Companies who understand IT get the benefits

Anyone who read my last blog entry might be wondering what it was that I found so interesting in the Sloan Management Review, well, it was this piece Generating Premium Returns on Your IT Investments which got my attention.

I've been running across the term IT Portfolio Management for a while now and wondering what it was all about.  You can always make an educated guess from such a term but then you risk getting it wrong or missing the important points.  Quite often IT Portfolio Management was associated with the term IT Governance which is something else I thought I should know more about.  Well, this piece on IT investment did three things: it set me straight about what is IT Portfolio Management, it inspired me to read more about IT Governance (I'll write something about this soon) and it provided some interesting statistics about IT success.

So, what is IT Portfolio Management?  Basically it is the idea that organizations should know what IT projects they are undertaking and should review them as a whole rather than just a one at a time basis.  The idea is that while you might have four big IT projects on the go, all of which make sense in their own right, when you look at them collectively you see that two of them are doing the same thing.

Now this is one of those things that sounds obvious.  How could any reasonable company not know it was funding overlapping or even competing projects?  Yet this happens, its quite possible large companies don't know every project that is happening, in a geographically dispersed company things get more difficult still.  Add in the way many companies distribute IT projects to business units and its quite clear that the investment group in Australia might be doing a project that looks a lot like the new business group in Sweden.

So the first step in IT Portfolio Management is simply to catalogue all your IT projects.  The next step is to review them all and then... well this is were the SMR piece is really focused.  This suggests that companies should categorise each project as: Strategic, Informational, Transactional or Infrastructure.  Each company should also decide what percentage of the IT budget to allocate to each of these types of project and use that as a management tool for managing the whole protfolio.

Well that's the idea in a nutshell, I won't go on about it any more.  The interesting thing that arises from this research is that the authors identify two types of company: those that are IT savvy - i.e. those that understand IT and can exploit IT - and the then those who are not IT savvy.

Those companies that are IT savvy can have higher profits the year after doing an IT project, typically $247 extra profit for every $1 invested in IT.  So for these companies doing IT project makes a lot of sense.

For the other companies, the non-IT savvy companies, the reverse is true.  Doing IT projects reduces subsequent profits, typically they make $909 profit less profit for each $1 spent on IT the year before.  In other words: these companies would be better off not doing IT projects.  (Which is worrying from a long term point of view.)

What occurs to me is that we can link all of this back to Nicholas Carr's arguement IT Doesn't Matter.  Carr argued that IT was no longer strategic and companies should concentrate on commodity IT.  Of course many people (including myself) took exception to this and argued the contrary.  Now perhaps we have an answer to the discussion, and its answer using one of those re-occurring business ideas: segmentation.

Carr is right, for some companies IT is not important, for those companies who are not IT savvy, they should get away from IT and find some other way to improve their business.  For other companies, namely the IT savvy ones, IT is important and can produce real benefits.

So the answer to the question: “Is IT important?” is simply; “it depends.”

Before finishing there is one more points that struck me in the Sloan piece.  One of the recommendations is: Companies should learn from post-implementation reviews and formal training.  This gives two action points.

Firstly, companies do not invest enough in IT training - typically less than 2% of the IT budget.  They optimistically think that giving someone new software is enough.  It isn't, you need to train people in it.  I've lost count of how many times I've seen this done.  Being on the development side I hear about companies who buy software but don't buy the training, or users who see the software as too complicated (it usually is) but can't get any more training; or, perhaps the worst of all, the manager who believes his staff can learn a new package (or even programming language) by reading the manual.

People are great learners, they will find a way of learning new software and even complex languages so the manager are right, why spend the money?  Simply: providing the training will help it happen much, much faster.  You want your project sooner?  You want your product delivered quicker?  Want to see an improved ROI?  Then spend the money on the training, don't leave it to trial and error and manuals.

Second point; post-implementation and in-process review help companies realise the benefits of IT projects, motivate the staff and improve organizational learning thus making the company more IT.  In other words, Retrospectives make a difference.

