1 comment on “The Startup Way by Eric Ries – Book review”

The Startup Way by Eric Ries – Book review

Want to know how to scale the “Startup Way” of doing business to conventional organizations? Want to know how to keep on perpetually innovating new products and processes? Then “The Startup Way- How Modern Companies Use Entrepreneurial Management to Transform Culture and Drive Long-Term Growth” should be for you. According to Eric Ries, it outlines nothing less than a “unified theory of management.”

Wow. What a claim. I was excited, as I admire Eric Ries last book, the “Lean-Startup” and many of its sister publications like “The Lean Enterprise.” And finding better ways to manage in the digital age is all that my work is about.

Spoiler Alert: I was bitterly disappointed.

How to transform a company to work like a start-up?

The recipe according to Eric Ries is to:

  1. Fully understand the Lean Start-up Model with its Minimal Viable Products, Experimentation, Pivots, Leap of Faith Assumptions, Iterations & Learning, etc.
  2. Gain top Management buy-in, so that they commit themselves fully to a big change management program that focusses on training more and more people in “Entrepreneurship.”
  3. Institutionalizing Entrepreneurship in a separate line function.  So Entrepreneurship become a department, such as HR, Finance, IT, Sales and Purchasing are. In contrast to the other departments, the “Entrepreneurship” unit has some matrix functions in the other line functions, such as training and coaching entrepreneurs and maintaining start-ups like funding and governance structures. Thereby the “Entrepreneurship Department” is mimicking external start-up functions internally inside a company.
  4. Continually change the processes of a company by experimentation and iteration to come up with just the right ones for your company. Do it scientifically, never stop experimenting and adapting and you will be fine for all time to come.

Eric’s “Unified Theory of Managment”

The new organization will be a combination of “general management practices” (see the left side of the graphic below) and “experimental management practices” (on the right side). Traditional management practices based on hierarchy and experimental, team-based, lean start-up practices are meant to coexist in every company:

Experimental Management is like a bolt on general management practices. IMG_6527.PNG

Nothing much changes in General Management practices. Eric describes experimental management – in a less than humble manner – as the “missing part of the lean manufacturing system,” known as Toyota Production System (TPS), the mother of all Lean and Agile movements. Lean Manufacturing (and its off spins like Six Sigma) have been all about efficiency (doing the things right). But they couldn’t help at all in effectiveness, i.e. determining what things are the right things to do. These “right things”  can only be identified by customer-centric experimentation. This is exactly what the lean startup method is there for.

And if these two pillars of the house of management are built on solid foundations, i.e., vision, purpose, a focus on people and long-term thinking, the house will stand. It will deliver excellence and continuous improvement if only the shared values of all people in the company embrace truth and discipline.

That’s it. That’s all there is. How stupid have we been not to see this future of management! Just bolt on experimental management and get the senior management team to sponsor vision, truth and discipline et voila: The Organization of the future.

Naivete galore!

It is so naive. So torpedos away.

Eric’s 4 step recipe for transforming a company is EXACTLY what a conventional change management program is all about since time immemorial. Get Management Buy-in, teach and motivate people, lead by example, devote time and attention, train-the-trainers, etc. This is business as usual in modern companies. It is just another top-down driven Change Program. There is nothing to assume that this program will be more efficient than any other change program is.

Oh, wait! Maybe there is: Entrepreneurship is an institution now. We are adding a new department to the company. Surely this will help! It will help exactly like installing a “Chief Digital” or a “Chief Innovation Officer” helps to promote those themes on the board. The name is different, but there is nothing that indicates why a “Chief Entrepreneur” should be more effective. Those Organisations will always be the “weak line”:  Organizations are dominated by those “strong lines” of the departments doing the real work, closer to the business. Hell, they ARE the business. Entrepreneurship is just another matrix function.

But wait again! The strong lines, the realm of General Management, will be all aligned with experimental management now, as they all share a vision and embrace truth and discipline now – as in the neat graphic above.

This degree of naivete leaves me speechless. There is nothing in this book and in the world that will indicate any more success with this as with all other Change management initiatives before.

Looking deeper into “Deep Processes.”

