Achieving Excellence, Risk-taking
and Agility
By Doug Brockway
March 2018
March 2018
In a recent Q and A interview about the makeup of workplace excellence and how
to achieve it, Bill Wray, an accomplished banking (Washington Trust) and health
insurance executive and Trilix, a leading technology consulting firm here in
Rhode Island—the biggest little state—laid out what excellence is and how to
achieve it.
Wray describes workplace excellence as combining financial
gain with personal and company satisfaction and risk management, protecting the
business from harm. Initiating a
recovery-of or a return-to excellence starts with the front line. That’s where key ideas are. It’s also where on-the-ground achievement
begets trust in the program and more progress. The correct leadership culture,
eventually achieved across all management, is needed to achieve
excellence. That culture includes the
belief that one must improve to survive, know how to programmatically
execute, and demonstrate personal participation and commitment to changes. A
final homily: be humble about what is,
about what you’ve achieved to date and have courage to achieve what could be.
In thinking about the business and project/program
recoveries I’ve played a part in I found that all of this rang true. Same-same for those companies I’ve worked for
where excellence was achieved, or, in counter-examples, could not be achieved
no matter how much exhortation there was to do so.
Bill Wray’s view that you need to believe you need to improve
to survive reminded me of behavior studies I’ve read about in Michael Lewis’ “The Undoing Project." When hundreds of people are presented a
choice between a certain gain or a 50/50 chance at a much larger gain or a
total loss most took the certain gain. In contrast, if the choice was between a known
loss and a 50/50 chance to prevent any loss or suffer a larger loss, people
tended to take the chance [see below for more]. People are risk-averse when gain is
assured. They take risk when loss is
likely. Think “burning platform” or,
“you need to improve to survive.”
“The
Undoing Project” observation on risk-taking behavior shows up
elsewhere. For instance, Clayton Christensen wrote in "The Innovator’s Dilemma" and elsewhere how many industries, disk drives and steel come
immediately to mind, discarded low margin businesses to easily achieve a “known
gain” in net profits. This tactic was
encouraged and followed religiously, ignoring the “need to improve to
survive.” In both industries competitors
filled the “low margin product” gap and learned how to be excellent throughout
the value chain and ended up overtaking risk-averse market leaders.
I am often reminded of a
story that Gary Hamel used to tell in
speeches about "Competing for the Future" (co-written with C.K. Prahalad) Hamel
told of running a strategic workshop with the top management of a technology
firm, a chip maker if I recall correctly.
He stood in front of the room asking for ideas on how the firm could add
products, enter new markets, grow revenue. He got a few. Then he asked how they could be more
efficient, cut costs, eliminate waste, and the executives went on without end.
Among his points, management has to insist that it can
productively talk about the future if it is to lead anywhere. Firms that increase productivity, Revenue ÷
Cost, only by managing the denominator lose. Succeeding firms don’t give up “potential
competence.” They need to be “future
oriented,” to discover new products and markets. “Firms have to challenge [existing] assumptions and embrace
curiosity of imaging a different future so as to discover unexploited
opportunities that lie underneath those undiscovered or unsatisfied human
needs.” They needed a number of
behaviors that are often summed up as “innovative.”
Also, of interest from “The
Undoing Project”, individuals’ appetites for risk are inversely
related to the stakes. This implies that
a transformation-to-excellence program should be made up of many, smaller
efforts. People will be more likely to
perceive them as worth the risk.
Integrated, massive efforts will seem (and likely are) too big to
succeed. This finding argues for making many, many incremental changes (as Agile,
Lean, Kanban all argue) instead of betting everything in one throw.
In using agile to build applications approaches like the Scaled Agile Framework (SAFe) allows
for managing portfolios of separate but related sprints and “release trains”
towards a strategic end. Recently, companies
like John Deere have applied agile concepts of many, incremental but
holistically linked changes across business to create “agile innovation.”
This article from Bain outlines how Deere and others use agile approaches do two things: design breakthrough
solutions to important customer problems and develop those solutions
economically. It’s about design and development, and it must be tightly
integrated and rapidly adapted to the direction and pace of market changes.
