Keener’s 6 Stages of Competitive Agility

Economic Stages of Competitive Agility

If we explore operational excellence “transformation” using our economic definition of agility: responsiveness to signals in a market with imperfect information and imperfect competition we see six major phases. You will note that some ideological camps – perhaps even the one you are currently involved with – tend to promise, but frequently fall short, of any realistic definition of Agile Utopia.

Stage 1 – Big Bang Waterfall

Big Bang Waterfall is the post-apocalyptic, dystopian, late-adopter, core-competence-turned-mass-layoff nonsense that every marketer, sales person, or consultant uses to sell the need for Agile (with a capital-marketing-“A”) utopia. Although serious blunders have taken place by late adopters, even contractors have gained enough operational best practices to assist in limiting the damage done by “Big Bang” – after all, extremely long-term contracts must be extremely defensible or they are poorly enforceable. This would be overhead few development consultancies could afford. Instead, like your average apartment in the city, everyone agrees that a commitment horizon of greater than one year with no clause for early cancellation is foolhardy and unrealistic.

  1. Reliance on top-down internal signals
  2. No concept of holding costs for information and knowledge
  3. Unknown economies of scale are assumed infinite
  4. No control over Work-in-Progress

Stage Gate Control

This is the real “waterfall” – in the real world – that you are likely to see. As it turns out, it is socioeconomically defensible: if a company clearly understands its strategic position, understands the necessary tradeoffs of that strategic position, and that position itself limits its digital product presence, it may make sense to fully outsource digital product design and development. Likewise, if and only if that position makes it economically advantageous to take a risk-intolerant late-adopter position for new technology, it makes sense to invest only in short bursts to keep up with the minimum expectation of that industry. It would even make sense to copy proven market demand and the value offering of proven winners in digital because innovation is very often a winner-takes-all competition. Unfortunately, the majority of companies we see that behave this way do not do it because of strong strategic focus. Many of them may have built their PMO on this foundation and did not notice the industry change around them.

  1. Reliance on top-down internal signals, with additional “resonators” added
  2. Increased overhead makes holding costs for information and knowledge apparent
  3. Unknown economies of scale are assumed infinite even though batch size is limited
  4. Project duration limits provide control over Work-in-Progress

Cost Center Agility (Agile XP, Kanban, Scrum)

This is the agility the sales reps deliver after promising utopia. I will not name any names. The tool, the process, or the framework can be very lucrative when sold at the right price, while a handful of true believers can reinforce the value proposition on behalf of the sales team for a lifetime. From our economic view, the real benefit of all such systems originates with two shifts: 1 – The gradual shortening of planning horizons until they are realistic, suited to the volatility of their market. 2 – The visibility and progressive restriction of work-in-progress, controlling previously ignored holding costs for information.

  1. Tempo of internal signaling is increased
  2. Sequence or prioritization can manipulate holding cost for information and knowledge
  3. Stable teams can collect enough data to reveal actual scale economies
  4. Time-boxed incremental effort provides control over Work-in-Progress

Continuous Delivery (CI/CD, ATDD, DevOps)

Continuous Delivery is focused on automation of manual activities. These activities were economically appropriate when short-run optimum batch size and long-run were equal (i.e. one project building something that lasts a long useful life). In Cost Center Agility, it became apparent that the economics of short-run manual transactions like testing were very different from the long-run economics, which justify automation. Throughout this process, transaction costs for testing internal and external signals of value must be minimized. The most important shift that occurs due to this reduction of transaction costs is an increasing definition of quality and an increasing check for signals. It is the first time in the pursuit of agility that the organization begins to seriously and methodically consider the possibility “we might be wrong.”

  1. Internal signaling is formalized and shifts toward instantaneous
  2. Decentralized control diminishes transaction cost considerations
  3.  Holding cost for information and knowledge is primarily within the planning and design portion of the value stream, making product marketing behavior patterns from Big Bang Waterfall unfit
  4. Product operational data is aggregated, allowing multi-fractal pattern analysis
  5. Canary analysis, A/B deployment, and automated rollout remove Work-in-Progress pressures

Hypothesis Driven

Once we move from the assumption we, as rationalists, can create and deliver against a “perfect” solution plan, and work instead from the assumption that uncertainty makes it necessary to validate continuously whether or not our assumptions are correct, we can then ramp up our attention and responsiveness to market signals directly. It is not sufficient to listen to complaints and work “very, very hard” to please people. We must be relentlessly scientific and maintain strategic focus at all times.

