[Experience Report] KataCon the first and best Toyota Kata Summit conference ever!

I was lucky enough to be invited by Mike Rother, author of the fantastic Toyota Kata, to ‘KataCon’ – the first ever Improvement Kata and Coaching Kata summit in Fort Lauderdale, U.S. The goal of the event was to bring together the rapidly growing world of Kata users that are integrating practices of the IK/CK routines into their teams and organizations.

Improvement Kata

The opening keynote was from Jeff Liker, author of The Toyota Way. He shared his inspirations for writing The Toyota Way and discussed how Toyota Kata has built upon the same principles of continuous improvement driven by people-led innovation. He shared his 5 reasons for writing the book;

  1. A personal resonance with Toyota’s message of learning about uncertainty by doing
  2. An observation that people with a lot of accumulated knowledge don’t like experimentation or learning new ways of working outside their comfort zone
  3. Frustration with people jumping to solutions without adequately understanding the problems or outcomes they really want to achieve
  4. The fit of the leadership model for Toyota Kata with The Toyota Way, especially the commitment to self development that is inherent in both
  5. A desire for people to experience what learning really felt like – simply knowing what you should do isn’t enough

It was interesting to learn that both Jeff and Mike, who had been academic colleagues, had written two of the most impactful books in this space without much collaboration.

Next was Brad Frank, President of Tulsa Tube Bending. Brad shared his lessons learnt from deploying Improvement Kata and Coaching Kata in his organization. He noted that as a leader, a lot of his coaching cycles are triggered by questions from visitors to the facility. This has helped him to consider the why of what Tulsa are doing, and has provided new ideas to further improve their work. His top 4 lessons learnt were;

  1. You must be the change you want to see. Tulsa had suffered from the classic problem of believing that others needed to change, not the organization itself.
  2. Understand where you are spending your time, and if it aligns to where you should be spending your time. Manage urgent vs. important.
  3. Company culture is always worse that management expects. “The culture in my office was great”, he said jokingly as the CEO. That doesn’t mean it is the same everywhere in the organization!
  4. Skills development and improving people is the real job, not managing profits. Like Toyota, he needed to build great people, who then build great cars.

These sessions were followed by other great examples from Cornerstone Healthcare Group, Zulily and GKN Sinter, each sharing different journeys in Healthcare and Manufacturing.

KataAfter the morning presentations W3Group created an Improvement Kata experience of ‘learning by doing’ with a domino game. The goal of the game was to build a structure with 200 dominos using Kata principles and practice routines: setting a vision, understanding and defining the current condition, and setting target conditions to work towards.

As a team we defined a hypothesis to achieve the target condition, then ran an experiment to test our hypothesis. We then ran a coaching cycle to reflect on the outcomes and developed new current and target conditions based on our learning. During the exercise we all got to experience the roles of the learner, coach and worker. The principle of ‘learning by doing’ really came into effect first hand!

Improvement Kata

The second day was broken into two practical components; workshops for attendees to discuss how to deploy Improvement Kata in their organization, and panel discussions (where I presented) from people working in manufacturing, healthcare, administration and software development that had deployed IK/CK.

My presentation showcased ‘Hypothesis-Driven Development’, including how we evolved our product development processes and expressions of work as hypotheses to be tested. For the majority of the audience this was their first experience of how this scientific approach can be applied beyond manufacturing and healthcare to a broad variety of domains, including software.

The software panel was hosted by Håkan Forss & Gary Perkerwicz. Mike Varecka from Obitial ATK, kicked it off by sharing his experience of trying to deploy IK/CK within his organization. Mike works on economic modelling for an aerospace organization, so finding ways to improve the efficiency of their supply chain is critical. He focused on the power of understanding the relationship between learner, coach and second coach as they support one another on the journey. Håkan shared the impact (through amazing Lego scenes) of shortening the learning cycle timeframe when trying to overcome persistent obstacles faced by teams.

The highlight of the conference was an opportunity to visit a B/E Aerospace facility in Miami and meet a team that had embraced Improvement Kata to achieve amazing results both in terms of business outcomes and people engagement.

The facility is responsible for building luxury airline seats (which can cost over $140,000 each) for private jets and Super First Class commercial airliners. We took a gemba walk to the shop floor and met staff as they went through their learning cycles and experiments.

Coming from a software background, I was interested to observe how the environment and its design was such a key consideration for the teams. Visual communication and the physical layout of people, card walls, information radiators and equipment are at the core of high performing Lean-Agile software development teams, as they build shared understanding, raise visibility and improve collaboration with internal and external stakeholders at speed. These principles were at play at B/E Aerospace too.

After the walk we had an open Q&A session with the business leadership and Kata coaches. There was plenty of great dialogue between attendees and employees during the session, and a B/E Aerospace employee raised a point that really captured the essence of the conference experience as a whole. When asked what has been the most transformational outcome of deploying Improvement Kata at B/E Aerospace, their answer was simple; “I feel I no longer need permission to experiment”.

