The Heretic’s Guide to Management – understanding ambiguity in the corporate world
I am delighted to announce that my new business book, The Heretic’s Guide to Management: The Art of Harnessing Ambiguity, is now available in e-book and print formats. The book, co-written with Paul Culmsee, is a loose sequel to our previous tome, The Heretics Guide to Best Practices.
Many reviewers liked the writing style of our first book, which combined rigour with humour. This book continues in the same vein, so if you enjoyed the first one we hope you might like this one too. The new book is half the size of the first one and I considerably less idealistic too. In terms of subject matter, I could say “Ambiguity, Teddy Bears and Fetishes” and leave it at that…but that might leave you thinking that it’s not the kind of book you would want anyone to see on your desk!
Rest assured, The Heretic’s Guide to Management is not a corporate version of Fifty Shades of Grey. Instead, it aims to delve into the complex but fascinating ways in which ambiguity affects human behaviour. More importantly, it discusses how ambiguity can be harnessed in ways that achieve positive outcomes. Most management techniques (ranging from strategic planning to operational budgeting) attempt to reduce ambiguity and thereby provide clarity. It is a profound irony of modern corporate life that they often end up doing the opposite: increasing ambiguity rather than reducing it.
On the surface, it is easy enough to understand why: organizations are complex entities so it is unreasonable to expect management models, such as those that fit neatly into a 2*2 matrix or a predetermined checklist, to work in the real world. In fact, expecting them to work as advertised is like colouring a paint-by-numbers Mona Lisa, expecting to recreate Da Vinci’s masterpiece. Ambiguity therefore invariably remains untamed, and reality reimposes itself no matter how alluring the model is.
It turns out that most of us have a deep aversion to situations that involve even a hint of ambiguity. Recent research in neuroscience has revealed the reason for this: ambiguity is processed in the parts of the brain which regulate our emotional responses. As a result, many people associate it with feelings of anxiety. When kids feel anxious, they turn to transitional objects such as teddy bears or security blankets. These objects provide them with a sense of stability when situations or events seem overwhelming. In this book, we show that as grown-ups we don’t stop using teddy bears – it is just that the teddies we use take a different, more corporate, form. Drawing on research, we discuss how management models, fads and frameworks are actually akin to teddy bears. They provide the same sense of comfort and certainty to corporate managers and minions as real teddies do to distressed kids.
A Plain Teddy
Most children usually outgrow their need for teddies as they mature and learn to cope with their childhood fears. However, if development is disrupted or arrested in some way, the transitional object can become a fetish – an object that is held on to with a pathological intensity, simply for the comfort that it offers in the face of ambiguity. The corporate reliance on simplistic solutions for the complex challenges faced is akin to little Johnny believing that everything will be OK provided he clings on to Teddy.
When this happens, the trick is finding ways to help Johnny overcome his fear of ambiguity.
Ambiguity is a primal force that drives much of our behaviour. It is typically viewed negatively, something to be avoided or to be controlled.
A Sith Teddy
The truth, however, is that ambiguity is a force that can be used in positive ways too. The Force that gave the Dark Side their power in the Star Wars movies was harnessed by the Jedi in positive ways.
A Jedi Teddy
Our book shows you how ambiguity, so common in the corporate world, can be harnessed to achieve the results you want.
The e-book is available via popular online outlets. Here are links to some:
For those who prefer paperbacks, the print version is available here.
Thanks for your support 🙂
The story before the story – a data science fable
It is well-known that data-driven stories are a great way to convey results of data science initiatives. What is perhaps not as well-known is that data science projects often have to begin with stories too. Without this “story before the story” there will be no project, no results and no data-driven stories to tell….
For those who prefer to read, here’s a transcript of the video in full:
In the beginning there is no data, let alone results…but there are ideas. So, long before we tell stories about data or results, we have to tell stories about our ideas. The aim of these stories is to get people to care about our ideas as much as we do and, more important, invest in them. Without their interest or investment there will be no results and no further stories to tell.
So one of the first things one has to do is craft a story about the idea…or the story before the story.
Once upon a time there was a CRM system. The system captured every customer interaction that occurred, whether it was by phone, email or face to face conversation. Many quantitative details of interactions were recorded, time, duration, type. And if the interaction led to a sale, the details of the sale were recorded too.
Almost as an aside, the system also gave sales people the opportunity to record their qualitative impressions as free text notes. As you might imagine, this information, though potentially valuable, was never analysed. Sure managers looked at notes in isolation from time to time when referring.to specific customer interactions, but there was no systematic analysis of the corpus as a whole. Nobody had thought it worthwhile to do this, possibly because it is difficult if not quite impossible to analyse unstructured information in the world of relational databases and SQL.
One day, an analyst was browsing data randomly in the system, as good analysts sometimes do. He came across a note that to him seemed like the epitome of a good note…it described what the interaction was about, the customer’s reactions and potential next steps all in a logical fashion.