Eric Ries describes the deep processes, such as career and promotion, salary management or purchasing, as “Deep Processes.” Those are the final frontier to conquer once all the successful experiments produced such a momentum to do this in a company’s drive to everlasting change and improvement.

This is very shallow. These are not the deep processes of an organization. These processes are just the result of the management hierarchy coming up with rules and regulations, that minimize variation, seek security in control and assign people to jobs like cogs in a machine.

To really change the “deep processes” you need to change the “metaprocess” under which decisions about processes are made. These are things like giving people a voice, letting the people who are doing the work decide what is best, utilizing all their local knowledge and sensors to come up what is best, giving them leverage to experiment and learn by their own initiative and not by the initiative of an autocrat of the management hierarchy.

It requires flatter hierarchies. It needs more self-management. It requires more local autonomy, less fear, and less separation. But there is no reference to that in the Startup Way. None at all.

A House divided against itself can not stand: The insecurities brought about by experimental management and its rule-breaking nature collide fundamentally with the stability and predictability seeking hierarchy. 

Eric asserts that companies need to act more based on rigorous “scientific experiments,” for which Lean Start-up is the vehicle. In doing that, he is basically giving the same advice that Frederick Winslow Taylor gave in 1911 in his book “The Principles of Scientific Management.” While no one can argue with this benefits of putting more science in management by doing more experiments, the “Startup Way” adds nothing new. The problem is still: How to get the hierarchy to embrace uncertainty and unpredictability? There are no answers to this in his book.

Damm it, he even gets the reference to Taylor’s all-time classic book wrong. This book, one of the most important books ever in the realms of organization and management, has been published in 1911, not 1915 as Eric Rees claims on page 355. A small, insignificant error? I think this is a symptomatic error. Just skim through the list of sources, and you will find secondary sources taken for example from such “authoritative” sites like Quora.

What happened to Eric Ries?

I feel kind of personally injured by “The Startup Way.” Lean Start-up was a great book. So many fabulous ideas that inspired such a great movement and community.

But it appears that all the well earned success within the Corporate world, for example in his long commercial engagement with General Electric, all those speeches to deliver, left him with only minimal time for deep thinking and research.

It feels like Eric Ries is out of his (Start-up) waters in the corporate world. His intentions are good, but there are much more thoughtful and ultimately helpful books available on the future of management such as Fredericks Laloux’s “Reinventing Organizations,” Jurgen Appelo’s “Management 3.0” or even General Stanley McChrystal’s “Team of Teams.” Or this Blog 😉

The “Startup way” is a shallow book.

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This is what I think. What do you think?

 

0 comments on “Moving an Organisation to Self Management”

Moving an Organisation to Self Management

What organizational change is the most severe of all? Mergers are pretty dangerous, especially for the weaker company. Scaling back operations, “downsizing,” is extremely hard because of all the psychological stresses it puts on people. Turning around unprofitable companies is hard, as it takes grit to create a sustained momentum.

But top on my list of tough things is to let go of hierarchy and introduce advanced management systems. Why? Because you need to let go of the steering wheel. While managing a Merger, a Downsizing or a Turnaround is complicated because of so many uncertainties, at least it leaves Management with the hands directly on the controls of an organization. If you want something done, you can order it. The outcomes may not always be what you asked for, but you are in control of the actions performed.

By adopting advanced Management models, you need to let go of the steering wheel and transfer control to people who have the autonomy to act as they think best. Think of how hard it is to hand over an area of responsibility to a successor. Things you genuinely care about and invested a lot of time in – e.g. by building relationships and great solutions – are now done by someone, who will make changes you might not be fond of. How great the temptation to interfere if you think something is not done “properly”!

Devolving control is hard. But you are not out totally out of control. Think of it as a self-driving car:

  • You task the car with getting you from A to B
  • You relinquish control to the car
  • The car chooses its route, determines its speed, distance to other cars, when to apply the brakes, and all the minutiae of driving

Likewise with organizations in an advanced management setting with flat, egalitarian hierarchies. The driver/manager is not out of control, she just relinquishes day to day control but remains in strategic control. This will feel pretty unnerving at first, but after a while, one will get used to it and focus on higher value-added things.