Too many companies talk about doing retrospectives but very very few companies actually do them.  The reasons for not doing them vary, and often when they are done they are done badly so fail to maximise the learning and change.  When they do happen and are done right they make a massive difference.

Now the question is: do you want your company to be IT savvy?  If so, start doing the retrospectives and giving people the training.  If not, then I suggest you save your money and get out of IT altogether.

So I’ve subscribed to a Serious Business Journal...

I read a lot but I don’t read everything, there are some things I positively don’t read and there are some that I just can’t find time for.  Although I read the Economist and FT regularly (and yes they do often seem to overlap – but that’s a different blog entry) I’ve felt for a while that I should be reading a more thoughtful business journal, something slightly academic in fact.

While there are many academic business journals most of them are unreadable - unless you have serious need to read them, in other words: you are in academia.  Probably the only time most business people read these journals is when (like me) they are studying for an MBA.  I finished my course thinking “I should keep reading on the journals” but, they are difficult to get hold of, expensive, and largely unreadable.

There are a couple of exceptions, most notably the Harvard Business Review (HBR).  This places itself somewhere between an academic journal and a thoughtful business magazine.  Compared to other academic business journals this decidedly easy reading.  However, if what I hear is true, while the HBR has a high circulation figure most copies go unread.  In other words, people subscribe to be seen to read the HBR – OK, they may simply find they don’t have the time but then why renew the subscription? 

Maybe I’m being cynical but I just can’t bring myself to subscribe to HBR.  I think its probably some form of reverse-snobbery.  Still, I felt I should subscribe to some serious journal....

During my MBA I also took a liking to the California Management Review.  Once in while I’ve wondered over to their website and thought about subscribing, but then I see the price, I remember its more academic that the HBR and ... well I don’t.

Then there is the Sloan Management Review, or as it is now know the MIT Sloan Management Review (SMR).  As with the other two I sometimes thought about subscribing but couldn’t see when I’d get the time to read, couldn’t justify the costs and wondered if it would be too academic.  Still, as with the other two I’ve bought the odd download from their website in the last couple of years.

And so it was that SMR used the oldest marketing trick in the book – and thats the Book of Readers Digest marketing.  A flattering letter, the offer of a free copy and a discount price.

The free copy turned up last month and I was pleasantly surprised.  Of the 15 or so pieces in this issue (Winter 2006 which means last January) there are only a few that interest me enough to read them.  But I found those I did read very interesting and it reminded me that many ideas appear first in these journals.  Such pieces are usually fresher and shorter than the books on similar subjects.

So I gave in.  I’ve spent the $125 to subscribe for a year.  Why did I finally do it?  Well, four factors really.

• I think I’ll learn some new stuff, it will expose me to things I might not see otherwise.
• The dollar is weak at the moment so it is cheap and a low risk – even if the discount price turned out to be not so discount.
• SMR is quarterly, so I have three months to read each copy.
• I can now get all the kudos of reading a serious management journal while being able to look down on those who read the mass-market HBR.

How will I know if the journal is worth reading in future?  Well I could use the Dr Dobbs test...

I’ve long had a theory that if your sitting on the Tube and you see someone reading Dr Dobbs then you should immediately hire them.  If someone is interested enough to read Dobbs they are going to be a good programmer.

The theory doesn’t hold the Economist or HBR.  They may be good journals but they are too common (you’d hire too many people) and they don’t set the threshold not high enough to make the reader an instant hire.

Now, lets see what I think about SMR readers in a years time...

Rational decisions?

I'm currently reading Strategy Bites Back and I'll write a proper review in time.  Before then I read something on Friday that really made me think.  The book is organized a series of essays, summaries and reprints - the "bites" of the title.  The bite I read on Friday was by Spyros Makridakis who is a business school professor so he should know what he's talking about.

What he says is: manager have a hard time making rational decisions. 

They may think they are making rational decisions but they probably aren't.  And its not just managers, its all of us - even engineers!  This is because....

