Creating Robust, Resilient & Antifragile Organizations (using Kanban)

Creating Robust, Resilient & Antifragile Organizations (using Kanban)
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Creating Robust, Resilient & Antifragile Organizations What does it take to be… …“built to last”? Presenter: David J. Anderson Lean Kanban North America San Diego May 2016
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Emotional Motivation for Change
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Nobody wants to lead the next Nokia! From $56 to $2!
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Motivation for adoption? Kanban has agendas Managerial Motivator • Senior-level • Lead the business (strategy and positioning) • Confidence they can deliver on strategic goals • Legacy (long term survival) • Mid-level • Up-managing – answer the hard questions with confidence • Down-managing – make difficult decisions with confidence • Line-level & Individual Contributors • Relief from abusive environment • Overburdened • Quality suffers • Low job satisfaction Kanban Agenda • Survivability • Service-orientation (and customer focus) • Sustainability
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja What are they afraid of? Manager • Senior-level • Mid-level • Line-level & Individual Contributors Fear • Mid-level managers lie to me. There is no transparency. Bad news arrives late. Too late to intervene • Business failure • Senior leaders over-react. I don’t trust them with information • Line managers & workers can’t be trusted to deliver on their promises • Our bosses constantly set us up for failure • Burn out
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Taleb’s Model for Organizations
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja A new way to look at organizations • Fragile • Resilient • Robust • Antifragile • At risk of total failure / financial ruin • Takes damage, avoids total failure, recovers • Absorbs uncertainty, repels blows, avoids damage • responds to stress by mutating, maintains fitness for purpose • purpose and identity can change entirely
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Fragile
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilient
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Robust
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Antifragile
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Moneyball highlights fragile, resilient & robust
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Fragile
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Fragile lead time distribution Weibull, k=0.8
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja More Robust Lead Time
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Examples of Lead Time Distributions
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Kanban mitigates risk of fragility Kanban systems limit WIP and improve flow efficiency Lead time distributions are much thinner tailed from full kanban systems with WIP limits and pull fully implemented In general, the Kanban Method contributes significantly to trimming the tail, reducing risk and improving resilience, robustness & antifragility
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Examples of fragile entities Monocultures are fragile Highly cohesive social groups are fragile Monopolies are fragile Firms with a dominant market position coupled to complacency or hubris are fragile Single class of service kanban systems are fragile
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja the Greenland Norse were fragile
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Monopoly skischool franchises didn’t survive deregulation in the 1990s
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Squeezes
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Deadlines create squeezes How to deal with a squeeze  Contingency (start early, buffer time)  Liquidity – more capacity (people, resources, money)  Demand shaping – divert demand • Defer quality problems, non-functional requirements, or features for some niches/market segments until later
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Dealing with squeezes Contingency is expensive but can be robust Liquidity can be expensive but can be robust  Kanban & Enterprise Services Planning provide some relatively cheap ways of improving liquidity Deferring quality problems is cheap but inherently fragile! Heroic effort appears cheap but is inherently fragile!  And often expensive to maintain, e.g. recruitment cost of replacing burned out people, or inflated cost of “hero”
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja A better way to deal with squeezes Hedge risk of a squeeze with optionality  Sequencing which maximizes optionality (commit early because you know why – low uncertainty)  Capacity allocation  Discretionary (or refutable) demand  Smart portfolio & product mix selection Optionality is not free but it is often (much) cheaper than contingency
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilient
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilient organizations avoid catastrophic failure Likelihood = Probability of x Impact = f(x) Probability of short or long landing = 1/14 million  fat tail problem  black swan event
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Impact function matter more than likelihood Examples of 2 short landings in last 3 years. Likelihood 1 in 14 million flights Impact - SFO Asiana Boeing 777. July 2013. Aircraft is written off, no loss of life - 2 crew severely injured. 3 teenage passengers die after incident, killed by emergency vehicles attending the scene Impact - Rostov-on-Don Russia. FZ981 Boeing 737. March 2016. Total loss of aircraft, passengers and crew. 62 deaths