The Starting Point

To adapt Liberation or Holacracy, you need to make that leap of faith. So the very starting condition for those Management System is your faith. Without holding deep, inert convictions yourself and the willingness to personally invest yourself, suffer and learn, do not make the leap. It takes a benevolent dictator in capitalistic systems based on private property rights to start. Are you that benevolent dictator?

How deep must your convictions be? Here is a test:

  • Get introduced to the concept of TEAL, best by reading this Article on HBR or even better chapter one of  Frederick Laloux’s “Reinventing companies.” The picture below provides a clue what a Teal organization is

teal2.png

  • Then ask yourself: Do you think mostly from a state of “Teal”? Do you accept contradictions, complexity, uncertainty and embrace a good deal of spiritualism?
    • If the answer is no and this all seems a bit too alien to you:  Do not start. Read more and try some Management 3.0 or Agile Workouts to build up more experience
    • If the answer is a wholehearted yes: Go for it and liberate your Company through either Liberation or Holacracy

adopt.pngWith Management 3.0 you do not necessarily need to hold those deep convictions that the other two system require. Management 3.0 allows you to experiment with this or that agile practice, thereby learning and shaping your and your team’s beliefs in the process. Management 3.0 offers two things that the other two systems are lacking:

  1. An evolutionary, explorational path to devolving control to more and more autonomous people and groups
  2. It enables any manager of any level in the organization to introduce agile principles. Holacracy and Liberation you can only start if you are the CEO of an organization. If not, your experiment will fail as the resisting forces of the hierarchy will come crashing down on you and your autonomous, liberated teams in times of a pinch, for example by HR descending upon you with some reasonable corporate standards policies on titles, etc.

Barriers to Adoption

Once that leap of faith is done, there is a period where the effort to maintain the system is high. Everyone involved needs to learn new ways of thinking and acting.  The intake of new values to heart and coming to grips with new practices takes time. This places a heavy demand on the time of Managers, who need to coach the organization and individuals intensively in the initial period.

Therefore, opting for the adoption of advanced management systems in times of crisis may be more of a measure of last resort. Best to go for it during reasonable stable times.

Due to the flexible nature of Management3.0, single practices can be tried here and there, consuming only as much effort as one is ready to invest at a certain point in time. These small-scale introductions can be pictured as a low benefit – low-cost interventions into the existing organizations. Over time, the benefits might add up to a sizeable number, as a self-reinforcing feedback loop of learning get’s going.

Brace for brittleness

I like the term “Brittleness.” An organization is brittle if small strains on it tear off more and more parts until eventually, it breaks. The parts torn off may be of any kind, e.g., lost revenue or employees leaving the company.

An increase in brittleness is a part of every organizational change. The larger the change, the more brittle (“less robust”) an organization becomes, at least in the immediate period after the intervention has been made.

After introducing Holacracy, organizations become extremely brittle. Zappos, for example, experienced about 30% of employee attrition p.a. in the first two years after introducing Holacracy (Attrition is the proportion of employees leaving the company relative to the total number of staff). A benchmark for businesses in the e-commerce sector is about 8 to 10%. There is much speculation about the root cause of this attrition, but the consensus view seems to be that people have difficulty finding their role in a Holacracy driven organization vs. the clearness offered by command and control.

This tension is inherent to all advanced management systems, but it is accentuated in Holacracy,  as organizations are governed by a constitution which standards are rigorously enforced. Liberation is more accommodating, as it focuses on values and behaviors and let people seek their own structures. Nevertheless, while data is difficult to get, war stories indicate increased attrition, too.

Richard-wilson-1.jpgIn the long run, however, attrition should end up at a level below any that can be achieved by running the organization as a hierarchy. The promise of all advanced management systems is self-fulfillment, so all things being equal, people choose not to leave the reformed organization.

Principal Risks

Liberated Companies are very much dependant upon implicit guidance that a commonly felt purpose, values, and social norms provide. If this guidance is defunct, for example by values that mean different things to different people, nasty things are bound to happen.

In the much more rule-bound system of Holacracy, this risk is much less acute. Here, the written constitution is very crisp about the core inner workings of the company. But that is achieved by incurring a different risk.

