Noise Between Stations

Author: Victor

  • Call an expert or toss a coin?

    Louis Menand reviewed Philip Tetlock’s new book, “Expert Political Judgment: How Good Is It? How Can We Know?” which summarizes a twenty year study of people who make prediction their business. In short, their predictions are “worse than dart-throwing monkeys.”

    This is good news for strategists using future planning tools like scenario planning: they don’t need to be experts in order to find plausible (as opposed to probable) stories of the future. Unfortunately, the distinction between a futurist and an expert may be lost on many.

    Here’s my favorite bits from Menand’s article:

    [Experts] have the same repertoire of self-justifications that everyone has, and are no more inclined than anyone else to revise their beliefs about the way the world works, or ought to work, just because they made a mistake.

    “Experts in demand,” Tetlock says, “were more overconfident than their colleagues who eked out existences far from the limelight.”

    “Expert Political Judgment” is just one of more than a hundred studies that have pitted experts against statistical or actuarial formulas, and in almost all of those studies the people either do no better than the formulas or do worse.

    The experts’ trouble in Tetlock’s study is exactly the trouble that all human beings have: we fall in love with our hunches, and we really, really hate to be wrong.

    Most people tend to dismiss new information that doesn’t fit with what they already believe. Tetlock found that his experts used a double standard: they were much tougher in assessing the validity of information that undercut their theory than they were in crediting information that supported it… In the terms of Karl Popper’s famous example, to verify our intuition that all swans are white we look for lots more white swans, when what we should really be looking for is one black swan.

    …like most of us, experts violate a fundamental rule of probabilities by tending to find scenarios with more variables more likely. If a prediction needs two independent things to happen in order for it to be true, its probability is the product of the probability of each of the things it depends on.

    Tetlock: “Low scorers look like hedgehogs: thinkers who “know one big thing,” aggressively extend the explanatory reach of that one big thing into new domains, display bristly impatience with those who “do not get it,” and express considerable confidence that they are already pretty proficient forecasters, at least in the long term. High scorers look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather as exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess.”

    In world affairs, parsimony may be a liability—but, even there, there can be traps in the kind of highly integrative thinking that is characteristic of foxes.

  • 10 years of influential business ideas

    To celebrate s+b’s 10th anniversary, they looked back at the conceptual breakthroughs that appeared in the magazine — and invited readers to vote on which were most likely to last.

    1. Execution
    2. The Learning Organization
    3. Corporate Values
    4. Customer Relationship Management
    5. Disruptive Technology
    6. Leadership Development
    7. Organizational DNA
    8. Strategy-Based Transformation
    9. Complexity Theory
    10. Lean Thinking

  • The opposite of bad PR

    If the huge oil profits caused PR and political problems for energy companies recently, it’s only logical that taking the reverse action could have the reverse effect, which is what Citgo (U.S. arm of Venezuelan oil) did, and is getting big media attention here this morning…

    Venezuelan President Hugo Chavez added New York City to his program of selling discounted heating oil to low-income Americans, begun in Boston last month… “We want to help the poorest communities in the U.S.,” Chavez said in August. “There are people who die from the cold in winter in the U.S.”

    Skeptics interpret this as a way of embarrasing President Bush, but ultimately it’s a great humanitarian gesture that should shame other companies into doing the same.

  • Old school look at innovation

    There’s a flurry of innovation talk from the old school business guard lately. Reading through it, it seems like those concerned with innovation are repeating ourselves, possibly because we’re not aware of what other work has been done and because we’re using discovery tools that aren’t revealing anything new.

    Jaruzelski, Dehoff, and Bordia from Booz did some financial analysis and found

    1. You need to spend the right amount of money, not too much or too little
    2. Big companies have more to spend
    3. Process and collaboration are important

    BCG’s annual survey (PDF) found

    • Executives will increase spending on innovation
    • Generating organic growth through innovation has become essential
    • Less than half of the executives were satisfied with the financial returns
    • Globalization and organizational issues were two of the biggest challenges

    In both cases I’m struck by the research tool used: both firms use familiar tools that are useful but (IMHO) result in limited answers. Financial analysis tells us what happened quantitatively but not why. Surveys show us perception of the situation, but not necessarily the real situation. Neither used qualitative research that, incidentally, can help address the problems they uncovered.