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilient organizations avoid catastrophic failure F(x) - the potential impact - always overrides probability of x - the likelihood. The two parameters cannot be multiplied together to prioritize risk management. Risk mitigation - reducing the impact - is more important than risk reduction - reducing the likelihood When there is a risk of total ruin, however unlikely, we need to pay attention to it and manage it. Probability of delay versus impact of delay Class of service reduces probability of delay, x, for items with a large impact (f(x)) of delay
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Blocker Clustering helps with resilience Identify Risks Identify Likelihood & Impact Reveals probability of delay versus impact of delay Root Cause Analysis Reduction & Mitigation actions http://www.klausleopold.com/2013/09/blocker-clusters-problems-are-not.html
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilient organizations use classes of service Class of service reduces probability of delay, x, for items with a large impact (f(x)) of delay
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilient organizations use experiments Resilient organizations use experiments but control the financial risk Avoid risk of ruin from overbetting on too many experiments Portfolio management with “Kelly betting”  If you have 60% confidence in payoff bet up to 20% of what you can afford to lose “bet size” includes option development experiment and cost of exercising the option, designing & building production version and bringing it to market
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Resilience requires a reason to pick yourself up and try again Resilient organizations have a strong sense of purpose Resilient organizations have unity and alignment behind that sense of purpose Resilient organizations have “Einheit” Purpose can be values based such as “superior customer service” – Virgin Group
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Purpose or values weigh more strongly than identity with resilient organizations Unity and social cohesion comes from a strong sense of purpose or a set of shared values
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Feedback loops for tactical concerns Immediate service delivery Selecting the right things, framed in the right way Responsiveness to tactical opportunities
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Robust
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Robust organizations… Are risk hedged Have optionality Have liquidity Have strong capability with low variability  Flight to quality (in uncertain times)
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Feedback loops for operational concerns Do we have enough capacity to cope with volumes of demand over time? How do we hedge risk? Do we have the correct risk assessment framework to analyze demand? Are we collecting the right metrics? Are we managing risk quantitatively?
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Leveraging an understanding of fragility, resilience & robustness
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Volatility & Turbulence Risk is manageable in conditions of stable volatility, i.e. where there is no/very little turbulence. Turbulence implies unmanageable risk Ergo, turbulent systems are fragile systems
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Kano Analysis, Strategy & Risk Performance Customer satisfaction Investment (time, money) linear exciter dissatisfier Fragile Robust Antifragile Call quality as a function of radio spectrum is hard to replicate. Some radio spectrum is therefore worth a lot more than other bandwidths. Correctly aligning marketing strategy - sell quality, signal robustness, call integrity - with decision to purchase expensive radio spectrum provides a robust differentiated position
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Entropy
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Entropy in a housing neighborhood
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Diversity of housing makes a robust neighborhood
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Without restriction entropy will continue
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Left unchecked a new monoculture develops
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Eventually maximum entropy occurs
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Robustness is fragile – a philosophical dilemma Fragile systems are often stable  Perhaps maximum entropy has already been reached? Like a well stirred Campari orange Robust systems exist in a fragile state vulnerable to entropy Explicit policy is required for diversity or organized inequality to enable robustness Low trust environments subject to corruption will entropy from one fragile condition to another. Robustness cannot be sustained in low social capital environments
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Singapore is Robust
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Antifragile
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja 3M – Minnesota Mutation Machine* 3M has innovation built into its DNA However, 3M doesn’t seem to have been capable of developing products that require long periods of investment and large sums of capital  E.g. in comparison, IBM invested in speech recognition for 50+ years  We don’t fly in 3M planes, get our power from 3M generators or use 3M smartphones, telecoms networks or computers * Collins & Porras, Built to Last
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja IBM has a long history of identity change 1911, CTR = The Tabulating Machine Company, the International Time Recording Company, the Computing Scale Company and the Bundy Manufacturing Company 1924 CTR becomes International Business Machines 1964 System/360 Mainframe family launched 1981 PC launched 1991 Sold Lexmark 2002 acquires PWC Consulting 2005 Sold PC business to Lenovo 2016 Announced exit of mainframe business Now, primarily a professional services firm! What will its next identity be? Does IBM have antifragility built into its DNA? Can it keep reinventing itself?