Roles are central pieces of Holacracies operating system. There are “link” and “representative” roles that connect one team to another. While roles are designed to be only temporarily assigned to any single person and roles may be transferred by a decision made in a group, there is a clear bias in everyone minds. The bias is to equate these leading roles with a higher hierarchical position. After all, Kindergarten, School, and previous Work experience have deeply ingrained in us the thinking patterns of hierarchy.  Taking away roles is socially challenging, as it can be pictured as a humiliating move to demote the primus inter pares. Over time, another kind of hierarchy becomes a de facto reality in all but name. There is a lot of egalitarian attitudes necessary for an Alpha type character to move back to the ranks.

With Management3.0 the biggest risk is that nothing gets done at all. Just using a small work-out here and there can quickly be interpreted as gimmickry. Modern cooperations are full of corporate gimmickry, for example, team building sessions, “embrace the value” exercises, Football tables, follow-up fewer sessions full of Post-it notes or whatever soft skill training you suffered during your career.

Used in a disconnected and inconsistent manner, all Agile and Management3.0 exercises won’t get you anywhere.  Therefore you need to have a master plan ready. Don’t go and waste good Agile or Management3.0 work-outs here and there. Instead, plan your path systematically by…

  1. Creating a rough master plan that starts from the current state of the organization, the customer, the business environment and the team members. Plan maturity stages, results, and behaviors accordingly
  2. Establish rituals that allow groups to reflect their work, their communications, and their emotions
  3. Build a shared sense of purpose over time
  4. Introduce only those work-outs that work well together and only when the foundations for their success has been laid. It’s no use to demand “total transparency” when there is no sufficient base of trust

The flexibility of Management3.0 is a blessing and a curse. It allows the incompetent manager to dabble with it and frustrate people even more. It may fail to provide sufficient momentum for any lasting impact on the organization. Management 3.0 practices may simply be crowded out by all the rest of the cooperate initiatives and noise, if not applied with sufficient force, without it being a “Schwerpunkt” of the Agenda of an organization.

A personal story of learning

Let me prepare the wrap-up of this series with a personal story about my experience with advanced Management Systems. I have read Mr. Laloux’s work, which can be seen as providing the foundations of all advanced management systems, shortly after its publication in 2015. I loved the case studies in the second part of the book, but I regarded the first part as a bit too esoteric to swallow for anyone in management.

Oh, I have been blessed to be associated with some very enlightened, highly successful, value-driven organizations during my career. I am deeply thankful for that. But I am still convinced, that most Managers are driven by an ethos of achievement that relegates values to the realm of glossy books: Values are not to be found in daily actions.

So I discarded the first, “esoteric” chapter about human stages of evolution and the rather awkward foreword by Ken Wilber. But two years later, after learning more and more about advanced management systems, this all makes much more sense to me. It’s like the underlying structure of all there is to reshape organizations. It’s like looking at a building:  I needed to have a look at the facade first, then the interior, then got interested and dug deeper and deeper. Finally, in 2017 I was ready to face the level of abstraction that is required to understand the conceptual foundations.

It takes deliberate effort to understand more about all the layers there are to people and organizations.

It takes this understanding to reshape long-held beliefs.

So finally – after 8 long posts with over 16.000 words – which of the four systems is “best”?

The Best System of Management there is!

Oh well, you know it’s complex.

I am fond of Liberated Companies:

  1. There are a lot of positive examples of companies using this model, e.g., well-known brands such as South West Airlines, Michelin, Spotify, and Patagonia. I love the model of the 14.000 employees working for the Nursing Company Buurtzorg
  2. There is a lot of positive momentum for this model in the market as more and more people get onboard
  3. I think it can be applied to any kind of organizational challenge, not just knowledge work. From Nursing to running a nuclear submarine to manufacturing and retail stores – anything
  4. I am convinced it will beat the hierarchical model by length, even in some low complexity, low uncertainty situations. By utilizing the cognitive and brain power by everyone in the organization, which always come in a package with the muscle power, even routine work will improve

The two largest pains I have with Liberation is that

  • it takes a whole company to adapt Liberation. It can not be done piecemeal, unit by unit.
  • It takes a “messiah” like CEO: Enlightened, Spiritual, Disciplined and quite heroic.

