Esko Kilpi on Interactive Value Creation

The art of interaction, the design of digital and the science of social complexity

Month: October, 2011

The future under construction

The approaches of industrial management have given us remarkable material well-being over the last few centuries, but are increasingly being criticized for not being suited to handling the needs of today. Organizations need to excel in innovation. Companies also need to embrace rapid change and uncertainty. Some of the most creative ones have even gone so far as to take a “let’s just do cool things and see what happens” approach, trying to avoid traditional governance systems. Is this yet another sign that management is in crisis?

The industrial theory of management is based on top managers choosing the future of their organization and guiding its development in the right direction. The belief is that managers can make useful forecasts and set goals. Their daily responsibility is to monitor activities to identify gaps between the goals and actual outcomes so that the gaps can be closed. Uncertainty plays a minor role. Managers know what is going on.

Every business is a set of assumptions that are taken as given, thus reducing the perceived uncertainty. The whole plan–execute cycle is a process designed to prove those assumptions correct. But assumptions are never totally right most often not totally wrong, either. Accordingly, it is quite seldom that ideas are turned into a successful business in just the way described in the business plan. Things change.

In conditions of rapid change and uncertainty, there have to be systematic processes indicating progress and new opportunities as they emerge. This is much more important than forecasting or planning. It is about testing the assumptions continuously and signalling which assumptions are helpful and which are not. It is about finding out repeatedly which of the efforts are creating value and which are wasteful. Are we on the right track? Are we progressing? What new possibilities have become visible?

Lean thinking defines value as providing benefit to the customer. Anything else is waste. But what if we really don’t know?  Then the most important business process is to find out. We have to learn what creates value for different customers in different situations. “Anything that does not contribute to learning is waste”  as Eric Ries puts it. The business challenge for a creative company is to learn fast and cheaply!

Management theory needs to leave behind the industrial, mechanistic model of reality and the belief in linear if-then, causality. The sciences of complexity, non-linear dynamics, uncertainty and creative learning are the foundations of modern, human-centric management.

The task of managers is not the reduction of uncertainty but to develop the capacity to operate creatively within it. Ilya Prigogine wrote in his book “The End of Certainty” that the future is not given, but under perpetual construction:

“Life is about unpredictable novelty where the possible is always richer than the real.”

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Thank you Eric Ries, Stu Kauffman and Ralph Stacey

On trust

Dire economic outlooks typically lead to emotional reactions and social fragmentation. This always results in bad decisions and conflicts. Then frustrations increase further as the established ways of doing things come under greater attacks. Irritation over the perceived ineffectiveness of governance systems then creates the wish for a saviour, a strong person, to come and clear up the mess. This is how we create dictators, this is how they come into power. This is how Hitler was elected.

The same dynamic is still inbuilt in our political and social systems and should be taken into consideration when we try to figure out what may happen next. Rather than trying to resolve situations through discourse, populist politicians are increasing tensions through an “us versus them” rhetoric in pursuit of support among their own.

We face a repeating social pattern: with growing economic difficulties, the populist stance is to blame “others”, normally “foreigners”, for taking our jobs or for taking our money.

Aristotle had interesting ideas to explain what was going on in the economy. Aristotle made a distinction between two kinds of value added – one that we get from nature’s resources to sustain our lives, and another, which we create to facilitate our relationships and trade. The value added in the latter does not begin from nature, but from the promises we make to one another – from money.

There are limits to what we can get from nature, but, according to Aristotle, since money is promises, there is no end to the amount of money we can aspire to collect. What is special about money, Aristotle says, is that its value is set by mutual agreement. It has no intrinsic use value, only an exchange value, and it keeps that value only as long as people agree to accept it in payment. As long as there is trust.

Therefore it is understandable if the expanding social dynamic reaches a point where promises are not believed any more. After that limit is passed, the result is a sudden and deep crisis. The whole house of cards crashes because it is made of promises that don’t have any value any more. Fear replaces trust. At the moment, it does not take much distrust to cause solvency problems to highly leveraged banks – or highly leveraged countries.

What is a fairly new phenomenon is that buying and selling are no longer confined to resources, to trading goods and services. The world economy mostly consists of buying and selling money, buying and selling promises according to Aristotle. This is why we are so deeply interdependent and why we are even more dependent on building and sustaining trust.

The only way to sustain democracy is to work together and share the burdens and the efforts – whatever happens.

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Thank you Ray Dalio and Mikael Jungner

Designing a life

Apple design was not about Steven Jobs alone, but about Steven Jobs and the lead designer Jonathan Ive. The way I see it, their collaboration in Apple followed a bit the story of another design icon, Braun. The key people then were the industrialist Erwin Braun, his brother and the designer Dieter Rams.

Jonathan Ive has described his first encounter with a Dieter Rams design: “No part appeared to be either hidden or celebrated, just perfectly considered and appropriate in the hierarchy of the product’s details. You knew exactly what it was and how to use it.”

“Good design is as little design as possible” is one of Dieter Rams’ most famous phrases. The meaning behind it was that a well-designed product should be so good that it is barely noticeable. By leaving the unnecessary out, the essential factors rise to the foreground. The challenge is that the design may be simple but the path taken to create it highly complex.

Dieter Rams was one of the first people who made the distinction between consumers and users when he talked about the people at whom his designs were aimed. The term “consumer” corresponds to someone who uses things up. Consumption is then a process of reducing the value that is built into the product. Rams preferred to use the German term “Gebraucher”, which translates as someone who uses something. The consumer is turned into the modern notion of a value-creating customer. If the design is useful, if the product facilitates value creation, it makes sense that it lasts as long as possible. For Rams, the term “Verbraucher”, the consumer, had a negative meaning, implying waste and short-term thinking.