References

Toyota Kata Website

LinkedIn Group

KataCon YouTube Channel

How to unleash innovation in the enterprise

I constantly hear how enterprises are poor at innovation, bad at product development and unresponsive to business change. So it begs the question, why do so many organizations get it wrong? And what are the key factors to consider when trying to innovate in large organizations?

Typically the factors constraining innovation are conflicting business goals, competing priorities, localized performance measures and success criteria. While these have traditionally been the tools of management – to control workforce behavior and output – in highly competitive and quickly evolving business environments they also have had the adverse effects of killing creativity, responsiveness and ingenuity.

So what are the components needed to unleash innovation in enterprise?

Strong Executive mandate

Ultimately, if any initiative is to be successful the CEO and Executive team need to buy into and drive the mandate. They must encourage or even force others with a stake in the game to participate and support the new initiative. The participants involved should be given the mission to explore and provide as many ideas as possible to form the key pillars of future growth for the enterprise.

Innovation collaboration sessionsExecutive sponsorship offers a powerful and immediate way for leadership to clearly articulate policy priorities and advance them. By linking innovation to a growth strategy it ensures it is a targeted, strategic and funded priority for the organization, and provides alignment between business strategy and execution through the action of delivery.

While I applaud the dissenters and nonconformists who attempt to start initiatives on their own, I find in practice that executive leadership support and sponsorship is required for systemic and lasting success.

Flexibility in innovation strategy

As with any business decision, organizations should begin by honestly assessing their capabilities. Organizations must access their culture, evaluate leadership support and people’s willingness to cooperate with various innovation strategies. For example, will employees behave territorially and discount ideas because they were generated by another department, or externally?

By choosing preferred focus areas for innovation, organizations can define an overall innovation strategy that is suitable for achieving the organization’s goals that are best aligned to its key capabilities. Organizations seeking to cultivate a culture of innovation should consider the merits and drawbacks of each of the options outlined below when making a decision.

Organizational Innovation Strategies

Organizational Innovation Strategies

When deciding on an innovation strategy I encourage leadership teams to base the decision on the answers to these key questions:

  • What is the intended outcome they want to achieve from pursuing the selected strategy?
  • Which strategy is best aligned to their objectives, capabilities, people and values?
  • Where do they want to be on the innovation curve — disruptor, early adopter, follower and laggard?
  • Finally, they should identify specific obsoletes and constraints that prevent them from being entrepreneurial in their pursuit of the strategy and find ways to remove or bypass them.

Consider Complementarity Strategies

An organization that chooses to pursue more than one of the six strategies simultaneously should consider strategies that complement each other, such as R&D and Strategic Alliances.

Procter & Gamble (P&G) launched a “Connect and Develop” program to systematically engage with partners outside the boundaries of the company to source new-product ideas. In 2012, its Head of Technology announced that P&G had tripled its percentage of ideas that made it successfully to market as new products.

Use constraining, not strangling control structures

Tight controls strangle innovation — as does lengthy planning, budgeting and review activities such as business case novels or annual budgeting cycles. Organizations should expect deviations from plan when exploring new domains. Opportunities emerge from unexpected places hence we need structures and control processes that are dynamic and respond to change based on new learning. Instead of strangling teams with KPIs, release milestones and fixed scope requirements, set shorter iteration cycle constraints on teams regarding time, budget and measurable target conditions to achieve based on feedback with customers/users/stakeholders. Then review the outcomes achieved and make decisions for further investment or closure based on evidence from performing the work, not writing the plan.

Open up the organizational network for collaboration

Businesses must also make organizational changes if they are to exploit innovation networks to the full. In particular, this means ensuring efficient collaboration and information sharing throughout the organization. Mechanisms for this include collaborative ideation workshops, organization-wide showcases by initiatives across the portfolio and cross-functional working days to meet and build relationship with other people in the organization.

Leadership must seek opportunities to increase the cross-fertilization of ideas between as many business units as possible. When starting new initiatives, this is typically achieved by creating small cross functional teams composed of representatives from all areas of the organization including development, marketing, finance and legal to explore the problem domain at speed.

Organizational ShowcasesEncourage customers/users to participate and co-create in innovation initiatives by regularly involving them throughout the process. Seek regular feedback on what you are doing with the people you are designing for. Close the feedback loop with them and use the learning to move forward and improve.

Tap into internal sources of ideas so that every part of the organization is regarded as involved in the innovation process. This often requires a shift in corporate culture – removing the ‘not invented here’ mentality to ensure that intrapreneurs and other leaders are prepared to open up to external sources of innovation. Be prepared to tell people within the business to consider the possibility that another part of the organization might be best-placed to exploit some of their ideas – together or maybe even without them.