  1. Internal signaling is consistent, reliable, and part of organization self-identity
  2. External market signaling replaces extensive planning because product marketing cannot maintain the same pace as technical delivery
  3. Holding cost for information and knowledge is diminished through direct market responsiveness
  4. Aggregated multi-fractal pattern analysis now combines marketing and operational
  5. Distributed control and single-piece flow reveals and removes value stream inefficiencies

Culture of Innovation

The Culture of Innovation, frequently promised as part of “agile utopia” is really not necessary for most businesses. This is because, unless you have established a strong strategic position that necessitates continuous innovation – that is, unless you are a technology company –the risk of such novelty is unjustified. Most organizations are wise to encourage “innovation” as a benefit to employees while maintaining tight control over administrative context and strategic fit. Especially for a mature publicly-traded company, this typically implies spinning off the new business unit because it no longer fits well with the historic risk profile of its stocks.

The Limits of Agile as Operational Effectiveness

Most organizations end up “stuck” in stages three and four. Without a clear of understanding the economics of operational effectiveness, this is the source of years of frustration for the consultants and coaches working diligently to encourage best practices that have diminishing marginal utility.

The standard of Operational Excellence for the majority of companies will likely fall in the Continuous Delivery stage, occasionally flirting with Hypothesis-Driven design-development (also called Lean UX by some). The Culture of Innovation, when looked at closely, is actually quite extreme. As mentioned above, we really would not want this level of agility in most of lives or in most of the economy. There is an element of controlled gambling because the economics of this stage rely upon asymmetric payoff and induced demand, creating or expanding demand for something no one had asked for. It requires such an intimate knowledge of the market that a company can go above and beyond extreme responsiveness and attempt to predict or even invent non-existent future demand.

None of these phases (or their ideological camps) are intrinsically correct or incorrect for a company’s digital product delivery. Instead, the validity of the philosophies, processes, and tools at each phase depend on the economics of interaction with the market. While none of these “phases” are intrinsically or ideologically correct, the firm that pursues a differentiation strategy dependent on superiority in digital product innovation as a competitive advantage will fail without guiding the economics of responsiveness to market signals. If a company chooses to pursue innovation as a competitive strategy, it will go through these phases to get there.

Why? Why? Why? Why? Why? (5 of them)

As I described this weekend on Snapchat using the example of my house, Root Cause analysis – or asking the 5 why’s – is essential to lean scalability and a thriving culture of relentless improvement. In complex systems thinking, you must see problems (lack of quality, decreasing sales) as a symptom of the system as a whole.

I bought my first home in November in a north suburb of Chicago. Naturally, that means finding little issues here and there as I go. It was originally built in the 1950’s and I knew it was in a neighborhood that had flooded a bit a few years back. I was excited from the first tour to see a fantastic dual sump pump system in the finished basement.

Unfortunately: The previous homeowner had treated the symptom, not the problem.

A house (like a software product or tool in its context) is part of a complex adaptive system. It is inserted into a biological ecosystem, and integrated with multiple networks (cable, electrical, plumbing, roads). What the previous homeowner did is a mistake many of us make when it comes to eCommerce, marketing campaigns, enterprise software, you name it – the symptom was treated in the context of a system in homeostasis without changing the ability of the system to adapt to deal with a chaotic event.

SO – my basement has flooded, just a little, three times this spring.

Enter the “5 Why’s” Analysis:

1- Why is the carpet wet in the basement?  The sump pump didn’t pump out the water quickly enough. If I were to continue to treat the symptom, I might upgrade the sump pump, which is expensive and might not work (and what we tend to do in the workplace).