• Most people only look for evidence to support the point of view they hold.  If we believe something we don't tend to look for opposing evidence.
• When we do look for supporting evidence we may not always find conclusive evidence but we'll think positively of the evidence we do find - even if it is isn't quite what we needed.
• We are far more likely to remember evidence that supports what we think than evidence that challenges what we think.
• Making decisions in groups doesn't necessarily help because we suffer from "group think".
• Managers are in a worse position because they rely on information filtered at various levels below them, since everyone below them suffers from the same problem it is unlikely that opposing evidence will ever get in front of a senior manager.
• Finally, many of the things that our culture leads us to believe are true aren't, e.g. we make better decisions when we have more evidence - this doesn't hold, indeed, for all the reasons I just outlined more evidence may simply support our initial position.

So making a rational decision is hard, very hard.  And not just for us, what about for our competitors, our employees, our employers and everyone else in our business?  The same effect works on them too so they won't act rationally, and how do you predict what an irrational person or business will do?

My question is: if making a rational decision is so hard what can we do about it?

At the moment I don't know, I find the whole thing quite worrying.  This much is clear: we need to learn to accept opposing evidence and we need to make a positive effort to seek it out to correct our natural bias.

Which makes the question: how do I seek out evidence and information I might otherwise avoid?

Again I don't have the answer.  It does seem that putting yourself in unusual situations might help, opening yourself to new ideas and talking to different people should help.  I'm also reminded of Scenario Planning – one promise of scenario planning is to help you consider the world differently and practise for difference scenarios.

For the moment thought the world just got a lot more irrational.

Incremental solutions

Mary Poppendieck recently pointed out this piece on one of the mailing lists I subscribe to.  It is a piece in Fast Company magazine online about Toyota's approach to improvement.  It is well worth reading.

Working to improve things in your organization means you have to tread a narrow path.  On the one hand if everything is good you risk complacency - nobody sees the need to change or improve anything.  On the other hand if things are bad and need changing then you risk depressing everyone by constantly talking about problems and failings, people get defensive and don't want to change - this takes us into the arguments around appreciative enquiry.

So, you want to motivate people to change but you don't want to get them all defensive.

The Fast Company piece describes how Toyota are constantly making improvements to their process and products but nobody seems to be defensive or upset by failings.  The pull factor is the urge to do better, its the promise of a better tomorrow, a more productive company, a better factory, more enjoyable work.  To some degree Toyota may have pre-selected for employees with a problem solving attitude but they have also created a culture were people see opportunities to get excited about and not problems to get depressed about.

The net result is that Toyota are constantly improving, and that means many incremental improvements and solutions on top of existing incremental improvements and changes - thousands of changes a year in one plant.

I like this, I'm a fan of incremental change, incremental improvements and solutions.  However I'm also aware that incremental change often gets a bad press, that's because incremental change can go horribly wrong and make things worse.

The problem with incremental solutions is that you don't tackle the underlying problems, rather you only tackle the immediate problem and the obvious issues.  Unfortunately we see this with many Government actions: tariffs to protect industries from overseas competition, financial support for declining industries, sticking plasters for infrastructure - sometimes we need a root and branch overhaul, or we need to recognise that some activities have no long term future and we are better letting them slowly die while we developing new ideas and industries.

Sometimes radical change is needed and I don't want to say that incremental change can solve every problem.  But, and this is a pretty big but, if you need radical change then you have failed at incremental change.  The objective of incremental change should be to ensure that you never need radical change because you have already adapted yourself to a changing environment.

Look at Toyota, lots of small incremental changes, you don’t see major change programmes like you do at Ford or GM.

The problem for incremental change is to avoid simplistic solutions which only tackle the immediate problem, the symptoms if you like.  Before you make incremental changes you need to fully understand that which you are proposing to change.  You need to think deeply about the issue/opportunity/problem, talk it through with other people, maybe model the situation and your proposed solutions, maybe create some future scenarios, engage in systems thinking, understand the real problems and look for alternative solutions. 

And when you do change look to see if your change makes a real difference, or whether there are any unforeseen side effects.

In short: incremental change needs to be thought through and considered in depth.  Don't jump at the first thing you think of.

