Tuesday, October 11, 2016

The Future of Corporate Agility

Guest post by by Jennifer Maerz, contributing editor of Lean Startup Co. 

The solution to long-term innovation in companies obviously isn’t having one person come up with all the bright ideas and then translating those ideas to teams that execute them. We’re looking at huge shifts in workplace structures that involve reimagining things like who holds the power to make decisions and how we judge performance, all the way down to how we run meetings to encourage constructive disagreement and a diversity of ideas.

A big part of adopting Lean Startup in an established company involves fundamentally shifting the way organizations manage people and ideas. Mark Raheja, founding partner at August, a consultancy focused on organizational development, will be speaking as part of the enterprise learning track at Lean Startup Week about agility at scale. Mark has created transformational programs for GE, PepsiCo, and American Express while working as a partner at Undercurrent, and he currently works with enterprise and fast-growing companies to crack the riddle of how to organize and operate quickly without breaking.

This interview is part of our “Future of….” series that includes interviews with experts out in the field on the Future of Workspaces, Government, Skill-Sharing, and more in the weeks leading up to Lean Startup Week.

In thinking about the future of corporate agility and management, what modern practices are most vital to today’s leaders? 

There are a few big shifts taking place. We tend to describe the industrial era model as being closed, efficient, and controlled. Those aren’t necessarily bad principles of operation; they were very well-suited to the time. Generally, though, we’re talking about shifts from being closed to being open. That can apply to the technologies you use and how you collaborate—whether you’re using cloud-based tools that everyone can be inside of and see all the time, or whether you’re using tools like Slack that have the biases of openness. It also has to do with the way you’re doing work. So do you work out loud with each other? Do you share work in progress or wait until it’s completed? There are a set of practices around each of these principals.

There’s another general stream of our work that has to do with decentralization of authority on some level. It used to be that because everything moved slowly you’d have all the decision-making authority nested at the top of an organization. A very big area of emphasis for us is working with leaders and introducing practices or tools that help make it safe for authority to move from the center to the edge of the hierarchy. There isn’t one thing that does that. There are a whole bunch of different things that do that.

One of those things is getting explicit about decision rights. Actually writing down who has the ability to make what decision. In most organizations that’s not even clear. In the absence of that clarity it just kind of floats to the top. So there’s a lot of work around trying to set teams up with the authority to do whatever work they need to do to accomplish a mission without having to ask for permission.

We actually spend a good amount of time focused on meetings—which can sound boring, but they’re the gateway drug to new ways of working. They’re one of the primary vessels of work that fills up everyone’s time, so how meetings work is a high leverage point to change work habits. We work to make meetings more structured, bring the role of facilitation into them, clarify the purpose of the meeting—are they about decision making? Prioritizing? Setting strategies? We bring structure in a way that tends to be liberating.

When you think about leaders transitioning into different roles, one of the scary things for some of these people has to be the fact that they’re used to having a lot of control, as well as the boost they get from having so much authority. 

Definitely. In all the literature around change, often the middle layer gets called out as being this big barrier. While technically it’s true that this is where we can run into challenges, though, I tend to sympathize with people in those roles. They’re in the hardest spot. They’re the ones who some senior leader is making all sorts of promises for about what is going to get done. You also have these people who spend 10-25 years moving up the corporate ladder and they have a lot on the line. They haven’t had the huge payoff that comes at the end of that climb in a large organization, and the systems and processes inside these large organizations are still incentivizing the wrong behaviors or pushing the wrong principles. So you have these leaders who have a lot to lose just by letting go and letting their teams go without their control. Basically we’re asking them to accomplish huge amounts of work and take on a certain amount of risk in transitioning to this new way of working while the reward is unclear. The other thing is they’ve gotten good at traditional management. They’ve been trained to lead in a way that’s starting to go away. So it’s really destabilizing from a psychological perspective; there’s no guarantee that they’re great at the kind of leadership companies need from them today.