Finally, innovation networks depend on the recognition that innovation doesn’t only come from the research laboratory, but also from other sources – both internal and external. To remain innovative in a world of distributed knowledge, many organizations are recognizing that they must open their innovation process to combine internal with external R&D. Many businesses are starting to open up to alternative structure models to bring thought leaders of independent tribes together. In doing so they are set to achieve greater performance than would be possible alone, such as complementing organizations with technology breakthrough capability with organizations specializing in design driven competencies (and visa-versa). Examples include IDEO, ThoughtWorks and others collaborating together on new pieces of work.

Find and empower talent doing the work

Culture comes from the top. It is up to leadership to define and enact the behaviors that make people feel empowered to innovate and experiment. Pushing down authority is an enabler and empowering teams to come up their own solutions to solve business problems can give rise to wider innovations.

If an organization only relies on recruitment, acquisition and strategic alliances to access creative talent, what does that say about its ability to generate and retain homegrown innovators? If you want your company to become a market leader, reflect on that question. The most effective way to achieve continuous innovation over the long term is to cultivate talented people and allow them to experiment, grow and learn on the job.

Underestimating the importance of growing the internal capability of your people cannot be understated. There is an onus on organizations to build a culture of learning that supports the development of their people and helps them get to the new vision of how the organization will operate.

The talent war is only getting tougher. There are limited people available in the world with experience in doing highly specialized work and the competition for their services is fierce. Hiring can only take you so far – you also need to grow people on the job.

Following this, you must empower and amplify trust in those performing the work to get on with it. Providing people with autonomy and accountability makes them intrinsically motivated to achieve the desired outcomes.

Make a long term commitment to investment

Change takes time. The culture shift needed in mindset, strategy and organizational structure is hugely challenging for most people. Fears of lost position, status or knowledge built up through existing practices and politics are often the biggest hurdles. The bigger the change, the harder the pushback.

Very few initiatives get it right the first time and people will stumble and fall along the way. However it is not the failure that we should celebrate, but the learning that ensues.

Conclusion

There is no single answer to solve every enterprises innovation challenge however I always remind leaders to consider the following points;

  • Ensure innovation has a strong executive mandate across your organization. If leadership are not willing to support it, success can only be incremental at best.
  • Understand your own organizations strengths and weakness, then be flexible in the innovation strategy you choose, then adapt it as you see what is working and what is not.
  • Don’t kill innovation with tradition operational KPIs, such as ROI, before they’ve ever had a chance to get traction. Use constraining, not strangling controls by setting short iteration cycles and reviewing the outcomes achieved before making further investment decisions.
  • Open up the organization network for collaboration by making it easy for people to meet, share what they working on and the information their learning. Encourage people to build up, not break others ideas.
  • Build a culture of intrapreneurship in your business. Find and empower people doing the work to make them as successful as they can be to further drive change in the business.
  • Make a long term commitment to invest as change takes time and needs support, funding and protection to build momentum over time.

Winning organizations are continually experimenting; testing theories to learn what works and what doesn’t. Not every innovation attempt will be successful, but those that do pass the test can have a massive impact on the organization’s future fortunes. Make your enterprise the place where that happens – without permission!

My new book ‘Lean Enterprise’ is now released

Lean Enterprise on Amazon

I’m delighted to announce that my new book, Lean Enterprise, is out. It’s been a fantastic journey and could not have been completed without the support of my family, friends, and co-authors.

I also want to thank everyone in the community who encouraged us, gave feedback, shared stories and provided guidance along the way. The final product is a collaboration of all our efforts, which hopefully will help move our industry forward to further innovation and excellence.

Gene Kim is calling Lean Enterprise “the classic, authoritative reference for how organizations plan, organize, implement, and measure their work.” Stephen Foreshew-Cain, COO of the UK Government Digital Service, says “it should be required reading for every executive who understands that we’re all in the technology business now.” Mary Poppendieck says its “the best current thinking about how to create great software-intensive products and services.”

You can click here to download a free sample of Lean Enterprise including  the preface and four chapters. You can purchase the ebook today or order the hardback (available for shipping from January 4th), at O’Reilly’s website.

If you are inspired by what you read, please write a review on Amazon or O’Reilly. Thank you so much.

In the spirit of continuous improvement, I look forward to hearing your stories of experimenting with these ideas.

Best wishes for the holiday season and hopefully see you in 2015.

Barry

Overview of Lean Enterprise: How High Performance Organizations Innovate at Scale

How well does your organization respond to changing market conditions, customer needs, and emerging technologies when building software-based products? This practical guide presents Lean and Agile principles and patterns to help you move fast at scale—and demonstrates why and how to apply these methodologies throughout your organization, rather than with just one department or team.