Having said all that don't let the need for analysis and deep thought stop you from making a change, don't get caught in paralysis by analysis.  Get use to changing often and changing fast.  So what if you get things wrong once in a while?  You can always put things back the way they were and mark it down as a learning experience.

That's an awful lot to do for a small change, but then, I never said this stuff was easy.  If it was easy then we'd all be doing it and it wouldn’t need writing about.

Extreme Managers

First there was Extreme Programming, now it seems we have Extreme Managers – according to the Financial Times.  The mention of Extreme Programming always made me imagine programmers jumping out of airplanes with keyboards and programming in freefall, the parachute opening and them surfing their keyboards to the ground. 

Extreme Managers – lets call them ‘XM’ – it seems prefer four-in-a-bed sleepless nights.  Manager, their partner and two Blackberries - whether this is one Blackberry each or whether the XM has two Blackberries themselves isn't mentioned in the report.

(In fact, the FT report is a cut down version of a forthcoming report in the Harvard Business Review, which most likely is the cut down version of a more academic report and in all likelihood will be turned into a book by Harvard Business School Press - such is the incisions world of business publishing.)

It seems Extreme Managers like working 12 hour days, 70-hours a week, they manage teams spread through the world, they are always-on, travel a lot but, perhaps surprisingly, actually really like their jobs.  At first sight it looks like a win-win, managers like the work, companies like the results - after all they are only paying for 40 hours a week.

There are obvious problems here: what about their families?  If they actually have any.  And their health?  Such people are creating health problems for themselves and society further down the line.

Then there are the hidden problems: these people can burn themselves out, and by the sounds of it these are people the company comes to depend on.  Second, these people enjoy their jobs but don't want to keep doing and eventually will quit, again the firm looses out.

For managers I think such extreme hours are a red flag: they say "This person can't delegate", they say "This person can't manage their own work load" - they should be prioritising more and cutting away the unnecessary items.

And what about the people who report to these managers, if these guys are always on the run when do they find time to sit down and give feedback to their staff?  When do they have time to help their reports develop? 

Even if they can find the time what kind of message are they sending to their workers?  First they are sending the message "I'm always busy, don't bother me" so they have closed their eyes and ears to problems, staff development and ideas from the shop floor.  Second they are making a very bad role model for those who might one day replace them.  XM's are only making their own lives worse.

The word the report doesn't use but should is "Sustainability."  These jobs are just not sustainable in the long run.  When you look at it this way the interesting thing is sustainability itself.  More and more this is the issue: for the environment, for personal health, for corporate success, for individual projects.  We need to move to a world were, at all levels, we do things in a sustainable way.

Unpaid overtime has always seemed a dangerous thing to me.  If a firm relies on its workers working 50, 60 or 70 hours a week but only pays them for 40 it isn't charging the true cost of its goods.  This is very true with software companies; you see development teams proud of pulling 60-hour weeks to ship a product.  The company may make a profit if it only pays for 40 hours but what if it had to pay the true cost, for 60 hours?  Quite possibly the profit disappears.

In other words, the business model does not work; in the short run you are dependent on the good-will of your workers to give money to your shareholders.  In the longer run this model is not sustainable either.  The replacement costs of the product are far higher than you think, the risks of product development are far higher and your dependency on individual's is far higher.

Over the long run not paying for overtime is not a win-win, its a loose-loose.  Your company shouldn't be proud its workers pull a 60+ hour week, its not commitment, its a sign that you don't understand your business.

So many bad companies in the world

It never ceases to amaze me how many bad companies there are in the world.  Companies that provide bad customer service, poor products, treat their employees badly, break all the rules in management books and yet continue to survive and trade, and even make profits.

Such companies grow to a certain size, usually not very big, a few hundred people at most, and then stagger on for years.  Sometime I think starting a company is as easy as falling off a log, it is growing of a company that takes skill.

Unfortunately I've worked for a few of these companies in my time and many of my friends still work for such firms.  It seems incredible to me that software firms don't invest in training, don't send their people to conference, these guys are in the knowledge business, how can they close their eyes?