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja John Menzies founded in 1833 as a newsagent in Edinburgh. Identity change in 1998 to distribution & airport baggage handler
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Microsoft is robust rather than antifragile Robustness comes from lack of complacency or hubris. Bill Gates’ “be paranoid” Shift perception to collective tribal insecurity Deep pockets. Lots of optionality Cooperative effort to strengthen the tribe Personal Sacrifice Symbols are more important Common enemy Rituals practiced “Be Paranoid”
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Microsoft is robust rather than antifragile Acquisition of Minecraft maker is entirely consistent with identity as a developer tools company Promotion of Sateya Nadella head of developer tools is entirely consistent with core identity
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Identities that are looser, wider, broader umbrellas are robust and enable antifragility
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Virgin are robust and may be antifragile so long as they survive the transition from Sir Richard Branson as their leader
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja What is Virgin Group’s Identity ? Not a record label but they are Not a retailer but they are Not a travel company but they are Not a communications company but they are Not a media company but they are Not a fitness company but they are
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Virgin’s brand Virgin’s brand is fun, irreverent, associated with superior customer service and “cool” things people need and use regularly  Except Virgin Galactic which is just “cool” and Richard wants it
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Feedback loops for strategy A learning organization that can ultimately learn to reinvent itself Antifragile organizations have feedback loops for strategy including regularly assessing  purpose  capability alignment with purpose  whether they are “fit for purpose”  Identity Antifragile companies can shed core businesses while embracing new ones
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja The Organizational Dilemma
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Organizational Dilemma Loose social cohesion encourages the behaviors required for antifragility  Loose attachment to identity  Liberal experimentation High social cohesion enable resilience & robustness  Unity and alignment High trust & high social capital are required for antifragility Designed & controlled inequality is required for robustness  Social mobility within organized inequality creates antifragility Utopian societies are fragile  Communism & anarchy  E.g. Anti-utopian novels such as Brave New World, The Beach
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Kanban & Resilience, Robustness & Antifragility
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Capability OptionalityAdaptability Agility Survivability Out-maneuvered Unfit for purpose Kanban enables Antifragility Antifragility
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja The Kanban Method General Practices 1. Visualize (with a kanban board 看板) 2. Limit work-in-progress (with kanban かんばん) 3. Manage flow 4. Make policies explicit 5. Implement feedback loops 6. Improve collaboratively, evolve experimentally (using models & the scientific method)
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Strategy Review Risk Review Monthly Service Delivery Review Bi-WeeklyQuarterly Kanban Meeting Daily Operations Review Monthly Replenishment & Commitment Meeting Weekly Delivery Planning Meeting Per delivery cadence change change change change change change change change change info info info info info info info info info change info Kanban Cadences
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Change Requests 3 1 Prod. Defects Maintenance Usability Improvement 2 1 Kanban helps with “einheit” (unity & alignment) Teams F E Engin- eering Ready G D GY PB DE MN 2 P1 AB Ongoing Analysis Testing Done Verification Acceptance 3 3 Ongoing Development Done 3 Joe Peter Steven Joann David Rhonda Brian Ashok
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Kanban enables resilience, robustness & antifragility Resilience  Thin-tailed lead time distributions – predictable  Einheit – unity & alignment Robustness  Explicit policies  Capacity allocation  Classes of service  Greater optionality Antifragility  Kanban cadences provide feedback loops at tactical, operational and strategic levels
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Thank you!
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja About David Anderson is an innovator in management of 21st Century businesses that employ creative people who “think for a living” . He leads a training, consulting, publishing and event planning business dedicated to developing, promoting and implementing new management thinking & methods… He has 30+ years experience in the high technology industry starting with computer games in the early 1980’s. He has led software organizations delivering superior productivity and quality using innovative methods at large companies such as Sprint and Motorola. David defined Enterprise Services Planning and originated Kanban Method an adaptive approach to improved service delivery. His latest book, published in June 2012, is, Lessons in Agile Management – On the Road to Kanban. David is Chairman & CEO of Lean Kanban Inc., a business operating globally, dedicated to providing quality training & events to bring Kanban and Enterprise Services Planning to businesses who employ those who must “think for a living.”
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja This presentation was inspired by the work of Nassim Taleb on Fragility, Resilience, Robustness & Antifragility in Risk Management and by his 5-day Real World Risk class in New York City, February 2016. None of the content of this talk is taken directly from Taleb nor is it meant to represent (or misrepresent) his work in shape or fashion. Cover images courtesy of John Menzies PLC, the Scotsman newspaper and the BBC. Lead time distribution courtesy Andreas Bartel Volatility & Turbulence data courtesy of Digite, Raymond Keating / CME Group, Andreas Bartel Acknowledgements
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Appendices
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Books
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja 2010 – Kanban “blue book”
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja 2012 Lessons in Agile Management The heavily under-rated book that underpins the Kanban Coaching Masterclass and most of the theory behind the Kanban Method
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja 2014 Kanban from the Inside
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Player Stats
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja Buster Posey San Francisco Giants Salary $17.3M Ryan Howard Philadelphia Phillies Salary $25M Salvador Perez Kansas City Royals Salary $1.85M Average OBP 0.318 Fairly Robust 0.350 – 0.400 Left skewed (no upside) Average OBP 0.277 Fragile mostly 0.250 – 0.300 Left skewed (many 0’fers) Average OBP 0.280 Very Robust above 0.250 Right skewed (some hot days)
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja
Copyright Lean Kanban Inc.dja@leankanban.com @lki_dja

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