Through case studies, you’ll learn how successful enterprises have rethought everything from governance and financial management to systems architecture and organizational culture in the pursuit of radically improved performance. Adopting Lean will take time and commitment, but it’s vital for harnessing the cultural and technical forces that are accelerating the rate of innovation.

  • Discover how Lean focuses on people and teamwork at every level, in contrast to traditional management practices;
  • Approach problem-solving experimentally, by exploring solutions, testing assumptions, and getting feedback from real users
  • Lead and manage large-scale programs in a way that empowers employees, increases the speed and quality of delivery, and lowers costs
  • Learn how to implement ideas from the DevOps and Lean Startup movements even in complex, regulated environments

Praise for Lean Enterprise

“This book is Reengineering the Corporation for the digital age. It is destined to be the classic, authoritative reference for how organizations plan, organize, implement, and measure their work. Lean Enterprise describes how organizations can win in the marketplace while harnessing and developing the capabilities of employees. Any business leader who cares about creating competitive advantage through technology and building a culture of innovation needs to read this book.”

Gene Kim, co-author of The Phoenix Project: A Novel About IT, DevOps, and Helping Your Business Win, founder and former CTO of Tripwire, Inc.

“This book is a godsend for anyone who’s tried to change their organization and heard: ‘It’s OK for the little guy, but we’re too big/regulated/complex to work like that here.’ Humble, Molesky, and O’Reilly have written an easy-to-read guide that demystifies the success of Lean organizations in a way that everyone can understand and apply. Lean Enterprise provides a pragmatic toolkit of strategies and practices for establishing high performing organizations. It should be required reading for every executive who understands that we’re all in the technology business now.”

Stephen Foreshew-Cain, COO, UK Government Digital Service

“To thrive in the digital world, transformation must be more than technology driven—everyone within the organization must collectively work together to adapt. This book provides an essential guide for all leaders to change the way they deliver value to customers.”

Matt Pancino, CEO, Suncorp Business Services

“This is the book I’ve been waiting for—one that takes on the hardest questions in bringing Lean approaches to the enterprise. The authors provide solutions that are valuable even in low trust environments.”

Mark A. Schwartz (@schwartz_cio)

“This book integrates into a compelling narrative the best current thinking about how to create great software-intensive products and services. The approach in this book is both challenging and disciplined, and some organizations will be unable to imagine following this path. But those who make the journey will find it impossible to imagine ever going back—and if they happen to be a competitor, they are well positioned to steal both your market and your people. Ignore this book at your own risk.”

Mary Poppendieck, co-author of The Lean Mindset and the Lean Software Development series

“My job is to support people in practicing a scientific pattern, to help reshape thinking and working habits in business, politics, education, and daily life. The 21st century is increasingly demanding a way of working that’s cognitively complex, interpersonal, iterative, and even entrepreneurial. With Lean Enterprise, Jez Humble, Joanne Molesky, and Barry O’Reilly explain how software can and is leading the way to transforming our ways of working, which can change our ways of thinking and help us adapt to the emerging world around us.”

Mike Rother, author of Toyota Kata

“Nearly all industries and institutions are being disrupted through the rapid advance of technology, guided by the inspired vision of individuals and teams. This book clearly explains how the disciplines of Lean, Agile, Kata, Lean Startup, and Design Thinking are converging through the unifying principles of an adaptive learning organization.”

Steve Bell, Lean Enterprise Institute faculty, author of Lean IT and Run Grow Transform

“Building software the right way is a challenging task in and of itself, but Lean Enterprise goes beyond the technology considerations to guide organizations on how to quickly build the right software to deliver expected business results in a low risk fashion. This is a must read for any organization that provides software based services to its customers.”

Gary Gruver, VP of Release, QE, and Operations for Macys.com

“To compete in the future businesses need to be skilled at understanding their customers and taking the validated learnings to market as quickly as possible. This requires a new kind of adaptive and learning organization—the lean enterprise. The journey starts here in this book!”

John Crosby, Chief Product and Technology Officer, lastminute.com

“Rapid advancements in technology are creating unparalleled rates of disruption. The rules of the disruption game have changed, and many organizations wonder how to compete as new giants emerge with a different approach to serving their customers. This book provides an essential guide to those that have come to the realization that they have to change to regain an innovative competitive advantage but are unsure where to start.”

Jora Gill, Chief Digital Officer, The Economist

“Lean Enterprise was the book I gave my leadership team to get everyone on the same page about how we can challenge the status quo, remove roadblocks, and out-innovate our competition. By leveraging the continual insights we get from co-creating with customers, our people, and data, we now have so many additional new ways to grow our business.”

Don Meij, CEO, Domino’s Pizza Enterprises Ltd.

“While agile and lean methods have had a big impact on software delivery, their true potential only comes as they have a broader impact on enterprises of all sizes. In this book, Jez, Joanne, and Barry have set out what those changes look like—a realistic vision of how future companies will make today’s look like cassette tape players.”