And I wonder about restaurants were the food is poor and service worse.  Don't these guys ever eat in other restaurants?  Why should I wait 45 to get the bill? Does anyone ever come a second time?

Poor websites are one of the things that get me often.  Has anyone who works for British train companies ever booked a ticket online?  You can choose from about 8 different sites, each of which simply has a different skin over the same (poor) booking system.  Then the choice of tickets - why tell me about the tickets I can't buy?

Now I must say I do not include my last employer in this list, sure they laid me off but I actually consider them amongst the good - or at lest the neutral.  Sure they made mistakes and they weren't perfect but they were good, not bad. 

Good companies on the other hand seem to be few and far between.  Sometimes it seems there are so few of them I can name them: Toyota, Dell, Shell, Southwest Airlines, SAS Institute, my former employer, ... - OK, I know, I've read too many case studies at business school, the same names come up again and again.

Optimistically I want to believe that there is a silent majority of good companies out there that just don't get case studies written about them.  Actually, I think most of us assume that to be the case, that's why we keep looking for these companies, unfortunately it can be hard to tell them apart when you only have a few hours in an  interview. 

A suggestion for job hunters: do your own due diligence on potential employers, search the net for them, not just websites check news groups and mailing lists too.  See if you can get some financial information on them - I've been using UK Data and Companies House to get some financial background.  You might not find a lot but you might find a red flag.  Yes, you have to pay for these services but its not a lot of money when you look at your salary then multiply by several years.

Anyway, back to good companies...

I'm not saying the good companies are perfect, most of the companies I just named have slipped up at some time or another but on the whole they get it right.  But why are there so few good companies and so many bad companies?

So I have a theory.  The theory is in two parts.  I've already given you the first part: there is very little to stop you founding a company.  At least in the UK you can be banned from being a company director but you have to break the law first.  Many of the companies I'm talking about are just run bad, not illegally.

As long as you have some idea that is different enough from the competition you can get into business.  I'm not saying this is easy, look at the life expectancy of new companies, most fail.  I'm just saying that if some element of your product is good you can get up and running.  You could have a unique product, a great sales guy, you could be first into the market or just a good location for your shop or website.  This is all you need, you don't need to know much else, the better this one idea the worse you can be at everything else.

If you get that bit right you can get everything else wrong.  You can treat your staff badly, you can ignore strategy and you can ignore your customers.  And the longer you are in business the more entrenched your position will be.  Sure you are open to competition but as long as nobody notices you can continue.

(Advice for software companies: make sure you sell on going support and maintenance for your products.  I've seen companies survive for years on this revenue alone without selling anything new.)

The flip side is you probably won't grow very large, and if someone does notice your weakness they can easily topple you but in the meantime you can employ a bunch of people who don't actually have a good time working for you.  Thus explaining why so many people seem to work for bad employers.

The second part of this explanation is statistical: being a good company means doing a lot of things right.  First you still need the product, location, idea what ever, you still need that essential driver.

Then you need to do your product or idea well, you need to treat your customers well, you employees well and get everything else going well.  This is so much more difficult than being a bad company, there are a lot of ducks to get in the row.  And if you are successful you'll probably attract more attention from competitors - although you should be able to fight them off better.

So, simply because being a bad company is so much easier than being a good one I would expect there to be many more.

Now, under this model, every bad company reaches a size were it is just about manageable by the people who run it badly.  Think of this as the Peter Principle for companies if you like.  Some good companies will start off good but as they expand they'll get it wrong, expansion is hard and they too will hit the Peter Principle.

A few companies will get it all right.  They will manage the growth, they will keep the good product/idea/location.  These companies are real killers, they will be super successful.  Its just that there won't be very many of them because this is hard.

Consequently, most of my friends are condemned to work for bad companies.  Sorry.

I have to put a disclaimer in here.  I've never founded a company that employed anyone other than me. I've come close a couple of times but I've not done it.  Real entrepreneurs out there are quite right to say "What does he know?  He's never done it."  I agree, I've never done it.