According to Bain, at John Deere the goal was to “think unreasonably big, work as iteratively and
as small as practical, deliver faster than what’s been possible, adjust and
adapt constantly” … John Deere’s
innovators target long-term disruptions that may require 5 to 10 years to fully
develop and bring to market. They typically take about nine months to identify
a new market opportunity, develop the basics of a solution that meets customer
needs and test the solution. Using agile techniques and a team of individuals
who were already familiar with the principles, the company was able to compress
this time frame by more than 75%.”
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Bill Wray suggests starting with the front line, with
material and observable success, and build from there. To make a complete effort, apply a systematic
approach and ensure that the leadership culture celebrates the push to
excellence.
Indications from “The
Undoing Project” suggest that how the efforts, the projects are
framed, how they are described, says much about peoples’ willingness to be
innovative. Keeping individual efforts
smaller increases participation and confidence but having a method to integrate
them is key to broad-based impact.
These factors lead me to think of approaches like the Scaled
Agile Framework: regular sprints,
integrated into release trains with real product results, scheduled and
resourced strategically by an executive team using Lean and Kanban methods. There
are many companies, as Bain contends, that are applying agile methods at scale
for general business innovation, for the achievement of business innovation and
success.
Michael Lewis’ book “The Undoing Project” includes a summary of a behavior study that Daniel Kahneman and Amos Tversky performed on how people
make judgments and decisions. In this
experiment they found that the way a question is framed says much about how
much risk someone is willing to take.
For example:
Challenge 1 - Given that you start with $1,000, which would
you prefer?
Gift A: A lottery ticket that offers a 50 percent chance to win $1,000
Gift B: A certain $500
Gift A: A lottery ticket that offers a 50 percent chance to win $1,000
Gift B: A certain $500
Almost all people choose B. Turn the challenge around …
Challenge 2 – Given that you start with $2,000 which would
you prefer?
Gift C: A lottery ticket that offers a 50 percent chance to lose $1,000
Gift D: A certain loss of $500
Gift C: A lottery ticket that offers a 50 percent chance to lose $1,000
Gift D: A certain loss of $500
Almost all people choose C.
They take the bet.
In the first example, if you wanted a 50-50 split in the
population you need only offer a certain $370 against the 50-50 bet to win
$1,000. When you turn it around, to a
choice of losses, the loss would also have to be about $370. These two
challenges are statistically identical choices, yet the bias to take the sure
thing in challenge 1 and the bet in challenge 2 remains the same.
This tendency, this preference, remains when the choices do
not involve money. For instance:
We are preparing for
an outbreak of a disease that is expected to kill 600 people. Two alternative programs have been
proposed. We can only do one:
Program A - 200 people will be saved
Program B – There is a one-third probability that all 600 will be saved; a two-thirds probability all 600 will perishMost people choose the sure thing, Program A. Turn it around:
Program A - 200 people will be saved
Program B – There is a one-third probability that all 600 will be saved; a two-thirds probability all 600 will perishMost people choose the sure thing, Program A. Turn it around:
We are preparing for
an outbreak of a disease that is expected to kill 600 people. Two alternative programs have been
proposed. We can only do one:
Program C - 400 people will die
Program D – There is a one-third probability that all 600 will be saved; a two-thirds probability all 600 will perishMost people choose Program D, the chance to save all.
Program C - 400 people will die
Program D – There is a one-third probability that all 600 will be saved; a two-thirds probability all 600 will perishMost people choose Program D, the chance to save all.
People did not choose between things. They choose between DESCRIPTIONS of things. People are
risk averse when facing incremental gains.
They are risk takers in avoiding incremental pain/loss.
“The
Undoing Project” also describes how people avoid loss more than they
pursue gain, especially when the stakes increase. If you ask someone to flip a coin for a $1,
no big deal. Make the coin flip for $100
and you have to offer 2:1 odds. Make it
for $10,000, and the odds needed to entice most people are much higher. People become more risk averse as the stakes grow.