Martin Fowler, Chief Scientist, ThoughtWorks

“This is an important book. It takes an informed and informative look at the fundamentals that need to shift to start building organizations capable of continuous learning and improvement. It moves well beyond the technical to the organizational. Lean Enterprise is a must-read for existing and emerging leaders seeking to ensure their company’s ongoing success.”

Jeff Gothelf, author of Lean UX, and Principal of Neo Innovation

“I was telling everyone to get this book for a year before it was finished. It documents the path being taken by the leading lean enterprises and the fat ones will be wiped out by the lean ones in the years to come.”

Adrian Cockcroft (@adrianco)

Technology Is Not Enough

Success in today’s business world is dependent on more than just technology. Building a fully automated deployment pipeline will certainly help teams deliver their work faster, but it doesn’t address the fundamental question, “Are we delivering value to our customers?

While technology is now a strategic capability for any organization, many large organizations fail to reap rewards of their investment because their culture and mindset does not support experimentation and learning.

In this talk Barry and Joanne will share what are the key issues that are holding organizations back from unleashing innovation, giving examples of large organizations that are embracing change to achieve high-performance at scale by adoption lean and agile practices and principles to do address their most pressing issues and succeed.

Why we carry watermelons?

I was working with a client recently that had decided to start a program of work involving 15 independent project teams, all working together to deliver a few key business objectives. 15 project teams comprised of roughly 140 people, all co-ordinating and collaborating together from different departments, locations and functions across a global organization with a few external vendors thrown in to add a little spice.

A challenging mission at best, I was keen to understand how the Program Management Office would measure progress towards the identified outcomes, while ensuring that individual teams shared information across the program of work.

I carried a watermelon?

I carried a watermelon?

“We’ve a program dashboard that each team populates with project status, progress, risks and issues each week”. I looked at the dashboard. “Everything is on track, and has been since we started a few weeks ago. We’re confident we’ll deliver everything within the program time line and constraints”, said the Program Lead. All the initiatives were green. “I think you’re carrying watermelons”, was my response.

What is a watermelon?

Green on the outside but with orange or red cores, watermelons are a nice analogy for healthy looking project reports served to PMOs on a weekly basis. In an environment of mistrust, fear or bureaucracy watermelon serving is rife. Teams tend to suppress or hide information that may highlight that everything isn’t executing as defined in ‘the plan’ – especially when everyone else in the program is serving up fresh green goodness too!

No one wants to be the focus of management never mind the PMO, they paint the happy, healthy and wholesome picture, avoid discovery and convince themselves everything will work out before the next checkpoint. The Eye of Sauron moves onto the next green blip and the team hopes to pull back the difference by the next time the dark lords glare comes around.

HealthCare.gov was a $93.7 million investment that turn into a $292 million failure for the US Government. People and teams within the program were aware that the initiative was not in a good state, yet they continued to report that everything was running to schedule, on track and green — even though inside the projects people knew the reporting was a fallacy and the status was red.

They lived their days hoping that everything would turn around, that they would reach the dates, and deliver the system. No one wanted to be the bearer of bad news. No team wanted to highlight that they had an issue, they were waiting for someone else to blink – why, so everyone could blame someone else for the failure that was about to happen?

Breaking open the watermelon culture

Visibility, transparency and the appropriate level of decision making lead to better choices. But yet, there are prerequisites that must be in place to get there.

To calibrate openness and safety teams monitor the response of leadership to difficult situations and emergent circumstances. Teams adapt the quality and detail of information they share in relation to the actions, not the words, in response to the information.

Encourage teams to cut the watermelon open and have a conversation about what you find inside. Then by working together to eat up what you find it encourages others to do the same.

Team will always encounter problems on any delivery initiative. Our mission is to create willingness to take accountability for the challenges faced and find the best solutions together.

Decisions on how teams work towards solving the challenges should be made by the teams doing the work, not someone in management located on the other side of the world.

However, these teams are then responsible for the outcomes of their decisions thus empowered to be accountable to do the right thing. The job of leadership is to provide support, space and remove blockers in their way.

In my experience programs based on cultures of fear tend to follow the pattern below

Transparent, trusting and teamwork based programs tend to be this pattern

We need to change the way our people think and work together towards a common goal. To do this, we need to address a few aspects;

  • Clarity of Purpose – clear direction from leadership and the team on the outcome (or target condition) to achieve
  • Alignment – collaboration and agreement on the tactics to achieve the target condition
  • Engagement – regular feedback loops with everyone involved in achieving the target condition. Then adjust and adapt based on the information we are learning from performing the work to address the issue at hand

When working with teams, I favour a “Go to Green” strategy by reviewing all aspects of the current situation including data presented by other team leaders in the program. By creating visual artifacts (not paper reports) where teams can meet, share and collaborate on current state and circumstances we can make better decisions that will improve outcomes for the entire initiative. It also serves to foster transparency and trust between all parties as they work together to solve problems and win.