All I'm saying is: to me, it looks like starting a company is as easy as falling off a log - provided you have an idea.  The hard bit is growing a company, keeping it good and avoiding the Peter Principle.

Introduction to Agile presentation online

Earlier this week I gave an Introduction to Agile presentation to a small company in central London.  This was a private presentation so no big conference or other named speakers.

Here is that presentation, please feel free to let me have your comments.  Did I miss anything?  How would you have done it differently?

And of course, if you would like me to deliver a similar presentation to your organization please get in touch.

 

Book review: Weinberg on Writing

As regular readers will have noticed I Write.  I write this blog, I occasionally contribute to ACCU journals – although I have contributed a lot more in the past – and I’m half way to writing a book. (I expect to sign the contract before Christmas now.)  Recently, I’ve become aware of the need to improve my writing so I thought I’d so in the time honoured way: by reading a book.  When someone recommended Weinberg on Writing I decided this was the book for me.

Gerry Weinberg is a minor legend in the computing field.  He’s probably most famous for one of his early books, The Psychology of Computer Programming (get the Silver Anniversary Edition) - it was in this book that he coined the term “Ego-less Programming”.  Since then he’s gone on to write many more books – if his publisher’s description is to be believed over 40.

(While we’re on the subject of Weinberg’s books, a quick note to my friend who asked me earlier today “How much should I charge for my consultancy services?”  The answer is in Weinberg’s The Secrets of Consulting even if you are not a consultant this book is worth reading.  There is lots of good advice for work and life generally.) 

In Weinberg on Writing he sets out to describe his Fieldstone method of writing.  Basically, this method entails collecting lots and lots of ideas for book section and assembling them into different books.  There is other advice for writers here but this is the subject he comes back to again and again.  As it happened, this technique isn’t a million miles from the way I write.  

Weinberg spends a lot of time on describing how to find and collect the fieldstones needed to write the book.  My problem tends to be the reverse.  I’m forever collecting stones, I see interesting ideas everywhere, its a question of finding the time to put these stones in good homes that I have.  Still, the blog and the current book use up lots.

I liked the book and although I found it covered a lot of territory I had already visited I still found good advice.  I probably would have found more value if I had completed more of the exercises he describes for budding writers.  I didn’t find any significant revelations in the book so in that way I was a little disappointed but again, I think thats because I’ve already addressed some of the issues in my own way.

If you are a budding writer then I highly recommend this book – and I recommend doing his exercises.  And if your not a budding writer then keep your eyes open for Weinberg’s other books, none of the others are about writing, many are about computing but not all, and they are all well written and useful.

 

IT does matter - at least sometimes

Ever since Nicholas Carr wrote IT doesn't matter there has been a well publicised debate on the real value of IT in modern businesses.  Sometimes Carr is right, commodity hardware and commodity software is good enough, there is no competitive advantage to be gained by going beyond cheap commodity products.

But sometimes IT does matter.  Sometimes IT can be the source of competitive advantage, sometimes it can help you do things you couldn't do otherwise.  I'm always on the look out for these instances and the front page of today's Financial Times gives a great example.

The London Stock Exchange (LSE) has just announced half year profits up from £26m to £76 - yes a three fold increase.  This is on trading volume up 42% to 744bn shares.  And the reason?  An improved IT system.

Over the last 10 years stock exchanges - and related institutions - have switched to electronic trading systems.  These have multiple advantages over the old "open outcry" systems: accuracy, speed, process automation, etc. etc.  Perhaps one of the biggest benefits is that electronic trading systems allow fully automated trading, a computer programmed with the right algorithms can conduct the trading.  This is more than just automating the process it is a radical change in the basis of share trading system and has helped hedge funds reach their current position.

Earlier this year the LSE introduced a new version of its trading system, SETS.  In reality this probably meant a software upgrade, perhaps a hardware upgrade, maybe even bandwidth upgrades.  The hardware is commodity boxes (Sun boxes I think) and the bandwidth is purchased from regular communication providers, the software is the interesting bit, this is specific to the LSE.  A change to the system usually means a software upgrade, and sometimes this can go wrong - like it did earlier this week at the London Metals Exchange (LME).