    In Not All Innovations Are Equal, Govindarajan and Trimble talk about the wider application of innovation beyond continuous improvement and products to strategic innovations. That classification has existed in the form of Doblin’s Ten Types of Innovation. Their conclusion, that “Limits to innovation have less to do with technology or creativity than with management skill” has been discussed by Gary Hamel and is now championed by MIG.

    That these ideas are becoming more widespread is great. But unless this is all just marketing bravura, we need more cross-pollination of ideas and experience to make progress rather than repetition. I’ve got a little project started to make that happen, more details in the New Year.

  • SarbOx flawed, but fixable

    James Surowiecki’s Sarboxed In?…

    • The Sarbanes-Oxley Act was a political knee-jerk even the Republicans couldn’t avoid, in reaction to Enron, Worldcom, etc.
    • The complexity of the new rules went too far, requiring six figure enforcement costs, and possibly hindering small companies from going public. There are now talks of easing enforcement or modifying the Act.
    • But the problem SarbOx addresses is very real: to fake earnings and revenue, companies made acquisitions and hires they didn’t need. Two researchers estimate that companies who restated financials fired between two hundred and fifty thousand and six hundred thousand people between 2000 and 2002, slashing payrolls by more than twenty-five per cent, while other companies cut them by just 1.5 per cent.

  • Improvements in products, process, and culture can reinforce each other over time

    products, process, and culture reinforce each other over time

    Improvements in products, process, and culture can reinforce each other over time.

    Great products can have a revitilizing effect on a company’s culture. But companies with poor cultures have trouble making great products.

    Developing great products relies on an effective process. Cultures that acknowledge the need for process will make better products. But we’re not taught process, so usually we focus on the more tangible products.

    Culture can make certain kinds of products and processes possible, but culture is hard to change directly; often it changes through the context of adopting new processes and products.

    One approach is to focus on product but introduce process in order for both to change the culture over time.

  • Katzenbach and Smith’s team guidelines

    Since I’ve been working on how to structure teams to do innovation work, I thought it would be a good time to revisit the basics in the form of The Wisdom of Teams by Jon Katzenbach and Douglas Smith. One point they make is to differentiate between “performing teams” structured in a mindful way and other groups of people merely working together. A performing team has certain characteristics…

    • It is small in number
    • The members have complementary skills
    • They are all working towards a commonly identified purpose
    • They have group performance goals, in addition to individual goals
    • They have a common approach to working together
    • They hold themselves mutually accountable, not just individually.

    In the book and article The Discipline of Teams, they identify three kinds of teams:

    1. those that recommend things — task forces or project groups
    2. those that make or do things — manufacturing, operations, or marketing groups
    3. those that run things — groups that oversee some significant functional activity.

    For managers, the key is knowing where in the organization these teams should be encouraged.

  • Tools for Thought

    I just discovered Howard Rheingold’s Tools for Thought is online. It’s usefulness should be obvious from his introduction…

    Tools for Thought is an exercise in retrospective futurism; that is, I wrote it in the early 1980s, attempting to look at what the mid 1990s would be like. My odyssey started when I discovered Xerox PARC and Doug Engelbart and realized that all the journalists who had descended upon Silicon Valley were missing the real story. Yes, the tales of teenagers inventing new industries in their garages were good stories. But the idea of the personal computer did not spring full-blown from the mind of Steve Jobs. Indeed, the idea that people could use computers to amplify thought and communication, as tools for intellectual work and social activity, was not an invention of the mainstream computer industry nor orthodox computer science, nor even homebrew computerists. If it wasn’t for people like J.C.R. Licklider, Doug Engelbart, Bob Taylor, Alan Kay, it wouldn’t have happened. But their work was rooted in older, equally eccentric, equally visionary, work, so I went back to piece together how Boole and Babbage and Turing and von Neumann — especially von Neumann – created the foundations that the later toolbuilders stood upon to create the future we live in today. You can’t understand where mind-amplifying technology is going unless you understand where it came from.

