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Business book review: Sense and respond

26 Jan 2017 by Tom Otley
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I have to admit I let out a small groan when I read the opening lines of this book which address the failure of Eastman Kodak to follow through on the design of a digital camera. We are all aware of the dangers of not innovating, and the bankruptcy of this great company is a salutary, but too-often told story. Thankfully many of the subsequent examples are less familiar, and concentrate on the argument that technology has changed every business for good and what we should do about it.

First comes the diagnosis. Technology makes two-way conversation with our customers an imperative. The problem is that “most of our management techniques were created at a time when this two-way conversation didn’t exist.” These management techniques “rewarded a management approach based on planning, deliberation and secrecy.”

“In the face of this new pace and these new expectations, our management systems, built for the manufacturing economy that dominated in the past century, are worse than insufficient. They are failing badly. They are in need of an update.”

As the title of the book indicates, the suggestion is instead to a kind of continuous feedback loop. There are five key principles suggested:

  1. Create two-way conversations
  2. Focus on the outcomes
  3. Embrace continuous change and continuous processes
  4. Create collaboration
  5. Create a learning culture.

The first part of the book explains the sense and respond model, and is fascinating. The second part is a manager’s guide on “how to adjust your teams and planning processes to work [with the new model], how to experiment to unlock value, and how to structure you operations for continuous, predictable delivery.”

The authors contrast failed IT projects with successful ones, and analyse the reasons why. Government departments have a fairly consistent record of failure. On the success side – everyone from Spotify to Amazon are held up as examples of successful continuous deployment (Amazon apparently releases new software to the world every 11.6 seconds). A/B testing is described, and the necessary technical infrastructure and managers necessary to make it work. The hashtag adopted spontaneously by Twitter customers, and the response of the technology platform to that initiative is instructive. Eventually it was turned it into a revenue producer (since you can buy campaigns targeting those hashtags), though whether that’s enough to save Twitter remains uncertain.

Nevertheless the authors maintain that, “most companies are not set up to take advantage of technology-driven continuous learning”, not least because most have an inappropriate rewards and compensation culture, and incentives are not something that teams themselves can change – hence the need for new management techniques and procedures.

The innovation labs set up by Airbus Group in Toulouse are examined, including one project to look at innovative ways to ensure the security of a parked plane, while General Electric’s Digital Twins program involved a jet engine having a “virtual twin” specific to the engine running entirely in software. “This allows GE to monitor real-time performance of that specific engine and also to experiment with new engine features and settings in the digital realm without having to take safety risks in the real world.”

What this adds up to is that we are all in the software business, whether obviously so like Spotify, or less obviously with some of the case studies here – Sonic Automotive, one of the largest US automotive dealership conglomerates; Select Sires, a US company serving dairy and beef producers, Domino’s Pizza and fashion designer Rebecca Minkoff or Zara. We also see instructive comparisons between BuzzFeed and the New York Times, or the campaigns of Mitt Romney versus Barack Obama.

Clearly this all raises challenges for managers – as the authors put it “In Uncertainty, Specifying Output Doesn’t Work.” Instead plans must be orientated toward the results teams are attempting to achieve. This idea of doing “less, more often”. The example of AutoTrader UK moving from print to digital, and its website moving from updates once or twice a year to quarterly releases and then continuously as it learns from customers what is welcome and what not.

This new agility means the old annual budget, model year and monthly sales plan becomes something holding back the organisation.

“All this comes down to one simple idea: as we move from manufacturing of discrete items to a world of continuous production it is important to consider other discrete processes and transition them to continuous ones that can match the rhythm and pace of our new ways of creating products and services.”

The book impresses not only by its advocacy for changing the culture of companies and management processes, but also the practical details the authors advocate. Food for thought, but then added to that, plenty of sensible advice. Just what a business book should offer, even one, ironically given the subject matter, written on paper. At least they put their emails on the last page so you can stay in touch and “share what you learn on the journey”.

hbr.org
$32
Publication date March 7

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