In the case of the LSE and its customers IT does matter, it allows them to do something different and it can make a big difference to the bottom line.  But it comes with risk, it matters because your business now depends on this stuff, like at the LME.

This IT is expensive and difficult to get right - I know, I worked on the Reuters end of the LIFFE Connect trading system when it went live in 1999.  As the LSE shows, when you get it right it makes a big difference.

However, IT also has its limits.  Its all to easy to dream up some big new idea, some strategy and say "Technology will implement it."  Technology has its limits and this can effect strategy is a very real way.  A good example of this is the problem Skype faces, describe by Robert X. Cringely in July.

Although most people think Skype is a pure peer-to-peer networking system it isn't.  Because of Network Address Translation (NAT) Skype needs to impose a server into most calls.  These don't have to be Skype’s own servers, they've worked out how to borrow server bandwidth from others but as the user base grows this will become a bigger problem.

For Skype there is no short or medium term way around this problem - their techno-business strategy means at some stage they had to get access to lots of server.  Consequently it was almost inevitable that they had to sell out to a big player like eBay or Google sooner or later to get access to more public servers.

Meanwhile, Skype, and similar VOIP technology, is changing the business strategy of other companies, obviously traditional telcos like AT&T and BT are vulnerable, so to are mobile operators like Vodafone but also  companies who simply use telephones - which is most of us – face change.  Even if in the long term VOIP becomes yet another commodity technology it is causing change now, and that is strategy and that is important.

So, there you have it, another reason why I still believe IT is important.  Ignoring IT in creating your strategy is wrong, letting it run the entire show is wrong, you need to find a middle way, which is were you need people who understand both.

Lessons from the Tu-144

I’ve been absent from this blog for the last couple of weeks – small matter of getting married and taking a honeymoon in Thailand.  This was my first visit to Asia proper – I’ve been to Siberia which is geographically closer to Asia than Europe but culturally part of Europe – and I’ve a lot to reflect on.

For now the only say I liked Thailand, and specifically Bangkok.  I didn’t like the new Bangkok airport, Suvarnabhumi.  This is a monster airport, far too big.  It seems the airport has been built for one purpose: to build something big.  It is totally dehumanising, especially the unrelenting shopping mall once you get past check-in.

Now I’m back, recovering from jet lag and reflecting on another footnote to air-travel the Tupolev-144, the Russian Concorde, or Concondski is you prefer.  I’ve been interested in this airplane for a while – if you haven’t guess already airplanes bring out the little kid in me.  And on several occasions I’ve cited the TU-144 as an example how documentation fails to capture tacit knowledge.

Some years ago I saw a TV programme about the TU-144.  I can’t remember if I saw the Channel-4 Equinox version of the program in the UK or the PBS Nova version in the US.  Either way my main reference has been the online transcript of the PBS version.  According to this report, the Soviet Union had the blueprints to Concorde in the mid-1960’s and to some degree tried to copy Concorde with the TU-144.  This isn’t news, the world has debated this question since the TU-144 was first revealed in the mid-1960’s.  However, the program seemed to say the Soviets has far more information than was previously known.

I’ve often used this as an example of tacit knowledge, the story goes like this: the Soviet Union had the plans for Concorde but couldn’t build a copy because it lacked the tacit knowledge associated with the plans.  Some of that tacit knowledge was contained in what Ikujiro Nonaka calls the “Ba” or space in which the knowledge exists.

While I was in Thailand I had the time to read Howard Moon’s book Soviet SST that formed the basis of the Equinox/Nova TV programme.  Well, it turns out the whole thing is more complicated than it seemed and there are several insights I didn’t expect to get.

One insight I wasn’t expecting was about incremental development.  It turns out that most Soviet aircraft design was a process of incremental development.  Sometimes only a few copies of an airplanes would be built and many new airplanes were modifications of existing designs.  Whether other airplane designers follow the same route I don’t know. 