So how do you weigh the decision of how much this leader or employee can learn and adjust to the new way of doing things and how much is this a situation where this person is now never going to be a fit? 

There will always be people who fall into that latter category, where the motivation just is not there. Or they’re motivated in a separate direction. But our experience is that it’s a relatively small group blocking change.

There’s a tremendous amount of unlocked potential and capacity inside existing teams and leaders. If you can make it safe and you can create the conditions for them to practice and try these new ways of working, they tend to flourish. They embrace it for the most part and everybody wins. You get a more productive organization that is able to work and shift faster and you get more engaged people who love their work.

You said a lot about creating a safe environment. How do you rethink performance reviews in the context of encouraging new practices? 

Performance management is one of dozens of systemic barriers to new ways of organizing and working inside big legacy organizations. The biases are kind of insidious. But it’s not just that. It’s how they budget. It’s how they do strategic planning. It's how they recruit people. If you’re really going to do this transition, all of those things need to be revisited with a fresh pair of eyes.

If you’re diving into performance management specifically, though, you see a lot of situations where it’s optimized for the few or the individual rather than the organization. You actually see people behaving in ways that aren’t for the benefit of the organization because they’re optimizing for themselves. You’ll have two teams that need to collaborate but they’re actually incentivized to do conflicting things. So you have to revisit structure. One thing we tend to emphasize is a general shift towards rewarding teams over rewarding individuals. That way you're trying to avoid this rogue hero behavior and trying to optimize teams to achieve together.

I’m curious how you see diversity fitting into the future of management. What does it mean for modern teams to reflect diversity when it comes to hiring people of color, people along the gender spectrum, etc. in shaping the company’s POV? 

We are very strong advocates for diverse and inclusive work. There’s plenty of data out there about why this is a good idea. Especially because it is right and it feels better but also because it builds more successful organizations. You need a diversity of perspectives and opinions; it’s like a generative force to have more of those present.

The more diverse your organization gets, the harder it will be to come to a consensus as a group. You’ve built in a systematic tendency to disagree, because you come from different perspectives. And that’s partly why we spend so much time with organizations trying to get them to stop trying to agree with each other. It might feel good to agree, but you don’t need that. What you need to agree on is how can we make this a place where new ideas are safe to try and keep moving.

One other thing we tend to emphasize with clients is something we call “rounds,” where you’re going one by one and you’re surfacing questions and reactions from an individual level instead of just letting everybody talk at each other, which biases us. Often in meetings there are a couple of voices that tend to dominate. So some of our work is about creating environments where all perspectives are represented and heard. That’s why structure in a meeting is a good thing. Typically the junior people and the introverts don’t say anything, and these days they tend to have some of the most valuable perspectives.

August is also a lab in and of itself. As you’re trying to promote better management practices for other companies, what have you come up with within August that you’ve found interesting?

We tend to be out on the proverbial edge of the work we’re doing and so we are motivated to push the envelope on these principles. It’s been just over a year [since August was founded] and we’re a radically transparent organization—our Google drive is public. A pocket of it has confidential client information but otherwise every other document we create we host publicly.

We don’t know many organizations operating with this level of transparency. It translates to our documents but also to our salaries and our equity models. We’re constantly learning the nuances of this transparency. So, for example, what’s it like to have our salaries public? Generally we believe there’s a huge systemic plus in us being open about them, but not all team members will be comfortable with that on an individual level. And so it’s interesting, reconciling our ambitions for having an impact on a system level with what is comfortable internally.

Both inside clients and internally we’re finding that there are bigger errors to these changes and you have to creatively find the solutions. We’re trying to stick to the principles and let the future emerge. So far the wheels haven’t fallen off.

Hear more from Mark and other leaders pondering the effects of long-term innovation on the way we do business at Lean Startup Week Oct. 31-Nov. 6 in San Francisco. Take advantage of our special fall pricing and save up to $350 before October 15th.

Friday, October 7, 2016

The Future of Government: Hayward & the Lean Startup

Guest post by Jennifer Maerz, contributing editor of Lean Startup Co. 