Plan, assign and execute those decisions in an agreed time frame, then set a frequency to review outcomes, share successes or revise activities based on what we’ve learnt from doing the work.

Conclusion

If you have a culture based on fear, you will never have true information flowing through your organizations network. People will share the right information, not the correct information.

The role of leadership is encourage transparency and recognize that their actions in response to negative news is what will create an environment of safety. When people feel secure to share real information on the situation, knowing that leadership will work together with them to identify strategies directed to solutions not blame, the system improves for everyone.

Encourage teams to work together to solve problems, thus building relationships and trust with one another to achieve successful outcomes for all by eating up those watermelons together!

melon-shark

References

The first time I heard the term ‘Watermelon Reporting’ was from Marc Loffler when he got on the stage at ALE 2011 with a meat cleaver and a bag of watermelons. I’ve kept it with me since then.

All watermelons from http://www.whataboutwatermelon.com

Lean Enterprise at Spark The Change

Spark The Change

Spark The Change

I had the pleasure of attending one of the most interesting, diverse and engaging conferences in recent memory last week in London. Spark The Change was designed to bring together leaders from across the business to explore how they can work together to create lasting and total change.

I was honoured to be invited to speak about Lean Enterprise.

Our world and future business opportunities are continuously emerging through advances in design, technology, and wider social and economic change. Organizations must continually revisit the question, “What business are we in, and how can we organize to maximise our performance”.

The session discussed how to embrace a culture of continuous experimentation and learning, to transform our business to an adaptable, resilient Lean Enterprise.

 

Lean Enterprise at ThoughtWorks Live Australia

I had the pleasure of traveling around Australia with my colleague Gary O’Brien to share our experiences on the secrets of transforming enterprises, helping them to develop new products and services faster and efficiently.

We aimed to address the most troublesome and counterintuitive aspects for adoption: process, budgeting and compliance, design and culture – providing examples from organisations that have learnt how to do it the hard way.

Our talk was excellently captured via stechnote by Gary Barber — thanks!

Lean Enterprise Sketchnote

Lean Enterprise Sketchnote via Gary Barber @tuna

The full presentation and slides are here.

Want to avoid disruption? Then keep exploring

Article for The Economist Insights

Want to avoid disruption? Then keep exploring

Want to avoid disruption? Then keep exploring

Businesses have always come and gone, but these days it seems that companies can fall from market dominance to bankruptcy in the blink of an eye. Kodak, Blockbuster and HMV are just a few recent victims of the rapid market disruption that defines the current era.

Where did these once iconic companies go wrong? To my mind, they forgot to keep challenging their assumptions about what business they were actually in.

Businesses have two options when they plan for the road ahead: they can put all their eggs into one basket, and risk losing everything if that basket has a hole in the bottom, or they can make a number of small bets, accepting that some will fail while others succeed.

Taking the latter approach, and making many small bets on innovation, transforms the boardroom into a roulette table. Unlike a punter in a casino, however, businesses cannot afford to stop making bets.

Business models are transient and prone to disruption by changes in markets and the external competitive environment, advances in design and technology, and wider social and economic change. Organisations that misjudge their purpose, or cannot sense and then adapt to these changes, will perish.

The sad truth is that too many established organisations focus most of their time and resources on executing and optimising their existing business models in order to maximise profits. They forget to experiment and explore new ideas for customer needs of tomorrow.

What business are we in?

Believe it or not, photography giant Kodak, which filed for bankruptcy in 2012, actually invented the digital camera. Steve Sasson, the engineer who created the potentially game-changing technology in 1975, was met with puzzled bosses who could not comprehend the future opportunity, or why customers would ever want to view photographs on a monitor.

Kodak’s business was optimised for developing photographs, not capturing memories, so the idea was not explored. Had Kodak built the capability to bring new products to market and evolve its business model, it could have led the digital revolution from the front. Instead, the reverse happened: after years of foot dragging, Kodak perished at the hands of competitors who had grasped the digital opportunity.

Contrast Kodak with Amazon, a company that was once dismissed as mere book seller. In 2008, it experimented with what is now Amazon Web Services as a way to operate IT infrastructure more effectively. It soon realised that the approach it was developing could be used to provide external customers with computing services. Six years later, Amazon is the company to beat in the cloud computing market.

Amazon’s willingness to flip a business model on its head can create runaway success stories, while stubbornly clinging to an established business model often signals an organisation’s demise.

As Amazon CEO Jeff Bezos notes, “What’s dangerous is not to evolve.”

These are no happy accidents

Winning organisations are continually experimenting, testing theories to learn what works and what does not. The reality is that fewer than one in ten of these new ideas or products will work, but the ones which do pass the litmus test could have a massive impact on the business’ future fortunes.