Another concept that Dieter Rams suggested was “re-design”. What he meant was to turn away from an addiction to novelty towards iterations, to improving what we already have.

“Less, but better” was the ultimate motto of Dieter Rams. The motto follows the idea of “less is more” of Mies van der Rohe and Peter Behrens. The original idea of Behrens was improvement through reduction, reducing quantity, waste, and excess and at the same time increasing quality, value and the effort to create a better world in a human centric way.

Dieter Rams formulated his ideas about good design into a set of principles to explain what makes a good product:

The first principle was: good design is innovative. Technological developments always offer new opportunities. Innovative design develops in collaboration with innovative technology.

The second principle: good design is about usefulness. A product is bought to be used. Design is about emphasizing usefulness whilst disregarding everything that could be a detraction from it.

The third principle: good design is beautiful. The aesthetic quality of a product is integral to functionality.

The fourth principle: good design makes a product understandable. At best it is self-explanatory.

The fifth principle: a good design is honest and does not try to make a product more innovative or valuable than it is.

The sixth principle: good designs are neither decorative nor independent works of art. Their design should leave room for interaction and the user’s self-expression.

The seventh principle: a good design lasts many years rather than being short-term and fashionable.

The eighth principle: it is about attention to detail. Nothing should be left to chance.

The ninth principle: good design makes an important contribution to the preservation of the environment. It minimizes waste and it minimizes visual and physical pollution.

The tenth principle: good design is “as little as possible”: it is about less but paradoxically at the same time about better, more valuable.

The principles of a good design may be the principles of a good life.

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Thank you Dieter Rams, Sophie Lovell, Marco Steinberg and his team at Sitra. Thank you also @moia

More: San Francisco Museum of Modern Art. The Museum of Modern Art New York. Helsinki Design Lab. Guy Kawasaki on Steve Jobs. Jonah Lehrer on Steve Jobs. John Sculley on Steve Jobs. Technology and social change. Fast Company: 50 Most Influential Designers in America.

Lean and social

Waste seems like a straightforward term, but lean thinking has given new meaning to the word. In lean vocabulary, anything that does not create value, slows one down, or does not contain potential for learning is waste. A thing or a document sitting around waiting to be used is waste. Making something that is not needed is waste. Unwanted movement is waste. Transportation is waste. Waiting is waste. Any extra processing steps are waste.

The concept of waste has lately been transferred from manufacturing to other practices such as product development. According to lean principles, when a development project is started, the goal is to complete it as rapidly as possible. In a sense, ongoing development projects are just like inventory sitting around in a factory. Design and prototypes are only valuable when (paying) customers are involved.

Eliminating waste is a fundamental lean principle. Thus three of the steps towards implementing lean development are learning to see waste, uncovering the sources and eliminating them. We recently studied the product development methodology of a large multinational company. They have been very successful in the past, leading in most of the markets they have entered. But lately, many people have voiced concern that there have been unnecessary delays in getting new products to market. To find out why, we gathered input from managers and ecosystem partners.

A division into two main areas of concern developed: technology/process and social interaction. We asked people what percentage of the barriers to faster time-to-market might relate to the technology/process side and what percentage would be on the social interaction side. The answers were almost unanimous: over 75 percent of the reasons for slow product development were on the social interaction side. The results were alarming because in this organization almost all approaches to being more agile and to taking waste out of the system were historically on the technology/process side.

People are used to lean thinking when it comes to technology and processes but it is still very rare to look at taking waste out of communication. Many managers still trivialize the power of conversation. They think that social interaction issues are soft compared to the hard issues of technology and process.

We still don’t understand that work is communication: we live and work in a network of conversations. Being lean means understanding that conversations are never neutral. They always affect the quality and pace of the outcome. Communication either accelerates or slows down. Communication either creates value or creates waste. Communication can create energy and inspiration or take energy away and reduce inspiration.

The world around us is changing. The interactions in mass manufacturing were very different from the interactions in complex, dynamic, knowledge-based work. Many managers possess the skills that meet the challenges of static conditions. Those conditions are based on predictability and systems thinking, meaning that the crucial variables are known in advance. The main risk factor is then the accuracy of the predictions.

In a static environment, you know how each role fits within the larger system. You know how the processes work, and you don’t want deviations. You know what it takes to make the products and you don’t want people experimenting and making things up. You want everyone to do their part and not get in each other’s way. Roles and organizational units are separated from other roles and other units. You, as a manager, do the coordination and share the information necessary for each to make their planned contribution and nothing more.

In dynamic business conditions the management practices described above are not only unhelpful but cause damage and create waste rather than value.

If you cannot predict you have to invest in real-time learning and iterations instead of more predictions. Success is based on speed of learning and responsiveness. Responsiveness is not possible if you are many handshakes away from the things that you should respond to. Learning is then based, not on teaching materials, but on conversations linking interdependent people. The question is what the design of a valuable conversation is? We spend countless hours attending meetings and sending/answering emails, but the nature of those hours goes unexamined. Many people think that a conversation is inherently valuable. That is not the case. The challenge we face is to deepen our awareness of how conversations create either value or waste. The goal is not just to be more social.

The agile manifesto points out that individuals in interaction are more important than processes and tools. Working prototypes are more important than documentation. Customer collaboration is more important than contracts and most importantly responding to change is more important than following a plan. Creating value or waste is a result of how we interact.

We need to embrace change, unpredictability and complexity as inescapable constants in all product development. It is about being lean and social!

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Thank you Craig Larman, Petri Haapio, Ari Tikka, Mickey Connolly, Vasco Duarte and Ken Schwaber