It’s been exciting to watch the Lean Startup movement grow from a practice utilized in the tech world to one implemented in a wide variety of sectors ranging from enterprise to education, religious organizations, nonprofits, and government groups. When we talk about government, we mean both the macro outfits whose work affects the entire country (perhaps you’ve heard of the IRS) and regionally-focused groups alike.

Kelly McAdoo is the City Manager & CEO of the City of Hayward in Alameda County, California. She’ll be speaking during Lean Startup Week at our Ignite Opening Reception on Tuesday, Nov. 1 about how she uses Lean Startup principles to empower government employees and to improve resident satisfaction. As part of Lean Startup Week’s “Future of…” series, we asked Kelly to tell us more about the future of how city governments work with and relate to their communities, what a civic MVP looks like, and why she so badly wants to disrupt how we think about local government.

This interview is part of a “Future of….” series that also includes the Future of Work, the Future of Corporate Agility, Skill-Sharing, and more in the weeks leading up to Lean Startup Week. 

Kelly, your Twitter handle asks, "Can we please disrupt the conversation about local government?" Pretty funny, but I'm also curious what you mean by that statement. 

I’ve been working in local government for almost 20 years now, and I think it’s probably the same situation that exists in most industries. You tend to get stuck in a rut—people get very insular and think that the best ideas may only come from others in your field who appear to be doing unique and creative things. You also can’t just take private sector ideas and overlay them on local government. How do we enable conversations that move us beyond where our organizations have been for the last 50 years?

I’m also tired of the rhetoric about bureaucrats working for government who stand in the way of progress. There are some amazing and committed public servants who work in local government, but many are stymied by an organizational infrastructure that rewards safety and security. My challenge to other local government CEOs is to have conversations about how to create organizational environments that facilitate disruptive change and are more responsive to the changing nature of our communities.

How did you first get interested in bringing Lean Startup into city government?

At our core, local governments are public service agencies, which means that we should be focused on maximizing value for our “customers” (AKA residents). I’ve always been intrigued by the concepts of design thinking and customer empathy and how those concepts might intersect with local government. However, I’ve never quite seen how we could operationalize this in our organization. To me, Lean Startup provides a framework and a methodology for taking customer empathy work and translating that into real and measurable outcomes for our community. It also adds the customer empathy piece that was missing for me from agile or Lean methods.

What kind of reception did you get when you tried to get other government employees on board with practicing Lean Startup? What were the biggest stumbling blocks? 

It’s ironic, but as I’ve talked with others who have been engaged in these types of initiatives in private enterprise, there are many of the same challenges. At the core, we are attempting to change the organizational culture of a large enterprise with all of the associated obstacles and heartburn. For example, we’ve had to deal with getting executive buy-in, creating time and space for people to try working in a different way, and generating a critical mass of people in the organization with the skill sets necessary to move the change forward.

The unique lens applicable to local government is the political and public scrutiny that comes with any new or risky project. This is the beauty of this methodology for me and why it has the potential to be so impactful in local government. Instead of spending hundreds of thousands of taxpayer dollars on major initiatives and failing very publicly, we can spend $5,000-$10,000 on experiments to determine whether we are even on the right track in the first place.

How are you incorporating the methodology now? What does an MVP look like when you're talking about the City of Hayward? 

Right now, we are really working on building capacity and skill sets around using the methodology. We are also having a lot of conversations about when it makes sense to use the methodology in our organization. For example, we aren’t going to run an experiment on how a firefighter starts an I.V. on a patient during a 911 medical call. We are looking to use the Lean Startup methodology on the more systemic problems that need a different perspective and viewpoint to help us get to the root cause.

