science teacher at Stratford Hall in Vancouver, isn’t a fan of the flipped classroom because of the potential for homework overload but said he supports any strategy that reduces teacher-led instruction.

This blog isn’t about the pros and cons, why you should and why you shouldn’t. It’s not about lambasting lazy teachers, lazy students, lazy administrators, lazy parents, lazy school trustees. Or perhaps, it’s not laziness but a matter of just too busy working on other life priorities; it’s easier to stay conditioned with the factory model.

This blog is about how do make change in a system steeped in tradition and culture. It starts with somebody not happy. In Durley’s case, she began to wonder if she was serving her pupils well as “the sage on the stage,” given the wealth of information available online and the growing expectation that schools in the 21st century will do more than deliver content and help students prepare for standardized tests. It might be educational leaders desiring a better solution to achieve the real goal: putting students in the centre. Or it could be a school trustee frustrated with the present money-sucking black hole and wanting more bang for the buck. In Change Management terminology, we call this the “emotional need for change”. Without it, the status quo will continue.

So our heart is now pumping and our head is demanding something needs to be done. Where do we start? Sadly, we often start off on the wrong foot. How many times have we seen this: A splashy announcement is broadcasted stating the formation of an astute task force mandated to launch a study. In 6 months they will report back, confident that the “problem” will be fixed. Alas, with the passing of time more urgent problems have arisen so the report is shelved indefinitely. The problem hasn’t gone away, it’s just been put on the back burner.

If the preceding was the wrong foot, what’s the right foot? It begins with the correct approach, recognizing that the teaching is a Complex Domain issue. The aim is to try to make sense of what’s happening and searching for behavioural patterns that can lead us to new solutions. We are on the Unordered Side of the Cynefin Framework where we observe to understand and learn, not the Ordered Side where we fix, repair, or get back on track.

Flipping the classroom is Safe-Fail Experiment
Conducting a Safe-Fail Experiment involves probing the system, sensing the behaviour changes, responding by either accelerating the positives or dampening the negatives. We will even shut it down if it is becoming dangerous to health and wellness.

What Southridge school in Surrey did last year is a great example. They gave the flipped classroom a test run and invited three experts to the school in late August to train all of the senior school teachers.

Be aware that Safe-Fail Experiment is different than a pilot project in the Complicated domain. Pilots are typically the second step in a larger implementation. The first step was developing a business case prepared by an expert analyst. In some circumstances, money may have been spent on a feasibility study prior to the more detailed business case. A decision is made and approval to proceed granted. The pilot project’s role to pick a test area, find oversights and make refinements before rolling it out to the masses. Once launched, very rarely are implementations stopped. After all, who wants to look bad and confess they made a mistake. Nope, once the track is put down and the train leaves the station, the project manager’s goal is to stay on track and get there on time, on budget.

This isn’t to say a Safe-Fail Experiment or Probe is an off-the-cuff effort. On the contrary, the discipline of project management is just as important. There is a leader and a team who follow a prescribed method to put the experiment into motion, monitor the impact on a regular basis, assess whether positive outcomes should be increased and negatives should be reduced. Like a project, it has a start and an end point. The Safe-Fail Experiment usually run 3 to 6 months, ample time to sense how the system behaved and what patterns emerged. And herein lies the big difference. It’s the patterns that potentially lead us to new solutions. It may or may not be the actual probe put into motion. You may discover serendipitously something else significantly better. In fact, a radical, provocative, crazy probe is a more effective simulate to jolt the system.

Flipping the Classroom is a radical probe and is gaining traction. But it may not be the final destination. “This is an exciting time in education because technology is finally pushing people and organizations to change the way they do things,” said Cameron Seib, Southridge school’s math curriculum leader.

Another Safe-to-Fail Experiment: New Starbucks Store in Denver

If I say “let’s get a coffee at Starbucks”, what images start appearing in your mind? It’s a high probably it’s one of these pictures below. This is the brand that Starttarbucks has successfully created and the paradigm they have imbedded inside our brain. It’s how we perceive what a Starbucks store looks like, a traditional store with large square footage. And we feel very comfortable being in one. 

imgres imgres imgres imgres

While we as customers feel comfortable, Starbucks understands it can’t be otherwise it will start heading down the negative slope of the S-Curve business life cycle. There are only so many large coffee houses you can build and expect profitability.They need to constantly think differently and explore other ways of meeting their mission statement: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

Understanding why people will visit a coffee house is a Complex Domain issue. Type of drinks offered, food served, price, location, convenience, ambience, social atmosphere, free amenities like WiFi and iTunes downloads are all factors that go into making up the Starbucks brand. These needs are well established. However, are there other consumer needs that a Starbucks store can satisfy? What about Art to emotionally touch the heart? As customers become more energy-saving conscious, what about a coffee house that has a small carbon footprint and is environmentally green? Really good questions that need answering.

Decision time. You can choose to analyze and build a “fail-safe” business case filled with forecasts, assumptions, and mitigations for every known risk. Then run it up the corporate ladder and negotiate with the strategy, marketing, finance, operations people to support it.

Safe-fail experiment

Alternatively, you can pose a “what-if” Value Proposition and conduct a Safe-Fail experiment. Try something small, monitor how people respond, learn what works and amplify, learn what doesn’t work and dampen, and be on the lookout for better opportunities that serendipitously emerge.
Smart business people will do the latter because it’s relatively better, cheaper and faster to execute. You avoid ego problems that come with owning an idea and defending it when it goes awry. The initial idea is simply a starting point. It’s just a probe, a drop of water into a pool to watch the ripple patterns and see where they go. If the idea catches on and even goes viral, then you have discovered a new solution. Now move back into the Complicated Domain to install the processes, systems, and structures.

This week in Colorado, Starbucks opened a store unlike any before it.
1670889-slide-dsc-6747 1670889-slide-dsc-6780 1670889-slide-dsc-8771

There are no leather chairs or free power outlets. In fact, there’s no space for the customer at all. Starbucks has reimagined the coffee hut as a “modern modular,” LEED-certified drive-thru and walk-up shop. The building was constructed in a factory and delivered from a truck, but its facade is clad in gorgeous old Wyoming snow fencing.
At a mere 500 square feet, they have just enough space to squeeze in three to five employees along with all of the coffee making apparatuses necessary to execute a full Starbucks menu.

Their new building paradigm is a confluence of all these various impulses: the environment, localism, market growth, low-cost, low-risk expandability. While officially labelled a “pilot program”, it sounds to me it’s still in the Safe-Fail experiment stage. Conceivably the local Denver folks might totally avoid it and the store will fail in terms of profitability. No big deal. You respond by closing the store, picking it up, re-imaging, and trying another location. Consider the money spent as an investment in learning and anticipating the future.

This blog was inspired by the design folks at Fast Company. To read their awesome article in full and learn more about Starbucks, click here.