This gave him an idea. Wouldn’t it be cool, he thought, if we could measure the quality of notes? Not only would this tell us something about the customer and the interaction, it may tell us something about the sales person as well.
The analyst was mega excited…but he realised he’d need help. He was an IT guy and as we all know, business folks in big corporations stopped listening to their IT guys long ago. So our IT guy had his work cut out for him.
After much cogitation, he decided to enlist the help of his friend, a strategic business analyst in the marketing department. This lady, who worked in marketing had the trust of the head of marketing. If she liked the idea, she might be able to help sell it to the head of marketing.
As it turned out, the business analyst loved the idea…more important, since she knew what the sales people do on a day to day basis, she could give the IT guy more ideas on how he could build quantitative measures of the quality of notes. For example, she suggested looking for emotion-laden words or mentions of competitor’s products and so on. The IT guy now had some concrete things to work on. The initial results gave them even more ideas, and soon they had more than enough to make a convincing pitch to the head of marketing.
It would take us too far afield to discuss details of the pitch, but what we will say is this: they avoided technical details, instead focusing on the strategic and innovative aspects of the work.
The marketing head liked the idea…what was there not to like? He agreed to support the effort, and the idea became a project….
…and yes, within months the project resulted in new insights into customer behaviour. But that is another story.
The hidden costs of IT outsourcing
Many outsourcing arrangements fail because customers do not factor in hidden costs. In 2009, I wrote a post on these hard-to-quantify transaction costs. The following short video (4 mins 45 secs) summarises the main points of that post in a (hopefully!) easy-to-understand way:
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Note: Here’s the full script, for those who prefer to read instead of watching…
One of the questions that organisations grapple with is whether or not to outsource IT work to external vendors. The work of Oliver Williamson a Nobel Laureate in Economics – provides some insight into this issue. This video is a brief look at how Williamson’s work on transaction cost economics can be applied to the question of outsourcing IT development or implementation.
A firm has two choices for any economic activity: it can either perform the activity in-house or go to market. In either case, the cost of the activity can be decomposed into production costs, which are direct and indirect costs of producing the good or service, and transaction costs, which are costs associated with making the economic exchange (more on this in a minute).
In the case of in-house IT work production costs include salaries, equipment costs etc whereas transaction costs include costs relating to building an IT team (with the right skills, attitude and knowledge).
In the case of outsourced IT work, production costs are similar to those in the in-house case – except that they are now incurred by the vendor and passed on to the client. The point is, these costs are generally known upfront.
The transaction costs, however, are significantly different. They include things such as:
- Search costs: cost of searching for a suitable vendor
- Bargaining costs: effort incurred in agreeing on an acceptable price.
- Enforcement costs: costs of ensuring compliance with the contract
- Costs of coordinating work : this includes costs of managing the vendor.
- Cost of uncertainty: cost associated with unforeseen changes (scope change is a common example)
Now, there are a couple of things to note about transaction costs for outsourcing arrangements:
Firstly, they are typically the client’s problem, not the vendors. Secondly, they can be very hard to figure out upfront. They are the therefore the hidden costs of outsourcing.
According to Williamson, the decision as to whether or not an economic activity should be outsourced depends critically on these hidden transaction costs. In his words, “The most efficient institutional arrangement for carrying out a particular economic activity would be the one that minimized transaction costs.”
The most efficient institutional arrangement for IT development work is often the market, but in-house arrangements are sometimes better.
The potentially million dollar question is: when are in-house arrangements better?
Williamson’s work provides an answer to this question. He argues that the cost of completing an economic transaction in an open market depends on two factors
- Complexity of the transaction – for example, implementing an ERP system is more complex than implementing a new email system.
- Asset specificity – this refers to the degree of customization of the service or product. Highly customized services or products are worth more to the two parties than to anyone else. For example, custom IT services, tailored to the requirements of a specific company have more value client and provider than to anyone else.
In essence, the transaction costs increase with complexity and degree of customization. From this we can conclude that in-house arrangements may be better for work that is complex or highly customized. The reason for this is simple: it is difficult to specify such systems in detail upfront. Consequently, contracts for such work tend to be complex…and worse, they invariably leave out important details.
Such contracts will work only if interpreted in a farsighted manner, with disputes being settled directly between the vendor and client instead of resorting to litigation. When this becomes too hard to do, it makes sense to carry out the activity in-house. Note that this does not mean that it has to be done by internal staff…one can still hire contractors, but it is important ensure that they remain under internal supervision.
If one chooses to outsource such work it is important to ensure that the contract is as unambiguous and transparent as possible. Moreover, both the client and the vendor should expect omissions in contracts, and be flexible whenever there are disagreements over the interpretation of contract terms. In this end, this is possible only if there is a trust-based relationship between the client and vendor…and trust, of course, is impossible to contractualise.
To sum up: be wary of outsourcing work that is complex or highly customized…and if you must, be sure to go with a vendor you trust.
Eight to Late 