We are also talking about how we can use the methodology to help us prioritize really scarce resources. Two great examples come to mind that demonstrate how this process has been helpful to our team. The first was one of our teams that was evaluating the need for an online business license application program. Every business that opens in the City of Hayward must register for a business license and pay the associated taxes. Our team had been heading down the path to spend $90k or more acquiring a software solution and spending probably a year implementing the program. The team used Lean Startup principles to evaluate the issue. When they actually talked to customers, they discovered that being able to complete their application online was not the biggest issue as many customers still had to come to City Hall for other reasons. The bigger issue was not understanding what the license requirements were before they got to City Hall or not being able to download an application, complete it, and bring it with them. Within a couple weeks, the team redesigned the website and allowed customers to print out the application forms which can now either be brought to City Hall or emailed directly to staff for processing. While an online application system might be more technically savvy, our team was able to solve a customer problem with a relatively quick and cheap fix.

The second example comes from a team that was attempting to address the issue of people who hoard items in their homes and create public safety concerns. The team had looked at implementing a program from a neighboring community that was touted as a very successful solution to this issue. However, as they started doing their customer empathy work, they quickly discovered that the program was not as successful as they had anticipated, primarily due to a key training and staffing deficiency within the County Adult Protective Services Department. The team estimated that they saved over $200,000 in staff resources by determining within a month that implementing the program would not have had the outcomes that they were originally anticipating and deciding against pursuing an ineffective solution. Instead, they refocused the discussion on how to work with the county to push for the necessary training.

In addition, they made changes to the city’s online reporting systems so that first responders could check a box to identify a property that had hoarding issues. In the future, once the county training resources are available, this change will allow the city to quickly run a report and identify households where hoarding is an issue.

For me, this is a prime example of using Lean Startup to prioritize scarce resources and to focus on the right problems at the right time. Do we want to solve the hoarding issue in our community? Absolutely. Do we want to spend lots of resources developing a program that won’t be successful because a key element is missing? Absolutely not. The Lean Startup methodology helped our team very quickly identify flaws in their assumptions and adjust accordingly.

How does showing that you're approaching your work with an entrepreneurial mind change your relationship with your community in Hayward? 

The number one value add I’ve seen from this process is simply the connection that happens during the customer empathy work. A lot of employees in local government are fearful about the reactions they might get when they go out and talk to the community. So instead our typical solution development process goes something like this: 1) staff convenes an internal work group or task force; 2) task force/work group spends 6-9 months brainstorming solutions, researching best practices, and then developing one idea into the final solution; 3) work group holds token community meeting to present nearly final solution and get “feedback”; 4) solution presented to city council for adoption/funding; and 5) solution implemented with limited success.

What our team has found is that 99% of our community is truly appreciative when you ask them for their input in the process, early and in a meaningful way. And community engagement doesn’t have to take a lot of extra work. That is a big fear in local government—you host a huge neighborhood meeting with lots of targeted outreach and staff work to set up and either no one shows up or you get a large contingent on one side of the issue that may or may not be representative of broader sentiments in the community. When we were looking at changes to our neighborhood preservation/code enforcement ordinance, our 8 Code Enforcement Officers took a part of a day when they were out doing their normal inspections and knocked on people’s doors to ask them a series of questions about the issues in their neighborhoods. They talked to over 300 residents from all over the community and got more direct and impactful insights than if we had held a community meeting at City Hall to share the proposed ordinance changes. It also changed the direction we headed with those ordinance changes.

We need to be thinking about how we can call ourselves a “public service” agency if the employees are scared or nervous to talk to the public. How do we give our employees tools to have productive conversations with the community? Lean Startup methodology helps frame the issues in different ways so that employees can ask more targeted and direct questions about the way in which customers are experiencing a problem in our communities.

In thinking about other city governments across the country, what advice would you give them about getting started, and why they should use these kinds of modern business practices?

In our organization, we started from the bottom up and trained a core group of employees in these methodologies. These were employees who had previously demonstrated a willingness to try new things, came from all levels in the organization, and who volunteered for the initial training workshop. I think it is also crucial to have an executive sponsor who can support the initial teams in their efforts to work differently. It will be frustrating and challenging as you push against the bureaucratic systems and old ways of doing things. Having someone at the top levels in the organization who is committed to the effort is key. I served this role in my prior position as Assistant City Manager. I attended the training with the initial team and hosted monthly lunches to support them in their efforts to work differently.