This is strange quirk: For a higher state of organizational performance and human existence at work, we have to rely on a brave leader again. Like in the days of Julius Caesar and Napoleon.

The good news is: Over time this heroic CEO will appear less and less heroic, as companies like Silicon Valleys Google, IDEO, Netflix, and AirBnB or companies like Gore, Buurtzorg, South West Airlines, Atlassian, and Michelin continue to win more and more in the marketplace. It will just make good business sense to liberate businesses and it there will be much more CEO’s ability to operate from a “Teal” mindset.

This path is paved by the planned, robust and decisive application of Agile and Management3.0  practices. With an Agile mindset and with an end in mind, in a systematic and sustained manner.

I am optimistic.

Appendix 1: Apps and Nuggets

There are a couple of Apps out there that facilitate different aspects of advanced Management Systems. This list is not exclusive. There are more apps out there. Can you recommend some? If so, leave a comment on the blog.

appsSpecific Apps

These Apps support the organizational modeling, maintenance, and communication  of loose network structures:

  • Holaspirit – supports not only Holacracy
  • Glassfrog – the classic Holacracy App
  • Agilityscales – a new app created by a company set-up by Jurgen Appelo (under construction)

Collaboration Apps

Apps that are critical to foster the free, spontaneous and transparent information flow across the organization:

  • Slack: The most advanced whiteboard and communication app there is
  • Jira: The Swiss Army Knife for Tracking
  • Trello: A multiuser Kanban board for any device. Integrates neatly into Jira.

Knowledge Management Apps

There are a lot of knowledge management apps in the market. One of the most significant problems with these apps is that they are not integrated enough in day to day business. The limited usability often results in these systems being out of date and incomplete.

Confluence circumvents this because it integrates neatly into Jira and Confluence. But you may choose to use any other system. Just remember this: It’s never a single tool that will help you most, it is the integrated tool-scape.

Appendix 2: Other Management Systems: Sociocracy, SAFe, LeSS, and Nexus

This series focused on three advanced, comprehensive Management systems. There are some other systems. But those have either…

  • limited usability outside the realm of Software Development (SCALe, LeSS, and NEXUS)
  • or have limited traction in the business world (Sociocracy)

Sociocracy, an alternative to Holacracy

There is a third way between the fast and speedy decisions provided by hierarchies with its sole decision maker and the slow and tedious, but ultimately more just and participative decisions of systems relying on majority or consensus votes (e.g., Democracies). Sociocracy is such a system which originates in a system described in 1926 by a dutch reformist educator.

Holacracy is a modern application of Sociocracy, but it is not the only one. An alternative to Holacracy is Sociocracy 3.0, albeit with less traction in the business area.

SAFe

SAFe – the “Scaled Agile Framework” describes how to scale small, agile projects to large projects or even entire organizations.

While it is has a sizeable number of adoptions in larger businesses, it is heavily criticized by the founders of Scrum for its complexity and top-down nature. It basically installs a top-down layer of control to multiple agile teams. Therefore it is logical, analytical, provides some agile stardust, but remains founded on hierarchy in its core – and this is precisely what it makes so attractive to established businesses.

LeSS

LeSS – Large-Scale Scrum: A lightweight framework to scaling Scrum. Useful for large-scale software engineering.

Nexus

Nexus is a lightweight framework to scale Scrum, too. Just like Less. There appear to be few significant differences to LeSS.

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I hope you enjoyed this 8 part series of long posts devoted to comparing Liberated Companies, Holacracy and Management 3.0.

In the next post, I like to dig into the central concept of Servant Leadership by extracting the lessons learned from a story of liberating the crew of a nuclear attack submarine. Transferring control in this “mother of all critical work environments” to work level is quite impressive.

Last, not least: The final Comparision Table:

long.png

 Sources

  • Frederick Laloux, “Reinventing Organizations,” 2015
  • Issac Getz et al. “Freedom 2.0”, 2017
  • J. Appelo,  “Management 3.0”, 2010
  • B.J. Robertson, “Holacracy,” 2015
  • J. Gotthelf, “Lean vs. Agile vs. Design Thinking”, 2017
  • L.D. Marquet “Turn the ship around”, 2015

All sources and a short review can be found on  ManagementDigital.net/Sources