Achieving Excellence, Risk-taking and Agility

By Doug Brockway
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.

MORE on “The Undoing Project” – about making choices

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

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

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:

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.

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.