I have seen a pattern in the way city governments approach problem solving. Someone in an organization will come up with a creative idea and have the wherewithal and stamina to see it through to implementation and will then see some successful outcomes. Other local governments will then hear about this organization’s idea and then we will tend to try and replicate it in our organizations. However, we haven’t really taken the time to understand whether the root causes of the problem we are facing in our community are the same root causes of the problem the original successful community faced. It is critical to create organizations with the skill sets and mindsets to look at and evaluate each issue as it comes up and to design a solution that, while it may be influenced by what other cities have done, is tailored to the needs of our constituents.

What is the biggest stumbling block generally to city governments modernizing their approaches?

One of the interesting dynamics I have seen in local government is that innovation is often driven out of or by IT departments or by the implementation of new technologies. While the IT team is a crucial partner in the innovation process, if you don’t create an organizational culture that understands how and is receptive to partnering with IT on change efforts, you won’t see the impact you are hoping for. It’s similar with private sector or non-profit partners. There are so many startups and companies out there who are talking about making life better in cities but they may be attempting to partner with cities that don’t have an organizational culture to support and maximize the impact of the effort.

I also think politics can derail these efforts by city governments. Many city councils may see any dollars spent on these types of training efforts as frivolous. This is where it is crucial for the project teams to be tracking metrics. What has been helpful with our city council is identifying how many residents or business owners we have talked to during our empathy work. We have also tried to demonstrate a data driven approach to implementing solutions. We spend a small amount of money on an experiment, collect data, and then determine whether to scale efforts accordingly. Talking with our residents also helps us determine whether or not we should pursue certain initiatives, saving the city money in the short and long term. It is also harder for the council to refute feedback from several hundred residents. It gives them evidence so that they can go back to the one or three really loud voices in the community and explain why the city won’t be pursuing a certain effort at that time.

What do you see as the future of how city governments work with and relate to their communities?

We in local government have to adapt to the changing nature of our communities— people are working longer hours, are more digitally connected, and have less time to engage with their government. We have to be careful that the squeaky wheels in our communities don’t drive the conversations and the community priorities. This requires those of us who work in local government to think and act differently. Our methods of “engagement” really haven’t changed much over the last 50 years. It would be interesting to see how we could apply Lean Startup principles to the problem of community engagement.

I also think that for many years, local governments have really driven the agenda in communities. I equate it to Maslow’s hierarchy of needs—when a community is still looking to have its basic needs met, the role of local government (or any government) is relatively simple. Provide food, shelter, and security. As community members have more of their basic needs met and they are on a path to self-actualization, what is the role of local government then? We become a quality of life provider. However, understanding what that means to your community without effective and robust dialogues is impossible. Our challenge as local government leaders will be to help frame these conversations and also to help shape organizations that can be responsive to this changing nature of our communities.

Are there any cities you model your approach on, either in the US or globally, that are particularly innovative?

There are lots of big cities experimenting with innovation labs and the like. New York City’s partnership with Sidewalk Labs, San Francisco’s Entrepreneurship In Residence Program, and Singapore’s experiments with the sharing economy come to mind. However, the challenge with using these big cities as models is that cities like Hayward don’t have the resources, either staffing or financial, to pull off these larger scale efforts. There are only a handful of cities on the scale of a New York or San Francisco but tens of thousands more like Hayward that have the potential to touch even more lives. It is important for smaller agencies to understand how they can implement this type of culture change without a big city budget. For me, the most important step is for local government to start somewhere, try the principles out, and see how they can be adapted for their community. It doesn’t matter if you are strictly rigid to the methodology. If our government simply increases the level of interaction and empathy our employees have for community members, I would say both our organization and our community is winning.

Hear more from Kelly and join the larger long-term conversation at hand by attending Lean Startup Week Oct. 31-Nov. 6 in San Francisco. Register now and take advantage of fall pricing.