This approach worked well, it was certainly low risk at a time when a failed project was simply unacceptable.  However, the approach failed when it came to the TU-144 for two reasons.  Firstly, a supersonic passenger plane was a massive leap rather than an incremental development.  And the only precedents for the plane were military.

Secondly, the demands on civil aircraft reached new peaks in the 1960’s and 70’s.  It was no longer enough for a plane to fly and carry a few passengers, it had to fly them in comfort, interface to ground systems and do so economically.  The incremental approach couldn’t deliver the TU-144.  It wasn’t really an increment on anything that went before.

Broadly speaking I’m an advocate of incremental approaches to most things: software design, business development and so on.  However, incremental developments have their limits.

The second insight I gained was about prestige projects.  The TU-144 project should have been scrapped a lot sooner.  The American’s scrapped their supersonic airliner in the early 1970’s and probably the Anglo-French Concorde should have been scrapped too.  But Concorde and the TU-144 were seen as prestige projects for their respective countries.

My question is: how do you tell a prestige project that should be scrapped from a visionary product?  Or a big-hairy-audacious-goal? Or a revolutionary product that changes the paradigm?  (Or whatever management speak you prefer.)

Frequently in business literature we find stories of people creating products nobody thought they could, of going beyond the current status-quo, of defying the cynics and so on.  We don’t hear about the projects that fail, only those that succeed.

So, I would like to know: how do I know that an ambitious project is visionary we should back?  And when, should we recognise it as built on sand and rooted in prestige?

And so back to my story.  Does it still stand up?  Can I still use the example?  Well, yes and no.

The TU-144/Concorde example still works as a headline but once you get into depth it is not the best example there is.  In fact, it turns out there are two better examples, the B-29 and the DC-3.  In the 1930’s the Soviets licenses the rights to build DC-3 planes.  Still, it was found necessary change the design, for a start the US designs used feet and inches while the Soviets used centimetres and millimetres.  In the end over 3000 LI-2 planes were built to this design.

In the 1940’s three of B-29 bombers fell into Soviet hands and Stalin ordered Tupolev to copy them exactly.  Still, the design was changed and the result was the TU-4.  Even having the planes it was impossible to completely reverse engineer them.

In both cases some changes were forced on the Soviets, like the measurement system, or the fact that some components or materials were simply not available.  Other changes stemmed from operating conditions, like the fact that dirt landing strips remained in use in Russia far longer than in the West, so planes needed to be able to land in more difficult terrain.  Either way, the “Ba” surrounding the Soviet and American versions was different.

 So, lessons from the Tu-144

• Tacit knowledge and the environment knowledge exists in (Ba) are real and important.
• Incremental development exists in many different industries; it is useful to enhance learning and reduce risk but it has limitations.  Sometimes you need to move beyond incremental development and when you do you need to recognise this.
• Big prestige can be very damaging; we need understand when something is a prestige project and when a project is truly revolutionary

Interestingly, the Tupolev website lists a TU-444 project to build a supersonic business jet.  This looks a lot like an incremental development of the TU-160 bomber.  Similarly, the Sukhoi website lists a supersonic business jet  project without any information.

As a book Soviet SST could have done with a little more editing and some more effort to make it accessible, say, more diagrams, pictures, time lines and footnotes on airplane naming schemes.  As far as I can tell it is the only book (in English at least) written about the TU-144 which is a shame because it is a fascinating aircraft.  Perhaps some of the books on Concorde contain more information.

My guess is that the book was not a big seller, certainly it is out of print and I had to buy my copy second hand from the US.  Consequently I don’t expect there will every be a second edition.   This is to be lamented.  The book was written in 1989, before the fall of the Soviet Union.  Today it should be possible to conduct much more research into the project in Russia and access more documents and still speak to many of the people who worked on the project.

One of the things that fascinates me about Russian, or a at least Soviet, technology is that much of this technology was developed independently of similar technology in the West.  In effect two independent groups addressed the same problems, sometimes they came up with similar solutions and sometimes with different solutions, building on different knowledge stores.  Today we have one global knowledge store.  Communication channels, Internet and international mobility mean we are more likely to converge on the same solutions.