  • Share a home-cooked meal

    Joel Spolsky’s Fog Creek Software created a documentary DVD of the summer interns’ experience creating an actual software product. Notice how they cook and share a meal together. I’m a big fan of establishing a relationship over home-cooked meals. Last winter I met the guys from Zago Design for the first time in one of their homes over a meal. We ate delicious food and talked for hours, and by the end I wanted to partner with them more than other firms I’d known for years on a more superficial basis.

  • Artful Making

    I watched State and Main recently. It’s a movie about making a movie, and hints at how that industry must blend the pure creativity of writing stories, the pure business of running a studio, and the combined creative/business endeavor of bringing together stories and studio to create a movie. I started to wonder if the collaboration and work styles found there was what business designers were trying to create.

    I think business design can be much more, yet I think there’s a lot to learn from how people in film and theater run things.

    I just discovered a book on this topic, called Artful Making: What Managers Need to Know About How Artists Work…

    This book is the result of a multi-year collaboration between Harvard Business School professor Robert Austin and leading theatre director and playwright Lee Devin. Together, they demonstrate striking structural similarities between theatre artistry and production and today’s business projects — and show how collaborative artists have mastered the art of delivering innovation “on cue,” on immovable deadlines and budgets.

    One Amazon reviewer compared it to agile programming. Another reviewer noted, “Concepts of rapid iteration, small groups and ‘playing’ …are not new.” Right, and that’s reassuring to me that we keep seeing these concepts applied in productive ways across several disciplines.

  • Labor and love

    “There’s a simple doctrine. Outside of a person’s love the most sacred thing they can give is their labor. Labor is a very precious thing you have and any time you can combine labor and love you’ve really made a match.” — James Carville

  • We’re trying to underdo the competition…

    …No one can really beat us on the low end. It’s just what you need, and nothing you don’t. You’re always going to have more people on the low end who just need a few things.”

    I love that Jason Fried quote, he’s proving out the worse if better argument.

    One benefit he didn’t cite was disintermediating IT departments. I’ve seen this happen: IT departments spend months deciding whether to offer a service, evaluating packages, and designing a scalable offering. Meanwhile, individuals and teams simply sign up for a web-based service and get their jobs done.

  • A bakeoff of product innovation methods

    Malcolm Gladwell’s The Bakeoff is now online, in which the food R&D firm Mattson tries to create the perfect cookie. Project Delta created three teams: one traditional in-house team, an “XP” (extreme programming) team of two people, and an “open source” dream team of the industry’s best working remotely. For anyone thinking about how to arrange people to create innovative products I’d say it’s a must read primer. With a couple caveats:

    1. The “open source” and XP methods are for building products, not for inventing new ones. The article illustrates why they don’t work well for inventing new things. We need some vocabulary to distinguish between innovation teams and building teams.
    2. Either the implementation of the methods or the description of them lacked key elements of what make them work. Open source is not simply an unstructured group of people contributing independent pieces. In Linux, for example, code is tested and reviewed by a central committee. And XP uses structured roles for programming vs. reviewing.

    The explanation of getting team size right alone is worth reading the article for. Some expertise on the team is good, but too many people create friction in the process and impedes progress. Also see What Makes Teams Work?

  • MITD blog

    The mysteriously authored MITD blog is harvesting a lot of interesting business+design links.

  • Designing organic milk

    Kim Severson’s article on organic milk production and sales answered a few questions I had, namely

    It’s the low supply, not the production costs, that are keeping the price high. I bet some qualitative research could influence this growth curve. For example, suppose it’s more educated parents who buy organic milk for their kids. Increase organic milk supplies to their geographic areas first and use the profits to increase production elsewhere.

    There’s still so much confusion over the “organic” labeling, due to industry/government disagreements. Designers could do an end run and solve this through, for example, smart package design to educate the consumer, e.g.

    • Pasture fed
    • No artificial growth hormones
    • Local cows
    • Antibiotics for sick animals

    Milk leads organic food sales because emotion plays a large role in this purchase, particularly for parents of babies. Again, this is another area that qualitative research can get the preferred organic products in people’s hands.