2- Why didn’t the sump pump handle it?  There was too much water around the house, building up hydrostatic pressure. The second time we had flooding, I noticed that the water appeared to have come in from all sides, not from the sump pump reservoir overflowing. (i.e. without “going to the place” I might have continued to blame the sump pump)

3- Why was there too much water around the foundation? I have a negative grade, meaning my lawn on one side slopes slightly toward the house. Again, easy to blame that and spend a fortune on a re-grading (legacy system migration anyone?) but I had the joy of really, really “going to the place” and spent an 1hr flash-flood storm OUTSIDE, managing the flow of water in non-normal conditions. After all, the yard may slope slightly, but there are 4 basement egresses with drains in the bottom that run to the sump pump…

4- Why did so much water flow to the basement window wells that the drains couldn’t get the water to the sump pump quickly enough? (notice that we are finally getting somewhere in our root cause analysis!) Once I was out in the storm, it was clear that the rain on its own was not the issue: despite having cleaned out my gutters hours before the storm, the winds that blew the storm in kicked lots of new leaves onto my roof, blocked the gutter, and a waterfall of water came off the gutter onto the negative grade instead of going down the downspout system that drains the water in a safer direction. What I also noticed was that the sidewalk gradually filled with water from the downspout nicely – meaning there was a certain amount of in-yard flooding that could occur before the water would pour unchecked into my window wells. (note, I could invest in LeafGuard or something as part of a total replacement of my gutters, but have we really found the root cause?)
5- Why doesn’t the system (my house in its context) handle a the flow of water in that quantity? Now we’re down to business. The soil has a high clay content and hasn’t been aerated recently. The previous homeowner removed bushes on that side of the house but not the roots and stumps. The downspouts eject water 3 feet from the house, but into an area of the lawn that can be easily filled with water that will then flow back to the egresses.

Root cause – The system is not prepared to handle the flow of unwanted inputs under non-normal conditions.

Oops, I slipped into discussing emergent leadership in complex adaptive systems.  What I meant was, nobody had bothered to look at what happens to the flow of excess water in flash-flood conditions.  Just like I frequently see no one planning for “storms” in their agile or devops culture, their social media presence, or omnichannel efforts.

To round out the story, now that we have a ROOT CAUSE.  I can come up with a….

Solution – Create a sub-system that encourage adaptation to non-normal systemic conditions.

Sorry, I did it again.  But you really can’t tack on a new tool or process if you have underlying cultural factors that need to be addressed.  For my house, the answer is simple, add a French Drain system that will handle excess water during a flash flood.

Now, with my years in custom app development consulting, the parallel is really quite striking. Investment in a bigger pump, a total re-grading, or new and improved gutters would have been an expensive way to deal with emergent properties of the system without helping it adapt properly to non-normal stress. The french drain and dry well implementation I have started will require some hard work (i’m digging it by hand!) but potentially no cash (I already have more river stones than I know what to do with).

  • I’ve discussed how this applies to agile or DevOps transformations that don’t address cultural problems.
  • I’ve shown how bad investments in software happen due to a lack of understanding of the root cause.
  • Look for more on how this applies to eCommerce and Marketing on the way!

Scrum Backlog Prioritization

“Portfolio management is the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.” – Investopedia

How do you manage your backlog?  The strategists at the top are often accustomed to trusting their gut, while the engineers below insist on absolute scientific certainty.  Handing priorities down that game of telephone is a circus side-show of bull whip effect and sociopolitical contract theory.

Not that it doesn’t work out just fine….

Meanwhile, accountants and financial analysts, with the help of algorithms, benchmarking, and actuaries, have been tracking the present value of an asset, mid-investment, with all risks taken into account for a VERY LONG TIME.

The real question is, do you need all that certainty?  Should you be focusing on human interaction and the existential plight more?  I guess that’s a separate discussion…

I mean, at one extreme, do you care about your customers so much that you feel an ethical duty to fix every little bug no matter how much it costs you, your employees, and the families they feed?

At the other extreme, do you love churning out features so much you don’t care how many of those features aren’t wanted or how unsustainable your product has become?

No, I assume neither of those are you (I hope).  Instead, you are trying desperately to strike a sensible balance that lets you sleep at night while feeling good you pleased a small group with their favorite feature.  You’re really in the business of political and emotional backlog prioritization.