When exploring new ideas, here’s a five-point plan that businesses should follow:

  1. Support the culture of experimentation. The only failure is the failure to learn. Leaders are responsible for creating and defining this culture.
  2. Don’t just set up a big project, make lots of small bets. Ramp up successes and limit losses.
  3. Give your initiatives enough money to do something, but not enough to do nothing. Focus on frequent demonstrable value and validated learning before further investment.
  4. Create co-located, cross-functional teams to explore the problem space with end to end responsibility for the product.
  5. Continuously evaluate the performance of your initiatives and adjust the direction based on frequent customer feedback.

These ideas form the basis of Eric Ries’ Lean Startup philosophy. But they also provide a way to evaluate and start up large programs of work within enterprises. We discuss an evidence-based approach to enterprise portfolio and program management based on these principles in our forthcoming book Lean Enterprise by Jez Humble, Joanne Molesky and myself, Barry O’Reilly.

How to implement Hypothesis-Driven Development

Remember back to the time when we were in high school science class. Our teachers had a framework for helping us learn – an experimental approach based on the best available evidence at hand. We were asked to make observations about the world around us, then attempt to form an explanation or hypothesis to explain what we had observed. We then tested this hypothesis by predicting an outcome based on our theory that would be achieved in a controlled experiment – if the outcome was achieved, we had proven our theory to be correct.

We could then apply this learning to inform and test other hypotheses by constructing more sophisticated experiments, and tuning, evolving or abandoning any hypothesis as we made further observations from the results we achieved.

Experimentation is the foundation of the scientific method, which is a systematic means of exploring the world around us. Although some experiments take place in laboratories, it is possible to perform an experiment anywhere, at any time, even in software development.

Practicing Hypothesis-Driven Development[1] is thinking about the development of new ideas, products and services – even organizational change – as a series of experiments to determine whether an expected outcome will be achieved. The process is iterated upon until a desirable outcome is obtained or the idea is determined to be not viable.

We need to change our mindset to view our proposed solution to a problem statement as a hypothesis, especially in new product or service development – the market we are targeting, how a business model will work, how code will execute and even how the customer will use it.

We do not do projects anymore, only experiments. Customer discovery and Lean Startup strategies are designed to test assumptions about customers. Quality Assurance is testing system behavior against defined specifications. The experimental principle also applies in Test-Driven Development – we write the test first, then use the test to validate that our code is correct, and succeed if the code passes the test. Ultimately, product or service development is a process to test a hypothesis about system behaviour in the environment or market it is developed for.

The key outcome of an experimental approach is measurable evidence and learning. Learning is the information we have gained from conducting the experiment. Did what we expect to occur actually happen? If not, what did and how does that inform what we should do next?

In order to learn we need use the scientific method for investigating phenomena, acquiring new knowledge, and correcting and integrating previous knowledge back into our thinking.

As the software development industry continues to mature, we now have an opportunity to leverage improved capabilities such as Continuous Design and Delivery to maximize our potential to learn quickly what works and what does not. By taking an experimental approach to information discovery, we can more rapidly test our solutions against the problems we have identified in the products or services we are attempting to build. With the goal to optimize our effectiveness of solving the right problems, over simply becoming a feature factory by continually building solutions.

The steps of the scientific method are to:

  • Make observations

  • Formulate a hypothesis

  • Design an experiment to test the hypothesis

  • State the indicators to evaluate if the experiment has succeeded

  • Conduct the experiment

  • Evaluate the results of the experiment

  • Accept or reject the hypothesis

  • If necessary, make and test a new hypothesis

Using an experimentation approach to software development

We need to challenge the concept of having fixed requirements for a product or service. Requirements are valuable when teams execute a well known or understood phase of an initiative, and can leverage well understood practices to achieve the outcome. However, when you are in an exploratory, complex and uncertain phase you need hypotheses.

Handing teams a set of business requirements reinforces an order-taking approach and mindset that is flawed. Business does the thinking and ‘knows’ what is right. The purpose of the development team is to implement what they are told. But when operating in an area of uncertainty and complexity, all the members of the development team should be encouraged to think and share insights on the problem and potential solutions. A team simply taking orders from a business owner is not utilizing the full potential, experience and competency that a cross-functional multi-disciplined team offers.

Framing Hypotheses

The traditional user story framework is focused on capturing requirements for what we want to build and for whom, to enable the user to receive a specific benefit from the system.

As A…. <role>

I Want… <goal/desire>

So That… <receive benefit>

Behaviour Driven Development (BDD) and Feature Injection aims to improve the original framework by supporting communication and collaboration between developers, tester and non-technical participants in a software project.

In Order To… <receive benefit>

As A… <role>

I Want… <goal/desire>

When viewing work as an experiment, the traditional story framework is insufficient. As in our high school science experiment, we need to define the steps we will take to achieve the desired outcome. We then need to state the specific indicators (or signals) we expect to observe that provide evidence that our hypothesis is valid. These need to be stated before conducting the test to reduce the biased of interpretations of results.