I want to let you know that I’m okay with that.  Relationships and society and worth building.  That said, when you are the bridge between the c-suite and several thousand staff member salaries, you may want to find ways to think harder about whether or not you are building the right thing, at the right time, for the right reason.

Thus, I will give you some science on backlog prioritization, but I wanted to let you know that I completely understand where you are with your current methods.

My First MVP.

Notice the blank spaces.  Notice the technological wonders that – despite my imaginative artist-engineering mind, you’d never actually see.

Tentatively Entitled – ShareLighter

Product Vision

Do you love reading physical books, but wish it were easier to share the insights you’ve gained and quotes you love via social media?  

Value Assumption

People want to share quotes from physical book pages with virtual highlights, blackout, or underlines as a form of expression. Someone – somewhere – in the fantastic conversations that grow from this narrative of noting, quoting, and sharing, wants to pay to be a patron for this game of reader-response, learn it and share it, cultural-criticism-gone-viral.

Growth Engine

Viral. People will love the app enough to share it with two or more friends. 

Success Metric

Viral coefficient, tracked by release version cohort analysis. If the viral coefficient is increasing, the cohort is correlated with the newest features, indicating they have tentatively proven their success hypothesis. 

Minimum Viable Product

To establish our baseline, we need the core functionality of taking a photo, highlighting text virtually, and sharing the photo with a caption to a social network.  To track our success, we will need an “invite friend” feature and the ability to correlate the act of inviting to the version of the app. 

“Blue Sky” Potential Features

You’ll have to see the Trello board…

Do you care?

You have other ideas, because you want this app too, right?  @mention me on Twitter for glory or shoot me an email. 

Strength to Compete

Excess of strength is the only proof of strength.  

We must strive, fight, and harden ourselves, continuously improve and overcome, to outstrip and outpace our rivals.  We must brace ourselves, proud and resilient, against risk – and even welcome loss when justified – because even in a wound there is the power to heal.  It is a first-principle from the military school of life:  

What does not kill me makes me stronger.

As warriors we expose our weakness happily, welcome vulnerability, fail often, delighted, and inspect, adapt, evolve, and innovate – hard and fast.  We make pain our truth, we make learning our competitive strategy, we make ourselves immune to the setbacks that ruin the weak around us.  In the face of tragedy the warrior in our soul celebrates, and even honors life as the most worth adversary we will ever face; because, more consistently than any other rival, “life” brings its most formidable weapons against us.  Every artist needs his torture, even more the disrupter and creator of values.

The warrior-champion is born out of, and evermore accustomed to, suffering, and extols his existence by means of tragedy and hardship, because he knows the value of a thing often lies not in what one attains with it, but in what one pays for it; what it truly costs him. Liberated by perseverance, gritting our teeth against pain and loss, war becomes a training in freedom – after all, what is freedom?

Freedom is the will to self-responsibility.

Freedom is a state of spirit; that one embodies the will to self-responsibility.  That one preserves the distance that divides us, even in an embrace.  That one is ready to sacrifice men to one’s cause, oneself not excepted.  Freedom means that the instincts that delight in war and victory within us have gained mastery over all other instincts.  The truly free man is a creator, destroying the past and disrupting the present, a warrior constantly overcoming resistance, five steps from becoming a tyrant while standing on the threshold of servitude.  He combats the tyranny of the pitiless, dreadful instincts with maximum authority and discipline toward himself.  After all, what is strength?

Strength is the will to self-discipline.

It is great danger, our thorough and deliberate exposure to risk, and winning against it, that makes us deserving of reverence.  It is only the real danger of losing everything that first teaches us to know our resources, our virtues, our shield and spear, our very spirit; it is danger that compels us to be strong.  Thus the first-principle:

One must need strength; otherwise one will never have it.

The strongest among us, champions respected throughout history, have felt precisely this way – freedom is something a man attains but can never own, something one always pursues, something for which we must fight, a state one continuously conquers.

Stay strong, rise to the fight!

– An adaptation, extension, paraphrasing from the works of Friedrich Neitzsche

Photo Attribution:  Rob Weir‘s photo of “Atlas (1937) Statue” by Lee Lawrie, Rockefeller Center, NYC