If we observe signals that indicate our hypothesis is correct, we can be more confident that we are on the right path and can alter the user story framework to reflect this.

Therefore, a user story structure to support Hypothesis-Driven Development would be;

We believe <this capability>

What functionality we will develop to test our hypothesis? By defining a ‘test’ capability of the product or service that we are attempting to build, we identify the functionality and hypothesis we want to test.

Will result in <this outcome>

What is the expected outcome of our experiment? What is the specific result we expect to achieve by building the ‘test’ capability?

We will know we have succeeded when <we see a measurable signal>

What signals will indicate that the capability we have built is effective? What key metrics (qualitative or quantitative) we will measure to provide evidence that our experiment has succeeded and give us enough confidence to move to the next stage.

The threshold you use for statistically significance will depend on your understanding of the business and context you are operating within. Not every company has the user sample size of Amazon or Google to run statistically significant experiments in a short period of time. Limits and controls need to be defined by your organization to determine acceptable evidence thresholds that will allow the team to advance to the next step.

For example if you are building a rocket ship you may want your experiments to have a high threshold for statistical significance. If you are deciding between two different flows intended to help increase user sign up you may be happy to tolerate a lower significance threshold.

The final step is to clearly and visibly state any assumptions made about our hypothesis, to create a feedback loop for the team to provide further input, debate and understanding of the circumstance under which we are performing the test. Are they valid and make sense from a technical and business perspective?

Hypotheses when aligned to your MVP can provide a testing mechanism for your product or service vision. They can test the most uncertain areas of your product or service, in order to gain information and improve confidence.

Examples of Hypothesis-Driven Development user stories are;

Business Story

We Believe That increasing the size of hotel images on the booking page

Will Result In improved customer engagement and conversion

We Will Know We Have Succeeded When we see a 5% increase in customers who review hotel images who then proceed to book in 48 hours.

It is imperative to have effective monitoring and evaluation tools in place when using an experimental approach to software development in order to measure the impact of our efforts and provide a feedback loop to the team. Otherwise we are essentially blind to the outcomes of our efforts.

In agile software development we define working software as the primary measure of progress. By combining Continuous Delivery and Hypothesis-Driven Development we can now define working software and validated learning as the primary measures of progress.

Ideally we should not say we are done until we have measured the value of what is being delivered – in other words, gathered data to validate our hypothesis.

Examples of how to gather data is performing A/B Testing to test a hypothesis and measure to change in customer behaviour. Alternative testings options can be customer surveys, paper prototypes, user and/or guerilla testing.

One example of a company we have worked with that uses Hypothesis-Driven Development is lastminute.com. The team formulated a hypothesis that customers are only willing to pay a max price for a hotel based on the time of day they book. Tom Klein, CEO and President of Sabre Holdings shared the story of how they improved conversion by 400% within a week.

Conclusion

Combining practices such as Hypothesis-Driven Development and Continuous Delivery accelerates experimentation and amplifies validated learning. This gives us the opportunity to accelerate the rate at which we innovate while relentlessly reducing cost, leaving our competitors in the dust. Ideally we can achieve the ideal of one piece flow: atomic changes that enable us to identify causal relationships between the changes we make to our products and services, and their impact on key metrics.

As Kent Beck said, “Test-Driven Development is a great excuse to think about the problem before you think about the solution”. Hypothesis-Driven Development is a great opportunity to test what you think the problem is, before you work on the solution.

More thoughts on Business Model Generation, Lean Startup and Continuous Delivery will be included in our upcoming book, Lean Enterprise.

References

[1] Hypothesis-Driven Development By Jeffrey L. Taylor

How Learning Really Drives The Innovation Cycle

tw-live-13-europe-logoThe software delivery problem has evolved, now its about leveraging the insights that our customers are giving us to build truly innovative products and services that challenge both their and our own assumptions about what we should be doing next.

In this presentation with John Crosby, Digital Product & Technology Leader for Travelocity International and lastminute.com, at ThoughtWorks Live we share the story of how we implemented Lean practices and principles within lastminute.com to create a new mobile web platform that doubled customer conversion compare of the existing site.

Key stories and concepts in the presentation are:

  • how to articulate clear product and technical vision to engage everyone across the organisation
  • how to communicate clear team goals through product scorecards based on real business outcomes, not efficiency or velocity
  • how to define the problem you want to solve, then create hypotheses to test the solution in order to validate or invalidate assumptions you are making about your product/market fit
  • how to reduced cycle time from concept to customer through Continuous Design & Delivery
  • how to get out of the building and talk to your customers to understand their problems using innovative approaches to user testing and sourcing customer feedback

Further talks from ThoughtWorks Live Europe

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